Travel Compensation Fund v John Harvey Blair & Ors [2003] NSWSC 720 | Case summary

Travel Compensation Fund v John Harvey Blair & Ors [2003] NSWSC 720 | Case summary | Zoe

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CATCHWORDS : Collapse of Ansett Group of Companies - Test cases sought to be brought directly against alleged former directors of Ansett Australia Limited or its wholly-owned subsidiary Traveland Pty Ltd ["Ansett Corporate Travel Agents"] - Travel Compensation Scheme made in accordance with Travel Agents Act 1986 in a number of States and in the Australian Capital Territory - Cooperative scheme for the regulation of travel agents and to provide fund to protect consumers of services offered by travel agents - Provisions by States and the ACT for Travel Compensation Fund to be subrogated to the rights of claimants upon specified payments being made to claimants under the Compensation Scheme - 12,000 claimants receiving payments of approximately $11 million - Legislation further providing that where rights so conferred on Travel Compensation Fund are exercisable against a body corporate travel agent, those rights are enforceable jointly against the body corporate and its directors at the time of the act or omission - Pleading and particulars - Test case proceedings sought to be brought by Travel Compensation Fund directly against alleged directors of Ansett Corporate Travel Agents without joining the Corporate Travel Agents as defendants and without joining the claimants as parties - Practice and procedure - Application for leave to amend summons - Principles - Utility - Whether causes of action adequately pleaded - Suggested improper constitution of both sides of the record - Parties - Parties who ought to have been joined - Parties whose joinder is necessary to ensure that all matters in dispute may be effectively and completely determined and adjudicated upon - Rules of natural justice - Whether the rights of a non party against or liabilities to any party to the action in respect of the subject matter of the action may be directly affected by any order which may be made - Difficulties and undesirability of attempting exhaustive formulation of principle as to when joinder is "necessary" - Part 31 power in the court to make orders for decision of questions separately from any other questions in the proceedings - Principles - Overriding Purpose Rule - Case management of proceedings - Constitutional Law - Whether inconsistency between State/Territory legislation and Commonwealth legislation within the meaning of section 109 Constitution - Whether direct collision where State and Territory law, if allowed to operate, said to impose an obligation greater than that for which the federal law has provided - Whether provision of State and Territory law would qualify, impair and negate essential legislative scheme of the Commonwealth Trade Practices Act 1974 - Construction of State and Territory legislation - Whether State and Territory legislation properly construed creates new additional set of rights under State and Territory law, incorporating and building on the provisions of the Trade Practices Act - Construction of State and Territory legislation - Principles - Whether Travel Compensation Act inconsistent with Fair Trading Act 1987 - Subrogation rights at general law - Party subrogated regarded as constituting one and the same person to person whom it succeeds - Differences between pursuit of subrogated rights and pursuit of assigned rights Agents Act 1968 (ACT) Agricultural and Veterinary Chemicals (New South Wales) Act 1994 (NSW) Corporations Act 2001(Cth) Contracts Review Act 1980 (NSW) Fair Trading Act 1987 (NSW) Federal Court of Australia Act 1976 (Cth) Gas Pipelines Access (New South Wales) Act 1998 (NSW) LEGISLATION CITED : Judiciary Act 1903 (Cth) Safety, Rehabilitation and Compensation Act 1988 (Cth) Supreme Court Rules Trade Practices Act (1974) (Cth) Travel Agents Act 1986 (NSW) Travel Agents Act 1986 (SA) Travel Agents Regulation 2001 (NSW) Trustee Act 1925 (NSW) Workers Compensation Act 1987 (NSW) ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301 Airlines of New South Wales v New South Wales (No. 2) (1965) 113 CLR 54 Australian Mutual Provident Society v Goulden (1986) 160 CLR 330 Australian Securities Commission v Marlborough Gold Mines Limited (1993) 112 ALR 627 Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 Breen v Williams (1996) 186 CLR 71 Brookfield v Davey Products Pty Ltd (1996) 14 ACLC 303 Brown v Jam Factory Pty Ltd (1981) 35 ALR 79 Bruce v Odhams Press Limited [1936] 1 KB 697 Butler v Attorney-General (Victoria) (1961) 106 CLR 268 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 Clarke v Kerr (1955) 94 CLR 489 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Commercial Bank of Australia v Thomson (1964) 81 WN (Pt 1) (NSW) 553 Commercial Radio Coffs Harbour Ltd v Fuller (1986) 161 CLR 47 Compania Colombiana de Seguros v Pacific Steamship Navigation Co [1965] 1 QB 101 Cropper v Smith (1884) 26 Ch D 700 Dare v Pulham (1982) 148 CLR 658 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Duncan v Theodore (1917) 23 CLR 510 Ellis v Grant (1970) 91 WN (NSW) 920 Emmerton v University of Sydney [ 1970] 2 NSWR 633 Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643 Ex parte McLean (1930) 43 CLR 472 Femcare Ltd v Bright (2000) 100 FCR 331 Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809 Garnett v Bradley (1878) 3 App Cas 944 General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125 Gill v Registrar General (Nos 1 & 2) (1991) 5 BPR 11,587 Grace Bros Pty Ltd v Magistrates, Local Courts of New South Wales (1988) 84 ALR 492 Great Eastern Cleaning Services Pty Ltd, Re [1978] 2 NSWLR 278 Grovenor v Permanent Trustee Co of NSW Ltd (1966) 40 ALJR 329 Gurtner v Circuit [1968] 2 QB 587 H 1976 Nominees Pty Limited v Galli (1979) 40 FLR 242 Hawkins v Clayton (1988) 164 CLR 539 Howden v Travel Compensation Fund (1997) 78 FCR 374 Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 Hurley v McDonald's Australia Ltd [1999] FCA 1728 Kelly v Kelly (1950) 50 SR (NSW) 261 CASES CITED : King v Victoria Insurance Co Ltd [1896] AC 250 Krambousanos v Jedda Investments Pty Ltd (1996) 64 FCR 348 Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 Linsley v Petrie [1998] 1 VR 427 McJannet; ex parte Minister for Employment, Training and Industrial Relations (Queensland), Re (1995) 184 CLR 620 McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 McSpedden v Harnett (1942) 42 SR (NSW) 116 National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514 Neilsen Investments (Qld) Pty Ltd v Spud Mulligan's Pty Ltd [2003] QCA 207 Nella v Kingia Pty Ltd (1986) ATPR 40-723 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 Pegang Mining Company Ltd v Choong Sam [1969] 2 MLJ 52 Pinson v Lloyds and National Provincial Foreign Bank Limited [1941] 2 KB 72 Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 Qantas Airway Ltd v Cameron (1996) 66 FCR 246 R v Associated Northern Collieries (1910) 11 CLR 738 R v Credit Tribunal; Ex parte General Motors Acceptance Corporation (1977) 137 CLR 545 R v Loewenthal; ex parte Blacklock (1974) 131 CLR 338 R v Winneke; ex parte Gallagher (1982) 152 CLR 211 Registrar-General v Gill (New South Wales Court of Appeal, 16 August 1994, unreported) Rose v Hvric (1963) 108 CLR 353 Rutledge v Jaluit Pty Ltd (1991) 6 BPR 13,826 Saunders v Jones (1877) 7 Ch D 435 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Securities Exchanges Guarantee Corporation Limited v Aird (2001) 38 ACSR 185 Solomons v District Court of New South Wales (2002) 76 ALJR 1601 South Eastern Drainage Board (South Australia) v Savings Bank of South Australia (1939) 62 CLR 603 State of New South Wales v Commonwealth Bank of Australia [2001] NSWSC 1067 State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 Sydney Turf Club v Crowley [1971] 1 NSWLR 724 Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 Travel Compensation Fund v Dunn (Federal Court, 2 December 1992, unreported) Travel Compensation Fund v Internova Travel Pty Ltd (in liq) [2003] FCA 664 Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 Turner v Dalgety & Co Pty Ltd (1952) 69 WN (NSW) 228 Wallis v Downard-Pickford (North Queensland) Pty Limited (1994) 179 CLR 388 WorkCover Queensland v Seltsam Pty Ltd (2001) 53 NSWLR 518 Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 Victoria v Sutton (1998) 195 CLR 291 Yorke v Lucas (1985) 158 CLR 661 Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 Travel Compensation Fund (Plaintiff) John Harvey Blair (1st Defendant) PARTIES : George Frazis (2nd Defendant) Scott David Roworth (3rd Defendant) Gary Kenneth Toomey (4th Defendant) FILE NUMBER(S) : SC 50175/02; 50176/02; 50177/02; 50178/02; 50179/02; 50180/02; 50181/02; 50182/02; 50183/02 Mr J E Marshall SC, Mr I Mescher (Plaintiff) Mr A Robertson SC, Mr M J Leeming (First Defendant) COUNSEL : Mr S R Donaldson SC Mr R L Butler (Second and Third Defendants) Mr M R Speakman (Fourth Defendant) Mr J Kirk for the Attorneys General of New South Wales and the Australian Capital Territory, intervening Minter Ellison (Plaintiff) Corrs Chambers Westgarth (First Defendant) SOLICITORS : Deacons (Second and Third Defendant) Henry Davis York (Fourth Defendant) Crown Solicitor of New South Wales on behalf of the Attorneys General of New South Wales and the Australian Capital Territory, intervening pursuant to s. 78A of the Judiciary Act 1903 (Cth)

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Whether by reason of s40(4) of the Travel Agents Act 1986 the [plaintiff] is entitled to proceed against directors of a corporation which is alleged to have contravened the Trade Practices Act , notwithstanding that it is not alleged that the director was knowingly involved in the contravention within the meaning of s75B of the Trade Practices Act . Whether by reason of s40(4) of the Travel Agents Act 1986 the [plaintiff] is entitled to proceed against directors of a corporation which is alleged to have contravened the Fair Trading Act , notwithstanding that it is not alleged that the director was knowingly involved in the contravention within the meaning of s61 of the Fair Trading Act . 2 Like motions for Part 31 orders are pursued in the other suits albeit comprehending the precise terms apt to embrace each of the relevant Travel Agents Acts. The Proceedings 3 The nine sets of proceedings comprise test cases in which the Travel Compensation Fund ["the Fund"] or ["the TCF"] seeks relief from four defendants [Messrs. Blair, Frazis, Roworth and Toomey] all of whom are alleged to have at material times been directors either of Ansett Australia Limited or of its wholly owned subsidiary Traveland Pty Ltd ["the travel agents"], both of which were part of the Ansett group of companies. The proceedings are underpinned by close to identical legislation in New South Wales [the Travel Agents Act 1986 (NSW)], South Australia [the Travel Agents Act 1986 (SA)] and the Australian Capital Territory [the Agents Act 1986 (ACT)] ["the Acts" or "the TAA"] 4 Of the nine proceedings before the Court, four involve claims under the NSW Act (nos. 50176, 50178, 50181 and 50182 of 2002), three involve claims under the SA Act (no.s 50175, 50179 and 50180 of 2002), and the remaining two involve claims under the ACT Act (no.s 50177 and 50183 of 2002). 5 Although each set of proceedings is not pleaded in identical terms, the degree of commonality is overwhelming and such that it is in the main, unnecessary for present purposes to differentiate between the suits. For that reason it is convenient to select one suit and at least initially, to address the disparate issues by reference to that suit. The suit selected is that by reference to which certain of the written submissions were addressed, namely proceedings 50176 of 2002 ["the Dean proceedings"] in which the relevant Act is that of New South Wales. [It is convenient to refer to the New South Wales Act as "the Act"] Background to the TCF and recoupment actions 6 The TCF was established by several of the States in 1986 as a cooperative scheme for the regulation of travel agents and to provide a fund to protect consumers of services offered by travel agents (termed "claimants" in the Acts and in the Further Amended Summons). The scheme has many similarities to the Fidelity Fund operated by the Law Society of New South Wales and the National Guarantee Fund administered by the Securities Exchanges Guarantee Corporation ("SEGC"). 7 The financial collapse of the travel agents has resulted in the TCF making payments out of the fund of approximately $11 million to some 12,000 claimants. 8 Initially the TCF commenced two actions, one in respect of Ansett claimants and the other in respect of Traveland claimants. Those two actions have been held in abeyance while the nine so called test cases are being dealt with by the Court. 9 The ability of the TCF to make payments to claimants is a function of its ability to replenish the fund. This the TCF does by levies on travel agents and by recovery actions. In the context of a different fund Bergin J said (Securities Exchanges Guarantee Corporation Limited v Aird (2001) 38 ACSR 185 at p210 para [116] and p211 para [124]):

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[new] An order for the refund of $3,590.00 pursuant to s40(4) of the Travel Agents Act as that section provides a cause of action to the first plaintiff for relief against the defendants analogous to that available to Brad Nathan Dean and Cheryl Raelene Dean (nee Hill) against Ansett under s87(2)(c) of the Trade Practices Act and s72(5)(d) of the Fair Trading Act . The submissions 17 The defendants oppose the granting of leave to amend on a number of bases. A constitutional question has been raised and the State of New South Wales and the Australian Capital Territory have been granted leave to intervene in order to address that question. Mr Kirk of counsel has represented the Attorneys in that regard. 18 The general course taken by the defendants has been to deliver separate sets of submissions in support of the proposition that the Court ought not grant leave to amend. Those submissions travel the full gamut of treating with questions such as: · whether causes of action have been adequately pleaded; · the suggested improper constitution of the record both in terms of the proposition that the TCF has no locus to bring proceedings and that Ansett and Traveland are necessary and proper parties; · the proper construction of the term "travel arrangements" or "travel-related arrangements" as used in clause 15.1 of the Trust Deed; · construction issues tied to the claim that no right of subrogation arises unless particular matters which are not pleaded are established [there are a number of sections of the proposed pleading using the prefatory averment "without admitting that it is a matter which the TCF needs to establish" and then proceeding to allege particular matters"]; and · disparate other problems with the pleading including the suggested impropriety of pleading that a person who is a director within the definition of 'director' in section 9 of the Corporations Act 2001, is a director within the meaning of that term in the Travel Agents Act, and including questions of particulars. 19 The convenient course would seem to be as follows: · to commence by setting out the principles which inform the exercise of the discretion to grant leave to amend; · to outline some of the more formal matters concerning the Trust Deed and the Act ["the scheme"]; · to deal with the attack on the amendments seeking to plead cases based on the TPA embracing the questions of construction concerning legislation; and · to deal with the other disparate matters raised by the several defendants. The Principles 20 The principles which are to be applied by the Court in dealing with an application for leave to amend are well established. 21 In State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 the High Court carefully analysed the development up to January 14 1997, of approaches taken to the exercise of the discretion to permit amendments to pleadings. Generally that judgment of the High Court, without purporting to be exhaustive, serves to set out the types of consideration which ought to direct the mind of the decision maker on such applications. However, the court accepted that the trial judge is afforded a large discretion in relation to the exercise and that it would be unwise and contrary to principle to seek to fetter that discretion with rigid rules. The special significance of the decision is to direct the mind of the decision maker to many of the considerations which may be taken into account in exercising the discretion and to emphasise, if it needed to be emphasised, that justice is the paramount consideration in determining such an application. 22 J L Holdings dealt, of course, with the particular circumstances before the court and whilst the general statements to be found in the joint judgment of Dawson, Gaudron and McHugh JJ and in the judgment of Kirby J assist a decision maker considerably, the obvious fact is that each and every case in which an application for leave to amend is pursued requires the court to deal with the special and peculiar matrix of circumstances which obtain at the material point in time in the litigation in respect of which such application is pursued. 23 To my mind the following statements of principle affirmed in JL Holdings are fundamental and clearly and succinctly express the general approach to be taken:

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28 As Barwick CJ said in General Steel at 129, the subject expressions occur in cases of different types. However, once it appears, as his Honour pointed out, that there is a real question to be determined, whether of fact or law, and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action. Pleading and particulars 29 Of course an applicant for leave to amend must satisfy the court that an arguable case has been properly pleaded. It may be taken as a given that "the plainest and most fundamental of all the rules of pleading" is that "all the material facts constituting the cause of action ought already to have been plainly stated in the pleading itself". [Pinson v Lloyds and National Provincial Foreign Bank Limited [1941] 2 KB 72 at 75; see also H 1976 Nominees Pty Limited v Galli (1979) 40 FLR 242 at 246-7] 30 Further, whereas the object of particulars is to prevent the opposite party being taken by surprise at the trial of an action and to identify the issues of fact to be investigated at the hearing, it is simply not the function of particulars to take the place of necessary averments in the pleading of the material facts: [Saunders v Jones (1877) 7 Ch D 435 at 451; R v Associated Northern Collieries (1910) 11 CLR 738 at 740; Bruce v Odhams Press Limited [1936] 1 KB 697 at 712-3; McSpedden v Harnett (1942) 42 SR (NSW) 116 at 119; Kelly v Kelly (1950) 50 SR (NSW) 261 at 265; Turner v Dalgety & Co Pty Ltd (1952) 69 WN (NSW) 228 at 229; Commercial Bank of Australia v Thomson (1964) 81 WN (Pt 1) (NSW) 553 at 557, 558; Ellis v Grant (1970) 91 WN (NSW) 920 at 924, 925; Emmerton v University of Sydney [ 1970] 2 NSWR 633 at 635; Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 at 219, 220, 221; Dare v Pulham (1982) 148 CLR 658 at 664] The Scheme 31 The Participation Agreement makes reference to a compensation fund. 32 Section 3 (1) of the New South Wales Act defines "compensation scheme" as meaning the scheme prescribed under section 57. 33 Section 57 of the Act provides inter alia: (1) The Governor may make regulations, not inconsistent with this Act, for or with respect to any matter that by this Act is required or permitted to be prescribed, or that is necessary or convenient to be prescribed, for carrying out or giving effect to this Act. (2) The regulations may: (a) prescribe a scheme for compensating persons who suffer a pecuniary loss by reason of an act or omission by a person who carries on, or carried on, business as a travel agent;

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Ordinarily, the reference to "subrogation" in s40(3) would be construed as picking up the meaning in equity, in the same way as that word in other State legislation (involving consumer protection funds) has been construed: Registrar-General v Gill (New South Wales Court of Appeal, 16 August 1994, unreported); Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 at 85. - However, subrogation is distinct from assignment, and in particular a party asserting subrogation could never sue in that party's own name: see eg Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643 at 663; Linsley v Petrie [1998] 1 VR 427 at 445. - Section 52 of the Travel Agents Act proceeds however on the premise that the TCF can sue in its own name. · The position was analysed, and resolved, by Lehane J in Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 at 373-4 as follows: "Thus if, as a result of an act or omission of a person carrying on business as a travel agent, a third party (the claimant) has rights against that person and the compensation scheme trustees, "by reason of" the act or omission, make a payment to the claimant then the compensation scheme trustees are subrogated to those rights. Clearly, that means that in those circumstances the compensation scheme trustees stand in the shoes of the claimant: it is the claimant's rights, no more and no less, of which the subsection gives them the benefit. The assumption then appears to be (perhaps oddly, given the use of the word "subrogated", it is not spelt out) that the compensation scheme trustees may in their own name proceed to sue the travel agent to enforce the right which they are given; and although the claimant may have no rights against directors of the travel agent, if it is a corporation, subs (4) enables the compensation scheme to "enforce" the claimants' rights against the corporate travel agent jointly and severally against the agent and those who were its directors at the relevant time, other than a director who makes out the defence for which subs (5) provides. To provide that A is subrogated to B's rights against C, where B has no concurrent claim against D, and that A may "enforce" jointly and severally against C and D the "right" which it thus gets by subrogation, is perhaps a somewhat elliptical way of imposing (for the benefit of A) a coordinate liability on D in respect of B's claim against C: a liability to which, but for the statutory "subrogation", D would not be subject (and which D still does not owe to B). That, however, appears clearly enough to be the intention of the provision, and it is the effect attributed to it by Wilcox J in Travel Compensation Fund v Dunn (Federal Court, 2 December 1992, unreported). I think I should proceed on the basis that that is the way in which subs (4) operates: no argument to the contrary was put to me." [emphasis added] [An appeal was dismissed: Travel Compensation Fund v Travel Guide Pty Limited (in liq) (1997) 72 FCR 371 ] · Section 52 does not create liability; rather, it imposes a norm of conduct: Brown v Jam Factory Pty Ltd (1981) 35 ALR 79; Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [99]. The other provisions in Pt V and Pt IVA of the Trade Practices Act, contraventions of which the TCF seeks leave to allege, are in no different position. · The right to recover damages by action where there has been a contravention of a provision of Pts IVA or V is given by ss82 and 87. · That right is given only to persons who suffer loss or damage "by" the conduct of a person in contravention of the statutory norms. It is established that a claim for damages under s82 of the Trade Practices Act cannot be assigned: National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514 at 537-539 (Lindgren J), where earlier authorities are set out; Brookfield v Davey Products Pty Ltd (1996) 14 ACLC 303 at [65]-[76] per Branson J; Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218 (Full Court). The principal reason for this, as Lindgren J held in National Mutual, is that: "only the [putative assignors] could possibly have satisfied the statutory descriptions of being persons who suffered loss or damage caused "by" or "as a result of" the conduct described in the statutes." · The same applies in the case of s87, save that it is sufficient for the person to be likely to suffer loss or damage.

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(b) against any person "involved in" the contravention. · Section 75B does not give rise to liability independently of s82 or s87: Nella v Kingia Pty Ltd (1986) ATPR 40-723; Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 36; Neilsen Investments (Qld) Pty Ltd v Spud Mulligan's Pty Ltd [2003] QCA 207 at [19]. Rather, s75B is definitional of the persons against whom the statutory right of action is given. · The words "involved in" are defined, exhaustively, by s75B, and requires the person to have knowledge of the essential matters which make up the contravention: Yorke v Lucas (1985) 158 CLR 661. 44 The first defendant then submitted that the following are the defects in the TCF proposed pleading: · The TCF does not allege that it suffered (or is likely to suffer) loss or damage "by" the alleged contraventions of the Trade Practices Act. As such, it is not itself able to sue for s82 damages or s87 orders (which are premised on the moving party having suffered, or being likely to suffer, loss or damage) unless somehow the cause of action alleged to have been possessed by the claimants has become assigned to TCF. This cannot happen as a matter of private law (see the authorities set out above). · Nor could this happen by reason of s40 of the Travel Agents Act, because so to do is inconsistent with what is established by ss82 and 87 of the Commonwealth Act and so invalid by reason of s109 of the Constitution. · The TCF does not allege that the defendants were "involved in" the alleged contraventions as those words are defined in ss82 and 87. Rather, the TCF alleges the contravention by the companies, from which it is said to follow that the directors are (in effect, vicariously) liable. · This is in the teeth of what the Trade Practices Act provides. The TCF seeks to plead a case whereby it, as opposed to the claimants, has standing to sue to recover ss82 or 87 relief, notwithstanding that it has not suffered loss, and whereby a director is liable not by reason of s75B knowing involvement but by reason of the strict liability in s40(4) of the State Act. · In Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at [27], the Full High Court said: "However, it is clearly established that there may be inconsistency within the meaning of s 109 although it is possible to obey both the Commonwealth law and the State law. Further, there will be what Barwick CJ identified as "direct collision" where the State law, if allowed to operate, would impose an obligation greater than that for which the federal law has provided. Thus, in Australian Mutual Provident Society v Goulden , in a joint judgment, the Court determined the issue before it by stating that the provision of the State law in question "would qualify, impair and, in a significant respect, negate the essential legislative scheme of the Life Insurance Act 1995 (Cth)" ." [Footnotes omitted] 45 The first defendant further submitted that this too is a case of a "direct collision". The proposition is that the federal law relevantly imposes an obligation only upon persons knowingly involved in a contravention, while, on the TCF's construction, the State law purports to impose a "greater obligation" upon directors, namely vicarious liability upon the directors, subject to their making out a defence under s40(5). The proposition is that the State law also seeks to "qualify", "impair" and "negate" the scheme to liability created by ss82 and 87. Section 109 of the Constitution prevents this from occurring. The first defendant's submissions from the bar table 46 During the course of address from the bar table the first defendant's submissions ultimately focused upon the following propositions: · the essential question is whether one can find a basis for concluding that somewhere within section 40 (4) [or in the gap between section 40 (3) and section 40 (4)] or somewhere within sections 40 (3) and (4), there are words to justify section 40 (4) of the Act being properly construed as creating a new additional set of rights under State law, though incorporating and building on the provisions of the TPA; · the answer to that question is in the negative. Hence section 40(4) upon its proper construction, does not address claims under the TPA; · that this answer is correct may be seen from the following considerations: - Had the answer been in the positive, the intention of the New South Wales Parliament must have been to furnish the TCF with rights which in effect permit the disaggregation of the TPA. That is to say, the intention of the Parliament must have been that [upon payment being made to a claimant under the travel compensation scheme by reason of an act or omission actionable by a claimant, being an act or omission in contravention of Part V of the TPA by a company carrying on business as a travel agent], the TCF would be furnished with two forms of entitlement arising by reason of a combination of the Act and the TPA: - The first such entitlement is: - the TCF's right to be subrogated to the rights of the claimant not only against the company, but also against those persons who were " involved in [the] contravention" within the meaning of that term in the TPA [the section 40 (3) Act subrogated rights] - The second such entitlement is: - the TCF's right not only to be subrogated to the rights of the claimant against the company but also, - the TCF's right [which was never a right of the claimant ], to enforce on a strict liability basis against persons who were the directors of the company at the time of the act or omission, the rights of the claimant against the company; · a close examination of the TPA makes plain that rights and liabilities are created by Part 6. Hence section 82 provides that: "A person [ here the claimant ] who suffers loss or damage by conduct of another person [here the corporate travel agent ] that was done in contravention of a provision of [Part IV, IVA], … or V or … may recover the amount of the loss or damage by action against that other person [ here the corporate travel agent ] or against any person involved in the contravention [ here the directors ]";

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· precisely the same form of wording referring again to the phrases "the person who engaged in the conduct" or "a person who was involved in the contravention", may be found in section 87 (1) and (1A); · section 75B far from being the source of liability, merely serves to give an internal dictionary definition of the words "person involved in a contravention of [relevant TPA Parts]". This term is used in sections 82 and 87 to impose civil liability in respect of contraventions of the provisions of relevant Parts of the TPA [cf Yorke v Lucas (1985) 158 CLR 661 at 668]; · there are authorities which support the proposition that it is not possible to plead a tort of conspiracy to contravene the provisions of the TPA at common law, outside the form of conspiracy expressly provided for in the TPA, the reason being that the TPA covers the field in relation to contraventions thereof: cf McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 per Weinberg J at [197] and the cases there cited; Krambousanos v Jedda Investments Pty Ltd (1996) 64 FCR 348 at 355 where Branson J said "Section 82 of the Trade Practices Act makes it plain that an action for damages brought by a person who suffers loss or damage by conduct of another that was done in contravention of provision of Pt IV or V of that Act may only be brought against the person who contravened the Act or a person involved in the contravention." [emphasis added] · the rights conferred by section 40 (3) [as referred to in section 40 (4) of the Act] are relevantly the claimant's TPA rights derived from Part 6, meaning each and every of such rights so conferred by the TPA. Those rights must be regarded in holistic fashion as including as an essential part thereof, the rights to recover the amount of loss or damage by action against persons who were involved in a contravention of relevant Parts of the TPA; · it is important to bear in mind that rights conferred by section 40 (3) represent one half only of the equation, the second half being the liabilities of those against whom the rights may be exercised. In that sense those persons alleged to have been involved in a contravention of the relevant Parts of the TPA who may therefore become liable to pay the amount of loss or damage to a claimant are accordingly entitled to have the question of liability determined by Part 6 of the TPA and not by some other route "picked up" by some other legislation unless that other legislation very plainly requires this result; · the Act does not very plainly or at all require this result. 47 It is said to follow that insofar as the proposed Amended Summons seeks to plead cases based on the TPA, those amendments should be disallowed. Dealing with the issue 48 Close submissions have also been addressed to the constitutional question: · by the TCF; · by the Attorneys. In what follows a number of those submissions are adopted as correct. Not all are accepted as correct. Fundamental parameters 49 It seems to me that it is important to bear in mind the following considerations: · certainly and as the Attorneys submitted, the heart of most of the issues rests on questions of construction of the Act; and · it is crucial to acknowledge that rights arising under Section 40 (4) are new substantive rights held only by the TCF, albeit that they are calculated by reference to the loss or damage suffered by the claimants. The liability is a coordinate and separate liability [cf TCF v Travel Guide supra per Lehane J at 373-374]. The effect of section 40 (4) is (1) to incorporate by reference and (2) then to extend, other legal rights and causes of action. 50 Whilst for obvious reasons it is all very well to focus upon the proper construction of Section 40 (3), the cases sought to be pursued by the TCF are cases only against directors of body corporate travel agents, which travel agents have acted or omitted to act in a manner giving rise to the claimants having relevant rights against such travel agents. Section 40 (3) - The type of rights which are subrogated 51 There is no limitation expressed in s 40(3) as to the type of rights which are subrogated. As the Attorneys submitted, prima facie, the words "the rights of the claimant" extend to all relevant rights, including rights arising under or relating to federal laws such as the TPA. Concept of subrogation 52 I accept as correct the following submissions put on behalf of the Attorneys: · the right granted to the TCF by s 40(3) arises by way of it being "subrogated". It may be accepted that the use of this word by the Parliament was intended to invoke the concept of subrogation as it is understood at general law, subject to indications to the contrary in the Act: see Gill v Registrar General (Nos 1 & 2) (1991) 5 BPR 11,587 at 11,589-90, upheld in Registrar-General v Gill (New South Wales Court of Appeal, 16 August 1994, unreported, BC9402892); Law Society of NSW v Bruce (1996) 40 NSWLR 77 at 85F per Giles CJ Comm D; · thus it has been held that pursuant to s 40(3) the TCF trustees "stand in the shoes of the claimant: it is the claimant's rights, no more and no less, of which the subsection gives them the benefit": Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 at 373G per Lehane J, upheld on appeal Howden v Travel Compensation Fund (1997) 78 FCR 374; see also Travel Compensation Fund v Internova Travel Pty Ltd (in liq) [2003] FCA 664 at [9] per Bennett J; · so construed, there can be no constitutional objection to the TCF pursuing the rights of the claimant, including any potential rights under the TPA. The situation here is distinguishable from the cases in which it was held that claims under the TPA may not be assigned: see eg Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218-19. When a subrogated right is pursued, it is the right of the claimant being litigated, in relation to damage caused to the claimant by the conduct of the contravening party. As Sheldon's Law of Subrogation puts it (as was quoted and approved in Gill v Registrar General per Young J at 11,590), the "substitute is put in all respects in the place of the party to whose right he is subrogated … The party who is subrogated is regarded as constituting one and the same person with the creditor who he succeeds"; and · whilst it is TCF which controls such litigation, there is nothing novel or objectionable about that. It is a commonplace when insurers pursue claims held by insureds, when a next friend litigates on behalf of a person with an incapacity, or when a representative party pursues claims on behalf of others in representative proceedings. As the Full Federal Court stated in rejecting a challenge to the constitutional validity of the representative proceedings scheme in Part IVA of the Federal Court of Australia Act 1976 (Cth), "[t]here is nothing unusual about the judicial power being exercised in relation to controversies generated by one person on behalf of another": Femcare Ltd v Bright (2000) 100 FCR 331 at [97]. It would be very surprising were the Commonwealth Parliament to have intended to prevent TPA claims being litigated in these circumstances. Proceedings being brought in the name of the TCF 53 Although certain of the parties addressed close submissions to the question of whether or not proceedings to enforce subrogated claims under section 40 (3) could be brought in the name only of the TCF, the proceedings before the court are in essence grounded upon Section 40 (4). And in relation to Section 40 (4), as has a really been pointed out, there can never be any question but that the only relevant plaintiff is the TCF. It is therefore appropriate that s 52 of the NSW Act enable the Fund to institute proceedings in its own name. As Sackville J stated in Howden v Travel Compensation Fund (1997) 78 FCR 374 at 379), "the clear intention of s 52 is to allow compensation scheme trustees who have an enforceable right to recover moneys from the director of a company to take proceedings in the name of the Fund". 54 Notwithstanding this consideration it seems convenient to set out the close submissions which were addressed to situations where Section 40 (3) proceedings were brought, insofar as the proper plaintiff is concerned. 55 These submissions by the Attorneys were: · Section 52 of the NSW Act provides that the TCF "may" sue and be sued in the name of the Fund. It does not require that this be done. · Further, the section does not expressly provide that this power (and liability) extends to situations where the TCF is pursuing subrogated rights. The provision would have work to do in any case. If it does not extend to such claims, then subrogated claims under s 40(3) could simply be brought in the name of the claimant - as is apparently being done in the Dean proceedings in the current matters. · Nevertheless, it is reasonably open to hold that s 52 does extend to allow the TCF to bring such claims in its own name. That is the view which has previously had general acceptance: eg Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 at 373G; Howden v Travel Compensation Fund (1997) 78 FCR 374. · The key difference between pursuit of subrogated rights and assigned rights is that an assignee may (subject to the terms of the assignment) keep all the fruits of the litigation, even if these exceed what has been paid for them: Compania Colombiana de Seguros v Pacific Steamship Navigation Co [1965] 1 QB 101 at 121 per Roskill J. In contrast, a person pursuing subrogated rights is only entitled to recover the amount they have paid, with the original claimant being entitled to keep the remainder: Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 per Diplock J. · Here, there can be little doubt that the subrogated rights given to the TCF were intended to be exercised for the benefit of consumers, not of the TCF itself, and that any excess recovered would belong to the claimant. Thus the rights given by s40(3) are, in truth, subrogated rights. · Once the substance of the matter is understood, the issue of the name in which the proceedings are brought is of peripheral importance. Whilst the general law doctrine of subrogation only enables claims to be brought in the name of the original party, the statutory invocation of the doctrine is subject to being construed in the context of the Act: Gill v Registrar General (Nos 1 & 2) (1991) 5 BPR 11,587 at 11,589; State of New South Wales v Commonwealth Bank of Australia [2001] NSWSC 1067 at [92] and [101]. · In any case, it is a mere matter of form. As Sackville J stated in Howden at 379C, s 52 is "a procedural provision". It would be unobjectionable, for example, were State laws or rules to provide that a partnership could sue or be sued under its trading name. Such rules would have no effect on the extent or character of the claim, and could not reasonably be construed as inconsistent with the TPA. Similarly, the rights litigated under s 40(3) are the rights of the claimant, and the extent of the TCF's control and ability to claim for those rights is governed by the doctrine of subrogation. The name in which the action is brought does not affect those characteristics, and creates no inconsistency with ss 82 and 87 of the TPA. 56 I return to deal with the matter below. 57 But the cases presently before the Court are Section 40 (4) cases and it is to that section that it is necessary to now turn. Section 40 (4) 58 In my view the New South Wales Parliament could not have intended the provision to directly modify or interfere with rights or liabilities under the TPA or other federal statutes. But does section 40(4) properly construed effect any such modification or interference? 59 The real question is whether: · the section should be construed as creating a new and additional set of rights under State law (though incorporating and building on the provisions of the TPA), [in which case no question of direct modification or interference with the TPA or other federal statutes arises]; or · the section should be construed as not having any application in relation to: (1) TPA claims generally [in which case no question of such modification or interference arises]; or

[91]

(2) claims made against directors under accessorial liability provisions of the TPA [in which case no question of any such modification or interference arises concerning accessorial liability]. 60 It is possible to posit the real question in a slightly different fashion so as to make the point. This involves hypothetically writing additional words into section 40 (3). 61 The hypothetical section 40 (3) would read: "Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are, save insofar as accessorial or other rights against directors of travel agent corporations are concerned , subrogated to the rights of the claimant in relation to the act or omission." 62 Section 40 (4) would continue to read: "Where the rights conferred by sub-section (3) on the compensation scheme trustees are exercisable against a body corporate, those rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission and severally against the body corporate and each of those directors." 63 The submissions of the first defendant, at least in part, appeared to thumbnail sketch the plaintiffs construction as proposing that: · one construed the existing wording of section 40 (3) in the same way as one would construe the hypothetical section 40 (3) and · one retained the existing wording of section 40 (4). 64 The submissions of the Attorneys General of New South Wales and the Australian Capital Territory and of the TCF were that it was unnecessary to read any particular words into the existing subsections, although those subsections could plainly have been better drafted with the requisite precision. 65 There is however a very obvious difficulty with the existing wording because, as a manner of English, section 40 (3) clearly gives to the TCF, the subrogated rights of the claimant in relation to the relevant act or omission, being all such rights including: · rights [including rights under the TPA] against a travel agent body corporate ["rights class 1"]; and · accessorial TPA rights against persons [including directors], who were involved in a contravention of the TPA. ["rights class 2"]. 66 And again as a manner of English, the wording of section 40 (4) clearly permits the TCF, by reason of its having been subrogated to the rights class 1, to enforce those rights on a strict liability basis against the persons who were the directors of the travel agent body corporate at the time of the relevant act or omission. This must and can only involve a parliamentary intent to permit the TCF to elect to jettison [that is to say to elect not to rely on], the rights class 2 - making it all the more curious that they were ever granted by section 40 (3) in the first place. The curious nature of this result is the essential strength of the submissions put by the first defendant. 67 Returning to the submissions by the Attorneys, it was put that the new substantive rights conferred by Section 40(4) build on rights held by claimants but are additional to and separate from them. The effect of s 40(4) is said to incorporate by reference, and to then extend, other legal rights and causes of action. 68 I accept that there is nothing unusual in the suggestion that a statutory provision can create new rights and duties in such a fashion. As the Attorneys have submitted, that was the very basis on which a number of cooperative schemes worked. Similarly, ss 68 and 79 of the Judiciary Act 1903 (Cth) incorporate and give federal effect to State laws (as they exist from time to time) that are picked up and applied in federal jurisdiction. Those laws then become "surrogate federal laws"; they are no longer given effect merely as State laws: eg Solomons v District Court of New South Wales (2002) 76 ALJR 1601 at [15] - [21], [74]. 69 A number of further examples were given by Mr Kirk. These included the predecessors to the Corporations Law and the ASIC Law. Those Acts applied only to the Australian Capital Territory and by State Acts of Parliament, the ACT Act was not only picked up and applied as the law of New South Wales, but further was picked up in an ambulatory way so that when the Federal Government had occasion to amend the Corporations Law, this automatically applied without an amendment to the New South Wales scheme being required. Another example is to be found in the Agricultural and Veterinary Chemicals (New South Wales) Act 1994 (NSW) which picks up and applies a code provided for in the ACT. Another example is the Gas Pipelines Access (New South Wales) Act 1998 (NSW) which picks up and applies a South Australian Act in an ambulatory fashion as a law of New South Wales.

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It is submitted that by reason of section 42(1) TAA Parliament intended that any rights or remedies available to Claimants against travel agents (under the TPA or otherwise) would not in any way be modified or excluded by the provisions of section 40 TAA. The TAA is designed to protect consumers (section 42(2) TAA) and the provisions of section 40 should not be read as intending to, in any way, impair or negate the effect of remedies available to Claimants under the provisions of Part V or Part IVA TPA. The provisions of s42 TAA are yet another indication that it was not intended that the provisions of s40 TAA should be directly inconsistent with any federal law which confers rights on consumers. Dealing with the problem 82 Ultimately it has to be said that the submissions threw up a real anomaly in the wording of subsections (3) and (4) of the Act. Following the careful submissions put by the parties, it seems to me that it cannot be said that the TCF has not shown an arguable case in support of the construction for which it contends. In the nature of things, the construction issue is live to be litigated. And there are clearly many circumstances where a Commonwealth law has been held to operate within the setting of other laws, hence being supplementary to or cumulative upon particular State laws in question [cf Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at [27] and cases cited at footnote 62]. The court cannot be satisfied that the TCF case cannot succeed. The court cannot be satisfied that there is no possibility that the TCF has not grounded the proceedings upon a good cause of action. There is a real question of law to be determined. Subject to the determination of the particular objections of the defendants referred to hereunder, it is clearly an appropriate exercise of the court's discretion to allow the amendments. Fair Trading Act causes of action 83 There is no material difference of substance between the cases sought to be pleaded by TCF based upon the TPA and those sought to be pleaded based upon the FTA in the sense that, as earlier made plain, both cases are sought to be pressed notwithstanding that:

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the TCF can sue not merely Ansett and Traveland, but also the directors of those companies who are in effect vicariously liable. 85 Insofar as the FTA causes of action of concern there is no constitutional imperative inhibiting the claim. Here the real issue concerns one of statutory construction, the FTA being a law of the State. The submissions of the first defendant 86 The submissions of the first defendant included the following: · The rights which are vested in the TCF are the statutory rights of action created by ss68 and 72 of the FTA (the equivalents to ss82 and 87 of the TPA). Those rights of action are defined as being available against persons who committed the conduct or persons "involved in" the conduct. Section 61 is the State version of s75B and uses the language "A reference in this Part to a person involved in a contravention of a provision of this Act shall be read as a reference to a person who . . .". Those rights of action are given to persons who have suffered loss or damage (or in the case of s72 are likely to suffer loss or damage). · The Travel Agents Act 1986 does not rewrite or redefine those rights of action. In particular, there is no basis for taking the right of action against persons who were "involved in" the conduct, and altering that right into a different right involving, in effect, vicarious liability on the part of a director. The right of statutory "subrogation" is to the right enjoyed by the claimant to whom the TCF has made a payment. · The TCF's construction to the contrary involves a direct clash between two State Acts. There is no reason why the latter Act (the Fair Trading Act) would not prevail - since it is last in time and deals more specifically with the right of action. The submissions of the plaintiffs 87 The plaintiffs submitted that: · section 109 of the Constitution does not necessarily provide safe guidance in a case which concerns statutes of the same legislature and alleged inconsistency between such statutes: Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 ("Suatu") at 546 per Gummow J; · where the comparison is to be made between two State Acts, there is a very strong presumption that the State legislature did not intent to contradict itself but intended that both Acts should operate. It will often be found that the two may reasonably and properly be reconciled by reading the one as subject to the other: Butler v Attorney-General (Victoria) (1961) 106 CLR 268 at 276; Suatu at 547; · the words of the later enactment must be "such as by their necessity to import a contradiction": Rose v Hvric (1963) 108 CLR 353 at 360; Garnett v Bradley (1878) 3 App Cas 944 at 966. The later enactment must contain clear language from which it is plain that its provisions should be applied (and intended to apply) in a manner inconsistent with the earlier enactment: South Eastern Drainage Board (South Australia) v Savings Bank of South Australia (1939) 62 CLR 603 at 625; · in light of the above that the provisions of sections 68, 72 & 61 FTA (and the equivalent provisions in South Australia and the ACT) are not inconsistent with section 40 TAA; · it is not clear or plain from these provisions of the FTA that they were intended to repeal the provisions of section 40 TAA, especially when one considers that it is presumed that no such contradiction exists between the two State statutes; · it does not necessarily import a contradiction between the State enactments; · for reasons similar to those above, they simply deal with different subject matters or, in the alternative, serve different ends in respect of the same subject matter - ie consumer protection; · the defendants have not rebutted the presumption that the provisions of the FTA should be reconciled with the provisions of the TAA; and · for there to be a relevant inconsistency or implied repeal between the two State statutes, the language of the later enactment must be clear and unambiguous. This is simply not the case with respect to the provisions of sections 68, 72 and 61 FTA. Conclusion 88 I am far from persuaded that the matter is sufficiently clear in the defendants favour to justify the Court in refusing the leave to amend. 89 I turn next to examine other submissions put in opposition to the proposed amendments based upon the FTA causes of action which the TCF seeks to pursue. It is necessary to proceed on a piecemeal basis dealing with each of the alleged obstacles to leave to amend being granted. Some of these submissions overlap with others. The submissions are generally dealt with seriatim. TCF not subrogated to the alleged rights under the FTA

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Allegation that no cause of action under the FTA has been properly pleaded 90 The second and third defendants have submitted as follows: · the right of statutory subrogation which the TCF seeks to exercise arises under subsections 40(3) and (4) of the Act where payment is made: - Under the Compensation Scheme; and - By reason of an act or omission of a registered travel agent; · the rights to which TCF is "subrogated" are rights against the travel agent arising from the act or omission which gave rise to the entitlement to payment of compensation; · under the terms of the Deed of Trust establishing the Compensation Scheme, payment under the Scheme may be made, and may only be made, in the circumstances described in paragraphs 15.1 and 15.2 of the Deed; · accordingly, in order to establish the existence of the right of statutory subrogation, TCF must establish the existence of acts or omissions which were sufficiently connected to the agent's failure to account so as to satisfy the requirement of subsection 40(3) that the entitlement to compensation arose "by reason of" that act or omission; · TCF now wish to assert that the contracts pursuant to which travel or travel-related services were provided were entered into as a consequence of misleading conduct, or conduct in breach of section 58(b) of the TPA, on the part of Ansett or Traveland; and · even if it could be established that some proper basis exists for asserting the existence of such causes of action, compensation was not payable under the scheme "by reason of" misleading and deceptive conduct inducing the entry into the contract. Compensation was payable only as a consequence of a failure to account. The right of statutory subrogation arises only in connection with acts or omissions by reason of which such failure to account occurred. 91 Here again I am not satisfied that the analysis is sufficiently certain to justify withholding leave to amend. The submissions which were advanced in terms of the suggested commonsense causation notions said to determine whether a breach of TPA section 52 [by way of the inducing of a claimant to entry into a contract with a travel agent] is an act by reason of which the trustees made a compensation payment under the scheme, may certainly be litigated. The matter cannot be said to be sufficiently certain against the TCF to stand in the way of the application for leave to amend. 92 A permissible view may be that there is a line, albeit a narrow line, between on the one hand, the notion of compensation payable by reason of misleading and deceptive conduct inducing entry into contracts and on the other hand, the notion of compensation payable only as a consequence of a failure to account. Another view may deny this distinction as having a relevance to the close question of construction. The above analysis put by the second and third defendants is insufficient to deny TPA an entitlement to have the matter litigated. 93 In this regard I note the plaintiffs submissions which make it even clearer that this is a matter requiring to be litigated:

[116]

The material which has been served suggests that no basis exists for the allegation that express promises were made to the effect alleged. The TCF has previously confirmed to the Court that it has served all its lay evidence. In relation to the Dean proceedings, the lay evidence relied upon by the TCF is the witness statement of Cheryl Raylene Dean, dated 21 March 2003. Therefore, the TCF ought now to be able to provide proper particulars of the express terms it alleges. The TCF's continued inability to particularise these terms suggests that they have no proper basis for pleading them. Having regard to the history of the matter, leave should not be granted to permit apparently baseless allegations to be raised. 96 The submission extends the distance of asserting that this is an amendment predicated "upon patently baseless allegations". 97 The approach taken by Mr Donaldson SC for the second and third defendants sought to have the Court disallow the application for leave to amend to plead the alleged express terms [paragraph 39 Dean] essentially on two related bases: · a failure to provide proper particulars of each of the express terms; and · a claim that to the extent that certain particulars have been furnished of the express terms, they are patently inconsistent with the evidence already served in the form of a statement of Mrs Dean. 98 In my view there is no substance in the second of these claims. One cannot, at least at the present point in time in these complex proceedings, mobilise the Overriding Purpose Rule in this case into a backdoor route by which to test TCF's case. 99 As to the first matter, a failure to provide particulars is always a matter of concern and notwithstanding that in relation to certain other matters dealt with below, it is appropriate to allow the furnishing of particulars after discovery [when the relevant materials are not in the possession of the TCF which has given the best particulars its presently able to give], particulars of the subject express terms are required to be given by the TCF and an order in that regard will be made. Lack of particulars of the implied terms-paragraph 40 of proposed Further Amended Summons [Dean] 100 TPA seeks to plead that the following were implied terms of the Agreement:

[135]

That is to say, no question of there being an obvious implication arises in such a case because that which is obvious will be a term of the contract as a matter of inference. Moreover, the line between inference and implication will not always be easy to draw." 105 Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 casts further light upon some of the intricacies of implication: Mahoney JA said (at 684 - 685) "A warranty as to what an employer will or may do for his worker may come into existence in at least three ways. It may be given expressly by the employer; it may be given by him by implication, in the sense that, though the words of warranty are not expressed, there is to be inferred from what the employer did the actual giving of the warranty; or, though the employer had no actual intention or purpose to give the warranty, it may be imputed to him by law. And, of course, that imputation may occur by force only of the common law or because of the statutory stipulations to that effect. Where the warranty arises because, expressly or by implication, the employer intended it to be given, the circumstances may warrant the worker taking from the making of the contract of employment that the employer will do what he warrants. The warranty, in the circumstances, may give the worker to understand that that will be so. In such a case, the conclusion will be open that, from the conduct of the employer in doing what he did, the worker was to take it that the employer would act in a particular way . And, if the employer had, for example, no intention or no provision for doing so, then the conclusion may be open that that which the worker took from the contract of employment would mislead. But, in my opinion, this does not follow where the warranty arises by imputation. If, for example, there be nothing more than that, absent actual intention, the law imputes or imposes on the employer the relevant warranty, it by no means follows that the worker may, in the relevant sense, take from the making of the contract of employment that the employer will, or will be able to, do what the warranty requires. As I have said, what may be taken from the making of the contract of employment will depend upon the circumstances." (emphasis added) Clarke JA said (at 698): "It may be otherwise if the term arises by implication from statements made at the time of entry into the contract or if a term is implied to give a contract business efficacy, or to give effect to a custom. But where the only conduct of the respondent was the entry into a contract in which , as a matter of law , a term or warranty was implied I am unable to accept that because the warranty was later breached any question of misleading conduct arises." (emphasis added) [McHugh JA took a wider view (but his Honour was in dissent)] Submission that there is no basis pleaded for categorising promises as representations 106 There is no substance in the complaint in this regard. Each of the identified sub-paragraphs in the proposed summons uses the word "would". This is sufficient to underpin the allegation that the promise constituted a representation as to a future matter. General distinction between matters of pleading and particulars and matters of evidence 107 Further in a number of areas the particular complaints of lack of particulars of facts, matters and circumstances to be relied upon in support of the matters pleaded go to questions of evidence and not pleading. This case is now pleaded somewhat differently from the earlier pleadings and whatever factual investigation may be requisite by reference to the pleadings will be a matter of legitimate forensic endeavour. TCF section 58 (b); FTA section 53 (b) Material Omission 108 Dean paragraphs 50 - 55 fails to disclose a cause of action, insofar as the pleading omits the reference in section 53(b) of the FTA, to supplying the services "within the period specified by the person or, if no period is specified, within a reasonable time": see Dean paragraph 54. This matter does require to be remedied. Other issues 109 No particulars at all are apparently given in relation to the allegations made in paragraph 52 [Dean]. However sub paragraphs (b)-(d) are very specific and I accept TCF's submission that with respect to these particular sub paragraphs, to require more would be to require TCF to disclose its evidence. 110 In relation however to sub paragraphs (a) and (e) the proper approach to be adopted is to case manage the timing when further particulars will require to be furnished. In Rutledge v Jaluit Pty Ltd (1991) 6 BPR 13,826 Hodgson J put the matter as follows:

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"… I think a fair balance would be to allow the plaintiffs to plead such a statement of claim, and to continue the proceedings to the stage of discovery and interrogatories, and if they cannot then give satisfactory particulars of the defendants "knowing participation", the statement of claim could be struck out at that stage." 111 Having said that, the Court should not be taken as giving any form of indication that interrogatories will necessarily be permitted in these proceedings. However I accept that TCF has given the best particulars presently capable of being given in the circumstances in which, for reasons which are common ground, TCF has up to this point in time not been capable of pursuing the entities or persons who would have further information. 112 Nor is it beyond possibility that in this very unusual case the Court, at a later stage in the proceedings, will direct that the TCF prepare, file and serve a detailed statement of the particular facts, matters and circumstances which are to be relied upon by way of the evidence to be adduced in support of the proposition that the travel agents were aware at the material time, of the matters now sought to be pleaded in Dean [52]. This is where the Overriding Purpose Rule may very well be engaged for the reason that unless some rigid guideline directions are given, the collapse of the Ansett Group and the number of investigations into and materials relating to that collapse have the capacity of submerging the parties and the Court into a veritable sea of materials. The position seems to be almost a clarion call for mobilisation of the Overriding Purpose Rule, with the high possibility that special directions will be seen as appropriate and will be formulated by whichever judge is then dealing with the case management of the matter. Section 43 FTA 113 A complaint is directed to the proposed pleading in paragraphs 56 & 57. Although the complaint is expressly directed to the pleading of sections 51AA and 51AB of the TPA, the same complaint is presumably addressed to the pleading insofar as it relies upon section 43 of the FTA [relevantly equivalent to TPA section 51AB]. Addressing the matter accordingly, in my view there is no substance in the complaint. The particulars given in paragraph 57 suffice as particulars of what is alleged to have been unconscionable. The submissions of no arguable case are not of substance. [cf ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301 at 317; Hurley v McDonald's Australia Ltd [1999] FCA 1728 at [22] and [31]; Qantas Airway Ltd v Cameron (1996) 66 FCR 246 at 262 as to the width of the concept of unconscionability] Contract Review Act claim 114 The first submission is that: · the rights to which TCF is "subrogated" are those arising from acts or omissions by reason of which payment of compensation has been made under the Compensation Scheme; · on no view of the matter can it be suggested that an entitlement to seek relief under the Contracts Review Act is a cause of action against Ansett or Traveland arising from an act or omission of the type referred to in the Act; and · accordingly, leave should not be given to enable TCF to purport to seek relief in connection with contracts to which it was not a party. 115 In my view this is a matter which the TCF is entitled to litigate. The meaning of the words "rights… arising from the act or omission which gave rise to the entitlement to payment of compensation" being a question of construction, the matter is not beyond argument. The question of parties 116 The second submission goes to the question outlined earlier, of proper parties. It is convenient to commence by addressing the principles. The principles 117 Part 8 Rule 8 (1) of the Supreme Court Rules (NSW) provides:

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"In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard…a better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?" [emphasis added] 120 McHugh J in Victoria v Sutton after citing the above passage, makes the point that although the test for determining whether a person is a necessary party has usually arisen in the context of a person seeking to join proceedings, rather than a failure to join a relevant person, the same principle must apply in both situations. 121 It has been said, in my view correctly, that the expression "effectually and completely determined" [cf Part 8 (1) (a)] should be liberally construed. It follows that it is difficult, and perhaps undesirable to attempt an exhaustive formulation of a principle as to when joinder is "necessary": Gurtner v Circuit [1968] 2 QB 587; Great Eastern Cleaning Services Pty Ltd, Re [1978] 2 NSWLR 278 [Ritchie's Supreme Court Procedure NSW [8.8.2]] The issues presently before the court as to parties 122 Traveland and Ansett have not been joined as defendants in the proceedings. 123 Save in relation to the Dean proceedings, no claimants have been joined on either side of the record in any of the proceedings. 124 Applying the principles set out above, in my view all of these parties ought to have been joined under one or both Part 8 Rules 8 (1). 125 It has to be recalled that: · claims are made to vary the subject agreements between the claimants and the travel agents under section 87 (2) (b) of the TPA, section 72 (5) (b) of the FTA and/or in relation to New South Wales proceedings, section 7 (1) (c) of the Contracts Review Act 1980 (NSW); · insofar as the travel agents are concerned, although no relief is sought against them, the allegations made against them which are sought to be proved as part of the route to obtaining relief against the directors, are serious in the extreme, going the distance for example, of claiming that they engaged in unconscionable conduct; that they accepted moneys for travel albeit being aware that there was a reasonable likelihood that the travel agent concerned was insolvent or would soon become insolvent; and that the travel agent engaged in misleading and deceptive conduct and in other contraventions of the TPA and the FTA. Indeed, as was pointed out by Mr Donaldson SC, at the time of the conduct complained of [April 2001 in Dean], the consequences of a breach of section 58 (b) were dealt with in section 79 which provided that a contravention of this section was an offence attracting criminal sanctions; · as Mr Robertson submitted, the interests of the travel agents would appear to be far more directly affected in these sets of proceedings than were the interests of the coaches and players in News Ltd v Australian Rugby Football League Ltd [supra]; and · whilst the position may not be anything like as clear in relation to the requirement to have the claimants joined as parties, here again it does seem somewhat anomalous to find that parties to a contract which is sought to be varied, should not be joined in the proceedings seeking that relief. And if the reason for suggesting that no such joinder is necessary concerns the claim by the TCF to be subrogated to all anterior rights held by the claimants in or relating to the subject contracts, one answer to this proposition is that there is a direct challenge by the defendants to that subrogation having been effected upon the payment of moneys by the TCF to the claimants [the challenge is put in a number of ways, most particularly by reference to the assertion that as a matter of ordinary statutory construction, the reference in section 40 (3) of the Act to a payment "under the compensation scheme" is a reference only to a payment made validly under that scheme-the defendants submitting that a number of the pre-requisites to their being a "payment… under the compensation scheme" were not satisfied]. Hence and if the defendants submissions were ultimately successful in this regard, it could not be said that the claimants no longer held their contractual rights. Nor could it be said that the claimants were no longer subject to such contractual obligations as may have been imposed upon them by the contracts with the travel agents. 126 For these reasons in my view the travel agents, as well as all claimants, are necessary parties to the proceedings. It is a matter for the TCF as to whether or not it elects to join the claimants as defendants or as plaintiffs. 127 Subject to the above-described obstacles to the attempt to plead the Contracts Review Act claim, I reject as of no substance the submission that no serious attempt has been made to plead the facts and circumstances which might arguably give rise to an entitlement for such relief. The specific requirements of clause 15 of the Trust Deed 128 A number of sophisticated submissions are addressed by Mr Speakman of counsel for the fourth defendant to the suggested pre-requisites or pre-conditions which require to be satisfied before any right of subrogation of the type generally sought to be pleaded, may arise. These commence with the specific requirements of clause 15 of the Trust Deed. 129 The submissions are as follows: · clause 15 of the trust deed of the Travel Compensation Fund governs when the board of the plaintiff "must" (clause 15.1) and "may" (clause 15.2) pay compensation out of the fund. Any other payment is "prohibited": see clause 18.2; · clause 15.2(b) does not apply in the present cases. That clause only applies in the situation of a travel agent "who is not a participant" (the expression "participant" being defined in clause 1.1 of the trust deed). Paragraph 8 of each of the draft further amended summonses pleads that Ansett or Traveland (as the case may be) was a "participant" within the meaning of that term in the trust deed; · this means that in the present cases, compensation could only have been validly paid either:

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"..in any action brought by [the TCF] it shall be presumed, unless the contrary is proved, that any condition precedent to the bringing of the action imposed on them by the compensation scheme has been complied with." 132 In my view but for the fact that the TCF has seen fit to affirmatively plead that the relevant payments "were made by the TCF 'under the compensation scheme" within the meaning of that term in section 40 (3) of the Act', this would indeed be a full answer to the submission [that the TCF is obliged to accept the defendants proposition that it must furnish particulars with precision as to how it is that payments to the claimants were made under the compensation scheme]. The TCF might, for example, have pleaded that upon the proper construction of section 52 of the Act, it is presumed in these proceedings unless the contrary be proved, that any condition precedent to the bringing of these proceedings imposed upon the TCF by the compensation scheme had been complied with. However in the present circumstances of the existing pleading the approach taken does require these particulars. Hence unless the TCF elects to amend to plead the presumption/deeming provision, a direction will be given for the particulars to be furnished as a condition of allowing the amended pleading. It may be possible for the TCF in this regard, to provide cross-references to earlier paragraphs in the document sought to be propounded. [cf transcript 120 - 121] Incantation 133 Insofar as the TCF has sought by prefatory averment to reserve its position by utilising the incantation: "without admitting that it is a matter that TCF needs to establish", in my view this is not a permissible mode of pleading. It is necessary for the TCF to grasp the nettle by pleading its case and it is not able to sit on the fence in this way. That this is so follows quite simply from the entitlement of the defendants to know the nature of the case which they are required to meet. This in turn requires a degree of specificity which the incantation would deny. But more particularly, the incantation is simply otiose as meaningless verbiage which plays no part in the pleading and is effectively of no relevance. The pleading will not be allowed unless the so-called incantation wherever appearing, is removed from the document. [cf generally in relation to non admissions: Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809 and [8] - [11]] Travel arrangements" and "travel-related arrangements 134 Each draft further amended summons alleges that arrangements for travel which were made "constituted travel arrangements" and/or "travel-related arrangements" within the meaning of those terms in clause 15.1 of the trust deed. In each case, the incantation recurs. 135 Here again this form of pleading for reasons already given cannot be permitted. It suffices to simply note the submission advanced by the fourth defendant that this matter covers a suggested fifth pre-requisite to a valid payment out of the fund (in addition to the four other suggested pre-requisites referred to above) namely that the recipient is a person who "entered into travel arrangements or travel-related arrangements". The proposition is that: · if the recipient is not such a person, the recipient is not a person within clause 15.1 of the trust deed, because paragraph (a) is not satisfied, and · the person is not someone within clause 15.2(a), because the person would not be "a person referred to in clause 15.1 …" Defendants as directors 136 Paragraph 9 in each draft further amended summons alleges that "[b]y reason of the matters pleaded" in other cross-referenced paragraphs of the draft further amended summons, "at all material times each of the defendants was a director of" Ansett or Traveland (as the case may be) within the meaning of the NSW, SA or ACT travel agents legislation (as the case may be). 137 These cross-referenced paragraphs include Dean paragraphs 20-25. 138 Those paragraphs, in effect, allege that the defendants were the only directors of "in excess of 50 wholly-owned subsidiaries of Air NZ". 139 The fourth defendant concedes that it may well be arguable for present purposes [including the NSW and South Australian cases], having regard to the extended definition of "director" in the Acts, that the matters alleged in Dean paragraphs 14 - 16 could be capable of supporting an inference that Mr Toomey was some kind of de facto director of Ansett or Traveland (as the case may be). 140 Paragraph 10 of the proposed amended summons pleads as follows:

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(c) in the case of a foreign company- (i) a member of the committee of management, council or other governing body of the foreign company; (ii) any person occupying or acting in the position of member of the committee of management, council or other governing body of the foreign company, by whatever name called and whether or not validly appointed to occupy or duly authorised to act in the position; and (iii) any person in accordance with whose instructions the members of the committee of management, council or other governing body of the foreign company are accustomed to act." 143 It may be seen that there is a considerable commonality in on the one hand, the definition of director to be found in the Act and on the other hand, sub-paragraph (a) of the Companies Code definition at the time. However sub-paragraphs (b) and (c) of the Companies Code definition were not picked up by the definition in the Travel Agents Act. 144 The fourth defendant has submitted that is appropriate to infer that the Legislature, having in effect, copied and pasted some similar words, deliberately intended not to pick up the balance of that definition of director in the Companies Code, so that, as at 1986, the mere fact that a person may have been a director within the meaning of the Companies Code, would not mean that that person was a director within the meaning of the Travel Agents Act. Clearly enough the task of the court will in these proceedings be to decide whether or not each director is a director within the language of section 3 of the Travel Agents Act and its interstate analogues. 145 I do not accept that it is proper for the TCF to have pleaded as it has in paragraph 10. The defendants are entitled to have properly pleaded, the facts, matters and circumstances of the case which they are to meet in support of the proposition that they were directors of the Travel Agents within the meaning of the Act. Some concessions appeared to come forward from TCF [Transcript 159]. In any event and whether the concessions were or were not intended to cover this matter, the pleading will not be allowed in this regard in its present form. 146 There were a number of overlapping objections put to the legitimacy of the directorship pleading. 147 The fourth defendant's objections to the directorship allegations included Dean paragraph 34 relating to Ansett cases. These paragraphs plead a non-admission "that the purported resignation of Toomey [as a director of Ansett] dated 24 August 2001 was effective". 148 The fourth defendant draws attention to the fact that in contrast: · there are no non-admissions about the effectiveness of the purported resignations of Messrs Blair and Roworth as directors of Ansett; and · instead there are averments that those purported resignations were ineffective (for a given reason): see Dean paragraphs 26 and 31. (The draft further amended summonses make no reference to any resignation or purported resignation of Mr Frazis.) [I interpolate that in the Traveland cases, there is no non-admission about the effectiveness of the purported resignation of Mr Toomey as a director of Traveland Instead there is an averment that the purported resignation was ineffective: see Corcoran paragraph 39, Hards paragraph 39, Jarrett paragraph 35, Barkway paragraph 39 and Cartwright paragraph 39.] 149 In my view there is substance in the fourth defendant's submission that the pleading in Dean paragraph 34 by way of "non-admission" in an originating process is embarrassing and evasive. The pleading apparently accepts that there was a "purported resignation" by Mr Toomey as a director of Ansett. As the fourth defendant submits, it is one thing for the plaintiff to allege that, whether or not Mr Toomey formally resigned as a director of Ansett, he continued to act as some kind of de facto director and was still a director within the meaning of the Act. If, however, the plaintiff intends to contend as well, that there is some reason why the formal resignation was ineffective, the plaintiff is obliged to state this reason in the summons: paragraph 6 of Practice Note 100. 150 The fourth defendant further objects to the directorship allegations concerning Dean paragraph 35. The allegation is that "further or in the alternative" Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period 24 August 2001 to 12 September 2001. 151 I accept as of substance the submission that these paragraphs fail to comply with Practice Note 100. As the fourth defendant submits, this is because they fail to plead the material facts by reason of which it is alleged that Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period in question. This, I accept, is especially embarrassing when: · the paragraphs commence "[f]urther or in the alternative"; and · Dean paragraph 34 apparently accepts, without admitting its effectiveness, that there was a purported resignation by Mr Toomey on 24 August 2001. 152 Dean paragraph 35 also renders paragraph 9 of the relevant draft further amended summons circular, insofar as paragraph 9 incorporates the period 24 August 2001 to 12 September 2001. 153 In the result and as the fourth defendant has submitted, if the plaintiff intends to allege that Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period 24 August 2001 to 12 September 2001 by reason of matters alleged in other paragraphs of the relevant draft further amended summons, then the defect may be simply cured by inserting appropriate cross-references in Dean paragraph 35. 154 If, however, the plaintiff intends to allege that Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period 24 August 2001 to 12 September 2001 partly or wholly by reason of other matters, those other matters require to be set out. Claimants' unspecified "entitlement" to relief 155 The fourth defendant submits that Dean paragraphs 84, 86, allege an entitlement of the claimants (presumably against Ansett or Traveland as the case may be) to certain relief under the FTA and the CRA, but without stating the basis for that entitlement. The matter is however said by TCF to be covered by paragraph 83. Whether this be so or not it will be necessary for TCF to give particulars of paragraph 84 by cross-references. Entrustment/the recurring incantation 156 Dean paragraph 65 alleges "entrustment" of moneys to Ansett or Traveland (as the case may be), but again using the phrase, "[w]ithout admitting that it is a matter which the plaintiff needs to establish". 157 Here again, and as the fourth defendant has submitted, the paragraph is embarrassing insofar as it is unclear whether a trust is alleged or, if no trust is alleged, as to what is alleged. 158 In addition, the pleading by way of "non-admission" in an originating process is, I accept, embarrassing and evasive. The confusion and evasion is amplified by the absence of cross-references to these paragraphs, elsewhere in the draft further amended summonses, so that it is not clear how the TCF intends to rely upon them, and 159 These matters require to be clarified in the transcript further pleading to be brought forward. The Part 31 Issue 160 At the commencement of the hearing of the Notices of Motion there was a consensus that it was appropriate for the court to hand down its judgment on the part 31 motions at the same time as dealing with the applications for leave to amend. This was obviously convenient because of the overlapping considerations material to both sets of motions. Albeit that this procedure required the parties to in effect address upon different alternative bases, this was not a serious difficulty 161 Relevantly, Part 31 rules (1) and (2) provide:

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164 The burden of showing the Court that it is desirable to have these separate questions determined lies with the defendants (Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 1215 at [7] ) Applying these principles 165 I have reached the very clear conclusion that the Part 31 Notices of Motion should be dismissed and for the following reasons: · Answers to the proposed questions will not lead to a final resolution of the proceedings · A very substantial time is likely to be taken by way of appellate proceedings concerning the subject questions; · The strength of the submission against the TCF's entitlement to proceed in the fashion sought to the impugned is far from sufficient to justify the making of the Part 31 orders; · It seems likely that applications for the making of disparate Part 31 orders will be pursued at later stages in the proceedings. Convenience would seem to dictate that all such applications be heard at the same time and be determined taking into account each of such applications and its content; · These are test case proceedings. The complexity of the proceedings and the number of persons likely to be affected by their determination strongly suggests that the proceedings should be permitted to continue in a regular fashion through a closing of pleadings and a continuance of interlocutory processes aimed at a final hearing being fixed for the earliest practicable time consistent, of course, with such other Part 31 orders as may ultimately be made, if any; · Very special care requires to be taken before what may well be very significant fragmentation should be permitted. That fragmentation is simply not warranted in terms of the existing application for the separate questions. Claims to relief 166 The claims to relief in paragraphs 1 and 3 of the proposed Further Amended Summons seem somewhat labrinthian insofar as the words "as that section provides… against Ansett" are concerned. This is simply a question of inelegance of pleading and not a concern of real substance. There can be no doubt as to the basis for the TCF's claims which are squarely put as advanced pursuant to section 40 (4), as is made plain in the bracket of paragraphs [92]-[102]. That should suffice. However should the position with joinder of any claimants become otherwise, in the sense that those claimants seek to have standing and to advance claims pursuant to section 40 (3), then of course it would be necessary to make to plead this fact. Currently the Dean individual plaintiffs make no claims to relief of any type.

Travel Compensation Fund v John Harvey Blair & Ors

At a glance

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Before

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Judgment (183 paragraphs)

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Legislation Cited (17)

Cases Cited (59)

Cited By (11)