South Sydney District Rugby League Football Club Ltd v News Limited - [1999] FCA 1710 - FCA 1999 case summary — Zoe

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South Sydney District Rugby League Football Club Ltd v News Limited

[1999] FCA 1710

Federal Court of Australia|1999-12-09|Before: Hely J

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Court

Federal Court of Australia

Decision date

1999-12-09

Before

Hely J

Source

Original judgment source is linked above.

Judgment (61 paragraphs)

[1]

Background 3 In October 1996 a Full Court of this Court dissolved injunctions, the effect of which had been to prevent companies within the News group from conducting a rival professional rugby league competition ("Super League") to that conducted by or on behalf of the ARL ("the ARL competition"). 4 For the first time in the 1997 football season there were two premier rugby league competitions conducted in Australia - the ARL competition with 12 clubs, and the Super League competition with 10 clubs. 5 There was a perception amongst many people, that the split competition was undesirable, and that it was causing substantial damage to the game of rugby league in Australia. There was a perceived public demand that "the war" between ARL and Super League should be brought to an end. The financial pressures on the participants were such as to call into question whether the Super League competition, and the ARL competition, could both survive.

[2]

Proposed ARL/Super League merger 6 On 19 December 1997 the ARL clubs, by a majority of 10:2 approved a protocol intended to bring about a merger between the ARL competition and the Super League competition. Souths and Balmain voted against the proposal. On the same day a media release was made which announced "in principle" agreement to a partnership between ARL and News which would put an end to the Super League dispute. This agreement, arrangement or understanding is referred to in the pleadings, and hereafter, as "the NRL partnership agreement". 7 The document which was placed before the ARL clubs on 19 December 1997 was styled "Proposed ARL/Super League Merger". It included a section headed "Competition Structure" which indicated that 20 teams would be licensed to play in 1998, 16 teams would be licensed to play in 1999 and 14 teams would be licensed to play in 2000. In a 14 team competition there would be no less than 6 teams and a maximum of 8 teams from Sydney. Conversely, there would be no less than 6 teams, and a maximum of 8 teams from regions outside Sydney. "All things being equal" licences are to be allocated on the following order of priority: - merged clubs; - regional clubs; - stand alone Sydney clubs. A section headed "Transparency" included the following: - all arrangements would be transparent; - Super League to disclose all interests which Super League or News has in any of the Super League clubs. A licence entitles the licensee to an annual grant of $2 million.

[4]

The 1998 competition 12 The inaugural NRL competition in 1998 involved 20 teams. Of those teams, 11 were ARL clubs and 8 were Super League clubs. The 20th was a new club, Melbourne. The only club which participated in the 1997 ARL competition, which did not participate in the NRL competition, was the South Queensland Crushers. Two Super League clubs from its 1997 competition did not participate in the NRL competition for 1998, the Hunter Mariners and the Perth Reds. 13 On 6 March 1998 ARL forwarded a form of franchise agreement to Souths which Souths did not sign. On 11 March 1998 ARL forwarded a letter agreement to Souths, which at least for the time being, was intended to take the place of the franchise agreement previously submitted. That letter was expressed to confirm the club's agreement to a number of points, including participation in the 1998 NRL competition. ARL in turn confirmed that if a club is solvent and abides by the rules of NRL, the club will be offered participation in the 1999 season. Clause 6 of the points of agreement confirmed the club's agreement to the NRL competition having no more than 14 participating clubs in 2000. 14 The first round of the competition was held on 13 March 1998 and it consisted of a game between Souths and Auckland, held in Auckland. 15 On 13 March 1998 ARL forwarded a letter to Souths which conveyed that all clubs should execute the letter of 11 March. A schedule attached to that letter included the following: "Number of participating Clubs in 2000 - it was agreed on 19 December 1997 that the competition structure in 2000 would comprise no more than 14 participating Clubs. It is not possible for the Clubs to unwind this commitment which is now a fundamental term of the merger agreement with News." 16 On 23 March 1998 Souths wrote to the ARL. The letter set out the bases on which Souths was prepared to sign the letter of 11 March. One such basis was that Souths reserved the right to challenge any aspects of the rules of the NRL (which had not then been promulgated) particularly in relation to Souths' rights to participate in the NRL competition from the year 2000 onwards. The letter concluded: "We are signing the letter with some reluctance but in the spirit of getting on with what is in the best interests of the game of Rugby League and to play our part in making the 1998 season a success." The amended statement of claim pleads that on or about 24 March 1998 Souths entered into a contract with the NRL partners to participate in the NRL competition in 1998 and subsequent years ("the Souths Contract"). 17 On 24 March 1998 ARL wrote to Souths. The letter included the following: "Souths have been asked to agree to the NRL competition having no more than 14 participating clubs in the year 2000. However, Souths have not relinquished any rights to challenge the make up of the 14 team competition in the year 2000 if it is established that any decision made in relation to the 14 team competition is made improperly or illegally." 18 On 25 March 1998 the fourth respondent was incorporated. The fourth respondent is the management company which Cl 2.4 of the MOU envisaged would be established to conduct the NRL competition as an independent contractor. 19 On 28 April 1998 NRL forwarded a memorandum to the clubs attaching a timetable in relation to the NRL competition structure documentation. It included a statement that all clubs would be dealt with equally and in a consistent manner. The competition structure documentation was to include the criteria for admission to the competition in the year 2000. 20 On 8 May 1998 NRL forwarded a document styled "Draft Admission Criteria for the National Rugby League Competition" to the clubs. The section of the document headed "Aims" was as follows: "1. Create and maintain a viable national competition. 2. To set and apply criteria for inclusion in the competition in a fair and reasonable manner."

[5]

The merger agreement 21 On 14 May 1998 a document styled "Merger Agreement" was entered into between the ARL, NSWRL, Super League, NRLI and News. It was expressed to supersede the Memorandum of Understanding. Recital B to that document provides as follows: "The Parties wish to merge the ARL Competition and the Super League Competition, on the terms set out in this Agreement, so that there is one premier rugby league competition in Australia, called the NRL Competition, on and from the 1998 rugby league playing season in Australia." Clause 2 of the merger agreement provides: "The objectives of the Parties are to implement the Merger so that: (a) public interest and support for the game of rugby league is maximised; (b) the viability and sustainability of the game of rugby league is protected; and (c) sponsors and media companies obtain access to an enhanced sports entertainment product. 22 Clause 7 of the merger agreement addresses the competition structure. Clause 7.5 provides that no more than 14 teams will participate in the 2000 NRL competition. Clause 7.12 provides that a franchise will entitle each franchisee to an annual grant of $2 million from NRL. 23 Also on 14 May 1998 a document styled "NRL Services Agreement" was entered into between ARL, NRLI and NRL by virtue of which ARL and NRLI, being the members of the NRL partnership, appointed NRL to provide certain services, including conducting the NRL competition, in accordance with the business plan. Clause 3.3 of that agreement obliges NRL not to grant any more than 14 franchises in 2000 or in any year thereafter without the approval of the NRL partnership, and to comply with cl 7 of the merger agreement unless otherwise directed by the partners. 24 On 17 June 1998 Souths' Board sent a document styled "NRL Draft Criteria Document" to NRL. It commented upon the draft admission criteria which NRL had circulated on 8 May 1998. That commentary on the draft criteria was without prejudice to Souths' rights to pursue relief in the courts as: "The Club has made its position abundantly clear it will if necessary seek relief in the courts to prevent its exclusion from and future competition conducted by the National Rugby League Ltd. The Club made its position clear on the 19th December 1997 and at various times thereafter."

[13]

Interlocutory relief 34 There was a consensus between the parties' legal representatives that it was impractical for a final hearing of this dispute to occur within a time frame which would permit Souths, if successful, to gear-up for the competition scheduled to commence on 5 February 2000. Accordingly, interlocutory relief is sought on the basis that a final hearing will not be held until some time next year, and possibly during the football season. 35 Whilst the interlocutory relief sought is negative in form, it was accepted that as a matter of substance, the relief sought is in the nature of an interlocutory mandatory injunction. It was also accepted that the principles governing the grant of mandatory interlocutory relief are those set out in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 502-504 and most recently restated by Sackville J in Australian Rugby Union Ltd v Hospitality Group Pty Ltd [1999] FCA 1136 [30] [31]. 36 The strength of the case shown is a material matter to take into account on the balance of convenience: OD Transport Pty Ltd v The Western Australian Government Railways Commission (1987) ATPR ¶40-761 at 48,239; Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729, 736-737. Regard should be had both to the strength of the claim and of the defence. The strength of the case shown is of particular importance in relation to the claim that the 14 team term is an exclusionary provision, both because of the surrounding circumstances (to which I shall return) and because the central issues between the parties are, for the most part, questions of law involving the proper construction and application of the Act, rather than factual issues requiring resolution at a trial. 37 The interlocutory relief sought was reformulated in the course of submissions as follows: - each of respondents 1 - 4 be restrained from doing any act or thing that will have the effect of excluding the applicant and its team from the year 2000 competition;

[17]

The 14 team term - surrounding circumstances 38 Because of the public interest involved, relief under s 80 of the Act is less likely to be withheld on the ground of laches and acquiescence than would an equity court in proceedings involving only individual interests: World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181, 190, 196, 203-204. 39 However, Souths has been aware of the 14 team term since 19 December 1997. It knew that the term was regarded as "a fundamental term of the merger agreement with News". There may be some room for debate as to whether, in the Souths/ARL correspondence of March 1998 referred to in [16] and [17] above, Souths accepted the principle of a 14 team competition, and only reserved the right to challenge the selection criteria when announced. However, Mr Piggins said in evidence: "In March 1998 you were prepared to accept the 14 team competition in principle but you reserved the right to challenge the application of the criteria, didn't you? --- That's correct. You did that after taking legal advice? --- Correct." And on 14 April 1998 Souths (Board of Directors) expressly resolved to accept the position as stated in ARL's letter of 24 March 1998. 40 Since that time: - NRL reached agreement at the end of 1998 with two clubs, Gold Coast and Adelaide, that they not participate in the NRL competition after 1998, and paid $2.5 million to each. - St George and Illawarra merged with the approval of NRL on 10 November 1998 and NRL committed to pay the joint venture incentive funding. - Wests and Balmain merged with the approval of NRL in late July 1999. NRL committed to pay incentive funding. - On 27 October 1999 NRL approved a joint venture of the Manly and Norths clubs. NRL committed to pay incentive merger funding. 41 The total amount expended or committed by NRL by way of redundancy or merger incentive grants is: - $15 million ($5 million each to three joint venture companies) as outright grants. - $3 million by way of non-commercial loans ($1 million to each joint venture company). - $5 million for the orderly closure of Gold Coast and Adelaide. 42 Although NRL made the arrangements referred to in [40] and [41] in the absence of a legal challenge to the 14 team term from Souths, the probabilities are that some such arrangements would have been made in any event: see Mr Whittaker T p 267/20-268/5. Whether they would have been as extensive is speculation. 43 Souths participated in the criteria process, the sole purpose of which was to identify the 14 teams to participate in 2000, and communicated with other clubs about the possibility of merger. Specifically, Souths: - commented to NRL on the draft criteria on 17 June 1998 (see [24] above); - wrote to St George, Sydney City and Balmain on 30 July 1998 to explore the possibility of mergers; - wrote to NRL on 30 July 1998 seeking clarification of the incentives offered to clubs which undertook mergers; - submitted a five year business plan to NRL on 31 July 1999; - corresponded with and provided information to NRL as part of the criteria process. 44 On 15 October 1999 the remaining 9 teams for participation in year 2000 were announced. On that date the 9 clubs were sent Club Agreements which had been already signed by the NRL under cover of a letter addressed to each Chief Executive. These Club Agreements were returned signed by the clubs between 17 October 1999 and 15 November 1999. All were received, except Penrith's, by the morning of 12 November 1999. On that morning Penrith advised NRL that it had signed the Club Agreement and would deliver it to NRL on the following Monday. On 15 November 1999 a signed undated agreement was delivered to NRL, which was dated by an NRL official that day.

[22]

Were the ARL/News competitive with each other? 47 Mr Gee QC, for Souths, submits that ARL and News were in competition with each other, or, but for the arrangements, would be likely to have been in competition with each other at the relevant dates, for the supply and acquisition of the services. That follows from the admitted fact of competition between ARL and News in relation to the supply and acquisition of those services up to 19 December 1997. It is not necessary to enquire as to the likely position in year 2000. 48 Mr Meagher SC, for News, submits that the services to which the 14 team term relates are the supply and acquisition of the services in and after the year 2000. Thus it is necessary for Souths to show that ARL and News were at the relevant dates, or but for the provision of some contract or arrangement, would be likely to be, in competition with each other in relation to the supply and acquisition of the services in and after year 2000. It is not established on any arguable basis that News and ARL were likely to be in competition in respect of those services in 2000. 49 It is not shown that ARL and News were, at the relevant dates, in competition with each other in relation to the supply and acquisition of the services in the year 2000. Whether, but for the arrangements, ARL and News would be likely to be in competition with each other in relation to the supply and acquisition of the services in and after year 2000 is a question of fact. They would be "likely" to be competitors if there would be a real chance or possibility of their being in competition: News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410, 564-565. This is not a stringent test. 50 Mr Whittaker was formerly the chief executive of NRL. It was his view in October 1997 that "there was no way that two premier professional rugby league competitions could survive". He then believed that "it was most unlikely that the Super League competition and the ARL competition could both survive and be running in the year 2000". In a similar vein, Mr Frykberg, formerly the executive director of sport for News, said: "I did not believe that Super League was sustainable as an independent rugby league competition in the medium to long term." In cross-examination, Mr Frykberg stated that both the ARL and Super League competitions in 1997 were "financially disastrous". 51 Thus if the services are to be characterised in the manner for which Mr Meagher SC contends, a real factual issue will arise as to whether, but for the arrangements, News and ARL would be likely to be in competition in relation to the acquisition and supply of the services in 2000, or whether one or more of them would have retired from the field. 52 However, as noted above, Souths need only demonstrate that there is a real chance or possibility of ARL and News being competitors. Moreover, for present purposes, this need only be shown on a prima facie basis. Exploration of an issue of this type at an interlocutory hearing is impractical, if only because it might require an examination of the dynamics of one or more markets, and the financial strengths and intentions of the participants. 53 For the purposes of the present application, there is a serious question to be tried as to whether the arrangements were made between persons who are competitive with each other in terms of s 4D(1)(a) and (2), even if Mr Meagher's characterisation of the services is to be preferred to that advanced by Mr Gee. It is therefore unnecessary for me to decide between them.

[23]

[s 4D(1)(b)] 54 There are three parts to this requirement. Relevantly the 14 team term must have the purpose of: - preventing, restricting or limiting the supply or acquisition of services; - to or from particular persons or classes of persons; - by all or any of the parties to their arrangements, or their related companies. 55 A provision is deemed to have the relevant purpose if the provision was included in the arrangements for that purpose, or for purposes that include that purpose. The purpose: - may be one of several purposes (s 4F(1)(a)(i)); - must be a substantial purpose (s 4F(1)(a)(ii)); and - is the subjective purpose of the parties, but this does not exclude a consideration of the circumstances surrounding the reaching of the understanding. 56 Souths did not call any direct evidence of the subjective purposes of the parties to the arrangements. They were negotiated between Mr Frykberg on behalf of News, and Mr Whittaker, on behalf of ARL. Mr Frykberg was not an officeholder in News/NRLI, but either he was the relevant mind of News for the purpose of the negotiations, or at least there is no warrant for an inference that the purposes of News/NRLI in entering into the arrangements were any different from the purposes that Mr Frykberg deposes to. 57 In the 1997 season, there had been 10 teams in the Super League competition and 12 teams in the competition conducted by ARL. The object of the arrangements was to bring about a merger between the two competitions so as to produce a competition of a consistently high standard, and one in which the competitors would be financially viable over the longer term. It was necessary to reach agreement as to the number of teams to participate in the competition. The number of clubs had to be reduced from 22 to a sustainable level. The number 14 was a compromise arrived at between the competing contentions of 12 teams on the News side and 16 teams on the ARL side. An important consideration (but not a major consideration so far as Mr Whittaker was concerned) is that with 14 teams, a full home and away competition could be conducted. It was the Sydney clubs which were most likely to be affected by the reduction in the size of the competition. 58 The reduction in the number of teams participating in the competition was to be phased in over two years, and financial incentives were offered to encourage the merger of existing clubs.

[25]

A purpose of preventing the supply of competition organising services to, or the acquisition of team services from, particular persons or classes of persons? 60 These are opposite sides of the same coin. 61 The case sought to be made by ASC pars 20(a) and 21(a) is misconceived. It alleges a purpose of restricting or limiting the supply of competition organising services to, and the acquisition of team services from, clubs which had participated in the 1997 competitions and who had not withdrawn from those competitions prior to 19 December 1997. But there was to be no restriction or limitation (in the sense of a partial supply or acquisition) of services to the 1997 clubs. Some would be fully supplied, and would fully supply NRL, and others not at all. Further, the pleaded case does not accommodate the factual situation, inasmuch as Melbourne Storm, and three new clubs coming into existence as a result of mergers, are to participate in the year 2000 competition. 62 The case sought to be made by pars 20(b) and 21(b) cannot be so easily disposed of, particularly if verbal infelicities in the pleading are put to one side, as they should be, in the context of an application such as the present. 63 On the evidence as it stands, I would conclude that the 14 team term was included in the arrangement as a means of achieving the desired end, namely a merged competition having a consistently high standard, in which the competing teams would be financially viable. On the evidence as it stands, I would also conclude that the objective was not to keep Souths, or any other particular club, out of the competition. Rather, financial incentives were to be made available to teams which entered into mergers or joint ventures. Souths did not foreshadow any case inconsistent with these tentative conclusions. 64 It is obvious that the effect of the 14 team term is to prevent the supply of competition organising services to, or the acquisition of team services from, clubs other than the 14 clubs to be selected to participate in the year 2000 competition. But the operation of s 4D is only enlivened if the provision was included in the arrangements for a proscribed purpose, or for purposes that include a proscribed purpose. 65 Mr Campbell QC, for News, submits that "purpose" is concerned with motivation and the reasons of the parties for introducing the provision: Dowling v Dalgety Australia Limited (1992) 34 FCR 109, 134 per Lockhart J. Having 14 teams is properly to be seen as the means by which the purpose of the agreement was achieved. News/ARL did not include the 14 team term in the arrangements for the purpose of excluding anyone from the competition. It was hoped that mergers would obviate the need to exclude anyone. Exclusion is an incidental and unwished for outcome, rather than a purpose for which the 14 team term was included in the arrangement. 66 I do not agree. One of the motivations behind the inclusion of the 14 team term in the arrangements was to restrict the supply and acquisition of the services to which the term relates to 14 clubs, in order to establish a viable and sustainable competition. This is not to confuse purpose with effect. It is merely an acknowledgment of the reality of the situation. The purpose of the 14 team term was not merely to achieve the desired "end", but to do so by particular means. For this reason it cannot be said that the only purpose of the provision is the establishment of a viable or sustainable competition. 67 But it does not necessarily follow from this conclusion that the 14 team term was included in the arrangements for the purpose of preventing the supply or acquisition of the services to which the term relates to or from particular persons or classes of persons. 68 Section 4D should not be construed as if it provided: "4D(1) A provision of a contract, arrangement or understanding ... shall be taken to be an exclusionary provision for the purposes of this Act if:- (a) ... and; (b) the provision has the purpose of preventing, restricting or limiting the supply or acquisition of goods or services [to particular persons or classes of persons] by all or any of the parties to the contract, arrangement or understanding ..." 69 The 14 team term is not confined in its focus to the clubs who were members of the 1997 competition. That this is so is illustrated by the position of the new entrant, Melbourne Storm, and of the merged clubs. 70 In pars 20(b)(ii) and 21(b)(ii) of ASC the excluded class is described as: "all rugby league clubs which were willing and able to participate in a top level rugby league competition other than the 14 clubs (including merged clubs as a single club) who would be selected to participate in the NRL competition for the year 2000."" 71 There is nothing particular about the excluded class, if the class is described in that way. It consists of any clubs which offer to supply or acquire the services in question for the year 2000 other than the 14 selected clubs. In my view, having regard to [68] above, that is not a particular class of persons. 72 However, pars 20(b)(i) and 21(b)(i) of ASC describes the excluded class as: "the clubs which participated in the 1997 ARL and Super League competitions and who had not withdrawn from those competitions before that date, other than the 14 clubs (including merged clubs as a single club), who would be selected to participate in the competition from the year 2000." 73 The 14 team term did not come into existence in a vacuum. The context was a desire to merge the ARL and Super League competitions, and a desire to reduce the number of participating clubs, particularly the Sydney clubs. Mr Whittaker (T p 263) said that a major consideration was getting the number of teams down to a sustainable level. Accordingly, it is at least reasonably arguable that a purpose of the provision was to prevent the supply/acquisition of services to or from the class of persons described in pars 20(b)(i) and 21(b)(i), and that this was a substantial purpose. 74 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 488 decides that a class may be a particular class even though at any one time the identity of all the members of the class might not readily be ascertainable. 75 The clubs which participated in the 1997 competitions are identifiable, and so are the clubs who have withdrawn prior to 19 December 1997. The 14 selected clubs are identifiable. A sufficiently identified class is to be carved out of a larger, sufficiently identified class. It must follow that the remaining class is itself sufficiently identified. The position is as shown in the following diagram. "A" represents the clubs which participated in the 1997 competitions and who had not withdrawn, "B" represents the 14 clubs to be selected.

[27]

Who is to supply or acquire the services? 78 The 14 team term will not be an exclusionary provision unless it has the purpose of preventing, restricting or limiting the supply or acquisition of services by a party to the arrangements or a related body corporate. 79 The parties to the NRL partnership agreement are ARL and News/Super League. That agreement envisaged a 50/50 partnership between Super League and ARL which would appoint a company, NRLC Co (itself owned 50/50), to operate the NRLC competition. NRLC Co was to grant licences to participate in the NRLC competition. Thus NRLC Co was envisaged as the supplier or acquirer of relevant services. 80 The parties to the MOU were ARL, NSWRL, News and Super League. That had a similar structure. Clause 2.4 provided that the partnership will contract with a management company (NRL Co) to conduct the NRL competition as an independent contractor. 81 The parties to the merger agreement were ARL, NSWRL, Super League, NRLI and News. By now, NRL had been incorporated, but it was not a party to the merger agreement. Nor, on the evidence before me, is it a related company of News or ARL. The NRL services agreement, which is an annexure to the merger agreement, provides for NRL to conduct the NRL competition and to contract with franchisees for participation in the NRL competition, as an independent contractor. Nothing in the agreement creates the relation of principal and agent between the partners and NRL. 82 Thus, from the inception of any understanding between ARL and News in relation to the conduct of NRL, up to and including the contractual documentation which gave legal effect to that understanding, the merger of the two competitions was structured on the basis that it would not be ARL/News or their related companies which would provide or acquire the relevant services, but an entity conceived as NRLC Co, and which became the fourth respondent. 83 Souths' case proceeds upon the basis that the services are supplied or acquired by ARL and News/NRLI via the partnership. That case is inconsistent with the provisions of cl 2.2 of the NRL services agreement and cl 5.1(a) of the club agreements. The club agreements record the terms on which the relevant services are supplied by NRL and acquired by NRL. Clause 5.1(a) provides: "The Club acknowledges and agrees: (a) the NRL Partnership has no liability to the Club under this Agreement or otherwise, and the Club agrees that NRL is not the agent of the NRL Partnership and does not have authority to make the NRL Partnership liable to the Club." 84 Of course, contractual stipulations purporting to negate a particular relationship will be ineffective to achieve the desired end, if the realities of the situation are otherwise. But there would need to be some evidence to this effect, and my attention was not directed to any. As matters currently stand, the prima facie position is that indicated by the documents. 85 Mr Gee QC submits that NRL is the creature of ARL/News, who constituted NRL on the basis that it would acquire and supply the relevant services on terms that it was obliged to conduct a 14 team competition in and after the year 2000, unless ARL/News agreed to the inclusion of a larger number of teams. 86 Section 4D(1)(b) applies to the supply or acquisition of services by the parties to an arrangement. By describes a level of participation in a process which can probably be expressed as through the agency or efficacy of. 87 But even if Mr Gee's description of NRL as "the creature of" ARL/News be accepted, s 4D operates within the confines of traditional doctrines of company law. The mere fact that ARL/News constituted NRL in the manner for which Mr Gee contends, and own its issued capital, does not mean that when services are acquired or supplied by NRL, they are acquired or supplied by those who constituted and own NRL. That remains so even though NRL may have been constituted for the purpose of acquiring and supplying the services in question. 88 However, (although Souths has not so far pleaded its case in this way) it is at least reasonably arguable that with the merger documentation, the agreement, arrangement or understanding which theretofore existed between News and ARL expanded so as to include NRL. The services agreement, which NRL executed, was itself an annexure to the merger agreement, and all documents were interdependent. 89 On that basis, it would not matter that the supply and acquisition is done by NRL, because it would be a party to the arrangement in question. However, once the matter is put in this way, an issue arises as to whether the giving effect to the 14 team term by NRL would amount to exclusive dealing.

[28]

Exclusive dealing 90 The traditional view is that s 45 does not apply to exclusive dealing arrangements (s 45(6)), as exclusive dealing is regulated by s 47. Nor does s 45 apply insofar as the contract provides for the acquisition of any assets of a person (s 45(7)), as acquisition of assets is regulated by s 50. Other provisions in the same contract might nevertheless infringe s 45. 91 Mr Campbell QC submits that ss 45(6) and (7) are provisions which are an exception or qualification to the definition of the grounds of a statutory liability, hence the onus of negativing them remains on Souths: Vines v Djordjevitch (1955) 91 CLR 512. It has not done so. Trade Practices Commission v Guests' Garage Pty Ltd (1976) 26 FLR 433 suggests that the onus lies upon the respondents to show that the operation of ss 45(6) and (7) is enlivened, rather than it being for Souths to negative the application of those provisions. However, for present purposes, nothing turns on the location of the onus of proof. 92 Mr Gee QC challenges what I have referred to as the traditional view of the operation of s 45(6). In his submission, the opening words of s 45(6) simply indicate that a breach of s 45 is not established merely because the contract contains a provision, the giving effect to which might constitute a breach of s 47. I do not agree. No sensible purpose would be achieved by construing the opening words in that way. The construction proposed produces a lack of harmony between the two parts of the section. The expression "by reason that" has a meaning equivalent to "if and insofar as". If the expression is read in that way, there is harmony between the two parts of the section, and the legislative intention of subjecting exclusive dealing to s 47 regulation, rather than regulation under s 45, is effectuated. 93 The issue, then, is whether the giving effect to the 14 team term would, but for the operation of s 47(10) [which introduces a competition test], be within s 47(4). Mr Meagher SC submits that the operation of s 47(4), as adapted to the case put by Souths, is as follows: "(4) A corporation (ARL and/or News) engages in the practice of exclusive dealing if the corporation - (a) acquires services (from NRL) (b) ... ... on condition that NRLwill not supply [competition organising services] (c) to particular persons or classes of persons (being the particular persons or classes alleged in ASC paras 20 and 21)." If the particular class of persons referred to in (c) is accepted as being sufficiently identified for the purposes of s 4D, it must also be sufficiently identified for the purposes of s 47(4). Accordingly, the acquisition by ARL/News of competition organising services from NRL on condition that those services will not be supplied to clubs other than the 14 clubs is conduct which, subject to s 47(10), falls within s 47(4). 94 The submission does not faithfully put Souths pleaded case, as that case proceeds upon the assumption that it is ARL/News which supplies competition services to the clubs. But the submission does faithfully reflect the documents, which, on the present state of the evidence, at least reflect the prima facie position. 95 The only response made by Mr Gee QC to this submission is that the exclusive dealing arrangement post dates the making of the proscribed agreements in December 1997 and February 1998. The 14 team term is to be found in the NRL partnership agreement and the MOU, but it was not until the merger agreement that NRL was introduced as the supplier/acquirer of services. 96 In my view, that is an inadequate response, because both the NRL partnership agreement and the MOU contained a provision, albeit in embryonic form, that NRL Co would be the acquirer/supplier of relevant services. Further, there is no warrant for a conclusion that anyone is intending to give effect to the NRL partnership agreement or the MOU, in relation to the year 2000 competition. If ARL/News are giving effect to anything (and there is a respectable view that they are not) it is the merger agreement. 97 However, there is or may be a question as to whether the 14 team term is both an element of the supply of competition organising services by NRL and the acquisition of team services by NRL from the clubs. If it is an element of the latter then it is by no means clear that s 47 would apply to the conduct described from that perspective. 98 But supply of competition organising services and acquisition of team services are opposite sides of the same coin. The conduct is the giving effect to the 14 team term by limiting the competition to 14 teams. It may be sufficient to attract s 45(6) if, viewed from one perspective (although not necessarily from all perspectives), that conduct would be within s 47. This aspect of the matter was not the subject of any submission, and I would not wish to decide it without the benefit of argument. 99 It is sufficient to say for present purposes that the interrelationship between s 45 and s 47 in a fact situation such as the present is or may be one of some complexity. In my view, there is a serious question to be tried as to whether the giving effect to the 14 team term would involve a contravention of s 45 of the Act. 100 Mr Campbell QC formulated an alternative basis on which it was submitted that the operation of s 47 was enlivened. However, even accepting his argument, it does not follow that the 14 team term is within s 47 just because other provisions of the arrangements, identified by Mr Campbell, may be. 101 I do not propose to deal in any detail with the argument based on s 45(7). That argument proposes that the 14 team term is so intimately bound up with the acquisition of assets that it is within the expression "in so far as the contract ... provides ... for the acquisition of any ... assets ...". As presently advised, I would not accept that argument.

[29]

The funding provision 102 Pars 26A - 26E of ASC allege that it is unlawful for effect to be given to those provisions of the arrangements which provide for the payment of an annual grant of $2 million to each of 14 clubs. It is submitted that those provisions had the purpose of preventing the supply of services (funding) to rugby league clubs willing and able to participate in the NRL competition other than the 14 clubs. 103 There are a number of problems with this argument in addition to those already discussed. It may be accepted that the arrangements provide for the payment by NRL of an annual fee to the 14 clubs selected to participate in the year 2000 competition. It may be an inevitable consequence, or necessary corollary, that NRL is not to be obliged to make an equivalent payment to other clubs. But it does not necessarily follow from this that the purpose of the funding provision is to prevent the supply of funding to other persons, let alone to a particular class of persons. 104 The suggestion that the funding provision has the purpose alleged represents an exaggeration or distortion of the factual situation. The purpose was to have a 14 team competition and to pay the selected clubs an annual grant of $2 million. It did not go beyond that. 105 The respondents submit that, assuming the funding provision to be an exclusionary provision and even assuming that NRL is inhibited by its assumed unlawful character, that might justify an injunction restraining NRL from giving effect to the provision by making the payments to the 14 clubs to which the funding provision relates. It would not justify a mandatory order to the making of equivalent payments to Souths. 106 Whilst I think that there is considerable force in this submission, I would not wish to foreclose the possibility, if an appropriate case were made out, of an order being made restraining payment to the 14 clubs unless accompanied by a corresponding payment to Souths. The party restrained could then decide whether to make no payments at all, or whether to make payments on a condition which would rob the provision of its exclusionary character. It is not necessary for me to reach a conclusion on this, as Souths does not seek an order prohibiting payment to the clubs. 107 In my view, Souths has not made out a seriously arguable case to the effect of that pleaded in ASC pars 26A - 26E. 108 Even though the funding provision itself may not be an exclusionary provision, if Souths were entitled to an order in terms of the order secondly referred to in [37] above, that may carry with it an entitlement to the funding which is part of the process of participation.

[30]

The contract claim - adoption of criteria 109 Paragraph 29 of ASC alleges that on about 24 March 1998 Souths entered into a contract with the NRL partners to participate in the NRL competition in 1998 and subsequent years. Paragraph 31 alleges a number of terms which are said to be implied into the contract with respect to the adoption and application of criteria for participation in the competition in the year 2000. In broad terms, the implied terms are that the criteria adopted would be fair and reasonable, and would be such that all clubs would be dealt with equally and consistently, and so as not to favour clubs in which News had a pecuniary interest. 110 Souths complains that the criteria adopted favoured the regional clubs and the merged clubs. That is so. However, the fact that the regional clubs and the merged clubs would receive differential treatment was apparent from 19 December 1997 onwards. This differential treatment was an integral part of the merger proposal from its inception. 111 Souths also complains that one of the criteria was profitability in 1998 and 1999. Revenue derived by the clubs from grants, including grants from Super League or News, were included in the clubs' revenues for the purpose of determining profit. One off payments made by Super League to the clubs to which it was contracted were also included. Large sums of money were paid to clubs such as Canterbury, Cronulla and Penrith in this regard. For example, Canterbury received a grant from News in excess of $7.4 million in 1998; Cronulla received a grant from News of $3.36 million in 1998. According to Mr Levy, Penrith received a grant of $4.5 million. In 1999 Penrith received a sum in the vicinity of $9 million as a payout of its Super League contract. 112 Mr Farish, the finance manager for NRL and a member of the selection committee, accepted that "the Super League clubs did a lot better on profitability than the ARL clubs." 113 The draft criteria forwarded to clubs on 8 May 1998 indicated the profitability based on the profit and loss accounts for 1998 and 1999 seasons was one of the criteria. Souths' response to the draft criteria document made no adverse comment on the inclusion of profitability, calculated on that basis, amongst the criteria. As earlier indicated, the admission criteria were published on 8 September 1998. There is no evidence of any complaint made by Souths, or for that matter, any other club, as to any unfairness in the formulation of the criteria. 114 There is, in my view, only a weak case for the implication into the agreement of March 1998 of the terms for which Souths contends. The agreement reached in March 1998 was for participation in the 1998 and, potentially, the 1999 season. The only stipulation in relation to the NRL year 2000 competition was that it would have no more than 14 participating clubs. The exchange of correspondence between Souths and ARL on 23 and 24 March 1998 (see [16]-[17] above) expressly excepted from the area of their agreement, any agreement in relation to the NRL rules (which had not then been promulgated) insofar as participation in the NRL competition in the year 2000 is concerned. The implied terms seek to cover matters which the parties, by their conduct, left for future discussion and consultation. Souths reservation, which ARL accepted, is inconsistent with an agreement to be bound by and have the benefit of any criteria when formulated. 115 Even if it be assumed that ARL/News was, on some basis other than that pleaded, under a duty to act fairly and in good faith in formulating the selection criteria for the year 2000 it does not necessarily follow that a breach of that duty is established by reason only of the fact that the criteria contained a profitability component based on 1998 and 1999 revenues in a context where the Super League clubs received more in grants than the ARL clubs. Mr Gee QC described the profitability criteria as "superficially fair", and asserted that one needed to be gifted with analytical powers in order to detect the bias in favour of the Super League clubs. 116 The contrary argument assumes that a duty to act fairly and in good faith necessarily requires that the historical performance of all clubs should be adjusted to eliminate the effects of "unfairness" or of all non recurring differences. I am not sure that this is so, and even if it were so, I have no material before me as to the impact of such a principle on the criteria as a whole. 117 The evidence before me does not enable me to make any assessment as to whether or not the selection criteria, considered as a whole, have been conceived and adopted fairly. One should not jump to a conclusion that there has been a failure to act fairly, when the publication of the criteria in 1998 is not shown to have provoked any complaint until the institution of these proceedings, more than a year later. Further, Souths participated in the criteria process in order to obtain the benefit of the process which it now seeks to characterise as inherently unfair.

[34]

Super League settlement 119 The Super League settlements involved large sums of money. According to one document they ranged between a cash figure of $4.98 million for North Queensland to $11.5 million for Cronulla, plus the write off of certain loans. As opposed to that, ARL provided its clubs with transitional funding of $3 million per club. 120 Souths (and apparently the other former ARL clubs) included the transitional funding as part of the operating profit for the relevant year, and the former Super League clubs included the Super League settlements in theirs. Souths now contends that both the transitional funding provided to some clubs by ARL, and the Super League settlement monies paid to other clubs, ought to have been excluded from the revenue figures. In other words, Souths contends that the proper basis of determining profit is different from that which it adopted itself at the time. 121 Note (f) to the selection criteria is as follows: "Profitability will be measured on the aggregate of profit and loss accounts for each Club for the 1998 and 1999 seasons as follows: (i) For 1998, the Profit and Loss Account prepared under current Australian Accounting Standards. (ii) For 1999, the forecast Profit and Loss Account (prepared under the principles of current Australian Accounting Standards) taking into account actual results to 31 August 1999 and the forecast to 31 October 1999. The estimate for the remaining two months must be agreed by NRL. (iii) Any revenue or expense item properly attributable to the football clubs, must be included in the Profit and Loss for this calculation irrespective of which entity it is recorded. NRL reserves the right to verify and challenge the validity of any amounts to be included (or excluded) in any of the revenue/cost items for this purpose. This extends to both the quantum and the source of the item. NRL shall have the discretion to obtain an independent opinion, at its cost. The final decision on the application of the Selection Criteria rests with NRL." The admission criteria document contains the following "important note": "NRL reserves the right to verify the validity or appropriateness of any information submitted to it as part of, or in connection with, the Admission Criteria. The final decision on the application of the criteria rests with NRL. NRL may obtain an independent opinion, at its cost, on any aspect of the information supplied as part of the Admission Criteria, or the application of the Admission Criteria." 122 Mr Hollington, a partner in the accountancy firm KPMG, swore an affidavit in which he said that the Super League settlements constitute abnormal items and "for this reason they should have been excluded from the profit and loss account" of the clubs which received them. He resiled from this position in cross-examination, and accepted that the amounts were properly included in the profit and loss account, albeit as an abnormal or extraordinary item. 123 Both Mr McClintock and Mr Farish, also chartered accountants, were of the opinion that abnormal and extraordinary items form part of the operating profit for the year. Ernst & Young, who were appointed to assist the admission criteria committee, reported to that committee that the Super League settlements had been properly accounted for. 124 Even assuming NRL was obliged to apply the selection criteria in a fair and reasonable manner, that would not justify a departure from, or a change to the criteria. It was not put to me that there was any lack of bona fides in the application of the criteria. 125 For this reason Souths has not satisfied me that it has a seriously arguable case in this regard.

[35]

Souths Juniors 126 Souths included in the "sponsorship and other income" section of the criteria $3,240,000 which it had received from Souths Juniors in 1998 ($1,500,000) and 1999 ($1,740,000). These items were disallowed by NRL. 127 The qualifying criteria contains a definition of "net sponsorship and other income". That definition also applies in respect of the selection criteria and states: "(ii) 'Net sponsorship and other income' should include: · Sponsorship Revenue; · Corporate Box Revenue; · Catering Revenue; · Signage Revenue; · Merchandising Revenue (direct sales and royalty income); · Revenue from functions; · Net Interest Income; · Prize Money Less · sponsorship servicing costs such as reserve seating costs, catering costs of corporate boxes, signage provided, tickets and airfares to away games, merchandise give-aways and club newsletters (magazines); · Catering expenses; · Merchandising costs of goods sold; · Costs of functions. NRL reserves the right to verify any of the amounts to be included in any of the revenue/cost items for the purposes of minimum or maximum net revenues. This extends to both the quantum and the source of the item. NRL shall have the discretion to obtain an independent opinion, at its own cost. The final decision on the application of the Qualifying Criteria rests with NRL. The maximum of $2.25 million allowed by News Ltd/ARL/Leagues Club funding is a total from all categories. None of this can be taken into account in determining either the Net Gate receipts or the Net Sponsorship and other income (unless proved to NRL that it is valid)." (emphasis added) 128 "Sponsorship revenue" is not defined. In the context it probably means revenue in return for the promotion by advertisement of a product or service of the sponsor. 129 Souths Juniors is a leagues club. In 1997 Souths Juniors offered "financial assistance" to Souths in the sum of $1.5 million for each of the years 1997, 1998 and 1999. That offer was in return for "control" of Souths football operations via an Operations Manager and Retention Committee and in return for various covenants. 130 On 3 March 1997 a "deed for financial assistance" was entered into between Souths and Souths Juniors. It provided for $1.5 million financial assistance in each of the years 1997, 1998 and 1999. The obligation on Souths Juniors to make those payments was expressed to cease on and from the happening of specified events, one of which was the merger of the ARL competition with any other competition. 131 In 1997 and 1998 the payments were recorded in Souths accounts as "Grants Received - South Sydney Juniors". A letter from Souths to Souths Juniors of 26 August 1997 referred to "the $1,500,000 donation". A letter from Souths to Souths Juniors of 18 June 1998 referred to "the matter of $1.5 M grant". 132 On 17 September 1999 the Admission Criteria Committee resolved that NRL should decide on the information presently before it that this funding was not sponsorship, but rather "Leagues Club funding", for reasons which were recorded. Souths was notified by letter dated 17 September 1999 of the proposed adjustment to its sponsorship and other income so as to leave the Souths Juniors funding out of account. NRL invited Souths to put forward a written submission. On 22 September 1999 Souths responded that "[i]t is the clear understanding of the Football Club and Souths Juniors that the $1.5 million is a sponsorship". 133 On 24 September 1999 the Admission Committee resolved that Souths be advised that the final opportunity for South Sydney to convince NRL that the Souths Juniors funding should be treated as sponsorship is when Ernst & Young visit South Sydney the following week. On 28 September 1999 Souths Juniors wrote to the NRL to confirm the nature of the past, present and future sponsorship arrangements with Souths. The letter stated: "Since 1997, South Sydney Juniors have been commercial sponsors of the South Sydney Football Club as a consequence of financial payments exchanged for visibility and hospitality based sponsorship benefits. To clarify the nature of this agreement, please find attached a listing of our 1999 Rights & Benefits which we have enjoyed over the past year." On no view of the matter was that an accurate statement of the arrangements which subsisted since 1997 if Mr Morris' evidence (see [135]) that there was a change in the basis of the relationship in 1998 is correct. 134 On 1 October 1999 the Committee resolved that it was still of the view that the funding from Souths Juniors was not sponsorship for the purposes of the selection criteria. Surprisingly, there was no communication of this decision to Souths. On 14 October 1999, in response to a letter from Souths stating that it was assumed that NRL agreed that the Souths Juniors were/are sponsors of the football club, Mr Whittaker informed Souths that it was for NRL to make a decision on that matter, and Souths should not make any assumption as to whether its submission had or had not been accepted by NRL. 135 Mr Morris gave evidence before me of a conversation which he had with Mr Piggins in connection with the 1998 season, to the effect that Souths Juniors wanted to become a jersey sponsor of Souths, but would be prepared to relinquish its position if Souths obtained another major jersey sponsor to enable Souths to obtain a better return. Souths Juniors logo was placed on Souths jerseys as worn in the 1998 season, but it relinquished that position in favour of Downtown Duty Free in 1999. Other sponsorship benefits were forthcoming in relation to the 1999 year. 136 Mr Meagher SC submits that I should not accept, or give little weight to Mr Morris' evidence, but it would be very unusual for adverse credibility findings to be made at this stage, and in an interlocutory hearing. Accordingly, I proceed on the basis that there is a factual contest as to whether or not the monies received from Souths Juniors are within the conception of "sponsorship". 137 However, it seems to me that it was for NRL to resolve that contest, and not for me to do so. That conclusion is reinforced by the words which I have emphasised in the definition of "net sponsorship and other income" referred to in [127] above. NRL had to address the correct question. It may have been under an obligation to act fairly in its consideration of the question. It may have been under an obligation to afford Souths the opportunity of being heard on the issue. NRL did all of these things. And there was material before it which was capable of leading to the conclusion to which it came: cf Edwards v The Hunter Valley Co-Op Dairy Co Ltd (1992) 7 ANZ Insurance Cases ¶61-113. The evidence of Mr Morris as to a change in the basis of the relationship in 1998 was never put before NRL. 138 Accordingly, I am not satisfied that Souths has a seriously arguable case in this regard.

[36]

Souths' financial position 139 On 25 August 1998 Ernst & Young conducted an independent review of Souths' financial position. Their report included the following: "The key issue is that Souths' financial position is fragile and it does not currently generate sufficient income to maintain a successful football team." A figure of $8 million per annum was said to be a reasonable minimum target to field a competitive team. 140 For the year ended 31 October 1998 Souths sustained an operating loss of $114,669, after bringing to account grants of $1.5 million from ARL/NSWRL/Optus, $2 million from NRL and $1.5 million from Souths Juniors. 141 On 13 October 1998 Souths projected a deficit of $1.8 million in year 2000. By 8 December 1998 this had become a projected $2.7 million deficit. 142 On 25 September 1999 Souths forwarded a forecast profit and loss account to NRL for the year ended 31 October 1999. There was a projected loss for the year of $433,665 taking into account grants received of $3,498,000. [The Souths Juniors grant was included within marketing income.] The September management accounts forecast a loss of $1,497,392 for year ended 31 October 1999. 143 On 30 September 1999 KPMG advised NRL that based on the five year business plan ("the millennium plan") and forecast balance sheet to 31 October 1999, "we believe the club will be able to pay its debts as and when they become due and payable". 144 On 1 October 1999 NRL advised Souths that it met the basic criteria. One of the basic criteria (A.3) is solvency. In reaching its decision on solvency the assessment committee assumed in favour of Souths that the $1 million of outstanding transitional funding the subject of the Supreme Court proceedings could be included as a current receivable. In reaching its decision the committee did not have access to the KPMG solvency review, or to certain other information. 145 On 20 October 1999 KPMG undertook a solvency review of Souths, upon the assumption that it did not participate in the year 2000 competition. That review indicated that at book values there was a surplus of current assets over current liabilities in an amount of $908,558. If the comparison is made on the basis of realisable values, the surplus shrinks to $42,452. That assumes that a sum of $647,307 which has been owing by Souths Leagues Club to Souths since 1995 is both current, and realisable at full value. That is at least a questionable assumption. The only assets which Souths then had which were not included in these calculations are plant and equipment valued in the order of $140,000, and a claim against ARL for $1 million (being the balance of the grant for 1999) which is currently the subject of litigation in the Supreme Court of New South Wales. 146 The report projected a cash deficiency of $807,296 at 30 June 2000. The conclusions included the following: "Unless action is taken to resolve the expected cash flow shortfall which is likely to materialise during November 1999 (based on existing liabilities and expected delays in the recovery of debt owing by SSLC and no further funding from the ARL) the Club may at some time in the near future become insolvent ..." 147 On 22 October 1999 Complete Marketing & Management, which was responsible for the management of the club in the months of September and October 1999, expressed the view that the KPMG solvency report was unduly favourable, and that the club "is now insolvent". 148 A Souths internal document prepared by Mr Punter on 15 November 1999 forecasts a cash deficiency of $52,806.00 as at 31 December 1999. Management accounts have not been prepared for the year ended 31 October 1999, contrary to the practice in past years. 149 Mr Punter, the financial controller of Souths, has prepared a balance sheet for Souths as at 31 October 1999. That shows a surplus of assets over liabilities of $1,357,956 upon the assumption: - that $1,000,000, the subject of the Supreme Court proceedings is a receivable;

[44]

Souths' ability to field a team 156 This is a difficult matter to assess. Souths does not now have a trained and prepared side, with the infrastructure in place to support it. The issue is whether this can be put in place in time for the year 2000 competition. There is evidence from Messrs Coleman and Gould that if an injunction were granted by early December, Souths would be able to field a competitive team in 2000. However, Souths has only four players contracted to it, but some others have entered into conditional arrangements. When Mr Coleman swore his affidavit of 24 November he said that Souths had a squad of 20 players in training of whom 12 are of first grade standard. 157 Mr Gould said at T p 178: "I mean you would have to concede that Souths are in a difficult position. They have given the other clubs a lot of start in this regard but that doesn't make the situation impossible. ... ... 2000 could be a stepping stone to bigger things provided they get the confidence of knowing they're in the competition in the long term." Such confidence would not be generated by the grant of interlocutory relief. 158 Souths does not presently have sufficient administrative or coaching staff players. It has only two or three full-time employees. It has a coach, but currently has no other coaching staff. Mr Carr's opinion is that Souths will be uncompetitive in 2000 and are likely to finish last. Mr Gould said that it was a bold statement to predict that a team would almost certainly finish last: "I would appreciate that Souths are in a difficult position at this point in time but given the time between now and the start of next season I can see an opportunity for them to surpass those thoughts of Mr Carr." 159 Souths has been in the competition since 1908, and it is a club with a proud history. It might be able to overcome the difficulties which it faces in putting together and maintaining a competitive team for the year 2000. One can project that as a possibility, but it is not a projection which, on the evidence, can be made with any high degree of confidence. The position is simply uncertain.

[47]

The clubs 171 If there are 15 teams in the NRL competition, the only practicable method of running the competition is by way of a 26 week, 24 match competition where each team plays each other once and 10 of the other 14 teams twice. There would be two byes per team in the 26 weeks. Each club would play one less home game than in the draw published for the 14 team competition. 172 Each club will receive less revenue than it otherwise would have made (and which it has budgeted for) on the basis of a draw containing 13 home games. Gate receipts for home games vary from about $22,000 to $262,000 per club (depending on the quality of the opposition). The evidence indicates a likely loss in gate takings for year 2000 for all clubs of between about $650,000 and $1.4 million. There may also be some loss in sponsorship income. It was not practicable in the time available for all club witnesses to be cross-examined. Mr Johnston, of St George/Illawarra, was cross-examined. This cross-examination called into question the loss of sponsorship income, and made it plain that the financial loss from losing a home game was closely tied to the identity of the team which would have been played in the lost game. The effect of this cross-examination should be borne in mind when looking at the raw figures put forward by the clubs. Nonetheless I am satisfied that there is a real risk of substantial financial loss by the 14 clubs (and possibly by at least some of the players) if Souths is compulsorily admitted as a participant in the year 2000 competition, as opposed to the competition being conducted on the basis proposed by NRL. 173 Clubs which have entered into joint ventures did so on the basis that the competition would be confined to 14 teams. In forming the Wests/Tigers joint venture, both Western Suburbs and Balmain, as foundation clubs, sacrificed their respective traditions and histories. The formation of joint ventures involved significant financial expenditure, as well as non financial concerns. 174 There is some evidence that the income of affiliated leagues clubs would be diminished as a result of the loss of a home game.

[48]

Assessment 175 The practical realities of the situation are such that it cannot be predicated with any satisfactory degree of certainty that Souths could participate throughout the year 2000 competition without the grant of $2 million from NRL. If a mandatory order were made for Souths participation in the competition, NRL would have little practical choice but to provide Souths with the same funding as it provides to the other participants in the competition in order to protect the integrity of its year 2000 competition. Souths seeks an order to that effect. The evidence is that NRL would not derive any financial benefit from this payment, and I am not satisfied that NRL would be able to obtain its repayment by means of the undertaking as to damages in the event that Souths ultimately fails in its claim. It would be impracticable to make an order for Souths participation in the year 2000 without it being entitled to receive the same grants as other clubs. 176 The respondent clubs will suffer loss, as will other persons, if Souths is admitted to the competition for the year 2000 season, but fails in its claim for final relief. Again, I am not satisfied that Souths' financial position is such that it is good for that loss. Souths' financial position, and its ability to perform its undertaking as to damages has always been an issue in these proceedings, yet there has been no offer by Souths, or its supporters, to provide security for that undertaking. 177 The merger of the competitions was agreed to in December 1997 upon the basis that the merged competition would reduce to 14 teams by 2000. In the meantime mergers have taken place in the expectation that this would occur. Souths has stood by whilst all this occurred, no doubt because it was hopeful that it would be included in the 14 teams. It was only when it was disappointed in that expectation that it instituted proceedings, and then only after a delay of about a month, which had the effect of making it practically impossible to have a final hearing. 178 The authorities establish that mandatory interlocutory relief is more likely to be given if its effect is to compel the respondent to revert to a course of conduct pursued before the events which provoked the litigation. I do not think that it can be said in any meaningful sense that the "status quo" is that Souths is a participant in the year 2000 competition. The grant of an injunction in relation to Souths' participation in the year 2000 competition would be to go beyond compelling the respondents to revert to a course of conduct pursued before the decision of 15 October 1999. Souths seeks, by means of a mandatory interlocutory order of the Court, to be put into a position which it has not previously occupied and to do so on the basis of a case that cannot be characterised as strong, and in circumstances where Souths' financial position is such that I cannot be satisfied that it will be able to compensate other parties and persons for loss which they will sustain if interlocutory relief is granted, but Souths ultimately fails in its claim. 179 It may be said that Souths and NRL declared their respective positions in December 1997. Souths then threatened legal action if it was excluded from the 2000 competition, but NRL proceeded to implement the merger notwithstanding that threat. But to look at the matter in that way is to pay insufficient regard to the position of the other clubs which are not involved in that standoff. Nor is the declaration of a position an acceptable substitute for the timely institution of proceedings. 180 In my view, even making full allowance for the public interest in the observance of the Act, the matters to which I have referred are such that the balance of convenience is heavily against the grant of the interlocutory relief sought no matter what sympathy one may feel for Souths by reason of its exclusion from a competition of which it is a foundation member and in which it has participated for so many years. For that reason the notice of motion is dismissed. I certify that the preceding one hundred and eighty (180) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.