Federal Court of Australia AAL Aviation Limited v Perth Airport Pty Ltd (No 2) [2022] FCA 813 File number: NSD 1351 of 2021 Judgment of: JAGOT J Date of judgment: 14 July 2022 Catchwords: COSTS — application for indemnity costs arising from respondent's unsuccessful challenge to Court's jurisdiction — no circumstances justifying indemnity costs — costs awarded on usual basis Legislation: Federal Court of Australia Act 1976 (Cth) s 43 Judiciary Act 1903 (Cth) s 39B(1A)(c) Cases cited: AAL Aviation Limited v Perth Airport Pty Ltd [2022] FCA 437 Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 96 ALJR 234 Kadam v MiiResorts Group 1 Pty Ltd [2017] FCA 1138 Re Culleton [2017] HCA 3; (2017) 91 ALJR 302 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 17 Date of last submission: 20 June 2022 Date of hearing: Determined on the papers Counsel for the Applicant: Dr B Kremer and Mr T Rogan Solicitor for the Applicant: MinterEllison Lawyers Counsel for the Respondent: Ms J K Taylor SC with Mr P A Walker Solicitor for the Respondent: Allens ORDERS NSD 1351 of 2021 BETWEEN: AAL AVIATION LIMITED Applicant AND: PERTH AIRPORT PTY LTD Respondent order made by: JAGOT J DATE OF ORDER: 14 JULY 2022 THE COURT ORDERS THAT: 1. The respondent pay the applicant's costs of and in connection with the issue of jurisdiction determined in AAL Aviation Limited v Perth Airport Pty Ltd [2022] FCA 437, including the dispute about the issue of costs, as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT JAGOT J: 1 On 27 April 2022, I delivered reasons in which I found that the Federal Court had jurisdiction to hear the dispute between the parties: AAL Aviation Limited v Perth Airport Pty Ltd [2022] FCA 437 (jurisdiction judgment or JJ). 2 These reasons for judgment are to be read with the jurisdiction judgment. Terms defined in that judgment have the same meaning in these reasons for judgment. 3 For the reasons that follow, I have decided that the respondent (PAPL) should pay the applicant's (AAL) costs of and in connection with the issue of jurisdiction determined in the jurisdiction judgment, including the dispute about the issue of costs, as agreed or taxed. I reject AAL's claim for indemnity costs. 4 The jurisdiction judgment identified that: (1) at the first case management hearing on 25 February 2022, PAPL identified that the issue of the jurisdiction of this Court was "not an entirely straightforward question". PAPL submitted that as the Court had to be satisfied it had jurisdiction, the parties should make submissions dealing with this issue as a preliminary matter: JJ [4]; (2) PAPL challenged AAL's contention that the Court had jurisdiction: JJ [11] and [12]; (3) I held at JJ [13] that: this Court has original jurisdiction as there is a matter arising under laws of the Commonwealth within the meaning of s 39B(1A)(c) of the Judiciary Act 1903 (Cth). This is so both because the dispute between the parties encompasses the dispute as to the effect of the relevant Commonwealth laws on the DTL and the subsequent relevant grants and contracts. That is, the dispute includes the claims as to whether the sources of the relevant rights are the Commonwealth laws on which AAL relies or not (and not merely the interpretation of those laws). (4) I accepted AAL's submission that "PAPL's proposition that it was not challenging this Court's jurisdiction was untenable": JJ [15]. 5 PAPL contended that the general rule as to costs does not apply on the basis that it did not bring any application in respect of which it was unsuccessful, but merely drew attention to an uncertainty as to jurisdiction. 6 I disagree. As I said at [15] in the jurisdiction judgment, PAPL disputed the correctness of AAL's assertion that this Court had jurisdiction and required the Court to determine the issue. Accordingly, PAPL did not merely raise an uncertainty about jurisdiction. It filed submissions of eight pages explaining why AAL was wrong in asserting jurisdiction. 7 Further, the fact that I did not require an interlocutory application to be filed to raise the issue of jurisdiction is immaterial. Section 43 of the Federal Court of Australia Act 1976 (Cth), which provides that the Court "has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction)", does not require an application to have been filed and rejected or withdrawn before an order for costs may be made. 8 While a court must always be satisfied that it has jurisdiction, it is bound to give detailed consideration to the issue where a party such as PAPL asserts that there is no jurisdiction. In such a case, moreover, a party asserting jurisdiction is bound to incur the costs of explaining why the other party is wrong to question jurisdiction. If the party asserting a lack of jurisdiction is incorrect, there is no reason in principle why the usual order as to costs should not be granted in order to compensate the other party for the costs it has incurred by reason of the asserted lack of jurisdiction. 9 I am also not persuaded that I reached my conclusion on any basis materially different from that which AAL had relied upon at all times to support its position that the Court had jurisdiction. As AAL submitted: The relevant fact is that PAPL necessitated a hearing on the papers. In any event, AAL did make its contentions clear to PAPL in correspondence on 23 February 2022, ahead of the first Case Management Hearing, and again on 14 March 2022 (CB tab 11; Drinnan affidavit at [10] and RJD-4). PAPL persisted with its challenge. AAL was put to the expense of not only the first Case Management Hearing, but also of formalising its reasons in two sets of submissions, including responding to PAPL's lengthy and detailed submissions in chief purporting to identify detailed factual bases on which the Domestic Terminal Lease was said to have been surrendered and regranted, and which did not deal with the fact that—even if that had occurred—the matter was still within federal jurisdiction. 10 Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 96 ALJR 234 did not identify any new principle determinative of the issue of jurisdiction in the present case. Accordingly, AAL is correct that it does not matter that, at the time PAPL first raised the issue of jurisdiction, the High Court remained reserved in that case. 11 While the principle that jurisdiction is not conferred by agreement is fundamental (see, for example, Kadam v MiiResorts Group 1 Pty Ltd [2017] FCA 1138 at [4] and Re Culleton [2017] HCA 3; (2017) 91 ALJR 302 at [23]–[24]), the compensatory principle that underlies the usual rule as to costs is engaged on the facts of the present case and there is no sound reason to depart from that principle. 12 To my mind, it was clear at all times that the source of the rights which AAL seeks to enforce are Commonwealth laws: JJ [14]–[15]. Despite this, I am also of the view that no order for indemnity costs should be made against PAPL for two reasons. 13 First, while the basis for PAPL continuing to dispute jurisdiction never became apparent to me (see JJ [16]), that does not mean I am bound to conclude that PAPL's refusal to concede jurisdiction in response to letters from the lawyers for AAL dated 23 February and 14 March 2022 was unreasonable. Wrong in law does not necessarily mean unreasonable in fact. I infer from the correspondence in evidence that PAPL considered that the history of variations to the leases did call into question whether the source of the rights asserted against it was Commonwealth law. 14 Secondly, jurisdiction is a fundamental issue. A party in PAPL's position, positively asserting uncertainty as to jurisdiction, may well be exposed to the usual order as to costs if this uncertainty is pursued in detailed submissions explaining why the other party asserting jurisdiction is wrong (as PAPL did in the present case). However, merely being found to be wrong in fact and/or law about jurisdiction does not mean that the party has acted unreasonably in not conceding its error or in arguing to the contrary (when it did not know it was in error). 15 This is particularly so where a basis for the award for indemnity costs is said to be an offer to settle the issue. If a party considers that jurisdiction is in issue, it is bound to raise that issue with the court. In so doing, the party may be exposed to the usual order as to costs if the resolution of its concern, as here, requires detailed written submissions in which the party asserts a lack of jurisdiction. But such a party cannot be said to have unreasonably refused an offer to settle the issue of jurisdiction. A court either does or does not have jurisdiction. A threat to seek indemnity costs if a party does not concede jurisdiction does not involve any element of compromise. Accordingly, something more than merely being ultimately wrong about a lack of jurisdiction is required to support an order for indemnity costs. If, for example, the assertion of lack of jurisdiction is manifestly untenable or made for an ulterior purpose, then the principles relating to an award of indemnity costs may well be engaged. This is not such a case. As PAPL submitted, its concerns were not "so devoid of substance such that merely to raise them can be said to have involved it committing a breach of duty to the Court". 16 While AAL has not succeeded in obtaining an order for indemnity costs, it should also have its costs of the dispute about costs on the usual basis. The reason for this is that PAPL opposed even the usual order as to costs. The indemnity costs arguments were also relevant to the making of the usual order as to costs. As such, there is no sound reason to try to apportion costs as between AAL's claim for the usual order as to costs and indemnity costs. 17 For these reasons I will order PAPL to pay AAL's costs of and in connection with the issue of jurisdiction determined in AAL Aviation Limited v Perth Airport Pty Ltd [2022] FCA 437, including the dispute about the issue of costs, as agreed or taxed. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jagot. Associate: Dated: 14 July 2022