Flying low – an airline’s ‘extraordinary’ response to a $19m penalty

A major international airline turned up to court to seek a stay of a A$19m penalty with evidence so inadequate that the Judge described it as “extraordinary” for a significant state-owned entity in an “extremely serious” situation.

Following 9 years of litigation and a 6 month trial, a A$19 million penalty was imposed on Garuda Indonesia for collusive conduct in breach of the former Trade Practices Act: ACCC v PT Garuda Indonesia Ltd (Remedies) [2019] FCA 786.

Garuda came back to court on the last day for payment, 9 August 2019, seeking a stay of the penalty pending an appeal, saying,

“effectively, that it was unable to pay the $19 million penalty without significant disruption to its internal affairs”.

But its evidence in support was, according to Justice Perram, an

“extraordinary document … couched at a level of generality which, having regard to the seriousness of the situation that Garuda currently confronts (which I would rate as extremely serious), is striking in its lack of detail … [it] might on one view—and there may be other views—tend to suggest that Garuda is insolvent”.

“For a significant entity, and particularly a significant state-owned entity such as Garuda, to put this kind of material before this Court is not something I have encountered before”.

The Judge suggested that “Garuda may think it appropriate to renew its application for a stay” with an affidavit which does a good deal more than [this] affidavit presently does”.

As an example, the Judge noted

“the absence of any explanation as to why it is that the $19 million cannot be funded by the Republic of Indonesia which, as Garuda has consistently pointed out when it suits it, stands behind Garuda”.

Garuda had also

“waited until the last day for payment before seeking a stay when the fact that that moment was coming must have been known for several months”.

The application for a stay

“raises so many unusual questions that one can only hope that if the application is renewed (in the event that the penalty is not paid), these matters receive the most serious attention within Garuda. …. the seriousness of the situation which currently exists has [not] been grasped by the people who are providing their instructions. I will say no more about that”.

A non-publication order was sought by Garuda but was refused, as lacking evidence in support. Perram J ordered indemnity costs.

As to the suggestion of insolvency,

“(i)it may be that that fact, if disclosed in the course of negotiations with Garuda’s creditors, would be helpful, or it may be that it would be unhelpful. It is certainly an unpleasant fact. But there is no evidence before me of what the exact difficulty to Garuda would be if this information were publicly released. It is another one of the mysteries of this case that no such affidavit evidence is before me today”.

Perram J ordered indemnity costs.

PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission (Penalty Stay Application) [2019] FCA 1317

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