Optus Vision P/L v Australian Rugby Football League Ltd & 5 Ors - [2004] NSWCA 61 - NSWCA 2004 case summary — Zoe

NSWNSWCA

Optus Vision P/L v Australian Rugby Football League Ltd & 5 Ors

[2004] NSWCA 61

Court of Appeal (NSW)|2004-03-12|Before: Optus Vision P, Meagher JA, Santow JA, Einstein J

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Court

Court of Appeal (NSW)

Decision date

2004-03-12

Before

Optus Vision P, Meagher JA, Santow JA, Einstein J

Source

Original judgment source is linked above.

Judgment (32 paragraphs)

[1]

CITATION : Optus Vision P/L v Australian Rugby Football League Ltd & 5 Ors [2004] NSWCA 61 HEARING DATE(S) : 05/02/04, 10/02/04 JUDGMENT DATE : 12 March 2004

[2]

JUDGMENT OF : Meagher JA at 1; Santow JA at 2; Stein AJA at 117 DECISION : 1. The appeal be allowed; 2. The respondents pay the appellant's costs of the appeal and at first instance; 3. Judgment for the appellant in the sum of $2.5 million.

[3]

CATCHWORDS : CONTRACT - INTERPRETATION - Context in form of interconnected agreements does not overrule primary text in absence of ambiguity or anomaly - context can be ambiguous or itself give rise to anomaly - effect of this on construction - text of contract the primary source and starting point for interpretation - construction of contract to avoid absurd or unreasonable result frustrating commercial purpose of contract - party bound in all its capacities and does not escape obligation by acting as a partner - meaning of sponsorship and exclusivity. LEGISLATION CITED : Partnership Act 1892 (NSW) Investors Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 WLR 896 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 186 ALR 289 at 292-3 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-3 B & B Constructions (Australia) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 CASES CITED : Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 421 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 State Bank of New South Wales v Commonwealth Savings Bank of Australia (1984) 154 CLR 579 Shoshana Pty Ltd & Anor v 10th Cantanae Pty Ltd & Ors (1988) 14 FCR 285 at 286 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 2 NSWLR 310 at 313 Optus Vision Pty Limited (ACN 066 518 821) PARTIES : v Asutralian Rugby Football League Limite (ACN 003 107 293) & 5 Ors FILE NUMBER(S) : CA 40400 of 2003 COUNSEL : Apellant: I M Jackman SC Respondents: A Sullivan QC & A S Bell SOLICITORS : Apellant: Baker & McKenzie Respondents: Blake Dawson Waldron

[8]

SALIENT FACTS AND ISSUES 4 To elaborate, it is not disputed that Optus lent $5 million to the ARL and that the terms applicable to that loan are governed by the Sponsorship Deed. But the proper interpretation of the Sponsorship Deed is in dispute. So too whether any breach of it has occurred and if it has, its consequences for repayment of the loan or damages. 5 ARL successfully contended before the trial judge, Einstein J, that it was not bound by the Sponsorship Deed in its capacity as a partner with an affiliate of News Limited, National Rugby League Investments Limited ("NRLI"). ARL also successfully contended that (a) there was no relevant breach of the Sponsorship Deed giving rise to repayment of half the loan, but (b) even if there were, the terms of the sponsorship Deed dealing with the consequences of termination had not been satisfied, in the absence of evidence of the value of the benefits that would have accrued to the Optus Group in the unexpired portion of its term (a remaining year out of the two year term). Each of these issues is the subject of the present appeal. 6 That Sponsorship Deed is last in a sequence of agreements entered into over two years (1998 to 2000). They cover the common subject matter of a national rugby league competition, its funding and sponsorship and in that way are inter-connected. The first of these was entered into after an accommodation had been reached by February 1998 between News Limited and ARL following earlier conflict. It was documented more formally in a merger agreement of 15 May 1998. That conflict centred around competing Rugby League competitions which each conducted. That accommodation led to restructure of the game of Rugby League into what became a combined national competition. There were in consequence substantial transitional costs for ARL in joining the combined competition and also from existing ARL Club player contracts. For these Optus was to provide sponsorship funding to ARL and its clubs. This it eventually provided on 3 February 2000 under the sponsorship arrangements then entered into and which are the subject of the present litigation. The $5 million funding was anticipated in earlier documents dating back to a Memorandum of Agreement dated 20 February 1998 but the money for various reasons was not made available till February 2000. 7 By the Sponsorship Deed Optus was promised certain exclusive rights of sponsorship by ARL and the ARL Clubs for the 2000 and 2001 seasons. While there remains dispute as to whether competition naming rights were covered by exclusivity arrangements which precluded Telstra having them, it is undisputed that such promises that were made were in consideration of the limited recourse interest-free loan of $5 million by Optus to ARL. On 18 December 2000, half-way through the term of that agreement, ARL and NRLI granted to Telstra what were said to be inconsistent sponsorship rights, and in particular naming rights to the competition. This was in return for payments of $4 million per annum under what I shall refer to as the "Telstra Contract". That contract is in the form of a terms sheet which effects a binding agreement between Telstra and the partnership of NRL and NRLI. 8 The trial judge concluded first that ARL was not bound by the Sponsorship Deed in its capacity as a partner of NRLI. He then concluded that there was no breach of the exclusivity provisions of the sponsorship Deed and in particular that naming rights to the competition were not covered by its terms. In each case he relied in construing the Sponsorship Deed on the sequence of agreements preceding and contemporaneous with the Sponsorship Deed. 9 Pursuant to the provisions of its Sponsorship Deed and by reason of its termination for alleged breach by ARL, Optus unsuccessfully claimed recovery of half the amount lent, namely $2.5 million. Its claim was on the basis that termination had occurred half-way through the two year sponsorship, so that half the loan was said to represent "the value of the benefits that would have accrued to the Optus Group in the unexpired portion of the term". Optus contended that it was not required to submit any evidence as to the actual value of the benefits received or to be received. Optus contended, unsuccessfully, that there was no reason to regard the value of the sponsorship rights as materially different for either of the two years. The trial judge concluded that Optus had failed to prove any damage or entitlement to be repaid the loan, which continued payable in accordance with the surplus profits formula in the Sponsorship Deed. Issue is joined in this appeal on each of those contentions. 10 The issues in the appeal therefore fall into four categories: (a) whether the obligations on ARL under the Sponsorship Deed bound it only in certain of its capacities, and not in its capacity as a partner of the NRL Partnership in conducting the NRL competition, (Appeal Grounds 1 and 2); "the capacity issue"; (b) whether the kind of sponsorship which ARL promised not to provide to Optus' competitors under the Sponsorship Deed included competition naming rights (Ground 3); "the Competition Naming Rights Issue"; (c) whether ARL was in breach of cl.6.1(b) and cl.8.1 of the Sponsorship Deed by entering into and performing the Telstra Contract (Grounds 4 and 5); "the best endeavours/breach issue"; and (d) whether Optus was entitled to repayment of $2.5 million, as representing half the value of the benefit of the two year contract (Grounds 6 and 7); "the quantum issue". 11 I deal with each issue in turn.

[9]

The Capacity Issue or, should the Sponsorship Deed be construed so as not to bind ARL as a partner of the NRL Partnership? (Grounds 1 and 2) 12 I begin with an elaboration of the relevant background bearing on this issue. The Sponsorship Deed itself was entered into on 3 February 2000 between Optus, ARL and the six Clubs which had remained loyal to the ARL during the "Super League" conflict of the mid-1990s. 13 That conflict had been resolved some two years earlier by a Merger Agreement and associated documents dated 14 May 1998: judgment at [16]. From that time, the NRL Competition was owned and operated by a partnership known as the NRL Partnership, between ARL and NRLI in equal proportions: judgment at [22]-[23]. ARL and NRLI entered into a Services Agreement, also on 14 May 1998 for the day-to-day conduct of what it terms "the NRL Competition". Contracts relating to Key Revenue Rights namely media, sponsorship and merchandising rights (other than franchisee sponsors) in relation to the NRL Competition were reserved for the NRL Partnership: judgment at [25]. Similarly, the Clubs on that date agreed that the NRL Partnership had the exclusive right to exploit all intellectual property rights, including "Marketing Rights" and "Sponsorship and Naming Rights": judgment at [26]. 14 On 15 May 1998, Optus and ARL entered into a Funding Deed. It was expressed to be for the purpose of assisting the ARL-loyal Clubs in making the transition to the newly established NRL Competition in 1998, 1999 and 2000: judgment at [18], [30]. A dispute concerning the operation of the Funding Deed led to the amended agreement (called the Sponsorship Deed) dated 3 February 2000, on which Optus' claim is based. 15 The Sponsorship Deed provided for a limited recourse loan of $5 million from Optus to ARL, in consideration of the appointment of Optus as a sponsor for the years 2000 and 2001. Clause 5 and Schedule 3 set out a number of specific sponsorship benefits such as ground signage, the display of Optus' logo on players' shorts and on all club stationery, and promotions to club members and sponsors. In addition, it contains two central stipulations on which Optus relies. 16 First, cl.6.1(b) provided that: "6.1 The ARL and each of the ARL Clubs agree to: ... (b) promote the sponsorship relationship between [Optus] and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefits to [Optus] ..." 17 Second, Clause 8.1 provided that: "8.1 The ARL and each and all of the ARL Clubs agree not to accept sponsorship from any competitor of any company in the Optus Group and will use their best endeavours to ensure that no player or official endorses or otherwise promotes or is involved in any promotion of any competitor's products, services, logos, trademarks or brands during the term of this deed. A competitor of the Optus Group includes, but is not limited to, Telstra Corporation, Telstra Media Pty Limited, Foxtel Management Pty Limited, the Foxtel Partnership (consisting of Telstra Media Pty Limited and Sky Cable Pty Limited) and AAPT Limited." [Emphasis added] 18 The term of the Sponsorship Deed was two years from 3 February 2000, that is to say expiring 3 February 2002: cl.3. 19 Further, on 15 May 1998, Optus entered into a separate agreement with the partners of the NRL Partnership (namely ARL and NRLI) known as the Partners Funding Deed: judgment at [37]-[39]. Under cl.3.3(a), the Partners are required to use their best endeavours to obtain what is termed "Third Party Sponsorship Funding" under cl.3.3(b) of that Deed the partners are prohibited from granting "naming rights" to the NRL Competition to Telstra or Optus before the end of the 2000 season: judgment at [40]. That is, the NRL Partnership could not contract for the competition to be known as, say, the "Telstra Cup" or the "Optus Cup" before the end of the 2000 season. I deal under Issue 2 (the competition naming rights issue), with the trial judge's conclusion that cl.3.3(a) and (b) of the Partners' Funding Deed prevent Optus from having exclusivity for competition naming rights. 20 The appellant's written submissions encapsulate its challenge to the trial judge's conclusion in these terms: "Moreover, the construction adopted by the trial judge is itself productive of absurdity. The effect of reading down references to ARL in the Sponsorship Deed as meaning ARL other than in its capacity as an NRL partner, is that ARL's contractual obligations entered into on its own account were readily undermined by ARL as one of the NRL Partners simply deciding to act in a contrary manner in conducting partnership business, such as the conduct of the NRL competition itself. The ability of a party unilaterally to undermine or render nugatory the value of its contractual promises is ordinarily the occasion for the implication of a term to prevent that outcome: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450 (McHugh and Gummow JJ); Breen v Williams (1996) 186 CLR 71 at 103 (Gaudron and McHugh JJ). Ironically, in the present case an express term which, construed naturally, would have prevented ARL from undermining or rendering nugatory the enjoyment by Optus of its contractual rights, has been given a strained construction with the result that ARL can validly act in a way which seriously undermines the enjoyment of those rights."

[10]

RESOLUTION OF CAPACITY ISSUE 21 The essence of the trial judge's reasoning, repeated by the respondents on appeal, is that this documentary context displaced the ordinary meaning of ARL being bound in all its capacities, notwithstanding unqualified reference to ARL in the Sponsorship Deed. The trial judge invokes the interpretive approach of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 WLR 896, quoted with approval by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 [11]. That is to ask what "a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting" would have understood by the unqualified reference to "ARL" in the Sponsorship Deed. The question is therefore whether such a person would understand that reference as if the following exclusion were added; "other than in its capacity as a partner in the NRL Partnership"; judgment at [67] - [79]. The trial judge answered this in the affirmative. His reasons at [58] to [84] contain a detailed exegesis of that documentary context. 22 The trial judge at [10] in his judgment commences by quoting the observations of the High Court in Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 186 ALR 289 at 292-3: "in Codelfa (1982) 149 CLR 337, Mason J (with whose judgment Stephen J and Wilson J agreed), had referred to authorities [In particular, speeches of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381 at 1383-1385; [1971] 3 All ER 237 at 239-241; L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 261; and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-997; [1976] 3 All ER 570 at 574-576] which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract. 'presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating". { Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574] Such statements exemplify the point made by Brennan J in his judgment in Codelfa at 401: "The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used." 23 To this I would add the observation of Lord Steyn, writing extra-judicially on "The Intractable Problem of the Interpretation of Legal Texts" (2003) SLR 1 at 7. After pointing to the shift from literal to purposive interpretation, he adds the caveat that it would be an oversimplification to say that there has been a homogenous shift towards a purposive interpretation of all legal texts. Nonetheless he says: "In a network of contracts governing a construction project, parties ought generally to be able to rely on the obvious meaning of the interlocking texts". The respondents seek to analogise the present sequence of agreements to such a network of contracts. 24 But resort to extrinsic evidence, here documentary, must not detract from the axiomatic proposition that the starting point when considering a point of interpretation must be the text itself. As Lord Steyn observes "The mandated point of departure must be the text itself. The primacy of the text is the first rule of legal interpretation for the judge considering a point of interpretation. Extrinsic materials are therefore subordinate to the text itself". Mason J reminds us in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-3 that the starting point is to identify ambiguity in that text: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning." 25 Thus far no Australian authority has gone so far as to allow unambiguous language to be contradicted by context. In B & B Constructions (Australia) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 Kirby P pulled back from the proposition that context can be so used, only going so far as to suggest that there can be cases where "ambiguity would not be perceived without reference to that extrinsic evidence" (at 234). He nonetheless concludes: "At least if on the face of the written agreement, the words appear ambiguous, the parties may call evidence to clear up the ambiguity. They may provide their own dictionary as to the meaning to be assigned to a particular word or phrase. This approach was accepted as the rule of the common law by the House of Lords in Prenn v Simmonds [1971] 1 WLR 1381 at 1388; [1971] 3 All ER 237 at 243. It was accepted as part of the common law of this country in Codelfa (at 352): see also Horsfall v Braye (1908) 7 CLR 629 at 638 and Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 606;" 26 Here, it was submitted by the respondents that the obvious meaning of the interlocking texts of these agreements had the effect that "ARL" in the Sponsorship Deed must be construed as meaning "other than in ARL's capacity as a partner in the NRL partnership". If correct that would allow ARL in its capacity as a partner in the NRLI partnership to bypass with impunity any constraint that it entered into as ARL and in particular concerning competition naming rights, were they covered by the exclusivity arrangements in favour of Optus. It is convenient to deal with the present capacity issue on the assumption that the trial judge was in error in concluding that competition naming rights were not covered, a proposition I consider under Issue 2. 27 Essentially, the trial judge found that when the prima facie unambiguous reference to "ARL" was found in the Sponsorship Deed, that reference had to be read in the context of a suite of inter-related agreements. So read it was said to be revealed as ambiguous, admitting of a meaning which excluded ARL as a partner in the NRL partnership. 28 Even if it be legitimate to use context unprompted by anomaly to attribute ambiguity where none is apparent, such a construction leads to its own serious anomalies. One is forced to suppose that the parties, well knowing that ARL was henceforth conducting the Rugby League competition exclusively in partnership with NRLI, nonetheless entered into a set of obligations under the Sponsorship Agreement that were a solemn farce. If ARL qua NRL partner was not bound, why would Optus make available to ARL an interest-free non-recourse loan for a set of valueless unenforceable sponsorship obligations? The only value they could have had would be if ARL were still conducting the NRL competition in its own right. But Optus well knew that state of affairs had ceased over two years before. Applying Lord Hoffman's test of what a reasonable person with Optus' background knowledge would understand, it would hardly be the case that Optus would be looking for exclusivity from ARL for ARL's now defunct Rugby League Competition, and not from ARL qua partner in the competition which Optus well knew replaced it. 29 Precisely the same analysis applies to the obligations purportedly adopted by ARL and each of the ARL clubs elsewhere in the Sponsorship Deed, such as under cl.6.1 or earlier under cl.5 along with Schedule 3. 30 From ARL's viewpoint too, a reasonable person in ARL's position having all the background knowledge reasonably available to the parties in their situation at the time of contracting, would bring to bear the knowledge that ARL had surrendered its independent capacity to carry on the rugby league competition in favour of its partnership with News Limited. Therefore, prima facie what would be conveyed to that reasonable person was that ARL was contracting with no exclusion of its capacity as an NRL Partner. Otherwise there would be no point in the Sponsorship Deed so far as Optus was concerned. All the benefits would flow to ARL in the form of an interest free loan, leaving ARL entirely free to carry on its partnership arrangements unbound by any sponsorship obligations to Optus in return. 31 Starting with the proposition that the primacy of the text is the first rule of interpretation, the text here gives no indication of any ambiguity whatsoever. Nor is there any obvious anomaly from applying the natural meaning of "ARL". Resort is then had to extrinsic materials to endeavour to find a basis for contending that a different meaning to that natural meaning should be attributed to ARL, namely one which excludes ARL qua NRL Partner. While it is true that "… few, if any, English words are unambiguous or not susceptible of more than one meaning or have a plain meaning" (per McHugh JA in Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 421) it is difficult to find a less ambiguous reference than the unqualified "ARL". 32 Nor does such unqualified reference yield a meaning which would frustrate the object of the Sponsorship Deed or render it futile. Ordinarily that is the signal for looking to extrinsic evidence to see whether an alternative interpretation can reasonably be found. Here anomaly rather occurs when one qualifies the plain meaning of ARL, as I have explained. To quote Lord Steyn again (at 7): "Extrinsic materials are therefore subordinate to the text itself. Often lawyers argue cases on the reverse hypothesis. Justice Frankfurter recalled the lawyer who said to the United States Supreme Court 'the legislative history is doubtful so I invite you to go to the statute'. Contextual materials must of course not be downgraded. On the contrary, the judge must consider all relevant contextual material in order to decide (a) what different meanings the text is capable of letting in and (b) what is the best interpretation among competing solutions. But the judge's task is interpretation not interpolation. What falls beyond that range of possible contextual meanings of the text will not be a result attainable by interpretation. There is a Rubicon which judges may not cross: principles of institutional integrity forbid it." 33 The two recent decisions in the House of Lords explored the extent to which contracts may express a meaning other than the obvious meaning of the contractual language. They are Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 and Investors' Compensation Scheme Ltd v West Bromwich Building Society (supra). They were both cases in which, contrary to the present case, there was clear indication of something having gone wrong in the drafting. In the first case it was obvious that the notice wrongly named the day upon which the tenant had to serve a contractual notice to determine release. In the second case there was similarly a clear indication that something had probably gone wrong in the drafting in terms of language and syntax. Lord Hoffman's approach liberated judges from indulging in the fiction that the parties must have intended an absurdity. The parties were no longer left to the doubtful comfort of a remedy in rectification, or none at all. But it would be ironic indeed if that substituted the notion that context may override text, absent ambiguity or obvious anomaly. 34 In the present case, it is said by the respondents that whatever be the case concerning the prima facie import of the unqualified reference to ARL, here context in the form of a series of interlocking texts drafted by the same law firm and involving the same or similar parties, properly led to the trial judge to attribute a qualified meaning to ARL in the Sponsorship Deed which excluded ARL qua NRL Partner. I need now to turn to those agreements in more detail to see if they do indeed reveal ambiguity so as to displace what prima facie appears the plain meaning of the Sponsorship Deed. In particular I need to ascertain whether the genesis of those agreements adequately explains what appears prima facie to be an absurd and uncommercial result where Optus gains essentially nothing for its interest free loan. 35 The trial judge said that he had regard to "the manner in which the parties themselves differentiated in a series of cognate agreements between the ARL in its traditional capacity as the peak body for the former ARL Competition, on the one hand, and the ARL in its capacity as a partner with NRLI …."; [69]. 36 After referring to the interaction of various of the agreements, the trial judge fastens upon "the suite" of transaction documents as having from early days involved : "• obligations of one of those partners which were not partnership obligations and were clearly discernible not to be partnership obligations; • obligations of the partnership which were clearly discernible as such.

[11]

[79] In the result the central proposition for which ARL has contended is upheld. Upon its proper construction, cl8.1 of the Sponsorship Deed in referring to the ARL was not intended to include and is not properly read as including the ARL in its capacity as a Partner of the NRLI Partnership. The proper approach is to construe the reference to the ARL in the Sponsorship Deed as having been intended to mean and as a reference to the ARL, other than in its capacity as a partner in the NRL Partnership." 37 First in the suite of agreements is a Memorandum of Agreement described as "NRL Support - Optus", the precursor to the later Merger Agreement. It is dated 20 February 1998. After stating its purpose as being concerned with the contribution Optus will make "to the merger of the ARL and Super League Rugby League competitions to form a national Rugby League competition" it sets out Optus' funding obligations in cl.2.1. Specifically those funding obligations require payment to what is there described as "NRLP". NRLP stands for "The National Rugby League Partnership". That was the partnership between ARL and News Limited (on behalf of a company still to be formed). There is to be funding amounts of $12 million and $10 million between 1998 and 1999 (cl.2.1). 38 Clause 3 then provides for the $5 million interest-free loan (only later to be made available under the Sponsorship Deed): " 1999 FUNDS OV must provide limited recourse loan funds to ARL to finance the ARL clubs' transitional costs in restructuring the game of rugby league and to satisfy existing ARL club and player contract obligations provided that in no event will OV be obliged to loan more than $5,000,000. Any such loan is pursuant to a letter dated 24 December 1997 between the ARL and OV, and subject to the conditions set out in that letter. NRLP has no liability to OV in relation to funds made available by OV to ARL." 39 The $5 million loan there referred to is therefore for the purpose of covering ARL Clubs' transitional costs in re-structuring the game of Rugby League and to satisfy existing ARL club and player contract obligations. 40 That amount of $5 million was not however then lent . The Sponsorship Deed reflects this earlier history when it defines "the loan" as "the cash advance of $5.0m from Vision to ARL on the terms and conditions set out in a deed called 'the Optus/ARL Funding Deed' dated 15 May 1998 as amended by a deed dated 27 January 2000". 41 The respondents persuaded the trial judge that because these various agreements demonstrate a clear differentiation between the partnership on the one hand and ARL on the other that sufficed to establish that reference to ARL alone in the Sponsorship Deed must be taken to exclude ARL qua NRL partner in the NRL partnership. This was so despite absence of any words saying so. I shall refer to that as "the exclusionary implication". But an alternative and more rational hypothesis is not to make that exclusionary implication merely because there is no express reference to NRL as a partner. Rather the explanation for absence of that express reference is that there was no need to make it - it simply went without saying that ARL was bound in all its capacities. Indeed one would not expect an express reference to the NRL partners collectively, as that would then have bound NRLI as distinct from just ARL in all its capacities. 42 The respondents also relied on the merger agreement of 14 May 1998 (Blue, 1/10). It provided for News Limited to make a matching loan on a similar interest free limited recourse basis, repayable by an amount equal to one-third of the amount by which ARL's available income from licence payments and ARL's revenue share exceeds $8 million for that financial year. There is a similar loan by Nine Network Australia Pty Limited, also by deed dated 14 May 1998 called the "Nine Funding Deed"; Blue, 1/106. 43 The News loan is documented in the News Funding Deed pursuant to the Merger Agreement of 14 May 1998 and the Nine loan in the Nine Funding Deed. In each Funding Deed there is again a specific provision (cl.2.3) that "the proceeds of the Loan must be applied by ARL for the purposes of grant to each ARL Club in 1999 of up to $1,500,000 per Club to enable the Club: (a) finance its transitional costs in re-structuring the game of Rugby League; and (b) satisfy existing Club and player contract obligations". Blue, 1/90. 44 The respondents again rely on the News Funding Deed and the Nine Funding Deed as differentiating between ARL on the one hand and ARL and NRLI "in their capacity as Partners in the NRL Partnership". They argue from this that the significance of the differentiation between the two sets of parties is that ARL was not intended to be bound as a partner in the NRL partnership save where specific provision was made to that effect. An example of this is said to be the provision of "sponsorship funding" specifically provided for in the News Funding Deed though not the Nine Funding Deed. Clause 5.1 of the former provides specifically that "News must pay to the NRL Partnership the sum of $5,000,000 for each of the 1998, 1999 and 2000 Seasons". That is said to reinforce the implication that where it is intended to bind ARL qua partner the document says so. 45 But for that differentiation to have had the significance attributed to it, one would expect to find it carried through consistently. It is not. Consider cl.3.1 of the News Funding Deed. It provides that "ARL must pay to News within three months of the end of each Financial Year, in reduction of the Money Owing, a sum equal to one-third of the amount by which ARL's available income from Licence Payments and ARL's Revenue Share exceeds $8 million for that Financial Year". 46 Significantly, "revenue share" is defined to mean "revenue received by ARL from the NRL Partnership". Why would the repayment formula focus upon revenue provided from the NRL Partnership in the form of licence payments or otherwise if ARL qua NRL partner was not to be bound? Similarly cl.4 provides for limited recourse against NRL sources. That again is not what one would expect under the strict differentiation pressed by the respondents. 47 In such a context, the sponsorship funding in cl.5 of the News Funding Deed made to "the NRL Partnership" serves the obvious purpose of binding both partners. While this money does not appear to be a loan, the obligation imposed on "the partners" under cl.5.4(a) is to use their best endeavours to obtain "Third Party Sponsorship Funding". Conversely, that obligation does not render ARL liable only in respect of its partnership assets should it breach that covenant. One would expect that assumed differentiation to be strictly observed in both directions, if it existed at all. But it clearly is not reciprocal. 48 Finally when it comes to the reference to "each party" as in cl.6 containing representations and warranties, again there is no differentiation between ARL, and ARL as a partner of the NRL partnership. 49 When cl.9 states that "nothing expressed or implied in this deed will constitute or be construed to constitute a party as a partner … of another Party …" that serves to reinforce the more likely purpose of a distinction drawn between ARL as a partner in the NRL Partnership and an unqualified reference to ARL. Clearly each party must be understood as wishing to avoid partnership liability for acts, including borrowing of the other party save where they are acting pursuant to their partnership; hence the very explicit reference to "the partners" where being so bound was intended. 50 Having dealt with the parallel loans from News Limited and Nine, I turn to the Optus/ARL Funding Deed also entered into on 15 May 1998. It is expressed to be simply with "ARL". Recital B provides that "NRLI and ARL have formed the NRL Partnership to conduct the NRL Competition on and from the 1998 Season". 51 The Optus/ARL Funding Deed provides for two separate sets of funding. The first, described as "Optus Funding", is provided for under cl.2.1. It is a sum of "up to a maximum of $16.5 million" to be provided "to ARL", and which is not to be a loan (cl.2.3). 52 Clause 3.1 again provides for the $5 million loan from Optus. Again the reference is to "ARL" and is to the effect that ARL "may provide to Vision a Notice requesting that Vision provide a Loan in the amounts set out in the Notice (up to a maximum of $5,000,000)". The purpose of the loan is provided for in cl.3. It is again to "finance its [ARL's] transitional costs in re-structuring the game of Rugby League; and …. satisfy existing Club and Player contract obligations". No interest is payable but the repayment is again exclusively from ARL's income from "Licence Payments" and ARL's Revenue Share. That revenue is in each case derived from the very same NRL Partnership. That as I have said is hardly consistent with the supposed strict differentiation between ARL qua NRL partner and ARL simpliciter. 53 Again the respondents seek to rely upon the contrast between the Optus/ARL Funding Deed between Optus and ARL where no express reference is made to ARL being bound qua NRL partner, and the Optus/Partners Funding Deed made 15 May 1998 where the agreement is between Optus on the one hand and ARL and NRLI "in their capacity as Partners in the NRL Partnership". In the latter case, Optus explicitly provides funding to "the NRL Partnership". That contrast between the two deeds of the same date, that is to say between the Optus/Partners Funding Deed and the Optus/ARL Funding Deed is said by the respondents to emphasise a strict differentiation between reference to ARL qua NRL partner, bound as such, and ARL simpliciter, where said not to be bound as an NRL partner. Stripped to its essentials, this is an argument based on the maxim expressio unius exclusio alterius; that when the draughtsman intended to bind ARL as a partner in the NRL Partnership it expressly said so. Reference merely to ARL without reference also to ARL as a partner in the NRL Partnership therefore is said to impliedly exclude ARL in its capacity as NRL Partner. 54 Even were the maxim applicable in such a context, it only applies if it is clear that the provision in question was intended to make exhaustive provision with respect to the topic concerned (State Bank of New South Wales v Commonwealth Savings Bank of Australia (1984) 154 CLR 579). Applying that reasoning here, one is asked to assume that each time the relevant deed referred to ARL as an NRL Partner or referred directly to the NRL Partnership, it did so exhaustively, with implication to the contrary where absent in other deeds. Hence whenever there was instead an unqualified reference to ARL in any of the other deeds it impliedly excluded from any obligation ARL qua NRL Partner. In effect ARL was to be allowed thereby to don a novel fictitious partnership veil, despite the fact that a partnership is not a separate legal entity, distinct from and shielding the partners themselves; Partnership Act 1892 (NSW) s6. 55 I come finally to the amending deed to the Optus/ARL Funding Deed of 3 February 2000. It amended the Optus/ARL Funding Deed including with respect to the $5 million loan. Again, the respondents make much of the fact that it opens by referring to ARL "in its own capacity and as agent for each and all of the ARL Clubs", omitting any reference to ARL in its capacity as NRL partner. More is made of the fact that cl.1.2 in its definitions refers expressly to the "Optus/Partners Funding Deed" where the parties are named as including "NRLI (ARL and NRLI in their capacity as partners in the NRL Partnership)". 56 This deed amended cl.3 of the Optus/ARL Funding Deed. In cl.4 it extends the period during which ARL may give the notice, which is a prerequisite of the making of the loan. Otherwise it expressly provides that cls.3.3 and 3.4 of the original funding deed remain wholly unaffected and enforceable. There is express confirmation of the fact that the advance is still limited recourse and on the same terms and conditions as the original Optus/ARL Funding Deed. 57 Clause 5 of the Optus/ARL Funding Deed is also amended. The broad effect of that amendment is that Optus' restricted liability to demand repayment of the loan is, in certain circumstances, removed, namely, where Optus has validly terminated the Sponsorship Deed. In that circumstance, Optus is entitled to repayment of the loan in accordance with cl.11 of the Sponsorship Deed. I deal with the consequence of this under "quantum" as the fourth issue. 58 Finally, cl.7 provides for the execution of the Sponsorship Deed. It was executed on the same day as the amending deed, namely 3 February 2000. 59 The parties to it are Optus, ARL and the named ARL Clubs. The Sponsorship Deed is ultimately the critical document to be construed. It provides for the current terms and provisions applicable to the loan of $5 million, whose progenitors I have traced in my reference to the earlier agreements. While the respondents rely heavily upon the linkages between this Sponsorship Deed and the earlier deeds to which I have made reference, I find that they provide no basis for construing the unqualified reference to ARL in the Sponsorship Deed as excluding ARL qua NRL partner. 60 Accepting that ambiguity is endemic in language, one therefore expects to find at least as much ambiguity in documentary context as in the original text. Risk of error in construction from ambiguous context is compounded by resort to documentary context when there is no anomaly or ambiguity justifying that resort. This is especially so when the result of doing so is highly anomalous. So it was here. This was never a case where a literal interpretation of the primary text produced absurdity. Rather it was a case where absurdity resulted from departing from the plain meaning of the primary text, itself unambiguous.

[13]

SECOND ISSUE - Did the sponsorship deed prevent ARL from conferring naming rights to the Competition on Telstra? Ground 3 62 The trial judge held that, even if ARL bound itself in all its capacities in entering into the Sponsorship Deed, that deed properly construed did not prevent ARL from conferring on Telstra naming rights to the NRL competition in 2001. His reasons are to be found in the judgment at [95]-[96] and earlier at [80]-[94] where he sets out to explain how the Sponsorship Deed, the Optus/Partners Funding Deed of 14 May 1998 and its Amending Deed dated 3 February 2000 bearing upon that construction as part of "the mutually known facts". The reason for that conclusion was said to be that otherwise the Sponsorship Deed read in that context would be inconsistent with cl.3.3 of the Optus/Partners Funding Deed of 15 May 1998. The latter prevented the NRL from granting naming rights to the NRL competition to Telstra or Optus until the end of the 2000 season, and otherwise provided for the partners to use their best endeavours to obtain Third Party Sponsorship Funding. 63 The appellant contends, in my respectful view correctly, that there are two fundamental flaws in that reasoning. I quote below from the appellant's written submissions: "First, the reasoning is at odds with the width and generality used in clause 8.1 of the Sponsorship Deed. Clause 8.1 prevents ARL from accepting "sponsorship" from Telstra, and the term "sponsorship" in its ordinary and natural meaning includes sponsorship by way of competition naming rights. An agreement whereby the NRL competition is called, for example, the "Telstra Cup", is sponsorship in the most central or focal meaning of that term. Further, if the naming rights agreement requires players to display Telstra's logos and trademarks (as Clause 2.1 of the Telstra contract stipulates), then the issue arises under clause 8.1 as to whether ARL has used its best endeavours to ensure that such promotion not occur. Second, the trial judge's reasoning is based on the proposition that because something was not prevented by one contract, it must therefore have been permitted by a different contract, in circumstances where the parties, the consideration and the apparent purposes of the two contracts differed. There is no inconsistency in a particular activity being prevented by the second contract in return for additional consideration, even if it was permitted by the first. In those circumstance each of the two contracts must be construed according to its ordinary and natural meaning, rather than being approached on the pre-supposition that they covered exactly the same ground." 64 I shall briefly elaborate on my reasons for agreeing with those submissions. 65 As before in construing the reference to "ARL" in the Sponsorship Deed, one must start with the primary text. The question concerns the meaning of "sponsorship benefits" in the Sponsorship Deed. Do they include, according to their natural and plain meaning, competition naming rights to be conferred exclusively on Optus? If they do, the question becomes whether there is any proper basis for displacing what appears the plain meaning by reference to the wider context of related agreements. 66 Clause 6.1(b), earlier quoted, obliges ARL and each of the ARL Clubs to "promote the sponsorship relationship between Vision and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to Vision; …". It follows the earlier provisions of cl.5 headed "Sponsorship Benefits", which are in turn described in detail in Schedule 3. Thus cl.5 is as follows: " 5. SPONSORSHIP BENEFITS In consideration of the payment of Vision to ARL referred to in clause 4 of this deed, the ARL and each and all of the ARL Clubs agree to: (a) provide sponsorship opportunities, signage and naming rights, promotions and endorsements and other benefits and promotional concepts as set out in Schedule 3 to this deed; and (b) use their best endeavours to provide an aggregate increase in the use of Optus Group Services by the ARL and the ARL Clubs for at least the amounts referred to as 'potential increase over current spend' in the table in Schedule 4 to this deed subject to existing contractual arrangements and Optus Group Services being available and competitive with existing service providers." 67 The expressed consideration for the sponsorship benefits is referred to in cl.4 under the heading "Sponsorship Fee". It is that "Vision will provide the Loan to ARL …", meaning the interest-free limited-recourse $5 million loan. 68 Schedule 3 elaborates upon the sponsorship benefits which are grouped under the heading "Optus Group Promotion Requirements". The latter has two relevant subclauses. Clause 1.1 under the hearing "Signage" provides that: "Ground signage to the value of $150,000 must be provided to the Optus Group at the home ground of each ARL club. Ground Signage must include fence signage, scrolling, PA announcements, video screen advertisements and other signage opportunities identified by Vision to each club. All production costs are to be paid by Vision and Vision will have all artistic direction of the content and form of all advertising."

[14]

It could not be disputed that ground signage rights are narrower in scope and distinct from, competition naming rights. The latter are applicable, as the name implies, to the whole Rugby League Competition. The "Telstra Cup", adopted following the NRL Naming Rights Sponsor Agreement with Telstra, clearly exemplified this. 69 Schedule 3 goes on to provide for a number of specific promotional requirements such as providing space for the Optus logo on playing shorts and stationery. Reference is also made to other promotional material which under cl.3 of that schedule is described as "promotion to club members and sponsors". This particularly includes the provision of database lists to assist Optus in direct marketing to football club members of its products. It also includes various other specific forms of promotion requiring either the availability of players for promotion or what is termed "hospitality" in the form of free tickets for games. There is, finally, a review under cl.8.1 of the Schedule in the following terms: "In the weeks leading up to 30 June 2000 and 30 June 2001, the ARL and each ARL club will meet with Vision to review the performance of the ARL clubs against their respective targets and consider any ongoing commitments past the 2001 season between the ARL clubs and Vision and any opportunities for Vision or the Optus Group to further extend its sponsorship arrangements with any of the ARL clubs." 70 Clause 8.1 has previously been quoted but it is convenient that I here set it out again: " 8. EXCLUSIVITY 8.1 The ARL and each and all of the ARL Clubs agree not to accept sponsorship from any competitor of any company in the Optus Group and will use their best endeavours to ensure that no player or official endorses or otherwise promotes or is involved in any promotion of any competitor's products, services, logos, trademarks or brands during the term of this deed. A competitor of the Optus Group includes, but is not limited to, Telstra Corporation, Telstra Media Pty Limited, Foxtel Management Pty Limited, the Foxtel Partnership (consisting of Telstra Media Pty Limited and Sky Cable Pty Limited) and AAPT Limited." [emphasis added] 71 There is no specific definition of "sponsorship" in the Sponsorship Deed. So the question becomes whether cl.8.1, when prohibiting ARL and its clubs from accepting "sponsorship" from Telstra or its affiliates thereby precludes conferral of competition naming rights on Telstra or its affiliates. That turns on the ordinary meaning of "sponsorship" in cl.8.1. 72 Starting with the primary text of cl.8.1 without reference to any of the other agreements upon which the trial judge relied, it is difficult to conceive of anything more central to sponsorship than the naming rights to a rugby league competition which was the whole focus of the sponsorship. Clause 1.1 of the NRL Naming Rights Sponsor Agreement provides that "Telstra will be the naming rights sponsor for the Competition which will be known as, or a similar expression to, the 'Telstra Cup' …". There is then a description of the regular season of weekly rounds of matches culminating in a grand final. There are consequential provisions dealing with the use of the Telstra logo to appear in all advertising, promotions and communications. Telstra is to be given "preferential treatment as far as prominence and dominance of its sponsorship as against other sponsors". Taken individually or together and putting aside any implication sought to be drawn from the other agreements, these constitute sponsorship in terms of what is prohibited by cl.8.1. To confer these sponsorship benefits on Telstra on the face of it clearly breaches both the positive obligation to "use their best endeavours to ensure that no player or official endorses or otherwise promotes or is involved in any promotion of any competitor's products …" and also of the negative stipulation "not to accept sponsorship from any competitor of any company in the Optus Group …". The blatancy of that breach is emphasised by the requirement to give preferential treatment as far as prominence and dominance of its sponsorship against other sponsors. That is obviously directed against Optus, apart from other potential sponsors. 73 The natural meaning of "sponsorship" was described by Burchett J in Shoshana Pty Ltd & Anor v 10th Cantanae Pty Ltd & Ors (1988) 14 FCR 285 at 286, in these terms: "When Shakespeare, in Venus and Adonis, pictured the "… true-love in her naked bed, teaching the sheets a whiter hue than white," he was not advertising a washing powder, but, as it happens, his language is remarkedly evocative of a modern technique of selling, by which a product is associated with a desirable personality, in whose reflected light it will appear more pleasing. The technique is called character merchandising. One form it takes (see article on "Character Merchandising" by Jill McKeough (1984) UNSWL J 97 which discusses also another type involving fictitious or cartoon characters) is the practice of obtaining for a product the endorsement of an admired television personality, or other celebrity, and it is out of this practice that the present case arose." 74 One may take it that the celebrities are here rugby league players engaged in the rugby league competition whilst the products so endorsed by association are those produced by Optus or Telstra as the case may be. The Telstra Naming Rights Sponsor Agreement uses the terminology of "sponsor" in relation to the competition naming rights. That further supports their inclusion as part of "sponsorship" when the term is used in cl.8.1 of the Sponsorship Deed. 75 I turn now to the Optus/ Partners Funding Deed of 15 May 1998. It was confirmed (including as to cl.3.3) on 3 February 2000 by the amending Deed to the Funding Deed. That confirmation is itself relied upon by the trial judge and by the respondents on this appeal as displacing what would otherwise appear to be the clear and unambiguous sense of cl.8.1. The trial judge (at [87] to [90]) relies particularly on the emphasised parts of cl.3.3 along with the attendant definition in cl.1.1 of "Third Party Sponsorship Funding" to displace that meaning. I start by quoting cl.3.3 with the emphasis that the trial judge included from ARL's submissions: "3.3 Third party sponsorship (a) subject to paragraph (b) , the partners must use their best endeavours to obtain Third Party Sponsorship Funding (b) during the period commencing on the date of this Deed and ending on the last day of the 2000 season , the NRL partnership must not grant naming rights to the NRL competition, State or Origin or other international representatives of matches conducted in Australia to Telstra, Optus or Vision. For the avoidance of doubt this clause does not prevent Telstra, Optus or Vision from securing other NRL Competition Sponsorship Rights, including sponsorships of Franchisees." [emphasis added by ARL]" 76 The trial judge then points out that: "[88] The expression "Third Party Sponsorship Funding" is defined in cl.1.1 of the Optus/Partners Funding Deed to mean "sponsorship funding obtained by the Partners for the NRL competition from third parties other than News." 77 It is important to bear in mind in what follows first that this prohibition on conferring "naming rights to the NRL competition" ceased under cl.3.3(b) after the last day of the 2000 season. But of itself, and leaving aside the effect of cl.3.3(a), that cessation did not preclude either NRL or NRLI by some other agreement submitting to a prohibition on conferring naming rights, for after the 2000 season; indeed that was precisely what Telstra imposed as did Optus earlier. Second, this prohibition applies to both Optus and Telstra. Third, the obligation on the partners to use best endeavours to obtain "Third Party Sponsorship Funding" under cl.3.3(a) meant that this could be got from any third party other than News. 78 The respondents adopt the following reasoning of the trial judge. It is predicated upon avoiding a supposed inconsistency between sponsorship exclusivity in favour of Optus, and cl.3.3(a), with its obligation for the partners to use their best endeavours to obtain Third Party Sponsorship Funding, by construing that exclusivity so it excluded naming rights to the competition. The reasoning is to be found at paras [89] to [96] inclusive of the judgment which for convenience I quote below: "[89] It is clear that, upon its proper construction, the granting of naming rights to the NRL Competition comes within the definition of "Third Party Sponsorship Funding" for the purposes of cl3.3 of the Optus/Partners Funding Deed. Further, it is clear that, pursuant to cl3.3(a) of the Optus/Partners Funding Deed, ARL as one of the NRL Partners, promised Optus that, after the end of the last day of the 2000 season, it would use its best endeavours to obtain such a naming rights sponsor. [90] As ARL points out, it is to be noted that when Optus and the ARL, inter alia, executed the Amending Deed to the Optus/Partners Funding Deed on 3 February 2000, no alteration was made to cl3.3 of the Optus/Partners Funding Deed. Indeed, cl2.2 of the amending deed provided that: 'Other than as amended by this deed, the terms of the Optus/Partners Funding Deed shall remain wholly unaffected and enforceable.' [91] The Sponsorship Deed was executed by ARL and Optus on the same day as the Amending Deed to the Optus/Partners Funding Deed (3 February 2000). [92] In these circumstances I accept that it is not only permissible, but necessary, to construe the Sponsorship Deed in the light of the Amending Deed to the Optus/Partners Funding Deed and the other agreements referred to which are all part of the "mutually known facts" and which, also, ought to be looked at as a whole in order to determine the agreement of the parties (see, Re Piccolo [2000] FCA 187 at para30-para34, para77). [93] It is clear from cl3.3 of the Optus/Partners Funding Deed that: '(a) Optus and the ARL regarded naming rights to the NRL competition as "sponsorship"; (b) that up to the end of the 2000 season (but only up to then), the NRL Partnership (of which the ARL was a partner) was not to grant such sponsorship to, inter alia, either Telstra, Optus or Vision; (c) that, therefore, after the end of the 2000 season, there was no prohibition upon the ARL (as a partner in the NRL Partnership) granting such sponsorship to Telstra, Optus or Vision; (d) indeed, by reason of subpara (a) of cl3.3 of the Optus/Partners Funding Deed, after the end of the 2000 season, the ARL, as a partner in the NRL Partnership, had an obligation to Vision to use its best endeavours to obtain such naming rights sponsorship from third parties which could include Telstra, Optus or Vision.' [94] Each of the matters referred to above was, I infer, a fact known to the parties at the time of execution of the Sponsorship Deed. Moreover, or alternatively, the Sponsorship Deed must be read in the light of the provisions of these other agreements. [95] Either way, it is plain that, in the circumstances, Optus and ARL, in using the term "sponsorship" in cl8.1 of the Sponsorship Deed, could not have intended to use that in a way which would have precluded the ARL, as a partner in the NRL Partnership, from obtaining Telstra as a naming rights sponsor. Such an intention would be inconsistent with the regime of contractual promises contained in cl3.3 of the Optus/Partners Funding Deed which was well known to both parties and had been expressly left on foot by them as the same time that they were executing the Sponsorship Deed. [96] In the circumstances, the submissions of ARL are seen to be correct: upon the proper construction of the Sponsorship Deed the term "sponsorship" in cl8.1 is not to be construed as including the entering into of the Telstra contract or any similar contract in respect of the naming rights to the NRL competition." 79 With respect, I do not find that reasoning a convincing justification for displacing the plain meaning of sponsorship in cl.8.1 of the Sponsorship Deed by excluding competition naming rights. All that follows from absence of any prohibition in cl.3.3(b) on conferring naming rights on Telstra, Optus or Vision after the last day of the 2000 season, is that thereafter ARL and NRLI were free from the stricture in cl.3.3(b). Thereafter they could, free of that stricture, grant naming rights to any one they chose, whether Optus or Telstra (but not, it appears News - see cl.3.3(a) and the attendant definition). Equally, ARL could under another deed submit if it so chose to an exclusivity regime covering naming rights in favour of Optus, unless prevented from doing so by cl.3.3(a). I turn now to that subclause, relied on by the trial judge for that result. 80 I do not consider that cl.3.3(a) precluded such an exclusivity arrangement covering naming rights. It obliged both ARL and NRLI to "use their best endeavours to obtain Third Party Sponsorship Funding". But one of the purposes of the $5 million loan was to enable ARL to assist ARL clubs with their transitional costs in restructuring the game of rugby league. That must have been recognised as necessary for the NRL competition to go ahead in its new combined form. On that view that loan so applied would itself constitute "Third Party Sponsorship Funding" obtained by submitting to the exclusivity arrangement in favour of Optus. 81 There was no evidence put to us that for ARL to deny itself from obtaining sponsorship for two years from Telstra or its affiliates would have had the practical effect of denying Third Party Sponsorship Funding to the competition from the many other sources. It was hardly likely both Telstra and Optus would have enjoyed that competition naming rights sponsorship, given their intense competitiveness. 82 Much was made by the respondents of the fact that the Amending Deed confirmed the Optus/ Partners Funding Deed including cl.3.3 and was entered into on the same day as the Sponsorship Deed. As a consequence, it was said that cl.3.3(a) of the Optus/ Partners Funding Deed as so confirmed, was one of "the mutually known facts" in the minds of the parties dictating the implied exclusion of the competition naming rights from cl.8.1. But another "mutually known fact" was that cl.8.1 of the Sponsorship Deed had been executed that same day with no exclusion of competition naming rights from the exclusivity conferred on Optus. Indeed it is difficult to envisage anything more central to sponsorship than the naming rights. Given that plain meaning of cl.8.1, why did not the parties, conscious of it, expressly amend cl.8.1 to take out of "sponsorship" at least those competition naming rights? That they did not speaks eloquently of an intention to make no such exclusion. It would be much more logical to read back cl.3.3(a), to the extent of any ambiguity, as accommodating the inclusion of competition naming rights under exclusivity for Optus. 83 Moreover, the implausibility of the respondents' construction of cl.8.1 is further demonstrated by the arbitrary limit placed on cl.3.3(a) by the respondents in restricting it to competition naming rights, when clearly it covers all form of sponsorship. Logically it would follow that Optus must be taken on the respondents' earlier logic to have agreed to forego any exclusivity on all forms of sponsorship, solely by reason of the fact that the amending deed had confirmed, in global fashion, the Optus/ Partners Funding Deed including cl.3.3(a). If that were so, cl.8.1 would have no purpose at all, as cl.8.1 deals with all forms of sponsorship, not just naming rights. 84 Indeed the illogicality of that proposition is demonstrated by the NRL Naming Rights Sponsor Agreement itself. That agreement confers an exclusive naming rights and sponsorship arrangement upon Telstra. This is when it requires that the sponsorship is for the "Telstra Cup", with the further requirement that Telstra is to be given preferential treatment "as far as prominence and dominance of its sponsorship as against other sponsors" [emphasis added]. Thus cl.1.3 is itself an exclusivity arrangement which, if the respondents' interpretation were correct would be precluded by cl.3.3(a).

[16]

ISSUE 3: Was ARL in breach of clauses 6.1(b) and 8.1 of the Sponsorship Deed by entering into and performing the Telstra Contract? Grounds 3 and 5 86 On 18 December 2000, ARL (together with its partner NRLI) entered into a sponsorship agreement with Telstra, entitled "NRL Naming Rights Sponsor Agreement". By that contract: · Telstra is the naming right sponsor of the National Rugby League Competition (cl.1.1), in which the ARL Clubs and others participate; · Telstra will be given preferential treatment as far as prominence and dominance of its sponsorship as against other sponsors (cl.1.1); · the contract is "exclusive to Telstra in that no other entity that competes with Telstra (or any subsidiary) in the telecommunications services sector in Australia will be appointed a sponsor or otherwise granted rights to become associated in any promotion or advertising sense with the Competition" (cl.1.3); · the term covers six consecutive football seasons commencing in 2001 (cl.1.4); · Telstra shall pay to the Partnership (i.e. that between the ARL and NRLI) $4 million per season, plus CPI (cl.1.5); · Telstra's logo will be displayed prominently on all players' jerseys (cl.2.1); · Telstra is entitled to ground signage, both around the perimeter and on the field (cl.2.2); · the competition and the trophy will be known as the "Telstra Cup" (cl.2.3); and · Telstra is entitled to general promotion by way of stationery and media presentations (cl.2.4). 87 In answer to Optus' request for discovery of "Documents evidencing the steps undertaken by the ARL and/or the ARL Clubs to ensure that no player or official endorsed or otherwise promoted or was involved in any promotion of products, services, logos, trademarks or brands of Telstra from 3 February 2000 to 3 February 2002" (Category 4 at Tender Bundle B217), the ARL discovered no documents at all: see the ARL's verified list at B235-242. Similarly, none of the ARL Clubs discovered any documents within this category. 88 Further, in answer to the Appellant's Notice to Admit Facts dated 16 September 2002 (Tender Bundle B275-291), the ARL admitted (Tender Bundle B308-9) that in respect of the "NRL Competition Matches", defined as "one or more rugby league match or matches conducted between 16 February 2001 and 9 April 2001 (inclusive) involving one or more ARL Club": "44. That during the NRL Competition Matches, players of each ARL Club taking part in those NRL Competition Matches wore playing apparel which displayed the logo, trademarks and/or insignia of Telstra Corporation Limited. 45. That during the NRL Competition Matches, the logos, trademarks, brand and/or insignia of Telstra Corporation Limited were displayed by the use of:

[27]

(a) Telstra perimeter signs surrounding the playing field; (b) Telstra on-field or on-grass signage in the centre of the playing field; (c) Telstra video commercials played on video screens at the ground; (d) Telstra signage of all ARL Club media backdrops." 89 I agree with the appellant's submission that contemporaneous reports of the sponsorship benefits given to Optus and Telstra respectively for the early games of the 2001 season demonstrate the predominant coverage of Telstra rather than Optus: Tender Bundles, B30-43 (22 February 2001), B72-84 (8 March 2001), B86-94 (15 March 2001), B 99-107 (29 March 2001). As the trial judge found at [106]: "The Telstra Agreement requires that Telstra's logo be positioned prominently on all players' jerseys. In the result in this and in other ways in terms of other promotional aspects, the promotional rights for which Optus claims an entitlement pursuant to the Sponsorship Agreement were simply lost [or perhaps more appropriately could be described as having been deluged], by way of the expansive and overwhelming promotional benefits seen to have been conferred upon Telstra." 90 The trial judge also said at [108]: "Faced with the massive benefits to Telstra from a whole of Naming Rights Sponsor Agreement, many of the benefits which Optus may have been legitimately entitled to expect from the terms of its Sponsorship Deed, fell away." 91 I agree with the appellant's submission that the circumstances establish the following breaches by ARL of the Sponsorship Deed: (a) accepting sponsorship from a competitor of Optus, namely Telstra, in breach of cl.8.1. That ARL did so in partnership with NRLI is irrelevant, for the reasons earlier set out, recognising that a partnership is not a separate legal entity distinct from the partners themselves: see Partnership Act 1892 (NSW), section 6. (b) failure to use best endeavours to ensure that no player or official endorsed or promoted Telstra's products, in breach of cl.8.1. The relevant authorities on the meaning of a "best endeavours" clause are referred to by the trial judge at [112]-[113]. The promisor is obliged to do all that can reasonably be done in the circumstances to achieve the contractual object: Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 64.6 (Gibbs CJ); and see 91.9-92.1 (Mason J), 116.9-117.6 (Wilson J); 121.5-122.1 (Deane J); 140.1-.4 (Dawson J); Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 at 94.2 (Stephen J), 101.4-102.1 (Mason J), 107.3-108.1 (Wilson J). In the present case, I agree with the appellant's submission that the ARL has by its own voluntary conduct acted in a manner directly inconsistent with any attempt to achieve the object of its contract with Optus, and did nothing to seek to achieve that object. (c) acting contrary to ARL's obligation to ensure maximum advertising and promotional benefit to Optus, in breach of clause 6.1(b). 92 As to the first of those breaches the trial judge construed the references to ARL in the Sponsorship Deed as excluding reference to ARL in its capacity as a partner in the NRL Partnership. The trial judge was, with respect, wrong in adopting that construction, so that a breach of cl.8.1 is established by ARL (as a partner in the NRL Partnership) accepting sponsorship from Telstra. 93 As to the second of those breaches, the trial judge held that no breach of the "best endeavours" obligation was established because the promotion of Telstra by the Clubs was something which the Clubs were obliged to do pursuant to the Club Agreements with NRL (which pre-dated the Sponsorship Deed): at [115]-[120], [125]. However I agree with the appellant's submission that there was no obligation in the Club Agreements which specifically required Clubs to ensure that their players displayed the Telstra logo. Clause 17 required only that the Clubs ensure that their players wear team apparel approved by NRL. As one of the two partners which owned and operated the NRL competition, ARL was duty-bound to use "best endeavours" to prevent a situation arising where players and officials promoted Telstra by displaying Telstra's logo and name. The trial judge's reasoning, with respect, gives no recognition to the fact that ARL itself, and not only the ARL Clubs, was bound by the "best endeavours" obligation in cl.8.1. 94 As a separate matter, the trial judge held at [121] that: "The fact that the ARL Clubs may have endorsed or promoted Telstra by the various acts alleged does not constitute a breach of the best endeavours clause because those actions did not amount to endorsements or promotions by players or officials." 95 However when Clubs endorse or promote a particular sponsor, they can do so only through the conduct of their players or officials, and that is what actually occurred in the present case. Accordingly, I agree with the appellant that the distinction propounded is without a difference. Moreover the reasoning again ignores the obligation on ARL to use its best endeavours to ensure that no player or official endorses or promotes Telstra's name or logo. 96 As to the third of those breaches, the trial judge construed cl.6.1(b) as not furnishing to Optus rights over and above the rights referred to in cl.5 and Schedule 3: at [109], [122]-[124]. That construction effectively and in my view wrongly treats cl.6.1(b) as mere surplusage, contrary to the ordinary and natural meaning of the language used. Clause 6.1(b) ensures that Optus will not only be given the particular sponsorship benefits referred to in cl.5 and Schedule 3, but that the manner in which they are provided will "ensure maximum advertising and promotional benefit" to Optus. In the event, ARL sought to provide Optus with those benefits in a purely formalistic or literal sense, at the same time as swamping the image of Optus' name and logo by the more prominent display of the name and logo of Optus' major commercial rival. The overall effect was to diminish the standing of Optus to the advantage of Telstra, in breach of the Sponsorship Deed, and in particular cl.6.1(b). 97 The respondents contended that not only did Optus fail to lead any evidence at the trial but neither were any admissions made that any ARL Club player or official participated in promotional appearances promoting Telstra. It was said that the fact that the players wore jerseys which bore the Telstra logo did not amount to "endorsement" or "promotion" within the meaning of cl.8.1 of the Sponsorship Deed. The appellant's submission overlooks the fact that the Sponsorship Deed deals expressly with "player" endorsements. 98 To this submission is allied the respondents' submission that all the Sponsorship Deed required and in particular cl.8.1, was a diluted best endeavours obligation. It merely required that ARL and ARL Clubs did all that was reasonable to ensure that their players and officials did not attend or provide such similar "appearances" and promotions as envisaged by the parties in cl.4.1 of Schedule 3 for Optus competitors. Thus cl.4.1 of the third schedule provided that each ARL Club must provide a minimum of ten appearances per season at Vision or other Optus Group trade shows or promotions by players who played for the majority of the previous season in first grade. 99 None of these submissions have any plausibility. This is when regard is had to the answers to the appellant's Notice to Admit Facts which I have earlier quoted and the nil answer to Optus request for discovery to which I have earlier made reference. Indeed the trial judge's own findings at [106] and [108] earlier quoted leaves no room for the respondents' submissions to which I have referred. 100 Finally, while it is true that the players are employed by the Clubs pursuant to individual player contracts and the Clubs have no contractual relationship with ARL, as I have said earlier ARL was duty-bound to use "best endeavours" to prevent a situation arising where players and officials of those Clubs promoted Telstra by displaying Telstra's logo and name. As the appellant correctly points out, there is no evidence whatsoever of any attempt by ARL to preclude any player or official from the Clubs from doing that which would lead to a breach of these stipulations in the Sponsorship Deed.

[29]

FOURTH ISSUE: Was Optus entitled to repayment of $2.5 million as representing half the value of the benefit of the two year contract? (Grounds 6 and 7) 102 This question concerns damages or more accurately the basis upon which half the loan was said to have become repayable. The trial judge at [9] concluded: "9. I am quite clear that on any basis and even if Optus was able to prove its case in relation to the proper construction of the Sponsorship Deed and in relation to the breaches of the deed which it alleges, it can recover only nominal damages by reason of its failure to discharge its onus of proof in relation to damages. …" 103 The trial judge deals with this matter at [126] to [144] concluding that "even if cl.8.1 of the Sponsorship Deed had been breached, Optus … would only be entitled to nominal damages." 104 The critical provision of the Sponsorship Deed is cl.11 which is in the following imprecise terms: "Despite the terms of the Optus/ARL Funding Deed, in the event that Optus terminates this Deed at any time pursuant to cl10, the ARL must repay on demand to Optus that part of the Loan paid by Optus which represents the value of the benefits that would have accrued to the Optus Group in the unexpired portion of the Term." 105 I say imprecise, even ambiguous, because the clause does not expressly explain how one determines the value of the benefits, particularly future benefits, or how precisely one determines how one quantifies that part of the Loan as represents that value. Nonetheless it is trite law that one endeavours to give commercial efficacy to the agreement, save where it is uncertain to the point of being unsalvageable. 106 The events giving rise to the claimed entitlement to damages are as follows: 107 Optus gave notice of breaches of cls.6 and 8 of the Sponsorship Deed pursuant to cl.10.1 on 23 February 2001: Tender Bundle B50-52 (the ARL), B46-48 (Newcastle Knights), B53-55 (St George Illawarra), B56-58 (Parramatta), B59-61 (Manly Norths, "Northern Eagles"), B62-64 (Eastern Suburbs, "Sydney Roosters"), B68-70 (Wests Tigers). Following the required period of 30 days for the breaches to be remedied, the breaches remained unremedied, and on 9 April 2001 Optus gave notice terminating the Sponsorship Deed: B111-112 (the ARL), and see the letters to the ARL Clubs at B113-124. Clause 11 of Optus' Sponsorship Deed is then invoked, following termination by Optus pursuant to cl.10. The ARL was required to repay that part of the loan which represented the value of the benefits that would have accrued to Optus in the unexpired portion of 'the Term". Optus contended that this represented, or corresponded to, half the loan, or $2.5 million, as the termination had occurred half-way through the term of the loan when half the value of the benefits had still to accrue. 108 The loan was defined in cl.1 of the Sponsorship Deed by reference to the terms set out in the Optus/ARL Funding Deed of 15 May 1998, as amended on 27 January 2000. Those terms provided for the loan to be a limited recourse loan. It was repayable only to the extent of one-third of ARL's income from Licence Payments and ARL's Revenue Share in respect of each Financial Year after first deducting $8 million. That threshold was not reached. Accordingly, in the absence of a breach under cl.10 of the Sponsorship Deed, no part of the $5 million loan would have been repayable, until the formula produced that result. The appellant then submits as follows: "30. There is no reason to suppose that the value of the benefits under the Sponsorship Deed, taken as a whole, would have been materially different in respect of either of the two years of the Deed, namely 2000 and 2001. The matters set out in Schedule 3, headed "Optus Group Promotional Requirements" were to be provided over the two playing seasons in calendar years 2000 and 2001. Matters such as signage, logo on livery and stationery, availability of players for promotions, and hospitality would, by their nature, be of no more value in the first year than the second. The telecommunications services referred to in clause 7 of the Sponsorship Deed accrue equally to Optus in each of the two years. Although the provision of database lists (clause 3.1) and the George Patterson Bates feasibility study (clause 3.2) may fairly be inferred to occur in the first year of the Sponsorship Deed, as the trial judge found at [143], these benefits were plainly contemplated to assist Optus in its marketing over the whole two-year period, and there is no reason to think that the benefits of those documents were exploited to any greater extent in 2000 than they would have been in 2001. 31. Accordingly, the value of one year's benefits under the Sponsorship Deed should have been found to be half the value of the two years' benefits which had been contracted for. The unexpired portion of the term of the Sponsorship Deed was one year's playing season in 2001. Having regard to the fact that the value of two years' benefit at $5 million was reached by way of an arm's length bargain between experienced and competent parties, the value of the benefits for 2001 should be found to be half that amount namely $2.5 million." 109 The foregoing submissions by the appellant rely also upon the trial judge being said to have wrongly treated the claim as only one for damages; see in the judgment the heading immediately before [126] and the language and reasoning in [128] to [144]. This was said to be so despite the fact that the trial judge acknowledged that Optus claimed that pecuniary relief was not a claim for damages but for repayment of a loan (see judgment [12] third bullet point). It was said that notwithstanding this, the trial judge wrongly proceeded on the irrelevant principle that a claim for damages requires proof of loss, and Optus had not discharged that onus. 110 While some of the language and reasoning of the trial judge and the heading "Damages" might suggest that the trial judge was proceeding on the basis that this was a claim for damages as distinct from repayment of the loan (or more accurately for repayment of half the loan which was said to correspond to half the value of the benefits still to accrue from the sponsorship arrangements) I am not at all sure that the trial judge had concerned himself with damages rather than loan repayment. In any event, indubitably the question is whether half the loan is now repayable pursuant to cl.11 of the Sponsorship Deed properly construed, as representing "the value of the benefits that would have accrued to the Optus Group in the unexpired portion of the Term". 111 The reasoning of the trial judge in rejecting any entitlement to receipt of half the loan amount essentially must rest on a series of propositions. First, that the $5 million was a genuine loan and not a sham. Second, that it is impossible to infer any equivalence or other relationship between that amount of $5 million and the value of the sponsorship benefits. Third, that in the absence of any evidence of the value of the relevant benefits from Optus, there is no basis for assuming that the value of the relevant benefits was $5 million. Finally, that a claim for half the $5 million assumed a linear progression in the receipt flow of the benefits and there was no evidence to justify that assumption. The trial judge also pointed to at least one significant contemplated benefit under cl.7 of the Sponsorship Deed, namely the capturing of telephony business and the use of best endeavours to meet certain targets. He found no sufficient basis for rejecting the respondents' contention that such benefit should be inferred as having accrued during or predominantly during, the course of the first year of its term rather than as the appellant contended, spread evenly over the term of the loan. 112 I have earlier set out the submissions of the appellant in that regard. Essentially they come down to an absence of any reason to suppose that the value of the benefits under the Sponsorship Deed would have been materially different in respect of the two years of the deed, namely 2000 and 2001. Similarly, the telecommunication services referred to in cl.7 of the Sponsorship Deed were said to accrue equally to Optus in each of the two years. Though the provision of database lists (cl.3.1) and a marketing feasibility study (cl.3.2) was to take place in the first year of the Sponsorship Deed, these were for "benefits … plainly contemplated to assist Optus in its marketing over the whole two year period". 113 Ultimately this question must resolve itself around the proper interpretation of cl.11 of the Sponsorship Deed. It is well settled that in construing the provisions of such a contract, themselves imprecise and ambiguous, one should endeavour to interpret them so as not to make commercial nonsense or produce a result that was self-evidently commercially inconvenient or such as to frustrate its evident commercial purpose, insofar as the language adopted permits such an interpretation; see for example Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 2 NSWLR 310 at 313 per Kirby P. I have concluded that what the parties must be taken to have done in this sponsorship context was to treat the loan as a "sponsorship fee" (see cl.4) yielding benefits evenly over the two year term (cl.3). The parties understandably did not choose to include any contractual mechanism for valuing the sponsorship benefits received up to the time of termination, given the commercial inconvenience of applying it. Nor did they attempt to install any process for estimating the value of sponsorship benefits still to accrue for the remaining part of the two years. The latter could only be guesswork and would, if it had been required, make commercial nonsense. This is because the benefits themselves are an amorphous collection of various sponsorship opportunities, intrinsically incapable of precise measurement in terms of particular value and incapable of any precise time apportionment into the future. Reasonable persons with the background knowledge of the parties would likely have envisaged their linear or even accrual over two years. Such an approach would certainly not be inconsistent with a rational system of accrual accounting, however Optus chose to account for them. This was after all a loan. The parties could have provided that the whole loan was immediately due and payable on termination for breach. Instead, favourably to the borrower ARL, the loan upon termination became repayable pro rata according to what was taken to be an even distribution of sponsorship benefits over the two years. It is wholly implausible and commercial nonsense that the parties contracted on the basis that Optus as lender/sponsor terminating the Sponsorship Deed for breach should be entitled only to payment under the surplus profits formula, being the same repayment formula as would apply even in the absence of breach. 114 I consider that cl.11, when it refers to "that part of the loan paid by Vision" which "represents the value of the benefits that would have accrued … in the unexpired portion of the term" simply reflected a commonsense position taken by the parties. They must be taken to have recognised that the value of sponsorship benefits past and especially future could not simply be estimated at the time of any termination of the Deed for breach. Those sponsorship benefits were therefore to be taken by the parties as spread evenly over the two-year sponsorship term. This meant early termination of the Deed for breach simply required a pro rata repayment of the loan.