Stadium Australia Management Limited v Sodexho Venues

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

50004/02 STADIUM AUSTRALIA MANAGEMENT LIMITED v SODEXHO VENUES (AUSTRALIA) PTY LTD JUDGMENT 1 HIS HONOUR: This is an appeal from an award made under the Commercial Arbitration Act 1984 by the Honourable Gordon Samuels AC CVO QC on 4 January 2002. 2 The plaintiff, Stadium Australia Management Limited, ("SAM") is the manager of Telstra Stadium (formerly known as Stadium Australia) ("the Stadium"). The defendant, Sodexho Venues (Australia) Pty Limited (formerly known as "Gardner Merchant (Venues) Australia Pty Limited) ("Sodexho") is a catering company. Sodexho entered into a deed dated 23 September 1996 with SAM for a term of ten years, with options to extend for two further ten year terms, to provide catering at the Stadium. Because of the level of trading which Sodexho has experienced, the parties are in dispute as to the obligations of Sodexho to pay a minimum Catering Rights Fee. The parties took the matter to arbitration before Mr Samuels, who determined the matter in favour of Sodexho. 3 SAM sought the leave of this Court to appeal the award. Leave was granted by Bergin J on 23 May 2002. Her Honour found that cl 5.4 of the deed, which was the source of the dispute, was ambiguous. This finding was contrary to the view expressed by the arbitrator. Accordingly, her Honour found there was an error of law on the face of the award sufficient to found an appeal. However, she expressed no opinion in relation to the meaning of the clause. Some background matters 4 As I have indicated, the agreement between the parties was expressed in a deed which is lengthy. Only a confined number of its provisions are relevant to the current dispute. However, it is necessary to understand a little of the context in which the agreement was made. 5 Negotiations for the catering arrangements at the Stadium took place in 1996, before the Stadium had been built. The negotiations were conducted through a tender process during which SAM published various documents including projected attendance figures which were ultimately incorporated into the agreement. Those figures were as follows: EVENT SCHEDULE EVENT DAYS PER ANNUM ATTENDANCE PER EVENT DAY ATTENDANCE PER ANNUM Rugby League State of Origin 1 80,000 International 2 45,000 Grand Final 1 80,000 Preliminary Final 1 60,000 Other Semi Finals 2 40,000 Club Matches 22 25,000 550,000

Total Rugby League 30 940,000 Rugby Union SANZAR Tests (Australia v NZ, South African 2 80,0000 Other International (Australia v Northern Hemisphere touring team) 1 50,000 International Provincial Championship ("Super 12") 5 42,000 Total Rugby Union 8 420,000 Soccer Internationals 6 25,000 Total Soccer 6 150,000 Concerts Major concerns (eg U2, Madonna, Rolling Stones) 3 70,000 Other non-sporting events 2 30,000 Total Non-sporting events 5 270,000 TOTAL STADIUM USAGE 49 1,780,000

6 Schedule 1 to the deed provided the Catering Rights Fees. They are, of course, payable by Sodexho and are expressed as a percentage of Sodexho's gross revenue. The percentage is ten percent up to a gross revenue of $20,000,000, the percentage increasing once revenue exceeds that figure. The table which provides for the fee is as follows: Gross Revenue Percentage payable to SAM Up to $20 millions 10% From $20 million to less than $21 million 11% From $21 million to less than $22 million 12% From $22 million to less than $23 million 13% From $23 million to less than $24 million 14% From $24 million to less than $25 million 15% From $25 million to less than $26 million 16% From $26 million to less than $27 million 17% From $27 million to less than $28 million 18% From $28 million to less than $29 million 19% From $29 million 20%

7 The guaranteed amount of the minimum Catering Rights Fee was ultimately agreed at $3 million. But for the guarantee, the Fee payable would only equal this amount in the event that Sodexho earned revenue of, at least, $27,111,111. 8 The deed contemplates that there will be two different types of uses of the Stadium which will generate demand for catering services. They are defined as an "Event", which means "a use of the Stadium for a sporting, cultural or entertainment activity such as a football match, concert or theatrical production, recital, performance, ceremony or any similar activity" and a "Function", which means "a use of the Stadium infrastructure for a conference, exhibition, trade show, seminar, banquet, private party, meeting, convention, assembly or similar activity but does not include an Event." Arrangements are made so that events and functions are not held at the same time. However, SAM is responsible for making arrangements for events at which catering services are provided. Either SAM or Sodexho is responsible for providing a function. 9 The deed provides that Sodexho may generate revenue from providing catering for either an event or a function. In its summary profit analysis, which was adopted for the purpose of the deed, Sodexho anticipated that its profit would be earned as to 47.12 percent from functions, the remainder coming from events. Revenue could also be earned by Sodexho by providing catering outside the Stadium, for which a lesser fee is payable to SAM. 10 It is plain that if Sodexho is to meet its anticipated revenue and be able to pay the projected Catering Rights Fees, a significant component of its income must be generated at major football events. 11 The gross catering revenue in year one was estimated to be $32,853,900 of which $17,373,142 was expected to come from patronage at events. Of the 1,780,000 persons which SAM suggested may patronise events at the Stadium, Premier League and Premier Union matches account for 810,000 or 45.5 percent. 12 It follows that if the revenue from events is $17,373,142 and patrons at Premier League and Premier Union matches generate $7,817,914 of that revenue, and those patrons total 810,000, then each patron is assumed to have spent $9.65 on food, beverages and/or tobacco. If the minimum guaranteed amount is payable if only 82,000 persons attend Premier League and Premier Union matches (ie one semi-final rugby league game and one Super Twelve rugby union game) each patron would have to spend $95.34 on food, beverages and/or tobacco to generate the relevant catering revenue of $7,817,914. 13 It is with this background that it is necessary to consider the relevant provisions of the deed. The provisions of the Deed 14 Part 5 of the deed provides for the Caterer's Payment Obligations. Clause 5.1 is in the following terms: "5.1 Catering Rights Fee In consideration of the grant of rights under clause 4.1 the Caterer must pay to SAM the Catering Rights Fee in respect of Catering Services and External Catering calculated and payable in the manner set out in Schedule 1." 15 Clause 5.2 provides for a Guarantee of Minimum Catering Rights Fee which incorporates the guaranteed amount provided in Schedule 4 to the deed. Clause 5.2 provides as follows: "5.2 Guarantee of Minimum Catering Rights Fee The Caterer guarantees to SAM, and undertakes to ensure, that the Catering Rights Fee paid by the Caterer under clause 5.1 in respect of each Guaranteed Year is not less than the Guaranteed Amount for that Guaranteed Year set out in or calculated in accordance with Schedule 4." 16 The Guaranteed Amount provided for the relevant year is $3 million. Clause 5.3 is in the following terms: "5.3 Payments in respect of Minimum Catering Rights Fee (a) If at the end of any quarter in a Guaranteed Year the cumulative amount of the Catering Rights Fee paid by the Caterer in respect of that year (together with any amounts paid previously by the Caterer under this clause in respect of the Guaranteed Amount for that year) is less than the relevant proportion of the Guaranteed Amount for that year, the Caterer must pay the shortfall to SAM within five Business Days of that date. (b) The relevant proportion referred to in clause 5.3(a) means the proportion of the Catering Rights Fee for that year which according to the Business Plan and Budget for that year should have been received by the end of that quarter." 17 Clause 5.4 provides for the circumstances in which the guaranteed amount may not be payable. It is the clause which gives rise to the dispute in the present proceedings. It is in the following terms: "5.4 Cancellation of the Guaranteed Amount The Caterer's obligations under clauses 5.2 and 5.3 apply in respect of each Guaranteed Year during the Term unless, in respect of that Guaranteed Year, either: (a) of the Premier League matches, all of those played in Sydney are not played at the Stadium; or (b) of the Premier Union matches, all of those played in Sydney are not played at the Stadium." 18 It is common ground that in the first guaranteed year not every Premier League and Premier Union match played in Sydney was played at the Stadium. However, some Premier matches of each rugby code were played in Sydney. SAM's submissions 19 SAM contends that the proper construction of cl 5.4 provides that Sodexho's obligations in cl 5.2 and 5.3 apply unless, "of the Premier League matches, all of those played in Sydney are not played at the Stadium", with the same application and exception for Premier Union matches. Because in the first guaranteed year this circumstance did not arise, some such matches played in Sydney were played at the Stadium (and so too with the Premier Union matches), it is submitted that the exceptions to the obligations in cl 5.2 and 5.3 do not arise. It is submitted that the universal negative "all … are not" is not satisfied when at least one member of the relevant class is positive. 20 SAM further submits that "a logical sequential analysis" of the clause would take the following form: "A. the words " the [defendant's] obligation under clause 5.2 and 5.3 apply in respect of each Guaranteed Year unless in respect of that Guaranteed Year, either: (a) of the Premier League matches, all of those played in Sydney are not played at the Stadium; or (b). of the Premier Union matches, all of those played in Sydney are not played at the Stadium, mean that the defendant's obligations continue to apply except when the circumstances stipulated in either (a) or (b) apply. The Macquarie Dictionary (3rd ed) confirms that "unless" means "except when". B. The circumstances stipulated in clause 5.4(a) by the words "of the Premier League matches, all of those played in Sydney are not played at the Stadium" require that all of the members of the defined class (being those Premier League matches played in Sydney) exhibit a certain characteristic: ie they are not played at the Stadium. Consequently, when either of the defined class does not exist (ie no Premier League matches are played in Sydney that year) or some members of the class do not exhibit that characteristic (some of the Premier League matches played in Sydney are played at Stadium) then: (i) The stipulated circumstances does not occur; (ii) The exception in clause 5.4(a) is not satisfied; (iii) The defendant's obligations under clauses 5.2 and 5.3 continue to apply. C. Clause 5.4(b) works in the same way in relation to Premier Union matches. D. Each of the exceptions contained in clause 5.4 stipulates a universal negative (ie all Premier matches are not played at the Stadium) in the event of a positive case (ie at least one such Premier match is played at the Stadium) the relevant exception is not activated. E. Similarly, the exceptions in clause 5.4 do not arise when a defined class does not exist (ie in a particular Guaranteed Year no Premier League or Union matches are played in Sydney at all). The minimum guaranteed obligation would apply in that situation. 21 SAM further submits that the meaning of cl 5.4 is plain. Accordingly, there being no ambiguity, it is submitted that resort cannot be had to any pre-contractual documents. In the event that the court finds that there is an ambiguity, evidence was tendered which it was submitted would aid in the construction of cl 5.4 (see Codelfa Constructions Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337). Sodexho's submissions 22 Sodexho submits that the arbitrator's decision was correct. Although its submission was further developed in argument, it essentially takes the following form. 23 Clause 5.4 prescribes the circumstances in which Sodexho's obligations under cl 5.2 and 5.3 do not apply. Those circumstances are defined by:

(i) identifying a set of football matches: the Premier League/Union matches; (ii) identifying a subset of the set referred to at (i): all of the Premier League/Union matches played in Sydney; and (iii) providing an escape from the minimum guarantee if the class of football matches referred to in (ii) "are not played at the Stadium" - which occurs as soon as one match from the class is not played at the Stadium. 24 The drafting of cl 5.4 reflects the fact that the parties were contemplating a baseline of quality events which would have to be held at the Stadium each year, otherwise the guarantee would fall away. The baseline was essentially that all Premier League and Union matches in Sydney had to be played at the Stadium. If this condition was not met - ie it could not be said that all such games were played at the Stadium - the minimum guarantee was inoperative. 25 Sodexho submits that if it is useful to use the descriptions "universal negative" or "negative universal", cl 5.4 is properly described as specifying "a negative universal". It does not require that each individual member of the class satisfy the negative description. If it did, the appropriate language would have been "each of those played in Sydney is not played at the Stadium" or "none of those played in Sydney is played at the Stadium". Rather, it requires that the class as a whole satisfy the negative description. That is true as soon as one match within the class is not played at the Stadium. Sodexho drew attention to the decision in Neville v London "Express" Newspaper, Limited [1919] AC 369, where Phillimore LJ was reviewing the prohibition on maintenance and champerty and noted that English criminal law statutes struck against champerty in general or absolute terms, yet the courts had to construe them not as absolute but as admitting of various exceptions. He went on to say: "How then were the Judges enabled to make these exceptions? It appears to me, my Lords, that it can only have been because all maintenance was not evil ." (p 427) 26 It is submitted that Phillimore LJ used the expression "all maintenance was not evil" as a negative universal. He meant that, because there were at least some species of maintenance which were not evil, one could say that the whole class was not evil. He certainly did not mean that each and every species of maintenance falling within the class was not evil. The approach of the arbitrator 27 The arbitrator identified that the work, which the exception embodied in cl 5.4 of the deed has to do is "to relieve the Caterer from payment of the guaranteed amount in the case which the exception contemplates". He recognised the following elements: · Catering rights fees and the guaranteed amount are payable out of gross catering revenue; · Gross catering revenue is critically dependent upon patronage at the Stadium; · Patronage at the Stadium is determined by the number and character of events and functions held there; and · Premier League matches and Premier Union matches are the most important matches in each code and, therefore, likely to attract the largest crowd. 28 He found that the exception "focuses upon the state of affairs at the Stadium, and the circumstances which might there arise in which the capacity of the Caterer to pay the guaranteed amount might be adversely affected." 29 Accordingly, he found that the parties intended to afford Sodexho protection, which it was only likely to need in the event of low patronage. He found that the parties had agreed that the protection would be enlivened in circumstances where certain classes of fixtures likely to attract large crowds, were not held at the Stadium. For the protection to have any real effect, it could not be confined to a situation where only one high patronage fixture of each relevant code was played at the Stadium. The appropriate construction of clause 5.4 30 In my opinion, the meaning of cl 5.4 is plain. The construction of the clause contended for by SAM erroneously emphasises the words "all of those played in Sydney are not played at the Stadium", without recognising that the reference to "all of those played" is a reference to the class or category of matches which is earlier identified in the clause. That a class is being referred to is apparent from the use of the word "of", by which the class or category is introduced. Once this is recognised, it follows that, of that class of match, all of those played in Sydney must be played at the Stadium, if the guarantee is to operate. As that event has not occurred but rather, some of the relevant matches have been played elsewhere in Sydney, the obligations in cl 5.2 and 5.3 have been released. 31 The purpose of cl 5.4 is to allocate the risk between the parties, if there is a failure to achieve the contemplated levels of expenditure by patrons, as a result of less than anticipated attendances at the Stadium. The agreement provides that if attendances fall below the required level and revenue is depressed, Sodexho will nevertheless have to pay a guaranteed fee for the right to provide the catering services. To this extent, Sodexho carried the risk that the projected attendances at the Stadium will be met. However, the acceptance of this risk by Sodexho is underwritten by the understanding that the major football matches played in Sydney will be played at the Stadium. It is the responsibility of SAM to provide those matches. 32 Having regard to the proportion of the anticipated revenue which will be generated by those matches, if only one of either the Premier League matches or Premier Union matches played in Sydney is played at the Stadium, the effect upon revenue will be very significant. I have identified the possible outcome earlier in these reasons. Even the loss of one of those matches, particularly a Rugby Union International or State of Origin Rugby League match, may have a significant impact. In my opinion it would not make sense, in the context of this arrangement, for Sodexho to be relieved of the guaranteed fee only in the event that all of the particular class of Premier rugby matches are not played at the Stadium. 33 Having regard to my conclusion, it is unnecessary to consider the effect of documents which were generated during the negotiations for the agreement and which, it is submitted, could inform the proper construction of cl 5.4. 34 Leave for this appeal was granted by Bergin J on the basis that the arbitrator should have found that cl 5.4 was ambiguous. I have found that it is not. Rather than withdraw the leave to appeal, the parties have agreed that in the event that I reached this conclusion, the appropriate order is that the appeal should be dismissed. 35 Accordingly I order: 1. Appeal dismissed 2. Plaintiff is to pay the defendant's costs. **********

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