National Telecoms Group Ltd v Bulldogs Rugby League Club Ltd [2003] NSWSC 654 | Case summary

1879/03 NATIONAL TELECOMS GROUP LTD v BULLDOGS RUGBY LEAGUE CLUB LTD JUDGMENT 1 The applicant plaintiff National Telecoms Groups Ltd ("NTG") was a sponsor of the defendant, Bulldogs Rugby League Club Ltd ("Bulldogs"). NTG ceased to make its sponsorship payments and the Bulldogs issued a statutory demand for five sponsorship payments of $55,000 each together with merchandise purchases of $1,560 totalling $276,560. NTG applied to set aside the statutory demand under the Corporations Act 2001 (Cth), s 459G. 2 The affidavits in support of the application filed within the statutory 21 days revealed the following. NTG sponsored the Bulldogs in the 2001 National Rugby League season. It did not take up an option to renew its sponsorship for the 2002 season. In subsequent negotiations, representatives of the Bulldogs said they were looking for a five year sponsorship after the 2002 season on the basis that NTG could benefit by installing the communications, data, electrical and security systems for the Bulldogs' Oasis Project at Liverpool which would be worth $30 million to $40 million. Representatives of NTG indicated that they would sponsor the Bulldogs for the 2002 season on the basis NTG got the first and last right of refusal on the electrical, data and communications work for the Oasis Project and a fine tuning of a further five years' sponsorship could take place along the lines of NTG repaying a percentage of its income from the Oasis Project to the Bulldogs. 3 In March 2002, a sponsorship agreement was executed between NTG and the Bulldogs. It was for a term of one year and provided for sponsorship benefits in return for a sponsorship fee of $550,000 including goods and services tax payable in ten equal consecutive monthly instalments from 1 January 2002. Additional bonuses were to be paid by NTG if the Bulldogs played in the semi-final, played in the grand final or won the grand final. It was provided that the agreement would be automatically extended for an additional five years upon the parties entering into an agreement for the payment of a sponsorship fee calculated as a percentage of the gross value of any contracted work that NTG or its related entities provided to the Oasis Project. In the event of a dispute, the parties were obliged to enter into good faith negotiations and, if unsuccessful, to attempt to resolve the dispute by mediation before commencing proceedings. 4 Tender documents with respect to the Oasis Project issued in April 2002. They provided that NTG was the preferred specialist subcontractor for the structured cabling system. NTG was not provided with the tender documents because the consulting engineers had put them down as a subcontractor and not as the main contractor. The tender documentation was finally made available to NTG and it was granted an extension of time to lodge a tender which it did. 5 Gary McIntyre, the chairman of the Bulldogs, subsequently spoke with representatives of NTG and said he did not wish to deal with them. NTG subsequently received a facsimile from a third party containing an addendum to the tender documents that provided that specialist accredited data cabling subcontractors apart from NTG could be used for the structured cabling system. NTG thereupon suspended payment of its sponsorship on 25 July 2002. Consequent upon discussion between the parties, a further payment was made in August 2002. 6 Nothing had been heard from the Bulldogs with respect to the tender and in early August 2002, NTG was instructed to submit it again. NTG then received an email indicating that tenders had closed on 16 July 2002. On the basis that it had been excluded from the tendering process and on the basis that the Bulldogs' breach of the salary cap rules of the NRL had damaged its sponsorship, NTG resolved to terminate its sponsorship and to seek a refund of the sponsorship fees already paid on 21 August 2002. The January to May 2002 fees totalled $275,000. The statutory demand related to the failure to pay the June to October 2002 instalments. 7 It was on 2 September 2002 that the board of directors of NRL imposed a penalty on the Bulldogs by deduction of 37 competition points and the imposition of a fine of $500,000. 8 NTG had set up a new telephone and communications system for the Bulldogs. Payment for this work had been sought but not paid. No attempt was made to quantify this offsetting claim in the supporting affidavits. I rejected an application to read further affidavits filed outside the 21 day period which sought to remedy this failure. 9 In a further affidavit filed outside the statutory period with respect to its exclusion from the tender process for the Oasis Project, an estimate of $650,000 was made of the total profit NTG was likely to have made if its tender had been successful. 10 The Bulldogs sought to read affidavits in opposition to the application. I reserved my decision on their admission. In Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 292-293 Hayne J refused leave to cross-examine the deponents of affidavits in support of an application to set aside a statutory demand with respect to an allegation of recent invention and that there had been no compromise of an issue. His Honour took the view that the cross-examination went to the merits of the dispute and not to whether it existed or was genuine. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 Mc Clelland CJ in Eq said that, except in an extreme case, a Court should not embark upon an inquiry as to the credit of a witness or a deponent. 11 On an application such as this, I do not regard it as appropriate to determine contested matters of fact except in the clearest of cases. In my view a similar approach should be taken as to the reception of evidence by a respondent to an application to strike out a pleading. 12 The purpose in reading the affidavits was to establish a prior inconsistent statement and a lack of articulation of the basis of a defence or offsetting claim. The latter issue is a matter for submission and not evidence and the former issue goes to the merits of the dispute and not to its existence or genuineness. I reject the reading of the Bulldogs' affidavits. 13 What constitutes a genuine dispute for the purpose of the legislation has been variously described. The Court should be satisfied that there is a serious question to be tried (Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451 at 467). The statute connotes a plausible contention requiring investigation raising much the same sort of considerations as the serious question to be tried criterion on an application for an interlocutory injunction (Eyota at 787). The court must be satisfied that there is a dispute that it is not plainly vexatious or frivolous (Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39). The task is no more onerous than that which would confront a party seeking to meet an application for summary judgment (Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347 at 354). 14 Counsel for NTG based his submissions that a genuine dispute existed on a number of grounds. He submitted that the requirement for mediation was a bar to the proceedings. It was submitted that a debt the subject of a statutory demand had to be immediately recoverable in an ordinary action (Re Elgar Heights Pty Ltd [1985] VR 657 at 669-670) and if it had been sued by the Bulldogs the agreement to mediate was enforceable (Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 at 209) and NTG would have been entitled to a stay of proceedings (Hooper Bailie at 211). 15 Counsel for the Bulldogs argued that the service of the statutory demand was not the commencement of proceedings for the purposes of the mediation provision. If it was, the words "due" and "payable" in the Corporations Act 2001 (Cth), s 459E(1) have the same meaning (Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213 at 220) and the moneys were due and payable under the sponsorship agreement whether or not an action might be stayed because of the mediation provision. 16 In my view, the question whether a stay of proceedings prevents a claim to a debt being the subject of a statutory demand raises a serious issue for determination thereby constituting a genuine dispute in terms of the Corporations Act 2001 (Cth), s 459H(1). 17 Next, counsel for NTG argued that it was an implied term and condition of the sponsorship agreement that the Bulldogs would conduct their affairs and participate in the NRL competition in compliance with the salary cap provisions. It was argued that by breaching the salary cap rules the Bulldogs brought adverse publicity upon their club and NTG as a sponsor failed to gain the benefits that would otherwise flow to it from its advertised association with the club. By stripping the Bulldogs of their competition points, there was no possibility of participation in semi-finals or grand final and the opportunity for further publicity to NTG upon payment of the additional bonuses was frustrated. 18 It was contended on behalf of the Bulldogs that NTG could not establish the five conditions for implication of a term propounded by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. The implication must be reasonable and equitable, it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it, it must be so obvious that it goes without saying, it must be capable of clear expression and it must not contradict any express term of the contract. In my view it is reasonably open to argument on the limited evidence before me that those conditions were satisfied. At least at this stage I would not exclude the prospect of a court making the implication. 19 The Bulldogs also submitted that the implication of such a term and its breach would sound in damages and no attempt was made in the affidavits filed within the statutory period to quantify those damages. 20 In my view, however, it is open to argument that breach of such an implied term constituted a repudiation of the contract of sponsorship leading to its termination and the release of NTG from its obligation to pay the further sponsorship fee instalments. 21 Next, NTG argued that the Bulldogs by silence represented that they would comply with the rules of the NRL including the salary cap rules, that representation was misleading or deceptive conduct in terms of the Trade Practices Act 1974 (Cth), s 52(1) and NTG is entitled to a refund under s 87(2)(c). 22 On the evidence before me it is unlikely that this claim will succeed. While the Bulldogs may have been conscious of a breach of the salary cap rules, there is nothing to suggest that NTG was, so that even if silence constituted a misrepresentation, it is unlikely that NTG suffered loss or damage "by" the conduct to give rise to relief under the Trade Practices Act 1974 (Cth), s 87(1). 23 Finally, NTG argued that it was an implied term of the sponsorship agreement, or a collateral agreement in consideration for entry into the sponsorship agreement, or a representation on which NTG acted by entering into the sponsorship agreement that NTG would be given the first and last right of refusal for work on the Oasis Project. It was submitted that NTG was excluded from the tender process and a genuine dispute exists on this ground as well. 24 On behalf of the Bulldogs it was argued that pre-contractual negotiations cannot ground a genuine dispute because the representatives of NTG, no doubt, considered each of the terms of the document which ultimately constituted the sponsorship agreement before executing it. It was submitted that breach of any such term could only give rise to an offsetting claim to damages and no attempt was made in the affidavits filed in the statutory period to quantify those damages. 25 I am of the view, however, for similar reasons to those discussed above that it is open to argument that the exclusion from the tender process gave rise to an entitlement to terminate the contract or to relief under the Trade Practices Act 1974 (Cth), s 87 thereby constituting a complete defence to a claim for the outstanding instalments of sponsorship fees. 26 There will be an order setting aside the statutory demand and an order that the Bulldogs pay NTG's costs.

National Telecoms Group Ltd v Bulldogs Rugby League Club Ltd

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Judgment (6 paragraphs)

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