Optus Vision Pty Limited v Australian Rugby Football League Limited & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50170/01 Optus Vision Pty Limited v Australian Rugby Football League JUDGMENT The Proceedings 1 Optus Vision Pty Ltd [" Optus "] claims in these proceedings that the first defendant, Australian Rugby Football League Ltd [" ARL"] and the second to seventh Defendants, Manly Norths Rugby League Football Club Ltd, St. George Illawarra Rugby League Football Club Ltd, Wests Tigers Rugby League Football Club Ltd, Eastern Suburbs District Rugby League Football Club Ltd, Newcastle Knights Ltd and Parramatta District Rugby League Football Club Ltd ["the nominate ARL Clubs"] have breached exclusivity provisions of a Sponsorship Deed ["the Sponsorship Deed"] entered into on 3 February 2000 between Optus, ARL and the ARL Clubs.

[From time to time reference is made in the sundry deeds referred to in the Judgment to Optus Vision Pty Ltd as "Vision". An early Memorandum of Agreement distinguished between Optus Vision Pty Ltd (sometimes called "OV") and Optus Communications Pty Ltd (sometimes called "OC"). There is no need to refer to this distinction as none of the issues turned upon it. During the hearing there was a tendency to use the terms "Optus" and "Vision" interchangeably, again for the reason that nothing turns on this. The Judgment without express acknowledgment, simply uses the word "Optus" to refer to Optus Vision Pty Ltd and for convenience references within the deeds to the term "Vision" have been changed in the judgment accordingly] 2 The central issues raised concern: · the proper construction of the Sponsorship Deed read in the light of the circumstances with reference to which the Deed was entered into [broadly the tranche of interrelated deeds and agreements effected by way of a restructuring of the game of rugby league and the endeavours to satisfy existing club and player obligations at the end of what has been referred to as "the Super League/ ARL war", being a reference to the late 1990's dispute over control for the game of rugby league]; · alleged breaches of the Sponsorship Deed; · damages [centrally concerning whether Optus has failed to discharge of its onus of proof in that regard]. 3 Clause 6.1(b) of the Sponsorship Deed [which deed is appended to this Judgment as appendix "A"] provided as follows:

(b) promote the sponsorship relationship between [Optus] and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to [Optus]. 4 Clause 8.1 of the deed provided as follows:

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 Ltd, Foxtel Management Pty Ltd, the Foxtel Partnership (consisting of Telstra Media Pty Ltd and the Sky Cable Pty Ltd) and AAPT Ltd" 5 Crucial issues in relation to the question of construction concern (i) whether or not the references in the Sponsorship Deed to " ARL " upon its proper construction should be read: · as referring to ARL in its capacity as a partner of the NRL Partnership; or · as referring to the ARL other than in its said partnership capacity.

(ii) the proper construction of the term 'sponsorship' in Clause 8.1. 6 Optus seeks to recover $2.5 million by reason of the claimed breaches by the ARL and the nominate ARL Clubs of the Sponsorship Deed and by reason of the subsequent termination of the Sponsorship Deed. The claim is that: · Optus was promised certain exclusive right of sponsorship by the ARL and the nominate ARL Clubs for the 2000 and 2001 seasons in consideration of a limited recourse loan of $5 million; · on 18 December 2000, halfway through the term of that agreement, the ARL and its partner in the NRL Partnership (namely National Rugby League Investment Pty Ltd [" NRLI"]) granted inconsistent sponsorship rights to Telstra Corporation Ltd ["Telstra"] in return for payments of $4 million per annum; · pursuant to the provisions of its Sponsorship Deed, Optus claims recovery of half the amount paid, namely $2.5 million, said to reflect the fact that it received for only half the term of its contract, the value of the sponsorship benefits which the ARL is said to have promised it. 7 Optus gave notice of breaches of clauses 6 and 8 of the Sponsorship Deed pursuant to clause 10.1 on 23 February 2001. It alleges that following the required period of 30 days for the breaches to be remedied, the breaches remained unremedied. On 9 April 2001 Optus gave notice purporting to terminate the Sponsorship Deed. 8 On 12 April 2001 ARL and the ARL Clubs purported to accept the Optus notice as a repudiation of the deed. Damages 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. The matter is dealt with below. Background to the Sponsorship Deed - The Principles 10 Clearly enough reference to the background to the Sponsorship Deed is permissible on well established authorities. No issue was taken at the bar table in this regard. A short reference to some of the authorities will suffice: · In Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 the High Court observed at 292-293 that:

"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."

· to similar effect is the observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 (para 11), quoting with approval Lord Hoffmann in Investors Compensation Scheme [1998] 1 WLR 896 at 912-913, to the effect that interpretation of a written contract involves the ascertainment of the meaning which the document would convey to 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; · in Investors Compensation Scheme at 912 - 913, it was said that;

"the background knowledge which a reasonable person in the position of the parties will be regarded as having, for the purposes of the construction of contracts, includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man with the proviso that it should have been reasonably available to the parties"; · there is of course no doubt but that the court is entitled to inquire beyond the language and to

"see what the circumstances were with reference to which the words were used, and the object appearing from those circumstances, which the person using them had in view": [Prenn v Simmonds [1971] WLR 1381 at 1384 per Lord Wilberforce] Principles as to admissibility of evidence to identify subject matter of an expression used in an agreement 11 Evidence of mutually known facts may be admitted to identify the meaning of a descriptive term (MacDonald v Longbottom (1859) 1 E & E 977; FCT v K Porter & Co Pty Limited (1974) 2 ALR 530). This is not inconsistent with the principles stated by Mason J in Codelfa: G.R. Securities Pty Limited v Baulkham Hills Private Hospital Limited (1986) 40 NSWLR 631 at 636).

12 Extrinsic evidence is always admissible, not to contradict or vary the contract, but to apply it to the facts which the parties had in their minds and were negotiating about (Bank of New Zealand v Simpson [1900] AC 182 at 189; Cheshire & Fifoot, The Law of Contract, 8th Australia ed, para 10.13).

13 Evidence is admissible to identify the subject matter of an expression used in a contract such as 'your wool' or 'existing clients'. That evidence can include pre-contractual discussions about that subject matter (MacDonald v Longbottom (1859) 120 ER 1177; Codelfa Constructions Pty Limited v State Rail Authority (1982) 149 CLR 337 at 349 - 350; Saad v TWT Limited unreported, Ireland J., 19 May 1995 at 10 - 11; Branir Pty Limited v Owston Nominees (No 2) (2001) 117 FCR 424 at para 417). The more detailed background 14 During the 1997 rugby playing season in Australia, two rugby league competitions were conducted: · the ARL Competition; · the Super League Competition. 15 In very general terms, during the early 1990's the rival pay TV stations being developed were through Optus/Channel 9 interests [aligned with ARL] and through News Ltd/Foxtel interests [aligned with Super League]. The Merger Agreement of 14 May 1998 16 Following much disputation and litigation [cf News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193] concerning the way forward, the entities with relevant interests agreed to merge the two competitions on particular terms so that there would be one premier rugby league competition in Australia on and from the 1998 playing season. The central transaction was consummated by entry into on 14 May 1998 of an agreement ["the Merger Agreement"] between ARL, New South Wales Rugby League Ltd [NSWRL], Super League Pty Ltd ["Super League"], National Rugby League Investments Pty Ltd, and News Ltd ["News"]. 17 The nominate ARL Clubs are those which had remained loyal to the ARL. 18 Relevantly particularly to the issue presently before the court is the fact that there is to be found as part and parcel of a large number of schedules to the Merger Agreement, a Funding Deed entered into between Optus and ARL on 15 May 1998 [subsequently amended on 3 February 2000], whereunder Optus agreed for the purpose of assisting the ARL Clubs in making the transition to the NRL Competition during 1998, 1999 and 2000, to provide what was referred to as "the Optus Funding" for the benefit of the ARL Clubs on particular terms and conditions. 19 The necessity to travel between these and various other deeds entered into over a period of time in order to examine, if and to what extent, relevant background matters should be taken into account in construing the Sponsorship Deed, requires some care and time and is certainly an exercise of complexity. It is particularly important during this exercise to keep in mind the bright line distinction drawn in the several deeds between on one hand, funding provided, or to be provided, directly to the ARL, for the purposes of assisting the ARL Clubs in making the transition to the NRL Competition and to assist those clubs to satisfy their existing club and player contract obligations [many of which were incurred because of the anterior Super League 'bidding war'], and on the other hand, funding provided or to be provided directly to the NRL Partnership for the purpose of the conduct of the NRL Competition. 20 The central structure, as the inter-related agreements make clear, involved three layers integral to the NRL Competition: · the NRL Partnership; · NRL being appointed by the Partnership to conduct the Competition on a day-to-day basis; · NRL contracting with the clubs in the form of the individual club contracts. 21 To my mind a useful approach is simply to carry out the exercise of travelling through the several deeds by reference to the way in which the defendants overview submissions sought to treat with the matter. Certainly to do so exposes many of the crucial issues. However before proceeding in that way, it is useful to follow the Optus emphasis on aspects of the Partnership Agreement of 14 May 1998, and of the Services Agreement and the Club contracts of the same date. The Partnership Agreement of 14 May 1998 22 The Partnership Agreement entered into between ARL and NRLI on 14 May 1998 provided for the terms of the NRL Partnership. The recital notes the agreement between ARL and NRLI to establish the Partnership to own and operate the NRL Competition on and from the 1998 season, on the terms and conditions of the agreement. 23 The following provisions are to be noted: · "Partnership Interest" was defined so that the right, title and interest of each partner in and to the assets of the Partnership was to be a 50% interest; · Clause 5 provided for "Management of the NRL Partnership": the partners were to form an executive committee to which each partner would appoint three members, decisions of which committee would be binding on the partners; · Clause 5.5 dealt with the nomination of the chairman of the executive committee who was not to have a casting vote; · Clause 8 read inter alia : " Duties and Responsibilities of Partners 8.1 General Duties (a) Each Partner must:

(i) be just and faithful to the other Partner in all transactions relating to the NRL Partnership; and

(ii) at all times give to the other Partner a just and faithful account of any transactions relating to the NRL Partnership and on reasonable request furnish a full and correct explanation to the other Partner." The Services Agreement of 15 May 1998 24 The NRL Services Agreement was entered into between ARL and NRLI and NRL, the recitals confirming that the NRL Partnership "wishes to appoint NRL and NRL wishes to accept the appointment, to provide the Services to the NRL Partnership as an independent contractor, on the terms and conditions of this Agreement". 25 The following provisions are to be noted: · "Services" was defined to mean the Services set out in Schedule 1 which was in the following terms: " SCHEDULE 1 - SERVICES

The following services to enable the operation of the NRL Competition:

Preparing and approving a draft Business Plan for submission to the Partners in accordance with clause 4.

Conducting the NRL Competition in accordance with the Business Plan.

Determining the operational aspects of the game of rugby league in Australia including: (a) structure of the NRL competition; (b) fixed allocation to clubs; (c) administration and marketing policies; and (d) scheduling.

Recommendations on judiciary and Rules for approval by the Partners.

Contracting with Franchisees for participation in the NRL Competition.

Preparing draws for the NRL Competition." · Clause 2.1 provided for the appointment and the acceptance of the appointment. · Clause 2.2 provided that in providing the Services, NRL would act solely as an independent contractor and that nothing in the agreement would constitute or be construed to be or to create the relationship of employer and employee, principal and agent, trustee and beneficiary, joint venturers or partnership between the Partners and NRL. · Clause 6 was in the following terms:

"Key Revenue Rights [defined as meaning all media, sponsorship and merchandising rights (other than Franchisee sponsors) in relation to the NRL Competition]

NRL acknowledges and agrees that: (a) the NRL Partnership is solely entitled (to the exclusion of NRL) to enter into contracts relating to Key Revenue Rights;

(b) the NRL Partnership is solely entitled (to the exclusion of NRL) to all revenue from Key Revenue Rights contracts; and

(c) NRL will perform the obligations of the Partners under the Key Revenue Rights contracts entered into by the NRL Partnership, provided always that NRL has first been consulted on the proposed terms of those contracts." The Club Contracts 26 The Club Contracts were generally in the same terms. The convenient course is to simply annex one of those contracts to this judgment as appendix "B". As appears from the contract, clause 3 deals with various aspects of the "System" which is generally defined as the system for rugby league competitions (meaning the Competition known as the NRL Competition and referred to in recital A). Clause 3 provides that the NRL Competition is to be a first grade, national (and international to the extent of Auckland) competition. Clauses 3.2 and 4 are in the following terms:

"3.2 Rights to the System (a) Subject to the grants of rights to the Club under this Agreement and to the Club's rights under this Agreement in relation to any Licence Property created by, owned or licensed by or to the Club, the Club acknowledges and agrees that the Club has no rights in relation to the System, and the NRL Partnership retains those rights.

(b) Subject to the grants of rights to NRL by the NRL Partnership, NRL acknowledges and agrees that NRL has no rights in relation to the System, and the NRL Partnership retains those rights.

4. EXPLOITATION OF RIGHTS Subject to the grants of rights to the Club under this Agreement and to the Club's rights under this Agreement in relation to any Licence Property created by, owned or licensed by or to the Club, the Club acknowledges and agrees that NRL Partnership has the exclusive right to exploit all intellectual property rights in relation to the System (including, without limitation, Broadcasting Rights, Marketing Rights and Sponsorship and Naming Rights)." [I note that "Sponsorship and Naming Rights were defined to mean "all Rights to exploit the Property and the Player Property by the grant of Sponsorship and Naming Rights] The Sponsorship Deed Recitals 27 Turning then to the ARL submissions, the proposition put is that guidance as to the relevant background is provided by the Recitals to the Sponsorship Deed which provide as follows:

"A. Various companies within the Optus Group provide telecommunications services.

B. The ARL Clubs (some of which are in the joint ventures with other ARL Clubs) specified in Schedule 1 have been accepted to compete in the NRL Competition .

C. ARL provides financial assistance to the ARL Clubs from time to time .

D. In consideration of the ARL and the ARL Clubs entering into this Deed, Vision has agreed to provide the Loan to ARL for the purpose of enabling ARL to assist the ARL Clubs specified in Schedule 2 with their transitional costs in restructuring the game of rugby league and satisfying existing club and player contract obligations ." [emphasis added by the defendants] 28 As is made plain in the Recitals, in consideration of the appointment of Optus as a sponsor, Optus promised to provide a "Loan to the ARL": clause 4. The "Loan" was defined in clause 1 of the Sponsorship Deed as

"the cash advance of $5 million from [Optus] 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." The Optus/ARL Funding Deed of 15 May 1998 and the Amending Deed of 3 February 2000 29 The Optus/ARL Funding Deed ("the Funding Deed"), and the deed in fact dated 3 February 2000 which amended it ("the Amending Deed"), are then said to be important documents incorporated by reference into the Sponsorship Deed (see the definition of Loan and Clause 11). They are said to assist in explaining the unusual description in the Sponsorship Deed of the moneys advanced as a "Loan" as well as the basis for the sum "lent" under the Sponsorship Deed. They are said to be also highly relevant in consideration of the damages issues. 30 The Funding Deed was entered into on 15 May 1998 by the ARL and Vision. The Recitals to that Deed were in the following terms:

"A. During the 1997 Season, two rugby league competitions were conducted: (i) the ARL competition, known as the Optus Cup, conducted and administered by the New South Wales Rugby League Limited under the logo and banner of the ARL and a sponsor, Optus Vision Pty Limited; and

(ii) the Super League competition, conducted and administered by Super League under the sponsorship of Telstra.

B. NRLI and ARL have formed the NRL Partnership to conduct the NRL Competition on and from the 1998 Season.

C. To assist the ARL Clubs in making the transition to the NRL Competition during 1998, 1999 and 2000, Vision has agreed to provide the Optus Funding for the benefit of the ARL Clubs on the terms and conditions set out in this Deed.

D. ARL has requested Vision, and Vision has agreed, to provide the Loan for the purposes, and on the terms and conditions, set out in this Deed." [emphasis added by the defendants] 31 The NRL Competition referred to in Recitals B and C to the Funding Deed was defined as the "national rugby league competition operated and managed by NRL pursuant to the NRL Services Agreement". The NRL is defined as National Rugby League Limited. The NRL Services Agreement was defined as meaning "the services agreement of even date as between the Partners and NRL". The Partners were identified as the ARL, NRLI, and NRL Partnership was defined as meaning the "partnership between NRLI and ARL formed for the purpose of owning and operating the NRL Competition."

32 Clauses 3, 4 and 5 of the Funding Deed were in these terms:

3.1 ARL Funding Requirement (a) On or before 1 March 1999 but after 31 December 1998, ARL may provide to [Optus] a Notice requesting that [Optus] provide a Loan in the amount set out in the Notice (up to a maximum of $5,000,000).

(b) ARL may only provide a Notice to [Optus] if it has provided a Notice in the same terms (including as to amount) to News under the News Funding Deed and Nine under the Nine Funding Deed.

(c) ARL may only provide one Notice to [Optus] and provided Vision complies with Clause 3.2, [Optus] will have no further liability to ARL under this Clause 3. 3.2 Agreement to make Loan [Optus] must pay to ARL within 10 Business Days of the date of the Notice, the Loan specified in the Notice.

3.3 Purposes The proceeds of the Loan must be applied by ARL for the purpose of grants to each ARL Club in 1999 of up to $1,500,000 each (being part of the $3.5 million grant to each ARL Club in the 1999 Season, the balance of which is payable by NRL) to enable the ARL Club to:

(a) finance its transitional costs in restructuring the game of rugby league; and

(b) satisfy existing Club and play contract obligations. 3.4 Interest No interest, fees, charges or other amounts in the nature of interest will be payable on any Loan.

4.1 Repayment ARL must pay to [Optus] 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 income from Licence Payments and ARL's Revenue Share exceeds $8 million for that Financial Year.

4.2 Early repayment ARL may repay all or any part of the Money Owing at any time without penalty. Any repayment may only be made if News and Nine are each repaid an equal amount under the News Funding Deed and the Nine Funding Deed respectively, and ARL will not repay News or Nine unless it simultaneously repays the same amount to Vision.

4.3 Repayment where Nine or News loans not provide ARL must repay the Loan to [Optus] immediately if either News or Nine fails to provide a loan to ARL in accordance with the Notice given by ARL under the News Funding Deed or Nine Funding Deed respectively by the day which is 10 Business Days following the due date for payment specified in the Notice, unless ARL is taking all reasonable steps, including commencing legal proceedings to enforce its rights against News or Nine (as the case may be).

5. LIMITED RECOURSE LOAN [Optus] acknowledges and agrees that:

(a) its recourse for recovery of the Money Owing is limited to 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:

(b) it will not, in relation to recourse for recovery of the Money Owing: (i) seek to execute or enforce any judgment or judgment debt against ARL in respect of the Loan except in respect of the excess income referred to in paragraph (a);

(ii) appoint, seek to appoint or take any action to appoint an External Administrator to ARL or the whole or any part of ARL's assets or business or apply to have ARL Wound Up except in relation to a judgment or judgment debt permitted by paragraph (b)(i); or (iii) exercise any other right of a creditor generally other than as permitted by this Deed." 33 The defendants then note that the expression 'Money Owing' referred to in Clauses 4 and 5 of the Funding Deed means 'at any time the aggregate of all monies owing or remaining unpaid by the ARL to Optus in respect of the 'Loan' advanced in accordance with Clause 3 of the Funding Deed (see the definition of 'Money Owing' and 'Loan' in Clause 1.1 of the Funding Deed).

34 This funding was in addition to the funding referred to in clause 2.1 of the Funding Deed.

35 The Funding Deed was the subject of the Amending Deed executed on 3 February 2000. The recitals to the Amending Deed recorded that:

"A. [Optus] and ARL are parties to the Optus/ARL Funding Deed.

B. Pursuant to Clause 3 of the Optus/ARL Funding Deed, [Optus] agreed to provide the Loan to ARL, if ARL requested [Optus] to provide the Loan, and ARL agreed to apply the proceeds of the Loan in accordance with Clause 3 of the Optus/ARL Funding Deed.

C. ARL failed to request [Optus] to provide the Loan on and subject to the terms required under Clause 3 of the Optus/ARL Funding Deed and [Optus] has disputed that it is any longer required to provide the Loan to ARL.

D. In consideration of the ARL agreeing to procure the ARL Clubs to provide additional sponsorship benefits to Optus in the 2000 and 2001 Seasons, Optus and ARL have agreed to resolve the Dispute and to amend the Optus/ARL Funding Deed on the terms and conditions of this Deed. 36 The submission of the defendants is that the dispute between the parties referred to in these recitals is then to be seen as evidenced by letters passing between Colin W. Love & Co. and Optus in the second half of 1999. Clearly the submission is correct. The defendants draw attention to the fact that the disputed amount, referred to in the Funding Deed as "Top Up Funding" is in the same amount as the "Loan" advanced under the Sponsorship Deed. Attention is also drawn to the purpose of the Loan under the Sponsorship Deed (Recital D) being the same purpose as under the Funding Deed (Recital C).

The Partners Funding Deed of 15 May 1998 and the Partners Funding Amendment Deed of 3 February 2000 37 Before returning to the terms of the Sponsorship Deed, it is also necessary to advert to a further deed known as the Optus/Partners Funding Deed ("the Partners Funding Deed") dated 15 May 1998 [the same date of execution as the Funding Deed], as amended by a further deed ("the Partners Funding Amendment Deed"), as part of the necessary exercise in any contract case of identifying the relevant mutually known facts and context for the purposes of construing the Sponsorship Deed. The Partners Funding Deed is referred to extensively in the Amending Deed.

38 The first two Recitals to the Partners Funding Deed are in the same terms as the first two recitals to the Funding Deed. Recitals C, D and E of the Partners Funding Deed are in these terms:

"C. The Partners have engaged NRL to provide services for the NRL Competition.

D. The Partners have requested [Optus] and [Optus] wishing to ensure access to rugby league programming for pay television has agreed, to provide the Transitional Funding on the terms and conditions set out in this Deed.

E. The Partners have requested [Optus] and [Optus] has agreed to provide the Sponsorship Funding on the terms and conditions set out in this Deed." (NRL is defined to mean National Rugby League Limited). 39 The Partners referred to in the Partners Funding Deed were the ARL and NRLI. As Recital B to the Funding Deed and the Partners Funding Deed recorded, the ARL and the NRLI formed the NRL Partnership to conduct the NRL Partnership on and from the 1998 season. Optus executed the Partners Funding Deed with ARL and NRLI "in their capacity as Partners in the NRL Partnership".

40 Clause 3.3 (b) of the Partners Funding Deed provided that:

"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 of Origin or international representative 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 the defendants]

41 The defendants then submit that from this clause, in particular, and the suite of agreements referred to above, it may readily be discerned that, at all material times, Optus knew that: · the NRL Competition was conducted not by the ARL but by a partnership between the ARL and NRLI; · that partnership was subject to a Partnership Agreement; · naming rights for the NRL Competition, State of Origin or international representative matches were something that could be granted by the NRL Partnership (and not by the ARL); · Optus differentiated in a suite of interrelated contractual documents (all drafted by the same law firm) between, on the one hand, the ARL and NRLI in their capacity as Partners in the NRL Partnership and, on the other hand, the ARL simpliciter as the organization under whose logo and banner the ARL competition known as the Optus Cup had been conducted and which provided financial assistance to the ARL Clubs from time to time. 42 The submission is accepted as of substance. 43 Both the Funding Deed and the Partners Funding Deed formed schedules to the Merger Agreement between ARL, NSWRL, Super League, NRL and News. Each of the five agreements referred to above trace their origin to the reconciliation of the dispute over control for rugby league, all of which facts it may reasonably be inferred were mutually known by the parties. In the context of the Sponsorship Deed, this is most clearly seen in the reference in Recital D to the purpose of the loan being to enable

"ARL to assist the ARL Clubs specified in Schedule 2 with their transitional costs in restructuring the game of rugby league and satisfying existing club and player obligations". The NRLI Support-Optus-Memorandum of Agreement of 20 February 1998 44 Another agreement of importance in understanding the background circumstances to the Sponsorship Deed is said to be an agreement dated 20 February 1998 styled the "NRL Support - Optus - Memorandum of Agreement" to which Optus and the ARL were parties. That Agreement referred to the National Rugby League Partnership ("NRLP") which it is said, may reasonably be inferred as having become the NRL Partnership referred to in agreements such as the Partners Funding Deed. The last sentence of clauses 3 and 4 of this Agreement states that 'NRLP has no liability to [Optus] in relation to funds made available by [Optus] to ARL', importantly, so it is said, distinguishing between ARL in its own right and ARL as a partner in the inchoate partnership that became the NRL Partnership. 45 Clause 5 of the NRL Support - Optus - Memorandum of Agreement relevantly provides:

"NRLP will not for the first 3 years of the NRL Competition grant naming rights to the NRL Competition, State of Origin or international representative matches conducted in Australia to Telstra, OC or OV, but this shall not restrict Telstra, OC or OV securing other NRL Competition sponsorship properties, in particular, NRL team franchise sponsorships."

46 The submission is that by inference, this agreement makes plain, and as a fact mutually known by Optus and the ARL, that the NRL Partnership alone had the power to grant naming rights for the NRL Competition and that, from the season 2001 on, was at liberty to grant these rights to Telsta, Vision or Optus Communications, amongst others. The terms of the Sponsorship Deed 47 Clause 5 of the Sponsorship Deed provided that:

"In consideration of the payment by Vision to ARL referred to in clause 4, 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." 48 In addition, clause 7 made provision for the ARL and the ARL Clubs to organise their telecommunications services in a manner calculated to confer benefits on the Optus Group by reference to the telecommunications spend of the ARL and the ARL and affiliated clubs and their members. 49 Clause 6 of the Sponsorship Deed recorded the agreement of the ARL and each of the ARL Clubs agreed to:

(i) promote Optus' sponsorship of the ARL and each of the ARL Clubs;

(ii) promote the sponsorship relationship between Optus and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to Optus; and

(iii) obtain Optus' prior written approval to all and any use made by the ARL and each and any of the ARL Clubs of the Optus Group's trade marks and logos. 50 The defendants draw attention to the fact that neither of the promises to confer benefits in clauses 5 or 6 of the Deed was stated to be exclusive in the sense that the ARL and the ARL Clubs were prevented, at the same time, from conferring similar benefits on more than one party or interest.

51 "Exclusivity" in the Sponsorship Deed is dealt with in clause 8.1 by which the ARL and each and all of the ARL Clubs agreed:

"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 …." The Telstra Agreement 52 On 18 December 2000, the ARL (together with NRLI with whom it was in partnership) entered into a sponsorship agreement with Telstra, entitled "NRL Naming Rights Sponsor Agreement" which agreement is appended to this Judgment as appendix "C". By that contract: · Telstra is the naming right sponsor of the National Rugby League Competition (clause 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 (clause 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" (clause 1.3); · The term covers six consecutive football seasons commencing in 2001 (clause 1.4); · Telstra shall pay to the Partnership (i.e. that between the ARL and NRLI) $4 million per season, plus CPI (clause 1.5); · Telstra's logo will be displayed prominently on all players' jerseys (clause 2.1); · Telstra is entitled to ground signage, both around the perimeter and on the field (clause 2.2); · The competition and the trophy will be known as the "Telstra Cup" (clause 2.3); · Telstra is entitled to general promotion by way of stationery and media presentations (clause 2.4). Dealing with the construction issue 53 In my view each of the submissions of ARL is of substance. Those submissions are generally adopted in the reasons set out below. 54 There are two principal and alternative strands to the ARL submissions. Both concern questions of construction. 55 The first focuses upon the reference in the Sponsorship Deed to the ARL in terms of the capacity in which ARL entered into the Deed ["the capacity issue"] 56 The second focuses upon the use of the term "sponsorship" in clause 8.1 of the Sponsorship Deed seeking to exclude from the reach of that term the entering into of any contract in respect of the naming rights to the NRL Competition ["the naming rights issue"]. 57 It is convenient to deal with these matters seriatim. The capacity issue Optus' submissions 58 Optus submits that entry into the Telstra Agreement constituted a breach of clause 8.1 of the Sponsorship Deed because it amounted to the ARL and ARL Clubs 'accepting sponsorship' from a competitor of Optus, namely Telstra. Paragraph 5 of the Further Amended Summons relevantly pleads that,

"On or about 18 December 2000, the ARL and National Rugby League Investments Pty Limited on their own behalf, or alternatively, in their respective capacities as partners of the NRL Partnership entered into a contract with Telstra Corporation …." 59 The submission is that the fact that the ARL did so in partnership with NRLI is irrelevant. A partnership it is said, is not a separate legal entity distinct from the partners themselves. Reference is made to section 6 of the Partnership Act 1892 (NSW) which provides that:

"An act or instrument relating to the business of the firm, and done or executed in the firm-name, or in any other manner, showing an intention to bind the firm by any person thereto authorised, whether a partner or not, is binding on the firm and all the partners: Provided that this section shall not affect any general rule of law relating to the execution of deeds or negotiable instruments." 60 The Further Amended Summons by way of an internal dictionary defines the words "Exclusivity Obligation" as a reference to so much of clause 8 as included an agreement by ARL and each of the ARL Clubs: · not to accept sponsorship from any competitor of any company in the Optus Group; · to use their respective best endeavours to ensure that no player or official endorsed or otherwise promoted or was involved in any promotion of any of Optus' competitors' (including Telstra Corporation) products, services, logos, trade marks or brands during the term of the deed. 61 Paragraphs 6 of the Further Amended Summons pleaded breaches of the Exclusivity Obligations. 62 Paragraph 7 pleads a breach of clause 6.1 (b) claiming a failure to promote the sponsorship relationship between Optus and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to Optus. 63 Optus further addressed in terms of the following submissions and emphases: Benefits received · Optus is said to have received the benefit furnished by the Optus/ ARL Funding Deed of 15 May 1998 of the mandatory obligation that in 1998 ARL was to procure ARL Clubs to comply with Optus' promotional requirements specified in schedule 3 to that deed and of the obligation of ARL to use best endeavours in 1999 and 2000 to procure those clubs to comply with the same promotional requirements [Clause 7]; · The submission sought to compare this benefit with what Optus was said to be promised under the later Sponsorship Deed which were said to be considerably more than the "best efforts" obligation which had been obtained for the years 1999 and 2000. Optus Partners Funding Deed Clause 3.3 (b) · The submission was that clause 3.3 (b) of the original Optus Partners Funding Deed was simply in negative terms, a clause which proscribed the NRL from granting naming rights to Telstra, Optus or Vision before the end of the 2000 and that the clause did not identify what the partnership was in fact entitled to do as of right. The submission was then that on 3 February 2000 one of the two partners, ARL, undertook fresh obligations to Optus, thereafter by its relevant covenants, succeeding in limiting the conduct in which it could engage, in any capacity. At the matter was put by Mr Jackman as follows: "So 3.3B is not an express positive permission for the NRL partnership to give naming rights to Telstra in 2001, it simply stipulates what they are not allowed to do until the end of 2000, but the legal operation of 3.3(b) is then cut down by the ARL's obligations to us entered into on 3 February 2000 which give us those additional sponsorship benefits right through to the end of 2001. So … 3.3(b) could have operated in 2001 to make Optus or Optus Vision the naming rights sponsor. So to that extent 3.3(b) sits happily with the later contract of 3 February, but 3.3(b) doesn't authorise, even on its own terms, doesn't authorise a naming rights sponsorship agreement with Telstra in 2001, but be that as it may, after 3 February, that cannot be done because one of the fifty-fifty partners in this partnership has undertaken the obligations of the sponsorship deed of 3 February 2000. So to the extent that 3.3(b) left something open as at May 1998 to the NRL partnership which it might have contemplated doing in the year 2001, that is then superseded by the 3 February 2000 agreement with Optus which gives us prominence and exclusivity and all the rest of it." [Transcript 48 - 49] Clause 6.1 (b) of the Sponsorship Deed · The submission was that in relation to clause 8 dealing with "exclusivity", ARL and each of the ARL clubs agreed not to accept sponsorship from any competitor of any company in the Optus Group and agreed to use their best endeavours to ensure that no player or official endorsed or otherwise promoted or was involved in any promotion of any competitor's products, services, logos, trademarks or brands during the term of the deed. The submission was that this limited the activities of ARL, just as clause 6.1 (b) limited its activities in relation to the matters there dealt with. And this was the case whether one considered ARL as an entity in its own right or whether one considered it as one of the two partners of the NRL partnership. Seeking to simplify the streams of funding 64 As is apparent it is a complex exercise to track through the various funding deeds and their amendments to keep a close focus upon what was envisaged as the entity having relevant obligations with respect to that funding. Endeavouring to simplify the matter it may be seen thus: Original Partners Funding Deed Under the original Partners Funding Deed there were two streams of funding to the Partnership. · The first stream required Optus to provide to the Partnership the sum of $22 million dollars payable as to $12 million in respect of the 1998 Season and as to $10 million in respect of the 1999 season [clause 2.1]. This was "transitional funding" to be applied by the partners towards the conduct of the NRL Competition [clause 2.4] · The second stream of funding under the same Deed obliged Optus to pay to the Partnership the sum of $5 million for each of the 1998, 1999 and 2000 Seasons. This $15 million dollar amount comprised "sponsorship funding" [clause 3.1 and 3.2]

Original Optus - ARL Funding Deed Under the original Funding Deed there were likewise two streams of funding but now given by Optus to ARL . This funding was interdependent with identical payments of amounts being made also by News and Channel Nine. · The first stream of funding was the payment of up to a maximum of $16.5 million to ARL to be applied by ARL pro rata to each of the ARL Clubs [clause 2.1]. The purpose of provision of these funds was to assist ARL clubs over the three-year transitional period [from 1998 until and including 2000], to finance their transitional costs in restructuring the game of rugby league [clause 2.6]. Optus was entitled at its option to convert the amount of this first stream of funding into a limited recourse loan [clause 2.7]; · The second stream of funding entitled "top-up funding" [being the genesis of what later became the funding provided for on the occasion of the Sponsorship Deed and associated Optus - ARL Amending Deed], was also for the same purpose, namely to assist ARL clubs over the transitional period to finance their transitional costs in restructuring the game of rugby league [clause 3.3]. In short the second stream was to top-up the first stream by providing a loan up to a maximum of $5 million, the mechanism requiring ARL to give a particular Notice to Optus in this regard [Clause 3.1]. 65 On 3 February 2000 changes took place to each of the funding arrangement deeds. Partners Funding Amendment Deed · The Partners Funding Amendment Deed made no change to the original first stream $22 million payment obligation which had been referred to in clause 2.1 of the Partners Funding Deed. · However in respect of the second stream of the Partners Funding Deed [namely the obligation to pay to the Partnership by way of sponsorship funding, the sum of $5 million for each of the 1998, 1999 and 2000 Seasons], this $15 million dollar amount was now reduced to $13 million [clause 3.1] and was capable of being further reduced to the extent that third party sponsorship funding would be received. [See the changes to clause 3.1 and 3.2 provided for in clause 2.3 of the Partnership Funding Amendment Deed]. Optus - ARL Amending Deed · Turning to the 3 February 2000 Amending Deed, there was no change to the first stream requiring the payment of up to a maximum of $16.5 million to ARL to be applied by ARL pro rata to each of the ARL Clubs by way of transitional funding. · There were however very significant changes in respect of the second stream "top-up funding obligation. · The first aspect of this change related to the giving of a notice at a different time than had previously been required. [Clause 4 (a)] · Importantly the deed provided that for the sake of certainty, clauses 3.3 and 3.4 of the original Optus - ARL Funding Deed remained wholly unaffected and enforceable and for the amount which now had a maximum by way of the loan of $5 million to be a loan "on the same terms and conditions referred to in the Optus/ARL Funding Deed" [in short this remain a limited recourse loan] [Clause 4 (c)] · Next by way of the changes introduced by clause 5, the amendment had the effect of specifically incorporating the provisions of the Sponsorship Deed into the Optus/ARL funding Deed. [See the specific references to the words requiring the Optus/ARL Funding Deed to be amended by the insertion of the words "Subject to clause 11 of the Sponsorship Deed" and the further reference to the addition of a new definition "Sponsorship Deed" [Clause 5 (a) and (b)] · In the result the original Optus/ARL Funding Deed was amended so as to effectively require that top-up funding was only payable in terms of the Sponsorship Deed. · In the result the mechanism adopted and used makes it quite plain that the word "ARL" as used in the Sponsorship Deed, at least in relation to the loan to be provided, could only be read as a reference to ARL as a recipient as previously of transitional funding to be applied by ARL to each of the ARL Clubs in contrast to advances by way of sponsorship funding made to the Partnership. There can be no question but that the word ARL as used in the Sponsorship Deed was intended to referred to ARL bearing a responsibility by way of this funding otherwise than in the capacity of partner in receipt of sponsorship funding. This then casts considerable light upon the capacity in which ARL is seen to have been understood by the parties as becoming an obligor in covenanting generally as it did in the Sponsorship Deed. Benefits conferred 66 The Telstra Contract was plainly entered into by NRL Partnership of which the ARL is a partner. It is executed under the description of the NRL Partnership and the benefits conferred by that agreement are plainly enough benefits conferred by the Partnership (see, for example, clauses 2.3, 2.6, 2.7, 3.1, 3.2, 4.1, 4.2, 4.3) which also has substantial benefits conferred upon it (clause 1.5). Findings in relation to the issue 67 On its proper construction, clause 8.1 of the Sponsorship Deed, in referring to the ARL, is not and was not intended to include the ARL in its capacity as a partner of the NRL Partnership. 68 On its proper construction, the reference in the Sponsorship Deed to the ARL should be read or understood as the ARL "other than in its capacity as a partner in the NRL Partnership". 69 The context and surrounding circumstances, together with 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 which Partnership owned and operated the NRL Competition, on the other hand, underpins these findings. 70 In CCOM Pty Limited v J Jeijing Pty Limited 36 FCR 524 at 527, it was said that:

"prima facie the words used in the written agreement are to be understood in their ordinary or popular sense in the search for the presumed intent of the parties to the agreement. However, few words have a single inflexible ordinary meaning, so the context in which they are used, and the evidence of the background circumstances against which the agreement was made, which is always admissible as an aid to interpreting a contract, are of paramount significance in identifying the particular meaning to be adopted." 71 Similarly and again as ARL has submitted, examination of the context in which words are used may reveal that the parties have attributed their own peculiar meaning to words, in which case it is the duty of the court to give effect to that meaning. In many cases the contract will contain explicit definitions of terms (Lewison para 4.10, pp107 - 111; Re Sassoon (1933) 1 Ch 858; Re George & The Goldsmiths & General Burglary Insurance Association Limited (1899) 1 QB 595; The Karen Oltmann [1976] 2 Lloyds Reports 708 at 712). 72 The juxtaposition of the Partners Funding Deed and the Funding Deed is to be noted. Optus was a common party to both Deeds. Both Deeds related to a common activity, namely the advance of money by Optus. As ARL has submitted, the juxtaposition of these two Funding Deeds is a powerful indicator that Optus itself at all times differentiated between the ARL in its capacity as a Partner of the NRL Partnership and the ARL in its ordinary corporate capacity. Further and as ARL has also submitted, this differentiation is made explicit by the very description of the parties in the Partners Funding Deed (see also the Memorandum of Agreement referred to in 28 above.). 73 This point is, I accept, further reinforced by the internal juxtaposition in the Funding Deed and the Sponsorship Deed of the ARL with the ARL Clubs. The ARL Clubs do not constitute the sum total of Clubs in the NRL Competition which is the Competition owned and administered by the NRL Partnership. Rather, and as ARL has submitted, they are the Clubs that remained loyal to the ARL during the Super League war and prior to the reconciliation constituted by the Merger Agreement. I accept that it would be curious to find a contract to be entered into by the ARL in its capacity as a partner of the Partnership also to be entered into by some but not all of the clubs that participated in a competition owned and operated by the Partnership. 74 I further accept as of substance the submission that the Funding Deed, in many respects the predecessor of the Sponsorship Deed, as a result of the ARL's alleged failure to issue the requisite notice under clause 3, plainly enough does not entail a loan to or funding of the ARL in its capacity as a Partner of the NRL Partnership. Rather, upon examination its purpose, as submitted by ARL, is that disclosed in Recital C and it is, in particular, directed for the benefit of the ARL Clubs. This central purpose of the Funding Deed, which casts light on the sense in which Vision and the ARL intended the reference to the ARL in the Sponsorship Deed, is reinforced by clauses 2.3, 2.6 and 3.3. 75 The Sponsorship Deed incorporates by reference the Optus/ARL Funding Deed dated 15 May 1998 as amended by the Amending Deed dated 27 June 2000 (see clause 1 of the Sponsorship Deed). In turn, the Amending Deed to the Optus/ARL Funding Deed expressly refers to the Optus/Partners Funding Deed dated 15 May 1998 to which Vision and the ARL were parties (see clause 1.2 of the Amending Deed to Optus/ARL Funding Deed). Importantly, in defining Optus/Partners Funding Deed in clause 1.2 of the Amending Deed, the draftsmen were conscious of pointing out that the ARL entered into that Deed in its capacity as a partner. 76 A further submission of ARL which seems clearly to have special weight is that Clause 2.3(b) of the Funding Deed refers to a substitution of one set of Funding Agreements by another. The earlier set of Funding Agreements could only have been between the ARL in its non-partnership capacity because the Partnership did not exist at the time of those Agreements. This is, I accept, made plain from the definition of Existing Funding Agreements in the Funding Deed. 77 In this context, it is also important properly to characterize the Telstra Contract. In terms, it was an NRL Naming Rights Sponsor Agreement which Vision knew, through its being a party to the Partners Funding Deed (and clause 3.3(b) of that Deed in particular) and the NRL Support - Optus - Memorandum of Agreement, only the NRL Partnership could grant. Naming Rights sponsorship was not sponsorship that the ARL itself was capable of "accepting". Alternatively, to the extent it could, as a matter of partnership law, accept that sponsorship, it could only do so in a different capacity to that in which it was bound by clause 8.1 of the Sponsorship Deed, again, a matter well known to Vision. 78 It has to be said that the subject transactions represent a particularly unusual set of circumstances where the rights and obligations and importantly contractual promises of entities who happen to be partners are able to be differentiated. And this by reason of the fact that the suite of transaction documents 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. 79 In the result the central proposition for which ARL has contended is upheld. Upon its proper construction, clause 8.1 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. Sponsorship Deed - Clause 6.1 (b) 80 In terms of the approach taken by Optus in relation to clause 6.1 (b) of the Sponsorship Deed, in my view that approach seeks to give this sub-clause an operation and reach well beyond that which on its proper construction it could reasonably bear. This is the clause providing that:

" the ARL and each of the ARL Clubs agree to promote the sponsorship relationship between Optus and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to Optus ". 81 In my view clause 6.1 (b) does not contain any promise as to exclusivity. The promise in clause 6.1 (b) is tied to the specific sponsorship benefits referred to in clause 5 and Schedule 3 and cannot rise any higher than those specific promises. It is not possible to spell out of clause 6.1 (b) a promise that the nominate clubs would not permit Telstra to advertise on their grounds. 82 In the context of ground signage, the reference to "maximum advertising and promotional benefit to Vision" in clause 6.1 (b) is appropriately construed as maximum advertising and promotional benefit to the extent of the $150,000 worth of signage contracted for. 83 Further I accept as of substance the ARL submission that the promise in clause 6.1 (b) could not sensibly be construed as a promise at large, divorced from clause 5 and Schedule 3. 84 Bearing in mind the holdings in this judgment accepting the ARL submissions in relation to the proper construction of the Sponsorship Deed, both as to the capacity in which the ARL contracted and the likely ambit of the best endeavours promise contained in clause 8.1, it seems to me that clause 6.1 (b) did not preclude and was not inconsistent with the Clubs also advertising Telstra at home games. The naming rights issue 85 Here again the submissions of ARL are accepted as of substance and are generally adopted in what follows. 86 The expression "sponsorship" is not defined in the Sponsorship Deed. It is a descriptive term, namely a term characterising by description those things or matters which the ARL and the ARL Clubs are not to "accept" from any competitor of Optus. Evidence is therefore admissible to identify the subject matter of the expression "sponsorship". 87 Clause 3.3 of the Optus/Partners Funding Deed reads as follows:

"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]" 88 The expression "Third Party Sponsorship Funding" is defined in clause 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. 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 clause 3.3 of the Optus/Partners Funding Deed. Further, it is clear that, pursuant to clause 3.3(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 clause 3.3 of the Optus/Partners Funding Deed. Indeed, clause 2.2 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 paras 30-34, 77). 93 It is clear from clause 3.3 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 sub-paragraph (a) of clause 3.3 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 clause 8.1 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 clause 3.3 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 clause 8.1 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. Standing back from these findings 97 There is no doubt that is curious indeed to find that ARL as part of an obligation expressed to bind it as well as the ARL Clubs, appeared to agree inter alia to provide "naming rights" in the Sponsorship Deed covering the 2000 and 2001 seasons, when the NRL Partnership was expressly bound not to grant naming rights covering the 2000 season. The matter requires close examination. 98 A number of answers to this conundrum are possible. Not all of those answers are consistent with one another. The Court obviously searches as a matter of the proper approach to construction, to discern the parties intent. The exercise carried out is an objective one. 99 Importantly as already observed, the Sponsorship Deed did not define the term "naming rights". It did however, in clause 5 (a), include a reference to "naming rights" as part of the description of a number of other sponsorship and promotional type concepts, all of which are then said to be "as set out in Schedule 3". That Schedule has a number of headings. None of those is entitled "Naming Rights". The Schedule does however in several places refer to aspects of promotion giving an entitlement to Optus to have its logo appear on club stationery, promotional material, advertising material and playing shorts. The Schedule also gives to the Optus Group a particular right to ground signage which must include fence signage and other signage opportunities identified by Optus to each club. 100 The Optus/Partners Funding Deed appears to give some content to its use of the term "naming rights" when those rights are described as "naming rights to the NRL Competition, State of Origin or international representative matches conducted in Australia ". 101 Even if the defendants "capacity" submission be incorrect, in light of the simultaneous signing on 3 February 2000 of the Amending Deed, the Partners Funding Amendment Deed and the Sponsorship Deed, the Court in its endeavour to discern the parties objective intent, strains to give a construction as would avoid an inconsistency of obligation where the arguably inconsistent references to the grant of "naming rights" appears in the above described instruments. Clearly Schedule 3 to the Sponsorship Deed cannot be construed as purporting to confer naming rights to the NRL Competition. To my mind it is appropriate to regard the parties to the Sponsorship Deed as cognisant of the need to avoid inconsistency and as treading warily in this regard. One is dealing with a close line. 102 What then in all of the circumstances is shown in terms of the pleaded breaches of contract. Clearly one turns to the Telstra Deed. In terms it is a "Naming Rights Sponsor Agreement". Importantly clause 1.3 ["the exclusivity clause"] expressly provides that the exclusive arrangement is "also to apply to all Clubs and to the players of those Clubs except to the extent of any existing arrangements as at the date of this Agreement" . Earlier in the same clause 1.3 finds the following sentence:

"This arrangement 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 …" 103 The width of the words emphasised in the above provision is obvious. 104 Now one has a circumstance in which attention appears to have been given to existing arrangements, which, if the defendants capacity submission be incorrect, requires one to examine whether or not Optus, in terms of its pleaded case, has proven any breach of the Sponsorship Agreement. It clearly has not proven any such breach by reference to the act of entry by the NRL Partnership into the Telstra Agreement insofar as that Agreement conferred the naming rights to the NRL Competition upon Telstra. 105 However the case for Optus goes further. And the Telstra Agreement appears to go further than simply dealing with the competition naming rights. 106 It is this approach which Optus submits comprises the breaches by ARL and the ARL Clubs of the obligation to promote the sponsorship relationship between Optus and ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to Optus. And the burden of the case put by Optus is that the very expansive rights given to Telstra in the "Sponsorship Package" portion of the Telstra Agreement were calculated to and in fact have had the result that the rights of Optus which, on this case, were given to it under its Sponsorship Deed, became writ in water; that is to say, were rendered valueless in the particular circumstances. Take for example the question of advertising by way of the provision of space on the playing shorts of the ARL clubs first grade and first division teams which were to be in accordance with the NRL guidelines, 25 cm² in area. 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. 107 Ultimately however it is important to closely examine the Schedule 3 Optus promotional requirements in the Sponsorship Deed. The matter was dealt with in the ARL submissions from the bar table [Transcript 60 and following]. In short the ARL submission was that a very close examination of each of the Schedule 3 requirements against the evidence and the Optus case discloses no basis for the proposition than these requirements were not or could not have been met, and discloses no basis for the proposition that there was any allegation of substance made suggesting a relevant breach. 108 I have had some doubts in this regard. However clearly a great deal of the Schedule 3 promotional requirements were still available to and offered to Optus which, for obvious reasons referable to the entry into of the expansive Telstra Agreement, viewed such rights as it had pursuant to the Sponsorship Agreement as effectively worthless. 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. 109 At the end of the day however the Court can only deal with the proper construction of each relevant clause. The proper approach for example to clause 6.1 (b) of the Sponsorship Agreement reference to the obligation to promoting the sponsorship relationship "to ensure maximum advertising and promotional benefit to Optus" should it seems to me be read as not furnishing to Optus rights over and above the clause 5 and Schedule 3 rights. 110 Ultimately the submissions of ARL are of substance and are adopted in what follows. 111 Optus alleges as against the ARL and the ARL Clubs that they failed 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, services, logos, trademarks, or brands during the term of this deed …" within the meaning of clause 8.1 of the Sponsorship Deed and that, in addition, the ARL and the ARL Clubs failed to promote the sponsorship relationship between Vision and the ARL and each of the ARL Clubs to ensure maximum advertising and occasional benefit to Vision (clause 6.1). Best Endeavours clauses - the principles 112 As ARL has submitted, a best endeavours clause is far from a matter of absolute obligation. All it requires is that the promisor 'do all he reasonably can in the circumstances to achieve the contractual object, but no more': Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 64 per Gibbs CJ; see also Best & Less Pty Limited v Divergent Technologies Pty Limited [2002] FCA 43 at para 34. In this case, Conti J., with whom the other members of the Court agreed, said:

"Divergent responded by first citing the following well known judicial dicta on the meaning of a contractual undertaking "to use best endeavours", namely "to do all he reasonably can in the circumstances to achieve the contractual object, but no more" (see Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 64 per Gibbs CJ), or to do "all that could reasonably be expected of (the promisor) having regard to the circumstances of its business operation" (see Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 at 107 per Wilson J). A key to the first of those authoritative citations is the determination of "the contractual object". Moreover both citations embody a concept of reasonableness in the light of prevailing circumstances . 113 In Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 at 101, Mason J. held that:

A "best endeavours" clause thus prescribes a standard of endeavour which is measured by what is reasonable in the circumstances, having regard to the nature, capacity, qualifications and responsibilities of the licensee viewed in the light of the particular contract.

114 Where a contract contained a provision that the parties 'shall use reasonable endeavours to agree' on certain matters, the English Court of Appeal has held that that clause left the parties at liberty to take into account their own financial position, at any rate short of bad faith or in breach of an express term of the agreement: Phillips Petroleum Co United Kingdom Limited v Enron Europe Limited (1997) CCH CLC 329. cf. State Bank of New South Wales Limited v Chia (2001) 50 NSWLR 587 at 620 - 621 (paras 426 - 428).

115 There is a strong argument in support of the proposition that there can be no breach of a best endeavours clause where, to do the action said to be required by that clause, would expose a party to a proceeding for breach of contract. The proposition is that such a clause must be construed as only permitting a party to do that which is lawful to be done (see, for example, Aerial Taxi Cabs Co-operative Society Limited v Lee (2000) 178 ALR 73 at 89 (para 75)). 116 The allegations made against the ARL Clubs, and in particular the allegation in relation to alleged failure to use best endeavours, need to be considered in the context of the Club Agreements which pre-dated the Sponsorship Deed. 117 In this context, and as ARL has submitted, it is necessary to appreciate that the Clubs' entitlement to participate in the NRL Competition, as it is defined in the Sponsorship Deed, depends upon those Clubs having executed the Club contracts with NRL which had been engaged by the NRL Partnership to operate and manage the NRL Competition.

118 Under clause 17 of those Club contracts, each of which was relevantly executed prior to entry into the Sponsorship Deed, each club was obliged to "ensure that its players wear only team apparel approved by NRL at NRL Competition matches." The clubs were required by the NRL to display the Telstra logo for the 2001 season. As such, the fact that the players displayed Telstra logos on their jerseys was a matter wholly beyond their control, and the subject of an existing contractual obligation pre-dating the Sponsorship Deed. Optus well knew that the Clubs were subject to the NRL guidelines in this regard (see paragraph 2.1 of Schedule 3 of the Sponsorship Deed). Accordingly, it is clearly arguable that there could be no breach of the best endeavours clause by reason of this fact, which is alleged to constitute one element of breach.

119 The particulars of the alleged breach of the best endeavours and clause 6 obligations also include that the "ARL and the ARL Clubs promoted or endorsed Telstra Corporation Ltd's services, logos, trademarks or brands by displaying Telstra perimeter signs, displaying Telstra television commercials, displaying Telstra grass signage in the in-goal area; displaying Telstra grass signage in the centre of the playing field; displaying Telstra signage on all club media backdrops."

120 Here again any promotion of Telstra through the use of ground signage rights arguably did not entail a breach by the clubs of the best endeavours clause because the clubs were obliged under Schedule 3 of the Club agreements to provide the NRL with certain venue rights which it was open to the NRL either to use itself or licence to NRL sponsors: see clause 8(d). 121 Further, the "best endeavours" obligation is one that rests upon the clubs in relation to the actions of a club's players or officials. 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.

122 In so far as it is alleged against the ARL Clubs that they failed to "promote the sponsorship relationship between Optus and the ARL and each of the ARL Clubs to ensure maximum advertising and promotional benefit to Optus" in breach of Clause 6.1(b), that obligation is properly to be construed in the context of Clause 5 of the Sponsorship Deed which identifies the sponsorship opportunities which were to be provided. These are those as set out in Schedule 3 to the Sponsorship Deed. The obligation under Clause 6.1(b) to promote the sponsorship relationship between Optus and the ARL Clubs requires be read in the context of the specific sponsorship benefits identified in Schedule 3 to the Sponsorship Deed.

123 In that context, and again as pointed out by ARL, on 16 February 2001, the Chief Executive Officer of the ARL wrote to Mr Cameron of Cable & Wireless Optus confirming that the ARL and the ARL Clubs would provide the promotional requirements set out in Schedule 3 of the Sponsorship Deed, that the players at the ARL Clubs would display the Optus logo on their apparel in accordance with Schedule 3 and that non-exclusive ground signage would be provided at the ARL Clubs' home grounds as required by Schedule 3.

124 Nothing in the Telstra contract prevented the ARL Clubs from providing the Schedule 3 benefits to Optus. If, because Optus was discontent with Telstra providing Naming Rights Sponsorship to the NRL Competition, Optus chose not to accept the Schedule 3 benefits under the Sponsorship Deed from the ARL Clubs, that was a commercial matter for it and there was no relevant breach by the ARL Clubs. 125 Ultimately it is unnecessary for the Court to here determine whether there can never be a breach of a best endeavour clause where to do the action would expose a party obligor to an action for breach of contract. Here Optus had clear knowledge of the NRL guidelines and of the Clubs contractual obligations generally in relation to the competition. The resolution of the matter is achieved by conventional contract construction discerning the parties presumed intent from the agreements read in the light of the matrix of circumstances, including the parties relevant knowledge or presumed knowledge at the material time. Damages 126 Clause 11 of the Sponsorship Deed provides that:

"Despite the terms of the Optus/ARL Funding Deed, in the event that Optus terminates this Deed at any time pursuant to clause 10, 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." Optus' Submissions 127 Mr Jackman submitted as follows: · The term of the Deed was two years, and the unexpired portion of the term was one year. · Having regard to the fact that the value of two years' benefits at $5 million was reached by way of an arm's length bargain between experienced and competent parties, the value of one year's benefits is half that amount, i.e. $2.5 million. · This is not a claim for damages, but is a claim for repayment of a loan being a liquidated sum, which will yield a judgment in the amount $2.5 million · Had the termination occurred at the commencement of the Sponsorship Deed, Optus would have been entitled to recover 100 percent of the $5 million. The reason why this is so is because it may be taken as a given that the value of the benefits that would have accrued to the Optus Group for the Loan as a whole was $5 million. This was the value provided for in a contract reached at arms length between the parties. The unexpired portion of the term would then be the whole of the two years. · Had the termination occurred at the very end of the contract after the last game had been played in the 2001 season, there would have been no more benefits for Optus to obtain during the term. Hence the unexpired portion of the term would yield no benefits and Optus would be disentitled from recovering any amount at all · Here the termination occurred halfway through the term, namely at the beginning of the 2001 season. The appropriate apportionment is therefore 50%, requiring a judgment in the amount of $2.5 million. · It is unnecessary for Optus to prove what objectively could be said to represent the value of the benefits that would have accrued to the Optus Group over the unexpired portion of the term on an objective basis.

Dealing with the issue 128 Here again the submissions of the ARL are of substance and are adopted in what follows. The central proposition is that Optus has failed to discharge the necessary onus of proof in terms of proving its loss. 129 The clause 10 termination process having been invoked by Optus, it became incumbent upon Optus to prove as its damages what was the 'value of the benefits that would have accrued to the Optus Group in the unexpired portion of the Term'. 130 Optus has simply failed to undertake this exercise and, thus, to discharge its onus. In the circumstances, even in the event that it had established a breach of the Sponsorship Deed, it would be entitled to nothing more than nominal damages. This was the outcome of the not dissimilar case of Luna Park (NSW) Limited v Tramways Advertising Pty Limited (1938) 61 CLR 286 where the High Court confirmed the Full Court of the Supreme Court of New South Wales' decision that the plaintiff had simply failed to prove its damages.

131 It is, of course, trite that a party seeking to claim damages for breach of contract, in order to be entitled to anything more than nominal damages, assumes and retains the burden of proving its loss, a conceptually quite distinct concept from what may be characterized as the defendant's gain.

132 In The Commonwealth v. Amann Aviation Pty. Ltd (1992) 174 CLR 64 at 118, Deane J said:

"The frequent inability of curial procedures to determine with certainty what has happened in the past, let alone what would have been or what will be, necessarily gives rise to a need for a number of subsidiary rules governing the determination of the loss or injury which a plaintiff has actually sustained by reason of a wrongful act. One such subsidiary rule is that ... a plaintiff bears the onus of establishing the extent of his loss or injury on the balance of probabilities. To satisfy the requirements of that rule, a plaintiff must , if he is to recover more than a nominal amount in such an action, affirmatively establish assessable damage, that is to say, loss or injury which is capable of being measured in monetary terms ((63) See, e.g. Luna Park (N.S.W.) Ltd. v. Tramways Advertising Pty. Ltd . (1938) 61 CLR at 301, 307, 311, 312.). In many cases, proof of the full extent of the loss or injury sustained will involve establishing an evidentiary foundation for positive and detailed ultimate findings by the court upon the balance of probabilities. (emphasis added)

133 In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10 (11 March 2003), para [38], Hayne J observed that: It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. This case did not invite attention to such questions. Placer sought to calculate its damages precisely.

134 I accept that the present case is one falling into the "latter" kind of case referred to by Hayne J, namely one "where, although apparently able to do so, the plaintiff has not adduced such evidence …" 135 It was just such a case that was considered in detail by Brooking J in the Victorian Full Court in JLW v Tsiloglou [1994] 1 VR 237, at p.241:

"A plaintiff cannot recover substantial as opposed to nominal damages unless he proves both the fact and the amount of damage: The Commonwealth v Amann Aviation Pty Limited .. If he proves the fact of the loss but does not call the necessary evidence as to its amount it cannot be awarded substantial damages ( McGregor on Damages , 14th Edition pp.190 and 222): he must put the tribunal in the position of being able to quantify in money the damage he has suffered: Watts v Rake .. It is often said that the amount of damage must be proved with certainty, but this only means as much `certainty' as is reasonable in the circumstances: Ratcliffe v Evans .. Where precise evidence is obtainable, the Court naturally expects to have it; where it is not, the Court must do the best it can: Biggin & Co v Permanit Limited .. But while in some cases guesswork may be permissible in assessing damages, in others it is not." 136 This passage was cited with approval by Rolfe J. in St George Commercial Credit Corporation Limited v Collins Wallis Properties Pty Limited unreported, 21 August 1998, by the NSW Court of Appeal in Rosser v Marine Ministerial Holding Corporation [1999] NSWCA 72 as well as by the Queensland Court of Appeal in Syntex Australia & Anor v Ray Teese P/L [1996] QCA 259 (6 August 1996). There Pincus JA (Fitzgerald P and Thomas J agreeing), after referring to the judgment of Mason CJ and Dawson J in The Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64 at 82 et seq., said:

"It does not appear likely that the Court intended it to be understood by these remarks that where a plaintiff is entitled to damages, whether in respect of loss of profits or otherwise, the court must always make an assessment whatever the state of the evidence (see also pp. 118, 137-8). Such a view would be contrary to the decision of the High Court in Ted Brown Quarries Pty Ltd v. General Quarries (Gilston) Pty Ltd (1977) 16 A.L.R. 23. That concerned a claim for damages in deceit in respect of the sale of a quarry; the Court holding that the proper measure of damages was the difference between the price paid and the fair value. There was evidence before the primary judge as to value, but it was rejected. Barwick C.J., who dissented, pointed out that the value could not be precisely calculated and went on: "At best it must be a matter of opinion. If no opinions are offered to the tribunal of fact, perforce it must do the best it can. This is not a case where some estimate by the Court is beyond its competence. The Chief Justice [the trial judge] did not take the view that it was. Certainly the Court cannot be justified in rejecting the claim for damages where undoubtedly a loss has been sustained because it has no material on which a precise calculation or assessment can be made". (27) Gibbs J. decided the case on the basis that there was not "sufficient evidentiary material to enable the Court" to assess the value, the case not being "one in which the matter had necessarily to be left to the opinion and a judgment of the Court, acting at large . . . It was possible, in the circumstances, to prove, with some degree of certainty and precision, the value of the property purchased, and it was not unreasonable to expect [the claimant] to call acceptable evidence as to the value of the `resource' " (37). Aickin J. at 38 took a similar view. " Ted Brown Quarries was followed on this point by the New Zealand Court of Appeal in Newark Engineering (N.Z.) Ltd v Jenkin (1980) 1 N.Z.L.R. 504 at 508, 509. The case was considered in the Appeal Division of the Supreme Court of Victoria in J.L.W. (Vic) Pty Ltd v Tsiloglou (1994) 1 V.R. 237. Brooking J reviewed the authorities at pp. 241 et seq; his Honour entertained: " . . . no doubt that the general proposition that if damage is proved the Court must regardless of the circumstances make some assessment of the damages cannot be sustained." (245)

The other members of the Court remarked that: " . . . when substantial damages are sought by way of compensation for tort, the plaintiff must also identify the loss or damage upon which he relies with such precision as will enable the Court, on the balance of probabilities, to make an award of compensation upon an assessment of his loss." (250) The judges went on to say in effect that the plaintiffs proved they had lost a significant proportion of their stock, but did not prove what was lost, so were entitled to no damages.

It appears to me that the better view is that what Bowen L.J. said in Ratcliffe v. Evans [1892] 2 Q.B. 524 at 532-533, is still good law; this was that in proof of damages "as much certainty and particularity must be insisted on . . . as is reasonable . . . ": see per Toohey J. in The Commonwealth v Amann Aviation Pty Ltd at 138.

The competing considerations are that to insist on more certainty of proof than is reasonable may unfairly disadvantage the plaintiff who, perhaps because of mere lack of foresight or incompetence, is unable to give a reliable account of the losses suffered. On the other hand, it would seem unfair to the defendant, at least in some circumstances, to make an assessment of damages which is no more than a guess, where the situation is such that a reasonably accurate estimate of the true amount of the loss could have been made, had the plaintiff taken any trouble about the matter. " (emphasis added). 137 To similar effect are the observations of Professor Waddams, cited in Lakatoi Universal & Walker [2000] NSWSC 113 at par [1398]:

"The plaintiff must prove what she can reasonably be expected to prove, and will suffer if she fails to adduce relevant evidence within her control, but where the uncertainty is not of the plaintiff's making, and she has suffered a real loss, the court will attempt to assess it, however difficult the task.' : [Waddams " Damages: Assessment of Uncertainties " (1998) 13 Journal of Contract Law 55, at 60 citing Wood v Grand Valley Railway Co (1915) 51 SCR 283 at 289; Penvidic Contracting Ltd v International Nickel Co of Canada Ltd [1976] 1 SCR 267 at 280.]" 138 The Court rejects the submission that Optus has established that the sum of $5 million constituting the Loan under the Sponsorship Deed inexorably represented the aggregate value of the benefits to Optus over the two year period of the deed. 139 The Court further rejects the submission that even if the sum of $5 million constituting the Loan under the Sponsorship Deed represented the aggregate value of the benefits to Optus over the two year period of the deed, it is rational and reasonable simply to attribute half of that value to the first year of sponsorship (which was provided) and the other half to the second year of sponsorship. As the defendants have submitted, this is so for a number of reasons: · First, the $5m paid by Optus was not a gift nor a payment which the ARL or the ARL Clubs could unconditionally retain if they provided the sponsorship benefits contemplated by the Sponsorship Deed. · Rather, the $5m was an advance to the ARL and the ARL Cubs by way of loan which, in certain circumstances, (unrelated to the provision of the sponsorship benefits or otherwise) was required to be repaid to Optus (see Clauses 1.1, 3, 4 and 5 of the Funding Deed incorporated into the Sponsorship Deed by reason of the definition of 'Loan' in Clause 1.1, 4 and 5 of the Sponsorship Deed. · Optus has not asserted that the characterization of the $5m figure as a loan was a 'sham' nor has it led any evidence to suggest that the $5m was unlikely ever to be repaid in whole or in part. · In these circumstances, it is simply impossible to infer any equivalence or other relationship between the stated amount of $5m and the value of the sponsorship benefits. · The appropriate inference to be derived from the Agreements is that the amount in question represented that which the ARL Clubs required to effect the transition to the re-structured Competition and to meet heavy contractual obligations from Super League days. The $5 million figure referred to as the Loan in the Sponsorship Deed may be tracked directly to the $5 million figure in the Funding Deed. That amount, in turn, was also exactly the same as News or Nine agreed to lend to the ARL and/or the ARL Clubs pursuant to their funding agreements which agreements are themselves referred to in the Agreements in evidence and which, together with the Funding Deed, comprise Schedules to the Merger Agreement. · The figure of $5 million advanced under the Sponsorship Deed was not a figure which originated in the context of the 2000 - 2001 seasons. Rather, it was a sum in the same amount as was due to be paid by Optus to the ARL in 1999 pursuant to the Optus/ARL Funding Deed. That deed, as its recitals make apparent, records that monies were to be advanced by Optus to the ARL and the ARL Clubs for the purposes of rebuilding in the aftermath of the ARL/Super League war in which the ARL had been supported by Optus. The Amending Deed provides further important background information, namely that a dispute had arisen as to whether or not the ARL had failed to issue a notice so as to trigger an obligation to pay the $5 million during the course of 1999. The monies advanced under the Sponsorship Deed represent the outcome of that dispute. · At the very least, it is reasonable and proper to so infer. 140 It follows that no confidence can be placed in the submission that the $5 million amount referred to in the Sponsorship Deed is a credible proxy for the value of the benefits contracted for by Optus under the Sponsorship Deed or is any legitimate indicator of that value. 141 The Optus submission simply assumes without basis: (a) that as earlier stated, the value of the relevant benefits were $5 million; (b) a linear progression in the receipt flow of the benefits. 142 An important matter further complicating what appears to be Optus' damages strategy of simply asking the Court to infer that the value of the benefits lost in the second season was half of the Loan, namely $2.5 million, is that, under the Sponsorship Deed, a significant contemplated benefit under clause 7 was the capturing of telephony business and the use of best endeavours to meet certain spend targets. Schedule 4 to the Sponsorship Deed places a value of just over $1.5 million on the "potential increase over current [telephony] spend" amongst the various ARL Clubs. As ARL submits it may fairly be inferred that a significant part of the perceived benefit of the Sponsorship Deed from Optus' perspective was both telephony loyalty and increased Optus spends. It is not alleged in the Amended Summons that clause 7 of the Deed was breached. Clearly the benefits derived from this important clause of the Sponsorship Deed may be inferred as having accrued during the course of the fist year of its Term.

143 Many of the other benefits received by Optus under the Sponsorship Deed flowed to it in the first year of that Deed: see, for example, paragraphs 3.1 of Schedule 3 which refers to the provision of data base lists to the Optus Group by the ARL Clubs together with the specific benefit of a fully funded study by George Patterson (paragraph 3.2). This was performed and paid for by the ARL. 144 In all the above described circumstances, even if Clause 8.1 of the Sponsorship Deed had been breached, Optus for the above reasons would only be entitled to nominal damages. Short minutes of order 145 Short minutes of order are to be brought in. Costs may be argued.

I certify that paragraphs 1 - 145 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 16 April 2003

      Susan Piggott
      Associate

16 April 2003

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