Aviation Briefs

The issue which Mr Justice Leggatt was called upon to determine, by way of a preliminary point, was whether the Court should apply the relevant English or Bangladesh limit of liability arising from the Warsaw Convention (‘the Convention’) to which both countries were signatories. The defendant did not dispute liability per se. To answer this question the Court had to determine whether the flight was governed by the relevant Bangladesh or English legislation giving effect to the Convention. The Convention to which Australia and most countries are parties, establishes a regime to, inter alia, govern and limit the air carrier’s liability for loss caused to passengers, baggage and cargo arising from international carriage. In particular Article 22 of the Convention imposes certain minimum amounts of compensation for such loss. The Convention expresses those amounts by reference to gold francs. As that unit of currency no longer exists many countries have adopted the sensible solution of converting the limitation expressed in Article 22 into an amount expressed either directly or indirectly in their own currency. In addition many countries which have adopted the Convention in relation to international carriage have also adopted a similar regime in relation to domestic or non-international carriage. In many cases those countries have converted the Convention limitations directly into their own currency. The United Kingdom and Bangladesh, along with most of Australia’s trading partners, have taken that step. Australia, curiously falls somewhere in between having taken the step of converting the Convention limitation into Australian currency in respect of domestic flights pursuant to Part IV of the Civil Aviation (Carrier’s Liability) Act 1959 (‘CALCA’) (and the parallel legislation adopted by the States in respect of purely intrastate aviation) but not in respect of international carriage.

In the Bangladesh case there was a substantial discrepancy between the Bangladesh and English limitations in respect of Mr Holmes’ death. Under English law the relevant limitation was approximately £84,000 whereas under Bangladesh Law the relevant limitation was equivalent to approximately £913. Under the Australian legislation, the relevant limitation is A$100,000. Leggat! J found that the English legislation including the English limitation applied to the claim. Leggatt J came to this conclusion by a purposive construction of the Convention and the relevant English legislation. Crucially the Court held that whether a cause of action could be brought in England depended on whether a defendant carrier could be validly served either within the jurisdiction (by virtue of the defendant having an office in the jurisdiction) or pursuant to the rules for service on defendants out of the jurisdiction. The Defendant had an office in England and that was where it was served. In other words in relation to non-international carriage either a plaintiff could invoke the jurisdiction of the English Court or he could not, and whether he could, depended upon the rules of service and not on any other nexus with the jurisdiction. The Court found that the English legislation applied and accordingly the limitation of liability was the limitation pertaining pursuant to the English regime.

The decision of Leggatt J is currently on appeal to the English Court of Appeal.

The significance of the case is that the only factual nexus between the defendant carrier and the English jurisdiction was that the Defendant had an office in England. The concern of the airlines and their insurers is that the decision could open the flood gates and encourage patent ‘forum shopping’ in favour of the English jurisdiction in respect of every foreign airline’s internal flights once service had been validly effected in England. Because the amount of damages varies from country to country ‘forum shopping’ would increase.

The ramifications for Australian airlines are interesting. The recent dramatic fall in the value of the Australian dollar with respect to almost every other world currency means that the personal injury limitation of A$100,000 is now worth substantially less than it was some years ago. Clearly had the accident occurred on an Australian domestic flight and had the relevant Australian carrier maintained an office in London, all a plaintiff has to do to chase a limitation fund of £83,000 rather than A$100,000 (at the current exchange rate the English limitation is more than twice the value of the Australian equivalent) is to serve the Australian carrier at its English office.

It might be argued that there is nothing exceptional in an English Court applying the English statutory limitations where the plaintiff is an English domicile. Such an argument pre-supposes that the English legislation has an extra territorial effect. Leggatt J was prepared to hold that it had such an effect, notwithstanding that the defendant’s counsel argued vigorously that such an extra territorial effect was never contemplated by the drafters of the English legislation. The judgment of Leggatt J serves as a salutary warning to domestic carriers that if they are prepared to accept fare paying passengers dominated in other jurisdictions they do so at the risk of knowing that such a passenger may be able to recover a verdict substantially in excess of the limitation prevailing in their own jurisdiction.

The final question arising from the decision in the Bangladesh case is whether an Australian Court would adopt similar reasoning in relation to an action brought in Australia by an Australian domicile arising from an accident involving a foreign domestic flight. Section 27 of CALCA provides that the relevant statutory limitation applies to the carriage of a passenger in certain circumstances (not necessarily purely domestic) where the carriage is not ‘carriage to which the Warsaw Convention applies’. Section 27 is in similar terms to the relevant part of the English legislation which was considered by Leggatt J in the Bangladesh case. Given the enthusiasm with which Australian Courts, especially the High Court, have recently found for upholding legislation giving effect to international conventions ratified by Australia, it is likely that an Australian Court would follow the reasoning of Leggatt J in the Bangladesh case. In other words any foreign domestic carrier with an office in Australia and which is properly served under the procedural rules applying in Australia can expect an Australian Court to impose the Australian limits of liability under CALCA rather than their own domestic limits of liability. In situations where the foreign jurisdictions apply a lower limit of liability, especially in Third World jurisdictions, the ramifications for those foreign domestic carriers may be substantial.

The lesson: foreign carriers are at a risk as long as they maintain offices in England and possibly Australia if their own Convention limitations are substantially lower than the English or Australian limitations. As closure of such offices is unlikely to appeal commercially, airlines and their brokers should ensure that their liability insurance is adequate to meet the increased risks of a Bangladesh style litigation.