NEWS LIMITED & ORS v AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED & ORS

                    NG 213 of 1996; NG 227 of 1996; NG 228 of 1996

                                                  SUMMARY

INTRODUCTION

When judgment was delivered on 23 February 1996, after the trial in this case, the Court published a short explanatory statement.  This was made available to the parties, the media and other interested persons.  It was not intended to be a substitute for the reasons of the Court, but to assist in understanding the issues in a complex and important case.

Today, the Full Court of the Federal Court, comprising Justices Lockhart, von Doussa and Sackville, has delivered judgment on the appeals from the orders made by the trial Judge.   There is one judgment of all three members of the Court. 

The Court has decided to issue this brief explanatory statement to accompany its reasons for judgment.  Again, it must be emphasised that only the Full Court's reasons for judgment constitute the authoritative pronouncement on the appeals.  This document is merely a brief and necessarily incomplete summary, which is intended to assist in understanding the principal conclusions reached by the Full Court. 

THE BACKGROUND TO THE LITIGATION

The New South Wales Rugby League Limited (the "League"), or its predecessor, the New South Wales Rugby Football League, has conducted a rugby league competition since 1908.  In 1995, the League, in conjunction with the Australian Rugby Football League Limited (the "ARL"), conducted a national competition comprising 20 clubs.  The 20 clubs are based in New South Wales, Queensland, Western Australia and the
Australian Capital Territory, and include one club based in New Zealand.

The litigation arises out of the attempt by News Ltd ("News") to establish a new rugby league competition, known as "Super League".  During 1995, News, or its associated Super League companies, entered into contracts with over 300 players and coaches.  The contracts provided for the players and coaches to participate in the Super League competition.  At the time the Super League contracts were entered into, most of the players and coaches were already contracted to clubs which were participating in the national competition.  Some of those clubs (referred to in the case as the "rebel clubs") were prepared to release the players and coaches from their existing contracts to allow them to participate in Super League.

The signing of the players and coaches took place after the League, ARL and all 20 clubs (including the rebel clubs) had executed Commitment and Loyalty Agreements.  These were executed respectively, in November 1994 and February 1995, in circumstances described in detail in the judgment.  In substance, the agreements precluded the clubs participating for a period of five years (until the end of the 1999 season) in any competition not conducted or approved by the League and ARL.  In return, each of the clubs was admitted to the national competition for five years.  Previously, the clubs were required to apply annually to the League for admission to the competition.

THE PROCEEDINGS

The case began when News commenced proceedings in March 1995, claiming that the Commitment and Loyalty Agreements were void, because they infringed the Trade Practices Act 1974 (Cth).  News contended that the agreements contained "exclusionary provisions" (as that term is defined in s.4D of the Trade Practices Act) and also had the purpose and effect of substantially lessening competition in various markets, in contravention of s.45(2) of the Trade Practices Act.

The League, ARL and the 12 "loyal" clubs filed cross-claims.  These included claims that:

•           the rebel clubs, by assisting Super League and releasing contracted players, had breached their contractual obligations to the League and ARL;

•           the rebel clubs had breached fiduciary duties, arising from the "joint venture" between the clubs and the League, and those duties prevented the clubs acting in a way that could harm the national competition or the League and ARL;

•           News and the Super League companies had induced the rebel clubs to breach their contractual and fiduciary duties; and

•           News and the Super League companies had engaged in misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act, had been guilty of passing off and had infringed the League's trade marks.

THE JUDGMENT BELOW

The League, ARL and loyal clubs succeeded before the trial Judge, although some issues were reserved for further consideration.  His Honour rejected News' claims that the Commitment and Loyalty Agreements contravened the Trade Practices Act.  He found that the rebel clubs had breached their contractual and fiduciary obligations to the League.  He also found that News and the Super League companies had induced the clubs to breach those obligations.

The trial Judge made a large number of orders.  In substance, the orders prevented News and the Super League companies from organising or participating in a rugby league competition, other than one authorised by the League or ARL, until the year 2000.

FACTUAL ISSUES

The Full Court accepts the primary facts found by the trial Judge, who had the advantage of seeing the witnesses give their evidence.  However, on many issues the Full Court has drawn different conclusions (or "inferences") from the primary facts.  Indeed, the major
reason for the length of the judgment is the need to set out in detail the course of events leading to the creation of the Super League venture, the execution of the Commitment and Loyalty Agreements and the signing of players and coaches to Super League contracts.  The differences between the parties were not so much on questions of legal principle, as on the application of legal principles to the complex facts of the case.

CONTRACT

First, the Full Court has found that, leaving aside the Commitment and Loyalty Agreements, the only contracts between the clubs and the League were those created when each club was admitted by the League to the 1995 competition.  These contracts were to last for one season only.  Each contract contained an implied term, requiring the club to do everything reasonably necessary to enable the 1995 competition to be carried on in a manner that allowed the League and ARL to receive the benefit of that competition.  The club's contractual obligations did not extend beyond the 1995 season.

The trial Judge was justified in finding that the rebel clubs had breached these implied terms.  By releasing their players during the 1995 season, and by other actions supporting Super League, the rebel clubs prevented the League and ARL from receiving the full benefit of the 1995 competition.  The trial Judge was also justified in finding that News and the Super League companies had induced the rebel clubs to breach these implied terms. 

Had the trial Judge not granted injunctions for a five year period, the League and ARL might have been entitled to an injunction to stop Super League obtaining an unfair "head start", by establishing the rival competition taking advantage of the rebel clubs' breaches of contract.  But since the trial Judge's orders have already been in force for the 1996 season, the remedies available to the League and ARL should be confined to an award for damages.  The matter should be referred back to the trial Judge for damages to be assessed.

PROPER PARTIES

Secondly, certain orders made by the trial Judge, in the opinion of the Full Court, directly affected the rights and obligations of Super League players and coaches.  The players and coaches were not, however, joined by the League and ARL as parties to the litigation.  This breached the principle that persons should be joined as parties to litigation if orders are to be made directly affecting their rights and obligations.  Accordingly, these orders should be set aside, regardless of whether they are otherwise supportable.

FIDUCIARY DUTIES

Thirdly, the relationship between the League, ARL and the 20 clubs admitted to the national competition in 1995 was not such as to create reciprocal fiduciary obligations among those parties.  In particular, there was not that degree of "mutual trust and confidence" that is found, for example, among partners in a commercial venture.  The League, ARL and each of the clubs had conflicting commercial interests.  Far from the League being at the mercy of the clubs, it exercised considerable control over them, notably (but not exclusively) through the annual admission process.  Furthermore, under the rules of the League, the clubs were entitled to withdraw from the national competition if they wished.  That right of withdrawal, which could be exercised by choosing not to apply for admission, was inconsistent with a fiduciary obligation to use the club's assets for the benefit of the national competition.

Since the rebel clubs did not owe fiduciary duties to the League, they could not be in breach of those duties.  Similarly, News or the Super League companies could not have induced any breaches of fiduciary duty.

COMMITMENT AND LOYALTY AGREEMENTS

Fourthly, the Full Court has decided that News and the Super League companies have established that the Commitment and Loyalty Agreements contained "exclusionary provisions" as defined in the Trade Practices Act and are therefore void.  The agreements
contained exclusionary provisions because:

•           the clubs were in competition with each other for the services of News as a rival competition organiser when the agreements were entered into;

•           the clubs and the League had entered into a "contract, arrangement or understanding", within the meaning of the Trade Practices Act; and

•           a substantial purpose for them entering into the Commitment and Loyalty Agreements was to restrict the supply of rugby league teams and players available to the rival competition, this being a prohibited purpose under the Act.

Since the Commitment and Loyalty Agreements are void, the Full Court has decided that the trial Judge's orders, insofar as they were based on the assumption that the agreements are enforceable, cannot stand.  News and the Super League companies should have the benefit of injunctions restraining the enforcement of the Commitment and Loyalty Agreements.

The Full Court has considered it unnecessary to decide whether the agreements are also void as contravening s.46 of the Trade Practices Act.  The Court's conclusion on this point would make no difference to the result.

FURTHER ISSUES

A number of issues remain to be decided.  These include the assessment of damages for the rebel clubs' breaches of contract and News' inducement of those breaches.  In addition, the trial Judge will have to consider the other claims by the League and ARL, for example, that News and the Super League companies have engaged in misleading or deceptive conduct, passing off and infringement of trade marks.

CONCLUSION

The result of the present appeals, however, is that the appeals have been allowed and all orders made by the trial Judge have been set aside.

            Members of the public may purchase copies of the full judgment from the Court's Registry on Level 16, Law Courts Building, Queens Square, Sydney. The judgment may also be ordered on disk in WordPerfect 5.1 format. The judgment will soon be available on the Internet via the AUSTLII site at

                                  hhtp://www.austlii.edu.au/au/cases/cth/federal_ct/