Travel Compensation Fund v John Harvey Blair & Ors

There are before the Court two sets of notices of motion in nine sets of proceedings: · Notices of motion pursued by the plaintiff, seeking leave to amend in terms of a Further Amended Summons in each suit; · Notices of motion pursued by the first defendant in each suit, seeking an order pursuant to Part 31 of the Rules for the determination of the following questions as separate questions: Dean Suit Whether by reason of s40 (3) of the Travel Agents Act 1986 (NSW) the [plaintiff] is entitled to commence and maintain proceedings to recover: - damages pursuant to s82 of the Trade Practices Act for contraventions of that Act suffered by persons, other than the [plaintiff], to whom the [plaintiff] has made payments; and - damages pursuant to s68 of the Fair Trading Act for contraventions of that Act suffered by persons, other than the [plaintiff], to whom the [plaintiff] has made payments. Whether by reason of s40(4) of the Travel Agents Act 1986 the [plaintiff] is entitled to proceed against directors of a corporation which is alleged to have contravened the Trade Practices Act , notwithstanding that it is not alleged that the director was knowingly involved in the contravention within the meaning of s75B of the Trade Practices Act . Whether by reason of s40(4) of the Travel Agents Act 1986 the [plaintiff] is entitled to proceed against directors of a corporation which is alleged to have contravened the Fair Trading Act , notwithstanding that it is not alleged that the director was knowingly involved in the contravention within the meaning of s61 of the Fair Trading Act .

Like motions for Part 31 orders are pursued in the other suits albeit comprehending the precise terms apt to embrace each of the relevant Travel Agents Acts. The Proceedings

The nine sets of proceedings comprise test cases in which the Travel Compensation Fund ["the Fund"] or [“the TCF”] seeks relief from four defendants [Messrs. Blair, Frazis, Roworth and Toomey] all of whom are alleged to have at material times been directors either of Ansett Australia Limited or of its wholly owned subsidiary Traveland Pty Ltd ["the travel agents"], both of which were part of the Ansett group of companies. The proceedings are underpinned by close to identical legislation in New South Wales [the Travel Agents Act 1986 (NSW) ], South Australia [the Travel Agents Act 1986 (SA) ] and the Australian Capital Territory [the Agents Act 1986 (ACT)] ["the Acts" or “the TAA”]

Of the nine proceedings before the Court, four involve claims under the NSW Act (nos. 50176, 50178, 50181 and 50182 of 2002), three involve claims under the SA Act (no.s 50175, 50179 and 50180 of 2002), and the remaining two involve claims under the ACT Act (no.s 50177 and 50183 of 2002).

Although each set of proceedings is not pleaded in identical terms, the degree of commonality is overwhelming and such that it is in the main, unnecessary for present purposes to differentiate between the suits. For that reason it is convenient to select one suit and at least initially, to address the disparate issues by reference to that suit. The suit selected is that by reference to which certain of the written submissions were addressed, namely proceedings 50176 of 2002 ["the Dean proceedings"] in which the relevant Act is that of New South Wales. [It is convenient to refer to the New South Wales Act as “the Act”] Background to the TCF and recoupment actions

The TCF was established by several of the States in 1986 as a cooperative scheme for the regulation of travel agents and to provide a fund to protect consumers of services offered by travel agents (termed “claimants” in the Acts and in the Further Amended Summons). The scheme has many similarities to the Fidelity Fund operated by the Law Society of New South Wales and the National Guarantee Fund administered by the Securities Exchanges Guarantee Corporation (“SEGC”).

The financial collapse of the travel agents has resulted in the TCF making payments out of the fund of approximately $11 million to some 12,000 claimants.

Initially the TCF commenced two actions, one in respect of Ansett claimants and the other in respect of Traveland claimants. Those two actions have been held in abeyance while the nine so called test cases are being dealt with by the Court.

The ability of the TCF to make payments to claimants is a function of its ability to replenish the fund. This the TCF does by levies on travel agents and by recovery actions. In the context of a different fund Bergin J said ( Securities Exchanges Guarantee Corporation Limited v Aird (2001) 38 ACSR 185 at p210 para [116] and p211 para [124]): “SEGC’s statutory right of subrogation is important as a matter of public policy. It provides a mechanism to obtain an important source of replenishment for the fund which is available for claimants thus fostering the intended boost in and maintenance of confidence in the securities market. It also has the economic impact of keeping levies upon members at as reasonable a level as possible”. (from para 116) “It seems to me that the policy behind the conferring of the statutory right of subrogation on the SEGC was to ensure that the fund had sources of replenishment so that confidence in the securities market was maintained”. (from para 124) The above remarks are apposite to the TCF. The Travel Compensation Fund

The following matters appear to be common ground: · By an agreement made on 19 September 1986 between the States of New South Wales, Victoria, Western Australia and South Australia, those States agreed to become the original participants in a co-operative scheme for the regulation of travel agents in Australia, and for the protection of certain clients of those agents as set out in that agreement ['the Participation Agreement']. · By deed of trust made on 12 December 1986 ['the Trust Deed']: - a trust was established for the purposes of the Participation Agreement on terms and conditions set out in a Schedule to the Trust Deed; and - certain persons were appointed as trustees of the trust. · The Trust Deed has been amended and the trustees have been replaced from time to time since 12 December 1986. · The Trust Deed (by clause 5.1) provides for a fund to be known as the "Travel Compensation Fund" and provides for the trustees of the fund to be responsible for administration of a scheme ('the compensation scheme' and 'the compensation scheme trustees') for compensating persons who suffer a pecuniary loss by reason of an act or omission of a person who carries on, or carried on, business as a travel agent. · The compensation scheme provided for by the Trust Deed is prescribed generally in the same terms under provisions of the Acts.

It is convenient to immediately note that the several sets of proceedings allege that the Compensation Scheme trustees may sue and be sued in the name of the "Travel Compensation Fund" and that they are entitled to sue in that capacity as plaintiff pursuant to the relevant section [in the Dean proceedings, section 52 of the Act is relied upon].

No doubt in order to raise the issue, the precaution of adding the claimants as plaintiffs has been taken only in the Dean proceedings. The demise of the Ansett group

It is common ground that the Ansett group ultimately failed, leaving many people who had paid moneys to the travel agents, without their anticipated travel or accommodation.

In those circumstances the Fund having compensated many such claimants, brings these proceedings against the defendants.

The proceedings are structured as follows: Statutory subrogation · The Fund seeks to exercise a right of statutory subrogation said to arise under the Act: Travel agent as 'participant' · A claim is made that at all material times the travel agent was a "participant" within the meaning of that term in the Trust Deed and carried on business as a travel agent within the meaning of the Act Defendants as 'directors' · A claim is made that by reason of matters pleaded across 20 or more paragraphs, the defendants were at material times directors of the travel agent. Agreements between the Claimants and the travel agent · A claim is made that the Claimants entered into travel agreements with the travel agent, the pleading alleging a number of express and a number of implied terms. Proper construction of clause 15.1 of the Trust Deed · A claim is made that the arrangements for the travel constituted "travel arrangements" and/or "travel related arrangements" within the meaning of those terms in clause 15.1 of the Trust Deed. Payments and receipt · A claim is made that pursuant to the agreements entered into between the Claimants and the travel agent, the Claimants paid moneys to the travel agent which received the moneys. Trade Practices Act and Fair Trading Act counts · Disparate claims said to arise by breaches of provisions of the Trade Practices Act 1974 (Cth) ["TPA"] and the Fair Trading Act [in each of the relevant jurisdictions] ["FTA"] sought to be pleaded are: - that " the promises " [a term which is not defined in the pleading] in the terms pleaded in a number of the earlier paragraphs [which allege particular express and implied terms of the agreements entered into between the Claimants and the travel agent], was conduct of the travel agent in trade or commerce within the meaning of the TPA and the FTA. - that each of such promises was a representation of the travel agent with respect to a future matter within the meaning of section 51A (1) TPA and section 54 (1) FTA - that at the time of making each of the representations the travel agent did not have reasonable grounds for making the representations. - reliance is sought to be placed upon s51A of the TPA and s41 of the FTA. - all of such conduct is said to have been misleading or deceptive or likely to mislead or deceive within the meaning of s52 of the TPA and s42 of the FTA. - that by reason of conduct of the travel agent referred to in particular paragraphs of the pleading, the Claimants paid the Moneys which were received by the travel agent on or immediately after the material identified dates. - that the acceptance of the Moneys was an acceptance of payment for services within the meaning of s58(b) of the TPA and s53(b) of the FTA. - that acceptance of the Moneys was in trade or commerce within the meaning of s58(b) of the TPA and s53(b) of the FTA. - that at the time when the travel agent accepted the Moneys it was aware of a number of particular matters including that there was a reasonable likelihood that it was insolvent or would soon become insolvent. - that at the time the travel agent accepted the Moneys it ought reasonably to have been aware of those particular matters. - that those matters constituted reasonable grounds for believing that the travel agent would not be able to supply the services - that acceptance of the Moneys by the travel agent constituted a contravention of s58(b) of the TPA and s53(b) of the FTA. - that acceptance of the Moneys was conduct by the travel agent in trade or commerce within the meaning of s51AA and s51AB of the TPA and s43 of the FTA. - that it was unconscionable for the travel agent to accept the Moneys.] Contracts Review Act 1980 [NSW count] · An allegation is made that by reason of particular matters the Agreement was unjust in the circumstances relating to it at the time it was made within the meaning of s7 and s9 of the Contracts Review Act 1980 (NSW) ['CRA']. Allegations of loss of the Claimants · Allegations are made as to further breaches of the Agreement and that by reason thereof the Claimants suffered loss and damage in the amount of the Moneys Claimants alleged entitlement to particular orders · Allegations are made that the Claimants are entitled to damages pursuant to s82 of the TPA and s68 of the FTA, and to a refund of the Moneys pursuant to s87(2)(c) of the TPA and s75(5)(d) of the FTA. · The travel agent is said not to have satisfied such alleged entitlement of the Claimants. · The Claimants are said to be entitled to an order, pursuant to s87(2)(b) of the TPA, s75(5)(b) of the FTA and/or s7(1)(c) of the CRA, varying the Agreement, such variation to have effect from the date of the Agreement, so as to include the terms in pleaded paragraphs (in the event that those are not otherwise found to be terms of the Agreement). · The Claimants are said to have suffered direct pecuniary loss, within the meaning of that term in clause 15.1 of the Trust Deed. · The Claimants are said to have suffered other pecuniary loss within the meaning of that term in clause 15.2 of the Trust Deed, namely the cost of the replacement travel, accommodation and associated arrangements and services that the Claimants were required to acquire. · A number of the matters pleaded are said to have constituted failures to account within the meaning of that term in clauses 15.1 and 15.2 of the Trust Deed. · An allegation is made that direct pecuniary loss said to be referred to in the summons (or alternatively other pecuniary loss said to be referred to in the summons) arose from the alleged failures to account. · An allegation is made that the Claimants were not protected against the direct pecuniary loss or alternatively the other pecuniary loss by a policy of insurance. Entitlement of the Fund · A claim is made that the Claimants lodged claims for compensation in particular amounts with the TCF. · It is alleged that the TCF paid to the Claimants particular sums which payments are said to have been made by the TCF “ under the compensation scheme ” within the meaning of that term in s40(3) of the Act. · A number of particular matters are alleged to have been acts or omissions within the meaning of that term in s40(3) of the Act. · A number of particular matters [“CRA matters”] are alleged to have been acts or omissions within the meaning of that term in s40(3) of the Act. · It is alleged that the TCF made particular identified payments by reason of the acts or omissions identified in the pleading. Subrogation Rights · An allegation is made that in the premises, the TCF is subrogated to the rights of the Claimants pursuant to s40(3) of the Act in relation to the particular acts or omissions. · An allegation is made that the rights of the Claimants in relation to such acts or omissions were exercisable against Ansett. · An allegation is made that in the premises, the TCF is entitled to enforce the said rights against the defendants severally.

The precise claims to relief in the Dean proceedings is as follows: The first plaintiff claims, alternatively the plaintiffs claim 1. [cp old 1] Damages in the sum of $3,590.00 at law and pursuant to s40(4) of the Travel Agents Act 1986 (NSW) as that section provides a cause of action to the first plaintiff for relief against the defendants analogous to that available to Brad Nathan Dean and Cheryl Raelene Dean (nee Hill) against Ansett under s82 of the Trade Practices Act 1974 (Cth) and s68 of the Fair Trading Act 1987 (NSW), 2. [new] An order varying the agreement between Brad Nathan Dean and Cheryl Raelene Dean (nee Hill) and Ansett pursuant to s87(2)(b) of the Trade Practices Act , s72(5)(b) of the Fair Trading Act and/or s7(1)(c) of the Contracts Review Act 1980 (NSW); 3. [new] An order for the refund of $3,590.00 pursuant to s40(4) of the Travel Agents Act as that section provides a cause of action to the first plaintiff for relief against the defendants analogous to that available to Brad Nathan Dean and Cheryl Raelene Dean (nee Hill) against Ansett under s87(2)(c) of the Trade Practices Act and s72(5)(d) of the Fair Trading Act . The submissions

The defendants oppose the granting of leave to amend on a number of bases. A constitutional question has been raised and the State of New South Wales and the Australian Capital Territory have been granted leave to intervene in order to address that question. Mr Kirk of counsel has represented the Attorneys in that regard.

The general course taken by the defendants has been to deliver separate sets of submissions in support of the proposition that the Court ought not grant leave to amend. Those submissions travel the full gamut of treating with questions such as: · whether causes of action have been adequately pleaded; · the suggested improper constitution of the record both in terms of the proposition that the TCF has no locus to bring proceedings and that Ansett and Traveland are necessary and proper parties; · the proper construction of the term " travel arrangements " or " travel-related arrangements " as used in clause 15.1 of the Trust Deed; · construction issues tied to the claim that no right of subrogation arises unless particular matters which are not pleaded are established [there are a number of sections of the proposed pleading using the prefatory averment "without admitting that it is a matter which the TCF needs to establish" and then proceeding to allege particular matters "]; and · disparate other problems with the pleading including the suggested impropriety of pleading that a person who is a director within the definition of 'director' in section 9 of the Corporations Act 2001, is a director within the meaning of that term in the Travel Agents Act , and including questions of particulars.

The convenient course would seem to be as follows: · to commence by setting out the principles which inform the exercise of the discretion to grant leave to amend; · to outline some of the more formal matters concerning the Trust Deed and the Act ["the scheme"]; · to deal with the attack on the amendments seeking to plead cases based on the TPA embracing the questions of construction concerning legislation; and · to deal with the other disparate matters raised by the several defendants. The Principles

The principles which are to be applied by the Court in dealing with an application for leave to amend are well established.

In State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 the High Court carefully analysed the development up to January 14 1997, of approaches taken to the exercise of the discretion to permit amendments to pleadings. Generally that judgment of the High Court, without purporting to be exhaustive, serves to set out the types of consideration which ought to direct the mind of the decision maker on such applications. However, the court accepted that the trial judge is afforded a large discretion in relation to the exercise and that it would be unwise and contrary to principle to seek to fetter that discretion with rigid rules. The special significance of the decision is to direct the mind of the decision maker to many of the considerations which may be taken into account in exercising the discretion and to emphasise, if it needed to be emphasised, that justice is the paramount consideration in determining such an application.

J L Holdings dealt, of course, with the particular circumstances before the court and whilst the general statements to be found in the joint judgment of Dawson, Gaudron and McHugh JJ and in the judgment of Kirby J assist a decision maker considerably, the obvious fact is that each and every case in which an application for leave to amend is pursued requires the court to deal with the special and peculiar matrix of circumstances which obtain at the material point in time in the litigation in respect of which such application is pursued.

To my mind the following statements of principle affirmed in JL Holdings are fundamental and clearly and succinctly express the general approach to be taken: "Now, I think it is a well established principle that the object of courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace" [ Cropper v Smith (1884) 26 Ch D 700 per Bowen LJ at 710]

A recent development in this State, which the Court is also entitled and indeed required to take closely into account, relates to Part 1 of the Supreme Court Rules as modified by Amendment No 337, which elucidates the overall objectives of practices and procedures as specified in the Rules. The overriding purpose of the Rules is to facilitate the “just, quick and cheap resolution of the real issues” in civil proceedings. The overriding purpose clause imposes an obligation on the Court to give effect to the overriding purpose when it exercises any of its powers."

Albeit dealing with an application to strike out pleadings, Barwick CJ in General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 to 130 enunciated principles equally applicable to an application pursued well before trial, for leave to amend. His Honour adopted the summary of authorities by Dixon J, as his Honour then was, in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91: "A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle a court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process."

Barwick CJ goes on to comment at 130: "in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal."

The test to be applied has been variously expressed: "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not permit of argument"; "discloses a case which the court is satisfied cannot succeed"; "no possibility that there can be a good cause of action"; "manifestly faulty so that to allow the pleading to stand would involve useless expense."

As Barwick CJ said in General Steel at 129, the subject expressions occur in cases of different types. However, once it appears, as his Honour pointed out, that there is a real question to be determined, whether of fact or law, and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action. Pleading and particulars

Of course an applicant for leave to amend must satisfy the court that an arguable case has been properly pleaded. It may be taken as a given that "the plainest and most fundamental of all the rules of pleading" is that "all the material facts constituting the cause of action ought already to have been plainly stated in the pleading itself". [ Pinson v Lloyds and National Provincial Foreign Bank Limited [1941] 2 KB 72 at 75; see also H 1976 Nominees Pty Limited v Galli (1979) 40 FLR 242 at 246-7]

Further, whereas the object of particulars is to prevent the opposite party being taken by surprise at the trial of an action and to identify the issues of fact to be investigated at the hearing, it is simply not the function of particulars to take the place of necessary averments in the pleading of the material facts: [ Saunders v Jones (1877) 7 Ch D 435 at 451; R v Associated Northern Collieries (1910) 11 CLR 738 at 740; Bruce v Odhams Press Limited [1936] 1 KB 697 at 712-3; McSpedden v Harnett (1942) 42 SR (NSW) 116 at 119; Kelly v Kelly (1950) 50 SR (NSW) 261 at 265; Turner v Dalgety & Co Pty Ltd (1952) 69 WN (NSW) 228 at 229; Commercial Bank of Australia v Thomson (1964) 81 WN (Pt 1) (NSW) 553 at 557, 558; Ellis v Grant (1970) 91 WN (NSW) 920 at 924, 925; Emmerton v University of Sydney [ 1970] 2 NSWR 633 at 635; Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 at 219, 220, 221; Dare v Pulham (1982) 148 CLR 658 at 664] The Scheme

The Participation Agreement makes reference to a compensation fund.

Section 3 (1) of the New South Wales Act defines "compensation scheme" as meaning the scheme prescribed under section 57.

Section 57 of the Act provides inter alia: (1) The Governor may make regulations, not inconsistent with this Act, for or with respect to any matter that by this Act is required or permitted to be prescribed, or that is necessary or convenient to be prescribed, for carrying out or giving effect to this Act. (2) The regulations may: (a) prescribe a scheme for compensating persons who suffer a pecuniary loss by reason of an act or omission by a person who carries on, or carried on, business as a travel agent; (b) prescribe the scheme by reference to a schedule comprising a copy of the Trust Deed by which the scheme is established; and (c) from time to time amend that schedule to incorporate amendments of the Trust Deed of which the Director-General is notified by the compensation scheme trustees. The Travel Agents Regulation

Clause 20 of the Travel Agents Regulation 2001 (NSW) provides: (1) For the purposes of section 57 (2) of the Act, the compensation scheme for compensating persons who suffer a pecuniary loss by reason of an act or omission by a person who carries on, or carried on, business as a travel agent is the compensation scheme established by the Trust Deed made on 12 December 1986… including all amendments to that deed that have taken effect on or before 5 July 2002 (2) Schedule 1 comprises a copy of the Trust Deed referred to in subclause (1), as amended by the amendments referred to in that subclause. The Compensation Scheme

Schedule 1 to the Travel Agents Regulation 2001 (NSW) sets out the "Compensation scheme". That scheme is referred to in Schedule 1 as "the Deed". The convenient course is to append the Trust Deed to this Judgment.

Relevant definitions provided for in clause 1.1 are: “claim” means a claim for compensation made under clause 16, “client account” means an account that only holds money received in advance in respect of travel arrangements or travel-related arrangements, “contribution” means any contribution determined by the Board under clause 6, “direct pecuniary loss” means the loss of the money or other valuable consideration actually paid to the travel agent, “Fund” means the Travel Compensation Fund referred to in clause 5, “operator” means a person who operates— (a) any transport system or transport facility, or (b) any hotel, lodging house or other place of accommodation, or (c) any restaurant or other eating or drinking place, or (d) any place of entertainment, leisure or study, or (e) any other facility or place in respect of which any travel arrangement or travel-related arrangement is made, “participant” means a person who is— (a) accepted as a participant of the Fund under clause 10, or (b) declared to be a participant of the Fund under clause 11, “Participation Agreement” means the Agreement made on 19 September 1986 between certain States to establish the scheme, “person” includes a body corporate, firm, partnership or other body, “scheme” means the co-operative scheme referred to in the Participation Agreement, “travel agent” means a person who carries on business as a travel agent in a State within the meaning of the Act of that State, “travel arrangement” means any arrangement entered into in a State with a travel agent for the provision of services which in that State constitutes the carrying on of business as a travel agent in that State, “travel-related arrangement” means— (a) any arrangement relating to— (i) hotel and airport transfers, or (ii) accommodation and meals, or (iii) car hire, or (iv) theatre and entertainment tickets, or (v) travellers cheques drawn against someone other than the person providing them, and (b) any other arrangement that in the opinion of the Board is normally incidental to travel arrangements, “Trust” means the Trust established under clause 2, Clause 2.2 provides: The object of the Trust is to provide a trust fund for the benefit of— (a) the Crown in the right of a State, and (b) any person who entrusts money or other valuable consideration to a travel agent in respect of any travel arrangement or travel-related arrangement if— (i) the travel agent fails to account for that money or consideration, or (ii) the travel agent passes all or part of that money or consideration to another travel agent who fails to account for that money or consideration in the capacity as a travel agent, or (iii) it appears likely that the travel agent or other travel agent will fail to account for that money or consideration as set out in clause 2.2 (b) (i) or (ii). Clause 3.1 provides: The purposes of the Trust are— (a) to provide compensation to certain people who deal with travel agents, and (b) to provide for the operation of the Fund, and (c) to ensure that only persons who have sufficient financial resources to enable them to carry on business as a travel agent are participants of the Fund. Clause 4 A.1 provides inter alia: The Board has the following duties: (a) to pay out of the Fund any claim admitted under clause 16.7, (b) to pay out of the Fund any costs, charges and expenses incurred in— (i) managing the Trust, or (ii) exercising any of its powers, or (iii) carrying out the purposes of the Trust, Clause 5 provides inter alia : 5.1 There shall be established a fund called the Travel Compensation Fund which shall be held and applied by the Trustees for the purposes of this Trust. 5.2 The Fund consists of the following: (a) any money or property transferred to, acquired, received or held by the Board for the purposes of the Trust, (b) any contributions, fees, levies and penalties Clause 6.1 provides: The Board is to determine the amount, method of calculation and manner of collection of all contributions, fees, levies and penalties payable to the Fund by participants and any other persons applying to be participants of the Fund. Clause 9 provides inter alia : 9.1 A person is eligible to be a participant if the Board considers that the person has, and is likely to continue to have, sufficient financial resources to enable the person to carry on business as a travel agent and enter into travel arrangements and travel-related arrangements. 9.2 In determining whether a person is eligible to be a participant, the Board may take into account whether the person, an employee of that person or, if the person is a body corporate, an officer of that body corporate— (a) has experience in the management of the financial affairs of a business, and (b) has been involved in the management of a failed travel agency, and (c) has been involved in the management of a travel agency in respect of which a claim has been made under this Deed, and (d) is or has been a travel agent in respect of whom a claim has been made under this Deed, and (e) has previously failed to meet a criterion in guidelines issued under clause 9.4, and (f) has been involved in the management of another business, and (g) has previously applied to be a participant. 9.3 In determining a matter under clause 9.1 or 9.2, the Board may take into account the financial resources of any legal entity with which a person or an employee of the person is or has been associated. 9.4 The Board is to develop and publish from time to time guidelines as to the criteria it may use to determine whether a person is eligible to be a participant.9.5 In developing the guidelines, the Board is to have regard to the risk of potential claims involved in particular types of operations carried out in the business of a travel agent.9.6 If the Board is not satisfied that a person is eligible to be a participant, it may require the person to comply with any one or more of the following conditions in order to be satisfied that the person is eligible as a participant: (a) that the person maintain and operate the business as a travel agent in a manner specified by the Board, (b the person— (i) maintain a trust account or client account in respect of any money received in the course of that business, or (ii) increase the capital of that business, or (iii) reduce the debt of that business, or (iv) provide in favour of the Board any security it requires in any form it determines, or (v) pay any costs incurred in connection with providing or releasing that security, (c) that the business be guaranteed or insured in a manner, or by a person or class of person, specified by the Board, (d) that the person maintain and operate books of account and other accounting records of the business in a manner specified by the Board, (e) that a report be obtained at the expense of the person from a duly qualified auditor or accountant nominated by the Board— (i) stating that the accounting records of the business give a true and fair view of the financial position of the business, or (ii) providing any other information the Board requires to determine whether the person has sufficient financial resources to carry on the business, (f) that the person provide full disclosure of the identity of any other person involved in the business. 9.7 The Board may— (a) determine a reasonable date or period of time for compliance with any condition referred to in clause 9.6, and (b) authorise payment of the cost of obtaining any report under clause 9.6 (e) from the Fund if it considers it appropriate to do so. Clause 10 provides: 10.1 If the Board determines that an applicant is eligible to be a participant, the Board, on payment of the initial contribution and relevant fees, must— (a) accept that applicant as a participant, and (b) notify the relevant licensing authority that the person is a participant. 10.2 If the Board determines that an applicant is not eligible to be a participant, it must— (a) refuse the application, and (b) give notice to the relevant licensing authority and the applicant of— (i) the refusal, and (ii) the matters taken into account in making the determination. Clause 15 provides inter alia : 15.1 The Board must pay compensation out of the Fund to a person who— (a) enters into travel arrangements or travel-related arrangements directly or indirectly with a participant, and (b) has suffered or may suffer direct pecuniary loss arising from a failure to account by the participant for money or other valuable consideration paid by the person, and (c) is not protected against the loss by a policy of insurance. 15.2 The Board may pay compensation to— (a) a person referred to in clause 15.1 in relation to other pecuniary loss arising from a failure to account as referred to in that clause, or (b) a person who has suffered direct pecuniary loss or other pecuniary loss arising from a failure to account for money or other valuable consideration in relation to any travel arrangement or travel-related arrangement by a travel agent who is not a participant. Clause 16.1 provides: A person is not entitled to compensation from the Fund unless the person makes a claim under this clause within 12 months after the failure to account for money or other valuable consideration to which the claim relates. Clause 17 provides inter alia : 17.1 The Board must— (a) determine the amount of compensation payable to a person under clause 15.1, and (b) determine the amount of compensation payable to a person under clause 15.2. 17.2 The amount of compensation is not to exceed the pecuniary loss suffered, except insofar as the payment is made by way of emergency compensation under clause 18. Sections 40 (3), (4) and 52 of the Act

Subsections 40 (3) and (4) of the Act provide: “(3) Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission. (4) Where the rights conferred by subsection (3) on the compensation scheme trustees are exercisable against a body corporate, those rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission and severally against the body corporate and each of those directors.”

Section 40(5) provides a defence to the rights given by s40(4) in relation to acts or omissions by a body corporate that occurred without the knowledge or consent of the director.

Section 40 of the Act is replicated or virtually replicated in the Victorian, Queensland, Western Australian, Northern Territory, Tasmanian and ACT legislation. The provision in South Australia is somewhat different and is as follows: “25(1) On payment to a claimant out of the compensation fund, the trustees are, to the extent of the payment, subrogated to the rights of the claimant arising from the circumstances to which the claim relates. (2) If rights to which the trustees are subrogated lie against a licensed travel agent (or former licensed travel agent) that is a body corporate, the trustees may determine that those rights may be enforced against the directors or one or more of the directors of the body corporate”.

Section 52 of the Travel Agents Act provides: “The compensation scheme trustees may sue and be sued in the name of the “Travel Compensation Fund” and, in any action brought by them it shall be presumed, unless the contrary is proved, that any condition precedent to the bringing of the action imposed on them by the compensation scheme has been complied with.” The attack upon the amendments insofar as they seek to plead cases based on the TPA

The first defendant, whose submissions were adopted by the other defendants, furnished detailed overview submissions in writing prior to the hearing of the motion and addressed on the hearing. To my mind there was a discernible shift in the emphasis put in the two modes of addressing submissions although both were sought to be relied upon during the hearing. It is convenient for that reason to summarise the submissions as they came forward.

Generally the submissions of the first defendant albeit raising other matters, often moved between: · the proposition that accessorial liability provisions having already been dealt with in the TPA, could not be qualified, impaired or negated by the Act section 40 (4); and · the proposition that TPA claims per se could never be picked up by the Act, at least in terms of the manner in which section 40 (4) of the Act is currently worded. The written submissions of the first defendant

The written submissions of the first defendant included the following propositions: · The amendments are, on analysis, seen to be futile. · Those amendments seek to plead cases based on the Trade Practices Act notwithstanding that: (1) the TCF does not allege that it has suffered any loss by reason of the alleged contraventions; and (2) the TCF does not allege that the defendants have themselves contravened those Acts. · Instead, the TCF seeks leave to plead a case that Ansett and Traveland contravened the Trade Practices Act, various persons who had sought to purchase travel services thereby suffered loss, those persons made a claim on the TCF and were reimbursed, and that by reason of s40 of the Travel Agents Act 1986 (NSW): - the TCF can commence and maintain in its own name proceedings in respect of those alleged contraventions; and - the TCF can sue not merely Ansett and Traveland, but also the directors of those companies who are in effect vicariously liable. · Section 40 of the Travel Agents Act , on which the TCF relies, does not bring about that result. It could not and does not bring about that result in the case of the alleged causes of action under the Trade Practices Act , because it would be directly inconsistent with that Commonwealth Act and to that extent invalid by reason of s109 of the Constitution and also as a matter of construction. · The first question is to construe the operation of those provisions, which on their face disclose a difficulty: - Ordinarily, the reference to “subrogation” in s40(3) would be construed as picking up the meaning in equity, in the same way as that word in other State legislation (involving consumer protection funds) has been construed: Registrar-General v Gill (New South Wales Court of Appeal, 16 August 1994, unreported); Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 at 85. - However, subrogation is distinct from assignment, and in particular a party asserting subrogation could never sue in that party’s own name: see eg Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643 at 663; Linsley v Petrie [1998] 1 VR 427 at 445. - Section 52 of the Travel Agents Act proceeds however on the premise that the TCF can sue in its own name. · The position was analysed, and resolved, by Lehane J in Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 at 373-4 as follows: “Thus if, as a result of an act or omission of a person carrying on business as a travel agent, a third party (the claimant) has rights against that person and the compensation scheme trustees, "by reason of" the act or omission, make a payment to the claimant then the compensation scheme trustees are subrogated to those rights. Clearly, that means that in those circumstances the compensation scheme trustees stand in the shoes of the claimant: it is the claimant's rights, no more and no less, of which the subsection gives them the benefit. The assumption then appears to be (perhaps oddly, given the use of the word "subrogated", it is not spelt out) that the compensation scheme trustees may in their own name proceed to sue the travel agent to enforce the right which they are given; and although the claimant may have no rights against directors of the travel agent, if it is a corporation, subs (4) enables the compensation scheme to "enforce" the claimants' rights against the corporate travel agent jointly and severally against the agent and those who were its directors at the relevant time, other than a director who makes out the defence for which subs (5) provides. To provide that A is subrogated to B's rights against C, where B has no concurrent claim against D, and that A may "enforce" jointly and severally against C and D the "right" which it thus gets by subrogation, is perhaps a somewhat elliptical way of imposing (for the benefit of A) a coordinate liability on D in respect of B's claim against C: a liability to which, but for the statutory "subrogation", D would not be subject (and which D still does not owe to B). That, however, appears clearly enough to be the intention of the provision, and it is the effect attributed to it by Wilcox J in Travel Compensation Fund v Dunn (Federal Court, 2 December 1992, unreported). I think I should proceed on the basis that that is the way in which subs (4) operates: no argument to the contrary was put to me.” [emphasis added] [An appeal was dismissed: Travel Compensation Fund v Travel Guide Pty Limited (in liq) (1997) 72 FCR 371 ] · Section 52 does not create liability; rather, it imposes a norm of conduct: Brown v Jam Factory Pty Ltd (1981) 35 ALR 79; Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [99]. The other provisions in Pt V and Pt IVA of the Trade Practices Act , contraventions of which the TCF seeks leave to allege, are in no different position. · The right to recover damages by action where there has been a contravention of a provision of Pts IVA or V is given by ss82 and 87. · That right is given only to persons who suffer loss or damage “by” the conduct of a person in contravention of the statutory norms. It is established that a claim for damages under s82 of the Trade Practices Act cannot be assigned: National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514 at 537-539 (Lindgren J), where earlier authorities are set out; Brookfield v Davey Products Pty Ltd (1996) 14 ACLC 303 at [65]-[76] per Branson J; Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218 (Full Court). The principal reason for this, as Lindgren J held in National Mutual, is that: “only the [putative assignors] could possibly have satisfied the statutory descriptions of being persons who suffered loss or damage caused “by” or “as a result of” the conduct described in the statutes.” · The same applies in the case of s87, save that it is sufficient for the person to be likely to suffer loss or damage. · The right to recover damages thereby given is confined to actions against (a) the person whose conduct contravenes the statutory norm, and (b) against any person “involved in” the contravention. · Section 75B does not give rise to liability independently of s82 or s87: Nella v Kingia Pty Ltd (1986) ATPR 40-723; Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 36; Neilsen Investments (Qld) Pty Ltd v Spud Mulligan’s Pty Ltd [2003] QCA 207 at [19]. Rather, s75B is definitional of the persons against whom the statutory right of action is given. · The words “involved in” are defined, exhaustively, by s75B, and requires the person to have knowledge of the essential matters which make up the contravention: Yorke v Lucas (1985) 158 CLR 661.

The first defendant then submitted that the following are the defects in the TCF proposed pleading: · The TCF does not allege that it suffered (or is likely to suffer) loss or damage “by” the alleged contraventions of the Trade Practices Act . As such, it is not itself able to sue for s82 damages or s87 orders (which are premised on the moving party having suffered, or being likely to suffer, loss or damage) unless somehow the cause of action alleged to have been possessed by the claimants has become assigned to TCF. This cannot happen as a matter of private law (see the authorities set out above). · Nor could this happen by reason of s40 of the Travel Agents Act , because so to do is inconsistent with what is established by ss82 and 87 of the Commonwealth Act and so invalid by reason of s109 of the Constitution . · The TCF does not allege that the defendants were “involved in” the alleged contraventions as those words are defined in ss82 and 87. Rather, the TCF alleges the contravention by the companies, from which it is said to follow that the directors are (in effect, vicariously) liable. · This is in the teeth of what the Trade Practices Act provides. The TCF seeks to plead a case whereby it, as opposed to the claimants, has standing to sue to recover ss82 or 87 relief, notwithstanding that it has not suffered loss, and whereby a director is liable not by reason of s75B knowing involvement but by reason of the strict liability in s40(4) of the State Act. · In Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at [27], the Full High Court said: "However, it is clearly established that there may be inconsistency within the meaning of s 109 although it is possible to obey both the Commonwealth law and the State law. Further, there will be what Barwick CJ identified as "direct collision" where the State law, if allowed to operate, would impose an obligation greater than that for which the federal law has provided. Thus, in Australian Mutual Provident Society v Goulden , in a joint judgment, the Court determined the issue before it by stating that the provision of the State law in question "would qualify, impair and, in a significant respect, negate the essential legislative scheme of the Life Insurance Act 1995 (Cth)” ." [Footnotes omitted]

The first defendant further submitted that this too is a case of a “direct collision”. The proposition is that the federal law relevantly imposes an obligation only upon persons knowingly involved in a contravention, while, on the TCF’s construction, the State law purports to impose a “greater obligation” upon directors, namely vicarious liability upon the directors, subject to their making out a defence under s40(5). The proposition is that the State law also seeks to “qualify”, “impair” and “negate” the scheme to liability created by ss82 and 87. Section 109 of the Constitution prevents this from occurring. The first defendant's submissions from the bar table

During the course of address from the bar table the first defendant's submissions ultimately focused upon the following propositions: · the essential question is whether one can find a basis for concluding that somewhere within section 40 (4) [or in the gap between section 40 (3) and section 40 (4)] or somewhere within sections 40 (3) and (4), there are words to justify section 40 (4) of the Act being properly construed as creating a new additional set of rights under State law, though incorporating and building on the provisions of the TPA; · the answer to that question is in the negative. Hence section 40(4) upon its proper construction, does not address claims under the TPA; · that this answer is correct may be seen from the following considerations: - Had the answer been in the positive, the intention of the New South Wales Parliament must have been to furnish the TCF with rights which in effect permit the disaggregation of the TPA. That is to say, the intention of the Parliament must have been that [upon payment being made to a claimant under the travel compensation scheme by reason of an act or omission actionable by a claimant, being an act or omission in contravention of Part V of the TPA by a company carrying on business as a travel agent], the TCF would be furnished with two forms of entitlement arising by reason of a combination of the Act and the TPA: - The first such entitlement is: - the TCF’s right to be subrogated to the rights of the claimant not only against the company, but also against those persons who were " involved in [the] contravention" within the meaning of that term in the TPA [the section 40 (3) Act subrogated rights] - The second such entitlement is: - the TCF’s right not only to be subrogated to the rights of the claimant against the company but also, - the TCF’s right [which was never a right of the claimant ], to enforce on a strict liability basis against persons who were the directors of the company at the time of the act or omission, the rights of the claimant against the company; · a close examination of the TPA makes plain that rights and liabilities are created by Part 6. Hence section 82 provides that: "A person [ here the claimant ] who suffers loss or damage by conduct of another person [here the corporate travel agent ] that was done in contravention of a provision of [Part IV, IVA], … or V or … may recover the amount of the loss or damage by action against that other person [ here the corporate travel agent ] or against any person involved in the contravention [ here the directors ]”; · precisely the same form of wording referring again to the phrases " the person who engaged in the conduct " or " a person who was involved in the contravention ", may be found in section 87 (1) and (1A); · section 75B far from being the source of liability, merely serves to give an internal dictionary definition of the words " person involved in a contravention of [relevant TPA Parts ]". This term is used in sections 82 and 87 to impose civil liability in respect of contraventions of the provisions of relevant Parts of the TPA [cf Yorke v Lucas (1985) 158 CLR 661 at 668]; · there are authorities which support the proposition that it is not possible to plead a tort of conspiracy to contravene the provisions of the TPA at common law, outside the form of conspiracy expressly provided for in the TPA, the reason being that the TPA covers the field in relation to contraventions thereof: cf McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 per Weinberg J at [197] and the cases there cited; K rambousanos v Jedda Investments Pty Ltd (1996) 64 FCR 348 at 355 where Branson J said " Section 82 of the Trade Practices Act makes it plain that an action for damages brought by a person who suffers loss or damage by conduct of another that was done in contravention of provision of Pt IV or V of that Act may only be brought against the person who contravened the Act or a person involved in the contravention. " [emphasis added] · the rights conferred by section 40 (3) [as referred to in section 40 (4) of the Act] are relevantly the claimant's TPA rights derived from Part 6, meaning each and every of such rights so conferred by the TPA. Those rights must be regarded in holistic fashion as including as an essential part thereof, the rights to recover the amount of loss or damage by action against persons who were involved in a contravention of relevant Parts of the TPA; · it is important to bear in mind that rights conferred by section 40 (3) represent one half only of the equation, the second half being the liabilities of those against whom the rights may be exercised. In that sense those persons alleged to have been involved in a contravention of the relevant Parts of the TPA who may therefore become liable to pay the amount of loss or damage to a claimant are accordingly entitled to have the question of liability determined by Part 6 of the TPA and not by some other route "picked up" by some other legislation unless that other legislation very plainly requires this result; · the Act does not very plainly or at all require this result.

It is said to follow that insofar as the proposed Amended Summons seeks to plead cases based on the TPA, those amendments should be disallowed. Dealing with the issue

Close submissions have also been addressed to the constitutional question: · by the TCF; · by the Attorneys. In what follows a number of those submissions are adopted as correct. Not all are accepted as correct. Fundamental parameters

It seems to me that it is important to bear in mind the following considerations: · certainly and as the Attorneys submitted, the heart of most of the issues rests on questions of construction of the Act; and · it is crucial to acknowledge that rights arising under Section 40 (4) are new substantive rights held only by the TCF, albeit that they are calculated by reference to the loss or damage suffered by the claimants. The liability is a coordinate and separate liability [cf TCF v Travel Guide supra per Lehane J at 373-374]. The effect of section 40 (4) is (1) to incorporate by reference and (2) then to extend, other legal rights and causes of action.

Whilst for obvious reasons it is all very well to focus upon the proper construction of Section 40 (3), the cases sought to be pursued by the TCF are cases only against directors of body corporate travel agents, which travel agents have acted or omitted to act in a manner giving rise to the claimants having relevant rights against such travel agents . Section 40 (3) - The type of rights which are subrogated

There is no limitation expressed in s 40(3) as to the type of rights which are subrogated. As the Attorneys submitted, prima facie, the words “ the rights of the claimant ” extend to all relevant rights, including rights arising under or relating to federal laws such as the TPA. Concept of subrogation

I accept as correct the following submissions put on behalf of the Attorneys: · the right granted to the TCF by s 40(3) arises by way of it being “subrogated”. It may be accepted that the use of this word by the Parliament was intended to invoke the concept of subrogation as it is understood at general law, subject to indications to the contrary in the Act: see Gill v Registrar General (Nos 1 & 2) (1991) 5 BPR 11,587 at 11,589-90, upheld in Registrar-General v Gill (New South Wales Court of Appeal, 16 August 1994, unreported, BC9402892); Law Society of NSW v Bruce (1996) 40 NSWLR 77 at 85F per Giles CJ Comm D; · thus it has been held that pursuant to s 40(3) the TCF trustees “stand in the shoes of the claimant: it is the claimant’s rights, no more and no less, of which the subsection gives them the benefit”: Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 at 373G per Lehane J, upheld on appeal Howden v Travel Compensation Fund (1997) 78 FCR 374; see also Travel Compensation Fund v Internova Travel Pty Ltd (in liq) [2003] FCA 664 at [9] per Bennett J; · so construed, there can be no constitutional objection to the TCF pursuing the rights of the claimant, including any potential rights under the TPA. The situation here is distinguishable from the cases in which it was held that claims under the TPA may not be assigned : see eg Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218-19. When a subrogated right is pursued, it is the right of the claimant being litigated, in relation to damage caused to the claimant by the conduct of the contravening party. As Sheldon’s Law of Subrogation puts it (as was quoted and approved in Gill v Registrar General per Young J at 11,590), the “substitute is put in all respects in the place of the party to whose right he is subrogated … The party who is subrogated is regarded as constituting one and the same person with the creditor who he succeeds”; and · whilst it is TCF which controls such litigation, there is nothing novel or objectionable about that. It is a commonplace when insurers pursue claims held by insureds, when a next friend litigates on behalf of a person with an incapacity, or when a representative party pursues claims on behalf of others in representative proceedings. As the Full Federal Court stated in rejecting a challenge to the constitutional validity of the representative proceedings scheme in Part IVA of the Federal Court of Australia Act 1976 (Cth) , “[t]here is nothing unusual about the judicial power being exercised in relation to controversies generated by one person on behalf of another”: Femcare Ltd v Bright (2000) 100 FCR 331 at [97]. It would be very surprising were the Commonwealth Parliament to have intended to prevent TPA claims being litigated in these circumstances. Proceedings being brought in the name of the TCF

Although certain of the parties addressed close submissions to the question of whether or not proceedings to enforce subrogated claims under section 40 (3) could be brought in the name only of the TCF, the proceedings before the court are in essence grounded upon Section 40 (4). And in relation to Section 40 (4), as has a really been pointed out, there can never be any question but that the only relevant plaintiff is the TCF. It is therefore appropriate that s 52 of the NSW Act enable the Fund to institute proceedings in its own name. As Sackville J stated in Howden v Travel Compensation Fund (1997) 78 FCR 374 at 379), “the clear intention of s 52 is to allow compensation scheme trustees who have an enforceable right to recover moneys from the director of a company to take proceedings in the name of the Fund”.

Notwithstanding this consideration it seems convenient to set out the close submissions which were addressed to situations where Section 40 (3) proceedings were brought, insofar as the proper plaintiff is concerned.

These submissions by the Attorneys were: · Section 52 of the NSW Act provides that the TCF “ may ” sue and be sued in the name of the Fund. It does not require that this be done. · Further, the section does not expressly provide that this power (and liability) extends to situations where the TCF is pursuing subrogated rights. The provision would have work to do in any case. If it does not extend to such claims, then subrogated claims under s 40(3) could simply be brought in the name of the claimant – as is apparently being done in the Dean proceedings in the current matters. · Nevertheless, it is reasonably open to hold that s 52 does extend to allow the TCF to bring such claims in its own name. That is the view which has previously had general acceptance: eg Travel Compensation Fund v Travel Guide Pty Ltd (in liq) (1997) 72 FCR 371 at 373G; Howden v Travel Compensation Fund (1997) 78 FCR 374. · The key difference between pursuit of subrogated rights and assigned rights is that an assignee may (subject to the terms of the assignment) keep all the fruits of the litigation, even if these exceed what has been paid for them: Compania Colombiana de Seguros v Pacific Steamship Navigation Co [1965] 1 QB 101 at 121 per Roskill J. In contrast, a person pursuing subrogated rights is only entitled to recover the amount they have paid, with the original claimant being entitled to keep the remainder: Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 per Diplock J. · Here, there can be little doubt that the subrogated rights given to the TCF were intended to be exercised for the benefit of consumers, not of the TCF itself, and that any excess recovered would belong to the claimant. Thus the rights given by s40(3) are, in truth, subrogated rights. · Once the substance of the matter is understood, the issue of the name in which the proceedings are brought is of peripheral importance. Whilst the general law doctrine of subrogation only enables claims to be brought in the name of the original party, the statutory invocation of the doctrine is subject to being construed in the context of the Act : Gill v Registrar General (Nos 1 & 2) (1991) 5 BPR 11,587 at 11,589; State of New South Wales v Commonwealth Bank of Australia [2001] NSWSC 1067 at [92] and [101]. · In any case, it is a mere matter of form. As Sackville J stated in Howden at 379C, s 52 is “a procedural provision”. It would be unobjectionable, for example, were State laws or rules to provide that a partnership could sue or be sued under its trading name. Such rules would have no effect on the extent or character of the claim, and could not reasonably be construed as inconsistent with the TPA. Similarly, the rights litigated under s 40(3) are the rights of the claimant, and the extent of the TCF’s control and ability to claim for those rights is governed by the doctrine of subrogation. The name in which the action is brought does not affect those characteristics, and creates no inconsistency with ss 82 and 87 of the TPA.

I return to deal with the matter below.

But the cases presently before the Court are Section 40 (4) cases and it is to that section that it is necessary to now turn. Section 40 (4)

In my view the New South Wales Parliament could not have intended the provision to directly modify or interfere with rights or liabilities under the TPA or other federal statutes. But does section 40(4) properly construed effect any such modification or interference?

The real question is whether: · the section should be construed as creating a new and additional set of rights under State law (though incorporating and building on the provisions of the TPA), [in which case no question of direct modification or interference with the TPA or other federal statutes arises]; or · the section should be construed as not having any application in relation to: (1) TPA claims generally [in which case no question of such modification or interference arises]; or (2) claims made against directors under accessorial liability provisions of the TPA [in which case no question of any such modification or interference arises concerning accessorial liability].

It is possible to posit the real question in a slightly different fashion so as to make the point. This involves hypothetically writing additional words into section 40 (3).

The hypothetical section 40 (3) would read: “Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are, save insofar as accessorial or other rights against directors of travel agent corporations are concerned , subrogated to the rights of the claimant in relation to the act or omission.”

Section 40 (4) would continue to read: “Where the rights conferred by sub-section (3) on the compensation scheme trustees are exercisable against a body corporate, those rights are enforceable jointly against the body corporate and the persons who were its directors at the time of the act or omission and severally against the body corporate and each of those directors.”

The submissions of the first defendant, at least in part, appeared to thumbnail sketch the plaintiffs construction as proposing that: · one construed the existing wording of section 40 (3) in the same way as one would construe the hypothetical section 40 (3) and · one retained the existing wording of section 40 (4).

The submissions of the Attorneys General of New South Wales and the Australian Capital Territory and of the TCF were that it was unnecessary to read any particular words into the existing subsections, although those subsections could plainly have been better drafted with the requisite precision.

There is however a very obvious difficulty with the existing wording because, as a manner of English, section 40 (3) clearly gives to the TCF, the subrogated rights of the claimant in relation to the relevant act or omission, being all such rights including: · rights [including rights under the TPA] against a travel agent body corporate ["rights class 1"]; and · accessorial TPA rights against persons [including directors], who were involved in a contravention of the TPA. ["rights class 2"].

And again as a manner of English, the wording of section 40 (4) clearly permits the TCF, by reason of its having been subrogated to the rights class 1, to enforce those rights on a strict liability basis against the persons who were the directors of the travel agent body corporate at the time of the relevant act or omission. This must and can only involve a parliamentary intent to permit the TCF to elect to jettison [that is to say to elect not to rely on], the rights class 2 - making it all the more curious that they were ever granted by section 40 (3) in the first place. The curious nature of this result is the essential strength of the submissions put by the first defendant.

Returning to the submissions by the Attorneys, it was put that the new substantive rights conferred by Section 40(4) build on rights held by claimants but are additional to and separate from them . The effect of s 40(4) is said to incorporate by reference, and to then extend, other legal rights and causes of action.

I accept that there is nothing unusual in the suggestion that a statutory provision can create new rights and duties in such a fashion. As the Attorneys have submitted, that was the very basis on which a number of cooperative schemes worked. Similarly, ss 68 and 79 of the Judiciary Act 1903 (Cth) incorporate and give federal effect to State laws (as they exist from time to time) that are picked up and applied in federal jurisdiction. Those laws then become “surrogate federal laws”; they are no longer given effect merely as State laws: eg Solomons v District Court of New South Wales (2002) 76 ALJR 1601 at [15] - [21], [74].

A number of further examples were given by Mr Kirk. These included the predecessors to the Corporations Law and the ASIC Law. Those Acts applied only to the Australian Capital Territory and by State Acts of Parliament, the ACT Act was not only picked up and applied as the law of New South Wales, but further was picked up in an ambulatory way so that when the Federal Government had occasion to amend the Corporations Law, this automatically applied without an amendment to the New South Wales scheme being required. Another example is to be found in the Agricultural and Veterinary Chemicals (New South Wales) Act 1994 (NSW) which picks up and applies a code provided for in the ACT. Another example is the Gas Pipelines Access (New South Wales) Act 1998 (NSW) which picks up and applies a South Australian Act in an ambulatory fashion as a law of New South Wales.

The Attorneys have submitted and I accept that: "As Lehane J implied, it would be strange to call this type of right a subrogated right when it could not be pursued by the claimant. In truth, they cannot be subrogated rights in the sense that term is understood at general law, because they are not pre-existing rights held by the claimants. But s 40(4) does not use the term “subrogated”. It is s 40(3) which does that. Whilst s 40(4) does refer to “the rights” and “those rights”, thus referring back to the subrogated rights in s 40(3), the operative clause of the provision comes after those words to create a new form of liability building on “those rights”. In any event, however the Parliament has chosen to label them, such labels are not definitive of their content, character and effect. For example, in WorkCover Queensland v Seltsam Pty Ltd (2001) 53 NSWLR 518 the Court of Appeal had to consider a Queensland statute which gave WorkCover Queensland an independent right of indemnity against third parties for it to seek to recover in relation to payments made to injured workers. After creating the indemnity, the statute went on to provide that “to that end, WorkCover is subrogated to the rights of the person for the injury”. As Young CJ in Eq noted at [23], “we have a situation where the word ‘subrogation’ is used in connection, not with the right of the worker but with a completely independent right, the right of the authority and that seems very strange”. This strange usage was resolved given the statutory context as follows (at [30]): … the phrase ‘to that end’ shows that the subrogation is only a limited subrogation. It is not subrogation to the worker’s action, but rather subrogation to the rights of the worker to the extent that it is necessary to aid the WorkCover’s indemnity as, for instance, by entitling WorkCover to give notices of action to the appropriate people so that the rights under [the section] will not be lost. Equally, the references in s 40(4) of the NSW Act to the subrogated rights in s 40(3) must be construed in context. So construed, they must refer to a new set of rights which build on the subrogated rights referred to in s 40(3)."

The submission continues to put the following propositions which I accept as correct: · it is self-evident that any attempt by a State Act to modify or interfere with rights granted by a Federal Act would be doomed to fail; and · given the ubiquitous nature of TPA claims, the possibility of such claims being made in relation to loss and damage suffered by claimants must have been in the contemplation of the Parliament when the NSW Act was enacted in 1986 (twelve years after enactment of the TPA).

Whether it is correct to say that, as no limitation is placed in s 40(4) on the types of rights that may be pursued, it appears likely that the NSW Parliament did intend the provision to operate in relation to rights arising in relation to federal laws, will be examined below.

Clearly also whilst s 40 might have been better expressed, the Court must look to its substance and likely intended operation. Inconsistency or collision between the Act and the TPA

I see no difficulty with the proposition that the rights of claimants to which the TCF is subrogated under section 40 (3) may extend to rights of such claimants under Federal legislation such as the TPA.

The submissions of the Attorney include: Proposition 1 Section 75(1) of the TPA provides that, subject to an exception relating to double jeopardy for criminal offences, Part V of the TPA “is not intended to exclude or limit the concurrent operation of any law of a State or a Territory”. Section 75(3) goes further by providing that except as expressly provided by Part V, “nothing in this Part shall be taken to limit, restrict or otherwise affect any right of remedy a person would have had if this Part had not been enacted”. The effect of this provision is to indicate that the Commonwealth did not seek to cover the field relating to these matters: R v Credit Tribunal; Ex parte General Motors Acceptance Corporation (1977) 137 CLR 545 at 564.

I see no difficulty with accepting proposition 1 Proposition 2 Whilst it is true that these provisions refer to the operation of Part V, and not to Part VI (“Enforcement and Remedies”) which contains ss 75B, 82 and 87, s 75 must have been intended to include enforcement and remedies of the Part V provisions, otherwise the provision would be meaningless. Further, that this was intended is confirmed by the reference to s 79 in s 75(2), reflecting the assumption that enforcement provisions were affected by s 75.

I see no difficulty with accepting proposition 2. Proposition 3 Of course, s 75 of the TPA would not save s 40(4) if there was “direct inconsistency or collision” between the federal and State Acts: R v Credit Tribunal at 564-5. As Gummow J stated when discussing s 75 in Grace Bros Pty Ltd v Magistrates, Local Courts of NSW (1988) 84 ALR 492 at 503-4, where it is possible to obey both laws, the question of whether the laws can operate concurrently “will depend largely upon the intention of the Commonwealth Parliament as perceived from the true construction of its law” (upheld on appeal: (1989) 23 FCR 68). There is no direct inconsistency in effect or statutory purpose here.

Generally I see no difficulty with accepting proposition 3 when one looks at the issue in terms of federal legislation imposing liability outside of accessorial liability of directors. It is in the area of such accessorial liability that the difficulties thrown up by the instant proceedings may be seen to arise. Proposition 4 Adopting the construction outlined, there could only be an inconsistency with the TPA if that Act positively protected directors of corporations from this type of liability: cf eg Commercial Radio Coffs Harbour Ltd v Fuller (1986) 161 CLR 47 at 57-8. It does not do so. Section 75B, on which the First Defendant places so much reliance (subs paras 16, 17, 22), creates one route by which directors of corporations may be liable for conduct of the corporation. But it says nothing as to limiting their liability to only such liability in relation to any claim for proscribed conduct.

This submission appears to be correct. The submissions of the plaintiffs

The plaintiffs in addressing this issue submitted that they were not relying on any provisions of the TPA or FTA. The submission was that the plaintiffs were simply seeking to make amendments to the summons to allege additional causes of action available to Claimants against Ansett or Traveland by reason of, inter alia, misleading and deceptive conduct and unconscionable conduct within the meaning of the TPA and FTA. Accordingly, so it was put, the new amendments to the summonses (for the purpose of the s.109 argument) simply allege further causes of action available to such Claimants.

The submissions put by the plaintiff include the following: To constitute a direct inconsistency under section 109, the relevant Commonwealth and State laws must make contradictory provision upon the same topic thereby making it impossible for both laws to be obeyed: Credit Tribunal at 563 per Mason J; R v Loewenthal ; ex parte Blacklock (1974) 131 CLR 338 at 346 - 347. One law must require what the other forbids: Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at 76; Wallis v Downard-Pickford (North Queensland) Pty Limited (1994) 179 CLR 388 at 398. Sections 82 and 87 TPA are not inconsistent with section 40(3) TAA. Firstly, the laws deal with quite different topics. Sections 82 and 87 TPA deal with the remedies available to persons who suffer loss or damage or seek section 87 ancillary orders against corporations which are in breach of Part V TPA. Section 40(3) TAA deals with the subrogations rights of the Travel Compensation Fund to rights of Claimants in relation to acts or omissions of persons carrying on business as a travel agent. They are quite distinct and disparate subject matters. When laws deal with different subject matters then any direct collision under section 109 is “less likely to occur”: Clarke v Kerr (1955) 94 CLR 489 at 505 Even if they are on the same subject matter (eg consumer protection) then they are in no way contradictory. Indeed, they compliment each other. The remedies available to Claimants under the Trade Practices Act (whereupon the Claimants can seek relevant orders under sections 82 and 87 TPA) are rights to which the plaintiff can be subrogated to by force of section 40(3) TAA. There is simply no contradiction. Similarly there is no direct inconsistency between section 75B TPA and section 40(4) TAA. The laws deal with different subject matters or, in the alternative, are not contradictory with respect to the one subject matter. Section 75B is not the entire means by which persons can institute proceedings against directors. Section 75B is not exclusive of the liability of directors pursuant to section 40(4) TAA. Section 40(4) TAA confers additional rights against directors of travel agent companies which are conferred upon the plaintiff. There is no collision. It is likewise clearly possible to obey both sets of laws. For example, a consumer books travel with the travel agent and that travel is not provided because the travel agent has engaged in misleading or deceptive conduct under section 52 TPA. That consumer has relevant rights against the travel agent under section 52 TPA and can recover losses suffered by him or her pursuant to section 82 TPA. The TCF is subrogated to the rights of those Claimants pursuant to the provisions of section 40(3) TAA. Both laws have been obeyed. There is no direct inconsistency. For similar reasons, there is no prohibition imposed by ss. 82, 87 and 75B TPA which, in any way, is permitted by the provisions of section 40 TAA. The provisions of section 40 TAA do not, in any way, alter, or impair or detract from the operation of sections 75B, 82 or 87 TPA: Australian Mutual Providence Society v Goulden (1986) 160 CLR 330 (“ Goulden ”) at 339; Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 (“ Telstra ”) at 76. The provisions of section 40 do not, in a significant respect, negate the essential legislative scheme of sections 75B, 82 & 87 TPA: Goulden at 339. Even if the laws do deal with the same subject matter they clearly serve different purposes or ends - ie the federal law concerns the rights of persons who have suffered loss or seek ancillary orders against corporations who are in breach of Part V TPA provisions whereas the State Law concerns the subrogation rights of the plaintiff against travel agents and directors of travel agents in circumstances where those agents have committed a relevant act or omission. In such circumstances there is no direct inconsistency under section 109: Airlines of New South Wales v New South Wales (No. 2) (1965) 113 CLR 54 at 121 - 122, 108 - 109; Ex parte McLean (1930) 43 CLR 472 at 485 - 486; R v Winneke ; ex parte Gallagher (1982) 152 CLR 211 at 220; Re McJannet; ex parte Minister for Employment, Training and Industrial Relations (Queensland) (1995) 184 CLR 620 at 642. The laws simply perform different functions within different systems thereby not being directly inconsistent. Section 40 TAA and sections 75B, 82 and 87 TPA are relevantly distinguishable from the laws found to be directly inconsistent in Telstra Corporation Ltd v Worthing as the Workers Compensation Act 1987 (NSW) and the Safety, Rehabilitation and Compensation Act 1988 (Cth) both concern the payment of workers compensation to a worker employed by the Australian Telecommunications Commission. The laws dealt with the same subject matter and the State law had the effect of qualifying, impairing, and, in some respects, negating, the effect of the federal law. The TAA and TPA deal with different subject matters or, at the very least, serve different ends in respect of the same subject matter. Lastly, section 42 TAA provides as follows: “(1) Except to the extent that this Act expressly provides otherwise, nothing in this Act modifies or excludes a right or remedy that a person would have had if this Act had not been enacted. For the purposes of any Act, matters arising under this Act are matters relating to the interests of consumers and this Act is an Act designed to protect the interests of consumers.” It is submitted that by reason of section 42(1) TAA Parliament intended that any rights or remedies available to Claimants against travel agents (under the TPA or otherwise) would not in any way be modified or excluded by the provisions of section 40 TAA. The TAA is designed to protect consumers (section 42(2) TAA) and the provisions of section 40 should not be read as intending to, in any way, impair or negate the effect of remedies available to Claimants under the provisions of Part V or Part IVA TPA. The provisions of s42 TAA are yet another indication that it was not intended that the provisions of s40 TAA should be directly inconsistent with any federal law which confers rights on consumers. Dealing with the problem

Ultimately it has to be said that the submissions threw up a real anomaly in the wording of subsections (3) and (4) of the Act. Following the careful submissions put by the parties, it seems to me that it cannot be said that the TCF has not shown an arguable case in support of the construction for which it contends. In the nature of things, the construction issue is live to be litigated. And there are clearly many circumstances where a Commonwealth law has been held to operate within the setting of other laws, hence being supplementary to or cumulative upon particular State laws in question [cf Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at [27] and cases cited at footnote 62]. The court cannot be satisfied that the TCF case cannot succeed. The court cannot be satisfied that there is no possibility that the TCF has not grounded the proceedings upon a good cause of action. There is a real question of law to be determined. Subject to the determination of the particular objections of the defendants referred to hereunder, it is clearly an appropriate exercise of the court's discretion to allow the amendments. Fair Trading Act causes of action

There is no material difference of substance between the cases sought to be pleaded by TCF based upon the TPA and those sought to be pleaded based upon the FTA in the sense that, as earlier made plain, both cases are sought to be pressed notwithstanding that: (a) the TCF does not allege that it has suffered any loss by reason of the alleged contraventions; and (b) the TCF does not allege that the defendants have themselves contravened those Acts.

Likewise the TCF seeks leave to plead a case that Ansett and Traveland contravened the FTA, various persons who had sought to purchase travel services thereby suffered loss, those persons made a claim on the TCF and were reimbursed, and that by reason of s40 of the Travel Agents Act 1986 (NSW): - the TCF can commence and maintain in its own name proceedings in respect of those alleged contraventions; and - the TCF can sue not merely Ansett and Traveland, but also the directors of those companies who are in effect vicariously liable.

Insofar as the FTA causes of action of concern there is no constitutional imperative inhibiting the claim. Here the real issue concerns one of statutory construction, the FTA being a law of the State. The submissions of the first defendant

The submissions of the first defendant included the following: · The rights which are vested in the TCF are the statutory rights of action created by ss68 and 72 of the FTA (the equivalents to ss82 and 87 of the TPA). Those rights of action are defined as being available against persons who committed the conduct or persons “involved in” the conduct. Section 61 is the State version of s75B and uses the language "A reference in this Part to a person involved in a contravention of a provision of this Act shall be read as a reference to a person who . . .". Those rights of action are given to persons who have suffered loss or damage (or in the case of s72 are likely to suffer loss or damage). · The Travel Agents Act 1986 does not rewrite or redefine those rights of action. In particular, there is no basis for taking the right of action against persons who were “involved in” the conduct, and altering that right into a different right involving, in effect, vicarious liability on the part of a director. The right of statutory “subrogation” is to the right enjoyed by the claimant to whom the TCF has made a payment. · The TCF’s construction to the contrary involves a direct clash between two State Acts. There is no reason why the latter Act (the Fair Trading Act ) would not prevail - since it is last in time and deals more specifically with the right of action. The submissions of the plaintiffs

The plaintiffs submitted that: · section 109 of the Constitution does not necessarily provide safe guidance in a case which concerns statutes of the same legislature and alleged inconsistency between such statutes: Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 (“ Suatu ” ) at 546 per Gummow J; · where the comparison is to be made between two State Acts, there is a very strong presumption that the State legislature did not intent to contradict itself but intended that both Acts should operate. It will often be found that the two may reasonably and properly be reconciled by reading the one as subject to the other: Butler v Attorney-General (Victoria) (1961) 106 CLR 268 at 276; Suatu at 547; · the words of the later enactment must be “such as by their necessity to import a contradiction”: Rose v Hvric (1963) 108 CLR 353 at 360; Garnett v Bradley (1878) 3 App Cas 944 at 966. The later enactment must contain clear language from which it is plain that its provisions should be applied (and intended to apply) in a manner inconsistent with the earlier enactment: South Eastern Drainage Board (South Australia) v Savings Bank of South Australia (1939) 62 CLR 603 at 625; · in light of the above that the provisions of sections 68, 72 & 61 FTA (and the equivalent provisions in South Australia and the ACT) are not inconsistent with section 40 TAA; · it is not clear or plain from these provisions of the FTA that they were intended to repeal the provisions of section 40 TAA, especially when one considers that it is presumed that no such contradiction exists between the two State statutes; · it does not necessarily import a contradiction between the State enactments; · for reasons similar to those above, they simply deal with different subject matters or, in the alternative, serve different ends in respect of the same subject matter - ie consumer protection; · the defendants have not rebutted the presumption that the provisions of the FTA should be reconciled with the provisions of the TAA; and · for there to be a relevant inconsistency or implied repeal between the two State statutes, the language of the later enactment must be clear and unambiguous. This is simply not the case with respect to the provisions of sections 68, 72 and 61 FTA. Conclusion

I am far from persuaded that the matter is sufficiently clear in the defendants favour to justify the Court in refusing the leave to amend.

I turn next to examine other submissions put in opposition to the proposed amendments based upon the FTA causes of action which the TCF seeks to pursue. It is necessary to proceed on a piecemeal basis dealing with each of the alleged obstacles to leave to amend being granted. Some of these submissions overlap with others. The submissions are generally dealt with seriatim. TCF not subrogated to the alleged rights under the FTA Allegation that no cause of action under the FTA has been properly pleaded

The second and third defendants have submitted as follows: · the right of statutory subrogation which the TCF seeks to exercise arises under subsections 40(3) and (4) of the Act where payment is made: - Under the Compensation Scheme; and - By reason of an act or omission of a registered travel agent; · the rights to which TCF is “subrogated” are rights against the travel agent arising from the act or omission which gave rise to the entitlement to payment of compensation; · under the terms of the Deed of Trust establishing the Compensation Scheme, payment under the Scheme may be made, and may only be made, in the circumstances described in paragraphs 15.1 and 15.2 of the Deed; · accordingly, in order to establish the existence of the right of statutory subrogation, TCF must establish the existence of acts or omissions which were sufficiently connected to the agent’s failure to account so as to satisfy the requirement of subsection 40(3) that the entitlement to compensation arose “ by reason of ” that act or omission; · TCF now wish to assert that the contracts pursuant to which travel or travel-related services were provided were entered into as a consequence of misleading conduct, or conduct in breach of section 58(b) of the TPA, on the part of Ansett or Traveland; and · even if it could be established that some proper basis exists for asserting the existence of such causes of action, compensation was not payable under the scheme “by reason of ” misleading and deceptive conduct inducing the entry into the contract. Compensation was payable only as a consequence of a failure to account. The right of statutory subrogation arises only in connection with acts or omissions by reason of which such failure to account occurred.

Here again I am not satisfied that the analysis is sufficiently certain to justify withholding leave to amend. The submissions which were advanced in terms of the suggested commonsense causation notions said to determine whether a breach of TPA section 52 [by way of the inducing of a claimant to entry into a contract with a travel agent] is an act by reason of which the trustees made a compensation payment under the scheme, may certainly be litigated. The matter cannot be said to be sufficiently certain against the TCF to stand in the way of the application for leave to amend.

A permissible view may be that there is a line, albeit a narrow line, between on the one hand, the notion of compensation payable by reason of misleading and deceptive conduct inducing entry into contracts and on the other hand, the notion of compensation payable only as a consequence of a failure to account . Another view may deny this distinction as having a relevance to the close question of construction. The above analysis put by the second and third defendants is insufficient to deny TPA an entitlement to have the matter litigated.

In this regard I note the plaintiffs submissions which make it even clearer that this is a matter requiring to be litigated: First, the TCF contends that all it needs to establish for the purposes of section 40(3) TAA is that a payment has been made to the relevant claimant under the compensation scheme by reason of an act or omission by Ansett or Traveland. The relevant act or omission may be a failure to account but it need not necessarily be restricted to a failure to account. Second, the TCF asserts that it is not open to the defendants to go behind payments which have been made from the fund. The position is analogous to a defendant sued by way of subrogation as a result of a payment by an insurance company. In such a situation, the defendant cannot be heard on whether or not the insurance company was legally obliged to pay the claim: King v Victoria Insurance Co Ltd [1896] AC 250 at 254–256; Sydney Turf Club v Crowley [1971] 1 NSWLR 724 at 730 (per Jacobs JA): “If an insured claimed to be indemnified by one insurer and that insurer disclaims liability, but honestly and by way of ex gratia payment with reservation of his rights pays the amount of the claim, then he is entitled to be subrogated to the rights of the insured against the real insurer. King v. Victoria Insurance Co. Ltd ”

Further, the TCF seeks to assert that if there is a condition precedent (contrary to the case of the TCF), any condition precedent to the bringing of the action imposed on the TCF by the compensation scheme is presumed to be complied with unless the contrary is approved: section 52 TAA. The proposition is that in such a situation, the burden rests on the defendants to show that, for example, any particular payment made by the TCF to a certain claimant did not comply with the alleged condition precedent(s) to the bringing of the action imposed by the compensation scheme established. This is again a matter live to be litigated. The matter is further examined below. Lack of particulars of express terms paragraph 39 of proposed Further Amended Summons [Dean]

The submission is that no proper particulars have been provided of the communications said to include the express undertakings sought to be pleaded in paragraph 39 of the proposed further amended Summons. The proposition is: The material which has been served suggests that no basis exists for the allegation that express promises were made to the effect alleged. The TCF has previously confirmed to the Court that it has served all its lay evidence. In relation to the Dean proceedings, the lay evidence relied upon by the TCF is the witness statement of Cheryl Raylene Dean, dated 21 March 2003. Therefore, the TCF ought now to be able to provide proper particulars of the express terms it alleges. The TCF’s continued inability to particularise these terms suggests that they have no proper basis for pleading them. Having regard to the history of the matter, leave should not be granted to permit apparently baseless allegations to be raised.

The submission extends the distance of asserting that this is an amendment predicated "upon patently baseless allegations".

The approach taken by Mr Donaldson SC for the second and third defendants sought to have the Court disallow the application for leave to amend to plead the alleged express terms [paragraph 39 Dean] essentially on two related bases: · a failure to provide proper particulars of each of the express terms; and · a claim that to the extent that certain particulars have been furnished of the express terms, they are patently inconsistent with the evidence already served in the form of a statement of Mrs Dean.

In my view there is no substance in the second of these claims. One cannot, at least at the present point in time in these complex proceedings, mobilise the Overriding Purpose Rule in this case into a backdoor route by which to test TCF's case.

As to the first matter, a failure to provide particulars is always a matter of concern and notwithstanding that in relation to certain other matters dealt with below, it is appropriate to allow the furnishing of particulars after discovery [when the relevant materials are not in the possession of the TCF which has given the best particulars its presently able to give], particulars of the subject express terms are required to be given by the TCF and an order in that regard will be made. Lack of particulars of the implied terms-paragraph 40 of proposed Further Amended Summons [Dean]

TPA seeks to plead that the following were implied terms of the Agreement: (a) in the alternative…Ansett would forthwith remit to the Operator(s) that portion of the moneys referable to their part of the Travel; (b) in the alternative to (a) above, upon receipt of the Moneys, Ansett would hold: (i) the Moneys; or (ii) alternatively, that portion of the Moneys referable to that part of the Travel provided by the Operator(s), on account for the Claimants and take reasonable steps to safeguard the Moneys, or alternatively that portion of the Moneys referable to that part of the Travel provided by the Operator(s), as the case may be. (c) if for any reason Ansett was unable to perform the express terms of the Agreement, it would refund the Moneys to the Claimants; (d) Ansett would ensure that it would be able to meet its obligations to perform the express terms of the Agreement, or in lieu thereof, would be able to perform, at least, the implied term set out in (c) above; and (e) upon receipt of the Moneys, Ansett would use its best endeavours, or alternatively, take reasonable steps to preserve such moneys as were necessary to ensure that Ansett was able to refund the Moneys if for any reason Ansett was unable to perform the express terms of the Agreement. Particulars of the implied terms The implied terms arise out of the relationship between the parties and the nature of the transaction entered into. Particulars of the reasonable steps The reasonable steps were, without limitation, the following: (i) maintain a separate client account and deposit clients' moneys into that account; (ii) maintain a trust account; (iii) ensure that clients' moneys were not used as working capital by Ansett or Air NZ; (iv) not permit a common treasury function to be maintained as between Ansett and/or Air NZ; (v) not permit the common treasury function maintained as between Ansett and/or Air NZ to include clients' moneys; (vi) cease the maintenance of a common treasury function as between Ansett and/or Air NZ as soon as there existed a significant risk that the continuation of those functions may result in clients' moneys not being available to be passed onto the Operator(s); (vii) give priority, in the Ansett or Air NZ budgetary and cash management processes, to the need to safeguard clients' moneys so as to enable those moneys to be available to pass on to the Operator(s); (viii) pass on clients' moneys to the Operator(s) as soon as practicable after receipt; and (ix) ensure pre-payment of the Operator(s).

The complaints in this regard appear to be: · that there is an inconsistency between on the one hand, the alleged express terms of the Agreement to be found in paragraph 39 (f) where the term pleaded is that Ansett, upon receipt from Flight Centre, would forthwith remit to the Operator that portion of the Moneys referable to their part of the Travel ["the forthwith remit the funds obligation"] and on the other hand, the alleged implied term to be found in paragraph 40 (b) [to upon receipt of the Moneys, hold the same on account for the claimants] ["the hold the funds obligation"]. [ I interpolate to note that: · the ‘forthwith remit’ the funds obligation is also put as an alleged implied term in paragraph 40 (a); · the hold the funds obligation to be found in paragraph 40 (b) is put as an alternative to paragraph 40 (a).]; and · that the particulars of the implied terms are insufficient insofar as implication in fact is to be relied upon, the proposition being that the particulars fail to descend to the requisite specificity by reference to the circumstances generally formulated in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26.

The matter is said to have special significance because of the complex area where the implied terms are said to constitute representations as to the future.

It has to be recalled that the TCF has given as particulars that: "The implied terms arise out of the relationship between the parties and the nature of the transaction entered into."

In the unusual circumstances which underpin the TCF's case it seems to me that the particulars of implied terms furnished are sufficient to apprise the defendants of the case sought to be made against them. There are cases and there are cases. In Breen v Williams (1995) 186 CLR 71 at 90 – 91 the matter was put as follows by Dawson and Toohey JJ: “Implied term The implication of a term in a contract is based upon the presumed or imputed intention of the parties. In the case of a formal contract which is complete on its face, it may be said in general that no implication arises (save where it is a legal incident of a particular class of contract) unless it is necessary or obvious – necessary in the sense of being required to give business efficacy to the contract or obvious in the sense that it goes without saying [see BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283-284; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 605-606; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347, 404]. Where, however, as in this case, there is no formal agreement, the actual terms of the contract must be inferred before any question of implication can arise. The test which is then to be applied was formulated by Deane J in Hawkins v Clayton [(1988) 164 CLR 539 at 573] in these terms: “The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case . That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties.” [emphasis added] That is to say, no question of there being an obvious implication arises in such a case because that which is obvious will be a term of the contract as a matter of inference. Moreover, the line between inference and implication will not always be easy to draw.”

Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 casts further light upon some of the intricacies of implication: Mahoney JA said (at 684 - 685) “A warranty as to what an employer will or may do for his worker may come into existence in at least three ways. It may be given expressly by the employer; it may be given by him by implication, in the sense that, though the words of warranty are not expressed, there is to be inferred from what the employer did the actual giving of the warranty; or, though the employer had no actual intention or purpose to give the warranty, it may be imputed to him by law. And, of course, that imputation may occur by force only of the common law or because of the statutory stipulations to that effect. Where the warranty arises because, expressly or by implication, the employer intended it to be given, the circumstances may warrant the worker taking from the making of the contract of employment that the employer will do what he warrants. The warranty, in the circumstances, may give the worker to understand that that will be so. In such a case, the conclusion will be open that, from the conduct of the employer in doing what he did, the worker was to take it that the employer would act in a particular way . And, if the employer had, for example, no intention or no provision for doing so, then the conclusion may be open that that which the worker took from the contract of employment would mislead. But, in my opinion, this does not follow where the warranty arises by imputation. If, for example, there be nothing more than that, absent actual intention, the law imputes or imposes on the employer the relevant warranty, it by no means follows that the worker may, in the relevant sense, take from the making of the contract of employment that the employer will, or will be able to, do what the warranty requires. As I have said, what may be taken from the making of the contract of employment will depend upon the circumstances.” (emphasis added) Clarke JA said (at 698): “It may be otherwise if the term arises by implication from statements made at the time of entry into the contract or if a term is implied to give a contract business efficacy, or to give effect to a custom. But where the only conduct of the respondent was the entry into a contract in which , as a matter of law , a term or warranty was implied I am unable to accept that because the warranty was later breached any question of misleading conduct arises.” (emphasis added) [McHugh JA took a wider view (but his Honour was in dissent)] Submission that there is no basis pleaded for categorising promises as representations

There is no substance in the complaint in this regard. Each of the identified sub-paragraphs in the proposed summons uses the word "would". This is sufficient to underpin the allegation that the promise constituted a representation as to a future matter. General distinction between matters of pleading and particulars and matters of evidence

Further in a number of areas the particular complaints of lack of particulars of facts, matters and circumstances to be relied upon in support of the matters pleaded go to questions of evidence and not pleading . This case is now pleaded somewhat differently from the earlier pleadings and whatever factual investigation may be requisite by reference to the pleadings will be a matter of legitimate forensic endeavour. TCF section 58 (b); FTA section 53 (b) Material Omission

Dean paragraphs 50 - 55 fails to disclose a cause of action, insofar as the pleading omits the reference in section 53(b) of the FTA, to supplying the services “within the period specified by the person or, if no period is specified, within a reasonable time”: see Dean paragraph 54. This matter does require to be remedied. Other issues

No particulars at all are apparently given in relation to the allegations made in paragraph 52 [Dean]. However sub paragraphs (b)-(d) are very specific and I accept TCF's submission that with respect to these particular sub paragraphs, to require more would be to require TCF to disclose its evidence.

In relation however to sub paragraphs (a) and (e) the proper approach to be adopted is to case manage the timing when further particulars will require to be furnished. In Rutledge v Jaluit Pty Ltd (1991) 6 BPR 13,826 Hodgson J put the matter as follows: "… I think a fair balance would be to allow the plaintiffs to plead such a statement of claim, and to continue the proceedings to the stage of discovery and interrogatories, and if they cannot then give satisfactory particulars of the defendants "knowing participation", the statement of claim could be struck out at that stage."

Having said that, the Court should not be taken as giving any form of indication that interrogatories will necessarily be permitted in these proceedings. However I accept that TCF has given the best particulars presently capable of being given in the circumstances in which, for reasons which are common ground, TCF has up to this point in time not been capable of pursuing the entities or persons who would have further information.

Nor is it beyond possibility that in this very unusual case the Court, at a later stage in the proceedings, will direct that the TCF prepare, file and serve a detailed statement of the particular facts, matters and circumstances which are to be relied upon by way of the evidence to be adduced in support of the proposition that the travel agents were aware at the material time, of the matters now sought to be pleaded in Dean [52]. This is where the Overriding Purpose Rule may very well be engaged for the reason that unless some rigid guideline directions are given, the collapse of the Ansett Group and the number of investigations into and materials relating to that collapse have the capacity of submerging the parties and the Court into a veritable sea of materials. The position seems to be almost a clarion call for mobilisation of the Overriding Purpose Rule, with the high possibility that special directions will be seen as appropriate and will be formulated by whichever judge is then dealing with the case management of the matter. Section 43 FTA

A complaint is directed to the proposed pleading in paragraphs 56 & 57. Although the complaint is expressly directed to the pleading of sections 51AA and 51AB of the TPA, the same complaint is presumably addressed to the pleading insofar as it relies upon section 43 of the FTA [relevantly equivalent to TPA section 51AB]. Addressing the matter accordingly, in my view there is no substance in the complaint. The particulars given in paragraph 57 suffice as particulars of what is alleged to have been unconscionable. The submissions of no arguable case are not of substance. [cf ACCC v Samton Holdings Pty Ltd (2002) 117 FCR 301 at 317; Hurley v McDonald’s Australia Ltd [1999] FCA 1728 at [22] and [31]; Qantas Airway Ltd v Cameron (1996) 66 FCR 246 at 262 as to the width of the concept of unconscionability] Contract Review Act claim

The first submission is that: · the rights to which TCF is “subrogated” are those arising from acts or omissions by reason of which payment of compensation has been made under the Compensation Scheme; · on no view of the matter can it be suggested that an entitlement to seek relief under the Contracts Review Act is a cause of action against Ansett or Traveland arising from an act or omission of the type referred to in the Act; and · accordingly, leave should not be given to enable TCF to purport to seek relief in connection with contracts to which it was not a party.

In my view this is a matter which the TCF is entitled to litigate. The meaning of the words " rights… arising from the act or omission which gave rise to the entitlement to payment of compensation " being a question of construction, the matter is not beyond argument. The question of parties

The second submission goes to the question outlined earlier, of proper parties. It is convenient to commence by addressing the principles. The principles

Part 8 Rule 8 (1) of the Supreme Court Rules (NSW) provides: "Where a party who is not a party- (a) ought to have been joined as a party; or (b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated upon the Court, on application by him or by any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceedings"

In Victoria v Sutton (1998) 195 CLR 291 McHugh J put the matter as follows at [77]: "The rules of natural justice require that, before a Court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the court to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order [footnote 77 cites News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; Grovenor v Permanent Trustee Co of NSW Ltd (1966) 40 ALJR 329 and continues- " This rule is derived both from the common law and by implication through the power of the courts to join parties who are unnecessary and proper for hearing”. ] That practice also assists in avoiding duplication of hearings on the same issue and in avoiding the spectre of inconsistent decisions by courts of the judges of the same court."

In Pegang Mining Company Ltd v Choong Sam [1969] 2 MLJ 52 Lord Diplock (at 55 – 56) in delivering the opinion of the Judicial Committee of the Privy Council said: "In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard…a better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?" [emphasis added]

McHugh J in Victoria v Sutton after citing the above passage, makes the point that although the test for determining whether a person is a necessary party has usually arisen in the context of a person seeking to join proceedings, rather than a failure to join a relevant person, the same principle must apply in both situations.

It has been said, in my view correctly, that the expression " effectually and completely determined" [cf Part 8 (1) (a)] should be liberally construed. It follows that it is difficult, and perhaps undesirable to attempt an exhaustive formulation of a principle as to when joinder is "necessary": Gurtner v Circuit [1968] 2 QB 587; Great Eastern Cleaning Services Pty Ltd, Re [1978] 2 NSWLR 278 [Ritchie's Supreme Court Procedure NSW [8.8.2]] The issues presently before the court as to parties

Traveland and Ansett have not been joined as defendants in the proceedings.

Save in relation to the Dean proceedings, no claimants have been joined on either side of the record in any of the proceedings.

Applying the principles set out above, in my view all of these parties ought to have been joined under one or both Part 8 Rules 8 (1).

It has to be recalled that: · claims are made to vary the subject agreements between the claimants and the travel agents under section 87 (2) (b) of the TPA, section 72 (5) (b) of the FTA and/or in relation to New South Wales proceedings, section 7 (1) (c) of the Contracts Review Act 1980 (NSW); · insofar as the travel agents are concerned, although no relief is sought against them, the allegations made against them which are sought to be proved as part of the route to obtaining relief against the directors, are serious in the extreme , going the distance for example, of claiming that they engaged in unconscionable conduct; that they accepted moneys for travel albeit being aware that there was a reasonable likelihood that the travel agent concerned was insolvent or would soon become insolvent; and that the travel agent engaged in misleading and deceptive conduct and in other contraventions of the TPA and the FTA. Indeed, as was pointed out by Mr Donaldson SC, at the time of the conduct complained of [April 2001 in Dean], the consequences of a breach of section 58 (b) were dealt with in section 79 which provided that a contravention of this section was an offence attracting criminal sanctions ; · as Mr Robertson submitted, the interests of the travel agents would appear to be far more directly affected in these sets of proceedings than were the interests of the coaches and players in News Ltd v Australian Rugby Football League Ltd [supra]; and · whilst the position may not be anything like as clear in relation to the requirement to have the claimants joined as parties, here again it does seem somewhat anomalous to find that parties to a contract which is sought to be varied, should not be joined in the proceedings seeking that relief. And if the reason for suggesting that no such joinder is necessary concerns the claim by the TCF to be subrogated to all anterior rights held by the claimants in or relating to the subject contracts, one answer to this proposition is that there is a direct challenge by the defendants to that subrogation having been effected upon the payment of moneys by the TCF to the claimants [the challenge is put in a number of ways, most particularly by reference to the assertion that as a matter of ordinary statutory construction, the reference in section 40 (3) of the Act to a payment " under the compensation scheme " is a reference only to a payment made validly under that scheme-the defendants submitting that a number of the pre-requisites to their being a " payment… under the compensation scheme " were not satisfied]. Hence and if the defendants submissions were ultimately successful in this regard, it could not be said that the claimants no longer held their contractual rights. Nor could it be said that the claimants were no longer subject to such contractual obligations as may have been imposed upon them by the contracts with the travel agents.

For these reasons in my view the travel agents, as well as all claimants, are necessary parties to the proceedings. It is a matter for the TCF as to whether or not it elects to join the claimants as defendants or as plaintiffs.

Subject to the above-described obstacles to the attempt to plead the Contracts Review Act claim, I reject as of no substance the submission that no serious attempt has been made to plead the facts and circumstances which might arguably give rise to an entitlement for such relief. The specific requirements of clause 15 of the Trust Deed

A number of sophisticated submissions are addressed by Mr Speakman of counsel for the fourth defendant to the suggested pre-requisites or pre-conditions which require to be satisfied before any right of subrogation of the type generally sought to be pleaded, may arise. These commence with the specific requirements of clause 15 of the Trust Deed.

The submissions are as follows: · clause 15 of the trust deed of the Travel Compensation Fund governs when the board of the plaintiff “must” (clause 15.1) and “may” (clause 15.2) pay compensation out of the fund. Any other payment is “prohibited”: see clause 18.2; · clause 15.2(b) does not apply in the present cases. That clause only applies in the situation of a travel agent “who is not a participant” (the expression “participant” being defined in clause 1.1 of the trust deed). Paragraph 8 of each of the draft further amended summonses pleads that Ansett or Traveland (as the case may be) was a “participant” within the meaning of that term in the trust deed; · this means that in the present cases, compensation could only have been validly paid either: (a) to a person who, among other things, “has suffered or may suffer direct pecuniary loss arising from a failure to account …” (see clause 15.1, where the requirements in paragraphs (a) - (c) are cumulative), or (b) to a person within clause 15.1 “in relation to other pecuniary loss arising from a failure to account as referred to in that clause” (see clause 15.2(a)).; · thus a first prerequisite to payment of compensation out of the fund in the present case is that there has been a “failure to account”; · a second prerequisite to the payment of compensation is that the recipient “has suffered or may suffer direct pecuniary loss”; · a third prerequisite to the payment of compensation is that this direct pecuniary loss is one “arising from” the failure to account. Unless the recipient “has suffered or may suffer direct pecuniary loss arising from” a failure to account: (c) clause 15.1 is not satisfied because paragraph (b) is not satisfied, and (d) clause 15.2(a) is not satisfied because the person is not “a person referred to in clause 15.1 …”.; · a fourth prerequisite to the payment of compensation is that the recipient “is not protected against the [direct pecuniary] loss by a policy of insurance”. Unless the recipient is “not protected” in this way: (e) clause 15.1 is not satisfied because paragraph (c) is not satisfied, and (f) clause 15.2(a) is not satisfied because the person is not “a person referred to in 15.1 …”. · in the case of the Dean draft further amended summons, the Travel Agents Act 1986 (NSW) applies: see paragraphs 5 - 6 of each of those draft further amended summonses. The plaintiff has, in certain circumstances, a right of subrogation under section 40(3) to the rights of a claimant on the fund. This only occurs where, among other things, “a payment is made to a claimant under the compensation scheme …”; · the reference in section 40(3) of the Travel Agents Act to a payment “under the compensation scheme” is a reference only to a payment made validly under the compensation scheme: - This follows as a matter of ordinary statutory construction: compare Duncan v Theodore (1917) 23 CLR 510 at 527.6, 544.9. - Except where the procedure in section 60 of the Trustee Act 1925 (NSW) is followed (which is not suggested here), there is absolute liability on the part of a trustee who pays away trust property in a way that is not authorised by the trust instrument: see Meagher and Gummow Jacobs’ Law of Trusts in Australia 6th edition 1997 at [1735]. It would be a strange result if a trustee who distributed trust assets in breach of trust could recover those trust assets from a third person. - The reference to “subrogation” in section 40(3) should be construed as picking up the ordinary meaning in equity: cf Law Society of New South Wales v Bruce (1996) 40 NSWLR 77 at 85F. As a matter of principle, an equitable doctrine would not be available to assist the trustee in breach of trust to restore trust property. Further, a person who makes payment to another voluntarily, not subject to a contractual or fiduciary obligation, does not enjoy any right of subrogation: see Meagher, Gummow & Lehane’s Equity Doctrines & Remedies 4th edition 2002 at [9-110].; · hence there is no “payment … under the compensation scheme” within the meaning of section 40(3) and no right of subrogation unless, among other things: - there has been a failure to account, - the “claimant” is a person who “has suffered or may suffer direct pecuniary loss”, - the “direct pecuniary loss” is one “arising from” the failure to account, and - the “claimant” is a person who “is not protected against the loss by a policy of insurance”.; · however, in the case of the Dean draft further amended summons: - it is alleged that payments made were “under the compensation scheme” within the meaning of section 40(3) of the Travel Agents Act : see Dean paragraph 95, Wagner paragraph 94, Corcoran paragraph 91 and Hards paragraph 126; - there is no pleading as to why those payments were made “under the compensation scheme” within the meaning of section 40(3) of the Travel Agents Act; - there is an allegation that certain matters constituted “failures to account within the meaning of that term in clause 15.1 [Dean: clauses 15.1 and 15.2] of the Trust Deed”, but this is said to be “[w]ithout admitting that it is a matter the TCF needs to establish”: see Dean paragraph 89, Wagner paragraph 88, Corcoran paragraph 85 and Hards paragraph 120; - in each case it is alleged that the claimant or claimants “suffered direct pecuniary loss, within the meaning of that clause in clause 15.1 of the Trust Deed”, but “[w]ithout admitting that it is a matter which the plaintiff needs to establish”: see Dean paragraph 87, Wagner paragraph 87, Corcoran paragraph 84 and Hards paragraph 119; - apart from the allegation that the claimants have “ suffered direct pecuniary loss, within the meaning of that term in clause 15.1 of the Trust Deed”, there is no additional allegation that the claimants “ may suffer direct pecuniary loss” within the meaning of clause 15.1 of the trust deed; - in the case of Dean, but not in the case of Wagner, Corcoran and Hards, there is an additional allegation that “without admitting that it is a matter the TCF needs to establish, the Claimants suffered other pecuniary loss within the meaning of that term in clause 15.2 of the Trust Deed”: see Dean paragraph 88; - it is alleged in each case that the “direct pecuniary loss” (or, in the case of Dean, alternatively the “other pecuniary loss”) “arose from” the alleged failure to account: see Dean paragraph 90, Wagner paragraph 89, Corcoran paragraph 86 and Hards paragraph 121. Again in each case the allegation is made “[w]ithout admitting that it is a matter which the plaintiff needs to establish”; and - in each case it is alleged that the claimants “were not protected against the direct pecuniary loss … by a policy of insurance”: see Dean paragraph 91, Wagner paragraph 90, Corcoran paragraph 87 and Hards paragraph 122. Again in each case the allegation is made “[w]ithout admitting that it is a matter which the plaintiff needs to establish”. · given the matters above, the draft pleadings referred to are objectionable as follows: (a) The non-admissions about the plaintiff’s need to establish: (i) failures to account, (ii) direct pecuniary loss, (iii) that the direct pecuniary loss arose from the failures to account, and (iv) the absence of protection against the direct pecuniary loss by a policy of insurance, are untenable. (b) In any event the plaintiff should plead with precision how it is that payments to the claimants were “under the compensation scheme ”. If the payments are said to have been made “under the compensation scheme” by reason of matters pleaded elsewhere, then appropriate cross-references should be inserted in Dean paragraph 95, Wagner paragraph 94, Corcoran paragraph 91 and Hards paragraph 126. If other or additional matters are relied upon, they should be pleaded. Dealing with these submissions

The short answer by the TCF to these submissions concerns the TCF's proposition that it is entitled to contend and does contend that: · none of these suggested pre-conditions are otherwise than pre-conditions to an obligation in the TCF to make payments to claimants; and · the terms of section 52 of the Act properly construed, demonstrate that none of the suggested pre-conditions comprise matters which the TCF is required to establish in these proceedings.

Section 52, it will be recalled, provides inter alia: "..in any action brought by [the TCF] it shall be presumed, unless the contrary is proved, that any condition precedent to the bringing of the action imposed on them by the compensation scheme has been complied with."

In my view but for the fact that the TCF has seen fit to affirmatively plead that the relevant payments " were made by the TCF 'under the compensation scheme" within the meaning of that term in section 40 (3) of the Act ', this would indeed be a full answer to the submission [that the TCF is obliged to accept the defendants proposition that it must furnish particulars with precision as to how it is that payments to the claimants were made under the compensation scheme]. The TCF might, for example, have pleaded that upon the proper construction of section 52 of the Act, it is presumed in these proceedings unless the contrary be proved, that any condition precedent to the bringing of these proceedings imposed upon the TCF by the compensation scheme had been complied with. However in the present circumstances of the existing pleading the approach taken does require these particulars. Hence unless the TCF elects to amend to plead the presumption/deeming provision, a direction will be given for the particulars to be furnished as a condition of allowing the amended pleading. It may be possible for the TCF in this regard, to provide cross-references to earlier paragraphs in the document sought to be propounded. [cf transcript 120 - 121] Incantation

Insofar as the TCF has sought by prefatory averment to reserve its position by utilising the incantation: " without admitting that it is a matter that TCF needs to establish" , in my view this is not a permissible mode of pleading. It is necessary for the TCF to grasp the nettle by pleading its case and it is not able to sit on the fence in this way. That this is so follows quite simply from the entitlement of the defendants to know the nature of the case which they are required to meet. This in turn requires a degree of specificity which the incantation would deny. But more particularly, the incantation is simply otiose as meaningless verbiage which plays no part in the pleading and is effectively of no relevance. The pleading will not be allowed unless the so-called incantation wherever appearing, is removed from the document. [cf generally in relation to non admissions: Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809 and [8] - [11]] Travel arrangements” and “travel-related arrangements

Each draft further amended summons alleges that arrangements for travel which were made “ constituted travel arrangements ” and/or “ travel-related arrangements ” within the meaning of those terms in clause 15.1 of the trust deed. In each case, the incantation recurs.

Here again this form of pleading for reasons already given cannot be permitted. It suffices to simply note the submission advanced by the fourth defendant that this matter covers a suggested fifth pre-requisite to a valid payment out of the fund (in addition to the four other suggested pre-requisites referred to above) namely that the recipient is a person who “ entered into travel arrangements or travel-related arrangements ”. The proposition is that: · if the recipient is not such a person, the recipient is not a person within clause 15.1 of the trust deed, because paragraph (a) is not satisfied, and · the person is not someone within clause 15.2(a), because the person would not be “a person referred to in clause 15.1 …” Defendants as directors

Paragraph 9 in each draft further amended summons alleges that “[b]y reason of the matters pleaded” in other cross-referenced paragraphs of the draft further amended summons, “ at all material times each of the defendants was a director of ” Ansett or Traveland (as the case may be) within the meaning of the NSW, SA or ACT travel agents legislation (as the case may be).

These cross-referenced paragraphs include Dean paragraphs 20-25.

Those paragraphs, in effect, allege that the defendants were the only directors of “ in excess of 50 wholly-owned subsidiaries of Air NZ”.

The fourth defendant concedes that it may well be arguable for present purposes [including the NSW and South Australian cases], having regard to the extended definition of “director” in the Acts, that the matters alleged in Dean paragraphs 14 - 16 could be capable of supporting an inference that Mr Toomey was some kind of de facto director of Ansett or Traveland (as the case may be).

Paragraph 10 of the proposed amended summons pleads as follows: "A person who is a director within the definition of 'director' in section 9 of the Corporations Act 2001 (Cth) is a director within the meaning of that term in the Act."

It is necessary to note that the definition of "director" to be found in clause 3 (1) which has never been amended, reads as follows: "director, in relation to a body corporate, includes any person occupying or acting in the position of director of the body corporate, by whatever name called and whether or not validly appointed to occupy, or duly authorised to act in, the position."

At the material time the definition of "director" under the Companies Code read as follows: “director”, in relation to a corporation, includes - (a) any person occupying or acting in the position of director of the corporation, by whatever name called and whether or not validly appointed to occupy or duly authorized to act in the position; (b) any person in accordance with whose directions or instructions the directors of the corporation are accustomed to act; and (c) in the case of a foreign company- (i) a member of the committee of management, council or other governing body of the foreign company; (ii) any person occupying or acting in the position of member of the committee of management, council or other governing body of the foreign company, by whatever name called and whether or not validly appointed to occupy or duly authorised to act in the position; and (iii) any person in accordance with whose instructions the members of the committee of management, council or other governing body of the foreign company are accustomed to act.”

It may be seen that there is a considerable commonality in on the one hand, the definition of director to be found in the Act and on the other hand, sub-paragraph (a) of the Companies Code definition at the time. However sub-paragraphs (b) and (c) of the Companies Code definition were not picked up by the definition in the Travel Agents Act .

The fourth defendant has submitted that is appropriate to infer that the Legislature, having in effect, copied and pasted some similar words, deliberately intended not to pick up the balance of that definition of director in the Companies Code, so that, as at 1986, the mere fact that a person may have been a director within the meaning of the Companies Code, would not mean that that person was a director within the meaning of the Travel Agents Act . Clearly enough the task of the court will in these proceedings be to decide whether or not each director is a director within the language of section 3 of the Travel Agents Act and its interstate analogues.

I do not accept that it is proper for the TCF to have pleaded as it has in paragraph 10. The defendants are entitled to have properly pleaded, the facts, matters and circumstances of the case which they are to meet in support of the proposition that they were directors of the Travel Agents within the meaning of the Act. Some concessions appeared to come forward from TCF [Transcript 159]. In any event and whether the concessions were or were not intended to cover this matter, the pleading will not be allowed in this regard in its present form.

There were a number of overlapping objections put to the legitimacy of the directorship pleading.

The fourth defendant’s objections to the directorship allegations included Dean paragraph 34 relating to Ansett cases. These paragraphs plead a non-admission “that the purported resignation of Toomey [as a director of Ansett] dated 24 August 2001 was effective”.

The fourth defendant draws attention to the fact that in contrast: · there are no non-admissions about the effectiveness of the purported resignations of Messrs Blair and Roworth as directors of Ansett; and · instead there are averments that those purported resignations were ineffective (for a given reason): see Dean paragraphs 26 and 31. (The draft further amended summonses make no reference to any resignation or purported resignation of Mr Frazis.) [I interpolate that in the Traveland cases, there is no non-admission about the effectiveness of the purported resignation of Mr Toomey as a director of Traveland Instead there is an averment that the purported resignation was ineffective: see Corcoran paragraph 39, Hards paragraph 39, Jarrett paragraph 35, Barkway paragraph 39 and Cartwright paragraph 39.]

In my view there is substance in the fourth defendant's submission that the pleading in Dean paragraph 34 by way of “non-admission” in an originating process is embarrassing and evasive. The pleading apparently accepts that there was a “ purported resignation ” by Mr Toomey as a director of Ansett. As the fourth defendant submits, it is one thing for the plaintiff to allege that, whether or not Mr Toomey formally resigned as a director of Ansett, he continued to act as some kind of de facto director and was still a director within the meaning of the Act. If, however, the plaintiff intends to contend as well, that there is some reason why the formal resignation was ineffective, the plaintiff is obliged to state this reason in the summons: paragraph 6 of Practice Note 100.

The fourth defendant further objects to the directorship allegations concerning Dean paragraph 35. The allegation is that “further or in the alternative” Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period 24 August 2001 to 12 September 2001.

I accept as of substance the submission that these paragraphs fail to comply with Practice Note 100. As the fourth defendant submits, this is because they fail to plead the material facts by reason of which it is alleged that Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period in question. This, I accept, is especially embarrassing when: · the paragraphs commence “[f]urther or in the alternative”; and · Dean paragraph 34 apparently accepts, without admitting its effectiveness, that there was a purported resignation by Mr Toomey on 24 August 2001.

Dean paragraph 35 also renders paragraph 9 of the relevant draft further amended summons circular, insofar as paragraph 9 incorporates the period 24 August 2001 to 12 September 2001.

In the result and as the fourth defendant has submitted, if the plaintiff intends to allege that Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period 24 August 2001 to 12 September 2001 by reason of matters alleged in other paragraphs of the relevant draft further amended summons, then the defect may be simply cured by inserting appropriate cross-references in Dean paragraph 35.

If, however, the plaintiff intends to allege that Mr Toomey was a director of Ansett or Traveland (as the case may be) in the period 24 August 2001 to 12 September 2001 partly or wholly by reason of other matters, those other matters require to be set out. Claimants' unspecified "entitlement" to relief

The fourth defendant submits that Dean paragraphs 84, 86, allege an entitlement of the claimants (presumably against Ansett or Traveland as the case may be) to certain relief under the FTA and the CRA, but without stating the basis for that entitlement. The matter is however said by TCF to be covered by paragraph 83. Whether this be so or not it will be necessary for TCF to give particulars of paragraph 84 by cross-references. Entrustment/the recurring incantation

Dean paragraph 65 alleges “ entrustment ” of moneys to Ansett or Traveland (as the case may be), but again using the phrase, “[w]ithout admitting that it is a matter which the plaintiff needs to establish”.

Here again, and as the fourth defendant has submitted, the paragraph is embarrassing insofar as it is unclear whether a trust is alleged or, if no trust is alleged, as to what is alleged.

In addition, the pleading by way of “non-admission” in an originating process is, I accept, embarrassing and evasive. The confusion and evasion is amplified by the absence of cross-references to these paragraphs, elsewhere in the draft further amended summonses, so that it is not clear how the TCF intends to rely upon them, and

These matters require to be clarified in the transcript further pleading to be brought forward. The Part 31 Issue

At the commencement of the hearing of the Notices of Motion there was a consensus that it was appropriate for the court to hand down its judgment on the part 31 motions at the same time as dealing with the applications for leave to amend. This was obviously convenient because of the overlapping considerations material to both sets of motions. Albeit that this procedure required the parties to in effect address upon different alternative bases, this was not a serious difficulty

Relevantly, Part 31 rules (1) and (2) provide: 1. Interpretation In this Part, "question" includes any question or issue in any proceedings, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise. 2. Order for decision The Court may make orders for: (a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings, and (b) the statement of a case and the question for decision. The Principles

The general approach is that all issues for determination should be tried together [see Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141 per Giles CJ in Comm Div; Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 1215 at [7]].

The relevant principles applicable to the exercise of discretion under Part 31 were set out by Giles CJ in Comm Div (as his Honour then was) in Tallglen at 141-142: “Part 31 r 2 of the rules empowers the court to make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings, and for the statement of a case and the question for decision. In the ordinary course all issues in proceedings should be decided at the one time , but separate decision of a question may be appropriate where , for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one way) will bring the proceedings to an end . In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions , but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of rights of appeal is borne in mind) brings delay, expense and hardship greater than that which the making of an order was intended to avoid . It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties’ dispute .” (emphasis added)

The burden of showing the Court that it is desirable to have these separate questions determined lies with the defendants ( Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 1215 at [7] ) Applying these principles

I have reached the very clear conclusion that the Part 31 Notices of Motion should be dismissed and for the following reasons: · Answers to the proposed questions will not lead to a final resolution of the proceedings · A very substantial time is likely to be taken by way of appellate proceedings concerning the subject questions; · The strength of the submission against the TCF's entitlement to proceed in the fashion sought to the impugned is far from sufficient to justify the making of the Part 31 orders; · It seems likely that applications for the making of disparate Part 31 orders will be pursued at later stages in the proceedings. Convenience would seem to dictate that all such applications be heard at the same time and be determined taking into account each of such applications and its content; · These are test case proceedings. The complexity of the proceedings and the number of persons likely to be affected by their determination strongly suggests that the proceedings should be permitted to continue in a regular fashion through a closing of pleadings and a continuance of interlocutory processes aimed at a final hearing being fixed for the earliest practicable time consistent, of course, with such other Part 31 orders as may ultimately be made, if any; · Very special care requires to be taken before what may well be very significant fragmentation should be permitted. That fragmentation is simply not warranted in terms of the existing application for the separate questions. Claims to relief

The claims to relief in paragraphs 1 and 3 of the proposed Further Amended Summons seem somewhat labrinthian insofar as the words "as that section provides… against Ansett" are concerned. This is simply a question of inelegance of pleading and not a concern of real substance. There can be no doubt as to the basis for the TCF’s claims which are squarely put as advanced pursuant to section 40 (4), as is made plain in the bracket of paragraphs [92]-[102]. That should suffice. However should the position with joinder of any claimants become otherwise, in the sense that those claimants seek to have standing and to advance claims pursuant to section 40 (3), then of course it would be necessary to make to plead this fact. Currently the Dean individual plaintiffs make no claims to relief of any type. Other suits

As the court made plain during the hearing of the motions, the efficient procedure appeared to me to be to at least initially, endeavour to deal with the vast bulk of suggested problems with the pleadings by reference to the proposed further amended summons in the Dean proceedings. Leave will be reserved to the parties to raise any of the remaining matters which may still require determination, when the proceedings are next before the Court, following the parties having had an opportunity to familiarise themselves with these reasons. Uniform construction of uniform legislation

There is of course a very soundly established principle relating to the uniform construction of uniform legislation in place in Australia: Australian Securities Commission v Marlborough Gold Mines Limited (1993) 112 ALR 627 Per Mason CJ, Dawson, Toohey and Gaudron JJ at 629.

Notwithstanding the slight variations in terms of the subject provisions as enacted in New South Wales, South Australia and the Australian Capital Territory, construction of the subject legislation involving sections 40 (3) and (4) and their analogues would seem to clearly require this approach. General

It is of course trite to observe that the views expressed in the above reasons are given for the purpose only of dealing with the subject interlocutory applications. Short minutes of order

The parties are required to bring in short minutes of order and an opportunity to address on costs will be afforded to the parties. I certify that paragraphs 1 - 171 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 7 August 2003 ___________________ Susan Piggott Associate 7 August 2003 Corrigendum To make changes to paragraphs 60 to 63 _______________ Susan Piggott Associate 8 August 2003