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The Super League Case: The Appeal
Mark Leeming
Consultant
Law and Public Administration Group
On 4 October 1996, a Full Court of the Federal Court (Lockhart, Von
Doussa, Sackville JJ.) set aside orders made earlier this year by Burchett
J. prohibiting the establishment by News Limited of the rival 'Super League'
professional rugby league football competition. The background to this
litigation, and an analysis of the decision at first instance may be found
in Research Paper No.23 1995 96. This Research Note outlines how the Full
Court differed from the trial judge, and offers some comments as to the
likely consequences of the decision.
The Decision of the Trial Judge
Central to the litigation were certain contracts, the 'Commitment Agreements'
and the 'Loyalty Agreement', which bound the various clubs to the League
until the year 2000. News Limited commenced proceedings in the Federal
Court claiming that the Commitment and Loyalty Agreements were void as
contravening the Trade Practices Act 1974. The principal findings of the
trial judge were that:
- the relevant market in which the League operated was sufficiently
broad that the Commitment and Loyalty Agreements did not contravene
the Trade Practices Act 1974 (Cth) either by being an unlawful misuse
of market power, or as having the purpose or effect of substantially
lessening competition;
- the Commitment and Loyalty Agreements were not unlawful as 'exclusionary
provisions' (arrangements having the purpose of restricting the supply
or acquisition of goods or services );
- accordingly, News Limited in attempting to set up 'Super League'
had induced the clubs to breach the Commitment and Loyalty Agreements,
for which it was liable in damages;
- moreover, in addition to their contractual obligations, the clubs
were found to be under fiduciary obligations to the League, through
their participation in a League Joint Venture', which finding considerably
increased the scope of the remedies available to the League;
- finally, the trial judge made injunctive orders not merely against
News Limited but personally against some 310 players and coaches, preventing
them from attempting to establish a rival competition.
The Decision of the Full Court
The Full Court, in a joint judgment, overturned all of the trial judge's
principal findings set out above other than '(a)' concerning market. In
summary, the Full Court held that:
- The orders binding the 'rebel' players directly affected those players'
rights, and should not have been made without giving those players the
opportunity to be heard.
- There was no fiduciary relationship between the League and the clubs.
The clubs did not have to subjugate their interests to those of the
League, nor was the league vulnerable to the clubs, these being typical
indicia of a fiduciary relationship. To the contrary, the commercial
interest of the clubs conflicted with those of the League, and the League
had demonstrated its supremacy over the clubs by its ability to exclude
clubs from the competition. Finally, the ability of the clubs to leave
the competition at the end of each season was another factor inconsistent
with the existence of a fiduciary relationship.
- The Commitment and Loyalty Agreements were void as being exclusionary
provisions. At the time the Agreements were made, the clubs were in
competition with each other (a prerequisite for the operation of these
provisions of the Trade Practices Act 1974) at least for the services
of an alternative competition organiser, and the Agreements restricted
the supply of teams and players available to a rival competition.
- There being no fiduciary obligations, nor obligations under the Loyalty
or Commitment Agreements, the Full Court found that the clubs were bound
to the League only by their commitment to the annual competition. As
in other contracts, there was an implied term that the clubs would cooperate
with the League to do everything that was reasonably necessary to enable
the 1995 competition to be carried on for the benefit of the League.
That term had been breached, and News Ltd was responsible for inducing
the breach and liable for damages caused in 1995, but not thereafter.
News Ltd was and is free to commence its Super League competition in
1997.
Comment
The following observations may be made of the decision:
- It was unnecessary for the Full Court to review the trial judge's
findings as to the width of the relevant market. The point is made in
Research Paper No.23 1995 96 that if the relevant market is very wide
(as is at least implicit in the trial judge's view), there is relatively
little scope for the operation of the provisions in the Trade Practices
Act which enhance competition. In the light of the reversal of his other
conclusions, however, the decision at first instance is slender support
for a such a market definition (which in any event is difficult to reconcile
with other Australian and overseas authorities).
- The litigation now will return to the trial judge for an assessment
of damages in relation to the 1995 season. This task will be significantly
complicated by the issue of the extent to which the undoubted damage
to the season was caused by the destabilisation by News Limited, or
by other factors including the cessation of sponsorship by Winfield,
the difficulties in finding a replacement sponsor, and the ending of
the contract pursuant to which Tina Turner promoted the competition.
- The trial judge has also not yet determined various other issues,
including, for example, whether News Limited's conduct was misleading
or deceptive, and issues relating to the use of club names, logos and
jerseys by Super League clubs. If the parties cannot settle their differences,
there is the prospect of quite lengthy litigation (and the potential
for further appeals) continuing in the Federal Court.
- The League has filed an application for special leave to appeal to
the High Court from the judgment of the Full Court. That application
has been expedited and will be determined on 15 November 1996. Even
if special leave is granted (which is far from automatic and generally
requires an important issue of legal principle) it is unlikely in the
extreme for an appeal to be heard and determined before the commencement
of the 1997 season.
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