WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd

Solicitors: Atanaskovic Hartnell (Appellant) Gilbert + Tobin (Respondent) File Number(s): CA 2016/137097 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division - Commercial List Citation: [2016] NSWSC 523 Date of Decision: 28 April 2016 Before: Hammerschlag J File Number(s): 2016/41896

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

1. McCOLL JA: I agree with Barrett AJA's reasons and the orders his Honour proposes.
2. SACKVILLE AJA: I agree with the orders proposed by Barrett AJA and with his Honour's reasons.
3. In my opinion there are two fundamental difficulties with the construction of cl 2.1 of the Program Supply Agreement (PSA) advanced by the appellant (WIN).
4. The first difficulty is that on WIN's argument, as it accepted, there is a disparity between the nature and extent of its licence to broadcast content provided by the respondent (Nine) and the nature and extent of the exclusivity attaching to the grant of the licence. In the absence of language indicating that the grant of exclusivity was to have a wider operation than the licence, the "exclusive" nature of the licence granted to WIN does not assist its claim to prevent Nine live-streaming content into WIN's licence areas.
5. The second difficulty is that the word "broadcast" is used in cll 2.2, 2.2A, 2.2B and 2.4 of the PSA to mean broadcast by means of terrestrial services on free-to-air channels. WIN's construction requires the word "broadcast" to be given a different meaning in cl 2.1 from the meaning it bears elsewhere in cl 2. This is not a construction lightly to be adopted.
6. Much of WIN's argument rested on the supposed commercial absurdity of WIN agreeing to a PSA that allowed Nine to exploit live-streaming to subscribers in the very areas for which WIN held a commercial television licence. But, as the primary judge observed, there is nothing commercially irrational or absurd about construing the grant of exclusivity in cl 2.1 as limited to program content to be shown on free-to-air channels broadcasting in WIN's licence areas.
7. The PSA in its original form was deemed to commence on 1 April 2013 and was to continue until 31 December 2015. Nine's live-streaming commenced on 27 January 2016.
8. The term of the PSA was extended to 30 June 2016 by a Variation Agreement dated 31 December 2015. The Variation Agreement was not executed until two months after Nine issued a media release announcing that its new live-streaming product would launch in early 2016.
9. There was nothing commercially irrational or absurd about WIN entering into a PSA in 2013 which did not address live-streaming by Nine. The evidence did not indicate that Nine had formed or conveyed any intention to commence live-streaming within a short time of the PSA commencing. As events transpired, no live-streaming took place until the term specified in the original PSA had expired. WIN may well have made a commercial judgment that the licence fees agreed with Nine reflected the risk (if any) that live-streaming would commence prior to the date on which the PSA was to terminate. As it happens, the risk did not eventuate.
10. The fact that WIN was prepared to agree to an extension of the PSA after it became aware that Nine proposed to commence live-streaming rather suggests that WIN took a sanguine view of the likely impact of the live-streaming on its advertising revenue during the five months between 27 January 2016 (when live-streaming commenced) and 30 June 2016 (the amended expiration date of the PSA). An alternative possibility is that the licence fees negotiated between Nine and WIN reflected WIN's commercial assessment of the likely impact of live-streaming on its ratings and advertising revenue.

Grounds of appeal

1. WIN advances a number of grounds of appeal. In relation to the central issue of construction, it says that the primary judge: [9] 1. failed to give the word "broadcast" in cl 2.1 its plain, ordinary and natural meaning and adopted an unacceptably narrow meaning; 2. construed the clause in a way that gave no real meaning to "exclusive"; 3. failed to have sufficient regard to certain other provisions of the PSA in construing cl 2.1; 4. wrongly paid attention to a particular matter as "contextual corroboration"; 5. failed to consider, properly or at all, WIN's preferred construction of cl 2.1; 6. wrongly took into account inadmissible evidence of pre-contractual negotiations; and 7. failed to construe cl 2.1 in a manner consistent with the commercial object of the PSA and notions of commercial common sense.
2. WIN says, in the alternative, that the primary judge should have held that live-streaming by Nine, although not broadcasting, was in breach of the particular implied term to which reference has been made.
3. As to the matters of both construction and implied term, Nine's position is that the decision of the primary judge is correct for the reasons his Honour gave. [10]

Construction - the decision of the primary judge

1. The primary judge identified the following matters (at [82]-[89]) as supportive of his conclusion as to the meaning of "to broadcast": 1. The reference in cl 2.1 to broadcasting "on and in the licence areas covered by the WIN stations" could only be a reference to free-to-air broadcasting because free-to-air was the only form of transmission that had ever been undertaken in those areas. 2. At the time the PSA was entered into, both parties knew that Nine was not in a position to give internet streaming rights to WIN for rugby league matches. 3. Definitions of "broadcast" in various legislative enactments are not of assistance. 4. It was commercially highly unlikely that the parties would have had anything but free-to-air broadcasting in mind. 5. The fact that fees payable by WIN to Nine under the PSA were based on revenues received from WIN's broadcasting activities (which were confined to free-to-air) indicated that only free-to-air was in the parties' contemplation. 6. The fact that it was known when the PSA was entered into that internet streaming was technologically available is neutral because the PSA made no reference to it.

Construction - plain, natural or ordinary meaning

1. WIN contends that the primary judge erred in concluding that these matters supported the construction he favoured and that his Honour did not give proper consideration to matters relied upon by WIN in support of its preferred construction. Chief among those is what WIN regards as the plain, natural or ordinary meaning of "broadcast" which, it says, the primary judge did not consider.
2. WIN relies, in that respect, on dictionary definitions of "broadcast" which, in addition to referring to radio and television activities, encompass activities concerned with various forms of wide dissemination (such as "to broadcast gossip" [11] ). Reference is also made to the following dictionary definitions of "webcast" which identify that activity as a form of "broadcast": "to broadcast on the internet to multiple recipients simultaneously" [12] "to broadcast live over the internet." [13]
3. WIN further points to a number of statutory provisions which obviously contemplate internet streaming or webcasting as a form of broadcasting.
4. Nine responds by emphasising the limited utility of dictionary definitions in construing legal text. [14] It also notes that both dictionaries and legislative enactments contain clear examples of the use of "broadcast" in the narrow free-to-air sense of transmission by radio waves.
5. The reality, it seems to me, is that "broadcast" has different meanings in different contexts and that it is not possible to say, as an abstract proposition, that the word always conveys either the broad meaning for which WIN contends or the more limited concept embraced by Nine. Each is today a plain, natural or ordinary meaning. There is no single fixed meaning that can be said to be the plain, natural or ordinary meaning.

Construction - "exclusive"

1. The parties agree that a person who grants an "exclusive" licence to exploit a particular advantage impliedly undertakes not only to refrain from granting a like right of exploitation to anyone else but also to desist from engaging in exploitation in competition with the licensee. [15]
2. WIN notes that, in the free-to-air sphere, Nine's licences under the Broadcasting Services Act are territorially confined to particular licence areas. Section 41C(1) of the Act states that a commercial television broadcasting licence for a licence area "authorises the licensee to provide the following services in the licence area", with the "following services" then described as certain "commercial television services". Nine's statutory licences relate to licence areas different from the licence areas covered by WIN's statutory licences. Nine therefore does not enjoy any statutory right to provide relevant commercial broadcasting services by free-to-air transmission in the licence areas to which WIN's statutory licences relate.
3. It follows, WIN says, that, if the parties had had free-to-air transmission alone in contemplation, they would not have described the contractual licence as an "exclusive" licence. Because Nine could not lawfully engage in free-to-air transmission in WIN's statutory licence areas, there was no need to exclude Nine by contract from that form of behaviour; and, unless the cl 2.1 grant extended beyond free-to-air broadcasting, the word "exclusive" in that clause was otiose and meaningless.
4. Nine's response is in two parts. First, it points out that competitors of WIN have statutory licences enabling them to engage in free-to-air transmission in the WIN licence areas. Because the cl 2.1 grant was "exclusive", it precluded Nine from conferring on any such competitor of WIN a right equivalent to the right given by cl 2.1 to WIN itself. Secondly and as regards its own activities, Nine accepts that the exclusive quality of the cl 2.1 grant had the effect that Nine was precluded from itself seeking a statutory licence that would enable it to disseminate relevant content by free-to-air transmission in the WIN licence areas.
5. In both those ways, in Nine's submission, the "exclusive" quality of the right it granted had coherence in relation to free-to-air activities alone even though Nine's existing statutory licences did not enable it to engage in such activities in the WIN licence areas.

Construction - other textual matters

1. Attention was paid in the course of submissions to use of the word "broadcast" (as a verb) in provisions of the PSA other than cl 2.1.
2. Clause 2.2 is in these terms: "The WIN Stations will broadcast the Nine Channel programs in parallel with the Nine schedule (for each of 'Nine', 'GO!' and 'Gem') between 6am and midnight except that between noon and 4.30pm each weekday, between noon and 5pm on Saturdays, and between 1.30pm and 4.30pm on Sundays, a WIN Station may alter Nine's program schedule to broadcast alternate programs provided WIN has notified the CEO of Nine of the proposed change to the schedule and taken into account any obligations of Nine to third parties (which Nine has advised to WIN). If a WIN station wants to make any changes to Nine's prime time schedule, the WIN Station will raise the proposed change with the CEO of Nine for discussion and Nine will not unreasonably withhold its consent to the proposed change to the prime time schedule."
3. Clause 2.2A is as follows: [17] "The WIN Stations will commence broadcasting 'Nine HD' and '9Life' during the Term. From such time as a WIN Station starts to broadcast 'Nine HD' and '9Life', clause 2.2 will apply to that channel as if it was named in clause 2.2."
4. The immediately following cl 2.2B reads: "The WIN Stations will broadcast the programming for 'Extra' in parallel with the Nine schedule for 'Extra'. Nine will pay WIN $[redacted] on 31 March 2016, in return for WIN broadcasting the 'Extra' channel in the period from 1 January 2016 to 30 June 2016."
5. Clause 2.4 provides: "WIN agrees that the WIN Stations will meet all sporting scheduling obligations imposed on Nine and its Related Bodies Corporate under their contracts for the broadcast of rugby league and cricket, provided that Nine provides full details of all existing such obligations to WIN forthwith upon execution of this Agreement and will provide full details of all future such obligations to WIN forthwith upon incurring such obligations."
6. Clause 6 is as follows: "(a) Nine will ensure that from time to time in the course of its broadcast of sporting events, its commentators will recognise the Win Stations in the following (or similar) form: 'You are watching [name of sports event] across Australia on Nine and the WIN network.' (b) Where any news footage broadcast by Nine is supplied to Nine by WIN, Nine will ensure appropriate attribution to WIN as the source of such supply."

Construction - WIN's "ultimate preferred construction"

1. WIN complains that the primary judge failed to deal adequately with what he called WIN's "ultimate preferred construction". His Honour said: [18] "My conclusion that 'broadcast' means free-to-air disposes of the necessity to consider WIN's ultimate preferred construction of clause 2.1, being that broadcast means by any means, but that it can only exercise the right free-to-air. However, I consider it commercially highly unlikely that the parties would have intended to achieve such a result by the use of and through the words which they chose. The only exclusivity Nine was giving was broadcasting on the WIN Stations in the WIN licence areas."
2. The "ultimate preferred construction" was an attempt by WIN to deal with the difficulty that, in cl 2.1, "broadcast" defines not only the content of the right acquired by WIN but also the content of the restriction to which the exclusive nature of the grant causes Nine to be subject. The suggested dichotomy between the content of the right and the freedom to exercise the right seeks to make the content of the restriction on Nine larger than the content of the licence enjoyed by WIN.
3. The primary judge was correct when he said that his conclusion as to the meaning of "broadcast" made it unnecessary to consider WIN's "ultimate preferred construction". Had his Honour addressed that matter, however, he would necessarily have rejected the proffered construction. This is because, as is noted at [35] above, counsel for WIN expressly conceded in the course of submissions that the PSA did not give WIN the right to live-stream the Nine programs. The notion that the cl 2.1 grant to WIN conferred a right allowing it to live-stream but denied its freedom to exercise the right by live-streaming cannot stand with that concession.

Construction - availability of extrinsic evidence

1. Discussion to this point has concentrated on the words used by the parties in their contract and objective facts which, at the time of contracting, were obviously known to them as major operators in the relevant commercial field. It is now necessary to address WIN's submission that the primary judge failed to appreciate and give due weight to the commercial purpose or objects to be secured by the contract, they being something that informs the meaning of the words used.
2. As a preliminary, however, there is a need to consider the extent to which evidence concerning the course of dealings and negotiations between the parties before the making of their contact may properly be taken into account in determining the commercial purpose and objects.
3. Evidence of prior negotiations is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract. [19] Conversely, evidence reflecting the subjective intentions of the parties is, in accordance with long-standing authority, necessarily inadmissible for the purpose of determining the meaning of the contract (unless it demonstrates knowledge of surrounding circumstances). [20] In recent times, the High Court has revisited the distinction between impermissible recourse to the parties' subjective intentions and expectations and permissible regard to objective matters known to the parties. In Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392 at [51], the Court unanimously approved the formulation of principle advanced by three members of the Court (French CJ, Nettle and Gordon JJ) in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (at [46]-[51]) that, as a general principle of construction, the rights and liabilities of parties under a contractual provision fall to be determined by objective consideration of its text, context and purpose. [21] The relevant enquiry is to be conducted on the footing of what a "reasonable businessperson" would have apprehended the terms to mean in light of the particular language used by the parties, the circumstances addressed by the contract and its commercial purpose. Although the Court was of the view that this process would not uncommonly be possible without reference to evidence of surrounding circumstances, [22] it acknowledged that regard could be had to such evidence if, for example, it assisted in establishing the objective facts known to the parties and thereby elucidated with greater precision the commercial purpose or subject matter of the contract.

Construction - commercial purpose and objects

1. WIN submits that the commercial purpose and objects included securing for WIN the advantage of freedom from all forms of competition by Nine in relation to the delivery of the relevant Nine program content in the WIN licence areas. [24] Nine takes a different view and, in doing so, relies on several aspects of pre-contract correspondence including, in particular, the following statement in a letter from Nine to WIN dated 19 January 2013 (written in the course of negotiations that culminated in execution of the PSA on 3 June 2013): "Nine is not willing to share revenue with WIN or otherwise pay WIN in relation to programming which Nine exploits online."
2. Nine further refers to drafts of so-called "long form" PSAs prepared in the early part of 2013 (and December 2012) before WIN requested in May 2013 that a "short form" agreement be substituted. The "long form" drafts contained definitions of "broadcast" which referred, in detailed descriptive terms, to free-to-air transmission and expressly excluded distribution by satellite or cable or by any means to any computer or computer network.
3. I am of the opinion that the evidence to which the parties have referred, even if it could properly be taken into account consistently with the principles outlined above, is of no use in identifying any shared commercial purpose or objects or elucidating such impression regarding shared purpose or objects as comes from a reading of the PSA itself. That evidence does not manifest in any readily discernible way a purpose or object of securing for WIN freedom from competition by live-streaming activities on the part of Nine. There is nothing commercially incoherent about a program supply agreement that deals with free-to-air transmission only and says nothing, expressly or by implication, about live-streaming. As to Nine's submission, [25] it is sufficient to observe that, in forming a view about the purpose or object of the short form agreement actually made, it would be impermissible to have regard to either a statement of one party's intention when the possibility of a long form agreement was under discussion or the content of a discarded draft of such a long form agreement.
4. WIN complains that the primary judge wrongly had regard to evidence of pre-contractual negotiations. [26] Even if that is so, his Honour was, in my respectful opinion, clearly correct when he said that "the evidence does not sufficiently establish the existence of any consensus outside the one objectively established by the PSA itself". [27] In the end, therefore, any attention that may have been paid impermissibly to such evidence was not productive of error.

Construction - conclusion

1. None of the grounds of appeal concerning construction of cl 2.1 of the PSA succeeds. Viewed in its context, the word "broadcast" was correctly regarded by the primary judge as referring to broadcasting by free-to-air transmission; and that meaning applied both for the purpose of delineating the right granted to WIN and in determining the scope and content of the restriction accepted by Nine as a consequence of the exclusive quality of the licence it granted.

The implied term

1. WIN's statement of claim pleaded a term of the PSA (said to be implied by law) as follows: "[T]hat Nine will do all things necessary to enable WIN to have, and not do anything which would deprive WIN of, the benefit of the Program Supply Agreement and, in particular, the exclusive licence granted by the Program Supply Agreement."
2. Nine, by its defence, denied that allegation.
3. The parties contentions at trial were summarised by the primary judge as follows: [28] "WIN argues that if 'broadcast' is, contrary to its contention, to be given the narrower meaning contended for by Nine, there is to be implied into the PSA a term that each party will not do anything which would deprive the other of that benefit, and by live streaming, Nine is in breach of this term. The purpose of the exclusivity granted to WIN, and the benefit WIN obtains under the PSA, is the ability to derive advertising revenue through carriage of Nine's programming. It puts that it would be antithetical to the purpose of the express provisions of the PSA if Nine could distribute the very same program schedule to viewers in the WIN licence areas, but with Nine's own advertising. Nine puts that no such term is to be implied, because such a term does not meet the requirements for the implication of a term, and that in any event, WIN did not acquire any rights beyond that which the PSA on its proper construction gives it, and such rights extend to free-to-air transmission only."
4. In the result, his Honour did not make any explicit finding whether the term alleged by WIN was implied. He did, however, say [29] that it will generally be implied that each party is to do whatever is reasonably necessary to enable the other to have the benefit of the contract. [30] The primary judge's conclusion on this aspect was: [31] "On the footing that there is to be implied into the PSA the term contended for, namely, that each party will not do anything which would deprive the other of the benefit of the contract, Nine is not in breach of any such term. WIN's relevant benefit is the exclusive licence. It gets to broadcast free-to-air into the WIN licence areas. Nine is not depriving it of this benefit. Put another way, given the construction of clause 2.1 that I have found, the proposed implied term restricting Nine from internet streaming is not necessary to give business efficacy to the PSA, and contradicts its express terms."

Disposition

1. The appeal should be dismissed with costs. I therefore propose orders as follows: 1. Appeal dismissed. 2. Order that the appellant pay the respondent's costs of the appeal.

Endnotes

1. The PSA was initially for a term ending on 31 December 2015. On that date, the parties entered into a variation agreement which extended the term to 30 June 2016.
2. The six channels designated the "Nine Channels" are channels through which Nine conducts free-to-air transmission in licence areas identified in statutory licences held by it.
3. Clause 2.3 is as follows: "In this Agreement, the 'WIN Stations' are WIN Television WA Pty Ltd, WIN Television Griffith Pty Ltd, WIN Television SA Pty Ltd, WIN Television Qld Pty Ltd, WIN Television Mildura Pty Ltd, WIN Television Victoria Pty Ltd, WIN Television Tas Pty Ltd and WIN Television NSW Pty Ltd".
4. It is appropriate, at this point, to refer in broad concept to two methods of content dissemination. Free-to-air television transmission involves the use of airwaves to convey audible and visible content by radio from a transmitter to receivers tuned to a particular airwave radio frequency in order to pick up the sound and visual transmission. In 2Day FM Australia Pty Ltd v Commissioner of Stamp Duties (NSW) (1989) 16 IPR 451 at 457, a case concerning a radio broadcasting licence, Sully J said that the licence conferred the "right to use for the transmission of commercial radio broadcasts and to the exclusion of all other would-be users, the airwaves in the appointed area". Live-streaming, by contrast, involves uploading of content to the internet so that, through that medium, it may be accessed by persons who establish an internet connection and visit a particular website by means of tablet, smartphone, computer or internet-connected television set. The process is sometimes described as "webcasting".
5. WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWSC 523 ("Primary judgment").
6. Primary judgment at [82].
7. Primary judgment at [86] and [93].
8. The term of the PSA, as varied, expired on 30 June 2016. At this stage, therefore, the claim for injunctive relief is academic only and, in terms of substantive remedy, the only question is as to damages. The hearing of WIN's damages case was deferred by the primary judge: Primary judgment at [75].
9. Primary judgment at [82]-[85] and [88]-[89].
10. A notice of contention filed by Nine was not pressed.
11. WIN notes that in Andreyevich v Kosovich and Publicity Press (1938) Pty Ltd (1947) 47 SR (NSW) 357 at 364, Jordan CJ referred to defamatory comments being "broadcast" by newspaper articles.