British Airways Board v Laker Airways Ltd

JurisdictionUK Non-devolved
JudgeLord Diplock,Lord Fraser of Tullybelton,Lord Scarman,Lord Roskill,Lord Brightman
Judgment Date19 July 1984
Judgment citation (vLex)[1984] UKHL J0719-2
Date19 July 1984
CourtHouse of Lords
British Airways Board (A Body Corporate)
Laker Airways Limited and Others
British Caledonian Airways Limited
Laker Airways Limited and Others
Laker Airways Limited and Another
Secretary of State for Trade and Industry
(Conjoined Appeals)

[1984] UKHL J0719-2

Lord Diplock

Lord Fraser of Tullybelton

Lord Scarman

Lord Roskill

Lord Brightman

House of Lords

Lord Diplock

My Lords,


Of these conjoined appeals, two are brought in civil actions in which the British Airways Board (B.A.) and British Caledonian Airways Ltd. (B.C.) respectively, are plaintiffs. With these I propose to deal first; the third appeal is brought in an application for judicial review. All three appeals form part of the aftermath of the relatively brief incursion into the ranks of airlines operating scheduled services between the United Kingdom and the United States of America, that was made by Sir Freddie Laker operating through a company, Laker Airways Ltd., incorporated in Jersey but with its principal office in London and transacting business there and elsewhere in the United Kingdom and in the United States. To this company, and the other companies through which Sir Freddie operated scheduled air services across the North Atlantic and the liquidators of those companies, I shall refer, collectively and individually, as "Laker."


The civil actions in the High Court


Laker's attempts to break into the market for the provision of scheduled air services between places in the United Kingdom and places in the United States of America (which, under the Chicago Convention of 1944, required the consent of the governments of both countries) achieved success in 1977 when it became an airline designated by the United Kingdom to operate a scheduled service on the New York-London route. This was done under the bi-partite treaty between the United Kingdom and the United States known as "Bermuda 2," which entitled each country to designate two of its airlines to operate on that route. The other designated British airline was B.A. Its status as sole designated British airline for the New York-London route was of long standing. Progressively, at intervals between 1977 and its subsequent financial collapse in February 1982, Laker also became a designated British airline for the New York-Manchester, Los Angeles-London, Los Angeles-Manchester, Los Angeles-Prestwick, Miami-London, Miami-Manchester, Miami-Prestwick and Tampa-London routes.


The other airlines operating scheduled services (as distinct from charter flights) across the North Atlantic between the United States and the United Kingdom and other destinations in Western Europe, including B.A. and B.C., were members of the International Air Transport Association ("I.A.T.A."). Between airlines that are members of I.A.T.A. ("I.A.T.A. Airlines") there exist elaborate arrangements for co-operation, involving through-bookings for carriage by different airlines, interchangeability of tickets, co-ordination of time tables, uniform fares for various classes of travel providing differing standards of amenity and the like, with which air travellers are familiar. They are made possible by I.A.T.A.'s operating a clearing house for the adjustment of accounts between member airlines resulting from the carrying out of such collaborative agreements.


Laker, upon becoming a designated British airline for the New York-London route did not become a member of I.A.T.A. It did not conform to the I.A.T.A. fare structure or participate in any of its arrangements for collaboration between I.A.T.A. airlines. Instead, it challenged the whole I.A.T.A. system by instituting a low-cost, no frills "skytrain" service in each direction at one-way fares which covered carriage only and, at the beginning, were little more than one-third of the price of the one-way fare then being charged for travel by I.A.T.A. airlines in the class that offered the lowest standard of amenities. This policy, which I will refer to for convenience as "the Skytrain policy," was extended by Laker to each of the new routes between the United Kingdom and the United States for which Laker progressively became a designated British airline. It was so successful in attracting passengers that by the time of its collapse, in February 1982, Laker was carrying one-seventh of all passengers by air across the Atlantic between the United Kingdom and the United States.


It may well be that the low fares charged under the Skytrain policy created a demand for air passages from persons who would not otherwise have contemplated transatlantic travel at all; but it appeared to the I.A.T.A. airlines operating transatlantic routes that fares so much less than the uniform standard fares charged by them under current I.A.T.A. agreements were calculated to attract, and to divert to Laker, passengers who would otherwise have travelled by I.A.T.A. airlines not only to destinations in the United Kingdom itself but to ultimate destinations in other Western European countries to which easy and frequent on-carriage was available to and from London. One of the most important factors in the profitability of operating a passenger airline is the payload, viz. the proportion of the total available seats which on an average it is able to fill. To meet what they regarded as the threat to the maintenance of payloads to which they were exposed by the lower fares charged by Laker under the Skytrain policy, the I.A.T.A. airlines introduced fares substantially lower than their uniform standard fares for the lowest class of travel, and approximately matching those charged by Laker. These new cheap fares were available on "stand-by" terms, depending on the availability of a seat, or were subject to compliance with requirements as to advanced booking; but, it is alleged by Laker, they were inclusive of "in-flight" amenities, for which extra charges were made under Laker's Skytrain policy, and entitled the passenger to other advantages resulting from the availability of collaborative arrangements with other I.A.T.A. airlines in consequence of their being parties to the various I.A.T.A. agreements.


By the beginning of 1982, Laker's finances had become overstretched, and disaster struck. The causes for this are not, in my view, a matter for your Lordships. Attempts at a rescue operation for re-financing Laker were made, but to no avail. The causes for their failure are also not a matter for your Lordships. On 5 February 1982 Laker ceased trading and on 17 February it went into liquidation in Jersey.


The American legal proceedings by Laker


My Lords, this brief account of the rise and fall of Laker is sufficient to explain the nature of the American litigation started by Laker (acting by its liquidator) in the Federal District Court of the District of Colombia ("the American action"). The object of the English civil actions in the High Court in which the appeal to your Lordships' House from the judgment of the Court of Appeal, reversing that of Parker J., is brought is to prevent Laker from continuing with the American action. The American action was started by a complaint, dated 24 November 1982, against a number of I.A.T.A. airlines: two of them, T.W.A. and Pan-Am, being U.S. airlines; two of them, B.A. and B.C., being British and the respective plaintiffs in the two English civil actions. Other airline defendants in the American action were airlines of other western European countries which operated North Atlantic routes; and there were two non-airline defendants, McDonnell Douglas Corporation ("McD.D."), the aircraft manufacturers, and an associated company of McD.D. concerned with providing finance for the purchase of aircraft from McD.D.


The complaint is reproduced in full as an appendix to the judgment of the Court of Appeal in the instant case [1984] Q.B. 142, 203-9. In order to dispose of the instant appeal, however, it is, I think, sufficient to point out that it alleges two causes of action ("counts"). The first is brought under section 4 of a United States Act of Congress, the Clayton Act, and claims threefold damages for injury caused to Laker by unlawful combination and conspiracy between the defendants in restraint of and to monopolise trade or commerce contrary to sections 1 and 2 of the U.S. Act of Congress, the Sherman Act; the second count, based on the same facts, is described as "intentional tort". The claim under the antitrust count is quantified at $l,050m., being three times the compensatory damage alleged to amount to $350m.; the claim for intentional tort count is for the same total figure arrived at by adding to the compensatory damage punitive damage amounting to $700m.


My Lords, one of the characteristics of the rules of civil procedure in the federal courts of the United States (as well as in most state courts), which seems to any English lawyer strange and, indeed, oppressive upon defendants, is that a "complaint," the document by which an action is begun, while it alleges that the complainant has a cause of action against the defendant or defendants, does not disclose, or discloses only in a most exiguous form, the facts which the plaintiff will eventually rely upon at the trial as giving rise to that cause of action. Instead, the complaint is accompanied, or immediately followed, by a request to the defendants for pre-trial discovery which bears little resemblance to the kind of discovery that is available in English civil actions. Its breadth, the variety of methods, oral and written, that it makes available for a wide-roving search for any information that might be helpful to the case of the party seeking discovery, the enormous expense, irrecoverable in any award of costs to a successful defendant, in which it may involve parties from whom discovery is sought, and its...

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