Consultant to the Law and Public Administration Group
The origins of Super League
Part IV of the Trade Practices Act
The argument in the Super League
The exclusionary provision argument
Consequences of News Limited's failure
Breach of Fiduciary Obligations
Consequences for sporting
Consequences for political parties and other
On 11 March 1996, a judge of the Federal Court of Australia made
orders of extraordinary breadth, preventing any alternative rugby
league football competition until the 21st century. Although
slightly reduced in scope by the Full Court two days later, pending
an appeal, it is clear that 'Super League'(1) - a concept into
which News Limited poured in excess of $100 million - will not be
seen in 1996, nor (subject to the success of an appeal) for some
years to come. Not only is the rival competition stopped, but also
all of its assets are now to be held on trust for the Australian
This paper deals with three questions. First, how did this come
about? Secondly, what was the reasoning in the judge's 220 page
judgment? Thirdly, and most importantly, what are the consequences
of the decision, not only for the League, but also for other
sporting bodies and, more widely, for non-sporting associations
formed to promote a common purpose, such as political parties and
employer and union federations?
This paper contends that there are two principal consequences of
the decision (assuming that it is not disturbed on appeal). On the
one hand, the decision stands for the proposition that the
provisions in Part IV of the Trade Practices Act 1974
(Cth) (the Trade Practices Act) will not have the same impact on
professional sport in this country as similar provisions have had
in the United States, principally because of the wide definition of
'market' that has been adopted. That means that, in general, the
controlling bodies of professional sports will be able to continue
to exercise their powers over clubs, particularly in the area of
competition restructuring and club expulsion, without regard to any
anticompetitive consequences which the Trade Practices Act
might otherwise render unlawful - even though the same conduct in
the United States would be unlawful. If this is thought
undesirable, attention should be given to amending the legislation,
although it might be overhasty to do so before the decision of the
Full Court has been delivered.
On the other hand, while those controlling bodies are, on the
whole, unaffected by the Trade Practices Act, they
will be constrained by fiduciary obligations which may be
found to exist between themselves and the clubs. Ironically, this
judge-made law may do more to restrict the conduct of sports
associations than the statute. Moreover, while the Trade
Practices Act generally applies only to corporations,
fiduciary obligations arise between unincorporated associations and
individuals. This paper contends that, on analogous reasoning to
that in the Super League case, fiduciary obligations may
arise between political parties and their branches, between union
federations and particular unions, in fact, wherever an association
is formed to promote a common goal. It may be that an
unincorporated political party wishing to disendorse or expel a
member or deregister a branch may now have to consider carefully
whether it is complying with its fiduciary obligations to that
member or branch.
Rugby League in Australia began as a breakaway movement from
Rugby Union, as had occurred in England. In 1907 the New South
Wales Rugby Football League was constituted as an unincorporated
association to organise competitions, arrange international matches
and otherwise foster and control the clubs and the game. From time
to time, in a series of high profile cases attracting prominent
members of the New South Wales Bar, the League was taken to court
by players or clubs who thought that the control exercised by the
League was unlawful. In 1958, a young barrister, W P Deane,
succeeded before the Supreme Court of New South Wales in arguing
that the eminent player Greg Hawick had been wrongfully
disqualified from the 1958 season by the League (for breach of
residence requirements).(2) In 1971, W P Deane, by then a Queen's
Counsel, argued, this time largely unsuccessfully, in the High
Court that the retain and transfer rules of the League were lawful,
not being in restraint of trade.(3)
In 1983, the League decided to exclude the Western Suburbs club,
which was experiencing financial difficulty, from the competition.
The club was successful in having the decision set aside, on the
basis that the League's Constitution did not authorise it to
exclude a team from the competition.(4) Four weeks later, the
League became incorporated as New South Wales Rugby League Limited,
this time with express provision in its Memorandum and Articles of
Association to determine which clubs should be entitled to enter
teams in the competition. After the 1984 competition, the League
again decided not to admit Wests, and this time its decision, which
again was challenged by the club, was upheld by the High
While the League(6) was successful before the High Court under
its new corporate constitution, one further consequence (whose full
ramifications may not have been clearly perceived at the time) was
that it became subject to the Trade Practices Act, which
applies to corporations but not to unincorporated associations.(7)
Throughout the 1980s, the clubs in the competition were also
incorporated. The litigation in the Super League case was
primarily based on the Trade Practices Act, which as will
be described below provides much more stringent restrictions on
anticompetitive behaviour by corporations than the common law
notion of restraint of trade. The Super League(8) case
could never have happened but for the decision by the League to
incorporate in 1983.
In the expanded competition which included clubs from outside
the Sydney metropolitan area, there were some very successful
clubs, including the Canberra Raiders and the Brisbane Broncos,
which claimed to have some difficulties in their dealings with the
older, established Sydney clubs. In particular, there were
allegations of the Sydney clubs 'poaching' their players.(9) This
background added credence to the rumours which began to circulate
in 1994 that the large media corporation News Limited was
interested in establishing a new rugby league competition. There
was substance to those rumours, for News Limited had in fact been
evaluating a proposal, known as Super League, which involved the
establishment of an elite competition of 12 teams in Australia and
New Zealand. Most of the teams were to be new.
The rumours reached Mr Ken Arthurson, Chairman of the League,
while he was in the United Kingdom. His response was to arrange for
documents which became known as the 'Commitment Agreements' to be
sent to each of the clubs in the League. Shortly after he returned
to Australia, each of the clubs executed the Agreement, whose
principal provisions were:
- the Clubs agreed to participate in the national competition for
the playing seasons 1995, 1996, 1997, 1998 and 1999, and not to
participate in any other competition not approved by the League;
- the League agreed to admit the Clubs to the national
competition for the playing seasons up to 1999.
One reason for choosing that five year period was that the
television rights to broadcast the competition had been sold to
Channel Nine until the year 2000.
Despite the Commitment Agreements, work continued at News Ltd on
the planning of Super League. Some clubs were approached in
confidence and given details of the proposal. On 30 January and 6
February 1995, the Super League proposal was outlined more widely,
first to the League and then to the representatives of the clubs.
No support was expressed at either meeting for the proposal.
Nevertheless, because the Commitment Agreements had been prepared
in some haste, at the meeting on 6 February the League proposed
that all clubs sign new, more detailed agreements, known as the
'Loyalty Agreements'. A motion was then passed:
That it be recommended to the Board of Directors of the League
that any clubs not signing the new Agreement by 9am on 8 February
1995 ... be expelled from the 1995 competition.
The Board of Directors resolved not to accept the recommendation
(which taken at face value would contravene the Commitment
Agreements). Nevertheless, all of the clubs executed the new
Agreements within that short time limit.(10)
The new agreements not only recited the Commitment Agreements,
but also made further, more specific provisions, in substantially
the following terms:
- the Clubs would use their best endeavours:
- to assemble, train and field the best possible teams to compete
in each grade of the National Competition;
- to maintain the services of their contracted players, and
obtain the services of the best available players, until 1999;
- to assist the League to maintain and enhance the viability of
the National Competition;
- the Clubs would have no direct or indirect involvement in any
rugby league competition which might undermine the quality,
competitiveness and geographical reach of teams in the National
Competition, or which might adversely affect the number of well
known and experienced players competing in the National
- the Clubs would not release or otherwise permit players who
were presently contracted to play for them to play in any
competition other than the National Competition approved by the
News Limited responded to these developments on two fronts,
simultaneously. In the last days of March 1995, News Limited
entered into large numbers of contracts with players and coaches
who were already employed under contracts with clubs within the
League. A number of clubs executed Deeds with News Limited,
releasing their players so that they could play in a 1996 Super
League competition. Importantly, News Limited agreed to indemnify
the clubs, their directors and officers against liability arising
from their entering into the Deeds, in particular, liability to the
League for breach of the Commitment and Loyalty Agreements.
At the same time, on 30 March 1995, News Limited commenced
proceedings in the Federal Court seeking to set aside the
Commitment and Loyalty Agreements because they contravened Part IV
of the Trade Practices Act. The clubs aligned with News
Limited also sought to have the Loyalty and Commitment Agreements
set aside for economic duress. For its part, the League
cross-claimed against News Limited and the 'rebel' clubs, alleging
breach of contract, the tort of inducing breach of contract, and
breach of fiduciary duty. The action was heard by Burchett J. over
the last 11 weeks of 1995. His Honour's 220 page judgment was
delivered on 23 February 1996, a week before the scheduled starting
date of the rival competitions. Final orders were made on 11 March
1996. The operation of some of those orders, which were intended to
compel players to participate in the League's competition, was
stayed by the Full Court on 13 March, pending an appeal which will
be heard by the Full Federal Court from 23 May 1996. After an
attempt by the players to organise a competition, under the name of
'Global League', was blocked by the Federal Court, it appears that
the 1996 competition organised by the League will proceed. The
appeal is unlikely to be decided before the latter half of
The Trade Practices Act is one of the most important
pieces of legislation in Australia. A high percentage of all
proceedings in the Federal Court, and many actions in the Supreme,
District and County Courts throughout Australia, contain
allegations of infringement of Part V, which deals with consumer
protection and includes the ubiquitous s.52.(11)
On the other hand, Part IV prevents corporations from engaging
in anticompetitive forms of conduct known generally as 'restrictive
trade practices' (in America, 'antitrust law'). The general purpose
and scope of the Part is to enhance competition by proscribing and
regulating agreements and conduct, such as exclusive dealing,
secondary boycotts, resale price maintenance, predatory price
discrimination and monopolisation, which is perceived to be
inherently anticompetitive.(12) Actions to enforce Part IV must be
brought in the Federal Court.(13)
Dissatisfaction with the common law's inadequacy in preventing
the anticompetitive practices of large corporations, trusts and
monopolies led to the enactment of restrictive trade practices
legislation roughly a century ago: the Sherman Act 1890
and the Clayton Act 1914 in the United States, and the
Australian Industries Preservation Act 1906 (Cth) in
Australia, the latter modelled on the former.(14) While the United
States legislation was actively enforced, its Australian
counterpart fell into disuse as a consequence of narrow decisions
of the courts.(15) Not until 1965 was further legislation passed,
and constitutional doubts remained until 1970.(16) The present
legislation was enacted in 1974, and substantially amended in 1977.
However, despite the divergent patterns of legislative history,
decisions of courts in the United States and elsewhere remain
influential in the continuing interpretation of the Australian
News Limited alleged that the League had breached s.45 and s.46
of the Act. Section 46 prevents a corporation with a substantial
degree of market power from taking advantage of that power by
eliminating or substantially damaging a competitor, or preventing
the entry of a new competitor into the market.(17) Section 45
prohibits a corporation from making a contract or arrangement or
arriving at an understanding, which contains an 'exclusionary
provision' or which has the purpose, or would be likely to have the
effect of substantially lessening competition.(18) An exclusionary
provision is a defined term,(19) but amounts in substance to
certain types of collective boycotts.
In applying both ss.45 and 46 of the Trade Practices
Act, the first question is to determine the limits of the
relevant market. If the market is defined narrowly, even a small
corporation will have a substantial degree of market power, and be
subject to s.46. Likewise, a contract, arrangement or understanding
that has the effect of substantially lessening competition in a
narrowly defined market may have no such effect in a more
generously defined market. '[I]f the market is defined either too
broadly or too narrowly an incorrect focus will be directed at the
real issue ....'(20)
There is no unambiguous procedure for determining the
appropriate market in any particular case. As Deane J. has said,
'the word [market] is not susceptible of precise comprehensive
definition when used an as abstract noun in an economic context'
(21) However, the approach sanctioned by the courts is to select
what emerges as the clearest picture of the competitive processes
in the light of commercial reality and the purposes of the law.(22)
The characterising feature of a market is the existence of close
competition between firms. Within a market there will be
substitution on the supply and demand side: buyers will switch to
another equivalent product if offered sufficient incentive, and
suppliers too will substitute one product for another in their
output mix, if sufficient profits can be made selling the new
product. On many occasions, courts have approved this test:(23)
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?
A more precise formulation which has been adopted by the courts
A vast number of firms might have some actual or potential
effect on a defendant's behaviour. Many of them, however, will not
have a significant effect and we attempt to exclude them from the
relevant market in which we appraise a defendant's power. We try to
include in the relevant market only those suppliers - of the same
or related product in the same or related geographic area - whose
existence significantly restrains the defendant's power. This
process of inclusion and exclusion is spoken of as market
It may be helpful to make these abstract ideas more concrete, by
considering examples of markets which have been found to exist for
the purposes of Part IV, and which have been rejected, when the
question of market definition has been in issue. Some examples
- the market for ski boots in Australia, not the broader markets
for sports gear or ski gear, nor the narrower market for Salomon
- the national market for biscuits, not the broader markets for
confectionary or foodstuffs;(26)
- the market for advertising real estate in local newspapers
circulating in the Eastern suburbs of Sydney, not the total Sydney
market for advertising Eastern suburbs real estate,(27) and
- the European market for bananas, not the market for
There have been few applications of the Trade Practices
Act to sporting competitions in Australia, and those few have
all been player restraint cases, such as the player 'draft' rules
in Rugby League. Nonetheless, the courts in those cases accepted
the following markets:
- the market throughout Western Australia in which cricketers
sell their skills or services and clubs buy the skills and services
- the market throughout Australia in which AFL clubs compete with
each other to attract professional footballers;(30) and
- the market for the acquisition of services of rough riders by
entities conducting rodeos.(31)
Very recently, there has been some tendency to define market
broadly, reflecting a concern that the prohibitory provisions of
Part IV should not be activated inappropriately.(32) It will be
seen that the same broad definition appears in Burchett J.'s
In the Super League case, News Limited contended that
there were a number of relevant markets, all confined to rugby
league, just as markets in other sporting cases had been confined
to one sport. News Limited also derived support from a body of
United States decisions, in many of which the market was confined
to the particular sport, or more narrowly still.(33) Some of the
markets it alleged were:
- a market for the supply of a national rugby league competition
for viewing by the public;
- a market for the supply of television and radio broadcast
rights for that competition;
- a market for the supply of pay television transmission rights
for that competition;
- a market for sponsorship rights in respect of the rugby league
- a market between clubs for the supply of teams to compete in
the national competition, each club competing in seeking players,
sponsorship, supporters and purchasers of merchandise.
News Limited argued that the Loyalty and Commitment Agreements
were an unlawful misuse of the League's power in those markets.
Burchett J. rejected the existence of all the markets News
Limited contended for. Without defining it with precision, the
judge identified a number of factors including the as indicating
that the true market, for the purposes of the Trade Practices
Act, was broader than rugby league, including at least the
other major sports played in winter. The factors identified
- There was evidence that the clubs were concerned to keep their
admission prices to levels comparable to those charged by the other
football codes and basketball.
- Crowd statistics revealed that when attendance at Sydney Swans
Australian Rules matches at the Sydney Cricket Ground rose,
attendances at rugby league matches for nearby league clubs Easts
and Souths decreased. In other areas, matches were scheduled so as
not to compete with soccer or basketball.
- Although there was a core body of supporters for whom no other
form of entertainment substitutes for rugby league, there were also
significant supporters who would be lost to the code if prices
increased or quality diminished.
- The fact that the national soccer competition was transferred
to the summer indicated that its administrators recognised that it
competed with league.
- Advertisers such as Coca-Cola Amatil treated a large number of
sports as part of the one sponsorship market.
- Channel Nine was able to substitute effectively with
alternative programming when Channel Ten held the television rights
- The evidence suggested that participants in the broader market,
such as the Queensland Rugby Union, perceived themselves to be
competing against the league for sponsorship.
- The clubs and News Limited itself in their internal documents
had referred on occasion to the competition posed by other codes of
football, and basketball.
From these considerations, Burchett J. found:(35)
...that at least the rugby union, soccer, Australian rules
football and basketball against which, the evidence shows, rugby
league sees itself as competing for spectators, would attract a
significant proportion of rugby league's crowds if the League chose
to attempt to assert market power by significantly raising prices
or giving less; and the sports which would attract persons away
from rugby league in those circumstances belong in the same market
with it. Both because those other sports would, as competitors, be
able to take advantage if the League did act in that way, and also
because the League, as I have said, does see itself as in
competition with those other sports, it is as a matter of fact
constrained in its commercial conduct from acting in the manner of
Accordingly, News Limited failed to establish the existence of
the markets it had propounded. Since News Limited had not argued
that the League had a substantial degree of market power in any
broader market which might be found to exist, the Loyalty and
Commitment Agreements could not be found to contravene s.46.
Likewise, News Limited had not argued that the Agreements had the
purpose or effect of substantially lessening competition in any
broader market, so that part of its s.45 action failed.
It is apparent from the breadth of material that needs to be
taken into account in a market definition case that the evidence in
such cases will be considerable and often disputed. Such cases are
long and expensive. Unfortunately, although an extremely expensive
case has been fought, with vast amounts of evidence from both
sides, there is still no judicial determination of the market.
However, on Burchett J.'s reasoning, it seems likely that the
conduct of the bodies administering rugby union, Australian rules
football, soccer and basketball will not be subject to the
provisions of Part IV of the Trade Practices Act which are
only triggered by having substantial market strength.
Some practices are prohibited only if they have the purpose,
effect or likely effect of substantially lessening competition. If
those practices are alleged, then it will be necessary to define
the relevant market. Other practices are sufficiently heinous that
they are unlawful irrespective of their effect on competition. The
prohibition against 'exclusionary provisions' in s.45 of the
Trade Practices Act is an example of conduct which is
unlawful per se.
In general terms, an exclusionary provision is a provision of a
contract, an arrangement or an understanding between two or more
competitors which has the purpose of preventing or restricting the
supply or acquisition of goods or services to or from some other
person or class of persons.(36) The American terminology is
descriptive: a 'concerted refusal to deal'. Loosely, it amounts to
a collective boycott.(37) So, for example, the practice whereby 145
carriers of readymix concrete agreed among themselves to restrict
the size of the fleet and to equalise their earnings by rostering
trucks was held to constitute an exclusionary provision.(38)
Although contracts, agreements and understandings which fall
within this category are unlawful irrespective of their
anticompetitive effect,(39) two prerequisites remain: (a) the
agreement or understanding must be between competitors,
and (b) the agreement must have the requisite purpose.
News Limited could not argue that the clubs and the League were
competitors in any relevant sense. Instead, it argued that the
Agreements contained exclusionary provisions with respect to:
- the clubs competing to supply their services to competition
organisers and to acquire the services of competition organisers,
- the clubs competing to supply the services of premium
Burchett J. rejected these arguments.(40) The clubs were not in
competition with each other in the relevant sense; instead, from
the very beginning the clubs and the League had jointly co-operated
to conduct the competition. As the future Chief Justice of the
Supreme Court of the United States had put it, 'Although individual
NFL teams compete with one another on the playing field, they
rarely compete in the market place.'(41) The clubs had joined in
arranging for the League to be incorporated to manage and control
the competition. While some clubs were excluded or forced to
relocate by the League, according to Burchett J., that was not done
on the basis that the clubs were in competition with each other to
participate in the league. For example, the Newtown club had
'excluded itself' by not remaining financially viable.(42) There
was no process of competition between the clubs when the annual
applications were submitted to the League. His Honour accepted that
no club which was able to comply with the general requirements
would be excluded (a point to be returned to), so that in this
respect, it could not be said that the clubs were competing with
Moreover, with respect to the competition for the supply of the
services of premium players, this fell within a specific exception
in the Act, which excludes from the operation of the Act the
performance of work under a contract of service.(43) All the clubs
signed up players on standard contracts which had been deliberately
cast in such a way as to take them outside the Trade Practices
Act. Accordingly, both limbs of the exclusionary provision
In any event, Burchett J. found that the Commitment and Loyalty
Agreements had not been entered into for the unlawful purpose of
preventing, restricting or limiting supply or acquisition. He found
that the purpose of the League was to preserve the quality of the
competition, while the clubs were actuated by their desire for
greater security within the competition.
In the case of all breaches of the Trade Practices Act,
the Court retains a discretion to grant a remedy. Burchett J.
stated that, had he found that s.45 or s.46 had been breached, he
would nevertheless not have ordered the Loyalty and Commitment
Agreements set aside. That was because News Limited had 'engaged in
self-help in an extreme form'.(44) Its conduct in inducing and
'corrupting' players and club officials to breach their contracts
made the situation exceptional, so much so, that any remedy would
have been withheld even had the case been made out.
The final challenge to the Commitment and Loyalty Agreements was
brought by the clubs aligned with News Limited. They sought to set
aside those Agreements on the ground that they had executed them
under duress. The clubs identified two factors. First, at the
meeting at which the Commitment Agreements were proposed, Mr Kerry
Packer had stated that he would sue any club or any person who
sought to interfere with Channel Nine's rights to televise rugby
league, and the League had acquiesced in this statement. Secondly,
the letter accompanying the Commitment Agreement stated:
The League will view the failure of any club to sign and Deed by
the deadline (45) as an act of gross disloyalty
I also refer you to yesterday's meeting of the League which
passed a resolution to recommend that the Board of the League
consider the expulsion of any club which fails to sign and return
the Deed by the deadline.
To satisfy the burden of making out a claim of economic duress,
it is necessary to show that the victim was induced to enter into
the contract by pressure which was illegitimate. Economic pressure
can be sufficient, but overwhelming pressure which does not amount
to unconscionable or unlawful conduct will not necessarily
constitute economic duress.(46) In the case of Mr Packer's
statement, Burchett J. held that the vigorous assertion of his
legal rights by him could not amount to duress.(47)
Similarly, Burchett J. held that the League - which in the past
had only accepted clubs on the basis of an application renewed
annually - would have been entitled to exclude a club which did not
sign the Commitment Agreement, because it would have enfeebled the
competition by its gross disloyalty.(48) Again, threatening to do
what the League was entitled to do could not amount to economic
duress. A second reason for the letter not amounting to duress was
that Burchett J. found that the threats did not in fact
significantly induce the clubs to sign. There was evidence that the
clubs perceived advantages in signing, because they would enjoy
greater security within the competition.
Accordingly, Burchett J. rejected all of the arguments of News
Limited and the aligned clubs for setting aside the Commitment and
Loyalty Agreements. Two consequences were immediate. The clubs
which had contracted to play in Super League had breached both the
Commitment and Loyalty Agreements, by releasing players,
encouraging their sponsors to support a different entity, and
licensing the Super League franchisee to use club names, logos and
jerseys. Those clubs were liable to compensate the League for the
damage their actions had caused, although it seems that the
indemnity clauses in their contracts would enable the clubs to pass
on their liability to News Limited. Secondly, once the Loyalty and
Commitment Agreements were found valid, there could be no real
answer to the League's argument that News Limited had committed the
tort of inducing breach of contract for which it could recover from
News Limited its damages directly.
As it happened, however, Burchett J. found that the League could
also be fully compensated for its losses directly from News
Limited, because he found that the clubs had breached certain
fiduciary obligations to the League.(49) The finding that
such obligations existed is surprising. It also has far reaching
consequences, both for the future conduct of the League, and more
widely. If sports bodies and other associations, including
political parties, trade union groups and employer federations, are
subject to fiduciary obligations, their behaviour will be
circumscribed in ways presently not apprehended. In particular,
they will have to be particularly careful when acting to expel a
member club or branch or union, and when they restructure or
In the light of Burchett J.'s finding, it is worth pausing a
moment on the notion of a fiduciary relationship. A fiduciary
relationship is one of trust and confidence. A fiduciary is in a
position, by his or her own actions, to injure another. In these
circumstances, the courts impose a fiduciary obligation which
prevents that party from being free to act in his or her own best
interests. Instead, his or her own interests must be subjugated to
those of the other party. The courts apply stringent rules to
ensure that fiduciaries conduct themselves 'at a level higher than
that trodden by the crowd' (50) Not only must the fiduciary not
profit from the relationship, but also must not put himself or
herself in a position of conflict. The clearest examples of
fiduciary relationships are those of trustee and beneficiary,
solicitor and client, senior employee and employer, and between
partners in a partnership. So, a solicitor may not make a profit
from an opportunity which came to his or her knowledge through
administering a trust, even if the beneficiaries could never have
exploited the opportunity, and even though the solicitor acted bona
fide and in the interests of the trust.(51) Nor may a senior
employee appropriate for himself or herself the company's clients,
even if the company was in the process of moving out of that line
of business anyway.(52)
A plaintiff who can show that the defendant has breached a
fiduciary, rather than a merely contractual, obligation is in an
advantageous position in respect of the remedies a court may grant.
In contract, the ordinary remedy is for the defendant to pay the
damages the plaintiff has suffered by reason of the breach. In the
case of breach of a fiduciary obligation, a similar and in some
ways more generous compensation is available.(53) However, three
further remedies are also available, for which there is no ordinary
counterpart for purely contractual breaches. First, if the
defendant has made profits out of the breach of fiduciary duty, the
plaintiff can recover those profits too. Secondly, if the defendant
is impecunious, but the property taken in breach of its fiduciary
obligations is now held by or can be traced to some other person,
in many circumstances the plaintiff can recover that property from
the other person. And finally, where a third person has assisted
the fiduciary to breach his or her obligations, in circumstances
where the third person knows of the breach, then the third person
will be liable for all the damage suffered by the plaintiff, even
if the third person never received any of the plaintiff's property.
Once it was found that the clubs aligned with News Limited had
breached not only contractual but also fiduciary obligations, it
was a very short step indeed to find that News Limited had
knowingly assisted them so to breach, and was accordingly liable.
Burchett J. so found.(54)
This is a novel form of fiduciary relationship. For if one
partner in a partnership is disliked by the rest, but is unwilling
to depart, it is ordinarily necessary to dissolve the entire
partnership. However, of course, the League could under its
Memorandum and Articles of Association - and did in fact - exclude
clubs, against their will, from the competition. The League
excluded Newtown, one of the founding member clubs of the League,
while another founding club, Western Suburbs, was forced to
relocate to Campbelltown, under threat of expulsion. A third club,
North Sydney, was threatened with expulsion when it objected to the
advertising of the League's principal sponsor. Under the law of
partnership, even where there is express power to expel a partner,
the power must be exercised in good faith, which includes the
obligation to give the partner who is to be expelled the
opportunity to be heard. That certainly does not appear to have
been considered in the expulsion threat of 6 February 1995.
Burchett J. wrote that 'partnerships also have partners retire
and new partners join them'.(55) But the examples taken from the
history of the League in the last decade are analogous not to the
voluntary retirement of partners, but to their forcible expulsion.
It appears that the analogy with a partnership or a joint venture
is, at best, strained.
In the appeal (to be heard in May), it is likely that the
reasoning supporting the fiduciary relationship will be subject to
scrutiny. However, the ramifications are sufficiently significant
to warrant some consideration below.
If the market for professional sport is as wide as that accepted
by Burchett J., there will be little room for the operation of Part
IV of the Trade Practices Act to protect sporting
associations, clubs, players and ultimately consumers (including
spectators) from restrictive trade practices. That result would
substantially weaken the protection offered by Part IV of the Act.
It would also cast doubt on the precedential weight of numerous
earlier decisions in which a narrower approach to market definition
has been used. If this aspect of the decision stands on appeal,
thought might be given to the question whether the provisions of
the Act warrant amendment.(56)
On the other hand, if the clubs do owe fiduciary obligations to
the League because all pursue a jointly held objective, it is
unescapable that the League also owes fiduciary obligations to the
clubs. Indeed, being more powerful than the clubs, and thus more
able to cause harm to them, it should follow that its fiduciary
obligations will be correspondingly greater. For example, the
League could not refuse to admit a club to the next season's
competition at will. Burchett J. accepted the following evidence of
One of the matters on which he insisted, with some fervour, was
the view that no club which maintained its ability to comply with
the general requirements would be forced out of the
Those words may come back to haunt the League, considering the
longstanding criticisms that there are too many teams and the
increasing pressure to restructure the competition. It may be that
the League in years to come, seeking to reduce the number of clubs
in the competition, may find itself constrained in its ability to
do so by the Super League decision.
Moreover, difficulties may also arise if the League attempts to
impose a multi-tiered Division A/Division B structure. Drummoyne
District Rugby Club, which competes in the competition organised by
the New South Wales Rugby Union, finished last in 1993, but
objected to being dropped to the second division. It was successful
in the courts, relying not on the Trade Practices Act or
any fiduciary obligation, but a separate legal doctrine known as
estoppel.(58) The point to be observed is that a club which feels
itself disadvantaged by changes sought to be imposed upon it by the
controlling body now has, after the Super League decision,
an additional potential remedy in court. At the same time, it seems
likely that the rate of change in organised sport, and the need for
restructuring, is growing. The unhappy prediction is that the
number of cases in the courts will increase.
Formerly, the courts declined to exercise a supervisory
jurisdiction over the internal proceedings of unincorporated
associations such as political parties. The leading decision is
Cameron v. Hogan,(59) arising out of the expulsion from
the Labour Party in 1930 of the Victorian Premier, Edmond Hogan,
for failing to repudiate the drastic measures proposed in response
to the onset of the Great Depression in 1929. At least in the
federal sphere, that has changed. Because of the registration
requirement under the Commonwealth Electoral Act 1918
(Cth), courts now consider that there is jurisdiction to hear
disputes.(60) So, for example, the Supreme Court was asked to find
that the disendorsement in 1995 of the Liberal Party candidate for
the seat of Macquarie was invalid.(61) The Court held that it had
jurisdiction to decide the issue, but found in the event that there
had been no breach of natural justice nor of the Party's rules.
It seems probable that the reasoning of Burchett J. in the
Super League case in relation to fiduciary obligations is
equally, if not more, applicable to political parties, which were
likewise formed to promote an object shared by all the members. The
fiduciary analogy may be even stronger, because there is (at least
in theory!) more communality of interest between different branches
of a political party than between different sporting clubs which do
in fact compete with each other each weekend. It follows that
disaffected members of a political party may therefore:
- take their grievances to a court (which will not decline to
exercise jurisdiction); and
- claim that a fiduciary obligation has been breached, in
addition to any other arguments that might exist.
Likewise, Burchett J.'s reasoning may have application to other
associations formed to promote a common objective, including other
sporting associations, recreational and social organisations such
as the RSL, and union and employer groups. It may arguably extend
to religious organisations.(62)
In all these areas, analogous reasoning suggests that the
controlling body of an association formed to promote a cause may be
less free to restructure or expel its member clubs or branches.
Even if it has explicit power to do so under its Constitution, that
power must be exercised by the controlling body in a manner
consistent with its fiduciary obligations. What precisely that
means is unclear from the Super League judgment because
the judgment deals with the issue only briefly. Once the court
accepted that the clubs owed fiduciary obligations to the League,
there was no doubt that their conduct breached those obligations
However, two tentative suggestions may be made. First, it is
suggested that a threshold test would be that the exclusion or
restructuring can only occur if the belief is genuinely and
reasonably held that it is in the best interests of the common
interests for which the association was formed. Secondly, it is
very likely that it would also be necessary to comply with
strengthened natural justice requirements.
Three issues emerge from the Super League decision of
wider import than the immediate consequences for the League
competition. First, the change from an unincorporated association
to an incorporated entity brings into play the operation of the
Trade Practices Act. Even if only the controlling body
incorporates, the branches or clubs remaining unincorporated, the
Trade Practices Act can still apply.(63) That Act may
limit the behaviour of the body in unanticipated ways, particularly
when restructuring occurs. Even though the arguments raised by News
Limited in the Super League case failed at trial, it is
important to note that they could not have been raised at all prior
to the League's incorporation in 1983.
Secondly, assuming Burchett J.'s reasoning is upheld on appeal,
there can be little application of the protective provisions of
Part IV of the Trade Practices Act in professional sports.
That may be a matter of concern to be addressed by the
Thirdly, and again if Burchett J.'s approach to identifying
fiduciary relationships is maintained on appeal, the judgment may
have wide application to organisations including political parties,
union and employer groups, other sporting bodies, recreational and
social associations - in short, potentially any grouping formed to
pursue a joint objective. If those bodies seek to restructure or
expel their members, they will have to have regard to the fiduciary
obligations owed. The precise content of those obligations is not
yet clear, but if the restructuring or expulsion disadvantages a
club or branch or member, there will be every incentive to apply to
the courts for redress.
- Although referred to in some News Limited documents and
throughout the judgment of Burchett J. as 'Superleague', the
company incorporated to manage the competition was 'Super League
Pty Limited'. The correct term is 'Super League', which is used
throughout this paper.
- Hawick v. Flegg (1958) 75 WN (NSW) 255.
- Buckley v. Tutty (1971) 125 CLR 353.
- Unreported, Helsham C.J in Eq., 22 November 1983.
- Wayde v. New South Wales Rugby League Ltd (1985) 180
CLR 459. Deane J. was appointed to the High Court in 1983 and was a
member of the majority in Wayde. He was appointed
Governor-General in. 1996.
- In 1986 another company, Australian Rugby Football League
Limited was incorporated. Throughout this paper, both it and New
South Wales Rugby League Ltd are referred to as 'the League'.
- In fact, it applies only to trading, financial and foreign
corporations, because of the limits of Commonwealth legislative
power: see Constitution, s.51(xx), Trade Practices
Act, s.4. However, the High Court has held that the Western
Australian National Football League (and by analogy, similar bodies
such as the League) is a trading corporation: R v. Federal
Court of Australia; ex parte Western Australian. National Football
League (1979) 143 CLR 190.
- News Limited v. Australian Rugby Football League Limited
& Ors (1996) 135 ALR 33. Orders made 11 March 1996.
- See report compiled by Chris Masters shown on Four
Corners on 22 May 1995.
- Subject to certain reservations by the Brisbane Broncos and the
Canberra Raiders not relevant to this paper. The Broncos in fact
executed the Loyalty Agreement shortly after the nominated time
- 'A corporation shall not, in trade or commerce, engage in
conduct that is misleading or deceptive or is likely to mislead or
- See Refrigerated Express Lines (Australia) Pty Ltd v.
Australian Meat and Livestock Corporation (1980) 44 FLR 455 at
- They are 'special federal matters': see Jurisdiction of
Courts (Cross-vesting) Act 1987 (Cth), ss.3(1), 6.
- For historical background, see Heydon, Trade Practices
Law (1989, Law Book Company), pars. [1.30]-[1.220]; Areeda and
Turner, Antitrust Analysis (4th ed 1988, Little Brown
- Huddart Parker & Co Pty Ltd v. Moorehead (1909) 8
CLR 330; Adelaide Steamship Co Ltd v. The King (1912) 15
CLR 65, (1913) 18 CLR 30.
- Resolved by Strickland v. Rocla Concrete Pipes Ltd
(1971) 124 CLR 468.
- Section 46 provides:
- A corporation that has a substantial degree of power in a
market shall not take advantage of that power for the purpose of -
- eliminating or substantially damaging a competitor of the
corporation ... in that or any other market;
- preventing the entry of a person into that or any other market;
- deterring or preventing a person from engaging in competitive
conduct in that or any other market...
- Section 45 provides:
- A corporation shall not -
- make a contract or arrangement, or arrive at an understanding,
- the proposed contract, arrangement or understanding contains an
exclusionary provision; or
- a provision of the proposed contract, arrangement or
understanding has the purpose, or would have or be likely to have
the effect, of substantially lessening competition; or
- give effect to a provision of a contract, arrangement or
understanding ... if that provision -
- is an exclusionary provision; or
- has the purpose, or has or is likely to have the effect, of
substantially lessening competition.'
- See s.4D (reproduced at footnote 36 below).
- Gardiner, 'The Continuing Saga of Market Definition: QIW
Retailers Ltd v. Davids Holdings Pty Ltd' (1995) 3 Trade
Practices Law Journal 177 at 178.
- Queensland Wire Industries Pty Ltd v. Broken Hill
Proprietary Company Ltd (1989) 167 CLR 177 at 195.
- Singapore Airlines Ltd v. Taprobane Tours WA Pty Ltd
(1992) ATPR 41-159 at 40,172 per French J.
- Re Queensland Co-operative Milling Association Ltd
(1976) 8 ALR 481; 25 FLR 169; (1976) ATPR 40-012, approved in
Queensland Wire Industries Pty Ltd v. Broken Hill Proprietary
company Ltd (1989) 167 CLR 177; Arnotts Ltd v. Trade
Practices Commission (1990) 24 FCR 313 at 328-329; Davids
Holdings Pty Ltd v. Attorney-General of the Commonwealth
(1994) 49 FCR 211 at 225, and many other decisions.
- Areeda and Kaplow, Antitrust Analysis, (4th ed, Little
Brown & Co, 1988), p.572; approved in Singapore Airlines
Ltd v. Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 at 178;
Davids Holdings Pty Ltd v. Attorney-General of the
Commonwealth (1994) 49 FCR 211 at 234.
- Mark Lyons v. Bursill (1987) 75 ALR 581, (1987) ATPR
- Arnotts Ltd v. Trade Practices Commission (1990) 93
ALR 657, (1990) ATPR 41-002; (1990) 24 FCR 313.
- Eastern Express Pty Ltd v. General Newspapers Pty Ltd
(1991) 30 FCR 385, (1992) 35 FCR 43.
- United Brands Company v. The Commission of the European
Communities  1 CMLR 429.
- Hughes v. Western Australian Cricket Association
(1986) 19 FCR 10.
- Adamson v. West Perth Football Club (1979) 39 FLR 199,
27 ALR 475.
- McCarthy v. Australian Rough Riders Association (1988)
- See Re Queensland Independent Wholesalers Ltd (1995)
ATPR 41-438, 132 ALR 225.
- Including International Boxing Club of New York Inc v.
United States 358 US 242 (1959); National Collegiate
Athletic Association v. Board of Regents of the University of
Oklahoma 468 US 85 (1984), and decisions of other federal
- (1996) 135 ALR at pp.74-85.
- (1996) 135 ALR at p.81.
- The section provides:
- A provision of a contract, arrangement or understanding, or of
a proposed contract, arrangement or understanding, shall be taken
to be an exclusionary provision for the purposes of this Act if -
by all or any of the parties to the contract, arrangement or
understanding or of the proposed parties to the proposed ccontract,
arrangement or understanding, or, if a party or proposed party is a
body corporate, by a body corporate that isis related to the body
- the contract or arrangement was made, or the understanding was
arrived at, or the proposed contract or arrangement is to be made,
or the proposed understanding is to be arrived at, between persons
any two or more of whom are competitive with each other; and
- the provision has the purpose of preventing, restricting or
- the supply of goods or services to, or the acquisition of goods
or services from, particular persons or classes of persons; or
- the supply of goods or services to, or the acquisition of goods
or services from, particular persons or classes of persons in
particular circumstances or on particular conditions,
- See Report to the Minister of Business and Consumer
Affairs ('the Swanson Report') (1976, AGPS); par. 44.116.
- Gallagher v. Pioneer Concrete (NSW) Pty Ltd (1993) 113
- Subject to authorisation by the Trade Practices Commission (now
the ACCC): s.88.
- (1996) 135 ALR at p.94.
- National Football League v. North American Soccer
League 459 US 1074 at 1077 (1982).
- (1996) 135 ALR at p.94.
- Section 4(1).
- At p.187.
- Letter of 7 February 1995 (see (1996) 135 ALR at p.115).
- Crescendo Management Pty Ltd v. Westpac Banking
Corporation (1988) 19 NSWLR 40 at 45-46; Dimskal Shipping
Co SA v. International Transport Workers Federation  2
AC 152 at 165-166. See generally Sindone, "The Doctrine of Economic
Duress" (1996) 14 Australian Bar Review 34.
- (1996) 135 ALR at p.115.
- (1996) 135 ALR at pp.116-117.
- (1996) 135 ALR at pp.122-127.
- Meinhard v. Salmon 164 NE 545 at 546 (1928) per
Cardozo CJ, approved in Warman International Ltd v. Dwyer
(1995) 182 CLR 544.
- Phipps v. Boardman  2 AC 46.
- Warman International Ltd v. Dwyer (1995) 182 CLR
- See Re Dawson (decd)  2 NSWR 211;
Witten-Hannah v. Davis  2 NZLR 141; cf. Target
Holdings Ltd v. Redferns  3 WLR 352.
- (1996) 135 ALR at p.126.
- (1996) 135 ALR at p.124.
- See Wood, 'How level is this new playing field?', The
Australian, 26 March 1996.
- (1996) 135 ALR at p.94.
- Drummoyne District Rugby Club v. New South Wales Rugby
Union (1994) Aust Contracts Rep 90-039. Very generally, the
doctrine of estoppel may give rise to rights when one party makes
representations by its words or conduct on which the other party
relies to its detriment: see Commonwealth of Australia v.
Verwayen (1990) 170 CLR 394; Waltons Stores (Interstate)
Ltd v. Maher (1988) 164 CLR 387.
- (1934) 51 CLR 358.
- Baldwin v. Everingham  1 Qd R 10. See on this
topic Forbes, 'Judicial Review of PoliticalParties', Research
Paper, Parliamentary Research Service 1996 (forthcoming).
- Thornley v. Heffernan (unreported, Brownie J, 25 July
1995; McLelland CJ in Eq, 12 September 1995).
- Cf. Scandrett v. Dowling (1992) 27 NSWLR 483.
- Hughes v. Western Australian
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