FEDERAL COURT OF AUSTRALIA

Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040

TRADE PRACTICES – definition of market – where respondent sole administrator of sport of rugby union in Australia – where limited number of international test matches played each year – where the first appellant supplies corporate hospitality packages – where some packages included rugby union tickets – whether a market for the supply of corporate hospitality packages at international rugby union test matches exists in Australia for the purposes of Part IV of Trade Practices Act 1974 – onus of proof – whether Court should draw a Jones v Dunkel inference from appellants’ failure to call relevant witnesses  

TRADE PRACTICES – exclusive dealing – whether respondent’s conduct is caught by s 47(7) of Trade Practices Act 1974

CONTRACT – restraint of trade – where respondent included a condition on test match tickets – where respondent entered into agency agreement with ATFS – where respondent agreed to provide international test match tickets to ATFS – where ATFS agreed to sell tickets only as part of retail travel packages – whether condition and restrictive clause void as being restraints of trade under common law or Restraints of Trade Act 1976

CONTRACT – breach of contract – where respondent included a condition on test match tickets – where tickets transferable – whether condition a term of contract – parties to contract – assignment of chose in action – novation – whether condition binds bearer where bearer is not purchaser of ticket

TORT – inducing breach of contract – where ATFS agreed to sell tickets only as part of retail travel packages – where appellants bought tickets from ATFS – where appellants sold tickets to public as part of corporate hospitality packages – state of mind of appellants

REMEDIES – assessment of damages – contract and tort – exemplary damages – circumstances in which Court will order exemplary damages – account of profits – whether possible to slot account of profits into framework of remedies for tort

Trade Practices Act 1974 (Cth) Part IV

Restraints of Trade Act 1976 (NSW) s 4

Conveyancing Act 1919 (NSW) s 12

Australian Rugby Union Ltd v Hospitality Group Pty Ltd [2000] FCA 823 cited

Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd  (1989) 167 CLR 177 followed

Re Queensland Co-operative Miling Association Ltd (1976) 8 ALR 481 followed

Attorney-General v Blake [1998] 2 WLR 805 cited

NCAA v Board of Regents of University of Oklahoma (1984) 468 US 85 referred to

International Boxing Club of New York, Inc et al v United States (1959) 358 US 242 referred to

Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313 cited

Jones v Dunkel (1959) 101 CLR 298 followed

Cropper v Smith (1884) 26 Ch D 700 followed

Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 followed

Sali v SPC Ltd (1993) 67 ALJR 841 cited

Briscoe v Briscoe [1968] P 501 cited

Barnes v BPC (Business Forms) Ltd [1975] 1 WLR 1565 cited

Amey v Long (1808) 103 ER 653 approved

Bank of New South Wales v Withers (1981) 35 ALR 21 cited

Re Commissioner of Water Resources and Leighton Contractors Pty Ltd (1990) [1991] 1 Qd R 549 cited

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd [1894] AC 535 followed

Buckley v Tutty (1971) 125 CLR 353 followed

Esso Petroleum Co. Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 298 cited

Australian Capital Territory v Munday (2000) 99 FCR 72 cited

Hall v Busst (1960) 104 CLR 206 cited

All State Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26 cited

Tito v Waddell (No.2) [1977] Ch.106 cited

Olsson v Dyson 120 CLR 365 cited

X L Petroleum (NSW) Pty Ltd v Caltex Oil (Australia)Pty Ltd (1985) 155 CLR 448 followed

Lamb v Cotogno (1987) 164 CLR 1 cited

Uren v John Fairfax and Sons Pty Ltd  (1966) 117 CLR 118 cited

Coloca v BP Australia Ltd [1992] 2 VR 441 cited

Trend Management v Borg (1996) 40 NSWLR 500 cited

Cassell & Co Ltd v Broome [1972] AC 1027 cited

Gray v Motor Accident Commission (1998) 196 CLR 1 cited

Backwell v AAA [1997] 1 VR 182 cited

Addis v Gramophone Co Ltd [1909] AC 488 cited

Butler v Fairclough (1917) 23 CLR 78 cited

Whitfield v De Lauret & Co Ltd (1920) 29 CLR 71 cited

Thyssen Inc v SS Fortune Star (1985) 777 F2d 57 cited

Vorvis v Insurance Corporation of British Columbia [1989] 1 SCR 1085 cited

Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 cited

Tzouvelis v Victorian Railway Commissioners [1968] VR 112 cited

Exchange Telegraph Company Ltd v Gregory [1896] 1 QB 147 cited

Rookes v Barnard [1964] AC 1129 cited

Lightly v Clouston (1808) 127 ER 774 cited

Foster v Stewart (1814) 105 ER 582 cited

Phillips v Homfray (1883) 24 Ch D 439 applied in dissent

Federal Sugar Refining Co. v United States Sugar Equalisation Board (1920) 268 F. 575 cited

Dart Industries v Décor Corporation Pty Ltd (1993) 179 CLR 101 followed in dissent

10^th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 followed in dissent

Sullivan, Handbook of the Law of Antitrust (1977) St Paul: West Publishing Company

Clerk & Lindsell on Torts (17th ed. 1995)

Cross on Evidence (6^th Australian ed.)  Sydney:  Butterworths

J Bentham, ‘Draught of a Code for the Organization of the Judicial Establishment in France’ (1790) in J Bowring, The Works of Jeremy Bentham, (1843) vol 4

Perpetuities and Restraints on Alienation (1999) 61 Am Jur 2d

The Digest of Justinian 46.2

McGregor on Damages (16^th ed. 1997)

Prosser & Keeton on Torts (5^th ed. 1984)

Daniel Friedmann “Restitution of Benefits obtained through the Appropriation of Property or the Commission of a Wrong” (1980) 80 Colombia Law Review 505 at 556‑558

Goff & Jones The Law of Restitution (5^th ed.)

HOSPITALITY GROUP PTY LIMITED AND ICM (MARKETING) PTY LIMITEDvAUSTRALIAN RUGBY UNION LIMITED

N 758 OF 2000

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.      The appeal, so far as it concerns the cross-claim, be dismissed. 

2.      The appeal, so far as it concerns the appellants’ claims against the respondent, be dismissed except so far as it concerns exemplary damages.

3.      The orders below be varied by setting aside the order that the appellants pay to ARU exemplary damages in the sum of $100,000.

4.      There be no order as to the costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

HILL & FINKELSTEIN JJ:

1                     The appellants/cross-respondents, Hospitality Group Pty Ltd (“THG”) and ICM (Marketing) Pty Limited (“ICM”) appeal against the judgment of a Judge of this Court in favour of the respondent/cross-appellant, Australian Rugby Union Limited (“ARU”) on its claim, and dismissing a cross-claim brought by the appellants as cross-claimants.  When the application was originally filed there were four respondents to it.  The proceedings were discontinued against what was then the third respondent, Australian Tours for Sport Pty Limited (“ATFS”), upon the basis of certain orders and undertakings given by consent prior to the hearing.  The fourth respondent to the application, Cameron Jackson, did not take part in the hearing.  Orders were made, ultimately against him, but no appeal is brought against those orders.

2                     ARU is the peak body administering rugby union in Australia.  It is affiliated with the International Rugby Board and directly administers rugby union matches in Australia.  No other body organises rugby union matches in Australia, at least at a high level.  A limited number of international test matches are played each year in Australia.  The most popular of these is the Bledisloe Cup match against New Zealand which is played in Australia, with another match each year played in New Zealand.  As well, international test matches are played, usually in Sydney or Brisbane, being the states with the largest following of rugby union and strongest local and interstate competitions, but also in Melbourne, Perth and Canberra.  In 1999, two international test matches were played at the Sydney Olympic Stadium at Homebush (the “stadium”) and test matches are to be played there up to and including the year 2004.  Relevant to the present proceedings are the Bledisloe Cup match in 1999 and an international match played between Australia and England, referred to as the Centenary Test, both of which had at the time of the first instance hearing already been played at the stadium (the “Matches”).

3                     The initial capacity of the stadium was, at the time of the first instance hearing, some 100,000 spectators, although that capacity was to be reduced after the Olympic Games to about 80,000.

4                     The present appeal concerns what are referred to as “hospitality packages”, which involve the marketing of a package consisting of a number of premium tickets, that is to say tickets well located at the stadium and preferably in a block of seats, together with pre-match and post-match hospitality involving food and drink, often one or more speakers with an association with rugby union and perhaps transport to and from the ground.  The hospitality may occur at the stadium itself (“on-site hospitality”) or at a location away from the stadium (“off-site hospitality”).  The packages are sold to a business organisation, which then invites guests corresponding to the number of tickets obtained through the package.  As the learned primary Judge observed, “the package plays a function similar to the hiring of a corporate box” at the stadium.

5                     Hospitality packages are not limited to tickets at the peak rugby union matches.  Those who market them sell similar packages to a wide variety of other sports or entertainment events, ranging from one-day cricket and other codes of football to opera and ballet.  Several firms offer such packages for sale.

6                     As will be seen, ARU markets tickets to its games subject to a condition.  The precise terms of that condition will need to be considered carefully.  It suffices here to say that it purports to limit the rights of a ticket holder to transfer the ticket at a price higher than the amount for which it was sold by ARU or for commercial purposes.  ARU also licenses others to sell tickets together with hospitality, again subject to an attempt to ensure that they are not sold to persons who will on-sell them to the public.

7                     THG and ICM are part of a group of companies which provide in Australia and elsewhere catering and corporate hospitality services in connection with major sporting events.  One or other of THG and ICM purchased tickets either for the Bledisloe Cup match or the Centenary Test match from Mr Jackson, the fourth respondent (and other individuals) and what purported to be travel packages from ATFS (the third respondent) and on-sold tickets, or packages which included tickets, to members of the public at a price overall higher than the price for which tickets were sold by ARU.  A travel package is a package which comprises both tickets and transportation to and from the stadium but does not include any food or drink.  Details of the various transactions will be set out later.

8                     The issues in the application and also in the appeal were and are whether the conditions printed on the tickets or contained in the agreement between ARU and ATFS are enforceable by ARU in contract or otherwise and, if so, whether ARU is entitled to injunctive relief, damages (including exemplary damages) and/or an accounting for profits.  ARU also claimed that the appellants had engaged in conduct in breach of Part V of the Trade Practices Act 1974 (Cth) (the “Trade Practices Act”) in making false representations that they could supply premium tickets which would permit purchasers to attend the Matches, be seated in appropriate seats and not be liable to be refused admission.  That matter was not pressed on the appeal.  The appellants claim that ARU is in breach of Part IV of the Trade Practices Act or, alternatively, that the ticket conditions or the non-exclusive licence agreements entered into by ARU, including the agreement with ATFS, are void by virtue of the common law doctrine of restraint of trade or the Restraints of Trade Act 1976 (NSW).

The facts

9                     Stadium Australia Management Limited (“SAM”) is the “operator” of the stadium and purports to have the right to “hire” the stadium for events.  By an agreement between SAM and ARU dated 1 July 1998, SAM agreed to hire the Stadium to ARU for the holding of the ARU “events.”  The full agreement was not tendered in evidence since ARU objected to selected parts of it being discovered, or otherwise disclosed, as they were not relevant and were commercially confidential.  The agreement, in its incomplete form, is far from easy to construe.  Perhaps the full agreement, if tendered (albeit subject to a confidentially order), would have made the task easier.  On one view of the agreement, it could be argued that it is SAM which sells tickets for events held at the stadium through its ticketing agent (Ticketek).  Such a view of the contractual arrangements would be fatal to the ARU case for, at the outset, SAM as the relevant contracting party would be a necessary party to enforcing any alleged contract with members of the public who purchased tickets.

10                  However, the case proceeded below on the basis that SAM authorised ARU not merely to hold events at the Stadium in accordance with the agreement but also to charge members of the public for admission, using Ticketek to sell tickets as agent of ARU and to impose conditions on the sale of the tickets.  In the agreement, ARU is specifically given by SAM the right to make tickets to an ARU event available to third parties to sell as part of travel and hospitality packages.  On this view of the agreement, ARU was empowered to impose conditions on the tickets and Ticketek, although described in the agreement as agent for SAM, was agent for ARU in making sales of tickets to members of the public and concluding any contract that may be entered into between members of the public and ARU, through the agency of Ticketek, when tickets are sold. 

11                  Although, after the Court had pointed out some of the difficulties of interpretation in the truncated version of the contract which had been tendered, the appellants sought to rely upon arguments arising out of the possible view that the contract makes SAM the contracting party in the sale of tickets, this was not a matter which was an issue emerging from the pleadings and no application was made by the appellants to seek leave to amend their grounds of appeal and their pleadings to permit the matter to be argued on the appeal.  We are accordingly of the view that the way in which the matter was argued at first instance should be accepted for the purposes of the appeal, namely that ARU was the contracting party on the sale of tickets to members of the public and Ticketek, for this purpose, was agent for ARU and not SAM.

12                  In some cases on the front and in others on the back of tickets sold to members of the public appeared a form of words.  The evidence disclosed that the existence of these words, as printed, was drawn to the attention of members of the public by Ticketek at the time of purchase.  The wording took different forms in 1998 and 1999. The change came about as a result of legal advice.  There is no doubt that in this period ARU and its advisers were particularly concerned with what they saw as pirate sales of tickets at a premium.  Although the wording of the ticket in 1998 is not relevant, directly, to the present appeal, the difference between that wording and the wording which appeared in 1999 may have relevance.  The 1998 condition read as follows:

“This ticket may not be resold at a premium or for commercial purposes without the prior written consent of the ARU.  If this ticket has been resold in contravention of this condition, the bearer of the ticket will be denied admission.”

13                  In February 1999, the ARU Ticketing Manager gave instructions to ensure that a different form of words was printed on tickets for the two 1999 matches.  The suggested wording was as follows:

“This ticket may not be re-sold at a premium for commercial purposes without the prior written consent of the ARU.  If this ticket has been re-sold in contravention of this condition, the bearer of the ticket will be denied admission.”

14                  However, it seems that following legal advice a different form of words altogether was adopted.  The final language appearing on tickets for the Matches was as follows:

“It is a condition of sale that any ticket may not be resold at a premium or used for advertising, promotion or other commercial purposes without the prior written consent of the ARU.  If a ticket is sold in contravention of this condition, the bearer of the ticket will be denied admission to Stadium Australia.”

15                  On 15 March 1999, Mr Cameron Jackson purchased 48 tickets to the 1999 Bledisloe Cup from a third party at Kings Cross.  These tickets were ultimately acquired by THG (through ICM) from Mr Jackson.  It would seem that Mr Jackson sold the tickets to ICM at a premium over the ordinary ticket price.  THG acquired tickets (203 in number) from a number of persons who had apparently been able to purchase multiple tickets through Ticketek.  To the extent that the evidence does not reveal precisely the price paid by THG it may easily be inferred that it acquired these tickets at a price higher than the price paid to Ticketek.  As will be seen, THG acquired these tickets in accordance with contractual arrangements entered into with its customers, as undisclosed agent for them.

16                  In May 1998, THG began to enter into contracts for the provision of hospitality packages to international rugby tests to be played during 1999, namely the Matches.  The agreements that it entered into with its customers stated that it would act as agent for its clients in the purchase of tickets from those who originally held them, which tickets were to be provided as part of the package.  THG had no agreement with ARU for the sale of hospitality packages that included rugby union tickets.

17                  An agreement had been entered into in July 1998 between ARU and International Management Group of America Pty Ltd (“IMG”) (it was, in fact, an extension of an earlier less formal arrangement which had existed since 1995) under which IMG was to act as ARU’s representative for the commercial exploitation of various rights owned or controlled by ARU, including corporate hospitality.  ARU was to receive a commission.  That agreement was to expire in 1999.  It was renegotiated in 1999 for a further five-year term, during which time IMG was to continue to act as agent for ARU and, in return, was to be paid a commission.  The 1999 agreement was not in evidence. 

18                  ARU also appointed various companies as retail licensees.  One company so appointed was ATFS.  ATFS was a travel agent and it was the practice of ARU to allocate a number of tickets to travel agents so that they could be used to form part of travel packages for persons visiting Sydney for a match.  On 2 March 1999, a licence agreement was entered into between ARU and ATFS (the “ATFS Contract”) under which ARU was to grant a retail licence for an agreed allocation of tickets to test matches played domestically.  The agreement was to terminate at the completion of the last domestic test match played in 1999.  Under the agreement, ATFS was entitled to 1500 tickets to the Bledisloe Cup, with an option to release back 50% of these tickets to ARU, an option in fact exercised.  The licence agreement contained the following provisions:

“3.10   Subject to availability, the travel agent is permitted to purchase ‘travel packages’, including domestic test match tickets from the wholesale travel agent.  If it is discovered that the travel agent proceeds to directly, or indirectly, source (or attempt to source) match tickets from any avenue other than this wholesale agent, that travel agent’s ticket allocation and license (sic) will be immediately revoked.

3.11     The travel agent is only permitted to sell ARU match tickets as part of a travel package (i.e. tickets are not permitted to be sold as a wholesale product) and only in Australia.  The travel agent cannot on sell the tickets through any other means.  Contravention of this clause may result in the cancellation of the license (sic) and a failure to allow entry to any ticketholders.

...

3.13     The travel agent will use its best endeavours to promote travel packages to all domestic test matches that have been taken by the travel agent.

…

4.3              The ARU will spread seat allocations equitably among its licensed retail travel agents.”

19                  The reference in this agreement to the “wholesale agent” is a reference to IMG

20                  Two days after the entry into of the ATFS Contract, ICM and ATFS entered into an agreement in writing for the provision of “travel packages” by ATFS to the Bledisloe Cup match to be held on 28 August 1999.  The packages were to include a total of 450 premium seats.  Packages, involving a total of 200 premium seats, were also to be sold for the Centenary Test to be played on 26 June 1999.  The correspondence and other evidence made it quite clear that the travel component of each package was not material to ICM.  It may be noted that in December 1998, the solicitors for ARU had written to THG (as already noted, a related company to ICM) informing it of the terms of the conditions then applicable to all tickets to test matches and asserting that THG had no entitlement to sell, or offer to sell, tickets for rugby test matches to members of the public.  The letter also asserted that THG should not make representations to members of the public as to its ability to provide premium seats.  On 12 March 1999, the solicitors for ARU also wrote to the solicitors for THG advising them of the terms upon which tickets were then being sold to the public.

21                  In October 1999, 18 companies (including THG) were invited by ARU to tender for the provision of non-exclusive off-site corporate hospitality in connection with international rugby test matches organised by ARU.  The invitation to tender included the following:

“2.9  Ticket availability

The ARU does not intend to supply tickets to Rugby Test Matches for use in connection with corporate hospitality except through on-site corporate hospitality managed by IMG and through off-site corporate hospitality managed by tenderers appointed pursuant to the process described in this request for EOIs.

All tickets to Rugby Test Matches are sold subject to the following terms:

‘This ticket may not be resold at a premium or used for advertising, promotion or other commercial purposes without the prior written consent of the ARU.  If this ticket has been resold or used in contravention of the condition, the bearer of the ticket will be denied admission.’

The ARU will take action, through the courts if necessary, to restrain a breach of this term by purchasers of tickets or conduct by third parties (eg. organisers of corporate hospitality) to induce purchasers of tickets to breach this term.”

22                  THG did not tender.  Six companies were ultimately appointed.  The relevant terms of the licence agreements entered into are set out in the judgment at first instance but are not material to the appeal.

23                  Under an agreement reached in May 1999 between THG and Wimbledon Tickets Limited for the swapping of tickets, (the latter company had, as at the time of the agreement, been dissolved, but nothing turns on that) THG acquired 104 tickets for the Centenary Test to be played on 26 June 1999 and 120 tickets for the Bledisloe Cup to be played on 28 August 1999.

24                  In summary, and excluding the swap with Wimbledon Tickets Limited, the evidence disclosed that:

·        ICM purchased 48 tickets from Mr Jackson;

·        THG ultimately acquired a further 203 tickets from other persons, which tickets were included in hospitality packages that it sold.  These tickets were purchased as agent for customers purchasing hospitality packages from THG.

·        ICM purchased 450 tickets from ATFS for the Bledisloe Cup and 200 for the Centenary Test (the so-called travel packages). 

25                  Ultimately, however, the appellants were unable to procure some 210 tickets for THG’s customers.

The issues between the parties

26                  Before the learned primary Judge the following issues were raised between the parties:

·        By way of defence to the whole of the claim, the appellants claimed that ARU was in breach of Part IV of the Trade Practices Act and in particular any of ss 45(2)(a)(ii), 46(1)(c), 47(1) and 47(7).  All but s 47(7) require consideration of whether there was, at the relevant time, a market for the sale of hospitality packages for international rugby union events in Sydney as the appellants claimed (in which clearly ARU was dominant) or a wider market, as ARU contended, which extended potentially to the sale of hospitality packages for events as diverse as football or ballet.  There was accordingly raised for decision the question whether there was on the evidence a market of the kind suggested by the appellants.

·        As a step in consideration of the Part IV claim, the appellants had sought leave to call a number of witnesses on the issue of market, not being witnesses in respect of whom affidavits had, in accordance with pre trial directions given by the learned primary Judge, been filed.  Senior Counsel for the appellants had indicated that he was unable to say what these witnesses would say.  Subpoenas were issued to these potential witnesses.  The issue addressed by the learned primary Judge was whether these subpoenas should be set aside.  The issue may, however, be restated to be whether leave should be given for these witnesses to give oral evidence.

·        Whether the condition printed on the tickets was an unreasonable restraint of trade at common law and pursuant to s 4 of the Restraints of Trade Act 1976 (NSW).

·        Whether the condition appearing on the 1999 tickets sold for the Matches was a term of a contract entered into by ARU with purchasers of the tickets or a condition not part of the contractual terms.

·        Whether, if the condition was part of the contractual terms of the contract between ARU and initial ticket purchasers, the appellants became subject in contract to that condition as a contractual term which was breached by the appellants on the sale of packages (or tickets) to their customers.

·        Whether, if the condition was part of the contractual terms, the appellants induced the original holders of the tickets, whether individuals or ATFS, to breach the contractual term so as to be liable in tort to ARU for inducing a breach of contract.

·        Whether ATFS breached clause 3.11 of the ATFS Contract (see para [18]) by agreeing to sell, and selling, so-called travel packages to ICM.  This issue depended upon the proper interpretation of clause 3.11 of the ATFS Contract.  If ATFS did breach that clause, the question would then arise as to whether ICM and THG, or either of them, committed the tort of inducing ATFS to breach its contract with ARU.

·        Depending upon the answers given to the above, whether ARU was entitled to an account of the profits made by THG as a result of any contractual breach by THG or as a result of committing the tort of inducing breach of contract.

·        Whether ARU was entitled to exemplary damages for breach of contract or for inducing breach of contract by ATFS or individual ticket holders.

The decision appealed from

27                  It is convenient here to summarise the judgment at first instance by reference to the issues set out above.  For convenience the issues will be dealt with in the order in which they appear above.

The existence of a market as submitted by the appellants

28                  His Honour found that THG had failed to establish the market it had pleaded.  After referring to the decision of the High Court in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 (“Queensland Wire”) and the decision of the Trade Practices Tribunal in Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481, among other cases referred to in Queensland Wire, (the parties were neither before his Honour, nor before us, in disagreement as to the relevant principles) his Honour turned to consider the critical issue of whether there was interchangeability of function with packages involving other sports or entertainment and, in this connection, whether there was substitutability of product.  The evidence as to cross elasticity of demand which his Honour summarised, was ultimately, so his Honour found, not such as to demonstrate the existence of a market in hospitality packages for elite (meaning, thereby, international) rugby matches, whether in Sydney or otherwise throughout Australia. 

29                  Putting to one side the evidence of experts, and survey evidence, his Honour summarised (at para 73) the evidence on this matter as follows:

“This body of material indicates that:

1.                  International rugby matches are among a group of elite events in demand for corporate hospitality.

2.                  The inability to offer hospitality packages for international rugby matches would be a competitive disadvantage for those in the field.

3.                  It is, at least, doubtful whether international rugby matches played in Sydney can be distinguished from international rugby matches played elsewhere in Australia.

4.                  Events in the package are substitutable for some clients – this is evidenced for example, by bundled packages, clients taking packages in more than one event, and by transfer to another event if one is sold out.

5.                  Pricing of corporate hospitality packages takes account of the price of other hospitality packages to some extent, but there is no close parallel between the price of packages for different events.  The differing content of the packages makes comparison difficult.

6.                  The principal purpose for which the price of other packages is taken into account is to assess, in general terms, what the traffic will bear, rather than to undercut to attract extra custom from other events or avoid losing custom to other events.  It is to be borne in mind, of course, that the clients are primary, rather than secondary, consumers.

7.                  There is no reliable evidence of customers moving from event to event because of the price.”

30                  The appellants tendered in evidence a survey designed to show the level of price responsiveness among clients of hospitality services provided in conjunction with major sporting events and evidence from a Professor of Econometrics commenting upon it. The survey was conducted by a Mr Sergeant from interviews or other investigations carried out by reference to persons who were purchasers of hospitality packages from IMG (the identity of those persons was obtained by a discovery order) and THG.  The survey was the subject of criticism from experts.  The survey showed, it was said, statistically significant price sensitivity, albeit small.  His Honour does not appear to have accepted the criticisms made by experts of the survey, for example that the sample was small or that it did not take account of quality differences.  His Honour’s findings on the outcome of the survey were as follows:

“ARU rely upon the fact that the Sergeant survey detected statistically significant price sensitivity.  However, the relationship, although statistically significant (ie. reliable), was small.  An exact relationship between price and demand would produce a result of 1 (or -1) and if there were no relationship the result would be 0.  The P value of this result was 0.018.  On further investigation, one of the three random cells was more likely than the other two to go elsewhere.  Furthermore, there was no statistically significant evidence that demand would be transferred to any of the four alternatives, namely, the National Rugby League Grand Final, the first final of international one-day cricket, the Indy Carnival Gold Coast Grand Prix and the Melbourne Cup.  These alternatives were chosen as being likely to be close substitutes.  In my view, this was a reasonable hypothesis, although, of course, they are by no means comprehensive as a list of potential close substitutes.  Overall, I do not regard the survey, or the expert evidence, to be decisive.”

31                  Shortly thereafter, his Honour commented that there was “much to be said for the view that there [was] no close substitute for international rugby union test match hospitality”.  His Honour continued (at paras 84-87, in a passage which was criticised in argument):

“It is unique in its appeal to a significant number of consumers, primary and secondary.  This conclusion is assisted by considering whether a monopolist in the provision of international rugby test match hospitality packages could extract a super profit or monopoly rent, which is the other, and business, end of the test of price sensitivity.  If the cross-elasticity of demand is not high enough, and substitutability not close enough, then price competition will only be partially successful (if at all) in restraining the price the monopolist can charge.  This, of course, does not mean that the monopolist is able to charge an unlimited amount.  With discretionary spending such as is involved here, a limit is set by what people can afford (or choose) to spend.

The conclusion is open that if the ARU were able to control all international rugby union test match hospitality packages it would be able to extract a significant monopoly profit compared with that which would prevail if there were competition from other providers of international rugby test match hospitality packages.  Put another way, the existence in the market of competitors such as THG is likely to affect prices of packages.  Indeed, this perception may be a significant reason for the desire of the ARU to stamp out what it calls ‘pirate operators’.  I have set out in the account of the facts some of the material which points in that direction, including the undertaking in the tender material by the ARU to take the very action that has been taken here against external operators.  This was obviously inserted in order to assure the tenderers of freedom from external competition, thus enabling higher prices to be charged, reflecting itself in higher rewards to the ARU.  It is to be borne in mind that the ARU conducts and controls all on-site and off-site hospitality by its agents.

However, THG has called no evidence from its own ranks or from the ranks of its consumers, whether primary or secondary.  It is a participant in the market, however it be defined.  It has actually set and charged prices.  It is part of a group of companies involved in corporate hospitality in a number of countries.  I can infer from its documents which are in evidence that it would have directly and indirectly available to it evidence of actual market behaviour by customers and potential customers.  Indeed, with the possible exception of IMG, it would probably have a better relevant knowledge of the realities of this field of commerce than any of the parties who were called.  Such evidence would have been most relevant …  There is no suggestion that it was not available.  I must apply the principle in Jones v Dunkel (1959) 101 CLR 298 and assume that any such evidence would not have assisted THG’s case (see, in similar circumstances, Beaumont J in Trade Practices Commission v Arnotts Ltd (1990) 93 ALR 657 at 671-2).  This, in itself, does not mean that THG must fail.  The Jones v Dunkel inference does not supply positive evidence.  However, in this case there is evidence both ways.  The question of market is one of fact and degree, and the evidence which has been called permits an answer either way.  In those circumstances, I regard the Jones v Dunkel inference as a powerful factor against THG’s case.  This is particularly so where the instructions on behalf of THG for the design of the Sergeant survey were narrow, and did not permit a comprehensive investigation of the cross-elasticity of demand.

Therefore, notwithstanding the appeal of much of THG’s argument upon this issue, I find that THG has failed to establish the market pleaded.  It follows that the defence and cross-claim based upon breach of Part IV of the Act must fail.  Each alleged breach depends upon THG establishing the market as alleged by it.”

The refusal of leave to call witnesses participating in the Sergeant survey

32                  To understand the refusal of his Honour to permit the appellants to subpoena and call sixteen witnesses who had either participated in the Sergeant survey or were secondary consumers in relation to those participants to which his Honour referred it is necessary to set out some details of the way the case was managed by his Honour.

33                  The present proceedings were commenced on 16 April 1999.  The Centenary Test was to be played on 26 June 1999 and the Bledisloe Cup on 28 August 1999.  There was then considerable urgency.  By 19 August 1999, after an urgent interlocutory hearing before Sackville J, injunctive relief (or undertakings) were in place in favour of ARU.  Subsequently directions were given for the filing of evidence and the matter listed for hearing on 20 March 2000 for three weeks.  By 14 February 2000, the present appellants had advised the learned primary Judge that their evidence was complete.  From 1 March to 20 March 2000, a large number of subpoenas were issued to persons who were the primary or secondary consumers of the hospitality packages with which the Sergeant survey was concerned.  The names of the IMG customers who had participated in the survey of purchasers of hospitality packages from IMG and THG, were revealed on discovery.  Two hundred people in all, (they were customers of IMG or THG), participated in that survey.  Secondary consumers, that is guests of primary consumers, were subsequently identified by contacting primary consumers.  In all 51 persons, being either primary or secondary consumers, were subpoenaed either to produce documents or to give evidence.  Ultimately, it was sought to require 20 persons to give evidence.

34                  On the first day on which the proceedings were listed for hearing Senior Counsel for THG indicated to the Court that he would seek leave to call on the subpoenas.  No affidavits had been filed from the persons subpoenaed.  Senior Counsel for the appellants indicated that the sort of evidence which would be addressed from witnesses subpoenaed was:

“demand for international rugby packages, corporate hospitality packages, why they choose rugby as against other things, other events and the factors that motivate their choice.”

35                  Senior Counsel for ARU objected on the ground that he had only had notice of the possibility of new lay witnesses the preceding Friday.

36                  On 21 March 2000, THG filed a notice of motion with supporting affidavit in respect of the subpoenaed witnesses.  It was said that from 15 to 20 witnesses would be called.  An explanation of delay was sought to be put forward, largely to the effect that Senior Counsel had only been retained in mid February and had suggested the course which was taken only at the end of February.  Senior Counsel for ARU raised on or around the time of the hearing at first instance the suggestion that the witnesses chosen were selected in a way that would be expected to favour the appellants, rather than randomly, and would thus give an unreliable picture of the market.  Senior Counsel for the appellants suggested to the learned primary Judge that the evidence of each witness would, in chief, be unlikely to take more than half and hour, more likely a quarter of an hour.  Senior Counsel for ARU complained that, notwithstanding that by this time it was clear that the case would not require the time allotted for hearing (only three weeks out of a four week period), the need to investigate the evidence that might be adduced and possibly call other witnesses in response might well mean that the hearing could not be completed and would have to be adjourned.

37                  On 23 March 2000, the learned primary Judge gave leave to the appellants to call four primary consumers to give evidence.  By this stage the appellants sought only to press for the calling of ten witnesses, five primary consumers and five secondary consumers.  One of the five primary consumers was unable to attend, so that his Honour consented to the calling of the four whose names were then pressed.  His Honour refused leave to the appellants to call any secondary consumers.  His Honour also set aside subpoenas to produce documents in respect of the persons whom the appellants were not permitted to call to give evidence in their case.  His Honour gave short ex tempore reasons for this ruling, indicating that he would deliver full reasons with the final judgment. 

38                  His Honour, in his ex tempore judgment, gave four reasons for his refusal to grant leave and for setting aside the subpoenas. First, that “the calling of oral evidence [was] contrary to the case managed regime laid down for [the] case”.  Second, “the disruption to the trial, the possible loss of the [trial] date and the undue interference with [ARU’s] conduct of the case”.  Third, the lack of cogency of the evidence from secondary consumers.  Fourth, that even if sought in a timely fashion, the issue of the subpoenas which his Honour set aside was “an unwarranted exercise by the court of [its] compulsory powers in the particular circumstances of this case”.  In his later reasons, the learned primary Judge did not amplify the first three grounds.  He did say more about the final ground, indicating that his decision “did not turn upon [that] point”,that is, the issue, while raising “a question of general importance” as his Honour put it, was not determinative in view of the other grounds.

Was there a restraint of trade at common law or pursuant to the Restraints of Trade Act?

39                  In his Honour’s view, neither the condition on the ticket or the condition in the agreement with ATFS were void as an unreasonable restraint of trade.  The latter condition was, so his Honour held, entirely reasonable and legitimate in the context of that contract.  As to the ticket condition, his Honour was of the view that ARU had a legitimate commercial interest to protect and a legitimate interest in ensuring that the tickets were used as intended rather than being “scalped”.  In a passage the subject of some criticism in the appeal, his  Honour said:

“The court is not equipped to judge whether keeping a competitor out of a particular aspect of commerce is against the public interest when set against organising a successful and profitable test match series, with tickets for followers kept at a reasonable level, and with profits distributed to help the sport.” 

40                  In the course of his reasons his Honour said, and the comment was likewise the subject of criticism, that THG bore the onus of proving that the restraint complained of was against the public interest.

Was the ticket condition a contractual term?

41                  In his Honour’s view, the condition was a term of the contract entered into between ARU and each original purchaser that was brought to the attention of purchasers at the time the contract was entered into.

Were the appellants bound by the contract?

42                  ARU submitted that the condition on the ticket bound each subsequent holder by way of assignment of the burden of the contract.  Alternatively, ARU submitted that there was a novation rather than assignment of the burden of the contract.  That latter submission supported by his Honour was as follows:

“The ARU impliedly agreed to transfer by the holder on the face of the ticket and was bound to honour the ticket when presented by the purchaser of the ticket, and in consideration of this, the purchaser agreed to be bound by the conditions of the ticket.”

On either view, if there were a breach of the condition then ARU was, his Honour held, entitled to refuse entry to the holder.  His Honour ultimately rejected the submission of the appellants that there was an assignment of the burden of the contractual obligation contained in the condition on the ticket.  However, his Honour expressed the view that, whether or not there was an assignment, there was adequate consideration to support a novation of the contract. 

Inducement to breach contract

43                  It followed from his Honour’s view, that the ticket condition was a contractual term, that THG, whether it purchased as agent for an undisclosed principal or itself as principal, induced breach of contract where it purchased tickets at a premium with knowledge of the condition.  Likewise inducement to ticket holders to sell not at a premium but for use in hospitality packages would be an inducement to breach contract for which injunctive relief and damages would be awarded.

44                  The issue of inducement arose also with respect to the agreement entered into between ATFS and ICM. 

45                  The first issue which his Honour was required to decide was the proper construction of clause 3.11 of that agreement.  For the appellants, it was submitted that clause 3.11 only prohibited selling a match ticket that was not part of a travel package and did not prohibit ATFS from selling rugby tickets “to hospitality groups generally”.  Thus, travel packages, which necessarily must include tickets, could be sold as a wholesale product. 

46                  His Honour concluded that the construction contended for by the appellants should be rejected.  Clause 3.11 was to be construed against the background that the role of ATFS was limited to retail dealings, i.e. dealings with actual customers who were interested in a travel package.  ICM was not a retail customer.  Accordingly, there was a breach of contract by ATFS selling to ICM.  Further, there was an inducement to breach constituted by conduct which his Honour summarised, but which made it clear that THG had sufficient knowledge of the substance of the restriction in clause 3.11.  His Honour found that there was, in the circumstances, at least constructive knowledge of the terms of the contract.

Damages

47                  His Honour found that ARU was not entitled to damages as it was unable to show any loss suffered by reason of breach.  All tickets wrongly acquired or used had been paid for at the asking price.

Accounting for profits

48                  His Honour held that ARU was not entitled to an accounting of profits for breach of contract, refusing to follow obiter dicta of the United Kingdom Court of Appeal in Attorney-General v Blake [1998] 2 WLR 805, then on appeal to the House of Lords.

49                  Likewise his Honour rejected a submission that restitutionary damages were available for the tort of inducing breach of contract so that ARU was not entitled to profits earned by the appellants as a result of the tort which would not have been earned by the appellants but for the tort.  While an accounting for profits was available for passing off, that was sui generis and the principle should not be extended.

Exemplary Damages

50                  In his Honour’s view, “the breaches were a conscious and planned response to the ARU’s efforts to shut THG out of access to the stadium, in full knowledge that the ARU was asserting that the ticket conditions and other contractual provisions were effective to do so”.  There was no honest belief that THG’s conduct would be protected by Part IV of the Trade Practices Act or any other reason.  No witness was called to establish bona fides.  His Honour concluded that injunctive relief was not a sufficient deterrent.  Further, THG had made a considerable profit, estimated by ARU as more than $200,000, by using the tickets it had acquired.  In these circumstances, his Honour concluded that the present case was exceptional and called for an award of exemplary damages by way of deterrent.  His Honour assessed exemplary damages as $100,000.

The existence of a relevant market

51                  As has already been adverted to, the parties were not in disagreement as to the relevant principles to be applied in market definition.  They are those set out in the judgments of the High Court in Queensland Wire.  It is clear enough from the definition of the word “market” in s 4E of the Trade Practices Act that attention is required to be drawn to goods or services (in the present case, services) that are substitutable or “otherwise competitive” with those services which are said to constitute the relevant market, here hospitality packages for what may be described as premier or elite rugby matches.  As the High Court in Queensland Wire and other cases cited in those judgments show, the issue will require:

·        identification of what goods or services are really competitive with the goods or services in question, particularly where there might be close competition between goods and services and their substitutes;

·        consideration of goods or services that are interchangeable and those that have special features that preclude interchangeability;

·        consideration of whether overlapping markets exist where both actual and/or potential close competition may be present;

·        examination of price competitiveness and competitiveness in other attributes leading to substitution with another good or service.  These play a part in defining a market.  Put another way, there needs to be considered cross-elasticity of demand to reveal the degree to which one product or service may be substituted for another.  So, one may ask whether a small increase in the price (or other attribute) of a particular product or service would cause a significant increase in demand for a similar product or service. (See the recommendation of the Report of the Trade Practices Review Committee to the Minister for Business and Consumer Affairs: August 1976 (Swanson Committee Report) at 4.22).

52                  Ultimately, there is a question of degree involved and we would add, thus, judgment.

53                  In this context, it is useful to adopt the discussion of market in the decision of the Trade Practices Tribunal in Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481 at 517, cited in Queensland Wire, as follows:

“We take the concept of a market to be basically a very simple idea.  A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them (if there is no close competition there is of course a monopolistic market).  Within the bounds of a market there is substitution – substitution between one product and another, and between one source of supply and another, in response to changing prices.  So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive.  Let us suppose that the price of one supplier goes up.  Then on the demand side buyers may switch their patronage from this firm’s product to another, or from this geographic source of supply to another.  As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another.  Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.

It is the possibilities of such substitution which set the limits upon a firm’s ability to ‘give less and charge more’.  Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to ‘give less and charge more’ would there be, to put the matter colloquially, much of a reaction?  And if so, from whom?  In the language of economics the question is this:  From which products and which activities could we expect a relatively high demand or supply response to price change, ie a relatively high cross-elasticity of demand or cross-elasticity of supply?”

54                  It is obvious enough that if the market were identified as hospitality for rugby matches generally or, as the appellants pleaded, international rugby matches in Sydney, then ARU, as the sole purveyor of rugby matches (and with the possibility of a potential competitor unrealistic) would have a monopolistic position in it.  On the other hand, if the market were identified as hospitality packages for sporting activities generally, then the situation becomes quite different.  If the market is for hospitality packages for all events, sporting and cultural, then the situation is even more diverse and ARU would not have a position of market power at all.  The issue which arises and that is necessary to resolve involves a choice between these three positions.  For this purpose, we leave out of consideration altogether geographical issues.

55                  The demand for hospitality packages derives from corporations and firms who purchase them (referred to by his Honour as “primary consumers”).  It does not derive from persons who may be invited to the particular activity the subject of the package, who his Honour refers to as “secondary consumers”.  No doubt primary consumers will, in making their choice, consider the persons who may be invited, but ultimately the decision whether to purchase and what to purchase lies with the primary consumers.

56                  As the learned primary Judge clearly appreciated, the issue arising in the case is not whether there is a market in rugby union matches, or even a market in international rugby union matches.  There is no doubt that a particular professional sport can be seen as a separate market, for enthusiastic adherents of one sport may not at all be interested in another sport.  This is demonstrated by the United States cases to which his Honour referred: NCAA v Board of Regents of University of Oklahoma (1984) 468 US 85 and International Boxing Club of New York, Inc et al v United States (1959) 358 US 242.  In the latter case, a decision that championship boxing contests should be seen as a separate market from other professional boxing events was upheld on appeal.

57                  A review of the American literature leaves one with the impression that the choice between a narrower or broader market is very pragmatic and influenced by the legislative context in which the question arises.  As Sullivan in his work Handbook of the Law of Antitrust at 60-61 observes:

“The goal is to assess power.  At times it will seem sensible to expand the market, to conceptualize more widely than the product cluster achieved by a particular firm’s business; at others, disaggregation will be indicated – a breaking down of a particular firm’s business and the assignment of segments of it to different markets.

There are various elements to be drawn into service of this pragmatic approach.  The major one, of course, is a sense about the utility of the market definition being used for measuring power.  The way buyers and sellers tend to view the market tells something about the ambit of competitive forces; so does production and distribution technology.  Another pragmatic factor is the availability of data.”  (L.A. Sullivan, 1977, Handbook of the Law of Antitrust, St Paul: West Publishing Company)

58                  This pragmatic approach, which takes into account the question to be asked, is well illustrated by the example of tea and coffee as separate markets discussed in Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313 at 332 to which reference is made by the learned primary Judge.  As their Honours there point out, it would thwart the objectives of provisions such as ss 46 and 50 of the Trade Practices Act if the question was considered by reference to a “hot beverage market” when there is, for each of tea and coffee, a distinct demand.

59                  The appellants rely somewhat heavily on the remarks made by the learned primary Judge at para 62 that the primary consumer would:

“... endeavour to match the interests of the secondary consumer with the invitation offered.  Furthermore, as I have held, there are many targets for corporate entertainment who are keen rugby followers for whom a night out at the ballet or a day out at the tennis would have little or no appeal.”

60                  This passage has to be read, however, with what his Honour continued to say.  It is obvious that there is plainly substitutability between hospitality packages for elite (or international) rugby union matches and other events including, for that matter, opera and ballet, whether or not it is the case that some primary consumers might not be inclined to buy hospitality packages for other sports or cultural events.  The fact that some purchasers in the market might only purchase hospitality packages for international rugby union matches does not prove the existence of a separate market in hospitality packages for such matches.  It would be necessary to show that this was the case for a quite substantial number of purchasers of packages.  This, the evidence does not show.  It is relevant, also, to consider the issue of cross-elasticity of demand.  But, even when this is considered, it is clear that the appellants failed to satisfy the onus of showing a separate market for international rugby union matches in Sydney.

61                  His Honour accepted evidence from the Corporate Hospitality Manager for Australia and New Zealand of IMG to the effect that when a particular event package is too expensive a client will opt for a less expensive corporate hospitality package involving a different event or, may purchase tickets separately and organise their own hospitality.  This evidence also was to the effect that there are other factors as well, such as the attractiveness of a particular team, which may be taken into account in setting prices.  It is obvious enough (and there was evidence to this effect from a Mr Mannion of MBM Corporate Event Management, among other witnesses), that hospitality packages were priced having regard, inter alia, to the cost of the ticket to the particular event packaged.  But, it is price and quality which govern what consumers purchase.  His Honour was influenced, as well, by the failure of the appellants to call any evidence of their own pricing policies.

62                  His Honour found in respect of the evidence, and his finding was clearly open, that the evidence before him indicated (and it  must be said that the findings are equivocal on the issue to be decided) that:

“1.       International rugby matches are among a group of elite events in demand for corporate hospitality.

2.                  The inability to offer hospitality packages for international rugby matches would be a competitive disadvantage for those in the field.

3.                  It is, at least, doubtful whether international rugby matches played in Sydney can be distinguished from international rugby matches played elsewhere in Australia.

4.                  Events in the package are substitutable for some clients – this is evidenced, for example, by bundled packages, clients taking packages in more than one event, and by transfer to another event if one is sold out.

5.                  Pricing of corporate hospitality packages takes account of the price of other hospitality packages to some extent, but there is no close parallel between the price of packages for different events.  The differing content of the packages makes comparison difficult.

6.                  The principal purpose for which the price of other packages is taken into account is to assess, in general terms, what the traffic will bear, rather than to undercut to attract extra custom from other events or avoid losing custom to other events.  It is to be borne in mind, of course, that the clients are primary, rather than secondary, consumers.

7.                  There is no reliable evidence of customers moving from event to event because of the price.”

63                  His Honour then turned to consider the Sergeant survey, which was the subject of critical expert evidence, which it seems, generally, his Honour did not accept.  Of the survey, it suffices to say that it indicated what his Honour referred to as “statistically significant (ie, reliable) [but] small” price sensitivity.  His Honour held, and we agree, having regard to the probability results of the survey that it could not, nor could expert evidence of opinions of economists on the question, be decisive. 

64                  Ultimately, his Honour’s decision rested upon the problem which the appellants had not overcome, namely that they had not satisfied the burden of proof which rested upon them.  This was so notwithstanding that there were factors which pointed in either direction.  In reaching this conclusion, the failure of THG to give evidence of its experience in the market (and it was a significant player in it) was seen by his Honour to be relevant.  The persons whose evidence may have been led would have included officers in the camp of THG as well, perhaps, as consumers of its hospitality packages.  Whether it would be correct to regard a failure to call customers of THG as an exemplar of the decision in Jones v Dunkel (1959) 101 CLR 298, a matter criticised by the appellants, is unnecessary here to decide.  As the learned authors of Cross on Evidence 6^th Australian edition (J.D. Heydon, 2000, Sydney:  Butterworths) at para 1215 point out:

“The significance of the inference depends on the closeness of the relationship of the absent witness with the party who did not call the witness”. 

That is not, however, a criticism of the application of the doctrine to the failure to call officers of THG (THG being a significant supplier of hospitality packages).  The other difficulty is that it is far from clear what inference his Honour could be said to have more confidently drawn from the failure to call the witnesses, be they customers or officers of THG.  

65                  However, in the circumstances of this case, we do not think that the references to Jones v Dunkel result in any error which assists the appellants.  We have read the evidence before his Honour.  It suffices to say that on that evidence, and without the drawing of any inference that evidence which the appellants failed to call would not have assisted their case, the appellants had not made out their case that the relevant market to be considered was a market in hospitality packages for international rugby union matches, whether that market was geographically limited to Sydney or not.  Ultimately, this was the basis of his Honour’s decision and with it on this point, we agree.

66                  That is not, however, the end of the appellants’ cross-claim so far as it concerns Part IV of the Trade Practices Act.  The appellants cross-claim had, as already noticed, pleaded in addition to s 46, the provisions of s 47 which are concerned with exclusive dealing and particularly subsection (7).

67                  Senior Counsel for ARU submitted that this part of the case had been abandoned.  The submission is based upon the fact that the matter was not dealt with by the learned primary Judge who, when delivering judgment, had asked the parties to draw his attention to any necessary matter that had been overlooked and that thereafter no attempt had been made by the appellants to raise s 47(7).  It may be that the matter was overlooked by his Honour, although mention was made of s 47(7) both in opening the case and, albeit briefly, in written submissions.  It may be that his Honour was of the view that the argument was untenable.  We are, however, of the view that the point was not abandoned by the appellants.  Had we been of a different view, we would have granted leave to argue the matter on appeal if only because it raises no new matter of fact.

68                  To fall within s 47(7) it must be shown, as the subsection itself provides, that there is a refusal of a corporation (here ARU) to supply, inter alia, a service (here, presumably, tickets; that being another way of saying a chose in action constituting the right to admission to the stadium for a particular match) to a person:

“... for the reason that the person has not acquired, or has not agreed to acquire, goods or services of a particular kind or description directly or indirectly from another person.”

69                  It is clear, as a matter of construction, that for s 47(7) to have application there need be found three parties: the corporation who refuses to supply, the person who is the subject of the refusal and yet another party, not being the initial corporation who refuses to supply, who is capable of supplying the goods or services refused to be supplied.  But, it is impossible to fit the facts of the present case into the language of the subsection, however one seeks to describe what the evidence shows. 

70                  The case as pleaded by the appellants was that the service which ARU refused to supply was admission to the stadium.  It was said that ARU refused to customers of THG that admission to the ground for the reason that such customers had not acquired or agreed to acquire a corporate hospitality package from IMG.  On the appeal, the case was said to be that there was a refusal to supply tickets to ATFS, (in all it was said by counsel that 120 tickets were withheld by ARU and thus were unavailable to customers of the appellants), ostensibly because for ATFS to deal with the appellants was said to be a breach of the contractual relationship between ARU and ATFS, for a reason that fell within the subsection.  It is asserted by the appellants, and accepted by ARU, and is what is stated in the contractual arrangements between ARU and ATFS, that ATFS is agent for ARU at least in the sale of tickets which will pass to customers.

71                  Neither formulation is capable of falling within s 47(7).  The first formulation fails both factually and because if IMG acted as agent for ARU there are only two parties.  The second formulation likewise fails factually if only because the refusal to supply ATFS was not for any reason which could fall within the subsection.  The subsection is concerned with forcing a person to acquire services from someone else by refusing them the supply of services from the offender.  It is not concerned with a case where all that happens is that ARU prohibits the acquisition of hospitality packages other than through an authorised franchisee.

The failure to permit the calling of witnesses

72                  If it really were the case that the learned primary Judge had failed to permit the appellants to call relevant oral evidence from primary consumers who had participated in the Sergeant survey, whether because there had been an earlier direction that evidence be filed on affidavit before a certain date or that it was an abuse of process to subpoena these witnesses or that the trial may need to be adjourned until a later day, particularly when it was clear that the proceedings would have concluded considerably before the time allotted to the trial, we would have been inclined to allow the appeal.

73                  The reasons given by the learned primary Judge for denying the appellants leave to call additional evidence fell into two categories, namely (a) discretionary factors and (b) inadmissibility because the evidence was not of “sufficient cogency”.  This ground of appeal will fail so far as his Honour refused leave to call secondary consumers because the learned primary Judge was correct in holding the evidence to be inadmissible.  Evidence of secondary consumers not themselves in the relevant market was, for the reasons already advanced, irrelevant.  As to the evidence proposed to be called from primary consumers it must be said that the appellants in fact were permitted to call four of the five witnesses whom they pressed.  The remaining fifth witness was absent from New South Wales and unavailable to give evidence.  In other words, the learned primary Judge did not refuse leave to the appellants to call any of the primary witnesses which they wished to call.  As the appellants acknowledge, the appellants did not, thereafter, seek leave to call any other witnesses who were primary consumers.  There is thus no substance in the submission which the appellants seek to raise. 

74                  Nevertheless, in view of the importance of the issue, it is appropriate to make some comments about the discretionary factors which the learned primary Judge relied upon. 

75                  First, it is necessary to go back to some basic propositions.  The relevant principle to be applied is that stated by Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710:

“Now, I think it is a well established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights.  Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party.  Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy …”

76                  This passage was applied by the High Court in Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146.  In an earlier decision, Sali v SPC Ltd (1993) 67 ALJR 841, the High Court had dismissed an appeal against the refusal by the Full Court of the Supreme Court of Victoria to grant an adjournment.  The Victorian Court had taken into account matters such as case management, efficiency, inconvenience to the Court, prejudice to other litigants and the like, to deny the adjournment.  However, in Queensland v J L Holdings Pty Ltd, the High Court pointed out (at 154) that: 

“The ultimate aim of a Court is the attainment of justice and no principle of case management can be allowed to supplant that aim.”

77                  If the evidence were admissible, the learned primary Judge was obliged to receive it.  If that required an adjournment of the trial (as it turned out, an unlikely result), an adjournment should have been granted, if necessary on the basis that the appellants bear the costs on an indemnity basis.  An adjournment with indemnity costs would have avoided the appellants suffering the injustice of being denied the right to call relevant witnesses, and would not have caused any prejudice to ARU.

78                  The learned primary Judge was not only concerned with delay and case management.  He said that, even if leave had been sought in a timely fashion, to require witnesses to attend on subpoena would have been an unwarranted exercise by the court of its compulsory powers.  It is necessary to go to the reasons for judgment to understand what the learned primary Judge meant.  He said that the result of the issue of the subpoenas “was to subject a large number of organisations and people with no interest in the proceedings, to considerable disruption and expense”.  If the witnesses were called, then, according to the learned primary Judge, the effect would be that “confidential business and perhaps personal affairs of a large number of persons [would be] brought to court for scrutiny by persons with absolutely no relevant connection with those persons, and it was proposed that they be publicly questioned about those matters”.

79                  The learned primary Judge acknowledged that “it is generally correct” that a judge has no discretion to reject admissible evidence.  But he went on to say that “it does not follow that a party will always be allowed to tender all the evidence that it desires.  The essence of case management, both before and at trial, is that the general demands of justice may result in limits (including time limits) being placed upon the presentation of evidence, including the form of that evidence”.  The learned primary Judge noted that THG “had access to its own clients” whom “it would have been perfectly entitled to call”.

80                  There are two significant errors evident in these reasons.  In the first place, the learned primary Judge seems to be of the opinion that a court has authority to decide which witnesses a party may call.  This is not correct.  It is for a party and his lawyers to decide what evidence is to be called in support of that party’s case, and it is not a function of the court to become involved in that process: Briscoe v Briscoe [1968] P 501; Barnes v BPC (Business Forms) Ltd [1975] 1 WLR 1565.  That is the first error.  The second error is in the view taken by the learned primary Judge that the disruption and expense which may be caused to a witness, and the fact that, if called, there may be exposure of confidential and personal affairs of a person who has no interest in the outcome of litigation, are reasons for denying a party the right to compel the attendance of a witness. 

81                  The true position is that, if the community demands that there be a system of justice that is administered by courts, it is the duty of every member of that community, when called upon, to attend and give evidence before those courts.  As long ago as 1808, Lord Ellenborough CJ said in Amey v Long (1808) 9 East 473 at 484; 103 ER 653 at 658:

“The right to resort to means competent to compel the production of written, as well as oral, testimony seems essential to the very existence and constitution of a Court of Common Law, which receives and acts upon both descriptions of evidence, and could not possibly proceed with due effect without them.”

82                  Earlier, in 1790, Jeremy Bentham had written:

“Upon business of other people’s everybody is obliged to attend, and nobody complains of it.  Were the Prince of Wales, the Archbishop of Canterbury, and the Lord High Chancellor, to be passing by in the same coach, while a chimney-sweeper and a barrow-woman were in dispute about a halfpennyworth of apples, and the chimney-sweeper or the barrow-woman were to think proper to call upon them for their evidence, could they refuse it?  No most certainly.”

83                  See J Bentham, ‘Draught of a Code for the Organization of the Judicial Establishment in France’ (1790) in J Bowring, The Works of Jeremy Bentham, (1843) vol 4, p 321.  See also Bank of New South Wales v Withers (1981) 35 ALR 21; Re Commissioner of Water Resources and Leighton Contractors Pty Ltd (1990) [1991] 1 Qd R 549 at 552.

Common law restraint of trade

84                  The substance of the appellants’ appeal so far as it relates to the general law principle of restraint of trade can be shortly put.  First, it is said that his Honour erred in holding that it was for the appellants to establish that the restraints in question were unreasonable.  Secondly, it is said that his Honour erred in declining to make an assessment of whether the so-called restraints were contrary to the public interest.

85                  There is no dispute between the parties as to the relevant principles to be applied.  The modern law of common law restraint of trade is as stated by Lord Macnaghten in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd [1894] AC 535 at 565 and accepted for Australia in Buckley v Tutty (1971) 125 CLR 353 at 376:

“The public have an interest in every person’s carrying on his trade freely: so has the individual.  All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void.  That is the general rule.  But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case.  It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable – reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.  That, I think, is the fair result of all the authorities.”

86                  Section 4(1) of the Restraints of Trade Act 1976 (NSW) adds not to the law in a case such as the present when it states:

“A restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.”

87                  Before the question of onus arises, and whether his Honour misconceived the question of upon whom the onus lay, there is an anterior question to be asked and that is whether there is a restraint in the relevant sense at all.  It is submitted by Senior Counsel for ARU that there is not.  For a restraint to fall within the common law doctrine or, for that matter, the NSW legislation, the restraint must be such that a person is required to “give up some freedom which otherwise he would have had”: Esso Petroleum Co. Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 (“Harper’s Garage”) at 298 per Lord Reid and see also at 328-329 per Lord Pearce, (the “pre-existing freedom test”): see also in this Court, Australian Capital Territory v Munday (2000) 99 FCR 72 (“Munday’s case”) et seq, a decision of a full court of this Court comprising Miles, O’Connor and Heerey JJ.  Munday’s case contains a detailed discussion by Heerey J, whose reasons were agreed to by Miles and O’Connor JJ, of the various rationales for applying the restraint of trade doctrine.  The case held that the restraint of trade doctrine had no application to the terms of licences under which the respondent and others entered a tip which the Territory operated.  The analogy, while not perhaps perfect, is close to the present case.  It should be said that the so-called pre-existing freedom test was not endorsed in that case, although discussed, and instead the so-called “trading society test” was adopted.  That test is to be found in the speech of Lord Wilberforce in Harper’s Garage at 335.  Put shortly, the test proceeds on the basis that various kinds of restraint have become historically acceptable as part of the structure of a trading society.

88                  It is useful, however, to quote a passage from the judgment of Heerey J in Munday’s case at 93 since it bears on the present problem:

“A common, and important, way of deriving economic benefit from land is the grant of exclusive licences for the conduct of business thereon.  Such licences are only of value because of the expectation that other persons will enter upon the land and be customers, but not competitors.  So persons gaining admission to the Melbourne Cricket Ground who happen to be caterers would not expect to be able to set up a pie stall in competition with those who have been granted exclusive catering rights by the MCG.  Nor would a television station expect to be able to send camera operators into the ground to transmit broadcasts in competition with the channel which has exclusive contractual rights.”

89                  Here, it is submitted, there cannot be an event unless ARU itself creates the event, could grant rights to enter or not as the case may be and appoint persons, whether exclusively or otherwise, to sell packages with respect to the event, and therefore there is no right to restrain.  This submission was accepted by the learned primary Judge and with respect, correctly, on whichever test is accepted.  As Senior Counsel for ARU points out in the written submissions:

“(a)     ATFS was an agent of the ARU offering the ARU’s tickets to a defined group: people requiring travel and not on a wholesale basis.  It was entirely legitimate in a ‘trading society’ for the ARU to restrict ATFS to the terms of its agency.  ATFS accepted this.  Its ‘pre-existing freedom’ (sic) were not restrained.  Its capacity was not sterilised; and

(b)     the ticket Condition was also entirely legitimate, designed by the ARU to ensure tickets were available and allocated so as to promote the sport to the various groups who follow the game and retaining the profits within the game, rather than being ‘scalped’.  Many jurisdictions (‘trading societies’) outlaw scalping.  The Sydney Olympic ticket conditions also prevented resale.  No pre-existing freedom has been curtailed, and no capacity has been sterilised.”

That being the case, the question of whether his Honour misconceived where the onus lay was not material to his Honour’s judgment.

90                  It is accepted by ARU that if there were a relevant restraint of trade the onus would lie on it to show that the restraint was reasonable as between the parties; the onus then shifting to THG to show that it was not in the public interest.  While the judgment may not be as clear as might be desirable, a fair reading of it is that his Honour did not deal at all with the question whether the restraint, if there were one, were reasonable as between the parties, but rather only with the question whether it was reasonable in the public interest.  On that matter, as his Honour rightly said, the onus lay on THG and it did not satisfy it.  There was thus no reason why his Honour needed to consider whether any relevant restraint was reasonable as between the parties, a matter on which ARU had the onus.  

91                  It may be that the ticket conditions could be argued to be void as a restraint or alienation and for that reason void: see eg. the discussion in 61 Am Jur 2d, Perpetuities and Restraints on Alienation (1999) at §100 and Hall v Busst (1960) 104 CLR 206.  The matter was not, however, raised on the pleadings nor was it the subject of argument before us and accordingly we express no opinion on the correctness of the argument on the facts before us.

ARU’S CLAIMS FOR Damages

92                  ARU relied on two bases for its claims for damages against THG and ICM.  The claims arise out of dealings with tickets for the Matches.  First, ARU alleged that THG or ICM induced breaches of:

·        contracts between ARU and the original purchasers of tickets for the Matches (the “Ticket Contracts”); and

·        the ATFS contract.

93                  Additionally, ARU contended that, by entering into contracts, or making arrangements, for the supply to its clients of tickets to the Matches, and by supplying such tickets to its clients, as part of hospitality services, THG itself breached the terms of the Ticket Contracts. 

94                  The claim based on inducing breach of the Ticket Contracts, as well as the claims based on breach of contract by THG, is dependent upon whether the condition on the tickets for the Matches constituted a contractual promise binding on the original purchasers of the tickets.  Both claims include a requirement that the breach was a breach of such a promise.  If there was no such promise, there could not have been a breach of it induced by THG.  Further, if there was no promise, there could not have been a breach of it by THG.  However, THG accepted that, if the condition is properly to be construed as a contractual promise, the other elements required for establishing the tort of inducing breach of contract were made out in relation to the Ticket Contracts. 

95                  The claim that ICM induced breach by ATFS of the ATFS Contract depends, inter alia, upon the proper construction of clause 3.11 of the ATFS Contract.  ICM contended that, on its proper construction, there was no breach of clause 3.11.  However, ICM also contended that, even if there was a breach of the ATFS Contract by ATFS, other elements necessary to establish the tort of inducing breach were not made out.  Specifically, ICM did not accept that it relevantly had knowledge of the terms of clause 3.11 of the ATFS Contract, so as to show the necessary intent to induce a breach of that clause.

CONSTRUCTION OF THE TICKET CONDITION

96                  It appears to be common ground that there was a contract between ARU and the original purchaser of each ticket for one of the Matches.  Such a contract was made partly expressly and partly by implication.  In so far as it was express, it was partly written and the writing included the condition on the ticket.  It was accepted by THG and ICM that the condition was part of such a contract.  It is not necessary to consider any other provisions of such contracts that might have arisen orally or by implication.

97                  The pivotal operation of each of the Ticket Contracts is that, in consideration of the payment of the price for the ticket, ARU promises to procure admission of the bearer of the ticket to the Stadium for the purpose of watching the relevant match.  The question of construction is whether it is a term of the Ticket Contracts that the original purchaser of the ticket makes a promise in the terms of the condition. 

98                  There are at least the following ways of construing the condition:

·        a contractual promise, breach of which gives rise to a claim for damages but might or might not justify recision;

·        a condition precedent to performance by ARU of its obligation to procure admission to the Stadium, being a condition that ARU would be entitled to waive; or

·        a delimitation of the licence granted by the relevant Ticket Contract, such that if not satisfied, the grant would be extinguished ipso iure.

For present purposes, it does not matter whether the condition, if it is to be construed as promissory, is a contractual term breach of which could entitle ARU to rescind.  Similarly, if it is not promissory, it does not matter, for present purposes, whether the condition is a condition precedent or a delimitation of the grant. 

99                  In order to determine the proper construction of the condition, it is necessary to determine the intention of the parties as evidenced by the contract itself.  It is relevant that the condition does not simply provide that it was a condition of the right to admission to the Stadium that there be no prohibited resale or use.  The condition does not provide that, if a ticket were resold or used in the prohibited manner, the bearer would be denied admission.  Instead, the condition goes further and contains the statement that there is to be a “condition of sale” and the reference to “contravention of this condition”.

100               That language points to a promise rather than a condition precedent or a delimitation of grant.  The expression “a condition of sale” suggests the notion of an important promise, made as part of the contract of sale.  The second sentence then specifies one of the consequences of resale “in contravention” of such a promise.  The phrase “in contravention” suggests that resale is prohibited: that is to say, the purchaser agrees not to resell.

101               The condition draws a distinction between the consequences of resale contrary to the prohibition and the consequences of use contrary to the prohibition.  It is only if there is a resale at a premium that denial of admission is expressly provided as a sanction.  However, there is no express sanction for use of the ticket “for advertising, promotion or other commercial purposes without the prior written consent of the ARU”, contrary to the prohibition.  That distinction suggests that the sanctions for prohibited use are the ordinary remedies for breach of a contractual promise.  On the other hand, there is no reason to construe the second sentence as specifying the only sanction for prohibited resale.

102               Clearly, the right of admission conferred by the Ticket Contracts, part of which is evidenced by a ticket, is intended to be transferable in the sense that ARU promises that the bearer of the ticket will be admitted to the Stadium for the purpose of watching the relevant match, whether or not the bearer was the original purchaser.  However, it does not necessarily follow that such a subsequent bearer has a contractual right to admission.  A subsequent bearer might possibly acquire a right to be given admission by assignment of the chose in action that a Ticket Contract constitutes.  On the other hand, even if there were no assignment, either expressly or by implication, the original purchaser would retain the right to require ARU to procure the admission either of that purchaser or a subsequent bearer to whom that purchaser had delivered the ticket, otherwise than in contravention of the condition.

103               The second sentence may therefore have been intended to deal with a doubt as to whether a subsequent bearer, who was not the original purchaser, would be bound by any promise made by the original purchaser.  The condition makes clear, accordingly, that if there has been a “contravention” of the condition, ARU would be entitled to deny admission to any bearer.  Such a provision, however, does not detract from the promissory nature of the first sentence.

104               In the circumstances, an intention that the original purchaser promises that the purchaser will not:

·        resell the ticket at a premium; or

·        use the ticket for advertising, promotion or other commercial purposes without the prior written consent of ARU,

is evidenced by the contract.  That is to say, the condition is a term of the contract.

105               It follows that sale at a premium by the original purchaser or prohibited use of the ticket would constitute a breach of contract by that purchaser.  Accordingly, in the light of the concessions made on behalf of THG and ICM, by buying a ticket at a premium from the original purchaser, who was bound by one of the Ticket Contracts, with knowledge of the terms of the condition, THG and ICM wrongfully induced a breach of that Ticket Contract.  The conclusion reached by the learned primary Judge in that regard was correct. 

CONSTRUCTION OF CLAUSE 3.11

106               The ATFS Contract was evidenced by a written instrument entitled “1999 Domestic Retail License (sic) Agreement”.  The agreement contains a section headed “THE CONCEPT” which says as follows:

“2.1      In 1999, the ARU will grant a limited number of retail licenses (sic) (not wholesale) to certain retail travel agents operating in the domestic market.  These operators will be referred to and recognised as ‘official domestic retail travel agents’ of the ARU.  These respective travel agents will be entitled to an agreed upon allocation of tickets to all domestic test matches played by the Australian Wallabies.”  (Emphasis added)

107               Section 3, headed “THE AGREEMENT (OFFICIAL DOMESTIC RETAIL LICENSE)”, contains the following relevant provisions, in addition to clauses 3.10 and 3.11:

“3.1      The travel agent will be recognised as an official licensed retail domestic travel agent acting on behalf of the ARU in the Australian market place.

…

3.12     No prices shall be printed on tickets allocated to the travel agent.

3.13     The travel agent will use its best endeavours to promote travel packages to all domestic test matches that have been taken by the travel agent.”  (Emphasis added)

108               Section 4 of the Agreement is entitled “TICKET ALLOCATIONS AND MARKETING SUPPORT”.  Under Clause 4.1, an allocation of domestic test match tickets was to be made available to ATFS as set out in an appendix.  The “quality and other ticket details” were outlined in a separate appendix.  The effect of the appendices was that ATFS was to be entitled to a “retail allocation” (emphasis added) of 400 tickets for the Centenary Test and 1500 tickets for the Bledisloe Cup. 

109               The references described above to the retail aspect of the licence conferred on ATFS, and the reference to the contract with the wholesale agent in clause 3.10, demonstrate that the intention of the parties was that ATFS was authorised to sell tickets only as part of a retail travel package.  Thus ATFS could not sell an ARU ticket except as part of a retail travel package.

110               The words in parenthesis in clause 3.11 do not have the effect of limiting the term “travel package”.  While the term “i.e.” or “that is” may not be entirely felicitous in the circumstances, it is clear enough that the prohibition contained in parenthesis is simply an example of what is not permitted.  The reference to a “wholesale” product signifies sale in bulk or sale to a person who is not the intended consumer.  Selling tickets “as a wholesale product” would hardly constitute a sale “as part of a [retail] travel package”.  Thus, ATFS would be in breach of Clause 3.11 if it sold tickets for the Matches otherwise than as part of a retail travel package. 

BREACH OF CLAUSE 3.11

111               ARU contended that breach of Clause 3.11 by ATFS occurred by reason of arrangements entered into between ATFS on the one hand, and either THG or ICM on the other hand, for the provision by the former to one or other of the latter of 450 tickets for the Bledisloe Cup match.  In order to determine whether there was a breach, it is necessary to examine in more detail the facts relating to the arrangement entered into between ATFS and ICM in early 1999.  There is no dispute as to those facts. 

112               In 1999, Mr Robert Whan was an executive director of ATFS.  As part of ATFS’s business development, Mr Whan regularly contacted hospitality companies to ascertain whether they were interested in travel or event packages offered by ATFS.  On or about 9 February 1999, in pursuing that practice, Mr Whan spoke to either Simon Rees or Tanya Purcell at THG’s office.  The discussion was by telephone.  Prior to that telephone call, Mr Whan had not been in contact with THG.

113               On or about 12 February 1999, presumably in pursuance to that telephone discussion, Mr Whan received a facsimile from THG headed “Ticket Requirements for Upcoming Events”.  The facsimile contained, inter alia, the following:

“For your information, please find following our ticket requirements for upcoming events in Australia and New Zealand.  Any assistance you are able to offer with regard to securing these tickets would be greatly appreciated.”

There then followed a table describing eight events, including each of the Matches.  Also included in the list of events were three Rugby League matches, an Australian Rules match, another Rugby Union match and the Melbourne Cup.  In relation to the Matches, the table specified 200 and 450 tickets respectively.

114               Upon receipt of that facsimile, Mr Whan telephoned Mr Rees and arranged to meet with him.  They subsequently met on 26 February 1999 at an office in Melbourne.  Mr Whan told Mr Rees that he had attended a briefing with officers of ARU on 1 December 1998.  Mr Whan said that, at that briefing, it had been explained to him that it was a condition of ATFS’s status as a licensed travel agent that it not under any circumstances sell rugby tickets to THG.  He said that it had also been explained to him that rugby tickets could only be sold with accommodation and/or travel.  He told Mr Rees that rugby tickets could not be sold on their own.  He also told Mr Rees that ATFS was not allowed to sell rugby tickets to hospitality groups generally.  In addition, he said words to the effect of:

“ATFS’s agreement with the ARU means that ATFS can only sell rugby tickets in conjunction with accommodation or travel.”

115               Mr Whan then handed to Mr Rees advertising flyers prepared by ATFS in relation to its travel packages.  Included were flyers for each of the Matches.  The two flyers were very similar in content.  Apart from the heading, which was specific to the particular match, the flyers contained the following:

“Australian Tours For Sport are proud to be one of the few official travel agents for the ARU during 1999.  Our packages consist of the following.

*          One Premium Reserved seat at the above event;

*          One night’s accommodation in your choice of hotel;

*          Complementary match program;

*          Complementary entry to Club matches at the new Royal Agricultural Showground at Homebush.  These games are prior to the main game.

Package Price Per Person:

Staying at                                           Twin Share

…                                                         …

To book your package to this historic event, complete the application form below and send it to ATFS.  If you require any flight bookings please contact ATFS for the cheapest available fare.  The above packages are very limited and can only be reserved with receipt of full payment.  Cheques made payable to “Australian Tours For Sport”.

…”

116               There was no suggestion in the proceeding that sale of packages described in those flyers would have been otherwise than in accordance with clause 3.11.  However, while Mr Rees said that the flyers might be useful for some of THG’s clients and that he might get back to Mr Whan “on this”, Mr Whan received no further communication from Mr Rees in relation to the travel packages described in the flyers.

117               Mr Rees then said to Mr Whan words to the following effect:

“We have another company which is not associated with THG and which is not a hospitality company which can purchase packages.  … The company is a marketing company.  … The company will contact ATFS direct to buy rugby packages and the number of tickets required will be in the order of the number set out in my fax of 12 February 1999, I expect that the travel component will be minor in dollar terms, for example an amount to cover a short coach journey from a nearby city such as Newcastle or Wollongong.”

118               Mr Whan responded to the following effect:

“I suggest a price of $165 per package for Centenary Test and $180 per package for Bledisloe Cup.”

Mr Rees responded by indicating agreement to that proposal.

119               In late February or early March 1999, Mr Whan received a telephone call from Ms Purcell who asked him to send a “draft form of agreement” to Mr Chris Thompson “of ICM”.  In response, Mr Whan sent a document to ICM.  The document was headed “Agreement between Australian Tours for Sports (ATFS) & ICM Marketing”.  It relevantly provided as follows:

“Upon payment to ATFS of $A114,000 from ICM Marketing, ATFS will provide the following:

·        450 travel packages to the Bledisloe Cup (Stadium Australia, Sydney, 28^th August 1999).  These packages include 450 Premium Seats for this event.

·        200 travel packages to the Centenary Test (Stadium Australia, Sydney, 26^th June 1999).  These packages include 200 Premium Seats to this event.

The above packages and tickets will be delivered by ATFS to ICM Marketing six weeks prior to each event.

The Premium Seats are as per the seating plan on the enclosed map.  ATFS will attempt to block all the seats together but guarantee that there will be a minimum of 10 seats blocked together to make up the total seating allocation.

Payment to be made by ICM Marketing to ATFS in full via direct bank deposit into the ATFS bank account by Thursday the 4^th of March 1999.”

120               Following despatch of that document, Ms Purcell communicated again with Mr Whan, saying words to the effect of the following:

“A further paragraph needs to be inserted into the draft agreement stating that if ATFS fails to deliver seating in the quantity and location as outlined in the agreement, a full refund is payable.”

121               Following that communication, Mr Whan sent a further form of agreement to Ms Purcell on 3 March 1999.  The document was in the same form, except that the following had been added:

“Should Australian Tours for Sport fail to deliver seating in the quantity and location as outlined above, ICM Marketing Pty Ltd will be entitled to a refund as follows:  Bledisloe Cup $180 per package and Centenary Test $165 per package.”

122               After sending that form of agreement, Mr Whan had a further conversation with Ms Purcell, who said words to the following effect:

“The amended agreement is OK and ICM will send the money.”

That amended document was signed by Mr Whan and dated “3/3/99”.  By 4 March 1999, ATFS had received a payment be means of telegraphic transfer of the amount referred to in the document.  On 4 March 1999, Mr Whan sent to Ms Purcell a receipt for the payment in a letter that said, inter alia, as follows:

“I will send you your tickets etc as soon as they are issued by the ARU.”

There was no further mention of travel and no travel arrangements were made by ATFS on behalf of ICM or THG or any of their clients. 

123               In May 1999, Mr Whan received a facsimile communication from Ms Purcell dated 17 May 1999 stating “we expect, per our contract, that our packages will be delivered to our office no later than this Friday, May 21 1999.”  Mr Whan then spoke to Ms Purcell and said that he could contact ARU and insist on immediate supply of tickets but that that may mean “that we don’t necessarily get the best seats available”.  Ms Purcell responded to the effect of the following:

“No don’t do that.  I understand the reasons for the delay.  It’s not a problem.”

124               On 21 May 1999, Mr Whan received a facsimile from Mr Rees on the letter head of THG.  The letter relevantly said:

“I am totally unsatisfied with the delay in the delivery of the Centenary tickets by you. As I explained to you 10 days ago, on the back of our agreement whereby you guaranteed to provide us with the ticket six weeks before the event, I concluded contracts with other parties.”

125               On 24 May 1999, Mr Whan travelled to Sydney and collected 200 tickets for the Centenary Test from Ms Frances Travers at ARU’s office.  He then took those tickets directly to the office of ICM where he saw both Mr Rees and Ms Purcell and delivered the tickets to them. 

126               It is demonstrably clear from the above that the supply of tickets by ATFS to ICM was not as part of a retail travel package.  In fact, it was not part of a travel package at all.  While mention was made of coach journeys from nearby cities, there never was any specification of the journeys required.  The ARU tickets were not for use by ICM or THG but for use by their clients.  There were around 200 of them.  The only construction to be placed on the arrangements that were made between ATFS and ICM was that they were for the wholesale supply of tickets.  It is clear that there was a breach of contract by ATFS of clause 3.11 of the ATFS Contract. 

KNOWLEDGE OF THE ATFS CONTRACT

127               The gravamen of the tort of inducing breach of contract is intention.  Although the requirement of knowledge of the contract is sometimes discussed as if it were a separate ingredient of the tort, it is in fact no more than an aspect of intention.  The requirement that the alleged tortfeasor have sufficient knowledge of the contract is a requirement that he have sufficient knowledge to ground an intention to interfere with contractual rights.  Both the intention to interfere with contractual rights and the necessary supporting knowledge of the contract refer to the state of mind of the alleged tortfeasor: All State Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26 at 43.

128               The knowledge of Mr Rees, derived from his discussions with Mr Whan on 26 February 1999, must be taken to be the knowledge of ICM, which was party to the contract with ATFS.  The question, however, is whether the knowledge of Mr Rees was sufficient to constitute knowledge by ICM of the relevant terms of the ATFS contract.

129               Mr Whan’s statements that ATFS could not under any circumstances sell rugby tickets to THG and that ATFS was not allowed to sell rugby tickets to hospitality groups generally were not correct as statements of the effect of the ATFS Contract.  However, his statements were correct in so far as they stated that the effect of the ATFS Contract was that rugby tickets could only be sold with accommodation or travel and could not be sold on their own.  Accordingly, to the extent that the ATFS Contract had that effect, Mr Rees was aware of that effect.  The question, however, is whether, in the perception of Mr Rees and Ms Purcell, the contract between ATFS and ICM could fairly be characterised as a sale of tickets in conjunction with accommodation or travel, or whether it was simply a sale of the tickets on their own.

130               Having been made aware of the requirement that tickets could only be sold in conjunction with accommodation or travel and could not be sold on their own, Mr Rees spoke in terms of contacting ATFS “to buy rugby packages” and referred to “the travel component”.  However, there was no mention of any travel or accommodation component in the facsimile concerning “ticket requirements” of 12 February 1999.  Nor was there any mention of any travel or accommodation component in the agreement signed by Mr Whan on behalf of ATFS on 3 March 1999. 

131               The contract that was made between ATFS and ICM was evidenced by the agreement of 3 March 1999.  While that contract referred to “travel packages”, no provision whatsoever was made for any travel or accommodation.  The only construction to be placed on the written contract is that it was an agreement for the sale of tickets on their own. 

132               Mr Rees knew that that constituted a breach of the ATFS Contract.  Having been informed that it was a requirement of that contract that there be a travel component and, despite referring to the possibility of a negligible travel component, Mr Rees knew that there was in fact no travel component involved in the contract.  He must be taken, therefore, to have known that the arrangement constituted a breach of the ATFS Contract and must therefore be taken to have intended that breach.  It follows that ICM was guilty of wrongfully inducing breach by ATFS of Clause 3.11 of the ATFS Contract. 

BREACH OF CONTRACT BY THG/ICM

133               Clearly, there could be no basis upon which THG or ICM became bound by clause 3.11 of the ATFS Contract.  In the light of the conclusion reached concerning inducing breach of the Ticket Contracts, it is not strictly necessary to determine whether THG or ICM became contractually bound to ARU, such that there was a breach of contract by THG or ICM.  In any event, it is difficult to perceive a mechanism whereby THG or ICM became bound by the terms of the condition on the tickets, either by assignment or novation.

134               At some stage, THG or ICM may have become the bearer of tickets for the Matches.  THG acquired custody of the tickets purchased from Cameron Jackson and others, which were then passed on to clients.  Similarly, ICM acquired custody of the tickets obtained from ATFS, which were then passed on to clients.  That, of itself, however, could not impose a contractual obligation on THG or ICM.

135               The obligation that ARU undertook by issuing a ticket was to procure the admission to the Stadium of the bearer of the ticket for the purpose of watching the relevant match.  The benefit of that chose in action would be capable of assignment at law by compliance with s 12 of the Conveyancing Act 1919 (NSW).  Section 12 relevantly provides as follows:

“Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any… legal chose in action, of which express notice in writing has been given to the… person from whom the assignor would have been entitled to receive or claim such… chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor:…”

However, there was no suggestion that the requirements of s 12 were complied with in relation to any such assignment.  There was no evidence of any written assignment or of notice given to ARU of any assignment. 

136               Even if there were an assignment in equity, by reason of the giving of value, that would not carry with it the imposition of any contractual obligation on the assignee.  It may be that, as a condition of enforcing the chose in action against ARU, the assignee would be required to perform any obligation upon which the right of admission to the Stadium was dependent.  If there had been a resale or use by the assignee in contravention of the condition, that may entitle ARU to refuse to perform its obligation to procure admission to the Stadium.  However, such a resale or use would not impose any secondary obligation on the assignee for breach of contract.  To say that an assignee cannot enforce the benefit of a contract without accepting the burden is quite different from saying that an assignee undertakes a contractual promise.  The principle is simply that the assignee cannot enforce the contract without accepting the burden: see Tito v Waddell (No.2) [1977] Ch.106 at 290, 302.  The principle does not put the original contracting party in the position of being able to enforce the assignor’s obligation against the assignee.

137               It is difficult to see a basis for concluding that there would be a novation in relation to the Ticket Contracts.  It is one thing to say that ARU was bound to the original purchaser of a ticket to procure admission of any bearer to the Stadium for the purpose of watching the relevant match, subject to there being no contravention of the condition.  It is another thing to say that a new contract was entered into at some point between ARU and a subsequent bearer, whereby that bearer became contractually bound to ARU. 

138               The notion of novation involves tripartite participation.  There must be an extinguishment of the original obligation and substitution therefore of a new obligation and in the same terms to or by a different party.  The requirements of novation in the common law can be satisfied by a tacit agreement to extinguish the former obligation, to be inferred when an inconsistent obligation is by agreement substituted.  Much of the learning concerning novation, apart from the word itself, has its origin in Roman law: see Olsson v Dyson 120 CLR 365 at 390 and Digest 46.2. 

139               There was, however, no point at which it could be said that ARU assented to becoming a party to a new contract, thereby extinguishing the existing contract between the original purchaser and ARU.  ARU would have no knowledge of and no control over who an assignee might be.  Further, there is no tacit extinguishment of the original obligation because there is no inconsistency between the obligation under the original Ticket Contract, to procure the admission of the bearer and the actual admission of the subsequent bearer of a ticket.  Since the primary obligation of ARU is to procure admission of the bearer of the ticket, there would be no occasion for any tacit extinguishment.  Indeed, ARU could hardly be thought to have agreed tacitly to an arrangement that was directly inconsistent with its express wishes.  There was no novation such as would have imposed any contractual obligation on THG or ICM.

 Exemplary Damages

140               The learned primary Judge correctly described the circumstances in which a court will award exemplary damages.  He said that this head of damage is punitive in character, designed to punish a wrongdoer who has been involved in conscious wrongdoing in contumelious disregard of another’s rights, and to deter him from engaging in that conduct again:  X L Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 471; Lamb v Cotogno (1987) 164 CLR 1 at 8-9.  But as was explained by Windeyer J in Uren v John Fairfax and Sons Pty Ltd (1966) 117 CLR 118, at 153,  “[E]xemplary damages must always be based upon something more substantial than a jury’s mere disapproval of the conduct of a defendant.” Accordingly, an award of this type will be “unusual and rare”:  Coloca v BP Australia Ltd [1992] 2 VR 441 at 448.  As Mahoney P cautioned in Trend Management v Borg (1996) 40 NSWLR 500 at 509:

            “ … if exemplary damages are to perform the function which the Australian law has assigned to them, it is important that the seriousness of the conduct involved be not diluted.” 

141               So, to be damnified by punitive damages, the defendant’s conduct must be “outrageous” (Cassell & Co Ltd v Broome [1972] AC 1027, at 1089 per Lord Reid) or must be conduct “which shocks the tribunal of fact, representing the community” (Gray v Motor Accident Commission (1998) 196 CLR 1 at 35, per Kirby J) or his behaviour must be “in a humiliating manner and in wanton or reckless disregard” of the plaintiff’s welfare (Backwell v AAA [1997] 1 VR 182 at 203).  In this connection, reference should also be made to the description of exemplary damages in McGregor on Damages (16th ed, 1997) at para 430:

            “The primary object of an award of damages is to compensate the plaintiff for the harm done to him; a possible second object is to punish the defendant for his conduct in inflicting that harm.  Such a secondary object can be achieved by awarding, in addition to the normal compensatory damages, damages which are variously called exemplary damages, punitive damages, vindictive damagesor even retributory damages, and comes into play whenever the defendant’s conduct is sufficiently outrageous to merit punishment, as where it discloses malice, fraud, cruelty, insolence or the like.”

See also Prosser & Keeton on Torts (5th ed) 1984 at pp 9–10: 

“Something more than the mere commission of a tort is always required for punitive damages.  There must be circumstances of aggravation or outrage, such as spite or ‘malice’, or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that the conduct may be called wilful or wanton.”

142               Exemplary damages cannot, however, be recovered for breach of contract.  This was authoritatively decided by the House of Lords in Addis v Gramophone Co Ltd [1909] AC 488.  The reason is plain.  The measure of damages for breach of contract is the loss that arises from the breach.  As Griffith CJ said in Butler v Fairclough (1917) 23 CLR 78 at 89:

            “The motive or state of mind of a person who is a guilty of a breach of contract is not relevant to the question of damages for the breach, although if the contract itself were fraudulent the question of fraud might be material … A breach of contract may be innocent, even accidental or unconscious.  Or it may arise from a wrong view of the obligations created by the contract.  Or it may be wilful, and even malicious and committed with the express intention of injuring the other party.  But the measure of damages is not affected by any such considerations.  A statement of claim which alleged that the defendant wilfully or maliciously or fraudulently committed a breach of contract would not gain any additional effect from the vituperative epithets, which would indeed be as irrelevant to the case as to ancient averment that a person accused of an offence acted at the instigation of the devil.”

143               That exemplary damages are not available for breach of contract has been accepted by the High Court in a number of cases, including Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71 and Gray v Motor Accident Commission 196 CLR at 6.  The position in the United States is the same:  Thyssen Inc v SS Fortune Star, 777 F2d 57 at 63 (1985).  In Canada, a different view has been adopted.  There, the Supreme Court held that aggravated damages may be awarded in actions for breach of contract in appropriate cases, although it was accepted that it would be a rare case where this would be allowed:  Vorvis v Insurance Corporation of British Columbia [1989] 1 SCR 1085.  The suggestion in Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500, that it is possible to conceive of circumstances in which a defendant’s conduct in relation to a breach of contract will attract exemplary damages, does not reflect the law in Australia, at least until such time as the High Court reverses the current rule.

144               The learned primary Judge awarded exemplary damages of $100,000.  He gave a number of reasons for taking that course.  Rather than summarise them, the relevant passages in the judgment should be set out, as they are not lengthy:

“The breaches were a conscious and planned response to the ARU efforts to shut THG out of access to the stadium, in full knowledge that the ARU was asserting that the ticket conditions and other contractual provisions were effective to do so.  It was also obvious that it would be very difficult for the ARU to detect the acquisition of tickets by THG, or, indeed, to ascertain which persons presenting at the gate were using tickets supplied by THG.  It also must have been obvious that, even if detected, the ARU would have difficulty proving damages, as the tickets had been paid for at the asking price.

There is no evidence that any particular justification, including Pt IV [of the Trade Practices Act], was raised prior to action.  …

THG is part of a multinational group with a substantial business in the pertinent field of commerce.  By not choosing to tender for off-site hospitality, it has decided to remain outside the ARU system, which is underpinned by contracts of various kinds.  There is plainly a risk of further breaches.   I am not satisfied that the injunctions to be granted avoid the need for a deterrent.  Breaches of those injunctions will be difficult to detect, and contempt of court is not easily proved.  The result of this judgment is that there will be no award of damages or account of profits.”

145               It will be noticed that, in deciding to award exemplary damages, the learned primary Judge took into account all “the breaches” which he found had been committed by the appellants.  One such breach was of the promise expressed on the ticket.  In the view of this Court, however, THG was not bound by the ticket condition and therefore was not itself in breach of contract.  In any event, even if the appellants had breached the ticket condition, the learned primary Judge was not entitled to take that breach into account in deciding whether to award exemplary damages.  Accordingly, the award of $100,000 must be set aside.

146               The question now is whether this Court should determine whether any award of exemplary damages should be made, and what the quantum of the award should be, or return the matter to the learned primary Judge.  Convenience demands that whenever possible the appellate court should assess the damages and so avoid the costs of another trial: Tzouvelis v Victorian Railway Commissioners [1968] VR 112 at 129.  There are exceptions.  For example, if all the necessary facts have not been determined and their determination involves an assessment of a witness’ credibility, the appellate court could not properly assume the task.  Here the factors relevant to the resolution of the issue have been identified by the learned primary Judge.  They do not arise from controversial evidence.  For the most part they involve inferences drawn from the facts as found, or are matters of impression taken from the circumstances of the case.  We are in as good a position as the learned primary Judge to deal with the issues. 

147               The first matter to be considered is whether it is “obvious” that it would be difficult for ARU to detect the acquisition of tickets by THG.  Mr O’Neill, the Managing Director of ARU, said that in recent years ARU recognised the opportunity to increase its revenue by participating in the market for corporate hospitality.  For the Bledisloe Cup played in 1999 ARU had allocated more than 6,000 tickets for distribution within hospitality packages.  ARU had entered into arrangements with IMG and David Campese Management Group Ltd for the provision of corporate hospitality at a number of its matches.  The agreement with David Campese Management Group is in evidence.  It shows that the net profits derived from corporate hospitality conducted by that organisation were divided as to 77.5 per cent to ARU and 22.5 per cent to David Campese Management Group.  The agreement with IMG follows similar lines.

148               In the absence of evidence, one would ordinarily conclude that, having entered the market, ARU would be familiar with its competitors.  And this is what the evidence does show.  A number of ARU’s internal documents were tendered.  They establish that the ticket condition was imposed so that ARU could eliminate competition from organisations that provide hospitality packages.  In 1998, ARU was aware that THG was one of its competitors.  This is hardly surprising.  THG is a member of a large international group that specialises in the provision of hospitality.  In Australia, THG offers corporate hospitality to large corporate groups, including many listed public companies, sporting associations, government departments, bankers, builders, hotel chains and so on.  The packages are expensive; they sell for as much as $1,190 per head and usually are arranged for a group of ten people.  The business is not conducted in secret.  To the contrary, as one would expect, THG extensively promotes its products.  Not only did ARU know that THG was one of its competitors, it had sufficient information to estimate THG’s profit in selling corporate hospitality packages.  In one of its internal documents, ARU speculated that THG made a profit of around $750,000 from the 1998 Bledisloe Cup.  Contrary to the views of the learned primary Judge, the evidence suggests that the risk of detection by ARU was significant, even if detection may have occurred after THG had acquired tickets.

149               The learned primary Judge said that it must have been “obvious” to the appellants that, if detected, ARU would have difficulty proving damages.  The assumption was that, because ARU had received the asking price for its tickets, it would suffer no other damage as a result of the appellants’ tortious behaviour.  The difficulty in proving damages is relevant as exemplary damages will be awarded more readily if it can be shown that the defendant’s violation of the plaintiff’s rights was motivated by mercenary considerations.

150               We do not accept, however, that ARU would suffer no compensable loss from the tortious conduct of THG if ARU received the price of the tickets sold.  Such a view fails to take account of the nature of damages that can be recovered for the tort of inducing breach of contract.  Although damage is the gist of the action, as Lord Esher MR said in Exchange Telegraph Company Ltd v Gregory [1896] 1 QB 147 at 153:  “It is not necessary to give proof of special damage” because “the damages are damages at large.”  That is to say, the damages may be inferred as those which would, in the ordinary course of things, have been inflicted on the plaintiff.  In Rookes v Barnard [1964] AC 1129 at 1121, Lord Devlin explained:

“It must be remembered that in many cases of tort, damages are at large, that is to say, the award is not limited to the pecuniary loss that can be specifically proved.  In the present case, for example, and leaving aside any question of exemplary or aggravated damages, the appellant’s damages would not necessarily be confined to those which he would obtain in an action for wrongful dismissal.  He can invite the jury to look at all the circumstances, the inconveniences caused to him by the change of job and the unhappiness may be by a change of livelihood.  In such a case as this it is quite proper without any departure from the compensatory principle to award a round sum based on the pecuniary loss proved.”

151               The type of damage that could well be inferred in any future inducement case is loss of profit.  The evidence shows that ARU had estimated that “non-authorised” companies offering corporate hospitality at its matches were making “possibl[y] $1.5m per test”.  ARU wanted to capture that business.  The introduction of conditions to restrict the sale of its tickets was the method by which it sought to achieve that object.  If there was a wrongful inducement to breach those conditions, it would be open to a court to infer that ARU had lost the business that went to THG.  If found that it procured such a breach, there is a significant risk that THG will be ordered to pay substantial damages. 

152               The learned primary Judge found that “there is plainly a risk of further breaches” and that there is a risk that the injunctions that were to be granted would not prove to be an adequate deterrent.  No facts were referred to that would justify these conclusions, and it seems to us that there are none.  To the contrary, what one does know about THG suggests that there is no serious risk of further breaches, and that it would abide by any injunctions that were granted.  THG is part of a worldwide group that specialises in hospitality arrangements. The group conducts business in Europe, Asia, and North and South America, as well as in Australia.  No doubt it is a very large organisation.  There is no suggestion that any member of the group, especially the appellants, have a reputation for wrongdoing, nor is there any history of disobeying court orders.  On a more practical level, it is difficult to contemplate that an organisation such as THG would ignore a restraining order made by an Australian court.  The risk of detection is significant, and the consequences, including repercussions beyond this case, would be regarded as wholly unacceptable by any sensible commercial person.

153               The award of exemplary damages is, as the cases show, an extraordinary remedy.  When awarded, it gives a windfall to the plaintiff.  In the case of the economic torts, in which intention is an element and damages are “at large”, a defendant must be guilty of something bordering on the malicious before the remedy will be granted.  If that were not so, exemplary damages would be granted whenever a defendant commits an intentional tort.  That is not the law.  Just as it is necessary for a jury to be told that it must display restraint in determining the amount of any exemplary damages (Backwell v AAA [1997] 1 VR 182 at 205-206), the same is true for a court.  Here, we also have in mind a passage in the judgment of Gibbs CJ in X L Petroleum (NSW) Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448 at 463:

            “Although the limitations which the House of Lords in Rookes v Barnard placed on the circumstances in which exemplary damages may be awarded are not part of the law in Australia, I nevertheless consider that in that case Lord Devlin was correct in pointing to the risk that exemplary damages might amount to a punishment greater than would be likely to be imposed if the conduct were criminal, and in suggesting that in making an award juries should display restraint.  Lord Hailsham of St Marylebone LC, in Broome vCassell & Co [1972] AC 1081, did not agree with the suggestion of Lord Devlin that appellate courts might more readily interfere with jury awards of exemplary damages than in other cases, but he did regard it as extremely important that judges make sure in their direction that the jury is fully aware of the danger of an excessive award.”

154               In our opinion, ARU has not established that the appellants have behaved in a manner that warrants the award of exemplary damages.

Account of Profits

155               In Attorney-General v Blake [2000] 3 WLR 625, the House of Lords decided that an account of profits could be awarded as a discretionary remedy for breach of contract.  The facts were extraordinary.  Blake was a member of the intelligence service but became a secret agent for the Soviet Union.  He was sentenced to 42 years’ imprisonment for passing on information to a foreign government.  He escaped and made his way to Moscow.  There he wrote an autobiography.  The Crown brought proceedings to prevent Blake from receiving royalties from his publisher.  Two causes of action were relied upon: breach of fiduciary duty and breach of contract.  The fiduciary claim failed.  The case in contract succeeded and the remedy granted was an account.  Lord Nicholls delivered the leading speech.  He said (at 638):

“[T]here seems to me to be no reason, in principle, why the court must in all circumstances rule out an account of profits as a remedy for a breach of contract.  I prefer to avoid the unhappy expression ‘restitutionary damages’.  Remedies are the law’s response to a wrong (or, more precisely, to a cause of action).  When, exceptionally, a just response to a breach of contract so requires, the court should be able to grant the discretionary remedy of requiring a defendant to account to the plaintiff for the benefits he has received from his breach of contract.  In the same way as the plaintiff’s interest in performance of the contract may render it just and equitable for the court to make an order for specific performance or grant an injunction, so the plaintiff’s interest in performance may make it just and equitable that the defendant should retain no benefit from his breach of contract.”

Later, (at 639) Lord Nicholls said:

“An account of profits will be appropriate only in exceptional circumstances.  Normally the remedies of damages, specific performance and injunction, coupled with the characterisation of some contractual obligation as fiduciary, will provide an adequate response to a breach of contract.  It will be only in exceptional cases, where those remedies are inadequate, that any question of accounting for profits will arise.  No fixed rules can be prescribed.  The court will have regard to all the circumstances, including the subject matter of the contract, the purpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief is being sought.  A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.”

156               ARU relies on this case to argue that an account of profits is an appropriate remedy that should be awarded in its favour.  It should be made quite clear, so that there be no doubt about it, ARU does not seek an account of profits based on some principle of equity such as constructive trust (as in Snepp v United States, 444 US 507 (1980)) or in reliance on principles of unjust enrichment.  Its claim is founded on the proposition that the remedy is available for breach of contract and in tort.  In view of the finding that THG is not in breach of contract, ARU now seeks the remedy to satisfy only its tortious claim.  Whether the remedy is available in an action in tort has not yet been considered in Australia.  Before dealing with that question, it is convenient, first, to determine whether the remedy might be available for breach of contract.

157               The general rule of the common law was laid down by Baron Parke in Robinson v Harman (1848) 1 Ex 850; 154 ER 363. Parke B said that the aim of contract damages was to place the plaintiff in the same position he would have occupied had the contract been performed.  See also Teacher v Calder [1899] AC 451.  In Tito v Waddell (No. 2) [1977] Ch 106, when considering the appropriate remedy for the failure by the British Phosphate Commissioners to restore Ocean Island following the termination of mining operations, Megarry VC said (at 332):

“[I]t is fundamental to all questions of damages that they are to compensate the plaintiff for his loss or injury by putting him in the same position he would have been in had he not suffered the wrong.  The question is not one of making the defendant disgorge what he has saved by committing the wrong but one of compensating the plaintiff.”

158               This principle has been accepted as correct by the High Court.  See, eg, Wenham v Ella (1972) 127 CLR 454; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 (“Amann Aviation”).  Moreover, as Mason CJ and Dawson J said in Amann Aviation (at 82):

            “The corollary of the principle in Robinson v Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed.”

See also L Albert & Son v Armstrong Rubber Co, 178 F2d 182 (1949) and Restatement, Second, Contracts (1991) §349, both cited by Mason CJ and Dawson J.  (As an aside, it is interesting to note that other jurisdictions have also had to grapple with the possibility of awarding account of profits for breach of contract, see, eg, the decision of the Supreme Court of Israel in Adras Building Materials Ltd v Harlow & Jones GmbH 42(1) P D (1988) 221).

159               Whether or not the law of contract is “seriously defective” (Attorney-General v Blake [1998] Ch 439 at 457 per Lord Woolf MR), if the court is unable to award disgorgement damages (the terminology proposed by L Smith in “Disgorgement of the Profits of Breach of Contract: Property, Contract and ‘Efficient Breach’” (1994) 24 Canadian Business Law Journal 121), the position in Australia is that the loss recoverable for breach of contract is limited to that laid down in Robinson v Harman (supra).  That is, the aggrieved party is entitled only to compensation.  If he has suffered no loss, he is not entitled to be compensated.  In an appropriate case, the aggrieved party may be able to recover (by a claim in restitution) benefits that he has made available to the wrongdoer; for example, he may be able to recover the price paid under an incomplete contract or recover possession of goods sold but not paid for.  Presently, however, it would be inconsistent with the current principles laid down by the High Court to confer a windfall on a plaintiff under the guise of damages for breach of contract. 

160               Turning to the remedies available to the victim of a tort, those remedies may conveniently (if somewhat inaccurately) be divided into two groups (a) damages; and (b) other remedies.  Here, we are not concerned with non-pecuniary remedies, the principal ones being injunction and restitution.  So far as pecuniary remedies are concerned, it should be noted that damages may be either compensatory or non-compensatory.  In the latter category are contemptuous damages, nominal damages, exemplary damages and restitutionary damages.  Restitutionary damages may be limited to cases involving the misuse of a plaintiff’s property: Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361.

161               Speaking generally, an award of damages is made in order to compensate the plaintiff for his injury.  The rule is that the plaintiff is to be placed in the same position as he was before the tort was committed: Livingstone v Rawyards Coal Co (1880) 5 AppCas 25 at 35.  This is sometimes referred to as the rule of restitutio in integrum.  The rule is more easily applied to losses which are capable of calculation in money terms.  In areas where the losses are not readily quantifiable, for example where damages are claimed for pain and suffering or in an action for defamation, the court attempts to award “fair compensation”: Clerk & Lindsell on Torts (17th ed, 1995) par 27-09.

162               However described, it is not possible to slot an account of profits into the general framework of remedies that are available in tort, when the account is not awarded to compensate the plaintiff for his actual or presumed loss.  That is to say, under presently accepted principles, an injured plaintiff cannot claim a windfall to prevent a wrongdoer profiting from his wrong, except in those cases where exemplary damages are available and it is proper that illicit profits are taken into account in assessing the quantum of the award, as happened in McMillan v Singh (1984) 17 HLR 120, 125 and John v MGN Ltd [1997] QB 586, 619. 

Conclusion

163               For the reasons we have given, the appeal, so far as it concerns the cross-claim, must be dismissed.  The appeal, so far as it concerns the appellants’ claims against the respondent, must, except so far as it concerns exemplary damages, likewise be dismissed.  The orders below should be varied by setting aside the order that the appellants pay to ARU exemplary damages in the amount of $100,000.  Each party should bear their own costs of the appeal.

Associate:

Dated:              3 August 2001

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

EMMETT J:

164               I have read in draft the reasons of Hill & Finkelstein JJ.  I agree with everything they have said, except their conclusion that the Full Court should determine whether any award of exemplary damages should be made or whether the matter should be returned to the learned primary Judge.  In particular, I agree with their conclusion, for the reasons they have stated, that the learned primary Judge erred in so far as he had regard to breaches of contract on the part of THG in awarding exemplary damages.  That would be sufficient to justify setting aside the judgment for $100,000.

165               However, I consider that the case is one where impressions formed by the learned primary Judge from the way in which the case was conducted at trial cannot be properly replicated on appeal.  His Honour managed the proceeding to trial and heard all of the evidence.  The Full Court has not had the advantage of being taken in detail to all of the evidence.  I consider that it is preferable to remit the matter to the learned primary Judge for reconsideration of the question of relief in the light of the conclusions reached by the Full Court that there has been no breach of contract by THG or ICM.

166               For the reasons that I shall state briefly below, I consider that it would be open to his Honour, if he concludes that it is appropriate, to order THG and ICM to account to ARU for any profit derived by them as a consequence of their having induced breaches of the Ticket Contract and clause 3.11 of the ATFS Contract. 

167               Whenever one person gains a benefit through the commission of a wrong, the availability of restitution might be determined under one of two distinct approaches.  One approach is founded upon concepts of property in the broadest sense.  Such concepts would include a spectrum of interests ranging from legal ownership of property, both corporeal and incorporeal, to expectations and opportunities.  The essence of such an approach is that a claimant should be entitled to any benefits derived, as a result of wrongdoing, from that which belongs to the claimant.  That approach responds to the notion that such benefits belong to the victim of the wrongdoing. 

168               The other approach is based upon the notion of deterrence. Restitution based on notions of deterrence emphasises the injustice and inequity of permitting a wrongdoer to keep gains derived from the wrongdoing, rather than responding on any notion that the gains belong to the claimant.  The forfeiture of profits acquired through the perpetration of wrongdoing, when those profits are not derived from another’s property, may be seen as punitive.  It may be, therefore, that, like punitive or exemplary damages, deterrent restitution ought generally to be confined to exceptional circumstances – see Daniel Friedman “Restitution of Benefits obtained through the Appropriation of Property or the Commission of a Wrong” (1980) 80 Colombia Law Review 505 at 556‑558.

169               One area where Courts have awarded an account of profits is in the commission of the tort of inducing a breach of contract between master and servant.  Where a wrongdoer acquires the benefits of the labour of an employee by reason of inducing that employee to breach his contract of employment with his employer, the employer is entitled to the value of the labour that he has lost.  The action is brought for the benefit acquired by the wrongdoer from the service of the employee. 

170               Historically, the rationale for such a result was said to be that the wronged employer is entitled to “waive the tort” and adopt the new contract entered into between the wrongdoer and the employee – see Lightly v Clouston (1808) 127 ER 774 at 775 and Foster v Stewart (1814) 105 ER 582 at 585.  This legal fiction was created to fit the remedy within the shape of the action for money had and received.  It no longer serves any useful purpose – see Goff & Jones The Law of Restitution (5^th ed.) at 775-778.

171               Cases that involve inducing breach of contract between master and servant might be regarded as analogous to those where goods are sold wrongfully and the proceeds of sale find their way into the pocket of the wrongdoer.  The wrongdoer acquires something that can be said to belong to the claimant. In such circumstances, it has been said, an action for account will lie only where the wrongdoer has something in his hands representing the claimant’s property or the proceeds or value of it – Phillips v Homfray (1883) 24 Ch D 439 at 463.  On the other hand, it has been said that where a wrongdoer, as a consequence of his wrongdoing, does not acquire any additional property or value belonging to another person, even if the wrongdoer derived a benefit by avoiding an expense, an action for account will not lie.

172               It is not necessary, in all cases where an account of profits derived by a wrongdoer will be ordered, to demonstrate that the benefit derived by the wrongdoer is a benefit that the claimant would have derived but for the wrongdoing – see Federal Sugar Refining Co. v United States Sugar Equalisation Board 268 F. 575 (1920) (S.DN.Y.) at 582. An account of profits is therefore confined to profits actually made. The guiding principle is that an account of profits aims to have the wrongdoer account for the actual profit, no more and no less, that has been gained from the wrongdoing.  The purpose of the order is not to punish the wrongdoer but to prevent the unjust enrichment of the wrongdoer – Dart Industries v Décor Corporation Pty Ltd (1993) 179 CLR 101 at 111 and 116.

173               Under an order for an account of profits, a wrongdoer is made to account for, and is then stripped of, profits which the wrongdoer has dishonestly made by the wrongdoing and which it would be unconscionable for it to retain.  The requirement that the profit be made “dishonestly” must be understood, in this context, as signifying no more than knowing infringement as distinct from innocent infringement.  It is not necessary to establish the elements required for an action in deceit – see 10^th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 at 332.

174               The finding of wrongfully inducing breach of contract that has been made against THG and ICM would satisfy any requirement that they derived profits dishonestly in that sense.  The Court has concluded that THG or ICM wrongfully induced both ATFS and the original purchasers of tickets to breach the terms of their contracts with ARU.  That required a finding of intent on their part.  THG and ICM knowingly put themselves in a position where they stood to derive a benefit that could not have been derived but for the breaches of contract that their conduct induced.  If either of THG or ICM has derived profits from the use of the tickets that were acquired as a consequence of the breaches that it induced, it has done so by doing the very thing that it knew ARU was determined to prevent.

175               The conduct of THG and ICM was a wrongful interference with incorporeal rights of ARU.  The choses in action comprising the ATFS Contract and the Ticket Contracts constituted incorporeal property of ARU, in so far as those contracts remained executory and partly performed.  True it is that the greater part of the performance remaining at the time of the breaches was performance by ARU.  That is to say, ARU was under the obligation to procure access to the stadium for the purposes of watching the Matches.  Nevertheless, ARU continued to have the benefit of the obligations imposed upon the other parties, since those obligations remained executory and unperformed by them.  In other words, ARU had the benefit of promises that the tickets would not be resold at a premium or used for commercial purposes.  It also had the benefit of a promise that tickets made available to ATFS would not be sold except as part of a travel package.  The effect of the conduct of THG and ICM was that the benefit of those incorporeal rights was lost to ARU. 

176               ARU, by reason of its contract in relation to the stadium, had the capacity to confer on individuals the right of access to the stadium for the purpose of watching the Matches.  That right was conferred upon the original purchasers of tickets.  Under the ATFS contract, ATFS was, in effect, given the capacity to confer such rights, subject to the restrictions contained in clause 3.11.  The effect of the wrongful conduct of THG was to appropriate that capacity to itself.  It effectively procured that the nominees of its clients were given the right of access, rather than the persons for whom ARU was prepared to procure access. 

177               While the rights of ARU in relation to the stadium may not be property in the same sense that legal ownership of goods or land is property, they are, for present purposes, analogous to rights of ownership.  Just as the right to the services of an employee can be characterised as property in the relevant sense, the right to procure access to the stadium can be so characterised.  There is no reason in principle why ARU should not be entitled to a restitutionary remedy.

178               ARU would have been entitled to injunctions to prevent the breaches of contract now complained of, if the proceeding could have been heard in time.  It has in fact obtained injunctions to prevent future breach by THG and ICM.  That is the type of situation that makes an account of profits a just response to prevent THG and ICM from deriving a benefit from its wrongdoing.

179               ARU made a decision as to how many tickets it would allocate to the corporate hospitality market.  It forewent possible revenue from the corporate hospitality sector in order to advance other legitimate goals that it wished to achieve.  It would be difficult to measure the benefit that ARU would have derived from the advancement or achievement of those other goals.  Nevertheless, ARU forewent that possible revenue without advancing those other goals.  ARU has, therefore, lost the benefit that it would have derived from advancing those goals.  At the very least, it has lost the opportunity of advancing those goals. Whatever benefit such advancement may have been to ARU, the opportunity of that benefit has been lost in consequence of the conduct of THG or ICM.  Further, by reason of that conduct, THG or ICM may have derived some benefit. .

180               Where the remedy of an account of profits is imposed, the remedy can result in a windfall for the claimant.  That is also the consequence of exemplary damages.  However, the difference between exemplary damages and an account of profits is that an award of exemplary damages is in the discretion of the court, while an account of profits and forfeiture of the benefit to the claimant is measured by the wrongdoer’s gain.  A restitutionary remedy, therefore, may be less harsh than the punitive remedy of exemplary damages. Wrongdoers are required to hand over only their profits.  Even though the profits may have been to a large extent due to their efforts and investment risk, their capital will remain intact. On the other hand, exemplary damages may be awarded even though the wrongdoer made no gain against which the damages can be offset.

181               ARU contends that THG made a profit of more than $200,000 by using the tickets in question. There was sufficient material before the learned primary Judge to warrant a conclusion that THG had derived some profit.  The learned primary Judge considered that, if such profits could be retained, whatever they may have been, THG might well decide to “chance the odds again”.  The injunctions ordered by the learned primary Judge would, of course, have prohibited such “chancing”.  However, even if there was no basis for concluding that THG would not have acted in contravention of the orders of the Court, the taking of an account to deprive THG of its unjust enrichment may be an appropriate deterrent against future wrongdoing.  It may also be regarded as an appropriate punishment for the deliberate interference with ARU’s rights.  Those questions should be decided by the learned primary Judge. 

182               It follows from the above that I agree that the appeal should be upheld insofar as it relates to the order made by the learned primary Judge that there be judgment for ARU against THG and ICM in the sum of $100,000 as exemplary damages. I would set aside the judgment in the sum of $100,000 and order that the proceeding be remitted to the learned primary Judge for further consideration, in the light of these reasons, of the further relief, if any, to be ordered in favour of ARU. There should be no order as to costs of the appeals. 

Associate:

Dated:              3 August 2001