FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Air New Zealand Limited (ARBN 000 312 685) (No. 7) [2013] FCA 83 Citation: Australian Competition and Consumer Commission v Air New Zealand Limited (ARBN 000 312 685) (No. 7) [2013] FCA 83 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AIR NEW ZEALAND LIMITED (ARBN 000 312 685) AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v P.T. GARUDA INDONESIA LTD (ARBN 000 861 165) File number(s): NSD 534 of 2010 NSD 955 of 2009 Judge: PERRAM J Date of judgment: 18 February 2013 Catchwords: EVIDENCE – business records exception to hearsay rule – application of rule to documents created in contemplation of proceedings – Evidence Act 1995 (Cth) s 69(3) - investigation by European Commission – relationship between Commonwealth and ACCC for the purpose of determining parties to proceedings EVIDENCE – discretion to exclude – inability to cross examine author of business record Legislation: Auditor-General Act 1997 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) s 8 Competition and Consumer Act 2010 (Cth) Pt IV, ss 6A, 7(2), 27, 29 Evidence Act 1995 (Cth) ss 69, 69(3), 135, 135(a) Financial Management and Accountability Act 1997 (Cth) Financial Management and Accountability Regulations 1997 (Cth) Sch 1 Judiciary Act 1903 (Cth) s 39B Public Service Act 1999 (Cth) Cases cited: Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd (No 4) (2008) 170 FCR 9 cited Australian Securities and Investments Commission (ASIC) v Edensor Nominees Pty Ltd (2001) 204 CLR 559 applied Kong v Kwan (2002) 11 BPR 20; [2002] NSWSC 1187 cited Roach And Ors v Page Ands Ors (No 11) [2003] NSWSC 907 applied Sellers Fabrics Pty Ltd & Anor v Hapag-Lloyd AG [1998] NSWSC 644 cited Seven Network Ltd v News Ltd (No 8) (2005) 224 ALR 317 applied Vitali v Stachnik [2001] NSWSC 303 cited Date of hearing: 11 February 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 25 Counsel for the Applicant: J Halley SC / J Clarke Solicitor for the Applicant: Australian Government Solicitor Counsel for Air New Zealand: R Smith SC / N Owens Solicitor for Air New Zealand: Corrs Chambers Westgarth Counsel for Garuda: M Leeming SC / T Brennan Solicitor for Garuda: Norton White IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 534 of 2010 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: AIR NEW ZEALAND LIMITED (ARBN 000 312 685) Respondent JUDGE: PERRAM J DATE OF ORDER: 13 FEBRUARY 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Annexures CLSY-4 and CLSY-16 to the affidavit of Ms Christine Liu So Yu sworn 2 May 2012 not form part of the evidence. 2. The third sentence of paragraph 22(f), paragraph 21(a) and paragraph 25(a) of Ms Liu's affidavit of 2 May 2012 be rejected. 3. The first sentence in paragraph 25 of Ms Liu's affidavit of 2 May 2012 be received as a submission. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 955 of 2009 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: P.T. GARUDA INDONESIA LTD (ARBN 000 861 165) Respondent JUDGE: PERRAM J DATE OF ORDER: 12 FEBRUARY 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Annexures CLSY-4 and CLSY-16 to the affidavit of Ms Christine Liu So Yu sworn 2 May 2012 not form part of the evidence. 2. The third sentence of paragraph 22(f), paragraph 21(a) and paragraph 25(a) of Ms Liu's affidavit of 2 May 2012 be rejected. 3. The first sentence in paragraph 25 of Ms Liu's affidavit of 2 May 2012 be received as a submission. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 534 of 2010 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: AIR NEW ZEALAND LIMITED (ARBN 000 312 685) Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 955 of 2009 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: P.T. GARUDA INDONESIA LTD (ARBN 000 861 165) Respondent JUDGE: PERRAM J DATE: 13 FEBRUARY 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 13 February 2013 I excluded Annexures CLSY-4 and CLSY-16 to the affidavit of Ms Liu sworn 2 May 2012 from the evidence. These are the reasons for taking that course. An important part of this litigation insofar as it concerns Hong Kong has, as the subject of its inquiry, the question of what kind of requirements the Hong Kong Civil Aviation Department ('the HK CAD') imposed upon carriers in relation to fuel and insurance surcharges. The evidence on this issue falls into two categories. The first consists of evidence of what the HK CAD was doing at times proximate to the events in question. This evidence is both testimonial and documentary. The second is purely documentary and consists of two letters sent by the HK CAD some years later to the President of the European Commission (on 3 September 2009) and to the Australian Assistant Treasurer and Minister for Competition Policy and Consumer Affairs (on 28 July 2008) ('the Minister'). Both letters contain a detailed account of the practices of the HK CAD in relation to surcharges. 2 These two letters constitute, therefore, the only account by the HK CAD of its own practices. None of the parties to this litigation is presently calling any official from the HK CAD and, so far as I understand it, no suggestion has been made that the relevant officials of the HK CAD might give their evidence on commission in Hong Kong or by video conference. 3 Air New Zealand, supported by Garuda, now seeks the admission of both letters into evidence as annexures to an affidavit of Ms Liu sworn 2 May 2012. If admitted they will go some way to providing insight into what it was that HK CAD required. They will not be the sole source of such information, however, which will also include the other material to which I have referred. The ACCC objects to the admission of both letters on the basis that they are hearsay. 4 The purpose to which Air NZ and Garuda wish to put the two letters is to prove what it was that the HK CAD required at the relevant times and this is certainly a hearsay use. Air NZ and Garuda submitted, however, that both letters were 'business records' within the meaning of s 69 of the Evidence Act 1995 (Cth) ('the Act') and admissible under the business records exception to the hearsay rule. The ACCC accepted that both were, in principle, business records but submitted that each was caught by the exemption in s 69(3) which, insofar as it is relevant, reinstates the hearsay rule in relation to a representation: …if the representation: (a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding; … 5 The first paragraph of the letter of 28 July 2008 from the HK CAD to the Minister (CLSY-4) was as follows: At the request of Cathay Pacific Airways Limited, the Hong Kong Civil Aviation Department ("CAD" or "this Department") is providing the following background information to you for the purposes of your consideration of whether collective surcharge applications filed by the Hong Kong Board of Airline Representatives Cargo Sub-Committee ("BAR-CSC") on behalf of certain carriers can be taken into account in class action proceedings in Australia. 6 The ACCC submits, and I accept, that this was made 'in connection' with an Australian proceeding, namely, the class action referred to in the last line of the paragraph. Garuda submitted, nevertheless, that the exemption in s 69(3) was not engaged because the reference to a proceeding in s 69(3) 'must mean a proceeding to which the party, otherwise entitled to the document, is a party' citing Sellers Fabrics Pty Ltd & Anor v Hapag-Lloyd AG [1998] NSWSC 644 per Rolfe J. 7 To this the ACCC rejoined that it was entitled to the document in the requisite sense because the Minister to whom the letter had been sent and the ACCC were both aspects of the Commonwealth; alternatively, that Sellers Fabrics was incorrect and should not be followed lacking any foundation in the text of s 69(3). 8 As to the first argument, the full quotation from the reasons of Rolfe J is as follows: An Australian proceeding is, clearly enough, an Australian legal proceeding, and it seems to me that the only sensible meaning that can be attributed is one to which the owner of the business record is a party. I should note that in the dictionary it may be open to argument that it is any proceeding because, "Australian or overseas proceeding" is defined as meaning, "a proceeding (however described) in an Australian court or a foreign court." However, in my view, that must mean a proceeding to which the party, otherwise entitled to the document, is a party. 9 This suggests that the document must be owned by a party to the litigation (cf. 'owner of the business record') or that a party to the litigation must be 'entitled' to it. I take that to mean entitled by legal means to obtain possession of the business record. The ACCC submitted that the Commonwealth was the owner of the letter and that it was possible also to see the Commonwealth as a party to the present litigation through the presence of the ACCC as a party. 10 I accept, and it was not disputed by Garuda or Air NZ, that the copy of the letter received by the Minister was the property of the Commonwealth. Mr Brennan, for Garuda, submitted that the ACCC, however, was not the Commonwealth but instead was an independent statutory authority established and maintained by s 6A of the Competition and Consumer Act 2010 (Cth). This is so, but it does not entail that the ACCC is not also the Commonwealth. The Australian Securities and Investments Commission ('ASIC') is also an independent statutory authority (cf. Australian Securities and Investments Commission Act 2001 (Cth) s 8) but was nevertheless held by a unanimous High Court to be the Commonwealth for the purpose of s 39B of the Judiciary Act 1903 (Cth) (which confers jurisdiction on this Court in suites in which the Commonwealth is a party): Australian Securities and Investments Commission (ASIC) v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 580-581 [39]-[42] per Gleeson CJ, Gaudron and Gummow JJ, at 608 [127] per McHugh J, at 628-629 [190] per Kirby J, 638 [215] per Hayne and Callinan JJ. Critical factors in that analysis included, as McHugh J observed, the fact that ASIC carried out public functions and exercised public powers; was controlled by persons appointed by a Minister of the Commonwealth; was under the ultimate direction of a Minister of Commonwealth government; was funded by the Commonwealth; could be required to pay any surplus to the Commonwealth and was audited by the federal Auditor-General: at 608 [127]. These are all qualities that the ACCC has too: see, for e.g. the power to commence proceedings to enforce the Competition and Consumer Act 2010 (Cth) in Part IV; the appointment of the members of the ACCC by the Governor-General (s 7(2)); the power of the Minister and Parliament to direct the ACCC in the performance of its functions (s 29); the engagement of its staff under the terms of the Public Service Act 1999 (Cth) (s 27); the presence of the ACCC in Schedule 1 to the Financial Management and Accountability Regulations 1997 (Cth) with its status as a result as a prescribed agency subject to the rigours of the Financial Management and Accountability Act 1997 (Cth) and audit by the federal Auditor-General under the Auditor-General Act 1997 (Cth). 11 It follows, at least for the purposes of s 39B of the Judiciary Act, that the ACCC is the Commonwealth. Should this conclusion also apply to the inquiry arising from s 69(3) of the Act? To put the matter another way, for the purposes of the principle in Sellers Fabrics, will a document sent to one part of the Commonwealth in contemplation of litigation being conducted by another be sufficiently owned by the party conducting the litigation to engage the carve-out in s 69(3)? The answer is provided by a consideration of the purpose which s 69(3) serves which was explained by Barrett J in Vitali v Stachnik [2001] NSWSC 303 at [12]: The purpose of the exclusion is, as I see it, to prevent the introduction through this exception to the hearsay rule of hearsay material which is prepared in an atmosphere or context which may cause it to be self-serving in the sense of possibly being prepared to assist the proof of something known or at least apprehended to be relevant to the outcome of identifiable legal proceedings. 12 In this case, the letter in question was sent to the Minister with a view to seeking to influence the ACCC. The last paragraph contains the following statement: The CAD has the right to implement and administer in Hong Kong any tariff approval system which is consistent with the applicable ASAs. Accordingly, we request that any regulator reviewing this Department's processes or the carriers that participated in the collective applications respect and defer to our approval system. Additionally, we ask you to acknowledge that it is lawful in Hong Kong for any carrier to levy a surcharge ex-Hong Kong based upon a collective application specifically approved by CAD and that relevant fuel surcharges have been specifically approved by CAD. (emphasis added) 13 For reasons which are not clear to me, this paragraph appears to involve the HK CAD seeking a clean bill of health for all carriers operating out of Hong Kong. Mr Clarke of counsel, for the ACCC, submitted that this oddity was to be explained by a meditation upon the question of who owned Cathay Pacific, but I do not think that the evidence to which I was taken allows me to take that step. It is sufficient instead to observe that Barrett J's concerns about the reliability of material prepared with a view to the outcome of proceedings is engaged. 14 It follows that for the purposes of s 69(3), as interpreted by Rolfe J in Sellers Fabrics, the ACCC was relevantly entitled to the letter since both the Minister and the ACCC were the Commonwealth for that purpose. Thus, the exemption for documents in s 69(3) arises and the exception to the hearsay rule is accordingly not engaged so that the letter is inadmissible hearsay. The letter forming Annexure CLSY-4 to Ms Liu's affidavit will not form part of the evidence. I will also reject paragraph 21(a) of Ms Liu's affidavit of 2 May 2012 which accompanies CLSY-4. 15 This conclusion makes it unnecessary to consider whether Sellers Fabric is correct in light of the text of s 69(3): but see Vitali at [13]-[14]; Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd (No 4) (2008) 170 FCR 9 at [8] per Finn J; cf. Kong v Kwan (2002) 11 BPR 20; [2002] NSWSC 1187 per Santow J. 16 I turn then to the second letter written by the HK CAD to the President of the European Commission on 3 September 2009 (CLSY-16). In a similar fashion to the first letter, it involved an attempt by the HK CAD to persuade the European Commission to accept its view of the tariff arrangements ('We trust that the CAD's position is clear and that the Commission will respect and defer to the lawful regulatory system in Hong Kong in its current proceedings.'). 17 I have no doubt that the letter was written in contemplation of the European Commission's investigation into the imposition of fuel surcharges by various carriers. It was not submitted to the contrary. Be that as it may, I do not accept that the European Commission's investigation can be characterized as an 'overseas proceeding' for the purposes of s 69(3). An 'Australian or overseas proceeding' is defined in the Dictionary to mean 'a proceeding (however described) in an Australian court or foreign court.' The expression 'foreign court' is defined to mean: …any court (including any person or body authorised to take or receive evidence, whether on behalf of a court or otherwise and whether or not the person or body is empowered to require the answering of questions or the production of documents) of a foreign country or a part of such a country. 18 The ACCC did not seek to submit that in conducting such an inquiry the European Commission was a court within the meaning of the Act, although some commentators have described its function of enforcing competition policy as involving the exercise of judicial power: see Craig and de Búrca EU Law Text, Cases and Materials (Oxford, 4th ed, 2008) at 45. Even so, it is difficult to describe the European Commission as a 'court', even if it exercises some judicial powers. I accept, therefore, that the exemption in s 69(3) is not engaged and the letter is admissible. 19 Against that outcome the ACCC sought to have the letter excluded from evidence pursuant to s 135 of the Act which provides: General discretion to exclude evidence The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time. 20 The ACCC submitted that the letter effectively allowed evidence to be given by the HK CAD whilst depriving the ACCC of the opportunity to test that evidence by cross-examination. 21 I accept that the admission of the letter into evidence carries with it a danger of unfair prejudice to the ACCC (i.e., the matter in s 135(a)). The question of what the HK CAD required of carriers is at the heart of part of the case and yet no witness is to be called from the HK CAD. Whilst its correspondence with the various participants at the relevant times is before the Court, there is no direct material to which I was taken from the HK CAD explaining its procedures apart from the two letters with which this judgment is concerned. The ACCC is exposed to the procedural risk that what is, in effect, testimonial evidence from the HK CAD will be placed before the Court without it being able to be tested by cross-examination. 22 The weight of authority supports the proposition that procedural prejudice will suffice for the purposes of ss 135-136: see, for e.g., Roach and Ors v Page and Ors (No. 11) [2003] NSWSC 907 at [19] per Sperling J; Seven Network Ltd v News Ltd and Others (No 8) (2006) 224 ALR 317 at 322 [20] per Sackville J. 23 Every case involving a business record, of course, potentially runs this risk, however, in this case there are additional matters of which account must be taken. The principal risk is that the letter was created in contemplation of an investigation by the European Commission as part of an attempt to persuade that body to a particular view. As an exercise in persuasion it lacks the neutrality or disinterest which is ordinarily associated with the process giving rise to business records. Accordingly, it is not the kind of canonical business record to which s 69 is centrally addressed. The letter is very far, for example, from an invoice or a maintenance log. Further, while it does not engage the terms of s 69(3) directly, the letter nevertheless resonates with the same concerns which underpin that provision. Relevant too is that no attempt has been made to prove that the author of the letter, a Mr Norman Lo, is not available to give evidence or, if he be unwilling to come to Australia, that his evidence could not be taken by video or, if necessary, on commission in Hong Kong. In those circumstances, I conclude that there is indeed a danger that the letter might be unfairly prejudicial to the ACCC if adduced. 24 But that, of course, is only half the inquiry. Section 135 requires me to assess the letter's probative value against that danger. The letter is, so it seems to me, potentially of considerable probative value. It emanates from a regulator whose actions are significantly in issue. It is addressed to another State entity. It carries with it, quite possibly, the presumption that it is unlikely to have been sent in bad faith. Whilst in due course it may emerge that the relationship between Cathay Pacific and the HK CAD could provide a motive for its writing, this is very far from certain at this stage. Should that inference not be drawn, the letter is likely to be the closest this Court will come to receiving direct testimony from the HK CAD. 25 The inability to test the contents of this letter creates a danger of prejudice that exceeds, and only increases in line with, its probative value. In my opinion, that danger substantially outweighs its probative value precisely for that reason. The power in s 135 is, therefore, enlivened. In my opinion, the unfairness which it presents requires that the discretion should be exercised in the ACCC's favour. I will exclude Annexure CLSY-16 from the evidence. I will also reject the third sentence of paragraph 22(f) which accompanies it. I will receive the first sentence of paragraph 25 as a submission. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 18 February 2013