JUNE 2009:

  • Australian Government reviews air carrier liability and insurance laws
  • Airport curfew prosecution
  • Domestic passenger “accident” claim decision
  • Regulator’s pleading struck out by court in cartel claim
  • Aviation and employee safety
  • Airlines challenge the reach of the ACCC as it fails in alleged cargo cartel saga
  • Rogue individual compromises airline safety

 

Australian Government reviews air carrier liability and insurance laws

For the first time in a decade the Australian Government is considering major charges to the laws governing air carrier liability and insurance. The Government has now released a Discussion Paper which identifies a range of “Preliminary Findings” which it is proposed will be implemented “to refine and improve Australia’s system of carrier’s liability and insurance”. As part of the process the Government will now consult with industry stakeholders and it has invited submissions on the Discussion Paper by 26 June 2008.

The Preliminary Findings contained in the Discussion Paper make for interesting reading and some will, if adopted, result in significant changes to air carrier liability laws and insurance arrangements. Some of the changes may result in higher verdicts in relation to passenger claims, (for example by raising the unbreakable limit on domestic carriage passenger injury damages from A$500,000 to A$750,000). Other changes (such as adoption of State modified damages laws, and restricting a passenger’s ability to claim for psychological damage) may result in significant savings.

Contained among the 30 Preliminary Findings are the following:

  • The Government should require international carriers servicing Australia to implement the International Air and Transport Association (IATA) agreements, whereby carriers waive the caps instituted under the Warsaw system, and to waive the Warsaw defences up to a threshold of 100,000 SDR. This requirement should be implemented by linking the requirement to the system of IALs. This measure would replace the higher caps that the Civil Aviation (Carriers’ Liability) Act 1959 (CACL Act) currently imposes on Australian carriers operating under the Warsaw system.
  • The Government should not apply the Montreal Convention to domestic travel at this stage, and instead maintain a separate system of strict and capped liability.
  • The Government should increase the domestic passenger liability cap to $725,000 to reflect changes in the cost of living.
  • The Government should ensure consistency between the international and domestic passenger liability frameworks in relation to the treatment of mental injuries by limiting the domestic system to compensation for “bodily injuries”.
  • The Government should maintain the system of strict and unlimited liability for carriers who cause damage to third parties on the surface.
  • The Government should explore the possibility of amending the Damage By Aircraft Act (DBA Act) to clarify that it provides the exclusive remedy available to third party victims, so that they are prevented from mounting legal proceedings based on alternative areas of law.
  • The Government should consider amending the DBA Act to disallow claims to compensation for mental injury suffered by air crash witnesses.
  • The Government should consider amending the DBA Act to clarify whether consequential damages are available under the Act, noting the overall objectives of the carriers’ liability and insurance framework.
  • The Government should amend the CACL Act and the DBA Act to ensure that damages are assessed in accordance with state government civil liability regimes.
  • The Government should increase the level of mandatory passenger insurance for domestic travel to $725,000 per passenger, in line with the proposed increase to the cap on liability.
  • The Government should give consideration to working closely with industry to develop a system of mandatory insurance for third party surface damage, modelled on the minimum insurance standards required in the EC.
  • The Government should give consideration to working closely with industry to develop a system that requires carriers to obtain insurance with coverage scope that is as broad as possible, by mandating the use of the AVN52E write back clause in conjunction with the AVN48B exclusion clause.
  • The Family Assistance Code continues to serve a useful purpose and should not be abandoned.
  • The Family Assistance Code should continue to oblige airlines to make an “advance payment” to family members in the event of a passenger death.

We will monitor developments regarding the implementation of these significant proposed changes, and will keep readers informed in future Bulletins.

Anyone wishing to read the full Discussion Paper can find it at www.infrastructure.gov.au/aviation/international/liability.aspx

Written by Simon Liddy, Partner

 

 

Airport curfew prosecution

Long time readers of our newsletters will recall past articles regarding airlines being prosecuted and fined for breaching the night curfew at Sydney Airport.

Sydney Airport has for a number of years had a permanent curfew on flights from 11pm to 6am. The fines for breaching the curfew can be substantial under The Sydney Airport Curfew Act 1995 (Act). The current maximum fines under the Act are A$550,000 for a corporation and A$110,000 for an individual aircraft operator.

Recently an airline was fined A$148,500 after pleading guilty for a departure from the Airport approximately 30 minutes after the curfew in circumstances where the aircraft had experienced a delayed departure due to a number of factors, including mechanical problems and local accommodation could not be found for passengers. A dispensation for the late departure was refused by the authorities at the time.

The fine is a reminder of the serious stance by the Australian Government and the Courts to breaches of the curfew, and the extent of the fines that may be imposed. Repeat offences by airlines could result in substantially higher fines.

 

Written by Simon Liddy, Partne

 

 

Domestic passenger “accident” claim decision

In a recent judgement, the plaintiff was awarded damages as a result of an “accident” occurring from an unexpected or unusual event or happening.

In the case of Paterson v Air Link Pty Ltd [2008] NSWDC 241 (4 November 2008), Malcolm Paterson (the plaintiff) injured his left knee whilst disembarking from an aircraft owned and operated by Air Link Pty Ltd (the defendant) during an interstate domestic carriage in Australia. The plaintiff alleged that once the aircraft had landed a ground attendant placed an aluminium step below the exit to the aircraft. He alleged that the step flipped from underneath him and he fell to the ground.

The plaintiff sought damages against the defendant pursuant to section 28 of the Civil Aviation (Carriers’ Liability) Act 1959 (the Act), which provides for the strict liability of a carrier for damage sustained to a passenger by reason of an accident during embarkation or disembarkation. The definition of “accident” is found by reference to Article 17 of the Warsaw Convention.

Was there an “accident” for the purpose of the Act?

Judge Elkaim referred necessarily to the only High Court authority to have considered Article 17, being Povey v Qantas Airways Ltd[1]. The High Court adopted the interpretation of “accident” in the US Supreme Court case of Air France v Saks[2], which stated that in order for the plaintiff to succeed in this case, he must establish:

  1. there had been an unexpected or unusual event or happening;
  2. that the unexpected or unusual event or happening must have been external to the plaintiff. Thus the injury must not have been the plaintiff’s “own internal reaction to the usual, normal, and expected operation of the aircraft”; and
  3. a causal link between the injury and the unusual or unexpected event.

Was there an “unexpected or unusual event or happening”?

His Honour referred to Parkinson v Qantas Airways Ltd[3], in which an aircraft passenger caught her foot on a normal part of a seat whilst moving along a line of seats to avoid a queue along one of the aisles. This was held not to be an unusual or unexpected event within the meaning of Povey. Similarly, in Carswell v Qantas Airways Ltd[4], it was held that a person tripping over an armrest cover which had fallen on the floor of the aircraft is not an unexpected and unusual event.

His Honour further referred to the US case of Girard v American Airlines[5], a case which was factually similar to the present one. As the plaintiff was leaving a bus that had taken her from the terminal to the aircraft, she flipped forward on the stairs and landed on the ground on her right knee. It was held that it is not usual or expected that the stairs of a bus would abruptly give way, thus the event was both external and unexpected.

In this case, His Honour found that he could not reach a conclusion as to what caused the step to move, but did determine that the event was unusual or unexpected. There was no direct evidence of a defect in the step but also no evidence that the step gave way because of some act by the plaintiff. As the plaintiff’s injury was not a result of his own “internal reaction to the usual, normal, and expected operation of the aircraft” (Saks at 406), His Honour concluded that the step gave way as a result of an external factor.

His Honour awarded judgment for the plaintiff in the sum of $439,500 as a result of an injury resulting from an “accident” within the meaning of the Act.

This decision was recently heard on Appeal in the NSW Court of Appeal, and a decision is currently awaited.

 

Written by Allison Radcliffe, Associate

[1]

223 CLR 189

[2]

1985 470 US 392

[3]

District Court of NSW, unreported, 17 October 2002

[4]

District Court of NSW, 2 July 2004

[5]

United States District Court, ED New York, Number 00-CV-4559

 

 

Regulator’s pleading struck out by court in cartel claim

In a setback for the ACCC the Federal Court has struck out its Statement of Claim in its action against Singapore Airlines. The decision has important implications both for this litigation and for any proceedings the ACCC may bring against other airlines.

A major focus of the ACCC’s activity in recent times has been alleged cartel behaviour and price fixing by international airlines concerning fuel and security surcharges on air cargo. The ACCC has brought proceedings against eight airlines including in six instances where the airlines have made admissions and agreed settlements subsequently approved by the Federal Court. In December 2008 the Court approved penalties of $20 million and $5 million against two airlines respectively. In February 2009, the Court approved penalties against another two airlines (jointly) of $6 million, and a further two airlines of $5 million.

Not all airlines have agreed to settle with the ACCC. In October 2008, the ACCC instituted proceedings in the Federal Court in Sydney against Singapore Airlines Cargo and in April 2009 instituted further proceedings against airline for alleged price fixing of air freight. The ACCC continues to investigate other airlines and has stated further actions are expected over the next few months.

Singapore Airlines mounted a challenge to the claims bringing an application in April this year to strikeout the Statement of Claim. Justice Jacobson delivered a judgment in Sydney on 20 May 2009 striking out the Statement of Claim against Singapore Airlines but at the same time giving leave to the ACCC to re-plead.

Singapore Airlines argued the Statement of Claim failed to identify a market in Australia within the meaning of section 4E of the Trade Practices Act 1975. For the purposes of the application, Singapore Airlines had to accept definitions for the alleged global market, Australian market and route-specific markets alleged by the ACCC. We understand the ACCC’s market definitions could well be subject to challenge by Singapore Airlines if the matter goes to a final hearing.

The Court acknowledged recent Australian cases (including the penalty decisions) which accepted the proposition that a global market was at least capable of constituting a market in Australia. One such case was the challenge brought by Emirates and Singapore Airlines to the validity of compulsory notices issued by the ACCC as part of the current investigations - these applications were dismissed by Justice Middleton in the Federal Court in Melbourne in early April 2009. Consistently, Justice Jacobson found (for the purposes of the strikeout application) Singapore Airlines could not succeed on its first objection because the pleaded markets were at least capable of amounting to markets in Australia.

The Court then considered whether the Statement of Claim pleaded the necessary material facts to establish the proscribed effects on competition in markets in Australia. Subject to one exception, Justice Jacobson found there were simply no material facts stated in the pleading which demonstrated that the alleged price fixing understandings in respect of international air freight services between destinations outside Australia have the proscribed effect on competition in a market in Australia. Justice Jacobson stated it was necessary to state facts which disclose how the parties to an understanding for the supply of air freight services from, for example, Jakarta to Paris, are in competition with each other in a market in Australia. It was not sufficient to simply assert that higher prices on routes between points outside Australia of themselves have an adverse price effect on consumers in Australia.

Justice Jacobson did not consider the defects incurable and has set a challenge to the ACCC to come up with a pleading which addresses the competition between the parties to the alleged understandings in a market in Australia and includes the necessary material facts demonstrating the required effect on competition in markets in Australia. The next version of the pleading should make for interesting reading. There are also some interesting observations in the judgment on the earlier cases including the penalty hearings for other airlines. His Honour was able to explain the broad approaches to issues of market definitions and the like in those judgments by reason of the admissions made by the airlines as part of their settlements with the ACCC.

 

Written by Steve Burns, Partner

 

 

Aviation and employee safety

In recent years the focus regarding the safety of airline employees, including cabin crew, has been in relation to the threat of a terrorist attack. However, a recent study commissioned by a major international airline found that while security and terrorism threats made up 12% of the safety risk incidents affecting cabin crew, it was in fact drunken and irate passengers that posed the greater ongoing and recurring threat, registering 20% of the incidents.

Duncan Chappell, Chair of the National Committee on Violence for the Australian Institute of Criminology, reports that some sections of the community believe that violence in the workplace has increased resulting in justifiable anxieties regarding personal safety in some public contact workers, including flight attendants.

Given that occupational health and safety legislation across Australia requires employers to provide a safe work environment for its employees and others in the employer’s workplace, airline operators need to put in place systems for controlling the risk posed by violent passengers.

Most major airline employers have in place regular “security training” for staff, which is designed to assist flight attendants in dealing with irate passengers and those who display threatening and potentially violent behaviour.

However, given that violent behaviour has been unidentified as a foreseeable workplace hazard it may not be enough for employer’s to rely on security training as evidence that it has done everything that is reasonably practicable to control the risk to employees.

Applying a risk management approach it may be necessary for airline operators to implement systems that eliminate the risk, including:

  • ensuring the stressors that contribute to passenger behaviour (cabin baggage restrictions, cancelled flights and delays) are better controlled;
  • identifying and controlling irate and/or drunk passengers prior to the passenger boarding the aircraft; and
  • identifying high risk groups (football teams, gang members etc) and controlling the risk of violence or anti-social behaviour occurring on the aircraft by separating individuals or groups.

Controllers of airport terminals may also need to look at ways of making terminals safer for workers and members of the public in light of the recent violent incidents by ensuring fixtures are not able to be used as a weapon (e.g. install crowd control equipment made of lightweight materials, if this is not practicable ensure they are fixed in place).

It is important that employers and controllers take a holistic approach to safety and attempt to control any risk of violent behaviour towards cabin staff. As identified above, preventing the offending passenger from boarding the plane in the first place may results in the risk being eliminated.

 

Written by Michael Connolly, Special Counsel

 

 

Airlines challenge the reach of the ACCC as it fails in alleged cargo cartel saga

Background

The Federal Court of Australia has recently handed down its decision in the challenge by two airlines with regards to notices issued by the Australian Competition and Consumer Commission’s (ACCC) under section 155(1) of the Trade Practices Act 1974 (Cth) (TPA).

Section 155 of the TPA relevantly provides that if the ACCC has reason to believe that a person is capable of producing documents relating to a matter that constitutes, or may constitute, a contravention of the TPA, the ACCC may, by notice in writing require that person to produce to the ACCC any such documents.

The notices primarily sought documents and information relating to an alleged price fixing arrangement or understanding in relation to international air cargo services, purportedly contravening section 45 of the TPA.

The TPA in this case had the effect that a corporation must not make or give effect to an arrangement if a provision of the arrangement has the purpose, or has or is likely to have the effect, of fixing the price for international air cargo services supplied by the parties to the arrangement or by any of them in competition with each other in any market in Australia in which a corporation that is a party to the arrangement supplies those services.

The Court rejected all the airlines’ arguments and held the motives were valid. The most significant part of the decision in the Court’s discussion was the concept of “market in Australia”.

Market in Australia

The airlines accepted that services on routes from Australia in respect of outbound flights are supplied in a market in Australia, but argued that there was no market in Australia for:

  1. the supply of inbound international air cargo services; or
  2. for the supply of air cargo services between two points wholly outside Australia;

because the marketing, competition, negotiation, and contracting for such services, and particularly the setting of rates, occurs entirely outside of Australia.

The Court held that the place of contracting was not determinative of the geographic locality of the relevant market and rejected the airlines’ argument as the evidence did not prove that no marketing or negotiating occurs in Australia in respect of all international air cargo services or that there is no possibility of competitive activity in a market in Australia in relation to inbound services to Australia.

The Court held that the airlines’ evidence did not eliminate any reasonable hypothesis that was inconsistent with the contention that the market is wholly outside Australia. The Court noted a number of reasons for this including:

  1. the possibility of customers in Australia booking space on an aircraft over the internet;
  2. charter flights are organised by the airlines at the destination point;
  3. inbound and outbound services may be sufficiently connected to be at least possibly complimentary; and
  4. the airlines’ evidence was inadequate in a number of aspects relating to the market definition.

The Court noted that a price fixing arrangement between two destinations outside Australia may be capable of controlling the prices of outbound flights. The example given by the Court was where there was no direct flight to the ultimate destination, say Bangalore. Price fixing arrangements between an enroute destination and Bangalore will affect the price offered in Sydney, on the Sydney to Bangalore route.

Similarly, the Court considered that price fixing arrangements for inbound cargo could affect the prices offered in Sydney, for a customer in Sydney who wanted to arrange a round trip air shipment. The hypothetical example given was a shipment of computers from Sydney to Bangalore for repair and back to Sydney.

The judgment does not define the boundaries of the relevant “market in Australia” but it does provide insight into how a Court will examine this issue. The Court and the parties will have to address this issue in any substantive proceedings in relation to alleged price fixing.

Implications of the decision

The airlines’ challenge to the notices was defeated and they now have to produce the documents sought by the ACCC (subject to any appeal).

The construction given to the notices by the Court demonstrates the Court’s desire to give the notices a reasonable and sensible construction facilitating their validity and just how hard it is for the recipient of a section 155 notice to have it set aside.

For the ACCC to issue such a notice it only has to have reason to believe that a person is capable of producing documents relating to a matter that may constitute, a contravention of the TPA (after allowing for undiscovered facts).

The Court agreed with the airlines that services on routes from Australia are supplied in a market in Australia. No definitive findings were made as to the market in question. However, the Court was not prepared to accept that inbound services or services between two points wholly outside Australia did not involve markets in Australia.

The definition of the relevant market will have to be decided in any substantive proceedings in which contraventions of section 45 of the TPA are alleged against the airlines.

 

Written by Robert McGregor, Partner and Simon Liddy, Partner

 

 

Rogue individual compromises airline safety

The Civil Aviation Safety Authority (CASA) recently concluded their investigation into video footage taken by a camera attached to a remote-controlled model plane that deliberately flew close to a 737 aircraft as it was coming in to land at Perth airport on 17 April 2009.

The video footage was set to music from the movie Top Gun and shows the model plane flying dangerously close to the aircraft. The model plane had metal parts that, among other things, could have been sucked into the engine of the 160-seat aircraft and caused engine failure. The video footage shows the model plane going into a spin and crashing to the ground after being caught in the 737’s jet wash.

The man who flew the model plane has been lucky to escape prosecution in the this case, but the incident wasn’t without consequences. In addition to prosecution, CASA has a system of administrative fines for breaches of the Civil Aviation Regulations. The level of the fine CASA issues depends upon the gravity of the offence as determined by the maximum penalty that a court may impose. Although CASA won’t disclose details of the fine imposed in this case, it has been reported that a fine of about $3000 is likely to have been imposed.

This case highlights the impact an individual can have on airline safety, with the proud safety record of airline operators being compromised by a rogue individual. The airline, which helped in the investigation, said it strongly supported authorities using the full extent of the law to deal with individuals who operate model planes in close proximity to an airport.

 

Written by Kristin Hibbard, Graduate-At-Law