News Ltd v South Sydney District Rugby League Football Club Ltd
(2003) 215 CLR 563
This case arose following the Super League drama between the Australian Rugby League and News Ltd (which was the subject of separate litigation. As part of a compromise, a new rugby competition, the National Rugby League (NRL) was formed in 1998. Part of the agreement between ARL and News for the formation of the NRL was that the number of teams would be reduced from 17 to 14 by 1998. This was to be done through a selection process which would rank teams in order of their suitability for the competition. In this ranking, the South Sydney Football Club was ranked 15th and was therefore excluded from the competition. South Sydney challenged the term, claiming it constituted an unlawful exclusionary provision.
Interlocutory injunction application (Hely J)
Prior to the trial, Souths sought an interlocutory injunction which would have required the ARL and News to allow it to participate in the 2000 competition. That application was dismissed by Justice Hely.
Trial (Finn J)
In 2000, Justice Finn rejected South's claim that the term reducing the competition from 17 to 14 teams was an exclusionary provision.
Full Federal Court
A majority of the Full Federal Court (Justices Moore and Merkel; Justice Heerey dissenting) overturned the decision of Justice Finn, holding that the term was an exclusionary provision
Overturned the Full Federal Court's decision. The majority (4-1, Justice Kirby dissenting) held that news did not have a purpose of excluding any particular club.
On the issue of purpose
The key issue addressed by all members of the Court was whether the term ‘purpose’ in s 4D should be interpreted objectively or subjectively. All members of the majority concluded that it is a subjective test that should be applied:
Gleeson CJ: Section 4D looks to ‘subjective purpose’ – that is ‘the end they had in view … The purpose of conduct is the end sought to be accomplished by the conduct.’ (at para 18). It is also important to distinguish purpose from effect, however, the ‘manifest effect of a provision in an agreement, in a given case, may be the clearest indication of its purpose’ (at para 18).
McHugh J: considered in more detail whether purpose for the purpose of s 4D meant subjective or objective purpose. His Honour considered that if the subjective purpose applied, then the trial judge’s finding that News and ARL did not have an exclusionary purpose would require the appeal to be upheld (at para 31). His Honour observed that there was 17 years of Federal Court precedent applying the subjective test and, despite noting that if he was interpreting the provision for the first time he would prefer the view that purpose in s 4D referred to ‘objective’ purpose, he was not prepared to upset this longstanding subjective interpretation. In particular, he noted that it was ‘impossible to hold that the subjective interpretation is plainly wrong.’ (at para 41).
Gummow J: noted that the subjective construction had substantial support (at para 60) and concluded that this was the correct approach (see para’s 60-63).
Callinan J: accepted that a ‘subjective’ test was to be applied.
All members of the majority considered that there was no subjective exclusionary purpose. Chief Justice Gleeson and Justice Callinan expanded on this issue
Gleeson CJ: His Honour focussed on the fact that in relation to any competition such as this, ‘exclusivity is a necessary feature’ (at para 11) and realistically the ‘competition could not be open to any rugby league club in Australia that wanted to join in’ (at para 15). In this case, ‘specifying the number of clubs to be admitted … was a necessary part of the definition of the new business venture’ (at para 21). Here, the method selected for determining which 14 clubs would play was not discriminatory and not aimed at any particular club. There ‘had to be some definition of the size, geographical spread, and other characteristics of the new competition. … The purpose of the 14 team term was to define the size of the competition …’ (para 22). His Honour noted
‘Any limitation upon the size of the competition … would have had the effect of potentially excluding some rugby league clubs in Australia that might have wanted to join the competition if given the opportunity. But exclusion of clubs of that kind would not have been the purpose of the provision …’ (at para 23)
In this case the 22 clubs that existed prior to the merger would have been in the contemplation of News and ARL and thus it would be ‘more plausible to suggest that News and ARL had a purpose relating to them.’ (at para 24). However, this was not the case here. Gleeson CJ considered it relevant that the method for selecting the 14 participants was not the subject of criticism for being discriminatory in any way (at para 26).
Callinan J: Along the same lines, Justice Callinan considered that, because of the nature of the competition it was ‘easy to see … why the ultimate number 14 might commend itself to the appellants’ (at para 168). His Honour noted that the criteria were ‘generally objective’ (at para 170) and that ‘the submission of Souths with respect to “purpose” [had] in the circumstances of the case, something of an air of unreality’ (at para 209). Here, his Honour noted that the conducting of the competition made it ‘necessary to set a limit on the number of participants’ and further, that while it is the purpose of the particular provision that is to be examined, the
‘discovery of that purpose is by no means necessarily to be gained by an examination of the provision itself only. … a provision may, sometimes must, be read with, and seen for its true meaning, effect and purpose, the relevant agreement or arrangement as a whole. Here, the 14-team term cannot be divorced from the agreement as a whole. It was no more than facilitative … of the purpose of establishing a viable competition …’ (at para 216)
In dissent Kirby J held that an objective test should be applied to ‘purpose’ in s 4D (para’s 125-130) and that, applying this test, the 14-team clause did have an exclusionary purpose.
Justice Kirby highlighted the importance of first acknowledging that that professional sport is a business that should be treated – in terms of the TPA – in the same way as any other business (para’s 103-109) and also noted the importance of giving full effect to the provisions of the Act – the court ‘should not whittle them down.’ (para 118). His Honour observed, in relation to exclusionary provisions, that the ‘Act is certainly wide. Seemingly, it is deliberately so.’ (para 124).
In determining an objective test should be applied to the term purpose in 4D Kirby J concluded that ‘the line of authority … in the Federal Court is wrong’ (para 130). His Honour noted in this respect:
‘The best textual argument for adopting an objective approach to the word “purpose” lies in the language of the Act itself. The relevant “purpose” is that of “the provision”. It is not the purpose of identified persons. …’ (para 127).
Similarly, his Honour noted that where there are multiple parties involved (which will always be the case in relation to exclusionary provisions) the subjective ‘purpose’ of each party might be different and impossible to calculate with any certainty (para 127).
Justice Kirby also considered whether it was the short or long-term purpose that should be assessed. In his discussion, Kirby J provided the following useful analogy:
‘If a soldier who shoots to kill in battle is asked whether his purpose is to kill the enemy or to defend his country, the answer will depend on the questioner, the occasion and the degree of particularity adopted in the response … with a view to the long term, the broader answer of defending the country might be given and accepted. But, focussing on the particular action of aiming the barrel of the rifle and pulling the trigger, killing the enemy will take on a compelling appearance as the soldier’s immediate “purpose”.’ (para 140).
After some further discussion his Honour concluded that it was the immediate purpose that is relevant in the context of 4D. In the context of this case, Kirby J noted that the issue
‘was not whether the overall objective of the merger or of the “arrangement”, taken as a whole, was rational or beneficial or in the best interests of the game, its supporters or sport generally. … The issue, and the only issue, was the “purpose” of the impugned clause … it is critical to focus on the “provision” in the midst of the context because that is what the language of the Act requires.’ (para 147)
Viewed in this context, Kirby J held that there could really only be one “purpose” of the “provision” and that was that it was exclusionary (at para 148). His Honour noted that the claim that the provision was in the ‘best interests of the market’ would not work in any other business context and should not apply here, and added, somewhat cynically, if not accurately, that:
‘As is usually the case in such matters, the restricting competitors assert that the best interests of the market or game or participants happen conveniently to coincide with their own best economic interests.’ (para 149)
His Honour concludes on this issue that if there was a valid argument that the 14 team term was necessary for the sport then News and ARL could, and should, have sought authorisation (para’s 151-152).
On this issue of 'target'
The Court’s discussion of “Target” The majority of the High Court, having concluded there was no ‘subjective’ exclusionary purpose did not find it necessary to discuss whether or not the requirement that there be a ‘target’ was satisfied. Nevertheless, Gummow and Callinan JJ discussed the issue briefly.
Souths had argued that the ‘class’ consisted of ‘clubs which had participated in the 1997 ARL and Super League competitions and which had not withdrawn from those competition, other than the 14 clubs which would be selected [for] 2000’:
Gummow J: His Honour observed: ‘In the present case, it appears to have been accepted (correctly in my view) that there may be a “particular class” notwithstanding that at any one time the identity of all of its members is not readily ascertainable.’ (para 77). His Honour then noted that ‘the terms of s 4D take as a compound element the purpose of preventing, restricting or limiting … to or from particular persons or classes of persons’ (at para 79) and that in this case there was ‘an absence in the evidence of indications that the purpose of the adoption of the 14-team term was to prevent the supply of services to or acquisition of services from those clubs which under the operation of the selection process would turn out to be among the “losers”.’ (at para 80).
However, in saying this, his Honour did not expressly dismiss the possibility that “those persons who turned out to be the losers” could constitute a particular class of persons for the purpose of s 4D.
Callinan J: held that to ‘have a prohibited purpose with respect to a class, the class must have a defining characteristic distinguishing it from others, and marking out its members as the object of it … in a case, as this one is, that is concerned with the prevention of supply, a class cannot be defined by the mere fact of non-supply or exclusion … the basic objective criteria … had the consequence that there was no way of knowing, let alone specifying in advance, those that would come to fail to satisfy them. … there was a randomness about the identity of the participants, and randomness is a concept remote from particularity of identity. Souths was not a particular person or a member of a class for the purposes of s 4D.’ (para’s 217-218)
In dissent Kirby J considered this requirement in detail; it was necessary to do so given his Honour’s conclusion that there was an exclusionary purpose. Justice Kirby held:
‘Even if it were accepted that a “particular class” within the meaning of s 4D(1)(b) could not be defined by the fact of exclusion, this is irrelevant. If ever there was a case in which there were identified criteria for exclusion, that pre-existed the fact of exclusion, this was it. [The objective criteria contained in the term] identified a particular class of persons, being the club or clubs supernumerary to 14, which in 2000 would lose the right to supply and acquire services in the relevant market during that year.’