Air Tahiti Nui Pty Limited v McKenzie [2009] NSWCA 429 (21 December 2009)

Last Updated: 9 February 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Air Tahiti Nui Pty Limited v McKenzie [2009] NSWCA 429


FILE NUMBER(S):
40144/09

HEARING DATE(S):
8 October 2009

JUDGMENT DATE:
21 December 2009

PARTIES:
Air Tahiti Nui Pty Limited
Robert James McKenzie
Diana May McKenzie

JUDGMENT OF:
Allsop P Hodgson JA Handley AJA

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
384/2007

LOWER COURT JUDICIAL OFFICER:
Toner DCJ

LOWER COURT DATE OF DECISION:
13 February 2009


COUNSEL:
Mr M J Leeming SC, Mr C H Withers (Appellant)
Mr R Tapperell (Respondent)

SOLICITORS:
Norton White Lawyers (Appellant)
Cantle Carmichael Lawyers (Respondent)

CATCHWORDS:
AIR LAW – personal injury of passenger – proper defendant – Civil Aviation (Carriers’ Liability) Act 1959 (Cth) - Montreal Convention No 4 – Guadalajara Convention – identity of contracting carrier – French parent company actual carrier – whether Australian subsidiary made an agreement for carriage as principal – Australian company liable as contracting carrier
ESTOPPEL – estoppel by representation – whether claims under Civil Aviation (Carriers’ Liability) Act are subject to the law of estoppel – contract formation governed by domestic law – estopped by representation from denying entry into agreement for carriage
Civil Aviation (Carriers’ Liability) Act 1959 (Cth)

LEGISLATION CITED:
Air Navigation Act 1920 (Cth)
Business Names Act 1962 (NSW)
Civil Aviation Act 1988 (Cth)
Civil Aviation (Carriers' Liability) Act 1959 (Cth)
Judiciary Act 1903 (Cth)

CATEGORY:
Principal judgment

CASES CITED:
Air Link Pty v Paterson [2005] HCA 39; 223 CLR 283
Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84
ANZ Bank Ltd v Ateliers de Constructions Electriques de Charleroi [1967] 1 AC 86
Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170
Best v BWIA West Indies Airways Limited 581 F Supp 2d 359 (2008)
Commonwealth of Australia v Verwayen [1990] HCA 39; 170 CLR 394
Coulls v Bagot's Executor and Trustee Co Ltd [1967] HCA 3; 119 CLR 460
Craine v The Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; 28 CLR 305
Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31
Franklins Pty Ltd v Metcash Trading Pty Ltd [2009] NSWCA 407
Formosa v Secretary, Department of Social Security [1988] FCA 291; 46 FCR 117
Freeman v Cooke [1848] EngR 506; (1848) 2 Ex 654; 154 ER 652
Gulf Air Company GSC v Fattouh [2008] NSWCA 225; 251 ALR 183
In re West Caribbean Airways SA 619 F Supp 2d 12 (2007)
London Joint Stock Bank v Macmillan [1918] AC 777
Macrobertson Miller Airline Services v Commissioner of State Taxation (WA) [1975] HCA 55; 133 CLR 125
Minister for Immigration and Ethnic Affairs v Polat [1995] FCA 1204; 57 FCR 98
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451
Protean (Holdings) Ltd v American Home Assurance Co (1985) 4 ANZ Insurance Cases 60-683
Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 Ind App 203
Taylor v Johnson [1983] HCA 5; 151 CLR 422
The Henrik Sif [1982] 1 Lloyds Rep 456
The Stolt Loyalty [1993] 2 Lloyds Rep 281
The Starsin [2003] UKHL 12; [2004] 1 AC 715
The Starsin [2001] EWCA Civ 56; [2001] 1 Lloyds Rep 437
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387
Wang v The Minister for Immigration [1997] FCA 70; 71 FCR 386

TEXTS CITED:
Montreal No 4 Convention
Guadalajara Convention
Warsaw Convention
Shawcross and Beaumont Air Law (Lexis Nexis)
RH Mankiewciz "The Liability Regime of the International Air Carrier" (Kluwer 1981)
Wilford et al "Time Charters" (5th Ed Informa Publishing 2003) Ch 21

DECISION:
Appeal dismissed with costs.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40144/09

ALLSOP P

HODGSON JA

HANDLEY AJA

Monday 21 December 2009

AIR TAHITI NUI PTY LIMITED v McKENZIE

Headnote

The respondents (plaintiffs below) were injured on an Air Tahiti Nui flight from New York to Tahiti. They filed a statement of claim under the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) naming the appellants, the Australian company Air Tahiti Nui Pty Limited as defendant. The appellant denied liability on the basis that it was not the carrier, claiming that the carrier was its parent company, Air Tahiti Societe Anonyme (“ATSA”) and therefore that the plaintiffs had sued the wrong company. The two year limitation period expired four days after the claim was filed and cannot be extended.

The question of whether the appellant was liable under the Civil Aviation (Carriers’ Liability) Act and if not, whether it was estopped from denying its liability were determined at trial by separate questions. The primary judge answered yes to the question of liability under the Act and although it did not strictly arise, also found an estoppel. The appellants appeal from that decision.

Held, dismissing the appeal
Allsop P and Handley AJA (Hodgson JA agreeing):

1. The appellant is liable as “contracting carrier”, as defined in the Montreal No 4 and Guadalajara Conventions and incorporated into Australian law under Civil Aviation (Carriers’ Liability) Act because it was the person who as principal made an “agreement for carriage”:

a. ATSA was the “actual carrier” however under Guadalajara Convention both the “actual carrier” and “contracting carrier” are subject to the Warsaw and Montreal Conventions and the acts and omissions of both carriers bind each other: [11]- [17].

b. The identity of a contracting party who made the “agreement for carriage” is to be determined objectively, examining and construing any relevant documents in the factual matrix in which they were created: [27].

c. In this case the contractual arrangements for carriage were made with the plaintiffs by a travel agent on behalf of the appellant as principal: [54].

2. If the appellant is not the contracting carrier by the rules governing formation of contract, nevertheless it is estopped from denying that position by its representations and those of its solicitors:

a. The formation of contract for the purposes of the definition of “contracting carrier” in the Guadalajara Convention is governed by the domestic law in the relevant jurisdiction, in this case Australian domestic law: [62].

b. Estoppel by representation is one of the methods of contract formation in Australian domestic law and therefore the plaintiffs can rely on estoppel by representation based on the appellant’s conduct so that they are estopped from denying liability: [65] -[66].

c. In the time from the accident to the filing of the statement of claim the appellant and its solicitors represented by their conduct that the appellant was the appropriate defendant that might be liable to the defendant: [83] – [98].

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40144/09

ALLSOP P

HODGSON JA

HANDLEY AJA

Monday 21 December 2009

AIR TAHITI NUI PTY LIMITED v McKENZIE

Judgment

1 ALLSOP P and HANDLEY AJA:

Introduction

2 On 15 November 2007, Mr Robert McKenzie and his wife Ms Diana Harsh (the plaintiffs) filed a statement of claim in the District Court naming the appellant, Air Tahiti Nui Pty Limited, an Australian company, as the sole defendant in a claim for injuries said to have been suffered by them on 19 November 2005 on an Air Tahiti Nui flight from New York to Papeete.

3 The action was brought under the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) (“the Act”) and thus in federal jurisdiction: Judiciary Act 1903 (Cth), s 39(2).

4 The appeal, brought by leave granted on 3 September 2009, challenged the answers given by the primary judge (Toner DCJ) to these separate questions:

“(a) Is the defendant the ‘carrier’ made liable pursuant to the Convention and the Act; and

(b) If the answer to question (a) is No, is the defendant estopped from denying its liability.”

5 The primary judge answered the first question: yes, and although it strictly did not arise, he also found an estoppel. Consequential orders were made striking out crucial parts of the defence.

6 The action has since gone to trial and the plaintiffs recovered judgment. The appellant challenged the answers and the consequential orders and sought an order dismissing the action.

7 The separate questions arose because the appellant claimed that it was not the carrier and therefore the plaintiffs had sued the wrong company. The two year limitation period expired four days after the statement of claim was filed and it cannot be extended. The appellant said that its parent, Air Tahiti Société Anonyme (“ATSA”), was the only carrier.

8 The plaintiffs’ case was that the appellant was the carrier or was estopped from denying that fact by its conduct and that of its solicitors.

The relevant statutory framework

9 It was common ground that the carriage was subject to the Montreal No 4 (Montreal) and Guadalajara Conventions (Guadalajara) as defined in the Act, s 5(1). Section 25K gave the force of law to Montreal, and s 25A gave the force of law to Guadalajara. Section 25B relevantly provided that references in Part IIIC of the Act to “the Convention” (which would otherwise be to Montreal) were also to Guadalajara.

10 Guadalajara resolved a difficulty in the Warsaw Convention (Warsaw) as to whether the carrier was the person who contracted to perform the carriage or, if different, the person who actually performed it. There was also uncertainty about the application of Warsaw to servants, agents and independent contractors involved in the performance of the contract of carriage. This threw up the difference between the common law and civil law notions of responsibility, vicarious liability and the reach of the préposé in civil law: see generally Shawcross and Beaumont Air Law (Lexis Nexis) at [181]-[182]; R H Mankiewicz The Liability Regime of the International Air Carrier (Kluwer 1981) at 37-50.

11 Guadalajara recognised that there could be both a “contracting carrier” and an “actual carrier” defined in Art I(b) and (c) as follows:

“(b) ‘contracting carrier’ means a person who as a principal makes an agreement for carriage governed by the Warsaw Convention with a passenger or consignor or with a person acting on behalf of the passenger or consignor;

(c) ‘actual carrier’ means a person, other than the contracting carrier, who, by virtue of authority from the contracting carrier, performs the whole or part of the carriage contemplated in paragraph (b) but who is not with respect to such part a successive carrier within the meaning of ... Warsaw. Such authority is presumed in the absence of proof to the contrary.”

12 Article II of Guadalajara provides that the contracting and actual carriers are both subject to Warsaw (under Art XXIII of Montreal this is a reference to Montreal), the contracting carrier for the agreed carriage and the actual carrier for the carriage performed by it.

13 Article III of Guadalajara provides that the acts and omissions of the contracting and actual carriers and their servants and agents bind both carriers.

14 Article 17 of Montreal provides:

“The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.”

15 This article covers the contracting and actual carriers.

16 Article 24.1 of Montreal protects carriers from actions for damages except those brought under the Convention:

“In the carriage of passengers and baggage, any action for damages, however founded, can only be brought subject to the conditions and limits set out in this Convention, without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights.”

17 Article 25A of Montreal extends the protections of a carrier to its servants and agents.

Relevant questions arising out of this statutory framework

18 The separate questions must be determined within this framework of Commonwealth law. Unfortunately the primary judge was not taken to Guadalajara and much of his reasoning is therefore irrelevant.

19 The first question is whether the appellant was the “contracting carrier”, because the actual carriage was undertaken by “ATSA”, a French Polynesian company.

20 Much of the argument turned on the definition of contracting carrier in Art I(b) of Guadalajara (see [11] above). The appellant argued that, even if it was a party to a contract with the plaintiffs, it did not contract “as a principal” within the definition because its only obligation was to procure performance by ATSA as the actual carrier. It was said that ATSA was the undisclosed principal, and the appellant therefore was not “a principal”.

21 We reject these submissions. The phrase “as a principal” describes the capacity of a person who “makes an agreement for carriage”. An agent who “makes” such an agreement, such as a travel agent, is not a contracting carrier. This is made clear in the travaux préparatoires in the minutes of the International Conference on Private Air Law in August-September 1961 before Guadalajara. These record the contribution of a United Kingdom delegate (Mr Richard Wilberforce QC, as his Lordship then was):

“... the United Kingdom Delegation would propose to add to paragraph (b) of Article I, after the English word ‘whom’, the words ‘as principal’. These words had been in the draft of this article at one stage, but had been removed, largely for drafting reasons he thought, because of difficulty in translating by the Legal Committee at Montreal.

It was very important to restore these words. The present draft of the article made a contracting carrier a person who contracted either as agent or a person on whose behalf as principal a contract was made, a party by whom an agreement for carriage was made and a party on behalf of whom an agreement for carriage was made. It was important to exclude from Article I cases in which the person entering into the agreement for carriage was only an agent for another person. It was important to exclude from the definition of the expression ‘contracting carrier’ the travel agent or booking agent. The air freight forwarder might in some cases be a contracting carrier. He believed that he was so in the United Kingdom. He was a principal; he was a carrier; he engaged to carry, and, therefore, that person was and should be treated as a contracting carrier. But in other cases, and in most cases in the United Kingdom, the air freight forwarder was not a principal. He was simply an agent; he contracted as agent for the operator who ultimately was going to carry the goods. Where he was an agent he should not be treated as a contracting carrier and be brought within the Warsaw rule as to contracting carriers. Hence, the insertion of the words ‘as principal’ was legally correct.”

22 Travel and transport intermediaries may procure a contract of carriage as a broker or agent; or may undertake a contractual obligation for carriage. In the former case they are not a principal, but in the latter they are, even if they cannot perform the contract themselves but have to subcontract with an actual carrier. The phrase in Art I(b) is “agreement for carriage”, not “agreement of carriage”: cf The Starsin [2003] UKHL 12; [2004] 1 AC 715 at 770 [132] (per Lord Hobhouse).

23 The appellant relied on In re West Caribbean Airways SA 619 F Supp 2d 1297 (2007) and Best v BWIA West Indies Airways Limited 581 F Supp 2d 359 (2008), but these cases do not support its argument.

24 If the appellant, a company without planes, entered into an agreement for carriage it does not follow that it acted as an agent. It may only mean that its obligations had to be performed by ATSA as the actual carrier.

25 The appellant also submitted that it could not be the “contracting carrier” because it did not have “authority” to require ATSA to undertake the carriage. The words “who by virtue of authority from the contracting carrier performs the whole or part of the carriage” appear in the definition of “actual carrier” but it was submitted that the two definitions should be read together. We do not accept these submissions. If there is a contracting carrier the authority of the actual carrier, that is from the contracting carrier, is presumed in the absence of proof to the contrary. The appellant could still be the contracting carrier although its parent was the actual carrier. It conferred the necessary authority on the parent by issuing the tickets which the parent honoured.

Did the appellant make an agreement for carriage as a principal with the plaintiffs?

26 The primary judge said, “yes”. We agree, though for somewhat different reasons.

27 It was common ground that contracts were formed when the tickets were issued and paid for and the appellant did not argue that there was no contract until the plaintiffs first boarded an Air Tahiti Nui aircraft: cf Macrobertson Miller Airline Services v Commissioner of State Taxation (WA) [1975] HCA 55; 133 CLR 125; and Gulf Air Company GSC v Fattouh [2008] NSWCA 225; 251 ALR 183 at 201-205 [79]- [103].

28 The identity of the contracting party is to be determined looking at the matter objectively, examining and construing any relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract. This is, to a point, a process of construction similar to the task of identifying whether a clearly contractual document (such as a bill of lading) is made with one party or another (such as a shipowner or time charterer): The Starsin at 770 and the cases considered in Wilford et al Time Charters (5^th Ed Informa Publishing 2003) Ch 21. Where the documents are silent or ambiguous, but there is undoubtedly a contract, the identity of the parties must be determined objectively from the surrounding circumstances: see Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170 at 174; Protean (Holdings) Ltd v American Home Assurance Co (1985) 4 ANZ Ins Cas 60-683 at 74,055–74,056; Coulls v Bagot’s Executor and Trustee Co Ltd [1967] HCA 3; 119 CLR 460 at 477 at 478-479 and 486.

29 The appeal was argued on the basis that either ATSA or the appellant was the “contracting party”. There could, however, be two contracting carriers: see the discussion by Rix LJ in The Starsin [2001] EWCA Civ 56; [2001] 1 Lloyds Rep 437 at 451-452 [70]- [76].

30 There is no doubt that ATSA was the actual carrier as defined in Guadalajara (see [11] above). It and not the appellant operated the aircraft and employed the flight crew. It and not the appellant was a member of the International Air Transport Association (IATA) with the latter’s designation “TN” and prefix code 244 (Blue 194-7, 187). It and not the appellant held the Air operator’s Certificate under the Civil Aviation Act 1988 (Cth) (Blue 40), and the International Airline Licence under the Air Navigation Act 1920 (Cth) (Blue 42).

31 Mr Leeming SC, for the appellant, relied on these matters, but while they unambiguously identified the actual carrier, they throw little light on the identity of the contracting carrier. There was no evidence that those facts, or the significance of the references on the tickets to TN and 244 were known, or should have been known to the plaintiffs.

32 To identify the contracting carrier the Court must focus on the actual contract with the plaintiffs.

33 ATSA had no presence in Australia. It had no office, staff or bank account here (Black 114-5). The appellant was responsible for sales, marketing and administration in Australia, and was registered under the Business Names Act 1962 (NSW) as "Air Tahiti Nui". Thus references in documents issued within Australia to Air Tahiti Nui are inherently ambiguous.

34 The plaintiffs paid Flight Centre for their Air Tahiti Nui tickets on 27 August 2005 (Blue 48) with a deposit for the rest of their travel (Blue 50) and paid the balance sometime after 19 September 2005 (Blue 48, 50). Their tickets were issued by "Air Tahiti Nui" (Blue 2) for travel Sydney -- New York -- Papeete -- Sydney.

35 Flight Centre’s Tax Invoice/Receipt dated 19 September 2005 included the cost of "Return airfare flying AIR TAHITI NUI" (Blue 48). Its booking terms and conditions" on the reverse (Blue 49) included, adjacent to the heading “Agency” underlined and in bold the following:

“Flight Centre Limited acts as a travel agent only. We sell various travel related products on behalf of numerous transport, accommodation and other wholesale service providers, such as airlines, ... Flight Centre Limited’s obligation is to make travel bookings on your behalf and to arrange relevant contracts between you and travel service providers. ... Your legal recourse is against the specific provider and not Flight Centre Limited. ...”

36 Mr Leeming SC placed some emphasis on this provision and submitted that the plaintiffs would expect to obtain contracts with the actual carrier.

37 While there is force in that submission, Flight Centre was an agent arranging contracts for air travel pursuant to authorities from various “transport ... service providers”; a service provider can provide the service through others.

38 The actual authority on which Flight Centre acted when it issued the tickets was that conferred by an agreement dated 27 June 2005 between Flight Centre Limited and the appellant which recited under the heading “Background”:

“This Agreement is intended to establish a commercial framework under which detailed cooperative day to day sales & marketing activities between Flight Centre Limited and TN can be negotiated and agreed.”

39 The agreement was between “Air Tahiti Nui Pty Ltd” (with its ABN number) and Flight Centre Limited (with its ABN number) and in it “TN” was the appellant (Black 116).

40 The agreement covered the period for 27 June 2005 to 31 December 2006 (Blue 138-151). Clauses 2-5 made detailed provision for the payment of commission and sales targets based on “TN international net availed flight revenues generated by Flight Centre ... on international flights operated by TN” (cl 2). “Availed Revenue” as defined was based on “[a]vailed coupons [tickets] issued for flights ... operated by the Carrier” which, in the agreement, was the appellant (cl 2).

41 The appellant agreed to pay Flight Centre monthly an incentive commission of two per cent (cl 4) and an additional introductory incentive commission of one per cent for the first six months (cl 4). Clause 5 provided for an additional targeted incentive commission if particular sales targets were met. Clause 7 gave Flight Centre a conditional right to 35 free tickets for Sydney to Tahiti to be used for promotional purposes.

42 This was the entire agreement between the parties (cl 10), and there was no mention of ATSA.

43 The agreement gave Flight Centre authority to act on behalf of the appellant and issue tickets on forms provided by it for "TN operated services". Flight Centre had authority to bind the appellant for air travel with Air Tahiti Nui but there was no evidence of any authority from ATSA. It was entitled to commission on its ticket sales from the appellant (cll 4 and 5, Blue 140). The agreement said nothing about Flight Centre's accounting for ticket sales and it may be inferred that this was covered by its arrangements with IATA.

44 Mr Lee, the sole director of the appellant, said in evidence (Black 107) that the commission was paid by ATSA but he did not say how payment was made, and did not say that payment was made from Papeete. ATSA did not have a bank account in Australia.

45 Mr Lee believed that the funds in the appellant’s bank account in Sydney were "owned by" ATSA (Blue 188-9, Black 114). The Billing and Settlement Plan (ie clearing house) operated by IATA received payments for air travel from its accredited travel agents and accounted to the airlines concerned. Payments for travel on Air Tahiti Nui were made to the appellant and were deposited in its Australian bank account.

46 The appellant had an operating budget which had been approved by ATSA and it used funds in its account to meet its budgeted and other expenses approved by ATSA (Black 114-5). Mr Lee said: "[T]he cost of running the Australian operation comes out of that fund" (Black 115).

47 Since the appellant was entitled to use funds in its bank account to meet its budgeted and other approved expenses it received the payments from IATA as agent subject to a liability to account, and not as trustee with an obligation to hold the funds in specie: see generally ANZ Bank Ltd v Ateliers de Constructions Electriques de Charleroi [1967] 1 AC 86 at 113-4.

48 The appellant was therefore the owner of the funds in its bank account. Payments of commission to travel agents must have been included in its approved budget. It follows, despite Mr Lee's belief to the contrary, that commission payments were made by the appellant to Flight Centre from its own funds in its bank account, to be reflected in due course in its accounting to ATSA in Papeete. In any event the appellant had the legal obligation to make these payments to Flight Centre under the agreement.

49 The terms of the ticket are ambiguous and do not clearly identify the contracting carrier. The conditions on the back include cl 4 which reads:

“Carrier’s name may be abbreviated in the ticket, the full name and its abbreviation being set forth in carrier’s tariffs, conditions of carriage, regulations or timetables; carrier’s address shall be the airport of departure shown opposite the first abbreviation of carrier’s name on the ticket; the agreed stopping places are those set forth in this ticket or as shown in carrier’s timetables as scheduled stopping places on the passenger’s route; carriage to be performed hereunder by several successive carrier’s is regarded as a single operation.”

50 The airport of departure opposite the first abbreviation of the carrier’s name was Sydney, but ATSA had no address in Sydney.

51 The Carrier’s tariffs, conditions of carriage, regulations and timetables were not in evidence.

52 ATSA did not have a continuing presence in this country and this must reflect a deliberate decision on its part. Its reasons are not known but an international air carrier could have commercial and fiscal reasons for not subjecting itself to the general laws of every jurisdiction serviced by its aircraft.

53 If ATSA wished to ensure that clients of Flight Centre travelled on its aircraft pursuant to contracts with itself this could have been made clear in the agreement with Flight Centre. On the face of that “entire agreement” Flight Centre’s only authority to issue Air Tahiti Nui tickets came from the appellant.

54 In our view, the contractual arrangements for carriage were made with the plaintiffs by Flight Centre on behalf of the appellant as principal.

55 There was no specific evidence that the appellant contracted with Flight Centre as agent for ATSA as its undisclosed principal, and the terms of the agreement appear to exclude proof of such agency.

56 Even if there had been such evidence the plaintiffs and Flight Centre were not bound to treat the appellant as an agent, but were entitled to treat it as the principal, liable as such on its contracts: Bowstead & Reynolds on Agency (17^th ed Sweet & Maxwell 2001) at para 9-012.

57 This makes it unnecessary for us to deal with the approach of the primary judge who followed some United States cases which are not relevant to the Act. On orthodox contractual principles the appellant contracted as a principal and was the contracting carrier within Montreal and Guadalajara.

58 This also makes it unnecessary for us to deal with the question of estoppel. However, the point was fully argued and we will deal with it in case we are wrong on the contract question.

The availability of estoppel

59 The appellant argued that there could be no estoppel in the face of the Act and that the class of carriers liable under the Act and the Conventions could not be enlarged in that way.

60 It is clear that there is no scope in Australian law for damages claims outside the provisions of Montreal and Guadalajara: Air Link Pty Limited v Paterson [2005] HCA 39; 223 CLR 283 at 295-296 [13]. This federal controversy must be determined under the Act.

61 The appellant cited Wang v Minister for Immigration and Multicultural Affairs [1997] FCA 70; 71 FCR 386 at 392; Formosa v Secretary, Department of Social Security [1988] FCA 291; 46 FCR 117 at 124-125 and Minister for Immigration and Ethnic Affairs v Polat [1995] FCA 1204; 57 FCR 98 at 105. These cases applied the principle that a court of limited jurisdiction cannot acquire additional jurisdiction by estoppel.

62 The principle is not in point. Guadalajara defines “contracting carrier” as a principal who makes an agreement for carriage. This leaves contract formation to be governed by the domestic law (including private international law) of the High Contracting Party in the relevant jurisdiction, here the proper law of the agreement, by the domestic law of Australia.

63 The domestic rules governing the formation of contracts cannot be divorced from the law of estoppel. The High Court has endorsed the objective theory of contract which means, as the plurality said in Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 428, that:

"... the law is concerned, not with the real intentions of the parties, but with the outward manifestations of those intentions. In practice, as between the contracting parties, there is little difference in the result of the application of the two competing theories since allied within any assertion of the ‘subjective theory’ is acceptance of one manifestation of the doctrine of estoppel which would ordinarily operate to preclude one who had so conducted himself that a reasonable man would believe that he was assenting to the terms of the proposed contract, from leading evidence as to what his real intentions were."

See also Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at 461-462 and Franklins Pty Ltd v Metcash Trading Pty Ltd [2009] NSWCA 407 at [4]- [5], [42]-[43], [50], [58] and [63].

64 This is traceable to the famous statement of principle by Parke B in Freeman v Cooke (1848) 2 Ex 654 at 663; [1848] EngR 506; 154 ER 652 at 656.

65 An estoppel by representation is one of the methods of contract formation under our law whether it operates before the contract is made, or retrospectively to prevent the representor denying that it is a party to an existing contract. An estoppel by representation affects the rights of the parties indirectly by changing the facts. Viscount Haldane said in London Joint Stock Bank v Macmillan [1918] AC 777 at 818 that estoppel "is [not] a rule ... of substantive law in the sense of declaring an immediate right or claim". Robert Goff J said in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 105 that "estoppel is not, as a contract is, a source of legal obligation." In Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 at 415 Brennan J said:

"If the estoppel relates to the existence of a contract between the parties, the legal relationship ... is ascertained by reference to the terms of the contract which has been assumed to exist ... The source of legal obligation ... is the assumed contract; the estoppel is not a source of legal obligation except in the sense that [it] compels the party bound to adhere to the assumption that the contract exists."

66 We conclude therefore that the plaintiffs can rely on an estoppel by representation to establish that the appellant was estopped by its conduct, after the plaintiffs returned to Australia, from denying that it had entered into an agreement for carriage with them.

Was an estoppel by representation established?

67 The primary judge set out in detail the correspondence from the plaintiffs’ solicitors from their first letter of 22 December 2005 to the General Manager Air Tahiti Nui Sydney. He also referred to the notice of motion for preliminary discovery by the appellant, identified as "the Prospective Defendant" (Red 1), filed by the plaintiffs on 14 May 2007 and served at the appellant’s registered address (Blue 130). The affidavit by the plaintiffs’ solicitor in support of the motion said that they were injured on 19 November 2005 "on the Prospective Defendant’s aircraft". The appellant’s solicitors entered an appearance on its behalf (Black 82-4) as "the Prospective Defendant", and filed an affidavit in opposition in which the appellant was described as the prospective defendant and the deponent said he was employed by the solicitors for the prospective defendant (Blue 23).

68 A Registrar made the order for discovery on 6 June 2007 over the opposition of the appellant. It did not take the point that the documents sought were held by ATSA in Tahiti and were not in its possession or power. The affidavit of preliminary discovery by the appellant, again described as "the Prospective Defendant", was filed on 2 August 2007 (Blue 25). It stated that the documents listed, most of which related to the flight on 19 November 2005, and came from ATSA in Papeete, were within the possession of “the Prospective Defendant”.

69 The primary judge set out at some length the evidence of the solicitor handling the matter for the appellant.

70 The initial correspondence was with the general manager of the appellant but after 8 January 2007 the correspondence continued between the solicitors.

71 On 25 May 2007 the plaintiffs’ solicitor wrote to the appellant’s solicitor noting that although the plaintiffs did not have to prove negligence "there are potentially a number of defences that may be available to your client", and that one of the purposes of the motion was to determine "the likelihood of the defendant being able to invoke a defence". He concluded by asking "what the basis for any defence may be".

72 As the primary judge at [88] of his reasons said this request "seems to have been assiduously ignored" until the defence was filed after the limitation period had expired.

73 The correspondence canvassed the possibility of settlement. The first letter from the appellant's solicitors of 8 January 2007 (Blue 17) asked for further information, including medical reports "so that we can better assess your clients’ claims."

74 The question of medical reports and a statement from Newcastle Umina Taxation Service in support of the claim for economic loss were referred to in the appellant’s solicitors’ letter of 3 April 2007 (Blue 20). In their follow-up letter of 11 April 2007 (Blue 22) the appellant’s solicitor stated that "when the further material is provided, we anticipate that we will receive instructions to put a proposal". Settlement on an unlitigated basis was again mentioned in the plaintiffs’ solicitor’s letter of 25 May 2007 (Blue 134), and in the reply of 1 June 2007 (Blue 135).

75 The initial correspondence from the plaintiffs’ solicitors was addressed in terms to the appellant. The later correspondence between the solicitors was ambiguous because it referred to "Air Tahiti Nui". However the documents generated by the motion for preliminary discovery unambiguously referred to the appellant as the prospective defendant.

76 The primary judge found at [114] that it must have been blatantly clear to those acting for the appellant at the latest when the Notice of Motion for preliminary discovery was served that of the plaintiffs were asserting that the appellant was the proper defendant (Red 155).

77 The primary judge also found at [115] that the appellant’s solicitor "knew or ought to have known" that this was the view of the plaintiffs’ solicitor, but they said nothing or "obfuscated in their failure to answer clear questions which would have revealed ... the true position." The plaintiffs’ solicitor proceeded to act to their detriment by commencing proceedings against the appellant (Red 155).

78 The appellant's solicitor said in his oral evidence that he did not sit back and hope the plaintiffs would sue the wrong entity (Black 84), and (surprising as it may seem) he did not turn his mind to the identity of his client (Black 85), or the identity of the likely defendant (Black 86-7). His instructions came from a law firm in the United States acting for an insurer (Black 90).

79 The solicitor’s credit was not challenged in cross-examination and at the close of the evidence later that day the primary judge said "I suspect everyone of the witnesses was telling the truth. It's a nice change" (Black 124).

80 In these circumstances the primary judge was not entitled to find that the appellant’s solicitor was conscious at the time of the distinction between the appellant and its parent. He was however fully entitled to find that the solicitor ought to have been aware that the plaintiff intended to sue the appellant in the belief that it was the actual carrier.

81 The primary judge upheld the estoppel because the appellant, directly and through its solicitors, "knew that the other party laboured under the assumption" that the appellant was the correct defendant "and refrained from correcting him when it was his duty in conscience to do so" adopting language of Deane J in Commonwealth of Australia v Verwayen [1990] HCA 39; 170 CLR 394 at 444.

82 With respect, that finding which depends on the party estopped having actual knowledge of the plaintiffs’ solicitor’s mistake, cannot be supported. The solicitor's evidence in chief was to the contrary and was not challenged in cross-examination. The primary judge considered at the time that he had been telling the truth.

83 On existing authority a finding that the appellant and its solicitor "ought to have known" of the mistaken assumption under which the plaintiffs’ solicitor laboured was not enough. However this is not the end of the matter because the evidence established an orthodox estoppel by representation. A party who makes a representation of fact which another acts on to his or her detriment may be estopped although he himself or she herself was mistaken and did not intend his or her words or conduct to be understood as they were reasonably understood by the other party.

84 The representations by the appellant, more often implied than expressed, date from the start of the correspondence. The first letter from the plaintiffs’ solicitor of 22 December 2005 addressed to Mr Lee at the appellant's Sydney office referred to "Your ... flight". After setting out his instructions the letter continued "Your company should have ... your failure to do so ... our clients are seeking compensation" (Blue 117-9).

85 The reply on Air Tahiti Nui letterhead (Blue 120) was noncommittal. Its significance for present purposes is that Mr Lee did not say that he was referring the solicitor's letter to the airline company in Papeete or give any indication that the appellant was not the appropriate recipient.

86 Mr Lee’s next letter of 8 December 2006 said that the matter had been forwarded to "our Head Office legal department in Papeete" (Blue 124). This conveyed a representation that the same entity was involved in Sydney and Papeete. This was true in a loose sense, but was false in fact.

87 Mr Lee must have known that two separate companies were involved in that his company, the appellant, had no presence in Tahiti, and ATSA, the parent, had no presence here. The legal department in Papeete was not in fact "our ... legal department" so far as the Australian company was concerned. He was blurring the distinction on which the appellant now insists.

88 The plaintiffs’ motion for preliminary discovery and of the affidavit in support stated in terms that the appellant was the prospective defendant. The appellant's appearance and affidavit in opposition accepted this position.

89 If the appellant was correct, and it was neither the contracting carrier, nor the actual carrier, it was not liable to the plaintiffs at all, and the documents sought were not in its possession or power. They were then in Papeete in the possession or power of ATSA. On either or both grounds there was no point in ordering preliminary discovery against the appellant.

90 Thus in the preliminary discovery proceedings the appellant represented by its conduct, and by representations in its appearance and affidavit, that it was an appropriate defendant that might be liable to the plaintiffs. The position is analogous to that in The Henrik Sif [1982] 1 Lloyds Rep 456 at 463 where the representative for shipping interests “impliedly represented ... that ... their principals, were capable in principle of being made liable on the bills of lading ..., subject to the merits of the claim.”

91 This is not the case where it is sought to establish a representation by mere silence and inactivity. The appellant both acted and spoke and its conduct is within the principle stated by Black CJ in Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 32:

"To speak of ‘mere silence’ or of a duty of disclosure can divert attention from [the] primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts and giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."

92 There is nothing to suggest that either Mr Lee or the solicitor deliberately intended to mislead the plaintiffs’ solicitor, or were consciously aware of his mistake, or had in the forefront of their minds the distinction between the two legal entities and decided to say nothing. Many of the problems flow from the ambiguity created by the appellant's corporate and registered business names which may have misled Mr Lee and the solicitor as much as the plaintiffs’ solicitor. The position would have been very different if the appellant was registered as Air Tahiti Nui Sales or the like.

93 The appellant's own mistake is not an answer to the estoppel. In Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 Ind App 203 at 215 Lord Shand said:

"The law of this country gives no countenance to the doctrine that in order to create estoppel the person whose acts or declarations induced another to act in a particular way must have been under no mistake himself, or must have acted with an intention to mislead or deceive. What the law ... mainly regard[s] is the position of the person who was induced to act and the principle on which the law ... rest[s] is, that it would be most inequitable and unjust to him that if another, by a representation made, or by conduct amounting to a representation, has induced him to act as he would not otherwise have done, the person who made the representation should be allowed to deny or repudiate the effect of his former statement, to the loss and injury of a person who acted on it. If the person who made the statement did so without full knowledge, or under error, [he has no one to blame but himself]. It may, in the result, be unfortunate for him, but it would be unjust, even though he acted under error, to throw the consequences on the person who believed his statement and acted on it as it was intended he should do."

94 The same point was made by Isaacs J, writing for Knox CJ, Starke J and himself, in Craine v The Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; 28 CLR 305 at 327 who, having cited the Privy Council decision referred to, continued:

"the law of estoppel looks chiefly at the situation of the person relying on the estoppel; ... the knowledge of the person sought to be estopped is immaterial; ... it is not essential that the person sought to be estopped should have acted with any intention to deceive;[and] conduct, short of positive acts, is sufficient."

95 The appellant can take no comfort from Lord Shand's reference to a representee acting on the statement "as it was intended he should" because the test of intention in cases such as this is objective. This was established in Freeman v Cooke at 663; 656 where Parke B said:

"By the term ‘wilfully’ ... we must understand, if not that the party represents that to be true which he knows to be untrue, at least that he means his representation to be acted upon, and that it is acted upon accordingly; and if whatever a man’s real intention may be, he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it, and did act upon it as true, the party making the representation would be equally precluded from contesting its truth."

96 In The Henrik Sif Webster J held that time charterers, who were not otherwise liable, were estopped from denying that they were parties to the contracts evidenced by the bills of lading. The representatives of the shipping interests knew that the representatives of the cargo interests were mistaken in thinking that their claim under the bills was against the time charterers but deliberately encouraged the mistake by granting extensions of time against the time charterers when the plaintiffs needed extensions against the owners.

97 In The “Stolt Loyalty” [1993] 2 Lloyds Rep 281 Clarke J, as he then was, upheld an estoppel in similar circumstances. The representatives of the shipping interests were aware that the solicitor for the cargo interests was mistaken in seeking an extension of time from the owners and needed an extension from the demise charterers. They decided to take advantage of this mistake and their letter granting an extension of time against the owners was worded so that it would not alert the solicitor for the cargo interests to her mistake. The demise charterers were estopped from relying on the time bar.

98 Both cases are distinguishable because the appellant's conduct in this case was inadvertent, but they show that a party who is not liable on a contract of carriage may, by an estoppel, become liable as if he or she was, or be estopped from relying on a time bar. In both cases the estoppel arose after the contract of carriage was made.

99 Thus, if the appellant was not the contracting carrier for the plaintiffs’ flight to Papeete, it is estopped from denying that it was. The appeal should therefore be dismissed with costs.

100 HODGSON JA: I agree with Allsop P and Handley AJA.

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LAST UPDATED:
9 February 2010