West Harbour Rugby Football Club Ltd v New South Wales Rugby Union Ltd

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3993/01 - WEST HARBOUR RUGBY FOOTBALL CLUB LTD & ANOR v NEW SOUTH WALES RUGBY UNION LTD & ORS

1 HIS HONOUR: This is an application for an interim injunction to restrain the first defendant from implementing a determination initially made on 26 July 2001 and confirmed on internal appeal on 9 August 2001 with respect to the conduct of a rugby union football competition in the Sydney area. 2 The determination was that the first plaintiff should be penalised by the loss of nineteen points from the Premier Competition table because of alleged breaches of Rule 5 of the Competition Rules which refer to overseas players. The effect of the penalty was that the first plaintiff, which, before the penalty was exacted, was ranking fourth in the competition, now ranks eighth with such penalty and, because of that, will not be playing in the semi-finals of the competition, which will be conducted over the next weekend. 3 The plaintiffs are the club affected and the New Zealand national whose presence has brought about the penalty. 4 The plaintiffs seek various orders. The first is that the first defendant be restrained until the final hearing from giving effect to that determination. The second is that the first defendant be restrained from conducting any semi-final match between the fourth and fifth placed teams unless it is played between the first plaintiff and the twelfth defendant. Or alternatively, that pending the final hearing the first defendant be restrained from giving any effect to or consequent upon its determinations which really seem to be just a variation of the earlier one, except that probably the undertaking as to damages if called upon would be more extensive. 5 A fourth order was contemplated, ie, that the semi-finals be restrained generally until the final hearing, but no undertaking as to damages was proffered to support such an injunction. As the undertaking to damages is the price of the injunction, I can discard that possible order. 6 When a judge is deciding a case of interlocutory injunction what he or she is really doing is deciding how the rights of the parties should be governed until the Court has time to deal with the case on a final basis. When I say "until the Court has time", of course the Court cannot deal with the case until both parties have had a proper opportunity of putting before the Court all the facts and circumstances that they wish taken into consideration on the final hearing. Until that happens how should the subject matter of the litigation be preserved? That is a vital question. 7 The authorities say that the Court must consider three aspects, viz:

(a) do the plaintiffs demonstrate an arguable case?

(b) are damages an adequate remedy for the hurt that the plaintiffs allege?

(c) where does the balance of convenience or balance of justice lie pending the hearing of the final case? 8 There is no problem about the second of these elements in the instant case. There is no contractual relationship between the second plaintiff and the defendants so that there would seem to be no case for damages and it is doubtful, because of the particular type of contract, that there is any case for damages flowing to the first plaintiff. Looking at it the other way, even if there were damages, they would not be an adequate remedy for the wrong. However, the other two elements are very awkward ones to determine in the current circumstances. 9 The Court is put in a very awkward position because of the lateness of the application. Had the application been made some three weeks ago it may have been - and I cannot put it any higher than that - that a final hearing could have been held. Mr Rares SC, who appeared with Mr Peter Brereton, for the first defendant, said that the plaintiffs were guilty of delay because they should have brought these proceedings shortly after 26 July as the present point was actually taken at the hearing before the internal tribunal on 23 July 2001. 10 However, Mr Gross QC, who appeared with Mr J R Clarke for the plaintiffs, said that this was an unfair way of looking at it as there had been an internal appeal within the first defendant, which was only decided on 9 August, ie Thursday of last week, and the proceedings were commenced very shortly after that. 11 Mr Gross QC is probably right, but that still does not make the Court's job any easier because there is no time to reserve a decision, there is no time to look at the very complex matters of law that have been raised, and the Court has to make a judgment in a fairly evenly balanced case virtually straight away. 12 The result of granting an order in the form of (1) or (2) noted above will be that the first plaintiff will play in the semi-finals, taking the place of the tenth defendant who has actually appeared by Mr Hand, solicitor, and put submissions. Thus, the making of the interlocutory orders will, to a great degree, deal with the major subject matter of the suit for all practical purposes, though not for legal purposes. 13 In such a situation the Court pays particular attention to the strength of the plaintiff's case. Ordinarily on an interlocutory injunction application one merely looks to see whether there is an arguable case, but where the interlocutory injunction will solve for practical purposes the dispute between the parties one looks a little deeper; see Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533. 14 Furthermore, on an interlocutory application for injunction, the Court does not decide questions of fact but it usually does determine questions of law. However, it declines to do so where the factual matrix disclosed by material that the parties are likely to put on may influence the question of law, or where there is insufficient time to resolve them properly. I think for one or other of those reasons in the present case I should not decide questions of law but leave them to the final hearing. However, I must take into account their impact when deciding on the strength of the case. 15 My impression - though it is an impression that Mr Gross QC has tried to rid me of throughout the day - is that there are really two separate cases being made here. The first plaintiff seeks to gain an injunction by saying that the provisions of the playing contract which in simple terms restrains the club from employing more than two overseas players unless there have been exemptions, is void for restraint of trade. 16 The second plaintiff, the player, says that the same part of the contract detrimentally affects his capacity to exploit his skills as a professional rugby union player. It is conceded that he has a full time job, but it was also fairly clear that, if he is as good a player as he appears to be, he has the capacity to earn income, as well, as a rugby union player. 17 The plaintiffs sought to marry both cases together in order to get an injunction. 18 I have great difficulty in approaching the case in this way. It seems to me that if the second plaintiff alone had been the plaintiff, none of the orders sought by the first plaintiff could necessarily be made and I should really concentrate, so far as the injunction is concerned, on the first plaintiff's alleged restraint. 19 Secondly, it seems to me that confusion has come about in the plaintiffs' case - if I can use that word respectfully - in the use of the words "illegally" and "void". Although covenants in the restraint of trade are often called "illegal" or "void", that is a misuse of language and such covenants are really only unenforceable. Moreover, as Mr Heydon, as he then was, showed in The Restraint of Trade Doctrine, 2nd ed (Butterworths, Sydney, 1999) at pages 219 and 220, the authorities demonstrate that the contract is not "void", but only partially unenforceable; see Boddington v Lawton [1994] ICR 478, 491. 20 It is extremely rare that if there are 16 parties to a contract and fifteen of them wish to abide by it and the sixteenth does not, that even if the Court finds that the contract is in restraint of trade, its enforceability between the fifteen will be affected. Accordingly, so far as the first plaintiff's case seeks an injunction by seeking to marry the two different types of restraint, it flounders because the contract is not void, but merely partly unenforceable. Even if this were not the case, the plaintiffs would be put in the invidious position of seeking to enforce part of a void contract which was not obviously severable; see Boddington's case at p 488. 21 Counsel for the plaintiffs referred to a large number of cases and noted there had been abundant authority for the proposition that contracts which had the effect of seriously limiting professional footballers from earning their money as players were quite often struck down by the courts as covenants in the restraint of trade. Leading the field are cases such as Buckley v Tutty (1971) 125 CLR 353; Adamson v NSW Rugby League Limited (1991) 31 FCR 242 and Adamson v West Perth Football Club Inc (1979) 27 ALR 475. There is no gainsaying that submission. 22 However, it was put that the basis of those cases was 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." 23 Those words were first uttered by Barwick CJ in Howard F Hudson Pty Limited v Ronague in a dissenting judgment; see (1972) 126 CLR 449, 453, but were picked up by Gummow J in Adamson v NSW Rugby League Limited at p 284. 24 With respect, that does not appear to be the test that is most applied to this sort of case. The test that is more usually applied in this sort of case is to distinguish between the situation where a person is going into an industry where participation in the industry is usually governed by certain limitations, in which case submitting to the limitations will not be submitting to a restraint of trade, and situations where a person is in an industry without limitations and then limitations are imposed upon him or her; or alternatively, the case where unusual or unreal limitations are put on the person; see Heydon op cit at p 47. 25 This approach seems to have been endorsed in the significant affectation of capacity test, further rejected by the High Court in Peters (WA) Limited v Petersville Limited [2001] HCA 45 at [34] to [39]. However, as Mr Heydon points out in his book, whichever test one applies one can see exceptions and problems, though the matter is not black and white, but it does affect the strength of the plaintiffs' case that so much depends on accepting the serious affectation of capacity test. 26 Even if that test were the appropriate one, there is another hurdle that has to be overcome. The plaintiffs' counsel indicated that there was, on the evidence before me, a common labour market in Australia and New Zealand so that a person such as the second plaintiff, who is a New Zealand passport holder had the same right to work as an Australian. 27 I find great difficulty with that argument. There does not seem to be any case on the point, but no case that I know of has dealt with a situation where a non-citizen has said that a local law which limits the rights of non-citizens to participate in trade within the jurisdiction is struck down by the restraint of trade doctrine. This is significant because, as I understand it, the limitation on overseas players in a sport is a relatively common phenomenon throughout the world. 28 I was referred to the Trans-Tasman Mutual Recognition Act 1997. However, it is clear that that Act does not apply to footballers such as the second plaintiff. 29 To counter this sort of suggestion, Mr Gross QC referred me to the decision of the European Court of Justice in Union Royale Belge des Societes de Football Association v Bosman [1996] 1 CMLR 645, but that case deals with the law that applies in Europe under European Community law and it seems to me very difficult to argue from that to the position in Australia. 30 The New Zealand case of Blackler v New Zealand Rugby Football League Inc [1968] NZLR 547 and the later New Zealand case of Kemp v New Zealand Rugby Football League Inc [1989] 3 NZLR 463 were both to the converse of the instant case in that rules in New Zealand preventing New Zealand players from exploiting their capacity overseas were considered as to whether they were a restraint of trade. Mr Gross QC pointed out that McCarthy J in Blackler at page 571 seemed to indicate that this was a two-way approach but with respect, I am not too sure that it is. As to the right to work, one must also remember what is in Mr Heydon's book at page 63, that in Australia at least it is not correct to talk about it as a right, it is a mere liberty. 31 For reasons which I would extend had there been more time, it seems to me that whilst the plaintiffs have an arguable case, it by no means gets them to the realm of a strongly arguable case, that there is an unenforceable rule which has been relied upon by the first defendant to penalise the plaintiffs. 32 However, I then pass to the question of balance of convenience. On the one hand it is clearly the case that if the first plaintiff does not succeed in this application, but does succeed on the final hearing, it will have lost the right to participate in a semi-final and perhaps become the premier, and that this may affect not only the club's financial position, but also that of the players, including the second plaintiff. 33 On the other hand, if the order is granted, the same situation will apply to the tenth defendant who is not in breach of any of the rules. There are other factors which are set out in Mr Wilson's affidavit as to whether there should be interference with the way in which the first defendant has been running the game. Added to that is the fact that the contract (exhibit PXO1) between the parties involved an offer by the first defendant to enter into the Sydney competition on the basis of the "terms and conditions of competition", including clause 5. 34 Although Mr Gross QC says, correctly, that it was a take it or leave it situation, and the terms were composed by the first defendant, it is significant for the reasons I have already mentioned that the first plaintiff voluntarily accepted entry into the competition on those terms, and that all clubs have proceeded on the basis that those were the rules which at least bound them. 35 I consider the balance of convenience favours not granting an injunction and I add this to the fact that there is not a strongly arguable case in coming to the view that the present application for an interlocutory injunction should be dismissed with costs. The case, however, should stand into the Registrar's call-over on 12 September 2001 and the parties should have liberty to mention the matter before the Registrar on three days' notice for directions. The exhibits may be returned.

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