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High Court of Australia |
AIR EXPRESS LTD. v. ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY. LTD. [1981] HCA 75; (1981)
146 CLR 249
Injunction - High Court
High Court of Australia
Aickin J.(1)
Barwick C.J.(2), Stephen(2), Mason(2), Murphy(2) and Wilson(2) JJ.
Barwick C.J.(3), Gibbs(4), Stephen(5) and Mason(6) JJ.
CATCHWORDS
Injunction - Interlocutory injunction - Undertaking as to damages - Loss or damage - Whether sustained by reason of grant of injunction - Distinction between loss or damage caused by grant of interlocutory injunction and loss or damage arising from litigation - Defendant added after commencement of action - Original undertaking as to damages extended to added defendant.High Court - Practice - Appeal - Objection to competence - Claim for damages for loss sustained by reason of grant of injunction - Usual undertaking as to damages - Order refusing damages - Whether judgment - Judiciary Act 1903 (Cth), s. 34.
HEARING
Melbourne, 1979, March 7, 15, 16, 19-23, 26-29; May 9-11, 14-16; August 17.DECISION
1979, August 17.
2. That claim arises out of the decision of the Full Court in Ansett
Transport Industries (Operations) Pty. Ltd. v. The Commonwealth
[1977] HCA 71; (1977) 139 CLR
54 . In that case Ansett commenced proceedings against the Commonwealth of
Australia and Mr. C. C.
Halton, the Secretary
to the Department of Transport,
by a writ issued on 18th February 1977. The writ was generally indorsed and
so
far as now material
it claimed as follows:
"The plaintiff's claim against the defendants is for an injunction to
restrain them and each of them their servants and agents
. . .(b) from granting or causing or permitting to be granted Air Express Ltd. or any company related to Air Express Limited a permission in writing under the said Regulations to import two Carvair aircraft on the grounds -
3. On the same day an ex parte application was made to me in chambers for an
injunction in terms of the relief claimed as quoted
above, supported by an
affidavit which set out a statement made by the Minister for Transport of the
Commonwealth on 17th February
1977 in the House of Representatives. That
statement included the following:
"I have looked at the air services to Tasmania and particularly the
freight services and have concluded that some innovation
is desired. That
is why this week I have approved the import of two Carvair aircraft for
Air Express and two Argosy aircraft for
Ipec carriage of freight between
the mainland and Tasmania. I believe that these innovations and the
improved aircraft will assist
markedly the capacity of Tasmanian
industries to sell their goods on the mainland and, likewise, the mainland
industries to deliver
their goods to Tasmania."
At that time the Customs (Prohibited Imports) Regulations contained a
provision which made aircraft prohibited imports unless the
importer produced
to the Collector of Customs "the permission in writing of the Director General
of Civil Aviation to import the
goods". The application was based on the
grounds set out above and the affidavit stated (inter alia) that there was no
office or
person known as the "Director General of Civil Aviation" and that
accordingly there was no person authorized to grant the permission
required
under those regulations. (at p253)
4. An order was made by me restraining the defendants from granting the written permission under the regulations until 4.30p.m. on Tuesday, 22nd February 1977, and giving various directions as to service. (at p253)
5. On Tuesday, 22nd February 1977, the parties appeared before the Chief Justice in chambers, and there also appeared before him counsel for Air Express and Interstate Parcel Express Co. (Australia) Pty. Ltd. ("Ipec"), who made oral applications to be added as defendants to the writ. The Chief Justice ordered that they be so added and continued the injunctions on the existing undertakings until Friday, 25th February, and gave certain directions as to pleadings. The matter again came before the Chief Justice in chambers on Friday, 25th February, when the defendants Air Express and Ipec asked for undertakings to the same effect as those given in respect of the original defendants. Those undertakings were given and the Chief Justice extended the injunctions on those undertakings until the suit was disposed of or further order. On the same day the writ was amended by adding Air Express and Ipec as defendants. Whether the amended writ was served does not directly appear but Air Express and Ipec entered appearances on that day. Order 16, r. 4(3) produces the result that the proceedings as against Air Express are to be deemed to have begun on that day. (at p253)
6. Ansett delivered a statement of claim which made no allegations and claimed no relief against Air Express or Ipec but claimed the original relief sought in the general indorsement against the Commonwealth and Halton. Those defendants delivered a defence as well as a demurrer to the statement of claim. Air Express and Ipec each delivered a document headed "defence" and demurred. The demurrers came on for hearing before the Full Court on 2nd March 1977 and on 4th March the hearing concluded and judgment was reserved. (at p253)
7. On 4th April 1977 Air Express applied to the Chief Justice in chambers for an order dissolving the injunction. The hearing of that application was adjourned to 18th April 1977 on which day the Chief Justice heard argument on the matter. The application was adjourned to 29th April 1977 at the request of Air Express to enable the parties to confer. The matter was again adjourned on 29th April to 5th May as no agreement had been reached. On 5th May the Chief Justice ordered that the application be refused with costs, though no formal order was taken out. (at p254)
8. The Full Court delivered judgment on the demurrer on 22nd December 1977 and by majority allowed the demurrer and dismissed the action [1977] HCA 71; (1977) 139 CLR 54 . (at p254)
9. By notice of motion taken out on 24th April 1978 Air Express sought an order that there be an inquiry as to whether it had sustained any and what damage by reason of the injunction granted on 18th February 1977 and continued on 22nd February and 25th February, which Ansett ought to pay in accordance with the undertaking given on 25th February 1977 and for directions as to further proceedings. On 4th May 1978 an order was made by Gibbs A.C.J. that the parties deliver pleadings, that they be at liberty to deliver interrogatories and that there be discovery and that the trial should be on affidavit with a right to cross-examine the deponents. The matter came before me for hearing on 7th March 1979, each party having filed numerous affidavits. Most of the deponents were cross-examined and a number of additional documents were put in evidence. (at p254)
10. When the matter came before the Full Court on 2nd March the Solicitor-General who appeared for the Commonwealth and Halton produced an Australian Government Gazette No. S34 of 2nd March 1977 which notified the making of Statutory Rule No. 23 on 1st March 1977 which amended the Customs (Prohibited Imports) Regulations by substituting the words "Secretary to the Department of Transport" for the words "Director-General of Civil Aviation" in the provision in the Third Schedule relating to permission to import aircraft. It was not suggested that the regulation was subsequently disallowed under the provisions of the Acts Interpretation Act 1903 (Cth). The making of that statutory rule produced the result that it was not necessary for the Full Court to consider the question whether under the unamended regulations the Secretary to the Department of Transport was authorized to issue the written permission referred to in the Third Schedule. It was clear that by 2nd March 1977 he was authorized by the regulations as they then stood to issue the written permission and no final order could be based on his alleged lack of power. That question is however material to some of the issues arising in the present proceedings and it is therefore necessary to set out the various administrative changes and statutory rules by which the abolition of the Department of Civil Aviation and the office of Director-General of Civil Aviation was affected. (at p254)
11. On 19th December 1972 there was notified in the Commonwealth Gazette the fact that the Governor-General in Council had approved the change of name of the former Department of Shipping and Transport to the Department of Transport and the name of the office of its permanent head from the Secretary to the Department of Shipping and Transport to the Secretary to the Department of Transport. On 5th March 1973 there was published in the Gazette approval by the Governor-General of certain administrative arrangements by which there were specified the principal matters dealt with by the Department of Transport and the Acts of Parliament which were to be administered by the Minister for that Department. The principal matters were "Navigation and shipping, Lighthouses, light-ships beacons and buoys, Land transport, Ship building". In the Gazette (No. 82) dated 30th November 1973 there was notified an order made by the Governor-General under s. 19B of the Acts Interpretation Act that references in any Act, or in any instrument (including regulations) made or issued under any Act to certain Ministers designated should be read as a reference to other Ministers designated in their place and that any references to certain specified departments should be read as a reference to departments specified in their place. That order required references to the "Minister of State for Civil Aviation" to be read as references to the "Minister of State for Transport" and references to the "Department of Civil Aviation" to be read as reference to the "Department of Transport". In the same Gazette there was notified the appointment of the defendant Halton to "the office of The Secretary to the Department of Transport and Director-General of Civil Aviation" to take effect on and from 30th November 1973. In a further issue of the Gazette (No. 183) dated 30th November 1973 there was notified the approval by the Governor-General of the abolition, in pursuance of s. 64 of the Constitution, of (inter alia) the Department of Civil Aviation and of the abolition, in pursuance of the Public Service Act 1922-1973, of (inter alia) "the office of Director-General of Civil Aviation". That Gazette also notified the creation in pursuance of the Public Service Act of the office of "The Secretary to the Department of Transport and Director-General of Civil Aviation" to be the permanent head of the Department of Transport. In the same Gazette there was also notified the revocation by the Governor-General of "so much of the Administrative Arrangements Order made on 19th December 1972" as related to the Department of Civil Aviation and so much of the Administrative Arrangements Order of 5th March 1973 as related to the Department of Transport. It also set out the approval of administrative arrangements which included the specification of the matters to be dealt with by the Department of Transport and the Acts to be administered by the Minister administering that Department. The matters to be dealt with by the Department of Transport included "Civil Aviation" and the Acts specified included the Air Navigation Act 1920-1973 and other Acts relating to air transport matters, but did not include the Customs Act or any part of it. (at p256)
12. The next step is recorded in the Gazette of Tuesday, 25th February 1975, which notified that the Governor-General in Council had changed the name of the office of the "Secretary to the Department of Transport and Director-General of Civil Aviation" to the "Secretary to the Department of Transport". It was however not until 1st March 1977 that the regulation was made which amended the Third Schedule to the Customs (Prohibited Imports) Regulations by omitting the words in the manner referred to above. (at p256)
13. That regulation was notified in the Gazette on 2nd March 1977 and pursuant to s. 48 of the Acts Interpretation Act took effect from the date of such notification, there being no other date specified. (at p256)
14. Accordingly when the interlocutory injunction was granted on 18th February 1977 and extended by the Chief Justice on 25th February 1977 the regulations were still in their old form. It is therefore necessary for me to consider whether there was then any person authorized under the Customs (Prohibited Imports) Regulations to issue the relevant written permission. Before I deal with the merits of the point I must note an objection raised by counsel for Air Express that Ansett had no locus standi to challenge the authority of the defendant Halton to issue that written permission. In my opinion there is no substance in this objection. It appears to me to be clear that Ansett had sufficient interest in the proper performance of the duties of those responsible for the administration of the relevant regulations to support its claim in these proceedings. It was affected in its private rights and had a greater interest than other members of the public. The relevant principle has recently been restated by four members of this Court in Robinson v. Western Australian Museum [1977] HCA 46; (1977) 138 CLR 283 and it is sufficient to refer to the following passages: per Barwick C.J. (1977) 138 CLR, at p 293 , per Gibbs J. (1977) 138 CLR, at pp 301-303 , per Stephen J. (1977) 138 CLR, at pp 324-325 , and per Mason J. (1977) 138 CLR, at pp 327-328 . If the formulation in Anderson v. The Commonwealth [1932] HCA 2; (1932) 47 CLR 50 is to be preferred, it is clear that Ansett was "more particularly affected" than other people, and in a manner different from the public generally. Accordingly I am satisfied that it does have locus standi in relation to this point. (at p257)
15. It was argued on behalf of Air Express that after the defendant Halton had been appointed as "The Secretary of the Department of Transport and Director-General of Civil Aviation" he was then "Director-General of Civil Aviation" within the meaning of that term as used in the Customs (Prohibited Imports) Regulations. In my opinion this argument overlooks the fact that by the notice included in Gazette No. 183 of 30th November 1973 the Governor-General in Council abolished "the office of the Director-General of Civil Aviation" and created a new office, namely that of "The Secretary to the Department of Transport and Director-General of Civil Aviation". That in my opinion created a new and different office, and not two offices, nor did it refer to two existing separate offices. After the abolition of the office of Director-General there was not and there could not be any person who was "the Director-General of Civil Aviation" though there was a person who answered the description "The Secretary to the Department of Transport and Director-General of Civil Aviation". The fact that it created a single new office is demonstrated by Gazette No. 182 which appointed the defendant Halton to "the office of the Secretary of the Department of Transport and Director-General of Civil Aviation". (at p257)
16. I am therefore of opinion that there was no person who was "the Director-General of Civil Aviation" within the meaning of the provision in the Customs (Prohibited Imports) Regulations and that there was no such office. (at p257)
17. When the regulations were amended on 2nd March 1977 the words substituted in the Third Schedule were "Secretary to the Department of Transport". It may be that it was only an oversight that this change was not made at an earlier stage. That this point was overlooked by the relevant departmental authorities is suggested by the provisions of the Air Navigation Act 1974 which was assented to on 3rd December 1974. Sections 7 and 9 of that Act were to come into operation on a date to be fixed by proclamation, which was in fact 1st March 1975. Section 7 provided for the amendment of the Air Navigation Act 1920-1973 as set out in Pt 1 of the First Schedule. The effect of that schedule is to insert in lieu of the definition of "Director-General" a definition of the expression "The Secretary" as meaning "The Secretary to the Department of Transport" and throughout the Act to omit the words "Director-General" and to substitute the word "Secretary". Section 9 (1) provided that "For all purposes of the Air Navigation Act 1920-1971 and of that Act as amended . . . and for all purposes of any regulations in force at any time before the commencement of this section under that Act or under that Act as so amended, the office of Secretary to the Department of Transport and Director-General of Civil Aviation shall be deemed to have been the same office as the office of Director-General of Civil Aviation". (at p258)
18. Sub-section (2) provided as follows: -
"Any act or thing done (including any instrument made or issued) -of, the office of Director-General of Civil Aviation; or
(a) before 30 November 1973 by a person holding, or performing the duties
under or for the purposes of -when the act or thing was done or the instrument was made or issued; or
(c) the Air Navigation Act 1920 or of that Act as amended and in force
Sub-section (3) provided thatregulations or other instrument in force or subsisting under or for the purposes of the Principal Act immediately before the commencement of this section, any reference in those regulations or in that instrument to the Director-General of Civil Aviation or to the Secretary to the Department of Transport and Director-General of Civil Aviation shall be read as including a reference to the Secretary to the Department of Transport". (at p258)
"In the application, after the commencement of this section, of any
19. It is significant that all those amending provisions are expressed to be
"for all purposes of the Air Navigation Act 1920-1971",
or "in relation to
acts or things done under or for the purposes of the Air Navigation Act or
regulations in force under that Act"
and that no attention was given to the
fact that under the Customs (Prohibited Imports) Regulations
another and a
different function
was conferred upon "the Director-General of Civil
Aviation". I am therefore satisfied that on 18th
February 1977 and thereafter
until
2nd March 1977 there was no such office as that of Director-General of
Civil Aviation and no person
who could issue the relevant
permission in
writing. There is no basis for regarding the fact that the point was
overlooked as disqualifying
Ansett from relying
upon the failure to amend
regulations until 2nd March 1977 for the purpose of these proceedings. (at
p259)
20. It was also argued on behalf of Air Express that Ansett was not entitled to rely upon the argument that the Secretary to the Department of Transport had no authority under the Customs (Prohibited Imports) Regulations to grant permission in writing for the importation of an aircraft. The basis of this argument was the allegation that Ansett itself had on one or more occasions imported aircraft into Australia on the basis of written permission signed by the Secretary to the Department of Transport and at a date or dates after the abolition of the office of Director-General of Civil Aviation. It was also said that this fact should have been revealed to the Court upon the application for the interlocutory injunction or for its continuation. I can see no basis upon which this argument can succeed. It is clear that neither Air Express nor anyone else was misled in any way or relied in any way upon the fact that Ansett had obtained permission to import aircraft on that basis if in fact it had done so. If the point had been overlooked by Ansett as well as by the Department of Transport and those responsible for the making of the various administrative arrangements to which I have referred, Air Express can have suffered no prejudice by reason of Ansett, or for that matter anyone else, having previously received written permission from the Secretary to the Department of Transport. (at p259)
21. The question whether there was any person who could exercise the function of granting the necessary permission in writing under the Customs (Prohibited Imports) Regulations is material to the question of damages in more than one way. If there were no such person, it would follow that, if the proceedings had been finally dealt with at the time of Ansett giving the undertaking to the Court on 25th February 1976, Ansett would have succeeded in that point. However the law was changed by an amendment of the regulations on the day before the hearing began in the Full Court. This is a situation which is not the subject of any direct authority and I defer for the moment the consideration of that point. (at p259)
22. I also defer for later consideration the question of the effect of events both earlier and later than the grant of the interlocutory injunction on 18th February and its renewal or extension on 25th February. (at p259)
23. It will be convenient to turn now to the state of the law with respect to damages to be awarded upon an undertaking given by a plaintiff who obtains an interlocutory injunction, but ultimately fails in his action. (at p260)
24. The undertaking given by Ansett was in the customary form which has been in use since about the middle of the nineteenth century in cases where an injunction is granted either ex parte or on motion on notice to operate until the determination of the action or further order. It is a procedure said by Jessel M.R. in Smith v. Day (1882) 21 ChD 421, at p 424 to have been invented by Knight Bruce L.J., when Vice-Chancellor. The first reported case in which an injunction had been granted on such an undertaking appears to be Novello v. James (1854) 5 De GM & G 876 (43 er 1111) from which it appears that on 15th December 1851 Knight Bruce L.J. (then Vice-Chancellor) granted an interlocutory injunction upon such an undertaking being given by the plaintiff. The injunction was dissolved without opposition in view of a later decision by the House of Lords governing the substantive question involved. On an appeal in relation to the question of damages Knight Bruce L.J. (1854) 5 De GM & G, at p 878 (43 ER, at p 1112) said in effect that the fact that law was doubtful at the time of the grant of the interlocutory injunction provided no reason for not ordering damages. Turner L.J. (1854) 5 De GM & G, at p879 (43 ER, at p 1112) agreed with that view. In Chappell v. Davidson (1856) 8 De GM & G 1 (44 ER 289) Knight Bruce L.J. said in the course of argument, "Has it not been for the last twelve or thirteen years an almost universal practice to require, on granting an injunction, an undertaking on the part of the Plaintiff to be answerable in damages?" In 1865 Kindersley V.C. said in Wakefield v. Duke of Buccleugh (1865) 11 Jur NS 523, at p 524 "the practice is settled, that not only on ex parte applications, but on injunctions granted upon motion by notice, the plaintiff should give an undertaking as to damages". (at p260)
25. In Graham v. Campbell (1878) 7 ChD 490, at p 494 the Court of Appeal, James, Cotton and Thesiger L.JJ., said "The undertaking as to damages which ought to be given on every interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been occasioned by an interlocutory injunction, which on the hearing is found to have been wrongly asked for, justice requies that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so." (at p260)
26. No reference was made in these cases to the interlocutory injunction having been obtained by suppression of facts or on insufficient information. It was however suggested by Jessel M.R. that an order for damages pursuant to such an undertaking would only be made where the injunction had been obtained by some false statement or suppression of information and that it would not apply where the injunction had been wrongly granted because of some mistake of law by the court: Smith v. Day (1882) 21 ChD 421, at pp 424-425 . However Cotton L.J. dissented from those observations and pointed out that in Novello v. James (1854) 5 De GM & G 876 Knight Bruce L.J. and Turner L.J. had said that the fact that the law was doubtful was no reason for not ordering damages. The third member of the Court, Brett L.J., expressly refrained from expressing a view upon the point. However, in Griffith v. Blake (1884) 27 ChD 474 the Court of Appeal expressly dissented from the dictum of Jessel M.R. and stated that it was not well founded. Baggallay L.J. (1884) 27 ChD at p 476 said "If the Defendants turn out to be right, it appears to me that they can, under the undertaking, obtain compensation for all injury sustained by them from the granting of the injunction". Cotton L.J. (1884) 27 ChD, at p 477 agreed and Lindley L.J. said "The dictum of the late Master of the Rolls is not consistent with what was done by the Court of Appeal in Novello v. James and Newby v. Harrison [1861] EngR 850; (1861) 3 De GF & J 287 (45 ER 889) ". (at p261)
27. The equitable nature of this remedy is apparent from its origin and nature. The view has always been taken that the right may be lost by delay - see Newcomen v. Coulson (1878) 7 ChD 764 and Ex parte Hall; In re Wood (1883) 23 ChD 644 , per Baggallay L.J. (1883) 23 ChD, at p 651 , per Cotton L.J. (1883) 23 ChD, at p 652 and per Bowen L.J. (1883) 23 ChD, at p 653 , the latter being a case in which the Court of Appeal held that the right had in fact been lost by delay. (at p261)
28. The cases display a substantial variation in the language in which the principle is expressed. The following are examples of expressions used: some cases speak of damages being available if it turns out that the injunction was "wrongfully granted"; others of where" The court is ultimately of opinion that the order ought not to have been made", and others again say that the damage should not fall on the "litigant who has without just cause been made so". It seems that the first two expressions mean no more than that the plaintiff ultimately fails and are not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction. At the trial the issues are of necessity different from those involved in the question of whether or not an interlocutory injunction should be granted. The use of the expression "the litigant who has without just cause been made so" in Graham v. Campbell (1878) 7 ChD, at p 494 was not in circumstances where there was a difference between, on the one hand, defendants against whom the proceedings had been taken by the plaintiff and, on the other hand, defendants who on their own application, had been added to proceedings in which no claim was originally or subsequently made against them. I do not think that an observation of that kind made in a quite differet context can directly assist in the present case, though the fact that Air Express and IPEC applied to be made defendants when no cause of action was asserted or existed against them is not irrelevant. (at p262)
29. Counsel referred to a number of American and Canadian authorities. I have not found the American authorities helpful upon the general nature of the equitable principles which are applicable. They appear to me mostly to proceed upon a view of the principles the same as or similar to that adopted by Jessel M.R. and subsequently rejected by the later English authorities referred to above. See, for example, the decision of the Circuit Court of Appeals (4th Circuit) in Greenwood County v. Duke Power Co. (1939) 107 F 2d 484; 131 ALR 870 (Annotated) which proceeds upon the basis that no damages are allowed except in cases where the matter has been prosecuted maliciously and without reasonable cause and that no damages are allowed where the law is doubtful. Somewhat the same view had been adopted in the Supreme Court in Alberta in Albertson v. Secord (1912) 1 DLR 804 but that view was rejected by the Supreme Court of Canada in Vieweger Construction Co. Ltd. v. Rush and Tompkins Construction Ltd. (1965) 48 DLR (2d) 509 where the Supreme Court states the relevant test by reference to Griffith v. Blake (1884) 27 ChD 474 . (at p262)
30. I turn now to the question of the measure of damage to be applied where a
plaintiff, having given an undertaking, has failed
in the action. The matter
was first adverted to in Smith v. Day (1882) 21 ChD 421 where it was the
subject of some discussion by
each member of the Court of Appeal. Jessel M.R.
said (1882) 21 ChD, at p 425 :
"Then, again, the Court must have regard to the amount of damage; if it
be trifling or remote the court would not be justified
in directing an inquiry
as to damages, though the injury might not be so remote that an action would
not lie"
and (1882) 21 Ch D, at p 426 :
"Apart from this, I am of opinion that there is no sufficient proof of
any damage having been sustained, and that if any was
sustained it is too
remote for the present purpose. I might indeed, say too remote for any
purpose. It is said that the Cab Company
had agreed to take a lease for seven
years at a rack rent, but there was in fact no agreement, nothing but
negotiations."
Brett L.J. said (1882) 21 Ch D, at pp 427-428 :
"Again, I am strongly of opinion that the question whether an inquiry as
to damages should be granted is within the discretion
of the Judge who
originally tries the case, and that his discretion ought not lightly to be
interfered with. In exercising this discretion
the Court should act as nearly
as may be on fixed rules, or by analogy to fixed rules. Now in the present
case there is no undertaking
with the opposite party, but only with the
Court. There is no contract on which the opposite party could sue, and let
us
examine the case by analogy to cases where there is a contract with, or
an obligation to the other party. If damages are granted
at all, I think
the Court would never go beyond what would be given if there were an
analogous contract with or duty to the
opposite party. The rules as to
damages are shewn in Hadley v. Baxendale [1854] EWHC J70 (Exch); [1854] EWHC J70 (Exch); (1854)
9 Exch 341 (156
ER 145) .
If the injunction
had been obtained fraudulently or maliciously, the
Court, I think, would act
by analogy to the rule
in the case of fraudulent
or malicious breach of contract, and not confine itself to proximate
damages,
but give exemplary
damages. In the present case
there is no
ground for alleging fraud or malice. The case then is to be governed
by
analogy
to the ordinary breach of a contract
or duty, and in such a case
the damages to be allowed are the proximate and natural
damages arising
from such a breach, unless
as in Hadley v. Baxendale, notice had been
given to the opposite party, of there
being
some particular contract which
would
be affected by the breach. This doctrine of notice has introduced
some difficulty
into
these cases, and it is not settled
what sort of
notice is sufficient. Here an alleged agreement for a lease is relied
on.
In the first place I do not think the
existence of such agreement proved.
If it did exist, the next question is, whether
the
injunction so
interfered with the
erection of the buildings as to entitle the tenant to
throw up the agreement. I am
not
satisfied that it did. But assume
that it
did, and that the agreement was broken in consequence of the injunction,
still
I agree with the Vice-Chancellor in thinking
that the breach is not
by reason of the injunction, but is a consequence too
remote to be
regarded. If any one obtains an
injunction preventing another from
proceedings with a building, he must be taken
to have notice of everything
in the building
contract, and all liabilities which the person stopped
incurs to his contractor
by reason of the stoppage, are a natural
and
immediate consequence of the injunction. But the fact that the injunction
prevents
the carrying out of an entirely independent
agreement as to the
property is too remote."
Cotton L.J. said (1882) 21 Ch D, at p 430 :
"I think that the damages must be confined to loss which is the natural
consequence of the injunction under the circumstances
of which the party
obtaining the injunction has notice." (at p264)
31. In Hunt v. Hunt (1884) 54 LJ (Ch) 289 , Pearson J. referred to the
judgment of Brett L.J. in Smith v. Day and applied that test.
(at p264)
32. In Schlesinger v. Bedford (1893) 9 TLR 370, at pp 370-371 Lindley L.J.,
with whom Lopes and A.L. Smith L.JJ. agreed, said:
"The real nature of an undertaking of this kind and the extent to which
damages ought to be awarded thereunder were carefully
explained by the
late Master of the Rolls in the well-known case of Smith v. Day. That case
was instructive for this reason, that
it showed that all the remote
consequences of obtaining an injunction which was afterwards dissolved,
were not to be taken into account
in assessing the damages to be paid to
the defendant under the plaintiff's undertaking. It would be unduly
straining such undertaking
to include in it damages which did not
naturally flow from the injunction. In Smith v. Day (1882) 21 Ch D 421 it
was held that the
damage was too remote. The defendant there claimed that
he had lost a good tenant by reason of the injunction, but it turned out
that there had not at the date of the injunction been any agreement for a
lease, although negotiations had been entered into with
a view to a lease.
That case was followed by Ex parte Hall; In re Wood (1883) 23 Ch D 644 ,
where a receiver obtained an injunction
restraining a man from the selling
of certain goods, and damage resulted from the receiver restraining him
from removing the goods.
The Court held that the man against whom the
injunction was obtained was not entitled to recover any damage except such
as resulted
naturally from his being restrained from selling and that the
damage was too remote. So here the plaintiffs ought not to be exposed
to
damages which were not fairly consequential upon the injunction, and which
they could not have foreseen when the injunction was
granted." (at p264)
33. In Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716, at p
718 Bankes J. spoke of "damage which necessarily and
naturally flowed from the
course which the landlord compelled them to adopt" by obtaining the
interlocutory injunction. In referring
to the damage claimed he said that he
did not agree "that such a loss was not in the contemplation of the parties or
that it was
not a natural consequence of what the landlord did". (at p265)
34. There do not appear to be any later English authorities but there was one
Canadian and one New Zealand authority to which I
must refer before turning to
the only Australian authority. In Douglass v. Bullen (1913) 12 DLR 652, at p
655 Britton J. in the Ontario
Supreme Court, after referring to Smith v. Day
said:
"The damages ought to be confined to the immediate natural consequences
of the injunction, under the circumstances, which were
within the
knowledge of the party obtaining the injunction. The damages claimed are,
in my opinion, too remote. The defendant gave
notice to the plaintiffs
that he was liable to suffer damage by reason of the injunction, and that
he would hold the plaintiffs responsible,
but, as to such damages as are
claimed, the plaintiffs could have no knowledge, and they could not have
been within their reasonable
contemplation when the order was asked for.
Damages should be confined to circumstances of which the plaintiffs had
notice. See Kerr
on Injunctions, 4th ed. (1903), p. 592.
No doubt, the defendant has suffered some damage, but I cannot sort out
damage by reason of the injunction distinct from loss
of time and trouble and
detriment arising from litigation; so no inquiry should be directed. See
Gault v. Murray (1892) 21 OR
458 ." (at p265)
35. In Newman Bros Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) (No. 2) (1935)
NZLR Suppl 17, at p 18 Myers C.J. dealt with this
question:
"If it appears that no damage is proved occasioned by the injunction as
distinct from the detriment arising from the litigation,
the defendants
are not entitled to an inquiry as to damages on an application such as
this. The cases on this point are referred
to in the Canadian case Gault
v. Murray. I am inclined to think in the present case that it cannot be
said that the defendants have
sustained damage by reason of the
interlocutory injunction apart from the litigation. All that the interim
injunction did was to
restrain the defendant J.C. Allum from hearing or
adjudicating upon the application for the transfer of the
passenger-service license
referred to in the proceedings until the further
order of the Court. Mr. Allum was acting as the statutory Licensing
Authority. As
I pointed out in the judgment in the main action,
considerable power and a wide discretion are vested in the Licensing
Authority,
but it cannot be doubted that, if the authority acts without or
in excess of jurisdiction, he can be controlled by this Court. I
had
occasion in my previous judgment to make some comment on the affidavit filed
in support of the application for an interim injunction,
but, nevertheless,
the plaintiff was entitled to that injunction. It is inconceivable, however,
that Mr. Allum as a quasi-judicial
authority, after being served with a
statement of claim in which the validity of his grant of the renewal of
the license
and his other actions in connection with the applications
before him were attacked would have proceeded, even though there
had been
no interim injunction to adjudicate further upon the matter until the main
action had been decided. My inclination of
opinion, therefore, is that it
cannot be said that the defendants have sustained damage by reason of the
interim injunction which
the plaintiff ought to pay." (at p266)
36. In Victorian Onion and Potato Growers' Association v. Finnigan (1922) VLR
819, at p 822 , Cussen J. said:
"The question which I have to decide, therefore, is whether, in the
exercise of my discretion, I should direct an inquiry or
myself assess the
damages. It was contended for the defendants that I should do so by
analogy to the principles to which effect is
given in connection with
enforcing the obligations on a sale of goods where there has been a breach
of contract by one of the parties.
I think the terms of the undertaking
are themselves of importance. It provides that there may be an order as to
damages if the Court
shall be of opinion that the defendant has sustained
any. I think the word 'damages' in that undertaking is to be given a very
general
meaning, and is not necessarily to be given the same meaning as
the word 'damages' when used in connection with breaches of contracts.
'Damages' in this case seems to me to mean real harm, rather than to have
any strictly defined meaning."
He referred to the judgment of Brett L.J. in Smith v. Day (1882) 21 Ch D 421
and said in effect that that judgment suggests that
damages which might be
given on breach of contract are the utmost which can be given, and he then
turned to the question of delay.
(at p266)
37. However he did not refer to the decision in Schlesinger v. Bedford (1893) 9 TLR 370 where a subsequent Court of Appeal applied the principle as to damages referred to in Smith v. Day. With all the respect properly due to Cussen J., I am unable to derive much assistance from the expression "real harm" and I respectfully think that it cannot be adopted as a substitute for what on the authorities has become at least a prima facie guide. In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case. No doubt the view as expressed in the two decisions of the Court of Appeal does not constitute a rigid rule and circumstances may sometimes require a different approach. However it will in my opinion be seldom that it will be just or equitable that the unsuccessful plaintiff should bear the burden of damages which were not foreseeable from circumstances known to him at the time. (at p267)
38. The subject of measure of damage has not been much discussed in the text-books but it may be noted that in Kerr on Injunctions, 3rd ed. (1888), p. 639 the learned author says "The damages, moreover, must be confined to the loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice" and he cites as authority for that proposition Smith v. Day (1882) 21 ChD 421 , the words used being substantially those of Cotton L.J. The same proposition has been repeated in each successive edition up to the latest (6th ed. (1927)) without alteration other than the addition of subsequent authorities. There is a useful discussion on the matter in Spry, Equitable Remedies, 1st ed. (1971), pp. 559-566, but for reasons which I have already given I am unable to agree with the view that the observations of Cussen J. are to be preferred to the earlier English authorities. (at p267)
39. It was suggested that on the question of the measure of damage it would
be appropriate to proceed by analogy with the practice
of the Court of
Chancery under Lord Cairns' Act (Chancery Amendment Act, 1858 (U.K.)). In my
opinion that would not lead to any different
approach. The practice of
requiring an undertaking originated prior to 1858 but there is no reported
case on the measure of damage
prior to that date, and no mention of that
analogy in any of the later cases. The position under Lord Cairns' Act has
been recently
restated by Lord Wilberforce in Johnson v. Agnew (1980) AC 367,
at p 400 where he said:
"Since the decision of this House, by majority, in Leeds Industrial
Co-operative Society Ltd. v. Slack (1924) AC 851 it is
clear that the
jurisdiction to award damages in accordance with s. 2 of Lord Cairns' Act
(accepted by the House as surviving the
repeal of the Act) may arise in
some cases in which damages could not be recovered at common law: examples
of this would be damages
in lieu of a quia timet injunction and damages
for breach of a restrictive covenant to which the defendant was not a
party. To this
extent the Act created a power to award damages which did
not exist before at common law. But apart from these, and similar cases
where damages could not be claimed at all at common law, there is sound
authority for the proposition that the Act does not provide
for the
assessment of damages on any new basis." (at p268)
40. It is important in all cases, and particularly in the present case, to
bear in mind the distinction adverted to in many of the
cases (e.g. per Myers
C.J. in Newman Bros. Ltd. v. Allum; S.O.S. Motors Ltd. (In liq.) (No. 2)
(1935) NZLR Suppl, at p 18 between
damages flowing from the injunction and
damages flowing from the litigation itself. There may not in every case be any
difference
between the two but, where there is a difference, it is essential
that the damage flowing from the litigation should not be confused
with the
damage flowing from the interlocutory injunction. This is necessarily required
by the form of the undertaking itself. (at
p268)
41. I have discussed the authorities at some length because of an argument put on behalf of Ansett that as a preliminary step it was necessary to decide whether the interlocutory injunction had been "obtained without just cause" or the order "ought not to have been made". It was said that if it were not so obtained then, in the absence of special circumstances, no inquiry as to damages should be made and no damages should be awarded, and that it was for Air Express to prove that the interlocutory injunction had been obtained without just cause and that the upholding of the demurrer by the Full Court was not in itself sufficient to demonstrate that. In my opinion the cases do not support those propositions. The argument harks back to the dictum of Jessel M.R. which was rejected in the cases to which I have referred. (at p268)
42. It was also submitted that it was first necessary to decide as a preliminary point whether there should be an inquiry. It is not necessary to decide whether this point was in effect disposed of by the directions given by Gibbs A.C.J. I indicated in the course of this hearing that it would be convenient to hear the evidence and give a ruling at the conclusion of the hearing since all the affidavits had already been filed. In my opinion this is a proper case for an inquiry, whatever the result of the inquiry may be. It would have been impossible to say at the outset that no inquiry was warranted. (at p268)
43. I turn therefore to the material facts as alleged and to the evidence. The early history of Air Express is not material to the present question. At the beginning of 1975 Air Express had four aircraft operating for the carriage of freight between Essendon Airport and Launceston and other northern Tasmanian airports. At that time its mode of operation was to charter an aircraft at an hourly rate to a customer for a flight between Essendon and a Tasmanian airport and return. The charterer was responsible for obtaining his own cargo, transporting it to the airport and loading it, and for unloading and dispatch to its ultimate Tasmanian destination. The aircraft comprised two Mk 31 Bristol Freighters which had been acquired in 1962 and 1968, and two Mk 21 Bristol Freighters which were said to have been acquired in 1971 for the purpose of providing a daily service from Melbourne to Launceston for an organisation known as Kwikasair. In May 1975 one of the two Mk 21 Bristols was lost in an accident. (at p269)
44. From the early 1950s a firm named Brain & Brown Airfreighters had operated an air freight business between Melbourne and Launceston and other northern Tasmanian airports, including Flinders Island and King Island in Bass Strait. That operation was taken over by a company named BBA Air Cargo Pty. Ltd. ("BBA"), the original shareholders and directors of which were the former partners, Brain and Brown. At all material times it had three DC3 aircraft. In 1974 it acquired one Argosy aircraft, at a stage when half of the shares held by each of Brain and Brown had been transferred to new shareholders who put in funds required to finance the acquisition of the Argosy. It appears that the Argosy was leased by BBA, but that it was in a position to dispose of the aircraft, and it was later sold. BBA and Air Express had operated as competitors until 1974, although in precisely what way does not appear. As from that time BBA acted as a carrier and as a freight forwarder in that it obtained cargo from its own customers which it carried in its own aircraft and, in addition, it carried freight for other freight forwarders. The Argosy was operated during part of 1974 and during 1975 primarily to carry goods from Melbourne to Launceston for Ipec - but that business came to an end on 24th December 1975, Ipec having given notice to that effect on 24th November 1975. The Argosy was due for a major and expensive overhaul in January 1976, which included a wing spar change. That work would have put the plane out of action for a considerable time. In the result the registration of the aircraft was not renewed and the necessary work to maintain its airworthiness certificate not then done. Brown had resigned from the position of managing director during 1975 and sold his shares in BBA to one of the incoming shareholders. (at p269)
45. Astling, the present managing director of Air Express, joined its staff and that of BBA at some time late in 1975 and by the middle of 1976 he was in effect in control of the operations of both companies. At that time the principal shareholder in each of the two companies was Signet Insurance Holdings Pty. Ltd. but the other shareholders were not identical in each company. (at p270)
46. On 19th October 1976 Astling made a formal offer to acquire the whole of the shares in BBA for the sum of $25,000 payable as to a deposit of $2,500 on acceptance of the offer, a cheque being enclosed with the formal offer, and the balance on or before 24th December 1976. Under the terms of the offer Astling was personally to guarantee debts owed by BBA to Donlin Industries Pty. Ltd. (one of the shareholders in BBA) for an amount of $155,000 and to Brain for the sum of $65,000. Those debts however were to be interest free until 1981 and to be repaid not later than that date or if not so repaid to bear interest as from the date of the offer. That offer was in fact accepted by all the shareholders at a date which does not expressly appear but which was probably on or shortly after 21st October 1976. Also on 19th October Astling made a written offer to the Chairman of Air Express for all the shares in that company and on 25th October Signet Insurance Holdings Pty. Ltd., acting with the authority of the other shareholders, accepted the offer subject to some minor adjustment of the figures, on which nothing now turns. (at p270)
47. At about the end of October 1976 some 97 per cent of the shares in Air Express were transferred to a subsidiary of a company, all the shares in which were owned by Astling and his wife ("Uplift Pty. Ltd.") and the transfers duly registered. This was done without payment of the balance owing on the purchase. The same course was taken with respect to all the shares in BBA. (at p270)
48. Shortly after the purchase of the shares in 1976 Astling prepared a
document called "Proposal for acquisition of an equity interest
in Air Express
Limited and BBA Air Cargo Pty. Ltd." (the "Proposal"). He received some
assistance in the presentation and in the
setting out of the financial
statements and projections from a Mr. Hilton, a partner in a well-known firm
of chartered accounts,
but the text was Astling's, not Hilton's. The document
is undated, as was a copy of a letter sent to various persons by Astling to
interest them in the project. It seems probable that the Proposal was
completed by the end of October or perhaps early in November.
The letter
stated (inter alia):
"The amount of investment required is in the vicinity of $400,000, and
it is expected that earnings before tax in the first
full year of
operation should exceed $500,000. A positive cash flow in excess of
$200,000 at the proposed level of operations is
expected in the first year
rising to in excess of $300,000 in subsequent years. Sales contracts
exist, and more are potentially available,
to support such level of
operation."
It lists the aircraft available to the two companies as one Argosy, two Mark
31 Bristol freighters and one Mark 21 Bristol freighter
and three DC3s. It
stated "These two companies now operate as a single unit". (at p271)
49. The Proposal is a document of some twenty-seven pages and states that its
purpose is " . . . to demonstrate the viability and
potential return from
obtaining a controlling equity interest in Air Express Ltd. (AEL) and BBA
Cargo Pty. Ltd. (BBA)". The Proposal
is important for a number of reasons, and
it is necessry to state its contents in some detail. It stated that "The
shares presently
being offered are: - AEL - 148,120 ordinary shares of 50
cents each (97.45%) BBA - 89,808 ordinary shares of $2.00 each (100%)" and
that "in due course steps will be taken to acquire the remaining 3,880 shares
in AEL". The document began with an historical survey
of the aviation industry
in Australia and in particular gives the history of BBA and of Air Express. It
referred to the existing
charter licences and stated that for almost a decade
Ipec had been seeking to obtain aircraft for use under a licence which it
held,
but it had not been permitted to import aircraft. It said that Ipec had
been conducting discussions with BBA to purchase the Argosy
aircraft. It then
said:
"However, BBA appreciates that allowing a competitor into the field
would affect the future viability of AEL and BBA. It is
the only
opportunity left for IPEC to obtain an existing aircraft which is already
registered in this country, and it is essential
for them to complete a
deal with BBA. To this end IPEC have offered either $440,000 to purchase
the Argosy or $150,000 to acquire
all the shares of BBA which, as shown in
Appendix 1, had a deficiency in nett worth of $704,924.00."
It stated that the price offered by Ipec for the Argosy was to be "compared
with its ex Australian value of some $200,000. This would
seem to indicate
that the value of the import licence may be in the vicinity of $240,000, but
the potential worth to the company,
based on future profit projections show
its worth to be much higher". (at p271)
50. Under the heading "Present Position Of The Companies" the Proposal
stated:
"The operations of AEL and BBA have been merged during 1976 with a view
to reducing staff in the areas of engineering, operations
and management,
thereby increasing potential profits of the group. The decision to ground the
Argosy resulting in approximatey 30
staff being retrenched with the closure of
BBA's engine overhaul workshop."
It then explained that all the employees with one exceptin were paid by Air
Express and that BBA paid only the air navigation charges
and insurance on its
aircraft and that Air Express operated the DC3s for BBA at a rate of $200 per
hour. It then stated that both
companies were at that time operating
profitably whereas twelve months earlier BBA had been operating at a loss of
more than $2,000
per day. (at p272)
51. The Proposal contained the following further paragraphs relating to the
Argosy aircraft and Ipec's endeavours to purchase it.
"For almost a decade Ipec have been seeking ways and means to obtain
aircraft for the charter licence which they hold, but
on every occasion
the government has refused to grant the necessary import licences. For
some time, they have been conducting discussions
with BBA to purchase the
Argosy and have made several firm offers. However, BBA appreciates that
allowing a competitor into the field
would affect the future viability of
AEL and BBA. It is the only opportunity left for Ipec to obtain an
existing aircraft which is
already registered in this country and it is
essential for them to complete a deal with BBA. To this end Ipec have
offered either
$440,000 to purchase the Argosy or $150,000 to acquire all
the shares of BBA which, as shown in Appendix I, has a deficiency in net
worth of $704,924.
In the event they obtain the Argosy aircraft, or the BBA shares, Ipec
could then demonstrate to the government that it was
impossible to operate
a regular service without a similar backup aircraft. Almost certainly, if
Ipec already owned or controlled
a turbo-prop freighter, such as the
Argosy, the government would be forced, because of operational
requirements, to allow them to
import a second aircraft. Alternatively,
with ownership or control of the Argosy, Ipec could approach the
government and agree to
keep the Argosy grounded forever provided they
were allowed to replace that aircraft with two new aircraft from
overseas." (at p272)
52. The position of the Argosy was again mentioned in par. 69 as follows:
"The Argosy will be sold as soon as possible after the acquisition of
the companies. An offer of $440,000 has been received
from Ipec, but as
previously noted in Part V, this would enable one of the companies'
competitors to expand its operations which
they are not otherwise able to do.
Therefore it is intended to sell the aircraft overseas, recovering only
the amount outstanding
on the lease." (at p272)
53. The Proposal stated that the companies were short of working capital,
needed short-term funds to pay creditors and that there
were a number of
"deferred borrowings" by the companies and that Astling had available to him
an arrangement deferring those loans
on an interest-free basis until October
1981. It then stated that Astling was "managing the combined AEL/BBA
operations" and "holds
options to acquire all or most of the shares". There is
however no evidence that he ever held any options and the situation at the
time of the Proposal was that he had already acquired but had not paid for the
shares in both companies. (at p273)
54. Under the heading "Financial Forecasts" a summary of a year's operations
based on the existing Bristols and DC3s and the acquisition
of two Carvairs
was set out showing a projected profit before tax of $532,900. The paragraph
then stated "existing long term sales
contracts have an escalation clause for
fuel and payroll increases". There was no evidence of the existence of any
long-term sales
contracts. The only evidence as to such contracts was that in
the air transport business freight forwarders did not enter into such
contracts. The Proposal also stated that "in the past two months AEL and BBA
have been approached by three major freight forwarders
prepared to enter into
long-term arrangements for the air freight of cargoes to Tasmania." If that
was intended to convey that such
forwarders were prepared to enter into
long-term contracts it was not borne out by the evidence. Paragraph 72 of the
Proposal was
as follows:
"It is expected that the BBA tax losses would be available to the new
shareholders. The tax losses amount to approximately
$900,000 and if available
would result in the companies paying little or no tax for at least two
years based on the forecast
profit and loss statement." (at p273)
55. The Proposal then set out the basis on which a 50 per cent interest might
be obtained, viz.:
"Purchase of 50% equity in AEL and BBA $140,000This involved the provision of only $150,000 in working capital to the two companies, but it was projected that it would enable them to earn a profit of $532,900 before tax. However it emerged that the situation was not as simple as that. (at p273)
Interest-free loan to W.S. Astling for a period
not exceeding 10 years 115,000
Short term loan at 10% interest per annum 150,000
------
$405,000"
======
56. The appendices to the Proposal comprise what were called "Combined Balance Sheets (Unaudited)" for the two companies as at 30th June 1976, and notes thereon, "Forescast Profit and Loss Statement (Full Years' Operations)" which set out the estimated revenue and "Cost of Sales" in respect of each of three categories of aircraft. In addition, there was a heading for "Selling and Administration Expenses" split up as between the three categories of aircraft upon a basis which is not explained in the Proposal but which in relation to most items splits the expenses equally between each category of aircraft. However smaller figures for salaries and wages are attributed to the Bristols and DC3s than to the Carvairs and larger figures for payroll tax are attributed to the Bristols and DC3s than to the Carvairs, a difference which is hard to follow. For some reason not explained, the whole of the long service leave provision and the motor vehicle expenses are attributed to the Bristols and DC3s, with none to the DC4s. The notes to the Forecast Profit and Loss Statement stated that one Bristol which had a structural fault, which was expected to be rectified, had been excluded from the Revenue Forecast, and that one DC3 had been excluded on the basis that at any particular point of time only two would be operating. The notes to the combined balance sheets included under the heading "Argosy" the following statment: "As it is intended to sell the Argosy for the amount outstanding on its lease it has been excluded from the balance sheet, as has the liability for future lease rentals" and in the notes to the "Forecast Cash Flow Statement" it is stated that "The intended sale of the Argosy has not entered in the cash flow calculations". (at p274)
57. Thus the financial statements in the Proposal arrive at estimated profits on the assumption that the Bristol freighters would remain in operation alongside the Carvairs for a full three year period. (at p274)
58. In the notes to the "Forecast Cash Flow" statement the following appeared under the heading "Income Tax" - "The accumulated losses of $921,781 are assumed to approximate the tax losses, and therefore little tax would be payable on the profit for years one and two", and the "Forecast Profit and Loss Statement (Full Year's Operations)" contains no provision for tax. Astling purported not to understand these statements and in fact said it was for Hilton to explain. Astling had insisted that the text was his and not Hilton's. I do not accept his evidence that he did not understand the statements, which were plainly inserted as an inducement to those to whom he intended to show the Proposal. Hilton said that he was responsible for the figures and not the text and was evasive in answering questions about these two statements. Neither was in cross-examination prepared to grasp the obvious nettle of the "continuity of business" test. (at p274)
59. The remaining relevant statement in the Proposal is that "approval for the leasing of the two Carvair aircraft for use by the combined operations of AEL and BBA had been obtained from the Department of Transport". (at p274)
60. On 22nd November 1976 Astling wrote on behalf of Air Express to the Secretary to the Department of Transport enclosing a formal application for a permit to import two Carvairs, having had earlier discussions with an officer of that Department. The nature of those discussions does not appear. That letter stated that "At very best the two Bristol MK 31 freighters cannot be expected to continue operating after the early part of 1978 due to unavailability of engine spares". On 25th November 1976 Astling again wrote to the Secretary, this time on behalf of BBA enclosing an application for a permit to import two Carvairs to replace the Argosy which he said had performed satisfacorily for eighteen months. The letter complained about the activities of Ipec and asserted that it was very undesirable for a freight forwarder to have a licence, notwithstanding that according to Astling's evidence BBA was then operating only as a freight forwarder, having leased its DC3s to Air Express. (at p275)
61. It is convenient at this stage to set out the position of the licences
held by Air Express for the aircraft which it had in
January 1977. The Air
Navigation Regulations provide in Pt XIII for the licensing of aircraft for
various operations. Regulation
191 defines (inter alia) "charter operations"
as "the carriage of passengers or cargo for hire or reward to or from any
place, but
which are not conducted in accordance with fixed schedules to and
from fixed terminals", or "carriage, in accordance with fixed schedules
to and
from fixed terminals, of passengers or cargo or passengers and cargo in
circumstances in which the accommodation in the aircraft
is not available for
use by members of the public". Regulation 197 (1) provides that aircraft are
not to be used in charter operations
except in accordance with charter
licences issued under the regulations. Sub-regulation (2) is as follows:
"A charter licence shall not be authority for the holder of such a
licence to engage in charter operations on two or more occasions
within
any period of four weeks over a route or section of a route on which a
regular public transport service is operating, but
the Director-General
may specially authorize the holder of such a licence to engage in such
operations and that authority may be
given subject to such of the
conditions applicable in relation to the regular public transport service
as the Director-General considers
necessary." (at p275)
62. Sub-regulation (3) provides in effect that, in exercising his powers
under sub-reg. (2) in relation to operations between the
States, the
Director-General shall "have regard to matters concered with the safety,
regularity and efficiency of air navigation
and to no other matters". (at
p275)
63. At all material times Air Express held three licences which had been renewed from time to time. Licence No. 991 authorized charter operations between any of the States "for the carriage of passengers or cargo for hire or reward that are not conducted in accordance with fixed schedules to and from fixed terminals". That licence was subject to the condition that only Bristol Mk 21 and Mk 31 aircraft were to be used. Licence No. 2194 authorized charter operations of the same kind within any of the States, but subject to the same condition. Licence No. 2195 authorized "charter operations to or from the Australian Capital Territory or to or from the Northern Territory", subject to the same condition. Those three licences together covered between them charter operations throughout Australia. (at p276)
64. In addition Air Express had been given authority under reg. 197 (2) to engage in charter operations on two or more occasions within any period of four weeks over a section of a route on which a regular public air transport service was operating between Essendon and any Tasmanian airport or two or more Tasmanian airports. It appears that a number of ad hoc authorities had been granted in respect of flights which would otherwise contravene the restriction in reg. 197 (2). There is no reason to suppose that from time to time other authorities would not be granted for particular purposes but I do not believe Astling's statement that he could obtain such authorities simply by asking for them. (at p276)
65. The position with respect to Air Express's aircraft in January 1977 was expressed in somewhat different terms in various parts of the evidence. It seems however that the correct position was as stated in Astling's first affidavit in which it is said that, after the loss of one of the Mk 21 Bristols in May 1975, the other was grounded pending investigations, as a result of which load restrictions came into operation in January 1976 which made that aircraft unsuitable for regular use although it was later used for back-up purposes. One of the Mk 31 Bristols was grounded in January or February 1977 because of wing-spar fatigue and the other Mk 31 was subjected to load restrictions as from mid-January 1977. During 1977 Air Express used the second Mk 31 and the Mk 21 notwithstanding the load restrictions. Notwithstanding this the assumption made in the Proposal that two Bristol freighters would continue in operation for at least three years was carried forward into the calculation of the calimed loss in the particulars of damage. This was also contrary to what had been said by Astling in his letter to the Minister in November 1976 that at the very best the Bristols could not operate beyond January 1978 at the latest. (at p276)
66. Astling said that the phasing out of the Bristols had been discussed with the Minister in January and that he knew that the Minister would not permit their sale because of the problem of over-capacity. Notwithstanding this, he said at a later stage of his evidence that he proposed to sell the Mk 31 Bristols to BBA to replace the Argosy and one DC3. (at p277)
67. It appears that further discussion with the Minister took place before
the announcement was made by the Minister on 17th February
1977. On 16th
February the Minister wrote to Astling as follows:
"I refer to your recent letter wherein you mentioned that operational
restrictions make it no longer economic for your Company
to operate its three
Bristol freighter aircraft - accordingly you had sought permission to
import two Carvair aircraft.
I understand that the Secretary of the Department has written you to say
that he will issue the import permit immediately he
has the necessary
assurances from you that the three Bristol freighter aircraft being
replaced will be permanently withdrawn from
the Australian air transport
fleet."
On 17th February 1977 the Secretary to the Department wrote to Astling as
follows:
"I refer to your letter of 22 November 1976, and later correspondence
and discussions, whereby you sought approval for the
import of two Carvair
freighter aircraft. I note that you have sent me a completed application form
for that purpose.
I am pleased to advise you that the Minister has raised no objections to
the import of these aircraft provided they are on
a firm replacement basis for
the three Bristol freighter aircraft that are at presently (sic) with your
Company.
You might please let me know the arrangements that you propose for the
concurrent disposal of the three Bristol freighter aircraft.
When I am satisfied that the three Bristol freighter aircraft will
definitely be removed from the Australian air transport
scene I will sign the
import permit forthwith."
In those letters there is no reference to the Carvairs being for the Bass
Strait service, as there was in the Minister's statement
in Parliament, but I
am satisfied that the permits if they had been issued would have been subject
to that condition. Astling said
in evidence that he did not believe that the
permits would have been so limited but I am unable to accept that evidence.
Later events
confirm that it was the intention of the Minister and the
Secretary to the Department in January and February to restrict the operation
to the Bass Strait service. In May 1977 Astling wrote to the Acting Minister
for Transport setting out proposals for the purchase
of two DC4 aircraft from
Qantas and the import of two Carvairs. The Acting Minister approved the
purchase of the DC4s on condition
that if the decision of the High Court
allowed the importation of the Carvairs, the import permits would not issue
until the DC4s
had been exported or disposed of to the satisfaction of the
Secretary. A further condition was that the Bristols should be retired
from
service in accordance with the Secretary's directions. Astling acknowledged
that the Department of Transport also imposed the
condition that the DC4s were
to be confined to the Bass Strait service. Arrangements were subsequently made
by Air Express to purchase
the DC4s from Qantas. They came into use by Air
Express towards the end of 1977. In March 1978 Air Express applied for a
permit to
import three Carvairs, indicating to the Minister that it was
intended to continue to operate one of the Bristols. The Minister replied
on
22nd March 1978 stating that he was prepared to agree only to permits for two
Carvairs to operate the Bass Strait service. He
also said that the conditions
imposed at the time of the purchase of the Qantas DC4s still applied. (at
p278)
68. Although I am satisfied that the issue of the import licences would have been subject to that condition, it seems likely that occasional departures from it would have been permitted for special purposes. (at p278)
69. In late November or early December 1976 Astling approached British Air Ferries Limited with a view to the acquisition of two Carvairs. By a document dated 8th December 1976 entitled "Heads of Agreement" an arrangement was made for the purchase of two Carvairs fitted with the equipment listed for a price of 256,666 pounds stg. with delivery to be made by the end of January 1977, but no list of equipment was attached to the document tendered. British Air Ferries was also to sell half of its remaining spare parts and spare engines for 47,500 pounds stg. The arrangement was subject to the proviso that it should lapse if a deposit of 32,000 pounds stg. was not paid within twenty-one days. No payment was in fact made within that time. (at p278)
70. At some stage in December 1976 Astling entered into discussions with a company named Bill Patterson-Cheney Ltd. ("BPC") which had evidently expressed interest in the Proposal. On 29th December 1976 BPC made a payment of $5,000 to Astling which was expressed to be "deposit on contract". That cheque was enclosed in a letter which stated that BPC was interested in investigating the Proposal with a view to reaching agreement concerning the purchase. The letter concluded by saying "As a tangible indication of our intentions, we enclose a cheque for $5,000 which is to be refunded in the event of us not being able to finalise negotiations for the purchase within two months". Discussions continued during January and on 25th January BPC wrote to Astling stating that it was prepared to enter into an arrangement "for the acquisition of the two companies" and the terms and conditions were set out. They required the formation of a holding company to be called Bill Patterson-Cheney Aviation Pty. Ltd., which company would acquire all the shares in Air Express and BBA. The remaining terms offered may be summarized as follows: BPC was to take 60 per cent of the 50 cent shares in the holding company, to be fully paid with a par value of $168,000 and Astling was to take up 40 per cent with a par value of $112,000 but paid up to 11 cents. That 11 cents was to be treated as paid by "using $24,640 of the $25,000 lodged as a deposit for the purchase of the shares in Air Express and BBA". The balance was to be payable at any time within ten years subject to a minimum of 30 per cent of all dividends being applied in that way. Suggested terms of employment of Astling as Managing Director were set out, as well as arrangements to be made if Astling wished to sell his shares. BPC was to provide the holding company with the balance of $76,106 necessary to purchase the shares in Air Express and BBA, and a loan of $150,000, repayment to be secured by charges over the assets of the companies. These arrangements were subject to written approval from the Department of Transport and the Customs Department for immediate import of two Carvairs, finalization of puchase arrangements for two Carvairs, and to completion of various arrangements to replace existing securities granted to the A.N.Z. Bank and the offer of security for the deferred borrowings from Signet Insurance Holdings Pty. Ltd., Mr. Brain and Donlin Investments Pty. Ltd. (at p279)
71. It is apparent from the letter that BPC was dealing with Astling upon the assumption that he was not already the owner of the shares in Air Express and BBA but had an option or some contract under which he had paid only a deposit and that the shares in these companies were to be transferred from their former holders direct to the new holding company. (at p279)
72. The witness Gibson, the Finance Director of BPC, said that Astling had objected to the requirement that BPC should have 60 per cent of the shares and had initially insisted on a 50/50 arrangement. Gibson said that BPC would not agree to any figure lower than 51 per cent. He said twice in cross-examination that Astling had not agreed to the 51 per cent prior to 17th February. In re-examination however he said that, although there was nothing in writing, he thought that Astling had agreed to the 51 per cent and that BPC would not have proceeded unless he had. In answer to a further question he said "at that time for us to have forwarded the deposit there must have been discussions that we were able to have 51 per cent control". (at p279)
73. I am satisfied that Gibson was an honest and truthful witness to the best of his recollection, and was careful in expressing his recollection. I am disposed to think that his statement that BPC would not have paid the deposit unless Astling had agreed to the 51 per cent required was more reconstruction than recollection but it seems very unlikely that BPC would have paid some $75,000 as deposit on the Carvairs unless they were satisfied that they could obtain control. In the end I do not find it necessary to resolve this conflict between the various passages in Gibson's evidence because it is clear on any view that no final agreement had been reached and that there was no more than a proposed agreement still in the course of negotiation. A number of matters were still outstanding, including the preparation of a satisfactory written contract and the finalisation of the position of the existing creditors, perhaps including the former shareholders. Gibson said that he understood that there was an arrangement that the loans by the former shareholders would not bear interest and would not be due for repayment until 1981 but evidently expected to have to provide security for such repayment. The question of the manner in which the acquisition of the Carvairs was to be arranged had not been finalised. BPC had provided three quotations with respect to leasing but no decision had been made. The position of the licences held by Air Express and BBA was still to be checked and Gibson said there would have to be a formal agreement before BPC would consider itself bound. Gibson was asked about the announcement that Ipec was to have a licence to import two Argosies and said that BPC had been concerned about that. He said that BPC had not heard of the possibility of Ipec obtaining an import permit until the Minister's announcement on 17th February. He said BPC would not have refused to go ahead on that ground because they understood that the Argosy would be permitted to operate only between Melbourne and Tasmania, whereas Air Express was licensed to operate throughout Australia. He said however that the latter requirement was not essential so far as BPC was concerned, a statement which is hard to reconcile with his explanation of why the competition was not regarded more seriously. He also said that the company ceased negotiations purely because of the injunction and the fact that Air Express was unable to bring the Carvairs into Australia. It is apparent that negotiations were resumed with British Air Ferries after BPC had expressed interest in the Proposal and presumably also after the letter of 25th January from BPC to Astling. In the result BPC paid the balance of deposit of 50,000 pounds sts on 17th February 1977. (at p280)
74. It is to be observed that the deposit required under the Heads of Agreement of 8th December 1976 was 32,000 pounds stg. The difference is to be accounted for by the fact that the amount paid was a deposit on three Carvairs, as appears from BPC's letter to Astling of 23rd February 1977 and British Air Ferries letter to Astling dated 1st March 1977. Astling said in his first affidavit that an additional Carvair was ordered for BBA in the expectation that it would obtain an import permit. It does not appear when this was done. (at p281)
75. It was submitted on behalf of Ansett that if damage was suffered by Air Express that damage was not a consequence of the injunction but a consequence of the litigation itself. I have already indicated that Air Express did not become a party to the proceedings until 25th February on which date the undertaking was given to the Court in respect of such damage as Air Express might suffer by reason of the order made on that day continuing the injunction. It is plain that the negotiations with Bill Patterson-Cheney had been broken off not later than 23rd February. The breaking off of those negotiations thus took place prior to the giving of the undertaking to Air Express and it is necessary to consider what the situation was on 25th February and thereafter. It was argued on behalf of Ansett that if the injunction had been dissolved at that point but the litigation had otherwise continued, as it is clear that it would have done, then the probability was that the defendant Halton, as Secretary to the Department of Transport, although by then having the necessary authority under the Customs (Prohibited Import) Regulations, would not in fact have signed the relevant permission because to do so would have been to pre-empt the decision of the Court and perhaps to subject the Commonwealth to a substantial claim for damages for breach of the Airlines Agreements. It is plain that an amendment of the proceedings against the Commonwealth would have been sought to add a claim for damages for breach of contract, the original claim having been only for an injunction to restrain a threatened breach. It does not follow from the fact that it was ultimately held that what was threatened would not have been a breach of contract that if the injunction had not been extended on 25th February the defendant Halton would have issued the written permission, either then or after the regulations were amended on 2nd March. The situation was analogous to that dealt with by Myers C.J. in Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) (1935) NZLR Suppl, at p18 in the passage which I have quoted above. In my opinion it is probable that the Secretary would not have pre-empted the decision of the Court in a situation in which the breach alleged to be involved in the grant of the permission would be one which was not reversible because once in the country the aircraft could be used for interstate trade. Unless conditions were imposed on the importation of the aircraft which would have required their re-export if it turned out that Ansett's claim was right, there would be no way in which the Commonwealth could have restored the situation to that which prevailed immediately prior to the commencement of the proceedings. If that had been proposed, it would be very unlikely that the aircraft would have been imported because finance would not have been available on that basis. Although it is perhaps going too far to use the word "inconceivable", as did Myers C.J., I consider that it is probable that the defendant Halton would not have issued the written permission while the litigation was continuing. (at p282)
76. It does not appear to me to matter for the purposes of this point whether the decision with respect to issuing the written permission was one to be made by the Secretary to the Department acting entirely upon his own view or whether he would have acted after consultation with the Minister and the ascertainment of Government policy. Whoever was to make the real decision, I consider that the result would have been the same. (at p282)
77. It was sought to rely on statements attributed to the Solicitor-General in the course of an application to the Chief Justice to dissolve the injunction on 4th April 1977 and recorded in the transcript of argument on that occasion, as demonstrating that the Minister and the Secretary to the Department would not have issued a permit at that time if the injunction had been dissolved. I do not myself think that it is desirable to rely on that transcript of argument. As is generally known such notes are not normally checked and may contain inaccuracies which may materially affect the meaning of statements attributed to counsel or to judges. They are not like the transcript of evidence which the parties are in a position to check and correct if errors have occured. I prefer to base my conclusion on this matter upon the substantial probability that neither the Minister nor the Secretary to the Department would seek to pre-empt the decision of the Court and subject the Commonwealth to the risk of a substantial claim for damages. (at p282)
78. A further factor which is material to the question whether Air Express's losses flowed from the injunction or from the litigation is that the only contract which was under negotiation was one to which Air Express would not have been a party at all, and which did not directly affect it. It was to be a contract which would have financed Astling's payment on the unpaid balance of purchase money to the previous shareholders of Air Express and BBA. It would have done this by Astling's re-sale of 51 per cent of the shares and by BPC providing Astling with an interest free loan which would have enabled him to pay the balance due in respect of the other half. I have expressed this in terms of Astling's account of the position of the share registers, rather than of BPC's understanding, since the difference is not material for present purposes. It also provided as between Astling and BPC that the latter would make $150,000 available on a short term basis through the interposed holding company as working capital for Air Express. There was no commitment to Air Express to provide it with finance to acquire aircraft or to support a contract for leasing of the aircraft. Indeed the proposed terms of a contract as set out in BPC's letter of 25th January contained no provision requiring the acquisition of the aircraft although it was no doubt the intention that that should be done. (at p283)
79. These matters were all subject to a variety of contingencies which made it by no means certain that the aircraft would in fact become available, although it may be said that it was more likely than not that the outstanding problems would be solved and satisfactory arrangements made for hiring aircraft. BPC's estimate of what its commitment would have been was approximately $1 million, being $405,000 according to the Proposal and some $560,000 for leasing charges or purchase of the aircraft. There is no doubt that all the facts would have been most carefully checked before any agreement was entered into. (at p283)
80. These considerations also lead to the conclusion that it was not the continuance of the injunction which brought about such damage as Air Express may have suffered but was the litigation itself. (at p283)
81. Another argument was based on the fact that Air Express was not a party to the original proceedings and became a party on its own application in a situation in which no claim was made against it or could have been made against it. It was not restrained from taking any step itself and was merely affected indirectly by the injunction obtained against the Commonwealth and the Secretary to the Department. I think this argument is misconceived and is really an argument that it should not have been joined as a defendant at all. It would no doubt have been possible for Air Express to have been permitted to intervene in the argument without being made a party but the fact is that it was joined as defendant and that there was no appeal from that order. There is no direct authority on this point, but the decision in Tucker v. New Brunswick Trading Co. of London (1890) 44 ChD 249 suggests that parties against whom no injunction is granted may nonetheless claim pursuant to an undertaking given in respect of them, though in that case the defendant in question was named as a defendant when the writ was issued. (at p284)
82. The present case is unusual in that Air Express itself sought to be added as a defendant and immediately asked for undertakings which were required "as the price of the continuance of the interlocutory injunction". It appears to me that that does not constitute "special circumstances" disentitling Air Express to damages if it suffered any. It is however not necessary for me to decide this point as I have for other reasons concluded that Air Express suffered no loss by reason of the injunction. (at p284)
83. On the view which I have expressed above the question of quantum of damage suffered by Air Express does not arise. However, in view of the extent of the evidence, both affidavit and oral, it is desirable that I should deal with it in case the matter should go further. It was argued on behalf of Ansett that the claim for damages was based on wrong principles and if the Court were to reject that basis, it should not proceed further and work out a different basis. In my opinion that argument is contrary to principle. It has long been settled that the difficulty of ascertaining the amount of damages does not warrant their denial. This was established at least by the time of the decision in Chaplin v. Hicks (1911) 2 KB 786 and I see no reason why this rule should not apply in this jurisdiction. On the other hand the ascertainment of damage is not an exercise in imagination. It is therefore necessary to examine the material in order to see what assumptions are involved and, in so far as they are not justifiable, to see whether adjustments can be made which would enable a reasonable approximation to be obtained. (at p284)
84. The principle evidence on damage was given by Astling and by Hilton, who was responsible for the preparation of the documents which are the basis of the amended particulars of damage. As I have indicated above I have reservations about the reliability of Hilton generally, principally because I found him evasive in relation to a number of matters and more disposed to take the role of advocate than that of an expert adviser or expert witness. (at p284)
85. The basis upon which he arrived at the figure claimed of $2,127,000 was to estimate the loss of net operating revenue to 31st December 1977 and 31st December 1978, the figures being respectively $1,274,953 and $1,609,643. The second item was the loss of the deposit for the Carvair aircraft, namely $79,381. The third item was $87,000, for estimated increased cost of acquiring new aircraft. The fourth item was loss of goodwill, $300,000. The fifth item was described as "loss suffered by (Air Express) by reason of it having to re-establish itself at the stage of development which would otherwise have been now reached had the injunction not been granted", for which $2,127,000 was claimed. (at p285)
86. The figures for estimated operating revenue in 1977 and 1978 were derived in part from the Proposal but were not divided so as to show separate figures for each kind of aircraft. I return to this item below. (at p285)
87. The amount of the loss of the deposit claimed is that which was paid for three Carvairs. There is no basis upon which the whole of that can be claimed by Air Express. The deposit had been increased from 32,000 pounds stg. for two Carvairs to 50,000 pounds stg. for three. It does not appear directly whether Hilton was aware of this, but it had been arranged by Astling. On any view the claim must be reduced to the Australian currency equivalent of the former figure, a result which is conveniently calculated by taking 64 per cent of the amount claimed, namely $79,318, which is $50,754. However it is clear that this sum was lost because of the withdrawal of BPC, which occurred not later than 23rd February, which was the day on which Air Express was added as a defendant and before the undertaking was given in respect of Air Express on 25th February. (at p285)
88. No evidence was given to support the item of increased cost of acquiring new aircraft. It was referred to by Astling in one of his affidavits as including variations in exchange rates and it was then said that an up to date figure would be provided prior to the trial. However no later figure was provided and no evidence was given to support the claim. Accoordingly it must be disallowed. (at p285)
89. As to the loss of $300,000 in respect of goodwill, I am not satisfied that this loss occurred, or if it did that it could be attributed to the injunction. If the price which Astling agreed to pay and which the vendors of the shares agreed to accept for virtually all the shares in Air Express and BBA was realistic, and there is no reason for supposing it was not, the Company in October 1976 had no goodwill of significant value. It is possible that it had a potential for profit if sufficient funds were made available to repay its then creditors, or satisfy them sufficiently to agree to postponement of payment, and to ensure the availability of aircraft, but that is not the same thing as goodwill. The facts which emerged, though I am satisfied that they were not known to Ansett prior to the end of March 1977, were that one of Air Express's aircraft was due to be grounded by the end of January 1977 and the other two had been subjected to substantial load restrictions and its major customer had withdrawn its support because of the unreliability of its service. I am therefore satisfied that there was not any loss of goodwill. (at p286)
90. I turn now to a more detailed examination of the first and fifth items, but before doing so it is helpful to set out the proper basis for dealing with claims for what are in effect loss of future profits which would have been earned but for the injunction. (at p286)
91. In Mallett v. McMonagle (1970) AC 166, at p 176 Lord Diplock said:
"The role of the court in making an assessment of damages which depends
upon its view as to what will be and what would have
been is to be contrasted
with its ordinary function in civil actions of determining what was. In
determining what did happen in the
past a court decides on the balance of
probabilities. Anything that is more probable than not it treats as
certain. But in assessing
damages which depend upon its view as to what
will happen in the future or would have happened in the future if
something had
not happened in the past, the court must make an estimate as
to what are the chances that a particular thing will or would have
happened
and reflect those chances, whether they are more or less than
even, in the amount of damages which it awards."
Although that was said in relation to a claim under Lord Campbell's Act the
last sentence appears to be equally applicable in the
consideration of the
present question. (at p286)
92. Estimates of what future profits would have been in a situation in which Air Express had two Carvairs and Ipec two Argosies requires an examination of the Bass Strait trade. (at p286)
93. A good deal of evidence was directed to the question of whether there was or was not directional imbalance in relation to the carriage of goods by air between Victoria and Tasmania. Astling maintained that there was no such thing as directional imbalance, although he subsequently acknowledged that directional imbalance "has been a fact of life" but maintained that it did not apply to Air Express. He admitted however that Tasmania was an importing State, but professed ignorance of the overall position of cargo southbound and northbound, though he said that it was well known that aircraft came back "fairly empty". (at p286)
94. He ultimately asserted that there was no such thing as directional imbalance anywhere. He said that Air Express operated on the basis that it chartered its aircraft at a set figure per hour from Melbourne to Launceston or other Tasmanian airports and return to Essendon, and that the use that was made of the aircraft was up to the charterer but he acknowledged that the charterers (when not carrying their own goods) charged a rate for the southbound journey which was appropriate to cover the cost of the return journey. He also acknowledged that there was imbalance in the rates charges, at the relevant time the southbound rate being about 33 cents per kilo and the northbound rate being sometimes as low as 6 cents per kilo, being fixed so as to match the subsidized sea freight for the same journey. Brown, whose evidence in this respect I accept in preference to Astling's, said that, in relation to the years in which he was managing the BBA operation, the mainland/Tasmania route was severely affected by directional imbalance of cargo. He said that when BBA did the Ipec work about 60 per cent of the flights were chartered for both southbound and northbound journeys, and 40 per cent southbound only. He also said that the round trip aircraft were not regularly filled on the return journey. I also accept the evidence of the Ansett witnesses, Orrock, Rowley and Warton, to the same effect. Warton's evidence was that the northbound cargo was carried at "bedrock rates". Brain expressed the view that the imbalance was more of a seasonal nature but in this respect I prefer the evidence of Brown. Brain was in my view an honest witness but I think that his understanding and recollection of the operations was severely limited and where he differs from Brown I accept the evidence of Brown. Ansett's northbound rate was stated as 19 cents but the evidence was that that rate could not be obtained in practice and business could only be obtained at very slightly above the shipping rate of 6 cents per kilogram. Astling acknowledged that all companies concerned charged more southbound than northbound, but asserted that that does not demonstrate directional imbalance. His evidence on the question of imbalance was evasive and I am not prepared to accept it. Evidence was given that the "Nimmo report" (being a report by a Commission of Enquiry into Transport to and from Tasmania by Mr. Justice Nimmo) stated that for 1974-1975 southbound air freight was 25,000 tons and northbound 12,000 tons. (at p287)
95. The figures in the Proposal included the operation of two DC3s and two Bristol aircraft. In what was intended to describe the merged operations of the two companies it was natural to include the BBA aircraft and their earnings, and to exclude inter-company charges. When however Air Express is to be considered separately this method is quite inappropriate. Any calculation of the income of Air Express alone must either eliminate the earnings of the DC3s and their cost of operation or take account of the inter-company charges. The evidence was that BBA had made the three DC3s available to Air Express under a "dry lease", on the basis that the only cost borne by BBA would be air navigation charges and insurance, while Air Express would bear the whole of the operating costs, direct and indirect, and all other costs and would pay to BBA $12,500 a month. The calculation of the damages claimed does not properly adjust for these factors. Hilton said that a dissection could be made as between types of aircraft but he had not made one, and no dissection was tendered. (at p288)
96. The next important factor is that both the Proposal and the particulars of damage proceed upon the assumption that the two Bristol aircraft would be in operation throughout the period contemplated by the Proposal i.e. three years. In my opinion this assumption is without foundation. Even Astling on some occasions acknowledged that a condition of the importation of the Carvairs would have been that the Bristols were retired from service. The estimated earnings are therefore further distorted by the inclusion of revenue earned by the Bristols. Moreover these figures are dependent on Astling's evidence of expected business. (at p288)
97. The remaining item in the particulars is the sum of $2,127,000 said to be lost because of need for Air Express to re-establish itself to the point which it would otherwise have reached. Hilton in his affidavit explaining the basis of this item said that he had taken a period of five years as being required for that purpose but in cross-examination he said that it was impossible to tell how long it would take and that it could be anything from two years to ten years. (at p288)
98. Moreover the claim is based on the assumption that the Carvairs could be used for regular flights throughout Australia. I have already said that in my opinion this would not have been so. I do not think that the amount of revenue claimed on this basis can be regarded as a probable loss. (at p288)
99. Before considering this item in more detail it should be noted that in addition to the other matters already referred to, the estimates of revenue for 1977 and 1978 and the basis for the amount claimed for re-establishment make no allowance for the effect of competition. Astling in his evidence said that he did not regard Ipec's operation of two Argosy aircraft as affecting the business of Air Express at all and that he had changed his mind in relation to the views which he had expressed in the letters which he had written to the Minister, and the objection which he had made to the Minister at the time when the announcement was made on 17th February 1977 that Ipec was to be granted a permit to import two Argosy aircraft. I do not believe this part of Astling's evidence. It is clear in my opinion that the substantial increase in the capacity of the freight aircraft which would have been operating between Melbourne and Tasmania would have had a substantial effect upon the profitability of those operating that freight service, at least for the immediate future. Each Carvair was said to have the capacity of two Bristols and the capacity of an Argosy was said to be approximately the same as a Carvair if calculated by weight though somewhat less if calculated by volume. Air Express was said to have carried a substantial amount of "cubic freight", i.e. cargo of large volume relative to its weight. In my opinion the evidence does not support Astling's assertion of under-capacity and in this respect I prefer what he said in his letter to the Minister dated 30th November 1976 to what he said in the witness box. It is no doubt possible that in time additional capacity and perhaps reduced charges would have generated additional air cargo by capturing some cargo which previously had gone by sea. I am unable to accept Astling's statement as to the market which he expressed by saying that the Bass Strait air freight operations suffered from "total under-capacity". (at p289)
100. Hilton's calculation of the figure of $2,127,000 is based upon an estimate of five years for re-establishment and a profit of $709,000 per annum. He deducted from the latter figure what he called "estimated recovery programme". For each of years one to five he deducted an amount, starting with nil in year one and rising to four-fifths in year five, which was his estimate of the proportion of that profit which would be earned in each of those years. This was based upon the assumption that it would take five years to recover the company's reputation for regularity and good service, and to recover lost customers. This involved the assumption that business could only be recovered slowly, but he did not indicate to whom aircargo business would have been lost by reason of the injunction. No competing air freight operators could or did enter the field during that period. There is no evidence that Ansett or T.A.A. would have had sufficient capacity to cope with Ipec's work, as well as the other work which Air Express hoped to obtain. It also assumes a state of the air freight market almost completely contradictory to that which Astling professed to believe, namely that there was an almost unlimited amount of air freight available on the southbound route from Melbourne to Tasmania. If that were correct the recovery of business would be very rapid from the time of the introduction of additional aircraft. Although I cannot accept Astling's evidence about the size of the market, it does not follow that there would have been so long a period for re-establishment as was claimed by Hilton. The situation was that Air Express's capacity in early 1977 remained reduced by reason of the condition of its aircraft, but no new operators came into the field. During part of the period of the injunction a part of Kwikasair's work went to Ansett, but most of it returned to Air Express when the DC4s acquired from Qantas came into operation. (at p290)
101. If however the injunction had not been granted and Air Express had begun operations with two Carvairs, whether it would have taken twelve months, as Hilton said, or three months, as Astling said, to have them fully operating, they would have been in competition with the two Argosy aircraft which Ipec would have had permission to import. It may be that it would have taken Ipec longer than Air Express to get its new aircraft into full operation. It was said in evidence that it took about twelve months for Ipec to get the Argosies into operation from the beginning of 1978 and assuming this to be so it may be that the Argosies would have been in operation perhaps six, but certainly not more than nine months, after the Carvairs were fully operative. I do not accept Astling's assertion that Ipec's business was so different that it would not have affected his operations. It is impossible to tell with any precision what effect it would have had in a situation in which the Ansett and T.A.A. operations continued with the same capacity available as there was in 1976 and Ipec's two Argosies and air Express's two Carvairs had come into operation. The effect of the high southbound freight rate, compared with air freight charges for smaller distances on the Melbourne, Sydney, Brisbane routes, and the relatively small volume of the northbound business, would make it unlikely that the air freight volume would increase rapidly so as to fill the whole of the capacity available, at least so long as sea freight subsidies continued. The evidence does not satisfy me that this was probable. (at p290)
102. The assumption made by Hilton and by Astling that the two Carvairs could operate to full capacity at 2,000 or even 2,500 block hours a year was based upon the assumption that Ipec would not be operating its own aircraft at all. Neither however would face the effect of Ipec's competition on the figures which they had prepared on the assumption that it would not exist. (at p290)
103. The next task is to evaluate the evidence of Astling upon whose figures Hilton had based calculations of profits and profitability. I found Astling's evidence and his demeanour in the witness box evasive and generally speaking I am not prepred to accept evidence given by him either on affidavit or in the witness box except where it constitutes an admission contrary to his interest or is corroborated by other acceptable evidence, or relates to non-contentious matters. I regard the statements made by Astling in the documents written prior to the litigation as more likely to be correct than statements made in his affidavits or oral evidence. Whilst the statements made in the Proposal were made prior to the litigation, it must be remembered that they were designed to attract financial support and to present an attractive opportunity. Some of the statements therein should, I believe, be viewed with a good deal of reservation. I have indicated above some particular statements which I regard as suspect. I regard Astling's statement in the Proposal that the Argosy was to be sold abroad for an amount equal to about half what could be obtained in Australia in order that it should not fall into the hands of Ipec, which was endeavouring to become a competitor in the Bass Strait trade, as indicating a real fear of the competition which Ipec would provide. That protection from competition for Air Express, as well as BBA, was to be obtained at the expense of the creditors of BBA. This fear of Ipec's competition appears also from Astling's letter of 30th November 1976 to the Minister for Transport, which sets out reasons why an import licence should not be granted to Ipec. Astling gave an explanation of this letter designed to deprive it of any significance but I do not accept that explanation. In that letter he said, "Previous reports and commissions (i.e. relating to the airfreight industry) have failed to establish any excess capacity of freight . . . justifying . . . yet another airline". It is obvious from the context that the words "excess capacity of freight" mean "excess of available cargo over and above the carrying capacity of the existing operators". That letter concludes by saying "any additional licence granted would seriously jeopardize the economic viability of all existing operations". Astling stated in his evidence that he had changed his mind about competition since writing that letter but I cannot accept that evidence. I do not regard the fact that in July 1978 he sold BBA's Argosy to Ipec as affecting the matter as Ipec already had two Argosies by that time. (at p291)
104. Astling stated in his affidavit that Air Express began to operate at weekly losses of $10,000 from March 1977 and attributed those losses to the injuction. However, it is plain that the cause of the losses in March 1977 was the existing condition of the aircraft held by Air Express and BBA and would not have been offset by Carvairs at that stage even if the arrangements with BPC had been concluded and a commitment made to complete the purchase from British Air Ferries. To suppose that the Carvairs would have been in full operation in March is a gross exaggeration. Another example of the unreliability of Astling's evidence is provided by his statement in his letter of 22nd November 1976 to the Secretary to the Department of Transport enclosing his application for an import permit for two Carvairs. He then said that "at the very best, the two Bristol Mark 31 freighters (VH-ADL and VH-TBB) cannot be expected to continue operating after the early part of 1978 due to the unavailability of spare engines" and he also refers to the fact that in January 1977 one of the Mark 31 aircraft will suffer a "fatigue life expiry" in relation to the wing spar. Notwithstanding this the Proposal was based upon the assumption that two Bristol Aircraft would operate for the full three year period of the Proposal, and the claim for loss of profit in 1977 and 1978 was based upon the use of two Bristol freighters as well as two Carvairs. I have indicated elsewhere that I am satisfied that Astling knew at all times that the Bristol freighters would have had to be retired if the Carvairs were imported. Again, his estimates of earnings and profitability prepared for the purpose of this claim for damages made no reference to, or allowance for, competition, notwithstanding the statements already referred to above. (at p292)
105. I turn now to the claims in the particulars of demand for loss of revenue in the years ended 31st December 1977 and 31st December 1978, the figures in which were derived ultimately from those in the Proposal. I have already indicated that I do not accept in relation to the year ended 31st December 1977 any estimate based upon the assumption that the Carvairs were in operation as from 1st February. A more realistic basis would have been to examine the second half of that year, on the assumption that the Carvairs would be fully operative by 1st July. As from that date the revenue generated by the Bristols must be disregarded. Air Express however refrained from making in these claims any dissection of the sources of revenue as between the different aircraft and in those circumstances there would be no basis for making assumptions in its favour in an attempt to arrive at some reasonable approximation. The estimated costs to be incurred and the revenue to be earned by the Bristols were shown in the Proposal for a full year's operations and produced an estimated net profit before tax of $159,600. I have already said that in relation to the DC3s the expenses must be increased by the charter cost ($150,000) and reduced by air navigation charges ($30,000) and aircraft insurance ($6,000), thus producing a loss of $100,160. (at p292)
106. The revised budget prepared by Hilton on assumptions made by Astling assume that the amount by which the capacity of the Bristols would be reduced by the load restrictions would be picked up by the extra operating hours for the Carvairs. However, the assumed charter rate for the Bristols remained the same, notwithstanding the reduced load capacity. These factors provide an initial reason for not accepting these figures as a reliable indication of the probable results. The two Carvairs represented approximately double the capacity of the two Bristols. On the Carvairs coming into full operation Air Express would have had to double the amount of business which it had previously been doing with the two Bristols as from the beginning of 1977 even on the same number of operating hours to obtain the utilization assumed by the Proposal. In due course it may well have gained some, or even all, of that additional business, but to assume that that would happen at the beginning of the period when the Carvairs were fully operational or within six months thereafter is to view the matter through rose-tinted spectacles. There is in the evidence which is capable of acceptance no foundation for such optimism. (at p293)
107. For the first half of 1976 the figures would not have substantially exceeded half the original estimated annual profit of three Bristols, before tax, bearing in mind the grounding of one Bristol and the reduced capacity of the other two. For that half year it is reasonable to assume that Ipec would not have provided any significant competition. A figure of $90,000 would be adequate. (at p293)
108. Some general confusion attaches to the figures in the documents in evidence, as they are variously shown for a "full year's operation" (i.e. in the Proposal for Carvairs, DC3s and Bristols), for calendar years, for financial years and for an eighteen month period. Since the particulars of demand relate to calendar years, I shall endeavour to keep to that period where possible. (at p293)
109. I must however begin with the Proposal which is in part expressed in financial years. It assumed for the year 1976-1977 that the revenue from Kwikasair would have increased by about 20 per cent and from BBA, as a freight forwarder, by about 10 per cent from what was said to have been the actual figures for 1975-1976, and that in 1977-1978 the revenue from Kwikasair would have increased by over 50 per cent from 1975-1976, and from BBA by almost 40 per cent from 1975-1976. The Proposal assumed a revenue from other sources in 1977-1978 of a further $1.2 million. The total estimated revenue for 1977-1978, $4.36 million, was more than double that for 1975-1976. This figure of $4.36 million, with very minor alteration, was carried forward into Hilton's calculation on which the particulars of demand are based. Not only are these figures based on the retention of the Bristols and on an assumed absence of competition from Ipec, but they represent what I regard as an unreal estimate of the growth of freight likely to be available to Air Express. (at p293)
110. It is significant that no figures were provided for the hours of operation of, or the volume of cargo carried by, Air Express in the period prior to May 1975 when it had four Bristols in operation, the capacity of which would have been approximately the same as that of two Carvairs. That information would have provided at least a useful base for an estimate of the volume of business which would have been available to Air Express, after allowance for any change in general business conditions. Some allowance would be required for additional competition and for any expansion, or diminution, of air freight to Tasmania. The absence of such figures makes it very difficult to arrive at any reasonably accurate estimate of profit which might have been obtained in 1976-1977. There is some evidence about the prior results of BBA but nothing about Air Express. It is however clear that the main source of Air Express's revenue had been Kwikasair. After Air Express chartered BBA's three DC3s BBA itself, as a captive freight forwarder, became the other principal customer. BBA is said in the Proposal to have employed five salesmen on commission to obtain business for its freight forwarding operation and an expenditure of $200,000 for this item in the combined forecast profit and loss statement. The evidence also shows that this arrangement ended in early 1977 but no explanation was given for the expectation that the increased revenue would still be received. Up to the end of 1975 BBA's principal customer was Ipec but in the events which would have happened no business could have been expected to come from Ipec to Air Express or BBA in 1977 and thereafter it would have had its own aircraft. (at p294)
111. The estimates for the first full year's operations in the Proposal attributed 4000 block hours to the Carvairs and 3600 block hours to the two Bristols, one having been omitted from the estimate. The figures thus assumed that the Carvairs would be occupied with completely new business. The Proposal however made no allowance for reduced carrying capacity for the Bristols, which did not apply until January 1977 when one was grounded and load restrictions applied to the others. One Carvair would have taken over the work of two Bristols but new work would have had to be found for the second Carvair. I find it unrealistic to assume that for the second half of calendar year 1977 the available work would have doubled so that the second Carvair would in that period have obtained the work attributed to it in the Proposal or in the revised budget, even assuming no additional competition before 31st December 1977. (at p294)
112. I consider next the position of Kwikasair, the company which had in the calendar year 1976 provided revenue to Air Express of the order of $1 million. Astling's evidence as to his expectations in respect of 1977 and 1978 was described by Edwards, the General Manager of Kwikasair, as being conjectural. Edwards said that the revenue which might have been earned in 1977 and 1978 would have been dependent on three principal factors, first Air Express's rates, second the availability of freight in a declining market and third Kwikasair's ability to convert part of its sea freight to air freight. Edwards said that his prediction in early 1977 that there would be an increasing volume of his company's air freight business to Tasmania in that year had turned out to be incorrect and that there had in fact been an overall drop in air freight throughout the company's business in 1977, including its Tasmanian business. He said that there had been further deterioration in 1978. He agreed that the provision of extra capacity for air freight might generate new business in the sense of attracting business formerly done by sea carriage, but said that it would depend entirely upon the rate available from Air Express. He said that he did not think that the suggested reduced rate of thirty cents per kilo referred to by Astling would enable Kwikasair to divert any of its sea freight to air freight. Edwards also said that the overall rate for northbound cargo was approximately one-third of the rate for southbound cargo. Edwards said that the business actually done with Air Express for 1977 was about $750,000 and for 1978 about $500,000 but that was not necessarily a guide to what the position would have been if the Carvairs had been in full operation from 1st July 1977. On the whole I am of opinion that the best estimate that can be made for 1977 is that the figure for the second half of that year would not have reached the rate achieved in 1976 and, doing the best that can be done with the material, a figure of $400,000 would be a maximum. (at p295)
113. For the second half of 1977 the additional capacity available would have been one Carvair and that could have been fully used only by capturing business from sea freight. No evidence was given with respect to the southbound rate for sea freight across the Bass Strait, although evidence was given about the northbound rate. It is thus impossible to make any soundly based assumption about what might have been diverted from sea freight. There may have been other commodities, in addition to those shipped by Associated Product Distributors (Snack Foods) Pty. Ltd. ("APD"), for which air freight would have been more suitable, especially in an aircraft which favoured high volume low weight goods. There is however no evidence as to the quantities which might have been available. Air Express put forward no figures which would have permitted any inference to be drawn as to the capacity to attract freight from sea carriage to air carriage and it is not a matter about which I am prepared to guess. (at p295)
114. It is necessary to consider contentions advanced about expected new business which it is said would have been available to Air Express. The first of these items is the expected business from Jetlink. I am not prepared to accept the evidence of the former Victorian manager of that business that it was only the inability of Astling to give him a firm undertaking to make a plane available when he required it which caused the collapse in June 1977 of the parcel delivery service established by that company in all the capital cities other than Hobart. The company had no business in Tasmania at all but apparently wished to embark upon the air freight of parcels between Melbourne and Launceston, without considering back load problems. Whether Jetlink's business would have ultimately been successful in the new mode of operation contemplated it is not possible to say with certainty but the inference is clear from the discontinuance of the parcel business throughout the mainland of Australia in the middle of 1977 that it had not been an immediate success. I think the probabilities are that virtually no business would have emerged from this customer, and the relatively small amount attributed to it in the estimates should be disregarded. (at p296)
115. An amount of $200,000 in the estimate for 1976-1977 was attributed to APD. I think it reasonable to assume that some part of this business would have been obtained once the Carvairs were introduced, subject however to agreement being reached on a freight rate, and suitable loading and unloading equipment being available. On the basis that the Carvairs would have been fully operative by 1st July 1977, it would be proper to include an estimated figure for the six months ending 31st December 1977. It is however unsafe to adopt the rate assumed in the Proposal which makes no allowance for contingencies. For that six months a figure of $75,000 would be the maximum justifiable in all the circumstances. A small figure is attribued to work for the Australian Ballet Foundation but it is based mainly on the availability of space on Air Express on journeys other than across the Bass Strait, and I think this should be disregarded. (at p296)
116. A figure of $250,000 is attributed in the Proposal to business form Kimberly-Clark but none had been done as at the end of the calendar year 1976 and there is no reason to suppose that any could have been done before the advent of the Carvairs. I did not find the evidence about the volume of work that was likely to be available satisfactory. It would, I think, be unsafe to assume that in the second half of 1977 more than half the business attributed to the financial year 1976-1977 could have been obtained and even that may be an over estimate. (at p296)
117. It remains to mention BBA as a freight forwarder. The Proposal assumed a 15 per cent increase from 1975-1976 to 1976-1977 and a 40 per cent increase in 1977-1978 over 1975-1976, as I have indicated above. No satisfactory evidence was given to account for these increases. In the light of the evidence of Edwards as to the general position of air freight in Australia, and in particular across Bass Strait, in 1977, I am not prepared to assume any increase for BBA in the calendar year 1977. To take the 1976 figure involves an optimistic view in the light of the evidence as to 1977. Some reduction, or equivalent adjustment on some other item would be more appropriate. (at p297)
118. I turn now to the evidence with respect to the expected business in 1978. At the beginning of 1978 there would have been substantial additional capacity because of the introduction of Ipec's Argosies. It is no doubt proper to assume that Ipec would have diverted its air freight from Ansett to its own aircraft. The capturing of new cargo for this new capacity would have been dependent primarily on the freight rates charged. It can properly be assumed that any work generated by BBA would continue to go to Air Express, although BBA might have had to meet the rates charged by others, and therefore Air Express in its turn would have had to meet such rates. I am prepared to assume that there would have been customers who would have preferred one service rather than another, and that the regular customers would have been likely to have stayed with Air Express or return to their former business, if the rate offered was competitive. (at p297)
119. Edwards said that, because Ipec was one of its principal competitors in its transport business throught Australia, Kwikasair would have been unlikely to do business with Ipec for carriage to Tasmania. That however would not have eliminated the effect of Ipec on the overall Bass Strait business because Ansett's capacity formerly used by Ipec would then have been available for other customers. (at p297)
120. The result would have been, that from the beginning of 1978, an overall increase in capacity over 1976, equivalent to one Carvair plus two Argosies, the other Carvair being the equivalent of two Bristols. (at p297)
121. As to Kwikasair and BBA it is not proper to attribute to them a larger amount than the 1976 figure in view of the evidence to which I have already referred. The position of APD in 1978 is difficult to assess because no evidence was available as to the overall business of APD which might at suitable rates and conditions have been attracted to air carriage with the introduction of the Carvairs. The business had been lost by Air Express in 1976 because of its inability to handle high volume and because of damage to APD's cargo. The APD cargo required a roll-on roll-off facility and the absence of man-handling of packages. In 1978 there would have been competition generated by Ipec which would have had the same advantages with respect to handling facilities as the Carvairs. It would be unrealistic to assume that the effect of the additional capacity, either directly or indirectly, would have had no effect on the rates which could have been obtained for this kind of work. For that reason I regard the figure of $300,000 for APD in the financial year 1977-1978 as requiring a substancial discount for contingencies. (at p298)
122. The evidence with respect to the new business from Kimberly-Clark was given by Astling and I am not prepared to regard his estimates as reliable though there is no doubt a possibility that some such work might have emerged. The position is the same with regard to Myer Emporium which is included in the estimate for the financial year 1977-1978 at $250,000. Some business had been done with the Bristol aircraft in the calendar year 1977 but the aircraft was not suitable and the business lapsed. It is possible that some part of it might have been regained in late 1977 or in 1978 with Carvairs but it would not be right to attribute to it the figure used by Astling in the absence of other evidence. A figure of $360,000 in the financial year 1977-1978 is attributed to Air Express International in respect of what were called long-range charters between the east and west coast of Australia. In the light of the view which I have taken that the Carvairs would generally speaking at least, be confined to the Bass Strait trade, I do not think that any amount for this figure should be included. It is a mere possibility incapable of quantification. The evidence from the Vice-President of that organisation was in very general terms and was subject to the cautious proviso that it would have taken some time to build up to the estimated figure. I do not consider it reasonable to assume that any significant revenue would have been derived from this source. (at p298)
123. Astling's evidence with respect to the Carvairs disclosed that when he re-opened negotiations with British Air Ferries in January 1978 they were not then prepared to sell the two Carvairs alone but were prepared only to sell three as a single "package". Astling was unable to obtain an import licence for three Carvairs. However he decided against the Carvairs on another ground. He had ascertained that the two aircraft in which he had originally been interested had disadvantages which he had not been aware of at the time of the negotiations in 1976 and January and February 1977. The disadvantages were that one of the Carvairs was due for a majore overhaul in December 1978 and that the other was due for a similar overhaul in May 1979. This would have required the grounding of each of those aircraft for a period of several months, as well as the expense of the overhaul itself. This would have substantially reduced Air Express's capacity for that period in late 1978 or early 1979 and again in the second half of 1979. Whatever the earning capacity would have been from mid 1977 it would not have been maintained without interruption for the future. Indeed Astling stated that he had decided not to pursue the possibility of obtaining Carvair aircraft and was seeking a different kind of aircraft to replace the DC4s purchased from Qantas. (at p299)
124. I think it is right on the evidence to regard 1978 as a year in which there was no significant expansion of the air freight business across Bass Strait and certainly not sufficient to cover the bringing into operation of two Argosies having approximately the same capacity as the Carvairs. For the year 1978 it is not in the circumstances proper to accept the figures assumed by Astling and Hilton as the most likely result. They ignore the question of increased capacity and contain what I regard as a quite inadequate allowance for contingencies. (at p299)
125. A further feature of the Particulars of Demand is that the estimated figure for the 1978 calendar year was said by Hilton to have been based upon the figures for November and December of that year, months which, in addition to being generally peak months for air freight, were months in which the scheduled airline services were badly affected by strikes. No satisfactory explanation was given for this course. (at p299)
126. One of the contentions made by Ansett was that its own air freight operations were unprofitable and that if they were unable to operate that section of their business profitably it should be inferred that Air Express could not expect to operate its freight service profitably. The operations of Ansett on the one hand and Air Express on the other are so different that I do not feel that this inference is one which can properly be made. Ansett's freight operations involved the use of pure freight aircraft and also of passenger aircraft which carried freight in addition to passengers' baggage. Indeed it was said that 62 per cent of Ansett's air freight was carried in passenger aircraft. The nature of the business is such as to preclude any safe inference as to the likely position of Air Express. I should add however that I do not accept the contention that the Ansett figures were incorrect or specially prepared for some ulterior purpose as was urged on behalf of Air Express. (at p299)
127. Some evidence was given by Astling that the air freight market in Australia, generally, was undeveloped compared with air freight in other countries and this was supported to some extent by the witness Goldsworthy who was engaged in the international freight forwarding business. Like evidence was given by Dr. Trace, a lecturer in economic history, who gave evidence on behalf of Air Express. He had made a short study of Air Express's business and some rather limited enquiries about air freight generally for the purpose of obtaining information preparatory to giving evidence. I do not derive any assistance from his evidence which was of too general a nature to be helpful in the present case and he did not appear to me to have addressed his mind to the problem of imbalance although he recognized its existence. In so far as he differed from the other economist, Dr. Norman, who was called on behalf of Ansett I prefer Dr. Norman's evidence which I think is of some assistance in relation to the last head of damage, i.e. to estimates of future profits and losses by reason of Air Express having to re-establish itself. (at p300)
128. Before turning to the question of the re-establishment costs it would be convenient to summarise the result of the views which I have formed on the items in the particulars of damage which I have already dealt with. The result of what I have said may be summarized as follows. (at p300)
129. The first period for consideration is the second half of 1977 for which the actual figure must be assumed to have been $640,000 (calculated from the actual figure for eleven months to 31st December 1977 in the "revised budget") which was obtained using the Bristols and for a short period the DC4s. No basis is shown for calculating how much the DC4s contributed to that figure. On the basis that the Carvairs were fully operative during that half year and the Bristols were retired, one Carvair would have done the work of the two Bristols. (at p300)
130. Proceeding from the Proposal, the profit assumed for the DC3s must be eliminated and a loss of $100,000 substituted. The Bristols must be eliminated and the work done by them attributed to one Carvair. (at p300)
131. The Proposal attributes an actual figure to the Bristols for 1975-1976 of $1.232 million and uses that in the Forecast Profit for the first full year's operation, which also attributes $1.2 million to each Carvair on the basis of one Carvair equals two Bristols. This however is misleading and the error involved affects all the subsequent assumptions. The figure for 1975-1976 was derived from the use of three Bristols, not two. With two Bristols prior to restriction on loads the figure must be assumed to be $820,000, and there should be attributed to each Carvair the same figure. For the second half of 1977 one may assume that one Carvair would have done the work of the two retired Bristols and earned $410,000. The next step is to estimate the earnings of the other Carvair from new business. I have already said that I regard it as impossible that Air Express's business would have doubled for the whole of that six months, but I think that some APD business would have been obtained. I do not think however that a figure of more than $100,000 for that six months is justifiable, and on a like basis I think a figure of $100,000 is the maximum justifiable for Kimberly-Clark. That gives a total of $200,000 additional business for that six months period. I am prepared to assume that some reduction invariable operating costs would have occurred but no reliable basis for estimating that was made available. It would be unrealistic to reduce them proportionately or to leave them unaltered. I think therefore that a reduction of one fifth rather than one quarter would be reasonable. The "selling and administration expenses" are less easy to deal with but I do not think it sufficient merely to eliminate the amounts allocated to the Bristols. The figures in the Proposal are distorted by the fact that some items representing significant costs for the Bristols are not attributed to the Carvairs in either the fixed or variable operating costs. These items should therefore be added to their costs, namely in fixed costs $35,000 for rent and rates for hangars and in variable operating costs repairs and maintenance for plant and equipment, $2,000, and electricity in hangars $3,000; a total of $5,000. Again selling and administration expenses exhibit inexplicable omissions from the costs attributed to the Carvairs and at least the following items must be transferred to the Carvairs, from the allocation to the Bristols; general depreciation (not aircraft) $5,000, long service leave $500 and motor vehicle expenses $1,300, a total of $6,800. No basis for reduction of overheads generally in this context was suggested. It is not correct to assume that the retirement of the Bristols would reduce the overheads by the whole of the amount which is allocated to them but it is reasonable to assume some reduction. A figure of one-half of that allocation, after transferring the items referred to would appear not ungenerous. On this basis it will also be necessary to make some reduction in the variable operating costs because of the conclusion that the two Carvairs would not have been fully employed in the latter half of 1977. Again neither party made any submissions on how this should be done but it is by no means unfavourable to Air Express to assume a 25 per cent reduction in those costs (after the adjustments referred to above) for this half year. (at p301)
132. In arriving at the figures for the loss of profit in the years ending 31st December 1977 and 31st December 1978 I have not made any allowance for taxation on those profits. The reason for that course is that, whether or not the principle in British Transport Commission v. Gourley [1955] UKHL 4; (1956) AC 185 is applicable in Australia in the field of personal injury and wrongful dismissal, the present situation is one in which the principle would not apply. As I understand that principle it requires the presence of two factors, the first being that the amounts for the loss of which damages are awarded would, if they had been received by the plaintiff, have been subject to tax. The second is that the damages awarded to the plaintiff would not be subject to tax. In the present case the latter requirement would not be met in relation to the loss of profits for those two years. The receipt of the damages would, in my opinion, fall within the terms of s. 26 (j) of the Income Tax Assessment Act 1936, as amended. This appears to me to follow from the decision of this Court in Federal Commissioner of Taxation v. Wade [1951] HCA 66; (1951) 84 CLR 105 where Dixon and Fullagar JJ. discussed the meaning of that provision. That view was followed in Robert v. Collier's Bulk Liquid Transport Pty. Ltd. (1959) VR 280 and in Williamson v. Commissioner for Railways (1960) SR (NSW) 252 . (at p302)
133. I turn now to the final head of damage namely, the claim for compensation in respect of the time which it is alleged would be taken for Air Express to rehabilitate itself to the position which it would have achieved but for the injunction. The starting point for this calculation is a figure of annual income before tax of $709,000 which is itself derived from the calculations made by Hilton of the expected income for the calendar year 1978. In the course of dealing with the year 1978 I have dealt with the foundation upon which that figure is based. It involves a number of assumptions which I regard as false and a number of estimates which I regard as unrealistic and I need not repeat what I have said in discussing the year 1978. I set out below what I regard as a reasonable figure for 1978 and the manner in which it is calculated. (at p302)
134. The calculation upon which the figure in the particulars of damage is based involves the further assumption that it would take five years for Air Express to achieve the position it would otherwise have achieved with the use of the Carvairs. This is an assumption which I find unacceptable. It is not based upon anything more than the simple choice of a figure. The only evidence is that of Hilton who said that no one could say what Air Express's position would have been at this stage if the Carvairs had been imported, and that it might take anything from two years to ten years to recover. In those circumstances it is perhaps understandable that he gave no explanation for choosing five years. The next comment is that this method of calculation is one which made no allowance for contingencies which might affect the profit earned by Air Express. It is possible that there might be a large expansion of air freight business across Bass Strait but it is also possible that one of the Carvairs might have been lost or have been so damaged as to be unserviceable. It is also possible that other operators might be permitted to import aircraft which would have resulted in a substantial increase in competition and likewise it is possible that Air Express might itself import new and more efficient aircraft which would have increased both its volume and profitability. There are indeed other contingencies which would represent normal risks. Moreover the actual presence of the competition of Ipec, whether its effect would be direct or indirect, is ignored. In arriving at a figure under this heading some evaluation of probabilities must be attempted. (at p303)
135. In dealing with the years 1977 and 1978 I have said that I have not made any deduction in respect of income tax but the position under this heading must be different because a lump sum in respect of the expected loss of future profits, or perhaps more appropriately a loss of profit earning capacity, would not attract tax because it would not fall within s. 26 (j) or any other heading of assessable income. It would be a capital sum even though it might be calculated by reference to expected annual loss of income or source of income. In this respect it is closer to the situation in Glenboig Union Fireclay Co. v. Inland Revenue Commissioners (1922) 12 Tax Cas 427 . Accordingly I am of opinion that using the approach of aggregating the predicted profit less actual profit for a period of years would produce a sum which would not be taxable, whereas the profits themselves if received would have been taxable. In my opinion the principles of Gourley's Case [1955] UKHL 4; (1956) AC 185 are applicable to such a situation, whether or not applicable to damages for negligence or breach of contract of employment. The damage now in question is to be that which the Court thinks Air Express would have suffered by reason of the injunction and which Ansett ought to pay. I do not think that any item of the kind now in question should be based on more than the after-tax profits of the years in question. (at p303)
136. On that basis the result of the calculation will depend upon an appropriate view of the estimated after-tax profits and an appropriate view of the number of years to be assumed, having regard to all the circumstances. (at p303)
137. In dealing with the quantification of these heads of damage I have adopted the basis used by Air Express of not adjusting 1976 costs or earnings for inflation, and indeed figures for the general level of inflation in the succeeding years were not put in evidence. (at p304)
138. I set out below the calculations of loss based on the views which I have
set out above.
Half-year ended 31st January 1977
Revenue from 1st Carvair $400,000(one-half of ($375,000 +
Revenue from 2nd Carvair $200,000
----------
$600,000
Fixed Operating Costs
Variable Operating Costs($1.5 million, less say 15 per cent)
Selling and AdministrationExpenses $110,000
----------Year ended 31st December 1978 (at p304)
$791,125
Showing a loss for that half year $191,125
Plus loss on DC3s $50,000
----------
$241,125
----------
Compared with actual loss from
Ex. AH5 for 11 months of
$817,253 which equals for six
months $445,774
Difference $204,649
----------
139. For the year 1978 I have assumed the second Carvair would be used at the
same rate as the first. On this basis the position
would be as follows:
Revenue from two Carvairs $1,600,000Costs $220,000
Fixed Operating Costs $406,000
Variable Operating Costs $1,275,000
($1.5 million less, say 15 per cent)
Selling and Administration
----------p305)
$1,901,000
Showing a loss for full year $301,000
Plus Loss on DC3s $100,000
----------
Total Loss $401,000
Compared with actual loss from
Ex. AH5 for 1978 of $891,500.
Difference $490,500
---------- (at
140. These two figures show damage for the period ending 31st January 1978 amounting to $695,000. (at p305)
141. Hilton's calculations for the last item in the Particulars of Demand are based on a figure of $709,000 maintainable pre tax profit. This in turn is based on assumed sales of $4.395 million, which depends not only on the continuance of two Bristols in full operation but on revenue of more than double the 1975-1976 figure. It also assumes a reduction in expenditure of $150,000 which Hilton said was based on more up-to-date estimates but was not otherwise explained. The calculation ignores the effect of competition from Ipec and possible competition from other entrants which the very high profit/sales ratio which he assumes, would attract. I accept Dr. Norman's criticism of this figure and regard Hilton's unsupported assertion that high ratios are obtained in service industries as an insufficient foundation for this assumption. In so far as earlier figures for Air Express and BBA are available they do not support such a view. (at p305)
142. It is, I think, reasonable to assume that by the end of 1978, Kwikasair would be providing business for Air Express equal to the year 1976, i.e. about $1 million per annum. Edwards' evidence as to 1978 business does not warrant the assumption that that could have been achieved before the end of 1978. The presence of extra capacity created by the introduction of the Ipec Argosies does not warrant the inference that new business of any great magnitude would have been attracted at existing rates or at the reduced rate of 30 cents per kilo proposed for the Carvairs. Edwards' view that it would not enable Kwikasair to transfer freight from sea carriage to air carriage would be likely to apply to other potential customers and the presence of competition would increase the problems of attracting new business. It is to be remembered that the Proposal assumed that competition was confined to T.A.A. and Ansett, and one small carrier. This assumption turned out to be mistaken and it materially affects the estimates even if they were otherwise acceptable. As I have said, I cannot accept the view that business would have doubled in two years, whether measured from 1975-1976 as in the Proposal, or from July 1977 which would have been the likely effective starting date for the Carvairs, even in the absence of competition. (at p306)
143. A figure for "re-establishment" assumes that the operation would have continued so as to reach a profitable condition within a reasonable time. The contingencies involved in estimation from 1979 onwards are such as to make arithmetical calculations meaningless, especially as I am unable to accept the estimates provided in the evidence. This is particularly so in relation to the effect of competition and the estimation of total revenue. The better course is to award a round figure involving no specific annual estimate of individual items, but bearing in mind the possibility that an enterprise incurring the initial losses which I regard as probable might not have continued indefinitely, or for the five year period assumed by Hilton's calculations. For this purpose a round figure of $1 million would be appropriate. (at p306)
144. In the final result the amount of damages which I would have awarded if
I had taken the view that any damage was caused by
the injunction may be
summarized as follows:
Loss of Deposit $50,754p306)
Loss of Net Earnings in
1977 and 1978 $695,000
Additional Damages $1,000,000 (at
145. However I make no such award as I have concluded that the damage
suffered by Air Express was not caused by the injunction,
I therefore dismiss
the claim with costs including reserved costs.
Claim dismissed with costs including reserved costs. (at p306)
From that decision the applicant appealed to the Full Court.Court consisting of Barwick C.J., Stephen, Mason, Murphy and Wilson JJ. heard an objection to the competency of the appeal by Air Express Ltd. That hearing was held in Melbourne on 3rd October 1979 and an oral judgment was delivered on the same day by Barwick C.J., with whom the rest of the Court concurred. The objection to competency was founded on the submission that there was no judgment which could be the subject of appeal under s. 34 of the Judiciary Act 1903 (Cth). Ansett contended that because it had not sought any relief against Air Express and because its undertaking as to damages was given to the Court and not to Air Express the findings of the inquiry as to damages were not a judgment within s. 34. The objection was dismissed, the Full Court holding that while an undertaking as to damages is given to the Court it is enforceable by the appropriate party to the suit in which the underaking is given regardless of whether relief has been sought against the party in the suit itself. If a subsequent inquiry as to damages resulted in an order for the payment of damages, there was no doubt such an order would be a judgment and if no such order was made that order would be a judgment within s. 34. (at p307)
Before the hearing of the appeal from the decision of Aickin J., the Full
2. The relevant facts pertaining to the appeal are set out in the judgment of Mason J. (at p307)
3. J.E. Barnard Q.C. (with him B.J. Shaw Q.C. and H.R. Hansen), for the appellant. When it is sought to enforce an undertaking as to damages two questions arise, first whether the relevant defendant has sustained any damage by reason of the order (which is a question about causation), and second, whether in the opinion of the court the damage suffered ought to be borne by the plaintiff. It is enough that the making of the order should have been a cause of the damage, so that if the making of the order and the continuance of the litigation are concurrent or material causes the undertaking will be applicable: McGhee v. National Coal Board [1972] UKHL 7; (1973) 1 WLR 1; (1972) 3 All ER 1008 ; Bonnington Castings v. Wardlaw [1956] UKHL 1; (1956) AC 613 ; Nicholson v. Atlas Steel Foundry (1957) 1 WLR 613; (1957) 1 All ER 776 . The importation of reference to notice, knowledge and natural and probable consequences when examining undertaking as to damages ought to be avoided since they confuse the notion of cause and recoverable damage: Chapman v. Hearse (1961) 106 CLR 112, at p 122 . A distinction ought to be drawn between damage which flows from the litigation and damage caused by an injunction, but the distinction is mainly theoretical because litigation does not exist by itself. Hence when an injunction restrains an act, it can be inferred that damage flowing from the non-performance of the act should be attributed to the injunction and not to action (such as executive action in this case) which might have occurred independently if the injunction had not been granted. In considering what motivated the Secretary here, there was no evidence to enable the judge to conclude that the damage would necessarily have occurred. The onus lies on a plaintiff who seeks to escape liability to prove what damage it contends would have flowed from the injunction: Watts v. Rake (1960) 198 CLR 158 ; Commissioner for Railways v. Stewart [1936] HCA 51; (1936) 56 CLR 520 ; Edgington v. Fitzmaurice (1885) 29 Ch D 459 . The first step involves a question about causation. The court is entitled to consider the common law rules of causation: Reischer v. Borwick (1894) 2 QB 548 ; Smith v. Day (1882) 21 Ch D 421 ; Heskell v. Continental Express Ltd. (1950) 1 All ER 1033, at pp 1047-1048 ; Leyland Shipping Co. Ltd. v. Norwich Union Fire Insurance Society Ltd. (1918) AC 350, at p 362 ; Edgington v. Fitzmaurice (1885) 29 Ch D, at pp 480-483 ; Harwood v. Wyken Colliery Co. (1913) 2 KB 158 ; Baker v. Willoughby [1969] UKHL 8; (1970) AC 467 . Once the causative event is found to be something for which the defendant is liable the fact that it would or might have happened anyway is irrelevant. Unless the defendant can establish that part of the damage was severable it is liable in full: Nitro-Phosphate and Odam's Chemical Manure Co. v. St Katherine Docks Co. (1878) 9 Ch D 503 ; Savini v. Australian Terrazo and Concrete Co. Pty. Ltd. (1959) VR 811 . (In relation to questions arising from the injunction's now having been directed to the appellant, they referred to Tucker v. New Brunswick Trading Co. of London (1890) 44 Ch D 249 .) (at p308)
4. P.A. Liddell Q.C. (with him R.A. Sundberg), for the respondent. It is wrong to suggest that damages flow simultaneously from the injunction and the writ and that the two causes are not severable. It is possible to separate the two causes, and in this case it is essential to do so because there was no entitlement to the issue of a permit to import the aircraft until the Regulations were amended on 1st March 1977. Hence there was no causal link. The appellant's damages accrued before then. What happened after then is a different matter and one which the appellants chose at their own risk not to pursue. The respondent as a company authorized as an operator under the Airlines Agreement had a substantial interest in preserving its interests by ensuring that no invalid import permits were issued to enable unregistered parties to compete with it. It therefore was entitled to an injunction to restrain the Commonwealth and the Secretary from issuing such permits. The matter came before the Court on 2nd March 1977 and it is improbable that the Secretary would thereafter have issued a permit, regardless of whether an injunction had been granted. He would not have run the risk of exposing the Commonwealth to a claim for damages for breach of contract. Further he would have sought the Minister's advice before doing anything. The judge's finding on this issue was one of fact and not a guess. Appellate courts are loath to overturn primary judges' findings of facts: Edwards v. Noble [1971] HCA 54; (1971) 125 CLR 296 ; Warren v. Coombes [1979] HCA 9; (1979) 142 CLR 531 ; Reg. v. Governor of Pentonville; Ex parte Narang (1978) AC 247 ; Benmax v. Austin Motor Co. Ltd. (1955) AC 370 . Even if a permit had been issued, the appellant could not have afforded to import the particular aircraft. By 1st March 1977 its financial position had deteriorated dramatically owing to the withdrawal of its financial backers. Furthermore it would have suffered no loss as it was intended to establish a new company to import the aircraft. The onus is on the claimant to prove its case. Having elected not to call a material witness, the appellant cannot say that it ought to be assumed that if he had been called he would have given evidence of a specific kind. The loss if any flowed from the litigation not the injunction: Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) (No. 2) (1935) NZLR Suppl 17 . (at p309)
5. J. E. Barnard Q.C., in reply. It is erroneous to suggest that the loss
belonged to a new company and not to the appellant. The
evidence showed that
the new company would have taken shares in the appellant and would not have
been a substitute for it. The suggestion
that the appellant had collapsed
financially before 2nd March 1977 is inconsistent with the findings of fact.
(at p309)
Cur. adv. vult.
1981, February 10.
The following written judgments were delivered: -before my brother Aickin in the inquiry into damages in this matter and I have read and considered the comprehensive reasons for judgment published by him when dismissing the appellant's claim for damages. These were said to be occasioned by the continuance of the injunction originally granted on 22nd February 1977, in the proceedings between the respondent, Ansett Transport Industries (Operations) Pty. Ltd. ("Ansett") and the Commonwealth, an injunction which restrained the grant of a licence to import aircraft. (at p309)
BARWICK C.J. I have considered the relevant portions of the evidence given
2. I am in complete agreement with my brother's reasons for concluding that any loss or damage the appellant may have suffered because no written permission was obtained by it under the Customs (Prohibited Imports) Regulations to import two Carvair aircraft was not due to the continuation of that injunction but generally to the litigation between Ansett and the Commonwealth. Being of that clear opinion, I have no need to repeat the facts so fully and concisely recited in my brother's reasons or to dilate upon those reasons so clearly expressed. The conclusion that any loss or damage which the appellant may have suffered was not due to the continuance of the injunction is not only supportable on the evidence adduced before my brother in the inquiry undertaken by him but is, in my opinion, the proper conclusion to be drawn from that evidence. My brother's reasons, in my opinion, correctly set out the question to be decided in the inquiry, and the considerations relevant to its answer. (at p310)
3. My brother, rightly in my opinion, in reaching his conclusion follows the decision of Griffith v. Blake (1884) 27 Ch D 474 and the cases which follow it. (at p310)
4. If I were free to do so, I might be inclined to think that there is reason to support the view taken by Jessel M.R. in Smith v. Day (1882) 21 Ch D 421 . It seems to me that there is much to be said for taking the view that the opinion of the Master of the Rolls better reflected the responsibility of the court in granting an injunction than the later view expressed in the cases to which my brother refers. After all, the damages recoverable by the successful litigant should be referable to the action of the party who seeks the injunctive order rather than to the action of the court in deciding to grant it. Approach to the court through the application for an injunction should not either be discouraged nor visited with a penalty. The presence of the undertaking does not in any respect lighten the responsibility of the court in making its decision to grant the injunction. The action of the court, if it had the facts and circumstances fairly and properly placed before it, might well be thought not to provide a reason for awarding damages. (at p310)
5. But it is far too late to re-open the decision reached in the judgment in Griffith v. Blake and the subsequent cases. I treat the relevant law as finally settled in the sense expressed by my brother Aickin. But the adoption of that view makes it the more imperative to maintain the distinction between results which are caused by the grant of an injunction and those which flow from the fact of the litigation itself. (at p310)
6. I would wish to reserve the question whether the fact that the appellant was joined to the proceedings between Ansett and the Commonwealth at its own request and after the initial grant of the injunction ought to be taken into consideration in deciding whether or not damages ought to be ordered against the respondent. Equally, I would reserve the question whether the request to be joined as a party in the circumstances in which it occurred constituted special circumstances within the operation of the rules relating to the award of damages following from the grant of an injunction. (at p311)
7. It suffices for the disposal of this appeal that, in my opinion, my brother was quite correct in his conclusion that the appellant had not suffered loss or damage from the continuance of the injunction and that such loss or damage as it may have suffered was due rather to the existence and course of litigation itself. (at p311)
8. I would dismiss the appeal. (at p311)
GIBBS J. The facts of this case are stated in the reasons given by Aickin J. for the judgment from which this appeal is brought, and in the reasons for judment prepared by Mason J. which I have had the advantage of reading. The question for decision is whether Aickin J. was correct in holding that the appellant, Air Express Ltd., sustained no damage by reason of the order made on 25th February 1977 continuing an injunction granted on 18th February 1977 whereby the original defendants in the action, the Commonwealth and the Secretary to the Department of Transport, were restrained from granting or causing or permitting to be granted to Air Express or any related company a permission in writing under the Customs (Prohibited Imports) Regulations to import two Carvair aircraft and from delivering or causing or permitting to be delivered to Air Express or any related company any such permission in writing as might already be in existence. The continued injunction was granted upon an undertaking by the plaintiff in the action, the present respondent, "to abide by any order which a Court or a Justice may make as to damages in case a Court or a Justice hereafter should be of the opinion that the defendants shall have sustained any, by reason of this Order, which the plaintiff ought to pay." By that time Air Express had been added as a defendant. (at p311)
2. The object of requiring a plaintiff who seeks an interlocutory injunction to enter into an undertaking of this kind is to attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it. The insistence upon the giving of an undertaking is a very important, if not an essential, means of preventing injustice from being done by the court when it makes an order at an interlocutory stage, before the rights of the parties have been finally determined. The court has a discretion not to enforce such an undertaking, but unless the defendant has been guilty of conduct that would render it inequitable to enforce the undertaking it would seem just, speaking generally, that a plaintiff who has failed on the merits should recompense the defendant for the damage that he has suffered as the result of the making of the interlocutory order. However, it is perfectly clear, and it appears from the words of the undertaking themselves, that the only damages to which a defendant is entitled are those which he has sustained by reason of the grant of the injunction. The generally accepted view is that the damages must be confined to loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice: see Smith v. Day (1882) 21 ChD 421, at p 430 and the cases cited in Kerr on Injunctions, 6th ed. (1927), p. 667, and Halsbury, 4th ed., vol. 24, par. 1077. However, in the present case the question is not whether loss caused by an injunction was a natural consequence of making it, but whether any loss which the appellant suffered was caused by the making of the injunction. In the cirumstances I do not find it necessary to discuss the dictum of Cussen J. in Victorian Onion and Potato Growers' Association v. Finnigan (No. 2) (1922) VLR 819, at p 822 , that "the word 'damages' in that undertaking is to be given a very general meaning, and is not necessarily to be given the same meaning as the word 'damages' when used in connection with breaches of contracts", which, although its meaning is not altogether clear, appears to be inconsistent with the statement of Lord Diplock in Hoffmann-La Roche v. Trade Secretary (1975) AC295, at p 361 , that the assessment of damages for breach of an undertaking "is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction". (at p312)
3. In a number of authorities the court has distinguished between loss which was caused by the injunction and loss which arose from the litigation: see Bingley v. Marshall (1863) 9 LTNS 144, at p 145 ; Gault v. Murray (1892) 21 OR 458, at p 462 ; Douglass v. Bullen (1913) 12 DLR 652, at p 655 and Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) (No. 2) (1935) NZLR Suppl 17, at p 18 . There is no reason to doubt that it is correct in principle to draw such a distinction if the facts warrant it. If the pendency of the litigation, rather than the making of the order, was the cause of the plaintiff's loss, the terms of the undertaking have no application, since the plaintiff has not sustained loss by reason of the order. Moreover, except in certain cases analogous to malicious prosecution, a defendant is not entitled to recover damages for loss resulting from legal proceedings brought against him - the only liability of the unsuccessful plaintiff is to pay costs. The court should no doubt scrutinize with care an assertion by a plaintiff that loss which has been suffered by a defendant has resulted from the litigation rather than from the making of the interlocutory order, since a plaintiff should not be allowed to evade payment of the price which he has agreed to pay for the grant of the injunction. In the end however the question becomes one of fact: did the making of the order cause the loss? The onus of proof must, in accordance with general principles, lie on the defendant who asserts that he sustained damage by reason of the order. (at p313)
4. It was submitted on behalf of the appellant that it is enough that the making of the order should have been a cause of the damage, so that if both the making of the order and the continuance of the litigation are concurrent causes the undertaking will be applicable. However, in almost every case in which an injunction is granted the injunction will play some part in causing the party bound by it to act in accordance with its terms. To order a plaintiff to pay damages where it appears that the party bound by the injunction would have acted as he did even if the injunction had not been granted, would be to give the undertaking an effect obviously not intended. The party seeking to enforce the undertaking must show that the making of the order was a cause without which the damage would not have been suffered. It was further submitted that the onus lies on the plaintiff, against whom the undertaking is sought to be enforced, to disentangle any damage arising from the litigation from that which was caused by the making of the order. However, the onus of proof does not shift in this way; the defendant, who seeks to enforce the undertaking, must prove that the damage he has sustained was caused by the making of the order. (at p313)
5. The present case is in a number of respects exceptional. In the first place, the injunction was not granted against the defendant who claims to have sustained the loss. In this respect the present case resembles Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (in liq.) (No. 2) (1935) NZLR Suppl 17 . Secondly, at the time when the injunction was granted the Secretary to the Department of Transport had no power to do that which he was restrained from doing. It was not until 1st March 1977 that the Customs (Prohibited Imports) Regulations were amended to give to the Secretary the necessary power to grant permission to import the aircraft. Thirdly, an injunction had originally been granted before the appellant became a party to the action. I am prepared to assume that the grant of the injunction on 18th February 1977 caused the Minister and the Secretary to withhold the written permission to import the aircraft, notwithstanding that they had previously decided to grant that permission. However, the appellant cannot obtain damages for any loss which thereby resulted to it because at that time it was not a defendant and was not entitled to the benefit of the undertaking. What the appellant had to prove was that the permission would have been granted on or after 25th February if it had not been for the order made on that date continuing the injunction. If for some reason the injunction had been dissolved on that date it is clear that the Secretary would then have been aware that he had no power to grant the permission, because of the form of the regulations. The probability, if not the certainty, is that he would then have taken no action before the regulations were amended. That did not occur until 1st March 1977. At that time the demurrers, which raised for the decision of this Court the question whether the issue of the permission would be a breach of the Commonwealth's contractual obligations, were due to be heard on the following day. The questions in issue were complex and difficult, as the judgments of this Court show: see Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth [1977] HCA 71; (1977) 139 CLR 54 . In all these circumstances I respectfully agree with the conclusion reached by Aickin J. that "it is probable that the Secretary would not have pre-empted the decision of the Court in a situation in which the breach alleged to be involved in the grant of the permission would be one which was not reversible because once in the country the aircraft could be used for interstate trade" and that accordingly it is probable that the Secretary would not have issued the written permission while the litigation was continuing. If it is said that it is merely a matter of speculation whether or not the Secretary would have granted the permission if the injunction had not been in force, the appellant should in my opinion still fail, since it has not proved that it is probable that the permission would have been granted, at some time after 25th February, if it had not been for the injunction. Since the appellant did not call either the Minister or the Secretary it may be inferred that their evidence was not likely to assist its case. I am unable to conclude on the balance of probabilities that any loss which was suffered by the appellant was due to the making of the order on 25th February and would not have been sustained if that order had not been made. (at p315)
6. Having reached this conclusion I have no need to consider the further matters which supported the conclusion of Aickin J. that it was the litigation rather than the continuation of the injunction which brought about such damage as the appellant may have suffered. (at p315)
7. I would dismiss the appeal. (at p315)
STEPHEN J. On 17th February 1977, the Minister for Transport announced in Federal Parliament his approval of the import by Air Express Ltd of two aircraft into Australia. The next day Ansett Transport Industries (Operations) Pty. Ltd. began proceedings in this Court against the Commonwealth and the Secretary to the Department of Transport, seeking an injunction to restrain the grant to Air Express of permission to import those aircraft. On the same day Ansett also obtained ex parte an interim injunction retraining those defendants from granting permission for importation of the aircraft. (at p315)
2. What subsequently occurred is described in detail in the judgment of Aickin J., from whose decision this appeal is now brought. It is enough for present purposes to say that Air Express, vitally affected as it was by the relief sought by Ansett, applied to be and was joined as a defendant; the injunction obtained by Ansett was continued until the disposal of the suit or further order and Ansett's undertaking as to damages, in customary form, was on 25th February 1977 extended to apply to Air Express. Ansett ultimately failed in its action, demurrers by the defendants being allowed. Air Express then claimed damages from Ansett under the latter's undertaking. This appeal is from the dismissal of that claim by Aickin J. (at p315)
3. In the course of his judgment Aickin J. has described the origins and development of the practice of requiring an applicant for an interim or interlocutory injunction to give an undertaking as to damages. He has also considered in detail the state of the authorities relating to what is the appropriate measure of damages under such an undertaking. Subject to one reservation, I am in agreement with all that his Honour has said on those matters, including his Honour's conclusion that in an appropriate case it may be necessary to distinguish between damage flowing from grant of the injunction, to which alone the undertaking applies, and that which flows from the litigation itself. That reservation concerns his Honour's view of the judgment of Cussen J. in Victorian Onion and Potato Growers' Association v. Finnigan (No. 2) (1922) VLR 819 , which, as will appear below, I regard as providing a valuable insight into one aspect, not elsewhere adverted to, of the award of damages under an undertaking. (at p316)
4. However, before enlarging upon this aspect I should first describe how his
Honour disposed of the claim to damages by Air Express.
It is on pp. 281-283
that his Honour describes why it is that he concludes that the damage claimed
by Air Express was attributable
to the litigation rather than to the grant of
the injunction. His Honour begins by noting, on p. 281, Ansett's submission
that the
damage was not a consequence of the injunction but of the litigation
itself. I may say that I do not regard Ansett's statement of
the proposition
as wholly satisfactory; more of that later. His Honour then observes that
negotiations for a contract aimed at providing
finance for the future
operations of Air Express were broken off not later than 23rd February, two
days before the undertaking as
to damages was given to Air Express. Without a
successful outcome to those negotiations, its future profitability, necessary
in order
to establish its claim to damage, could not be established. His
Honour then turns to a consideration of "what the situation was on
25th
February and thereafter" and concludes:
"In my opinion it is probable that the Secretary would not have
pre-empted the decision of the Court in a situation in which
the breach
alleged to be involved in the grant of the permission would be one which
was not reversible because once in the country
the aircraft could be used
for interstate trade. Unless conditions were imposed on the importation of
the aircraft which would have
required their re-export if it turned out
that Ansett's claim was right, there would be no way in which the
Commonwealth could have
restored the situation to that which prevailed
immediately prior to the commencement of the proceedings. If that had been
proposed,
it would be very unlikely that the aircraft would have been
imported because finance would not have been available on that basis."
His Honour is there not so much upholding Ansett's submission that the damage
was not a consequence of the injunction but of the
litigation as saying that
the litigation itself would have caused that damage even if no injunction had
ever been granted. This is
significantly different from his Honour's
description of Ansett's submission and, unlike it, represents, with respect,
the proper
approach: unless Air Express can show that the injunction was a
causa sine qua non its claim must in my view fail. On this appeal
Air Express
contended to the contrary; it was enough, it said, that the injunction was a
concurrent cause. (at p317)
5. One further factor his Honour mentions as material, namely, that Air Express was neither itself to be a party to the contract, the negotiation of which was broken off on 23rd February, nor would that contract directly affect Air Express itself. This was, essentially, because a holding company was to be interposed between Air Express and the two parties to the negotiations, one of whom was the existing major shareholder in Air Express. However it is clear that a successful outcome of those negotiations would have enabled Air Express to operate the two aircraft, once imported, and his Honour concludes that "it was more likely than not that the outstanding problems would be solved and satisfactory arrangements made for hiring aircraft". (at p317)
6. These, then, were the factors which caused his Honour to conclude that Air Express's damage was attributable to the litigation and not to the injunction. These factors are, of course, directed to those two events critical to Air Express's claim: that Air Express would otherwise have obtained permission to import the aircraft and that it would also have been in a position to in fact have procured and sucessfully operated the aircraft in Australia. Air Express sought to prove that it was the injunction which prevented the happening of these two events. Moreover, since the undertaking was only extended to Air Express on 25th February 1977, it also had to prove that it was the operation of the injunction after that date which led to that result. (at p317)
7. As appears from his Honour's judgment, there was no direct evidence concerning the effect either of the litigation or of the injunction upon the grant of permission to import the aircraft. All that appeared was that on 17th February the Minister announced that he had approved the import of the aircraft, that on 18th February the litigation was begun and the injunction was granted, that the injunction continued in force thereafter and that, despite the Minister's statement, the permission was not in fact granted. In those circumstances it is no doubt a proper inference that on and after 18th February the injunction, which was so expressed as specifically to restrain the granting of that permission, was a cause of it not being granted. However, despite the fact that Ansett was not content to rely merely upon issue of the writ and thought it prudent to also obtain interim injunctive relief, it can by no means necessarily be inferred that but for the injunction permission would have been granted. What is wanting is evidence from the Minister or, perhaps, from the Secretary as to what was indeed the reason why no permission was granted. In its absence all else is speculation. (at p318)
8. One might conclude, as did his Honour, that the Minister, not wishing to run the risk of the Commonwealth being held liable for damages at the suit of Ansett, would, despite his announcement, change his mind and prevent the grant of that permission. One might equally well surmise that a considered statement of government policy as to importation of these aircraft would not have been made without regard to the probability that Ansett would sue: on that view the government's decision would not be likely to have been reversed when Ansett did in fact sue. Each of these lines of thought rely upon speculation rather than permissible inference from proven facts. (at p318)
9. What follows from this is that it is important to determine upon whom lay the onus of adducing further evidence, an onus which was not discharged. That further evidence should have had as its object the resolution of the question left unresolved; whether, but for the injunction, permission would have been granted. (at p318)
10. The need for such evidence, and hence the importance of determining upon whom lay the onus of adducing it, depends upon the nature and the terms of the undertaking given by Ansett and upon the nature of the rights of Air Express under such an undertaking. (at p318)
11. Perhaps the first point to be observed is that undertakings such as this
are given to the court and not to the party enjoined.
Brett L.J. made this
point when, in Smith v. Day (1882) 21 ChD 421, at p 428 he said: "Now in the
present case there is no undertaking
with the opposite party, but only with
the Court. There is no contract on which the opposite party could sue." A
claimant under an
undertaking cannot complain of any breach of contract nor of
any breach of duty, tortious or otherwise, owed to him, nor, of course,
of any
breach of the undertaking. What occurs when such an undertaking is extracted
from a plaintiff is that the court, as a condition
of its grant of interim or
interlocutory injunctive relief, has ensured that, should it turn out that
that relief should never have
been granted, it will have the power, so far as
monetary compensation allows, to make good the harm which the grant has done
to the
defendant. The court acquires powers to do justice between the parties
which it would not otherwise possess. As North J. said in
Attorney-General v.
Albany Hotel Co. (1896) 2 Ch 696, at p 699 :
"If it should subsequently appear that such an order had been
improvidently made, it is difficult to see how, in the absence
of such an
undertaking, the defendant could recover from the plaintiff the damages which
were really sustained by him by reason of
the improper order of the Court."
(at p319)
12. Damages awarded under such an undertaking are, therefore, of a rather
different nature from those awarded at common law. Their
special character
appears from the fact that their source lies in the plaintiff's own voluntary
undertaking, given as the price of
obtaining an injunction. It may also be
seen in the words of the common form of the undertaking, they must not only be
sustained
by reason of the grant of the injunction but the court must form the
opinion that the plaintiff "ought to pay" them. It was in the
context of such
an undertaking that, in Finnigan's Case, Cussen J. said (1922) VLR at p 822 :
"I think the terms of the undertaking are themselves of importance. It
provides that there may be an order as to damages if
the Court shall be of
opinion that the defendant has sustained any. I think the word 'damages'
in that undertaking is to be given
a very general meaning, and is not
necessarily to be given the same meaning as the word 'damages' when used
in connection with breaches
of contracts. 'Damages' in this case seems to
me to mean real harm, rather than to have any strictly defined meaning."
(at p319)
13. It is appropriate enough, in claims under such undertakings, to rely upon
analogies drawn from the common law in matters of
remoteness of damages, the
concern of Brett L.J. in Smith v. Day, as Lindley L.J. points out in
Schlesinger v. Bedford (1893) 9 TLR
370 . It is quite a different thing to
seek to apply common law rules of causation to a claim made under such
undertakings; there
is no such analogy as Lord Reid in Baker v. Willoughby [1969] UKHL 8;
(1970) AC 467, at p 492 found to exist in the case of workers'
compensation.
The reason for this is plain enough. In both contract
and tort it is enough
that the breach of contract or of duty
is one direct
cause of whatever damage
a plaintiff has suffered - McGregor
on Damages, 13th ed. (1972), pp. 69, 118.
The breach is
a wrongful act
on the defendant's part and the common law visits
him with
liability for the consequences to the plaintiff, subject
always to
rules
as to remoteness. But a plaintiff who sues for an injunction
and obtains
interlocutory relief, giving an undertaking
to the court
as the price of that
relief, commits no wrongful act, no breach
of contract or of duty when, at the
trial, he fails
to obtain any
perpetual injunction. If, as a result of the
grant of interlocutory
relief, the defendant has been harmed there will,
however, have
been injustice and, an undertaking having been given, the court
will
thereby have been armed with jurisdiction, otherwise
lacking,
to right
that injustice and compensate the defendant for the harm done
to him. (at
p320)
14. From this it can be seen that it will only be if damage is suffered because of the grant of the injunction, and would not have been suffered but for it, that the court should compensate a defendant who claims damages under the undertaking. Its grant must be shown to be the causa sine qua non of the damage complained of before the defendant can be entitled to be compensated for what turns out to be the erroneous grant by the court of the injunction against it. Only then will the defendant have suffered, from the grant of the injunction, such "real harm" as Cussen J. spoke of in Finnigan's Case what North J., in Attorney-General v. Albany Hotel Co. (1896) 2 Ch, at p 699 described as "the damages which were really sustained". (at p320)
15. It follows that it is for the claimant under an undertaking to establish by evidence, or by inference from evidence, a prima facie case both that the grant of the injunction was a cause of his damage and that but for it he would not have suffered that damage. In the present case Air Express failed to establish that but for the injunction there would have been a grant to it of permission to import the aircraft. The consequence is that it did not make out its entitlement to damages under the undertaking. In the circumstances it is unnecessary for me to examine the other element critical to its claim, its ability successfully to procure and operate the aircraft. (at p320)
16. I would dismiss this appeal. (at p320)
MASON J. This is an appeal from an order made by Aickin J. dismissing a claim by Air Express Ltd. ("Air Express") against Ansett Transport Industries (Operations) Pty. Ltd. ("Ansett") for damages for breach of an undertaking given by Ansett to the Court. The undertaking was given to the Court as a condition of Ansett obtaining an interlocutory injunction in this Court against the Commonwealth of Australia and Mr. C. C. Halton, the Secretary to the Department of Transport, in an action restraining the grant of permits to Air Express and Interstate Parcel Express Co. (Australia) Pty. Ltd. ("Ipec") to import freighter aircraft into Australia pursuant to the Customs (Prohibited Imports) Regulations. In the event Aickin J. held that the damage sustained by Air Express (which he fixed at $1,745,754) was caused by the litigation and not by the interlocutory injunction. Air Express contests this finding. Ansett claims that the amount of $1,745,754 is excessive in that it exceeds the actual loss suffered by Air Express. However, this question is not of present concern, because argument has been restricted at this stage to the issue of causation: Was his Honour in error in concluding that the damage was caused by the litigation, not by the injunction? (at p321)
2. The claim for damages arose out of the decision of the Full Court in Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth [1977] HCA 71; (1977) 139 CLR 54 . Ansett had commenced proceedings against the Commonwealth and Mr. Halton by writ issued on 18th February 1977. The writ was issued following the making of a statement in the House of Representatives on 17th February by the Minister for Transport in which he said that he had approved the importation of two Carvair aircraft by Air Express and two Argosy aircraft by Ipec for the carriage of air freight between the mainland and Tasmania. The importation of the aircraft would enable Air Express and Ipec to compete with Ansett in the carriage of air freight on the Tasmanian route. At the time, the Customs (Prohibited Imports) Regulations prohibited the importation of aircraft unless the importer produced to the Collector of Customs "the permission in writing of the Director-General of Civil Aviation to import the goods". (at p321)
3. On 18th February, Aickin J. made an order ex parte restraining the two defendants from granting the written permission until 4.30 p.m. on Tuesday, 22nd February. The ex parte injunction was granted on an undertaking in the usual form to "abide by any order which the Court or a Justice may make as to damage in case the Court or a Justice shall hereafter be of the opinion that the defendants shall have sustained any, by reason of this Order, which the plaintiff ought to pay". (at p321)
4. On Tuesday, 22nd February, on an application by Air Express and Ipec, the Chief Justice ordered that they be added as defendants to the writ. He continued the existing injunctions until Friday, 25th February. On that day Air Express and Ipec asked for, and obtained, undertakings in terms similar to those already given in respect of the original defendants. The Chief Justice continued the injunctions on those undertakings until the suit was disposed of or further order. On the same day the writ was amended by the addition of Air Express and Ipc as defendants and they entered appearances. By virtue of O. 16, r. 4 (3) the proceedings against Air Express are deemed to have commenced on that day. (at p321)
5. Ansett's statement of claim made no allegations and sought no relief against Air Express or Ipec. The two original defendants delivered a defence and demurrer to the statement of claim, as did Air Express and Ipec. On 4th March the Full Court reserved judgment on the demurrers. On 4th April Air Express applied for dissolution of the injunction. On 5th May the Chief Justice refused the application with costs. (at p322)
6. The day before argument on the demurrers began in the Full Court on 2nd March 1977, the Customs (Prohibited Imports) Regulations were amended by the substitution of the words "Secretary to the Department of Transport" for "Director-General of Civil Aviation" in the provision in the Third Schedule relating to the importation of aircraft. The amendment made it clear that by 2nd March 1977 the Secretary to the Department of Transport was authorized to issue the written permission and that the objection based on his lack of power could no longer be maintained. (at p322)
7. Aickin J. held that "on 18th February 1977 and thereafter until 2nd March 1977 there was no such office as that of Director-General of Civil Aviation and no person could issue the relevant permission in writing". His Honour noted that if there was no person who could exercise the function of granting the necessary permission under the Regulations, then, if the proceedings had been dealt with finally when Ansett gave its undertaking on 25th February 1977, Ansett would have succeeded in obtaining a final injunction. But this conclusion is not material to the issue which presently arises on the appeal. (at p322)
8. Although the injunction restrained the original defendants and did not restrain Air Express, Aickin J. considered that the undertaking as to damages could be enforced by Air Express as a defendant if it sustained damage in consequence of the injunction. In this his Honour was plainly right. The undertaking can be enforced by any defendant who suffers damage as a result of the injunction (Tucker v. New Brunswick Trading Co. of London (1890) 44 ChD 249, at p 252 ). (at p322)
9. Aickin J. accepted that damages should be awarded to a defendant for
breach of an undertaking given to the court if, in the light
of the final
judgment, it transpires that an interlocutory judgment should not have been
granted. Authority for this principle is
provided by Novello v. James (1854) 5
De GM & G 876 (43 ER 1111) , where Knight Bruce and Turner L.JJ. concluded
that the fact
that
the law was doubtful at the time when the interlocutory
injunction was granted was not a reason for not awarding damages (1854)
5
De
GM & G, at pp 878-879 (43 ER, at p 1112) . To the same effect was Graham v.
Campbell (1878) 7 ChD 490, at p 494 , where
the Court
of Appeal (James, Cotton
and Thesiger L.JJ.) said:
"If any damage has been occasioned by an interlocutory injunction,
which, on the hearing, is found to have been wrongly asked
for, justice
requires that such damage should fall on the voluntary litigant who fails, not
on the litigant who has been without
just cause made so."
And in Griffith v. Blake (1884) 27 ChD 474 the Court of Appeal explicitly
rejected the suggestion made by Jessel M.R. in Smith v.
Day (1882) 21 ChD 421,
at pp 424-425 , that damages for breach of an undertaking will only be awarded
when the interim injunction
has been procured by a false statement or
suppression of material information and that damages will not be awarded when
the injunction
has been wrongly granted because the court made a mistake of
law (1884) 27 ChD, at pp 476-477 . (at p323)
10. There are statements which indicate that the court has a discretion to decide whether it shall order an inquiry for damages for breach of an undertaking given to the court - see Smith v. Day (1882) 21 ChD, at pp 425, 427 . But the discretion is to be exercised according to well-settled principle. Generally speaking, so long as the claim for damages is not trivial or trifling an inquiry should be directed and the defendant will be entitled to recover the loss which is the natural consequence of the grant of the injunction. The Supreme Court of Canada has held that the court will be entitled to refuse a reference as to damages where there are special circumstances, i.e. when the plaintiff is a public body and acts in the public interest to hold the situation until the rights are determined or when the defendant, having succeeded on technical grounds, has been guilty of misconduct (Vieweger Construction Co. Ltd. v. Rush & Tompkins Construction Ltd. (1964) 48 DLR (2d) 509, at p 519 ). It has not been suggested that there are any special circumstances in the present case. (at p323)
11. Aickin J. drew a distinction between damage flowing from the litigation
and damage flowing from the interlocutory injunction.
The latter, but not the
former, he thought, was compensable pursuant to the undertaking. In making
this distinction his Honour followed
what was said by Britton J. in Douglass
v. Bullen (1913) 12 DLR 652, at p 655 and by Myers C.J. in Newman Bros. Ltd.
v. Allum, S.O.S.
Motors Ltd. (No. 2) (1935) NZLR Suppl 17, at p 18 . See also
Gault v. Murray (1892) 21 OR 458 . Newman Bros. has some similarity
to the
present case. There, an interim injunction was granted restraining a licensing
authority from hearing or adjudicating upon
an application for transfer of a
passenger-service omnibus licence. The Chief Justice said (1935) NZLR Suppl
17, at p 18 :
"If it appears that no damage is proved occasioned by the injunction as
distinct from the detriment arising from the litigation,
the defendants
are not entitled to an inquiry as to damages on an application such as
this . . . It is inconceivable . . . that Mr.
Allum as a quasi-judicial
authority, after being served with a statement of claim in which the
validity of his grant of the renewal
of the license and his other actions
in connection with the applications before him were attacked would have
proceeded, even though
there had been no interim injunction to adjudicate
further upon the matter until the main action had been decided. My
inclination
of opinion, therefore, is that it cannot be said that the
defendants have sustained damage by reason of the interim injunction which
the plaintiff ought to pay." (at p324)
12. The distinction between damage caused by the injunction and damage which
flows from the litigation is, I think, well founded
on the language in which
the usual undertaking as to damages is expressed. The party seeking damages
must show that he has sustained
damage "by reason of the Order". The words
cannote a causal connexion between the damage and the interim injunction. (at
p324)
13. English law has not adopted a uniform approach to causation. Instead, it has tended to take refuge in the notion that causation is very largely a question of fact. But the many statements to this effect which are to be found in the decided cases do not attempt to deny the fact that the common law has applied a variety of theories and standards of causation, in each instance applying that which is in point of policy the most apt or appropriate to the question which arises for decision. (at p324)
14. For this reason little is to be gained in the present case from an examination of the myriad authorities which deal with causation of damage in contract, tort and other situations many of which were pressed upon us in argument. We are better advised to look to the purpose which the undertaking as to damages is designed to serve and to identify that causal connexion or standard of causal connexion which is most appropriate to that purpose. The object of the undertaking is to protect a party, normally the defendant, in respect of such damage as he may sustain by reason of the grant of the interim injunction in the event that it emerges that the plaintiff is not entitled to relief. It is no part of the purpose of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise, as for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when no interim injunction is sought or granted. Consequently, it is for the party seeking to enforce the undertaking to show that the damage he has sustained would not have been sustained but for the injunction. (at p325)
15. Air Express does not deny that a distinction is rightly to be made between damage caused by an injunction and damage which flows from the litigation. However, it asserts that the distinction in most cases is of theoretical significance only and that where, as here, an injunction restrains the doing of an act, the inference to be drawn is that damage flowing from the non-performance of the act is to be attributed to the injunction, not to executive action which might have taken place independently had the injunction not been granted. It is upon this submission that the outcome of the appeal substantially hinges, because Aickin J. held that such loss as Air Express sustained was damage flowing from the litigation, not from the injunction, inasmuch as the original defendants would have refrained from granting permission to import the two Carvair aircraft once Ansett commenced its action seeking substantive relief. (at p325)
16. Air Express claimed damages in the sum of $2,427,000. This sum consisted
of an amount of $2,127,000 representing estimated profits
for five years on
the footing that Air Express would have been able to operate the two Carvairs,
less estimated recovery. In making
this estimate Air Express took into account
loss of customers, damage to its long history of service and reliability,
inhibition
of its natural expansion, inability to proceed with a planned
financial restructuring of the company which was stopped by the injunction,
and other factors which I need not mention. The calculation was based on the
fact that the two new aircraft would replace two Bristol
freighters owned by
Air Express which were nearing the end of their economic life. The additional
amount of $300,000 reflected loss
due to deteriorating cash flow of Air
Express occasioned by suppliers changing their terms to cash on delivery in
lieu of normal
trading terms. Aickin J. did not accept these figures. He said
that, if he had taken the view that any damage was caused by the injunction,
he would have awarded an amount of $1,745,754 consisting of -
Loss of deposit on Carvair aircraft $50,754p326)
Loss of net earnings in 1977 and 1978 $695,000
Additional damages $1,000,000 (at
17. At all material times Air Express held three licences entitling it to engage in commercial air navigation: (a) two air charter licences authorizing charter operations "for the carriage of passengers or cargo for hire or reward that are not conducted in accordance with fixed schedules to and from fixed terminals"; they were subject to the condition that only Bristol Mark 21 and Mark 31 aircraft be used; and (b) another air charter licence authorizing "charter operations to or from the Australian Capital Territory or to or from the Northern Territory", subject to the same condition. In addition Air Express had been given authority under reg. 197 (2) to engage in charter operations on two or more occasions within any period of four weeks over a section of a route on which a regular public air transport service was operating between Essendon in Victoria and any Tasmanian airport or two or more Tasmanian airports. A number of ad hoc authorities had been granted for flights which would otherwise contravene the restriction in reg. 197 (2). (at p326)
18. At the beginning of 1975 Air Express had two Mark 21 and two Mark 31 Bristol freighters which carried freight between Essendon and northern Tasmanian ports. In May 1975 one Mark 21 was lost in an accident. (at p326)
19. In 1975 William Sinclair Astling became Managing Director of Air Express. At about the same time he joined BBA Air Cargo Pty. Ltd. ("BBA"), a former competitor of Air Express. It owned an Argosy freighter and three DC3 aircraft. By 1976 Astling was in control of the operations of both companies, the principal shareholder in each company being Signet Insurance Holdings Pty. Ltd. In the same year Uplift Pty. Ltd., a company owned by Astling and his wife, purchased the share capital in Air Express and BBA. (at p326)
20. With the assistance of Mr. Hilton, an accountant, Astling prepared a document described as "Proposal for acquisition of an equity interest in Air Express Limited and BBA Air Cargo Pty. Ltd." for circulation to persons who might be interested in taking up a controlling interest in the two companies. The document stated that the operations of the two companies had been merged and that both companies were operating profitably. It said that the amount of the investment sought was $400,000 and that earnings before tax in the first full year of operations should exceed $500,000. It went on to say that the companies were short of working capital, needed short-term funds to pay creditors and that there were a number of "deferred borrowings" by the companies and that Astling had available to him an arrangement deferring those loans on an interest-free basis until October 1981. (at p327)
21. A summary of a year's operations based on the existing Bristols and DC3s and the acquisition of two Carvairs showed a projected profit before tax of $532,900. This calculation was evidently made on the footing that the Argosy freighter would be sold. It had been said that an offer of $440,000 had been received from Ipec for the Argosy. However, it was proposed to sell the aircraft overseas, recovering only the amount outstanding on the lease, as a sale of the aircraft to Ipec would give that company an undesirable advantage in the Australian air freight market. (at p327)
22. The proposal was that a 50 per cent equity in the two companies should be acquired for $140,000 and that the purchaser should make an interest-free loan to Astling for ten years in an amount of $115,000 and a further short-term loan at 10 per cent per annum in the sum of $150,000, the latter constituting provision of working capital to the two companies. (at p327)
23. In support of its application to import two Carvairs, Air Express informed the Department of Transport that the two Bristol Mark 31 freighters could not be expected to continue operating after the early part of 1978 due to unavailability of engine spares. As I have said, one Mark 21 Bristol was lost in May 1975. Moreover, it appeared that the other Mark 21 was grounded pending investigations as a result of which load restrictions came into operation in January 1976 which made that aircraft unsuitable for regular use, although it was later used for back-up purposes. One of the Mark 31 Bristols was grounded in January or February 1977 because of wing-spar fatigue and the other Mark 31 was subject to load restrictions in January 1977. The second Mark 31 and the Mark 21 were used in 1977 notwithstanding the load restrictions. (at p327)
24. On 16th February the Minister wrote to Astling and stated that the Secretary to the Department had written to Air Express to say that the import permit for the two Carvairs would issue immediately the Secretary had the necessary assurances that the three Bristol freighter aircraft being replaced would be permanently withdrawn from the Australian air transport fleet. In fact the Secretary wrote on 17th February 1977 to Astling asking for information as to the arrangements proposed for the current disposal of the three Bristol freighters, stating that when he was satisfied that they would definitely be removed from the Australian air transport scene he would sign the air permit forthwith. (at p327)
25. Aickin J. found that if the permits had been issued they would have been subject to a condition that the Carvairs were to be used on the Bass Strait service exclusively. (at p328)
26. In May 1977 Astling wrote to the Acting Minister for Transport setting out proposals for the purchase of two DC4 aircraft from Qantas and for the import of the two Carvairs. The Acting Minister approved the purchase of the DC4s on condition that if the High Court allowed importation of the Carvairs, the import permits would not issue until the DC4s had been exported or disposed of to the satisfaction of the Secretary. A further condition was that the DC4s were to be confined to the Bass Strait service. Subsequently arrangements were made by Air Express to purchase the DC4s from Qantas and they came into use by Air Express towards the end of 1977. In March 1978 a further application by Air Express for a permit to import three Carvairs was refused, the Minister stating that he was prepared to agree only to permits for two Carvairs to operate the Bass Strait service. (at p328)
27. As will be seen, the conclusion reached by Aickin J. turns partly on the state of the negotiations undertaken by Astling at the end of 1976 and in the beginning of 1977 with a view to the acquisition of two Carvairs. At the end of 1976 Astling approached British Air Ferries Ltd. ("BAF"). An arrangement entitled "Heads of Agreement" dated 8th December 1976 was made with BAF for the purchase of two Carvairs fitted with certain equipment for a price of 256,666 pounds stg. with delivery to be made by the end of January 1977. However, the list of equipment was not settled and the arrangement was subject to the proviso that it should lapse if a deposit of 32,000 pounds stg. was not paid within twenty-one days of 8th December 1976. No payment was in fact made within that time. (at p328)
28. At some stage in December 1976 Astling entered into discussions with Bill Patterson-Cheney Ltd. ("BPC"). On 29th December 1976 BPC made a payment of $5,000 to Astling which was expressed to be "deposit on contract". BPC's covering letter stated that the cheque for $5,000 was to be refunded in the event of negotiations for the purchase of an interest in the two companies not being finalized within two months. On 15th January 1977 BPC wrote to Astling setting out the terms and conditions on which it was prepared to enter into an arrangement for the acquisition of two companies. They required the formation of a holding company, Bill Patterson-Cheney Aviation Pty. Ltd., which would acquire all the share capital in Air Express and BBA. BPC was to take 60 per cent of the 50 cent shares in the holding company, to be fully paid with a par value of $168,000, and Astling was to take up 40 per cent with a par value of $112,000 but paid up to 11 cents. The 11 cents was deemed to be paid by "using $24,640 of the $25,000 lodged as a deposit for the purchase of the shares in Air Express and BBA". The balance was to be payable at any time within ten years subject to a minimum of 30 per cent of all dividends being applied in that way. Astling was to be appointed as Managing Director. BPC was to provide the holding company with the balance of $76,106 necessary to purchase the shares in Air Express and BBA and a loan of $150,000, repayment to be secured by charges over the assets of the companies. These arrangments were subject to written approval from the Department of Transport and the Customs Department for the immediate importation of the two Carvairs, finalization of purchase arrangements for the two aircraft and to completion of arrangements to replace existing securities granted to the A.N.Z. Bank, and to certain other arrangements. (at p329)
29. Mr. Gibson, the Finance Director of BPC, who, according to his Honour, "was an honest and truthful witness to the best of his recollection, and was careful in expressing his recollection", stated that Astling had objected to the requirement that BPC should have 60 per cent of the capital and had initially insisted on an equal division of capital. However, Gibson said that BPC would not accept a figure lower than 51 per cent. It is not clear on his evidence whether Astling had agreed to BPC having a 51 per cent interest. Aickin J. found it unnecessary to make a finding on this issue of fact because, as he said, "it is clear on any view that no final agreement had been reached and that there was no more than a proposed agreement still in the course of negotiation". His Honour observed that there were a number of matters still outstanding, "including the preparation of a satisfactory written contract and the finalisation of the position of the existing creditors, perhaps including the former shareholders". His Honour also noted that the manner in which the acquisition of the Carvairs was to be arranged had not been finalized. BPC had provided three quotations with respect to leasing but no decision had been made. The licences held by Air Express and BBA were still to be checked and a formal agreement had to be made before BPC would consider itself bound. (at p329)
30. Gibson stated in evidence that BPC ceased negotiations solely by reason of the injunction and the fact that Air Express was unable to bring the Carvairs into Australia. Negotiations with BAF for the purchase of the Carvairs were resumed after BPC expressed interest in the Proposal. On 17th February 1977 BPC in fact paid the balance of the deposit of 50,000 pounds stg. payable to BAF. (at p329)
31. The deposit required under the Heads of Agreement of 8th December 1976 was 32,000 pounds stg. The amount of the deposit was increased because in the meantime an additional Carvair had been ordered for BBA in the expectation that an import permit would be obtained for it. (at p330)
32. Aickin J. found that the negotiations with BPC had been broken off not later than 23rd February, prior to the giving of the undertaking as to damages to Air Express on 25th February. (at p330)
33. His Honour, returning to the question whether the import permit would
have issued had no injunction been granted, said:
"In my opinion it is probable that the Secretary would not have
pre-empted the decision of the Court in a situation in which
the breach
alleged to be involved in the grant of the permission would be one which
was not reversible because once in the country
the aircraft could be used
for interstate trade. Unless conditions were imposed on the importation of
the aircraft which would have
required their re-export if it turned out
that Ansett's claim was right, there would be no way in which the
Commonwealth could have
restored the situation to that which prevailed
immediately prior to the commencement of the proceedings. If that had been
proposed,
it would be very unlikely that the aircraft would have been
imported because finance would not have been available on that basis.
Although it is perhaps going too far to use the word 'inconceivable', as
did Myers C.J., I consider that it is probable that the
defendant Halton
would not have issued the written permission while the litigation was
continuing." (at p330)
34. His Honour based his conclusion upon the substantial probability that
neither the Minister nor the Secretary would seek to pre-empt
the decision of
the Court and subject the Commonwealth to the risk of a substantial claim for
damages. (at p330)
35. Aickin J. then came back to the contract under negotiation with BPC. He
observed that it was not a contract to which Air Express
would have been a
party and that it would not directly affect Air Express. After referring to
Air Express's need for working capital,
for finance with which to acquire the
aircraft, his Honour said:
"These matters were all subject to a variety of contingencies which made
it by no means certain that the aircraft would in
fact become available,
although it may be said that it was more likely than not that the outstanding
problems would be solved and
satisfactory arrangements made for hiring
aircraft. BPC's estimate of what its commitment would have been was
approximately
$1 million, being $405,000 according to the Proposal and
some $560,000 for leasing charges or purchase of the aircraft. There is
no
doubt that all the facts would have been most carefully checked before any
agreement was entered into." (at p330)
36. His Honour went on to say:
"These considerations also lead to the conclusion that it was not the
continuance of the injunction which brought about such
damage as Air
Express may have suffered but was the litigation itself." (at p331)
37. From what I have already said it will be seen that Aickin J. advanced two
grounds for his conclusion that the damage was caused,
not by the injunction
but by the litigation: (1) that the Minister and the Secretary to the
Department would have refused to issue
the written permission to import the
aircraft had the injunction not been granted; and (2) that the negotiations
between Astling
and BPC, which were subject to a number of contingencies, had
been broken off not later than 23rd February. As I understand his Honour's
judgment, he was saying that had the litigation and the injunction not
supervened, the likelihood was that outstanding difficulties
would have been
overcome and satisfactory arrangements would have been made for the hiring of
the aircraft. By implication his Honour
was also saying that the grant of the
injunction did not cause the breaking off of the negotiations. They were
terminated by reason
of the litigation. By linking this factor to his
conclusion, his Honour indicated that the termination of the negotiations was
also
a detriment due to the litigation. (at p331)
38. It is important to a proper understanding of the first ground to appreciate that his Honour was not denying that the immediate reason for the non-issue of the written permission was the grant of the injunction. His Honour was saying that although the original defendants obeyed the injunction by not issuing the permission, the injunction was not the effective or operative cause, for the reason that, even if there had been no injunction, they would have taken the same course. This finding was not based on evidence given by Halton. He was not called as a witness. The finding was made by reference to considerations which might have influenced Halton to make a decision one way or the other on the hypothesis that no injunction was granted. (at p331)
39. An examination of the question must begin with the fact that on 16th February 1977 the Minister wrote to Astling stating that the Secretary would issue an import permit on receipt of the necessary assurances. On 17th February the Secretary wrote to the like effect and the Minister announced in Parliament that a written permission to import two Carvairs would be granted. There is an irresistible inference that the subsequent non-issue of the written permission was due to a fresh decision on the part of the Secretary, whether acting on his own motion or at the instigation of the Minister or of the Government. In the absence of any other evidence there was a compelling inference that the fresh decision was taken in response to the grant of the injunction. Two events supervened after the Minister's announcement. One was the commencement of the litigation, the other was the grant of the injunction. The commencement of the litigation did not prohibit the issue of the permission to import. The injunction did. It was therefore to be inferred that the decision to refrain from issuing the permission was taken in obedience to the injunction. (at p332)
40. But is it enough for Air Express to show that the decision not to issue the written permission to import the two Carvairs was taken by way of response, or in obedience, to the injunction? Air Express must show that it has sustained damage "by reason of" the injunction. Air Express bears the onus of showing the necessary causal connexion in the sense already explained between the damage and the injunction, that is, that the damage would not have been sustained but for the injunction. The crucial question is whether by establishing the sequence of events it has done enough to discharge that onus by making out a prima facie case. (at p332)
41. Unless the circumstances indicate otherwise, when it appears that damage flows from the non-performance of an act and the performance of that act has been restrained by an interim injunction, the inference will generally be drawn that the damage has been occasioned by the injunction. That, I think, is the conclusion which I would draw here if the non-issue of the import permit was all that was in question. On the view which I take of the evidence, the circumstances do not indicate that the non-issue of the permit was caused by the litigation. Ansett might have made out countervailing circumstances by proving that it was Government policy to leave the question to the Court once proposed Government action is challenged in legal proceedings, or perhaps by calling Halton to give evidence of what he would have done had the injunction not been granted. Ansett took neither of these courses. Instead, it invited the primary judge to speculate on what would have occurred had no injunction been granted. I use the word "speculate" advisedly because, as it seems to me, it is mere conjecture to attempt to identify the factors which the Secretary would have regarded as relevant to the making of a decision and to assess the weight or force which he would have attached to the factors which he considered relevant in the absence of any evidence from him. (at p332)
42. Had he applied his mind to the hypothetical question whether to proceed with the issue of the written permission on the assumption that proceedings had been commenced by Ansett but no interlocutory injunction had been granted, he would have encountered a number of competing considerations. On the one hand, he would not have wished to pre-empt a decision by the Court, more particularly when importation of the aircraft would have put it beyond the capacity of the Commonwealth to deny authority to Air Express to use the aircraft in interstate air navigation in accordance with the conditions of the permission to import. On the other hand, in the absence of an injunction, the Secretary was entitled to grant the permission. He was free to do so, subject to the risk that if his action constituted a breach of contract, he thereby subjected the Commonwealth to liability for damages to Ansett. Whether he was prepared to take that risk depended on several factors of which there is no evidence. They include the nature of the legal advice which he received and the importance which he and the Minister (or perhaps the Government) attached to the provision of additional air freight services between the mainland and Tasmania. But one thing we do know is that the Secretary and the Minister (possibly with Cabinet approval, because it is a question which, having regard to its importance, one would expect to be taken to Cabinet) had already decided to embark on a course which would expose the Commonwealth to liability in damages in the event that this Court subsequently held that the proposed action constituted a breach of the "Two Airlines Agreement". It can scarcely be supposed that they had not taken into account the possibility, indeed the probability, that Ansett would commence proceedings. It is almost inevitable that they had decided to proceed upon the announced course with this eventuality in mind. It is inconceivable that the decision taken on 16th February or earlier was taken without legal advice. (at p333)
43. When all these matters are taken into account I do not find it "inconceivable", to use the word favoured by Myers C.J. in the Newman Bros. Case (1935)NZLR Suppl 17, at p 18 , that the Secretary might proceed to issue the written permission to import in the absence of an injunction. I regard Myers C.J.'s observations, not as the enunciation of a general principle, but as the expression of his reaction to a particular factual situation which is very different from the instant case. (at p333)
44. Ansett sought to highlight the point by saying that the question should be considered on the footing that there was no entitlement to issue an import permit until the regulations were amended on 1st March and that the issue was: Would the Secretary have granted the permit on the eve of the Court commencing the hearing of the demurrer which was to dispose of the substantial question in the case? I do not find this way of expressing the question more favourable to Ansett. It seems to me to invite the likely response from the Secretary, "Unless restrained by injunction I shall carry into effect the decision already made. I shall grant permission to import the two Carvairs on the conditions stated and on receipt of the necessary assurances." (at p334)
45. However, my preferred view is that the materials to which I have referred, regarded as a foundation for predicting the likely response of the Secretary and the Minister, give rise to speculation and not to legitimate inference. In the result, without the benefit of evidence from the Secretary and perhaps from the Minister, we are left to speculate as to the decision which the Secretary would have made, had no injunction been granted. (at p334)
46. There remains to be considered the effect of the breaking off of the negotiations with BPC and his Honour's finding that it was likely that outstanding problems would be solved and satisfactory arrangements made for hiring aircraft. It seems to me that in making this finding his Honour was postulating a continuation of the negotiations on the footing that there was no litigation and no injunction. On this hypothesis the finding is consistent with his Honour's ultimate conclusion that the termination of the negotiations and inability to obtain finance for the acquisition of the aircraft were attributable to the litigation, not to the injunction. (at p334)
47. The principal obstacle barring the way to an acceptance of this
conclusion is the evidence of Gibson, which was not rejected
by his Honour.
Gibson, who was called by Air Express, said in cross-examination:
"The fact that we ceased negotiations was purely because of the
injunction and the fact that Air Express was unable to bring
the Carvairs into
the country."
Later, his evidence continued in this way:intention as to whether it was going to acquire an interest in Air Express Limited? --- Certainly, yes; we had a directors' meeting on 20th January at which it was decided that the letter of offer would be made to Mr. Astling, and the letter was subsequently sent on 25th January. So we certainly had agreed at that stage, as a board, that we would proceed. The only point subject to negotiation after that time was what the equity interest would be.
"MR. BARNARD: Prior to 22nd February, had the board expressed any
And you say that point was resolved by oral agreement? --- Yes.board to change that intention? --- The granting of the injunction preventing the Carvairs to be brought into the country.
At the time - on 23rd February 1977, what were the factors which led the
48. It was not suggested to him in cross-examination that BPC would have
terminated or suspended the negotiations if no injunction
had been granted.
Counsel for Ansett was more intent on putting to Gibson circumstances which
might lead to the conclusion that the
negotiations were far from complete and
that they were unlikely to result in a firm contract. However, Gibson
repudiated these suggestions
and his repudiation was accepted by Aickin J. It
is impossible to go behind the finding that the difficulties would be
overcome,
an arrangement made and the aircraft procured, because it is a
finding based on the evidence of a witness whose testimony was accepted.
(at
p335)
49. In all this I find no secure footing for drawing an inference that the failure of the negotiations was caused by litigation, not by the injunction. (at p335)
50. In the result I am unable to accept the basis on which the primary judge held that Air Express suffered no damage by reason of the injunction. (at p335)
ORDER
Appeal dismissed with costs.
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