FED: Airservices keeps $13 million from owners of Compass planes

AAP General News (Australia)
12-02-1999
FED: Airservices keeps $13 million from owners of Compass planes

By Fiona Hamilton

CANBERRA, Dec 2 AAP - Airservices Australia could keep $13 million it forced out of
three companies who leased planes to the failed Compass Airlines, the High Court said
today.

Compass tried to become Australia's third domestic airline but went into liquidation
in December 1991, owing Airservices $13 million for air traffic services, rescue and firefighting
services and meteorological advice.

Canadian Airlines, Monarch Airlines and Polaris Holding Company leased five aircraft to Compass.

When Compass went belly-up Airservices asserted it had a right - a lien - under the
Civil Aviation Act to detain the leased planes to secure payment of the debt.

Under protest the three companies paid the $13 million so they could get their planes back.

They paid on condition they would be repaid with interest if the charges and/or the
liens were later ruled invalid.

Each company sued Airservices - formerly the Civil Aviation Authority (CAA) - seeking
recovery of the money.

The Federal Court decided the charges contravened the act and amounted to taxation,
allegedly because these were calculated on the basis of an Australia-wide network rather
than on the actual costs of the particular airports and routes used by Compass which only
flew between six cities.

But in a 5-2 judgment, the High Court upheld Airservices' appeal, saying that charging
on a network basis was appropriate.

"In the nature of the services provided by the CAA ... it is artificial to isolate
a particular service to a particular carrier at a particular airport and treat it as disconnected
from services provided through the network," Chief Justice Murray Gleeson and Justice
Michael Kirby said in the leading judgment.

"Whatever might be possible in the provision of other public services, the nature of
civil aviation demands integration of services for their safety and effectiveness."

Chief Justice Gleeson and Justice Kirby said the charges were not tax as they were
not for raising revenue, they were fees for services, and they were reasonably related
to expenses incurred by Airservices.

They said liens were necessary as charges mounted up quickly, aircraft may be the only
asset a failed airline had and planes could quickly leave the country.

They said the aircraft lessors would have expected liens to be imposed and could have
protected themselves, for example, with insurance or under the contract with Compass.

AAP fh/mfh/cjh/br

KEYWORD: COMPASS

1999 AAP Information Services Pty Limited (AAP) or its Licensors.