Electricity Generation Corporation v Woodside Energy Limited

Supreme Court of NSW|2016-04-06|Before: Hammerschlag J

Solicitors: Atanaskovic Hartnell - Plaintiff Gilbert + Tobin - Defendant File Number(s): 2016/41896

introduction

HIS HONOUR: Clause 2.1 of a written Program Supply Agreement (the PSA) entered into by the plaintiff (WIN) and the defendant (Nine) on 3 June 2013 provides: Nine grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as "Nine, "NineHD", "9Go", "9Gem", "Extra" and "9Life" (the "Nine Channels"), to be picked up by WIN at Nine's NPC.
The PSA was to expire on 31 December 2015. However, by Variation Agreement signed by the parties on 31 December 2015, amongst others, its term was extended to 30 June this year.
Nine is transmitting its program schedule by live internet streaming, which is available to recipients in the licence areas covered by the WIN Stations (the WIN licence areas). WIN claims that Nine is in breach of the PSA by broadcasting within the meaning of clause 2.1. WIN says that even if Nine is not broadcasting, it is still in breach of an implied obligation not to do what it is doing. WIN moves the Court for an injunction restraining Nine from continuing to live stream into the WIN licence areas for the remainder of the life of the PSA.
For the reasons which follow, I have concluded that live streaming is not broadcasting within the meaning of the PSA, and that Nine is under no express or implied obligation not to do it. WIN's claim for an injunction must therefore be refused.

The parties

WIN itself, and through related corporate entities, owns and operates television stations. It is Australia's largest regional television broadcaster (using the term neutrally). It delivers the television programs using broadcasting services bands, that is, by terrestrial transmission to the general public free of charge. It does this under commercial television broadcasting licences issued by the Australian Communication Media Authority (ACMA) under the Broadcasting Services Act 1992 (Cth) (the BSA). The licences authorise the licensee to provide this service within a geographical "licence area" shown on a map which is a part of each licence. This form of broadcast is commonly known as "free-to-air". WIN does not currently live internet stream, nor does it presently intend to do so in the future.
Nine is an Australian national television broadcaster.

Previous arrangements

Over many years, under different written program supply agreements entered into at different times and on different terms, Nine has supplied WIN with programming and licenced WIN the right to broadcast it. There are written agreements between them in evidence which go back to as early as 1997. Some of the agreements are in what the parties call "long form", containing, amongst others, detailed definitions. Others are in "short form". The long form agreements, using different but not materially different terminology, invariably define "broadcast" to exclude transmission by distribution technology other than pursuant to a commercial television broadcasting licence under the BSA, whether now known or later developed. This is not surprising, given that WIN has only ever broadcast free-to-air.
The program supply agreement which governed the parties' relationship, prior to entering the PSA, was in short form signed by them on 7 September 2007, with a commencement date of 1 July 2007 and a period of five years. This agreement contained no definition of broadcast, and contemplated the parties moving in good faith to complete long form documents within 14 days. However, and notwithstanding a lengthy course of negotiations, this was never achieved. For reasons which will appear below, it is necessary to set out in some detail the course of those negotiations.
On 25 September 2007, Nine proffered a draft long form agreement which contained the following definition of "broadcast", which meant free-to-air and nothing else: The terrestrial transmission of television program material to the general public free of charge pursuant to a commercial television broadcasting licence issued under the BSA and, for the avoidance of doubt, broadcast expressly excludes transmission or distribution by any means now known or hereafter existing, to any computer or computer network, through any interface, protocol or other technology.
WIN responded on 2 November 2007 by proffering a definition of broadcast meaning transmission by any means. The draft deleted the words which expressly excluded from the definition transmission by a computer, computer network or other technology.
Nine responded on 30 November 2007 by rejecting WIN's expanded definition. By notation in a marked up draft, Nine stated that: This agreement relates solely to free-to-air broadcasting. Any proposal for the acquisition or exploitation of other rights in the licenced programs should be the subject of separate discussions between the parties.
Nine proffered a further draft on 1 September 2008, which included the definition of broadcast first insisted upon by it.
In a draft proffered by WIN on 16 October 2008, it apparently accepted Nine's definition.
The parties, however, continued to negotiate on various aspects including rights with respect to other forms of transmission.
In an email dated 12 November 2008, following a meeting between them, WIN's then Managing Director, David Butorac, wrote to Nine's then Chief Executive Officer, David Gyngell, that: WIN requires [Nine] to identify when additional rights are available (e.g. internet, mobile, additional programme rights etc.) and WIN to be offered those first. Whilst you understood the principle and you agreed that as a partner you would want to include us first anyway, you expressed concern about a process that could slow down your capacity to leverage the rights to other parties. I suggested I was happy to be bound to a short time period to revert when rights are offered. This extended to rights to programmes and or formats that [Nine] may choose not to continue with but WIN may desire to take up prior to their sale to other parties, such as pay TV.
In a response dated 29 December 2008, Amanda Laing, Nine Group's General Counsel, wrote to Butorac: (a) None free-to-air rights in Nine's Programs Nine's arrangements with WIN have only ever been for free-to-air rights and Nine is not willing to contractually commit to any new regime relating to the exploitation of non free-to-air rights in its programs. However, to seek to accommodate WIN's wish to have its desire to exploit such rights considered, Nine proposes that if a program is on the Nine schedule and WIN is interested in seeking additional non free-to-air exploitation rights (should these be, or become, available), WIN must identify to Nine the show and the rights it is seeking. Nine will consider any such request from WIN.
Butorac replied on 12 January 2009 as follows: 5. Notification and right of refusal in relation to any offer by Nine of non-FTA rights or of programs Nine has agreed to a 14 day exclusive negotiating period in relation to Nine programs but not in relation to non-FTA rights. WIN needs such a period for both types of rights, which would be on the same terms as any offer to a third party. A short negotiating period will not affect Nine's ability to deal with these rights and for Win is an important recognition of WIN's position as Nine's most important partner. As we would not know what rights you hold with relation to non FTA rights associated with programmes in the affiliation agreement, it would be unworkable for us to have to request from you those rights we would like to acquire. A far simpler approach would be to align the process for programme and additional rights as you suggested for programme rights.
Separately, on 26 May 2009, the parties entered into a short form agreement under which Nine licenced WIN to broadcast its programming in WIN's South Australian licence areas. The agreement defined "broadcast" as meaning free-to-air transmission.
The negotiations towards a long form of the 7 September 2007 short form agreement were never concluded.
On 24 July 2009, Butorac emailed Jeffrey Browne, an executive director of Nine, enquiring how he proposed to move forward to put in place a binding agreement.
On 24 July 2009, Browne replied, saying "Thank you. We do have a binding agreement, what we don't have is a long form document. It seems we might just have to live with what we have. Like you, I welcome any other suggestions."

Rugby League

On 21 August 2012, Nine announced a "new deal" with the Australian Rugby League Commission to hold the free-to-air television broadcast rights for the National Rugby League (NRL) for the next five years, with Fox Sports taking the rights for subscription television. An article in the Australian Financial Review on 11 December 2012 revealed that Telstra had required digital rights from the NRL which included "rights to broadcast NRL matches live via mobiles, tablets and Internet protocol TV". By formal admission in the proceedings, WIN admits that it knew in and from December 2012 that Telstra had acquired such rights, and that it knew as at and from 3 June 2013 that Nine did not hold those internet broadcast rights, but that it also knew that Nine had been actively seeking to obtain internet broadcast rights.

Events leading up to the PSA

In mid-2012, it seems that negotiations for a new program supply agreement commenced. WIN proffered a draft on 24 December 2012, under which Nine would grant to WIN "the exclusive and irrevocable right and licence to Broadcast in the Territory the Program Material of Nine (other than the Excluded Programs) pursuant to the Licensee's Broadcasting Licence". The draft defined "Broadcast" to mean: the terrestrial transmission of television program material to the general public free of charge pursuant to a commercial television broadcasting licence issued by the ACMA pursuant to the BSA but expressly excludes transmission or distribution by any means to any computer or computer network through any interface, protocol or other technology
The draft contained a proposed clause 33.6, which would have obliged Nine to keep WIN informed of developments relating to its intended future plans for internet programming. By way of a letter dated 19 January 2013 from Laing to Bruce Gordon, Deputy Chairman of WIN, with an accompanying marked up draft, Nine's response was to delete the proffered provision. In the letter, Laing stated: WIN consultation: While Nine is prepared to reasonably consult and liaise with WIN in relation to certain matters, the level of consultation, approval and compliance with WIN advice set out in the draft PSA is unrealistic and unacceptable. The clauses proposed by WIN do not reflect the roles of the parties to the PSA or the manner in which Nine operates its business and must make commercial, legal, financial, regulatory and programming decisions. Online Exploitation: Nine is not willing to share revenue with WIN or otherwise pay WIN in relation to programming which Nine exploits online.
The proffered draft included a definition of "Broadcast" which excluded transmission or distribution by any means to any computer or computer network through any interface, protocol or other technology.
There were apparently meetings between the parties in the week of 4 March 2013. WIN's solicitors sent Laing a marked up draft on 12 March 2013 which did not take issue with the definition of broadcast in Nine's preceding draft.
On 5 April 2013, apparently against the background of a possible takeover of Nine, Browne wrote to Andrew Lancaster, WIN's Chief Executive Officer, proposing discussion on a different agreement, or series of agreements, for Nine "to re-affiliate" with WIN. This drew a lengthy (and perhaps understandably acerbic) response from WIN in a letter from Gordon to Gyngell dated 9 April 2013. There was a further exchange of correspondence and apparently meetings between the parties.
Around 28 May 2013, WIN proffered a short form draft agreement, which contained no definition of broadcast.

The PSA

On 3 June 2013, the parties entered into the PSA.
On 31 December 2015, the parties entered into the Variation Agreement which extended the life of the PSA so as to expire on 30 June 2016. It accordingly has just over two months to go.
Centrally relevant clauses are set out below.
Clause 2 of the PSA (as varied by the Variation Agreement) is in the following terms: 2. Licence of Programming to WIN Stations 2.1 Nine grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as "Nine, "NineHD", "9Go", "9Gem", "Extra" and "9Life" (the "Nine Channels"), to be picked up by WIN at Nine's NPC. 2.2 The WIN Stations will broadcast the Nine Channel programs in parallel with the Nine schedule (for each of 'Nine', 'Go' and 'Gem') between 6am and midnight except that between noon and 4.30pm each weekday, between noon and 5pm on Saturdays, and between 1.30pm and 4.30pm on Sundays, a WIN Station may alter Nine's program schedule to broadcast alternate programs provided WIN has notified the CEO of Nine of the proposed change to the schedule and taken into account any obligations of Nine to third parties (which Nine has advised to WIN). If a WIN Station wants to make any chances to Nine's prime time schedule, the WIN Station will raise the proposed change with the CEO of Nine for discussion and Nine will not unreasonably withhold its consent to the proposed change to the prime time schedule. 2.2A The WIN Stations will commence broadcasting "Nine HD" and "9Life" during the Term. From such time as a WIN Station starts to broadcast "Nine HD" and "9Life", clause 2.2 will apply to that channel as if it was named in clause 2.2. 2.2B The WIN Stations will broadcast the programming for 'Extra' in parallel with the Nine schedule for 'Extra'. Nine will pay WIN $[redacted] on 31 March 2016, in return for WIN broadcasting the 'Extra' channel in the period from 1 January 2016 to 30 June 2016. 2.3 In this Agreement, the "WIN Stations" are WIN Television WA Pty Ltd, WIN Television Griffith Pty Ltd, WIN Television SA Pty Ltd, WIN Television Qld Pty Ltd, WIN Television Mildura Pty Ltd, WIN Television Victoria Pty Ltd, WIN Television Tas Pty Ltd and WIN Television NSW Pty Ltd. 2.4 WIN agrees that the WIN Stations will meet all sporting scheduling obligations imposed on Nine and its Related Bodies Corporate under their contracts for the broadcast of rugby league and cricket, provided that Nine provides full details of all existing such obligations to WIN forthwith upon execution of this Agreement and will provide full details of all future such obligations to WIN forthwith upon incurring such obligations.
Clause 3.1 provides: 3. Affiliation Fees 3.1 WIN will pay Nine affiliation fees calculated and paid in accordance with the clause 3 based on Monthly Gross Revenue (as defined in paragraph 3.6 below) from all WIN Stations, including without limitation WIN Television SA Pty Ltd in relation to the licence areas Riverland TV1 and Mount Gambier/South East TV1 and WIN Television WA Pty Ltd in relation to the licence area Remote and Regional WA TV1 ("Affiliation Fee").
Clause 3.6 provides relevantly: 3.6 For the purposes of this Agreement: "Monthly Gross Revenue" means, in respect of each calendar month, the revenues received by the WIN Stations from their broadcasting activities for the sale of air time as required to be reported in the ACMA B10 Form. When an amount which would be considered gross earnings is paid or given otherwise than in cash, the fair value of the consideration is to be included in gross earnings.
Clause 6 provides: 6. Recognition of WIN Stations (a) Nine will ensure that from time to time in the course of its broadcast of sporting events, its commentators will recognise the Win Stations in the following (or similar) form: "You are watching [name of sports event] across Australia on Nine and the WIN network". (b) Where any news footage broadcast by Nine is supplied to Nine by WIN, Nine will ensure appropriate attribution to WIN as the source of such supply.
Clause 9.6 provides: 9.6 Both parties agree to enter into good faith negotiations to complete long form documents of this Agreement within 3 months of the date of this Agreement. For the avoidance of doubt, this Agreement remains binding on the parties if long form documents are not agreed and executed by both parties.

Live streaming

In late October 2015, Nine announced the launch, in early 2016, of 9Now (the service), a new streaming and video on demand product which allows members of the public (users) to log in via an internet website or application to view via the internet live or near live streaming (commonly referred to as live streaming) of Nine's programming, or on a video on demand basis.
The latter allows users to watch that programming at a time of their choosing. The service is available to users who have access to the internet. This includes people who happen to be located in the WIN licence areas.
The service went live on 27 January 2016, and has since then been available to users on a range of devices, including personal computers, smart phones and tablets.

The PARTIES' contentions

There is no issue that the grant by Nine to WIN of the exclusive licence under clause 2.1 of the PSA brings with it the implied negative stipulation by Nine that it will itself not do what it has licenced WIN to do.

Meaning of "broadcast" - construction

WIN contends that the natural and ordinary meaning of the word "broadcast" is a wide one, encompassing the broad dissemination of material, including sound and images by any medium, including internet. One meaning given to the term in the Macquarie Dictionary is "to spread or disseminate widely".
WIN argues that in the absence of a bespoke definition of the term in the PSA, it is to be given this wide meaning. In support of this submission, it refers to statutory enactments which define the term to include by and through means of the internet. For example, s 127 of the Supreme Court Act 1970 (NSW) defines "broadcast" as: a live or delayed broadcast by means of radio, television or the internet (including webcasts).
Another example is s 6 of the BSA, which contains the following definition: broadcasting service means a service that delivers television programs or radio programs to persons having equipment appropriate for receiving that service, whether the delivery uses the radiofrequency spectrum, cable, optical fibre, satellite or any other means or a combination of those means, but does not include: (a) a service (including a teletext service) that provides no more than data, or no more than text (with or without associated still images); or (b) a service that makes programs available on demand on a point to point basis, including a dial up service; or (c) a service, or a class of services, that the Minister determines, by notice in the Gazette, not to fall within this definition.
Following an investigation by ACMA into the content of online-services and a report to the Minister for Communications and the Arts dated 30 June 1996, on 12 September 2000, the Minister for Communications, Information Technology and the Arts determined that under paragraph (c), the following class of services does not fall within the definition of "broadcasting service": A service that makes available television programs or radio programs using the Internet, other than a service that delivers television programs or radio programs using the broadcasting services bands.
WIN argues that the apparent necessity for a determination by the Minister excluding internet delivery supports the proposition that such delivery is actually broadcasting.
Win argues that a construction of the word "broadcast" which would allow Nine to internet stream the same program schedule in real time to viewers in the WIN licence areas is inconsistent with the separate and complementary broadcast rights contemplated by clause 2.2 of the PSA, which requires parallel broadcasting of Nine programs by WIN and Nine, and with the requirement in clause 6 for Nine to recognise WIN in the broadcast of sporting events.
It argues that at the time of the PSA television programming was being delivered through the internet by competing channels. Channel Seven (another Australian national channel) had launched an internet service in around 2010. The BBC had done so as early as 2008. It puts that it would be odd if the parties, knowing of the potential to deliver Nine programming by various means (such as through the internet or by cable), intended to limit the exclusivity granted to WIN in its licence areas to one means of transmission only, being traditional free-to-air transmission.
WIN argues that the commercial object of the PSA would be frustrated if the exclusivity granted in clause 2.1 were limited to only one mode of transmission of the Nine program schedule. It submits that the exclusive licence granted under the clause is the primary, if not sole, benefit WIN obtains under the PSA, and that WIN pays substantial amounts by way of "affiliation fees" as consideration for that exclusivity. While the payments to Nine are fixed and not affected by a drop in WIN's ratings, WIN's advertising revenue is highly sensitive to ratings performance.
It submits that unless "broadcast" is given a wide meaning, including internet transmission, the effect would be that WIN agreed that Nine could compete with WIN in WIN's licence areas with the same program content (potentially watched on the same television screens), thereby affecting WIN's ratings and advertising revenue, but that WIN remained obliged to pay guaranteed affiliation fees to Nine. It puts that it would have been commercially illogical, and unlikely, for WIN to have agreed to pay guaranteed affiliation fees for exclusivity which Nine could "sidestep" through its own choice of broadcast medium. It went so far as to put that a different outcome would be perverse.
Initially, WIN argued as its main contention that clause 2.1 operates so as to give it the right to disseminate by any means, including live streaming, Nine programming in the WIN licence areas, and correspondingly to deny Nine the ability to do so. A significant hurdle in the way of this argument is that at the time of the PSA, Nine was not, to the knowledge of both parties, in a position to licence WIN to internet live stream NRL games, because Nine itself did not have the right to do so. Also, under clause 2.2 of the PSA, WIN undertook that the WIN Stations would broadcast Nine programs in parallel with Nine's schedule. If WIN did this by live streaming, Nine would have been in breach of the licencing arrangements for NRL. No doubt recognising this impediment, WIN shifted emphasis in final submissions.
Although it did not abandon its initial stance, WIN finally put as its preferred construction that whilst "broadcast" is to be given a wide meaning, WIN's right to broadcast is limited to doing so free-to-air. It reasoned that Nine has given it an exclusive licence to broadcast, that is, WIN is the only person who is permitted to broadcast (in any fashion), but that the exercise of its right is limited to broadcasting on and in the licence areas covered by the WIN Stations, which means free-to-air, because the WIN Stations only, and only ever have, broadcast in this way. If this construction is correct, WIN cannot live stream in the WIN licence areas, but neither can Nine.
Nine argues that in its natural and ordinary meaning, "broadcast" means transmission by radio or television, and that as used in the context of the whole of the PSA, it can mean, and only means, free-to-air.
It argues that this construction accords with the commercial purpose and objects of the PSA, and is revealed as the correct construction when regard is had to the genesis of the transaction, the background, the context and the market in which the parties were operating. It puts that the evidence establishes that the parties united in rejecting WIN's wider definition. It also puts that the evidence identifies that the subject matter of the parties' agreement was free-to-air broadcasting.
It puts that the commercial purpose and object was to give WIN a licence only to broadcast free-to-air, and Nine's arrangements with WIN had only ever been for free-to-air rights.
It puts that Nine had rejected WIN's attempt to extend the meaning of broadcast beyond free-to-air and that by 12 March 2013, WIN had accepted Nine's changes to its draft PSA, including the free-to-air definition, and that there is no evidence of any discussion or negotiation prior to the entry of the PSA indicating that a wider definition was in contemplation or play.
It puts that at the time of the PSA both parties knew that:

in order to broadcast in its licence areas, WIN and its subsidiaries were required to hold a commercial television broadcasting licence allowing them to provide, in those licence areas, a broadcasting service comprising a commercial television broadcasting service (as defined by the BSA);
those licences did not include a right to internet stream;
Nine was free to live stream its programming across regional Australia, including in the WIN licence areas, without regulatory constraints; and
Nine was not in a position to give WIN the right to internet stream all of its programs.

It puts that resort to other instruments does not assist. With respect to the definition of "broadcasting services" in s 6 of the BSA, it puts that at the time of the PSA, and for years before, both parties knew that internet delivery had been excluded from the definition by ministerial direction.

Implied term

WIN argues that if "broadcast" is, contrary to its contention, to be given the narrower meaning contended for by Nine, there is to be implied into the PSA a term that each party will not do anything which would deprive the other of that benefit, and by live streaming, Nine is in breach of this term. The purpose of the exclusivity granted to WIN, and the benefit WIN obtains under the PSA, is the ability to derive advertising revenue through carriage of Nine's programming. It puts that it would be antithetical to the purpose of the express provisions of the PSA if Nine could distribute the very same program schedule to viewers in the WIN licence areas, but with Nine's own advertising.
Nine puts that no such term is to be implied, because such a term does not meet the requirements for the implication of a term, and that in any event, WIN did not acquire any rights beyond that which the PSA on its proper construction gives it, and such rights extend to free-to-air transmission only.

Relief

Nine argues that even if it is in breach of the PSA, injunctive relief should be withheld on discretionary grounds because:

WIN led no evidence of having suffered loss by Nine's alleged breach;
injunctive relief would visit disproportionate harm on Nine, predominantly because the current state of technology would not enable Nine to "geo-block", that is, cut off the live streaming business only to persons physically within the WIN licence areas, with the consequence that it would have to shut down the service entirely to comply with any injunction; and
WIN delayed in bringing these proceedings.

WIN's position is that if Nine is in breach, an injunction to enforce a negative stipulation should not be refused unless there are good reasons to do so, and Nine has not established that there are good reasons to do so in this case.

Construction

As a commercial agreement, the meaning of the PSA is to be determined by what a reasonable businessperson would have understood it to mean. It is to be construed by reference to the language used, the surrounding circumstances and the commercial purpose or object of the contract. Reference must be had to its entire text, context and purpose. It is to be construed so as to avoid making commercial nonsense or working commercial inconvenience: Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640 at [35].
In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 French CJ, Nettle and Gordon JJ said at [46]-[51]: Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties … intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".
In Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-353 Mason J (as his Honour then was) held as follows, in a well-known passage: There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances: see Heimann, (38 SR(NSW) at 695).
In Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23 at [97] McLeish JA said of the exception, and in reference to Mason J's statement, that: …the possible exception permitting evidence of actual intention, to which Mason J alluded in the passage above, operates only to rebut reliance on evidence of surrounding circumstances where admissible as an aid to construction.
General evidence of surrounding circumstances is admissible to identify the persons or things referred to in a written contract: Giliberto v Kenny (1983) 48 ALR 620 at 623 [30]; Prenn v Simmonds [1971] 1 WLR 1381 at 1383-1384.

Implied terms

The requirements for the implication in fact of a term into a written contract which is complete on its face are well established. They are that the term must be reasonable and equitable, be necessary to give business efficacy to the contract, be so obvious that it goes without saying, be capable of clear expression and not contradict any express term of the contract: Codelfa at 347; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283.
There is readily implied into contracts an obligation on each party to do all that is reasonably necessary to secure performance of the contract, and generally, it will be implied that each party agrees by implication to do all such things as are necessary on that party's part to enable the other party to have the benefit of the contract: Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 (Mason J). However, Mason J went on to say: It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract.

Meaning of "broadcast" - construction

The constructional choice is a simple one.
Only two possible meanings of the term "broadcast" are contended for, the first being dissemination of Nine's programming by any means, the second being terrestrial transmission via the WIN Stations, that is, pursuant to broadcasting licences issued under the BSA.
The parties had the now almost customary debate in significant commercial contract construction disputes about the extent to which evidence led, supposedly of surrounding circumstances, was admissible in aid of construction.
Much of the evidence adduced by Nine related to precontractual negotiations and was submitted by it to be admissible either under the exception articulated by Mason J in Codelfa, or because it identified the subject matter of the parties' arrangement. I reject both of these submissions.
As to the first argument, the evidence of precontractual negotiations does not rebut any relevant evidence of surrounding circumstances sought to be relied on by WIN.
In any event, the evidence does not sufficiently establish the existence of any consensus outside the one objectively established by the PSA itself.
Where rectification of a written instrument is sought, actual intention as to the effect which the instrument would have, which was inconsistent with the effect the instrument did have in some clearly identified way, must be established by clear and convincing proof: Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345 (McLelland A-JA). I consider that the same approach applies to assessing whether there has been concurrence for the purpose of the exception.
The evidence does establish that Nine had rejected WIN's wider definition of the term on 30 November 2007, and WIN had apparently accepted the narrower definition on 16 October 2008. But this was in relation to negotiation of a long form agreement to expand on the 7 September 2007 one, not in relation to the PSA. Additionally, after WIN had apparently accepted Nine's definition, negotiations continued with respect to other forms of transmission, and a long form agreement was never finalised.
As to the PSA itself, the evidence establishes that as at 12 March 2013, there was apparent consensus on the narrower definition. However, the evidentiary material is incomplete. For example, WIN's letter of 24 December 2012 refers to a number of other letters which are not in evidence. More than this, neither party led evidence as to the course of negotiations which resulted in the use of the word "broadcast" in the PSA with no definition.
Whilst there is no evidence revealing that the parties departed from what appeared to be an earlier consensus that the narrower definition was to apply, there is no clear and cogent proof of any consensus between the parties to reject the wider definition beyond that which the written words of the PSA reflect. The present case demonstrates the wisdom of the policy behind the inadmissibility of precontractual negotiations as an aid to construction.
As to the second submission, the so called evidence of surrounding circumstances, properly characterised, is not evidence identifying the subject matter of the parties' arrangement. The PSA itself identifies the subject matter by using the word "broadcast". This raises a matter of construction, not identification of subject matter.
It is in any event not necessary to resolve the contest with respect to the admissibility of evidence in aid of construction in this case.
A reading of clause 2.1, in the context of the legislative framework and the undisputed factual context in which it has always operated, reveals with clarity that the construction contended for by Nine is the correct one.
Where clause 2.1 refers to broadcasting on and in the licence areas covered by the WIN Stations this is, and can only be, a reference to free-to-air. The licence areas are the geographical delimitations imposed on WIN by its licences under the BSA. These licences cover only free-to-air. Unsurprisingly, it is common cause that the WIN Stations have only ever broadcasted free-to-air and under such licences. They are traditional television stations. They do not deliver by internet. Internet delivery is not geographically based in the same way as is free-to-air.
Additional contextual corroboration, if any is needed, is supplied by the fact that both parties knew that Nine was not in a position to give internet streaming rights to WIN, at least in relation to the NRL.
Bespoke definitions of "broadcast" in various legislative enactments are not of assistance in the construction of the particular instrument under consideration here. In relation to WIN's submission that some guidance is to be derived from the definition of "broadcasting services" in the BSA, and the ministerial direction excluding internet services, it is appropriate to observe that the 1996 ACMA report, which led to the ministerial direction, contains the following statement (ABA, being the former name of ACMA): While the ABA acknowledges that the vast majority of emerging on-line services cannot be called broadcasting in the traditional sense, it is likely that on-line Services will increasingly be offered and marketed with content of a broadcast nature. They may be offered as a package with broadcast radio and television programs.
My conclusion that "broadcast" means free-to-air disposes of the necessity to consider WIN's ultimate preferred construction of clause 2.1, being that broadcast means by any means, but that it can only exercise the right free-to-air. However, I consider it commercially highly unlikely that the parties would have intended to achieve such a result by the use of and through the words which they chose. The only exclusivity Nine was giving was broadcasting on the WIN Stations in the WIN licence areas.
The implied negative stipulation relates only to Nine broadcasting free-to-air. There is nothing to inhibit it from internet live streaming to areas covered by the WIN licence areas, or at all. This is what the parties bargained for. There is nothing perverse, irrational, commercially nonsensical or commercially inconvenient about it. Indeed, this is clearly the position under the agreement entered into on 26 May 2009.
WIN's proposition that its exclusivity is undermined by Nine being able to internet live stream begs the question as to what exclusivity it got. On the construction I have found, the only exclusivity it got was to broadcast free-to-air in the WIN licence areas. There is no suggestion that Nine can do this.
WIN's proposition that the affiliation fees it must pay for exclusivity, which are highly sensitive to its advertising revenue, will be adversely affected if Nine is permitted to stream its own advertising into the licence areas, is counterbalanced by the fact that it would, in that event, pay reduced affiliation fees, and more importantly, advertising revenue generated by WIN through internet streaming would be left out of account in calculating the affiliation fees payable by it to Nine. The definition of Monthly Gross Revenue in clause 3.6, which must be reported to the Australian Communications and Media Authority (or ACMA), clearly relates to free-to-air.
WIN's proposition that internet streaming was covered because it was technologically available at the time of the PSA is counterbalanced by the fact that the PSA makes no express reference to it.
In Bowes v Chaleyer (1923) 32 CLR 159 at 191, Higgins J said that it is not for the Court to weigh the importance of conditions which the parties have put into their contracts.

Implied term

On the footing that there is to be implied into the PSA the term contended for, namely, that each party will not do anything which would deprive the other of the benefit of the contract, Nine is not in breach of any such term.
WIN's relevant benefit is the exclusive licence. It gets to broadcast free-to-air into the WIN licence areas. Nine is not depriving it of this benefit.
Put another way, given the construction of clause 2.1 that I have found, the proposed implied term restricting Nine from internet streaming is not necessary to give business efficacy to the PSA, and contradicts its express terms.

Discretionary grounds

Having regard to my finding that Nine is not in breach of the PSA, it is unnecessary to consider whether injunctive relief should be withheld in any event.
I record, however, that I do not consider that I would have exercised my discretion to withhold relief if WIN had otherwise succeeded. This is primarily because if Nine had been in breach, it undoubtedly went ahead with the service with its eyes wide open. WIN's delay in bringing the proceedings would not have been sufficient to deprive it from relief that it was otherwise entitled. As to evidence of damage, the Court was not hearing any claim for damages, and I would be prepared to infer that if Nine was in breach of the PSA, it must follow that some damage would be suffered by WIN, even if quantification might transpire to be difficult.

conclusion

It follows that the proceedings must be dismissed, and I so order.
I will hear the parties on costs should that prove necessary.
The exhibits are to be returned. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 April 2016

At a glance

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Judgment (18 paragraphs)

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Legislation Cited (2)

Cases Cited (9)