Travel Compensation Fund v Travel Guide Pty Ltd (in liquidation) & Ors [1997] FCA 54 (13 February 1997)

CATCHWORDS

By-Laws & Regulations - Travel Agents Regulation 1987 - whether repeal of cl 20 affected rights acquired or obligations incurred before the date of repeal, or any proceeding or remedy in respect of any such right - Interpretation Act 1995 (NSW) s 30 - Travel Agents Regulation - whether cl 20 validly establishes a compensation scheme under the Travel Agents Act 1986 (NSW) - whether a scheme prescribed under s 57(2)(a) of the Act is required by s 57(2)(b) to be prescribed by reference to a schedule comprising a copy of the trust deed by which the scheme is established - whether lack of certainty in language used and serious consequences of alternate holding indicate the directory rather than mandatory nature of s 57(2)(b)

Evidence - Proof - extent to which reasonable inference may be drawn in relation to "act or omission" of Travel Agent under s 40(3) of Travel Agents Act 1986 (NSW)

Travel Agents Act 1986 (NSW) subs 40(3), subs 40(4), subs 40(5), subs 57(1), subs 57(2)(a), subs 57(2)(b), subs 57(2)(c) and subs 52(3)(1)

Interpretation Act 1987 (NSW) subs 30(1)

Travel Agents Regulation 1987 cl 20, cl 15.1, cl 15.2

Travel Agents Regulation 1995 cl 20, cl 15.1, cl 15.2

Travel Compensation Fund v Dunn FCA 2 December 1992 unreported

Yrttiaho v Public Curator (Qld) [1971] HCA 29; (1971) 125 CLR 228

R v Secretary of State for Social Services, ex parte Association of Metropolitan Authorities [1986] 1 WLR 1

Bugg v DPP [1993] QB 473)

Victoria v The Commonwealth [1975] HCA 39; (1975) 134 CLR 81

Clayton v Heffron [1960] HCA 92; (1960) 105 CLR 214

Australian Broadcasting Corporation v Redmore Pty Ltd (1987) 11 NSWLR 621

Scurr v Brisbane City Council [1973] HCA 39; (1973) 133 CLR 242

State of New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307

TRAVEL COMPENSATION FUND v TRAVEL GUIDE PTY LIMITED (IN LIQUIDATION) AND ORS

No. NG 686 of 1995

CORAM: Lehane J

PLACE: Sydney

DATE: 13 February 1997

IN THE FEDERAL COURT OF AUSTRALIA )

NEW SOUTH WALES DISTRICT REGISTRY )

GENERAL DIVISION ) No. NG 686 of 1995

BETWEEN: TRAVEL COMPENSATION FUND

Applicant

AND: TRAVEL GUIDE PTY LIMITED (IN LIQUIDATION)

First Respondent

JOHN KEITH KNIGHT

Second Respondent

MATTHEW HOWDEN

Third Respondent

AIR AUSTRALIA WORLDWIDE MARKETING PTY LIMITED (IN LIQUIDATION)

Sixth Respondent

CORAM: Lehane J

PLACE: Sydney

DATE: 13 February 1997

MINUTE OF ORDERS

THE COURT ORDERS:

1. The applicant within seven days from the delivery of these reasons for judgment file and serve on the first, third and sixth respondents short minutes giving effect to the conclusions contained in the judgment.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

NEW SOUTH WALES DISTRICT REGISTRY )

GENERAL DIVISION ) No. NG 585 of 1995

BETWEEN: TRAVEL COMPENSATION FUND

Applicant

AND: TRAVEL GUIDE PTY LIMITED (IN LIQUIDATION)

First Respondent

JOHN KEITH KNIGHT

Second Respondent

MATTHEW HOWDEN

Third Respondent

AIR AUSTRALIA WORLDWIDE MARKETING PTY LIMITED (IN LIQUIDATION)

Sixth Respondent

CORAM: Lehane J

PLACE: Sydney

DATE: 13 February 1997

REASONS FOR JUDGMENT

LEHANE J: The applicant, which asserts that it is the body of trustees of the compensation scheme established under the Travel Agents Act 1986 (NSW), claims that it is entitled, under subs 40(4) of the Act, to recover from the first, third and sixth respondents sums which the applicant says it has paid to claimants under the scheme. The first and sixth respondents are companies, both of which are in liquidation: an order that each be wound up was made by the Court on 19 August 1994; the applicant obtained leave to proceed against each of them but neither lodged a defence and each appeared simply to submit to such orders as the Court might make. The third respondent has throughout the relevant period been a director of each of the first and sixth respondents. By leave of the Court, he filed a defence on 31 January 1997 and, though he led no evidence, he was represented by a solicitor, Mr Mura, at the trial. Claims against other respondents have been discontinued, as have cross claims made by the second respondent. Thus, the substantial contest at the trial was between the applicant and the third respondent. I shall return to the matters in issue between those parties; first, I think it is helpful to describe the legislative context in which the applicant's claims arise.

Legislative Context

The Act is the New South Wales legislative part of a cooperative and, I was told, substantially uniform legislative scheme for the regulation of the travel agency business in New South Wales, Victoria, South Australia and Western Australia. The Act provides for the licensing of persons carrying on business as travel agents; it provides for the supervision of travel agents and for disciplinary proceedings against them; it regulates in various ways the conduct of travel agency business; and, of particular relevance to these proceedings, it contemplates the establishment of a compensation scheme.

The Act does not itself establish a compensation scheme. Instead, it provides for the establishment of such a scheme by regulation. Section 57 provides, in subss (1) and (2), as follows:

57. (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;

(b) prescribe the scheme by reference to a schedule comprising a copy of the trust deed by which the scheme is established; and

(c) from time to time amend that schedule to incorporate amendments of the trust deed of which the Commissioner is notified by the compensation scheme trustees.

The trustees of a scheme thus established are defined by subs (3)(1) as the "compensation scheme trustees", and s 52 provides that the compensation scheme trustees may sue and be sued in the name of "Travel Compensation Fund" and that, in any action brought by them, 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.

Subsections (3), (4) and (5) of s 40 are of particular importance. They provide:

(3) 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 subrogated to the rights of the claimant in relation to the act or omission.

(4) Where the rights conferred by subsection (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.

(5) Where it is proved that an act or omission by a body corporate occurred without the knowledge or consent of a director of the body corporate, rights are not enforceable as provided by subsection (4) against the director in relation to the act or omission.

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 FCA 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.

A regulation, the Travel Agents Regulation 1987 (the 1987 Regulation), took effect on and from 2 February 1987. Clause 20 of the 1987 Regulation prescribed, under s 57(2), a compensation scheme: the scheme was to be that contained in a trust deed a copy of which was set out in Schedule 2 to the 1987 Regulation. The 1987 Regulation was repealed by the Travel Agents Regulation 1995 (the 1995 Regulation) which commenced on 1 September 1995. Clause 20 of the 1995 Regulation obviously was intended to continue the existing scheme in operation. But, rather than following the form of its predecessor, it expressed that intention as follows:

20. (1) For the purposes of section 57(2)(a) of the Act, the compensation 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 is the compensation scheme established by the trust deed made on 12 December 1986 by Deirdre Mary Grusovin, Peter Cornelis Spyker, Christopher John Sumner and Keith James Wilson, as amended from time to time.

(2) A copy of the trust deed may be obtained from the Commissioner.

The regulation did not, in the words of para 57(2)(b) of the Act, "prescribe the scheme by reference to a schedule comprising a copy of the trust deed by which the scheme is established"; instead, it told the reader from whom a copy might be obtained.

The deed establishing the compensation scheme, scheduled to the 1987 Regulation (which is the deed referred to in cl 20 of the 1995 Regulation), has been amended several times, including once during the period to which these proceedings relate. Its substance, however, did not change in any way which is material to the outcome of these proceedings.

The deed is common to each of the participating States: that is, it is prescribed not just for the purpose of the New South Wales legislation but also for that of Victoria, South Australia and Western Australia. Clause 15 provides for the payment of compensation. Until 15 May 1995 its first two subclauses provided as follows:

15.1 Subject to this Deed, the Trustees shall pay compensation out of the Fund to a beneficiary -

(a) who is a client; and

(b) who has suffered or may suffer pecuniary loss arising directly from a failure to account for money or other valuable consideration by a participant -

where -

(c) the failure to account arises from an act or omission by the participant or an employee or agent of the participant; and

(d) the client is not protected against the loss by a policy of insurance.

15.2 The Trustees may in their absolute discretion pay compensation to a beneficiary to whom they are not required to pay compensation by virtue of clause 15.1.

On 15 May 1995 subcl 15.2 was amended. The effect of the amendment was twofold. First, it was made clear that compensation under subcl 15.1 might (in the trustees' discretion) extend to consequential loss; and, secondly, the category of those to whom compensation might, as a matter of discretion, be paid was extended, beyond the class of beneficiaries as defined, to "a person to whom they are not required to pay compensation under clause 15.1".

Thus, at all relevant times the trustees had an obligation to pay compensation where the requirements of subcl 15.1 were met. Except for the use of certain defined terms, those requirements speak for themselves. A defined term of particular significance is "participant": that means, in broad terms, a travel agent licensed under one of the State Acts which meets, in addition, certain eligibility requirements prescribed by the Deed. From 15 May 1995 the class of cases in which, under sub cl 15.2, the trustees might in their discretion pay compensation was very broad; before the May 1995 amendment, it was limited by reference to the term "beneficiary", defined relevantly as a

... person who entrusts money or other valuable consideration to another person (or an employee or agent to the other person) in the course of the other person's carrying on business as a travel agent in a State if either:

(i) that other person; or

(ii) any third or subsequent person who carries on business as a travel agent in a State and who, in turn, received directly or indirectly through an employee or agent of the third or subsequent person all or any part of that money or consideration, other than as a principal,

fails to account for the relevant money or consideration, whether due to an act or to an omission of that person (or an employee or agent of that person) [sic].

Thus, before the amendment, the discretion to pay compensation under sub cl 15.2 was limited by reference to a requirement that the claim arise from the "entrusting" of consideration to a person carrying on business as a travel agent where there had been a failure to account (apparently) due to an act or omission of the travel agent or its employee or agent. Particularly, however, it may be noted that at all relevant times compensation might be paid under subcl 15.2 despite the fact that the agent concerned was not a participant (as the sixth respondent was not) and even if the claim was covered by insurance (as some of the claims relating to the first and sixth respondents may have been).

The invalidity argument

Before turning to the question whether the applicant has otherwise made out its claims against the first, third and sixth respondents, it is convenient to consider a contention of the third respondent that cl 20 of the 1995 Regulation does not validly establish a compensation scheme under the Act so that there is now no such scheme in existence; and so that those who claim to be the trustees of such a scheme are not compensation scheme trustees for the purposes of the Act and have no title, under s 52 of the Act, to sue in the name of the "Travel Compensation Fund". The basis of the contention is stated in para 2A of the third respondent's defence: the third respondent

... says the scheme is not the scheme prescribed under section 57 of the Travel Agents Act 1986 (NSW) ("the Act"). Sections 20(1) and (2) of the Travel Agents Regulation 1995 ("the Regulation") which commenced on 1 September 1995 purports to prescribe a compensation scheme for the purposes of Section 57(2)(a) of the Act. Section 57(2)(b) of the Act requires that any regulations which prescribe a scheme do so by reference to a schedule comprising a copy of the trust deed by which the scheme is established. Sections 20(1) and (2) of the Regulation fail to prescribe the scheme by reference to a schedule comprising a copy of the trust deed by which the scheme is established.

The essence of the argument is that the 1987 Regulation, which prescribed a compensation scheme, was repealed with effect from 1 September 1995. Clause 20 of the 1995 Regulation purported to prescribe the same scheme; but it failed to do so effectively because it did not obey what was said to be the statutory requirement, in s 57, that the scheme be prescribed by reference to a schedule comprising a copy of the trust deed by which the scheme was established. Consequently, from 1 September 1995 there was no compensation scheme and the trustees of the deed referred to in the 1995 Regulation had no right of subrogation under s 40 or, on 5 September 1995 (when they commenced these proceedings) or subsequently, a right to sue under s 52.

To that contention the applicant made two answers. First, as all matters giving rise to the right claimed by the applicant arose before 1 September 1995, its claim was properly to be regarded as based on the 1987 Regulation: thus its repeal did not affect the rights which the applicant had acquired, the obligations which the respondents had incurred or any legal proceeding or remedy in respect of any such right or obligation: Interpretation Act 1987 (NSW) subs 30(1). Secondly, the applicant argued that para 57(2)(b) of the Act was to be regarded as directory only, so that the failure to prescribe the scheme by reference to a deed set out in a schedule did not render the regulation invalid.

In my view both the applicant's arguments should be accepted.

(a) Interpretation Act, s 30

Subsection 30(1) of the Interpretation Act 1976 provides:

(1) The amendment or repeal of an Act or statutory rule does not:

(a) revive anything not in force or existing at the time at which the amendment or repeal takes effect, or

(b) affect the previous operation of the Act or statutory rule or anything duly suffered, done or commenced under the Act or statutory rule, or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act or statutory rule, or

(d) affect any penalty incurred in respect of any offence arising under the Act or statutory rule, or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability or penalty,

and any such penalty may be imposed and enforced, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, as if the Act or statutory rule had not been amended or repealed.

Clearly, for most purposes at least, if there is now a "compensation scheme" for the purposes of subs 3(1) of the Act, it is not that which was prescribed by the 1987 Regulation; nor, for most purposes, are the "compensation scheme trustees" those administering a scheme prescribed by the repealed regulation. Thus, if cl 20 of the 1995 Regulation were invalid, there would, for most purposes, simply be no continuing compensation scheme as defined in the Act. It would not follow, however, that the trusts of the deed would, on that assumption, have failed as from 1 September 1995: it was not suggested that the deed did not validly constitute the trust which it purported to establish; if the trust ceased to be the compensation scheme for the purpose of the Act, there is no reason to suppose that it could not continue on the terms set out in the deed. I can see nothing in the deed as prescribed by the 1987 Regulation to suggest that it could not continue to operate; and though there is provision for the termination of the trust in certain circumstances, those circumstances do not include its ceasing to be the compensation scheme under the Act. If it were not that compensation scheme, of course, its trustees would not have, subject to the effect of s 30 of the Interpretation Act, the rights or powers which the Act gives to the compensation scheme trustees. But, since the trust would continue in existence and to be capable of administration, there would be no impediment to the continuing exercise by the trustees of any statutory rights or remedies which, by virtue of s 30, they retained.

The evidence is that all the claims with which these proceedings are concerned were made and paid by the trustees before 1 September 1995. On the assumption that the payments were made under the scheme (prescribed by the 1987 Regulation) by reason of an act or omission in relation to which the claimants had rights, those rights had arisen and the trustees had, before 1 September 1995, become "subrogated" to them; on the same assumption, the trustees thus had, before 1 September 1995, rights which were enforceable jointly against the travel agent concerned and those who were its directors at the time of the relevant acts or omissions. The relevant rights, therefore, had been acquired under subs 40(3) and legal proceedings and remedies were available, under subs 40(4), in respect of them before the repeal of the 1987 Regulation; thus the repeal did not affect the rights (or the correlative obligations) and the proceedings might be instituted and remedies enforced as if the 1987 Regulation had not been repealed; I can see no reason to doubt that the rights and proceedings unaffected by the repeal include suit in the name of "Travel Compensation Fund" under s 52 of the Act. The effect of provisions such as a s 30 of the Interpretation Act was considered by the High Court in Yrttiaho v Public Curator (Qld) [1971] HCA 29; (1971) 125 CLR 228. The judgment of Gibbs J (with whom Windeyer and Walsh JJ agreed) at 245 indicates plainly the distinction between that case and one such as the present and shows, in my view, equally plainly that this is a case where the Interpretation Act preserves the right (under s 52 of the Act) to commence proceedings in respect of an accrued substantive right (under subss 40(3) and (4)).

(b) Validity of 1995 Regulation

On the question of the validity of the 1995 Regulation the starting point must, I think, be a consideration of the way in which subs 57(2) of the Act is expressed. It was put to me by Mr Mura that the use of the word "and" at the end of para (b) indicates, as a matter of grammar, that the three paragraphs of the subsection, but particularly paras (a) and (b), are to be read cumulatively. Often - perhaps usually - that will be the effect of the use of the word "and" in that way. However, a number of particular matters may be noticed. One is that the three paragraphs obviously cannot be read as cumulative in the sense that if the regulations do one of the three things indicated they must necessarily do all three. That is so, if for no other reason, because para (c) deals with amendments and is applicable, of course, only if amendments in fact are made. Another aspect of para (c) may be mentioned. It empowers the Governor to make regulations which amend a schedule (in which a form of deed is set out) to incorporate amendments to the deed of which the Commissioner is notified; but there appears to be no actual requirement to notify and the assumption is, and it is borne out by the amendment provisions in cl 30 of the trust deed, that amendment (i.e. effective amendment) precedes notification. That is to say, the deed, if set out in a schedule to a regulation, may be amended without notification and without the necessity of making a regulation under para (c). The other matter to be noted, in relation to paras (a) and (b), is that they are expressed as separate powers, though notionally linked by the word "and". If it had been intended to provide that a scheme might be prescribed only by reference to a schedule, it would have been easy enough so to provide within para (a) itself: the separation of the two paragraphs might be taken to suggest that the means provided by para (b) was one, but not the exclusive, way in which a scheme might be prescribed. Simply as a matter of language, I do not think that, although para (b) may be read as imposing a requirement which must be observed when a scheme is prescribed under para (a), that is its only possible construction.

No attention was directed in argument to that aspect of the construction of the section. Instead, the applicant argued that para (b) was to be regarded as directory rather than mandatory, so that a failure to comply strictly with the particular manner prescribed for publication of the scheme should not be regarded as invalidating the 1995 Regulation. It is, I think, clear enough that that distinction is relevant in the context of conditions required to be met, and procedures required to be followed, in the making of delegated legislation. Although perhaps the English cases (e.g. R v Secretary of State for Social Services, ex parte Association of Metropolitan Authorities [1986] 1 WLR 1, Bugg v DPP [1993] QB 473) should be regarded with caution, since the issue seems generally to arise there in the context of judicial review, the decision of the High Court in Victoria v The Commonwealth [1975] HCA 39; (1975) 134 CLR 81 proceeds on the footing that the distinction is relevant to the requirements to be met under s 57 of the Constitution in order that a law may be passed by a joint sitting of the Senate and the House of Representatives: see at 155-162 per Gibbs J; 178-180 per Stephen J and 182, 183 per Mason J; see also Clayton v Heffron [1960] HCA 92; (1960) 105 CLR 214, especially at 247 per Dixon CJ, McTiernan, Taylor and Windeyer JJ. If the distinction was relevant to those cases there can, I think, be no reason to suppose that - possibly a fortiori - it not applicable here.

Assuming a preferred interpretation which requires prescription of a scheme by reference to a deed in a schedule, and by no other means, the question is whether, as a matter of construction, the statute was intended to have the effect of avoiding a regulation by which the terms of the scheme were published in some other way. The existence of the intention is to be ascertained by reference to the language of the section, its subject matter and objects and the consequences of holding void a regulation purportedly made otherwise than in strict compliance with the requirement: see Australian Broadcasting Corporation v Redmore Pty Ltd (1987) 11 NSWLR 621 at 634 per McHugh JA. The language of the statute is, as I have shown, by no means crystal clear; it is relevant, I think, to the present inquiry that it is not a necessary construction of para (b) that it imposes an exclusive requirement. The purpose or object generally of subs 57(2) is, of course, to enable a scheme to be prescribed which will offer protection to members of the public dealing with travel agents who fail to account for money paid to them: quite plainly that in turn is a central element of the regulatory scheme which the Act establishes. A subsidiary object of paras (b) and (c) is, no doubt, to enable members of the public to inform themselves of the current terms of scheme. However, if that object may be substantially achieved by means falling short of precise compliance with paragraph (b), the result if such means are adopted is not necessarily invalidity if there is what may be regarded as substantial compliance: Scurr v Brisbane City Council [1973] HCA 39; (1973) 133 CLR 242 at 255, 256. The consequence of holding the 1995 Regulation invalid would be that there was in existence no compensation scheme as referred to in the Act: an essential element in the legislative framework would be lacking. Although the invalidity of the 1995 Regulation would not entail the failure of the trust, it would deprive the compensation scheme trustees of the rights and powers which they are intended to have under the Act.

One comment should be added in relation to the subsidiary object of paras (b) and (c), though it is implicit in what I have already said. The paragraphs do not provide a regime which will ensure that members of the public are precisely informed of the current terms of the scheme: substantial amendments to the deed as originally scheduled may be made and will be effective even if further regulations are not made amending the schedule. That, I think, may be treated as an indication of an intention that substantial compliance, by way of making the deed available by other means, may be regarded as sufficient to save the 1995 Regulations from invalidity.

The matters to which I have referred - particularly the lack of certainty in the language used, the fact that the means of publication provided will not, strictly, ensure that the public is informed as to the terms of the deed current at any time and the consequences of invalidity (particularly given the cooperative nature of the legislative scheme) - persuade me that this is not a case where strict compliance with para 57(2)(b) is to be regarded as essential to the validity of a regulation under subs (2), and that cl 20 of the 1995 Regulation (which provides a method of publication which may be regarded as substantial compliance) is valid.

If, on the material before me, I had been inclined to favour a different result, no doubt it would have been appropriate to relist the matter so as to give the State of New South Wales the opportunity to present argument in support of the 1995 Regulation: State of New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307 at 312. Given the conclusion to which I have come, however, that step is not required.

Other issues

The result of my conclusions about the effect of the repeal of the 1987 Regulation and the validity of the 1995 Regulation is that the trustees of the deed of 12 December 1986, as it has been amended, are the compensation scheme trustees under the Act and may sue in the name of the Travel Compensation Fund. In circumstances where subs 40(3) of the Act applies, they have rights of subrogation under that subsection and rights of enforcement under subs (4).

The essential allegations in relation to the first respondent, in the applicant's amended statement of claim, are as follows. It was incorporated in New South Wales, it carried on business as a travel agent and was a participant in the compensation scheme and it was ordered to be wound up, the winding up commencing on 19 August 1994. It is then alleged that claimants paid the first respondent sums of money for the future provision of travel services and that the first respondent failed to provide the services or (as in the circumstances it was obliged) to repay or account for the moneys received. Thus, it is claimed, the first respondent is indebted to the claimants or liable to account to them in respect of the amounts paid. Each claimant is alleged to have claimed against the applicant in respect of the first respondent's failure and the applicant to have made payments to the claimants; it is said that each of the payments made by the applicant is a payment made to the claimant under the scheme by reason of an act or omission of the first respondent carrying on business of a travel agent and that consequently the applicant has the rights of subrogation arising under subs 40(3). It is then said that by a deed of release each claimant has assigned to the applicant all its relevant rights against the first respondent and its directors (that is a matter which does not affect the third respondent as there is no material before the Court which suggests that any claimant had rights against him, and it need not be pursued). It is claimed that the third respondent was a director of the first respondent and that accordingly the applicant's rights of subrogation under subs 40(4) are enforceable by the applicant jointly and severally against the first and third respondents by virtue of subs 40(4).

Similar allegations are made in relation to the sixth respondent, and the third respondent as a director of the sixth respondent, except that it is not claimed that the sixth respondent was a participant in the scheme: it is said, however, that it carried on business as a travel agent in New South Wales.

The third respondent by his defence denies some of the applicant's allegations: he denies the claimed application to wind up the first respondent and the order winding it up with effect from 19 August 1994 (but the evidence sufficiently establishes, in my view, that the winding up order was made with effect from that date); he denies an allegation that at the time when payments were made to the first respondent for the future provision of travel services there were reasonable grounds to expect that the first respondent would not be able to account for each prepayment at the proper time (a matter which was not canvassed during the trial and which requires no further consideration); he denies that the alleged payments by the applicant to the claimants were payments made under the scheme by reason of an act or omission of a person carrying on business as a travel agent and therefore the existence of any rights of subrogation and of enforcement under s 40. There are similar denials in relation to the sixth respondent; in addition, the third respondent denies that the sixth respondent carried on business in New South Wales as a travel agent (he also denies that the sixth respondent is a company incorporated in New South Wales on 12 December 1989, and the denial seems to be correct: the evidence indicates that the sixth respondent was incorporated in Victoria, but nothing, I think, turns on that). The remaining factual allegations in the applicant's amended statement of claim are not admitted. As I have mentioned, the third respondent led no evidence.

The evidence on behalf of the applicant comprised affidavits of Alexandra Mary Radkevitch, a claims assessor for the applicant, and Carlo Claudio Brattoni, the applicant's Chief Executive Officer. There are annexed to Ms Radkevitch's affidavit Australian Securities Commission searches in relation to both the first and sixth respondents and a summary of claims made to the applicant in respect of the first and sixth respondents and payments made by the applicant to the claimants. There is also annexed a copy of the applicant's standard form of claim for compensation. To Mr Brattoni's affidavit there are exhibited copies of the compensation scheme trust deed, as in force during the relevant period, copies of minutes of the applicant's management committee recording resolutions relating to claims in respect of the first and sixth respondent and a list of cheques, and copies of cheque requisitions, relating to payments made to the various claimants. Additionally, the affidavit evidence describes the procedure adopted by the applicant in dealing with claims, and in particular the claims relating to the first and sixth respondent. Ms Radkevitch identifies schedules to the statement of claim originally filed by the applicant as listing the claimants, the dates on which each claimant made relevant payments to the first or sixth respondent and the date and amount of each payment made by the applicant to each claimant. Additionally, there are in evidence the applicant's files on the claims relating to the first and sixth respondents. Four files relating to the first respondent were separately tendered and I was taken to them in detail; I was also taken in detail to one of the files relating to the sixth respondent, which was separately marked for identification.

The applicant argued that, on that evidence, it had made out its claims against the first, third and sixth respondents; the third respondent argued that no claim had been made out against him.

A number of things were, in my view, particularly in the absence of any evidence to the contrary, clearly established by the evidence; they were not seriously disputed. Thus, the evidence enables me to find that the first respondent was incorporated, carried on business in New South Wales as a travel agent, was a participant in the Compensation Scheme and was wound up by order of the Court with effect from 19 August 1994. Equally, I find that the sixth respondent was incorporated (though in Victoria), carried on a business associated with that of the first respondent and was wound up by order of the Court as from 19 August 1994. I find also that the third respondent was at all relevant times (at least until the winding-up orders were made) a director of the first respondent and of the sixth respondent. Similarly, I find that the applicant made the payments listed in the first and second schedule and the statement of claim filed on 5 September 1995, totalling $499,641, on claims relating to the first and sixth respondents; and that those claims were in respect of payments made by the claimants to either the first or sixth respondent on the dates listed in those schedules. I find that each amount so paid by a claimant was for travel or arrangements (e.g. hotel accommodation) associated with travel.

Those findings, however, are insufficient, by themselves, to enable the applicant to succeed. Among other things (to which I shall return), they do not attribute particular payments to the first and sixth respondents respectively and they do not, in relation to the sixth respondent, satisfy the requirement of subs 40(3) that it was a "person carrying on business as a travel agent".

The issue about apportionment arises, to a large extent, from the use by the first and sixth respondents, at various times, of similar names. The evidence indicates that the sixth respondent was formerly known as Pan Pacific Airlines Marketing Pty Ltd and, before that, as Pan Pacific Airlines Pty Ltd. One of the files to which I was specifically referred in relation to the first respondent related to travel bookings made by Maria Crimi. Correspondence addressed to Ms Crimi is on notepaper headed "Pan Pacific Airlines" and one of the letters thanks Ms Crimi "for choosing to use the Pan Pacific Airline special travel offer". However, at the foot of the notepaper one reads "Travel Guide Pty Ltd ... trading as Pan Pacific Airlines". I think I am on safe ground in inferring that "Pan Pacific Airlines", as well as being at one time part of the name of the sixth respondent, was also a trading name of the first respondent; and it appears clearly enough that it is in that sense that it is used in the correspondence with Ms Crimi, that it was through the first respondent (not the sixth) that Ms Crimi made her bookings and that when Ms Crimi in her claim form asserted that her arrangements were with the sixth respondent, rather than the first, she was simply mistaken. I was informed by counsel for the applicant, and Mr Mura did not demur, that all the files which are now in evidence were discovered and produced for inspection many months ago; Mr Mura did not, however, draw my attention to matter in any other file which might be taken to indicate a mistake in attribution, by the applicant, of claims as between the first and sixth respondents. In those circumstances it is open to me to find, and I do, that where the applicant's deponents say that a particular payment was made to the first respondent, rather than the sixth, that was indeed so.

As for the other matter, whether the sixth respondent carried on business as a travel agent, I was taken specifically to a file relating to a booking by a Ms Susan Jane Stevenson. Her claim was said to relate to a payment to the sixth respondent. On that file there is correspondence to Ms Stevenson on paper headed "Travel Guide" (not, incidentally "Travel Guide Pty Ltd"). There is no company name at the foot of that letterhead, merely an address. However, Ms Stevenson received, for a payment she made for "Fiji deal" a receipt signed on behalf of "Air Australia Worldwide Marketing Pty Ltd [i.e., the sixth respondent], level 2, 56 Berry Street, North Sydney, NSW 2060". Plainly what that indicates is that the sixth respondent received from Ms Stevenson a sum of money for, possibly among other things, return air fares to Fiji ("tickets", no doubt, within the meaning of subs 4(1) of the Act). The inference is clearly available that at that time the sixth respondent carried on, or at least (which is sufficient: see subs 4(1) of the Act) held itself out as carrying on, business as a travel agent. Again, it was not suggested to me that I might find in any other file material suggesting a different conclusion; and in circumstances where the third respondent, a director of the company, has chosen not to give evidence in my view I should, and I do, draw the inference.

Even so, however, the applicant is entitled to the relief which it seeks only if the claimants had rights against the first or sixth respondent and if the payments by the applicant were made "under the compensation scheme by reason of an act or omission" by the first or sixth respondent, as the case may be. It is convenient to deal first with the element of "act or omission".

Except, perhaps, in the case of a payment authorised by sub cl 15.2 of the trust deed as amended on 15 May 1995, a payment under the deed is required or authorised only in circumstances where a person carrying on business as a travel agent fails to account for money or other consideration entrusted to it in the course of carrying on that business; and the failure to account must arise from an act or omission by the person carrying on the business or an employee or agent of that person. Similarly, subs 40(3) of the Act confers rights of subrogation only in a case where a payment is made under the compensation scheme "by reason of an act or omission by a person carrying on business as a travel agent". The mere failure to account is not, or at least is not necessarily, the relevant "act or omission": the terms of the deed assume that the act or omission is independent of, and precedes, the failure. In Travel Compensation Fund v Dunn supra, Wilcox J held, accordingly, that directors were not necessarily excused from liability because they had ceased to hold office at the time when the failure to account occurred. His Honour held, in the circumstances of that case, that the relevant act or omission, which led to the failure to account, was an omission to pay funds received from clients into a trust account which the travel agent had established (though apparently having no legal obligation to do so). That omission occurred at a time when the directors still held office so that, subject to any defence available under subs (5), rights arising under subs (3) could be enforced against them under subs (4). Mr Mura submitted that in this case, if a failure to account were assumed for the purposes of the argument, no preceding act or omission was established by the evidence, or indeed sufficiently pleaded, so that no statutory right of subrogation arose.

The evidence sufficiently establishes that the payments to the first and sixth respondent, giving rise to the claims paid by the applicant, were received during a relatively short period in 1994. Most of them were received in June and July of that year; relatively a few were received during May and a very small number earlier - the earliest in February. Travel arrangements in respect of which claims were paid by the applicant were not made (some, it seems, were for Travel on dates after the commencement of the winding up) and the relevant funds were not repaid by the first and sixth respondents to the claimants. A provisional liquidator of each of the corporate respondents was appointed on 22 July 1994 and each was wound up with effect from 19 August 1994. Thus, over a relatively brief period a large number of individual payments was received amounting in total to almost $500,000; a short time later a provisional liquidator of each company was appointed, shortly followed by a winding up order; and neither company in liquidation has seen fit to file a defence in these proceedings or take any part in the trial.

In the circumstances I have no difficulty in holding, on the applicant's evidence, that in the case of each payment for which the applicant paid a claim there was a failure to account. Mr Mura argued, however, that so far as the evidence went such a failure could equally have been due to intervention by the applicant and the appointment of a provisional liquidator (perhaps in circumstances where "trading out" would have been possible) as to any act or omission of either the first or the sixth respondent. He argued that it was necessary, in each case, for the applicant to allege and prove a particular act or omission by the travel agent, or its employee or agent, leading to the failure to account.

Apart from failure to provide the travel services paid for or to repay or account for the money paid, the amended statement of claim makes two relevant allegations in relation to the two corporate respondents. Those relating to the first respondent are as follows (the allegations relating to the sixth respondent are in the same terms):

23. Further or in the alternative the first respondent failed to ensure, on or before the time at which payments were made to the first respondent by or on behalf of the claimants for the future provision of travel services, that the first respondent would be able to meet its obligations to provide those travel services.

24. Further or in the alternative, when payments were made to the first respondent by or on behalf of claimants for the future provision of travel services, there were reasonable grounds to expect that the first respondent would not be able to account for each prepayment at the time it was obliged to pay over the moneys to ensure each claimant received the benefit of the travel services the purpose for which (sic) the payment was made to the first respondent.

I do not think that paragraph 24 (which, as I have said, the third respondent denies) is of any particular assistance to a claim under the Act and I need not discuss it further. Paragraph 23, however, alleges an omission, albeit in general terms: it is asserted that on or before the time at which payments were made for travel services the first respondent failed to ensure that it would be able to provide them. Mr Mura's contention was that the effect of Dunn is that an act or omission must be specified with much greater particularity. I do not think, however, that the judgment in Dunn says that and I do not see why, as a matter of principle or of construction, it should be held to be required. Certainly it is possible to conceive of circumstances consistent with the evidence in which it might be held that there was no relevant act or omission of the first or sixth respondent: an example I suggested in the course of argument was a case where all the agent's money, sufficient to enable it to meet its commitments, is in an account with a bank which unexpectedly fails. But to say (truly) that the applicant must establish the essential elements of its claim is not to say that the applicant is required by evidence to eliminate bank failures, earthquakes or other remotely possible, but highly unlikely, explanations of what has occurred. In the absence of any evidence on behalf of the third (or any other) respondent, it is open to me, and proper, to infer that the actual explanation is what experience teaches to be the probable one: that is that at the time the money was received by the first and sixth respondents they were in a parlous financial situation and that they did not - for example, but only for example, by establishing a trust account for receipt of the money - take steps which would ensure that obligations to provide travel services could be met or, at least, that money received could be refunded. The failure to take such steps is the omission to be attributed to the first and sixth respondents, leading to their failure to account.

That finding is sufficient, all other essential elements of the claim being established, to make good a claim to subrogation under s 40(3) of the Act. The third respondent was a director at the time of receipt of all the payments and remained in office until the companies went into liquidation. Though it probably does not matter, on the evidence (and see Corporations Law s 471A) he appears to remain in office to the present day. He was in any event in office throughout the period in which the relevant omission occurred that is, the period from the first of the payments listed in the schedules to the statement of claim to, probably, the date on which the provisional liquidator was appointed or, possibly, the making of the winding up order (it does not matter which is correct).

There can, I think, be no doubt in the circumstances that each claimant had rights against the first or sixth respondent, as the case may be, resulting from its receipt and acceptance of money on terms that it was to be applied for the purchase of particular travel arrangements and in circumstances where the respondent concerned did not, or could not, either provide the travel arrangements or refund the money. I see no reason to doubt, on the applicant's evidence and in the absence of evidence to the contrary, that in each case the amount claimable against the respondent concerned is the amount paid to it.

Conclusion

It follows that the applicant succeeds in its claim to subrogation under subs 40(3) of the Act and to entitlement to enforce the rights to which it is subrogated jointly and severally, in the case of payments made to the first respondent, against the first and third respondents and, in the case of payments made to the sixth respondent, jointly and severally against the sixth and third respondents. The amount of the claims paid in respect of the first respondent is $472,445; the amount of the claims paid in respect of the sixth respondent is $27,196. Accordingly there will be judgment against the first respondent $472,445, against the sixth respondent for $27,196 and against the third respondent for $499,641. The applicant seeks interest under s 51A of the Federal Court of Australia Act; Mr Mura did not address the question, and I will of course hear him on it if he wishes, but at present I can see no reason why the applicant should not have interest on the principal amount of each judgment, calculated in the ordinary way. The applicant is also, of course, entitled to its costs of the proceedings against each of the first, sixth and third respondents. The costs of the hearing, from the time at which legal representatives of the other respondents were excused from further attendance, should be the responsibility of the third respondent.

I direct the applicant within seven days from the delivery of these reasons for judgment to file and serve on the first, third and sixth respondents short minutes giving effect to those conclusions. The parties may approach my associate to make arrangements for setting the matter down in order to deal with any matter, as to the orders, in dispute and for the making of final orders.

I certify that this and the preceding 28 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.

Associate:

Dated: 13 February 1997

Heard: 3 February 1997

Place: Sydney

Decision: 13 February 1997

Appearances: Mr T S Hale and Mr I Mescher of counsel instructed by Minter Ellison appeared for the applicant.

Mr E L Mura of Hillman Mura & Consultants appeared for the third respondent.

Ms A Pearsall of Parlish Patience appeared for the first and sixth respondents.

Ms M F Grigg of Toomey Pegg & Drevikovsky appeared for the second respondent.