High Court upholds IATA Clearing House claim

The High Court of Australia has upheld the International Air Transport Association's Clearing House system in relation to the debts owed by Ansett Australia.

When Ansett collapsed, it was a member of the IATA Clearing House, which pays out airlines for services provided to other airlines in accordance with agreements between IATA and the airlines. Each month, airlines with a net credit balance receive a payment from the Clearing House while those with a net debit balance are obliged to pay funds into the Clearing House.

The agreements between IATA and the airlines provided that settlement of amounts payable would be in accordance with IATA's Regulations. IATA claimed to be a creditor of Ansett and alleged that Ansett had a net debit balance of $US4,370,989 outstanding as at December 2001.

However Ansett and the administrators submitted that a Deed of arrangement and the insolvency provisions of the Corporations Act prevented other airlines' claims against Ansett, in accordance with the Deed rather than with the IATA Regulations. Ansett submitted that the Regulations operated to circumvent the Deed and the Corporations Act.

The High Court, by a 6-1 majority, allowed each appeal and upheld IATA Regulation 9, which provides that no liability for payment and no right of action to recover payment accrued between Clearing House members and that members instead had liabilities to or rights of action against the Clearing House.

The Court held that the effect of the IATA Regulations was that no liability for payment arose between airlines and that the only debt or credit which arose was that between IATA and member airlines. It followed that IATA was a creditor of Ansett to the exclusion of the member airlines. The Court held that there was no contracting out of the operation of the Deed or the Act and no repugnancy between the Deed and the Clearing House arrangements. It also rejected Ansett's submission that the IATA Regulations were ineffective or void by reason of public policy.

7 February, 2008


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