[1991] FCA 425; 103 ALR 319

[1991] FCA 425; (1991) 31 FCR 242

[1991] FCA 425; (1991) 38 IR 427

Trade Practices (restrictive) - contracts or arrangements affecting competition - "exclusionary provision" - respondents comprise 16 professional football clubs (each of which fields a team in a regular competition) and the body ("the League") which controls that competition and the conditions upon which football players may become and remain members of particular teams - appellants a number of professional football players - adoption by League of rules known as "the internal draft" providing for the procedure to be followed at the end of each season by clubs and players whose contracts with particular clubs have expired - players required by internal draft to nominate terms and conditions upon which they are prepared to play football for any club and to submit themselves to all clubs on those terms and conditions but in the order provided for in the internal draft, that is, in an order which is the reverse of that in which the teams were ranked at the conclusion of the competition - each player obliged to accept employment from first club requiring his services - whether internal draft an "exclusionary provision" within the meaning of s.4D of Trade Practices Act 1974 - whether players' participation in competition constitutes "services" for the purposes of the definition of that term in s.4 of the Trade Practices Act.

Restraint of Trade (common law) - whether internal draft rules in unreasonable restraint of trade - whether restraint imposed by such rules beyond that reasonably necessary to protect interests of League and clubs.

Unfair Contracts - whether internal draft rules "unfair" within meaning of s.88F of Industrial Arbitration Act 1940 (N.S.W.) - dismissal of proceedings based on this section because section applies only to contracts actually in force - absence of evidence to enable Court to judge whether particular contracts, assuming any to be in force, were unfair.

Trade Practices Act 1974, ss.4(1)(definition of "services"), 4D, 45, 51(2)(a).

Counsel and Solicitors Mr B.J. Gross QC and Mr B. Walker

for the Appellants: instructed by Messrs Bush Burke and Co.

Counsel and Solicitors Mr T.E.F. Hughes QC, Mr A.J. Sullivan QC

for the 1st Respondent: and Mr T.D.F. Hughes instructed by

Messrs Colin W. Love and Co.

Counsel and Solicitors Mr L.G. Foster instruced by Messrs Sly

for the 2nd - 17th Respondents: by Messrs Sly and Weigall

Orders that of the orders made by Hill J. and entered 9 April 1991, order 3 and so much of order 2 as dismissed the proceeding commenced in this Court, be set aside.

Orders that the first respondent be released from its undertaking given to the Court and noted in the said orders entered 9 April 1991.

Declares that the Rules and Regulations of the first respondent are void as being in unreasonable restraint of trade insofar as they oblige each of the clubs (together being the 2nd - 17th respondents) to treat as eligible to play for it in a match in the New South Wales Rugby League Premiership Competition a player (not being a player in any one or more of the Categories 1, 2, 3, 4, 5, 8 and 9 listed in Rule 47 (c), but being a player described in Rule 56 (a)) only if he has participated in the Internal Draft established by Rules 55 - 58.

Orders that there be liberty to apply in relation to the form of the declaration in para. (4) hereof.

Orders that the respondents pay two thirds of the appellants' costs of the appeal.

Orders that the proceeding be remitted to a Judge of the Court and that there be liberty to apply as regards costs of the proceeding at first instance.

NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

In this matter I have had the advantage of reading the judgments to be delivered by Wilcox J. and Gummow J. I agree in their respective conclusions that the appeal should be allowed.

2. There are some matters which I wish to mention. The only aspect of the trade practices point about which I wish to say something is the submission made by counsel for the appellants that the adoption of the internal draft rules was done with the purpose of preventing or restricting the supply of services by players within the meaning of s.4D of the Trade Practices Act 1974. The decision of this Court in ASX Operations Pty. Limited v Pont Data Australia Pty. Limited (No. 1) (1990) 27 FCR 460 establishes that the word "purpose" is used in a subjective sense. In the submission of counsel for the appellants, the necessary purpose is established because the rules operate to prevent players providing their services to the clubs as independent contractors rather than as employees. Objectively speaking that is true. But the difficulty with the submission is that the evidence does not establish that that was an intended purpose which the rules were designed to have. It is no doubt correct to say that the restriction is a consequence of their operation but what evidence there is about the matter does not suggest that that effect was contemplated or intended by those responsible for the internal draft rules.

3. The principal evidence which bears on the matter was given by Mr Quayle who is the General Manager of New South Wales Rugby League Limited. His evidence establishes - there is other evidence on the point as well - that for many years the League has insisted on players signing standard form contracts before they are entitled to play for a club. The form of these contracts has varied over the years but all have provided for employment of players by the clubs. Mr Quayle was asked whether players had ever been allowed to have their own service companies contract on their behalf for the purposes of their playing rugby league. Mr Quayle said there were some contracts made out in the name of players' personal companies which he said were private companies set up for the players for taxation reasons. Mr Quayle said that the League had no objection to that form of contract but if a player wished to contract with a club otherwise than on the standard form contract, the club would not accept the contract. It followed that, if a player wished to contract on the basis that he was an independent contractor rather than an employee, neither the club nor the League would agree because the contract would not be in accordance with the standard form.

4. The difficulty with the appellants' submission is that there is no evidence to suggest that players, whether personally or by their agents or advisers, have in the past sought contracts which would make players independent contractors rather than employees; and there is no suggestion in the evidence that players, or some players, would in the future prefer to be engaged as independent contractors rather than employees. It is one thing to draw the conclusion that the rules, as they presently stand, would prevent such a course and that administrators, particularly Mr Quayle, would not countenance it. But that does not establish any demand for it and makes less likely the fact that the League had any purpose of achieving such a result when the internal draft rules were adopted. For all the evidence shows, the matter was not present to the minds of any of those who control the League before or at the time when the rules were made. In those circumstances it is quite impossible to draw the inference that the provisions of the internal draft rules were adopted for the purpose of ensuring that players would be unable to offer or to provide their services otherwise than by a contract of employment.

5. The appellants would be entitled to succeed if they could show that the internal draft rules had or were likely to have the effect of substantially lessening competition with respect to services other than the performance of work under a contract of employment (i.e. those services not excluded by the definition of "services" in s.4); see para. 45(1)(b). But the appellants cannot succeed under this provision because their evidence does not establish that the internal draft rules, whether because they prevent players from being engaged as independent contractors or operate in some other way so as to prevent or restrict the supply of relevant services to the club, had or were likely to have the particular effect of substantially lessening competition.

6. I turn to the case made by the appellants based on unreasonable restraint of trade.

7. A point of possible unevenness between the other judgments, with the substance of both of which I am generally in agreement, concerns the question whether it is relevant to take into account the interests of, or matters affecting, the players. In my respectful opinion, this is a relevant consideration. I recognise that this is a case of a combination between the League and the various clubs which has the effect of limiting or restricting the freedom of action, not only of the clubs, but also of the players who are not parties to the combination. The question at issue is whether the restrictions imposed by the internal draft rules are in unreasonable restraint of trade. If they are, the public interest requires that they be avoided. There is sometimes an issue in cases of this kind whether there is a restraint of trade at all; Eastham v Newcastle United Football Club Ltd. (1964) Ch 413 was such a case. In relation to that question it is plainly relevant to look at the likely or potential effect which the rules in question will have once they begin to operate, and, if they have been implemented, to look at the effect they are already having on the freedom of players to compete with each other economically or to procure from clubs the most satisfactory terms and conditions of employment from their point of view.

8. When one comes to the question, as one does in this case, of whether it has been established that an attempted restraint goes no further than is reasonably necessary to protect the interests of those who have imposed it, I have not understood why the likely or potential effect on those most affected by it - in this case professional football players - is not a matter relevant to be taken into account. The ultimate question is whether the restraint is unreasonable. If one does not make a judgment about how it is likely to affect the players whose ability to earn their living is or may be restricted by it, one will not have the complete picture. The restraint, as I have said, affects the clubs, but they are parties to it. It also has drastic consequences for the players who are not. Unless one examines the consequences or potential consequences upon the players, one will not be able to make an adequate or satisfactory judgment on the question whether the persons who have imposed the restraint have established that it goes no further than is reasonably necessary to protect their legitimate interests. An important part of the mosaic will be absent.

9. In Eastham there are indications that Wilberforce J. (as he then was) did take account of effects or likely effects of the rules there in question on players, not only for the purpose of determining whether there was a restraint, but also for the purpose of determining whether the restraint that he found to exist was reasonable. Amongst other things he said (p 437):-

"Now I must consider the transfer system. Taking this alone

- that is, on the assumption that the retention system is

not used to reinforce it - it does not appear to me to be so

very objectionable. As I have already pointed out, placing

a player on the transfer list and asking a fee for him,

though it prevents a player from going to another league

club unless the fee is paid, leaves the player with the

right to apply to have the fee reduced or eliminated (which

is often obtained in practice) and leaves him free to seek

employment outside the league. There is a restraint here,

but it would not require so much to justify it."

I have emphasised the last sentence of the quotation to indicate that his Lordship was considering reasonableness at the time he said what he did. Later he said (p 438):-

"What makes the transfer system objectionable, in my

judgment, is its combination with the retention system.

When it is so combined - that is, when a man is retained and

it is made known that his club is open to offer, or when a

man is put on both the transfer and the retain list - he

cannot escape outside the league, all he can do is (in the

latter case) to apply to have the transfer fee reduced. But

even if it is reduced, no club in the league may pay it, and

yet he cannot go outside. It seems to me that the arguments

put forward in favour of the retention system alone equally

fail to support this combined system."

10. No doubt there are many possibilities. There may be cases in which the restraint is so obviously unreasonable that no examination of its effect in the market place is required in order to reach a conclusion. But there will be others of a kind where it will be shown that the restrictions or some aspects of them, are reasonably necessary to protect the interests of the person or persons imposing them. In such cases - and I think this is one of them - one needs to consider the impact of the restraint upon those whom it is intended to affect. The effect upon them may be minimal with the consequence that the court will reach the conclusion that the restraint is, after all, reasonable. In other cases such as this one the effect will be drastic and will lead plainly to the conclusion that the restraint is unreasonable.

11. Some of the effects upon players, which were referred to in argument and are referred to in the judgment of Wilcox J., are of a personal or domestic kind rather than of an economic kind. Some may affect players both economically and in their personal and domestic lives. Still others have purely economic consequences. I think there is a question whether it is appropriate to take into account effects which are only of a private or domestic character and not economic in their consequences. Whether a party has engaged in unreasonable restraint of trade to my mind raises for consideration substantially, if not wholly, economic considerations. I think there is a real question whether it is appropriate to take into account anything other than economic effects.

12. I have not found assistance, one way or another, in any of the authorities to which we were referred on this question. In the present case it is obvious, as the judgment of Wilcox J. demonstrates, that the internal draft rules operate, or are capable of operating, to the substantial economic disadvantage of players in given circumstances. This is not to say that in some cases the existence of the internal draft may not also be of economic advantage to players. But that is of no relevance to the point I am now making. It is that, because there is ample evidence of actual or potential adverse economic effect on players as a result of the operation of the draft, the matter does not arise directly for decision in this case. It is, accordingly, a matter which I would prefer to leave open in the present case.

13. In the course of the submissions made on behalf of the respondents much was said about the fact that the League, the clubs and the administrators were acting in good faith and with the best interests of the game looked at from all points of view, including that of the players, in mind. I do not doubt that that is indeed how the matter is perceived by the administrators. But the fact that that is so does not warrant the conclusion that there is no unreasonable restraint of trade. A similar argument was put to Wilberforce J. in the Eastham case. The circumstances with which his Lordship had to deal were different from those here in question but the following passage from his judgment is instructive, namely (p 438):-

"... it was said that this system, the combined system of

registration, retention and transfer fees, or something like

it, is operated in all professional leagues and has been so

operated for a long time. This is claimed as evidence that

those who know best consider it to be in the general

interest of the game. I do not accept this line of

argument. The system is an employers' system, set up in an

industry where the employers have succeeded in establishing

a united monolithic front all over the world, and where it

is clear that for the purpose of negotiation the employers

are vastly more strongly organised than the employees. No

doubt the employers all over the world consider the system a

good system, but this does not prevent the court from

considering whether it goes further than is reasonably

necessary to protect their legitimate interests."

14. Finally, as is mentioned in the other judgments, there is in force a provision known as a "salary cap". By this provision each club is obliged to spend no more in salaries in any given year than the "cap" which is prescribed for it by the League. With some exceptions the cap is, at the moment, $1.5 million for each club. No challenge to the salary cap was made by the appellants. It was not in issue in the case. It was their submission that, if the salary cap remained in place and were enforced, the League's fears about the effects of cheque book warfare would be shown to be unjustified. Such disadvantages as might flow from cheque book warfare would be avoided because no club could spend more than its allotted cap.

15. I agree with what both Wilcox J. and Gummow J. have said about the salary cap and its significance for the outcome of this case. But it ought to be clear that the validity of the rules providing for the salary cap was not in issue. The validity was assumed by all parties. I have no reason to think that the rules may be invalid - I have not considered them; but I would not wish to pre-empt the decision of this or any other court which may need in the future to deal with those rules. I should mention also in this respect that the only task of this Court is to consider the validity of the rules in question in the case as they now are. It is not for the Court to contemplate what the situation may be in relation to rules expressed in a different form. That is not a matter which I have considered nor upon which I have any view.

16. The parties agreed that it would be sufficient, assuming that we came to the conclusion that the appeal should be allowed, for there to be a declaration rather than any injunctive relief. I agree in the form of declaration formulated by Gummow J. in his judgment and with the other relief which he has proposed.

This proceeding is brought by a group of Rugby League players by way of challenge to the portion of the rules of the New South Wales Rugby League which deals with what is called "the internal draft". When the proceeding was commenced there were 222 applicants but 52 discontinued their claim prior to the delivery of judgment by the trial judge, Hill J. The remaining 170 applicants joined in the appeal to this Court against his Honour's dismissal of their claim that the internal draft rules contravened s.45 of the Trade Practices Act 1974 and s.88F of the Industrial Arbitration Act 1940 (NSW) and were invalid at common law as constituting an unreasonable restraint of trade. However, when the appeal was called for hearing, counsel for the appellants sought leave to discontinue on behalf of 16 of his clients. Leave was granted, subject to the matter of costs, leaving 154 applicants actively pursuing the case. The respondents are New South Wales Rugby League Limited ("the League"), the controller of the game in New South Wales, and each of the 16 clubs which contested the 1990 New South Wales Rugby League Premiership Competition ("the Competition") and are currently participating in the 1991 competition.

2. The 16 clubs which presently participate in the competition consist of two Queensland clubs (Brisbane and Gold Coast), the Canberra club, clubs located in Newcastle and the Illawarra district and 11 clubs whose home grounds are situated in the Sydney metropolitan area. All clubs play in three grades: the President's Cup (Third Grade), the Reserve Grade (Second Grade) and what Hill J described as "the pinnacle of rugby league competition in Australia and perhaps the world" the First Grade, presently known as the Winfield Cup Competition.

3. The League is a company incorporated by guarantee. Pursuant to its Memorandum and Articles of Association it has formulated rules and regulations providing, amongst other subjects, for the conduct of the Competition. A club applying to participate in the Competition must agree to abide by those rules. All of the 16 respondent clubs have agreed. Playing contracts, made between clubs and players, are subjected to those rules.

4. The rules with which this case is concerned are contained in Part II of the League's rules and regulations. That Part is headed "Premiership Competition Rules". The Part is introduced by a statement of objectives in the following terms:

"OBJECTIVES

The League and the Clubs as defined in Article 1 of the Articles of

Association of the League wish to ensure that the teams fielded in the

Competition are as strong and competitive as possible. Public support

and the opportunities for players to develop and employ their skills

both depend upon the League continuing to conduct the Competition

between evenly matched and financially viable Clubs. In order to

achieve these ends, and in pursuance of the objects in its Memorandum of

Association, and with the unanimous support of the Clubs, the League has

adopted these rules with a view to providing a system that will:

(a) Ensure sufficient stability in the membership of Club teams to

enable team spirit and public support to be maintained both at

Club and League level.

(b) Prevent the stronger Clubs from obtaining the services of an

unfair proportion of the better players at the expense of the

weaker Clubs.

(c) Provide Clubs with an incentive to expend substantial time and

effort in the development of Rugby League at School and Junior

(d) Prevent Clubs from weakening Country and Interstate Leagues by

recruiting excessive numbers of Country or Interstate players.

(e) Provide an orderly basis for Clubs to negotiate with players and

minimise the problems arising out of Clubs negotiating with

players during the course of a season and thus distracting them

from their current obligations.

(f) Provide young talented players with the opportunity to play the

game at the highest level."

5. Rules 38 to 42 deal with entry by clubs into the Competition. Rule 42 provides:

"42. Each Club admitted into the Competition agrees to abide by the

Memorandum and Articles of Association of the League and the

Rules, Regulations and decisions of the Board of Directors of the

League and any Committee of the League made pursuant thereto and

any terms and conditions imposed upon its admission to the

Competition."

6. Rules 43 to 45 specify the three Competition grades. Rules 46 and 47 deal with player qualifications. The effect of rule 46 is that, before each match of the Competition, each club must nominate not more than 57 players as participants in the three games for that Competition round. In order to be eligible for nomination a player must satisfy five conditions: first, he must be a member of the nominating club; second, he must be registered with the League as a player of the club; third, subject to some limited exceptions, he must have played, or be playing, for the club before 30 June in the relevant year; fourth, he must be not less than 16 years of age and; fifth, he must be suitably qualified with the relevant club.

7. The specification of qualifications, the fifth matter referred to above, is a central facet of the rules' scheme. So it is desirable to set out in full the relevant provision, para. (c) of rule 47:

"(c) He is contracted at that time to play for the Club in the

Competition and he has at least one of the following

qualifications with that Club:

(i) Category 1 - A player who played in the preceding

Competition and whose last match in

that Competition was with the Club.

(ii) Category 2 - A player who did not play for the

Club in the preceding Competition

but who played for the Club on the

last occasion that he played in the

Competition and such occasion was

not more than two (2) years prior to

the date of the commencement of the

current Competition.

(iii) Category 3 - A player who at the date of the

commencement of the Competition had

never played in the Competition but

who had played Rugby League with a

team located within the boundaries

of the Club in at least one match

after 30 June in each of the two (2)

seasons preceding the date of the

commencement of the Competition.

(iv) Category 4 - A player who has not played Rugby

League anywhere in the world at any

time during the three (3) seasons

prior to the date of the

commencement of the Competition.

(v) Category 5 - A player who has contracted to play

for the Club pursuant to the

provisions of the External Draft.

(vi) Category 6 - A player who has contracted to play

for the Club pursuant to the

provisions of the Internal Draft.

(vii) Category 7 - A player whose name was included on an

Internal Draft List but was not selected

by any Club at the Internal Draft Meeting

and is contracted pursuant to Rule

56(e)(i).

(viii) Category 8 - A player who at the date of

commencement of the Competition had

never played in the Competition but

whose father played for the Club for

at least five (5) seasons of the

Competition.

(ix) Category 9 - A player who has completed at least

his tenth consecutive season playing

for any one Club in the Competition."

8. It is common ground that most players will become qualified under category 1 or 2 (last game with the nominating club), category 5 (the external draft) or category 6 or 7 (the internal draft).

9. Rules 48 to 50 deal with the nomination of players. It is unnecessary to discuss them. Rules 51 to 54 relate to the external draft. Those rules are concerned with players (mainly juniors) who have not previously played in the Competition. Although the Statement of Claim used language wide enough to include an attack upon the validity of the external draft rules, no such case was mounted at the trial. Consequently, we are not concerned with those rules.

10. Rules 55 to 58 are the internal draft rules. It is desirable to set them out in full:

"55. On 7 November, 1990 and on the first Wednesday of November of each

succeeding year the League shall circulate to each Club a list to

be known as the 'Internal Draft List'. Where necessary, pursuant

to the provisions of this Rule, the League shall also circulate to

each Club a further Internal Draft List on the first Wednesday of

each of the months from January to June of the year in which the

Competition is played.

56. (a) A player who has or will have attained at least sixteen (16)

years of age by 31 December prior to the commencement of the

Competition may make application to be placed upon an

Internal Draft List on the form prescribed by the League

from time to time provided that:

(i) he has previously played in the Competition or

in a major Premiership Competition conducted in

another country or in a senior Rugby League team

representing Australia or New South Wales or

Queensland;

(ii) he is not contracted to play for a Club in the

Competition and;

(iii) he is not contracted to play for any other club

or body affiliated with the League unless a

clearance is submitted to the League from such

Club or body granting or having the effect of

granting permission for the player to play in

the Competition for a specified period of the

Competition.

(b) The League shall include in each Internal Draft List the

names of all applicants received by the League prior to the

preparation of that List. The League shall not place the

name of a player upon an Internal Draft List if his

application does not comply with the requirements of the

preceding paragraph.

(c) A player shall be entitled to stipulate in his application

that no Club whose ground is situated more than one hundred

(100) kilometres in a direct line from the ground of the

Club with which the player last played in the Competition

shall be entitled to select him at the Internal Draft Meeting.

(d) The Internal Draft List shall be in a form prescribed by the

League from time to time.

(e) A player who participates in an Internal Draft and is not

selected at the Internal Draft Meeting shall:

(i) be entitled to negotiate and enter into a

contract with any Club on the terms and

conditions contained in his application to be

placed upon an Internal Draft List;

(ii) be entitled to make application to be placed

upon any subsequent Internal Draft List and

shall be entitled to vary the terms and

conditions which were inserted in any prior

application to be placed upon an Internal Draft List.

57. On 20 November, 1990 and on the third Tuesday of each month in

which the League circulates an Internal Draft List pursuant to

these Rules, the League shall conduct a meeting to be known as the

'Internal Draft Meeting'. At that meeting a representative of

each Club shall be entitled to attend and, subject to Rule 56(c),

to make selections of players from the Internal Draft List until

the total number of players with whom the Club has contracted

reaches fifty-seven (57), in the following manner:

(a) At the November Internal Draft Meeting each Club shall be

given the opportunity of selecting the players whose names

appear on the Internal Draft List one at a time in the

reverse order to the order in which the Clubs finished at

the completion of the preceding Competition.

(b) At subsequent Internal Draft Meetings held from January to

June of each year each Club shall be given the opportunity

of selecting players in the same order as in (a) above with

the exception that such order of selection shall continue

from where it concluded at the previous Internal Draft Meeting.

58. A Club shall not sign a contract with a player to play for the

Club unless such contract is in the standard form approved from

time to time by the League with such additional conditions as may

be agreed upon between the Club and the player."

11. Rules 59 to 64 are concerned with appeals against selections made pursuant to the external and internal drafts. There is to be an Appeals Board constituted by a legally qualified Chairman, a person nominated by the League's Board of Directors and a person nominated by the President of the Association of Rugby League Professionals, a players' organisation (rule 59). A player who does not wish to play for a club which selected him at an External or Internal Draft Meeting is entitled to appeal to the Board (rule 60). The Board must accord the player the opportunity of a hearing, at which he is entitled to be legally represented, and must give reasons for its decisions (rule 63). By force of rule 61, in determining appeals the Board is to have regard to:

"(a) The best interests of the game, the player and the Club;

(b) Any unreasonable financial or other hardship caused to the

player by reason of him joining that Club having regard to:

(i) his age

(ii) his marital status

(iii) the health and welfare of his family

(iv) his employment and any possible loss of income

(v) any mortgages or other financial obligations of

the player

(c) The service he has given to the game;

(d) Any other relevant matter."

12. Rule 64(a) provides that a player who is successful in an appeal to the Appeals Board against his selection by a club at an Internal Draft Meeting "shall be entitled to participate in the next Internal Draft Meeting following that Appeals Board Meeting on the same terms and conditions as he placed upon himself in the previous Internal Draft". Rules 65 and 66 deal with players' contracts. They provide:

included in an Internal Draft List shall constitute an offer to

any Club drafting that player to employ the player on the terms

contained in the prescribed application form and any Club drafting

such player shall be deemed to have accepted the offer of

employment of the player upon such terMs A Contract shall

thereupon be constituted between the Club and the player

incorporating the terms contained in the said form and the terms

contained in the standard Playing Contract. The player and the

Club shall thereupon execute a standard Playing Contract as

approved by the League from time to time and containing the terms

referred to in the prescribed application form.

66. A copy of every playing contract entered into between a Club and a

player shall be lodged for registration with the League by:

(a) a date twenty eight (28) days after the date of its

execution or;

(b) the expiry date of any existing playing contract registered

with the League between the same Club and player,

whichever is the later."

13. Finally, it is necessary to refer to the bracket of rules concerning player registration. Rule 67 forbids the League to "register a player as a player of a Club" unless certain conditions are met, including the registration of a playing contract between the club and the player pursuant to the rules. Rule 70 provides that a club "playing an unregistered or unqualified player may lose any competition points gained in a match of the Competition in which that player has taken part".

14. In his reasons for judgment Hill J noted that not all rugby league players are paid for participating in the sport. But, when it comes to the Competition, the position is otherwise. In a finding that has not been challenged, the learned trial judge found that all players in the Competition are professionals "in the sense that they are paid in one way or another for their services".

15. As might be expected, the problems which the internal draft rules are designed to meet are neither novel nor confined to the Competition. It is useful to set out a passage from his reasons in which Hill J offered an overview of the position and an explanation, from the evidence, of how the present rules came to be adopted:

"The history of professional sport, both in Australia and overseas,

reveals a tendency to regulation in ways which interfere with the

freedom of players to contract. Such regulation may take a number of

different forMs For example, it is not uncommon for there to be a

requirement in organised sport, that a player play for a club only in

the geographical area in which he resides.

16. Since the early 1970s, there have been a number of attempts made to regulate the sport of rugby league for the stated objective of promoting or encouraging evenness of competition. One such method, was what is referred to as a 'ceiling payment scheme', under which there was a maximum sign-on fee and match payments that could be made by a club to a player. That regulation failed, apparently because of the inability of the League to enforce it in light of payments being made by associates of clubs rather than by the clubs themselves. Another rule, was what is known as the 'thirteen import rule', pursuant to which no club could have any more than thirteen players on its books from another area at the one time. That rule clearly restricted the right of clubs to some degree to poach players from other clubs, but apparently was thought to be practically unenforceable. It was replaced by the introduction of the transfer system, ultimately declared invalid by the High Court of Australia in Buckley v Tutty [1971] HCA 71; (1971) 125 CLR 353. Under that system, a player was effectively tied to a club, even if the player was not contracted to play with the club. If a player was placed upon a transfer list, any other club wanting his services was required to pay a transfer fee entirely within the discretion of the club with which he was previously registered and under which the player received only a small percentage.

17. The transfer system in force at the time of Tutty's case was replaced by a modified transfer system pursuant to which if a player desired to transfer to another club a fee had to be paid to his old club, that fee being set by the League in conjunction with the Players Association as 80% of the average playing fee of contracts, relevant to the standing of the player. In the first year of this new system, $36,000 was the maximum transfer fee, which amount rose to a maximum fee of $50,000 for an individual who played international football through to $2,500 for a junior.

18. The Board of the League regarded the transfer system, in its modified form, as unsatisfactory. It did not act to deter wealthier clubs from spending a large amount of money to obtain key players at the expense of clubs that were less wealthy. Those responsible for the administration of the sport perceived the transfer system as not being in the interests of players either, as a club desiring to employ the player had to pay not only the sign-on fee for the player but also the transfer fee. The solution was thought by those administering the League to be the introduction of a salary cap and the draft system.

19. The League first gave consideration to the introduction of a players' draft in early 1988, although the question of the salary cap had been discussed earlier than that. In determining to implement both the draft and the salary cap, the League looked to the experience of professional sport in the United States, and in particular NFL football and American basketball, as well as to the experience in Australia with the regulation of the Australian Football League. American basketball has an external draft system as well as a salary cap. The idea of an external draft evolved in American football apparently in 1936. However, in neither sport in the United States is there an internal draft of the kind presently under attack. The Australian Football League, the body responsible for administering Australian Rules, had introduced, in 1984, a salary cap, and in 1986 and 1989 an external and an internal draft respectively. In formulating the present rules, the League gave close consideration to the rules adopted by the Australian Football League, although the present rules are somewhat simpler.

20. At a meeting of the New South Wales Rugby League Premiership Policy Committee, a committee of the League, held on 18 August 1988, that committee decided to recommend the implementation of a player payment ceiling (the salary cap), that ceiling to be determined by reference to player contracts for the 1987-1989 seasons and the financial state of the clubs. The specific problem which gave rise to the recommendation of a salary cap was that some clubs had overspent on salaries to players in order that these clubs might remain competitive. As a result, clubs required additional finances, either from outside sources or from the League. Further, the poorer clubs could not remain competitive as they could not meet the demands of players and accordingly risked losing the services of their players to other and richer clubs.

21. The salary cap was introduced by the League to be operative in the 1990 season. It was not the subject of attack by the applicants, but forms an important part of the context of the competition rules against which the internal draft must be seen. In implementing the salary cap, the League determined a ceiling of expenditure for each club, having regard to the financial situation of the club in question. Although it is clearly desirable that each club have the same ceiling, some clubs were, no doubt because of their financial difficulties, allocated a ceiling somewhat below that of the wealthier clubs. All payments to players were to be made from the ceiling allocated, subject to a two and a half percent margin for error. The initial ceilings ranged from either $800,000 or perhaps $1,000,000 to $1,500,000. A similar inequality of ceiling is in operation for the 1991 season. The ultimate intention is to set a uniform ceiling for each club.

22. The player draft was scheduled to commence at the end of the 1990 season. The rules for the draft took some time to prepare and some criticism of the proposed rules led to minor amendments being made. To enable the draft to be introduced, the chief executives of the respondent clubs agreed that they would not negotiate or attempt to negotiate with players registered with other clubs to obtain their services for the 1991 season or beyond until an initial date of 20 March 1990. That agreement was subsequently varied so that until further notice, no club, or person acting on behalf of that club, was to negotiate or to attempt to negotiate with a player currently registered with another club with a view to obtaining the services of that player for any future season or seasons."

23. At the time when the trial commenced there had been no experience of the operation of the internal draft rules. However, in November 1990, during the course of the trial, the first Internal Draft Meeting was held. Evidence was given to Hill J as to the result. One hundred and fifteen players, all of whom had been on contract with clubs in the 1990 season, submitted applications setting out the terms and conditions upon which they were prepared to be engaged for the 1991 season or beyond. Twenty three players were selected in the draft, leaving 92 players in a situation where they were free to negotiate with any club, but only on the terms and conditions set out in their offer, and/or to reconsider their terms and conditions in anticipation of the second draft in January 1991. Hill J noted that South Sydney club, the club which came last in the Winfield Cup for the 1990 season and was therefore entitled to first bid under the internal draft system, did not bid. No evidence was adduced in explanation of this failure.

The Trade Practices Act

24. It will be necessary to return to the evidence in discussing the claim of common law unreasonableness. But the issues between the parties in connection with the application of the Trade Practices Act depend upon the proper construction of the relevant provisions of that legislation. It is convenient immediately to turn to them.

25. Section 45, upon which the appellants rely, relevantly provides:

"45.(1) ...

(2) A corporation shall not -

(a) make a contract or arrangement, or arrive at an

understanding, if -

(i) the proposed contract, arrangement or

understanding contains an exclusionary provision;

(ii) a provision of the proposed contract,

arrangement or understanding has the purpose, or

would have or be likely to have the effect, of

substantially lessening competition; or

(b) give effect to a provision of a contract, arrangement

or understanding, whether the contract or arrangement

was made, or the understanding was arrived at, before

or after the commencement of this section, if that

provision -

(i) is an exclusionary provision; or

(ii) has the purpose, or has or is likely to have

the effect, of substantially lessening

competition.

(3) For the purposes of this section and section 45A,

'competition', in relation to a provision of a contract,

arrangement or understanding or of a proposed contract,

arrangement or understanding, means competition in any

market in which a corporation that is a party to the

contract, arrangement or understanding or would be a party

to the proposed contract, arrangement or understanding, or

any body corporate related to such a corporation, supplies

or acquires, or is likely to supply or acquire, goods or

services or would, but for the provision, supply or acquire,

or be likely to supply or acquire, goods or services.

(4) ...

(5) ...

(6) ...

(7) ...

(8) ...

(9) ..."

26. The applicants rely upon both sub-paras. (i) and (ii) of paras. (a) and (b) of subs. (2). Accordingly, the definition of "exclusionary provision" is relevant. It is contained in s.4D which reads:

"4D.(1) A provision of a contract, arrangement or understanding, or

of a proposed contract, arrangement or understanding, shall

be taken to be an exclusionary provision for the purposes of

this Act if -

(a) the contract or arrangement was made, or the

understanding was arrived at, or the proposed contract

or arrangement is to be made, or the proposed

understanding is to be arrived at, between persons any

two or more of whom are competitive with each other;

and

(b) the provision has the purpose of preventing,

restricting or limiting -

(i) the supply of goods or services to, or the

acquisition of goods or services from,

particular persons or classes of persons; or

(ii) the supply of goods or services to, or the

acquisition of goods or services from,

particular persons or classes of persons in

particular circumstances or on particular conditions,

by all or any of the parties to the contract,

arrangement or understanding or of the proposed

parties to the proposed contract, arrangement or

understanding or, if a party or proposed party is a

body corporate, by a body corporate that is related to

the body corporate.

(2) A person shall be deemed to be competitive with another

person for the purposes of sub-section (1) if, and only if,

the first-mentioned person or a body corporate that is

related to that person is, or is likely to be, or, but for

the provision of any contract, arrangement or understanding

or of any proposed contract, arrangement or understanding,

would be, or would be likely to be, in competition with the

other person, or with a body corporate that is related to

the other person, in relation to the supply or acquisition

of all or any of the goods or services to which the relevant

provision of the contract, arrangement or understanding or

of the proposed contract, arrangement or understanding relates."

27. Subject to one matter - which, however, is of critical importance - there is no doubt that the arrangement embodied in the internal draft rules would offend both sub-paragraphs of both paras. (a) and (b). The effect of the internal draft rules is that a footballer who has previously played in the Competition for a club is not free to contract with any other club unless selected by that club at an Internal Draft Meeting. A player not selected at the Internal Draft Meeting is precluded from negotiating with any club, except on the terms and conditions notified in his previous internal draft application. Accordingly, those rules constitute an arrangement which has both the purpose and the effect of restricting the supply of services by footballers to the participating clubs. Subject to that one matter, the rules clearly constitute an arrangement which both contains an exclusionary provision and which has the purpose and the likely effect of substantially lessening competition between clubs for players' services.

28. However, and this is the critical matter, the prohibitions in both sub-paras. (i) and (ii) relate only to contracts for the supply of goods and services, as these terms are defined in s.4 of the Act. Paragraph (a) of the s.4D(1) definition of "exclusionary provision" includes the element that the parties to the contract, arrangement or understanding be "persons any two or more of whom are competitive with each other". The concept embodied in those words is explained by subs. (2). A person is only competitive with another person, for the purposes of subs. (1), if the first-mentioned person, or a related body corporate, is, or is likely to be or would but for the contract etc. be or be likely to be, in competition with the other person or its related body corporate "in relation to the supply or acquisition of all or any goods or services" to which the relevant provision of the contract etc. relates.

29. In the present case it is not suggested that the arrangement embodied in the rules relates to the supply of goods. It is suggested on behalf of the appellants, and disputed by the respondents, that it relates to the supply of services, in the defined sense.

30. The position is similar in relation to sub-para. (ii) of paras. (a) and (b) of s.45(2). Both these paragraphs refer to a contract etc. which has the purpose or likely effect "of substantially lessening competition". That phrase is defined, for the purposes of the section, in s.45(3). The word "competition" means competition in a market in which a corporate party to the contract etc. or a related body corporate "supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services."

31. Once again there is no question of a contract, arrangement or understanding for the supply or acquisition of goods. But there is a contested claim that the arrangement embodied in the rules relates to the supply or acquisition of "services", as that word is defined.

32. The respondents do not dispute that, as a matter of ordinary English, the participation by a player in the Competition constitutes the supply of "services". The League and its participating clubs are engaged in the business of providing public entertainment. The entertainment is supplied directly by the players, giving their time and employing their football skills. However, the respondents say that the players' contribution does not constitute "services" within the definition of that term provided by s.4 of the Act. That definition reads:

"'services' includes any rights (including rights in relation to, and

interests in, real or personal property), benefits, privileges or

facilities that are, or are to be, provided, granted or conferred in

trade or commerce, and without limiting the generality of the foregoing,

includes the rights, benefits, privileges or facilities that are, or are

to be, provided, granted or conferred under -

(a) a contract for or in relation to -

(i) the performance of work (including work of a

professional nature), whether with or without the supply

of goods;

(ii) the provision of, or of the use or enjoyment of

facilities for, amusement, entertainment, recreation or

instruction; or

(iii) the conferring of rights, benefits or privileges for

which remuneration is payable in the form of a royalty,

tribute, levy or similar exaction;

(b) a contract of insurance;

(c) a contract between a banker and a customer of the banker entered

into in the course of the carrying on by the banker of the

business of banking; or

(d) any contract for or in relation to the lending of moneys,

but does not include rights or benefits being the supply of goods or the performance of work under a contract of service; ..."

33. It is clear that a contract between a player and a club whereby the player binds himself to play matches on behalf of the club and to perform ancillary obligations such as achieving an acceptable level of physical fitness and attending training is a contract which confers benefits upon the club. It is common ground, as I have said, that the respondent clubs are engaged in the business of providing public entertainment for reward, which is an aspect of trade or commerce, and that their contracts with players are made in the course of that business. Accordingly, the relevant benefits are conferred in trade or commerce. But the respondents argue that the services provided by the players pursuant to those contracts are excluded from the definition because of the concluding words of the definition; they are "the performance of work under a contract of service".

34. The appellants do not dispute that the form of contract stipulated by the League pursuant to rule 58 is a contract of service, rather than a contract for services; that is, that the player is an employee rather than an independent contractor: cf. Commissioner of Taxation v Maddalena (1971) 45 ALJR 426. Nonetheless they contest the conclusion suggested on behalf of the respondents, presenting several alternative arguments. In the first place, they say that the rules must be read as a whole. It is true, say counsel for the appellants, that the rules contemplate only a contract of service between player and club, excluding the possibility of a contract between, say, the player's family company and a club pursuant to which the company promises to make the player available for stipulated duties, but without there being any contract directly between club and player. (Compare, for example, Building Workers' Industrial Union v Odco Pty Limited [1991] FCA 87; (1991) 99 ALR 735 and Hughes v Western Australian Cricket Association [1986] FCA 357; (1986) 19 FCR 10 at pp 40-41, where Toohey J found that the relevant contract, under which a professional cricketer was made available to a club, was a contract for services.) But counsel say that rule 58 has to be seen as merely part of the exclusionary provision, or term substantially limiting competition, which the rules impose. They submit that the whole subject must be considered as if there were no such rule; in which case, they say, it would immediately be seen that players' services might be provided otherwise than under a contract of service. At this point, counsel for the appellants draw attention to the incontestable facts that the opening words of the definition of "services" are wide enough to include the provision of benefits under a contract for services and that para.(a) of the definition expressly contemplates that benefits may be provided in a contract for or in relation to "the performance of work". The only relevant exclusion from the definition, say counsel, is benefits which amount to a "performance of work under a contract of service". Once it be accepted that relevant work may be performed under a contract for services, counsel say, it follows that the exclusion is not adequate totally to exclude those benefits which might, but for the improper provisions, be supplied to clubs.

35. This argument is attractive. It accommodates the holding of Northrop J in Adamson v West Perth Football Club (Incorporated) [1979] FCA 81; (1979) 39 FLR 199 - the only present authority on the concluding words of the definition - at p 228 that "(t)he right or privilege of the club ... to enter into a contract of service with a footballer is not acquisition of services by a club under s.45(3) of the Act". Northrop J was plainly contemplating a contract of service; the possibility of a contract for services does not appear to have been mentioned to his Honour. But difficulties emerge, in this case, once one begins to apply the definition contained in s.4 to the relevant statutory provisions. Thus, to take the first claim, exclusionary provision, the question is whether the internal draft rules have the purpose of preventing, restricting or limiting the supply of "services" - that is, on this approach, services provided by way of a contract for services rather than a contract of service - to clubs. This question, in turn, immediately raises the vexed issue whether the word "purpose" in s.4D(1)(b) is used in an objective or subjective sense. In Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at p 75 Franki J expressed the view that the term is used objectively. His Honour pointed to the fact that the paragraph speaks of the purpose as being the purpose of a provision - of a contract etc. - in contrast to other contexts in the Act, for example s.45D, in which the relevant purpose is that of a person. If his Honour's view had prevailed, there would have been much to be said in favour of the view that rule 58, at least, fell within s.4D. But in ASX Operations Pty Limited v Pont Data Australia Pty Limited (1990) 97 ALR 513 at pp 526-528 the Full Court held that the word "purpose" in s.4D(1)(b) is used in a subjective sense.

36. Once it is determined that the word "purpose" is used subjectively, the appellants' submission runs into the difficulty that there is no evidence that any of the respondents ever intended to exclude the supply of services pursuant to contracts for services, as distinct from contracts of service. There is nothing to suggest that anyone concerned with the formulation of the rules ever considered the possibility of footballers working otherwise than pursuant to a contract of service. Perhaps this was because the League had always insisted upon a particular form of contract, which was, in law, a contract of service. But whatever the reason, the fact is that there is a total absence of evidence of the formation of the necessary purpose.

37. Sometimes it may be unnecessary to have evidence that a particular purpose was actually formed. The relevant provision may so obviously be intended to constrain particular conduct that the purpose of imposing that constraint may be inferred from the terms of the provision itself. But I do not think that such an inference ought to be drawn where the only effect of the provision, in this case rule 58 which requires adherence to the League's standard form of contract of service, is to impose a regime which has always applied in the relevant industry and has not previously been challenged.

38. The position is much the same when one turns to the second formulation: "substantially lessening competition". Here the relevant question is whether the corporation, the relevant club, acquires or is likely to acquire or would, but for the provision, acquire or be likely to acquire services by way of a contract for services, as distinct from a contract of service. Once again, there is no evidence of any such acquisition or likelihood of acquisition. The evidence does not suggest that anybody involved with the sport has ever considered such a possibility.

39. The second argument put by counsel for the appellants, in connection with the application of the definition of "services", depends upon the fact that, under the standard form of contract, clubs commonly supply benefits to players, other than the payment of money. It is said, by way of example, that clubs usually provide coaching services, fitness and training facilities and medical treatment to their players. Counsel concede that the provision of these benefits is an advantage to the club, enabling it to field a team whose skill and physical fitness will be conducive to its playing success. But football skills and fitness are also beneficial to players, say counsel; consequently, players' contracts should be seen as contracts under which clubs supply benefits to the players. Even if those benefits are supplied under a contract of service, they are not "the performance of work under a contract of service" so as to be caught by the concluding words of the definition. Counsel contend that those words exclude only the services which the performer of the work - in this case, the player - supplies under such a contract.

40. A similar argument was put to Hill J. He described it as appearing "to turn the prohibition of s.45 on its head". It certainly turns the players' contracts on their heads. The services to which counsel refer are not services supplied by the clubs to the players at large; as, for example, if a club operated a public gymnasium or medical centre. They are simply an incident of a contract whereby the player puts his time and skills at the disposal of the club, a contract under which he performs work. It cannot be said, on the evidence, that the internal draft rules had either the purpose or likely effect of interfering with clubs' rights to train or medically attend their contracted players.

41. The third proposition of the appellants is even less tenable. On this argument the relevant benefit is the opportunity to enter into a service agreement (whether by way of contract for services or contract of service). The rules limit that opportunity, thus they restrict the supply of benefits (the opportunity of contracting with him) by a player to a club. Counsel say that the concluding words apply only to a contract, of a particular nature, actually made. They have no application, according to the argument, at the negotiation stage. This argument was rejected by Northrop J in Adamson at p 228. But counsel rely upon a comment by Woodward J in Walsh v Victorian Football League (1983) 5 ATPR 40-422, a strike out application. In declining to strike out the applicant's claim Woodward J noted that the applicant sought to challenge the view expressed in Adamson. He said: "Without wishing to indicate any dissent from Northrop J's view, I believe that the applicant should not be summarily deprived of that right". This is less than a ringing endorsement of the present appellants' argument.

42. The reason why I describe this third argument as untenable is that it would render otiose the concluding words of the definition. Even if the proposed work was clearly to be supplied under a contract of service, those words would in all cases be excluded by focussing attention upon the antecedent negotiation stage. That cannot have been intended.

43. The definition does not stipulate that the services to which it refers must be services supplied pursuant to a contract, understanding or arrangement; although, as they do have to be provided etc. "in trade or commerce" this will generally be the position. So perhaps the mere fact that the opportunity to negotiate arises outside of any contractual context is not an answer to the appellants' argument. And it is true that the definition is framed in inclusive, rather than exhaustive, terMs Nonetheless, the definition refers to those things which, as a matter of ordinary English, are known as services, subject to any relevant exclusion under one of paras. (a) to (d). As a reference to any standard dictionary will show, although the word "services" has a wide application, it imports always the notion of some assistance or accommodation being made available by one person to another. It is impossible to regard a mere freedom to negotiate with a person as the supply by that person of "services" to the prospective negotiator.

44. In the result I am of the opinion that each of the arguments put by the appellants in relation to the statutory definition of "services" must fail. The claim cannot be brought within s.45 of the Trade Practices Act. Consequently, it is not strictly necessary for us to rule on the submission put by counsel for the League that s.51(2)(a) of the Act would, in any event, defeat the appellants' s.45 claim. That paragraph provides that, in determining whether there has been a contravention of s.45, amongst other provisions:

"... regard shall not be had ... to any act done in relation to, or to

the making of a contract or arrangement or the entering of an

understanding, or to any provision of a contract, arrangement or

understanding, to the extent that the contract, arrangement or

understanding, or the provision, relates to the remuneration, conditions

of employment, hours of work or working conditions of employees."

45. Counsel contend that adherence to the internal draft rules is "an act done ... in relation to the making of a contract (with the player) ... to the extent that the contract ... relates to the remuneration" etc. of players.

46. In view of my conclusion that s.45 does not apply to the case, it is inappropriate to attempt any definitive statement about the application of s.51(2)(a), the interpretation of which is not free from difficulty. However, as it seems to me, counsel's contention could not be sustained. If one thing about the paragraph is clear, it is that the exclusion from the operation of s.45 which it confers is limited to contracts relating to remuneration, conditions of employment, hours of work or working conditions of employees. Presumably, the intention of Parliament was to prevent any overlap with the type of matters regulated under industrial legislation. But the arrangement under challenge in the present case is the arrangement between the respondents embodied in the internal draft rules. That arrangement is directed to the circumstances under which clubs may recruit players; it says nothing about their remuneration etc. once recruited.

47. From a policy viewpoint some people might think it unfortunate that s.45 does not apply to a case such as this. As I have pointed out, the internal draft rules undoubtedly have the purpose of restricting the supply of footballers' services (in the ordinary sense of that word) and the effect of substantially limiting competition in the market place for those services. Section 45 would apply, freeing up the market and facilitating competition, if there was a history of Rugby League footballers offering themselves to clubs pursuant to contracts for services, as distinct from contracts of service. It is difficult to see what policy purpose is achieved by leaving inviolate arrangements under which potential employers agree not to compete amongst themselves for the recruitment of employees who will work on a contract of service basis. Such a situation seems to be inconsistent with the general philosophy underlying Part IV of the Trade Practices Act. It certainly is not in the interests of employees. They find themselves, uniquely so far as the Act is concerned, having to suffer any collusion amongst those with whom they would negotiate. And it is not necessary to have that situation in order to avoid conflict between the Trade Practices Act on the one hand and the Industrial Relations Act 1988, and awards and agreements made thereunder, on the other. As I have pointed out, the latter provisions bear upon the terms of the employer-employee arrangement, the former upon any restrictive arrangement between prospective employers. It seems to me that the present position is anomalous. That anomaly may achieve particular importance if there is a movement towards "enterprise bargains" in the labour market, with increased reliance on contracts between employers and employees to regulate matters such as remuneration and employment conditions. In such a climate any agreement between prospective employers which restricts competition between them for prospective employees may be extremely prejudicial to employees.

48. Section 88F of the New South Wales Industrial Arbitration Act relevantly provides:

"88F.(1) The commission may make an order or award declaring void in

whole or in part or varying in whole or in part and either ab initio or

from some other time any contract or arrangement or any condition or

collateral arrangement relating thereto whereby a person performs work

in any industry on the grounds that the contract or arrangement or any

condition or collateral arrangement relating thereto -

(a) is unfair, or

(b) is harsh or unconscionable, or

(c) is against the public interest. Without limiting the generality

of the words 'public interest' regard shall be had in considering

the question of public interest to the effect such a contract or a

series of such contracts has had or may have on any system of

apprenticeship and other methods of providing a sufficient and

trained labour force, or

(d) ...

(e) ..."

49. As Hill J pointed out, s.88F is directed primarily to contracts relating to the performance of work. If the section had any application to this case it would be in connection with the contracts of service actually entered into by the players with their clubs. These are the contracts pursuant to which the players perform work.

50. The submission was put to Hill J that the provisions of the playing contract were unfair because they operate to prevent the players from changing employment. No doubt they do have that effect, during the subsistence of the contract. But that is because the contract binds the player to the contracting club for the duration of the contract. True, there is a term requiring the player to observe the rules of the League, which include the internal draft rules. However, during the subsistence of the contract, that is a matter of no relevant practical importance; the player would, in any event, not be free to go to another club. The internal draft rules affect the player only at the expiration of his contract.

51. The central complaint of the appellants in this litigation is that the internal draft rules are unfair or unreasonable. Once the complaint is changed from a non-contracted player's position under the internal draft rules to the position of a contracted player, as is required by the s.88F submission, it is evident that the question of unfairness may not be considered in the abstract. The Court would have to consider the position of each player pursuant to the contract, weighing the disadvantage of his loss of freedom to change clubs with the benefits he takes under his contract. No attempt has been made to adduce evidence on those matters. The Court knows virtually nothing about the personal position of individual appellants. In that situation, and leaving aside any other difficulties in the appellants' reliance on s.88F, it is obvious that their case under that section cannot be sustained.

52. The classic statement of the modern common law rule regarding restraint of trade is that made by Lord Macnaghten in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Limited (1894) AC 535 at p 565:

"The true view at the present time I think, is this: The public have an

interest in every person's carrying on his trade freely: so has the

individual. All interference with individual liberty of action in

trading, and all restraints of trade of themselves, if there is nothing

more, are contrary to public policy, and therefore void. That is the

general rule. But there are exceptions: restraints of trade and

interference with individual liberty of action may be justified by the

special circumstances of a particular case. It is a sufficient

justification, and indeed it is the only justification, if the

restriction is reasonable - reasonable, that is, in reference to the

interests of the parties concerned, and reasonable in reference to the

interests of the public, so framed and so guarded as to afford adequate

protection to the party in whose favour it is imposed, while at the same

time it is in no way injurious to the public."

53. The principles enunciated by Lord Macnaghten have most often been applied in cases where the only persons affected by the restraint were parties to the agreement; as, for example, a contract made on the sale of a business or in a contract of employment. Notwithstanding that, by his contract of employment with his existing club, each player is required to observe the rules of the League, it seems to be artificial to treat each player as a party to the agreement embodied in the internal draft rules. Those rules were made by the League, with the concurrence of its constituent clubs, and not by the players. But, as Buckley v Tutty demonstrates, this does not matter. In that case the rules were solely the creation of the League. Counsel for Buckley argued that the common law rules regarding restraint of trade were inapplicable since there was no contractual relationship between Tutty, a player, and the League. The High Court held, at p 375, that it was not necessary for Tutty to show a contractual relationship. The Court said that "the doctrine of the common law that invalidates restraints of trade is not limited to contractual provisions. There is both ancient and modern authority for the proposition that the rules as to restraint of trade apply to all restraints, howsoever imposed, and whether voluntary or involuntary".

54. Before turning to the facts of the case, it is desirable to mention one legal issue which arose during the course of the argument: the nature of the players' interests which may legitimately be taken into account. In particular, there was a question of the relevance of non-economic considerations. Counsel for the League argued that the principles regarding restraint of trade were protective only of economic interests, as opposed to social interests or mere domestic convenience. But they were not able to cite any authority to that effect. It will be recalled that, in Nordenfelt, Lord Macnaghten spoke simply of "the interests of the parties concerned", without elaboration. In that case the only argued interests were economic ones. As the subsequent cases show, this is commonly the position. But, of course, it does not follow from those circumstances that non-economic interests must be disregarded in those cases where they arise.

55. In order to put this issue into context, it is relevant to note the limit to which a third party's interest (economic or non-economic) is relevant. The main focus of inquiry, in considering the issue of reasonableness between the parties, is upon the position of the covenantee; that is, the person for whose benefit the restriction was imposed. Isaacs J pointed this out in Brightman v Lampson Paragon Limited [1914] HCA 90; (1914) 18 CLR 331. Referring to Lord Macnaghten's reference to "the interests of the parties concerned" Isaacs J said at pp 337:

"The words upon which the appellant laid stress were 'the interests of

the parties concerned,' and he said that they meant the interests of the

covenantor as well as and as distinct from those of the covenantee. The

answer to his argument, in my opinion, is this: It is quite true that

by the law the interests of both parties are conserved, but in this way,

that the covenantee is entitled by law, if he can get such an agreement

from the covenantor, to have all reasonably necessary provision for his

adequate protection. That is so whether the agreement is one relating

to the sale of a business or the engagement of an employee. On the

other hand, the covenantor is entitled, whatever he has actually agreed

to do or to abstain from doing, to have the fullest liberty of action

consistent with all reasonably necessary precautions consented to for

the adequate protection of the covenantee. That is the frontier line,

so to speak, dividing the interests which the law preserves for both

parties. If that line is not passed, then the covenantor's interests

are not infringed and up to that point the law permits the covenantee to

adequately protect his own interests. That is what I understand the

passage I have read to mean."

This exposition was endorsed by Latham C.J. in Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 at p 633.

56. However, although the primary question will always be the extent of the covenantee's need for protection, it is impossible to leave out of account the effect of the restraint upon the covenantor: see Amoco Australia Pty Limited v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288 per Gibbs J at p 316. The very notion of reasonableness involves a balancing of competing considerations. The more onerous the restraint, the more difficult it is for the person seeking to enforce the restraint to satisfy a court that it was, in all of the circumstances, no more than was reasonably necessary for the protection of his or her interests.

57. In most cases, I suppose, the only persons directly affected by a restraining covenant will be the covenantor and covenantee. In such cases, the court will be concerned only with their interests. But where a third party's interests are directly affected, it will be necessary to consider the effect of the restraint upon those interests before it can say whether the provision is reasonably necessary for the protection of the covenantee. No doubt it is for that reason that, in cases involving agreements between sporting clubs and their controlling bodies regarding player recruitments, the courts have always considered the effect of the agreement upon the players, even though the players were not parties to it.

58. There is nothing in any of the cases, so far as I am aware, to suggest that consideration of onerousness must be confined to economic effects. On the contrary, Isaac J's reference to the covenantor's "fullest liberty of action" suggests that his Honour held the view that the covenantor's total position is relevant. Whether or not that is so, it seems to me that, in principle, non-economic effects ought not to be disregarded. They may not be as easy to evaluate as economic effects; but they may be just as significant, especially in the case of a restraint on a person's ability to choose an employer.

59. Counsel for the respondents did not dispute that the effect of the internal draft rules was to impose upon clubs a restraint of trade which would be void unless justified by the circumstances of the case. In this they were clearly correct. In finding that the rules were a restraint of trade, Hill J said:

"There can be little doubt that the rules relating to the internal draft

do operate as a restraint of trade: not in the sense that they operate

to prevent a player from exercising his trade at all, as was the case in

Tutty, but in the sense that a player may be prevented from playing with

the club of his choice. The employment agreement is fundamentally a

personal agreement so that it might be thought that short of restraining

a player from playing altogether there could seldom be a greater

restraint upon trade than restricting an employee's freedom from

choosing his employer. As Viscount Simon L.C. said in Nokes v Doncaster

Amalgamated Collieries Ltd (1940) AC 1014 at 1020, albeit in a different

context:

'a free citizen, in the exercise of his freedom, is entitled to choose

the employer whom he promises to serve ...'

It seems to me no answer to say, as the respondents do, that a player is

free, without the limitations of the draft, to play in competitions

other than those regulated by the rules for the conduct of the New South

Wales Premiership Competition. No doubt, a player may seek employment

in the United Kingdom and may obtain at least comparable remuneration or

perhaps in New Zealand, or play competition football in Queensland or in

the lower grades of competition played in club football in New South

Wales or in the Metropolitan Cup, a competition not regulated by the

present rules. The evidence, however, makes it clear that the New South

Wales First Grade Competition is the premier competition in rugby league

in the world and the pinnacle of attainment in rugby league football.

Although the analogy is not completely apposite, it is like saying that

a person may not practice at the bar of a capital city in Australia but

is entitled, should he so desire, to practice in a country town."

60. I agree with these observations but I add two comments. First, it is worth emphasising the significance and ramifications of the right referred to by Viscount Simon. As to its significance: the right to choose between prospective employers is a fundamental element of a free society. It is the existence of that right which separates the free person from the serf. As to its ramifications: they were spoken in a different country, age and context - an inducement of breach of contract case - but the words of Lord Lindley in Quinn v Leathem [1901] UKHL 2; (1901) AC 495 at p 534 apply:

"As to the plaintiff's rights. He had the ordinary rights of a British

subject. He was at liberty to earn his own living in his own way,

provided he did not violate some special law prohibiting him from so

doing, and provided he did not infringe the rights of other people.

This liberty involved liberty to deal with other persons who were

willing to deal with him. This liberty is a right recognised by law;

its correlative is the general duty of every one not to prevent the free

exercise of this liberty, except so far as his own liberty of action may

justify him in so doing. But a person's liberty or right to deal with

others is nugatory, unless they are at liberty to deal with him if they

choose to do so."

61. To restrain a person from entering the employment of a particular person, or from following a particular trade or occupation, so as to safeguard the interests of a covenantee by whom that person was once employed or to whom the covenantor has sold a business is one thing; to compel a person - on pain of surrendering his or her occupation altogether - to enter the service of someone whom he or she has not chosen is another. If a rule which has the latter effect can ever be said to be reasonable, the case in justification must be extraordinarily compelling.

62. Secondly, I express a reservation about Hill J's observation that the internal draft rules do not operate to prevent a player from exercising his trade at all. The position is not clear, because the new rules are so recent, but it occurs to me that they may so operate, at least for a time. Suppose that a player is not selected at an Internal Draft Meeting and is not successful thereafter in finding a club willing to employ him upon his then stipulated terms and conditions. His only option is to submit a fresh internal draft application specifying amended conditions. He may again be unsuccessful and have to submit a third application. Perhaps he will ultimately fix terms and conditions which prove attractive to a club. In the meantime he will be unemployed, as a footballer. Bearing in mind that Internal Draft Meetings occur only in November and in each of the months January to June, the season may be well advanced before he finds employment; whereas, if he had been free to negotiate at will he may have reached agreement, and have been in employment, at a much earlier date.

63. In the final analysis, this reservation does not matter. As I have said, restraint was conceded by counsel for all the respondents. But they submitted that Hill J was correct in finding justification. In developing this argument, counsel for the League took as their text the following passage from Buckley v Tutty, at p 377:

"It is a legitimate object of the League and of the district clubs to

ensure that the teams fielded in the competitions are as strong and well

matched as possible, for in that way the support of the public will be

attracted and maintained, and players will be afforded the best

opportunity of developing and displaying their skill. It is therefore

legitimate to aim to provide a system that will ensure sufficient

stability of membership to permit those who play for a club to be

trained as a team and to develop a team spirit, and that will prevent

the stronger clubs obtaining all the best players, thus leaving the

weaker clubs with teams that are unable effectively to compete with

their stronger opponents. It is, of course, impossible to ensure by any

means that the membership of a football club will remain for ever

unchanged. Some players will cease to play for the club whatever the

system. On the other hand, even if there were no restraint on the

movement of players, not all players would go; some might not be

fortunate enough to receive offers and others to whom offers were made

might for one reason or another not wish to accept them. Moreover a

club may ensure some continuity of membership by binding its

professional players by contract to remain employed for a number of

years and, if necessary, by staggering the periods for which different

players are engaged. It may nevertheless be reasonable to lay down some

qualifications for membership of a club, or to impose some restrictions

on the transfer of professional players from one club to another or on

the extent to which a club may entice players away from another club."

64. Counsel for the League then went to the reasons of Hill J, claiming to extract from it ten favourable "findings of fact". Counsel said that these findings justified Hill J's conclusion that the restraint imposed by the rules was no greater than was reasonably required for the protection of the respondents' interests. Counsel for the appellants disputed that all the matters identified by their opponents could properly be described as findings of fact. Whatever their correct description, it is necessary to deal with those ten matters seriatim; upon them rests the League's case of justification.

65. First, Hill J reached a conclusion about the effect of the internal draft on the competitiveness of the teams in the Competition:

"On the evidence I find that immediately prior to the introduction of

the internal draft the game of rugby league in New South Wales was very

competitive although it had not reached such a state of equal

competition that no improvement in competitiveness was possible. It is

a legitimate object of the League and the clubs involved in the

competition, to endeavour to improve and maintain competitiveness of

teaMs I am of the view that the internal draft, on the balance of

probabilities, does operate to some degree to assist in the furtherance

of these aiMs However, if no other matter were to be taken into

account beyond that discussed to this point, I do not think that the

respondents would have satisfied the onus of showing that the restraint

of the internal draft, having regard to the detriments it places upon

the players, is no more than is reasonably necessary."

66. The finding that the internal draft operates "to some degree" to further competitiveness was not disputed before us by the appellants, although their counsel emphasised the qualifications expressed by Hill J, in the context of financial viability, about the effect of clubs having equal salary caps. For their part, counsel for the League adopted the finding of Hill J, whilst not disputing its relegation to a position of minor significance.

67. The second finding identified by counsel for the first respondent is that "(t)he League has ... a legitimate interest in ensuring the financial viability of clubs, an interest coincident with the interests of players". This proposition has never been challenged by the appellants.

68. Hill J proceeded to deal with the matter of financial viability. He said that "the reality of equally financially successful clubs has not been achieved". He went on, and this is the third identified "finding":

"One of the undesirable consequences of inequality of financial strength

of clubs lies in the ability of the wealthier clubs to offer higher

rewards to players which the poorer clubs are unable to match. The

outcome, unless some restraint is applied, is likely to be that the less

wealthy clubs can not attract the top players and coaches if the wealthy

clubs engage in what the evidence referred to as 'cheque book warfare'.

The likely result would be a lessening of competitiveness among the

69. The trial judge noted that, in an effort to overcome "cheque book warfare", the League introduced the concept of the salary cap. He said:

"Provided that cap were equal for all clubs and provided each of the

clubs were sufficiently financially viable to enable it to spend up to

the limit of its salary cap, the internal draft scheme would have no

particular effect in ensuring financial viability and its reasonableness

could not be supported on this ground. However, the present salary cap

limits are not equal, for the reason that they are determined on a basis

that takes into account the effect of the expenditure on the club's

financial viability. Further, the evidence supports the view that some

clubs are unable or perhaps unwilling for prudential reasons to spend

money on players even up to the limits of the salary cap set by the

League. The internal draft must be considered against this factual

background.

One of the consequences of the draft is that clubs can not approach

players and offer high rewards in the knowledge that the club making the

offer will secure the services of the player. The player must

participate in the draft and in the result notwithstanding previous

negotiations his services may be acquired by some other club. Hence, to

some extent the internal draft does militate against the consequences of

full blown 'cheque book warfare' when taken together with the existence

of the salary cap. Within the confines of the salary cap rules, each

club has the ability to select in turn the best talent available in the

draft.

In my opinion the internal draft may be justified by the objective of

financial stability (when taken together with the matters hereafter

discussed under the heading of retention of players) given the situation

now prevailing that some clubs are less viable than others and where

unequal salary caps are factually justified. With greater financial

equality of clubs and an equal salary cap (both objectives of the

League) the result may well be different."

70. The fourth finding identified by the appellants is the statement in this passage: "... to some extent the internal draft does militate against the consequences of full blown 'cheque book warfare' when taken together with the existence of the salary cap."

71. The fifth and sixth findings relied upon by the League relate to an entirely different matter, referred to in the evidence as "mid-season offers". Hill J noted the respondents' reliance on the need "to prevent one club from poaching players from another club mid-season". His Honour said the internal draft achieves this object because neither the player nor the club can be sure that the player will be selected by the club making the offer in the draft at season's end (the fifth finding). His Honour went on to say that the draft also prevents the "plundering" of one club by another simultaneously taking a number of its best players.

72. Hill J referred to conflicting evidence as to whether mid-season offers affected the performance of players. He concluded this part of his judgment with the following paragraph, the second sentence of which constitutes the sixth finding relied on by the League:

"The evidence satisfies me that the consequences on morale and playing

performance of mid-season offers will vary depending upon the

personality of the player receiving the offer and the personalities of

his team mates. However, I am satisfied that it is reasonable for the

League to seek to outlaw unrestricted mid-season offers that would lead

to the loss of the top playing talent of a club, particularly where

multiple poaching might otherwise occur. Judged against this criterion,

but subject to the earlier qualifications as to the possibility that a

different conclusion might follow if equal salary caps and equal ability

to purchase players up to the salary cap existed, I am of the view that

the restraint created by the internal draft is reasonable in the

legitimate interests of the League."

73. The remaining four findings focus, not upon the clubs' position, but upon that of the players. They are: that the 100 kilometre and the ten year exceptions "do mitigate the effects of the draft to a minor degree"; that the appeal provisions "assist in ameliorating the consequences to a player of draft selection that may prove disadvantageous to him"; that "in practical terms" no club would nominate under the draft a player "who clearly did not wish to play with that club"; and that it is not a likely outcome of the internal draft rules that clubs would offer players substantially less rewards.

74. I return to the six findings regarding the clubs' position. I think that these are all findings of fact. They involve three separate matters: the competitiveness of teams (finding 1); the financial viability of clubs (findings 2, 3 and 4); and mid-season offers (findings 5 and 6).

75. In relation to the first matter, as I noted in passing, Hill J's finding is non-contentious but is accepted as insufficient to justify the restraint imposed by the internal draft rules.

76. There is a major issue between the parties as to Hill J's findings on financial viability. Counsel for the appellants accepted the possibility that, without some restraint, competition between clubs for top players might become so extreme as to threaten the financial viability of some clubs. They agreed that this would be an undesirable result, injurious not only to the clubs but, indirectly, to everyone associated with the game including the players. But they argued that the effect of the salary cap system is to preclude such injurious competition, whether or not there are more direct restrictions upon recruitment by clubs. They pointed to evidence that, in 1990, 12 out of the 16 clubs had a common salary cap of $1.5 million, the remaining four clubs having salary caps lying between $1 million and $1.5 million, and that the objective of the League was to have equal salary caps by 1993. Counsel called in aid the concluding remarks of Hill J on this topic, quoted above, where his Honour indicated that his opinion on justification "might well be different" with "greater financial equality of clubs and an equal salary cap".

77. Counsel for the League accepted the significance of salary caps. During the course of their submissions they suggested that "the view is open that the combination of the two procedures is to be viewed as a temporary but necessary expedient". That comment did not go so far as to concede that the internal draft rules would be unnecessary once all clubs were subject to the same salary caps; although it did suggest that any justification may be limited to the transition years. However, as counsel said, the question before the Court was the reasonableness of the rules at the time they were made; that is, in 1990 in preparation for the 1991 playing season. I agree with counsel that, if the rules were reasonable when made the appellants must fail in these proceedings. It does not matter that the Court might think it likely that the rules would be adjudged unreasonable at some future time when salary caps were equal.

78. Counsel for the League endeavoured to support Hill J's conclusion that the salary cap system would be inadequate to restrain "cheque book warfare", under present conditions and without the internal draft rules, by reference to the evidence of three witnesses: Mr John Quayle, General Manager of the League, Mr Roy Masters, a well-known coach and football journalist, and Mr Alan Schwab, Executive Commissioner of the Australian Football League ("the AFL"). As Hill J's conclusion was hotly disputed, it is necessary to go to that evidence.

79. Mr Quayle said in evidence that "it is not possible to stop what can currently happen with just the salary cap". In support of his opinion, he put the hypothetical case of a club which lost a lot of its top players, or perhaps had few star players to begin with, and which found that, after allowing for payments to its continuing players, it had sufficient moneys, within its salary cap, to "go out and purchase from another club the best of its players". Mr Quayle thought that this would be an undesirable thing, only able to be stopped by the draft.

80. Mr Masters gave only brief evidence on the point. When asked to express an opinion on "whether the salary cap scheme alone without the concurrent operation of the player draft scheme would serve to eradicate the objectionable features of the old system" he replied:

"I think in the short run certainly for the rest of this decade you have

got to have both but I really do believe that in the next century that

you could probably get away with just the cap or the draft because by

that time I am sure that the inequities that exist at the present time

would have evened themselves out."

Mr Masters did not give reasons for his view. His reference to "the rest of this decade" apparently reflected his opinion, in contrast to that of Mr Quayle, that equal salary caps were not likely to be in place within a couple of years.

81. Mr Schwab did not claim any experience in administering Rugby League football. But he has had considerable experience in Australian Rules Football. As Hill J recounted, the AFL has had a salary cap system since 1984 and an internal draft system since 1989. Mr Schwab was asked whether, taking into account his experience as an administrator, he saw "the salary cap system by itself, that is to say without a player draft system, serving the purpose of lessening inequalities in the competitive playing strengths of the clubs in the league". He replied: "No I do not". When asked for his reasons, Mr Schwab gave a long answer during the course of which he referred to the considerable variation in the nature and size of payments made to AFL players. This answer concluded:

"Now if a club at the end of the year is over its salary cap by given

amounts it gets fined and it also runs the risk of losing draft choices

in the following draft so that if a club totally abused the system and

was half a million dollars over it would be within the ambit of the AFL

commission to say that you will not have the first four picks in a

national recruit draft because you have tampered with the rules and you

have also been fined $200,000. Now if you did not have the draft there

would be nothing to stop a club proceeding down that course, at the end

of the year even throwing in other bonuses, finish up $300,000 or

$400,000 over the salary cap and be willing to pay the fine and win the

premiership but not have the ultimate penalty of losing draft choices at

the next draft."

82. The material which I have summarised represents the whole of the evidentiary justification advanced in support of the proposition that internal draft rules are necessary to supplement a salary cap system. It should be noted that none of those witnesses gave evidence bearing on the issue of financial viability; that is, stopping "cheque book warfare" - as distinct from competitiveness. No doubt that was because it is self-evident that, if salary caps are set at levels which clubs can in fact afford and are observed, spending within those limits will not threaten the clubs' viability. The case made by Mr Quayle and Mr Schwab goes to competitiveness. But even then, it is hardly persuasive. It is not difficult to accept Mr Quayle's hypothesis of a club which has few star players, or few retained star players, and therefore has sufficient funds to make substantial player purchases. However, if such a club did go onto the market and buy a number of top players, it would be likely to improve the quality of its teams and, therefore, its competitiveness in the following season. This ought to improve, rather than detract from, the overall competitiveness of the Competition.

83. Mr Quayle was concerned that a club in purchasing mood might take an undue number of its recruits from one particular club. This possibility must be conceded, although the evidence revealed only two instances where this was even argued to have occurred in the period before the introduction of the internal draft rules. If this event did happen, the result would, no doubt, be upsetting to the club which lost the players. But traders cannot be immunised from upset; and upset has nothing to do with financial viability. A "raid" on a club's players would affect that club's competitiveness only if it was unable to obtain suitable replacements. As the club's financial commitment to retained players would be significantly reduced, it may justifiably be assumed that, within its salary cap but in an otherwise free market, this would be possible.

84. Mr Schwab's evidence is interesting, both for what it says and for what it does not say. As to what it says, the only reason given by Mr Schwab for his opinion that an internal draft scheme is a necessary adjunct to a salary cap scheme is that it provides a method of disciplining clubs who transgress the salary cap rules. However, it is an unattractive justification for a significant restraint on the freedom of action of third parties, the players, that the restraint provides a sanction by the controlling body of a sport against the misdeeds of its own constituents, the clubs. Sanctions should bear upon the guilty, not the innocent. There must be other sanctions available to a body such as the AFL, such as forfeiture of premiership points, the suspension of a club or even its disqualification from the AFL competition.

85. The most significant aspect of Mr Schwab's evidence is what it did not say. That evidence came from a man who occupied a key position in the administration of Australian Rules Football (as Executive Director of the Victorian Football League) throughout the whole of the five year period during which the VFL (renamed the AFL in 1990) operated a salary cap system without an internal draft rule. Mr Schwab was in an excellent position to observe any problems in a system which imposed salary caps without an internal draft rule. He did not refer to any such probleMs On the contrary, with perhaps justifiable pride, he recounted how Australian Rules Football had prospered and expanded during that same period.

86. I make a similar remark about the evidence of Mr Quayle. The salary cap system was introduced by the League in 1990, only one year before the internal draft. So there was less opportunity to observe the effect of having one constraint without the other. But Mr Quayle was asked the direct question: "Is there anything that went wrong with the competition in 1990 that required that you have a draft for 1991?" He replied:

"No, and I do attribute a lot of that success in 1990 to the clubs being

aware of the introduction of the salary cap which they were given at

least 2 years notice, that the restriction on clubs started in 1990.

The clubs being aware that the draft would be introduced at the end of

the 1991 season also gave them the option with at least 18 months notice

to start to look within their own ranks rather than going out through

the 1990 season and taking players from other clubs. Now, we have had a

very stable competition in that area in 1990 because I believe, of those

two major reasons, first of all the salary cap. As I said yesterday I

believe if the salary cap was not introduced as it was there would be

many more clubs facing financial disaster within a very short time."

87. I turn to the next justification urged by the respondents: the prevention of "mid-season poaching". Counsel for the League referred to this justification as "a principal reason" for the internal draft. I do not find it necessary to recount the evidence in respect of mid-season poaching; its effect is clear. However, there appears to be some ambiguity in the term "mid-season poaching". Some witnesses seem to have used the term to refer to the recruitment of a player from an opposing club in mid-season, the recruitment having immediate effect. It is clear from the evidence, and indeed as a matter of commonsense, that any such action would be undesirable. Although this cannot entirely be avoided, because of injuries and disciplinary suspensions, the loss of a team member during the course of a season is ordinarily a disadvantage to the team's competitive prospects. Team morale may suffer. Team tactics and team understanding may be affected. In the case of a player of outstanding ability, such a loss may be of great importance; and the result may be even more devastating if several players leave at once. It is not difficult to envisage the confusion amongst team supporters and acrimony amongst the players which might occur if a player played for a team one week and confronted his former team mates the next.

88. There is no evidence that "mid-season poaching", in this sense, is currently a problem in the Competition. If it is, it may readily be addressed. Rule 47(d) requires, as a condition of eligibility of a player for a club, that the player has played, or is playing, for that club on or before 30 June unless he was precluded from injury from doing so, was selected in a match on or before 30 June - though he did not play - or is qualified under rule 47(c)(iii). Rule 47(c)(iii) includes the internal draft qualification. If the League is concerned about mid-season transfers it could prevent this either by eliminating the reference to rule 47(c)(iii), or excluding Category 6 of that sub-rule. Alternatively, it could make a player ineligible to play for more than one club in any one Competition year, subject to such exceptions (if any) as it thought desirable.

89. The other sense in which witnesses used the term "mid-season poaching" was as a reference to the practice of a club approaching a player during the course of a playing season with a view to persuading him to play with that club in the following season. This seems to be the more usual sense of the term; the practice appears to be quite common. As I have noted, witnesses were divided as to whether such approaches affected players' performances. Hill J thought that the effect would depend upon the personality of the player receiving the offer and the personalities of his team mates; assuming, I suppose, that they learned of the offer. I would not wish to differ with that conclusion and I can accept that it would be less unsettling for negotiations to open only at the end of a season. But, as it seems to me, there is no possibility of excluding earlier discussions. Whatever the rules may say, if a club is interested in a player whose existing contract is due to expire at the end of a season, that club is likely to inform the player of its interest at an early stage; firstly, to induce him to put himself on the open market rather than to renew his contract with his existing club and, secondly, to discuss with him mutually acceptable terms and conditions. It is true that, under the internal draft system, the approaching club cannot be certain that the player will be available to it; he may be snapped up by another club with a prior selection right. Nonetheless, even under the internal draft system, it is in the interests of clubs who are in recruiting mood to detach from their existing clubs as many attractive players as possible and to ensure that they go into the draft seeking terms and conditions acceptable to that club. Those interests will best be achieved by early negotiations.

90. A major element in the "poaching" argument is that a measure of team stability is desirable. There was a deal of evidence to the effect that team stability promotes public identification with - and, therefore, support of - a team and assists in the generation of team spirit and player loyalty. Counsel for the League relied on this evidence in submitting that it was therefore in the interests of the game, and ultimately of the players themselves, for clubs to have a reasonable opportunity of negotiating contract renewals with their existing players at or shortly after the end of season. It was undesirable, said counsel, that a club wishing to negotiate a renewal should find that the player had already contracted to join a different club.

91. The evidence does not establish how frequently this situation occurred, in the days before the internal draft. It might be thought likely that, unless he had firmly decided to leave his existing club, a player would investigate that club's renewal terms before signing with someone else. But, accepting counsel's point, it seems to me that it falls well short of justifying the restraint of trade which is imposed by the internal draft rules. There are other means of guarding against early contracts. Although the League cannot legislate against early negotiations, it could so frame its eligibility rules as to exclude early contracts. For example, it could be a condition of eligibility for a transferring player that he had entered into his contract with his new club not earlier than a certain date in the previous year; for example, the date of the last Competition round or of the Grand Final, or a specific date in, say, October or November. If there was a fear of post-dated contracts, this could be met by requiring execution not earlier than the chosen date before one of a number of independent persons specified in the rules. Such a rule would ensure that, whatever discussions had taken place, a player remained legally uncommitted until a date selected by the League as being sufficiently late to give his existing club a fair opportunity of negotiating a renewal.

92. The preceding discussion has focussed upon the six findings of Hill J, identified by counsel for the League, which were claimed by them to justify the validity of the restraint of trade. Counsel for the clubs took a different course. Although also adopting the submissions put on behalf of the League, they justified their case, on the issue of reasonableness, by reference to that part of the passage in Buckley v Tutty, set out above, which referred to teams being "as strong and as well-matched as possible". This is the matter dealt with in Hill J's first finding, to which the appellants made no challenge. So it is unnecessary to go to the detail of the clubs' submission that the internal draft rules are conducive to evenness of competition.

93. As will be obvious, I do not think that the evidence makes out a powerful case on the issue of reasonableness, considering the matter from the clubs' point of view. The most that can be said, using the words of Hill J, is that the internal draft rules "operate to some degree to assist" the cause of evenness of competition and that they are one means - although certainly not the only means - of combating "mid-season poaching"; in either sense of that term. The claim that the internal draft is necessary to ensure the financial viability of clubs is not supported by the evidence.

94. In order to determine whether the matters of justification which are found to be established are sufficient to support the rules, it is necessary also to consider the effect of those rules upon the players. In considering that matter, I turn first to the final four "findings" of Hill J.

95. First, I agree with Hill J that the 100 kilometre and ten year provisions do serve to mitigate the effects of the internal draft. His Honour's reference was, of course, to para.(c) of rule 56 and Category 9 in rule 47(c). But as Hill J said, the mitigation is only a minor one. In relation to the ten year rule his Honour said:

"The ten year rule will not be likely to have a significant impact. A

player's career is relatively short, although the evidence suggested

that players are commencing in the upper levels of the game at the age

of 16 or 17. There seem to be few top players remaining in the game

over the age of 30."

96. The authors of the 100 kilometre rule apparently had in mind that the selection of a player in the draft might be disruptive to him and/or members of his family. The evidence supports that perception. There was a considerable amount of evidence as to footballers' careers and lifestyles. Although players in the Competition are professionals, in the sense that they are paid something for their participation, Hill J found that money was not necessarily their dominant concern. He said:

"I would conclude from the evidence of the players that many, if not

most, players were not, in desiring to be free to choose the club with

which they would play, motivated solely by monetary considerations. To

many players other considerations were at least equally significant.

Among these were:

* the chance of improving their game with a good team or a good

coach; geographical considerations; quality of life;

* the need to fit in service with the club with family requirements;

* the potentiality of a job which would provide a career after the

player's league career had come to an end;

* the possibility of advancing the player's long term goals of being

a coach;

* improving the player's choices of playing first grade or

representative football which might be poor if the player were

required to play with a team already well catered for in the

position of his choice;

* the chance of playing with a winning team; and

* the prospect of getting better television and media exposure.

The effect of the draft could well be that these legitimate interests of players would be put to nought if the player were selected other than by a club of his choice."

97. Hill J went on to discuss several matters put to him on behalf of the appellants. In the present context I should mention one of them: the importance that a particular player might place upon the ability to obtain - and, I would add, retain - a job which would provide training for a future career. Hill J commented that it might be possible for a player to overcome the danger of losing such a job by stipulating for appropriate employment on his internal draft application form. Perhaps so; but the practicality of that must depend upon the nature of the job and the player's needs.

98. The 100 kilometre rule seems to acknowledge disturbance. But it seeks to minimise it by allowing a player to indicate that he is not available for selection by a club whose home ground is situated more than 100 kilometres in a direct line from the ground of his previous club. As Hill J pointed out, the rule has some strange consequences. In practical terms, the 100 kilometre qualification is unavailable to a Canberra or Newcastle player. No other club has its home ground within 100 kilometres of the home ground of either of these clubs. So an invocation of the limitation would be inconsistent with an application to go on the internal draft. A Canberra or Newcastle player may only change clubs by entering the internal draft. It follows that a player from either of these clubs has only two choices: either to stay with his existing club or to take the chance of being required to join any other club in the Competition. I illustrate the ramifications of this situation by a hypothetical case. Assume a Newcastle player wishes to move to Sydney; perhaps for family, career or educational reasons, remembering that players may be as young as 17 years old. The player may be content to play with any Sydney club and may be attractive to one or more of them. But he finds himself selected by the Gold Coast. Subject to the appeal rules, he must move to southern Queensland. Take another case. A Sydney player wishes to move out of Sydney and seeks a warmer climate. The Gold Coast club would like to sign him but he is selected by Canberra.

99. These examples could be multiplied indefinitely. The point is an obvious one. Because of the variation in the distances between home grounds, the 100 kilometre rule operates unevenly. As I have said, it has no practical application to Canberra and Newcastle players submitting to the internal draft. A Brisbane or Gold Coast player who invoked the rule could limit himself to selection by the other of these two clubs. This might suit him, if he wished to remain in Queensland. But if he wished to go to Canberra, but not to Sydney, he might find himself disappointed. The Illawarra ground is within 100 kilometres of all Sydney club grounds. So an Illawarra player might invoke the rule so as to avoid being moved to Queensland; but this fate might befall him if he chose to leave open the chance of going to Canberra or Newcastle.

100. Even where the 100 kilometre rule works best, as between the 11 Sydney clubs and Illawarra (all of whose home grounds are within 100 kilometres of each other), its sufficiency is questionable. The 100 kilometres is measured in a direct line between grounds. The distance actually covered by a player journeying between his existing home and the ground of his new club may be much more.

101. The limited mitigation afforded by the 100 kilometre rule may easily be demonstrated. Take a player who wishes to leave his existing club; whether for better remuneration, because of friction between him and the club management, the coach or a team mate or simply because, in that club, he faces the competition of a better player for selection in his favourite playing position. He might approach an adjoining club, whose ground is sufficiently close to his existing home as to enable him to attend for training and matches without inconvenience to either himself or his family. That club may be willing, even anxious, to have him. Terms may be agreed. Notwithstanding those facts, the internal draft rules forbid the making of any agreement. The player must enter the internal draft and play for whichever club selects him. Thus a Manly player who lived in the Warringah Shire and who had reached agreement with North Sydney might find himself required to attend for training several times each week at Wollongong or Campbelltown. An Illawarra player who was happy to transfer to Cronulla might have to travel to Brookvale Oval. A Parramatta player who lived at St Marys and wished to transfer to Penrith might be required to travel to Cronulla or Kogarah. Of course, the inconvenience of the selection will not always be as extreme as in the examples I have given. But the point remains that, even under the 100 kilometre rule, players who elect to retain their previous abode may be called upon to spend many hours each week getting to and from training, notwithstanding that there may be a closer club with whom they could make a mutually acceptable arrangement.

102. I acknowledge that one option for such a player would be to move to a new home, closer to the new club. But that option may involve significant costs. The costs may be economic costs such as those associated with the selling of an existing home and buying a new home and removal expenses, or the loss of the player's or his wife's employment or extra costs of a journey to work. They may be intangible costs, such as an adverse effect upon the education or career of the player or his wife or the loss to them of family support.

103. I appreciate that all of the above comments must be read subject to the appeal rules, the matter referred to in Hill J's eighth finding. I do not disagree with his Honour's observation that the rules "assist in ameliorating the consequences to a player of a draft selection that may prove disadvantageous to him". But there is no way of knowing to what extent, in practice, they will do so. It is true, as emphasised by counsel for the clubs, that one of the members of the Appeals Board is a person nominated by the President of the players' association. It is also true that the Appeals Board is required to take into account any unreasonable hardship caused to the player arising out of factors such as his marital status, the health and welfare of his family, his employment and his financial situation. But it will be for the Board to determine how much weight to give such factors; the criteria specified in rule 6 are open textured. The first criterion is "The best interests of the game, the player and the Club". Suppose that the Appeals Board determines that it would be in the interests of the selecting club to acquire the appellant player and that this will improve competitiveness within the Competition. To what extent will the Appeals Board be willing to set aside the selection because of matters of demonstrated hardship? And what is "unreasonable hardship?" Does this term include the effect on the player's wife of having to give up a promising job, or to cope with two young children without the assistance of her mother who lives around the corner from her existing home? If it does, how can such factors be weighed against "the best interests of the game"?

104. It may have been possible to frame appeal criteria which would ensure that a player who was significantly disadvantaged by a selection could avoid that selection, whatever the consequences for the selecting club and the game. These criteria do not do so; they merely make unreasonable hardship an element in the exercise of a broad general discretion.

105. It is true, as counsel for the League pointed out, that the Appeals Board is required to afford the player a hearing and to give reasons. It may be, as suggested by counsel, that its operation would be subject to judicial review. But, except in the extreme case of unreasonableness (in the Wednesbury sense), judicial review does not permit a court to go to the merits of a decision.

106. The ninth "finding" relied upon by the League is the statement of Hill J that: "In practical terms ... no club would nominate a player who clearly did not wish to play with that club". The appellants dispute that this remark should be regarded as a finding of fact. They say that it was merely an assumption by his Honour. I agree. There was no evidence to indicate, one way or the other, whether a club would be likely to take that course. Indeed, it is difficult to see how such a matter could be the subject of evidence. Evidence of what is done today does not prove what will happen tomorrow. It was not even made clear at the trial to what extent clubs made a practice, or proposed to make a practice, of sounding out prospective nominees before Internal Draft Meetings. So far as the evidence shows, a club might nominate a player (who would then be committed contractually to the club) without being aware of his unwillingness to join it.

107. Having regard to the view he expressed on nomination, Hill J would presumably have assumed that a club would not force upon a clearly unwilling player the choice of playing for that club or retiring from the game. I hope that such an assumption would be well-justified. But it cannot be assumed, merely because the player does not take a "clearly unwilling" stance, that the selection does not cause him hardship. No doubt some players are confident, articulate persons, or persons who have the assistance of such people in expressing their views. But there must be many who are not. Some top players are represented by agents, but most players are not. I note that the effect of rule 45 is that at least 25 of a club's 57 registered players must have been under the age of 21 years at the preceding 31 December. They might have been as young as 16 years at that time. For reasons of inexperience, lack of confidence or fear of prejudicing his football career a player may fail to press his objection to a particular selection, however hard it bears upon him.

108. The tenth "finding" of Hill J was that it is not a likely outcome of the draft system that clubs would offer players substantially less rewards. Counsel for the appellants say that this is not truly a finding of fact; but, rather, speculation. It is true that some of the witnesses expressed views about this matter but counsel say that their views were also mere speculation. Moreover, say counsel, the speculation favoured by the trial judge is opposed to common sense. Counsel argue that one effect of the internal draft system is to inhibit players from changing clubs. Players may prefer the club they know, with its limited rewards, rather than the hazard of the internal draft. Indeed, according to some of the witnesses, this is a major virtue of the internal draft system; it makes for team stability by discouraging players from leaving. Counsel say that, to the extent that players are inhibited from looking elsewhere, their bargaining position with their existing club is weakened; and that it is common experience that a weakened bargaining position leads to diminished rewards.

109. I think that this argument is irrefutable. I add that, even for a player who has decided to leave his existing club, there may be a weakening in bargaining power, occasioned by the cumbersomeness of the internal draft procedure. A player might discuss terms with an interested club. But, even if he inserts those terms on his internal draft application, he may not be selected by that club. The club might already have exhausted its salary cap allowance or its available funds. The player may be passed over and have to enter new negotiations with another club with a view to selection at the following Internal Draft Meeting. As with other vendors, it seems to me axiomatic that a player is likely to get the best result if he is free to play off interested purchasers against one another and promptly close a deal once an agreement is reached.

110. There are two other aspects of this matter. First, a player may decide to change clubs because, in his existing club, he cannot obtain regular selection in First Grade; there may be a better player in his position in that club. Notwithstanding that he has not regularly played in First Grade, he may be sufficiently skilled to be attractive to some clubs as a First Grade player. However, on entering the internal draft, he might be selected by a club which already has a competent First Grade player in his position but which wishes to use him in its Reserve Grade team. Even if that club is willing to meet his financial stipulations, the effect will be to diminish the player's opportunities to develop his game and, perhaps, earn representative selection and the rewards which accompany it.

111. Secondly, I mention a point made by Hill J himself. There is a considerable divergence between the methods of remuneration of players. Bonuses are commonly a major component of players' remuneration. Usually, they are dependent upon team success. In such a case, the actual remuneration of a player will depend upon the team which selected him, notwithstanding that his stipulated terms and conditions remain the same. Regardless of his own skills and playing form, if a player is selected by a low-ranking team, his actual remuneration may be much less than if he had been selected by a winning team; or had been free to contract directly with that team.

112. In dealing with the respondents' submissions in justification of the restraint, I have mentioned many of the criticisms of the effect of the internal draft upon players made by counsel for the appellants . But I should note three additional matters, all complaints of principle which seem to be valid.

113. First, the internal draft is contrary to the common law principle that people are entitled to practice their trade as and where they wish, exercising and developing their skills as they see best and making their own decisions as to their employment and lifestyle. Instead, the draft imposes upon a player a regime which limits his freedom to select his employer, his coach and his team mates. In discussing the appeal provisions I have posed some of the subtle and intangible issues which are likely to arise. The more fundamental question is: how, in a free society, can anyone justify a regime which requires a player to submit such intensely personal decisions to determination by others?

114. Secondly, the internal draft rules operate at the conclusion of a player's contract, imposing a new post-contractual restraint upon him even in cases where he entered his contract before the rules were adopted. The player receives nothing in return for this new impost.

115. Thirdly, the rules are too broad. The rules are sought to be justified by arguments concerning competitive equality and financial viability; but not many players have the playing ability substantially to affect the evenness of the Competition or the money-earning capacity to threaten a club's financial viability. Counsel for the appellants say that, if there is anything in the respondents' arguments, the rules should be much more limited in their operation. I agree. It seems to me unjustifiable to apply the same rules to a struggling Third Grade player who earns a few dollars a week from football, and for whom some other career is much more important, as to a Test star who can command six-figure annual emoluments and who proposes to build his career around the game.

116. During the course of their submissions, counsel for the clubs stated that the internal draft rules had been adopted unanimously by their clients, notwithstanding the differences between their wealth and competitive success. The adoption came only after two years discussion and consultation with players' representatives; although no agreement was reached with those representatives. Counsel pointed out that the League is a non-profit organisation, concerned only with the interests of the game. The directors are not beholden to shareholders. If there was any doubt about the reasonableness of the rules, counsel said, the benefit of that doubt should be accorded to the respondents. The rules ought to be allowed to operate until such time as actual cases of injustice emerge. Counsel for the League made a submission in similar terms, contending that the present application was premature.

117. I do not doubt that those who framed the internal draft rules did so carefully and from the best of motives. Nor do I doubt that those people would feel themselves to be genuinely concerned with the welfare of the players. As is obvious from the evidence in this case, most of the people who are presently concerned with the administration of the League and its constituent clubs have given many years devoted service to Rugby League. But this case cannot be decided by reference to sincerity and motive. As is conceded, the internal draft rules impose a significant restraint upon the employment opportunities of those players who are affected by them. If that restraint is enforceable, it can only be because it does no more than reasonably protect the interests of the respondents, having regard to its effect upon the players. If it does not, it would be impermissible to decide the matter by reference to the motives, sincerity or integrity of those who imposed the restraint. Nor is it permissible to give the respondents the benefit of any doubt. The onus of justifying the restraint lies on the respondents, not the appellants. If the Court is left uncertain as to justification, it must find for the appellants. Nor is the application premature. The constraints imposed by the rules bear down on the appellants at the present time. The appellants are entitled now to put the respondents to justification and, if they cannot, to obtain relief.

118. Hill J concluded his discussion of the case by commenting that it was a "borderline" one which he had not found easy to resolve. I have not felt the same difficulty about the merits of the matter. As I have already indicated, my opinion is that some of the findings and assumptions made by Hill J were unduly favourable to the respondents. On the view I take, the internal draft rules do very little to protect the interests of the respondents. They do much to infringe the freedom and the interests, economic and non-economic, of the players. The attempted justification fails.

119. In expressing that conclusion, and having regard to one submission made by counsel for the League, it is desirable to indicate that I realise that Hill J reached a contrary conclusion at the end of a lengthy trial at which he heard and saw numerous witnesses. But this is not a case where anything turns upon disputed questions of primary fact. Insofar as facts were recounted in evidence they were mostly undisputed anecdotes. I am not conscious of any factual dispute which Hill J thought it necessary to resolve. Most of the evidence at the trial was in the realms of prediction and opinion. The predictions were honestly made, the opinions sincerely held. No attack was made upon the integrity of any witness. His Honour expressly stated that he accepted that all the witnesses "honestly hold the views which they expressed". His Honour's task was to evaluate the predictions, and the opinions expressed by the witnesses about the virtues and vices of the internal draft rules, against a background of factual information which was not in significant dispute. This is not a case which depends upon the trial judge's "estimate of the man": see per Lord Sumner in SS Hontestroom v SS Sagaporack (1927) AC 37 at p 47, applied by the High Court in Abalos v Australian Postal Commission [1990] HCA 47; (1990) 65 ALJR 11 at p 16. It is not even a case of inference from primary facts which were either undisputed or found by the trial judge; as to which see Warren v Coombs [1979] HCA 9; (1979) 142 CLR 531 at p 551. This is a case where the task of the Court is to make a judgment about the reasonableness of a restraint, whose terms are written and undisputed, against a background of, relevantly, undisputed evidence. In undertaking that task, this Court is in no worse position than the trial judge. Although we must give full weight to the views expressed by Hill J, in the end it is our duty to evaluate the matter for ourselves.

120. The appellants' case in relation to common law restraint of trade should be upheld, with the result that the appeal itself should be upheld. The order made by Hill J should be set aside. In lieu of that order, the Court should make a declaration that the internal draft rules (rules 55 to 58) are contrary to public policy and invalid. Having regard to the assurances of counsel for the respondents that their clients would abide by any declaration that the Court may make, it is not necessary to grant injunctive relief.

121. The respondents should pay two-thirds of the appellants' costs of the appeal. The order made by the primary Judge in relation to costs should be set aside and the matter remitted to him so that the parties may apply in relation to the costs of the proceedings at first instance.

I agree that the appellants should have relief by way of declaration to the effect that the provisions of the Rules and Regulations of the first respondent, New South Wales Rugby League Limited ("the League") which establish and give effect to what is known as the Internal Draft, are void because they offend the restraint of trade doctrine. For the reasons given by Wilcox J., I also agree that this is the only ground upon which the appeal succeeds. However, I should state for myself the steps by which I reach my conclusion concerning the application of the restraint of trade doctrine.

2. The League is a public company, limited by guarantee. It was incorporated in 1983 under the Companies (New South Wales) Code 1981, but its antecedents began in 1908. The 2nd to 17th respondents are clubs within the meaning of Article 1 of the Articles of Association of the League. The members of League include at least two representatives from each club. The Board of Directors of the League may suspend, exclude or forfeit the right of a club to representation on the League if the club, inter alia, shall be guilty of conduct which in the opinion of the League is prejudicial to the interests of the League. The League may conduct such competitions between teams representing all or any of the clubs as the Board may from time to time determine, and the conditions governing the playing of any competition conducted by the League are those determined by the Board (Articles 76, 78).

3. The League conducts large scale operations. The competitions conducted by the League have prospered. In 1989, the League received $10,504,362 from its trading activities and the operating profit was $6,224,742. Of this, $5,067,000 was distributed to clubs by way of grants and other payments. In 1990, the League received $19,777,625 from its trading activities, the operating profit had increased to $9,441,835 and the distributions to $8,672,600. Attendances for the 22 rounds of the New South Wales Rugby League Premiership Competition ("the Competition") in 1990 reached 2,000,393, a rise of 153,225 from what, in 1989, had been a record. The trading activities of the League bring receipts from the sale of television rights, fees from sponsors, and admission fees paid at the gate.

4. Article 32 (b) of the Articles of Association provides that the Board of the League may by resolution make such rules or regulations as are deemed necessary for the proper carrying out of the objects and powers of the League.

5. At a meeting on 23 July 1990, the Board adopted Premiership Competition Rules ("the Rules") which are now embodied in Part II of the Rules and Regulations of the League. One of the objectives stated in the preamble to Part II is the provision of "an orderly basis" for clubs to negotiate with players and to "minimise the problems" arising from negotiations between clubs and players during the course of a season "thus distracting them from their current obligations". The Rules did not come into operation in time for the 1990 season. Rule 42 provides that each club admitted by the Board of the League into the Competition agrees to abide by the Memorandum and Articles of Association of the League and, inter alia, by the Rules. Rule 47 specifies the criteria for the eligibility of a player to play for the club which nominates him for a match of the Competition. A player is not eligible unless (i) he is a member of the club which nominates him, (ii) he is registered with the League as a player of that club, (iii) he is contracted to play for the club in the Competition and (iv) he has at least one of nine possible qualifications listed as "categories" in Rule 47 (c). Qualification 6 applies to "A player who has contracted to play for the Club pursuant to the provisions of the Internal Draft".

6. Rules 55 - 58 provide for the Internal Draft. Rule 58 forbids a club to sign a contract with a player to play for it unless the contract is in the standard form approved from time to time by the League "with such additional conditions as may be agreed upon between the Club and the player". An application by a player to be included in the Internal Draft constitutes an offer by him to any club drafting that player to employ him on the terms in the prescribed application form, and these terms are contained in the standard form of contract (Rule 65).

7. Wilcox J. has shown in his reasons for judgment that the effect of the obligations accepted by the clubs, and established by this complex of provisions, is that a footballer who has played in the Competition for a club or in a major premiership competition in another country or has represented, at senior level, New South Wales, Queensland or Australia, is not free to contract with any other club. He must first be selected by that club pursuant to the Internal Draft. A player who is not selected at a meeting pursuant to the Draft may not negotiate with any club, save on the terms and conditions notified in his previous application under the Draft.

8. By way of contrast to the Internal Draft, whilst the Rules also provide for the External Draft, it is concerned with players who have not played in the Competition or its equivalent elsewhere and who are not already engaged to play for a club. It specifies procedures whereby for the first time they may play for a club in the Competition. No question arises as to the provisions establishing the External Draft.

9. The appellants are all professional footballers, and when the present proceeding was instituted on 4 September 1990, each had a playing contract with one of the clubs who comprise the 2nd - 17th respondents. There was no challenge to their standing to seek the declaratory relief for which their counsel pressed on the appeal.

10. The principle on which the restraint of trade doctrine rests is that in the public interest the citizen should be free of any unreasonable restraint upon the exercise of his capacity to be gainfully employed or to engage in trade or commerce: Howard F. Hudson Pty Ltd v Ronayne [1972] HCA 3; (1972) 126 CLR 449 at 452-453 per Barwick C.J. It was common ground before the primary Judge that the clubs were competitive with each other in securing the services of players, and that the clubs and the League were parties to a contract, arrangement or understanding to implement the Rules providing for the Internal Draft. This combination between the clubs and the League operates as a restraint of trade upon the players in the sense that a player thereby may be prevented from playing with the club of his choice. As the primary Judge pointed out ((1991) [1991] FCA 9; 27 FCR 535 at 555) it may be thought that, short of restraining a player from playing altogether, there could seldom be a greater restraint upon the exercise of an individual's capacity to pursue his occupation.

11. The respondents did not challenge the propositions that the restraint of trade doctrine applied to professional footballers, or that a relevant restraint was imposed upon the appellants in the manner I have described. Rather, the respondents sought, as they had done successfully before the primary Judge, to justify the restraint. The respondents accepted that if the appellants otherwise were successful on the appeal no question of severance arose under the Restraints of Trade Act 1976 (N.S.W.).

12. As a general proposition, the time for testing the validity of a restraint is the date when it was imposed, in the present case with the adoption of the relevant rules at the meeting of the Board of the League on 23 July 1990. This is because at common law (in the administration of which the Court lacks the wide powers given by s. 87 of the Trade Practices Act 1974, the issue is the absolute one of whether the restraint was void ab initio as offending public policy. It is not whether the restraint is voidable nor, it seems, whether it has become void by reason of later events which occurred before the institution of proceedings to challenge it.

13. In a number of decisions, the High Court has treated the date of imposition of the restraint as the time for testing its validity: Lindner v Murdock's Garage [1950] HCA 48; (1980) 83 CLR 628 at 653 Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co. Pty Ltd [1973] HCA 40; (1973) 133 CLR 288 at 318; Geraghty v Minter (1979) 142 CLR 177 at 179, 187-188, 193, 200. In the last cited case, Mason J. alone regarded the principle as unsettled: supra at 199-200. The Privy Council (to which Geraghty v Minter supra had been cited) has expressed the same view as the majority of the High Court: Bridge v Deacons (1984) AC 705 at 718. However, Gibbs J. pointed out in the Amoco Case supra at 318, that facts which have occurred since the relevant date may throw light on the circumstances existing at that date.

14. But there always remains the basic proposition, as Scott J. has expressed it, that the reasonableness of a restraint of trade must be tested, not by reference to what the parties have actually done or intend to do, but what the restraint entitles or requires the parties to do: Watson v Prager (1991) 3 All ER 487 at 507-508. In my view, it would have been permissible to have had regard, in the sense described by Gibbs J., to the operation of the Internal Draft had effluxion of time yielded such material. But, to the contrary of what the primary Judge appears to have indicated in several passages (27 FCR at 556, 563), in my view it was not the case that the issue of reasonableness of the restraint was to be determined by looking to the manner in which from time to time it operated in practice or might operate in practice. The fundamental question involves an assessment of what was permitted to the League and the clubs by the terms of the arrangement between them, as set down in the Rules. Thus, in my view, it was not correct upon the state of the facts in the present case to enter upon an inquiry leading to his Honour's conclusion (27 FCR at 558) that "no club would nominate a player under the draft who clearly did not wish to play with that club".

15. Counsel for the League submitted that the Privy Council had earlier taken a contrary view to that it expressed in Bridge v Deacons supra. Reference was made to a passage in Stenhouse Australia Ltd v Phillips [1973] UKPC 1; (1974) AC 391 at 402-403. But in truth, in the passage in question their Lordships were concerned with a different question. They were dealing with a clause which on its face was not a restraint of trade at all, but a provision for the payment of money. They said that the approach to be taken was that which had been endorsed by the High Court in Howard F. Hudson Pty Ltd v Ronayne supra. In that case, the High Court emphasised that in deciding whether a contract imposed a restraint within the meaning of the doctrine, regard should be had not only to form, but to substance; see 126 CLR 453, 457, 462. The plaintiff had entered into a deed with his employer which undertook to pay him a retiring allowance by stated instalments, subject to a provision that further instalments might not be paid if the plaintiff engaged in certain business activities. The High Court held that the combined effect of the provisions in question was to impose a restraint of trade upon the plaintiff; they entitled the employer to penalise the former employee for engaging in those activities. The restraint was void, ager initio, whether or not, in the future event, the employer might stay its hand.

16. In many cases the restraint was imposed some considerable time before its validity was tested in litigation. In those circumstances, and subject to the caveat entered by Gibbs J. in the Amoco Case supra, the principle that the time for testing the validity of the restraint is that of its imposition has assumed particular importance. The present is not such a case. The restraint flows from what was done at the meeting of 23 July 1990, the litigation was commenced on 4 September 1990 and the trial took place in November and December 1990.

17. In deciding whether there are special circumstances justifying a restraint of trade, the Court should be wary of placing weight upon "improbable and extravagant contingencies as indicating the restraint to be unreasonable": Haynes v Doman (1899) 2 Ch 13 at 26. Evidence from persons in the trade or occupation in question is admissible to inform the Court of the nature of that trade or occupation, what is customary in it, and of any particular dangers requiring precautions, but evidence from persons in the trade or occupation stating their views of the reasonableness of the restraint is inadmissible. This is because it is directed to the ultimate question, which is one of law: Haynes v Doman supra at 24, Stenhouse Australia Ltd v Phillips supra at 402.

18. In this situation, evidence was admissible from persons associated with rugby league competition football as to the nature of that activity, any threats to the continued success of the game, and as to the nature of the economic forces at work. But much of the evidence went beyond this and involved speculation as to the effects of the future operation of the Internal Draft, with a view to persuading the Court as to the reasonableness or otherwise of the restraint. That evidence was inadmissible.

19. The primary Judge concluded (27 FCR at 568) that the respondents had shown "on balance" that the restraint imposed by the Internal Draft was not unreasonable "having regard to the legitimate interests of the League and the clubs, on the one hand, and the players on the other". His Honour considered various alleged harsh consequences for players of the operation of the Internal Draft (27 FCR at 556-559). It will become apparent that in my view this did not represent the correct approach to the legal issues in the case.

20. The onus of proving the facts said to constitute special circumstances justifying a restraint of trade rests on the party alleging them; when they have been proved, it is, as I have said, a question of law whether or not the restraint is justified: The Bacchus Marsh Concentrated Milk Co. Ltd (In Liquidation) v Joseph Nathan and Co. Ltd [1919] HCA 18; (1919) 26 CLR 410 at 440-441; Peters American Delicacy Co. Ltd v Patricia's Chocolates and Candies Pty Ltd [1947] HCA 62; (1947) 77 CLR 574 at 590; Stenhouse Australia Ltd v Phillips supra at 402.

21. Accordingly, in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co. Pty Ltd supra at 318, Gibbs J. said:

"The judge's findings as to the circumstances of the case, of

course, stand on appeal in the same position as any other finding of

fact made by a judge, but his decision that the covenants were

reasonable is not a decision of fact and an appellate court in

reviewing such a decision inquires not whether it has been shown to

be wrong, but simply whether it is right."

22. Before considering whether the primary Judge was in error in concluding as he did, it is appropriate to refer to four important but, in a sense, preliminary matters.

Distinction between findings as to existence of a restraint and attempted justification

23. First, this is not a case where it was submitted, in the alternative, that the restraint of trade doctrine had no application, and that if it did, the restraint could be justified. In a number of leading authorities, there was a challenge on both points, and care is necessary in considering the judgments not to treat observations on the first point as bearing upon the second, the only issue in this case. The leading authorities to which we were referred and which bear upon both points include Esso Petroleum Co. Ltd v Harper's Garage (Stourport) Ltd [1967] UKHL 1; (1968) AC 269; The Queensland Co-operative Milling Association v Pamag Pty Ltd [1973] HCA 24; (1973) 133 CLR 260 and Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co. Pty Ltd supra. In another leading authority, Pharma-ceutical Society of Great Britain v Dickson (1970) AC 403, as Lord Upjohn pointed out at 436-437, the issue at the trial had been whether the restraint of trade doctrine applied to a proposed rule of the society. It was only in the Court of Appeal that there was debate as to whether, if the doctrine did apply, the restraint would be reasonable. The House of Lords agreed with the Court of Appeal that the appellant had not made out its case on either issue.

24. It also should be noted that in Buckley v Tutty [1971] HCA 71; (1971) 125 CLR 353, a decision to which much reference naturally was made in argument before us, the High Court was dealing with a decision at first instance of three judges upon a statement of agreed facts.

25. Secondly, I turn to consider the legal footing on which the appellants may claim the declaratory relief they seek. The giving of effect to an agreement or arrangement between the members of a combination, such as that formed by the League and the clubs, may, in a given case, involve the commission of one or other of the economic torts, for example, that of conspiracy. In such a situation, the third parties, who are the objects of the combination, will have their remedy in tort. Nothing of the sort is suggested here. However, where there is no such legal footing in tort for action by the third parties, and they remain strangers to any contractual combination, they nevertheless may have the necessary interest to support the making of a declaration in their favour that the restraint of trade embodied in the arrangements between the other parties is void.

26. In Eastham v Newcastle United Football Club Ltd (1964) Ch 413 at 443, Wilberforce J. said that to grant a remedy by way of declaration to persons whose interests were vitally affected by the operation of such a restraint of trade would be well within the spirit and intent of the rules as to declaratory judgments. The New Zealand Court of Appeal took the same view: Blackler v New Zealand Rugby Football League (Incorporated) (1968) NZLR 547 at 554-556, 568, 572. In Greig v Insole (1978) 3 All ER 449 at 495-496, 511, the three cricketers who were the plaintiffs were not themselves in any contractual relationship with the International Cricket Conference or the Test and County Cricket Board, the bodies whose rules or proposed rules were attacked as being in restraint of the activities of the plaintiffs. But only declaratory relief was sought. See, also, Palfreyman v South Metropolitan Master Planning Authority (1963) 15 LGRA 38 at 53; Kingdom of Spain v Christie Manson and Woods Ltd (1986) 3 All ER 28 at 35-37.

27. In Buckley v Tutty supra at 381, the High Court rejected the submission that a contract unreasonably in restraint of trade does not support proceedings by a third party for a declaration or injunction. The court upheld orders granting not only declaratory but also injunctive relief. The nature of the legal or equitable right in protection of which the injunction was granted did not appear, beyond the statement that persons have a "right to work". Subsequently, in Howard F. Hudson Pty Ltd v Ronayne supra at 453, Barwick C.J. said that a person who sought to make a restraint "effective in fact" would be restrained by injunction. Professor Atiyah has suggested in a Note (1972) 46 ALJ 235 at 236, that what is involved is the development of a "quasi tort". If so, presumably an action for damages would lie, but this does not seem to be the case: Cooke v Football Association ("The Times", 24 March 1972, unrep). It appears that no such relief was sought at first instance in Tutty v Buckley (1970) 92 WN (N.S.W.) 329.

28. It is not necessary further to deal with this matter on the present appeal because the appellants indicated that if successful they would rest upon declaratory relief and, as I have said, there was no challenge to their standing to seek that relief.

29. Thirdly, it is necessary to have regard to the particular mechanism by which the restraint is imposed by the respondents upon the appellants. At the heart of this case is not any particular covenant in any agreement negotiated between a player and a club. The essence of the restraint is in the operations of the combination which controls the affairs of the League and the clubs. The effect of the combination is to restrain the terms of the engagement between each of the clubs, the members of the combination, and third parties, namely the players; there is to be a refusal to deal with the third parties other than on terms complying between what is provided for in the agreement or arrangement which constitutes the combination. The restraint imposed upon the players is involuntary rather than voluntary.

30. Where the restraint is contractual and arrived at by bargaining between the covenantee taking the benefit of the restraint and the covenantor accepting the burden of the restraint, it has been said that the Court should not be astute to find that the bargain is "unreasonable as between themselves". The point was put as follows by Menzies J. in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co. Pty Ltd supra at 294, where his Honour said he agreed entirely with the approach of the trial judge:

"(T)hat when parties negotiate a commercial arrangement from

positions where one does not have the other at an unfair advantage

and do, after hard bargaining, reach an agreement which each finds

in its interests to accept, the Court will not readily find that

their bargain is unreasonable as between themselves, notwithstanding

the well-established policy of the law against restraints of trade."

The appeal with which the High Court was dealing was such a case. See also what was said in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co. Pty Ltd supra, by Walsh J. at 306 and by Gibbs J. at 320. Contractual restraints of this nature repeatedly have been the subject of litigation concerning agreements for the sale of businesses, restraints imposed by partnership articles, and restraints contained in service agreements. In that setting, there has been debate as to the extent to which, in assessing the reasonableness of the restraint, regard may be had to the quantum of the consideration received by the covenantor in exchange for accepting the burden of the restraint, and the effect of the agreement on the position of the covenantor. The matter is discussed in the judgments of Walsh J. and Gibbs J. in Amoco supra at 306-307, 315-316.

31. The present is a quite different case. As I have said, the appellants are not consensual parties to the combination pursuant to which the restraint is imposed upon them. Since Pharmaceutical Society of Great Britain v Dickson supra, and Buckley v Tutty supra, it is well settled that the doctrine of the common law which invalidates restraints of trade is not limited to contractual provisions. It extends to restraints imposed upon their captives. Hence, the application of the doctrine to the arrangements between the League and the clubs, as they affect the players. But in cases such as the present, when the Court comes to deal with the issue of alleged reasonableness of the restraint, there is no occasion to put into the equation the exercise by the appellants of bargaining power in the negotiation by them of any contract they impugn as containing a restraint of trade. Nor is it to the point to inquire as to the adequacy of consideration received by the appellants as covenantors. The issue as to reasonableness is a more direct one.

32. In the present case, the issue may be propounded, consistently with what was said in Buckley v Tutty supra at 376-377, 378, as being whether the restraint is reasonably related to the objects of the League or the clubs and affords no more than adequate protection to the interests of the League and the clubs. The onus, of course, to make out such justification rests upon the League and the clubs. The High Court did not state the ultimate question as being whether, in some broader sense, the restraint was unreasonable. The restraint in such cases strikes at the essential interest of each player in being free to play with the club of his choice. Therefore (and this vindicates the interests of the players) it is void, unless shown to provide no more than adequate protection to the interests of the sporting bodies. That inquiry may, as in this present case, require the Court to have regard to the special character of the area in which the restraint operates, and thus "to the special interests of those concerned with the organisation of professional football" (an expression used by Wilberforce J. in Eastham v Newcastle United Football Club Ltd (1964) Ch 413 at 432). In so doing, the Court, perhaps inevitably, will have to consider aspects of the position of players because what is put forward as constituting those "special interests" of the organisers will include contentions as to why their dealings with players, pursuant to the combination, have to take, or should take, a particular form. But that is not to undertake a "balancing" exercise with a comparative evaluation of the weight of the interests of organisers and players. It is to test the justification attempted by those in adverse interest, in the litigation, to the players.

33. What was said in Buckley v Tutty, in the passage referred to at 376-377, followed a reference by the Court to another case of a combination, McEllistrim v Ballymacelligott Co-operative Agricultural and Dairy Society Ltd (1919) AC 548. There, (at 563), Lord Birkenhead L.C. propounded the test in terms of what was reasonably necessary for the protection of the co-operative society whose rules were challenged. Lord Finlay (at 572-573) and Lord Shaw of Dunfermline (at 589) spoke in like terMs

34. Similarly, in Eastham v Newcastle United Football Club Ltd supra Wilberforce J. put the issue as whether the restraints upon the players were no more than was reasonably necessary for the protection of the English national bodies, The Football Association, The Football League or other member clubs. His Lordship held (at 439) that the defendants "do not discharge the onus which rests on them of showing that the restraints are no more than is reasonable to protect their interests". Wilberforce J. (at 434) had referred to the personal circumstances of the players, but not, in my view, as part of any "balancing" process. An unsuccessful submission was made by the defendants that the "retention system" was no more than what was necessary to prevent richer clubs from buying all the best players. His Lordship accepted the submission in response that these results would be prevented by "natural checks", such as reluctance of players with children at school to move from one locality to another. In this respect, the judgment illustrates not a "balancing" process, but the assessment and determination of the justification attempted by the defendants.

35. I have referred to the passage in the judgment of the primary Judge (27 FCR at 568) in which his Honour concluded that the League and the clubs had shown on balance that the restraint imposed by the Internal Draft was not unreasonable, and stated that in so deciding, he had had regard to "the legitimate interests of the League and the clubs, on the one hand, and the players on the other". His Honour had proceeded on the footing that was a question of "balancing" those competing interests. In my view, that was impermissibly to lighten the burden carried by the respondents. What they had to show was that the restraint was reasonably related to the objects of the League or the clubs, and that the restraint afforded no more than adequate protection to the interests of the League and the clubs. Otherwise it would be void.

36. Where the restraint is imposed contractually in the sense I have described, the interests involved are of each party to the contract. The investigation of special circumstances said to justify the restraint is never conducted as if the Court had before it a representative action. Indeed, to treat the appellants as if each were party to a covenant he had agreed with the respondents and then to inquire as to the effect of that covenant upon the personal position of each appellant as covenantor would have been an impossible task.

37. Further, if the Court was required to take into the "balance" the particular effects upon the appellants of the restraint which is imposed by the present combination, one would expect personal circumstances to differ between them. The result could then be that at the suit of some players, the restraint survived challenge, whilst at the suit of others a declaration of invalidity was granted. Yet such relief would be expressed in general terMs An odd result, which suggests that the law is as I have indicated.

38. The fourth matter concerns the appeal provisions in the Rules. Before the primary Judge, and on appeal, the respondents relied, as a matter supporting the reasonableness of the restraint, upon the appeal rules whereby a player dissatisfied with the outcome of the Internal Draft might appeal. The so-called appeals procedure is provided for in Rules 59 - 64 of the Rules. The Appeals Board is obliged by Rule 61 to have regard to various matters including, but not limited to, unreasonable financial or other hardships caused to the player with reference to his age, marital status, the health and welfare of his family, his employment and possible loss of income, and his financial obligations. His Honour decided (27 FCR at 568) that these rules assisted in ameliorating the consequences to a player of a draft selection which might prove disadvantageous to him, and stated that the rules assisted him in reaching his ultimate conclusion in the case.

39. In my view, the existence of such a procedure in the Rules might have been relevant to an argument that, when the restrictions flowing from the operation of the Internal Draft provided for in Rules 55 - 58 were properly understood, there was no relevant restraint to which the common law doctrine applied. That would have been a difficult argument, bearing in mind the well-settled and fundamental proposition expressed long ago by James v-C. in Leather Cloth Co. v Lorsont [1859] EngR 686; (1869) LR 9 Eq 345 at 354 (a passage since approved by the House of Lords on at least two occasions) namely, that public policy requires that when a man has by skill or by any other means obtained something which he wants to sell, he should be at liberty to sell it in the most advantageous way in the market.

40. Be that as it may, the alleged amelioration upon the position of the players which is said to flow from the existence of the appeal procedure, in my opinion does not go to the central issue on this appeal, namely whether the restraint, to which the common law doctrine admittedly applies, is no more than the provision of adequate protection to the interests of the League or the clubs.

41. In Buckley v Tutty supra, unlike the present case, there had been a contention that the relevant rules did not operate as a restraint of trade. The High Court rejected that submission (at 373), then dealt with the further question as to whether the restraint of trade doctrine was limited to restraints imposed by contractual provisions (at 375), and then decided that there were no special circumstances justifying the restraint (at 377-378). Then, the High Court passed on, as it said, to refer briefly to some further matters mentioned by counsel for the unsuccessful appellants "although they do not affect the conclusion at which we have arrived". It was in that setting that there was a discussion of the inadequacies of the alleged mitigation in the severity of the rules by the appeal procedure. If it had been accepted by the appellants in Buckley v Tutty that the rules operated as a restraint of trade, it is difficult to see how there then would have been room for the argument that the apparent severity of the rules was relevantly mitigated by the existence of the appeal procedure; cf Watson v Prager (1991) 3 All ER 487 at 508.

42. Therefore, there is no need to decide a subsidiary issue which emerged at the hearing of this appeal, namely the extent to which, if at all, the proceedings of the Appeals Board would be amenable to the remedies of public law. The Board appears to be a body exclusively concerned with private rights and interests which do not have any statutory or public law source. The authorities as to the scope for public law remedies in such cases are divided and, at least in Australia, indecisive; see Heatley v Tasmanian Racing and Gaming Commission [1977] HCA 39; (1977) 137 CLR 487 at 511; Shepherd v S.A. Amateur Football League Inc. (1987) 44 SASR 579; Dixon v Australian Society of Accountants (1989) 95 FLR 231; R. v Panel on Take-overs and Mergers ex parte Datafin plc [1986] EWCA Civ 8; (1987) QB 815, and the paper "New Horizons In Administrative Law" delivered by Professor Sir William Wade to the 9th Commonwealth Law Conference, 1990, with comments by Sir Patrick Neill QC These materials are published as "9th Commonwealth Law Conference Papers", 1990, CCH New Zealand.

43. In returning to consider whether the present respondents have met the burden imposed upon them of showing the necessary special circumstances to support the restraint, it is necessary to consider the statement by Barwick C.J. in Howard F. Hudson Pty Ltd v Ronayne supra at 453, that the restraint of trade doctrine is to be applied to factual situations "with a broad and flexible rule of reason". In speaking as he did, the Chief Justice was referring to a passage in the speech of Lord Wilberforce in Esso Petroleum Co. Ltd v Harper's Garage (Stourport) Ltd supra at 331-332. After using the expression "rule of reason", his Lordship had continued:

"The use of this expression justifies re-statement of its classic

exposition by White C.J. in Standard Oil Co. of New Jersey v

United States [1910] USSC 113; (221 US 1 (1910)). Speaking of the statutory

words 'every contract in restraint of trade' (Sherman Act, 1890),

admittedly taken from the common law, almost contemporaneous with

Lord Macnaghten's formula and just as wide, he said (at 63):

'. . . as the acts which may come under the classes stated in the

first section and the restraint of trade to which that section

applies are not specifically enumerated or defined, it is obvious

that judgment must in every case be called into play in order to

determine whether a particular act is embraced within the

statutory classes, and whether if the act is within such classes

its nature or effect causes it to be a restraint of trade within

the intendment of the Act . . .'

And he goes on to say that to hold to the contrary would involve

either holding that the statute would be destructive of all right

to contract or agree or combine in any respect whatsoever, or

that, the 'light of reason' being excluded, enforcement of the

statute was impossible because of its uncertainty. The right

course was to leave it to be determined by the light of reason

whether any particular act or contract was within the

contemplation of the statute. One still finds much enlightenment

in these words."

44. Earlier, in The Bacchus Marsh Concentrated Milk Co. Ltd (In Liquidation) v Joseph Nathan and Co. Ltd supra at 441, in a passage later approved by Dixon J. in Peters American Delicacy Co. Ltd v Patricia's Chocolates and Candies Pty Ltd [1947] HCA 62; (1947) 77 CLR 574 at 591, Isaacs J. discussed the general principle upon the law in this area rests and said:

"That principle is that true freedom of trade is not to be

restricted, but that a provision which, taken by itself, would

amount to such restriction may, when considered in conjunction

with and as qualified by the surrounding circumstances, prove to

be not really a restriction but merely part of a larger

transaction which, regarded as a whole, does not restrict, but may

even assist, freedom of trade."

(Emphasis supplied).

The distinction, implicit in this passage, between restriction and permissible regulation, earlier had been drawn by Brandeis J.. In Chicago Board of Trade v United States [1918] USSC 41; 246 US 231 (1918) at 238, he said:

"(T)he legality of an agreement or regulation cannot be determined

by so simple a test, as whether it restrains competition. Every

agreement concerning trade, every regulation of trade, restrains.

To bind, to restrain, is of their very essence. The true test of

legality is whether the restraint imposed is such as merely

regulates and perhaps thereby promotes competition or whether it

is such as may suppress or even destroy competition."

45. However, in other respects, in the United States the common law (and statute) has developed differently. In United States v Addyston Pipe and Steel Co. (1898) 85 F 271, Taft C.J. rejected the proposition that competitors may lawfully agree to sell their goods at the same price as long as the price is reasonable. In so doing, he referred to a number of English cases, including the judgment of Lord Macnaghten in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd (1894) AC 535. Further, in the United States some species of restraint remain totally beyond the pale of the Rule of Reason: National Society of Professional Engineers v United States [1978] USSC 67; 435 US 679 (1978) at 687-692. For example, the American decisions have unequivocally foreclosed any interpretation of the Rule to permit an inquiry into the reasonableness of price fixing agreements, whilst, as Professors Areeda and Kaplow note with some incredulity, the English courts have even enforced such agreements: Areeda and Kaplow, "Antitrust Analysis", 4th Ed., 1988, pp 47-48, 254-256.

46. These concerns are apparent in the judgment of the majority of the Court of Appeals in Smith v Pro Football Inc. [1979] USCADC 35; 593 F 2d 1173 (1978). Counsel for the appellants referred us to this authority. When dealing with the player selection system operated by the National Football League (also called the "draft"), the majority said (at 1185-1186):

"The draft that has been challenged here is undeniably

anticompetitive both in its purpose and in its effect. The

defendants have conceded that the draft 'restricts competition

among the (National Football League) clubs for the services of

graduating college players' and, indeed, that the draft 'is

designed to limit competition' and 'to be a "purposive" restraint'

on the player-service market. The fact that the draft assertedly

was designed to promote the teams' playing-field equality rather

than to inflate their profit margins may prevent the draft's

purpose from being described, in subjective terms, as nefarious.

But this fact does not prevent its purpose from being described,

in objective terms, as anticompetitive, for suppressing

competition, is the telos, the very essence of the restraint.

The trial judge was likewise correct in finding that the draft was

significantly anticompetitive in its effect. The draft

inescapably forces each seller of football services to deal with

one, and only one buyer, robbing the seller, as in any

monopolistic market, of any real bargaining power. The draft, as

the District Court found, 'leaves no room whatever for competition

among the teams for the services of college players, and utterly

strips them of any measure of control over the marketing of their

talents'. The predictable effect of the draft, as the evidence

established and as the District Court found, was to lower the

salary levels of the best college players. There can be no doubt

that the effect of the draft as it existed in 1968 was to

'suppress or even destroy competition' in the market for players'

services.

(T)he draft, while it may heighten athletic competition and thus

improve the entertainment product offered to the public, does not

increase competition and the economic sense of encouraging others

to enter the market and to offer the product at lower cost."

It follows that notwithstanding references that have been made to the Rule of Reason in dealing with the common law in this country and England, the approach taken by the Court of Appeals in dealing with the National Football League draft cannot provide an immediate guide to resolution of the present appeal. In particular, the authorities binding us do not set so high a requirement of the respondents that they must show that the effect of the draft is actually to increase or assist competition. Rather, the immediate question is to identify the criteria by which, as a matter of law, the Court is to identify and assess the "interests" of the League and the clubs, and the "adequacy" of the protection given by the draft to those interests. What is it for which and what is it against which, protection is required?

47. A starting point is provided in the judgment of Stephen J. in the Pamag Case supra at 277-278:

"In the Esso Case the maintenance of a stable system of

distribution, the preservation of secure outlets, Esso's interest

in selling petrol at the covenantor's site, these were regarded as

interests justifying lawful protection by a restraining covenant.

In Peters American Delicacy Co. v Patricia's Chocolates and

Candies Pty Ltd the interests which might be protected were

variously described. Latham C.J. referred to 'the protection of

the plaintiff's trade'; Rich J. cited a passage from a judgment of

Wrottesley L.J. referring to the protection of the covenantee's

business, Dixon J. treated price maintenance of the supplier's

goods as not illegitimate, and Williams J. referred both to the

protection of the covenantee's business and to it being the

'goodwill of that business which they are entitled to take

reasonable measures to protect'. In Buckley v Tutty this Court

treated a football league and its member clubs as having a

legitimate object in ensuring that competing teams were strong and

well matched and, as ancillary to that, that there existed a

degree of stability in membership of teams, to be preserved by

restraints upon transfers of players from one club to another."

48. The primary Judge identified some three relevant legitimate interests of the League and the clubs with the protection of which the Internal Draft was concerned. First, there was the desirability of a strong and competitive Competition in which the clubs were as evenly matched as possible. Secondly, the clubs competing in the Competition should be financially viable. Thirdly, it was desirable (though one might have thought not necessarily compatible with the first objective) that individual clubs retain the players presently engaged by them, and that, in particular, rich clubs should not "plunder" the weaker clubs of their good players. As I understood it, the appellants did not challenge the legitimacy of these "interests" but disputed the conclusions reached concerning their significance in underpinning the Internal Draft.

49. The adequacy of the protection given those interests by the Internal Draft must be assessed in the light of the degree of danger, clear and present, remote or conjectural, which was presented to those interests when the Internal Draft was adopted in 1990. At the outset in these reasons, I referred to some of the salient points in the evidence which indicate that the League was then prospering and that its fortunes, and therefore those of the clubs to which it made substantial, and increasing, distributions, were improving from year to year. Any danger to the legitimate interests identified by the primary Judge appears not to have been immediate or significant. Of course, things might change, but they might change even more for the better.

50. As to the first objective, the trial Judge found that the draft system "should go some way" towards assisting in bringing about, and certainly in maintaining "equality of talent" (27 FCR at 562). The importance of this objective was explained in an earlier passage:

"Where teams are evenly matched, it is likely that public

support for the game reflected in attendances at games and

in the number of people watching matches televised, will be

maintained and increased. In consequence sponsorship will

become more readily available to clubs and the quantum of

funds provided by sponsors is likely to increase. This, in

turn, is likely to lead to higher remuneration to players,

to games being played in places where no games are currently

played, and to an increase in support for the game among

junior players."

On the other hand, the primary Judge recognised that the assessment of equality of talent in teams will always be very subjective, and that there was a question as to whether there was any way at all of determining objectively whether and when equality of playing talent exists. His Honour appears to have accepted evidence for the appellants that whilst in the past there had been a noticeable inequality of teams with the result that some teams had dominated the field in the Competition for a number of years while others had consistently been at the bottom end of the Competition, this inequality was no longer as noticeable, even before the introduction of the internal draft. Further, his Honour noted (27 FCR at 561) that Mr Quayle, the General Manager of the League, had conceded in evidence that the Competition, at least in the preceding two or three years, was one that was very competitive and successful. The rising level of operating profit by the League would support that view of matters.

51. The primary Judge concluded (27 FCR at 564) that the internal draft, on the balance of probabilities, did operate "to some degree" to assist in the furtherance of the legitimate object of the League and the clubs, to endeavour to improve and maintain competitiveness of teaMs But his Honour went on:

"However, if no other matter were to be taken into account

beyond that discussed to this point, I do not think that the

respondents would have satisfied the onus of showing that

the restraint of the internal draft, having regard to the

detriments it places upon the players, is no more than is

reasonably necessary."

52. Thus, it was the other two interests or objectives which were crucial to his Honour's conclusion upholding the restraint. To appreciate the finding as to financial stability, it is necessary first to refer to the introduction of the "salary cap".

53. The "salary cap" was introduced by the League in time for the 1990 Competition. The appellants made no attack upon its validity. The new system involves the determination by the League of an expenditure limit for each club within which all payments to players are to be made, subject to a 2 1/2% margin for error. Some clubs, given their financial position in 1990, were allocated a lower ceiling than the wealthier clubs; that is to say, the salary cap is fixed after taking into account the effect of expenditure upon players on the financial position of the clubs. The expenditure limits fixed by the League for 1990 ranged between $0.8m and $1.5m. The League's ultimate intention is to set a uniform salary cap for each club.

"In my opinion the internal draft may be justified by the

objective of financial stability (when taken together with

the matters hereafter discussed under the heading of

retention of players) given the situation now prevailing

that some clubs are less viable than others and where

unequal salary caps are factually justified. With greater

financial equality of clubs and an equal salary cap (both

objectives of the League) the result may well be different."

The primary Judge's conclusion as to the third interest or objective appears from the following passage (27 FCR at 566):

". . . I am satisfied that it is reasonable for the League to seek

to outlaw unrestricted mid-season offers that would lead to the

loss of the top playing talent of a club, particularly where

multiple poaching might otherwise occur. Judged against this

criterion, but subject to the earlier qualifications as to the

possibility that a different conclusion might follow if equal

salary caps and equal ability to purchase players up to the salary

cap existed, I am of the view that the restraint created by the

internal draft is reasonable in the legitimate interests of the

League."

55. It will be apparent that at least in the second of these passages there is an impermissible lightening of the burden carried by the respondents to show special circumstances justifying the restraint. What they had to show, and what, as it appears to me, was not found, was that the restraint on players flowing from the operation of the internal draft, afforded no more than adequate protection to the interests of the League and the district clubs.

56. The evidence bearing upon the justification by the objective of financial stability is analysed by Wilcox J. in his reasons for judgment, particularly with reference to the significance of the adoption in 1990 of the "salary cap". One of the witnesses, Mr Schwab, had occupied an important position in the affairs of the Victorian Football League throughout a five year period during which it operated a salary cap system without an internal draft. There was no evidence of any problems as to financial stability in a system which imposed salary caps without an internal draft. Further, the evidence of Mr Quayle, to which his Honour also refers, indicates that the success of the 1990 Competition, may be, at least in part, attributed to the introduction in 1990 of the salary cap.

57. Wilcox J. also deals in his judgment with the evidence bearing upon the other significant factor in the conclusion reached by the primary Judge, namely the prevention of mid-season agreements being reached between players and clubs. As Wilcox J. points out, whilst the practice of clubs approaching a player during the course of a season with a view to persuading him to play with that club in the following season appears to be quite common, the evidence does not indicate how frequently such approaches were successful, so that a club wishing to negotiate a renewal found that the player in question already had contracted to join a different club. In any event, perhaps the best way to keep a player with a club is to offer him a long term contract. I agree that the case put forward by the respondents on this issue falls well short of meeting the onus of supplying a justification for the restraint of trade imposed by the internal draft.

58. In my view, the primary Judge should have held that the attempted justification of the Internal Draft by propositions concerning competitive equality, financial viability and player retention did not succeed.

59. It may be that the respondents' fears could be met by rules which were more limited in their operation and which did not offend the restraint of trade doctrine. The primary Judge accepted, as a step assisting him in upholding the validity of the Internal Draft, an undertaking to bring forward the date of the first Internal Draft meeting (27 FCR at 559). But this does not remove the essential vice in the Internal Draft, its restraint upon trade. The respondents may now wish to reconsider the Rules and should not be hampered in a full review by the continuance of the undertaking.

60. The High Court emphasised in Buckley v Tutty supra at 337-338, it is not for the Court to advise in advance as to what restraints should be reasonable. Wilberforce J. spoke to the same effect in Eastham v Newcastle United Football Club Ltd, supra at 438. The function of the Court is to determine whether the rules of the Internal Draft in their present form impose a greater restraint than is necessary for the adequate protection of the interests of the League and its members.

61. The appeal should be allowed and the League released from the undertaking given to the Court and noted in the orders entered 9 April 1991. The restraint which is void is imposed by a complex interaction between Rules 42, 47, and 55-58, together with the definition provisions in Rule 37. There should be a declaration (with liberty to apply in relation to its form) that the Rules and Regulations of the 1st respondent, the League, are void as being in unreasonable restraint of trade, insofar as they oblige each club (together being the 2nd - 17th respondents) to treat as eligible to play for it in a match in the Competition a player (not being a player in any one or more of the Categories 1, 2, 3, 4, 5, 8 and 9 listed in Rule 47 (c), but being a player described in Rule 56 (a)) only if he has participated in the Internal Draft established by Rules 55-58.

62. The respondents should pay two-thirds of the appellants' costs of the appeal, on the basis that the respondents were successful on the trade practices point. The matter should be remitted to the primary Judge and there should be liberty to apply as regards costs of the proceedings at first instance.