RUGBY LEAGUE LITIGATION

                    EXPLANATORY STATEMENT

     In view of the length and complexity of the judgment in this matter, and as the case is one of substantial interest to a great many people, the Court has decided to issue this short explanatory statement when delivering judgment, and to make it available to the parties, the media and other interested persons.  It does not constitute the reasons for judgment of the Court, which will be published at the same time.  Only the reasons for judgment of the Court are its authoritative pronouncement on the questions in issue.  This statement is intended, however, to assist in a general understanding of the matters dealt with in the case. 

     In the latter part of 1994, there were rumours about a proposal associated with News Limited that a new rugby league competition should be introduced under the name Superleague, in effect replacing the National Competition, which had been increased to 20 clubs, as the Premier Competition.  The League (by which is meant Australian Rugby Football League Limited and New South Wales Rugby League Limited) decided in November 1994 to offer the 20 clubs admission to the National Competition for five seasons up to and including 1999 upon the basis that they would agree to participate in the National Competition for those playing seasons, and not participate in any other competition not conducted or approved by the League.  Each club was sent a form of Commitment Agreement, and each club signed it.

     Nevertheless, News Limited developed its proposal, which was expressed as a proposal for a Superleague controlled by the League, and this was presented to a meeting of representatives of the clubs chaired by Mr Arthurson on 6 February 1995.  The meeting unanimously rejected the idea, and the League decided to send out to each club urgently a fresh form of agreement, which has been called the Loyalty Agreement
in this case, confirming the Commitment Agreement and designed to strengthen it if it had any technical defects.  All clubs signed the Loyalty Agreement, although the Brisbane Broncos made some reservations on the effect of which no decision has yet been given.

     Nearly two months later News Limited arranged for the signing up of a considerable number of top players and coaches and, some time afterwards, for new clubs to be formed associated with certain clubs that aligned themselves with the Superleague proposal, to whom the services of the coaches and players were to be made available.  News Limited also commenced this action in the Court, claiming that the Commitment Agreements and the Loyalty Agreements should be set aside under sections 45 and 46 of the Trade Practices Act.

     Subsequently, a number of clubs aligned with News Limited brought cross-claims seeking to have the same agreements set aside on a ground known as "economic duress". 

     The League defended the action, and also cross-claimed against News Limited, the clubs aligned with it, and the new Superleague companies, making a large number of claims.  The principal claims were for breach of contract against the clubs which (1) had entered into the Commitment and Loyalty Agreements; (2) earlier, had joined the League by their representatives; and (3) had entered the competition pursuant to what the League claimed were contracts requiring them to abide by the memorandum and articles of association of the League.  The League also sued News Limited for the tort of inducing breach of contract, on the ground that it had intentionally induced the clubs to break their contracts.  The League sued the clubs for breaches of fiduciary obligations in respect of property which it said they were obliged to hold for a joint venture, consisting of the League and all the clubs, in the organization of the rugby league competition, and which it said they had in effect handed over to Superleague.  It also sued News Limited and the Superleague companies, claiming that they were dishonestly involved in the clubs' breaches of fiduciary obligations.  In addition, the League sued in respect of trade marks, registered in its name, that related to the clubs, claiming that the clubs were not entitled to use those trade marks for the benefit of Superleague.  There were other cross-claims upon which the Court has not yet reached any decision. 

     In these reasons, the Court dismisses the claims made by News Limited that the Commitment and Loyalty Agreements were bad under the Trade Practices Act.  By section 46 of that Act it is provided that a corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of preventing the entry of a person into that or any other market or for certain similar purposes.  Under this section, News Limited was claiming that the League had a substantial degree of power in a rugby league market, defined in various ways.  The market alleged by News Limited did not involve any other sport or form of entertainment.  The League defended the claim made under section 46 on several grounds, but one ground was that the true market was much wider, including at least other sports such as cricket, soccer Australian rules football and basketball, and that there was no evidence it had "a substantial degree of power" in the true market.  The Court held that the League was right in this argument, and as News Limited did not attempt to show that the League had a substantial degree of power in a wider market, the case under section 46 brought by News Limited had to fail.  A similar argument applied to another provision of the Act too, on which News Limited relied.

     News Limited also made claims under section 45, which refers to arrangements or understandings containing what is called an exclusionary provision, or containing a provision that would have or be likely to have the effect of substantially lessening competition in a market.  News Limited claimed that the Commitment Agreements and the Loyalty Agreements were given pursuant to such an arrangement or understanding between the 20 clubs and the League.  The Court has held that there was not such an arrangement or understanding, and also that there was not an exclusionary provision within the meaning of the Act.  Accordingly this claim by News Limited also failed. 

     The Court has held that economic duress was not proved.

     Accordingly the Court has held that the Commitment Agreements and the Loyalty Agreements are valid.

     On the cross-claims brought by the League, the Court has held that the League was successful in proving breach of contract against the clubs which aligned themselves with News Limited, and had proved the tort of intentional inducement of breach of contract against News Limited and the Superleague companies. 

     The Court has also held that the League had been successful in proving breaches of fiduciary duty in various respects, and participation in those breaches by News Limited and the Superleague companies.

     Formal orders have not yet been made.  The Court has directed the League to submit Short Minutes of the orders to which it says the judgment entitles it on a day to be fixed, when some outstanding issues may also be dealt with.

Sydney

23 February 1996