CATCHWORDS
PRACTICE AND PROCEDURE - Appeals - findings of primary facts - review of inferences to be drawn from primary facts.
Abalos v Australian Postal Commission (1990) 171 CLR 167
Jones v Hyde (1989) 85 ALR 23
Minister for Immigration Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359
Warren v Coombes (1979) 142 CLR 531
CLUBS AND ASSOCIATIONS - rugby league - constitution and by-laws of organiser and clubs participating in competition - review of cases concerning rugby league in New South Wales.
Adamson v New South Wales Rugby League Ltd (1991) 27 FCR 535, rev'd (1991) 31 FCR 242
Bernasconi v Bellew (22 November 1983, S Ct NSW/Helsham J, unreported)
Hawick v Flegg (1958) 75 WN(NSW) 255
McKinnon v Grogan [1974] 1 NSWLR 295
Tutty v Buckley (1970) 92 WN(NSW) 329, and on appeal (1971) 125 CLR 353
Wayde v New South Wales Rugby League Ltd (1989) 9 ACLR 349 (NSW S Ct/Hodgson J); (1985) 1 NSWLR 86; (1985) 180 CLR 459
CONTRACT - whether clubs are members of New South Wales Rugby League Ltd ("League") - whether clubs are bound by statutory contract constituted by memorandum and articles of association - Corporations Law, s.180(1).
CONTRACT - whether contract constituted by acceptance of club's application to participate in 1995 national competition - terms of contract - whether clubs obliged not to act in a manner prejudicial to the interests, welfare and image of the League.
CONTRACT - implied obligation to do all reasonably necessary to secure performance of contract for 1995 competition - duration and scope of implied obligation - whether launch and promotion of rival "Super League" competition during 1995 national competition breached implied obligation - remedies for breach of implied term.
CONTRACT - effect of Commitment and Loyalty Agreements entered into between League and participating clubs - whether consideration illusory - whether duty of good faith implied.
TORT - finding that players and club officials breached contractual obligations owed to clubs - whether finding can stand - whether inducement of such breaches constitutes unlawful interference with the League's undertaking - whether cause of action recognised in Australian law remitted for further consideration.
TORT - unlawful inducement of breach of contract - whether tort can be committed where contract subsequently declared void by the court.
REMEDIES - availability of remedy of constructive trust for clubs' breach of contract and rival competition organiser's tort of inducing breach of contract - damages as remedy - whether injunctive relief appropriate.
Australian and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662
Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399
Baumgartner v Baumgartner (1987) 164 CLR 137
Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66
Muschinski v Dodds (1985) 160 CLR 583
CORPORATIONS LAW - whether clubs acted inconsistently with objects in breach of Corporations Law, s 162(2) - whether any remedy available for such a breach - matter remitted for further consideration.
Corporations Law, s 162(2)
PRACTICE AND PROCEDURE - joinder of parties - whether players and coaches signing with Super League necessary parties under Federal Court Rules Order 6, rr 7, 8 - whether orders should be set aside by reason of non-joinder - whether players' and coaches' rights and liabilities directly affected by orders - relevant test to apply when issue arises after final orders made - whether letter to players and coaches notifying of proceedings sufficient to justify non-joinder - whether non-joinder of `necessary parties' cured by permitting to make submissions on form of orders.
Federal Court Rules, Order 6 rr 7,8
Associated Growers Co-Operative Limited v Hubbard Properties Pty Ltd (1986) 42 SASR 321
Grovenor v Permanent Trustee Company of NSW Limited (1966) 40 ALJR 329
Pegang Mining Ltd v Choong Sam [1969] 2 MLJ 52
EQUITY - fiduciary duties - whether fiduciary duties existed between League and participating clubs - discussion of principles governing existence of fiduciary relationships - whether relationship between parties could be described as one of "mutual trust and confidence" - significance of League's control over clubs and clubs' right to withdraw - discussion of indicia of fiduciary relationships.
Baumgartner v Baumgartner (1987) 164 CLR 137
Birtchnell v Equity Trustees Executor (1929) 42 CLR 384
Chan v Zacharia(1984) 54 CLR 178
Coomber, In re; Coomber v Coomber [1911] 1 Ch 723
Hodgkinson v Simms [1994] 3 SCR 377
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Kelly v C A & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248
Mabo v Queensland (No.2) (1992) 175 CLR 1
Muschinski v Dodds (1985) 160 CLR 583
Noranda v Lachlan Resources NL (1988) 14 NSWLR 1
Norich Winterhur Insurance (Australia) Ltd v Australian Associated Motor Insurers Ltd (18 July 1996, S Ct Vic/Brooking J, unreported)
United Dominions Corporation Limited v Brian Limited (1985) 157 CLR 1
United States Surgical Corporation v Hospital Products International Limited [1983] 2 NSWLR 157
Woodson (Sales) Pty Limited v Woodson (Australia) Pty Limited (12 July 1996, S Ct NSW/Santow J, unreported)
TRADE PRACTICES - exclusionary provisions - whether Commitment and Loyalty Agreements contained exclusionary provisions within the meaning of Trade Practices Act 1974 (Cth), ss 4D and 45 - whether clubs in competition to retain services of competition organiser - whether clubs in competition for services of rival competition organiser - whether clubs in competition for services of premier players - meaning of `likely' in construction of Trade Practices Act, s 4D(2) - relevance of players' contracts being contracts of service - whether clubs were parties to contract, arrangement or understanding for the purpose of Trade Practices Act, s 45(2)(a)(ii) - whether clubs and League had an exclusionary purpose - effect of contravention - whether services provided in trade and commerce.
TRADE PRACTICES - relief under Trade Practices Act, s 87(2)(a) - Trade Practices Act, s 45(2) - whether contractual provisions are void ab initio.
TRADE PRACTICES - severance pursuant to Trade Practices Act, s.4L - whether invalid exclusionary provisions severable from Commitment and Loyalty Agreements - whether severance would materially change intent of agreements.
Trade Practices Act, 1974 (Cth), ss 4D, 45, 87(2)
British Basic Slag Ltd's Agreements, Re [1963] 2 All ER 807
Carlton and United Breweries Limited v Castlemaine Tooheys Limited (1986) 161 CLR 543
Carney v Herbert [1985] AC 301 (PC)
Dowling v Dalgety Australia Limited (1992) 34 FCR 109
Eastern Express Pty Limited v General Newspapers Pty Limited (1991) 30 FCR 385
The King and the Attorney-General of the Commonwealth v The Associated Northern Collieries (1912) 14 CLR 387
McFarlane v Daniell (1938) 38 SR(NSW) 337
Radio 2UE Sydney Pty Ltd v Stereo F.M. Pty Ltd (1982) 62 FLR 437
Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35
Theatre Enterprises Inc v Paramount Film Distribution Corporation 346 US 537 (1958)
Thompson v Australian Capital Television Pty Ltd (1994) 54 FCR 513
Tillmans Butcheries Pty Ltd v Australian Meat Industry Employees' Union (1979) 42 FLR 331
Trade Practices Commission v Email (1980) 43 FLR 383
Trade Practices Commission v Milreis (1977) 29 FLR 144
NEWS LIMITED & ORS v AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED & ORS
NG 213/96
BRISBANE BRONCOS RUGBY LEAGUE FOOTBALL CLUB LIMITED & ORS v AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED & ORS
NG 227/96
COWBOYS RUGBY LEAGUE LIMITED v AUSTRALIAN RUGBY FOOTBALL CLUB LIMITED & ORS
NG 228/96
LOCKHART, VON DOUSSA, SACKVILLE JJ.
SYDNEY
4 OCTOBER, 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
MATTER NO. NG 213 OF 1996
BETWEEN:
NEWS LIMITED
First Appellant
SUPER LEAGUE PTY LIMITED
Second Appellant
AH IL PTY LIMITED
AH GC PTY LIMITED
AH EA PTY LIMITED
AH CR PTY LIMITED
AH CT PTY LIMITED
AH CB PTY LIMITED
AH BR PTY LIMITED
AH BA PTY LIMITED
AH MN PTY LIMITED
AH NE PTY LIMITED
AH NO PTY LIMITED
AH NQ PTY LIMITED
AH WR PTY LIMITED
AH WE PTY LIMITED
AH SG PTY LIMITED
AH SQ PTY LIMITED
AH SO PTY LIMITED
AH PE PTY LIMITED
AH PA PTY LIMITED
AH AU PTY LIMITED
Third to Twenty-Second Appellants
AND:
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
First Respondent
NEW SOUTH WALES RUGBY LEAGUE LIMITED
Second Respondent
BRISBANE BRONCOS RUGBY LEAGUE CLUB LIMITED
CANBERRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
CANTERBURY-BANKSTOWN RUGBY LEAGUE CLUB LTD
CRONULLA-SUTHERLAND DISTRICT RUGBY LEAGUE
FOOTBALL CLUB LIMITED
COWBOYS RUGBY LEAGUE FOOTBALL LIMITED
WESTERN REDS RUGBY LEAGUE FOOTBALL CLUB LIMITED
PENRITH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
AUCKLAND WARRIORS RUGBY LEAGUE LIMITED
SYDNEY BULLDOGS LIMITED
Third to Eleventh Respondents
SOUTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
EASTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
ST. GEORGE DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SYDNEY TIGERS RUGBY LEAGUE FOOTBALL CLUB LIMITED
WESTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB
MANLY WARRINGAH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
PARRAMATTA DISTRICT RUGBY LEAGUE CLUB LTD
GOLD COAST SEAGULLS RUGBY LEAGUE FOOTBALL CLUB LIMITED
ILLAWARRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SOUTH QUEENSLAND CRUSHERS RUGBY LEAGUE FOOTBALL CLUB LIMITED NEWCASTLE KNIGHTS LIMITED
Twelfth to Twenty-Third Respondents
THE 310 PLAYERS AND COACHES NAMED IN THE SCHEDULE TO THE NOTICE OF MOTION FILED ON 23 MAY 1996, WHOSE NAMES ARE LISTED IN APPENDIX II HERETO
Intervenors
MATTER NO. NG 227 OF 1996
BETWEEN:
BRISBANE BRONCOS RUGBY LEAGUE CLUB LIMITED
CANBERRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
CANTERBURY-BANKSTOWN RUGBY LEAGUE CLUB LIMITED
CRONULLA-SUTHERLAND DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
WESTERN REDS RUGBY LEAGUE FOOTBALL CLUB LIMITED
PENRITH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SYDNEY BULLDOGS LIMITED
AUCKLAND WARRIORS RUGBY LEAGUE LIMITED
First to Eighth Appellants
AND:
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
First Respondent
NEW SOUTH WALES RUGBY LEAGUE LIMITED
Second Respondent
SOUTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
EASTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
ST. GEORGE DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SYDNEY TIGERS RUGBY LEAGUE FOOTBALL CLUB LIMITED
WESTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB
MANLY WARRINGAH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
PARRAMATTA DISTRICT RUGBY LEAGUE CLUB LTD
GOLD COAST SEAGULLS RUGBY LEAGUE FOOTBALL CLUB LIMITED
ILLAWARRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SOUTH QUEENSLAND CRUSHERS RUGBY LEAGUE FOOTBALL CLUB LIMITED NEWCASTLE KNIGHTS LIMITED
Third to Fourteenth Respondents
NEWS LIMITED
Fifteenth Respondent
SUPER LEAGUE PTY LIMITED
Sixteenth Respondent
AH IL PTY LIMITED
AH GC PTY LIMITED
AH EA PTY LIMITED
AH CR PTY LIMITED
AH CT PTY LIMITED
AH CB PTY LIMITED
AH BR PTY LIMITED
AH BA PTY LIMITED
AH MN PTY LIMITED
AH NE PTY LIMITED
AH NO PTY LIMITED
AH NQ PTY LIMITED
AH WR PTY LIMITED
AH WE PTY LIMITED
AH SG PTY LIMITED
AH SQ PTY LIMITED
AH SO PTY LIMITED
AH PE PTY LIMITED
AH PA PTY LIMITED
AH AU PTY LIMITED
Seventeenth to Thirty-sixth Respondents
THE 310 PLAYERS AND COACHES NAMED IN THE SCHEDULE TO THE NOTICE OF MOTION FILED ON 23 MAY 1996, WHOSE NAMES ARE LISTED IN APPENDIX II HERETO
Intervenors
MATTER NO. NG 228 OF 1996
BETWEEN:
COWBOYS RUGBY LEAGUE FOOTBALL LIMITED
Appellant
AND:
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
First Respondent
NEW SOUTH WALES RUGBY LEAGUE LIMITED
Second Respondent
NEWS LIMITED
Third Respondent
SOUTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
EASTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
ST. GEORGE DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SYDNEY TIGERS RUGBY LEAGUE FOOTBALL CLUB LIMITED
WESTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB
MANLY WARRINGAH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
PARRAMATTA DISTRICT RUGBY LEAGUE CLUB LTD
GOLD COAST SEAGULLS RUGBY LEAGUE FOOTBALL CLUB LIMITED
ILLAWARRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
SOUTH QUEENSLAND CRUSHERS RUGBY LEAGUE FOOTBALL CLUB LIMITED NEWCASTLE KNIGHTS LIMITED
Fourth to Fifteenth Respondents
THE 310 PLAYERS AND COACHES NAMED IN THE SCHEDULE TO THE NOTICE OF MOTION FILED ON 23 MAY 1996, WHOSE NAMES ARE LISTED IN APPENDIX II HERETO
Intervenors
CORAM: LOCKHART, VON DOUSSA, SACKVILLE JJ.
PLACE: SYDNEY
DATE: 4 OCTOBER 1996
MINUTES OF ORDER
A. The Court orders:
1. That the appeals be allowed.
2. That the orders made and confirmed by the trial Judge on 11 March 1996 be set aside.
B. The Court proposes to order, subject to any further submissions made by the parties (including the players and coaches given leave to intervene), to make the further following orders:
3. That there be a declaration pursuant to s.87 of the Trade Practices Act 1974 (Cth) that the Commitment Agreements (as defined in paragraph 16 of the Further Amended Statement of Claim) and the Loyalty Agreements (as defined in paragraph 31 of the Further Amended Statement of Claim) are void ab initio.
4. That each of the respondents to the application, as amended on 18 May 1995, be restrained from giving effect to, requiring compliance by any person with, or otherwise enforcing the Commitment Agreements or the Loyalty Agreements.
5. That the matter be remitted to the trial Judge for further hearing and determination of the following outstanding issues:
a) claims for misleading or deceptive conduct, infringement of trade marks and passing off;
b) claims for unjust enrichment;
c) claims for unlawful interference with the undertakings and activities of the cross-claimants;
d) claims for damages under s.162(8) of the Corporations Law;
e) claims for damages for breach of contract and unlawful inducement of breach of contract; and
f) questions as to the costs of the trial.
6. Subject to paragraph 5 of this order, that the cross-claims be otherwise dismissed.
7. That
the New South Wales Rugby League Ltd, the Australian Rugby
Football League Limited and the cross-claimants in the second cross-claim pay
the costs of the appeal (including the hearings before the Full Court on 13 and
25 March 1996), of each of the appellants and of the players and coaches given
leave to intervene on the appeal.
C. The Court directs that the matter be listed for further directions on a date to be fixed.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
MATTER NO. NG 213 OF 1996
BETWEEN:
NEWS LIMITED
First Appellant
AND OTHERS
AND:
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
First Respondent
NEW SOUTH WALES RUGBY LEAGUE LIMITED
Second Respondent
AND OTHERS
THE 310 PLAYERS AND COACHES NAMED IN THE SCHEDULE TO THE NOTICE OF MOTION FILED ON 23 MAY 1996, WHOSE NAMES ARE LISTED IN APPENDIX II HERETO
Intervenors
MATTER NO. NG 227 OF 1996
BETWEEN:
BRISBANE BRONCOS RUGBY LEAGUE CLUB LIMITED
First Appellant
AND OTHERS
AND:
AUSTRALIAN RUGBY LEAGUE LIMITED
First Respondent
NEW SOUTH WALES RUGBY LEAGUE LIMITED
Second Respondent
AND OTHERS
THE 310 PLAYERS AND COACHES NAMED IN THE SCHEDULE TO THE NOTICE OF MOTION FILED ON 23 MAY 1996, WHOSE NAMES ARE LISTED IN APPENDIX II HERETO
Intervenors
MATTER NO. NG 228 OF 1996
BETWEEN:
COWBOYS RUGBY LEAGUE FOOTBALL LIMITED
Appellant
AND:
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
First Respondent
NEW SOUTH WALES RUGBY LEAGUE LIMITED
Second Respondent
NEWS LIMITED
Third Respondent
AND OTHERS
THE 310 PLAYERS AND COACHES NAMED IN THE SCHEDULE TO THE NOTICE OF MOTION FILED ON 23 MAY 1996, WHOSE NAMES ARE LISTED IN APPENDIX II HERETO
Intervenors
CORAM: LOCKHART, VON DOUSSA, SACKVILLE JJ.
PLACE: SYDNEY
DATE: 4 OCTOBER 1996
INDEX
I. INTRODUCTION 1
A. Background 1
B. Review of the Facts 3
C. Form of the Judgment 6
II. THE COURSE OF EVENTS 8
A. Background to Rugby League in Australia 8
B. Court Cases: 1958-1974 10
1. Hawick v Flegg 10
2. Tutty v Buckley 11
3. McKinnon v Grogan 12
C. The NSWRL's Constitution - 1979 13
D. The Attempts to Exclude Western Suburbs 15
1. The First Decision 15
2. Bernansconi v Bellew 16
3. The Second Exclusion Decision 16
4. Wayde v NSWRL 17
E. Prelude to Incorporation: The Scott Report 19
F. Incorporation - The Memorandum and Articles 21
1. Objects and Powers 21
2. The Directors 23
3. The Members 24
4. Expulsion and Termination of Membership 25
5. The Rules and Regulations 26
G. Incorporation of the Clubs 28
1. The Process of Incorporation 28
2. North Sydney 29
3. Brisbane Broncos 30
4. Inconsistent Provisions 32
H. Incorporation of the ARL 32
I. Developments in the League 1989-1994 33
1. Newtown 33
2. North Sydney and "Quit for Life" 33
3. Towards Expansion 34
4. The Bradley Report 38
5. Admission of New Clubs 39
6. ARL as Organiser 40
J. The Roles of the ARL/League and Clubs 40
1. Promoting Evenness of the Competition 40
2. Marketing Activities 41
3. Financial Arrangements 42
4. Financial Model for 1995 49
5. League Finances 49
6. League Financial Statements - 31 October 1994 53
7. Promotion of the Game 56
8. Player Contracts 56
K. Invitations to Participate in the 1995 Competition 58
L. The Birth of the Super League Proposal 59
1. The Initial Proposal 59
2. The "Superleague" Concept 61
M. Events Leading to the Commitment Agreements 62
1. Newspaper Reports 62
2. Mr Arthurson's Return 63
3. The Commitment Agreements 66
4. The Conversation between Mr Arthurson and
Mr Cowley 67
5. The Meeting of 14 November 1994 68
6. Execution of the Commitment Agreements by ARL 70
N. November 1994 - January 1995 71
1. The ACP Strategy 71
2. The Confidentiality Deeds 73
3. Further work within News 75
O. The Loyalty Agreements 76
1. The Meeting of 30 January 1995 76
2. The Letter of 2 February 1995 78
3. The Meeting of 6 February 1995 79
4. Execution of Loyalty Agreements 81
5. Terms of the Loyalty Agreements 82
P. The Final Conflict 85
1. News' Reaction to the Loyalty Agreements 85
2. Developments within the ARL 86
3. The News Meeting of 23 March 1995 88
4. Signing Coaches and Players 90
5. The League's Response 91
6. News and the Clubs 93
7. The Heads of Agreement 94
8. The Club Deeds 96
9. The Player Contracts 97
10. The Players and Their Contracts 99
Q. The Proceedings 100
1. News' Application 100
2. The First Cross Claim 102
3. The Second Cross Claim 104
4. The Cross Claims by the Rebel Clubs 104
5. The Decision of the Trial Judge 104
6. The Orders 107
7. Stay Applications 108
8. The Appeals 108
III. CONTRACTUAL AND NON-FIDUCIARY CLAIMS 109
A. Contractual Claims Against the Rebel Clubs 109
1. Introduction 109
2. The Statutory Contract 109
3. The 1995 Competition Contract 112
4. The Commitment Agreements and the Loyalty Agreements 119
B. Allegations of Breach of Contracts by Players and Coaches 122
1. The Pleaded Allegations 122
2. Playing Contracts 122
3. Club Officials 124
C. Unlawful Inducement of Breach of Contract 127
D. Unlawful Interference Claims 128
E. Remedies Available for Breach of Contract and
Procurement of Breach 129
F. Other Claims 132
1. Breach of Corporations Law 132
2. Intellectual Property Claims, Misleading or
Deceptive Conduct and Passing Off 134
3. Unjust Enrichment 136
G. The Question of Parties 137
1. The Test 137
2. Non-Joinder of the Players and Coaches 140
H. Summary 142
IV. THE CLAIMS BASED ON BREACH OF FIDUCIARY DUTY 144
A. The Pleadings 144
1. The First Cross-Claim 144
2. The Second Cross-Claim 147
B. The Judgment Below 147
1. The Reasons 147
2. Relief 151
C. The Argument 152
1. The Scope of the Argument 152
2. The League and ARL's Submissions 153
D. Fiduciary Duties 155
1. The Fiduciary Principle 155
2. The Indicia of Fiduciary Relationships 158
E. Application of Principles 161
1. Incorporation and Control by the League 161
2. Decision-Making Processes 165
3. Assets and the Joint Venture 165
4. The Clubs' Right to Withdraw 167
5. Co-Operation and Competition 168
6. Profits and Goodwill 169
7. The United States Authorities 171
8. Norwich v AAMI 172
9. Conclusion 173
F. Some Related Issues 174
1. A Narrower View of Fiduciary Duties? 174
2. Unconscionability and Constructive Trusts 175
3. Players' Contracts 176
4. Coaches' Duties 178
5. Participation in Breach of Fiduciary Duties 179
V. VALIDITY OF THE COMMITMENT AND LOYALTY AGREEMENTS: THE EXCLUSIONARY PROVISIONS QUESTION 180
A. Introduction 180
B. The Legislation 181
1. The Trade Practices Act Provisions 181
2. A Preliminary Comment 183
C. The Proceedings Below 184
1. The Pleaded Case 184
2. The Trial Judge's Reasons 185
D. The Submissions 190
E. Competition Among the Clubs 192
1. The Test 192
2. Preliminary Observations 193
3. Competition for the Services of the League and ARL 194
4. Competition for the Services of News 196
5. Competition for the Services of Premier Players 201
F. Was There a Contract Arrangement or Understanding? 202
1. The Test 202
2. The Trial Judge's Approach 203
3. The Position Before 14 November 1994 204
4. The Meeting of 14 November 1994 206
G. Did the Clubs Have a Sufficiently Substantial Exclusionary Purpose? 207
1. The Test 207
2. A Gloss 208
3. The Facts 209
H. Were Services Provided in Trade or Commerce? 212
I. Consequences of a Breach of TP Act, s.45 214
1. The Application of TP Act, s.87(2)(a) 214
2. Severability 214
3. Conclusion 216
VI. ORDERS 217
A. The Orders Made by the Trial Judge 217
1. Orders 2 and 3 217
2. Orders 4, 5 and 6 218
3. Orders 7 - 11 218
4. Orders 12 - 14 219
5. Orders 15 - 18 219
6. Orders 19, 21, 22 220
7. Orders 23 - 28B 220
8. Orders 29 - 31 220
9. Order 32 221
10. Orders 33, 34 221
B. Orders on Appeal 221
REASONS FOR JUDGMENT
I. INTRODUCTION
A. Background
This case arises out of an attempt by the appellants, one of which is News Limited ("News"), to establish a new professional rugby league competition in Australia, known as "Super League" or "Superleague". (For consistency we use the designation "Super League", except where another style is adopted in quotations.) According to the appellants, they intend Super League to operate in competition with the established national rugby league competition, which has been conducted for many years under the auspices of the New South Wales Rugby League Limited (the "League") or the Australian Rugby Football League Limited (the "ARL"), or their predecessors. The appellants invoke the provisions of Part IV of the Trade Practices Act 1974 (Cth) (the "TP Act") to attack certain contractual arrangements, referred to in argument as the Commitment and Loyalty Agreements. These agreements, to which the League, the ARL and the 20 clubs participating in the 1995 national competition were parties, were executed, respectively, in November 1994 and February 1995.
According to the respondents, which include the League and ARL, the establishment of Super League constitutes an attempt to destroy the existing competition by unlawful means. The nub of their case is that some of the clubs participating in the national competition have breached fiduciary and contractual obligations owed to the League, the ARL and other clubs. The respondents contend that News and its associated Super League companies have induced or encouraged these breaches, including breaches of the Commitment and Loyalty Agreements.
The trial Judge, although reserving some issues for further consideration, in substance found in favour of the respondents. His Honour's judgment is reported as News Limited v Australian Rugby Football League Limited (1996) 58 FCR 447. His Honour's orders (at 548-556) have the effect, inter alia, of preventing the appellants organising or participating in a rugby league competition, other than one authorised by the League or ARL, until the year 2000. The respondents support his Honour's orders, the terms of which are set out in Appendix I to this judgment.
The history of the present proceedings is recounted in Part II, Section Q of this judgment. It suffices to note here that News instituted the proceedings on 30 March 1995. The respondents were the League, the ARL and 17 of the 20 clubs, including five clubs aligned with Super League. (Following the terminology adopted by counsel, we refer to these five clubs, together with the other three clubs aligned with Super League, as the "rebel clubs"). The five rebel clubs named as respondents did not contest the claims made by News, but the other respondents did.
On 11 April 1995, the League, the ARL and the twelve clubs aligned with them (to which we refer as the "loyal clubs"), filed cross-claims. The cross-respondents were News, 20 licensee clubs created by News for the purpose of Super League (to which we refer as the "Franchisees"), Super League Pty Ltd ("SLPL") (a company associated with News), and the eight rebel clubs.
Since his Honour reserved a number of matters for further consideration, the judgment as a whole is interlocutory in character and leave to appeal is required, notwithstanding that some orders, viewed alone, appear to be final in character: Federal Court of Australia Act 1976 (Cth), s.24(1A); Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767 (H Ct); Miki Shoko Co Ltd v Merv Brown Pty Ltd [1988] ATPR 40-858 (FCA/FC), at 49,275-49,276, per Lockhart J; NZI Securities Australia Ltd v Poignand (1994) 51 FCR 584 (FCA/FC), at 593-594. On 13 March 1996, whilst considering a stay application, the members of a differently constituted Full Court, granted leave to the appellants to appeal, insofar as such leave is necessary.
News, the Franchisees and SLPL filed a notice of appeal, pursuant to the leave granted by the Full Court. The eight rebel clubs, together with Sydney Bulldogs Ltd (a company associated with Canterbury-Bankstown Rugby League Club Ltd, one of the rebel clubs) also filed a notice of appeal.
The appeal was argued over a period of nine hearing days. News and the Super League companies were represented by Mr T.E.F. Hughes QC, Mr J.D. Heydon QC, Mr C.P. Comans, Mr J.T. Gleeson, Mr T.D. Castle and Mr R. Cobden. The rebel clubs were separately represented on the appeal by Mr C.A. Sweeney QC, Mr J.J. Garnsey QC and Mr P.J. Dowdy. Mr Heydon and Mr Sweeney addressed their oral submissions principally to the issues arising under the TP Act. Mr Hughes and Mr Garnsey addressed the other issues in the appeal, including the claims based on breach of contract and of fiduciary duties and the nature of the relief (if any) that it was appropriate to grant.
The ARL and League were represented by Mr R.J. Ellicott QC, Mr D.M. Yates, Mr A.J.L. Bannon, Mr R.J. Weber and Mr D.B. Studdy. Mr J.J. Spigelman QC appeared with Mr A.J. Payne for the loyal clubs. Mr Spigelman directed his oral submissions principally to the issues arising under the TP Act, while Mr Ellicott addressed the remaining issues in the appeal.
At the commencement of the hearing, Mr J.R. Sackar QC, who appeared with Ms P.P.W. Wines, sought leave to intervene for the limited purpose of making submissions on behalf of 300 players and 10 coaches who had signed Super League contracts. Mr Sackar sought leave in order to argue, inter alia, that the players and coaches should have been joined as cross-respondents to the cross-claim and that the failure to do so meant that the proceedings were improperly constituted and that the orders founded on the cross claims should not have been made. Leave to intervene for the limited purpose indicated was not opposed and was granted by us.
This judgment is lengthy. In large measure this is because of the complexity of the factual and legal issues. In particular, it has been necessary to set out in detail the course of events in order to evaluate the competing arguments of the parties and the interveners. The length of the judgment also reflects, at least in part, the course of the proceedings themselves. The trial generated nearly 5,000 pages of transcript and a vast amount of documentary evidence. On the appeal, each set of represented parties (including the players and coaches) prepared extensive written submissions. Each set of parties replied in detail to the submissions of their opponents. In some cases, lengthy replies to the replies were filed.
The text of the various submissions on the appeal (leaving aside the transcript of oral argument) ran into thousands of pages. The various submissions were supported by extensive documentation, including summaries and extracts from statements, exhibits and other evidence tendered at the trial. In all, apart from a dozen or so volumes of authorities, each member of the Court was presented with about 70 folders of documents. The transcript of the proceedings before the trial Judge was available on disk.
B. Review of the Facts
One reason for the length of the present
judgment is that we have thought it necessary to set out the course of events
in considerable detail. Since the
respondents relied on the history of the League and ARL to support their case,
the statement of facts includes a good deal of historical
material. The account also includes the
circumstances in which the Super League proposal was formulated and developed
and the events leading up to the execution of the Commitment and Loyalty
Agreements. These circumstances and
events bear directly on the issues argued on the appeal.
Generally speaking, with some significant exceptions, the parties (including the players and coaches) were not in substantial disagreement as to the legal principles to be applied in this case. The contest centred on the way in which the principles should be applied to the facts of the case and, in that context, the inferences that should or should not be drawn from the primary facts found by the trial Judge. In particular, the appellants contended that the trial Judge had drawn unwarranted inferences from the primary facts, in concluding that the clubs owed fiduciary duties to the League and ARL and that the Commitment and Loyalty Agreements were not entered into for any of the purposes proscribed in s.4D of the TP Act.
Much of the evidence in the case was documentary. However, some of the findings of primary fact depended on the trial Judge's assessment of the credit of witnesses. This was the case, for example, with the findings that certain conversations took place between representatives of News and representatives of the League and ARL prior to the meeting of 14 November 1994, at which the clubs and the League discussed execution of the Commitment Agreements. To the extent that his Honour made findings of primary fact of this kind, the appellants did not seriously challenge them. There was some criticism in argument of the strong language used by his Honour in describing the conduct or character of certain witnesses. But, in the end, counsel for the appellants accepted that, in the light of the advantages enjoyed by a trial Judge, there was no basis for interfering with the findings of primary fact: Jones v Hyde (1989) 85 ALR 23 (H Ct), at 27; Abalos v Australian Postal Commission (1990) 171 CLR 167, at 179. The account of events in this judgment therefore incorporates his Honour's principal findings of primary fact.
Because the appellants challenged many of the inferences drawn by the trial Judge from primary facts, it is convenient to recall the principles governing appellate review of findings of this kind. In Warren v Coombes (1979) 142 CLR 531, Gibbs ACJ, Jacobs and Murphy JJ said this (at 551):
"Shortly
expressed, the established principles are, we think, that in general an
appellate court is in as good a position as the trial Judge to decide on the
proper inference to be drawn from facts which are undisputed or which, having
been disputed, are established by the findings of the trial Judge. In deciding what is the proper inference to
be drawn, the appellate court will give respect and weight to the conclusion of
the trial Judge, but, once having reached its own conclusion, will not shrink
from giving
effect to it. These principles, we
venture to think, are not only sound in law, but beneficial in their
operation."
This does not mean that an appellate court will necessarily interfere simply because it would not have been inclined to reach the same conclusions as the trial Judge. The position was explained by Beaumont and Lee JJ in Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359, at 368-369:
"The material upon which his Honour made his findings consisted of documents, affidavits and uncontested oral testimony. This Court is as well placed as his Honour to draw inferences from that material. (See Warren v Coombes (1979) 142 CLR 531.)
Section 27 of the Federal Court of Australia Act 1976 (Cth) provides as follows:
`In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its decision, to receive further evidence, which evidence may be taken on affidavit, by oral examination before the Court or a Judge or otherwise in accordance with section 46.'
However, the hearing of an appeal in this Court is neither a trial de novo nor a trial of the case afresh on the record (Duralla Pty Ltd v Plant (1984) 2 FCR 342) and the court is not obliged to proceed to make new findings of fact on all relevant issues and discharge the judgment appealed from if those findings differ from those of the trial judge and do not support the judgment. The court must be satisfied that the judgment of the trial judge is erroneous and it may be so satisfied if it reaches the conclusion that the trial judge failed to draw inferences that should have been drawn from the facts established by the evidence. The court is unlikely to be so satisfied if all that is shown is that the trial judge made a choice between competing inferences, being a choice the court may not have been inclined to make but not a choice the trial judge should not have made. Where the majority judgment in Warren v Coombes (supra) (at 552-553) states that an appellate court must not shrink from giving effect to its own conclusion, it is speaking of a conclusion that the decision of the trial judge is wrong and that it should be corrected. (See also Edwards v Noble (1971) 125 CLR 296, per Barwick CJ (at 304), per Menzies J (at 308-309) and per Walsh J (at 318-319).)"
As will be seen, we have concluded that some of the inferences which the trial Judge drew from the findings of primary fact he made, were erroneous, in the sense described in the authorities. In reaching these conclusions, we have borne in mind the principles stated in those authorities.
We should add that, generally speaking, we have not found it necessary to make a judgment about the propriety of the tactics employed by News in its dealings with the League and ARL and in formulating and implementing its strategy to advance the Super League proposal. His Honour, for example, was critical of what was described in an internal News strategy document as the "ARL/League blitzkrieg", by which the clubs and the League would be left defenceless against a virtual take-over by News. Similarly, his Honour was critical of the tactics used by News and its representatives to secure the signature of players and coaches to Super League contracts. In Part II we describe the tactics employed by News and those acting on its behalf in that endeavour.
We do not suggest that his Honour was necessarily unjustified in criticising these tactics or in characterising News' conduct, in certain respects, as misleading or contrary to assurances given by its representatives. But the critical question is whether News' tactics and conduct bear on the issues that must be resolved on this appeal. In certain respects they do. For example, the tactics employed to sign players and coaches may be relevant to the issues of whether the rebel clubs breached their contractual obligations to the League or ARL, and whether News induced any such breaches. Furthermore, News' conduct may bear on other issues yet to be resolved in this litigation, including allegations of misleading or deceptive conduct and passing off. However, in our view, the probity of News' conduct and tactics is not central to the questions that we have had to decide on this appeal.
C. Form of the Judgment
In Part II we trace the course of the major events relevant to this litigation. We have already explained why this account is so lengthy.
Part III addresses claims pleaded by the League and ARL, that the rebel clubs had breached contractual obligations owed to the League and ARL. We reject some of these claims, but find that the clubs breached an implied obligation arising under the contract constituted by their admission to the 1995 national competition. Part III considers associated claims against News, SLPL and the Franchisees, based on allegations that they unlawfully induced the rebel clubs to breach their contractual duties.
In addition, Part III deals with other claims for relief. These include alleged infliction by News of harm on the League and ARL by unlawful means; alleged breaches of the Corporations Law by the rebel clubs; and unresolved claims for relief based on misleading or deceptive conduct, passing off and infringement of intellectual property rights. Many of these matters require further examination by the trial Judge.
Finally, Part III deals with the contention of the Super League players and coaches that they were necessary parties to the proceedings and that certain orders should not have been made in their absence. We conclude that some of the orders made by the trial Judge, if otherwise supportable, cannot be sustained in the absence of the players and coaches as parties to the proceedings.
The case for the League and ARL and the loyal clubs rested, in part, upon the submission that the relationship between the League, ARL and the clubs involved fiduciary obligations. These obligations were said to arise out of the pleaded "League Joint Venture", which was defined as a joint venture for the carrying out of the respective objects of the League, ARL and the clubs. In Part IV we give our reasons for rejecting the contention that the rebel clubs owed fiduciary duties to the League, ARL and other clubs. Accordingly, we reject the claims based on breach of fiduciary duties.
Part V deals with the attack by the appellants on Commitment and Loyalty Agreements executed, respectively, in November 1994 and December 1995. The attack rested on the contention that the agreements included "exclusionary provisions", as defined in s.4D of the TP Act, and that they were therefore void as contravening s.45 of the TP Act. We give reasons for upholding these arguments.
Part VI considers the Orders made by the trial Judge and the form of orders that should be made on the appeal.
It will be seen that we have not considered the argument put forward by the appellants that the League and ARL contravened s.46 of the TP Act, by taking advantage of their market power to achieve purposes proscribed by that section. Nor have we considered the appellants' claim that the Commitment and Loyalty Agreements were contracts, arrangements or understandings which contained provisions having the purpose or effect, or likely effect, of substantially lessening competition in a market, thereby contravening s.45 of the TP Act. The extensive arguments before us on these issues raised many difficult questions, in particular the definition of the relevant market. We consider it unnecessary to resolve these questions, having regard to our conclusion that the appellants must succeed on the appeal on other grounds. Whatever view we might have taken on the market issues would not have altered the result. To have addressed these issues would have expanded an already lengthy judgment and delayed publication of our decision and reasons.
II. THE COURSE OF EVENTS
A. Background to Rugby League in Australia
In England, towards the end of the nineteenth century, the game then known as rugby football was organised and conducted as an amateur sport by the English Rugby Union. Local rugby matches in the north of England were controlled by the Northern Rugby Football Union ("NRFU"). The participants were predominantly working class men.
In the 1890s, the NRFU changed its rules to allow payments to be made to rugby players. At first, the rules governing games played under the auspices of the NRFU were the same as those of rugby football. However, in 1903, the NRFU playing rules were changed. These changes, such as limiting the teams to 13 players a side (rather than 15) and eliminating line-outs, form part of the rules of rugby league today and distinguish it from the game now known as rugby union.
The beginnings of rugby league in Australia can be traced to a meeting attended by about 50 people at Bateman's Hotel, George Street, Sydney, on 8 August 1907. The meeting voted to establish the "New South Wales Rugby Football League" (to which we refer as "NSWRL" to distinguish it from its successor body, the League). The meeting elected office bearers and formed a committee to draft a constitution for the new body. The meeting also appointed selectors for a representative New South Wales team to play a professional rugby team from New Zealand.
Following the formation of the NSWRL, nine clubs were established in Sydney. Each was established as an unincorporated association. These were Glebe (9 January 1908); Newtown (14 January 1908); South Sydney (17 January 1908); Balmain (23 January 1908); Eastern Suburbs (24 January 1908); Western Suburbs (4 February 1908); Newcastle (early April 1908); and Cumberland (20 April 1908).
At the end of 1908, the NSWRL selected a team to represent Australia on a tour of England later that year. The team was known as the "Kangaroos" and the matches between the two teams were referred to as "tests". The term "tests" has survived to the present day to describe contests between Australian rugby league teams and other national rugby league teams.
The first club competition administered by the NSWRL was described as the "Agriculture Shield Competition". It commenced in April 1908. Club games did not attract large crowds. Nonetheless, the NSWRL introduced the then novel concept of a season ticket, admitting holders to all grounds and stands during the season. The cost was one guinea and the NSWRL collected all receipts. From the outset of the competition, the NSWRL paid referees to officiate at both representative and club games.
Of the clubs participating in the first competition, South Sydney, North Sydney, Balmain, Western Suburbs and Eastern Suburbs adopted the colours in which they continue to play today. Cumberland adopted blue and gold, the colours now worn by Parramatta.
The membership of the NSWRL changed over time. Some clubs withdrew from the competition. These were Cumberland (1909); Newcastle (1910); and Glebe (1929). Others joined the competition. The new clubs joining the competition before 1970 were St George (1921); Canterbury (1935); Manly (1947); Parramatta (1947); Penrith (1967); and Cronulla (1967). Sydney University joined the NSWRL in 1920, but withdrew in 1937.
In 1961, a rugby league match (Balmain v North Sydney) was televised for the first time in Australia. Games were thereafter televised on a Saturday, with each of the three channels then operating (Channels 2, 7 and 9), taking it in turns to cover the matches. The NSWRL secured its first sponsorship in 1962, when the pre-season competition was sponsored by W.D. & H.O. Wills Ltd. In 1976, Eastern Suburbs became the first club to receive corporate sponsorship.
In 1982, Canberra and Illawarra became the first non-Sydney clubs to join the competition. In that year, the competition became known as the "Winfield Cup". This followed a long-term sponsorship agreement between Rothmans and Pall Mall Ltd and the NSWRL, which carried with it naming rights to the premiership competition.
In December 1983, the NSWRL became incorporated as "New South Wales Rugby League Limited", a company limited by guarantee. As we have already noted, we refer to that company, as did the trial Judge, as the "League". On 23 May 1986, the ARL was incorporated as a company limited by guarantee.
During the 1980s, all clubs in the competition
became incorporated as companies limited by
guarantee. As from the 1984 season,
Newtown did not participate in the competition.
In 1984, Western Suburbs was excluded from the competition, in
circumstances we describe in Section D of this Part (although the club was
subsequently re-admitted). In 1988,
Brisbane, Newcastle and Gold Coast joined the competition. In 1995, the competition was expanded to 20
teams by the inclusion of the Western Reds (based in Perth), the Auckland
Warriors, the South Queensland Crushers (based in Brisbane) and the North
Queensland Cowboys (based in Townsville).
B. Court Cases: 1958-1974
From 1958 onwards, a number of cases involving the constitution and by-laws of the NSWRL were decided. These cases shed light both on the relationship between the NSWRL and its members and on the history of rugby league in New South Wales.
1. Hawick v Flegg
In Hawick v Flegg (1958) 75 WN (NSW) 255 (S Ct NSW), McLelland J granted relief to a professional rugby league player who had been disqualified from playing for a period of twelve months, because he had refused to make himself residentially qualified to play for a club to which he was contracted. McLelland J (at 259) addressed the nature of the relationship among the members of the various clubs belonging to the NSWRL:
"The League itself consists, according to r.1(b), of:
`Such Metropolitan District Clubs, hereinafter called District Clubs, Junior Leagues, The Country Rugby Football League of N.S.W. and its affiliated Leagues, The N.S.W. Rugby League Referees Association, and any other Metropolitan District Clubs or affiliated Leagues which may be admitted as hereinafter provided.'
The bodies mentioned, of course, are all in themselves unincorporated bodies, and the net result is that each member of a club throughout the League is a member of the League and indeed throughout the rules individual members are referred to.
Having regard to r.18 [dealing with entitlements of members] and the rules generally, the conclusion I have come to is that there is a contractual connection between each of the members of the League with one another, and that this contractual relationship is similar in nature to that which was discussed in the English authorities. To use the language in Cameron v Hogan [(1934) 51 CLR 358, at 371] I am of opinion that upon the true construction the members did contemplate `the creation of legal relations inter se'."
2. Tutty v Buckley
In Tutty v Buckley (1970) 92 WN (NSW) 329 (NSW CA), the issue was whether the rules of the NSWRL governing the retention and transfer of players from one club to another constituted an unreasonable restraint of trade under common law principles. The rules were introduced in 1959, in place of earlier provisions, which required players who played for district clubs to be residentially qualified. The replacement rules permitted a club, to which a player had been contracted, to prevent that player transferring to another club without consent. The club had this power even if it declined to use the player's services. The defendants (the president and secretary of the NSWRL and the president of the Balmain club) argued that the district clubs were the "mere creatures" of the NSWRL and existed primarily as a means of enabling a competition to be organised. Thus, so it was said, there was only one employing body and no relevant restraint of trade. The defendants also argued that the NSWRL and the district clubs were mere sporting bodies and that, consequently, the rules restricting transfer of players were not intended to have contractual force.
The Court rejected these arguments. The rules operated in a "commercial context", the clubs themselves having a large financial interest in the restrictions on transfer of professional players. Having regard to this commercial context, the rules were intended to have contractual force (at 333). The relationship between the clubs and professional players, and among the clubs themselves, was aptly described as "trade" (at 333-334).
The Court found unconvincing the contention that the NSWRL was simply organising a sport, through an association of non-profit clubs (at 334-335):
"In the circumstances we do not think it to be of primary importance that the various bodies are not carried on at a profit. The fact is that substantial profits are made from the actual conducting of the games. It is true that these profits are expended in promoting the sport and that other moneys donated for the purpose are likewise expended, but the actual activity of the Metropolitan District Clubs seems to us on the figures presented to have been a quite profitable one.
Once it is determined that the rules in question are applicable only to the Metropolitan District Clubs, and since it appears that those clubs have the teams which consist largely of professional playing members, then a conclusion that the various clubs and the various players in them are engaged in a trade in a relevant sense leads in our view to a conclusion that the retention and transfer provisions are in restraint of that trade.... Such a conclusion is based upon the view that the Metropolitan District Clubs are distinct entities even though they are co-ordinated and largely controlled through their central voluntary association, the League itself.... The Metropolitan District Clubs and, indeed, the affiliated Leagues are independent entities, even though they have for the common purpose largely subordinated themselves to the central organising association."
In the result, the Court held that the restraint of trade was unreasonable and granted the plaintiff declaratory and injunctive relief.
The defendants appealed to the High Court which, in substance, dismissed the appeal: Buckley v Tutty (1971) 125 CLR 353. The High Court approached the issues somewhat differently than did the Court of Appeal. The joint judgment of the High Court held that the rules operated as a restraint of the plaintiff's trade as a professional footballer, playing the game for reward (at 373). Their Honours rejected the argument that the NSWRL was analogous to a large corporation imposing rules governing the transfer of employees from one branch or factory to another (at 373):
"However, the suggested analogy of a corporation which is itself an employer is inappropriate to the present case. The League may sometimes employ footballers e.g. those who play in State teams - but it is not the sole, or the most important, employer. One of the principal functions of the League is to control, either directly (as in the case of district clubs) or indirectly (through The Country Rugby Football League of New South Wales), the bodies who are employers of Rugby League professionals. The district clubs which provide employment for professional footballers are, in truth, in keen competition for the more skilful players. The rules however prevent professional players from making the most of the fact that there are clubs prepared to bid for their services. If valid, the rules prevent [a] professional player who is a member of one club, even if he is not contractually bound to play for it, from becoming employed as a professional footballer by another club, except with the concurrence of the former club or the Qualification and Permit Committee. This is plainly a fetter on the right of a player to seek and engage in employment."
Their Honours considered it unnecessary to decide whether the rules of the NSWRL constituted a contract between members. This was so because the common law doctrine of restraint of trade applied to all restraints, however imposed, and whether voluntary or involuntary (at 375).
3. McKinnon v Grogan
The next case to consider the structure of the NSWRL and its member clubs was McKinnon v Grogan [1974] 1 NSWLR 295 (S Ct NSW/Wootten J.). A threshold issue was whether a member of the NSWRL and of a district club had standing to claim declaratory relief in relation to the affairs of the club. Wootten J found in favour of the members on this issue. His Honour described the position of the members of the NSWRL as follows (at 298):
"But
ordinary members such as the parties in this case, as distinct from players, do
not belong to the league for any financial gain to themselves, or with a view
to an ultimate participation in distribution of assets on dissolution. They join because they are lovers of a sport
which is a major community activity, and desire to participate in its conduct
and management. Some aspire to hold
office, but in most cases this is more likely to result in personal expenditure
than in personal gain. No doubt in
addition to their
association with a favourite sport, they value the opportunity to exercise
managerial skills, enjoy public esteem, and perform a public service by
ensuring that a sport important to many thousands of people is cleanly and
efficiently conducted. Is the law to say
to such people that their rights and opportunities to participate in these
activities are less entitled to protection in the courts than a right or
opportunity to make a few dollars selfish gain?"
C. The NSWRL's Constitution - 1979
The Constitution, Standing Orders and Competition Rules of the NSWRL were consolidated and printed in 1979. That document was in evidence before the trial Judge.
The objects and powers of the NSWRL were as follows (cl.4(1)):
"(a) To foster and control the game throughout the State of New South Wales and The Australian Capital Territory and generally to take such action as may be considered conducive to its best interests.
(b) To co-operate with organisations controlling the game in other States of Australia and other countries in the fostering and control of the game."
The powers of the NSWRL included the following (cl.4(2)):
"(a) To provide and maintain grounds, playing fields, materials, equipment and other facilities for the game.
(b) To join with other organisations controlling the game in other States of Australia and with other countries, in the playing of interstate and international matches, and in controlling and regulating those matches and the movement of players between the States and between Australia and the other countries concerned.
(c) To regulate and control the operation of all member bodies and affiliates.
(d) To regulate and control the relationships between member bodies, and affiliates and the members thereof and to provide facilities for settlement of disputes, punishment of misconduct and for breaches of this Constitution or any Rule or By-Law made thereunder."
The members of the NSWRL were the twelve specified Sydney district clubs (and such other clubs as were subsequently admitted to membership); the Country Football League; the Referees' Association, and life members (cl.5(1)). Each of the Sydney district clubs remained as an unincorporated association. The affairs and assets of the NSWRL were under the control of the general committee (cll. 8,15).
The powers of the general committee included
making rules and by-laws, not inconsistent with the
constitution, for the purposes of carrying out the objects of the NSWRL
(cl.56). In particular, the general
committee had power to make rules or by-laws with respect to the admission of
new members of the League; the constitution, control, management and membership
of member bodies; the registration and qualifications of players; the
relationship between a player and his club, including the movement of players
from one club to another; contracts between players and clubs; and the control
of assets, funds and gate receipts (cl.56).
The constitution of each member body of the NSWRL, and any rules or by-laws made thereunder, were to be in such terms as were approved by the general committee (cl.29(1)). Any proposed alteration or addition to the constitution, rules or by-laws had to be submitted to the general committee for its approval. Such approval was required before the alteration or addition became operative (cl.29(2)). Clause 30 provided as follows:
"As from date of its adoption by the League, all provisions of this Constitution, which relate to District Clubs shall apply to, and be deemed to have been adopted by, each District Club in the place of and to the exclusion of the existing relevant provisions in the Constitution, Rules, By-laws and Standing Orders of that Club in existence on that date."
The members of the general committee comprised the patron; the president; ten vice-presidents (none of whom was to hold office in any member body); two delegates from each of 12 specified clubs and from any club subsequently admitted to membership; two delegates from the Referees' Association; four delegates from the Country Football League; and the director of refereeing (cl.8(1), 12). The president and vice-president were elected by the members of the general committee at its annual general meeting (cll. 10,11). The director of refereeing was appointed by the general committee (cl. 8(1)(b)(iv)).
The jurisdiction of the NSWRL, as provided for in the constitution, extended to and was to be acknowledged by, inter alia, all members of the general committee, member bodies and individual members of those bodies (cl.21(2)). The general committee was to be the "final appellate body" in all matters of dispute involving any one or more of those bodies or persons, except where the constitution provided otherwise (cl.21(2)).
The disciplinary provisions of the Constitution included the following:
"22. Upon any complaint being made to it of
conduct contrary to the policy or prejudicial to the
interests or welfare of the League or the game on the part of any member of the
General Committee, ... Member Body or any individual member thereof, or
Affiliate, the General Committee shall have power to deal with such complaint
and in the exercise of the power hereby conferred may disqualify, suspend, fine
or otherwise deal with any person or body it finds to have been guilty of such
conduct."
Member bodies had power to cite any of their own members against whom a complaint had been made of conduct contrary to the policy, or prejudicial to the interests or welfare of the NSWRL (cl.23(1)).
D. The Attempts to Exclude Western Suburbs
The circumstances in which attempts were made to exclude Western Suburbs ("Wests") from the League in 1983 and 1984 were frequently referred to in submissions. It is therefore necessary briefly to set out the events that led to the High Court rejecting Wests' challenge to the actions of the (by then) incorporated League.
1. The First Decision
By 1983, Wests, one of the district clubs referred to by name in the constitution of the NSWRL, had fallen on hard financial times. Its expenditure exceeded income by about $140,000 in the year ended 31 October 1981; that figure had grown to approximately $231,000 in the 1982 financial year. A budget for 1983, prepared in March 1983, showed an estimated deficiency of $142,000. In late 1982, the League had lent Wests $200,000, repayable over 10 years by instalments of $20,000, without interest. Wests already had received a ground improvement loan from the NSWRL, in respect of which $108,000 was owed at the end of 1982.
On 5 September 1983, a sub-committee of the general committee, known as the Executive Grounds and Finance Committee, considered a report of the NSWRL's auditors. That committee resolved, by majority, to drop Wests from the competition in 1984 and to put a motion to this effect to the general committee. After some negotiations on financial matters, the committee reaffirmed its resolution on 22 September 1983. The general committee met on 26 September 1983. A motion by Wests' secretary that Wests be permitted to enter the premiership competition in 1984 was lost in a secret ballot, by 29 votes to 12.
2. Bernansconi v Bellew
Wests commenced proceedings in the Equity Division of the Supreme Court of New South Wales, seeking declaratory relief to the effect that it was entitled to participate in the 1984 competition. The NSWRL relied on cl.46(1) of the constitution, which empowered it to conduct such competitions between teams representing district clubs or junior leagues as the general committee should determine. The club succeeded in obtaining relief: Bernansconi v Bellew (unreported, S Ct NSW, Helsham CJ in Eq, 22 November 1983). It did so solely on the ground that cl. 46 of the NSWRL's constitution required the competition to include all the district clubs specifically described in the constitution as being members of the NSWRL. There were 12 such clubs, including Wests. Helsham CJ in Eq construed cl.46(1) as meaning that all teams representing district clubs had to be included in the competition, not some of them.
3. The Second Exclusion Decision
Following the Supreme Court's decision, a special meeting of the general committee was held on 5 December 1983. The meeting considered a motion that cl.46(1) be amended, to make it clear that the district clubs referred to in the constitution were not entitled to participate in the competition as of right. The mover of the motion explained (as recounted in the judgment of Hodgson J in Wayde v New South Wales Rugby League Ltd (1984) 9 ACLR 349 (S Ct NSW), at 352), that the only time the rule would be invoked was if a club was taking action designed to discredit rugby league or if it could not meet its commitments. The resolution was carried.
On 21 December 1983, the League was incorporated. Article 76 of the newly incorporated company followed the form of the old cl.46(1), but incorporated the changes agreed to at the meeting of the general committee on 5 December 1983. It read as follows:
"The League may conduct such competitions between teams representing all or any of the Clubs or Junior Leagues as the Board of Directors may from time to time determine provided that the Board of Directors may at its discretion invite other Clubs and/or teams to participate in any competition conducted pursuant to the provisions of this clause." (Emphasis added.)
The 1984 premiership competition was conducted
by the League under the name "The Winfield Cup premiership
competition". The League did not
seek applications from any of the participating clubs, nor did it issue formal
invitations to the clubs. However, one
team from the previous year,
Newtown, did not enter the competition.
Thus the competition involved only 13 teams and a bye had to be
introduced. Wests ultimately finished at
the bottom of the competition table, winning only one game out of 24.
In June 1984, the general manager of the League sent a letter to each club inviting it to apply to enter the 1985 competition. The letter enclosed criteria for entry into the competition, relating to such matters as finance, administration, junior league and grounds. The letters stated that not all clubs would necessarily be able to meet all criteria, but that clubs should demonstrate their capacity to meet those criteria they were able to fulfil. Replies were received from the 13 clubs, all of whom applied to enter the 1985 competition.
On 3 September 1984, the board of the League resolved unanimously to reduce the number of clubs in the competition from 13 to 12. It was also unanimously resolved, in reliance upon art.76, that Wests' application for admission into the 1985 competition should be refused. Wests, which was still an unincorporated voluntary association, was notified of the decision on the same day.
The secretary and president of Wests, who were members of the League as the two representatives of Wests, brought proceedings in the Supreme Court of New South Wales, claiming that the exclusion of Wests constituted oppression within the meaning of s.320 of the Companies (NSW) Code 1981 ("the Code").
4. Wayde v NSWRL
The plaintiffs succeeded at first instance before Hodgson J: Wayde v NSWRL. Hodgson J held (at 364) that the directors of the League were bound to act, not merely in the interests of the game of rugby league, but bona fide in the interests of members, viewed in the light of the League's objects. Moreover, the plaintiffs had standing to complain of any oppression (at 364):
"The clubs were themselves members of the unincorporated association to which the League is successor. The League was formed pursuant to a resolution of the unincorporated association to the effect that it be incorporated. In my view the incorporation was not intended to bring to an end the position which the clubs enjoyed under the unincorporated association of being in substance members of that association. The change in the structure pursuant to which the actual members of the League are representatives of the clubs, rather than the clubs themselves did not, in my view, have the effect of so substantially changing the position of the clubs that they were no longer in substance members of the body set up to have overall control of the game in New South Wales. Accordingly, in my view, if action taken by the League did amount to oppression so far as the club, Wests, was concerned, then that conduct also amounted to oppression of the plaintiffs who are members of the League as representatives of Wests."
His Honour considered (at 366) that the likely effect of Wests' exclusion from the 1985 competition was that it would be destroyed. The decision to exclude Wests did not provide for any compensation to the club. To exclude a club completely and to provide no compensation, having regard to the fact that the League and the clubs were participants in a "multi-million dollar enterprise" (at 367), was oppressive within the meaning of s.320(2)(b) of the Code. This was so, notwithstanding that the board had acted bona fide in what it saw as the interests of the game.
On appeal, the New South Wales Court of Appeal accepted that the directors' decisions were prejudicial to Wests. The issue, however, was whether they were "unfairly prejudicial": New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86, at 99. The Court did not agree that, simply because the impact of exclusion upon Wests was so great, the decisions were incapable of being in the interests of the members as a whole. The Court said this (at 100):
"The background circumstances and the impact of the decision on an existing club would have to be considered by the directors before excluding that club from a competition. But, if the interests of the members of the league as a whole, balanced against the prejudice to be suffered by the member to be excluded, justified the exclusion of an existing club from a competition, we have no doubt that the directors would be entitled to arrive at such a conclusion without being guilty of oppression or unfair prejudice to the excluded club."
The Court concluded that, since it had been expressly conceded that the directors had acted in good faith and without any collateral purpose, it was not for the courts to make the decisions entrusted to the directors (at 101-102).
An appeal to the High Court was dismissed: Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459. The substance of the reasoning of the majority (Mason ACJ, Wilson, Deane and Dawson JJ.) is contained in the following passage (at 466-468):
"But here the decision to limit the premiership
competition to twelve participants - and this was the critical decision - was
taken honestly in pursuit of the object of fostering the game of rugby league
and serving its best interests: cl.3(b), memorandum of association. The Board was not only empowered but obliged
to face up to the difficulties presented by a competition which occupied too
long a period of the year and to exercise the power expressly bestowed upon it
in a manner which it considered to be in the best interests of the game. It is not seriously suggested that the Board
overlooked the extreme consequences which the decision would visit upon Wests,
amounting perhaps to its virtual extinction.
The appellants' contention is that, while the Board could reasonably
conclude that a competition confined to twelve clubs was preferable to one
involving thirteen clubs, the facts that the latter was not wholly unworkable
and that Wests was a viable competitor lead to the conclusion that the
prejudice to Wests so outweighs the perceived benefits to the League as to be
unfair. They submit that the exclusion
of a viable club, such exclusion not being required to render the competition
workable, would promote "purposes foreign to the company's operations,
affairs and organisations", adopting the meaning ascribed to the phrase
`benefit of the company as a whole' by Dixon J. in Peters' American Delicacy Co Ltd v Heath
[(1939) 61 CLR 457, at 512).]
The answer to this contention is that no amount of sympathy for Wests can obscure the fact that the League was expressly constituted to promote the best interests of the sport and empowered to determine which clubs should be entitled to participate in competitions conducted by it. It was upon this basis that the clubs, including Wests, chose to incorporate. Indeed, the 1984 correspondence between Wests and the League which is in evidence plainly shows that Wests itself fully appreciated that it had no secure right to participate in the premiership competition. In truth, the Board was confronted with a conflict of immediate interest between Wests on the one hand and the League as a whole on the other and the exercise of the power conferred by Art. 76 must necessarily be prejudicial to one or the other. Given the special expertise and experience of the Board, the bona fide and proper exercise of the power in pursuit of the purpose for which it was conferred and the caution which a court must exercise in determining an application under s. 320 of the Code in order to avoid an unwarranted assumption of the responsibility for management of the company, the appellants faced a difficult task in seeking to prove that the decisions in question were unfairly prejudicial to Wests and therefore not in the overall interests of the members as a whole. It has not been shown that those decisions of the Board were such that no Board acting reasonably could have made them."
Ironically, despite the litigation, the League ultimately decided to admit Wests to the competition, although the club relocated from Lidcombe to Campbelltown.
E. Prelude to Incorporation: The Scott Report
By 1983, the NSWRL was beset with a number of major problems. Most district clubs were experiencing financial difficulties and it was thought that at least two would have to drop out of the competition. Attendances were falling (although television ratings remained high). The NSWRL had attracted adverse publicity, following revelations on a television program that had led, among other events, to the resignation of the general manager. These circumstances prompted the NSWRL to obtain independent advice on its administrative structure from W.D. Scott & Co. The "Scott report" (as it was referred to in argument) was presented on 7 September 1983 and comprised 43 pages, plus appendices. This document is of some importance in understanding the corporate structure ultimately adopted by the League.
The report noted that, despite the NSWRL's difficulties, rugby league had "emerged from very humble beginnings, to become a multi-million [dollar] entertainment business" (p.1). The report made two major recommendations. These were that the NSWRL should
– incorporate pursuant to the Code; and
– adopt a new organisational structure.
The main features of the recommended organisational structure were described in the report as follows (p.9):
". the retention of the General Committee although with a different role from what it currently has. A role appropriate to the owners or stakeholders in an organisation. A role similar to the role of `shareholders' in any company organisation.
. the creation of a N.S.W. Board to replace the current Executive Committee, with a role equivalent to that of a Board of Directors for a company organisation.
. a General Manager who is responsible primarily for the running of the Winfield Premiership League, the administration of the League's full time office staff and the coordination and participation in the formulation of policy through the four Policy Committees.
. the creation of a series of policy formulation committees to formulate, develop and monitor the implementation of various policy areas.
. a Premiership Review Committee to allow the District Clubs to review and comment on the policy recommendations being made to the Board."
The report commented that the general committee was the major decision-making body of the NSWRL, but that in practice the executive committee made most decisions and the general committee approved them as a matter of formality. In discussing the role of the general committee, the report adopted the concept of "interest groups" (p.11):
"In any organisation or association such as the League the members are made up of various interest groups who are concerned with the effective operation of that organisation or association. In the League at the present time the interest groups are:
· the District Clubs
· the country R.F.L.
· the Referee's [sic] Association
· the Vice Presidents.
These interest groups in effect `own' that organisation and at all times must retain the ultimate control of that organisation.
The role envisaged and recommended for the General Committee is similar to the role of `shareholders' in a company. They retain the ultimate control of the organisation and they exercise that control through the General Meeting or through extraordinary general meetings called either by the `shareholders' or by the Board."
The Report said that there was no reason to decrease the size of the general committee (p.17).
The board of the company was to play a role
equivalent to that of a board of directors.
It was to
be responsible for the "profitable development, direction and control of
the game" throughout New South Wales and the Australian Capital Territory
and to "further foster and control the game" elsewhere in Australia,
in co-operation with other organisations (p.12). The board's specific responsibilities were to
include:
"making the `hard' decisions which are currently not being made such as the review of the League's competition structure" (p.12).
The board was to consist of nine members, made up of five from the general committee (one of whom was a country representative); the general manager; and two others from outside the committee, who were not paid employees or office bearers of any district club or its related leagues club, but were "top businessmen with an interest in sport". The report explained the need for the last category as follows (p.18):
"The purpose of having experienced businessmen on this Committee is to ensure that the vested interest of clubs do [sic] not have an undue influence on major decisions. It will also help to ensure that the various `hard' decisions that need to be made are taken. Further it will bring into the League additional business expertise to supplement that which is already available."
The report referred to the "financial difficulties" faced by most clubs and the "questionable" financial viability, in particular, of Cronulla and Wests. It pointed out (p.35) that the financial position of the clubs would be one of the criteria for determining the League's competition structure for the 1984 season. It recommended that, in all future years, the district clubs be required to submit budgets to the League before the season started and that the clubs also provide statements of actual income and expenditure compared with budget at least twice per season.
F. Incorporation: The Memorandum and Articles
1. Objects and Powers
As previously noted, the League was incorporated as a company limited by guarantee on 21 December 1983, under the name "New South Wales Rugby League Limited". The memorandum of association specifies the objects and powers of the League, including the following (cl.3):
"(a) To take over the funds and other assets and the liabilities of the present unincorporated body known as the New South Wales Rugby Football League.
(b) To foster and control the game of
rugby league football throughout the State of New South Wales and The Australian
Capital Territory and generally to take such action as may be
considered conducive to its best interests.
(c) To co-operate with organisations controlling the game in other States of Australia and other countries in the fostering and control of the game.
...
(f) To regulate and control the operation of all member bodies and affiliates.
(g) To regulate and control the relationships between member bodies, and affiliates and the members thereof and to provide facilities for settlement of disputes, punishment of misconduct and for breaches of the Articles of Association of the League or any Rules or Regulations made by the League.
...
(j) To determine which clubs shall be entitled to enter teams in the Rugby League Premiership and other competitions conducted by the League and the terms and conditions upon which and the manner in which Clubs shall make and renew such applications.
...
(l) To raise money by subscription percentage or otherwise from Clubs or the players thereof.
(m) To make grants by way of gift and to render other financial assistance to the Clubs and other persons and bodies connected with the conduct of the game.
(n) To hear and determine upon and settle questions or disputes on any matter relating to rugby league football.
...
(p) To inflict fines or penalties by way of suspension expulsion or otherwise for any breach of the Articles of Association or the Rules and Regulations of the League or the laws relating to rugby league football on any Club or member thereof, the Referees' or Players' Association or members thereof and a decision of the League in respect thereof shall be final conclusive and binding.
(q) To grant suspend exclude or forfeit the right of a Club, Referees' Association or Players' Association to membership of or representation on the League but so that that right shall not be granted, suspended, excluded or forfeited without a resolution therefore passed by a 75% majority of Directors at a meeting.
(r) To regulate and control the activities of players coaches and referees of the League in any activity associated with rugby league football and in particular activities connected with television broadcasting, advertising, the writing of articles for newspapers and contributions to publications."
Clauses 5 and 6 of the memorandum provide for the "non-profit" status of the League:
"5. The income and property of the League wheresoever derived shall be applied solely towards the promotion of the objects of the League as set forth in this Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend bonus or otherwise howsoever by way of profit to the members of the League ....
6. If upon the winding-up or dissolution of the League there remains, after satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the League, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the League ...".
2. The Directors
The articles of the League give effect to many of the recommendations in the Scott Report. As consolidated and reprinted in 1992, they provide for the business of the League to be managed by the directors, who are empowered to make rules or regulations not inconsistent with the memorandum and articles (art.32). There are to be nine directors comprising (art.23):
– the president of the League, who is elected by members at the annual general meeting (art.5) and who is chairman of the board (art.27);
– the executive chairman of the ARL (which was incorporated in 1986);
– three members of the general committee elected by the members at the annual general meeting (art.25);
– one nominee of the Country League;
– the general manager of the League, who is appointed by the directors and is responsible for the conduct of the premiership league competition (art.48);
– two outside directors (not employees or office-bearers of a club or its related licensed club), who are elected by the other directors at their first meeting in each year.
The articles confer powers on the directors in relation to the constitution of each club. Articles 73, 74 and 75 provide as follows:
"73. The Constitution or Memorandum and Articles of Association of each Club and affiliated League and any Rules and/or Regulations made thereunder shall be in such terms as are approved by the Board of Directors.
74. Any
proposed alteration, addition to or deletion from such Constitution, Rules or
Regulations or
Memorandum and Articles of Association must be submitted to the Board of
Directors for its approval which must be given before such proposed alteration,
addition or deletion becomes operative.
75. The Board of Directors may at any time require any Club or affiliated League to alter, add to, or repeal any provision of its constitution, Rules or Regulation or Memorandum & Articles of Association in such manner as it may direct."
The articles also confer powers on the directors in relation to the conduct of competitions, including the proceeds of admission charges. Article 76 has already been extracted in connection with the attempt to exclude Wests from the 1985 competition. Articles 77 and 78 are as follows:
"77. Each Club shall pay to the League from the proceeds from admission charges to matches played by it in competitions conducted by the League such amounts as the Board of Directors may from time to time determine.
78. The conditions governing the playing of any competition conducted by the League shall be such as are determined by the Board of Directors."
3. The Members
The members of the League, who are to constitute the general committee, comprise the following (art.2):
– the president and general manager of the League;
– the executive chairman of the ARL;
– ten vice-presidents, elected at the annual general meeting (none of whom is to hold office in any club: art.4);
– two representatives from each club;
– four representatives of the Country League;
– two representatives of the Referees' Association;
– two representatives of the Players' Association;
– life members and such other persons as the directors admit to membership.
All members, other than the last category, are eligible to vote at meetings of the League,
"with the exception of those representatives nominated either by a Club which is not competing or did not complete in the Sydney Premiership Competition in the year in which the meeting is held or a Club whose application to compete in that Competition in the following year has been considered and refused" (art.60).
The word "club" is defined to mean any of the fourteen named district clubs in the competition as at 1992 "and shall include such new clubs as shall, from time to time be admitted to the League" (art.1). Each club is entitled to nominate two eligible persons for membership of the League, one of whom is to be the Secretary or other full-time executive officer of the club (art.7). To exercise this right a club must nominate its two representatives annually seven days before the annual general meeting by submitting a duly completed application for membership (art.12).
The articles provide (art.11) that, to be eligible for membership, a person must complete an application for membership in the following form:
"I, of hereby apply to become a member of the New South Wales Rugby League Limited and if accepted for membership agree to be bound by the Memorandum and Articles of Association and Rules and Regulations of the League."
The board of directors must hold a meeting within three days prior to each annual general meeting to consider the applications for membership submitted by the representatives of each club, the Country League, the Referees' Association and the Players' Association (art.13). Article 13 contemplates that applications will not necessarily be accepted, since it also provides that "when an application has been admitted or rejected" the general manager must notify the club, the Country League or the Association. A club, Country League or Association "may terminate the membership of its representative by giving notice in writing of such termination to the League" (art.16).
4. Expulsion and Termination of Membership
The Board of Directors has the power to expel members and to suspend or forfeit the right of a club to representation on the League. Articles 19 and 20 provide as follows:
"19. If any member of the League shall be
guilty of any conduct which in the opinion of the Board of Directors is
unbecoming of a member or prejudicial to the interest image or welfare of the
League or makes public statements which in the opinion of the Board of
Directors are damaging to the reputation of the League the Board of Directors
shall have power to expel the member from the League....
20. The Board of Directors may by a resolution passed by a majority of the Directors present at a meeting specially called for the purpose, suspend, exclude or forfeit the right of a Club or Association to representation on the League as it thinks fit if the Club or Association shall:
a) be guilty of conduct which in the opinion of the League is unbecoming of a Club or Association or is prejudicial to the interests image or welfare of the League;
b) being a Club, be unable to obtain and retain occupancy rights over a ground approved by the League for that Club;
c) amend, alter or otherwise change its constitution in such manner as to conflict with the Memorandum & Articles of Association, Rules and/or Regulations of the League or without the approval of the Board of Directors;
d) fail to pay to the League, other club or registered player any monies due by the Club to the League, other Club or player as the case may be after due notice has been given.
e) fail to discipline any of its members who in the opinion of the League has engaged in any conduct unbecoming of a member of that Club or Association or prejudicial to the interests image welfare of the League or makes public statements which in the opinion of the Board of Directors are damaging to the reputation of the League."
The secretary of a club is to have the opportunity of giving an explanation or defence before the right to representation is suspended, excluded or forfeited (art.21).
Article 22 specifies the circumstances in which a member ceases to be a member of the League. It reads as follows:
"22. A member shall cease to be a member of the League and his name shall be deleted from the Register of Members if the member:
a) dies;
b) resigns as a member by notice in writing to the League;
c) being a representative of a Club, the Country League or an Association is not nominated by such Club, the Country League or Association to be its representative for the following year in accordance with Article 12 or has his representation terminated by such Club, the Country League or that Association;
d) is expelled from the League in accordance with Article 19;
e) being a representative of a Club or Association if the right of such Club or Association to representation on the League is suspended, excluded or forfeited by the League in accordance with Article 20;
f) being an employee of the League resigns or has his employment terminated."
5. The Rules and Regulations
The rules and regulations of the League deal
with a range of topics, such as restrictions on public comments by members of
the League or clubs; clearances of players; misconduct by players
(including appeals and disciplinary provisions); and player payment rules. The control in the rules and regulations is
widely cast, by the operation of rules 27 and 28:
"27. The Jurisdiction of the League as provided by the Memorandum and Articles of Association and rules and Regulations of the League extends to and shall be acknowledged and submitted to by all Members of the League, Clubs, Referees' Association and Members thereof and all persons applying for membership of clubs and the Referees' Association must sign an acknowledgment to that effect in the form prescribed by the League.
28. No person shall be appointed or employed as a Coach or Trainer by a club unless he has been admitted to membership of the Club."
Part II of the rules governs entry into and conduct of competitions conducted by the League. Rules 38-42 assumed some significance in argument:
"38. Each Club desirous of entering a team or teams in the Competition conducted by the League pursuant to the provisions of Article 43 shall lodge an application with the General Manager by such date as shall be prescribed by the Board of Directors.
39. Such applications shall be in the form, and shall be supported by such information including information as to the financial affairs of the club, as may be prescribed from time to time by the Board of Directors.
40. A Club which enters a team or teams in a Competition conducted by the League in one Season shall not be entitled as of right to enter a team or teams in that Competition in the following Season and the Board of Directors shall be entitled to refuse the application of any Club to enter a team or teams in any Competition conducted by the League.
41. The Board of Directors shall be entitled to approve the application of a Club on specified terms and conditions and may by resolution cancel such approval if, in the opinion of the Board, the Club or any member thereof has not complied with any of such terms and conditions....
42. Each Club admitted into the Competition agrees to abide by the Memorandum and Articles of Association, the Rules and Regulations of the League and decisions of the Board of Directors of the League and any Committee of the League made pursuant thereto and any terms and conditions imposed upon its admission to the Competition."
The rules prescribe the form of application to be completed by a club seeking admission to the competition for a particular year. Form 1 is as follows:
"APPLICATION BY CLUB FOR ADMISSION
TO (YEAR) NEW SOUTH WALES RUGBY LEAGUE PREMIERSHIP
COMPETITION
The (`the Club') hereby makes application to participate in the (year) New South Wales Rugby League Premiership Competition (`the Competition'). The Club acknowledges that the League has an absolute discretion to accept or reject this application.
Submitted herewith is the material required by you to satisfy the guidelines laid down by the League.
The Club agrees that if it is admitted to the Competition,
1. The Club will abide by the Memorandum and Articles of Association of the League and the Rules and the decisions of the Board of Directors of the League and its Committees made pursuant thereto.
2. The Club will abide by all conditions attached to its admission to the Competition.
3. The Board of Directors of the League may cancel the admission of the Club into the Competition if in the opinion of the League, the Club or any member thereof does not comply with 1 and 2 above.
4. Admission is for the one Competition only and the Club is not entitled as of right to admission into the Competition conducted in the following year.
DATED this day of 199 .
Chief Executive/President
Name of Club".
G. Incorporation of the Clubs
1. The Process of Incorporation
At various times from 1980 the clubs then in the competition conducted by the NSWRL changed their status from unincorporated associations to incorporated bodies. The newer clubs, which joined the competition after 1980, were incorporated from their inception. By the time the League was incorporated in December 1983, 11 of the 14 clubs named in the articles were already incorporated. North Sydney and Penrith were incorporated, respectively, in 1985 and 1989, while Newtown (which did not participate in the competition after 1983) apparently never became an incorporated body.
As the trial Judge noted (at 457), all clubs
are "non-profit", in the sense that dividends cannot be paid to
members and that, upon a winding-up, any surplus is not to be distributed among
members, but is to be transferred in some cases to the League, and in others to
an associated Leagues club, or to be held for some sporting or charitable
purpose. In the case of the Auckland Warriors
Rugby League Limited, the surplus is to be transferred to the ARL, and in the
case of the Western Reds Rugby League Football Club Limited, to the Western
Australian Rugby League Limited. (It
should be noted, as we discuss later, that in consequence of their trading
activities
some of the Leagues clubs have accumulated very substantial assets.)
The memorandum and articles of association of each club are not identical. It is, however, useful to illustrate the position by reference to the memorandum and articles of one loyal club and one rebel club. North Sydney serves as an example of a loyal club, while the Brisbane Broncos is an illustration of a rebel club.
2. North Sydney
North Sydney was a foundation member of the NSWRL and operated as an unincorporated association until 1985. The club was incorporated as a company limited by guarantee on 24 July 1985, under the name North Sydney District Rugby League Football Club Limited. The memorandum provides that the company shall "affiliate" with the League and shall not be voluntarily dissolved or have its name changed without the League's consent (cll.2, 3).
The objects for which the company is established include the following (cl.4):
"(a) to take over and assume the assets and liabilities of the unincorporated association known as NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB;
(b) to foster, encourage and promote the development playing and interests of Rugby League Football generally;
(c) within the area defined from time to time as the Company's district
(i) to control the development, playing and interests of Rugby League Football;
(ii) to aid, support, assist financially and otherwise and control Junior Rugby League Football;
...
(d) to maintain the overall control of Rugby League Football in the Company's district as defined...".
The income and property of the company must be applied solely towards the objects of the company and no portion thereof is to be paid by way of dividend, bonus or profit to members (cl.5). Any surplus on a winding up is not to be paid or distributed to members, but is to be given to North Sydney Leagues Club Ltd to further its objects or, if the Leagues club does not exist, to North Sydney Municipal Council to promote athletic games and sports (cl.8).
The articles of association of North Sydney provide that the company is established for the purposes set out in the memorandum of association (art.2). Membership of the company consists of life members and ordinary members (art.7). The latter category comprises persons who have applied for membership on the form prescribed by the League and, in the case of playing members, have been approved by the League (art.7(b)(ii)). The board is entitled to accept or reject any application for membership in its absolute discretion (art.8). Upon being accepted into membership of the company, members are bound by the articles and the rules or by-laws made thereunder (art.10).
The jurisdiction of the company in relation to the articles extends to all members. The board is to determine all "matters of dispute", subject to a right of appeal to the League (art.64). The "Code of Behaviour" of the League, as reproduced in its articles, is to be read with and form part of the company's articles, to the extent that it is applicable to members of the company (art.65(f)).
3. Brisbane Broncos
The Brisbane Broncos club was admitted to the competition for the 1988 season. The Brisbane Broncos Rugby League Club Ltd was incorporated on 9 December 1987, as a company limited by guarantee. The proposed memorandum and articles of the company were approved by the League.
The memorandum of the company requires it to "affiliate with" the League (cl.2) and prevents the company dissolving or changing its name without the League's consent (cl.3). The objects of the company are enumerated in cl.4 and include the following:
"(i) to play and compete in Rugby League Football competitions conducted by League;
(ii) to foster, encourage and promote the development playing and interests of Rugby League Football generally;
...
(v) to establish, support, maintain, train, coach and field in Rugby League Football matches teams of Rugby League footballers and to promote the status of professional Rugby League footballers, or to assist other parties to such ends and to assist Rugby League Footballers generally;
...
(vii) in furtherance of the objects of the Company to sell, improve, manage, develop, exchange, lease, dispose of, turn to account or otherwise deal with all or any part of the property and rights of the Company;
...
(xi) subject to the approval of the League, to:
(a) admit members of other organisations voluntary or corporate and other bodies corporate to membership of the Company;
(b) enter into agreements with such organisations;
...
(xii) to grant, subject to the approval of the League, licences, concessions, franchises or the like conferring limited or unlimited, exclusive or non-exclusive rights to use the Company name, emblem, badge or colours...;
...
(xxiv) to take part or assist in the promotion or control of the game of Rugby League Football and to arrange for the representation of the Company or any club, established, maintained, conducted or carried on by the Company in or upon any corporation or body concerned with the promotion or control of Rugby League Football."
The memorandum requires the income and property of the company to be applied solely for the objects of the company and forbids payments by way of dividends or bonuses to members (cl.6). Any surplus on a winding up is to be transferred "to some other institution...having objects similar to the objects of the Company" and in default to the League or by application to the Supreme Court for determination (cl.8). The memorandum also restricts the circumstances in which the memorandum or articles can be altered:
"10. No purported addition, alteration or amendment to or in the Memorandum or Articles of Association for the time being in force shall have any effect, unless the same shall have been previously submitted to and approved by the [Queensland] Commissioner for Corporate Affairs ... and by the League."
The articles provide that an application for ordinary membership of the company is to be made in such form as the directors prescribe and the League from time to time approves (art.5). The application of persons seeking to be playing members must be approved by the League (art.4(b)). The control of the League is reflected in the provision that the articles, to the extent that they are inconsistent with the memorandum and articles of the League, are deemed to be invalid unless approved by the League itself (art.70(b)). No amendment of the articles is to have any force or effect until approved both by the League and the Queensland Commissioner for Corporate Affairs (art.70(c)). Furthermore, any by-laws or rules made by the directors (referred to in the articles as the "Committee") are not to be operative unless approved by the League (art.40).
The Brisbane Broncos club is in an unusual
position compared with other clubs. This
is because it
forms part of a privately owned group, which includes, in addition to the
Brisbane Broncos Rugby League Club Ltd, Brisbane Broncos Management Corporation
Pty Ltd and Brisbane Broncos Corporation Pty Ltd as trustee for the Brisbane
Broncos Corporation Trust. These two
companies have an issued share capital of 250 shares, of which 50 are held by a
publicly listed company and the remainder by individuals associated with the
club. The Trust has issued 250 units,
held in the same proportions as the shareholdings in the trustee company.
The principal responsibility of the Brisbane Broncos Management Corporation Ltd is the administration of the Brisbane Broncos. The business of the trustee company includes obtaining and servicing sponsorships; collecting gate takings; promoting and marketing corporate boxes; and reimbursing expenses to the club.
The club does not make a profit, but is reimbursed for its expenses. However, the Trust does record substantial profits. These amounted to $2.41 million in the year ended 31 October 1993 and $2.06 million in the year ended 31 October 1994.
4. Inconsistent Provisions
Most clubs (15 of the 20) have a provision in their articles stating that, in the event of an inconsistency between the memorandum and articles of the club and the League, the former is deemed invalid to the extent of the inconsistency. Similarly, most (again 15 of the 20) provide that no purported amendment of the articles should have any force or effect unless approved by the League.
H. Incorporation of the ARL
On 23 May 1986, the ARL was incorporated as a company limited by guarantee. The objects of the ARL include the following (cl.3):
"(a) To take over the funds and other assets and the liabilities of the present unincorporated body known as the Australian Rugby Football League.
(b) To foster develop extend and control the game of Rugby League Football throughout the States and Territories of Australia and generally to take such action as may be considered conducive to its best interests.
(c) To co-operate within the Rugby
Football League International Board and organisations controlling the game in
other countries in the fostering and control of the game of Rugby
League."
The unincorporated association referred to in cl.3 had been formed in 1924, originally under the name "Australian Rugby League Board of Control".
The articles provide that the membership shall consist of the original seven subscribers and such other persons as the board of directors may agree to accept (arts. 2, 4). The structure of the membership provisions is such that only people who are to be directors will become members, as art. 8 provides that a member who has ceased to be a director shall forthwith resign as a member and if he fails or refuses to do so the executive chairman is appointed to execute a resignation in his name. The ARL is also a "non-profit" company, and the memorandum of association provides that upon a winding-up any property remaining after the payment of debts and liabilities shall be given or transferred one half to the Queensland Rugby Football League Limited or its successor and one half to the League or its successor.
Since the commencement of the 1995 season, the League has conducted the national premiership competition with the agreement of the ARL.
I. Developments in the League 1989-1994
1. Newtown
In February 1989, the board of the League rejected a proposal for the incorporation of a proposed Newtown Rugby League Football Club Limited, on the ground that the club no longer had responsibility for the administration and control of rugby league in a particular area. Newtown had not participated in the competition since the 1983 season, the club having experienced at that time what Mr Arthurson described in his evidence as "dire financial difficulties". In December 1989, the board voted to amend art.60 of the League's articles, to make it clear that representatives nominated by a club not competing in the competition were not entitled to vote. (The amended form of art.60 has been reproduced earlier: see section F3 of this Part.)
2. North Sydney and "Quit for Life"
In March 1991, the League wrote to the North
Sydney club in connection with its proposed
sponsorship agreement with the anti-smoking program "Quit for
Life". The general manager of the
League noted in his letter that North Sydney intended to continue in the
premiership competition. His letter
continued as follows:
"I have been directed to remind you that the Rules of the League provide that participation by any Club in any Competition conducted by the League is subject to approval by the Board of an application for such participation.
In this regard the Board decided that if the North Sydney Club submits an application for admission to the 1992 Winfield Cup Premiership Competition for consideration by the Board it must be accompanied by an undertaking from the Club to the effect that it agrees to abide by the Rules and Regulations of the League and decisions of the Board and any Committee made pursuant thereto and that it will support without qualification the Winfield Cup Premiership Competition and its sponsors, the Winfield Company."
3. Towards Expansion
At a meeting of 14 May 1991, the board of the League resolved to accept guidelines proposed by the Premiership Policy Committee. These included the following principles:
"1) Expansion of the future Competition
It was desirable to expand the competition geographically.
2) Candidate geographical areas for expansion
Expansion was considered feasible in the following geographical areas:
2.1 The immediate future
Brisbane
North Queensland
Perth
New Zealand
NSW Central Coast
2.2 The long term
Melbourne
Adelaide
Northern Territory
...
5) Relocation
Applications should be considered from any of the 16 existing Clubs interested in relocating to any of the nominated candidate areas for geographical expansion.
6) Amalgamation
Flexibility should exist on the issue of amalgamation where in the course of discussion on the future direction of the Premiership any existing club(s) choose to consider the possibility.
...
9) Objectives
The overall objectives in assessing any expansion options are:
9.1 To achieve the maximum competitiveness between participating Clubs
9.2 To sustain financial viability for all participating Clubs
10) Advantage of expansion
10.1 Would open up new and national marketing potential for sponsors
10.2 Greater media exposure nationally
10.3 Potential for greater live audiences
10.4 Greater number of participants in Rugby League
10.5 Greater financial rewards for Clubs through increased sponsorship due to wider geographical exposure
10.6 Greater development of game at school and junior level, ultimately providing a bigger bank of better players
10.7 The opportunity for the better players to earn a greater share of the rewards
10.8 Expansion seen as a benefit by the existing 16 clubs
11) Disadvantages
11.1 Increased financial cost through increased travel
11.2 Potentially a longer season
11.3 The Challenge Cup which is seen as an important promotional activity in developing areas would be eliminated or relocated to a mid-season, mid-week competition."
On 30 September 1991, the League issued a media release announcing that seven applications had been made to join the competition. These were from the Queensland Rugby League; the North Queensland Cowboys; the Wellington Dolphins; the Auckland Rugby League; two Victorian groups, and the Perth Pumas. An application was subsequently received from Wyong, in New South Wales. On 14 October 1991, the board resolved that expansion would not occur until 1994 and asked for detailed submissions to be prepared.
The Premiership Policy Committee considered a document entitled "A Blueprint for the Expansion of Rugby League" at its meeting of 9 April 1992. The blueprint contained the following comments:
"1. THE BUSINESS OF RUGBY LEAGUE
1.1 Overall Objective:
Rugby League is a business. We should seek to expand that business whilst delivering a product of sustainable quality.
1.2 As in any business, it is important to identify our Competition. These are:
Australian Football League
Basketball
Soccer
And potentially, Rugby Union
It is noted that all these competitors have a national and in some instances, international Competition.
1.3 Return on Investment:
Again, as in any good business it is an objective to (a) make a profit, and (b) achieve a return on investment. The Rugby League to date has expended a considerable investment in both Interstate and International, (New Zealand) promotions.
This has been done with a view to future expansion of the code.
1.4 Financial Independence:
It is a business objective for all Football Clubs to achieve financial independence and self sufficiency.
...
1.5 Market Leadership:
It is an objective within the plan to achieve market leadership for Rugby League as the premier Winter sport in Australia and (New Zealand?)
1.6 Quality of Product:
Equality of competition and the overall quality of the product is of paramount importance and a major objective.
2. EXPANSION. AN ATTITUDE
It is agreed that geographical expansion is desirable. The reasons being:
2.1 A Wider Audience:
A wider geographical spread has the benefits of exposing the game to a wider audience and thereby providing:
* a greater participation
* a wider TV audience
* expanded media promotional opportunities
2.2 Marketing Opportunities
Marketing opportunities arising from expansion are:
* availability of new sponsorships
* greater opportunity for return for national, (international?) advertisers.
2.3 Finance:
There are clear financial ramifications for both the League as a whole and clubs individually from the financial returns resulting from expansion.
3. STRUCTURE OF ANY EXPANDED COMPETITION
The options for any expanded Competition are a:
16 team Competition - status quo
18 team
20 team
...
5. EXECUTIVE SUMMARY
...
The Premiership Policy Committee in giving consideration to expansion recognised the following options.
1. Expansion
2. Relocation of Existing Clubs
3. Attrition
4. Amalgamation
To guarantee the quality of Competition, the Premiership Policy Committee recommends that the number of teams in the Winfield Cup should not exceed 16 teams in the immediate future."
At its meeting on 12 May 1992, the committee recommended to the board that geographical expansion should occur, but not before 1995; the premiership competition should "preferably consist of 16 clubs"; and Auckland and the Western Australia Rugby League (Perth Pumas) should be invited to participate in 1995.
On 18 May 1992 the board of the League, after considering the report of the committee, resolved that
"Rugby League Promotions, Auckland, be invited to enter a team into the Winfield Cup Premiership Competition from Season 1995, subject to approval of the Australian Rugby League and New Zealand Rugby League and the Queensland Rugby League, Western Australian Rugby League and Top End Rugby League be asked to provide further information in respect of their submissions particularly in the areas of sponsorship, financial arrangements and ground facilities with a view to a team from one of those areas joining Auckland to enter the Competition in 1995."
4. The Bradley Report
In August 1992, the General Manager of the League distributed to all clubs a copy of a draft document entitled "Organization Review", prepared by Dr G. Bradley, of W.D. Scott & Co ("the Bradley Report"). The report, which was actually prepared in September 1991, presented, for discussion purposes, findings and recommendations based on an organisational review of the ARL. The report proposed that if the competition were to expand to other parts of Australia, the competition should be taken over and run by the ARL. Against this background, the report proposed a new management structure and organisation for the ARL.
The recommended structure involved the "two main stakeholder groups", the States and the national competition clubs, both working at ARL level. The long term goal was that all States would become full voting members of the ARL (the then current position being that New South Wales and Queensland were the only States with voting rights, each having an equal vote). The report recommended that all clubs participating in the national competition should be full voting members of the ARL. Dr Bradley envisaged that the role for stakeholders would be similar to that of shareholders in a company. The role of the board would be similar to that of a board of directors for a public company. The board would comprise a chairman; two representatives of each of New South Wales and Queensland; one representative of other States; one representative of the club; the general manager; and two outside directors.
The report canvassed the issue of the number of clubs in the competition. After considering alternatives, the report reached the following conclusions:
"The fourth solution, to reduce the number of clubs in Sydney, will be very hard for the League to implement given the long playing traditions of some of those clubs. In the long term, however, it is likely that Sydney is not going to be able to support eleven clubs as it does at present. Therefore in the long term this is the only viable solution. Sydney based clubs are going to have to move to new areas, merge or be relegated from the League. This is going to be a painful process.
...
In the long term I believe that the ARL should be looking to reduce the number of clubs in the National Competition to fourteen thus allowing clubs to play two complete rounds. This will mean, assuming that only four new clubs are admitted from areas outside Sydney, that there will be only five clubs based in Sydney."
5. Admission of New Clubs
On 30 November 1992, the board resolved that three clubs, namely the Western Australian Rugby League Ltd (the Western Reds), the South Queensland Crushers Pty Ltd (the South Queensland Crushers) and Top End Rugby League Inc (the North Queensland Cowboys) should be admitted to the Winfield Competition in 1995. The admission was subject to four conditions:
"1) That each Club deposit with the League the sum of $500,000 which is to be held in Trust for a period of three years during which the Club will receive interest on the amount deposited and the amount will be returned to the Club at the expiration of that period, provided the Club continues to be able to meet its commitments or alternatively that each Club lodge with the League a Bank Guarantee for the sum of $500,000 in respect of its operations for 1995, 1996 and 1997.
2) The League is satisfied as to the financial viability of the Club.
3) That sponsorship and other arrangements including those in relation to ground improvements and leases are confirmed.
4) That each applicant provide to the League a Memorandum and Articles of Association of the club in a form acceptable to the League."
Ultimately, these three clubs, plus the Auckland Warriors, joined the competition in 1995.
Prior to the admission of the four clubs, consultations took place with the existing clubs, during which their representatives were given the opportunity to express their views. Lengthy discussion of the question took place at several meetings of chief executive officers. This followed an established practice whereby the League consulted with existing clubs before agreeing to the admission of any new clubs. For example, the decision to admit teams in 1982 was made after a lengthy meeting of the NSWRL held on 13 December 1980, at which club delegates and representatives of other affiliated bodies discussed the proposal.
Subject to compliance with the conditions set out above, the new clubs were not asked to pay any fee as consideration for their admission to the competition. This, too, followed the practice applied to earlier entrants to the competition. However, all new clubs were required to have their memoranda and articles of association approved to ensure that they were consistent with the objects and articles of association of the League. In some cases, the approval process (for 1995 and on an earlier occasion) involved significant changes to the draft memoranda and articles submitted to the League or to its predecessor, the NSWRL.
6. The ARL as Organiser
On 12 May 1993, Mr Arthurson, who was chairman of both the League and ARL, sent a minute to the board of the ARL relating to the organisation of the national competition. In this minute he expressed his opposition to the clubs gaining direct representation on the board. He said that he could not accept that individual clubs participating in only one aspect of the national body's activities should have any say in matters not associated with that activity, be they national or international. He therefore proposed that the ARL authorise the League to conduct the national competition.
At its meeting on 18 May 1993, the board of ARL discussed Mr Arthurson's minute and resolved that the League be authorised to conduct the competition. Participating teams would be required to use the logo of the ARL in lieu of that of the League. The chief executive of the ARL would have a dual role as general manager of the League. Participating clubs would have an input to the policies of the competition, by having a vote on the election of the board of directors of the League and by direct representation on the Chief Executives' Committee, the Premiership Policy Committee and other sub-committees.
J. The Roles of the League, ARL and Clubs
There was a great deal of evidence concerning the respective activities of the League, ARL and the clubs, and the relationship between them. It will be necessary to refer later to some of this evidence, when discussing particular legal issues. However, some matters should be noted here since they were referred to in the written submissions or oral argument.
1. Promoting Evenness of the Competition
The League has introduced a number of measures
designed to ensure evenness of competition among participating clubs. Two examples illustrate the point. In 1988, the League decided to introduce a
"salary cap" for each club.
This involves the imposition of a ceiling on contract payments, match
payments and other benefits which each club is permitted to make to its graded
players. The salary cap provisions now
appear in the League's rules. The salary
cap question has provoked some disagreement among clubs and the limits have not
always been observed by all clubs, although the principle was unanimously
endorsed in 1994. In 1995, the salary
cap
applicable to most clubs in the competition was approximately $1.8 million.
Secondly, in 1990, the board of the League resolved to implement a player draft system. Under this system, players out of contract with their clubs were to submit themselves to the draft, by specifying the terms and conditions on which they were prepared to be engaged by a club. Clubs were provided with draft choices, in reverse order to their position on the ladder in the previous season. For his part, the player was obliged to accept employment with the first club requiring his services and prepared to meet his terms.
This system was challenged in the Federal Court: Adamson v New South Wales Rugby League Limited (1991) 27 FCR 535 (FCA/Hill J), rev'd (1991) 31 FCR 242 (FCA/FC). The challenge ultimately succeeded in the Full Court, where it was held that the League and the clubs had failed to establish that the restraint of trade imposed by the system was a reasonable means of maintaining the competitiveness of teams and the financial viability of clubs.
2. Marketing Activities
From the mid-1980s, the clubs attempted to expand their marketing activities, with a view to maximising revenue from sponsorship and advertising. The League assisted in this process by providing grants for marketing purposes and by offering advice on marketing issues. The clubs proved to be successful in attracting sponsorship from a variety of sources.
Sponsorship agreements to which the clubs are parties have required the prior approval of the League, through the Sponsorship and Promotions Committee. In general, sponsorship agreements have stipulated that the sponsor is entitled to terminate the arrangement if the club ceases to participate in the competition, or ceases to be affiliated with the League or ARL. These clauses, no doubt, have been inserted in the sponsorship agreements in response to the annual admission requirements of the League.
In 1985, the League entered into a licensing
and merchandising agreement with News Publishing Australia Ltd ("News
Publishing"), a company associated with News. That agreement was subsequently extended and
News Publishing took over management of the merchandising division. The division licensed the sale of
merchandise, such as jerseys and other goods, bearing the logos and colours of
the League and the clubs. The funds
received from these activities have formed
part of the League's general funds. The
clubs have not received payment from the League in proportion to the volume of
sales of goods bearing that club's colours or logos.
The League is the registered owner of each of the trade marks relating to the clubs. In September 1979, a meeting of the general committee of the NSWRL resolved that an agreement should be executed, providing for the NSWRL to apply for registration of trade marks on behalf of a joint venture to be constituted by the clubs and the League under which the profits would be shared equally between the NSWRL and the clubs. In 1981 a trust deed was drawn up to better record this joint venture. It provided that the trustees would hold the trust property and trademark applications on trust for NSWRL and the clubs in equal shares as tenants in common. That agreement was never executed, but the League nonetheless registered the marks and established a property division. The trial Judge found (at 548) that, over the years, the clubs had acquiesced in these arrangements relating to trade marks.
From 1989 onwards, the League engaged in extensive advertising in order to promote the competition. The campaign centred on the slogan "Simply the Best", the title of a song sung by Tina Turner, an American entertainer, who was prominently featured in television advertisements for the League. The campaign has been regarded as highly successful in increasing spectator interest in the game, particularly among females and children. Players from each of the clubs have appeared in promotions for the League on television, including "Simply the Best" promotions.
3. Financial arrangements
The NSWRL and, later, the League derived funds from a number of sources. These included gate receipts, sale of television and broadcast rights, sponsorship, "FootyTAB" (a form of State regulated wagering on the Winfield Cup competition) and the sale of publications. In the days when gate receipts from regular club matches constituted the main source of funds, the League collected all receipts and distributed a portion to the club. This practice was discontinued in the late 1960's and thereafter the clubs retained gate receipts. More recently, the major source of funds has been the sale of television rights. The League has retained the major share of revenue derived from this source. It has also collected all gate receipts from final series and certain representative matches and meets all expenses.
The League has always set and supervised the price of general admission to regular competition matches held at club grounds. This price is reviewed, but not necessarily altered, annually. All clubs must provide entry to the public at the price set, although they are free to charge higher prices for admission to grandstands and for reserved seating.
In recent years, the League has entered into agreements with television networks, granting rights to televised matched for varying periods. In 1987, the League granted the rights to Channel 9 to televise State of Origin games for three seasons. In 1990, agreement was reached with the Australian Broadcasting Corporation to televise matches for a three year period. Most importantly, in March 1994, a series of agreements was executed between the League, ARL and Channel 9 for televising competition and State of Origin matches, on both free-to-air and pay television. These agreements do not expire until 1999 and, as will be seen, have played an important part in the dispute between the League and ARL and News. The League has also granted rights for certain matches to be shown on television networks outside Australia.
The League has provided assistance over a long period to clubs for the improvement of ground facilities and for other purposes. For example, in or shortly before 1992, the League paid $1 million to the Government of the Australian Capital Territory, as part of an arrangement whereby the Bruce Stadium was leased to the Canberra Raiders. The club agreed to repay the advance by annual instalments of $100,000, to be deducted from the League's revenue grants to the club. Advances have frequently been made to clubs by the League from the Ground Improvement Fund. These advances have usually been made at lower than market interest rates, with repayments usually being required from the club's annual grants. In addition, the League has provided guarantees or letters of comfort to banks, in support of loans made by the banks to individual clubs.
The establishment of FootyTAB has provided a source of funds for ground improvements. The League has advised the New South Wales State government on the priority that should be accorded to requests from clubs for grants from this source. The total amount of the grant has also been negotiated between the League and the State. However, payments to individual clubs have been made directly by the State.
A table in evidence provided a summary of
income and expenditure for each of the 16 clubs participating in the Winfield
Cup for the years 1991 to 1994. Not all
information was available
from all clubs for each of those years.
Nonetheless, the summary provides a helpful statement of the sources of
income, major heads of expenditure and financial performance of the clubs
during the relevant years. The following
table shows the information available for six clubs, three of which ultimately
became aligned with News (Canberra, Canterbury-Bankstown and Penrith) and three
of which (Manly Warringah, Parramatta and South Sydney) remained aligned with
the League.
|
CANBERRA |
CANTERBURY-BANKSTOWN |
PENRITH |
||||||||||
|
|
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gate receipts and prize money |
|
1,182,892 |
695,408 |
1,220,650 |
1,290,654 |
1,182,892 |
695,408 |
642,990 |
|
799,966 |
1,016,811 |
1,123,225 |
|
Sponsorship - Receipts |
|
449,026 |
700,096 |
1,535,973 |
1,193,434 |
449,026 |
700,096 |
622,758 |
|
|
1,405,772 |
1,423,403 |
|
Sponsorship - Expenses |
|
0 |
0 |
|
(711,533) |
0 |
0 |
0 |
|
0 |
0 |
|
|
NSWRL profit distribution |
|
320,000 |
360,000 |
290,000 |
400,000 |
320,000 |
300,000 |
290,000 |
|
320,000 |
300,000 |
290,000 |
|
Other income |
|
92,168 |
175,730 |
511,502 |
126,821 |
92,168 |
175,730 |
209,744 |
|
58,852 |
274,133 |
|
|
Total income |
|
2,044,086 |
1,871,234 |
3,558,125 |
2,299,376 |
2,044,086 |
1,871,234 |
1,765,490 |
|
2,609,362 |
3,076,696 |
2,836,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Players and coaching staff payments |
|
2,039,877 |
1,963,690 |
2,484,060 |
2,073,254 |
2,104,310 |
1,767,397 |
1,711,129 |
|
1,736,127 |
1,180,731 |
1,292,624 |
|
Match payments |
|
550,765 |
427,006 |
1,202,800 |
669,870 |
392,133 |
401,056 |
418,894 |
|
543,373 |
588,143 |
606,027 |
|
Development - Scholarships |
|
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
0 |
0 |
0 |
|
Development - Juniors |
|
131,783 |
107,235 |
139,514 |
190,157 |
131,783 |
107,236 |
107,982 |
|
216,206 |
200,164 |
145,044 |
|
Development - Schools |
|
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
0 |
0 |
0 |
|
General and administration expenses |
|
1,618,271 |
1,355,557 |
1,657,305 |
1,874,131 |
1,712,470 |
1,587,800 |
1,534,239 |
|
900,556 |
728,255 |
676,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenditures |
|
4,340,696 |
3,853,488 |
5,483,679 |
4,807,412 |
4,340,696 |
3,853,488 |
3,772,244 |
|
3,396,262 |
2,697,293 |
2,719,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (Loss) Before Grant |
135,242 |
(2,296,610) |
(1,982,254) |
(1,925,554) |
(2,508,036) |
(2,296,610) |
(1,982,254) |
(2,006,754) |
|
(786,900) |
379,403 |
562,223 |
|
Leagues Club grant |
334,938 |
2,141,312 |
2,170,621 |
1,289,874 |
2,507,774 |
2,141,312 |
2,170,621 |
2,531,684 |
|
2,194,084 (Rent) |
200,000 (Rent) |
0 |
|
Profit (Loss) After Grant |
470,180 |
(155,298) |
188,367 |
(635,680) |
(262) |
(155,298) |
188,367 |
524,930 |
|
1,407,184 |
579,403 |
562,223 |
|
MANLY-WARRINGAH |
PARRAMATTA |
SOUTH SYDNEY |
||||||||||
|
|
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gate receipts and prize money |
1,216,355 |
1,161,222 |
898,024 |
1,056,109 |
785,650 |
884,007 |
885,419 |
905,090 |
587,642 |
488,217 |
582,898 |
446,289 |
|
Sponsorship - Receipts |
484,002 |
537,441 |
0 |
0 |
1,231,923 |
1,171,865 |
1,150,030 |
1,185,545 |
3,067,672 |
1,864,601 |
1,675,233 |
942,840 |
|
Sponsorship - Expenses |
0 |
0 |
0 |
0 |
(515,784) |
( 456,737) |
(431,484) |
(411,333) |
(990,545) |
(788,662) |
(726,285) |
(291,849) |
|
NSWRL profit distribution |
400,000 |
320,000 |
300,000 |
290,000 |
400,000 |
320,000 |
300,000 |
290,000 |
400,000 |
320,000 |
300,000 |
290,000 |
|
Other income |
336,633 |
168,392 |
272,891 |
222,562 |
91,983 |
157,411 |
80,482 |
151,279 |
38,864 |
28,302 |
29,920 |
173,906 |
|
Total income |
2,436,870 |
2,187,055 |
1,470,915 |
1,568,671 |
1,993,772 |
2,076,546 |
1,984,447 |
2,120,581 |
3,103,633 |
1,912,458 |
1,862,266 |
1,561,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Players and coaching staff payments |
1,920,304 |
2,044,939 |
1,887,326 |
1,839,766 |
1,995,394 |
1,989,679 |
1,821,785 |
1,872,295 |
1,774,539 |
1,312,287 |
1,168,644 |
1,167,192 |
|
Match payments |
429,550 |
273,123 |
351,719 |
221,192 |
623,400 |
596,149 |
555,060 |
567,806 |
508,864 |
213,865 |
200,313 |
100,397 |
|
Development - Scholarships |
0 |
3,288 |
8,589 |
0 |
103,052 |
97,567 |
83,941 |
63,902 |
0 |
0 |
0 |
0 |
|
Development - Juniors |
155,548 |
101,660 |
101,461 |
94,880 |
122,720 |
104,635 |
81,645 |
110,116 |
123,476 |
130,124 |
99,310 |
68,210 |
|
Development - Schools |
17,581 |
24,940 |
32,499 |
27,360 |
52,479 |
47,711 |
30,588 |
26,950 |
0 |
347,172 |
0 |
0 |
|
General and administration expenses |
944,188 |
859,569 |
507,902 |
380,248 |
888,518 |
732,118 |
907,058 |
635,080 |
614,383 |
|
529,235 |
483,618 |
|
Total Expenditures |
3,467,171 |
3,307,518 |
2,889,496 |
2,583,446 |
3,785,563 |
3,567,859 |
3,480,077 |
3,276,149 |
3,021,262 |
2,003,448 |
1,997,502 |
1,819,417 |
|
Profit (Loss) Before Grant |
(1,030,301) |
(1,120,464) |
(1,418,581) |
(994,775) |
(1,791,791) |
(1,491,313) |
(1,495,630) |
(1,155,568) |
82,371 |
(90,900) |
(115,236) |
(258,231) |
|
Leagues Club grant |
1,180,000 |
1,125,000 |
1,438,185 |
1,034,965 |
1,800,000 |
1,500,000 |
1,500,000 |
1,160,000 |
0 |
325,000
|
475,000
|
1,030,000 |
|
Profit (Loss) After Grant |
149,699 |
4,536 |
19,604 |
40,190 |
8,209 |
8,687 |
4,370 |
4,432 |
82,371 |
234,010 |
339,764 |
771,769 |
The position revealed in this table varies from club to club and, indeed, the experience of each club has varied considerably from year to year, depending in part on the club's performance on the field. It is evident, however, that profit distribution from the League is not the major source of income for the clubs, usually providing between 15% and 20% of income before account is taken of any grant from an associated Leagues club. Of course, the clubs receive other forms of support from the League, including prize money, payment of certain match expenses (such as referees' fees) and the benefit of promotional expenditure by the League.
The table makes it clear that, in general, the clubs have been very heavily dependent upon grants (in one form or another) from their associated Leagues clubs. These derive their revenue principally from the sale of food and liquor and from poker machines. The performance of the Leagues clubs associated with the six clubs for which information has been provided is summarised for the financial years 1991-1994 (so far as available) in the following table:
|
CANBERRA QUEANBEYAN LEAGUES CLUB LIMITED |
CANTERBURY-BANKSTOWN |
PENRITH |
||||||||||
|
|
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
|
Net Profit/(Loss) Before Grants |
|
1,036,493
|
1,389,965 |
1,454,440 |
|
4,514,928 |
3,980,165 |
3,701,684 |
|
(1,224,639) |
(956,439) |
(468,432) |
|
Less Grants to Football Club |
|
1,258,794 |
771,876 |
1,667,438 |
|
2,190,560 |
2,586,948 |
2,353,456 |
|
0 |
0 |
0 |
|
Net Profit/(Loss) After Grants |
|
(222,301) |
618,089 |
( 212,998) |
|
2,324,368 |
1,393,217 |
1,348,228 |
|
(1,224,639) |
(956,439) |
(468,432) |
|
MANLY |
PARRAMATTA |
SOUTH SYDNEY |
||||||||||
|
|
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
1994 |
1993 |
1992 |
1991 |
|
Net Profit/(Loss) Before Grants |
1,942,917 |
( 102,094)
|
1,078,574 |
704,997 |
|
3,033,594 |
2,176,647 |
1,190,064 |
|
733,372 |
517,738 |
1,592,303 |
|
Less Grants to Football Club |
1,142,063 |
1,576,450 |
1,032,501 |
942,037 |
|
1,500,000 |
1,500,000 |
1,160,000 |
|
325,000 |
325,000 |
1,000,000 |
|
Net Profit/(Loss) After Grants |
800,854 |
(1,678,544) |
46,073 |
(327,040) |
|
1,533,594 |
676,647 |
30,064 |
|
408,372 |
192,738 |
592,303 |
4. Financial Model for 1995
In 1994 an accounting firm prepared a report for the League, which included a financial model for an average Sydney-based club, using the past three years' funding results as the base. The following is the model projected at the time for the year ended 31 October 1995:
INCOME $ %
Gate receipts and prize money 945,000 21
NSWRFL - Profit Distribution 360,000 8
Sponsorship income - Gross 1,305,000 29
Leagues Club grant 1,755,000 39
Other income 135,000 3
4,500,000 100
EXPENDITURE $ %
Players and coaching staff 2,115,000 47
Motel and development expense 945,000 21
Sponsorship expenses 495,000 11
Salaries and wages 360,000 8
General and administration expenses 585,000 13
4,500,000 100
Profit/Loss 0 0
This table reinforces the conclusions to be drawn from the figures for the six clubs extracted above.
5. League Finances
In 1985, the League's Finance Committee recommended that the League's financial reserves be increased. The board agreed that reserves should be increased to $5 million within 6 years. The strategy adopted was for the League to increase net revenue retained until the reserves reached the target. In fact, the target was reached earlier than expected.
The following table, derived from a schedule prepared by the League's financial manager from the League's profit and loss accounts, shows income and expenditure over the period 1988-1994. It also shows the proportion of the League's operating profits distributed to the clubs and the proportion retained over the period 1983-1994.
|
NSWRL LTD FINANCIAL FIGURES [$,000]
|
|||||||
|
|
1988 |
1989 |
1990 |
1991 |
1992 |
1993 |
1994 |
|
INCOME |
|
|
|
|
|
|
|
|
TV FEES |
3690 |
4180 |
9815 |
8159 |
8628 |
8116 |
8992 |
|
GATE RECEIPTS- REFER NOTE (1) |
3049 |
3306 |
4011 |
4064 |
5285 |
4513 |
6742 |
|
SPONSORSHIPS |
1358 |
1341 |
2122 |
2797 |
3689 |
4212 |
6416 |
|
MERCHANDISING |
314 |
545 |
467 |
494 |
694 |
975 |
883 |
|
INTEREST |
757 |
1380 |
1728 |
1118 |
714 |
637 |
680 |
|
HOSPITALITY |
234 |
257 |
181 |
331 |
496 |
681 |
958 |
|
OTHER - REFER NOTE (2) |
1150 |
875 |
769 |
1223 |
3364 |
876 |
1865 |
|
|
10552 |
11884 |
19093 |
18186 |
22870 |
20010 |
26536 |
|
|
|
|
|
|
|
|
|
|
EXPENDITURE |
|
|
|
|
|
|
|
|
ADMINISTRATION - REFER NOTE (3) |
1206 |
1374 |
2670 |
3005 |
2639 |
2733 |
3511 |
|
|
|
|
|
|
|
|
|
|
OPERATIONS |
|
|
|
|
|
|
|
|
- PROMOTIONS |
328 |
638 |
1442 |
969 |
1832 |
2256 |
2822 |
|
- TRAVEL |
291 |
692 |
943 |
754 |
1428 |
1109 |
1279 |
|
- OTHER - REFER NOTE (4) |
1152 |
909 |
2374 |
2467 |
3923 |
1421 |
3282 |
|
- REFEREES - REFER NOTE (5) |
242 |
282 |
317 |
430 |
443 |
481 |
519 |
|
|
|
|
|
|
|
|
|
|
DEVELOPMENT |
|
|
|
|
|
|
|
|
- SCHOOLS & JUNIORS |
219 |
250 |
317 |
335 |
595 |
526 |
631
|
|
- JUNIOR REPS |
88 |
89 |
147 |
118 |
176 |
139 |
144 |
|
- ACADEMY |
279 |
414 |
357 |
517 |
488 |
428 |
407 |
|
- COUNTRY D/OS |
164 |
184 |
313 |
361 |
399 |
388 |
416 |
|
|
|
|
|
|
|
|
|
|
MARKETING |
588 |
827 |
771 |
594 |
885 |
897 |
1032 |
|
|
4557 |
5659 |
9651 |
9550 |
12808 |
10378 |
14043 |
|
|
|
|
|
|
|
|
|
|
SURPLUS |
5996 |
6224 |
9442 |
8636 |
10062 |
9632 |
12494 |
|
DISTRIBUTION TO CLUBS |
4613 |
5067 |
8673 |
7879 |
8046 |
8416 |
10010 |
|
TRANSFER TO RESERVE - REFER NOTE (6) |
|
|
|
-95 |
1261 |
710 |
881 |
|
TRANSFER TO RETAINED EARNINGS |
1383 |
1157 |
769 |
852 |
755 |
506 |
1603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NSWRL CLUB DISTRIBUTIONS AND RETAINED PROFITS |
||||||||||||||||
|
|
OPERATING PROFIT |
% |
PRIZEMONEY |
% |
TV GRANTS |
% |
ADMIN GRANTS |
% |
REFER NOTE (7) SPECIAL GRANTS |
% |
TRANSFERS TO RESERVES |
% |
RETAINED |
% |
TOTAL |
% |
|
1983 |
2105 |
100 |
453 |
21.52 |
|
|
964 |
45.8 |
|
|
|
|
688 |
32.68 |
2105 |
100 |
|
1984 |
2068 |
100 |
1067 |
51.6 |
|
|
650 |
31.43 |
70 |
3.38 |
|
|
281 |
13.59 |
2068 |
100 |
|
1985 |
2867 |
100 |
1160 |
40.46 |
|
|
650 |
22.67 |
282 |
9.84 |
|
|
775 |
27.03 |
2867 |
100 |
|
1986 |
3750 |
100 |
1178 |
31.41 |
|
|
1274 |
33.97 |
289 |
7.71 |
|
|
1009 |
26.91 |
3750 |
100 |
|
1987 |
4793 |
100 |
1188 |
24.79 |
650 |
13.56 |
1515 |
31.61 |
310 |
6.47 |
|
|
130 |
2.72 |
4793 |
100 |
|
1988 |
5996 |
100 |
1507 |
25.13 |
645 |
10.76 |
2180 |
36.36 |
281 |
4.69 |
1000 |
20.86 |
1383 |
23.07 |
5996 |
100 |
|
1989 |
6224 |
100 |
1637 |
26.3 |
710 |
11.41 |
2400 |
38.56 |
320 |
5.14 |
|
|
1157 |
18.59 |
6224 |
100 |
|
1990 |
9442 |
100 |
1891 |
20.03 |
1560 |
16.52 |
4800 |
50.84 |
422 |
4.47 |
|
|
769 |
8.14 |
9442 |
100 |
|
1991 |
8636 |
100 |
1949 |
22.57 |
1290 |
14.94 |
4640 |
53.73 |
|
|
- 95 |
- 1.1 |
852 |
9.87 |
8636 |
100 |
|
1992 |
10062 |
100 |
2036 |
20.23 |
1210 |
12.03 |
4800 |
47.7 |
|
|
1261 |
12.53 |
755 |
7.51 |
10062 |
100 |
|
1993 |
9632 |
100 |
2021 |
20.98 |
1275 |
13.24 |
5120 |
53.16 |
|
|
710 |
7.37 |
506 |
5.25 |
9632 |
100 |
|
1994 |
12494 |
100 |
2255 |
18.05 |
1355 |
10.85 |
6400 |
51.22 |
|
|
881 |
7.05 |
1603 |
12.83 |
12494 |
100 |
|
TOTAL |
78069 |
100 |
18342 |
23.49 |
8695 |
11.14 |
35393 |
45.34 |
1974 |
2.53 |
3757 |
4.81 |
9908 |
12.69 |
78069 |
100 |
Notes to NSWRL Ltd Financial Figures
Note 1 - Gate Receipts
Includes gate receipts from Final Series, State of Origin, Challenge Cup, City v Country and Metropolitan Cup. Does not include State of Origin matches held in Brisbane.
Note 2 - Other
Includes income received from Radio Broadcasting Rights, Government Grants, Video Sales, QRL Settlement Fees, and other sundry income.
Note 3 - Administration
Includes Referees Administration Costs.
Note 4 - Operations - Other
Includes costs of conducting the Final Series, Premiership, State of Origin, Challenge Cup, City v Country and Metropolitan Cup.
Note 5 - Referees
Includes Referees match fees and expenses.
Note 6 - Transfers to Reserves
Represents amounts transferred to General Reserve that were considered to be abnormal trading items such as salary cup fines, television development fees and bad debts recovered.
Note 7 - Special Grants
Includes allocations made to clubs such as marketing and development grants, ground turnstiles, computer hardware and software.
6. League Financial Statements: 31 October 1994
The following are extracts from the League's profit and loss account for the year ended 31 October 1994:
NEW SOUTH WALES RUGBY LEAGUE LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31 OCTOBER 1994
REVENUE ACTUAL
Premiership
T.V. Fees 4,653,351
Sponsorships 3,676,300
Radio Broadcasts 256,745
T.V. Fees - F.N.F. 1,180,000
Sundry 20,000
TOTAL 9,786,396
General and Administrative
TOTAL 828,096
Representative Matches
1. State of Origin
T.V. Fees 450,000
Gate Receipts 2,572,633
Sponsorships 639,000
Radio Broadcasts 2,250
Sundry 26,000
TOTAL 3,689,883
2. City v Country
TOTAL 150,000
3. Final Series
T.V. Fees 1,379,000
Gate Receipts 3,309,280
Sponsorships 900,000
Radio Broadcasts 26,760
TOTAL 5,615,040
Metropolitan Cup
TOTAL 88,728
Development & Coaching
TOTAL DEVELOPMENT & COACHING 869,201
TOTAL REVENUE 21,027,344
EXPENDITURE
Premiership
Advertising 2,218,894
Grants - clubs 6,700,000
Travel 675,366
Referees Fees 294,698
Referees Expenses 148,881
Friday Night Football 480,000
Saturday Football 875,000
[Other items omitted]
TOTAL 12,534,897
General and Administrative
TOTAL 3,511,334
Metropolitan Cup
TOTAL 181,702
Representative Matches
1. State of Origin
TOTAL 1,590,459
2. City v Country
TOTAL 115,854
3. Final Series
Prizemoney 1,549,000
[Other items omitted]
TOTAL 2,217,602
Development
1. Schools and Juniors
TOTAL 631,119
2. Junior Representatives
TOTAL 144,214
3. Academy
TOTAL 406,748
4. Country Development Officers
TOTAL 416,294
TOTAL DEVELOPMENT 1,598,375
TOTAL EXPENDITURE 21,750,223
PROFIT/(LOSS) (722,878)
The loss of $722,878 revealed in this profit and loss statement must be adjusted, by adding the profit of $1,227,420 from the marketing division and $1,098,011 profit from the conduct of the Challenge Cup (a pre-season competition). Once these figures are taken into account the resultant profit figure for the League is $1,602,553.
The balance sheet of the League, as at 31 October 1994, showed accumulated funds of $16.4 million.
For the period ended 31 October 1994, the ARL's
profit and loss statement showed a profit of
$134,797. The ARL's balance sheet, as at
31 October 1994, reveal accumulated funds of $3,993,701, after allowing for a
`future development expenditure reserve' of $5,893,804.
7. Promotion of the Game
As is apparent from the League's profit and loss statement for 1994, it has been involved in establishing and promoting junior leagues and in supporting rugby league in schools. In 1991, the League's Coaching and Development Academy was officially opened at Narrabeen. By 1995, the Academy employed some eight staff, responsible for conducting coaching courses and clinics. It also employed five officers in country areas.
Each of the clubs is responsible for the promotion of rugby league in a designated geographic area, selected by the League. Clubs usually employ a number of people whose primary function is to conduct and foster the game in their local area. The personnel typically include a junior league manager, a development officer and a district rugby league administrator. In each district, the activities of the club are supported by large numbers of volunteers, serving in an honorary capacity. They perform tasks such as committee work, coaching and organising local competitions.
8. Player Contracts
Until 1990, player contracts were tripartite arrangements, to which the League, the player and the club were parties. This practice changed in about 1991. Thereafter contracts were entered into only between the club and the player. The change followed the successful challenge in 1991 to the draft rules in Adamson v NSWRL. The new approach was adopted because the League had received legal advice that, if the contract with the player were a contract of service to which only the club and the player were parties, it would not be subject to the TP Act.
By 1991, a standard form of player's contract was in use by the clubs. Between 1991 and 1993 the Premiership Policy Committee and the Chief Executives' Committee discussed amendments to the players' contracts. An amended version was introduced for use by the clubs in 1993. The `Playing Contract' introduced in 1993, bears the logos of the League and the ARL. It is expressed to be a contract between the club (as an incorporated body) and the player for a fixed term to expire on 31 October in a nominated year. The main provisions are as follows:
"1. EMPLOYER/EMPLOYEE RELATIONSHIP
The parties hereto acknowledge and agree that the relationship between them constituted or evidenced by this Agreement is one of employment with the Club being the employer and the Player being the employee.
...
3. SERVICES
The Player will -
(a) whenever and wherever reasonably required, during the playing season(s) of the New South Wales Rugby League Limited ('the League'), well and faithfully and to the best of his ability and skill play the Game for the Club in such team and grade as the Club shall from time to time specify;
...
(d) obey all reasonable directions of the Club relating to training for and playing the Game;
...
(f) agree to be bound by and observe the provisions of the Memorandum and Articles of Association and Rules of the Club, the League and the Australian Rugby Football League Limited ('the Australian Rugby League');
...
(h) not play in any rugby League Football match other than for the Club or in a representative match sanctioned or approved by the League or the Australian Rugby League (except with the express prior written consent of the Club);
...
(j) complete the New South Wales Rugby League Player Registration Form:
(k) participate in all activities required by the Club or the League for the promotion of the Game ...
5. PUBLICITY
The Player shall not -
...
(b) deliberately make any statement or comment whether written, televised or broadcast, detrimental to the interests welfare or image of the Game or the League or the Club;
...
10. MISCONDUCT AND THE INTEGRITY OF THE GAME
(1) The Player shall not misconduct himself or otherwise act in a manner inconsistent with the integrity of the Game during the term of this contract.
...
(3) Without limiting the generality of the expression `misconduct' or the expression 'acted in a manner inconsistent with the integrity of the Game' those expressions shall include the following:
...
(j) being guilty of any other form of conduct prejudicial to the Club or the League.
...
26. NEGOTIATING WITH OTHER CLUBS
(a) The Player agrees during the term of this agreement he will not enter into any discussions, negotiations, contract, agreement, arrangement, understanding or option to play the Game for any other Club without first obtaining the written consent of the Club provided that in the last year of this agreement, such consent shall not be withheld once the Club has completed its premiership competition commitments for that year ...
(b) Sub-clause (a) shall not apply to Players negotiating to play in the 1995 season with any of the four new Clubs which shall be joining the Premiership Competition in that year, provided that such negotiations shall be undertaken discreetly and confidentially and that neither the Player nor the new Club with which he has negotiated shall make any public announcements of the signing of the Player until he has completed his playing commitments with the Club."
The expression "the Game" is defined by cl.19 to mean the game of Rugby League Football.
The contract contains an acknowledgment that the player has had a copy made available to him of the memorandum and articles of the League and ARL, as well as a copy of the rules of the League. The contract also includes a confidentiality provision.
The standard contract has a player's registration form printed on it. That form is addressed to the League and requires the signature of the player. Among other things, the player agrees to be bound by the League's memorandum, articles and rules and to make himself available for selection in representative teams.
K. Invitations to Participate in the 1995 Competition
On 2 May 1994, Mr Quayle, as general manager of the League, sent a letter to the chief executive of each club, inviting the club to submit an application for entry into the Winfield Cup Premiership Competition for 1995. Replies were required by 11 May 1994. The letter enclosed an application form as prescribed by Form 1 of the League's Competition Rules, extracted above.
The letter also enclosed guidelines for entry
into the competition under 19 headings, including continued financial
viability; future viability as a competitive force for ten years; minimum
sponsorship arrangements ("jumper identification" of not less than
$500,000 and additional sponsorship of at least $1 million); and an ability to
attract a minimum average home attendance
of 10,000 people. The guidelines stated
that admission to the competition would be on conditions, many of which were
similar to conditions applied in earlier years, including "licensing
regulations", under which the club agreed that "logos, emblems and
characters of the NSW Rugby League and affiliated clubs are the registered
properties of the New South Wales Rugby League Limited".
All clubs provided information in reply to the League's invitation. Some responses were brief (such as those from Brisbane Broncos, Canterbury-Bankstown and Eastern Suburbs), although they addressed the issues raised by the League. Others (such as Illawarra and North Sydney) were somewhat more detailed. All clubs were duly admitted to the 1995 competition.
Later in the year, there was some correspondence which affirmed the importance of the annual admission process. On 12 August 1994, Mr Quayle wrote to the Brisbane Broncos, in response to a request by it for approval by the League of the sale to Northern Rivers Ltd of a 20% shareholding interest in the Broncos group of companies. On the same date, Mr Quayle also sent a letter to Northern Rivers Ltd explaining that there was no provision for consent to be given and expressing concern that "even some form of informal consent could lead to misunderstandings or misconceptions". The letter continued:
"Under the terms of the League's Constitution, it is necessary that, without exception, all clubs which wish to participate in the League's Premiership competition, must apply each year for admission. No club has any automatic right to participate in any year's competition and the League has the unfettered right to reject any club's application for participation.
This is not to suggest that the League has made any decision in relation to any club in respect of 1995. It is just that it is important that all clubs, and their members and shareholders, have an adequate understanding as to the limits of their entitlements, for the time being, in relation to the League's competitions."
A copy of this letter, which was written on legal advice, was sent to the Brisbane Broncos.
L. The Birth of the Super League Proposal
1. The Initial Proposal
In January 1994 News agreed to become a sponsor of the Brisbane Broncos through an associated company. This sponsorship was arranged between Mr Ribot, then the chief executive officer of the Broncos, and Mr Cowley, chief executive of News in Australia.
In April 1994 Mr Ribot prepared a report, with the knowledge and concurrence of his board, which proposed a "Superleague", consisting of a ten to twelve team competition. The report acknowledged as a "possible obstacle" the League and ARL. Mr Ribot suggested that the Super League would require the establishment of an independent management structure, differing from the structure then in place through the League.
On 14 June 1994, Mr Ribot sent Mr Cowley a more detailed proposal, which followed a series of meetings with representatives of News. The proposal was for a Super League competition, comprising ten or twelve teams. The document included preliminary budgets, which provided for a management fee of 10% for News for "running and ownership" of the events. This document was prepared with the knowledge of the board of the Brisbane Broncos. From the time the report was prepared, Mr Ribot held conversations on a weekly basis with News' representatives about Super League.
Mr Ribot's proposal was the subject of a written assessment within News. The assessment was based on an analysis of financial data, the results of Australian Securities Commission searches by News' in-house lawyer and conversations with Mr Ribot. The assessment bears a notation, apparently in the handwriting of Mr Smith, a director of News, stating "delete any reference to Ribot".
Newspaper or magazine articles concerning a rebel Super League competition sponsored by News appeared as early as March 1994, the first such article being in the Rugby League Week of 2 March 1994. In July 1994, further newspaper articles appeared, referring to the possible establishment of a "Rugby Superleague" or a "super league" conducted by private enterprise backed by Mr Rupert Murdoch, chairman of News and New Corporation Ltd. For example, in an article appearing in the Brisbane Courier Mail of 28 July 1994, Mr Morgan (chairman of the Broncos) was quoted as supporting an "elite competition", on the basis that a reduction in the number of teams was inevitable if quality football was to occur each week. He was also quoted as referring to the potential of News' European and Asian television networks to promote the game as never before. Mr Arthurson (in comments he accepted he made) was quoted as saying that "to turn your back on the game of rugby league for the mighty dollar, you'd be a pretty poor sort of an individual". Similar articles appeared at about this time in the Australian, the Sydney Morning Herald and the Sunday Telegraph.
2. "The Superleague" Concept
A document entitled "Superleague", dated 12 August 1994, was prepared within News. The stated objective was to set up a company called Superleague Ltd, owned by News. Superleague Ltd would establish an elite national competition (including a New Zealand team), between 12 privately owned teams. News would own up to four of these teams. Superleague Ltd would also conduct an internationally televised World Club Series between clubs initially involving Australia, New Zealand and the United Kingdom.
The business was described in the document as
"entertainment. Football will be part of the entertainment."
News was to obtain a 15% management fee, the profit share allocated to the clubs owned by it and other benefits. Superleague Ltd was to devise revenue from sponsorship, free-to-air and pay television rights, gate takings and merchandising. The company was projected to make an operational profit of $5 million by 1997 and $12 million by 1999.
The competition was to consist of twelve clubs, of which four would be based in Sydney. New teams would be based in Perth, Adelaide and Melbourne. Each of these teams would initially be owned by News. An objective of the proposal was "to ensure that no other competition [could] exist in competition to Superleague". To achieve this, it was considered necessary to have at least the four Sydney teams (to maintain the game's largest base) and to ensure that all teams were privately owned.
The document set out a series of steps to
implement the proposal. Step 1 was to
approach the four "continuing teams" (Brisbane, Canberra, Newcastle
and Auckland), with a view to securing a commitment for 7 years. Step 2 was to meet with representatives of
the League in a "casual pleasant atmosphere" and to offer
"concessions". The concessions
included allowing ARL to conduct Tests and retain the profits from those
matches. The League and ARL was also to
be given a grant to promote the game.
Step 3 was to meet at short notice with representatives of the 11 Sydney
clubs and Illawarra. Each club was to be
offered a share in a team. If there were
three clubs in an area, each would be offered one-third of the ownership of the
team. It was envisaged, for example,
that the new Western Sydney club would be offered to Wests, Penrith and
Parramatta. If only one of the offerees
accepted, it would own 100% of the new club; if two
accepted they would each own 50%. The
proposal was that the old club would own half of its entitlement in the new
club and the remaining 50% would be offered directly to members. The old club and non-members could sell their
entitlements to a private owner. Step 4
was to announce that Super League was happening and to explain its
structure. Step 5 was to deal with other
clubs not included in the arrangements, such as the South Queensland Crushers.
The document noted that the co-operation of some clubs was required, while the co-operation of players needed by the new competition was essential. It was acknowledged that compensation might have to be offered to unwanted players and teams. It was also acknowledged that it would be difficult to use current names and logos, although this would be an issue for only three or four clubs, since it was better for the new or combined clubs to start with completely new identities.
M. Events Leading to the Commitment Agreements
1. Newspaper Reports
As the trial Judge remarked, events moved rapidly from October 1994. On 17 October 1994, the board of the League resolved to hold a special board meeting to discuss several issues, including Super League and a "reduction in the number of Sydney teams". In his evidence, Mr Arthurson said that the Super League issue "kept rearing its head" at the time and was "starting to have a destabilising effect" on the clubs. Sponsors had expressed concern and wished to know whether Super League was a reality or only "paper talk".
At about this time, a flurry of newspaper reports appeared about Super League. For example, on 15 October 1994 the Sydney Morning Herald reported that the push towards the Super League rugby league competition was gaining new momentum and was likely to be a breakaway league of eight to twelve teams supported by News. A Sydney Morning Herald article of 21 October 1994 was headed "Arko's [Mr Arthurson's] fury at Broncos rebel talks". The article reported Mr Arthurson as saying, among other things:
"`I think it's done a lot towards devaluing our major sponsorship,' Arthurson said. `I think it's wrong that people in the game should be talking about a break-away movement. I think its a disgrace to tell the truth.'
...
The League has the right, as you well know, to deny admission to any team in the Winfield Cup.'"
Mr Arthurson accepted that the quotations were substantially accurate. An article published on the same date in the Daily Telegraph Mirror reported Mr Arthurson as stating that Mr Ribot had admitted that the Broncos had spoken to organisers of a proposed breakaway competition. Mr Arthurson accepted in evidence that a conversation with Mr Ribot had taken place on 17 October 1994, in which Mr Ribot said that he had had talks with News about Super League. In that conversation, Mr Arthurson told Mr Ribot of his (Mr Arthurson's) disappointment that Mr Ribot should have been involved in those talks.
2. Mr Arthurson's Return
Shortly after the meeting of 17 October 1994, Mr Arthurson went to the United Kingdom for the 1994 Kangaroo tour. At the first test at Wembley, on 22 October 1994, Mr Arthurson spoke to Mr Graham Lovett, a director of the League and an executive of News. Mr Lovett said words to the effect:
"This Superleague business is definitely going on Ken. It's going to happen."
Mr Lovett had previously had a conversation with Mr Arthurson in Sydney, in mid-October. Mr Lovett had said that he had seen News' plans for Super League and that he thought many aspects had merit. In that conversation, Mr Lovett said that the plan involved News working in conjunction with the ARL.
During the weekend of 22-23 October Mr Arthurson telephoned Mr Quayle and described this conversation with Mr Lovett at the Test. Mr Arthurson then said to Mr Quayle:
"I am very concerned about this, so concerned that I am coming home. I'll be home after the second Test."
Mr Arthurson at that time also told Mr Carr, the manager of the Kangaroo team, that he was concerned about the newspaper reports of a "proposed alternate competition" or a "proposed competition run by News Limited".
Mr Arthurson decided to cut short his visit to
the UK and to return to Australia. His
impending return was reported in a number of newspapers. An article in the Australian of 2 November
1994, for example, reported Mr Arthurson as saying the following:
"I've been hearing all this rumour and innuendo so I have to go back.
It's not a matter for putting off until December or January. I don't want to sit and worry all that time. So, I'm going home to get it straightened out.
They're [the Broncos] trying to shaft the people who let them in the game in the first place."
Mr Arthurson agreed in evidence that he had been accurately reported.
On 6 November 1994, Mr Arthurson telephoned Mr Quayle, the General Manager of the League, from England. He said words to this effect:
"I'll be home Tuesday your time. What I would like you to do for me John, is to ring every President, or if the President is not available to speak to the CEO of each club, and tell them that I am coming home, and that when I get home I want to speak with them personally about the News Limited developments, tell them I want to talk to them about entering into an agreement to play in the competition for 3 to 5 years."
Mr Arthurson said in evidence that he thought at the time that such an agreement had benefits for the clubs in "ensuring solidarity and giving them an assurance of their position in the competition in the medium term".
Mr Arthurson returned to Sydney on 8 November 1994. He conferred with Mr Quayle on that day. In the meantime, Mr Quayle had asked the League's solicitors to prepare a document providing for the clubs to commit their loyalty to the League for five years and for the League to admit them to the competition for the same period. Mr Arthurson then telephoned a number of club presidents. In the case of Canberra, in the absence of the president, he spoke to Mr McIntyre, an influential person in the club. He asked Mr Quayle to telephone the presidents of other clubs so that, with the exception of Canberra, every club was contacted.
Mr Arthurson and Mr Quayle told the club officials of the nature of the agreement that was soon to be dispatched. They requested that the agreement be signed and returned as soon as possible. When asked in cross-examination what he had explained to the club executives, Mr Arthurson gave this evidence:
"I can't
remember the exact conversation, but in substance, what I would have said to
everybody, because it was certainly the reason I wanted them to sign the
loyalty agreements, the reason I wanted
them to sign the loyalty agreements was that I wished to preserve what I
considered was the league's and the clubs' greatest asset, and that is our
competition. It's a competition,
incidentally, which we have developed together over a period of more than 80,
almost 90, years. As I have said
repeatedly, I don't think anybody would deny that the standard and quality of
the Australian Rugby League competition is undeniably the best in the
world. And because of the bonds of
unity, the historic bonds of unity, that existed between the clubs, it's
enabled us to do great things together. And I believe the ultimate example of
what we have done is the competition itself.
I would have said, to summarise that, that my purpose was to try to
maintain and preserve not only the quality and standard of our competition, not
only for the clubs and the league, but for the benefit of the general
public."
In the event, none of the persons contacted indicated any form of dissent. The agreements, referred to by the parties as the "Commitment Agreements", were duly forwarded to the clubs.
On the morning of 10 November 1994, a meeting was held at the offices of News between Messrs Arthurson and Quayle and Messrs Cowley and Lovett. A conversation to the following effect took place:
"Arthurson: There is continuing media speculation about the establishment of a Super League. There are suggestions that there will be a break away or rebel competition.
Cowley: The stories don't come from me.
Arthurson: ...it is common knowledge around the traps that a comprehensive report has been put together by News, with nobody knowing what the report's about. There's plenty of suspicions being harboured amongst the clubs as to your intentions.
Cowley: We do have a proposal to develop a Super League. We would like to see a competition of 12 teams. We'd like to see the number of Sydney teams reduced.
[Mr Cowley then spoke in what Mr Arthurson described as "fairly vague" terms about the proposal.]
Cowley: My people have been working on the project for some time. That is a report on their findings. One of these days I will give it to you. You will probably not like some of the things you read in it.
...
I would like to take Rugby League to the rest of the world. If you come with us we will make the code a much stronger code.... I love the game, Ken, I want you to know that I'd never do anything to harm it.... What you fellows have done for the game has been terrific, but News can take the game the next step.
[Mr Arthurson then asked about the League's role. Mr Cowley was non-committal, but suggested that News would control a peak competition, leaving the League to look after lower levels and its development.]
Quayle: What is going to happen if we are not interested?
Cowley: Super League is going to happen with you or without you people. It is entirely up to you.
We would be interested in exploring any way to improve the game with you and to promote it internationally. It is absolutely essential however for any discussions for it to be understood that the control of the game must stay in the hands of the accepted authority of the game, and that is the Australian Rugby League.
...
Cowley: We are only seeking a slice of the television cake.
Arthurson: Well, you will understand that we have got legally binding contractual arrangements with Nine to the year 2000. We can't break that agreement legally, nor should we consider doing so morally, because Nine was there with an offer for the TV rights when the TV industry was in disarray and nobody else would make an offer.
Cowley: I understand that. I am going to take that matter up with Kerry Packer later in the day."
As the trial Judge found, it was made clear very soon that Mr Packer had no intention of relinquishing his company's television rights.
3. The Commitment Agreements
The Commitment Agreement sent out to each of the clubs was drawn as an agreement between the ARL, the League and the particular club. The agreement recited that the ARL and the League had agreed for 1995 and thereafter that the national competition would be conducted under the logo and banner of the ARL in lieu of the competition conducted by the League, but on the basis that the League would conduct the national competition. The final paragraph of the recital was as follows:
"(vi) The parties hereto have agreed to provide for the participation of the Club beyond the playing season 1995 until the playing season 1999 upon and subject to the terms and conditions hereinafter set out."
The substantive provisions were as follows:
"NOW THIS AGREEMENT WITNESSES as follows:
1. The ARL and NSWRL hereby jointly and severally agree to the Club participating in the National Competition for the playing seasons 1995, 1996, 1997, 1998 and 1999 upon the terms and conditions hereinafter set forth, and the Club for its part agrees to participate in the National Competition for the said playing seasons upon such terms and conditions, and not to participate in any other competition not conducted or approved by the ARL and NSWRL.
2. The
Club undertakes in favour of ARL and separately in favour of NSWRL to observe
and perform all obligations expressed in the Articles of Association and Rules
and Regulations for
the time being of NSWRL on the part of Clubs and their respective
representatives as though the same were set forth herein as contractual
promises and conditions on its part, and for so long as the NSWRL shall continue
to conduct and administer the National Competition, and the Club undertakes to
ARL that in the event that it shall conduct and administer the National
Competition in lieu of the NSWRL during the currency of this Agreement, the
Club shall thereafter observe and perform all obligations expressed in the
Articles of Association and Rules for the time being of the ARL in lieu of the
obligations expressed in the Articles of Association and Rules and Regulations
of the NSWRL.
3. Without limiting the generality of the obligations of the Club under Clause 2 hereof, the Club agrees to observe and perform all directions and requests of the NSWRL and of ARL (if and when ARL shall take over the conduct and administration of the National Competition) relating to (inter alia):
(a) The signing and lodgment of players' contracts, and the form in which the same must appear;
...
(c) The minimum financial capacity and status of the Club;
(d) The administration of the Club;
(e) The provision of playing fields;
...
(g) Sponsorship;
(h) Licensing regulations in relation to logos, emblems and characters".
A critical meeting was held at 4pm on 14 November 1994 at the ARL's premises, attended by representatives of all clubs, except the Auckland Warriors who sent an apology. We shall return to that meeting shortly. By the time the meeting was held, the Commitment Agreements had been signed by 16 of the 20 clubs. A further three clubs had indicated their willingness to execute the agreements, but were awaiting the holding of formal board meetings. A Commitment Agreement was not proffered to the Brisbane Broncos until immediately after the meeting on 14 November 1994. That agreement was executed and returned to the League by 29 November 1994.
4. The Conversation between Mr Arthurson and Mr Cowley
Shortly before the meeting of 14 November 1994, Mr Arthurson had a telephone conversation with Mr Cowley. The conversation was to the following effect:
"Arthurson: While I am prepared to negotiate with you and conciliate, the one thing which I will never give ground on is the idea that in any game in which News Limited participates, the control of the game must rest with the Australian Rugby League.
Cowley: I appreciate that.
If there is to be a Superleague it has to be under the control of the
ARL. My people are preparing a proposal
for you and I expect to be able to get back
to you with that proposal in early February."
The trial Judge observed that it was not suggested at trial that Mr Cowley's remarks were insincere. His Honour found that Mr Cowley must have intended to convey an assurance to the League that News would not attempt to set up a rival competition outside the control of the League.
5. The Meeting of 14 November 1994
A transcript of the meeting of 14 November 1994 was taken and was in evidence. It runs for 37 pages. It is enough for present purposes to extract some of the comments made by participants. Further reference will be made to the meeting elsewhere in this judgment.
The opening remarks of Mr Arthurson, who chaired the meeting, were as follows:
"The purpose of the meeting today is to bring you fully up to date with the `Super League' position and what transpired at our meeting with News Limited last Thursday and subsequent discussions that have taken place. Also, it will give all of you the opportunity to ask any questions that you might have and, thirdly, we would like to seek your views as to the direction that you wish us all to take in future talks.
Gentlemen ... the one thing that we must insure never happens is that the control of the game of Rugby League ever falls out of the hands of the accepted authority of the game, which is, of course, the Australian Rugby League ... [W]e've had plenty of challenges but we've always been able to answer those challenges by virtue of the fact that, apart from the unity that we've had amongst the clubs, we've had that unswerving loyalty, not only towards each other but towards the game itself ... .
[Mr Arthurson outlined what had occurred at the meeting of 10 November 1994.]
My personal view is that [what was said by Mr Cowley on 10 November 1994] would be unacceptable as it would virtually mean that the Australian Rugby League would be relegated to something akin to the Junior League. Mr Cowley said he thought it would be a great opportunity for us to really develop and expand the game and all he was saying that he wanted us to be involved. In response to a question from John Quayle as to whether they intended to go ahead with or without us, Mr Cowley replied that they would be going on with it in any case. ...
I've just had a meeting with him in the last few minutes and from the first moment we've spoken to him, the main thing John Quayle and I have said over and over again, whilst we're prepared to sit down, negotiate and we would be prepared to conciliate, the one thing that was not negotiable was the fact that we would never be a party to the accepted authority of the game losing control. At the meeting today that we had with him, he has apparently had further thoughts on it and he did say to me today that he appreciated that if there was a move towards "Super League", they would accept the fact that it would be controlled by the Australian Rugby League."
In the course of the meeting, Mr Arthurson explained why the Commitment Agreement had not been forwarded to the Brisbane Broncos:
"... I'll be very candid, the reason why it wasn't forwarded to the Broncos was because, right at the particular time, we were looking for immediate expressions of loyalty towards the game and, I must say, that from the newspaper reports we had received, we weren't absolutely certain we could get that immediate support from the Broncos ...".
The Brisbane Broncos were represented at the meeting by Mr Ribot and two directors, Messrs Maranta and Morgan. Mr Maranta was the spokesman. He rejected the notion that the Broncos had been involved in secret discussions:
"We came down today to find out what the basis of the discussion was all about ... comments that, somehow, in a clandestine way the Broncos have been involved seems [sic] to be good media hype but has [sic] no basis in truth. What we're trying to do is find out what's going on."
The trial Judge found (at 463) that Mr Maranta was engaged in a deliberate exercise in deception, since the Broncos' representatives knew very well what was "going on" and were involved in it, in a way that could properly be described as clandestine.
In the course of discussing the Super League proposal Mr Arthurson, in answer to an inquiry from one speaker who questioned how realistic the Super League proposal was, said that it was "quite possible" that News could go ahead with Super League. Mr Cowan (Penrith) then said:
"So the point that I'm making is that there is no question about loyalty to [sic] support at all and whatever decision is made, we're going to stick together, I hope, and go for it as hard as we can but I'm not too sure it [sic] we shouldn't be spending quite a bit of time really evaluating this threat, seeing how realistic it is and seeing whether we need a strategy to make the most of the situation. It seems that we have such a good product now that somebody, like a corporate raider, wants to take if [sic] off us. It's that good ... So all I'm saying is that all the loyalty in the world may not win this battle. We may need to do something ... about really evaluating the threat."
Mr Arthurson replied:
"To just answer your question, Roger, we are currently working with our lawyers now to see how we can, we're doing our best to tie the clubs up and also we've obviously got to tie the players up because as you quite rightly say, I mean, another organisation can easily have 10 private franchises - I mean 10 privately owned companies and start something quite separately from the clubs, there's nothing at all to stop them if they can get sufficient players they can go ahead and run a competition in opposition to ours. But I guess that if we've got all the players tied up and all the clubs tied up, it's pretty difficult to do."
Towards the end of the meeting a speaker asked:
"Would it be possible, Mr Chairman, to lower the amount of misinformation getting out by taking the hype out of by the group of people here saying they've pledged loyalty for five years and the League has pledged loyalty back to them so it's a done deal, so if something happens about News Limited, it may be in the future."
Mr Arthurson replied:
"I think that would be good. I think [that's] the only statements should come from here ...".
Shortly thereafter, another speaker said to Mr Arthurson:
"... earlier today, you said in the press ... there's one thing that's not negotiable, that's the control of the game. I'm sure we all agree with that. I think, as a result of today, I would like you to go out and say there are 2 things that are not negotiable, one is the control of the game and the second one is that there will be 20 teams in the competition, that you run, as long as those 20 teams meet the criteria ...".
Mr Arthurson said:
"O.K. How's everyone feel about that?"
There was no dissent from the proposition, and the meeting concluded with one speaker saying:
"Isn't it a fact that we're all in provided we meet the criteria for the next five years, if we stick together?"
Mr Arthurson replied:
"Well, that's how it is. Yes. That's is exactly how it is. O.K. gentlemen, well, if there's no further discussion, we'll wrap it up at that and we'll get back to you as soon as possible ...".
Following the meeting, the ARL issued a press release. This stated, inter alia, that the clubs had been told at the meeting of News' agreement that, should the Super League proposal be accepted, the competition would be administered by the League.
6. Execution of the Commitment Agreements by ARL
On 29 November 1994, the board of the League endorsed the actions of management in preparing and forwarding the Commitment Agreements to the clubs for their signature. The board also resolved that the 20 agreements be executed on behalf of the League. It appears that the agreements were executed by the League and ARL on or shortly after 29 November 1994.
N. November 1994 - January 1995
1. The ACP strategy
Towards the end of November 1994, News engaged a firm of management consultants, Australian Consulting Partners ("ACP"), to provide advice on developing and realising the Super League concept. ACP prepared a document, dated 13 December 1994, which put forward four propositions:
"1. The economics of an Australian Superleague are attractive overall versus the current competition.
2. However, News faces some major hurdles in securing Superleague and earning attractive promoters' returns, if the battleground is the Rugby League establishment.
3. Therefore, News should consider making early moves outside the establishment to secure a strong position, and then devising an arrangement with ARL and Packer.
4. The next steps should be aimed at addressing a range of remaining hurdles."
Under the fourth proposition, ACP identified, in substance, three strategies, although they were not regarded as mutually exclusive. The first, labelled the "Establishment Approach" required a proposal to be presented to the League and ARL and envisaged negotiations with them "to make Superleague happen". This ran several risks, including being "strung along" or "outbid" by Mr Packer, as well as the possible inability of the League and ARL to deliver, given the perceived political hurdles.
The second approach identified by ACP was labelled the "Early Defection Approach". This also required a proposal to be presented to the League and ARL, but envisaged that they would undertake exclusive and reciprocal obligations to News. As explained by Mr Orlay of ACP in his evidence, if the League and ARL responded favourably to the proposal, News would revert to the first strategy.
The third approach, designated as the "Rebel Approach" involved News manoeuvring with stakeholders to strengthen its position, signing up key clubs on confidentiality agreements and then securing the agreement of the League and ARL and the remaining clubs. The report identified six steps as part of this strategy. In substance, these were as follows:
A. Weaken Mr Packer's position via third parties (for example, by promoting the view that the ARL was short sighted to accept a five year television deal with Mr Packer's interests).
B. Sign up the key clubs in Australia and the United Kingdom on confidentiality agreements and secure key players.
C. Brief Lion Nathan (considered to be a key potential sponsor of Super League) and possibly others to block a Packer alternative.
D. Devise an accommodation with Mr Packer "to avoid diluting Super League's potential", since "two competing competitions would be unattractive for both parties".
E. "Seed champions to facilitate Sydney mergers", for example, by priming opinion leaders "to act as catalysts" for the mergers.
F. Sign up the League and ARL and the remaining clubs.
This document was presented at a meeting with representatives of News, including Mr Cowley and Mr Smith, held on 13 December 1994. At the same meeting, a document entitled "Outline of News' Superleague Proposal to ARL/NSWRL" was presented. The outline, which reflected the work of a number of people within News and ACP, summarised the proposal this way:
"– 12 teams in fully professional Australasian competition
– Existing 20 clubs to remain
- Fielding teams in First Division competitions in NSW, Qld, ACT
- As shareholders in 12 Superleague Teams
– ARL continues to run football and mounts Tests
– News vigorously promotes the game nationally and internationally (e.g. World Finals) and provides finance."
By this stage, News had details of at least some player contracts. On 13 December 1994, for example, Mr Neil of Canberra had sent to Mr Smith of News details of Canberra's players' contracts, including their salaries.
The trial Judge made no finding as to whether Mr Cowley approved a specific strategy at the meeting of 13 December 1994. The oral evidence is equivocal on the point. It is, however, clear that the concept of Super League was very much alive and that alternative strategies were actively being considered by News.
We interpose to note that on the same day as the presentation to Mr Cowley, the ARL held its annual general meeting. The minutes record Mr Arthurson as reporting on progress in relation to meetings with News:
"the original proposals were totally unacceptable. All Clubs had signed an agreement drafted by the League's legal advisers committing themselves to remaining with the League for the next five years and not to play with any other organisation.
At a second meeting a concession was made by News Limited to the effect that any proposal for a "Super League" would provide that any such competition would be under the banner of the Australian Rugby League. News Limited had undertaken to provide a firm proposal by February. The Australian Rugby League must always control its own destiny but with clubs having signed the agreement the position seems assured for the future."
Two days later, on 15 December 1994, Mr Orlay of ACP wrote to Mr Smith of News, confirming ACP's engagement for the next stages of implementation of the Super League concept. The first stage, to take place in the remainder of December 1994, required ACP to help "prepare the paper to Sam Chisholm [an executive in a company associated with News], plot the club and ARL/NSWRL `blitzkrieg'".
The trial Judge considered that the use of the word "blitzkrieg" was significant. His Honour thought that the word described (at 469):
"a meticulously planned operation, involving secrecy, suddenness and deception, by which so many key officials were to be `signed up' for unprecedented amounts that the clubs and the League would be left defenceless against a virtual takeover by News".
2. The Confidentiality Deeds
On 22 December 1994, News sent five clubs -
Brisbane, Canberra, Newcastle, Cronulla-
Sutherland and the Western Reds - a document entitled "Super League
Confidentiality Deed". The covering
letter stated that News wished to provide the particular club with an outline
of the Super League proposal, which was to be presented to the ARL. Because the matters to be discussed were
extremely sensitive, the deed was to be signed on behalf of the club. The letter attached an opinion from a Queen's
Counsel, to the effect that signing the deed would not place the club in breach
of its obligations under the Commitment Agreement. The opinion noted that the author had not
seen the articles of association, nor the rules and regulations, of the League
and ARL.
Each deed was expressed to be between News and the club concerned. The relevant provisions of the deeds were as follows:
"A. The parties propose to ("Proposal") enter into negotiations in relation to the establishment of and participation in an alternative rugby league football competition to that currently run by or in conjunction with the New South Wales Rugby League Limited ("NSWRL") and the Australian Rugby League Limited ("ARL").
B. News will use its best endeavours to discuss the Proposal with the ARL and the NSWRL with a view to them participating in the Proposal.
C. The fact that the Proposal is under discussion, the identity of the parties discussing the Proposal, the terms of and arrangements in connection with the Proposal and any information developed by the parties in relation to the Proposal (together the "Confidential Information") is the property of News and is confidential to News.
1. NON-DISCLOSURE
Subject to Clause 2, the Club shall:
(a) only use the Confidential Information in connection with the Proposal; and
(b) maintain the Confidential Information in strict confidence and not disclose it to any person.
2. PERMITTED DISCLOSURE
...
3. STATUS QUO
3.1 Exclusive Discussions
For a period of 18 months from the date of this Deed, the Club shall not field a team or otherwise participate (directly or indirectly) in any preliminary or definitive discussions in relation to, any rugby league competition, except:
(a) a competition which is both:
(i) conducted by or in association with the NSWRL or the ARL; and
(ii) in the form of the National Competition contemplated in the Agreement between the NSWRL, the ARL and the Club, dated on or about 9 November 1994, under which the club agrees "not to participate in any other competition not conducted or approved by the ARL and NSWRL";
(b) a competition conducted by or in association with News; or
(c) with the prior written consent of News.
3.2 Additional
(a) Prior to the expiry of that period, the Club will not waive, vary, terminate or otherwise discharge a player of rugby league from any contract or arrangement that player has entered into with the Club without the prior consent of News (which consent shall not be unreasonably withheld).
(b) The Club will not execute or otherwise enter into any agreement or arrangement with the NSWRL and/or the ARL n relation to any of the matters referred to in Clause 3.1, in addition to those which it has entered into as at the date of this Deed, without giving three days prior notice to News of its intention to take such action.
..." .
With one exception, the deeds were executed by the five clubs in this form. Newcastle objected to recital A, on the ground that it referred to "an alternative rugby league competition". Recital A was accordingly changed to refer simply to a proposal to enter into negotiations "in relation to the establishment of and participation in a rugby league football competition". Newcastle executed the deed in this amended form.
3. Further work within News
On 5 January 1995, a draft of a script, to be used in conjunction with slides in a presentation to the League and ARL, was completed within the News organisation. During January, representatives of News met with officials of Auckland, Cronulla-Sutherland, Illawarra and St George about their proposed participation in Super League. In early February 1995, Mr Carr, the chief executive officer of St George, was offered the position of chief executive officer of the Super League club to be formed by agreement among St George, Cronulla-Sutherland and Illawarra. The offer was conditional, inter alia, on Super League eventuating and the clubs reaching agreement among themselves.
On 25 January 1995, ACP provided News with a further report, entitled "Superleague Options". This identified the "current proposal" as "News Superleague via Clubs/ARL". Under this proposal, Superleague would fund the ARL ($3m per annum) and the clubs ($2.5m). News would fund Super League in Australia and Europe, take a management fee and buy pay television rights ($4m per annum).
The alternatives were summarised in the following chart form:
|
2. ARL Superleague |
. News gives ARL the Australian Superleague plan plus management assistance to run it ($1m p.a.), and buys pay TV rights ($4m p.a.)
. No Euroleague |
|
3. News Superleague via Players |
. News contracts with players to form rebel competition of 12 Australian teams, owns and runs all teams, and keeps TV rights
. No Euroleague |
O. The Loyalty Agreements
1. The Meeting of 30 January 1995
A meeting took place on 30 January 1995 between Messrs Arthurson, Quayle and Moore, on behalf of the League, and Messrs Cowley, David Smith and Lovett, on behalf of News, at the offices of News. A Super League proposal was put in what Mr Arthurson described as "fairly general terms", by means of typewritten pages projected onto a screen.
A draft of the documentation used for the presentation was in evidence. On the basis of this material, it can be inferred that the presentation included the following points:
– There was to be a twelve team competition, with the game's best players. This was to be an integral part of an international competition, with a world-wide audience of tens or even hundreds of millions.
– The existing 20 team competition would continue. The ARL's "pivotal role" would also continue, as it would administer the game. The ARL would run the State competition and Test matches and be responsible for the judiciary, referees and junior development.
– The
existing 20 clubs would be shareholders in the licensed, privately owned Super
League teams. This would eliminate the
problem of breach of players' contracts, since there would be no breach. The 20 club competition would be the
"breeding ground for the stars of the future".
– The 12 clubs would be based in Sydney (4), Queensland (2), Newcastle, Canberra, Melbourne, Adelaide, Perth and Auckland.
– The current financial status of the game, despite its success in attracting fans, was a net loss, with the clubs being dependent on subsidies from their associated Leagues clubs. The Super League proposal would allow the clubs to benefit from News' global media network. Super League would make it possible for $100m to be invested in rugby league, thus giving the ARL a "$100m friend".
– There would be a "fully representative Board of Directors", with three Superclub board members and the ARL represented. The chairman of the ARL would be the chairman of Super League.
In response to this presentation, Mr Arthurson reiterated the requirement that, regardless of any organisational changes to the game sought by News, it had to remain administered by ARL. Mr Arthurson also requested more detailed information about the proposal, including financial projections. Mr Cowley indicated that these would be provided only if the League were prepared to sign a confidentiality agreement. Mr Arthurson stated that this could not be done without board approval. Mr Arthurson pressed Mr Cowley about a suggestion, made in the course of the News presentation, that profits would be shared 50/50 between News and the League. Mr Cowley replied that these proportions were negotiable.
After the meeting had concluded, Mr Cowley asked if he could make a presentation to the clubs. Mr Arthurson responded that, subject to the clubs' agreement, that could be done. Mr Smith said:
"We want the League to support the vision of Super League, to support the concept".
2. The Letter of 2 February 1995
On 1 February 1995, the board of the League held a meeting, at which a resolution was passed not to sign the confidentiality deed. The next day, Mr Quayle, on behalf of the ARL, sent a letter by fax to each club advising that a conference scheduled for 6 February 1995 had been cancelled and inviting the club to send three delegates to a meeting on that day. The letter, so far as relevant, was as follows:
"As you can appreciate this action, after all details for the Conference had been finalised, indicates that serious issues have arisen which require urgent attention.
You are no doubt aware that the `Super League' matter involving News Limited, the League, and Member clubs of the League, has again created a climate of uncertainty, and I must say, some mistrust amongst stakeholders within the League who potentially may be affected by `Super League'.
...
Those implications were such that the League now feels that to proceed with a Chief Executives Conference involving the 20 current Clubs within the League would be irresponsible in light of certain aspects of the News Limited offer.
...
The purpose of the meeting will be to review the outcomes of the previous meeting held on this matter on 14 November 1994 at which the League sought, and all clubs gave, an undertaking of a five (5) year commitment to the existing Premiership structure.
It does seem, however, that in the aftermath of the News Limited meeting that there is considerable doubt regarding the commitment by a number of Clubs to that resolution.
In order that a full and frank discussion can occur, the League has invited the appropriate News Limited representatives to address the meeting so that collectively all Clubs are hearing the same message. Whether that invitation is accepted or not is not known at this time. In any case the League is determined to seek from clubs their position in relation to the `Super League' proposal and the League role, if any, in that proposal.
So that all Clubs can leave the meeting with some certainty about their future, you are requested to carefully consider your club's position with regard to this potentially most damaging situation.
...".
Mr Quayle gave evidence about this letter. The phrase "serious issues" was intended by him to refer to the speculation that a number of clubs had had discussions with News. The "mistrust amongst stakeholders" was a reference to the same speculation. The phrase "certain aspects of [News'] offer" was a reference to News' proposal that the competition should have fewer teams. The statement that the clubs should have "some certainty about their future" was a response to News' proposal, the object being to provide reassurance of a secure future "under an ARL banner".
3. Meeting of 6 February 1995
A meeting of clubs, chaired by Mr Arthurson, took place as arranged on 6 February 1995. Unlike the meeting of 14 November, 1994, no transcript was kept of this meeting, although a summary record was prepared by the ARL. Messrs Cowley and Smith attended part of the meeting.
After some debate, Mr Cowley was invited to address the meeting and did so for about ten minutes. His presentation included some material that had been presented at the meeting of 30 January 1995. The trial Judge found that, in the course of his presentation, Mr Cowley made the following statements:
"[A]ny role which News was to play in the game would not result in the ARL losing the control and administration of the game ... It is not intended for News to own the game ... News' interest in Superleague is to provide broadcast opportunities, not proprietorship of the game.
...
Whatever happens we will not start up a rebel league."
In response to a question from the floor, Mr Cowley said:
"There will never be a rebel competition".
At the meeting, Mr Smith handed out a document headed "Super League Presentation". This document corresponded closely to the draft prepared in early January and which had provided the basis for News' presentation to the meeting of 30 January 1995. The document made it clear that News envisaged a competition among 12 teams, only four of which would represent the Sydney region (including Illawarra). The document also made it clear that the ARL would be in a minority on the proposed board of Super League and would not run the national competition. In the course of his presentation, Mr Smith also said that News would not start a rebel league. In response to a question, he said that the ARL would decide which Sydney clubs would participate in the Super League.
After Mr Cowley and Mr Smith had left the meeting, Mr Arthurson pointed out that a television contract, including pay television, had been entered into with Channel 9 until the year 2000. Mr Arthurson told the meeting:
"The League does not want to be part of the News proposal, we can't accept it. It seems to me that the tactics of News appeared to be to divide and conquer....Our strength has always been our solidarity; the fact that we have always stood firmly beside each other. If we continue to stick together like this no one, not even Rupert Murdoch, will break our game up. The ARL does not want to be a part of the News proposal, and will not accept it."
When the meeting resumed after lunch, Mr Packer addressed the representatives. He told them that the Nine Network had contractual rights until the year 2000, which he expected the ARL and the clubs to honour. Legal action would be taken against any club or person failing to comply with their contractual obligations.
Mr Arthurson then sought from each club a statement of its position, with regard to Super League. The representatives of those clubs that said they had not signed any confidentiality agreement all expressed their commitment to and support for the ARL. Mr Morgan of the Brisbane Broncos said that his club had signed a confidentiality agreement with News, but had stipulated that the club would only play in a competition owned by the ARL. Mr Neil of Canberra and Mr Lawler of Newcastle said much the same thing, each stating that his club would remain loyal to the League. Mr Puddy of the Western Reds said that a confidentiality agreement had been signed by his club, but that it wholeheartedly supported the ARL.
Mr Arthurson responded as follows:
"Well, thank you gentlemen for that unanimous pledge of loyalty to the ARL and your commitment not to join a Super League of any description. I would like Colin Love [the League's solicitor] to say a few words to you in relation to further actions which may be necessary following your unanimous support given to the concept of the ARL controlled competition."
The League's solicitor, Mr Love, then addressed the meeting as follows:
"You will recall that in November last you all signed an agreement to remain loyal to the League for the next five years. Our view is that this agreement will withstand any legal challenge and in that view we are supported by the opinion of senior counsel. It seems to us however, that for more abundant caution it would be advisable to have the clubs sign a further agreement pledging loyalty to the League, which supplements and supports the original document."
Mr Arthurson then said:
"Once everybody has signed this Agreement that Colin has referred to, there will not be any doubt about anybody's loyalty to the League and indeed if there is any doubt about anyone's loyalty they ought not to be part of the League."
A motion was then moved and seconded as follows:
"That it be recommended to the Board of Directors of the League that any clubs not signing the new Agreement by 9 am on 8 February 1995, or in the case of the Western Reds by 9 am on Thursday 9 February 1995 be expelled from the 1995 competition."
This motion was carried unanimously. A further motion was moved that no negotiations with News be undertaken by any club in relation to Super League. Mr Arthurson indicated to the meeting that this motion was unnecessary, having regard to the resolution already passed.
Immediately after the meeting closed, the board of the League held a meeting. The board resolved not to accept the resolution passed at the meeting. The board also resolved to seek legal advice regarding the action that might be taken against clubs which did not sign the new agreement by the due date and time.
Between the closure of the meeting with the clubs and before the board meeting, Mr Arthurson telephoned Mr Cowley and told him that the clubs had unanimously rejected the proposal put by News. The trial Judge found (at 466) that Mr Cowley responded as follows:
"Ken, I am disappointed in that. I think that it is a great opportunity for the League but we are certainly not discarding the idea, and we will be pursuing the idea in the future. But I want you to know that any further negotiation or approach will be made through the front door of the Australian Rugby League."
The trial Judge commented that if what he described as "Mr Cowley's assurance" was honest, it represented a complete volte-face by News. His Honour made this comment because, as he said (at 469), News had plans in preparation since at least December 1994:
"to present the League with a fait accompli by the conclusion of secret deals with officials and players of selected clubs. This could properly be described as infiltration by the back door".
4. Execution of the Loyalty Agreements
On 7 February 1995, Mr Quayle, on behalf of the
ARL, sent by fax a letter to each of the clubs, accompanied by a draft
deed. The letter stated that the deed
was being sent to all clubs which
were members of the League. It specified
that each club had to sign the deed and return it by 9am the following day
(except for the Western Reds, which was given until noon the following day). The letter included the following paragraphs:
"The League will view the failure of any club to sign and return the Deed by the deadline as an act of gross disloyalty.
I also refer you to yesterday's meeting of the League which passed the resolution to recommend that the Board of the League consider the expulsion of any Club which fails to sign and return the Deed by the deadline."
The letter made no reference to the resolution passed by the Board of the League immediately after the meeting of 6 February 1995.
Each club, with the exception of the Brisbane Broncos, returned the duly executed deed by the appointed time. The Broncos executed their deed within a short period thereafter. It should be noted that the Broncos say that they executed the agreement in escrow, an issue that the trial Judge has stood over for further consideration. In the case of Canberra and the Broncos, certain amendments were agreed. As we have noted, the deeds were described, both before the trial Judge and this Court, as the "Loyalty Agreements".
On 10 February 1995, the board of the ARL met. According to the minutes, the chairman, Mr Arthurson, explained that it had been necessary following discussions with News to ask all clubs to sign a deed in the form presented to the meeting. The board resolved that the deed, a copy of which was attached to the minutes, be executed by the League.
5. Terms of the Loyalty Agreements
As with the Commitment Agreements, each Loyalty Agreement was made between the ARL, the League and the club. The recitals were as follows:
"A. Pursuant to an agreement between the ARL, NSWRL and the Club ('Previous Agreement'), the club agreed to participate in a Rugby League National Competition ('the National Competition') for the playing seasons 1995, 1996, 1997, 1998 and 1999 under the logo and banner of the ARL and regulated and governed by the Memorandum and Articles of Association and Rules and Regulations of the NSWRL.
B. Each
of the ARL, NSWRL and the Club consider that it is in their mutual interests to
ensure that, during the period of this deed, the National Competition is a
premier sporting competition, and the premier rugby league competition, of
significant interest to as wide a section of the Australian public as possible,
involving rugby league players of the best ability and of international and
national pre-eminence; and to maintain and enhance the prestige and reputation
of the
National Competition; and to maintain and enhance the commercial success of the
National Competition; and to maintain and enhance the appeal of the National
Competition to commercial sponsors and the media ('the Objective').
C. ARL, NSWRL and the Club consider that the revenue earning potential of the National Competition and, through distribution of revenue derived from the National Competition, each Club (including the Club) participating in the National Competition, will be enhanced through each club (including the Club) fielding the best possible team to compete in each grade of the National Competition; and the ARL and NSWRL maintaining, and wherever possible continuing to improve, the quality, competitiveness and geographical spread of teams competing in the National Competition, and the number of experienced and well known players competing in teams organised by participating clubs in the National Competition, including but not limited to players participating in teams organised by the Club.
D. ARL and NSWRL propose to enter contractual arrangements and other binding commitments and obligations to third parties in relation to the National Competition, including without limitation, long term sponsorship arrangements, arrangements for broadcasting of matches, contracts with providers of sporting venues, arrangements with tour promoters and affiliated national leagues, and arrangements with sponsors for international tours and other commitments (collectively `Relevant Commitments'), which arrangements will ensure to the benefit of the club and other clubs in the National Competition through revenue distributions by ARL and/or NSWRL to clubs.
E. ARL and NSWRL wish to make statements and promises to prospective parties to Relevant Commitments as to the quality, competitiveness and geographical range of teams competing in the League and concerning the number of experienced and well known players participating in the National Competition, in order to induce those prospective parties to enter into Relevant commitments and to maximise revenue from Relevant Commitments expected to accrue to ARL, NSWRL and clubs participating in the national competition, including the Club.
F. The Club wishes ARL and NSWRL to maintain and wherever possible enhance the commercial viability of the National Competition and to maximise the revenue earning potential of the National Competition and in consideration of and by way of inducement for NSWRL and/or ARL entering into Relevant commitments, the Club has agreed to enter into this deed (without limiting the Club's commitments under the Previous Agreement)."
The operative provisions of the Loyalty Agreements were as follows:
"1 COMMITMENTS TO THE NATIONAL COMPETITION
1.1 Each of ARL, NSWRL and the Club agrees to use its best endeavours to assist directly and indirectly in achieving and maintaining the Objective.
1.2 Without in any way limiting clause 1.1, the Club agrees to use its best endeavours to:
(a) assemble, train and consistently field the best possible teams to compete at each grade in the National Competition, including:
(i) maintaining the services of its existing and any further contracted players for the duration of their respective contracts, in accordance with their terms, so ensuring that each of them plays exclusively in the National Competition for the duration of their respective contracts;
(ii) securing the services of the most experienced, most talented and well known rugby league players to play in the national Competition, for each of the playing seasons 1995, 1996, 1997, 1998 and 1999;
(b) assist the ARL and/or NSWRL directly
and indirectly to maintain, and wherever possible enhance, the commercial
viability of the National
Competition, and to maximise the revenue earning potential of the National
Competition.
1.3 Without in any way limiting clause 1.1, the Club agrees that it will exclusively participate in the National Competition for each of the playing seasons 1995, 1996, 1997, 1998 and 1999.
2 COMPETITION
2.1 The Club agrees:
(a) that it will not directly or indirectly have any economic or financial or other interest or involvement in or otherwise carry on or be engaged in or be concerned as principal, agent, trustee, partner, director, shareholder, financier or otherwise, whether alone or jointly, in any, or in any club or team participating in any rugby league football competition which:
(i) may undermine the quality, competitiveness and geographical reach of teams competing in the National Competition;
(ii) may adversely affect the number of depth of experienced and well known players participating in the Club's teams in the National Competition, or teams organised by other clubs participating in the National Competition,
for playing seasons 1995, 1996, 1997, 1998 and 1999;
(b) that it will not release, waive or otherwise permit or allow players who either now or in the future are under contract or other binding obligation to play for the Club to play in any competition other than the National Competition approved by the ARL and/or NSWRL for playing seasons 1995, 1996, 1997, 1998 and 1999.
3 COMMENCEMENT DATE, TERM AND OPERATION
3.1 The provisions of this deed record the terms of the agreement between the parties applicable on and with effect from the date of signing ('Commencement Date').
3.2 This deed will commence on the Commencement Date and operate for the playing seasons 1995, 1996, 1997, 1998 and 1999 and expire at the end of the last mentioned playing season.
3.3 This deed is an addendum to the Previous Agreement. The Previous Agreement is deemed to be incorporated in this deed and this deed is to be construed in conjunction with the Previous Agreement.
4 NON CIRCUMVENTION
4.1 No party will seek to circumvent or permit circumvention of the operation of this deed, by any legal person or entity which is directly or indirectly controlled or otherwise directed or influenced by that party doing anything which that party has agreed not to do pursuant to the terms of this deed."
Each Loyalty Agreement provided that damages
would not be an adequate remedy in the event of breach and that an aggrieved
party could seek and obtain injunctive relief without proof of damage (cl.5.1).
It also provided that if any part or "provision" of the deed should
be void, voidable, illegal or unenforceable it would be severable (cl.7). The expression "provision" was
defined to
include the term of the deed, "with the intent that avoidance of any part
of the term will not affect the balance thereof"), and that the deed could
be terminated in defined circumstances (cl.8).
The trial Judge made a finding as to the purpose of Mr Arthurson and the League in entering into the Commitment and Loyalty Agreements (at 469):
"He saw the Rugby League competition as a great achievement of the League and clubs, unrivalled in the world as a rugby league competition. The agreements were designed to preserve the quality of that competition through the joint participation of all the clubs. I accept that Mr Arthurson's purposes were of this nature, and that his was the guiding mind of the League on the matter."
His Honour returned to the question of purpose later in his judgment, when dealing with the arguments based on s.4D of the TP Act, and applied that finding. So far as the clubs were concerned, his Honour said that in a number of cases the evidence was that those who made the decisions on their behalf were actuated by the desire to secure formal contractual recognition of their right to continue in the competition for the period of five years. He was satisfied that in almost every case, if not every case, there was a strong positive desire to promote a competition of which all participants were very proud. His Honour was not satisfied that in any case was this not an important factor (at 525).
P. The Final Conflict
The trial Judge used the term "final conflict" to describe the events leading to News signing a large number of well-known rugby league players, as well as coaches, for the purpose of starting the Super League competition. We are content to adopt the same term.
1. News' Reaction to the Loyalty Agreements
Mr Cowley was quoted in the Sydney Daily Telegraph Mirror (a News publication) on 7 February 1995, as accepting that he would not contemplate being a "wrecker" of a game he loved, by pursuing the concept of a rebel league. Mr Cowley was also reported as saying that, although Mr Packer had conceded that News was in a position to split the game, his (Mr Cowley's) refusal to damage the game came above his corporate ambition. Finally Mr Cowley was quoted as saying that, while he still believed that a twenty team competition was too large, a Super League competition could only ever have existed "hand in hand" with the ARL.
The trial Judge pointed out that the statements in the Daily Telegraph Mirror had not been repudiated or withdrawn. His Honour made no finding that Mr Cowley's statement as reported (Mr Cowley himself did not give evidence) was not honestly made. However, the trial Judge did conclude (at 470) that, accepting the honesty of Mr Cowley's statement at the time it was made, it was soon falsified. His Honour commented that, nonetheless, nothing was said to Mr Arthurson about a change of mind on the part of News.
It should be noted that Mr Ribot gave evidence that he had a telephone conversation with Mr Cowley shortly after the meeting of 6 February 1995. In that conversation, Mr Ribot expressed the view that, having regard to the ARL's attitude at the meeting, it would not be possible to proceed with the Super League competition in its then form. According to Mr Ribot, Mr Cowley had replied that he would like Mr Ribot to speak to Mr Smith "about putting a different proposal together to progress the matter". In his oral evidence, Mr Ribot stated that this conversation occurred on 8 February 1995. The trial Judge, who did not regard Mr Ribot as a reliable witness, made no finding about this conversation.
Mr Ribot also gave evidence that about a fortnight after the meeting of 6 February 1995, he had several conversations with Mr Smith. Mr Smith had indicated that he needed to put in place a strategy to overcome the ARL's refusal to support the Super League proposal. Again, the trial
Judge made no finding as to these conversations. Certainly, at this stage Mr Smith had not entirely given up hope of realising the concept of Super League. This is indicated by a fax he sent to the President of the South African Rugby League on 9 February 1995. The fax included the following statement:
"In relation to Superleague - it's not over till it's over. And it isn't over yet".
2. Developments within the ARL
At least one loyal club took the view that Super League, perhaps in an altered version, was not out of the question. In a letter dated 16 February 1995, Mr Hudson, the chairman of the board of Manly Warringah, wrote to Mr Quayle:
"there are great advantages for News Limited in getting their current proposal, or some version of it, finally accepted. Hence, we feel that the proposition is not `dead and buried' and that attempts to de-stabilise the competition will continue.
...
There is a vulnerability in this which News Limited have identified. Their twelve (12) team competition has just four (4) teams in Sydney. They can see that a Sydney club can only survive with great difficulty financially and logistically, against the competition provided by one city clubs, and now (for Brisbane) a two (2) club city.
...
If the situation of the eleven (11) teams in Sydney is not addressed in some way by the League, the threat of a take-over, or such like, will continue to loom large.
...
We suggest that a plan to address the problems of the eleven (11) Sydney clubs vis-a-vis their colleagues in other cities and in other states is urgently needed."
The letter went on to request that the question of the Sydney clubs be considered by the Premiership Policy Committee on an urgent basis.
The committee did consider the letter at its meeting of 14 March 1995. The meeting (at which Mr Quayle was present) unanimously agreed that the "future structure of the Winfield Cup competition should contain fewer Sydney clubs". The committee also expressed the view that "the Board should convene as soon as possible to demonstrate leadership on the issue of fewer Sydney clubs".
In the meantime, a meeting of the board of the League, held on 20 February 1995, received a report from the League's solicitor, Mr Love, that all clubs, except Brisbane and Canberra, had signed Loyalty Agreements. The board agreed to accept the amendments proposed by Canberra and to have Mr Love continue to negotiate with the Brisbane Broncos on outstanding issues. Agreement appears to have been reached shortly thereafter. In any event, the board resolved "to endorse the [Loyalty] Agreements received by the League which had been properly executed".
In mid-March 1995 a meeting took place between Mr Cowley and Mr Arthurson. The minutes of the ARL's board meeting of 24 March 1995 record Mr Arthurson's report of that discussion. According to Mr Arthurson's account, the discussion had been cordial. Mr Cowley had assured him that News would still be pursuing the principle of Super League, but had given an assurance that any proposals in respect of its establishment would be made directly to the ARL and not to the club.
On 16 March 1995, Mr Arthurson wrote to each of the clubs, referring to the meeting with Mr Cowley. The letter included the following:
"Mr Cowley has given me an assurance that, even though News Limited supports the principle of a Super League, any further approaches to clubs will be made through the Australian Rugby League. I accept that these assurances were given to me in good faith and I will keep you informed of any further developments if we are approached by News Limited in the future.
That is the positive news. Unfortunately, I have also been presented with evidence that representatives from some clubs have been speaking with representatives of News Limited in relation to the participation of these clubs in a Super League, after the clubs signed the loyalty deed.
...
It is important that all clubs realise that those clubs which have had discussions with News Limited regarding the Super League proposal after signing the loyalty deed, are likely to be in breach of their obligations in the deed.
As Chairman of the Australian Rugby League, if I receive evidence of any clubs having any further discussions with News Limited or any other party in relation to their involvement in any other competition, I will consider such involvement a serious breach of the loyalty deed and I will be recommending that the ARL consider the expulsion of those clubs from the ARL competition and legal action under the deed.
You will appreciate the fact that this action is necessary because of the destabilising effect such conduct creates and, in particular, the damage it does in terms of adversely affecting negotiations by the League to secure a major sponsor."
In evidence Mr Arthurson said that, when he wrote the letter, he was concerned at the possibility that News might be endeavouring to entice clubs to compete in another competition. The trial Judge found that Mr Cowley had received a copy of the letter written by Mr Arthurson.
3. The News Meeting of 23 March 1995
On 23 March 1995, a meeting took place within News. The participants included Messrs Cowley, Smith and Ribot, together with Mr Rupert Murdoch. The notes for discussion at that meeting were in evidence, although not referred to by the trial Judge. The notes, which were presumably seen by Mr Murdoch, state that the first attempt to build an Australian Super League had been unsuccessful, because News had made some wrong assumptions. In particular, it had been assumed that the threat of clubs defecting to an alternative competition would pressure the ARL to accept the concept and that the ARL had the ability to grant television rights to News. News' position had been weakened because the clubs did not think that News would follow through with a rival competition outside the ARL. Moreover, Mr Packer had dominated events, in large measure because of his threat at the meeting of 6 February 1995 to sue clubs in the event of breach. This threat had "spooked" club officials.
What was needed, according to the notes, in order to set up a competition in 1997 or, perhaps, 1996, was a second, more aggressive approach. Building an Australian Super League to capture television rights would cost $60 million over four years. Super League would be owned and operated by News. The key elements of the more aggressive approach were to:
l sign up all the players required for a ten team Australian competition, at approximately twice their current earnings;
l mount a challenge to the "Five Year Agreement" binding the clubs; and
l credibly mount a rival Super League without the "ARL Establishment", even though the "best" outcome was for the ARL to co-operate.
The notes for discussion included the following chart which assessed the various strategies:
|
Approach |
Description |
Comment |
Cost |
|
Co-operative Reform |
l Work with governing body |
l Position is weak as dependent on co-operation (Strong if expertise is recognised)
l Required changes may be unappealing |
l Low |
|
Forced Reform |
l Facilitate a groundswell for change |
l Position is weak as dependent on constituent parties |
l Low |
|
|
l Existing governing body changes for fear of rebel competition |
l Strength depends on credibility of threat of rival competition |
l Med |
|
Rebel Competition |
l New competition |
l Strength depends on credibility of threat of rival competition |
l High |
Clearly enough, Mr Murdoch approved the option of the "rebel competition".
Thereafter, detailed planning took place within
the News organisation. The planning was
recorded in a chart designated as the "war room" chart. The expression "war room" was
apparently a reference to Mr Smith's office at News. The planning group prepared a schedule of
about 200 target players, considered to be the ARL's "core playing
strength" (a phrase used by Mr Raneberg, a consultant engaged by ACP). A "Presenter's Outline" was
drafted, setting out, in
effect, a sales pitch designed to persuade players contracted to AFL clubs to
sign with Super League. Plans were
formulated for approaches to be made to players and coaches in various parts of
Australia and New Zealand. The plans
included making travel arrangements under false names in order to preserve
secrecy.
4. Signing Coaches and Players
On or shortly after 28 March 1995, News entered contracts with the coaches of the Auckland, Canberra, Canterbury-Bankstown, Cronulla-Sutherland and Western Reds clubs. Each contract was constituted by a letter, countersigned by the particular coach. The term of the engagement in each case was three years, commencing three months after notice from News but no later than 1 January 1997. Each coach received a signing-on fee on execution of the letter. Mr Ribot acknowledged in evidence that it was very important to sign up the coaches, since they were thought to be instrumental in News' success in signing up players. He also acknowledged that in most cases the approach to the coach was made with the knowledge of the chief executive of the club.
On 30 March 1995, the present proceedings were instituted by News. That evening, a number of Canterbury-Bankstown players attended a meeting at the request of their coach, Mr Anderson, who had already signed a contract with News. The first the players knew of the meeting was at training, when they were asked to attend that evening. At the meeting, Mr Ribot and Mr Lachlan Murdoch spoke to the players about Super League. Each player was then asked individually to sign a contract with a Super League company, which would require him to play full time in the new competition. The players were offered salaries of between $150,000 and $350,000 per annum, plus signing-on fees of between $50,000 and $100,000. The salaries, in general, were very much greater than the payments they were entitled to under their contracts with the Canterbury-Bankstown club. The players were not permitted to consult with their managers or families, nor were they permitted to take the contracts away with them. In the event, seven players signed contracts that night. The last contract was signed well after midnight. Each player who signed was handed a cheque for the amount of the agreed signing-on fee.
More or less the same process was repeated the
following day, when a total of about twenty-six players from the Brisbane
Broncos, Canberra and Cronulla-Sutherland clubs signed employment
contracts with various Super League companies.
In each case the coach supported the Super League approach. The salaries offered to these players ranged
from $80,000 to $600,000 per annum. The
signing-on fees varied from $20,000 to $100,000. Other players subsequently signed similar
contracts, including thirteen Auckland Warriors players, who signed employment
contracts on 2 April 1995 in New Zealand.
The trial Judge found (at 470) that the whole operation to secure the signatures of the players was carried out in great secrecy, with elaborate plans being made in advance in order to avoid word of what was afoot leaking out. The players were not only brought to meet the News representatives late at night, but were asked to sign complex legal documents without the benefit of legal or other advice. Once players had signed agreements, they were advised by News representatives how to handle expected inquiries from the press. As the trial Judge said (at 471), the players were encouraged to dissemble their involvement with Super League. For example, a document entitled "Player Response to Media Questioning" suggested a response if the player were asked whether he was in negotiations with News. The suggested response was as follows:
"There is no point in that, when I have a current contract which I am obliged to honour."
The trial Judge concluded (at 470-471) that the "assault upon the League" was characterised by "secrecy, deceit and suddenness". The object was to put the club and the League itself in a position where they could do nothing but capitulate.
For his part, Mr Cowley, when challenged by Mr Arthurson as to how his actions were consistent with his promise to approach through the front door, replied:
"We thought that after we had bought your players that it would have such an effect on you that we would be better able to negotiate with you and come through the front door."
5. The League's Response
The board of the League met at 12 noon on 1 April 1995 to consider the Super League situation. Three representatives of PBL (a Packer company involved in the operations of Channel Nine) and two from Optus and Optus Vision joined the meeting. Mr Powers, on behalf of PBL and Optus Vision, stated that these organisations would provide human and financial resources to assist the League in stemming defections to Super League. Mr Powers said that Channel Nine and Optus were prepared to commit $13-20 million. He also stated that the quid pro quo would include the League making some changes to accelerate the reduction of teams and the signing of player contracts with the ARL, instead of the clubs.
The board resolved, inter alia, that:
« the Canterbury-Bankstown, Cronulla-Sutherland and Canberra clubs be requested to show cause why they should not be excluded from the competition;
« a committee be established to identify and sign players to League agreements; and
« Mr Leckie, representing PBL and Optus vision, be appointed as a director of the League.
In the course of the meeting, Mr Moore arrived. Mr Moore was a director of both the League and ARL. He was also a director and chief executive of Canterbury-Bankstown. Mr Moore had been actively involved in supporting Super League, and in securing the signature of the Canterbury-Bankstown coach (his son-in-law) to a Super League contract. Mr Moore offered his resignation from the League and ARL to Mr Arthurson outside the meeting. His offer was accepted. The trial judge found (at 470) that Mr Moore owed fiduciary duties to Canterbury-Bankstown, as its chief executive and to the League as a director. His Honour also made a number of adverse findings about Mr Moore's conduct. These included a finding (at 470) that Mr Moore sought to evade his duties as a director of the League and ARL, but only succeeded in implicitly acknowledging them, by his resignation, after the event, on 1 April 1995.
Immediately after the meeting, the League issued a press release. This stated that any players or coaches who had agreed to be associated with News would not be considered for representative selection. It also warned that the ARL would vigorously pursue through the courts any player found to have breached his obligations to the ARL. The press release indicated that the League, with the support of Channel Nine and Optus, through Optus Vision, would commit substantial resources to establishing financial incentives for players to play exclusively in the ARL competition.
A further meeting of the board of the League took place on 7 April 1995. Among other things, the board discussed the actions of News in completing arrangements with the New Zealand Rugby League and the English Rugby League. This was a matter of considerable significance to the League, since test matches between Australia, Great Britain and New Zealand had been conducted through the New Zealand and English Leagues. The board also rescinded the resolution of 1 April 1995 requiring the three clubs to show cause why they should not be excluded.
A document dated 11 April 1995 summarised "deal terms" between the League and ARL and Channel Nine/Optus Vision. This provided for Channel Nine/Optus Vision to fund player contract commitments up to $40 million. The League and ARL were not to change the competition, format and frequency of the competition in a materially adverse way without the consent of Channel Nine/Optus Vision. The rights period under existing television agreements were to be extended for a further five years, with Channel Nine/Optus Vision to have a first and last right of refusal. Channel Nine/Optus Vision's funding commitment was non-recoupable, except as follows:
« if the League and ARL agreed, it could be recouped over time out of fees received for television rights;
« it could be recouped out of moneys received by the League and ARL for assignment of player contracts;
« the commitment could be used as a set-off against the cost of exercising the right of refusal for renewal of the television rights agreement.
On 11 April 1995, the ARL and League commenced proceedings against News and others.
6. News and the Clubs
On 6 April 1995, News agreed to indemnify the Canberra Raiders against any action by the ARL or the League in consequence of the club contracting with News or supporting Super League.
During April, News made a concerted effort to
sign up target clubs. By this stage,
some had lost key personnel to Super League.
Club representatives were told that if they did not join Super
League, they would face rival clubs established in their area. Advertisements appeared in the media, giving
publicity to the fact that prominent players had signed with Super League. News also placed advertisements advising
players who had signed with the ARL that their contracts might be set aside
because News had signed the English and New Zealand Rugby Leagues. Frequent meetings took place between News
representatives and "rebel" clubs to obtain their support in
implementing the proposed arrangements.
In particular, meetings took place between News representatives and
those clubs on 13 and 18 April 1995.
7. The Heads of Agreement
On 20 April 1995, News and a subsidiary, Star League Pty Ltd ("SLPL") entered into separate heads of agreement with seven newly established entities. Each entity was described as a "licensee" in the agreement to which it was a party. (Following the terminology used in the judgment below, and in the pleadings, we refer to these entities as "the Franchisees".) The Franchisees each bore a name which combined the initials AH (presumably the initials of News' solicitors) with the initials of clubs that had agreed to enter into a deed of agreement with News. Thus AH BB Pty Ltd was the Franchisee for Brisbane. That company also entered into a deed with the Brisbane Broncos, to which we refer shortly. The Franchisees were the entities with which players had entered into Super League contracts.
The parties to each of the heads of agreement were News, SLPL and a Franchisee. The agreement recited that SLPL was setting up a system for a rugby league competition ("the SLS Competition") which was to be an alternative to that run by the ARL and the League (referred to as "the Proposal"). It also recited that the Franchisee wished to engage in the business of offering entertainment services and goods in the form of rugby league competition matches and associated services under a system controlled by SLPL. Provision was made for the agreement and any other agreement in respect of the Proposal to be the confidential information of SLPL. Except as expressly permitted, the Franchisee was not to disclose the existence of any such agreement or its terms.
The general structure of the SLS Competition
was described in cll.3 and 5. The SLS
Competition was to be national (and international, at least to the extent of
Auckland) (cl.3.2). It was to include
the Franchisees, each of which was to be licensed for a particular geographic
area. Each
Franchisee was to participate in the SLS Competition with its best teams and to
ensure that players contracted to it participated in competitions as required
by SLPL (cl.3.5). That company was to
arrange and promote the SLS Competition and other competitions, such as a
"tri-series" between Queensland, New Zealand and New South
Wales. Among other things, SLPL was to
procure venues in each geographic area (cl.9.1). SLPL was empowered, to the extent determined
by News, to "progress the Proposal and organise the SLS Competition in
conjunction with [the ARL]".
The structure of SLPL was dealt with in cl.4. News was entitled to own all shares in SLPL until the "Start Up Costs" and any accumulated losses had been recouped. Thereafter, if at least 75% of the Franchisees required, the capital of SLPL was to be restructured, so that the Franchisees could obtain shares entitling them to cast 50% of the votes at a general meeting of members (cl.4.2).
News was entitled to appoint a majority of SLPL's board of eleven directors (including the chief executive officer and chairman) (cll.4.3, 4.4, 4.5). The Franchisees were to appoint the remainder (cl.4.3(b)). News was entitled to manage the operations of SLPL at all times (cl.4.5(a)(i)). SLPL was to pay News a management fee of 15% of gross revenue and the cost to News of services provided by it (cl.4.5(c)). SLPL was to own all intellectual property rights including the Super League name and logos of each team (but not team names) (cl.4.6). Subject to grants of rights to the Franchisees, SLPL was to own and exploit all rights in relation to the Proposal (cl.4.7).
Interests in the Franchisees were to be offered initially to "Current Sydney Clubs" and "Current Non-Sydney Clubs" (comprising clubs then in the premiership competition conducted by the ARL) (cl.6.2(a)). If the ownership was not taken up, as contemplated, SLPL was to have the right to own some or all of the Franchisees (cl.6.2(d)).
SLPL was to bestow rights on the Franchisee during its "Contract Period". These included the right to operate a Super League team in relation to a defined geographic area and the right to use and to license use of the name, getup and logo of the team (cl.6.5). However, the grant of rights was subject to terms and conditions required by SLPL to protect its rights in the Proposal (cl.6.6).
Each Franchisee was to maintain a team which
was to participate in the Super League competition.
The Franchisee was also to provide support staff and ancillary facilities
(cl.7.1, 7.2). The members of the team
were to comprise the best players available to the Franchisee (cl.7.3(a)). Release of players was dealt with in
cl.7.3(b):
"In the case of a Sydney SLS Licensee, each Current Sydney Club which forms part of the syndicate owning such Sydney SLS Licensee, will be asked to release any existing players contracts so as to make all its players available to play in the SLS Competition for a Sydney SLS Licensee."
SLPL was to specify a "Salary Cap" applicable to each club in the competition for each season (cl.7.4).
8. The Club Deeds
On the same day as the heads of agreement were signed, each of the seven clubs corresponding to a Franchisee entered into separate deeds. The parties to each deed were News, SLPL, the relevant Franchisee and the corresponding club. The deed, in each case, recited that the club was party to a number of employment contracts with players (referred to as club contracts), substantially on the terms and conditions of the League's form of playing contract; that the Franchisee was "party to a number of employment contracts (`SLS contracts') between itself and each of the Players, and has today entered into a form of heads of agreement...between itself, SLPL and News"; that the club was allotted three shares in the Franchisee paid up by News as a gift to the club; that the club was party to the Commitment Agreement and the Loyalty Agreement and pursuant to the Loyalty Agreement "inter alia undertook not to release, waive or otherwise permit or allow the Players to play in any competition other than the National Competition referred to in the Loyalty Agreement"; and that News had instituted proceedings "seeking inter alia a declaration that the Commitment Agreement and/or the Loyalty Agreement are void ab initio pursuant to the Trade Practices Act".
Clause 2(a) obliged the club to release its contracted players:
"Club hereby releases and discharges each of the Players from the provisions of any Club Contract or other arrangements with Club to which the Player is party to the extent necessary for such Player to observe or perform his obligations under his SLS Contract (including the Standard Terms referred to therein) as if the Employment Period under his SLS Contract had commenced on 1 January 1996 rather than the date stated in item 4 of the Schedule to the Player's SLS Contract, the intent and effect of such release and discharge being inter alia that the Player may perform his obligations under his SLS Contract (including such Standard Terms) on and from 1996 without breaching his Club contract or other arrangements with Club."
Clause 3(a) provided that, subject to certain conditions, News agreed to indemnify the club (inter alia):
"(i) from any liability that Club may incur to ARL and or NSWRL under the Commitment Agreement or the Loyalty Agreement or both by reason of club entering into and delivering this deed or observing or performing the provisions hereof on its part to be observed or performed".
By cl.4(a) News also agreed to indemnify, again subject to certain conditions:
"each of Club's directors and officers (each "Indemnified Party") from any liability that Indemnified Party may incur to ARL, NSWRL, Club, Club's members or any other person by reason of Club entering into and delivering this deed or observing or performing the provisions hereof on its part to be observed or performed...".
Deeds in this form were executed by Auckland, Brisbane, Canberra, Canterbury-Bankstown, Cronulla-Sutherland, North Queensland and the Western Reds. The deeds were expressed to be operative for periods of between three years (for example, Cronulla-Sutherland) and nine years (for example, Brisbane). Subsequently, on 4 May 1995, Penrith entered into a deed in similar terms, although the indemnity was wider, extending to liability under any joint venture arrangement. On 12 May 1995, the existence of the deeds to which the eight clubs were parties was publicly announced.
9. The Player Contracts
Each of the players agreeing to participate in Super League entered an employment contract, to which the other parties were SLPL (described in the contract as "SLL") and a Franchisee (described as the "SL Employer"). The agreement provided for the employment of the player (described as the "SL Player") as follows:
"1. EMPLOYMENT
(a) Subject to paragraph (b), the SL Player shall, during the Employment Period, play rugby league football for the SL Employer in accordance with the Standard Terms (as if such Standard Terms were set out in full in this Agreement), as modified by the express terms of this Agreement.
(b) If, at any time prior to the first date specified in Item 4 of the Schedule, the SL Player is able to perform his obligations under this Agreement and the Standard Terms had the Employment Period commenced at that time, without breaching any agreement (existing at the date of this Agreement) under which the SL Player is obliged to play rugby league in the National Competition, then the SL Employer may, in its absolute discretion, by notice to the SL Player, vary the Employment Period so that it commences on the date specified in the notice (not being a date earlier than one month after the date of the notice)."
"Standard Terms" was defined to mean the terms and conditions of employment headed "Star League Standard Terms". It appears to have been intended that, subject to cl.1(b), the "Employment Period" would commence on the expiry of the player's existing contract with his club. Clause 1(b) allowed that date to be brought forward in the circumstances there described. The existence and terms of the agreement were to be confidential to SLPL and were not to be disclosed by the players, subject to limited exceptions (cl.4).
The Standard Terms made it clear that the relationship between the player and the Franchisee was one of employee and employer, with the player to be a full-time employee (cl.2.1). The obligations of the player were specified in cl.4:
"4. PLAYERS OBLIGATIONS
4.1 Playing Obligations
The SL Player shall:
(a) play rugby league football for the SL Employer at such times and at such venues as SLL may nominate;
(b) play rugby league football in such teams of the SL Employer or any other SL Employer or other Entity (or a team included in any Other Competition) as the SL Employer may nominate;
(c) attend and participate in such rugby league football games as the SL Employer may nominate;
...
4.2 Negative Playing Obligations
Except as required under Clause 4.1, the SL Player shall not:
(a) play rugby league football with any person, team or organisation except The SL Employer or with the prior consent of SLL and the SL Employer;
..."
The construction of cl.4.1 played a role in the argument on the appeal, in relation, in particular, to Order 15 made by the trial Judge. This order requires News, SLPL and each of the Franchisees to give a notice in writing to each of their contracted players and coaches, pursuant to cl.4.1, requiring them to play with the ARL club to which they would have been contracted but for any purported release.
One issue debated was whether cl.4.1
contemplates a direction to a player to participate in a competition conducted
by the ARL. Although we have not found
it necessary, for reasons that will appear, to resolve this issue, it is
convenient to set out other terms of the employment
contract bearing on the question. The
word "Entity" (used in cl.4(1)(b)) was defined in the Standard Terms
to mean
"any club (not a party to this Agreement) which holds or will hold a Licence".
"Licence" was defined to mean:
"the licence granted by SLL to the SL employer in relation to the participation by the SL employer in the SL Competition".
It is also relevant to note that cl.8.2 of the employment contract provided that
"[f]or the purposes of this Agreement, in the Standard Terms...'Entity' includes any entity (including a club participating in the National Competition) which participates, directly or indirectly, in a rugby league competition conducted in Australia and/or New Zealand and which entity is based within 40 kilometres of the headquarters of the Club nominated in Item 7 of the Schedule or the greater Sydney or Brisbane regions."
10. The Players and Their Contracts
A total of 307 players and 10 coaches entered into Super League contracts. Of those, three players subsequently had their contract cancelled by agreement and four players had their contracts cancelled following proceedings in the New South Wales Industrial Commission. Consequently, at the date of the hearing of the appeal, 300 players were parties to the current Super League contracts. None of these had proceedings on foot seeking cancellation of the contracts. We were told that 42 of the 300 contracted players had signed on or prior to 2 April 1995. (On 1 April 1995, the League and ARL announced that it would be signing players in competition with Super League.)
Counsel representing the intervening coaches and players prepared a schedule listing the 300 players. The schedule specified, in each case, whether the player was party to an ARL club contract and, if so, the year in which the contract expired. A summary of the contractual status of the 300 players is as follows:
(i) Players who never had ARL club contracts - 28
(ii) Players who had ARL club contracts expiring in 1995 or earlier - 109
(iii) Players who had ARL contracts expiring in 1996 or later - 163
300
Of those in the third category, 30 had contracts expiring in 1997 and only 7 had contracts expiring later than 1997.
Following the club releases executed on 20 April 1995 and 4 May 1995, notices were given on 12 May 1995 to players whose club contracts were with the rebel clubs, advancing the commencement date of their playing contracts to 1 January 1996. The standard letter from SLPL was in the following terms:
"SUPER LEAGUE TO START IN 1996
I refer to your Super League Employment Contract with both the Star League Pty Limited and your SL Employer, [ ] Pty Limited.
Star League and News Limited have announced that Super League will commence in 1996. In addition, your existing Club player contract with [ ] District Rugby League Football Club Limited, under which you are obliged to play in the ARL Premiership Competition for that Club, has been released by that Club to the extent necessary to allow your Employment Period under your Super League Employment Contract to commence on 1 January 1996.
As a result, your SL Employer hereby notifies you under clause 1(b) of your Super League Employment Contract that your Employment Period under that contract is varied so that it commences on 1 January 1996. This means that you will receive your increased remuneration under your Super League Employment Contract from 1 January 1996. It also means that you will be employed under that contract from 1 January 1996, and provided with Super League games to play in during 1996, details in these regards (including your actual start date) will be sent to you well beforehand."
Not all players received this letter. Some, who signed before 12 May 1995, had Super League contracts expressed to commence on 1 January 1996. No acceleration notices were given to these players, apparently because their club contracts had already expired. Other players signed Super League contracts after 12 May 1996.
Q. The Proceedings
1.News' Application
The present proceedings were instituted by News on 30 March 1995. News named as respondents to its application the League, the ARL and 17 of the 20 clubs which were to participate in the 1995 national competition. The clubs not joined were Auckland, Penrith and North Queensland.
The
case brought by News, insofar as relevant to this appeal, will be examined in
more detail later. In substance,
however, News sought relief under the TP Act in respect of the Commitment
and Loyalty Agreements. News pleaded
that:
lby entering the Commitment and Loyalty Agreements, each of the respondents had made a contract or arrangement, or had arrived at an understanding, which contained an "exclusionary provision", in contravention of s.45(2)(a)(i) of the TP Act (having regard to the definition of "exclusionary provision" in s.4D of the Act);
lby giving effect to the provisions of the Commitment and Loyalty Agreements, each of the respondents would thereby give effect to a provision of a contract, arrangement or understanding which contained an exclusionary provision, in contravention of s.45(2)(b)(i) of the TP Act;
lby entering into the Commitment and Loyalty Agreements, each of the respondents (other than the League and the ARL) had made a contract or arrangement or understanding which had the purpose, or would be likely to have the effect, of substantially lessening competition in one or more of several pleaded markets, in contravention of s.45(2)(a)(ii) of the TP Act; and
lby giving effect to the provisions of the Commitment and Loyalty Agreements, each of the respondents would give effect to a provision of a contract, arrangement or understanding which contained a provision which had the purpose, or would be likely to have the effect, of substantially lessening competition in one or more of the pleaded markets in contravention of s.45(2)(b)(ii) of the TP Act.
News also pleaded that the League and ARL had a substantial degree of market power in one or more of several markets, including one described as the "Rugby League Competitions Market". They had taken advantage of that power to prevent News, or any other person proposing to establish another rugby league competition in Australia in the years 1995-1999, from entering the relevant market or markets, in contravention of s.46(1)(b) of the TP Act. Alternatively, the League and the ARL had taken advantage of their power to deter or prevent News or other persons from engaging in competitive conduct in any of the pleaded markets, in contravention of s.46(1)(c) of the TP Act.
The
relief sought by News included declarations, pursuant to s.87 of the TP Act,
that the Commitment and Loyalty Agreements, or specific provisions of those
agreements, were void ab
initio. News also sought orders
under s.80 of the TP Act, restraining each of the respondents from giving
effect to the Commitment or Loyalty Agreements, or to specific provisions of
those agreements.
Ultimately, five clubs aligned with Super League (Brisbane, Canberra, Canterbury-Bankstown, Cronulla-Sutherland and the Western Reds) filed defences in which they did not contest the allegations made in News' statement of claim (as later amended). The remaining respondents filed substantive defences.
2.The First Cross-Claim
On 11 April 1995, the League and ARL commenced proceedings against News and a number of other parties, by way of statement of claim. Ultimately, the League and the ARL proceeded by way of what became the first cross-claim in the proceedings commenced by News. The respondents to that cross-claim were:
– News;
– SLPL;
– the 20 Franchisees created by News for the purposes of Super League; and
– The eight rebel clubs aligned with News (including Auckland, North Queensland and Penrith), together with Sydney Bulldogs Ltd, a company associated with Canterbury-Bankstown.
Some time after the cross-claim had been filed, the solicitors for the ARL wrote letters to coaches and players who had signed Super League contracts, advising them of the orders that, at that stage, were sought in the proceedings. The letters suggested that the players and coaches should seek their own legal advice on the implications of any orders sought in the proceedings. No steps were taken, either then or later, to join the players and coaches as cross-respondents to the first cross-claim. Nor did any of the players and coaches apply to be joined as parties, although, as will be seen, some of them were permitted to make representations as to the form of orders that were to be made in consequence of the judgment at first instance. A question on this appeal is whether the first cross-claim was properly constituted without the Super League players and coaches being joined.
As ultimately pleaded, the allegations made by the League and ARL included the following:
– the conduct of the rebel clubs, inter alia, in assisting News in relation to Super League and releasing their contracted players, breached their contractual obligations to the League and ARL to abide by the memorandum, articles and rules of the League and to comply with the Commitment and Loyalty Agreements;
– the conduct of the rebel clubs constituted a breach of the fiduciary duties owed by them to other participants (including the League and ARL) in what was described as the "League Joint Venture";
– News, SLPL and the Franchisees had unlawfully induced the players to breach their contractual obligations, the benefit of which was held in trust for the participants in the League Joint Venture;
– News, SLPL and the Franchisees had unlawfully induced the clubs to breach their contractual duties to the League and ARL and had knowingly participated in the clubs' breach of their fiduciary duties to the League and ARL;
– News, SLPL and the Franchisees had unlawfully induced members of the rebel clubs to breach their contractual obligations owed, as members, to those clubs. These obligations were held by the clubs in trust for the League and ARL or alternatively for the League Joint Venture;
– News, SLPL and certain of the Franchisees had engaged in misleading or deceptive conduct in contravention of s.52 of the TP Act, had been guilty of passing off and had infringed registered trade marks of the League; and
– the unlawful conduct of News, SLPL and the Franchisees alleged (as above) constituted the tort of unlawful interference with the undertaking and activities of the League, ARL and the League Joint Venture.
The
League and ARL claimed various forms of relief, including declarations,
injunctions, mandatory orders, damages and relief for unjust enrichment. The relief sought included orders that clubs
which had released players withdraw those releases. Orders were also sought restraining News or
any of its associated companies from participating in a rugby league
competition involving players who had been released from their contracts by any
of the rebel clubs.
A detailed defence to the first cross-claim was filed by News, SLPL and the Franchisees. The rebel clubs adopted this defence.
3.The Second Cross-Claim
A second cross-claim was filed by the 12 "loyal" clubs. The cross-respondents to this cross-claim were identical to those named in the first cross-claim. The allegations pleaded and the relief sought followed very closely the pleadings in the first cross-claim, although not all allegations made and relief sought by the League and ARL were adopted.
4.The Cross-Claims by the Rebel Clubs
The rebel clubs filed cross-claims alleging, in substance, that the Commitment and Loyalty Agreements were voidable by reason of duress. These claims were rejected by the trial Judge and there is no appeal from his Honour's dismissal of the cross-claims. There is therefore no need to refer further to these cross-claims.
5.The Decision of the Trial Judge
Despite the large number of issues raised by the pleadings and their legal and factual complexity, the trial began on 25 September 1995, less than six months after News had instituted the proceedings. At the trial, News, the Super League companies and the rebel clubs were represented by a team of eight counsel, including three senior counsel. The League and ARL were represented by a team of six counsel, including three senior counsel. Somewhat more modestly, the loyal clubs were represented by one senior and one junior counsel.
The trial continued for 51 sitting days and concluded on 15 December 1995. It generated 4,875 pages of transcript and hundreds of volumes of documentary evidence.
Doubtless
conscious of the desirability of delivering judgment prior to the commencement
of the 1996 rugby league season, the trial Judge published his reasons for
judgment on 23 February
1996. The judgment runs to 219 typed
pages and, with appendices, to 115 pages in the Federal Court Reports:
(1996) 58 FCR 447. In substance, his
Honour found in favour of the League, ARL and loyal clubs, and against News,
the Super League companies and rebel clubs.
At this stage, we do no more than give an outline of the trial Judge's
conclusions.
News' claim that the League and ARL had breached s.46 of the TP Act was rejected. The trial Judge found (at 504) that none of the markets pleaded by News had been established. In particular, he rejected the contention that the market for determining whether the League and ARL had taken advantage of market power should be confined to rugby league; rather the market included at least some other sports, such as rugby union, Australian rules football, soccer and basketball (at 500). In any event, the trial Judge found that the substantial purposes for which the Commitment and Loyalty Agreements were entered into did not include any of the proscribed purposes specified in s.46 (at 524, 526).
News' contention that there had been breaches of s.45(2)(a)(i) and s.45(2)(b)(i) of the TP Act also failed. His Honour reached this conclusion for several reasons. First, no "exclusionary provision" could be found unless there was a contract, arrangement or understanding between persons any two of whom were competitive with each other (s.4D(1)(a)). The clubs were not relevantly in competition with each other, either in relation to the supply of rugby league teams or in relation to the acquisition of services of competition organisers (at 517). Secondly, while it was true that the clubs were in competition with each other to secure the services of players, this kind of competition was expressly excluded from the scope of the TP Act by the definition of "services" in s.4(1) of the TP Act (at 519). Thirdly, there could be no "exclusionary provision" unless the provision had the substantial purpose of preventing, restricting or limiting the supply of services to, or the acquisition of services from, particular persons. The principal purpose underlying the Commitment and Loyalty Agreements was to preserve the quality of the rugby league competition, through the joint participation of all the clubs. In any event, News had failed to establish the proscribed purpose (at 524-526). Fourthly, there was no contract, arrangement or understanding, within the meaning of s.45(2) of the TP Act, since it had not been shown that the persons said to be parties to the contract, arrangement or understanding had the necessary meeting of minds to constitute a contract, arrangement or understanding (at 526-531).
The trial Judge rejected News' claim that there had been a breach of s.45(2)(a)(ii) or s.45(2)(b)(ii) of the TP Act, for three reasons (at 531). News had failed to establish the market it had propounded; there was no contract, arrangement or understanding for the purposes of s.45(2); and News had failed to establish the necessary purpose or effect of "substantially lessening competition".
The trial Judge went on to say (at 532-534) that, even had News established contraventions of ss.45 or 46 or the TP Act, he would have refused relief under ss.80 and 87 of the TP Act, on discretionary grounds. This was an exceptional case, because of News' conduct in inducing breach of contract and its part in procuring the "corruption of fiduciaries".
In relation to the cross-claims, the trial Judge found that the rebel clubs had breached the Loyalty Agreements, by making players available to enter into Super League contracts. Further, the rebel clubs were under a contractual obligation to comply with the articles of association of the League. They had breached that obligation by acting in a manner prejudicial to the interests of the League. They had also breached terms to be implied in the Commitment Agreement, requiring the clubs, inter alia, to act in good faith and with fair dealing towards the League and ARL (at 541).
The cross-claimants had established that News and the Super League companies had intentionally induced the rebel clubs to breach the Commitment and Loyalty Agreements. News and its associated companies had also intentionally induced the clubs to breach their contractual obligations to comply with the memorandum, articles and rules of the League (at 541-543).
The trial Judge upheld (at 544-548) the claim by the cross-claimants that the conduct of rugby league, through the League and participating clubs, constituted a joint venture involving fiduciary relationships. The rebel clubs were in breach of their fiduciary duties since they had joined with Super League and had transferred assets to the control of the Super League companies. News and the Super League companies had knowingly participated in a dishonest design on the part of the fiduciaries (that is, the rebel clubs). His Honour found that, in these circumstances, it was not unconscionable for the League to retain trade marks registered in its name, notwithstanding that the marks were brought into existence for purposes associated with the joint venture.
The
trial Judge did not address a number of issues raised on the pleadings, either
because he considered it unnecessary to do so or because he intended to reserve
consideration of them until a further hearing.
The matters not addressed included claims by the League and ARL that
News and the Super League companies had engaged in misleading or deceptive
conduct and passing off
and had infringed a large number of trade marks registered in the name of the
League and ARL.
6.The Orders
After publication of the trial Judge's reasons, extensive argument took place over the form of the orders required to give effect to the judgment. At that hearing, which took place over several days, the rebel clubs were represented separately from News and the Franchisees. Leave was granted to 34 players who had signed contracts with one or other of the Franchisees to make submissions in relation to the content of the orders and whether a stay should be granted. Senior counsel appeared on their behalf.
On 11 March 1996 the trial Judge made a series of detailed Orders (at 548-556). The full extent of the orders can be gleaned only by studying them. They are set out in full in Appendix I to this judgment. However, they have the effect, inter alia, subject to certain limited exceptions, of restraining News and the Super League companies until 31 December 1999 from organising or participating in any football competition or game anywhere in the world not authorised by the League or ARL.
Order 35 (at 556) deals with matters not yet resolved in the proceedings:
"35. An order that the further hearing of the proceedings in relation to questions as to:
(a) any additional injunctive or declaratory relief to reflect further the reasons for judgment dated 23 February 1996 which may be appropriate in the circumstances as they may become known after the date hereof;
(b) damages including exemplary or punitive damages;
(c) equitable compensation;
(d) the identification and tracing and restitution of any property of the joint venture;
(e) any additional injunctive relief arising out of the matters referred to in (d);
(f)outstanding intellectual property and misrepresentation issues and relief;
(g) costs, including the basis on which the Cross-Claimants' costs to date in these proceedings are to be assessed;
be stood over to a date to be fixed."
This order plainly recognises that a number of issues are still to be dealt with in the litigation. Order 35(d) appears to refer to the trial Judge's acceptance of a submission made by the League and ARL (at 545) that, where property committed to a joint venture is vested in the name of a particular participant, rather than in the joint names of all, that participant holds the joint venture assets on trust for all of the joint venturers.
The trial Judge has not published reasons for making orders in the form set out in Appendix I to this judgment. We have therefore had to consider arguments relating to the relief granted by the trial Judge without the benefit of his Honour's reasons for making orders in that form.
7.Stay Applications
On 13 March 1996 a Full Court granted a stay of Orders 7, 8, 9, 15, 15A, 15B, 18 and 33. That stay was expressed to continue until determination of the appeal or further order. In the course of the hearing, the Court granted leave to appeal in relation to the orders of the trial Judge, insofar as such leave was necessary.
On 25 March 1996 the same Full Court terminated the stay in respect of Orders 15, 15A, 15B and 18.
8.The Appeals
By an amended notice of appeal, News, SLPL and the Franchisees appealed against the whole of the judgment of the trial Judge, except in relation to his Honour's findings on economic duress. The notice of appeal sought orders that the appeal be allowed, and that the amended first and second cross-claims be dismissed. The appellants also sought orders declaring the Commitment and Loyalty Agreements to be void ab initio and restraining the League and ARL from giving effect to or requiring compliance with those agreements. An order was also sought that the matter be remitted to the trial Judge for determination of any outstanding intellectual property or other issues.
The rebel clubs (including Sydney Bulldogs Ltd) filed a notice of appeal seeking substantially identical orders. A separate notice of appeal to the same effect was filed on behalf of Cowboys Rugby League Football Club Ltd.
III.CONTRACTUAL AND NON-FIDUCIARY CLAIMS
A. Contractual Claims Against the Rebel Clubs
1.Introduction
The trial Judge considered (at 537-541) allegations pleaded by the League and ARL that four distinct contracts had been breached by the actions of the rebel clubs:
(a) A "statutory contract", effected by s.180(1) of the Corporations Law, between each of the rebel clubs, as a member of the League, and the League itself. This contract was said to be constituted by the League's memorandum and articles of association and was one whereby each club agreed to observe and perform the provisions of the constitution of the League in force from time to time, so far as those provisions were applicable to that club.
(b) The 1995 competition contract, made in May 1994 between each club and the League. This contract was said to be constituted by the application for admission to the 1995 competition and the acceptance of that application by the League.
(c) The Commitment Agreements made between the League, the ARL and each club in November 1994 in circumstances previously described.
(d) The Loyalty Agreements made between the League, the ARL and each club in February 1995 in circumstances also previously described.
We consider each of these contracts in turn.
2.The Statutory Contract
It
will be remembered that, prior to the incorporation of the League, the members
of the NSWRL included each of the clubs then participating in the annual
premiership competition. However, under
the memorandum and articles of the League, which we have described in Part II,
Section F, the participating clubs were not expressly included in the
membership provisions. Rather, included
among the members were "two representatives from each club". The
articles entitled each
club to nominate annually two persons for membership. The nominations were made by duly completed
applications for membership, by which each person agreed "to be bound by
the Memorandum and Articles of Association and Rules and Regulations of the
League". Many of the articles, for
example arts.2, 7, 11-13, 19, 20 and 22, appear to be drawn so as to identify
clearly the representatives, not the club, as members. However, the trial Judge concluded that, when
a club nominated representatives who became members, the representatives were
agents through whom the club itself became bound by the statutory contract. On this analysis, as a matter of law, the
club itself became a member.
His Honour referred to the observation of Hodgson J in Wayde v NSWRL, at 363, that the members of the League nominated by the clubs "are members in their capacity as representatives of the clubs". (We have discussed the judgment in Wayde v NSWRL in Part II, Section D4.) In our opinion, Hodgson J did not mean by this statement that the representatives were members of the League as agents for their clubs, in the sense that the clubs themselves became bound by the statutory contract binding members. Significantly, the proceedings had been brought not in the name of the Western Suburbs club, but in the names of its representatives as members of the League. His Honour recognised the distinction, but held that it was not sufficient, in the particular circumstances of that case, to disentitle the plaintiffs, as members, to relief under s.320 of the Companies (NSW) Code 1981. The relevant passage from the judgment (at 364) is set out earlier in these reasons. The question of the entitlement of the plaintiffs to seek relief under s.320 was not an issue in either the Court of Appeal or in the High Court.
The League supported the interpretation placed on its constitution by the trial Judge by reference to the objects in clauses 3(f) and (g) of the memorandum of association, which include a power to regulate and control "member bodies and affiliates". It was contended that the reference to "member bodies" discloses an intention that the clubs are to be members. As the objects are merely enabling powers, it does not necessarily follow that the articles are intended to implement those particular objects. In any event, if the articles are intended to implement those objects, they are accommodated by the membership provision. This includes as members "[s]uch other persons as the Directors shall admit to membership" (art.2). There is nothing in the memorandum and articles that would exclude a corporate body from admission to membership under this paragraph, although the fact is that the clubs have never been so admitted.
The League also relied on the definition of "Club" in the articles, which includes new clubs "admitted to the League" (art.1). It was submitted that the plain inference is that all clubs were admitted as members. However, when the definition is read with the membership provisions, and the rules, in particular Part II, we think it is clear that "admission to the League" means the admission of a club by the League into the group of District Rugby League Football Clubs eligible to apply for entry of a team to the annual competition under rule 38.
The memorandum and articles should be construed against the background circumstances in which the incorporation of the League occurred. One of those circumstances was the established practice of the NSWRL to distribute a portion of its net revenue by way of grants to the clubs. Upon incorporation, cl.5 of the objects expressly prohibited the payment or transfer of the income or property of the League directly or indirectly, by way of dividend, bonus or distribution of profit to the members of the League. This prohibition prevented the League being carried on for the purposes of profit or gain to its individual members, thereby bringing the constitution of the League within the exemption contained in s.23(g)(iii) of the Income Tax Assessment Act 1936 (Cth). We consider the proper conclusion to be drawn is that the membership provisions of the articles were carefully and deliberately drawn to ensure that the clubs did not become members of the League when they nominated representatives to be members.
Accordingly, in our opinion, the clubs have at no time been members of the League, and are not bound by the statutory contract constituted by the memorandum and articles of association of the League.
Even if this interpretation of the memorandum and articles of association is wrong, and a club became a member of the League upon the acceptance of its application for membership of its representatives, that membership was one that was subject to renewal each year, by means of an annual application for membership by the representatives: arts.12 and 13. A club was under no obligation to nominate representatives. Moreover, membership could be terminated during the currency of a year by the resignation of the club representative members under art.22(b). It follows that the rebel clubs, if they were members, could have brought that membership to an end, either by not renewing the membership of their representatives, or by resigning. Thus, the statutory contracts alleged would provide no basis for long-term injunctions of the kind embodied in the orders under appeal, even if the contracts imposed obligations of the kind alleged by the League.
3.The 1995 Competition Contract
In May 1994, each club submitted its application to the League to play in the 1995 Winfield Premiership Competition on the prescribed Form 1 (see Part II, Section F5). It became bound, on acceptance of its application, for the duration of the competition to:
"...abide by the Memorandum and Articles of Association of the League and the Rules and the decisions of the Board of Directors of the League and its Committees made pursuant thereto."
This agreement implemented rule 42 of the League, which requires each club admitted into the competition to agree in these terms. The application and the rules make it plain that admission was for the year of the competition only, and that the club was "not entitled as of right to admission into the Competition conducted in the following year" (Form 1, condition 4).
As events turned out, the 1995 competition was conducted as the national competition by the League on behalf of the ARL and under the logo and banner of the ARL. The cross-claimants pleaded that the 1995 competition was conducted pursuant to the terms of the Commitment and Loyalty Agreements. However, in the event that these agreements are held to be void or unenforceable, it is not in dispute that the rebel clubs were still bound by the contracts established by their admission into the 1995 competition in May 1994.
The alleged breaches of the 1995 competition contract by the clubs were not clearly identified in the pleadings. The cross-claimants alleged that, by arts.19 and 20 and rules 27, 29, 30 and 31, each of the clubs was
"obliged to refrain and to cause their players for the time being and members for the time being to refrain from engagement in conduct which is prejudicial to the interests and welfare and image of [the League]"
They further alleged that the clubs breached this obligation. Articles 19 and 20 contain disciplinary powers in respect of conduct which, in the opinion of the board of directors of the League, is unbecoming of a club or is prejudicial to the interests, image or welfare of the League. Rule 27 has the effect of extending the disciplinary jurisdiction to, among others, the clubs; and rules 29 to 31 make further provision for dealing with complaints of conduct contrary to the policy and prejudicial to the interests or welfare or image of the League or the game, including complaints against clubs.
The pleadings went on to allege that each rebel club, in taking the steps which it did towards joining the Super League competition, had breached its contractual obligations. These steps included executing the Heads of Agreement and Club Deeds, failing to disclose its involvement to the League and ARL, and making available for the benefit of the Super League competition its property, skills and influence, together with its capacity, reputation and nucleus of players. The contractual obligations were said to arise, first, from the provisions as to the fostering and control of the game of rugby league by the League and, secondly, from the prohibition on conduct prejudicial to the interests, welfare and image of the League.
It is convenient to take the second of these alleged obligations first. The trial Judge found (at 539) that the articles and rules imposed an obligation on the clubs not to act in a manner prejudicial to the interests, welfare and image of the League. His Honour rejected the cross-respondents' submission that the articles and rules merely provide for disciplinary consequences in the event that the clubs engaged in conduct of that kind. His Honour said that to construe a term in the way contended for, unless the language is intractable, was contrary to the statement of Windeyer J in Coulls v Bagots Executor Trustee Company Limited (1967) 119 CLR 460, at 504:
"The primary obligation of a party to a contract is to perform it, to keep his promise. That is what the law requires of him. If he fails to do so, he incurs a liability to pay damages. That however is the ancillary remedy for his violation of the other party's primary right to have him carry out his promise. It is, I think, a faulty analysis of legal obligations to say that the law treats a promisor as having a right to elect either to perform his promise or to pay damages. Rather, using one sentence from the passage from Lord Erskine's judgment which I have quoted above, the promisee has a legal right to the performance of the contract'."
But, with respect, to invoke this principle begs the question whether each of the rebel clubs was subject to a contractual promise. That question requires a consideration of the relevant terms of the contract and, in particular in this case, of the articles and rules.
The rules were made
by the directors of the League under art.32, which provides that they must not
be inconsistent with the memorandum and articles of association. The disciplinary power in the articles
relating to clubs is conferred by art.20.
That power can be exercised to exclude or forfeit the right of a club to
representation on the League. The power
may be exercised if the board of directors passes a resolution by a majority of
the directors present that the club is guilty of conduct, which in the opinion
of the League (that is, the directors), is unbecoming of a club or is
prejudicial to the interests, image or welfare of the League. The exercise of that disciplinary power
against a club is conditioned upon the opinion of the League, determined by the
majority of
the board of directors present at a meeting, specially called for the
purpose. At least seven days before such
a meeting, the club which is the subject of the resolution must be notified in
writing. The club secretary has the
opportunity of making oral or written submissions by way of defence or
explanation, before any resolution is passed (art.21). Nonetheless, neither the articles nor the
rules, by their terms, prescribe standards of conduct to be met by clubs which
can be judged by criteria independent of the opinion of a majority of the directors.
The uncertainty as to what conduct might attract the exercise of the power tells against the implication of a promise of the kind alleged, the breach of which renders the promisee liable to an action for damages. In our opinion, the construction of the articles and rules contended for by the cross-respondents is correct. The articles and rules relied on do not impose a contractual obligation on each club participating in the competition not to engage in conduct prejudicial to the interests, welfare and image of the League.
The first of the obligations alleged, unlike the second, is not conditioned upon the formation of an opinion by the majority of the board of directors. The obligation is framed in terms that follow the opening words of cl.3(b) of the League's objects. These empower the League:
"to foster and control the game of rugby league football throughout the State of New South Wales and the Australian Capital Territory and generally to take such action as may be considered conducive to its best interests."
The notion that a person bound to abide by the constitution of a company must observe or perform, or even act consistently with, the provisions of each of the object clauses in the memorandum of association, is a difficult one. It does not reflect the intention of the provision in Form 1, to which we have referred. The object clauses, by their nature, are permissive only and are not necessarily readily compatible one with another. In our opinion, the obligation imposed by the agreement between the League and the club, to abide by the constitution, rules and decisions of the League, is not one that requires each club to conduct its affairs as if the constitution, rules and decisions of the League were those of the club itself. The obligation so imposed requires no more than that the club submit to the directions and requirements imposed by the League in the exercise of its powers and functions under its constitution and rules relating to the conduct of the competition to which the Form 1 application relates.
Even if it were
accepted that an obligation in the present case rested on each club
participating in
the 1995 competition to observe and perform, or to act consistently with,
object cl.3(b), there is no warrant for confining the obligation to the opening
words of the clause. To do so is to
disregard the words "and generally to take such action as may be
considered conducive to its best interests".
Once the obligation is extended to an obligation to observe and perform, or to act consistently with, action conducive to the best interests of the game, a difficulty immediately confronts the League's case. This is because views differ so markedly as to where the best interests of the game lie. Doubtless supporters of the League would deny (as indeed they have denied) that the proposed Super League competition will foster and promote the development of rugby league and generally be conducive to its best interests. It is clear from the evidence that some others, including directors of the rebel clubs, have formed a contrary view. A decision as to where the best interests of the game lie is not one that lends itself to judicial determination; and it is not a question which the trial Judge endeavoured to answer. It is a quite different question to one which asks where the best interests of the League lie.
Fortunately, it is not necessary to explore further the uncertain scope of an obligation to act in the best interests of the game. This is because a more certain and well recognised obligation, which would seem to meet the thrust of the League's complaints, arises by implication. The relevant principle was stated by Mason J (with whom Gibbs, Stephen and Aickin JJ agreed) in Secured Income Real Estate (Australia) Limited v St. Martins Investments Proprietary Limited (1979) 144 CLR 596, at 607:
"But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v. Dick (1881) 6 App. Cas. 251, at p.263:
`as a general rule...where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.'
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith C.J. said in Butt v. M'Donald (1896) 7 Q.L.J. 68, at pp.70-71:
`It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.'"
The rebel clubs themselves accepted that the League's constitution and rules show that the primary purpose and object of the League is the organisation, regulation and control of the sport of rugby league football in competitions conducted by it. It may be accepted that the 1995 competition was conducted by the League in furtherance of that purpose and object, and that the participation of each club was an integral part of the competition. By agreeing to participate in the competition for which the constitution and rules provide, each club by implication became obliged to do all that was reasonably necessary on its part to enable the 1995 competition to be carried on in a manner that allowed the other participants in the competition, including the League and ARL, to receive the benefits which the competition was intended to achieve. One of the benefits which the competition was intended to achieve for the League was the promotion of the League and its national and international competitions.
For reasons given in Part IV of this judgment, we have concluded that the clubs were bound to the League only by their commitment to the annual competition and not by some additional longer term (or as the League's case would have it, permanent) obligations arising by reasons of fiduciary duties associated with the pleaded League Joint Venture. In our view, it follows that the implied contractual obligation to which we have referred, came to an end at the conclusion of the competition year, unless in the meantime the club had applied for and been accepted into the League's competition for the following year. Each club was free at the end of the competition year to decide not to participate in any competition the following year. In that event, the club simply would not apply for admission under the rules. The club was also free to compete in another competition not organised by the League (subject, however, to certain constraints such as not infringing intellectual property rights belonging to the League, and not engaging in misleading conduct as to the relationship of the League with the other competition).
As a general proposition, a party committed by
a fixed term contract to supply goods and services exclusively to another party
is free, during the currency of the contract, to enter into another contract to
supply the same goods and services to a third party once the term of the first
contract has expired. The 1995
competition contract did not provide that the club during the 1995 season could
not enter into negotiations or a contract with another organiser to compete in
a different competition the following year.
It is of note that cl.26 of the Playing Contract approved by the League
in 1993 prohibits a player negotiating or contracting with another club during
the currency of the contract, except with the written consent of his club. It follows that a club not already accepted
into the national competition for the following year would not be prevented by
the terms
of the 1995 competition contract from making arrangements, including contracts,
before the end of the season with another competition organiser for the following
season. But in doing so, the club would
be obliged by the implied term not to take any action or to engage in any
activity, such as promoting the rival competition, that would prejudice the
fulfilment of the 1995 competition, and its purposes.
The line between engaging in permissible activities in relation to the following year and complying with the obligations attaching to the 1995 competition is a fine one, and is not easy to articulate. However, conduct during 1995 that undermined goodwill and public support for the League's national competition plainly crossed the permitted boundary.
His Honour found that it was not in doubt that the rebel clubs breached their contractual obligations by releasing players and/or threatening to do so; by encouraging their sponsors to support a different entity, namely, the Super League Franchisee; by licensing the Franchisees to make use of club names, logos and jerseys; and by giving up their own use of their grounds and their own capacity to participate in the competition conducted by the League (at 541). In specifying these breaches, his Honour did not differentiate between the obligations arising under the Commitment and Loyalty Agreements which he held to be enforceable for the five year term, and those arising under the 1995 competition contract. On the conclusions we have reached, such a distinction is necessary.
The purpose of the proposed release of players was to enable them to play from 1 January 1996, for their new Super League employer. As this playing date was after completion of the 1995 competition season, the mere fact of a release for that purpose did not constitute a breach of the 1995 competition contract. The players were contracted to the clubs, and the clubs were free to vary those arrangements with effect from a date after the close of the 1995 season. Similarly, arrangements that may have affected the use of grounds were to operate after the end of the 1995 season. The rights to use those grounds were held by the clubs, not the League.
The League contended that there was evidence to
support the other factual findings made by the trial Judge and invited us to
consider a folder of evidence on this topic.
But the folder identified by the League contains very little material
suggesting that the rebel clubs encouraged their sponsors to support a
different entity. The evidence is to the
effect that they anticipated, and hoped, that their sponsors would follow the club
teams into the Super League competition the
following season. But that anticipation,
without more, does not establish a breach of the 1995 competition
contract.
For the most part, issues relating to the use by Franchisees of club names, logos and jerseys were stood over by the trial Judge for further consideration. Under the orders we propose (see Section F 2 of this Part), these issues remain to be decided. Whether the rebel clubs breached contractual obligations by licensing the Franchisees to use club names, logos and the like is therefore dependent on issues still to be resolved.
Upon an assessment of damages for breach of contract, it will be necessary for the League and ARL to identify in relation to each club separately the conduct that is said to have constituted a breach of contract. It will also be necessary to specify how the breach caused loss and over what period, having regard to the fact that the 1995 competition contract was only for the limited duration of the 1995 season. There is no specific ground of appeal directed to the findings of breach made by the trial Judge. As the appeal is directed to issues of liability, not damages, it is neither appropriate nor necessary for this Court to canvass hundreds of pages of material seeking out evidence for and against every possible breach of contract by a rebel club.
While we are not in a position to identify the conduct of each individual club amounting to a breach of contract, we consider that the evidence as a whole shows that the conduct of the rebel clubs seriously destabilised the successful promotion and conduct of the 1995 competition. This conduct included
– making public their proposed alignment with Super League early in the 1995 season;
– participating in vigorous promotion of the Super League competition; and
– in the case of some rebel clubs, encouraging their high profile players to sign secretly and swiftly with News in the circumstances which occurred on and about 30 and 31 March 1995.
These actions breached the implied contractual term because they were inimical to the obligation to co-operate with the League in doing all that was reasonably necessary to be done to enable the League to have the benefit of the 1995 competition.
The destabilisation of the 1995 competition impaired the "goodwill" of the 1995 competition. The reputation of the League's competition, which had been built up over decades, was harmed. It caused upset among core and loyal supporters of the competition, and division among the followers of the game. The goodwill and reputation lost by the League's competition accrued, at least in part, to the pending Super League competition. In short, the launch and promotion of Super League, encouraged by the rebel clubs and prominent players who supported Super League during the 1995 competition, gave Super League a head start before the end of the 1995 competition. It tapped the public interest in and enthusiasm for the 1995 competition to gain interest and enthusiasm for Super League and the current players who would be transferring to the Super League competition as early as 1996.
The consequences flowing from the breaches of contract must have been foreseen by News. It follows that the claim against News, SLPL and the Franchisees for unlawfully inducing the breaches of contract by the rebel clubs is likely to raise similar questions relating to assessment of damages as those arising from the claims against the rebel clubs. We refer in Section 6 of this Part to the claims based on inducing breach of contract.
Had the Super League competition gone ahead in 1996, it is easy to envisage ways in which that head start would have greatly benefited SLPL and the Franchisees at the expense of the League. However, the orders made by the trial Judge have effectively frozen the Super League proposal and prevented the Super League competition starting in 1996. Because of those orders, the head start that Super League otherwise would have enjoyed has been substantially reduced, if not wholly offset. The League has had an unimpeded opportunity, in full knowledge of the existence of a proposed Super League operation, to secure its national competition. The significance of that situation is not a matter to be assessed on this appeal. It should be dealt with by the trial Judge when the matters stood over, including assessment of damages, are further considered in light of the orders we propose to make.
4. The Commitment Agreements and the Loyalty Agreements
The principal claims made by the League and ARL
for breach of contract were based on the contentions that the rebel clubs had
contravened the terms of the Commitment and Loyalty Agreements and that News
had induced those breaches. The
Commitment and Loyalty Agreements, by their terms, committed the clubs to the
national competition and to no other, save
with the approval of the League and ARL, until 1999. The rebel clubs conceded that, if the
Commitment and Loyalty Agreements were valid and enforceable, they had each
breached the agreements by making players available to enter into and to
perform Super League employment contracts with the Franchisees.
As we explain in Part V of the judgment, we have concluded that the making of those agreements contravened s.45(2) of the TP Act, because they included "exclusionary provisions" within the meaning of s.4D of the TP Act. We have also concluded that the appellants are entitled to a declaration that the Commitment and Loyalty Agreements are void. These conclusions make it unnecessary to address other issues raised in relation to the Commitment and Loyalty Agreements. However, we mention two of them briefly here.
First, in addition to the express terms of the Commitment and Loyalty Agreements, the League and ARL pleaded a number of implied terms. These included an implied obligation on each of the clubs to act in good faith towards and to deal fairly with the League and ARL and to conduct itself reasonably and honestly with regard to the contractual interests of the League and ARL. It suffices to say that we agree with the submission of the rebel clubs that there is no occasion to imply further terms of the kind alleged. This follows from the detailed nature of the disciplinary provisions in the League's articles, the provisions in the rules and the principle stated in Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd, to which we referred earlier.
Secondly, the rebel clubs and News raised, as
an alternative to the arguments based on the TP Act, a contention that the
Commitment and Loyalty Agreements were unenforceable in any event. They argued
that, assuming the agreements otherwise to be valid, the consideration given by
the League and ARL was illusory. They
further argued that the lack of consideration carried through into the Loyalty
Agreements, rendering them unenforceable, even though the Loyalty Agreements
were executed by deed. Whilst the
agreements purported to accept the clubs into the national competition for five
years, the participation of a club beyond the 1995 competition (which was
already in place under the 1995 competition contracts) was upon terms that each
club observe and perform all obligations expressed in the articles of
association and the rules of the League for the time being. These included the requirement of an annual
application for admission into the competition, which could be refused in the exercise of the League's
discretion. In short, it was said that
the position of each club remained as it had been before the Commitment
Agreements were executed. A club could
apply each year but, if the application were not approved, the club
could not participate in the competition.
We do not accept this submission. It is true that the Commitment Agreement obliges each club to observe the articles of association and rules of the League. But this does not make the articles and the rules the sole source of rights and obligations. The Commitment Agreement, whilst picking up applicable provisions of the articles and rules, operates according to its provisions construed as a whole: cf Bailey v New South Wales Medical Defence Union Limited (1995) 184 CLR 399, 410-411, per Brennan CJ, Deane and Dawson JJ; at 439, per McHugh and Gummow JJ.
Rules 38 and 39 of the League provide for the lodgment of the annual team application on Form 1. Rule 41 provides for the board of the League to deal with the application. Rule 40 provides that a club which enters a team in one season shall not "be entitled as of right" to enter a team in the following competition. These rules do not, however, prevent the League, if it chooses to act independently of the procedures laid down in the rules, from accepting an application by a club to enter a team made in some other way, or to accept a team for more than one season. Nor do the articles or the rules prevent the directors of the League from inviting a club to enter into an agreement to participate in the League's competition for several years without any further application having to be made by the club. This was the intention and effect of the Commitment Agreement.
Once the League and a club have entered into such an agreement, assuming it to be enforceable, an annual application is no longer an ongoing requirement for the duration of the agreement. The annual application procedures specified in rules 38 to 41 no longer require observance or performance by the club. The club is entitled, for the duration of the agreement, to compete in the following season. This entitlement does not arise from the fact of participation in the competition in the preceding year, but by force of the agreement.
It may well be that the board of directors would have a power under the rules to exclude a club from the competition during the term of the agreement for non-compliance with conditions, for example, relating to the financial viability of the club or the provision of a playing ground (compare cl.3 of the Commitment Agreement). But such a power of exclusion does not render the consideration for the agreement illusory. As the trial Judge observed, there is a real difference between admission to the competition which is defeasible in certain circumstances, and no entitlement to admission.
B. Allegations of Breach of Contracts by Players and Coaches
1. The Pleaded Allegations
The first cross-claim pleaded breaches of contractual obligations owed by players to the rebel clubs and by various officials, as members of rebel clubs, to those clubs. These were put forward as two categories of breach of contract unlawfully induced by News, SLPL and the Franchisees. These allegations are relevant to the proceedings in two ways. First, it was said that the contractual obligations owed to the clubs were held in trust for the participants in what was pleaded as the League Joint Venture, including the League and ARL. This allegation is addressed in Part IV of the judgment, in which we reject the argument that the clubs owed fiduciary obligations to the League and ARL.
Secondly, it was argued that the players and club officials had been induced to breach their contracts by the actions of News, SLPL and the Franchisees. This was said to found a claim by the League and ARL for the tort of interference with their undertakings and activities by unlawful means.
The pleadings recognised that proof that News, SLPL and the Franchisees unlawfully induced players and club officials to breach their contractual obligations would not, without more, give the League and ARL a cause of action. This is because the contractual obligations were owed to the relevant clubs, which would be the proper parties to enforce the contractual obligations. However, before dealing with the claims based on unlawful interference, it is necessary to determine whether the players and the officials were in breach of contractual obligations owed to their respective clubs.
2. Playing Contracts
By the rules and regulations of the League, a
player is not to make any statement detrimental to the interests of the
League. By the express terms of the
Playing Contracts, each player agreed with his employer club that he would be
bound by the memorandum and articles of association and the rules of the
League, and the club. The player also
agreed that he would not misconduct himself: see cl.10. Misconduct was defined to include conduct prejudicial
to the club or the League. The League
and ARL contended that the Playing Contracts were breached by (unnamed)
players who contributed to promoting Super League during 1995. The pleadings also imply that those players
who entered into Super League employment contracts broke their existing Playing
Contracts with the clubs.
Mr Sackar QC, senior counsel for the Super League players and coaches who were granted leave to intervene on the appeal, argued that, as his clients were not parties to the first cross-claim, the trial Judge should not have determined the allegations of breach of contract by the players and coaches. This argument was made in the course of wider submissions directed to the issue of whether the players and coaches were necessary parties to the first cross-claim, who should therefore have been joined.
We discuss those submissions later in this Part (Section G). It is sufficient to note at this stage that, for reasons we give there, this Court is not precluded from considering and determining the issues relating to the Playing Contracts raised on the pleadings between the actual parties to the cross-claim. Depending on the conclusions reached, however, it may be that certain of the remedies sought should not be awarded, because they would directly affect rights and liabilities of players and coaches who were not parties and who did not participate in the trial.
All cross-respondents admitted that News, SLPL and the Franchisees engaged in media and other public promotion of the proposed Super League competition. These promotions took the form of photographs of prominent and skilful players, accompanied by statements purportedly made by them in terms laudatory of the proposed Super League competition. It follows from the findings of the trial Judge, and it could not seriously be disputed, that the statements were detrimental to the interests of the League. The extent of those activities and the number of players concerned is not the subject of any finding by his Honour. It was sufficient for his conclusions that conduct of the kind alleged had occurred. The extent of that conduct and its damaging effects were matters that would become relevant if and when damages were assessed against the cross-respondents.
Although all the Super
League employment contracts were expressed to commence at the expiration of the
existing Playing Contracts, the signing of the Super League employment
contracts by players, without the prior written consent of their employer
clubs, was also a breach of cl.26 of the Playing Contracts. It cannot be assumed that written consent
would have been a mere formality. The
request for consent would have disclosed to the directors of each of
the employer clubs and, perhaps, to the wider club membership, News' approach
to the players.
Moreover, the disclosure would have
occurred before the players from that club signed Super League employment
contracts. The advantage of the
clandestine activities of 30 and 31 March 1995, and the element of surprise in
the tactics employed by News against the League would in all probability have
been lost.
It was central to the successful launch of the "rebel" competition that the services of leading players be secured as an enticement to other players and clubs to align themselves with the Super League proposal. Had the targeted players approached the directors of their clubs, the intelligence gained by the directors of those clubs who were not aware of what was proposed could have caused News' plans to falter at the outset. Although fewer than 50 players had signed Super League employment contracts by 2 April 1995, the commitment of those players whose services had been secured appears to have provided the foothold which News required to persuade others to align themselves with Super League.
We do not overlook that neither cl.10 nor cl.26 of the Playing Contracts is expressly pleaded in the first cross-claim. However, as those provisions bear on the matters agitated at trial we think that we should have regard to them.
3. Club Officials
The pleadings alleged that News, SLPL and the Franchisees solicited chief executives, coaches and team managers to participate in, or to procure players to participate in, the Super League competition. It was also alleged that these officials procured certain (unidentified) members of rebel clubs to facilitate the participation of prominent players in activities supportive of Super League. By so doing, the club officials were induced to breach contractual obligations imposed on them by virtue of their membership of a rebel club "not to conduct themselves in a manner contrary to or prejudicial to the interests and welfare of the (League) or the game".
Membership of a club binds each member, by means of the statutory contract, to observe and perform the provisions of the constitution of the club so far as those provisions are applicable (s.180(1) of the Corporations Law). Under rules 28 and 65 of the League, coaches and trainers must be members of the clubs employing them. The pleadings assumed that chief executives were also members of the clubs which employed them.
The submissions of the League and ARL did not analyse separately the constitutions of each of the rebel clubs. Consequently, they did not identify which provisions (if any) in each constitution imposed on members a contractual obligation not to conduct themselves in a manner contrary to or prejudicial to the interests and welfare of the League or the game. Nor was the task undertaken by the trial Judge. That the constitutions would impose a contractual obligation in these terms on each club member, as opposed to making prejudicial conduct a ground for disciplinary action (compare rules 30 and 31 of the League), is unlikely. But even if the constitutions of rebel clubs purported to impose contractual obligations on members in these terms, the memorandum and articles of association only bind members in their capacity as members: Bailey v New South Wales Medical Defence Union Ltd, at 410-411, 437. In the case of a coach or employed official, obligations to the particular club arise not from the statutory contract, but from the employment contract. The duties so owed (whatever their exact nature), were not the contractual duties pleaded.
It was agreed between the parties that each coach who signed a Super League employment contract was employed by a rebel club under a written contract. However, only three written contracts were in evidence. A fourth was said to be oral, confirmed on a "handshake". The terms of the others were not established. Insofar as the expiry dates of those contracts are known, they were expressed to expire at the end of the 1996 season. The terms on which officials of rebel clubs were appointed was not the subject of evidence.
The trial Judge was critical of the conduct of certain club officials. In particular, his Honour said (at 470) that the coaches who signed Super League contracts on 28 March 1995 acted
"in complete disregard of the duty as coaches employed by clubs that had an obvious interest in retaining the services of the players indefinitely, and were bound to the League, and whose members generally were, of course, quite unaware of what was happening...".
The Super League coaches were not present at the trial to answer the criticisms made of them. The possibility that they had obligations - legal and otherwise - to look after the best interests of the players over whose careers they held considerable sway, was not explored. Perhaps the criticism was too harsh.
Be that as it may, as between the parties to the proceedings, we construe the findings of the trial Judge to include findings that at least some of the coaches and officials of the rebel clubs acted in breach of the contractual duties owed by them as employees of those clubs, by encouraging players to sign Super League employment contracts. This finding was sufficient for the purpose of his Honour's analysis of the rights and duties of the participants in the League Joint Venture although, as we explain in Part IV, we do not agree with that analysis. However, findings of breach of contract by a particular coach or official would require consideration of the terms of that person's contract of employment. Other issues might arise, including the possibility that executives and directors of the particular club had knowledge of, and approved the activities of the coach or official. The trial Judge did not find it necessary to go into this degree of detail.
Although the evidence concerning the impugned activities of the coaches and officials is imprecise in numerous respects, we think that a general finding was open in the terms made by the trial Judge. It is probable, as a matter of law, that the contracts of employment encompassed an implied duty of fidelity and good faith: see Blyth Chemicals Limited v Bushnell (1933) 49 CLR 66, at 81-82. The evidence showed that the activities of several of the coaches and officials who were involved in signing up players between 28 March and 2 April 1995 were not known to the directors of their clubs. It was open for his Honour to hold that their activities were inconsistent with obligations owed to their employers. But the findings made by his Honour do not provide a sufficient basis from which to proceed to an assessment of damages against any party found responsible for procuring those breaches of contract. If the claims for unlawful interference were otherwise established, the details of the nature and extent of contractual breaches by coaches and officials would need to be resolved before any assessment of damages could take place. We should add that the trial Judge was required to bring down orders on the main issues within a tight time frame, and it is readily understandable that matters of this kind were left for later attention and decision.
As we have pointed out, the employment contracts of coaches and officials were not the contracts pleaded. Nonetheless, the duties owed to their clubs by coaches and officials who aligned themselves with Super League was a significant issue at trial. On the approach taken by the trial Judge, the pleading point was not an issue, as his Honour treated the breaches of contract by coaches and officials as material to the wider claim that fiduciary duties were owed among the participants in the League Joint Venture. The omission in the pleadings, in light of the conduct of the trial, is a technicality only.
In written submissions to this Court, the
League and ARL contended that certain of the club
officials who aligned themselves with and participated in the Super League
proposal were members of the League, as well as being members of one of the
rebel clubs. It was contended that they
owed contractual obligations, in their capacity as members of the League, not
to conduct themselves in a manner contrary to or prejudicial to the interests
of the League. These contractual
obligations were included amongst the breaches of contract said in the argument
to have been unlawfully induced by News, SLPL and the Franchisees. However, the first cross-claim did not allege
breaches of contractual obligation owed to the League by club officials in
their capacity as members of the League.
This part of the submissions appears to raise an entirely new issue
which was not considered at the trial.
The League and ARL should not be permitted to raise it now for the first
time.
C. Unlawful Inducement of Breach of Contract
The trial Judge held that News, SLPL and the Franchisees had unlawfully induced the rebel clubs to breach the four categories of contracts which, in his view, bound the clubs to the League (at 541-543). The elements of the tort are not in dispute. These are an intention by the respondents to procure the breach, actual inducement to breach and damage flowing from the breach: Allstate Life Insurance Co. v Australia and New Zealand Banking Group Limited (1995) 58 FCR 26 (FCA/FC), at 42-45. His Honour found that the elements were made out. News and the Super League companies were aware of the critical arrangements of the League and the clubs, since they had meticulously examined their corporate structures and contractual arrangements. Executives of News had access to a number of senior club officials, as well as the assistance of Mr Ribot. His Honour had no doubt that the cross-respondents acted intentionally and observed (at 541) that "there is no dispute about damage".
The grounds of appeal by News, SLPL and the Franchisees, insofar as they were directed to the finding that they had unlawfully induced breaches of contract, contended that the trial Judge erred in rejecting a defence argued at the trial. This defence was that News, SLPL and the Franchisees lacked the requisite intent, because they acted on legal advice that the Commitment and Loyalty Agreements contravened the TP Act and were therefore void. It followed that the cross-respondents honestly believed that they had good prospects of success on the application to have the agreements declared void. His Honour rejected this defence on the ground that, whatever the prospects of success in the application, the Commitment and Loyalty Agreements were on foot and bound the parties thereto unless and until they were by judicial decree declared void.
For reasons given in Part V, we consider that his Honour erred in this respect. However, it is not necessary for us to consider further the issues raised by this defence, as it related only to the Commitment and Loyalty Agreements, both of which we have held to be void. The law is clear that where a contract is void, there can be no breach of it, and the tort of unlawfully inducing breach of that contract cannot be committed: De Francesco v Barnum (1890) 45 Ch.D.430, at 443; Joe Lee Limited v Lord Dalmeny [1927] 1 Ch. 300, at 307; Clerk & Lindsell on Torts (17th ed.), para.23-14.
As we hold that there was no statutory contract between the clubs and the League, and that the Commitment and Loyalty Agreements are void, the finding of the trial Judge that News, SLPL and the Franchisees were guilty of inducing the clubs to breach their contracts with the League can only be upheld on the basis of the established breaches of the 1995 competition contract. The question of the damages flowing from these breaches and other remedies is a separate question. We deal with that issue briefly in Section E of this Part.
D. Unlawful interference claims
The trial Judge did not discuss the unlawful interference claim in his reasons for judgment. The pleadings alleged, first, that News, SLPL and the Franchisees had been guilty of unlawful conduct. This conduct was said to include the unlawful inducement of breaches by the players of the Playing Contracts and by the clubs of their contractual obligations to the League and ARL. It also included a large number of unlawful acts pleaded in connection with causes of action based on misleading or deceptive conduct and passing off. Secondly, it was alleged that this unlawful conduct constituted unlawful interference with, and was directed against, the undertaking and activities of the League Joint Venture and the corporate undertakings and activities of the League and ARL. The written submissions of the League and ARL made it clear that the pleading was not intended to allege a conspiracy between News, SLPL and the Franchisees. The pleading is therefore to be understood as alleging that the various companies individually engaged in the conduct said to constitute the tort of unlawful interference.
In Northern
Territory of Australia v Mengel (1995) 129 ALR 1, at 16, the High Court
left open the question whether the law of Australia recognises tortious
liability for harm caused by unlawful acts directed against an applicant. But even if the developments in the United
Kingdom are to be followed in Australia, the cause of action would be dependent
on proof that the unlawful acts were
directed at the applicants, although, perhaps, not necessarily done for the
purpose of injuring their interests: Northern
Territory v Mengel, at 15.
As the trial Judge did not make findings in relation to this claim, the question whether the unlawful conduct pleaded was directed at the applicants has not yet been considered. This is hardly surprising, since much of the alleged unlawful conduct related to the causes of action based on misleading or deceptive conduct and passing off that were stood over for further consideration. Although the orders do not expressly refer to the claim for unlawful interference, we think it must have been intended that it be one of the matters stood over to be dealt with as a claim for relief dependent on the "misrepresentation issues" referred to in Order 35(f). In the absence of findings both on the unlawful acts alleged, and on whether those unlawful acts were directed at the League and ARL, it would be inappropriate for this Court to undertake the task of deciding whether the tort alleged is a cause of action recognised by Australian law.
E. Remedies Available for Breach of Contract and Procurement of Breach
The primary remedy for breach of contract and the tort of inducing breach of contract is damages. However, the Court may in its auxiliary jurisdiction in equity make orders by way of mandatory or negative injunction, so that the remedies granted more effectively make good the consequences of the respondents' wrongdoing. In an exceptional case, the principles stated by Deane J in Muschinski v Dodds (1985) 160 CLR 583, at 619-620, and by Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner (1987) 164 CLR 137, at 148, could warrant the intervention of equity to impose a constructive trust upon property gained by a party through its breach of contract or tortious conduct. This might be the case if damages were not an adequate remedy and it would be unconscionable to allow the respondent to retain the property: see also Australian and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, at 673.
The remedial orders awarded by the trial Judge include both mandatory and negative injunctions, and also orders which have as their basis a trust binding the cross-respondents. However, as his Honour did not publish reasons for making each of the orders it is not clear whether, or to what extent, the trust relied on was based on the fiduciary duties his Honour held arose out of the League Joint Venture, on a remedial trust imposed by order of the Court to prevent an unconscionable retention of property, or on some other principle.
The breaches of contract in March and early April 1995 by the rebel clubs, players and club officials, identified earlier in this Part, had the effect of giving News, SLPL and the Franchisees a head start. That start might have been sufficient, in the absence of intervention by the Court, for News to mount the Super League competition as the premier rugby league competition in 1996. The breaches at least contributed to a situation where enough clubs and players transferred allegiance to the promoters of the Super League competition for this to happen. If News had been allowed to retain this head start, the national competition would in all likelihood have suffered a fatal blow. Indeed, it was anticipated by News that the suddenness and success of the onslaught would cause the League and ARL to have no alternative but to accept the News proposals. Damages awarded after the event could not have restored life to the national competition.
Absent the head start, News would have had to compete in a much more difficult environment in its efforts to establish the Super League competition. It may ultimately have succeeded in doing so. But the League and ARL would not have been deprived of the opportunity to wage the battle from the more favourable starting point which would have been available to it had all clubs, players and coaches in the 1995 competition abided by their contractual obligations until the end of the 1995 season.
We have concluded that the League and ARL have established a very much more limited category of breaches of contract and tortious conduct than did the trial Judge. But even for this more limited category of wrongs, at the time the orders were made, damages would not have been an adequate remedy. Equitable remedies would have been necessary to undo the head start which the wrongdoing had conferred on News, SLPL and the Franchisees. However, we think that this objective could have been adequately achieved by injunctive orders, without resorting to constructive trust remedies.
The orders creating or recognising trust obligations were made, in part, in consequence of the trial Judge's conclusion that there was a joint venture involving the League, ARL and the clubs and that this joint venture gave rise to fiduciary obligations among the participants. The orders were also presumably based, in part, upon his Honour's findings that the Commitment and Loyalty Agreements were valid and that their terms had been breached by the rebel clubs. As we have explained, we have held elsewhere in this judgment that the relationship involving the League, ARL and the clubs did not give rise to fiduciary duties. We have also held that the making of Commitment and Loyalty Agreements infringed s.45 of the TP Act and that the agreements are therefore void. The substantial bases of the orders under appeal have accordingly been removed. The question then arises as to what remedies are appropriate in relation to the breaches of contract and inducement of breaches of contract that we consider have been established by the League and ARL.
Remedies based on the contractual breaches must reflect the fact that the contractual relationship between the League and the clubs expired at the end of the 1995 season. On our conclusions, the rebel clubs would have been at liberty to withdraw from the national competition at the end of the 1995 season (apparently, on or about 31 October 1995). Players would have remained contracted to the clubs and the clubs would have been at liberty thereafter to field those players in a team in another competition. Moreover the clubs would have been at liberty before the end of the 1995 season to negotiate for the following season, so long as they did so consistently with the implied condition to do everything reasonably necessary to secure performance of their contracts with the League during the 1995 competition. In this respect, we do not consider the confidentiality agreements signed by some of the clubs with News between December 1994 and March 1995 constituted any breach of contract by them. Because their involvement with News was kept secret by the terms of the confidentiality agreement, no publicity detrimental to the 1995 competition occurred. Had the players been approached under the umbrella of a confidentiality agreement, and with the written consent of the clubs given under cl.26 of the Playing Contracts, it is possible that players could have signed Super League employment contracts without there being any breaches of contract unlawfully induced by News, SLPL or the Franchisees.
The practical effect of the orders made at
trial, in our opinion, has been at least to reduce substantially, if not wholly
remove, whatever competitive advantage and head start the cross-respondents
might otherwise have achieved from the breaches of clubs', players', coaches'
and officials' contracts and from the procurement of those breaches by the
cross-respondents. It has to be
recognised that, even without the clandestine events of March and the first
days of April 1995, approaches to the clubs and players, backed by the monetary
and other incentives offered by News, could well have attracted many coaches,
players and clubs to the Super League competition. It cannot be overlooked that by 2 April 1995
fewer than 50 players had signed Super League Employment contracts, and that
from then on, notwithstanding heavy competitive activity by the League and ARL
to sign up players, some 260 further players signed Super League Employment
contracts. The Club Deeds were signed by
clubs on 20 April 1995 notwithstanding the efforts of the League and ARL, with
the extra funding from Channel Nine and Optus Vision,
to hold the national competition together.
The competitive advantage having been undone, or at least largely so, by the orders under appeal, we think it is appropriate that the cross-claimants now be left to their remedies in damages, if any, after just allowance is made for the savings gained from player remuneration paid under SL Employment Contracts by News, SLPL and the Franchisees.
The observations made in this Section do not relate to any entitlement to relief which the League or ARL may establish in respect of the allegations of misleading or deceptive conduct, infringement of trade marks and passing off. These claims are yet to be determined and it is possible that the League and ARL may establish an entitlement to relief other than, or in addition to, damages, if they make out their claims.
F. Other Claims
1. Breach of Corporations Law
The cross-claims alleged that the rebel clubs, by aligning themselves with the Super League concept, and with News and the Franchisees, acted inconsistently with their objects, thereby contravening s.162(2) of the Corporations Law. Section 162(2) provides as follows:
"(2) Where:
(a) a company exercises a power contrary to an express restriction on, or an express prohibition of, the exercise of that power, being a restriction or prohibition contained in the company's constitution; or
(b) the memorandum of a company contains a provision stating the objects of the company and the company does an act otherwise than in pursuance of those objects;
the company contravenes this subsection."
The cross-claimants seek to recover loss suffered by them as a result of the rebel clubs' conduct, pursuant to the combined operation of ss.162(8) and 1324 of the Corporations Law. It is to be noted that by s.162(5) an act of a company is not invalid merely because of the contravention; concluded agreements cannot be affected by the contravention and the company is bound by them. The remedy given under s.162(8) to a person whose interests are affected by a contravention is damages. It is this remedy which the cross-claimants seek.
These claims were not dealt with by the trial Judge in his reasons for judgment, perhaps because they were treated as an issue of peripheral importance in light of conclusions reached on other claims. In any event, they are not mentioned in the list of matters in Order 35, stood over for further consideration. The claims raise both factual and legal issues that have not been explored in the submissions of the parties. Consequently, they should be referred back to the trial Judge. In particular there is a question whether the conduct pleaded constitutes conduct otherwise than in pursuance of the objects of the clubs. The rebel clubs, other than Auckland and Canberra, would appear to have a range of objects which are wide enough to include maintaining and fielding a team in a competition run otherwise than by the League.
In the case of a club whose objects do not presently extend to maintaining and fielding a team in another competition, it would be relevant on the issue of damages to explore whether the club has the power to amend its objects, either by omitting that which binds its team to the League's competition, or by adding new objects that permit participation in another competition. The position of each club will require separate consideration, since the evidence of the clubs' constitutions suggest that, in several instances, there is no restriction in the memorandum which purports to limit the power of amendment of the memorandum. In other instances such a restriction appears.
Further questions may then arise as to the proper construction of ss.171 and 172 of the Corporations Law. Section 171(1) provides that the memorandum of a company may only be altered to the extent and in the manner provided by the Corporations Law. Section 172(1) empowers a company, by special resolution, to alter its memorandum, inter alia, by altering, omitting or inserting a provision with respect to the objects of the company. Section 172(2), (3) and (4) provides as follows:
"(2)...if a provision of the memorandum of a company could lawfully have been contained in the articles of the company, the company may, by special resolution, alter the memorandum:
(a) unless the memorandum prohibits the alteration of that provision - by altering that provision; or
(b) unless the memorandum prohibits the omission of that provision - by omitting that provision.
(3) The memorandum of a company may provide that a special resolution altering, adding to or omitting a provision contained in the memorandum, being a provision that could lawfully have been contained in the articles of the company, does not have any effect unless and until a further requirement specified in the memorandum has been complied with.
(4) Without limiting the generality of subsection (3), the further requirement referred to in that subsection may be a requirement:
...
(b) that the consent or approval of a particular person be obtained; or
(c) that a particular condition be fulfilled."
One question is whether the proposed objects of the clubs could have been lawfully contained in the articles: see s.172(2) and (3). Another is the effect of s.172(4)(b) in cases where the consent of the League is required for an amendment to the memorandum.
If there has been a breach of s.162(2) of the Corporations Law it will be necessary to determine whether the League or ARL, which are not members of the clubs, have an interest sufficient in law to constitute either of them "a person whose interests have been ... affected by the conduct", within the meaning of s.1324 of the Corporations Law. Unless they have such interests, they do not have standing to recover damages. This issue, together with the others we have identified, will need to be considered by the trial Judge in the next phase of the case.
2. Intellectual Property Claims, Misleading or Deceptive Conduct and Passing Off
In the first cross-claim, the League and ARL pleaded extensive claims in respect of alleged infringement of intellectual property rights associated with trade marks. They also pleaded that News, SLPL and certain Franchisees had engaged in misleading and deceptive conduct and passing off in respect of the use of names, team symbols, jerseys, colours, personalities, expressions (for example, "Simply the Best") and player groupings. All of these intellectual property rights were said to have been held by or in trust for the League and ARL or the participants in the League Joint Venture (or the Club Joint Venture, which was pleaded as an alternative).
As earlier noted, the trial Judge dealt briefly (at 547-548) with an aspect of the claim. His Honour found that trade marks relating to individual clubs were held by the League under arrangements that were never formalised, although it had been proposed for some years that this be done so as to state expressly the respective rights of the League and the clubs. That proposal was not carried through to completion. His Honour said that the trade marks were put into the name of the League and, over the years, the clubs acquiesced, indeed participated, in this system of control of trade marks. His Honour also considered that the very lack of formality indicated mutual trust and confidence between the clubs and the League, suggestive of a fiduciary relationship.
We deal in detail in Part IV with the issue of whether the League and ARL and the clubs had the requisite degree of mutual trust and confidence to warrant holding that the relationship involved fiduciary obligations. However, it is convenient to address here his Honour's conclusion that the lack of formal arrangements relating to trade marks demonstrates that there was a relationship of mutual trust and confidence between the League and ARL and the clubs.
In our view, this conclusion is not warranted. The trade marks were put into the name of the NSWRL as part of a specific marketing scheme agreed to by NSWRL and the clubs in September 1979. An agreement, specific to the scheme, was reached that the trade marks would be held on behalf of a joint venture constituted by the NSWRL and the clubs as tenants in common in equal shares. That the NSWRL and the clubs considered it necessary to enter into such an agreement, in our respectful view, lends no weight to his Honour's conclusion. This scheme continued, although without being properly documented, until about 1985. At that time, presumably to support the licensing and merchandising agreement with News Publishing, "licensing regulations" were imposed by the League as a condition of the annual admission into the Premiership Competition. That the licensing regulations were imposed in this way also lends no weight to his Honour's conclusion. On the contrary, the evidence shows that the trade marks became registered in the name of the League pursuant to contractual arrangements between it and the clubs.
The League had "control" of the trade marks, as the trial Judge said, but under the licensing regulations. Those regulations say nothing about the rights of a club in respect of marks relating to it, should that club cease to be a participant in the League's competition. The nature of those rights is one of the contentious issues raised on the pleadings by the first cross-claim.
As noted earlier in these
reasons, the trial Judge drew the inference that there was a tacit agreement,
by which the League held the trade marks in trust for itself and for all of the
clubs participating in the competition from time to time. His Honour held that, in the special
circumstances in which the rebel clubs left the competition, it would not be
unconscionable for the League to retain the trade marks. Order 32, which restricts the rebel clubs
from assigning or licensing or authorising the use of the trade marks to or by
News, SLPL or any Franchisee, rests upon this foundation. Order 32 goes further than trade marks, and
extends the restraint to "any name, logo or jersey or colour"
used by any rebel club. In all other
respects the claims for
"intellectual property and misrepresentation issues and relief" were
stood over to a date to be fixed: order 35(f).
Given the limited findings made on the intellectual property and misrepresentation claims, Order 32 ultimately appears to rest on the trial Judge's conclusion that the pleaded League Joint Venture gave rise to fiduciary obligations. As we do not uphold that conclusion, Order 32 must be set aside.
The other bases on which the League and ARL seek relief in respect of the alleged infringement of trade marks, misleading or deceptive conduct and passing off remain to be determined. These claims, along with those relating to the breaches of contract which we consider were established at trial, seem to us to be the causes of action which appropriately address the legal wrongs alleged to have been suffered by the League, ARL and the loyal clubs in the events which occurred.
3. Unjust Enrichment
The first cross-claim also seeks relief for unjust enrichment. In David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, at 378-9, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ referred to unjust enrichment as a concept, not as a definitive legal principle. Their Honours pointed out that recovery for unjust enrichment depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality.
Here, the claim as pleaded advances as qualifying factors the alleged misappropriation by News and SLPL of part or all of the goodwill in the name, team symbols and so on, the subject of the intellectual property, misrepresentation and passing off claims and the alleged misappropriation of assets of the joint venture. Insofar as the pleaded claim for unjust enrichment adds anything to the causes of action separately alleged in relation to the facts on which it is based, it is not dealt with expressly in the reasons for judgment.
Presumably the claim was intended to be one of the matters stood over for determination after the intellectual property, misrepresentation and passing off claims had been dealt with. Insofar as that claim rests on the alleged misuse of joint venture assets, this judgment bears on it. Otherwise the claim remains to be considered, although, for practical purposes, the outcome is likely to be subsumed in the results of the other outstanding claims on which it rests.
G. The Question of Parties
1. The Test
In this Section, we deal with the submission on behalf of the Super League players and coaches that all the orders made on the first cross-claim should be set aside. They argued that, since the players and coaches were not joined, the first cross-claim was improperly constituted. Mr Sackar, on their behalf, relied on what he said was the fundamental rule that all the parties necessary for determining the point in issue must be before the Court: see FCR O.6, r.8(1) and Grovenor v Permanent Trustee Company of NSW Limited (1966) 40 ALJR 329. He submitted that this principle is not affected by FCR O.6, r.7. Rules 7 and 8(1) relevantly provide as follows:
"7(1) A proceeding shall not be defeated by reason of the misjoinder of a party or the non-joinder of any person as a party.
(2) The Court may in any proceeding determine the issues or questions in dispute so far as they affect the rights and interests of the parties.
8(1) Where a person who is not a party -
(a) ought to have been joined as a party; or
(b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon,
the Court, on application by him or by any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceeding."
The League and ARL contended that the Super League players and coaches were not necessary parties who "ought to have been joined" within the meaning of O.6, r.8(1). It was not impossible to do justice between the existing parties to the litigation without the players and coaches being joined. In any event, O.6, r.7 saved the proceedings from being "defeated" by reason of their non-joinder. Furthermore, the players and coaches had received sufficient notice of the proceedings and the remedies sought, but had elected not to take up the opportunity to be joined before trial.
Order 6, r.7 is in terms common to post-Judicature
Act rules of court. The rule is intended to give effect to the abolition of
the plea in abatement: Werderman v
Société Générale D'Électricité (1881) 19 Ch.D. 246, at 251. It has to be understood in the context of the
extended power available following the Judicature Act 1873 (UK) to join,
after the commencement of proceedings,
additional parties who are either parties who ought to have been joined in the
first instance (FCR O.6, r.8(1)(a)), or whose presence before the Court is
necessary in order to enable the Court effectively and completely to adjudicate
upon and settle all matters in dispute in the proceeding: cf FCR O.6,
r.8(1)(b); see Qantas Airways Limited v A
F Liddle Pty Ltd [1981] 2 NSWLR 34 (NSW CA). The post-Judicature Act rules of court
also included provisions of the kind now found in FCR O.6, rr.1 and 2 for the
joinder of multiple claims and multiple parties, either plaintiffs or
defendants, where the subject matter of the proceedings is in respect of, or
arises out of, the same transaction or series of transactions, involving some
common question of law or fact. These
provisions reflect an intention, which now receives more emphasis than in the
past, to avoid where reasonably practicable a multiplicity of proceedings: Montgomery v Foy, Morgan & Co. [1895]
2 QB 321; but see Amon v Raphael Tuck
& Sons Ltd [1956] 1 QB 357, at 378, per Devlin J.
In relation to a rule based on the precursor to FCR O.6, r.8, Lord Diplock, delivering the opinion of the Judicial Committee of the Privy Council in Pegang Mining Co. Ltd. v. Choong Sam [1969] 2 MLJ 52, said this (at 55-56):
"The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.
It has been sometimes said as in Moser v. Marsden [1892] 1 Ch. 487 and in In re I.G. Farbenindustrie A.G. [1944] Ch. 41 that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between `legal' and `commercial' interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?"
An order which directly affects a third person's rights against or liabilities to a party should not be made unless the person is also joined as a party. If made, the order will be set aside. Order 6, r.7 is not directed to that type of situation, but to cases where there is a curable defect, for example the misnaming of a party.
The League relied on the majority decision in Finance Corporation of Australia Limited v. Bentley (9 May 1991, NSW CA, unreported), in support of an argument that O.6, r.7 prevented the proceedings being defeated even if the players ought to have been joined. We do not think this decision is an authority for that proposition. The Court of Appeal heard and determined an appeal in the absence of a person who ordinarily would have been joined as a necessary and proper party. But the case was unusual, as the Court accepted assurances from counsel that the third party's interests would not be affected by the outcome of the appeal. In the special circumstances of that case, the majority of the Court held that it was appropriate to determine the appeal.
There are some classes of case where the ascertainment of the necessary parties who "ought to have been joined" is not difficult. Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest. Grovenor v Permanent Trustee Company of NSW Limited is an example of this class of case. Where the subject matter of the proceedings is not of this kind, the ascertainment of necessary parties who ought to have been joined may be more difficult.
In our opinion, the question should be decided according to the test proposed by Lord Diplock. The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction: see Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317, at 322, per Kirby P. The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential.
Where, before trial, a question arises whether
a necessary party has been joined, attention should be directed to the orders
sought in the proceedings. It is the
effect of the orders upon the third party that must be determined. The test is not whether the conduct of the
third party is raised in the pleadings between the existing parties, or whether
the third party is a party to a contract, the meaning or effect of which is
pleaded as a matter relevant to the ascertainment of the rights between those
parties. Where the question arises after final orders have been made in the
proceedings, the inquiry must be directed to the orders actually made, or
which, on appeal it is
contended should be made: cf. Associated
Grocers Co-operative Limited v. Hubbard Properties Pty Ltd (1986) 42 SASR
321 (S Ct SA/FC), at 341.
2. Non-Joinder of the Players and Coaches
In the present case, insofar as the remedies sought at trial by the League and ARL against News, SLPL and the Franchisees were confined to damages based on unlawful inducement of breaches of the players' and coaches' contracts, the Super League players and coaches were not necessary parties who ought to have been joined. An award of damages against News and the Super League companies would not directly affect the rights or liabilities of the players or coaches. Their non-joinder did not prevent the Court from considering, for the purpose of this part of the claim, whether breaches of players' and coaches' contracts with their clubs had occurred. The position is less clear insofar as the remedies sought injunctive relief and declarations in respect of the pleaded joint venture, which was said to include the benefits of player and coach contracts, and the expectation of player contract renewals. The absence of the players and coaches was a deliberate choice by the League and ARL. As the players and coaches were not joined, the relevance of their non-joinder became a matter of importance when orders were formulated at the conclusion of the trial. They remain matters of importance in the formulation of the orders that are to operate between the parties in consequence of the judgment of this Court.
In our opinion, the notice given to the players before trial does not, and could not, extend the jurisdiction of the Court to make orders which offend the test stated in Pegang Mining. Absent an application for joinder by a defendant, or by a third party who claims to be directly affected by the proposed orders, it is for the party prosecuting the proceedings to choose who are the necessary parties to enable the Court to make the orders sought. Generally speaking, to permit that party to transfer to others who might be affected by the outcome of the proceedings the responsibility of deciding whether or not they should apply to be joined could be productive of uncertainty and inconvenience. At times, it could lead to the need to halt expensive litigation part- way through, because a third party insufficiently understood the proceedings, or, through impecuniosity or some other reason, was not adequately advised. The present case demonstrates the potential difficulty.
On 1 August 1995, solicitors for the League and
ARL suggested to the solicitors for News that a representative of the players
should be joined. The solicitors for
News did not agree. On about
10 August 1995, the League's solicitors sent to each of the players a copy of
the orders then sought in the first cross-claim. The letter said:
"We act for the ARL, and the NSWRL and all of the Football Clubs who remain aligned with the ARL/NSWRL in the legal proceedings against News Limited, Star League Pty Limited, franchisees and Football Clubs who have aligned themselves with News Limited. In those proceedings our clients intend to ask the Court to make a number of orders which could have an affect on you.
We enclose a copy of the orders sought in those proceedings. We draw your attention in particular to the orders which would prevent Star League and the franchisees from either conducting or participating in:
1. Any rugby league competition in which any player who has been released from a NSWRL Player Contract participates; or
2. Any competition in which a team participates which includes more than four players who are presently playing together in the same team.
There are other orders which could possibly affect you, including the `further or other orders' which the Court is empowered to make in the proceedings.
Obviously, you should take your own legal advice on the implications of any of the orders that might be made in these proceedings on your own position. We emphasise that the ARL/NSWRL is not seeking any orders against any player. Whether or not you are content to leave the matter in the hands of the lawyers who are representing News and its associated clubs, is a matter for you. If you or any other players wanted to approach the Court in order to make submissions as to what orders should be made in the case, our clients would not oppose any such application." [Emphasis added.]
No response was received and the action proceeded without the players being joined as parties. It also proceeded without the coaches, to whom the letter was not sent.
The orders sought in the proceedings, read
without the pleadings that preceded them, gave an inadequate description of the
scope and possible effect of the orders sought.
They were not likely to be readily understood by people without legal
training. The sentence to which the
letter gave emphasis had the potential to give comfort to the players that no
action on their part was necessary. In
particular, the copy of the orders sought, which was enclosed with the letter,
failed to give notice of Orders 12(a), 15, 15A and 15B, which were ultimately
made. These orders directly affect the
Super League players' and coaches' rights against, or liabilities to, their
Super League employers. They do so in a
way that restricts their freedom to choose the employer for whom they would
work: cf. Nokes v Doncaster Amalgamated
Collieries Limited [1940] AC 1014, at 1020, 1026; Adamson v New South Wales Rugby League Ltd (1991) 31 FCR 242
(FCA/FC), at 267, per Wilcox J. This is
likely to be a matter of fundamental importance, at least to many of them. In our opinion, these orders do in a direct
and substantial way affect the obligations and rights of the players (some of whom
were not subject to player contracts with any of the clubs when they signed
Super League employment contracts) to and against parties to the first cross
-claim. The same applies to the
coaches.
In our opinion, the non-joinder of the players and coaches, to the extent that orders made did so affect them, is not cured by the fact that they were permitted to make submissions after the delivery of judgment to the trial Judge as to the form of the orders. By that stage, they had been deprived of the opportunity to participate in the trial of the issues that had already been determined in a way that the trial Judge thought required redress in terms of the orders made. It follows that, regardless of whether Orders 12(a), 12(b), 15, 15A and 15B should be set aside on other grounds, they should be discharged by reason of the failure of the cross-claimants to join the Super League players and coaches in the proceedings.
H. Summary
In summary, we consider that the League and ARL, under the first cross-claim, have established that each of the rebel clubs was in breach of the implied term in the 1995 competition contract to do all that was reasonably necessary to enable the 1995 competition to be carried on in a manner that allowed the League and ARL to receive the benefit which the national competition was intended to achieve for them. At trial, the fact of the breaches was established only in broad terms. Upon the resumption of the hearing before the trial Judge it will be necessary for the League and ARL to identify in relation to each rebel club against which an award of damages is sought, the conduct of that club which constituted a breach. It will also be necessary to show how the breach caused loss, and to quantify the loss having regard to the conclusions reached by this Court. We have referred briefly to the question of damages in Section E of this Part.
The League and ARL have also established against News, SLPL and the Franchisees that they unlawfully induced each of the rebel clubs to break the 1995 competition contracts. The losses resulting to the League and ARL from these breaches will provide the measure of damages for the unlawful inducement.
These claims by the League and ARL against the
rebel clubs, and against News, SLPL and the Franchisees, based on the breaches
of the 1995 competition contracts, involve claims for losses arising from the
failure of the clubs to fulfil obligations owed to the League and ARL. However, in the claims for unlawful
interference, which remain to be determined, the League and ARL seek to recover
losses alleged to arise from the non-fulfilment of contractual obligations owed
to third
parties, in particular by players to their clubs under cll.10 and 26 of the
Playing Contracts, and by club officials to their clubs. Losses suffered by the employer clubs may not
be a guide to the losses, if any, suffered by the League or ARL. Losses suffered by the League and ARL could
arise quite independently of loss to an employer club.
In the second cross-claim, allegations similar to those in the first cross-claim were made as to breach of contract by the rebel clubs of obligations owed to the League and ARL; inducement of those breaches by News, SLPL and the Franchisees; and unlawful interference with the undertakings and activities of the League, the ARL and the League Joint Venture. In the alternative, it was pleaded that News, SLPL and the Franchisees unlawfully interfered with the undertakings and activities of the Club Joint Venture. As we have not upheld the allegations pleaded as to the existence of the League Joint Venture or the Club Joint Venture, it is difficult to envisage how the loyal clubs themselves could have claims for damages arising out of these matters. The entitlement of the loyal clubs to damages for those of the allegations in the second cross-claim which are made out was not addressed by the trial Judge and is an aspect of the case which remains to be decided by the trial Judge.
The claims in respect of misleading or deceptive conduct, infringement of trade marks, passing off and unjust enrichment remain to be determined.
IV. THE CLAIMS BASED ON BREACH OF FIDUCIARY DUTY
A. The Pleadings
1. The First Cross-Claim
The first cross-claim, as amended, pleaded that the relationship between the League and ARL, and the twenty clubs and each of them, was and at all material times had been
"a mutual association or joint venture for the carrying out and fulfilment of the respective objects of the NSWRL, the ARL and the Football Clubs, and for the well-being and advancement of the game of rugby league in Australia under the aegis of the ARL and NSWRL and for the mutual benefit of the ARL, NSWRL and the Football Clubs and the conduct and furtherance of the mutual association or joint venture has involved and required mutual trust and confidence between ARL, NSWRL and the Football Clubs (`the League Joint Venture')." (Para.24.)
The participants in the League Joint Venture, as pleaded, were the League, ARL and the clubs (para.25).
The League Joint Venture was said to have come about by reason of:
l the terms of the constitutions of the League, ARL and the clubs;
l the terms of the Commitment and Loyalty Agreements;
l the activities of the League and ARL over decades in organising, fostering and promoting rugby league (including at levels below that of the Premiership Competition); conducting marketing campaigns, negotiating sponsorship and merchandising agreements and the sale of television and broadcasting rights; distributing revenues and otherwise financially assisting the clubs; and providing referees and officials and a forum for adjudicating on the rules and relationship among clubs; and
l the activities of the clubs in organising and promoting the game in their various districts; organising marketing campaigns; financially assisting and directing rugby league at levels below that of the Premiership Competition; supporting the expansion of the Premiership Competition; and providing financial and administrative assistance to each other.
Each of the clubs, by reason only of its
participation in the League Joint Venture, had acquired the capacity to
participate in the highest quality competition and had obtained a nucleus of
players
who had become associated in the public mind with that club and its district
(para.26). Each club had also obtained a
reputation for its capacity to participate in the competition and had acquired
substantial property, including contractual arrangements with coaches and
players.
The cross-claimants alleged that, because of the matters pleaded, each of the clubs owed fiduciary duties to the other participants in the League Joint Venture. These duties were pleaded in broad terms as follows (para.27):
"(a) to act in good faith and loyalty to the participants in the League Joint Venture for the purpose of ensuring the maintenance and enhancement of the Premiership Competition and national Competition, its standards, quality and reputation, for the mutual benefit of the participants in the League Joint Venture.
(b) not to do or permit to be done any act or thing which might adversely affect or derogate from the standards, quality and reputation of the Premiership Competition and national Competition, and its maintenance and enhancement, for the mutual benefit of the participants in the League Joint Venture;
(c) to make full and proper disclosure to the other participants in the League Joint Venture of all matters of importance to the League Joint Venture;
(d) not to place itself in a position where its duties to the other participants in the League Joint Venture conflict with its own interests;
(e) not to acquire a private advantage at the expense of the League Joint Venture;
(f) not to utilise its capacity and reputation referred to in paragraph 26 hereof otherwise than for the benefit of the League Joint Venture; and
(g) to apply its property towards the fulfilment and achievement of the objects of the League Joint Venture."
It should be noted that the duties pleaded in para.27(f) and (g) would have the consequence that the "capacity and reputation" and property of the clubs could only be applied for the benefit of the League Joint Venture, and not for each club's own purposes.
The cross-claim further alleged that the principal officials of each club, including the first grade coach, owed a duty of fidelity to his employer or to the League Joint Venture, to the effect that the official was not to inflict harm on his employer or the League in the furtherance of his own interests or those of any other person (para.28). That duty was said to have been held in trust for the League Joint Venture (para.29). Further, representative players owed similar fiduciary duties to the League and ARL and to the League Joint Venture. The League and ARL held the benefit of those duties in trust for the League Joint Venture (para.31).
The rebel clubs were alleged to have breached the fiduciary duties owed by them to other participants in the League Joint Venture, inter alia, by (paras.37, 39, 42):
l assisting News, SLPL and the Franchisees to solicit players and coaches for the Super League competition and to promote that competition;
l taking up shareholdings in the Franchisees;
l releasing players from their employment contracts, in order to allow them to participate in the proposed Super League competition;
l inducing representative players to breach their duties of fidelity to the League and ARL; and
l failing to disclose to participants in the League Joint Venture the existence and nature of the Super League proposals; entering into confidentiality agreements with News, SLPL and the Franchisees.
Certain officials of the rebel clubs were also said to have assisted News and its associated companies to engage in conduct relating to the promotion and development of Super League (para.41).
The conduct of News, SLPL and the Franchisees was alleged to have constituted (inter alia) inducements to breach, or knowing participation in the breach of the fiduciary duties owed by the clubs to the other participants in the League Joint Venture (para.47). Their conduct also constituted inducements to breach, or knowing participation in the breach of duties of fidelity owed by certain officers of the rebel clubs and by certain representative players.
The cross-claim pleaded that certain property and assets were held in trust for the League Joint Venture. These included the contractual rights arising under the player contracts; the duties of fidelity owed by club officials to the club; the capacity and reputation of the clubs relating to the Premiership Competition; and various forms of intellectual property (para.50). These assets and property rights were referred to as the "League Joint Venture Trust Property".
It was said that, by reason of their activities
in relation to Super League (including alleged infringements of trade marks and
other intellectual property rights), News, SLPL and the Franchisees knowingly
received or acquired the League Joint Venture Trust Property (para.51). Furthermore, News and the Super League
companies had engaged in conduct which was
unconscionable or, alternatively, objectively dishonest (para.52A).
2. The Second Cross-Claim
The second cross-claim repeated the allegations made in the first cross-claim. However, the second cross-claim also alleged, in the alternative, that the relationship between each of the clubs was a mutual association or joint venture, operating through the vehicle of the League and ARL for the benefit of the clubs (para.24(b)). This was described as the "Club Joint Venture". The participants in this joint venture were said to have been the clubs (para.25(b)).
B. The Judgment Below
1. The Reasons
The trial Judge dealt with the case put by the League and ARL on breach of fiduciary duty towards the end of his judgment (543-548). His Honour dealt with the issues relatively briefly, although plainly some of his earlier findings and conclusions played a part in his reasoning process.
The trial Judge commenced by referring to the "joint nature of the activities of the clubs and the League in the sporting association" that had commenced under the name "Rugby League" (543). Earlier, the trial Judge had expressed the conclusion (at 510) that:
"... [f]rom the beginning, the rugby league competition ... was a joint activity of the predecessor of the League, or of the League, and the clubs which had been admitted to the competition at any particular time."
His Honour had also referred to some United States authorities which had "affirmed" the joint nature of the activities in a sporting association (at 510-512).
The trial Judge then quoted from the judgments of the members of the High Court in United Dominions Corporation Limited v Brian Proprietary Limited (1985) 157 CLR 1. Since these passages were repeatedly referred to in argument, it is convenient to set them out here. However, before doing so, the context in which that case was decided should be noted.
UDC v Brian involved "two distinct but related `joint ventures'", concerning the development of certain land as a hotel and other land as a shopping centre. The first venture was subsequently abandoned by the participants. The joint venturers included SPL (the promoter), UDC (which was the major financier) and Brian. The issue confronting the Court was whether UDC was entitled to retain the whole of the proceeds of sale by reason of a collateralisation clause which, unknown to Brian, was contained in each of the three mortgages executed by SPL in favour of UDC to secure borrowings for the joint venture. The effect of the clauses was that the land was mortgaged to secure not only borrowings for the joint venture, but all amounts advanced by UDC to SPL for unrelated purposes.
The High Court was unanimous in holding that UDC owed fiduciary duties to Brian at the time the mortgages were executed and that the mortgages, to the extent that they authorised UDC to retain Brian's share of the surplus, were executed in breach of those duties. Each judgment addressed the circumstances in which a joint venture will give rise to fiduciary obligations. Mason, Brennan and Deane JJ, in their joint judgment, said this (at 10-11):
"The term `joint venture' is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots' law, `adventure') will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a `joint venture' and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other. One would need a more confined and precise notion of what constitutes a `joint venture' than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one: but cf. per Cardozo C.J., Meinhard v. Salmon (1928) 249 N.Y. 458, at [464]; 164 N.E. 545, at 546. The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship: see, generally, Birtchnell v. Equity Trustees, Executors & Agency Co. Ltd (1929) 42 C.L.R. 384 at 407-409."
Gibbs CJ said (at 7-8):
"Although it is not easy to attempt to define the circumstances in which a fiduciary relationship will be found to exist (see the discussion in Hospital Products Ltd. v. United States Surgical Corporation (1984) 156 C.L.R. 41 at 67 ff.) there was, in the circumstances of the present case, a relationship between U.D.C. and Brian based on the same mutual trust and confidence, and requiring the same good faith and fairness, as if a formal partnership deed had been executed."
Dawson J, who agreed with the joint judgment, rested the existence of fiduciary duties in a joint venture primarily on mutual trust and confidence between the participants (at 15-16):
"Perhaps in this country, the important distinction between a partnership and a joint venture is, for practical purposes, the distinction between an association of persons who engage in a common undertaking for profit and an association of those who do so in order to generate a product to be shared among the participants. Enterprises of the latter kind are common enough in the exploration for and exploitation of mineral resources and the feature which is most likely to distinguish them from partnerships is the sharing of product rather than profit. It is, however, unnecessary to pursue that matter here.
Although the relationship between participants in a joint venture which is not a partnership will be governed by the particular contract rather than extrinsic principles of law, the relationship may nevertheless be a fiduciary one if the necessary confidence is reposed by the participants in one another. Of course, in a partnership the parties are agents for each other and this may constitute a separate reason for the fiduciary character of a partnership. There may be no such agency between participants in a joint venture but, as Dixon J. pointed out in Birtchnell v. Equity Trustees, Executors & Agency Co. Ltd. (1929) 42 C.L.R. 384, at 407-408, even in a partnership it is really the mutual confidence between partners which imposes fiduciary duties upon them and the same confidence may, in appropriate circumstances, be found to exist between participants in a joint venture."
The trial Judge considered that the circumstances in which the League, ARL and the clubs combined to produce the competition satisfied the test of mutual trust and confidence (at 544-545):
"It seems to me that mutual trust and confidence, in pursuit of jointly held objectives in order to generate a product to be shared among the participants, each of whom will have contributed, is a description of the situation of the League and the clubs which matches what their Honours said in United Dominions Corporation Limited v Brian Pty Ltd. The clubs were indeed constituted with a view to their playing the competition controlled by the League. Most of them reposed in it the power of ultimate control over the form of their own memoranda and articles of association, and it admitted them, by their representatives, to become its members with a predominant voting power within the League. Mutual trust could scarcely go further. Their interdependence, from the point of view of their sporting enterprise, has been sufficiently emphasized in passages I have quoted from some of the United States cases. It includes, in the case of the League, the equal sharing among the clubs of substantial amounts distributed by the League, and the arrangements with respect to merchandising which involve both the clubs and the League. The mutuality of the enterprise was evidenced by a number of witnesses, whose evidence I accept, who spoke of the assistance rendered by one club to another when problems were encountered, and of course there were grants and other forms of assistance given by the League to clubs. The very admission of new clubs was a great form of assistance to the promotion of rugby league in their areas, as they were admitted without any payment for the accumulated benefit of the prestige, goodwill and substantial assets involved in the competition. Trade marks relating to individual clubs were held by the League under arrangements that were never formalised, the very lack of formality of which indicated the mutual trust involved.
Mutual reliance also extends to a wide range of activities that are fundamental to the continuance of rugby league. Each of the League and the various individual clubs is responsible, in various ways, for the promotion of the game among the young and the development and maintenance of junior competitions. Activities of joint concern include the revision of rules, the scheduling of competitions, the appointment and training of referees, the system of control over player infractions of the rules, and the arrangements for interstate and international competition."
His Honour held (at 545), that the fact that clubs had dropped out of the competition over the years and others had joined was not inconsistent with a joint enterprise. Changes were inevitable and, indeed, partnerships, the paradigm of fiduciary relationships, frequently had fluctuating membership.
The trial Judge accepted the submission of the League and ARL that, where property committed to a joint venture is vested in the name of a particular participant, it is held on trust for all joint venturers (at 545). The clubs had rights in respect of grounds (which extended well beyond one year), goodwill intermittently associated with the League-controlled competition and contractual rights conferred by long-term contracts with players. It was unconscionable, or contrary to equitable principles, for the rebel clubs to retain for their own benefit, or to pass over to a Super League company, assets acquired by them for the purposes of the joint venture. It was also contrary to principle for them to utilise the material resources, expertise, goodwill and assets made available to them by virtue of their participation in the joint venture.
His Honour cited in support of these conclusions the observations of Deane J in Muschinski v Dodds (1985) 160 CLR 583, at 619-620, and of Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner (1987) 164 CLR 137, at 148. It should be noted, however, that neither of these cases involved a partnership or contractual joint venture. Deane J in Muschinski v Dodds, at 618 ff, relied on the particular rules applicable to the premature dissolution or collapse of a partnership or joint venture, as illustrative of a more general principle of equity. That principle prevents a person exercising a legal right, in the context of domestic relationships, where to do so would constitute unconscionable conduct. The same principle was applied in Baumgartner v Baumgartner, to support the imposition of a constructive trust where it was unconscionable for one party to a de facto relationship to claim the whole entitlement to property purchased with pooled funds provided by both parties.
The trial Judge concluded (at 546) that the rebel clubs had breached their fiduciary obligations when they joined with Super League. They had dismantled their own operations and set about deliberately arranging the effective transfer of assets held by the joint venture to the new corporate venture.
"They were not merely leaving one competition to join another, but hastily, and with high-handed disregard of the rights of the League and of other clubs, transferring all the joint assets that were within their control to the Superleague companies. They were facilitating what was frankly acknowledged to be an attempt to substitute the Superleague competition for the joint venture's competition, thus in effect taking it over."
His Honour then cited Royal Brunei Airlines Sdn Bhd v Philip Tan Kok Ming [1995] 2 AC 380 (PC), for the proposition that a third party who dishonestly assists a trustee to commit a breach of trust, or who procures the trustee to do so, is liable to the beneficiary for the loss so occasioned, on the basis of that party's own dishonesty.
News and the Super League companies had acted, in the relevant sense, with dishonesty (at 547):
"They knew the circumstances out of which the relevant legal conclusions arise; and the extraordinary steps taken, culminating in comprehensive indemnities, provide powerful evidence from which full knowledge may be inferred. ... Bearing in mind the detailed investigations and the meticulous planning undertaken by News Limited, to which I have previously referred, the Court would be shutting its eyes to the obvious if it did not conclude that News Limited and those involved on its behalf, and in association with it, were well aware of all the aspects of the situation which created fiduciary obligations. If anything more were needed, the extreme secrecy preserved even after the plan had been put into execution, and during its execution, extending to unusual confidentiality clauses and the encouragement of players to dissemble their involvement, suggest an awareness that injunctive relief might have stopped everything in its tracks had the true position been made known in time. Among many indications of the knowledge of those involved is the presentation Mr Smith made in February to the League, recognizing as it did the organic unity of the League and the clubs, and the heritage they had received from their past joint activities."
Finally, as we have already noted in Part III, the trial Judge briefly addressed the issue presented by the trade marks which were registered in the name of the League. While there was a proposal to document an allocation of rights between the NSWRL and the clubs, the proposal had simply lain "fallow". But the clubs had acquiesced in a system in which the League controlled the marks. His Honour said this (at 548):
"In my opinion, the proper inference is that there was a tacit agreement by which the League held the trade marks in trust for itself and all the clubs participating in the competition from time to time, and on the basis that the League would have a power of control over their use. In the special circumstances in which the clubs aligned with News Limited left the competition, it would not be unconscionable, within the meaning of the principle stated by Deane J. in Muschinski v Dodds, for the League to retain the trade marks."
2. Relief
Because the trial Judge has not published
reasons for making the orders giving effect to his judgment, it is not easy to
ascertain precisely which orders were based, in whole or in part, upon the
finding that the clubs had breached their fiduciary duties to the League and
ARL and that
News and the Super League companies dishonestly assisted or procured the clubs
to breach their fiduciary duty. The ARL
and League, however, identified in their submissions the following orders as
resting, in whole or in part, on those findings: Orders 2, 3, 4, 5, 6, 7, 8,
8A, 9, 10, 11, 12, 13, 14, 15, 15A, 15B, 16, 17, 18, 19, 21 and 22.
C. The Argument
1. The Scope of the Argument
In ascertaining whether a claimant is entitled to relief by reason of an alleged breach of fiduciary duties, it is necessary to address a number of questions: see J.R.F. Lehane, "Fiduciaries in a Commercial Context" in P.D. Finn, Essays in Equity (1985), at 96:
– Is the person said to be a fiduciary actually subject to any fiduciary obligations owed to the applicant?
– If so, what is the scope of those obligations? More specifically, were the acts or omissions of the fiduciary within the scope of the obligations?
– If it is contended that the claimant consented to the actions (or inaction) of the fiduciary, was informed consent given by the applicant?
– Assuming breach of duty is established, what relief should be granted to the claimant?
Most argument on the appeal centred on the
first question, namely, whether the clubs owed fiduciary duties to the other
participants in what was pleaded as the "League Joint Venture". Despite the voluminous submissions,
relatively little attention was paid to the scope of the duties which were
owed, assuming that the finding that the League Joint Venture involved
fiduciary relationships was upheld. The
League and ARL relied on the broad fiduciary duties pleaded in para. 27 of the
first cross-claim, which appear to have been accepted by the trial Judge as
incidents of the League Joint Venture.
The League and ARL did not formulate any alternative, narrower version
of any fiduciary duties said to be owed by each club to the League and ARL and
to other clubs. Perhaps not
surprisingly, News and the appellant clubs also concentrated their
attention on the issue of whether fiduciary relationships existed. No doubt they did not see it as part of their
role to suggest an alternative formulation of any fiduciary duties that might
have been owed by the clubs to the League and ARL.
Argument was also directed to the scope and form of the orders made by the trial Judge. These arguments, in so far as they involved fiduciary principles, were influenced by the respective submissions as to the existence of fiduciary duties. The League and ARL, for their part, supported the very broad duties pleaded and contended that they justified the sweeping relief granted by the trial Judge. News and the appellant clubs disputed the existence of fiduciary relationships and thus the entitlement of the League and ARL to relief based on those duties. We have already made observations on some of the orders, in Part III of this judgment.
2. The League and ARL's Submissions
The League and ARL relied on the reasoning in UDC v Brian to support both the existence of fiduciary relationships and the scope of the fiduciary duties pleaded in the cross-claims. The League and the clubs had joined together to pursue a common object. Each participant in the venture had pursued the group purpose, for mutual benefit, at the expense of the immediate interest of the individual clubs. Accordingly, the property acquired by the League and the clubs had been dedicated to the common goal. It followed that the key elements identified in the joint judgment of Mason, Brennan and Deane JJ and in the judgment of Gibbs CJ in UDC v Brian were satisfied.
More specifically, the League and ARL identified a number of overlapping factors that pointed to the existence of fiduciary relationships. First, the League and the clubs were joined together in the common undertaking of promoting and fostering rugby league and conducting a successful competition. From the very beginning, the clubs were required to observe and pursue common purposes with the NSWRL, a proposition demonstrated by their constitutions and, after incorporation, the terms of their memoranda and articles of association. The clubs had no other raison d'etre, except to participate in the competition and foster the game under the auspices of the NSWRL and, later, the League.
Secondly, the relationship among all
participants was co-operative. Each
contributed money, property and skill to ensure the success of the competition
and the development of the game. The
League provided the administrative support, financial skill, overall direction
and dispute resolution machinery. The
clubs provided the competitive teams and promoted the game locally.
Thirdly, all participants were obliged to apply their funds to the common purpose. They did not deal with each other on a purely commercial basis. This was shown, for example, by the admission of clubs into the competition without payment for goodwill. Moreover, each of the clubs was constituted as a non-profit organisation. There was therefore no reason to display the reticence towards the creation of fiduciary relationships that had motivated the majority in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. The clubs and the League had shown mutual reliance and interdependence in pursuing the common (non-commercial) purposes. There were commercial objectives, but these were subservient to the larger purposes of the undertaking.
Fourthly, the funds generated by the joint undertaking had been shared. The League shared revenue among the clubs, while needy clubs were supported and funds were provided for the development of the game.
Fifthly, the League was effectively the `managing participant' entitled to be indemnified against losses. Its memorandum, cl.3(l), gave it the right to raise money from the clubs. It had always exercised the right to licence the televising of games and had undertaken other revenue-raising activities.
Sixthly, the policy of the joint enterprise was ultimately a matter for joint decision, through the processes of the League. The clubs reposed in the League the power of ultimate control, in that it could ultimately determine the form of their memoranda and articles of association. The League was also entrusted with a power to determine which clubs would enter the competition. Yet the League reposed trust in the clubs as well, by admitting them (through their representatives) to the League and entrusting them with predominant voting power.
Seventhly, the League Joint Venture was a
"web of interdependence and reliance". The League and the clubs relied on each club
in the competition to engage personnel and maintain competitive teams. The League performed the role of a central
organising body. All parties co-operated
in generating interest in the game, thereby producing ever increasing revenues
through gate receipts, sponsorships and the sale of broadcasting rights. The clubs trusted the League to negotiate
contractual arrangements with third parties, including television rights and
the exploitation of trade marks. The
relationships could not be comprehensively reduced to contractual form.
Eighthly, the clubs were required to use their assets only for the purposes of the joint venture. The League and ARL relied on the passages from Muschinski v Dodds, per Deane J at 620, and Baumgartner v Baumgartner, at 148-149, to which we have already referred, to support the proposition that the other parties to the joint venture could require property to be applied for the purposes of the joint endeavour. This included the clubs' goodwill, which was to be used only in connection with the competition. Similarly, the player contracts had the "indelible stamp" of the League and the clubs were bound to employ those rights for the benefit of the competition. The written submissions of the League and ARL contended that the clubs held property rights, in the form of player and coach contracts, ground leases and licences, interests in names, logos and colours and rights against officials, in trust for the joint venture. In his oral submissions, Mr Ellicott accepted that individual clubs could leave the competition, but submitted that they could not apply their assets to any purpose other than the advancement of the national competition. Unless this was so, a club would have the power to destroy or diminish the value of the competition by applying its assets to an alternative competition. This demonstrated the vulnerability of the joint venturers to the actions of the rebel clubs.
Finally, the League and ARL anticipated the principal arguments against the existence of fiduciary relationships, by submitting that there was an assumption of continuity underlying the relationship between the parties to the League Joint Venture. They conceded that there was an annual admission process for clubs to be admitted to the competition. But this was for the protection of the joint venture, since it was designed to ensure that all participants met the requisite standards. Co-venturers, like partners, are concerned with the financial stability of each other. The clubs themselves assumed that they would have a long-term contractual commitment to the competition and accordingly entered into long term arrangements with respect to such matters as leases and licences of grounds and sponsorship arrangements.
D. Fiduciary Duties
1. The Fiduciary Principle
A learned commentator has remarked that
"fiduciary" has become the "peripatetic adjective": P.D.
Finn "The Fiduciary Principle" in T.G. Youdan (Ed.), Equity,
Fiduciaries and Trusts (1989), at 1.
By using that phrase, Professor Finn (as he then was) expressed concern that
the fiduciary concept is frequently applied by the courts of common law
countries in circumstances where it is unnecessary or inappropriate to do
so. That view has gained currency, as
courts and commentators resort to other equitable doctrines, such as
unconscionable conduct and estoppel, to provide relief in lieu of an
"over-ready tendency to reach for the amplitude of [the] fiduciary
remedy": Woodson (Sales) Pty Limited
v Woodson (Australia) Pty Limited, (12 July 1996, S Ct NSW, Santow J,
unreported). To the same effect see A.F.
Mason, "The Place of Equity and Equitable Remedies in the Contemporary
Common Law World" (1994) 110 LQR
238, at 248.
The overreach of the fiduciary principle helps to explain an earlier extra-judicial comment by Sir Anthony Mason, that the "fiduciary relationship is a concept in search of a principle": A.F. Mason, "Themes and Prospects" in P.D. Finn (ed.), Essay in Equity (1985), at 246. The comment also reflects the difficulty of formulating a comprehensive principle suitable for application to very different relationships, operating in very different circumstances and for different purposes.
This difficulty was acknowledged by Gibbs CJ in Hospital Products v USSC. His Honour noted (at 68) that the authorities contain much guidance as to the duties of one who is in a fiduciary relationship, but provide no comprehensive statement of the criteria by which the existence of such a relationship may be established. Of course, as his Honour recognised, there are classes of persons who normally stand in a fiduciary relationship to one another. These include trustee and beneficiary; solicitor and client; principal and agent; director and company; employer and employee; and partners. Although "[t]here is no reason to suppose that these categories are closed", the Chief Justice thought that it was not (at 69):
"fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist."
The fact that the situation in the present case
- the conduct of a sporting competition and associated activities by the
League, ARL and the clubs - does not fit within any clearly established
category of fiduciary relationships is not necessarily a barrier to fiduciary
duties being imposed. UDC v Brian clearly demonstrates that
undertakings described as "joint ventures" may attract fiduciary
duties. And this is so notwithstanding
the reluctance of the majority in Hospital
Products v USSC to apply fiduciary principles to "purely commercial
transactions", at least in the context of a contractual arrangement
between a supplier of goods and its distributor (156 CLR at 70, 118, 149). Business relationships (leaving aside
partnerships) clearly can attract fiduciary obligations. The categories are not mutually exclusive: Kelly v C A & L Bell Commodities
Corporation Pty Ltd (1989) 18 NSWLR 248 (NSWCA), at 258.
As McPherson J has said (also in an extra-judicial capacity), equity is less concerned with the classification of the relationship between the parties (for example, partnership, association or joint venture) than with the substance of the relationship. In particular, it is concerned with whether the relationship is founded on "mutual trust and confidence" in a relevant sense: B H McPherson, "Joint Ventures" in P D Finn, Equity and Commercial Relationships (1987), at 35-36. There is much to be said for the proposition that the "commercial" character of a transaction, of itself, is of little relevance to ascertaining whether a fiduciary relationship exists between the parties. The critical question is whether the transaction satisfies criteria which justify characterising the relationship between the parties as fiduciary: J.R.F. Lehane, supra, at 104; cf. Hospital Products v USSC, at 122-123 per Deane J.
The duties owed by a fiduciary are usually stated in broad terms. In Chan v Zacharia (1984) 154 CLR 178, Deane J set out the principle governing a fiduciary's liability to account as follows (at 199):
"Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee".
See also Phipps v Boardman [1967] 2 AC 46, at 123-124, per Lord Upjohn. The language used by Deane J is reflected in the terms in which the fiduciary duties said to be owed by the clubs are pleaded in para.27 of the first cross-claim.
It is important to appreciate that the
existence of a fiduciary relationship does not determine the content of
the duties owed by one fiduciary to another.
It has long been recognised that the nature and extent of the duties
depend on the circumstances surrounding the particular relationship and the
context in which relief is sought: Re
Coomber; Coomber v Coomber [1911] 1 Ch 723, at 728-
729, per Fletcher Moulton LJ; Hospital
Products v USSC, at 69, per Gibbs CJ; at 102, per Mason J; Mabo v Queensland (No.2) (1992) 175 CLR
1, at 204, per Toohey J. For example, to
accept that the participants in a particular joint venture owe fiduciary
obligations to each other does not necessarily mean that all obligations
ordinarily incidental to recognised classes of fiduciary relationships will
apply: Kelly v Bell Commodities, at
258. In particular, in a relationship
constituted by contract, the nature of the fiduciary obligations owed by the
parties - and indeed whether there are any fiduciary obligations at all - may
be determined by the terms of the parties' agreement: Hospital Products v USSC, at 102, per Mason J; Noranda v Lachlan Resources NL (1988) 14 NSWLR 1 (S Ct NSW/Bryson
J, at 15-17). As Dixon J observed in a
frequently cited passage in Birtchnell v
Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384, at 408, the
subject matter over which fiduciary obligations extend is determined by the
character of the venture or undertaking, and this is to be ascertained both from the express agreement
of the parties and the course of dealing actually pursued by them.
2. The Indicia of Fiduciary Relationships
In the absence of a single test of a fiduciary relationship, it is useful to distinguish between two kinds of relationships: G M D Bean, Fiduciary Obligations and Joint Ventures (1995), at 117. The first has been described by Dr Bean as a "vertical" relationship, such as principal and agent or employer and employee. The second is a "collaborative" or "horizontal" relationship, such as a partnership or joint venture. The criteria to be applied in determining whether the relationships are fiduciary in character will not necessarily differ in each case. However, the significance of a particular criterion may vary, depending upon whether the relationship is "vertical" or "horizontal". For example, although the notion of mutual trust and confidence can be applied to certain vertical relationships which are clearly fiduciary in character, it is perhaps more readily applied to collaborative undertakings. Similarly, it may be easier to apply the notion of a party undertaking to act solely in the interests of another where the relationship between them is vertical. A horizontal relationship is more likely to involve an undertaking, actual or imputed, that the parties act only for their mutual advantage.
UDC
v Brian was a case involving a collaborative or horizontal
arrangement. In a passage already cited,
Mason, Brennan and Deane JJ specifically rejected the stringent view, expressed
by Cardozo CJ in Meinhard v Salmon
(1928) 249 NY 458; 164 NE 545, that "[j]oint adventurers, like copartners,
owe to one another, while the enterprise continues, the duty of the finest loyalty"
(NY at 464, NE at 546). The most that
can be said is that whether or not the relationship between joint venturers is
fiduciary depends upon the form of the particular joint venture and the content
of the obligations the parties have undertaken: UDC v Brian at 11.
The critical features of the arrangement in UDC v Brian which, according to the joint judgment, created fiduciary relationships were these: the participants were joint venturers in a commercial enterprise with a view to profit; profits were to be shared; the joint venture property was to be held on trust; the participants indemnified the managing participant against loss; and the policy of the joint enterprise was a matter for joint decision. In short, the relationship exhibited all the indicia of a partnership: 157 CLR at 11. Thus the joint venturers owed to each other the ordinary duties of partners. Moreover, their Honours held (at 12) that the "mutual confidence and trust" which underlie most consensual fiduciary relationships, applied to the prospective joint venturers, even before the precise terms of the arrangement had been settled. The joint judgment continued (at 12-13):
"In so far as Brian was concerned, it was a fundamental element of the substratum of the fiduciary relationship that then existed that the subject land, which was being purchased with joint venture funds for joint venture purposes, would be held available to be devoted to any ensuing joint venture or joint ventures and that Brian, as an accepted joint venturer who had already made financial contribution towards the proposed hotel joint venture, was and would remain able to participate in the net profits in accordance with its share in the relevant joint venture. To transpose the words of Dixon J in Birtchnell (at 407-408), the participants in each of the then proposed joint ventures were `associated for ... a common end' and the relationship between them was `based ... upon a mutual confidence' that they would `engage in [the] particular ... activity or transaction for the joint advantage only'."
Both Gibbs CJ and Dawson J, in passages already cited, emphasised that the fiduciary relationship between the parties flowed from the mutual confidence and trust between them.
In Hospital Products v USSC, Mason J noted that the accepted fiduciary relationships (including partners) are sometimes referred to as relationships of trust and confidence. His Honour identified (at 96-97) the critical feature of these relationships as being that:
"[the] fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of the other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions `for', `on behalf of', and `in the interests of' signify that the fiduciary acts in a `representative' character in the exercise of his responsibility'...".
Mason J made several other important observations. First, contractual and fiduciary relationships may co-exist. In these circumstances, the fiduciary relationship, if it exists, must conform to the terms of the contract (at 97). Secondly, the fact that a party to an arrangement (such as the distributorship agreement in that case) is free to make decisions by reference to its own interests, presents an "overwhelming obstacle" to a comprehensive fiduciary relationship (at 99). However, an entitlement to pursue one's own interests is not inconsistent with more limited fiduciary duties if there is (despite that entitlement) an obligation to act in the interests of another. It is that obligation which is the foundation of the relationship.
Gibbs CJ, with whom Wilson J substantially agreed, accepted (at 68-70) that, in the circumstances, it was not inappropriate to apply the general test that had been stated in the same case by the New South Wales Court of Appeal. This was that a fiduciary relationship exists where the facts establish that, in a particular matter, a person has undertaken to act in the interests of another and not in his or her own interests. The Court of Appeal had added that it is the fiduciary's undertaking to subordinate his or her interest that gives rise to the beneficiary's expectation or trust and confidence that the fiduciary will act accordingly: United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157, at 208.
Dawson J took further the theme of vulnerability, referred to by Mason J. He considered (at 143) that the notion underlying all cases of fiduciary obligations is that one party is in a position of disadvantage or vulnerability, causing him or her to place reliance upon the other. It is, however, difficult to disagree with the judgment of La Forest, Heureux-Dube and Gonthier JJ in Hodgkinson v Simms [1994] 3 SCR 377, at 405, that vulnerability is not the hallmark of fiduciary relationships, although it can be an important indicium. Vulnerability is, after all, an element in many non-fiduciary relationships in which the law intervenes. Similarly, as Gibbs CJ in Hospital Products v USSC, at 69-70, recognised, inequality of bargaining power is not enough by itself to create a fiduciary relationship: Hodgkinson v Simms, at 406.
In the end, an important question - if not the question - is whether, in the words of Professor Finn
"the actual circumstances of a relationship are such that one party is entitled to expect that the other will act in his interests in and for the purposes of the relationship. Ascendancy, influence, vulnerability, trust, confidence or dependence doubtless will be of importance in making this out, but they will be important only to the extent that they evidence a relationship suggesting that entitlement."
P.D. Finn, "The Fiduciary Principle", at 46.
E. Application of Principles
1. Incorporation and Control by the League
The argument of the League and ARL rested very heavily on the history and traditions of the competition conducted, first, by the NSWRL and, then, by the League. There is no question that, historically, the clubs were formed to participate in the competition. It is also true that prior to the incorporation of the League in 1983 each of the Sydney district clubs was a member of the NSWRL. Since each club was itself unincorporated (until the clubs began to incorporate in 1980), its members were members of the NSWRL: Hawick v Flegg,at 259.
But incorporation of the League marked fundamental changes, both in the structure of the League, and in the relationship between the clubs and the League. The very point of incorporation was to create a separate legal entity to take over the assets and business of the NSWRL. A board of directors became responsible for managing the business of the League. The board was to be capable (in the words of the Scott report) of making the "hard decisions" not then being made. The board's membership was to be such that the "vested interest of the clubs" did not have an undue influence on major decisions. As the chief executive officer of South Sydney (Mr Parker) said in evidence, the proposal to incorporate was controversial precisely because it took power away from the clubs and vested it in the board of the League.
The clubs themselves, as we have explained in Part III of this judgment, were not included as members of the incorporated body. Rather, they were each given the right to nominate two representatives to the general committee, which was to perform (according to the Scott report) a role similar to that ordinarily played by shareholders in a company. That right could be suspended or forfeited by the board in any of the circumstances specified in art.20. These include a club engaging in conduct prejudicial to the "interests image or welfare of the League" or amending its constitution to conflict with the memorandum, articles, rules or regulations of the League. The voting rights of the clubs' representatives automatically cease if the club is not competing in the competition or if its application to compete in the following year has been considered and refused.
Prior to and indeed after incorporation, neither the clubs nor the NSWRL appear to have considered that their relationship involved fiduciary duties. For example, no suggestion was made in any of the litigation involving the clubs or the NSWRL that fiduciary relationships were involved. Be that as it may, it was open to those undertaking the restructuring of the NSWRL to establish a partnership or a joint venture with the characteristics of a partnership. An intention to create fiduciary duties might have been demonstrated, for example, by explicitly imposing a trust of all property applied to the joint undertaking or making it clear that all parties (including the League) were bound to subordinate their own interests for the joint advantage of all other participants. None of these steps was taken. Instead, the form of restructuring ultimately adopted subjected the clubs to detailed control and regulation by the League. Of course, the new structure imposed some fiduciary duties. But these were the duties ordinarily associated with a corporation, specifically the fiduciary duties owed by the directors to the League.
The extent of control assumed by the League over the clubs is very clearly illustrated by the rules requiring annual applications by each club. They specifically provide (r.40) that no club is entitled as of right to enter a team in the competition for the following season. The rules are consistent with the articles of the League which make it clear that the competition does not have to include all clubs referred to in the memorandum and articles, thereby overcoming the decision in Bernasconi v Bellew.
The application form prescribed by the rules requires the club to abide by the memorandum, articles and rules and any decisions of the board and committees in relation thereto. We have referred in Part III to the terms of the contract constituted by the League's acceptance of each club's application to be admitted to the 1995 competition, including the commitment to abide by the memorandum, articles and rules of the League. We have also referred in Part II to the fact that the requirements for admission to that competition included, for example, minimum spectator drawing power, minimum sponsorship arrangements (at least $1.5 million) and the continuing financial viability of the club.
The trial Judge appeared to discount the significance of the annual admission requirements, because he considered that the League and the clubs proceeded on the assumption that the clubs' association with the competition would continue over a lengthy period (at 458). Moreover, he took the view that it was known and accepted that no club which maintained its ability to comply with the general requirements for annual admission would be forced out of the competition.
It is true that the financial viability of a club has been a most important consideration in determining whether a club should be admitted to the competition. Newtown was denied admission largely because of its profound financial difficulties. Financial considerations played a significant part in the attempts to exclude Western Suburbs from the competition, culminating in the 1984 resolution, upheld by the High Court in Wayde v NSWRL.
Nonetheless, the annual admission requirements clearly served purposes other than protecting the competition against clubs unable to make their own way. As the Wayde litigation demonstrates, financial considerations were not the only matters taken into account in the decision to exclude Western Suburbs. The League justified the decision to exclude the club (without any compensation for the disastrous impact upon it) on grounds related to the undesirability of maintaining a competition with 13 participating clubs. This is hardly a striking illustration of a fiduciary (the League) being bound to subordinate its interests to all participants in the joint undertaking. Indeed, the judgment of the majority in the High Court specifically refered (at 467) to the board of NSWRL being
"confronted with a conflict of immediate interest between Wests on the one hand and the League as a whole on the other".
There are other examples. The correspondence with North Sydney in March 1991 illustrates the use of the annual admission requirement as a means of ensuring that a club adhered to a policy formulated by the League. The correspondence with the Brisbane Broncos and Northern Rivers Ltd, in August 1994, reaffirmed in clear terms the League's "unfettered" right to reject an application by the club for admission. The cross-examination of Mr Quayle demonstrates that the board of the League regarded the admission process as extremely important and would take into account a club's failure or refusal to comply with non-financial guidelines.
Some arrangements made by the clubs, with the knowledge and approval of the League, have recognised the insecure tenure enjoyed by the clubs. It is true that the clubs entered into certain medium or long term commitments, for example in relation to the leasing of goods or contracts of employment with players. (Even those sometimes were framed by reference to the possibility that the club might be excluded from competition. For example, Manly Warringah's lease over Brookvale Oval was subject to the club remaining with and playing in the major competition.) Sponsorship agreements, to which the trial Judge referred (at 458) as examples of the long term commitment to the competition, usually provided that the sponsor was entitled to terminate the arrangement if the club ceased to participate in the competition or to be affiliated with the League. Sponsorship agreements have required the prior approval of the League. Thus, the form of sponsorship agreements is, at the least, consistent with the League conducting its affairs on the basis that it was prepared, if necessary, to refuse clubs admission to the competition.
It is difficult, in view of the circumstances we have outlined, to see how the League could be said to have placed trust and confidence in the clubs, in the sense required to create fiduciary relationships among persons engaged in a common endeavour. An actual relationship of confidence is neither necessary for, nor conclusive of, the existence of a fiduciary relationship: Hospital Products v USSC, at 69, per Gibbs CJ. But here one of the chief characteristics of the relationship between the League and the clubs was the power of the League to impose terms and conditions upon participating clubs and to exclude clubs from the competition. Contrary to the trial Judge's views, the League's power of control over the clubs suggests very strongly that the success of the competition, from the League's perspective, did not depend solely or even principally upon trust and confidence reposed in the clubs. On the contrary, its success rested in large measure on close monitoring and control. This extended, if necessary, to the exclusion of a club from the competition and the termination of its right to representation on the general committee.
The course of dealings between the League and the clubs demonstrates that, although the power of exclusion was exercised rarely, the League formulated and implemented policy on a day to day basis. Moreover, it was quite prepared to threaten to use the power of exclusion (and occasionally actually to use it) where this was thought necessary to secure compliance with policies or objectives at odds with the perceived interests of individual clubs. The League's structure and decision-making processes were very different from those associated with partnerships or with joint ventures said to have the essential characteristics of partnerships.
Just as these considerations point to the
absence of mutual trust and confidence, they tend to contradict any suggestion
that the League was vulnerable to the actions of the clubs in a sense that
warrants the creation or recognition of fiduciary relationships. If anything, the clubs were vulnerable to the
exercise of the League's powers, including the ultimate power of
exclusion. The League carefully
constructed its relationships with the clubs, so as to confer on itself the
power of control thought to be necessary for the effective conduct of the
national competition. Any vulnerability
on the part of the League flowed from the ability of the clubs to leave the
competition. But that was a choice which
(as we explain shortly) was clearly made available to the clubs by the articles
and rules of the League itself.
In the case of most clubs, the memorandum of association requires the club to affiliate with the League. Many clubs also have provisions in the memorandum which purport to require an amendment to the memorandum to be approved by the League. The League and ARL contended that these requirements, together with arts. 73-75 of the League's articles, show that the relationship between the clubs and the League was one of mutual trust and co-operation giving rise to fiduciary obligations. We do not agree. In our view, these provisions in the constitutions of the clubs and the League reflect the requirements specified by the League for the admission of the clubs into the national competition. If anything, they provide additional evidence of the tight control imposed by League over the clubs and reinforce the absence of mutual trust and confidence characteristic of fiduciary relationships.
2. Decision-Making Processes
It is also difficult to reconcile the structure and decision-making processes of the League with the contention, advanced by the League and ARL, that the policy of the common enterprise was ultimately a matter for joint decision. It is true that the clubs nominated representatives to the general committee and that, if they voted as a bloc, they could (like the shareholders of a company) ensure the passage of resolutions at general meetings. It is also fair to say that the clubs were consulted in relation to major decisions. But, as we have said, the clubs were not members of the League. In practice, the board was the major decision-making body. It was set up in a manner that allowed it to act independently of the vested interests of the clubs. The clubs were not privy to the board's deliberations and, indeed, Mr Quayle acknowledged that sometimes the board deliberately kept confidential matters from the clubs. This structure is very different from the joint decision-making processes typically involved in a partnership or in a joint venture of the kind discussed in UDC v Brian.
3. Assets and the Joint Venture
The League and ARL placed considerable reliance on the contention that the participants in the League Joint Venture were obliged to apply both their funds and their assets to the joint undertaking. As we understood the argument, the League and ARL departed from the proposition put in written submissions, that the participants held their assets in trust for the joint undertaking. They maintained, however, that each club was under a duty, even if it left the competition, not to apply its property otherwise than to the fulfilment of the objects of the League Joint Venture.
In our view, this argument pays insufficient regard to the extent to which individual clubs have conducted businesses and built up assets, separately from the activities of the League and other clubs. Figures extracted earlier in this judgment demonstrate that the League and ARL, in particular, but also the clubs, have conducted significant commercial operations. (On this question, see Adamson v New South Wales Rugby League Ltd (1991) 31 FCR 242 (FCA/FC), at 283, per Gummow J.) This is so, notwithstanding that the clubs are non-profit, in the sense that dividends cannot be distributed to members. In conducting their businesses, the clubs have entered into contractual commitments on their own account with players, sponsors and others. Although some decisions have required League approval, the clubs have made commercial decisions in their own interests. They have borrowed funds, both from the League and third parties, and have accepted the burden of repaying the moneys borrowed.
In practice, the clubs have prepared their own financial statements and have done so independently of the League and ARL. The accounts show that some clubs have built up substantial assets. No doubt, in most cases this has been primarily due to their involvement in the competition. However, as we have indicated, most clubs are associated with a Leagues club. Some, such as Canterbury-Bankstown and Canberra, produce consolidated financial statements, which include the assets and operations of the associated Leagues club. The balance sheet of Canterbury-Bankstown and its "controlled entity" as at 31 October 1993, for example, showed total assets of $30.26 million, and net assets of $14.16 million. The assets included land and buildings valued at $21 million. It would be surprising if these assets were held in trust for the League or other clubs.
Certain clubs have prepared financial
statements which do not incorporate the operations of any Leagues club. Some of these clubs have also accumulated
substantial net assets. The balance
sheet of Manly Warringah as at 31 October 1994, for example, showed total
assets of $7.83 million, and net assets of $5.69 million. The assets in the balance sheet included
freehold land leased to the Leagues club, valued at $6.26 million. It was not suggested that Manly Warringah's
financial statements or, for that matter, the financial statements of any other
club, recorded that assets were held in trust for the participants in the
League Joint Venture. Nor did the League
and ARL point to any other documentary evidence suggesting the assets vested in
the clubs were held
in trust for the League or other clubs.
Furthermore, there was evidence that some clubs have received injections of capital or assistance from sources having no connection with the League or other clubs. For example, the North Queensland Cowboys took a sub-lease of the Stockland Stadium in Townsville in March 1995. In order to utilise the stadium, works had to be undertaken. The works were funded, inter alia, by a State Government grant of $500,000, a loan from a semi-government authority (the Willow Sports Complex Joint Board) of $3.5 million and a contribution from the Cowboys of $1 million. The Cowboys accepted responsibility for repayment of one third of the loan of $3.5 million, while the balance was to be repaid by Townsville and Thuringowa City Councils. It was not suggested that the parties providing grants or loans to clubs understood that the assets thus acquired or improved would be held in trust for the League or other clubs.
The fact that the clubs conducted separate businesses and built up their own assets is significant for another reason. We have already pointed out that the League had the power to exclude a club from the competition and to suspend or cancel its representation on the League. In our opinion, the powers vested in the League are not consistent with the submission that each club was bound not to apply its property or "capacity" to objects other than those of the League Joint Venture. On the case mounted by the League and ARL, a club excluded from the competition nonetheless must continue to apply its assets to the purposes of the joint undertaking of which it was previously part. In our view, this result was not contemplated by the memorandum and articles of the League, or by the contractual arrangements between the League and the clubs.
4. The Clubs' Right to Withdraw
In assessing the contentions of the League and
ARL, it is important to bear in mind that the articles and rules of the League
acknowledge the entitlement of individual clubs to withdraw from the
competition. Article 60, for example,
provides that the representatives of a club are not entitled to vote if the
club is not competing in the competition or if its application for the
succeeding year has been refused. This
appears to contemplate that a club may decide, of its own volition, not to
compete. The position is, however, made
clearer by rule 38, which refers to a club "desirous of entering a team in
the competition" being required to lodge an application for
admission. This clearly implies that a
club may not be "desirous" of entering the competition in a given
year. In other words, rule 38 is framed
on the assumption that a club may choose, in
effect, to withdraw from the competition by not applying for admission. It is not a question, as Mr Ellicott
suggested it was, of a club giving reasonable notice before withdrawing from
the competition. Rather, the articles
and rules of the League contemplate that a club may choose not to participate
in the competition and may give effect to that decision by electing not to
apply for admission.
The League's articles and rules may have been framed in this manner in order to accommodate the annual admissions process considered so important by the League. Whatever the reason, the articles and rules seem to us to accept that a club is entitled to withdraw from the competition by assessing and acting upon its own interests. The club must make a judgment that it is "desirous" of remaining within the competition. The articles and rules give no indication that a club will be inhibited in making this judgment if the failure to apply works to the disadvantage of the competition. It is of course possible to envisage circumstances in which a club's voluntary withdrawal is helpful to the national competition. Equally, it is possible to see that such a withdrawal could be very harmful, especially if the decision is made in order to allow the club to participate in another rugby league competition. Yet this is what the articles and rules contemplate.
We have referred earlier to the observations of Mason J in Hospital Products v USSC about the need for fiduciary obligations to conform to the terms of any relevant contract. It is, at the least, very difficult to see how the terms of art.60 and rule 38 conform with fiduciary duties which require a club, exercising its entitlement not to apply for admission, nonetheless to apply all its assets for the purposes of the national competition. It is equally difficult to see how the club can be subject to fiduciary duties that prevent it from withdrawing if to do so would derogate from the standards and quality of the competition. The possibility of harm to the competition is inherent in the entitlement not to apply for admission under the annual process contemplated by the articles and rules of the League.
5. Co-operation and Competition
The submissions of the League and ARL
emphasised the co-operative activities of the clubs, undertaken in conjunction
with the League. The evidence suggests a
certain degree of co-operation on such matters as rule changes, promotion of
the game in local areas and in junior competitions, and financial assistance
and advice from the League to particular clubs.
But the
evidence also shows that the clubs competed strongly, not merely for the best
players and coaches, but for sponsorship and marketing opportunities. Mr Arthurson, along with other witnesses,
acknowledged in evidence that the clubs competed for sponsors. Competition for players was of course crucial
for on-field success. On-field success,
in turn, was crucial to sponsorship and to ensuring that the club remained
viable and could meet the guidelines for annual entry. It perhaps overstates the case somewhat to
suggest (as did the submission on behalf of the rebel clubs) that this degree
of competition was the "antithesis of any relationship of mutual trust and
confidence". But the degree of
competition between the separate business entities constituting the League
Joint Venture is difficult to reconcile with the trust and confidence required
for a fiduciary relationship of the kind supported by the League and ARL. It shows that in important respects the clubs
(and, for that matter, the League and ARL) were free to (and did) pursue their
own interests at the expense of the other participants in the venture. Moreover, they did so in the context of the
very undertaking that was said to give rise to fiduciary duties.
6. Profits and Goodwill
The submissions of the League and ARL drew a parallel between the objectives of the League and clubs and those of a partnership. In particular, it was submitted that the object of the undertaking (relevantly) was to share profits among the League and the clubs. This, so it was said, was an important indicium of a fiduciary relationship.
The evidence, to which we have already referred, showed that the League distributed varying proportions of its operating profits to the clubs by way of administration grants of equal amounts to each club. The proportions varied from 22.67% ($0.65 million) in 1985 to 53.16% ($5.12 million) in 1993 and 51.22% ($6.4 million) in 1994. The administration grants formed a relatively small proportion of the revenues derived by the clubs. The League also distributed some of its net revenue to the clubs in the form of prize money. The amounts depended on the on-field performance of the clubs in the particular season.
In addition to these payments, the League made special grants and loans to clubs for specified purposes. These grants and loans were not made to the clubs equally, but in accordance with a judgment exercised by the League in relation to each grant or loan. Some clubs received substantially greater assistance than others.
The clubs clearly had no entitlement to receive the whole or a fixed proportion of the net revenue derived by the League. Rather, the League exercised a discretionary judgment as to what proportion of net revenues should be paid to the clubs as administration grants in any given year. It was free to act in its own interests, rather than in the interests of all clubs. From time to time, for example, it made judgments about the extent to which its own reserves needed to be built up. This is a very different situation from that which exists where partners or joint venturers agree to share the profits of an undertaking or venture. The differences are accentuated when account is taken of the different treatment accorded to clubs in relation to grants and loans.
The League and ARL also submitted that the fact that the clubs were allowed to join the competition without payment for goodwill indicated that the relationship was one of mutual trust and confidence. It is not, however, accurate to suggest that newly admitted clubs received substantial benefits without any countervailing obligations. The four clubs admitted to the competition in 1995, for example, were each required to lodge a deposit or bank guarantee in the sum of $500,000 as security for meeting its commitments over a three year period. Each club was required to satisfy requirements relating to sponsorship, ground improvements and leases, and to satisfy the League of its financial viability. Of course, one of the objects of admitting additional clubs was to increase the national exposure of the game and to generate greater revenue from sponsorship, merchandising and the sale of television rights. In these circumstances, the terms of admission of the new clubs does not point to the existence of fiduciary relationships among the participants in the League Joint Venture.
It should not be overlooked that the role of the League and ARL was that of a competition organiser. It is of the very essence of a competition that there are competitors. Whilst benefits are received by the competitors through their participation in the competition, the competition organiser also gains benefits. The commercial value of the national competition to the organiser cannot be doubted.
The League and ARL supported the trial Judge's conclusion that the assets held in trust for the participants in the League Joint Venture included the "goodwill intimately associated with the competition". His Honour did not explain what was meant by "goodwill" in this context. As Gummow J observed in Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 (FCA/FC), at 367, the term has significance in various areas of the law and is notoriously difficult to define.
The League and ARL submitted that the fact that goodwill was generated by the competition was indicative of a fiduciary relationship among the participants. They contended that no club could acquire separate goodwill so as to be free to utilise it in another competition. The submission did not define "goodwill", but referred to the use of club logos, names and jerseys as illustrations of the goodwill built up by the competition.
The fact that the national competition has generated goodwill does not necessarily mean that the participants owe fiduciary duties to each other. Many non-fiduciary relationships generate goodwill, in the sense of enhanced business reputations, for the parties. Aspects of the "goodwill" generated by the competition may well be vested exclusively in the League or ARL, as distinct corporate entities, so as to enable them to prevent clubs or third parties appropriating features associated with the competition for the purposes of another competition. In any event, a club which chooses to leave the national competition cannot, for example, engage in passing off or in misleading or deceptive conduct in contravention of s.52 of the TP Act. Other aspects of goodwill may be shared among the participants in the competition: cf Erven Warnink Besloten Vennootschap v J. Townsend & Sons (Hull) Ltd [1979] AC 731. Members of the group sharing goodwill are individually able to prevent outsiders (but not other members of the group) from taking advantage of the goodwill. But, like the Dutch traders manufacturing "advocaat" in Erven Warnink, they do not necessarily share fiduciary duties.
The trial Judge has reserved for further consideration claims by the League and ARL that the rebel clubs and the News appellants have engaged in passing off, misleading or deceptive conduct and infringement of trade marks. In the context of these claims it may be necessary to examine questions relating to the goodwill generated by the national competition. However, none of this points to the existence of fiduciary relationships among the participants in the national competition.
7. The United States Authorities
The trial Judge referred to a number of United
States authorities in support of his conclusions: National Collegiate Athletic Association v Board of Regents of the
University of Oklahoma 468 US 85 (1984), at 101, 117; National Football League v North American Soccer League 459 US 1074
(1982), at 1077-1078 (Rehnquist J dissenting on denial of a petition for
certiorari); Volvo North America
Corporation v Men's International Professional Tennis Council 857 F 2d 55
(2nd Cir.
1988) at 71-72; Mid-South Grizzlies v
National Football League 550 F Supp 558 (1982), at 566-568.
In our view, these cases are not helpful in determining whether the arrangements involving the League, ARL and the clubs created fiduciary duties. All the cases cited by his Honour raised questions under the Sherman Anti-Trust Act. For example, in NCAA v Board of Regents, the question was whether the NCAA's television plan, which fixed prices for particular telecasts of college football games and limited the production of televised college football, contravened s.1 of the Sherman Act. The Supreme Court referred to a "certain degree of co-operation" being necessary, if the college football competition were to be preserved. The Court also referred to a sporting venture of this kind constituting a "joint enterprise". However, these references were made in the context of a decision that it would be inappropriate to apply a "per se rule of illegality", where some horizontal restraints on competition were essential if the product was to be available at all (at 100-101). The Court simply did not address the question of whether the members of the NCAA owed fiduciary duties to each other. The same is true of the other cases to which the trial Judge referred.
8. Norwich v AAMI
The League and ARL relied on the judgment of Brooking J in Norwich Winterthur Insurance (Australia) Ltd v Australian Associated Motor Insurers Ltd, (18 July 1988, S Ct Vic/Brooking J, unreported). That case concerned common pool agreements among insurers who were shareholders in a company ("AAMI"), which wrote comprehensive motor vehicle business. AAMI conducted its affairs so that it did not make a profit. All of its insurance business was insured with the pool at rates determined by AAMI. Members of the pool accepted the whole of every risk underwritten by AAMI and obtained the benefit of all premiums, subject to payment of an exchange commission to enable AAMI to meet its marketing and administrative expenses. Shareholdings in AAMI were proportionate to shares in the pool. The agreements provided for the election of a special committee, whose members became directors of AAMI.
Brooking J held (at 107) that the pool members, whether or not they were partners, were bound by the fiduciary duties one partner owes to another. His Honour was influenced by a number of factors. Their relationship resembled a partnership, in that they were commercial venturers with a view to profit. They were to share profits. The policy of the joint venture was a matter for agreement through their representatives or through the ultimate exercise of voting power. They were concerned with each member's financial stability, since the insolvency of one would have exposed the others to a greater proportion of the risks reinsured. The agreements made only the "baldest" provision for reinsurance, suggesting that AAMI and the members trusted each other. The members were tied to the pool unless their associates permitted them, by special resolution, to withdraw.
The facts of AAMI are different to those of the present case. The clubs and the League did not share profits in the same sense as the pool members in AAMI. The decision-making processes were different in each case. The clubs were neither members of the League, nor was the board of the League simply representative of their interests. In the event of failure of one club, the others were not responsible for its debts. The memorandum and articles of the League, together with the contractual arrangements, set out the obligations of the clubs in considerable detail. The clubs, unlike the pool members, were entitled to withdraw from the competition, simply by electing not to apply for a place in the following year's competition.
It follows, in our view, that there is no inconsistency between our conclusions and the decision reached by Brooking J in Norwich v AAMI.
9. Conclusion
In our view, the circumstances surrounding the League Joint Venture are not consistent with the existence of fiduciary relationships among the participants as pleaded by the League and ARL. It is true that the conduct of the national competition involved a certain level of co-operation among the participants. But, as we have described, there are important factors contradicting the submission that the relationship among the parties can be described as one of mutual trust and confidence, of the kind that attracts fiduciary obligations.
Ultimately, in our view, it cannot be said that
the clubs were bound to act only for the joint advantage of the participants in
the League Joint Venture. Nor can it be
said that the participants, including the League and ARL, were entitled to
expect each club to subjugate its own interests to those of the other
participants. There are simply too many
indicators that the clubs were entitled to act in accordance with their own interests,
even if to do so involved conflict with the interests of the other
participants. Accordingly, the trial
Judge was in error in concluding that the League
and ARL had established the fiduciary duties associated with the League Joint
Venture, as pleaded in the first cross-claim.
For the same reasons, we do not think that the loyal clubs succeeded in establishing the fiduciary duties pleaded in relation to the Club Joint Venture.
F. Some Related Issues
1. A Narrower View of Fiduciary Duties?
We have referred earlier to the principle that the content of a fiduciary obligation will depend on the circumstances of the relationship giving rise to the obligation. We have also referred to the fact that the League and ARL did not formulate any alternative, narrower view of the fiduciary duties said to be owed by the clubs, other than those pleaded in para.27 of the first cross-claim.
The absence of any alternative formulation was raised in the course of oral argument. Mr Ellicott indicated that it would be open to take a narrower view of the scope of the alleged fiduciary duties, if the Court considered that this was the appropriate course on the material before the trial Judge. However, he submitted that any fiduciary duty would at least require the clubs to apply their assets for the purposes of the national competition, including the period after they had elected not to participate in that competition.
We have concluded that the clubs did not owe
fiduciary duties to other participants in the League Joint Venture. It is therefore unnecessary to consider the
nature and scope of the duties that might be owed, should our conclusion be
erroneous. It is enough to say that the
factors influencing us to reach this conclusion strongly suggest that, even if
our conclusion were wrong, the duties owed by the clubs would be far less
extensive than the League and ARL submitted was the case. We doubt that any such duty could extend
beyond the implied contractual obligations that we have held bound each of the
clubs admitted to the 1995 competition.
We have found that each individual club was under an implied contractual
obligation to do all that was reasonably necessary to enable the 1995
competition to be carried on so as to allow the other participants, including
the League and ARL, to receive the benefits which the competition was intended
to achieve. An obligation of this
character would not include a duty to apply, indefinitely, the club's assets
for the
purposes of the national competition, even after the club ceased to participate
in that competition.
2. Unconscionability and Constructive Trusts
Reference has already been made to the principles warranting the intervention of equity to impose a constructive trust upon property acquired by a respondent, in consequence of a breach of contract or tort. The League and ARL relied on these principles to support orders obliging the clubs to use their assets only for the purposes of the national competition. As we have noted, the trial Judge cited Muschinski v Dodds, at 619-620, and Baumgartner v Baumgartner, at 148, to support his conclusion that it was unconscionable for rebel clubs to retain for their own benefit, or to pass over to a Super League company, assets acquired by them for the purposes of the League Joint Venture.
The argument of the League and ARL, insofar as presently relevant, rested on the assumption that the clubs owed fiduciary duties to other participants in the national competition, including the League and ARL. In view of our conclusion that no such duties were owed, the foundation for the application of the principles stated by the High Court is wanting.
As Deane J said in Muschinski v Dodds, at 615, the
constructive trust is not a "medium for the indulgence of idiosyncratic
notions of fairness and justice".
The equitable remedy is available "only when warranted by
established equitable principles or by the legitimate processes of legal
reasoning". See also Stephenson Nominees Pty Ltd v Official
Receiver (1987) 16 FCR 536 (FCA/FC), at 557, per Gummow J. The principles include the concept of
unconscionable conduct, as developed in Muschinski
v Dodds and applied in Baumgartner v
Baumgartner. However, in the absence
of fiduciary duties owed by the clubs to the League or other clubs, there is
nothing unconscionable in the mere fact that a club has used or proposes to use
its assets for the purposes of another rugby league competition. As we have explained, not only has each of
the clubs built up its own assets, but the memorandum and articles of the
League recognise that clubs can withdraw from the national competition. Once a club leaves the national competition,
it cannot hold itself out as still being associated with the League or ARL. Nor can it utilise assets for the purposes of
another competition that it has undertaken to apply only to the national
competition. But, subject to these
restrictions and others that may flow from established principles, it can apply
its separate assets for the purposes of a new competition. Accordingly, there is no basis, independent
of the fiduciary duty argument, for imposing a constructive trust
over the general assets of rebel clubs, requiring those assets to be devoted to
the purposes of the national competition.
As we have noted in Part III of this judgment, a number of issues remain to be resolved in the case. These include alleged infringement of trade marks, passing off and misleading or deceptive conduct. It may be that the League and ARL can make out a case for the imposition of constructive trusts in relation to specific assets held by particular rebel clubs. For example, to use an illustration drawn from the appellants' submissions, if the League permitted a club to register a trade mark for the purpose of allowing that mark to be used in connection with the national competition, it may be regarded as unconscionable for the club to use the mark for the purposes of a different competition. In those circumstances, the Court might well declare that the asset was held on trust for the League. But this would require findings that the particular club had engaged in unconscionable conduct, or had otherwise acted, so as to warrant the imposition of the constructive trust.
3. Players' Contracts
The League and ARL submitted that the players' contracts, which were expressed to be between a player and a particular club, imposed obligations on the players which were held in trust for the League. This submission was not put in order to obtain any relief against the players themselves, since they were not joined as parties to the proceedings. Rather, the submission was used to support the contention that the clubs were subject to a fiduciary obligation to enforce their rights under the players' contracts only for the purposes of the national competition.
It should be said that the submission was not elaborated, either in written submissions or oral argument. Consequently, it is not clear whether the proposition that certain contractual obligations were held in trust for the League was relied on as an indicator of a general fiduciary duty of the kind we have already rejected, or whether it was said to support an independent fiduciary duty attaching to the contractual rights created by the contracts. In any event, we think that the basis for the argument is lacking.
Several members of the High Court in Trident General Insurance Co Ltd v McNiece
Bros Pty Ltd (1988) 165 CLR 107, endorsed the view of Fullagar J in Wilson v Darling Island Stevedoring &
Lighterage Co Ltd (1956) 95 CLR 43, at 67, that it is difficult to
understand the reluctance of
courts to infer a trust in cases where the common law doctrine of privity of
contract operates unjustly: see at 120, per Mason CJ and Wilson J, 146-147, per
Deane J, 166 per Toohey J. A trust will
be recognised where it appears from the language of the parties, construed in
its context (including the matrix of circumstances), that the parties so
intended: Trident, at 121, 148. Ultimately, it is a question of ascertaining
the intentions of the parties.
The League was not expressed to be a party to the players' contracts. In each case, the player and the club acknowledged that the relationship between them was one of employment (cl.1). Certain provisions imposed obligations on the player that are capable of being construed as being for the benefit of the League. For example, the player agreed to be bound by the memorandum and articles of the League and ARL (in addition to those of the club): (cl.3(f)). The player agreed not to "misconduct" himself (cl.10(1)). The expression "misconduct" was defined to include (in addition to a number of specified forms of improper behaviour) "being guilty of any form of conduct prejudicial to the Club or the League" (cl. 10(3)(f)). However, it was the club which was empowered to charge the player (cl.10(2)) and to impose penalties on any player found guilty as charged (cl.10(4)).
Read as a whole, the form of player's contract used in and after 1993 does not suggest an intention to create a trust in favour of the League or ARL. No trust is expressly created. The obligations that appear to benefit the League or ARL also benefit the club, which is subject to its own contractual obligations to the League and ARL. Enforcement of the obligations imposed on the player, by way of disciplinary sanctions, is specifically entrusted to the club. The inference we would draw from the language of the player's contract is that the parties did not intend to create a trust in favour of the League or ARL. At the very most, the language is equivocal.
In construing equivocal language, the context must be taken into account. Until 1992, the players' contracts were tripartite arrangements, involving the League, the club and the player as parties. The decision to move to bilateral contracts was (as Mr Quayle acknowledged) made deliberately, in consequence of legal advice that such contracts would not be subject to attack under the exclusionary provisions of the TP Act. It would fly in the face of the decision to exclude the League as a party to the players' contracts to construe them as imposing a trust of particular contractual undertakings in favour of the League. Accordingly, there is no basis for concluding that any of the entitlements of the clubs under the players' contracts were held in trust for the League.
4. Coaches' Duties
The League and ARL also submitted that the coaches of the clubs owed fiduciary and contractual duties to their employer clubs and that the benefit of these obligations was held in trust for the League. The significance of this submission was that the trial Judge found that some of the coaches of the rebel clubs had encouraged players contracted to those clubs to sign Super League contracts. It followed, according to the submission, that the coaches had breached duties owed to the League. The breach consisted of acting contrary to the interests of the club, which embraced the interests of the League because of the clubs' obligations under its own objects and order the League's memorandum and articles.
Once the argument that the clubs owed fiduciary duties to the League is rejected, it is difficult to see how the coaches could be in breach of any relevant duties owed to the League. Even assuming that some fiduciary or contractual obligations owed by them to the clubs were held in trust for the League, it is unlikely that they could be in breach of those obligations by acting at the request or direction of the board or the duly authorised officers of the club employing them.
Once again, the submission that the duties owed
by the coaches to the clubs were held in trust for the League was not
developed. We have already concluded
that the relationship between the clubs and the League was not fiduciary in
character. Given that conclusion, in our
opinion the evidence before the trial Judge could not justify a finding that
the coaches' obligations were held in trust for the League so as to allow the
League to complain of coaches participating in Super League activities. Only three of the coaches' contracts were in
evidence. (There was also evidence that
Mr Anderson of Canterbury-Bankstown had an oral agreement, but there was no
evidence of its terms.) One of the
contracts, a letter of agreement of 16 December 1992 between Mr Monie and the
Auckland Warriors, contains no provision suggesting that any of Mr Monie's
contractual or fiduciary responsibilities were held in trust by the Warriors
for the League. Another, an agreement
dated 17 August 1994, between Mr Simmons and Penrith, includes clauses
requiring Mr Simmons to observe the memoranda and articles, respectively, of
the club, the League and the ARL and to participate in promotional activities
required by the club or the League. But
these provisions are insufficient to create a trust of any obligations in
favour of the League. The third contract
(between Mr Mulholland and the Western Reds) appears not to have been
reproduced in the appeal papers, and no reference was made to its terms by the
League and ARL. In the absence of
evidence relating to the terms upon which the other coaches were engaged, it is
not
open to conclude that their contractual and fiduciary duties were held by their
respective clubs in trust for the League.
5. Participation in Breach of Fiduciary Duties
The trial Judge found that News and the Super League companies knowingly and dishonestly assisted or procured the clubs to breach fiduciary duties owed to the League and ARL. There was considerable argument before us as to whether this finding was warranted. The League and ARL referred extensively to the evidence in order to demonstrate that News or its representatives had induced the clubs to divert their assets to the purposes of Super League and otherwise to infringe their fiduciary duties. The appellants disputed that the evidence warranted this conclusion and argued that, in any event, it was necessary to scrutinise the evidence relating to each club and, for that matter, each player and coach, separately.
As we have concluded that the clubs did not owe fiduciary obligations to other participants on the pleaded League Joint Venture, it is not necessary for us to resolve the issues. There is therefore no need to consider whether the clubs did indeed breach their fiduciary duties. Nor is there any occasion to undertake the difficult task of determining whether, if the clubs had breached their fiduciary duties, News and its representatives had induced those breaches.
V. VALIDITY OF THE COMMITMENT AND LOYALTY AGREEMENTS: THE EXCLUSIONARY PROVISIONS QUESTION
A. Introduction
The issues arising under ss.4D and 45 of the TP Act centre on the Commitment Agreements, entered into in November 1994 between the twenty clubs and the League and ARL, and the Loyalty Agreements entered into in February 1995 between the same parties. We have extracted the terms of these agreements earlier (Part II, Sections M3, O5). In summary, the Commitment Agreements, if enforceable, prevent for five years (1995-1999):
– the participation by the clubs' teams in rugby league competitions organised by any competition organiser other than one approved by the League and ARL;
– the acquisition by the clubs of the services of any competition organiser, other than one approved by the League and ARL; and
– the acquisition by the clubs of the services of premium players to participate in competitions conducted by persons other than the League and ARL, or persons approved by either of those bodies.
The Loyalty Agreements contain provisions which have substantially the same effect as the relevant provisions of the Commitment Agreements.
As we have explained earlier, the appellants contended that the Commitment and Loyalty Agreements infringed s.45 of the TP Act and are, therefore, void or, alternatively, unenforceable. It followed, on the appellants' case, that the League and ARL could not obtain any relief founded on the obligations those agreements purport to create.
B. The Legislation
1. The Trade Practices Act Provisions
Section 45(2) of the TP Act provides as follows:
"A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding, if:
(i) the proposed contract, arrangement or understanding contains an exclusionary provision; or
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:
(i) is an exclusionary provision; or
(ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition."
Section 45(3) and (4) defines the concept of "competition":
"(3) For the purposes of this section and section 45A, `competition', in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provisions, supply or acquire, or be likely to supply or acquire, goods or services.
(4) For the purposes of the application of this section in relation to a particular corporation, a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding shall be deemed to have or to be likely to have the effect of substantially lessening competition if that provision and any one or more of the following provisions, namely:
(a) the other provisions of that contract, arrangement or understanding or proposed contract, arrangement or understanding; and
(b) the provisions of any other contract, arrangement or understanding or proposed contract, arrangement or understanding to which the corporation of a body corporate related to the corporation is or would be a party,
together have or are likely to have that effect."
The term "exclusionary provision" is defined for the purposes of the TP Act by s.4D:
"4D.(1) A
provision of a contract, arrangement or understanding, or of a proposed
contract, arrangement
or understanding, shall be taken to be an exclusionary provision for the
purposes of this Act if -
(a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any two or more of whom are competitive with each other; and
(b) the provision has the purpose of preventing, restricting or limiting -
(i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or
(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions,
by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.
(2) A person shall be deemed to be competitive with another person for the purposes of sub-section (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates".
In construing s.4D of the TP Act, it is necessary to take account of s.4F:
"4F. For the purposes of this Act:
(a) a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, or of a covenant or of a proposed covenant, shall be deemed to have had, or to have, a particular purpose if:
(i) the provision was included in the contract, arrangement or understanding or is to be included in the proposed contract, arrangement or understanding, or the covenant was required to be given or the proposed covenant is to be required to be given, as the case may be, for that purpose or for purposes that included or include that purpose; and
(ii) that purpose was or is a substantial purpose; and
(b) a person shall be deemed to have engaged or to engage in conduct for a particular purpose or a particular reason if:
(i) the person engaged or engages in the conduct for purposes that included or include that purpose or for reasons that included or include that reason, as the case may be; and
(ii) that purpose or reason was or is a substantial purpose or reason."
Section 4D uses the word "services". That word is defined in s.4 of the TP Act as follows:
"`services' includes any rights (including
rights in relation to, and interests in, real or personal property), benefits,
privileges or facilities that are, or are to be, provided, granted or conferred
in trade or commerce, and without limiting the generality of the foregoing,
includes the rights, benefits, privileges or
facilities that are, or are to be, provided, granted or conferred under -
(a) a contract for or in relation to -
(i) the performance of work (including work of a professional nature), whether with or without the supply of goods;
(ii) the provision of, or of the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction;
...
but does not include rights or benefits being the supply of goods or the performance of work under a contract of service."
Section 4L of the TP Act addresses the question of severability in the following terms:
"4L. If the making of a contract after the commencement of this section contravenes this Act by reason of the inclusion of a particular provisions in the contract, then, subject to any order made under section 87 or section 87A, nothing in this Act affects the validity or enforceability of the contract otherwise than in relation to that provision in so far as that provision is severable."
2. A Preliminary Comment
The prohibition imposed by s.45 of the TP Act applies irrespective of the extent to which putative exclusionary provisions affect competition in a market. It is plain that the Parliament regarded horizontal arrangements of an exclusionary character as having a necessary tendency to inhibit competition and that this was regarded as sufficient to proscribe the making of such arrangements.
Section 4D(2) of the TP Act is important. The subsection deems persons to be competitive with each other if they satisfy the specified tests. The Act prohibits the making or giving effect to exclusionary provisions whether they do or do not have the purpose or the effect of substantially lessening competition. This is plain from the terms of s.45(1) and (2). The prohibition against making or giving effect to a provision of a contract that has the purpose, or would have or be likely to have the effect of substantially lessening competition is imposed by s.45(1)(b), (2)(a)(ii) and (2)(b)(ii). The definition of "competition" for the purposes of those provisions appears in s.45(3), in terms which require competition in a market. This contrasts with the prohibition against the making of or giving effect to exclusionary provisions. Hence it is not necessary to consider questions of market definition for s.4D purposes.
C. The Proceedings Below
1. The Pleaded Case
The following is a summary of the case pleaded in the amended statement of claim by News.
In November 1994, the League and ARL entered into the written Commitment Agreements, in identical terms, with each of the clubs,
"each of them doing so in the knowledge and expectation that each other Corporate Club having a 1995 Team would sign and return the Commitment Agreement." (Para.26.)
On 7 February 1995, the ARL sent to each club a Loyalty Agreement in substantially identical terms, under cover of a letter directing each club to sign and return it within a very short time. Each club signed and returned its Loyalty Agreement in the knowledge and expectation that every other club would do the same.
The clubs were competitive with each other in a number of respects in relation to the pleaded "Teams Market". That term was defined in the pleading to mean "a market for the supply of teams of Premier Players for participation in a Competition". Although the pleadings identified a number of forms of competitive behaviour, News' case, as put to the trial Judge and on appeal, rested only on three forms of competition among the clubs:
– the supply of services, in the form of participation by their teams in rugby league competitions, to competition organisers;
– the acquisition of services of competition organisers; and
– the acquisition of the services of premium rugby league players.
We note in passing that the trial Judge
attributed the limitation of News' case to these three forms of competition as
flowing from the point made by Wilcox J in Eastern
Express Pty Limited v General Newspapers Pty Limited (1991) 30 FCR 385, at
420. In that case, his Honour noted that
s.4D(2) of the TP Act requires the relevant competition to be "in relation
to the supply or acquisition of all or any of the goods or services to which
the relevant provision of the contract...relates". In short, the "area of competition
[must] coincide with the area of contractual regulation". (This point was not addressed on appeal: Eastern Express Pty Limited v General
Newspapers Pty Limited (1992) 35 FCR 43.)
The Commitment and Loyalty Agreements collectively constituted an arrangement or understanding between each of the clubs and the League and ARL. The terms of each of the agreements were provisions of the arrangement or understanding, having the following purposes:
– preventing, restricting or limiting the clubs from the supply of the service of participation by each club or its team in a competition conducted or to be conducted by News, or any other person, in the years 1995 to 1999;
– preventing, restricting or limiting the clubs from acquiring the services of premier players in the course of each club providing or supplying a team for a competition organised by a person other than the League or ARL; and
– preventing, restricting or limiting the clubs from the acquisition of services provided or which could be provided by a competition organiser (whether News or a third person other than the League or ARL).
By reason of these matters, the terms of the Commitment and Loyalty Agreements were exclusionary provisions within s.4D of the TP Act. Each of the respondents, by entering into the agreements, had contravened s.45(2)(a)(i) of the TP Act. To give effect to any of the provisions of the Commitment and Loyalty Agreements would be to give effect to a provision of a contract, arrangement or understanding containing an exclusionary provision, in contravention of s.45(2)(b)(i) of the TP Act.
2. The Trial Judge's Reasons
The trial Judge rejected News' case that the Commitment and Loyalty Agreements contained "exclusionary provisions", and that the making of those agreements and the giving effect to such provisions were prohibited by s.45. The following is a brief outline of his Honour's reasons.
His Honour first accepted four propositions of law (at 509-510):
– An exclusionary provision must have that character at the time it is made. If it does not have that character at the time, subsequent circumstances cannot supply the missing ingredient: Dowling v Dalgety Australia Limited (1992) 34 FCR 109 (FCA/Lockhart J.), at 134.
– The competition referred to in s.4D(2) of the TP Act includes
"a situation of likely competition, as well as actual competition, and in addition a case where only the provision of some...contract, arrangement or understanding stands in the way of competition."
– Section 4D of the TP Act is not satisfied by mere proof that two or more parties to the alleged arrangement are in competition. They must be in competition in relation to the very goods or services the subject of the alleged exclusionary provision: Eastern Express v General Newspapers, above.
– By reason of s.4L of the TP Act, a corporation is entitled to give effect to the terms of a contract, arrangement or understanding which do not involve exclusionary provisions.
We did not understand any of these propositions to be challenged on the appeal.
The trial Judge identified two questions to be answered in relation to the competition issue. Each had to be answered at the two different times at which the Commitment and Loyalty Agreements had been concluded. The questions identified (at 510) were:
"1. Whether at those dates the clubs were or were likely to be in competition in relation to the supply of the service of a team or in relation to the acquisition of the services of a competition organiser;
2. Whether the clubs were or were likely to be in competition in relation to the acquisition of the services of "premier players" for the purpose of supplying such a team as referred to in 1."
The trial Judge answered the first question in the negative. His Honour reasoned as follows (at 510):
"Competition within the meaning of s.4D in the
first respect would be contrary to the history of rugby league, the constituent
documents of the League and the clubs, and the terms on which the clubs were
admitted to the competition. From the
beginning, the rugby league football competition (a competition in a different
sense) was a joint activity of the predecessor of the League, or of the League,
and the clubs which had been admitted to the competition at any particular
time."
He then cited United States authorities in support of the proposition that clubs in a sporting association are engaged in joint activities. We have referred to those authorities in Part IV of this judgment, on the issue of fiduciary duties, and have noted there that the cases involved questions arising under the Sherman Act.
The trial Judge continued (at 512-513):
"The control conferred by the clubs on the League in various ways shows that the clubs were not set up to compete, as commercial entities, to supply their teams or to acquire a competition organiser; instead they reposed in the League the power to determine who should supply such teams, and did not have in contemplation at all any thought of competition to acquire the services of some other competition organiser (which in any case did not relevantly exist)."
As at the date of the Commitment Agreements, all the clubs were acting on the basis that the competition was controlled by the League and that there would be no change except as the League directed. No significant change by the League was likely or expected.
His Honour rejected (at 513-514) News' argument that the exclusion of Newtown and Western Suburbs demonstrated that there was competition among the clubs. Newtown had excluded itself by becoming financially unviable; Western Suburbs had been excluded by a decision made in the interests of rugby league, rather than on the basis of preferring one competition over another. His Honour accepted (at 514) Mr Arthurson's evidence that no club which maintained its ability to comply with the general requirements would be excluded. This was supported by the willingness of the League to overlook non-compliance with the requirements, if there was a substantial reason for the non-compliance.
The trial Judge accepted that there was an ongoing debate about the desirability of having a smaller competition, but found that there was no realistic prospect, as at November 1994 or February 1995, that amalgamations would take place except by agreement of the amalgamating clubs themselves. Moreover, the annual applications were dealt with individually, with no element of commercial rivalry.
His Honour also relied on the finding that Mr Cowley had said, in November 1994, that "If there is to be a Super League it has to be under the control of the ARL" (at 515). This finding showed that News was not a competing competition organiser. Furthermore, the proposed Super League did not involve a competition between the existing clubs but a "new breed", the Super League Franchisees.
When the trial Judge directed attention to the Loyalty Agreements, he considered that the position was even more clearly in favour of the League (at 516). The clubs had been admitted to the national competition for five years and thus could not be regarded as competing or likely to compete in relation to the acquisition or supply of services concerning admission to a competition. The Commitment Agreements had been accepted as valid. News had stated that any approaches would be through the front door and, in any event, Super League was "dead in the water".
His Honour acknowledged (at 516-517) that s.4D(2) of the TP Act contemplates that parties can be competitive if, but for the provision of a relevant contract, arrangement or understanding, they would be or would be likely to be in competition. However, it was not by reason of any exclusionary provision that the clubs were assured of entry into the competition for five years. They were each given that right by an individual agreement between the club and the League. The arrangements between each club and the League were "vertical", rather than "horizontal", since the individual Commitment and Loyalty Agreements had not been the product of any anterior understanding or arrangement among the clubs.
The trial Judge accepted (at 518) that the clubs were in competition with each other to acquire the services of premier players. However, the competition was only upon the terms of the League's standard player contract. That form of contract was a contract of service, or employment. The Super League contracts were in similar form. Since contracts of service were specifically excluded from the definition of "services" in s.4, the parties were not competitive in a relevant sense.
His Honour then turned to the question of whether any contract or arrangement was made for the proscribed purpose specified in s.4D(1)(b) of the TP Act. He accepted that the Full Federal Court, in ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No.1) (1990) 27 FCR 460, at 476, had determined that s.45 of the Act required
"one to look to the purposes of the individuals by whom the provision was included in the contract, arrangement or understanding in question. It therefore directs attention to the `subjective' purposes of those individuals."
His Honour accepted that the proscribed purpose could exist if it were held by only some of the parties (including those who are not relevantly competitive with each other). However, he thought that the subjective purpose of only one party was not enough (at 521).
A contract, agreement or understanding was not caught unless the proscribed purpose, being one of a number of purposes, was a "substantial purpose": s.4F. Section 4D should be construed as referring only to what can be identified as the "real", "dominant" or "ultimate" purpose. He added (at 522-523) that in
"considering whether the quality of substantiality should be attributed to one of a number of purposes, in a case under s.4D, the seriousness of the consequences of a contravention should be borne in mind. It is not to be thought that the legislature intended to visit these consequences upon the basis of a slight connection between the transaction and a purpose falling within the section. It would not be consistent with general principle to interpret the section so as to widen the area of its interference with general freedom of contract under the law, especially as the consequences would be so serious: see Thompson v Australian Capital Television Pty Limited (1994) 54 FCR 513, at 526."
His Honour noted (at 524) that s.4D does not refer to the "effect" of a provision, but only its purpose. He accepted that purpose can be inferred from effect. However, in the light of Mr Arthurson's evidence, the
"purpose of the League was to preserve the quality of its rugby league competition through the joint participation of all the clubs.
...
Having regard to the long-term commitments affecting the League and the clubs, and the lead times involved in preparing a team to compete, I am satisfied that the period of five years contained in the Commitment Agreements and the Loyalty Agreements provides no ground for inferring any proscribed purpose. It was commercially proper and, from the point of view of the parties, entirely reasonable."
Nor did the clubs have the proscribed purpose (at 525):
"So far as the clubs were concerned, the
evidence in a number of cases is quite express that those who made the
decisions on their behalf were actuated by the desire to secure formal
contractual recognition of their right to continue in the competition for the
period of five years. There is evidence
that the absence of such a contractual commitment has caused problems in the
past in connection with long term sponsorship agreements. I am also satisfied that in almost every
case, if not in every case, there was a
strong positive desire to forward and promote a competition of which all the
participants were very proud. I am not
satisfied that in any case this was not an important factor, although some
individuals, and in particular Mr Ribot [of the Brisbane Broncos], appear to
have had a different view."
Finally, his Honour addressed the question of whether an arrangement or understanding of the kind alleged had been made out. He surveyed a number of authorities and adopted the approach of Lockhart J in Trade Practices Commission v Email Ltd (1980) 43 FLR 383 (FCA/Lockhart J), at 385:
"For there to be an arrangement or understanding there must be a meeting of the minds of those said to be parties to the arrangement or understanding. In some cases this may be inferred from circumstantial evidence. There must be a consensus as to what is to be done and not just a mere hope as to what might be done or happen. Independently held beliefs are not enough...".
In this case there was no evidence of actual horizontal communications of intent that formed the basis of the execution of the individual Commitment Agreements. Had such communications actually occurred, there would have been abundant evidence of them, since some clubs had changed sides. Furthermore, the League was a special body, that had grown out of aims that were not commercial in character. The "roots of the clubs and the League" and their community, sporting and youth interests, were likely to lead the deciding minds in directions other than those that might have appealed to purely commercial concerns. The clubs were content to reach their understandings directly with the League. There was simply insufficient evidence to draw any inference of an actual arrangement.
D. The Submissions
With some qualifications, the appellants did not challenge the legal principles formulated by the trial Judge. Rather, they submitted that his Honour erred in applying those principles in the course of rejecting the pleaded case. In particular, they contended that his Honour's findings of fact did not depend on the credibility of witnesses, but were based on erroneous inferences from the primary facts.
The appellants characterised their case as a "simple one". Their starting point was that the policy underlying s.4D of the TP Act is that competition is valuable and should not be constrained. Prior to November 1994 the clubs, although subject to tight control by the League and ARL while they remained participants in the national competition, were free not to apply for admission to the competition in the following year. They were therefore free to apply for admission to a competition sponsored or organised by News. By this means, they could compete with other clubs to supply services to sponsors, viewers, spectators and others.
The advent of News as an organiser or potential organiser of a rugby league competition created the opportunity, at least potentially, for the clubs to take this course. Once the opportunity arose, s.4D made it illegal for the clubs and the League and ARL to bind themselves by contract to a regime which excluded News from providing services as a competition organiser. Any other result would allow competition activity among the clubs to be restricted.
Section 4D required that, because the clubs were competitive or potentially competitive with each other, they should make separate choices as to which competition to compete in, if there were a choice, and as to the means whereby services could be supplied to sponsors, spectators, viewers and others. Section 4D prohibited the clubs from agreeing among themselves to remain with the League and ARL to the exclusion of News as a potential rival competition organiser. The form of the arrangements (namely, a series of contracts which effectively overrode the articles of association and the rules of the League without observing the formal procedures for doing so) and the speed with which they were executed, were indicative of the competition then existing or likely to exist between the clubs, and of the purpose of excluding News as a potential rival competition organiser.
The horizontal character of the arrangements was illustrated by
– the knowledge of all clubs that each was being offered and was entering identical contracts;
– their perception that this was a means of achieving unity and showing each other commitment and loyalty;
– the communications at the critical meeting of 14 November 1994;
– the role played by Messrs Arthurson and Quayle, as the hub of the wheel, the spokes leading to each of the clubs; and
– the communications at the meeting of 6 February 1995.
The respondents, in substance, supported the reasoning and findings of the trial Judge.
E. Competition Among the Clubs
1. The Test
Section 4D(2) of the TP Act provides that a person is deemed to be competitive with another person for the purposes of s.4D(1) if the first person
"is or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed arrangement or understanding, would be, or would be likely to be, in competition with the other person...".
Clearly this test does not require the two or more relevant persons to be actually competing with each other at the time the contract, arrangement or understanding is entered into. It is enough that the person is likely to be in competition or, but for the contract, arrangement or understanding, would be likely to be in competition.
In Tillmans Butcheries Pty Ltd v Australian Meat Industry Employees' Union (1979) 42 FLR 331 (FCA/FC), Deane J considered the meaning of the word "likely" as used in s.45D of the TP Act. That section prohibited certain conduct ("secondary boycotts") which would have been likely to have the effect of causing substantial loss to the business of a corporation. His Honour said this (at 346-348):
"The word `likely' can, in some context, mean `probably' in the sense in which that word is commonly used by lawyers and laymen, that is to say, more likely than not or more than a fifty per cent chance.... It can also, in an appropriate context, refer to a real or not remote chance or possibility regardless of whether it is less or more than fifty per cent. When used with the latter meaning in a phrase which is descriptive of conduct, the word is equivalent to `prone', `with a propensity' or `liable'.
...
The conclusion which I have reached is that, in the context of s.45D(1), the preferable view is that the word `likely' is not synonymous with `more likely than not' and that if relevant conduct is engaged in for the purpose of causing loss or damage to the business of the relevant corporation, it will suffice, for the purposes of the subsection, if that conduct is, in the circumstances, such that there is a real chance or possibility that it will, if pursued, cause such loss or damage. Whether or not such conduct is likely (in that sense) to have that effect is a question to be determined by reference to well-established standards of what could reasonably be expected to be the consequence of the relevant conduct in the circumstances."
The same test has been applied to the word "likely" in s.52 of the TP Act: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1986) 2 FCR 82 (FCA/FC), at 87.
In our view, the same approach should be taken to the construction of s.4D(2) of the TP Act. As Deane J pointed out in Tillmans (at 487), the phrase "would be likely to have" conveys a lower degree of likelihood than the phrase "would have". Similarly, the phrase "would be likely to be" in s.4D(2) conveys a lower degree of likelihood than the phrase "would be". Given that "likely" has the meaning attributed to it by Deane J when used within the expression "would be likely to be", it must also bear the same meaning when used in the expression "is likely to be".
2. Preliminary Observations
We commence with two comments about the reasoning of the trial Judge. First, there are some similarities between his Honour's reasoning on the question of exclusionary provisions and his approach on the question of fiduciary relationships. In each case he emphasised the co-operative or joint elements of the relationship among the clubs and between the clubs and the League and ARL (albeit subject to the control of the League and ARL). He was disinclined to give weight to the commercial activities of the clubs and the League and ARL and, in particular, took the view that the clubs "were not set up to compete, as commercial entities, to supply their teams or to acquire a competition organiser" (512).
We have explained elsewhere why we reject the contention that the relationship between the clubs and the League and ARL was one of mutual trust, such as to attract fiduciary duties. That analysis shows that, despite co-operative aspects of the various relationships associated with organising and participating in a rugby league competition, each of the clubs and the League and ARL had its own distinct commercial interests. In many respects the clubs were in vigorous competition, notably for spectators, sponsors and television viewers. The financial information to which we have referred elsewhere reveals the magnitude of the commercial undertakings of various clubs, as well as of the League and ARL.
Secondly, the trial Judge drew a distinction between competition among clubs to gain or retain a place in the rugby league competition organised by the League and ARL and the financial non-viability of a club that might lead to its exclusion from the competition. For example, his Honour accepted evidence that Western Suburbs would never have been removed from the competition had it remained financially viable and concluded that the decision had not been made "on the basis of accepting one competitor over another". As we have explained elsewhere, the exclusion of Western Suburbs did not rest solely on financial considerations, but these plainly played a very important part in the decision.
Yet the very requirement that a club remain financially viable (reinforced by the guidelines for annual admission to the national competition) necessarily means that the clubs were competing for a place in the competition. The evidence makes it clear that during the 1980s and 1990s, despite some degree of co-operation, the clubs competed for spectators, sponsorships and television audiences. The point was not merely to win rugby league matches, but to ensure that the particular club could meet the criteria for annual entry into the national competition. Financial success in a competitive environment was necessary to ensure survival. It will be recalled, for example, that the criteria governing entry to the 1995 season imposed stringent requirements, including minimum levels of sponsorship and minimum match attendances. Far from the Western Suburbs' case and the annual admission requirements being at odds with competition among clubs, in our view they illustrate that the clubs were or were likely to be in competition with each other to remain in the national competition.
A similar point can be made in relation to the trial Judge's acceptance of Mr Arthurson's evidence that he would not force clubs to merge if they did not wish to do so. Mr Arthurson expressed this view in the context of conceding that he had been "a little concerned" that it may have proved "fairly difficult for Sydney teams to compete against the one-city teams". While he may not have been prepared to force clubs to merge, the simple economic consequences of competition are that a failed club may have no alternative but to fold (like Newtown) or to merge. Mr Arthurson's evidence is not inconsistent with competition among the clubs for a place in the national competition.
3. Competition for the Services of the League and ARL
In our view, the overwhelming inference from
the evidence is that at the time the Commitment Agreements were executed, the
clubs were or were likely to be in competition for the services of the League
and ARL as competition organisers. After
1983, the clubs were obliged to make an annual application, by a form which
became standard in 1991. It was made
clear to the clubs, as we have discussed elsewhere, that admission to the
competition was for one year only and that
admission for that year gave no entitlement to entry into the competition for
future years. The League and ARL
regarded the annual admission requirement as important, and took the view that,
subject to some flexibility, the guidelines were to be adhered to. As we have previously noted, the importance
of the admission requirement is illustrated by the correspondence between the
League and North Sydney in 1991, relating to its sponsorship agreement with
Quit for Life, and by the statement by Mr Quayle in the letter of August 1994
to Northern Rivers Ltd emphasising the League's "unfettered right" to
reject any club's application for admission.
It is important to appreciate that some of the clubs had long requested the League and ARL to change its policy on annual admissions. In 1985, for example, the club secretaries voted 11 to 4 in favour of entry into the competition for three to five years. This proposal was rejected by the board of the League. In 1992, North Sydney wrote to the League stating its belief that
"all current 16 clubs should not have to go through the annual process and the Articles should show quite clearly any method or process by which any current or future club could be eliminated from the competition".
The board of the League rejected this suggestion. In the light of this history, it is not surprising that, in the course of the meeting of 14 November 1994 relating to the Commitment Agreements, Mr Quayle on three occasions referred to the five year tenure as a "major concession".
It is also important to appreciate that from the early to mid-1980s there had been discussion among the clubs and the League about the desirability of reducing the number of Sydney clubs, independently of the position of Newtown and Western Suburbs. For example, the Bradley report, prepared in 1991, expressed the belief that in the long term the ARL should reduce the number of clubs to fourteen, thereby (having regard to new clubs outside Sydney) reducing the Sydney-based clubs to only five. Mr Arthurson accepted in his cross-examination that he was concerned about the long term viability of eleven Sydney clubs, that and his concern had been fostered by the Bradley report. He had formed the view that it was an issue that had to be addressed.
In May 1994, several clubs raised for discussion at a Premiership Policy Committee meeting, scheduled for 12 May 1994, the question of rationalisation of clubs. Canberra asserted that the "[n]umbers of teams must be reduced to remain a QUALITY Competition". Parramatta identified as an issue the "[r]ationalisation of Sydney clubs". Penrith suggested that the 11 Sydney based clubs should be reduced to seven. The Premiership Policy Committee discussed four options, namely, retaining the status quo, relocation (such as Balmain relocating to Melbourne), elimination or amalgamation. In the event, no change occurred, but all options were dealt with, including elimination and amalgamation (the latter Mr Quayle describing as a topic that was "consistently discussed").
Almost at the very time the Commitment Agreements were executed, the question of reducing the number of teams was raised for consideration by the board of the League. As we noted in recounting the events leading to the Commitment Agreements, on 17 October 1994 the board of the League resolved to hold a special meeting to discuss several issues, including a "reduction in the number of Sydney teams". That the issue remained a live one even after the Commitment and Loyalty Agreements were executed is shown by the fact that the Premiership Policy Committee unanimously agreed on 14 March 1995 that "the future structure of the Winfield Cup competition should contain fewer Sydney clubs".
In view of these facts (and others that we have not recounted), it is impossible to resist the conclusion that at least some of the clubs which had executed the Commitment Agreements were in competition or likely to be in competition with each other to retain their position within the national competition.
4. Competition for the Services of News
We also think that the evidence inevitably leads to the conclusion that the clubs, or some of them, were in competition or likely to be in competition to secure the services of News as an alternative competition organiser.
The trial Judge approached the matter on the basis that, at the time the Commitment Agreements were executed, no alternative competition organiser existed. This construction of events is not borne out by the circumstances leading up to the execution of the Commitment Agreements, which we have recounted in Part II, Section M of this judgment. It is perfectly true that until early 1994 there was no alternative competition organiser looming as a potential competitor to the League or ARL, or as a potential consumer of services provided by the clubs (or some of them). But from early 1994 the position changed, both in relation to the existence of an alternative competition organiser and the perceptions of the parties to the Commitment and Loyalty Agreements.
It is not necessary to repeat our account of the circumstances leading to the execution of the Commitment Agreements. The following major points can be extracted from that account:
– From April 1994, when Mr Ribot prepared a report for Mr Cowley of News, active planning for Super League was undertaken within News.
– The document entitled "Superleague", prepared in August 1994, outlined a detailed proposal for an "elite national competition", to consist of 12 teams, four of which would be based in Sydney. While the teams were to be privately owned, a commitment for seven years was thought necessary from four of the "continuing teams".
– From July 1994 onwards, media commentary and speculation concerning Super League became more frequent and intensive. Some of those reports accurately quoted Mr Arthurson as expressing concern about the impact of the Super League proposal on the clubs and the game of rugby league.
– At its meeting of 17 October 1994, the board of the League resolved to hold a special meeting to discuss, inter alia, Super League.
– Mr Arthurson decided to return early from his visit to England after being told by Mr Lovett that Super League was definitely going to happen. Mr Arthurson expressed concern about the proposed competition to be run by News.
– The draft Commitment Agreements were prepared and Mr Arthurson and Mr Quayle requested the clubs to execute them because (as Mr Arthurson said) they wanted to preserve the greatest asset of the clubs and the League, namely, the national competition.
– On 10 November 1994, the meeting between the League, ARL and News took place at which Mr Cowley said that Super League was definitely going to happen.
– On 14 November 1994, the meeting of
the League and ARL and the clubs took place.
The very point of the meeting was to discuss the developments with Super
League and to ensure (as Mr Arthurson said at the meeting) that rugby league
would never fall out of the hands of the accepted authority. Super League was seen as a realistic
possibility and the clubs
were urged to stick together.
– The major (if not the sole) point of the Commitment Agreements executed at about the same time was to prevent the clubs participating in a rival competition.
– On 2 February 1995, a further meeting was called to consider the Super League issue, in part because of doubts concerning the commitment of some clubs to the national competition.
– On 6 February 1995, the clubs resolved, after hearing a presentation from News representatives, to execute the Loyalty Agreements. All were duly executed within a short period. Again the major purpose of the Loyalty Agreements was to prevent the clubs participating in any rival rugby league competition.
This brief summary of the relevant events shows that the threat posed by News' potential rival competition was very much at the forefront of the minds of the representatives of the League and ARL and of the clubs. The Commitment and Loyalty Agreements were designed, in large measure, to prevent any of the clubs from choosing to participate in the rival competition.
The trial Judge placed considerable reliance on what he found was the assurance given by Mr Cowley, on behalf of News, shortly before the meeting of 14 November 1994, that if there was to be a Super League "it has to be under the control of the ARL". In our view, his Honour placed too much emphasis upon this cryptic remark in reaching the conclusion that, by the time the Commitment Agreements were executed, Super League as a potential rival competition had ceased to exist.
The evidence establishes clearly enough that News' preferred course was to co-operate with the League and ARL in supplying services to and acquiring services from the clubs. The "Superleague" concept, as developed in August 1994, plainly avoided a strategy of confrontation. The plan formulated at that time contemplated that the League would conduct test matches and receive grants to promote the game of rugby league. Most of the clubs would be offered shareholdings in the new Super League clubs. Whether this proposal could reasonably be described as one in which the League and ARL would control Super League is a matter on which different views might be held.
Be that as it may, it is quite clear that the League and ARL and, indeed, the clubs did not regard the Super League concept as non-existent on 14 November 1994 and thereafter. For example, at the meeting of the clubs on 14 November 1994, Mr Arthurson, in his opening, repeated Mr Cowley's comment on 10 November 1994 that News would be going ahead with Super League in any event. The discussion and the draft Commitment Agreements were directed to nipping the Super League threat in the bud.
Events after the meeting of 14 November 1994 reinforce the point that Super League continued to be at least a potential rival competition and News a potential rival competition organiser. The ACP document of 13 December 1994, which presented three strategies, including the "Rebel Approach", showed that Super League was very much alive only a few weeks after the meeting. Progress on Super League continued with the Confidentiality Deeds, signed by five rebel clubs, and the formulation of further options in January 1995. These developments are not consistent with a conclusion that no rival competition or competition organiser was likely to be available to the clubs in November 1994.
Similarly, in our opinion, the facts cannot support a conclusion that the clubs were not likely to be in competition with each other for the services of a rival competition organiser when the Loyalty Agreements were executed in February 1995. His Honour relied on several matters in making a finding to this effect:
– the Commitment Agreements had been accepted as valid;
– News had unequivocally stated that any further proposals would be made "through the front door of the League"; and
– Super League was "dead in the water".
In our view, the first proposition is belied by the terms of the letter of 2 February 1995, sent by Mr Quayle, on behalf of the League, to the clubs. In that letter Mr Quayle noted that the Super League proposal had created a climate of uncertainty and mistrust among stakeholders in the League. He expressly stated that
"in the aftermath of the News Limited meeting... there is considerable doubt regarding the commitment by a number of Clubs to that resolution".
It is also belied by the course of the meeting of 6 February 1995, where each club was asked to state its position with respect to Super League. Several clubs, although professing loyalty to the League, disclosed that, since the execution of the Commitment Agreements, they had signed confidentiality deeds with News. Mr Love advised the meeting that the Loyalty Agreements were desirable "for more abundant caution".
In any event, the existence of the Commitment Agreements could not prevent the clubs competing for the services of News as a rival competition organiser. The clubs would have been competitive (or would have been likely to be competitive) in this sense but for the provisions of the Commitment Agreements. Section 4D(2) of the TP Act operates in this situation to deem the clubs to have been competitive with each other.
Secondly, the statements by News' representatives did not alter the perception of the League and many, if not all, clubs that Super League was a threat to the national competition and that the clubs were potentially in competition for the services of News as a rival competition organiser. Indeed, that perception continued after the Loyalty Agreements had been executed. In his letter of 16 March 1995 to the clubs, Mr Arthurson reported that he had evidence that some club representatives had been speaking to News in relation to their participation in Super League. Nor did the statement alter the fact that News was still planning an alternative competition and that it had the means to do so.
Finally, the phrase "dead in the water" is simply not an accurate description of the state of Super League in February 1995. The phrase was used by Mr Neil of Canberra in his evidence, to describe his assessment of the situation after 6 February 1995. However, his evidence indicates that he formed his view in large measure because Mr Packer had made it clear to the meeting on 6 February 1995 that he expected the contractual arrangements concerning the televising of games to be honoured. Mr Neil's opinion at the time, based (inevitably) on incomplete knowledge, is not a reliable indicator of whether Super League was a sufficiently realistic alternative to the national competition to justify concluding that the clubs were likely to be in competition for the services of News. The evidence demonstrates that the objective position was that Super League was a realistic alternative to the national competition.
5. Competition for the Services of Premier Players
The trial Judge concluded that the clubs were not in competition for the "services" of premier players, as that term is defined in s.4 of the TP Act. His Honour relied on the fact that, as the appellants conceded, the contracts between the clubs and premier players, at least during the period 1993-1995, were contracts of employment. Similarly, the Super League player contracts, entered into from March 1995, were also in the form of contracts of employment. These facts prompted his Honour to find that the competition was only in relation to the performance of work under a contract of service. Since the definition of "service" excludes the performance of work under a contract of service, the competition was not in relation to the services of premier players.
Having regard to the conclusions we have reached on other forms of competition, it is not necessary to resolve this issue. However, we think that the better view is that the clubs were, or were likely to be, in competition with each other in relation to the acquisition of the services of players.
The standard form of contract of service between players and clubs was adopted by the League because it had received legal advice that a contract in this form would not be subject to the TP Act. But there is nothing in the articles or rules of the League which deals with formalities associated with player contracts, except for Form 2 to the Rules. However, Form 2, which sets out an application for registration of a player, merely requires the playing contract to be enclosed and does not specify its form. It was therefore open to a club to engage the services of a player otherwise than under a contract of service. In Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 (FCA/Toohey J), at 40-41, for example, Toohey J found that the contract under which a professional cricketer agreed to play for a club was a contract for services. Alternatively, the club might have entered into a contract with a player's family company, whereby the company agreed to make the player available for specified duties.
The same applies to the competition for players to participate in Super League. It is true that the Super League contracts were in the form of contracts of service. But this could have changed at any time or in relation to any particular player. There was nothing which required the contracts to take the form of contracts of service.
The point can be illustrated by the terms of
the Commitment and Loyalty Agreements.
These
agreements were intended to prevent News or the clubs acquiring the services of
premier players for the Super League competition. If a club engaged players under contracts for
services, or encouraged them to accept contracts for services, with a Super
League club, the League and ARL would have regarded such conduct as in breach
of the Commitment and Loyalty Agreements.
Moreover, that view, assuming the agreements to be valid, would have
been well-founded. The form of the
contract, whether one of employment or for services, was not to the point. The point was that premier players should
play only in teams supplied by clubs operating under the auspices of the League
and ARL.
In these circumstances, it seems to us that in the competition and rivalry between clubs for premier players there was a real chance or possibility that there could be competition to engage players otherwise than under a contract of service. It follows that, at the time the Commitment Agreements and Loyalty Agreements were executed, the clubs were likely to be in competition with each other for the "services" of premier players.
F. Was There a Contract Arrangement or Understanding?
1. The Test
The trial Judge relied on the passage from the judgment of Lockhart J in Trade Practices Commission v Email, at 385, in which his Honour said that, for there to be an arrangement or understanding, there must be a meeting of minds. Lockhart J in that case emphasised that there must be a consensus and not just a mere hope as to what might be done.
The distinction between a hope or expectation and an understanding was applied by Ryan J in Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35 (FCA/Ryan J). In that case, a number of newsagents entered into identical advertising membership agreements with Newspower (Victoria) Pty Ltd. One issue was whether s.45(2)(a)(i) of the TP Act had been contravened. His Honour found that there was no relevant arrangement or understanding (at 61):
"Individual membership agreements are not
themselves the subject of attack under s.45(2)(a)(i). Rather, it is contended that there is an
understanding between Newspower Victoria and those newsagents who have applied
to become advertising members of `Newspower' that identical membership
agreements would be made with other newsagents.
The attack is therefore upon a twofold understanding, first between
Newspower Victoria and newsagents and, secondly, between individual newsagents
themselves.
The first question is whether there is any understanding between newsagents to
which Newspower Victoria is also a party.
It is obvious that the `Newspower' arrangements required the acceptance
of individual newsagents which, it may be inferred, would not be forthcoming if
it were regarded as unlikely that other newsagents would join. Clearly, there must have been an expectation
that other newsagents would participate in the `Newspower' arrangements. However, an expectation of that kind does not
carry with it an understanding, arrived at between newsagents, to enter into
membership agreements.
The applicants must go further and establish an understanding between newsagents because Newspower Victoria and newsagents are not, as between themselves, competitors in any market. I can discern, however, no evidence which establishes an understanding between newsagents. In my view, it is necessary to establish something more than a hope or expectation that a certain outcome will occur before the Court can find that an understanding exists."
2. The Trial Judge's Approach
In the present case, the trial Judge found that the clubs had no more than a hope or expectation that others would execute the Commitment and Loyalty Agreements. It was not possible to infer a horizontal arrangement or understanding out of the series of vertical agreements. His Honour pointed to the absence of direct and express communications between the parties to the alleged arrangement or understanding.
His Honour recognised that, in certain circumstances, it may be possible to infer an arrangement or understanding from a series of individual agreements. He instanced as such a case Re British Basic Slag Ltd's Agreements [1963] 2 All ER 807 (CA). There, eight steel manufacturing companies were shareholders of B. Ltd and each appointed a director to the board. All eight companies entered into identical agreements with B. Ltd on the same day. The question was whether there was an arrangement between two or more persons for the purposes of s.6(1) and (3) of the Restrictive Trade Practices Act 1956 (U.K.). The Court of Appeal held that there was. Diplock LJ analysed the situation this way (at 819):
"`Arrangement' is not a term of art; and in s.6(3) of the Act I agree with my Lords that it bears the meaning that an ordinary educated man would ascribe to it. It involves a meeting of minds because under s.6(1) it has to be an arrangement `between two or more persons' and, since it must be an arrangement `under which restrictions are accepted by two or more parties', it involves mutuality in that each party, assuming he is a reasonable and conscientious man, would regard himself as being in some degree under a duty whether moral or legal to conduct himself in a particular way or not to conduct himself in a particular way as the case may be, at any rate so long as the other party or parties conducted themselves in the way contemplated by the arrangement.
...there are many ways in which arrangements may be made [and] it is sufficient to constitute an `arrangement' between A and B, if (i) A makes a representation as to his future conduct with the expectation and intention that such conduct on his part will operate as an inducement to B to act in a particular way; (ii) such representation is communicated to B, who has knowledge that A so expected and intended, and (iii) such representation or A's conduct in fulfilment of it operates as an inducement, whether among other inducements or not, to B to act in that particular way.
On the evidence in the present case it is plain beyond a peradventure that the knowledge of each member acquired at the board meetings of Basic from statements made by the nominees on that board of his fellow members that each of his fellow members was going to enter into a contract with Basic in the terms of the vertical contract, or at any rate that any of his fellow members who entered into a contract for the sale of fertilisers to Basic would do so on substantially the same terms as of those of the vertical contract, operated as an inducement to each member himself to enter into a contract with Basic in the same terms as those of the vertical contract. If this is not an `arrangement' I do not know what is."
See also Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 24 FLR 286, at 291, per Smithers J.
The trial Judge distinguished Re British Basic Slag, principally on the ground that the parties to the separate agreements could be regarded as likely to act in accordance with the dictates of commercial practice. It would be easy in such a case to infer that "winks and nods" had taken the place of overt contracts. His Honour considered that the representatives of the clubs were relatively unsophisticated and would be unlikely to advert to Trade Practices considerations. Further, the setting had to be considered. His Honour took the view that the relationship of the clubs to the League was very different from that of the members of a trade association or of a group of retailers to a wholesaler (at 529-530):
"As I have already found, the League is a special body, which has grown out of aims that are not commercial and has objectives appropriate to those aims, to which like-minded clubs had joined themselves with the intention of conferring upon it controlling powers, designed to be exercised in the pursuit of their common aims and objectives. The peculiar relationship of the League with the clubs must be taken into account. The roots of the clubs and the League, and of the active spirits involved in them, deeply embedded in community, youth and sporting interests, are likely to have led the deciding minds in directions other than those that might have appealed to purely commercial concerns.... Control having been committed to the League, with which the clubs had established strong links from the beginning, links that had developed and strengthened over the years, those involved would have had every reason to be content to reach their understandings directly with the League, and not as between the clubs. The League was the controlling body, and decisions about the competition were to be made by it."
3. The Position Before 14 November 1994
The trial Judge's view of the inferences that could be drawn from the circumstances preceding the execution by the clubs of the Commitment Agreements was heavily influenced by his characterisation of the objectives of the League, ARL and the clubs as essentially non-commercial. We have given reasons elsewhere for rejecting this characterisation of the objectives and of the relationship among the clubs and between the clubs and the League and ARL.
Be that as it may, even if attention is confined to the circumstances prior to the meeting of 14 November 1994, those circumstances provide powerful support for the proposition that there was an arrangement or understanding among the clubs, to which the League and ARL were also parties. That arrangement or understanding included the provisions of the Commitment Agreements, which (as we shall explain) had purposes of the kind specified in s.4D(b)(i) of the TP Act. In reaching this conclusion we take into account the observations of Isaacs J in The King and the Attorney General of the Commonwealth v The Associated Northern Collieries (1912) 14 CLR 387, a case concerned with an alleged combination. His Honour said this (at 400):
"Community of purpose may be proved by independent facts, but it need not be. If the other defendant is shown to be committing other acts, tending to the same end, then though primarily each set of acts is attributable to the person whose acts they are, and to him alone, there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts were the outcome of pre-concert, or some mutual contemporaneous engagement, or that they were themselves the manifestations of mutual consent to carry out a common purpose, thus forming as well as evidencing a combination to effect the one object towards which the separate acts are found to converge."
The Commitment Agreements were executed by the clubs in substantially identical form (with some minor exceptions). The clubs also executed those agreements within a short time of each other, in response to approaches to each club made by Mr Quayle and Mr Arthurson. These circumstances, of themselves, may not be enough to establish mutual consent to carry out a common purpose. However, the context in which the agreements were executed strongly supports that conclusion.
The preparation of the draft Commitment
Agreements and the approaches by Mr Arthurson and Mr Quayle took place
immediately after Mr Arthurson's return from England. His return was prompted by concern about the
threat to the national competition posed by Super League. The existence of the Super League proposal
and Mr Arthurson's concern about it were common knowledge among the clubs
because of the extensive newspaper coverage of the Super League proposal. If the officials of the clubs had any doubts
about the object of the exercise, those doubts would have been removed by their
communication with Mr Arthurson and the receipt of the draft agreement. On his own account (as is discussed in Part
II, Section L2), Mr Arthurson told each club official that he wanted to
preserve the competition, which was the "greatest asset" of the
League and the clubs. He stressed the
"bonds of unity" that had always existed among the clubs and (as he
said in one of his affidavits) he "emphasised the need for the clubs to
remain unified". Mr Arthurson put
to the club officials that the purpose was to preserve the quality and standard
of
the competition not only for the clubs and the League, but for the benefit of
the public. Mr Quayle was even more
explicit. He told the club officials he
contacted that the News proposal was a "potential threat to the game"
and that he and Mr Arthurson wanted "to ensure that all clubs stick
together". The draft agreement
received by each club expressly prevented that club, for a five year period,
from participating in any competition not conducted or approved by the League
and ARL.
Regardless of their commercial sophistication or otherwise, the officials of each club could hardly fail to understand, even before the meeting of 14 November 1994, that they were being asked to join all other clubs in undertaking not to participate in an unauthorised competition and, specifically, not to participate in Super League. Notwithstanding the absence of evidence of direct communications among the clubs prior to 14 November 1994, it is difficult to resist the conclusion that the clubs were consenting, through the medium of Mr Arthurson and Mr Quayle, to carry out a common purpose. They were not merely hoping that the other clubs would join in; what they were doing made sense only as a common undertaking.
4. The Meeting of 14 November 1994
If, despite what we have said, the position was unclear by 14 November 1994, the meeting provided both the opportunity and the occasion for "horizontal" communications among the clubs. The respondents attempted to avoid this difficulty in their path by pointing out that sixteen of the clubs had already signed the Commitment Agreements and a further three had indicated willingness to sign subject to board approval. It was submitted that these clubs had accepted an offer made by the League and ARL and that, therefore, the agreements had been finalised in these cases (although not in the remaining four) before 14 November 1994.
The trial Judge made no finding to this effect. In our view, such a conclusion would be inconsistent with the course of events. At the meeting of 14 November 1994, Mr Arthurson was specifically asked whether the Commitment Agreements had been signed by the League and ARL. The transcript records the following:
"CHAIRMAN: Not at this time, no.
DES BOLSTER: When will that take place?
CHAIRMAN: After this meeting if that's the wish of the meeting. The reason why we asked for those expressions
of loyalty is so that, prior to going to the meeting with Mr Cowley, we
wanted to be armed with the knowledge that we, at least, had the support of the
majority of the clubs." [Emphasis added.]
This exchange indicates clearly that Mr Arthurson took the view that the League and ARL were not bound by the Commitment Agreements until the agreements were executed by them.
The transcript of the meeting of 14 November 1994 reveals a number of references by participants to the need for the clubs to "stick together" or "band together" and by Mr Arthurson to the virtues of "unswerving loyalty". All clubs other than Auckland were represented at the meeting. All had the opportunity to hear Mr Arthurson's explanation of the threat posed by Super League to the control of rugby league. The relationship between that threat and the Commitment Agreements, to the extent that there was any doubt, was made quite clear. In these circumstances to suggest, as did the respondents, that what occurred was mere "conscious parallelism", fails to pay due regard to the undisputed facts: cf. Theatre Enterprises Inc v Paramount Film Distribution Corporation, 346 US 537 (1954).
The Loyalty Agreements were executed after the meeting of 6 February 1995. Once again, Super League was at the forefront of discussion. Mr Arthurson reiterated the importance of the clubs sticking together. Each club stated its position, expressing its commitment to and support for the ARL. A motion was passed requiring all clubs to sign the Loyalty Agreement on pain of expulsion. In our view, these events make it clear that there was a common understanding of the clubs, evidenced by communications among them at the meeting, to take concerted action to adopt the provisions of the Loyalty Agreements.
G. Did the Clubs Have a Sufficiently Substantial Exclusionary Purpose?
1. The Test
In ASX
Operations Pty Ltd v Pont Data, supra,
the Full Court (at 475) pointed out the "curiosity" that ss.45(2) and
4D(2) of the TP Act speak of the purposes of a provision, not the purposes of
those who devised and propounded it. The
Full Court also pointed out that s.45 operates upon contracts, arrangements or
understandings between two or more parties, not all of whom will necessarily
have a proscribed purpose. Both of these
facts provided some support for the contention that the test of whether the
proscribed purpose existed is an objective one.
However,
s.4F refers to the purpose for which a "provision was included in the
contract, arrangement or understanding".
The Full Court held that the language indicates that it is necessary to
look to the subjective purposes of the individuals responsible for including
the provision in the contract, arrangement or understanding.
There was some debate before us as to whether ASX Operations v Pont Data correctly stated the test for ascertaining the purpose of a provision of a contract, arrangement or understanding. It is not necessary to address this issue since, on our view of the evidence, it makes no difference whether a subjective or objective test is used. In making this observation, however, we should not be understood as casting any doubt on the correctness of ASX Operations v Pont Data.
As the Full Court said in ASX Operations v Pont Data (at 476), s.4F of the TP Act makes it plain that it is sufficient that a purpose was or is a substantial purpose. It is also sufficient that the proscribed purpose was included in other purposes. In Radio 2UE Sydney Pty Ltd v Stereo F.M. Pty Ltd (1982) 62 FLR 437, at 444-445, Lockhart J considered the various meanings of the word "substantial". He did not find it necessary to reach a conclusion on the issue, but saw "considerable force" in the view that, in the context of s.45, the word meant "considerable". In Dowling v Dalgety Australia, at 135, Lockhart J reiterated his view that "substantial" means considerable or large, rather than the lower threshold of "real or of substance and not insubstantial or nominal": cf Tillmans Butcheries Pty Ltd v Australasian Meat Industry Employees' Union, at 348. In ASX Operations v Pont Data (at 478), the Full Court proceeded on the basis of the approach adopted in Dowling v Dalgety Australia, in relation to the question of whether an agreement "substantially lessened competition". However, the Full Court was not required to resolve the question, since counsel for both sides accepted that this approach was appropriate.
Again, we do not need to resolve the proper construction of the word "substantial" in s.45(2). In our view, whether the test propounded by Lockhart J or some less demanding standard is applied, the result in the present case is the same.
2. A Gloss
The trial Judge cited the authorities to which we have referred and accepted the principles formulated in them. However, his Honour's approach to the question of purpose was criticised by the appellants on the ground that, in substance, he added a gloss to the statutory language. The effect of this gloss, it was said, was to elevate the requirement of substantiality to the point where the test actually applied was more stringent than that required by the authorities.
In our view, the criticism has considerable force. His Honour cited Thompson v Australian Capital Television Pty Ltd (1994) 54 FCR 513 (FCA/FC), to support the proposition that it would not be consistent with general principle to interpret ss.4D, 4F and 45 so as to widen the area of interference with general freedom of contract under the law. But the very point of those sections is to "interfere with general freedom of contract". They do so by rendering unenforceable and prohibiting the making of a contract, arrangement or understanding that contains an exclusionary provision. It cannot assist in construing the language used in the sections to approach the task by applying a presumption that interference with freedom of contract must be minimised. Plainly, the language of s.4F must be given full effect and this requires the proscribed purpose to be a "substantial purpose". But that is not the same as interpreting "substantial" in a manner that minimises the impact of the legislation on the parties' freedom to contract.
Thompson v Australian Capital Television does not suggest otherwise. It was a very different case, the issue being whether the Law Reform (Miscellaneous Provisions) Act 1955 (ACT) abolished the common law rule that a release of one joint tortfeasor operates as a release of all.
3. The Facts
It is not necessary to repeat the facts that have been referred to at length elsewhere. In our opinion, they plainly establish that the clubs and the League and ARL entered the Commitment Agreements for the purposes of preventing, for five years
– the supply by the clubs of rugby league teams to any competition organiser other than one approved by the League and ARL; and
– the acquisition by the clubs of the services of a competition organiser other than one approved by those two bodies.
It is equally clear that, while the clubs and the League and ARL may have had other objectives in entering the agreements, these were substantial purposes on any view open of the word "substantial".
The discussion at the meeting of 14 November 1994 speaks eloquently of the fact that the participants perceived News to be a potential rival competition organiser, whatever assurances Mr Cowley might have given Mr Arthurson about the control of the game. It is plain that the League and ARL brought the clubs together, in circumstances that were redolent of great urgency, for the purpose of arresting the nascency of News as a real competition organiser. The participants at the meeting were told repeatedly of the importance of sticking together. The Commitment Agreements were clearly aimed specifically at News as a rival competition organiser and were understood that way by the representatives of the clubs. The position was very similar in relation to the meeting of 6 February 1995 and the Loyalty Agreements executed shortly thereafter.
The respondents contended that, as his Honour had accepted Mr Arthurson and Mr Quayle as reliable witnesses, it followed that there could be no finding that they were substantially motivated by the proscribed purposes in promoting and executing the Commitment and Loyalty Agreements. We note in passing that a reading of the transcript of the cross-examination of Mr Arthurson and Mr Quayle suggests that, on occasions, each was somewhat reluctant to accept propositions that might have been thought to be reasonably clearcut, if not incontrovertible. This of course does not detract from his Honour's finding that their evidence should be accepted.
However, in our view, the evidence given by Mr Arthurson and Mr Quayle was not inconsistent with the conclusions we have reached. The following extracts from Mr Quayle's cross-examination illustrate the point. They are consistent with Mr Quayle having as a substantial purpose the shutting out of News as a rival organiser and locking in the clubs to the national competition, to the exclusion of their participation in a rival competition:
"Q. It's simple, Mr Quayle: If you had the clubs and the players tied up for five years, there was no way that any rival organisation could establish a rival competition involving the best players in that period; that's the case, isn't it?
...
A. I think from my point of view at the time, we were trying to protect what our competition was all about.
Q. Sorry, we were trying to?
A. We were trying to protect the clubs, the clubs that were in our competition. As I said, it was the 16 clubs who, three years ago, had allowed expansion to take place.
Q. But as you've said, what you were seeking to do was to protect what you had; true?
A. Our competition.
Q. Your competition?
A. Yes.
Q. What you had was the 20 teams?
A. Yes.
Q. And you were trying to protect those 20 teams; true?
A. I was trying to make sure that our competition and the League as it was, the clubs as a direct partnership, were united with each other.
Q. And the way in which you were seeking to secure that protection was to bind the 20 clubs to play for your competition and not to play for anybody else's; that's the case, isn't it?
A. Well, that's the case as far as - yes.
Q. What caused you to do this was the speculation in the press plus the telephone call from Mr Arthurson which followed on that speculation; that is right, isn't it? That's obvious?
A. Yes.
Q. Do you agree?
A. Yes.
Q. Was it your view, Mr Quayle, that if a club was involved in assisting in the establishment of a rival competition, that would be an act of disloyalty to the League?
A. If that was the case, yes."
In the case of Mr Arthurson we have referred elsewhere (Part II, Section M2) to his account of the conversations he had with club executives on his return from England. After that account, the cross-examination continued as follows:
"Q. You would have said to them all that, of course, you are ringing them in view of the Super League threat which had caused you to return from England?
A. Yes, I don't know that I used that expression.
Q. Perhaps not `threat', but `issue' - Super League issue?
A. I certainly don't think I called it a threat. I think I said I had returned from England and that I was seeking the clubs to agree to loyalty agreements with the league, because of the fact that I wanted to preserve and maintain our competition.
Q. In the light of the fact that there was all this rumour and suggestion of a News Limited move?
A. Well, as I've pointed out previously, I was totally, to use an expression, in the dark, I suppose, as to what their intentions really were, because you know, they never, ever really told me what it was all about. I just kept reading - press reports would die out; and a couple of weeks later, we would read something else, and then, you know, at that stage, a lot of it was innuendo and certainly I had no knowledge of what they actually had in mind.
Q. Of course, that meant to you, being prudent, you had to secure your position or the position of your league and your competition in relation to any threat that may come from --
A. It was my desire to preserve the standard and quality and maintain our competition, that's perfectly right.
Q. Having in mind what you had learned of the News Limited proposal?
A. Well, as I say, my knowledge of the News Limited proposals was extremely vague.
Q. Yes?
A. And I just thought that if there was any move to break up our competition - a competition that, as I said earlier, we had worked so hard together to put together over so many years, a competition that was regarded throughout the world as certainly the best rugby league competition, the Australian Rugby League, in the world - I wanted to ensure that we could preserve that and maintain that standard and quality of competition.
...
Q. Mr Arthurson, perhaps I will withdraw the previous question and ask you this question: In speaking to the representatives of the clubs, I take it that you mentioned to them that you had returned from the United Kingdom in order to speak with Mr Cowley or with representatives of News Limited?
A. Yes, I possibly did.
Q. And that that meeting was planned for the 10th?
A. Yes. I'm not sure that I said to all the clubs' delegates that that meeting was planned for the 10th. I certainly mentioned it to John Quayle and members of my board.
Q. So far as the representatives of the clubs are concerned, did you not say to each of them, in effect, that the request that was made of them was made urgently in view of the Super League issue, which seemed to have emerged again in your absence overseas?
A. Well, I said to them, as I said earlier, that I'd returned because I was concerned about all the rumours. I wanted to get to the bottom of it. I was concerned, as I said, with preserving the competition that we had all worked together to get over so many years. I certainly would have referred to the bonds of unity between the clubs and the clubs and the league and the historical bonds actually that we have between us. I certainly would have said those things, because I feel so strongly about that.
Q. Your purposes in speaking to them was to assure yourself, prior to going to the meeting with Mr Cowley, that you were armed with the knowledge that you had at least the support of the majority of the clubs?
A. Well, yes, I wanted to be content in the knowledge that the clubs joined with me in wishing to preserve the standard and quality of our competition, and, yes, I guess it was of some comfort to me when I spoke to Ken Cowley."
In the result, the finding by the trial Judge that the clubs and the League and ARL did not have the relevant substantial exclusionary purposes cannot be sustained. On the contrary, we think that the relevant purposes were established by the evidence.
H. Were Services Provided in Trade or Commerce?
Much of the reasoning of the trial Judge and the submissions of the respondents proceeded on the basis that the relationship between the League and ARL and the clubs existed outside the sphere of business activity. In our view, at the relevant times, the League and ARL were engaged in trade and commerce. They derived substantial sums of money from sponsorships; they derived income from exploiting merchandising rights; they acquired money from the public by organising finals games, interstate games and international games; and they sold television rights. Part II of this judgment provides details of the trading activities and financial performance by the League and ARL.
The clubs were also engaged in trade and commerce. They hired grounds; they obtained money from the public at home games; and they sold sponsorships. Many of the Leagues clubs shared the revenue derived from trading activities with their associated clubs. The League and ARL distributed a portion of their income through the annual grants to clubs. Again, details are to be found in Part II.
To the extent that it is relevant, the evidence shows that the League and ARL exercised a significant measure of control over the trading activities of the clubs. For example, they prevented the clubs from entering into their own contracts with television stations or with respect to certain kinds of merchandising; they fixed the level of outer ground admission charges; and they exercised considerable influence over matters such as club colours and the kinds of sponsorship the clubs could obtain.
The essence of the case for the respondents, both at trial and on appeal, was that, although these were all trading activities, the case was concerned with conduct that was not of a trading nature, but rather was non-commercial in character. In our opinion, it is not possible to sever the activities of the clubs and the League and ARL in the manner for which the respondents contended. It is true that the game of rugby league is at the centre of the activities of the League and ARL and of the clubs. But the game is played on grounds from which income is derived; and it is the vehicle for obtaining sponsorship and other sources of revenue. The playing of rugby league generates the interest of the media and it is that interest that leads to the League deriving income from the sale of television and broadcasting rights. Merchandising rights can be characterised in the same way.
The Commitment and Loyalty Agreements themselves are contrary to the case presented by the respondents. The Loyalty Agreements expressly acknowledge that the national competition is a commercial operation: see recitals and cll.1.1 and 1.2(b). By cl.1.2(b) the clubs promised to assist the League and ARL to use their best endeavours to "enhance" its "commercial viability" and to maximise its "revenue earning potential". They also promise, in the same agreements, to "assist directly and indirectly in achieving and maintaining the objective" which was, inter alia, to "maintain and enhance the commercial success of the national competition; and to maintain and enhance the appeal of the national competition to commercial sponsors and the media": recital B and cl.1.1. See also recitals C, D, E and F, which are to the same effect.
Plainly, the League and ARL and the clubs were
concerned to strengthen the national competition, so as to enhance its revenue
earning potential. This reinforces the
essential trading and commercial character of the national competition. It also reinforces the point that the actions
of
the League and ARL and the clubs in organising and participating in the
national competition from year to year were commercial in character.
I. Consequences of a Breach of TP Act, s.45
1. The Application of TP Act, s.87(2)(a)
It follows from what we have said that the appellants have established that the making of the Commitment and Loyalty Agreements by the clubs and the League and ARL contravened s.45(2)(a)(i) of the TP Act, since those agreements contained "exclusionary provisions" within the meaning of s.4D of the Act. It also follows that the clubs and the League and ARL are prohibited by s.45(2)(b)(i) from giving effect to any of the exclusionary provisions contained in those agreements. The trial Judge concluded that, even if contraventions of the TP Act were established, that would not necessarily dispose of the claims for breach of contract based on the Commitment and Loyalty Agreements, or the further claims that News, SLPL and the Franchisees had unlawfully induced the breaches. His Honour referred to the discretionary nature of the remedies provided by ss.80 and 87 of the TP Act. In relation to the declaratory remedies sought by News that the Commitment and Loyalty Agreements were void ab initio, his Honour said (at 534) that these agreements
"were clearly in law extant then [referring to March and April 1995], and will remain so now unless the Court makes an order pursuant to s.87 or otherwise setting them aside."
His Honour found that News "here engaged in self-help in an extreme form...". His Honour considered that this self-help was "accompanied by the extraordinary actions...which can only be regarded as well outside the norms of proper and acceptable commercial conduct". Accordingly, he concluded that it would be inappropriate to exercise the discretion to grant relief by setting aside the agreements ab initio.
The power to declare a contract to be void, and
if the Court thinks fit, to have been void ab
initio or at all times on or after a specified date, is contained in
s.87(2)(a) of the TP Act. In our
respectful opinion, this provision does not have the effect in law which the
trial Judge suggested. On the contrary,
the powers in s.87 do not alter the ordinary rule, that where a statutory
provision such as s.45 of the TP Act provides that a contract is contrary to
law, the contract is void: see
Trade Practices Commission v Milreis Pty
Ltd (1977) 29 FLR 144 (FCA/FC), at 151, per Bowen CJ. In the same case Brennan J said this (at
162):
"The effect of s.45 upon contracts falling within its ambit is therefore to avoid them wholly or in part, ab initio or from the time when the circumstances bring the contract within its terms....
The provisions of s.87(2)(a) do not require a special construction to be given to s.45. The powers conferred by s.87(2)(a) may in appropriate cases, be exercised to reflect precisely the ordinary operation of s.45 upon contracts falling within its ambit. Attributing to s.87(2)(a) the primary meaning which it bears, viz, the conferring of a power to make a declaration in accordance with legal relationships (rather than a power to alter legal relationships), the ordinary operation of s.45(2) is not limited or changed."
Deane J made the following observations (at 168):
"The conferring upon a court of a power to declare a contract void does not carry with it any inference that the court is entitled to declare or make void what is otherwise valid. The power, if the court thinks fit, to declare the whole or any part of a contract to have been void ab initio or at all times on and after a designated date to which the sub-clause refers is explained by the fact that the provisions of a contract which were not initially avoided by the Act can become void either by reason of the coming into operation of new or altered provisions of the Act or by reason of an alteration in circumstances without any change in the relevant provisions of the contract...".
The High Court in Carlton and United Breweries Limited v Castlemaine Tooheys Limited (1986) 161 CLR 543, at 554-555 referred to TPC v Milreis with approval, noting that it was there accepted that the ordinary consequences which the common law attaches to illegality flow from a breach of s.45(2) of the TP Act. See also Webb Distributors (Aust) Pty Ltd v The State of Victoria (1993) 179 CLR 15, at 37.
Accordingly, subject to the question of severability dealt with below, we conclude that the appellants are entitled to a declaration that the Commitment and Loyalty Agreements are void.
2. Severability
The League and ARL contended that, even if the Commitment and Loyalty Agreements contravened s.45 of the TP Act, they were not rendered wholly invalid. They relied on s.4L of the TP Act, which provides that the invalidity of an exclusionary provision of a contract, if severable, does not affect the validity or enforceability of the balance of the provisions. They also relied on cl.7 of the Loyalty Agreement, which provides for the severance of any part of the deed found to be void or unenforceable.
A provision of an agreement or a deed can be severed only if the severance of the invalid or void term does not materially change the intent of the contracts: McFarlane v Daniell (1938) 38 SR(NSW) 337 (NSW CA), at 345; Carney v Herbert [1985] AC 301 (PC), at 311. The terms of the Commitment and Loyalty Agreements which prohibit the participation of the clubs and their players in a competition not conducted or authorised by the League or ARL are exclusionary provisions and are invalid. They are so bound up with the agreement of the League and ARL that the clubs should be admitted into the national competition until 1999 as to form an indivisible whole. If those terms are removed, the nature of the contract is altered in a fundamental way. Moreover, the agreement of the clubs to participate in the national competition for that period gives effect to the purpose of preventing or limiting the supply of rugby league teams to News or any other competition organiser. It is as much a provision giving effect to a purpose proscribed by s.45 as the express prohibition on the clubs or their players participating in another competition. In our view, severance is not possible.
It follows that claims based on alleged breaches of the Commitment and Loyalty Agreements must fail. It also follows that the appellants are entitled to declarations that those agreements are void.
3. Conclusion
Each of the Commitment and Loyalty Agreements contains exclusionary provisions within the meaning of s.4D of the TP Act. Accordingly, the making of the Commitment and Loyalty Agreements containing those provisions constituted a contravention of the Act (s.45(2)(a)(ii) and giving effect to them would constitute a contravention of the Act (s.45(2)(b)(i)).
VI. ORDERS
A. The Orders Made by the Trial Judge
The orders made by the trial Judge are set out in the schedule to this judgment. There was considerable argument as to whether, assuming his Honour's findings of fact and law to be correct, at least some of the orders ultimately made were too wide or flawed for other reasons. Because of the conclusions we have reached, the orders made by his Honour must be set aside.
Although we think it follows from our reasoning that Orders 2-34 made by the trial Judge should be set aside, we make some brief comments below on those orders. Since the trial Judge has not given reasons for making the orders, it is necessary to rely on the arguments of the League and ARL to ascertain the basis for the making of each order.
1. Orders 2 and 3
Orders 2 and 3, in effect, prevent News and the Super League companies from organising or promoting any football competition, not authorised by the League or ARL, until 31 December 1999. They also prevent News and the Super League companies from using any Super League player or coach in a competition or game not authorised by the League or ARL.
The League and ARL supported these orders as providing relief by reason of
– the clubs' breach of contractual obligations pursuant to the memorandum and articles of the League and to the Commitment and Loyalty Agreements;
– News' participation in and breach of the clubs' fiduciary duties owed to the League;
– unlawful interference in the undertaking of the League and the loyal clubs; and
– unconscionable conduct.
We have held that the Commitment and Loyalty
Agreements are void by reason of the TP Act.
We have also rejected the other contentions on which the League and ARL relied
to support Orders 2 and 3. It follows
that Orders 2 and 3 should be set aside.
2. Orders 4, 5 and 6
Order 4 restrains the rebel clubs until 31 December 1999 from releasing or perfecting the release of any player or coach contracted to any such club so as to allow the player or coach to participate in a rugby league competition not authorised by the League or ARL. Order 5 imposes a similar restraint, preventing the clubs from releasing players or coaches for the benefit of any of the News companies. Order 6 restrains the rebel clubs, until 31 December 1999, from being involved in any unauthorised competition.
The reference in Orders 4 and 5 to "perfecting a release" apparently reflects the absence of evidence that releases had actually been executed between the rebel clubs and the players. Although the rebel clubs had agreed in the club deeds to release their contracted players, there was no evidence that the clubs and the players were parties to agreements giving effect to the releases.
Having regard to our conclusions, these orders cannot stand and therefore should be discharged.
3. Orders 7 - 11
Order 7 is a declaration that the rebel clubs and News hold all shares in the Franchisees and SLPL on trust for the League. Orders 8-11 are consequential on this declaration.
The League and ARL sought to support these orders on the basis of the rebel clubs' breach of fiduciary duties and News' participation in those breaches. They also relied on unconscionable conduct and the constructive trust as a remedy for contractual breaches or tortious conduct.
As our reasons indicate, the only relevant breach was the breach by the rebel clubs of the implied obligation to the League to do what was reasonably necessary to allow the 1995 competition to be carried on. We have held that the remedy for that breach, in the circumstances, sounds in damages only. Accordingly, the breaches by the clubs of contractual duties owed to the League and News' participation in those breaches cannot support Orders 7-11.
4. Orders 12 - 14
Order 12 declares that News, SLPL and the Franchisees hold in trust for the League, inter alia, all rights pursuant to Super League contracts with players and coaches and contracts or leases to use grounds for staging any competition involving Super League players (see Order 12(a), (b) and (c), respectively). Orders 13 and 14 are consequential and include orders restraining News and its associated companies from using specified grounds without the League's prior consent.
The League and ARL justified these orders on essentially the same basis as they supported Orders 7-11. We have concluded elsewhere that Order 12(a) and 12(b) are liable to be set aside because the League and ARL failed to join the Super League players and coaches. In any event, it follows from our reasoning on the substantive issues that Orders 12-14 must be set aside.
5. Orders 15-18
Order 15 requires News, SLPL and the Franchisees to give every player or coach who has entered a Super League contract a notice pursuant to cl.41 of the "Star League Standard Terms" requiring the players and coaches to play or coach rugby league for the ARL club specified by the League. Order 15A restrains News and the Super League companies, without the League's consent, from making any payment to a player or coach who fails to act in accordance with a nomination given under Order 15. Order 15B provides for revocation of nominations pursuant to an order of the Court or request of the League. Orders 16, 17 and 18, although important, are consequential.
Much argument was directed to whether cl.4.1 of the Star League Standard Terms, as a matter of construction, authorised SLPL to give the nomination or direction contemplated by Orders 15, 15A and 15B. It is, however, not necessary to consider the competing contentions.
As in the case of Order 12, Orders 15, 15A and 15B, for reasons we have given, must be set aside by reason of the failure to join the Super League coaches and players in the proceedings. In any event, our conclusions on the substantive issues would require Orders 15-18 to be discharged.
We note that it may be necessary for orders to be made in respect of nominations given by News and the Super League companies pursuant to Order 15. We shall give News the opportunity to bring in short minutes of orders to deal with this question.
6. Orders 19, 21, 22
Order 19 declares that, as between the parties to the proceedings, cl.2 of the club deeds (which obliges the signatory clubs to release their contracted players) is not and never has been legally effective. Order 21 declares that, as between the parties to the proceedings, the acceleration notices varying the employment periods for the Super League players contracted to rebel clubs were of no effect. Order 22 restrains News or the Super League companies from granting or performing an indemnity to a player or coach of an ARL club with respect to any future breach by that person of contractual or fiduciary obligations owed by such a person to the League or any of the clubs.
In the absence of the Super League players and coaches being joined as parties, it is not clear what practical effect, if any, Orders 19 and 21 would have. Order 22 is framed in extremely broad terms. In any event, in view of the conclusions we have reached, these must be set aside.
7. Orders 23-28B
Order 23 declares that the rebel clubs are bound by the terms of the Commitment and Loyalty Agreements. Order 25 is an order for specific performance of those agreements. Orders 24, 26, 27, 28, 28A and 28B appear to be designed to give effect to the terms of the agreements until the end of 1999, but may also rest on the finding by the trial Judge that the rebel clubs breached the fiduciary duties they owed to the League.
We have held that the Commitment and Loyalty Agreements are void and that the rebel clubs were not bound by fiduciary duties owed to the League or ARL. It follows that the foundation for Orders 23-28B is wanting.
8. Orders 29-31
Order 29 restrains the rebel clubs, until 1999, from having a financial interest in any rugby league club or team which may undermine the national competition. Orders 30 and 31 restrain the rebel clubs, for the same period, from taking steps to make available grounds for an unauthorised competition, or from encouraging sponsors.
Although it is not entirely clear, these orders appear to be based principally on the trial Judge's findings relating to the clubs' breach of fiduciary duties. However, they may also be intended to give effect to the terms of the Commitment and Loyalty Agreements. Having regard to our conclusions, they must be set aside.
9. Order 32
Order 32 restrains the rebel clubs from licensing the use of League or ARL trade marks for any purpose related to a competition not authorised by the League. We have already given reasons for concluding that this particular order must be set aside.
10. Orders 33-34
Order 33 requires News, SLPL and the Franchisees to deliver up jerseys, promotional material and goods incorporating the words "Super League" used or proposed to be used in an unauthorised competition. Order 34 is consequential.
To the extent these orders are based on his Honour's findings of fiduciary duties, we have reached a different conclusion. To the extent that they rest on his Honour's findings as to trade marks, those findings do not justify the orders. Accordingly, they should be set aside.
B. Orders on Appeal
It follows from what we have said that the following orders should be made:
1. That the appeals be allowed.
2. That the orders made and confirmed on 11 March 1996 be set aside.
We set out below the additional orders we are presently minded to make on the appeal. However, because of the complexity of the issues and possible uncertainty about the matters to be determined at the further hearing, we shall give the parties an opportunity to make submissions about the form of these additional orders. We shall also give the parties (including the players and coaches) an opportunity to make submissions on the proposed orders as to costs, if they wish to do so.
The additional orders we propose to make are as follows:
3. That there be a declaration pursuant to s.87 of the Trade Practices Act 1974 (Cth) that the Commitment Agreements (as defined in paragraph 16 of the Further Amended Statement of Claim) and the Loyalty Agreements (as defined in paragraph 31 of the Further Amended Statement of Claim) are void ab initio.
4. That each of the respondents to the application, as amended on 18 May 1995, be restrained from giving effect to, requiring compliance by any person with, or otherwise enforcing the Commitment Agreements or the Loyalty Agreements.
5. That the matter be remitted to the trial Judge for further hearing and determination of the following outstanding issues:
a) claims for misleading or deceptive conduct, infringement of trade marks and passing off;
b) claims for unjust enrichment;
c) claims for unlawful interference with the undertakings and activities of the cross-claimants;
d) claims for damages under s.162(8) of the Corporations Law;
e) claims for damages for breach of contract and unlawful inducement of breach of contract; and
f) questions as to the costs of the trial.
6. Subject to paragraph 5 of this order, that the cross-claims be otherwise dismissed.
7. That the New South Wales Rugby League Ltd, the Australian Rugby Football League Limited and the cross-claimants in the second cross-claim pay the costs of the appeal (including the hearings before the Full Court on 13 and 25 March 1996), of each of the appellants and of the players and coaches given leave to intervene on the appeal.
We propose to list the matter for further directions on a date to be fixed.
I certify that this and the preceding 222 pages
are a true copy of the Reasons for Judgment of the Court.
Associate:
Dated: 4 October, 1996
Heard: 23, 24, 27, 29, 30 and 31 May 1996, 4, 5 and 6 June 1996
Place: Sydney
Decision: 4 October, 1996
Appearances:
Counsel for the appellants in the main proceedings (NG 213 of 1996), the second respondent in NG 227 of 1996 and the third respondent in NG 228 of 1996:
Mr T.E.F. Hughes QC with Mr J.D. Heydon QC,
Mr C.P. Comans, Mr J.T. Gleeson, Mr T.D. Castle
and Mr R. Cobden
Instructed by: Atanaskovic Hartnell, Solicitors.
Counsel for the first and second respondents in the main proceedings, in NG 227 of 1996 and in NG 228 of 1996:
Mr R.J. Ellicott QC, Mr D.M. Yates, Mr A.J.L. Bannon,
Mr R.J. Weber and Mr D.B. Studdy
Instructed by: Gilbert & Tobin, Lawyers
Counsel for the twelfth to twenty-third respondents in the main proceedings and the third to fourteenth respondents in NG 227 of 1996:
Mr J.J. Spigelman QC, Mr A.J. Payne
Instructed by: Gilbert & Tobin, Lawyers
Counsel for the appellants in NG 227 of 1996 and NG 228 of 1996:
Mr C.A. Sweeney QC with Mr J.J. Garnsey QC and Mr P.J. Dowdy
Instructed by: Phillips Fox, Solicitors, for the appellants in NG 227 of 1996;
Suthers & Taylors, Lawyers, for the appellant in NG 228 of 1996.
Counsel for the parties granted leave to intervene ("the players and coaches") in the main proceedings, NG 227 of 1996 and NG 228 of 1996:
Mr J.R. Sackar QC and Ms P.P.W. Wines
Instructed by: Gadens Ridgeway, Lawyers
APPENDIX
ORDERS MADE AT TRIAL BY BURCHETT J. ON 11 MARCH 1996
The Court makes and, in the case of Orders 1 and 23(i) and (ii) which were made on 27 February 1996, confirms the following Orders and Declarations:
1. An order that the Amended Application be dismissed.
1A. An order that each of the Additional Cross-Claims of Brisbane Broncos Rugby League Club Limited and others be dismissed.
1B. An order terminating the previous interlocutory orders replaced by Orders 2 and 3 upon the making of these orders.
2. An order that each of News Limited (News), Super League Pty Limited (SLPL), and each of the Franchisees and the Sydney Bulldogs whether by themselves their servants or agents or otherwise be restrained up to and including 31 December 1999 from (directly or indirectly);
(a) organising, authorising, conducting, participating in, promoting, advertising, sponsoring, televising or broadcasting or otherwise transmitting (in each case free to air or pay);
(b) permitting or soliciting or inducing or assisting (including, without limitation, by licensing, selling or assigning any rights or other property) any other person to organise, conduct, participate in, promote, advertise, sponsor, televise or broadcast or otherwise transmit (in each case free to air or pay);
any football competition or game
(being any competition or game in Australia or New Zealand or elsewhere not
authorised by New South Wales Rugby League Limited (the NSWRL) or Australian
Rugby Football League Limited (the ARL) played under rules which are
substantially identical with or similar to or based on
the rules of the game played in the premiership competition conducted by the
NSWRL and the ARL including, without limiting the generality of the foregoing,
the competition proposed to be known as "Superleague" or Super League
(Superleague), any game referred to in the Schedule annexed hereto and marked
"A", and any competition or game involving any team referred to in
Annexure A). But this order shall not
prevent the broadcasting, televising or otherwise transmitting (and advertising
thereof) of games in competitions in which no Superleague Player or Coach is
involved and:
(a) for which News or a related company of News held rights to engage in such broadcasting, televising or otherwise transmitting prior to 28 March 1995; or
(b) for which News or a related company holds or acquires rights which games are not related to the events and circumstances involving the setting up and activities of Star League Pty Limited and the Franchisees.
Note, without impliedly affecting the construction of the foregoing part of this order, that it will not be a breach of this order for the News Corporation Limited to perform its obligations under the Heads of Agreement dated 8 April 1995 or the Heads of Agreement annexed and marked "F" with the Rugby Football League and the Rugby Football League Clubs provided that the News Corporation Limited does not enforce the first appearing clause 3(e) in the Heads of Agreement or clause 4(d) of the Heads of Agreement marked "F" with respect to any ARL team or ARL Club and further provided that no Super League Player or Coach plays in, coaches players for, participates in, trains for, promotes or advertises, or appears in or participates in any televising or broadcasting or other transmission of (in each case whether free to air or pay) any competition or game
(i) conducted by or under the auspices of the Rugby Football League; or
(ii) in which any Rugby Football League Club a party to the Heads of Agreement participates; or
(iii) conducted by or under the auspices of any new international Rugby League authority as referred to in the secondly appearing clause 3(e) in the Heads of Agreement.
3. An order that each of News, Super League Pty Limited, each of the Franchisees and the Sydney Bulldogs whether by themselves, their servants or agents or otherwise, be restrained up to and including 31 December 1999 from (directly or indirectly) using or engaging the services of or negotiating to use or engage the services of or requiring or requesting or permitting or soliciting or inducing or assisting (including without limitation by assigning or selling or licensing or exercising any rights) any other person to use, engage, negotiate with, require, request, permit or solicit, any Super League Player or Coach to:
(i) play in; or
(ii) coach players for; or
(iii) participate in; or
(iv) train for; or
(v) promote or advertise; or
(vi) appear in or participate in any televising or broadcasting or other transmission of (in each case whether free to air or pay)
any Unauthorised Competition or Game regardless of where any such game, competition, playing, coaching, participation, training, promotion, advertising, appearing or televising broadcasting or transmitting takes place. [Note that it will not be a breach of this order to pay a player under his existing contract of service.]
4. An order restraining up to and including 31 December 1999 each of the Club Cross-Respondents and the Sydney Bulldogs, whether by themselves, their servants or agents or otherwise, from releasing or purporting to release or perfecting the release of or requiring or requesting or permitting or soliciting or inducing or assisting, whether directly or indirectly, any player or coach who has been or is contracted from time to time to play or coach for any such Club Cross-Respondent or the Sydney Bulldogs to:
(i) play in; or
(ii) coach players for or in; or
(iii) participate in; or
(iv) train for; or
(v) promote or advertise; or
(vi) appear in or participate in any televising or broadcasting or other transmission (in each case whether free to air or pay) of
any Unauthorised Competition or Game.
5. An order restraining up to and including 31 December 1999 each of the Club Cross-Respondents and the Sydney Bulldogs, whether by themselves, their servants or agents or otherwise, from releasing or purporting to release or perfecting the release of any player or coach who has been or is contracted from time to time to play or coach for any such Club Cross-Respondent or the Sydney Bulldogs from any agreement or any obligations thereunder to or for the direct or indirect benefit of any of News, SLPL or any of the Franchisees or any related company or any assignee or licensee or successor of any of the foregoing.
6. An order restraining up to and including 31 December 1999 each of the Club Cross-Respondents and the Sydney Bulldogs, whether by themselves, their servants or agents or otherwise, from directly or indirectly:
(i) being involved in; or
(ii) assisting in; or
(iii) participating in; or
(iv) promoting; or
(v) permitting or soliciting or inducing or assisting, including without limitation by assigning or selling or licensing any rights, any other person, to be involved in or assist in or participate in or promote
any Unauthorised Competition or Game.
7. A declaration that each of the Club Cross-Respondents and the Sydney Bulldogs and each of News, SLPL and each of the Franchisees and their subsidiaries or nominees holds and has always held on trust for the NSWRL any shares and any rights to shares held by any of the Club Cross-Respondents or the Sydney Bulldogs or any of News, SLPL or the Franchisees or their subsidiaries or nominees in any of the Franchisees and SLPL.
8. An order that the Club Cross-Respondents and the Sydney Bulldogs and each of News, SLPL and the Franchisees transfer to the NSWRL or procure each of their subsidiaries or nominees to do so, as the case may be, any shares and any rights to shares held by any of the Club Cross-Respondents or the Sydney Bulldogs or any of News, SLPL or the Franchisees or any of them and each of their subsidiaries or nominees in any of the Franchisees and SLPL.
8A. An order restraining each of the Club Cross-Respondents and the Sydney Bulldogs and each of News, SLPL and the Franchisees, whether by themselves, their servants or agents or otherwise, from transferring, assigning or otherwise dealing with (except pursuant to the orders of the Court) any shares and any rights to shares held by any of the Club Cross-Respondents or the Sydney Bulldogs or any of News, SLPL or the Franchisees or any of them and each of their subsidiaries or nominees in any of the Franchisees and SLPL.
9. An order that each of News, SLPL and each of the Franchisees and each of their subsidiaries and nominees consent to the transfers referred to in Order 8.
10. An order restraining each of News, SLPL and each of the Franchisees whether by themselves, their servants or agents or otherwise, from issuing or causing or permitting to be issued a Redemption Notice pursuant to the articles of association of any of the Franchisees in respect of any shares held by any of the Club Cross-Respondents or the Sydney Bulldogs in any Franchisee and whether such shares are transferred to the NSWRL or otherwise.
11. An order that any such Redemption Notices which have been issued be set aside.
12. A declaration that each of News, SLPL and each of the Franchisees holds in trust for the NSWRL all its rights pursuant to:
(a) any contract which any of them has with any Super League Player; and
(b) any such contract with any Super League Coach; and
(c) any contract lease or licence to use any ground for the staging of games in any proposed competition involving any Superleague Player or Coach.
13. An order that News and SLPL each supply to the NSWRL within 7 days of the date of this order copies of any contracts leases or licences referred to in paragraphs (a), (b) and (c) of 12 above.
14. An order restraining each of News, SLPL and each of the Franchisees whether by themselves, their servants or agents or otherwise from doing any of the following things for the purpose of or so as to facilitate the staging of games in any proposed competition to be organised or conducted or participated in by any of News, SLPL and the Franchisees: dealing with or performing any obligations under or in respect of or exercising any rights or granting any approvals or consents or making any nominations under or in respect of or making any payments under or in respect of any contract referred to in paragraphs (a), (b) and (c) of order 12 above, including, without limitation, any contract lease or licence to use the following grounds:
(a) Caltex Field, Cronulla;
(b) Belmore Oval, Belmore
(c) Parramatta Stadium, Parramatta
(d) Penrith Football Stadium, Penrith
(e) WACA Ground, Perth
(f) Stockland Stadium, Townsville
(g) Ericsson Stadium, Auckland
(h) ANZ Stadium, Brisbane
(i) Bruce Stadium, Canberra
without the prior written consent of the NSWRL.
15. An order that within 48 hours of the
making of this order or such further period or periods as the NSWRL may notify,
each of News, SLPL and each of the Franchisees give notice in writing to every
player or coach who has entered into a contract with any of News, SLPL and any
of the Franchisees incorporating the
Star League Standard Terms pursuant to clause 4.1 of the Star League Standard
Terms that:
(i) SLPL nominates that such players and coaches shall:
(a) play or coach rugby league football in the teams of,
(b) attend and participate in rugby league football games played by,
in the case of players or coaches who were parties to a contract with an ARL Club prior to 28 March 1995 the term of which, but for any purported release of such contract, remains unexpired, that ARL Club and, in any other case, the ARL Club specified by the NSWRL; and
(ii) such players or coaches are required by SLPL to attend and participate in all training sessions and team meetings conducted in relation to all games referred to in (a) and (b) of (i) above.
15A. An order that each of News Limited, Super League Pty Limited and each of the Franchisees, whether by themselves, their servants or agents or otherwise be restrained, without the leave of the Court or prior consent in writing of the NSWRL, from making any payment to any player or coach who fails whilst reasonably able to do so to act in accordance with a nomination and/or requirement of Order 15 hereof.
15B. An order that each of News Limited, Super League Pty Limited and each of the Franchisees, if so requested by the NSWRL or with the leave of the Court, revoke any nomination and/or requirement made pursuant to order 15 and in the case of any nomination and/or requirement so revoked, order that the revoking party make such further nomination and/or requirement, if any, of the character referred to in order 15 as may be requested by the NSWRL or ordered by the Court, provided that the NSWRL will not, in the case of a player or coach who is a party to an unexpired contract with an ARL Club, request that any Club be nominated other than the ARL Club with which that player or coach has such a contract.
16. An order restraining each of News, SLPL and each of the Franchisees whether by themselves their servants or agents or otherwise from granting any consent under clause 4.2(a) of the Star League Standard Terms to any player or coach who has entered into a contract with any of News, SLPL and any of the Franchisees incorporating such terms, without the prior written consent of the NSWRL.
17. An order that within 48 hours of the making of this order each of News, SLPL and each of the Franchisees give an irrevocable notice in writing to every player or coach who has entered into a contract with any of News, SLPL or any of the Franchisees incorporating the Star League Standard Terms to the effect that any consent previously granted under clause 4.2(a) of the Star League Standard Terms and Conditions is withdrawn.
18. An order that each of News, SLPL and each of its Franchisees issue all directions to Super League Players and Coaches as they are permitted to issue under any contractual arrangements between any of News, SLPL and the Franchisees and such players and coaches, as requested by the NSWRL.
19. A declaration that as between each and all of the parties to the Application and each of the Cross-Claims, clause 2 of each of the deeds between any of the Club Cross-Respondents and Sydney Bulldogs and any of News, SLPL and any of the Franchisees is not and has never been legally effective.
20. [Deleted.]
21. A declaration that as between each and all of the parties to the Application and each of the Cross-Claims any notice varying the "Employment Period" in any employment contract between any Franchisee and a Current Club Cross-Respondent Player is of no effect.
22. An order restraining News, SLPL and each of the Franchisees, whether by themselves, their servants, officers or agents or otherwise, from directly or indirectly granting or performing any indemnity or authorising or procuring any other person to grant or perform any indemnity to any person who was a player or coach or officer or director or employee of any ARL Club, with respect to any future breach by such person of any contractual or fiduciary obligation which may now or hereafter be owed by such person to any of the Cross-Claimants or Club Cross-Respondents.
23. A declaration that the Club Cross-Respondents are bound by the terms and conditions of:
(i) the written agreements between the ARL, the NSWRL and the Club Cross-Respondents dated in or about November 1994;
(ii) the written agreements between the ARL, the NSWRL and the Club Cross-Respondents (other than the Brisbane Broncos Rugby League Club Limited) dated in or about February 1995;
(iii) the Memorandum and Articles of the NSWRL.
24. An order restraining each of News, SLPL, each of the Franchisees and the Sydney Bulldogs whether by themselves their servants or agents or otherwise from directly or indirectly procuring or inducing or assisting in or participating in or permitting or soliciting or inducing or assisting (including without limitation by licensing, selling or exercising or arranging rights) any other person to procure or induce or assist in or participate in, any breach of any of the contracts referred to in Order 23 or of any contract between any player and any ARL Club or the NSWRL or the ARL, including without limitation any contract purportedly released, or of any obligation contractual or fiduciary owed by any person or ARL Club to any ARL Club or the NSWRL or the ARL.
25. An order that each of the written agreements between the ARL and the NSWRL and the Club Cross-Respondents dated in or about November 1994 and each of the written agreements between the ARL and the NSWRL and the Club Cross-Respondents dated in or about February 1995 (other than the Brisbane Broncos Rugby League Club Limited) be specifically performed and carried into effect.
26. An order that throughout the period to and including 31 December 1999 each of the Club Cross-Respondents use its best endeavours to assist directly and indirectly in achieving and maintaining the Competition conducted by the NSWRL (in these orders called "the National Competition") as a premier sporting competition and the premier rugby league competition, of significant interest to as wide a section of the Australian public as possible, involving rugby league players of the best ability and of international and national pre-eminence and maintaining and enhancing the prestige and reputation and the commercial success of the National Competition and maintaining and enhancing the appeal of the National Competition to commercial sponsors and the media.
27. An order that throughout the period to and including 31 December 1999 each of the Club Cross-Respondents use its best endeavours to:
(a) assemble, train and consistently field the best possible teams to compete at each grade in the National Competition, including:
(i) maintaining the services of its existing and any further contracted players for the duration of their respective contracts, in accordance with their terms, so ensuring that each of them plays exclusively in the National Competition for the duration of their respective contracts;
(ii) securing the services of the most experienced, most talented and well known rugby league players to play in the National Competition, for each of the playing seasons 1996, 1997, 1998 and 1999;
(b) assist the ARL and/or NSWRL directly and indirectly to maintain, and wherever possible enhance, the commercial viability of the National Competition, and to maximise the revenue earning potential of the National Competition.
28. An order that each of the Club Cross-Respondents exclusively participate in the National Competition for each of the playing seasons 1996, 1997, 1998 and 1999.
28A. An order that the Twentieth Cross-Respondent participate in the National Competition conducted by the ARL and the NSWRL for the playing seasons 1996, 1997, 1998 and 1999.
28B. An order that the Twentieth Cross-Respondent be restrained from participating in an Unauthorised Competition.
29. An order that each of the Club Cross-Respondents whether by themselves their servants or agents or otherwise be restrained from:
(a) directly or indirectly having any economic or financial or other interest or involvement in or otherwise carry on or be engaged in or be concerned as principal, agent, trustee, partner, director, shareholder, financier or otherwise, whether alone or jointly, in any, or in any club or team participating in any, rugby league football competition which:
(i) may undermine the quality, competitiveness and geographical reach of teams competing in the National Competition;
(ii) may adversely affect the number or depth of experienced and well known players participating in such Club Cross-Respondent's teams in the National Competition, or teams organised by other clubs participating in the National Competition,
for playing seasons 1996, 1997, 1998 and 1999;
(b) releasing, waiving or otherwise permitting or allowing players who either now or in the future are under contract or other binding obligations to play in any competition other than the National Competition approved by the ARL and/or NSWRL for playing seasons 1996, 1997, 1998 and 1999.
30. An order restraining until and including
31 December 1999 each of the Club Cross-Respondents and the Sydney Bulldogs,
whether by themselves, their servants or agents or otherwise, from encouraging
or inducing or authorising or releasing from any contract any person or company
with whom such Club Cross-Respondent or the Sydney Bulldogs has an agreement to
use a ground or venue, to make
available such ground or venue for any purpose associated with any football
competition or game played under rules which are substantially identical with
or similar to or based on the rules of the game played in the premiership
competition conducted by the NSWRL and the ARL unless the competition or game
is authorised by the NSWRL or the ARL.
31. An order restraining until and including 31 December 1999 each of the Club Cross-Respondents and the Sydney Bulldogs, whether by themselves, their servants or agents or otherwise, from encouraging or inducing or authorising or releasing from any contract any person or company who sponsored any team of the Club Cross-Respondent or the Sydney Bulldogs in 1995 to enable that person or company to provide any sponsorship in connection with any Unauthorised Competition or Game.
32. An order restraining until further order each of the Club Cross-Respondents and the Sydney Bulldogs, whether by themselves, their servants or agents or otherwise, from assigning or licensing or authorising the use of any NSWRL Trade Mark or ARL Trade Mark or any trade mark substantially identical with or deceptively similar to any such trade mark or any name, logo or jersey or colours used by any Club Cross-Respondent or the Sydney Bulldogs to or by any of News, SLPL or any of the Franchisees or any company related thereto or to any person for use in connection with or for any purpose related to any Unauthorised Competition or Game or the promotion or advertising or conduct or organisation thereof.
33. An order that News, SLPL, and each of the Franchisees deliver up by 4.00pm, 20 March 1996 to an address to be nominated by the Solicitors for the Cross-Claimants by 4.00pm, 13 March to be held pending further order:
(a) all jerseys;
(b) clothing of any kind, including but without limitation, football shorts, socks, t-shirts, caps and track suits;
(c) footballs;
(d) mascots;
(e) all advertising, promotional and other material;
(f) all bromides, videos, film or other material recording or referring to trade marks (whether or not applied for or registered) logos, words and expressions;
(g) any and all other goods or materials bearing or incorporating the words "Super League" or any logo, words and expressions from which any of the foregoing shall not have been removed before 20 March,
used at any time or proposed to be used in or in relation to any Unauthorised Competition or Game.
34. An order restraining each of News, SLPL and each of the Franchisees whether by themselves their servants or agents or otherwise from selling, destroying or otherwise dealing with or procuring or authorising any other person to sell, deliver or otherwise deal with any items referred to in Order 33 above.
35. An order that the further hearing of the proceedings in relation to questions as to:
(a) any additional injunctive or declaratory relief to reflect further the reasons for judgment dated 23 February 1996 which may be appropriate in the circumstances as they may become known after the date hereof;
(b) damages including exemplary or punitive damages;
(c) equitable compensation;
(d) the identification and tracing and restitution of any property of the joint venture;
(e) any additional injunctive relief arising out of the matters referred to in (d);
(f) outstanding intellectual property and misrepresentation issues and relief;
(g) costs, including the basis on which the Cross-Claimants' costs to date in these proceedings are to be assessed;
be stood over to a date to be fixed.
36. Stand over the proceedings for further directions on a date to be fixed.
37. Grant liberty to apply on such notice as is appropriate in the circumstances.
In these orders:
"ARL Club" means any of the Club Cross-Claimants and the Club Cross-Respondents;
"News" means News Limited;
"SLPL" means Super League Pty Limited;
"Franchisees" means those parties listed in Annexure "C" hereto;
"Club Cross-Claimants" means those parties listed in Annexure "D" hereto;
"Club Cross-Respondents" means those parties listed in Annexure "E" hereto;
"Sydney Bulldogs" means Sydney Bulldogs Limited;
"ARL" means Australian Rugby Football League Limited;
"NSWRL" means New South Wales Rugby League Limited;
"Unauthorised Competition or Game" means any football competition or game not conducted by the ARL or NSWRL or not approved by the ARL and the NSWRL;
"National Competition" means the rugby league competition conducted under the logo and banner of the ARL;
"Super League Player or Coach" means any person who has agreed with any of News Limited, Star League Pty Limited or any of the Franchisees to play in or coach players for or in any game or competition, including without limitation each of the persons listed in Annexure "B" hereto, but does not include persons who satisfy each and every of the following criteria:
(a) they were not at any time in 1995 employed by; and
(b) they were not parties to contracts with; and
(c) they did not owe any duty of fidelity or fiduciary duty to,
any ARL Club.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
APPENDIX II
PLAYER AND COACH INTERVENORS
COACHES
1. Anderson, Chris
2. Bennett, Wayne
3. Lang, John
4. Lowe, Graham
5. Monie, John
6. Mulholland, Peter
7. Murray, Graham
8. Reddy, Rod
9. Sheens, Tim
10. Simmons, Royce
PLAYERS
11. Adamson, Matt
12. Adamson, Phillip
13. Afoa, Faausu
14. Alexander, David
15. Alexander, Greg
16. Anderson, Faron
17. Appo, Graham
18. Arthur, Brad
19. Banister, Robert
20. Barnett, Richard
21. Bartlett, George
22. Bateman, Allan
23. Beauchamp, Keith
24. Beckett, Robert
25. Bellamy, Troy
26. Bell, Geoff
27. Bergman, Phil
28. Berrigan, Barry
29. Betts, Dennis
30. Bird, Deon
31. Bird, Rick
32. Blacker, Scott
33. Blackmore, Richard
34. Blair, Cameron
35. Blake, Phil
36. Booth, Mark
37. Boughton, Dave
38. Bouveng, David
39. Bowan, Paul
40. Boyd, Brett
41. Boyd, David
42. Britt, Darren
43. Brosnihan, Wayne
44. Brown, Scott
45. Bulmer, Andrew
46. Burnham, Jason
47. Campion, Kevin
48. Cann, Alan
49. Carige, Andrew
50. Carne, Willie
51. Carroll, Tony
52. Carter, Mark
53. Carter, Steven
54. Cartwright, John
55. Catic, Ned
56. Chapman, Damien
57. Chapman, David
58. Civoniceva, Petero
59. Clifford, Matthew
60. Clyde, Bradley
61. Coorey, Michael
62. Cressbrook, Reggie
63. Croker, Jason
64. Cross, Kain
65. Daley, Laurie
66. Davico, Luke
67. Davidson, Les
68. Death, Jason
69. Dever, Chris
70. Devine, Shaun
71. Doherty, Darren
72. Domic, Sidney
73. Donaghy, Paul
74. Dooley, Justin
75. Dorreen, Mike
76. Doyle, Jeff
77. Drew, Brad
78. Driscoll, John
79. Dunemann, Andrew
80. Dunemann, Ian
81. Durkin, James
82. Dykes, Adam
83. Eade, Jason
84. Edger, Eamonn
85. Edmed, Steven
86. Edmunds, Jason
87. Edwards, Logan
88. Edwards, Morvin
89. Ellis, Mark
90. Erba, Jason
91. Eru, Syd
92. Ettingshausen,
Andrew
93. Evans, Paul
94. Evans, Wayne
95. Falcon, Gordon
96. Farrar, Danny
97. Fisher, Paul
98. Fleming, Greg
99. Ford, Damien
100. Fritz, Dale
101. Fulivai, Albert
102. Fuller, Matthew
103. Furner, David
104. Galea, Brett
105. Galea, Paul
106. Gall, Jody
107. Gee, Andrew
108. Geyer, Mark
109. Geyer, Matt
110. Gibbs, Andrew
111. Gibson, Damian
112. Gillies, Benjamin
113. Gillies, Simon
114. Girdler, Ryan
115. Godden, Brad
116. Goldthorpe, Noel
117. Goodwin, Luke
118. Gower, Craig
119. Green, Brett
120. Green, Paul
121. Greenhill, Craig
122. Grieve, Jon
123. Grimaldi, Tony
124. Grimley, Danny
125. Groves, Leigh
126. Guttenbeil, Awan
127. Halligan, Daryl
128. Hamill, Matt
129. Hancock, Michael
130. Hannay, Dallas
131. Harder, George
132. Hauff, Paul
133. Hause, Mark
134. Healey, Mitch
135. Hetherington, Brett
136. Hetherington, Jason
137. Hick, Andrew
138. Hicks, Chris
139. Higgins, Darren
140. Hill, Andrew
141. Hill, Gavin
142. Hinson, Andrew
143. Hogue, Michael
144. Holmes, Steven
145. Hoppe, Sean
146. Horan, Tim
147. Horo, Mark
148. Howarth, Shane
149. Howe, Rod
150. Hughes, Glen
151. Hughes, Steven
152. Hutton, Byron
153. Iro, Tony
154. Johns, Chris
155. Joe, Leroy
156. Johnson, Paul
157. Jones, Gavin
158. Jones, Peter
159. Jones, Stacey
160. Kearney, Steve
161. Kearns, Robbie
162. Kennedy, Ben
163. Kennedy, Jamie
164. Kenworthy, Roger
165. Ketchell, Aaron
166. Kiri, Solomon
167. Kirwan, John
168. Lamb, Terry
169. Langer, Allan
170. Lee, Danny
171. Levy, Chris
172. Lidden, Jason
173. Locke, Martin
174. Lockyer, Darren
175. Lomax, David
176. Lomax, John
177. Long, Nathan
178. Loomans, Justin
179. MacGillivray, Duncan
180. MacNamara, Carl
181. Mackie, Jason
182. Maddern, Ryan
183. Maddison, Tim
184. Maguire, Michael
185. Maher, Adam
186. Mamando, Bruce
187. Marinos, Andrew
188. Marshall, Jason
189. Martin, Jason
190. Mather, Barrie-Jon
191. Mathiou, Jamie
192. Maybon, Rod
193. McCormack, Robbie
194. McIntosh, Ken
195. McKell, Brendan
196. McNab, Cameron
197. Menkins, Craig
198. Miles, Troy
199. Millar, Jared
200. Morganson, Willie
201. Muller, Pieter
202. Mullins, Brett
203. Munro, Matthew
204. Murphy, Ben
205. Murphy, Glen
206. Nadruku, Noa
207. Nagas, Ken
208. Neave, Andrew
209. Newton, Mitch
210. Ngamu, Gene
211. Nikau, Tawera
212. O'Connor, Matthew
213. O'Donnell, David
214. Okesene, Hitro
215. O'Neill, Julian
216. Paiyo, Elias
217. Peachey, David
218. Petersen, Fred
219. Piccinelli, Neil
220. Pickering, James
221. Pierce, Andrew
222. Piva, Robert
223. Plath, John
224. Platt, Andrew
225. Poching, William
226. Polla-Mounter, Craig
227. Pongia, Quentin
228. Potter, Michael
229. Powell, Daio
230. Price, Steven
231. Priddle, Tony
232. Reardon, Stephen
233. Reihana, Tahi
234. Relf, Robert
235. Renouf, Steven
236. Richardson, Russell
237. Ridge, Matthew
238. Robinson, Andrew
239. Robinson, Darren
240. Rodwell, Matthew
241. Rogers, Matthew
242. Ropati, Tea
243. Ross, Robbie
244. Russell, Ian
245. Russell, Levi
246. Ryan, Chris
247. Ryan, Matthew
248. Ryan, Peter
249. Ryan, Sean
250. Sailor, Wendell
251. Sammut, Ben
252. Sargent, Mark
253. Schifilliti, Dean
254. Schraader, Kevin
255. Scott, Dennis
256. Seeto, Elton
257. Shahin, Paul
258. Shiels, Peter
259. Simonds, Wayne
260. Sing, Wayne
261. Skardon, John
262. Solomona, Se'e
263. Stewart, Christian
264. Stone, Steven
265. Strauss, Tiaan
266. Stuart, Ricky
267. Suluvale, Henry
268. Swain, Richard
269. Taewa, Whetu
270. Tallis, Gordon
271. Tamani, Joe
272. Tanginoa, Peter
273. Tassell, Kris
274. Tatupu, Tony
275. Taylor, Rick
276. Thompson, Bobby
277. Thompson, Brad
278. Thorn, Brad
279. Thorne, Robin
280. Tillett, Stephen
281. Timu, John
282. Tocco, Robert
283. Topper, Stuart
284. Treister, Dean
285. Trevitt, Peter
286. Tuimavave, Tony
287. Vagana, Joe
288. Vowles, Adrian
289. Waddell, Stephen
290. Walker, Barry
291. Walker, Ben
292. Walker, Shane
293. Walters, Kerrod
294. Walters, Kevin
295. Walters, Steve
296. Webcke, Shane
297. Westley, David
298. Wheeler, Peter
299. White, Graham
300. Whittaker, Aaron
301. Wiki, Ruben
302. Williams, Brendan
303. Williams, Jason
304. Wilson, George
305. Wise, Craig
306. Wolens, Darren
307. Wood, Matthew
308. Woolford, Simon
309. Wrigley, Kurt
310. Yeatman, Leon
