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High Court of Australia Transcripts |
Sydney No S34 of 2002
B e t w e e n -
NEWS LIMITED
First Appellant
NATIONAL RUGBY LEAGUE INVESTMENTS PTY LIMITED
Second Appellant
AUSTRALIAN RUGBY FOOTBALL LEAGUE LIMITED
Third Appellant
NATIONAL RUGBY LEAGUE LIMITED
Fourth Appellant
and
SOUTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
First Respondent
CANBERRA DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Second Respondent
CANTERBURY-BANKSTOWN RUGBY LEAGUE CLUB LTD
Third Respondent
CRONULLA-SUTHERLAND DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Fourth Respondent
NEWCASTLE KNIGHTS LIMITED
Fifth Respondent
ST GEORGE ILLAWARRA RUGBY LEAGUE FOOTBALL CLUB PTY LIMITED
Sixth Respondent
BRISBANE BRONCOS RUGBY LEAGUE CLUB LIMITED
Seventh Respondent
COWBOYS RUGBY LEAGUE FOOTBALL LIMITED
Eighth Respondent
MELBOURNE STORM RUGBY LEAGUE CLUB LIMITED
Ninth Respondent
MANLY WARRINGAH DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Tenth Respondent
NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Eleventh Respondent
EASTERN SUBURBS DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED
Twelfth Respondent
PENRITH RUGBY LEAGUE CLUB LTD
Thirteenth Respondent
PARRAMATTA DISTRICT RUGBY LEAGUE CLUB LTD
Fourteenth Respondent
WESTS TIGERS RUGBY LEAGUE FOOTBALL PTY LIMITED
Fifteenth Respondent
AUCKLAND WARRIORS RUGBY LEAGUE LIMITED
Sixteenth Respondent
MANLY-NORTHS RUGBY LEAGUE FOOTBALL CLUB PTY LIMITED
Seventeenth Respondent
VALIMANDA PTY LIMITED
Eighteenth Respondent
AH CB PTY LIMITED
Nineteenth Respondent
BRISBANE BRONCOS CORPORATION PTY LTD
Twentieth Respondent
GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON TUESDAY, 6 AUGUST 2002, AT 10.19 AM
Copyright in the High Court of Australia
MR A.J. MEAGHER, SC: May it please the Court, I appear with MR M.J. LEEMING for the appellants. (instructed by Allens Arthur Robinson)
MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR S.A. GLACKEN, for the first respondent. (instructed by Nicholas G. Pappas & Company)
MR N.J. YOUNG, QC: May it please the Court, I appear with my learned friend, MR M.H. O'BRYAN, seeking leave to intervene on behalf of the Australian Competition and Consumer Commission. (instructed by the Australian Government Solicitor)
GLEESON CJ: Now, just before we deal with that matter, Mr Young, could I mention that there is a certificate from the Deputy Registrar that she has been informed by the solicitor for the second to the twentieth respondents that the second to the twentieth respondents will submit to any order of the Court save as to costs. What is the attitude of the parties to the application by Mr Young, Mr Meagher?
MR MEAGHER: We do not oppose it, your Honour, on the basis indicated in our submissions in reply.
GLEESON CJ: Mr Jackson?
MR JACKSON: Your Honours, with two qualifications, we do not object to the intervention. One is trivial; one is more substantial. The trivial one is simply a question of the order of addresses. We have discussed it amongst ourselves and assuming that leave to intervene were granted we would submit the appropriate time would be after our learned friend and before us. The second matter, however, your Honours, concerns one aspect of the contentions on behalf of the ACCC, namely that which appears in paragraphs 30 to 37 of our written submissions. It is the temporal aspect of competition, if I can put it shortly.
Your Honours, that is an issue which we object to being raised by the intervener, for a number of reasons. It was not the subject of an application for special leave. It is an issue which is not raised by the appellants' contentions and, in consequence, is not dealt with by ours. It is an issue decided in our favour, both at first instance and on appeal by all the members of the court, and for the intervener to address submissions on the issue is to allow a matter not in issue between the parties to become the subject of dispute in this Court and, your Honours, without special leave.
GLEESON CJ: Well, perhaps we can deal with that further when we hear what is involved in that submission and you can press that argument that you make at that stage.
MR JACKSON: Yes.
GLEESON CJ: There is another aspect that you have not mentioned, Mr Jackson, and that is the question of time. We plan to finish this case today. Do either you or Mr Meagher think it will be necessary to impose any time limit on Mr Young in order to achieve that result or are you prepared to take that risk yourselves?
MR JACKSON: Your Honour, I am prepared to take the risk. I expect the case will finish today.
GLEESON CJ: Yes, you have that leave, Mr Young. Yes, Mr Meagher.
CALLINAN J: Could I just mention that I was retained by News Limited as chairman of a disciplinary body for some time before I was appointed to this Court. I would not have thought that raised a problem, but I just mention it. Is there any difficulty about that?
MR MEAGHER: Certainly not for our part, your Honour.
MR JACKSON: Your Honour, I would be very surprised. I will have that checked, but I would not ask your Honour to stand it down at the moment.
McHUGH J: I used to have a retainer for News Limited, but it was nearly 20 years ago, so I do not regard that as having any bearing.
MR JACKSON: Statute barred, I think, your Honour.
GLEESON CJ: Yes, Mr Meagher.
MR MEAGHER: If it please your Honours. The question in this appeal is whether the so-called 14-team term was an exclusionary provision within the meaning of section 4D of the Trade Practices Act.
GLEESON CJ: Where is the most convenient place to find that term in the papers?
MR MEAGHER: It is set out in paragraph 21 of our written submissions.
GLEESON CJ: Where do we find the term of the contract in the papers? I want to see the term in the context of the contract.
MR MEAGHER: It is volume 10 or 11, your Honour.
KIRBY J: Some time I would like to see the letter that was sent to Souths that they had missed out. That is referred to on 3434 paragraph 16 of Justice Heerey's opinion.
MR MEAGHER: Your Honour, the precise formulation of the term evolved over the period from December 1997 through to May 1998 when the final form of agreement, the merger agreement, was executed between the parties. The merger agreement is set out in volume 12 of the appeal books. It commences at page 2518. The relevant clause is clause 7 which commences at page 2529. Souths did not contend and, as we understand it, does not contend that the whole of that clause constituted the so-called 14-team term. There were particulars provided of the - - -
GLEESON CJ: If we could just stick with the language of the statute for a moment, what we need to identify is the provision. Section 4B is about a provision of a contract. What is the provision? I presume the contract is that which you have just taken us to.
MR MEAGHER: The provision which was pleaded is the provision in clause 7.9. As I indicated to your Honours, we have set out in our written submission the references to the pleaded term. But clause 7.8 provided that before 1 October 1999 there must be no more than 14 franchisees and then 7.9 provided that:
In a 14 team NRL Competition, there will be no less than six teams, and a maximum of eight teams, from Sydney. Conversely, there will be no less than six teams, and a maximum of eight teams, from regions outside Sydney.
GLEESON CJ: Now, the principal object of the contract, as distinct from the provision, was to implement a merger, is that right?
MR MEAGHER: To implement a merger which had a particular result, namely a competition conducted by the merged entity which would be sustainable in the medium to long term.
GLEESON CJ: And that is referred to in recital B on page 2521, is that right?
MR MEAGHER: That is so.
GLEESON CJ: Now, in terms of section 45 of the Act, did anyone contend at any stage that that fell within section 45(1)(b) of the Trade Practices Act?
MR MEAGHER: No.
GLEESON CJ: But the entire purpose of the merger was to get rid of the competition between the two competitors, was not it?
MR MEAGHER: Yes, but in a context where both parties had formed the view that that competition - that is the competition between the two competitions - would not survive in the medium to long term.
McHUGH J: Well, that is what happens in price wars, where if you get together to put an end to the price war you are likely to run foul of Part IV.
KIRBY J: Justice Heerey mentions (b) but it is not then developed. Could we ignore it in the way the matter proceeded below or not?
MR MEAGHER: In my submission, yes. The way this case was conducted below was solely by reference to an allegation that the 14-team term was an exclusionary provision and thus - - -
GUMMOW J: .....(2)(a)(i) all that was pleaded, was not it?
MR MEAGHER: Yes.
GUMMOW J: So it was the making - - -
MR MEAGHER: It was the making of 45(2)(a) - - -
GUMMOW J: Not the giving effect to?
MR MEAGHER: Or the giving effect to under 45(2)(b)(i). If I could just say this in further response to what your Honour put. In an analysis involving an allegation under 45(2)(a)(ii) would necessarily involve a market analysis, and there was no market analysis undertaken. The inquiries below were solely as to purpose for inclusion of the provision.
GUMMOW J: Yes. If you could bring yourself within the exclusionary provision, you are advanced, in a sense, that you do not have such a difficult case and you do not have to get into markets.
MR MEAGHER: One does not have to engage in a market analysis at all and, indeed, there really might be more than one possible market analysis which would need to be undertaken in a context of the conduct of competitions which are designed in part to be sold to television to be viewed by spectators.
GLEESON CJ: Now, the competitors who entered into this agreement were which of the parties referred to on page 2521?
MR MEAGHER: The Australian Rugby Football League and, I think, strictly National Rugby League Investments Pty Limited, they were the two entities which were conducting the competitions. The Australian Rugby Football League Competition was conducted on its behalf by the New South Wales Rugby League and the National Rugby League Investments was a subsidiary of News Limited. Perhaps I should correct that. I think, on reflection, that the party conducting the Super League Competition was Super League, itself.
KIRBY J: Investments is not a party to the agreement that you have taken us to.
MR MEAGHER: Yes, it is. NRLI, your Honour, is a party to the merger agreement.
KIRBY J: I see, yes. It is the fourth, yes. You said "Australian" and I was looking for Australian International.
MR MEAGHER: So it is the ARL and either Super League or NRLI, as there indicated, who were the parties conducting the competitions.
GLEESON CJ: So the provision that fell foul of section 4D and 45(1)(a) was the provision that there would be a maximum of eight teams in the new competition.
MR MEAGHER: No. If your Honour goes back to clause 7 - I should have included 7.5 - 7.5 stated that:
No more than 14 teams will participate in the 2000 NRL Competition on varying terms depending on the level of satisfaction of the franchise criteria -
and 7.9 said that in that competition there would be a split between regional and Sydney teams, essentially, 6:8 or 8:6. Now, those two clauses, 7.5 and 7.9 - - -
GUMMOW J: Plus 7.1 which gives you the covenantal parties - - -
MR MEAGHER: Yes, but the formulation of the pleaded 14-team term encompassed what is said by clause 7.5 and 7.9.
GLEESON CJ: Now, in so far as that provision was going to operate to keep out, that is to exclude from the 2000 competition teams, presumably it would operate to exclude to any team that wanted to be in the competition?
MR MEAGHER: Which was not selected?
GLEESON CJ: Yes, so it would exclude, for example, a team of barristers. If a group of enthusiastic barristers got together and formed a rugby league and called themselves the "Legal Eagles" and said, "We want to play in this competition", that provision would exclude them.
MR MEAGHER: Yes.
GLEESON CJ: And the operation of that exclusion would be no different than the operation to exclude South Sydney or any other team that wanted to be in the competition and could not be.
MR MEAGHER: Yes.
KIRBY J: The only difference was that Souths was extant and was operating and had players and presumably facilities and - a running business and as a corporation.
MR MEAGHER: That is so. Could I just make one point, your Honour. Your Honour uses the word "exclude". We would stress that the position between the various clubs who were participating in 1997, 1998 and 1999, was that none of them had a right to participate in the year 2000 so that in a sense the exclusion is more correctly described as a selection against them as an applicant to participate in 2000.
GLEESON CJ: What I am endeavouring to understand is the legally relevant difference, if any, between keeping out a club that had previously been in the competition and keeping out, for example, a new club that wanted to be in it. What is the legal difference?
MR MEAGHER: In our submission there is no legal difference.
McHUGH J: So, if Lakes United and Newcastle wanted to enter the competition they would be excluded by this?
MR MEAGHER: If they sought to participate, they qualified to participate but were not included by some process which may have been a selection process, then they would be excluded by the operation of this clause in the same way that Souths was.
GLEESON CJ: I can understand why keeping out a team that had previously been in the competition would be more likely to cause trouble, but what I cannot understand at the moment is the difference from the point of the Trade Practices Act between keeping out a team that had previously been in the competition and keeping out any team that wanted to join the competition.
MR MEAGHER: Our case is, your Honour, that there is no difference. In that context, section 4D is not attracted. The distinction between the case your Honour puts and a case which Justice Finn considered below was where it was proposed that there would be selection criteria which would discriminate in a way to select against a particular club or a group of clubs, so that it might be said that the operation of the limit, together with the proposed operation of selection criteria, would produce the consequence that a club or a group of clubs would not be permitted to participate.
McHUGH J: But, Mr Meagher, this discussion only indicates, to my mind, the importance of the point made in paragraph 37 of the intervener's submission. You do not take any point about that, and one's approach to the construction of certain parts of this section may depend upon how one works it out in respect of other parts. On one view, you can give these provisions a very liberal construction - as contended for by Souths - but on the understanding that these two entities were not in competition, in any relevant sense, in the year 2000, and would not have been in competition because of the significance of the 14-team term. Now you argued that point twice below.
MR MEAGHER: Well, your Honour, with respect, the inquiry that section 4D(2) addresses is whether they would have been in competition in the absence of the relevant provision, so that the inquiry is whether, absent here the merger, these parties would have been in competition with respect to the same services. Now, the argument which was put below was that one aspect of the characterisation of the services was that they were to be delivered in 2000, and that the reality was that neither of these two competitions would have survived - or, at least, that the ARL competition would not have survived to 2000 - so that the probability was that they would not have been in competition in any event. We were unsuccessful - - -
McHUGH J: But the argument that is put by the ACCC is, is it not, that the introduction of a 14-team term and the merger of the two competitions into a single competition made a fundamental change in the whole structure of what one was examining or one has to examine for the purpose of 4D? Now, at the moment anyway, we have submissions from the ACCC on the record; Mr Jackson does not want us to deal with it; they are going to have to deal with it at some stage; but at some stage I would also like to know what you have to say about this.
MR MEAGHER: Your Honour, we do not press the competition point before this Court. We have not raised it as a ground of our appeal and we do not press it.
GLEESON CJ: What do you mean?
McHUGH J: So if I come to the conclusion that you should have won in the Full Court, nevertheless, I am entitled to dismiss your appeal? That is to say, if I come to the conclusion that both Justice Finn in the Full Court got it wrong on the competition point and you should have won, nevertheless, I am entitled to dismiss this appeal, if I am against you - - -
MR MEAGHER: If your Honour is against us on the other points, that would follow from the grounds that we have raised.
McHUGH J: Thank you.
KIRBY J: But you say it does not arise because of the clause but for the provision of any contract or at least you accept that now in this Court?
MR MEAGHER: In the way that Justice McHugh put the point to me in argument, yes, your Honour. It is not as simple as simply saying they would not have been in competition because the 14-team term would have resulted in the merger and the merger would have resulted in one competition rather than two. The inquiry is as to whether in the absence of the 14-team term and, therefore, the merger, they would nevertheless have been in competition. The point we raised below was one which turned on a consideration of what the position would have been in 2000 if the two competitions had proceeded, absent merger, and we failed on that point and we do not seek to agitate it here.
KIRBY J: I asked, and it does not have to be done now, if you would direct me to the letter that was sent to Souths telling them, in the words of Justice Heerey, "they missed out". It is a sort of somewhat soft way of telling them that they were not successful but - - -
MR MEAGHER: I will get the reference to that for your Honour, I do not have it immediately at hand.
KIRBY J: Not necessarily now, but I would like to see how the news was broken to them.
MR MEAGHER: Your Honours, before going to the provisions of the Act, could I just indicate briefly what our position is in relation to the issue on the appeal.
The inquiry called for by section 4D(1)(b) is one of fact. It inquires as to the correctness or otherwise of a single, factual proposition, and in this case it is to be answered by reference to the uncontested findings of the trial judge. If one was to paraphrase the question, it is whether a substantial purpose of News and ARL for including that 14-team term in their arrangement was to prevent supply of what are described as "competition organising services" to Souths or to a class or group of clubs which included Souths critically, as distinct from any other club or group of clubs. In that context the purpose of the provision which is what section 4D operates upon, we accept is the effect or result sought to be achieved by the inclusion of the provision in the arrangement.
KIRBY J: What do you say was the purpose properly classified?
MR MEAGHER: To produce a unified competition which would be sustainable in the long term in circumstances where the parties had separately arrived at the conclusion that the two competitions could not survive and that the existence of the two competitions was causing damage to what is described globally as the game of rugby league.
KIRBY J: I can understand that but we had a case recently where a judge asked in respect of the jury, what is the magic in 12? And the question remains what was the magic in 14 which was a non-negotiable number, given that it came down from 16?
MR MEAGHER: Each of the parties - - -
KIRBY J: Was it related to the - it was probably a conflict. As I read the material it was that they had to be home and away, they had to be of a certain quality, they had to reduce the Sydney teams, they had to be of a sufficient number for the media presentation of the competition. But at some stage, given that you are propounding that the majority got wrong the purpose, I would like to know what you say was the real purpose properly classified under the Act? Why did it have to be 14? What was the magic in 14?
MR MEAGHER: I will take your Honour at some stage in the near future to the relevant findings of the trial judge, but could I point out to your Honour that the findings of the so-called majority in the Full Court, Justices Merkel and Moore, were as to different purposes. Indeed, Justice Moore's purpose was what might be described as an inclusive purpose and Justice Merkel's is what might be described as an excluding purpose, and one analysis - the two purposes are inconsistent. Justice Moore's is closer to that which was found by the trial judge and agreed in by Justice Heerey.
Could I return again to our overall position. The adjective "particular" identifies the person or class which is the object of the purpose of preventing supply so that if the term was included to prevent supply to that person or class rather than anyone else or the rest, then each is relevantly particular, so that in our submission that word has nothing to say about the specificity with which the members of a class are identified or identifiable. It describes them as the objects of the purpose which is the prescribed section 4D purpose and it follows in our submission that whilst for analysis it assists to consider questions of purpose separately, ultimately, the question posed must be considered as a whole and there must be a personal class which is the object of the prescribed purpose. That is the way that the matter was approached by Justice Finn and Justice Heerey and to some extent Justice Merkel, at least in stating the relevant principle, and it is also the way in which the question has been approached by the Full Court of the Federal Court in a recent decision in Rural Press v ACCC which we have included.
GUMMOW J: Is there a special leave application in that?
MR MEAGHER: As I understand it there is not at the moment but it is anticipated that there may be.
McHUGH J: The intervener says that case was wrongly decided.
MR MEAGHER: We see that, your Honour, and we also observe the position the intervener takes with respect to the question whether particular requires some notion of being aimed at or being the object of the purpose is a point which was conceded before the Full Court in the Rural Press decision but ACCC seems to want to agitate it further before this Court.
KIRBY J: Could you help me because I am not entirely aware of all of the jurisprudence in the Federal Court. The word "boycott" appears in the marginal note, does it not, or the heading?
MR MEAGHER: Yes.
KIRBY J: Under - my recollection of the Acts Interpretation Act says that that is not part of the Act.
MR MEAGHER: That is so.
KIRBY J: But Justice Heerey refers to "boycott" - indeed he refers rather unkindly, I thought, to "Captain Boycott" and I just do not know what the status of boycott is. Is it part of the case.
MR MEAGHER: It is not a word that is used in the legislation and in fact the question whether section 45 should be addressed by reference to notions of primary boycott or secondary boycott was considered by this Court in Devenish v Jewel Food Stores 172 CLR. I will not take the Court to it. We accept that the words have to be construed without regard to any preconceived notions of what a primary or secondary boycott is but we, nevertheless, say that the words make it clear that they focus upon conduct directed to specific people or groups of people who become particular.
Could I, before taking your Honours to the provisions of the legislation, just take your Honours briefly to some of the material which preceded the introduction of these sections. The current form of section 45 and section 4D and section 4F was introduced following the Swanson Report in 1976. In the previous form of section 45 prohibited the making or giving effect to of contracts in restraint of trade or commerce which was a similar prohibition to the prohibition in section 1 of the Sherman Act.
Your Honours may recall that the meaning of section 45 was considered again by this Court in Quadramain and views were expressed as to its relationship to the common law doctrine and as to the limitations of that doctrine. There then followed the Swanson Report. We have provided your Honours with a copy of that in tab 1 of the supplementary materials. I would like to take your Honours to one paragraph of the report.
If I could ask your Honours to go to page 32. In paragraph 4.115 the authors indicate that they outline in the following paragraphs their views on what should replace the current form of section 45. Then, in paragraph 4.116 the report addresses what is described as:
a collective boycott, ie an agreement that has the purpose of or the effect of or is likely to have the effect of restricting the persons or classes of persons who may be dealt with -
and it is said that that:
should be prohibited if it has a substantial adverse effect -
Now, there are two respects in which the recommendation of the Swanson Report was not implemented in section 45 and section 4D. The first is that section 4D operates only if the agreement has the purpose of restricting dealings. It does not operate in terms in circumstances where the provision may have that effect.
Secondly, the qualification to the prohibition suggested by the Swanson Report, namely that it have a substantial adverse effect on competition, again was not implemented.
KIRBY J: The European Union also has effect, does it not? I think that is mentioned in one of the judgments. That is an important point of distinction for your case in our Act.
MR MEAGHER: It is. One finds when we go to the provisions that the notions of purpose and effect are used in the legislation. In section 4D in the relevant part it is only the purpose of the provision to which attention is directed. We have also given your Honours copies of the relevant reading speech and the explanatory memorandum. The second reading speech is at tab 3. I will not take your Honours to the terms of it. The explanatory memorandum is at tab 5. If I could just take your Honours to paragraph 10 of that. It provides with respect to boycotts:
The Bill contains special provisions for the prohibition of collective boycotts. Collective primary boycotts (where the boycott seeks to restrict the dealings of the parties with the target person) are prohibited as "exclusionary provisions" . . . Collective secondary boycotts (where the boycott seeks to restrict the dealings of persons, other than the parties, with the target person) are prohibited where they have or are likely to have a prescribed effect - new section 45D.
As I indicated to your Honours earlier, this Court in Devenish considered an argument that fixed upon the use of those expressions or the meaning of those notions of primary and secondary boycott as a basis for limiting the words of the statute. That argument was rejected and we do not seek to put a similar argument here. We accept that the legislation is remedial and that it should be given whatever fair meaning its language will allow, subject to two matters which we submit have to be taken into account. The first is that a breach of these provisions exposes the parties to significant pecuniary penalties. The relevant provision is section 76. They are civil penalties but nevertheless significant. Secondly, the provision should be construed in a way which produces certainty if it can. That factor is recognised by this Court in the judgments in Melway in the judgment of the majority in paragraph 8 and in your Honour Justice Kirby's judgment in paragraph 91.
GUMMOW J: One of the things Mr Jackson says is that you have to look at this bearing in mind the authorisation provisions too. How do they fit in?
MR MEAGHER: The authorisation provisions plainly permit the entry into or giving effect to agreements containing exclusionary provisions if authorisation is sought and granted.
GUMMOW J: But what are the criteria for the authorisation?
MR MEAGHER: It is contained in section 90(8). Section 88(1) provides for the Commission to grant an authorisation. The relevant factors to be taken into account are set out in section 90(8). The Commission has to be satisfied:
that the proposed provision or the proposed conduct would result, or be likely to result, in such a benefit to the public that the proposed contract or arrangement should be allowed to be made . . . as the case may be - - -
GUMMOW J: The chances of you getting authorisation here look pretty slim.
MR MEAGHER: I must say I have not considered whether those chances were or were not.
GUMMOW J: It is all part of the one legislative scheme. People come up here and they focus on two or three words. I am not saying you are doing it but it happens all the time. We never get taken to the whole legislative scheme.
MR MEAGHER: Well, your Honour, we accept that there are authorisation provisions there, but that does not have the consequence that one reads the words of section 4D or 45 in a way that does not reflect their ordinary meaning. We acknowledge that in commerce parties are going to want to enter into arrangements which contain exclusionary provisions and, in those circumstances, if they are advised of that result, then they apply for an authorisation.
CALLINAN J: Mr Meagher, you might well get an authorisation if you have regard to the fact that you might not just look at Rugby League; you might look at all of the sports, particularly the winter sports, and they are all in competition with one another and, in consequence, it may be necessary and in the public interest to have a very high standard competition in one particular code.
MR MEAGHER: Indeed, your Honour, but the factors which drove the parties to this merger were factors which, in a sense, were directed as much to the public benefits of the merger as to the benefits to the parties in the sense that it was perceived that the national competition would not proceed in the absence of a merger in the medium term.
CALLINAN J: The most intense competition appears to be taking place, even to an ordinary observer, between all the codes, between Rugby Union and Rugby League and Australian Rules. That is where the real fights probably are.
MR MEAGHER: The competition that was, in part, the focus of inquiry below was the competition for what are described as competition organising services and the provision of team services rather than more broadly, although any authorisation would have had to look more broadly.
Could I take your Honours to the legislation and go first to section 45. By subsection (2) it prohibits the making of contracts containing exclusionary provisions and the giving effect to such provisions. Your Honours will see that in subsection (2)(a)(ii) it also prohibits the making of contracts if a provision of the contract:
has the purpose, or would have or be likely to have the effect, of substantially lessening competition;
and in subsection (2)(b) there is a similar distinction between purpose and effect. Those words in those provisions are used in contrast and they bear different meanings. The purpose means, not the motive, but the effect which it is sought to achieve by the provision, whereas the effect is the end in fact accomplished or achieved. That distinction is referred to in the judgment of the Privy Council in Newton v Commissioner of Taxation, which is referred to by Justice Heerey at paragraph 66 of his judgment.
KIRBY J: What is the principle that you get from the Privy Council decision?
GUMMOW J: You get the construction of section 260 of the Tax Act.
MR MEAGHER: It is a passage which describes, in our submission, correctly, the distinction between the meaning of purpose and effect. One looks at the result; the other looks at the intended result. Looking at the other provisions of section 45, subsection (3) identifies the market in which the provision must have the purpose or effect. That, as I indicated earlier, was not the subject of debate in this case. Then subsections (5) to (9) are just exceptions to the operation to the prohibition, and your Honours would be aware that the exception in subsection (6) is the subject of a case which is now before this Court, the ACCC v Visy Board or Visy Paper.
McHUGH J: Has this Court ever held that for the purpose of 4D "purpose" refers to the subjective view of the makers of the arrangement as opposed to it encompassing an objective test which is imputed to the arrangement?
MR MEAGHER: This Court has not, in relation to section 4D. It has addressed a similar question in relation to section 46, and as to the use of the word "purpose" in section 46, and in Queensland Wire and Melway held that "purpose" carries with it the notion of an intent to achieve the result spoken of. The passage is in a judgment in Queensland Wire, of Justice Toohey, which is cited by the majority in Melway.
KIRBY J: Could I explain a little difficulty I have with that. I can see the point you are making, that we have to try to be consistent in the way the statute is construed, but the object of the Act is not the keeping of the consciences of corporate executives, it is the protection of competition. That seems to run against the notion that your search is for the - as it were - subjective intentions of the executives of the parties in this case, and takes you, rather, to what, objectively, their purpose is for the relevance to the objective of the statute, which is the protection of competition.
MR MEAGHER: With respect, your Honour, no, in relation to an exclusionary provision. There is what might be described as an absolute prohibition in relation to the making or giving effect to an exclusionary provision, which does not turn on competitive purpose or effect. As I pointed out, the Swanson Report suggested otherwise, but it does not turn on competitive purpose or effect, nor does it turn on - - -
KIRBY J: I can see that point, but that is a point in your favour.
MR MEAGHER: Nor does it turn on whether the object - - -
KIRBY J: It is all this theory in the Federal Court that the search is for subjective motivations, wishes, desires, of corporate executives. Now, the devil himself knoweth not those things, and therefore one would think that you would look at the word "purpose" in the context of a statute which is aiming at protecting competition. Therefore you would look at the object, rather than what was going through the minds, at a particular time, of particular executives.
MR MEAGHER: There is another provision of the statute which has to be taken into account, and that is section 4F, which expressly addresses the meaning of purpose of a provision. I was going to take the Court to that shortly. I will take the Court to that now. Section 4F(1) provides that:
(a) a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, or a covenant or a proposed covenant, shall be deemed to have had, or to have, a particular purpose if -
it was, "included in the contract . . . for that purpose".
KIRBY J: Well, that "is to be included" seems to be talking in objective terms - not if the parties intended to include it, but if, objectively, the court says that it was included for that purpose.
MR MEAGHER: It is focusing, in our submission, on the reasons why the provision was included by those who included it, and that is certainly how the expression - specifically having regard to what is said by section 4F - has been construed in a number of authorities, both at first instance and in the Full Federal Court, not in this Court.
McHUGH J: But it is the provision that must have the purpose - - -
GLEESON CJ: Which is in contrast with section 46, which deals with the purpose of a corporation. There is a difference, is there not, between the purpose of a corporation or an individual on the one hand, and the purpose of a provision of a contract?
MR MEAGHER: There is, your Honour, but - - -
McHUGH J: And 4F itself makes the distinction, because 4F(1)(a) speaks about the purpose of the contract and so on, and 4F(1)(b) talks about a "person" who is deemed engaged in things for a particular purpose.
MR MEAGHER: It draws that distinction because the legislation in various sections draws distinctions between conduct engaged in for a purpose and provisions having a purpose. But when one is looking to the question, "Why was a provision included?", one, in our submission, does not merely answer that by reference to the effect of the provision. One answers that by an inquiry as to what was it intended to achieve by its operation. Now, in a context where, as I have submitted, the - - -
GUMMOW J: Intended by all the contracting parties? That is a problem.
MR MEAGHER: That is a problem, your Honour, which was recognised by the Full Court in Pont Data.
GUMMOW J: Yes.
MR MEAGHER: But it is a problem which one does not directly face on the facts of this case and it may be that as we - - -
GUMMOW J: That is no help to us, though.
MR MEAGHER: There would be cases, your Honours, where the parties are ad idem about the way in which a provision is to operate and why it is included. There will be other cases where one of the parties will have a view about it and the other will be indifferent or the other will adhere to the view of the first party. In those circumstances, it may be difficult to identify the purpose of the provision, but nevertheless it is a task which is capable of arriving at a result and in Pont Data the court did arrive at a result.
GLEESON CJ: But one well-recognised distinction and one that was certainly applied in relation to section 260 of the Income Tax Assessment Act was distinguishing between purpose and motive.
MR MEAGHER: Yes.
GLEESON CJ: The motive of a person who entered into an agreement, arrangement or understanding to avoid tax might have been to increase his or her disposable income so that it could be given to charity - that was utterly beside the point - and I thought the Privy Council said that you find the purpose of a contract in its effect.
MR MEAGHER: The Privy Council says in the context of section 260 that ultimately the search may be as to its effect, but the words of section 260 were very different, your Honour. They talked in terms of an arrangement - - -
McHUGH J: But you were citing Newton's Case to us a while ago and what Justice Gummow said to you is that all it said was what those words meant in 260.
MR MEAGHER: With respect, your Honour, I should take the Court then to the relevant passage. It is in 98 CLR 2. If your Honours go first of all to page 6, there is set out section 260 which fixes upon a:
contract, agreement or arrangement made or entered into, orally or in writing, whether before or after the commencement of this Act, shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly - - -
GLEESON CJ: Yes, but the passage I had in mind is at the top of page 8, lines 6 and 7.
MR MEAGHER: As I submitted to your Honour earlier, in section 4D one is concerned only with purpose and not with effect. We accept that there may be a distinction between purpose and motive, but the distinction is satisfied by inquiring as to the effect which was sought to be achieved by the operation of the provision. In that way one focuses on the purpose of the provision. Was it intended to operate to produce a specific result? The parties may or may not have had a number of different motives for having it operate in that way, but ultimately the inquiry is as to whether it was intended to operate in a particular way. That is our submission as to how the purpose of a provision is to be arrived at, particularly having regard to what is said in section 4F.
If the position was otherwise, your Honours, and one was simply looking at effect, the distinction between purpose and effect would be put to nought. It is a distinction which is made in the legislation with respect to conduct in section 45A, in section 45D, in section 45DA - - -
GLEESON CJ: But if you are willing to put motive to one side, how does your approach to the concept of purpose apply to the facts of this case?
MR MEAGHER: Justice Heerey found that the reason the parties fixed upon the number 14 as the limit to the number of teams in the competition in 2000 was to produce a number of related results concerned with a viable single competition.
GLEESON CJ: But whatever number they fixed on was going to exclude somebody, was it not?
MR MEAGHER: He found that in addition it was a foreseen consequence of the term that in certain circumstances some clubs may not be supplied but he found that that was not a reason that the clause was inserted, to produce, and indeed - - -
GLEESON CJ: Am I not right in thinking, and correct me if I am wrong, if they had fixed on the number 24 that would have had a potential exclusionary effect?
MR MEAGHER: That is so.
GLEESON CJ: If they fixed on 34 it would had a potential exclusionary effect?
MR MEAGHER: That is so.
GLEESON CJ: What is the difference between the exclusionary effect of the number 14 and the exclusionary effect of the numbers 24 or 34?
MR MEAGHER: In our submission, there is no difference and the that trial judge and Justice Heerey were of the same view, that the parties had to choose a number once they decided which would be the number of teams in the competition. The competition had to have a number.
GUMMOW J: What was to be the temporal duration of this arrangement? For how long was it going to be? I know it had to be got down to 14 but how long was it going to stay at 14? Forever?
MR MEAGHER: The agreement is, I think, so long as the arrangement between the parties subsists, so forever in the absence of further agreement.
GUMMOW J: Yes, and the contract itself was not one that had expressed a term, was it, of length?
MR MEAGHER: I am sorry, I did not hear what your Honour said.
GUMMOW J: There is no provision for length of this arrangement in the contract?
MR MEAGHER: I do not think there is, your Honour, I will check that.
GUMMOW J: So it is terminable on reasonable notice between the contracting parties, is it?
MR MEAGHER: It probably would be terminable on reasonable notice and the question of what would be a reasonable term may be difficult to discern.
CALLINAN J: The franchises or licences were for limited periods, were they not? Reviewable, in effect?
MR MEAGHER: The arrangements between the clubs and the competition organiser are for periods of between one and five years.
GLEESON CJ: The practical difference, as distinct from the legal difference, between fixing the number 14 and fixing the number 24 was that by fixing 14 you were going - if I can use a literal word - you were going to leave out at a future time, unless they had agreed to merge themselves in the meantime, some people who had previously been franchisees, some clubs who had previously been franchisees?
MR MEAGHER: That is so.
GLEESON CJ: What, in your submission, is the significance, if any, of that practical consideration?
MR MEAGHER: The relevant inquiry is, accepting that as a possible outcome if clubs did not drop out or they did not merge that there would be some who were not be included, the inquiry was whether those who might ultimately not be included were in some way targeted by this provision when it was included.
GLEESON CJ: I am not suggesting the answer is none but what is the difference, legally, between clubs that had previously been in the competition and clubs that never got in to these competitions, like the club in the Hunter River area that Justice McHugh referred to earlier or some completely newly-formed club?
McHUGH J: Melbourne was an illustration, was it not?
MR MEAGHER: Yes, it was, although I am not sure if I can adopt what your Honour puts as fairly reflecting the facts of this case because in December 1997 the parties contemplated that in 1998 there would be 20 teams in the competition, one of which was Melbourne which was a new club, the others of which had participated in one or other of the other competitions, and the parties that contemplated that, in effect, those 20 teams would move forward in what was described by some of the witnesses as a rationalisation process, reducing to 14.
GLEESON CJ: But in point of legal analysis the consequence of fixing any number, X, is going to be to keep out any clubs that are above that number.
MR MEAGHER: That is so.
GLEESON CJ: They may be old clubs, they may be new clubs, they may be clubs that have played in other competitions, they could be clubs of any kinds. What I want to understand is in point of legal analysis, what is the difference between keeping out clubs that had previously been franchisees and other clubs, such as newly formed clubs.
MR MEAGHER: In terms of legal analysis, there is no difference, your Honour.
CALLINAN J: Well, Mr Meagher, is that right? If you look at 4D(1)(a) of the Act, would you say that those teams that had never been in the competition before were competitive with each other in terms of paragraph (a)? They would not have been, would they? So do not you look at the actual teams that were competing in the same competition or competitions?
MR MEAGHER: No, in this case, your Honour, the inquiry as to competition is as between - - -
McHUGH J: ARL and NRLI, is it not?
MR MEAGHER: And Super League, yes.
GLEESON CJ: The two or more persons who are competitive with each other - - -
MR MEAGHER: Yes, they are my clients. So 4D has nothing to say about the objects of the purpose. They could be competitors, they could not be competitors. In other words, 4D, in a sense, does not fix upon any competitive consequence of the conduct. It fixes merely upon conduct which is directed to prevent the flow of goods or services to particular persons or particular groups of people.
McHUGH J: To or from?
MR MEAGHER: To or from. So that whether the clubs are clubs which were participating in earlier years or whether they were new clubs who were excluded - to use your Honour's expression - by the operation of this term, the legal significance only arises if those who were excluded were intended to be excluded by the term or by the operation of the term.
Could I give your Honours an example of the distinction between purpose and effect in operation. The decision of Justice Toohey in Hughes v Western Australian Cricket Association throws up the question usefully because there - - -
McHUGH J: Yes, but what does it stand for? I mean, counsel come along and tell us all the facts of a case and context verse details later. What does it stand for?
MR MEAGHER: It stands for the proposition that one directs attention to the reason why the provision was included and upon whom it was intended to operate because the provision in that case was a provision in general terms which was capable of operating on any players who played in non-recognised games without consent. But the reason the provision was altered in the way it was, was to specifically prevent Kim Hughes and three other cricketers from participating in district cricket.
So that if one had looked merely at the effect of the relevant provision which was a rule in some cricket by-laws, one might have come to the conclusion that it was to operate generally and it had no effect on a specific person or group of people, but the inquiry was addressed specifically to the reason why it was included and who it was intended to operate upon and the answer was, "The four cricketers."
GLEESON CJ: Well, now, that may provide part of the answer to my question. It may be said against you by Mr Jackson or Mr Young that the difference between clubs who had previously been in the competition, or one of the competitions, and clubs that had never been in one of the competitions or clubs that have never yet been formed is that this provision was aimed at the existing clubs and at reducing their number.
MR MEAGHER: Accepting that, the question then was - it was, in effect, therefore capable of operating upon at least the existing clubs with the consequence your Honour indicates. The question is was it intended to operate in a way which discriminated in some way or was it capable of operating at the time it was included on all of them or any of them. That, in a sense, is the critical distinction.
GLEESON CJ: I may not have the figures right, and correct me if I am wrong, but what this provision did was to say, "There are 20 of them now and there is going to be only 14 in the future"?
MR MEAGHER: That is so, in two years time, and it said that even at the early stage there was a complex arrangement which gave priorities to some clubs and gave priorities to merged clubs and then regional clubs and then Sydney clubs, and provisions which provided for incentives to clubs which merged, clubs which moved from Sydney to a region were given priority. There were a host of different events which could have occurred between December 1997 and the end of 1999 when this limit was to come into effect.
GLEESON CJ: But Mr Jackson then says the case against you is simple. If two competitors get together and say, "We are now supplying services to 20 franchisees that is not good business. We will agree between ourselves that we will restructure our operations and one of the things that we will do that in two years time we will reduce the number of people to whom we supply our services to 14."
MR MEAGHER: With the consequence that in two years time some clubs are supplied and some are not. The question then is, was the clause included to prevent supply to a specific club or to a specific group of clubs having some characteristic which made them class.
McHUGH J: But why? Take what I would have thought was the paradigm case for 4D. Suppose Qantas says to Virgin, "We have ten flights a day to Canberra. You have three. Let's form a new company and we will only supply eight flights a day to Canberra." Surely that would be the paradigm case to the application of 4D, would it not? You are not dealing with any particular people; you are talking to the passengers as a class in the future.
MR MEAGHER: But there is no distinction in the example your Honour gives between the way in which the clause operates on one potential passenger rather than any other potential passenger. That was the same with respect to this limit. It was capable of operating, if you like, to have its consequence of preventing those in excess of 14 from receiving supply on at least any of the 20 clubs.
McHUGH J: I know there is not much distinction, but it does seem to me that is the sort of case that 4D applies to. The arguments that you should only have 14 teams, or in the Qantas/Virgin example, only eight flights, may be arguments that could be used in support of an authorisation application, but why are you not caught by 4D?
MR MEAGHER: In this case?
McHUGH J: Yes, in both cases.
MR MEAGHER: Because there was no club or group of clubs to which there was an object of preventing supply which provided a or a substantial reason for including this term.
GLEESON CJ: There was a group of 20 of them to whom the supply was going to be reduced.
MR MEAGHER: In relation to the group of 20, your Honour, the true analysis was that in 1999 when the selection was made if it was necessary, there would as a result be some of them who were supplied and others who were not supplied at all.
GUMMOW J: So?
MR MEAGHER: That is the consequence of the term. It is said against us that that is sufficient. We submitted, and Justice Heerey held, that it is necessary to ask whether when it was inserted it was inserted with the intended result of excluding a particular club or a particular group.
GUMMOW J: Does your construction depend upon this notion of intention?
MR MEAGHER: It depends upon - - -
GUMMOW J: In other words, if one looks at it objectively, are you in difficulties?
MR MEAGHER: Not in this case, your Honour, because of the requirement - - -
GUMMOW J: I just wondered why you used "intention", that is all.
MR MEAGHER: I was seeking to underline the meaning which we seek to give to "purpose", but in this case 4D also requires that there be some group or person who can be said to be the object of the provision.
KIRBY J: That is the second argument. We are concentrating on the first argument at the moment. My reading of the special leave transcript was that one of the reasons that got you up into this Court was to look at whether or not "purpose" had, as the Federal Court has held, the subjective element or had an objective element in this context.
MR MEAGHER: Your Honour, as I put earlier, the argument we seek to make does not separate "purpose" and "particular". In our submission, one has to look at the whole expression.
McHUGH J: One can accept that, but at some stage I would like to hear some submissions from you based on the major premise that the Federal Courts have it wrong when they talk about 4D having a subjective element as opposed to an objective element. I have to tell you at the moment my thinking is that it is an objective test.
MR MEAGHER: If it is an objective test, then one looks merely at the effect of the provision.
GLEESON CJ: No, the effect might misfire. You cannot defend yourself against an allegation that you have contravened the Act by saying the plan did not work.
MR MEAGHER: That, in our submission, is why one is required to look at the reasons of the parties, the subjective reasons of the parties.
GLEESON CJ: But the legislation refers to cause or effect partly because if it referred only to effect the legislation would not apply if the plan misfired.
MR MEAGHER: That is in relation to the second of the provisions struck by section 45 but in relation to exclusionary provisions, your Honour, that is not the provision. Section 4D does not say anything about effect, it is concerned only with purpose, so that the critical question is purpose, irrespective of whether the purpose miscarries or not.
GLEESON CJ: If two competitors who are supplying services to 20 persons say to themselves, for whatever reason, "This has to stop. In the future we will only supply those services to 14 persons", have they not entered into an agreement that contains a provision that has the purpose of limiting supply of services to a particular class of persons, namely, the 20?
MR MEAGHER: It limits supply to a class of persons, your Honour, but they are not particular because they cannot be distinguished from the rest.
McHUGH J: But why does it particularly govern classes as opposed to persons?
MR MEAGHER: It governs both.
McHUGH J: But why? Why is not the better reading of it "particular persons; or classes of persons"? Why would you talk about a "particular class" or "particular classes of persons"?
MR MEAGHER: Because, as I have sought to put, "particular" tells you that the provision and its purpose is directed to those persons or those classes, as distinct from everybody or the rest.
GUMMOW J: You might get some support from 4D(1)(b)(ii), I suppose, the reiteration of "particular" three times. Maybe it is three phrases, as it were.
McHUGH J: But why do you not read it as saying, "Well, the particular persons, BHP, Westpac, classes of persons, barristers, footballers"?
MR MEAGHER: We submit the natural meaning of it is that you construe it distributively. The adjective applies both to the persons or the classes of persons.
McHUGH J: What is the difference between a particular class of person and a class of persons?
GUMMOW J: That is your problem, is it not?
MR MEAGHER: With respect, no. The work which we say the word "particular" has is that it describes those persons or classes as the objective of the purpose. Section 4D(b) provides that:
the provision has the purpose of preventing -
supply not at large to anybody but to particular - - -
McHUGH J: To BHP or barristers.
MR MEAGHER: If it is directed to preventing supply to BHP then BHP is a particular person within the meaning of 4D(1)(b).
GLEESON CJ: But the focus not on preventing but on limiting. Now, if you are supplying services to a class of persons that are 20 in number and you decide that it does not make sense to supply that many and that you want to limit the number of 14, why are you not limiting the supply of services to a class, namely, the original 20?
MR MEAGHER: You may be. If I could just take up this point with your Honour. If a supplier supplies a fixed volume of services to 20 people and then decides to reduce the volume, leaves it to the 20 people to decide how the burden of the reduction is borne, then it may be that the provision has the purpose of limiting supply to that group or class and if they are treated differently from others, they may be a particular class. But in this case the provision is not intended to operate immediately. It is intended to operate in the year 2000 and it is intended to operate such that 14 will be supplied and others will not be supplied.
GLEESON CJ: I understand the relevance of that to the argument that Mr Young raises in his submissions - - -
MR MEAGHER: But it is also relevant to - when one looks at what the service is, relevantly here the service is to provide an organising service to a club in 2000 and these people are saying, "We won't supply more than 14. We won't have a competition, and thereby supply those services to more than 14 in 2000."
GLEESON CJ: When you bear in mind the rather special nature of the services that were being provided in this case, from one point of view the limiting of the supply of services was the very essence of the purpose and, no doubt your clients would say, it was a very good and sensible purpose, but we are not concerned with that.
MR MEAGHER: But the limiting of supply, as your Honour puts it, is really looked at in December 1997 in terms of an opportunity. That is they were saying that in 2000 there will be a more limited opportunity to participate in this competition, but ultimately in 2000, 14 would be supplied. It is not a question of limiting supply in 2000. It is really a question of whether supply is given or not, a question of prevention.
GLEESON CJ: But they decided - and they might have, for all I know, decided quite rightly - that it would be a better competition if it had fewer competitors. That is not a strange conclusion to reach in relation to an athletic competition, but how does it relate to the legislation?
MR MEAGHER: As I put, the question is whether they arrived at that limit for a purpose which included a purpose of not supplying a specific group, as distinct from arriving at a limit which was operating, or was capable of operating, on everybody or anybody.
KIRBY J: What was the classes of persons propounded by Souths in the court below? Was it the 20 or was it looking forward to 2000 any left over from the 14? In other words, anyone who did not merge, did not voluntarily liquidate or disappear and was left over. I thought it was the latter. I may be wrong.
MR MEAGHER: The class of persons was said to be the 1997 clubs, of which there were 19, if one did not include Melbourne, less those who were chosen to participate. So that the class was, in effect, those who missed out, although it was said that - - -
GLEESON CJ: That depends on whether you focus on the word "preventing" or the word "limiting". If you focus on the word "preventing", I can understand why the class would be the ones who are left out, but if you focus on the word "limiting", you might get a different result.
MR MEAGHER: But in relation to "limiting", the clause was capable of operating on the 20 clubs, that is including Melbourne, in the sense that if one assumed that the 20 clubs going forward were to be the base from which the 14 were chosen, the clause was capable of operating on any of them to produce the consequence that one or more were not supplied, or it could have the result that all of them were supplied, if one allowed for the probability that some would drop out and some would merge, as indeed happened. Ultimately, clubs dropped out and there was only need to select against one club, in the ultimate application of the criteria.
KIRBY J: That is why I would like to see the letter that says, in the neutral words of Justice Hely, "You missed out".
MR MEAGHER: Your Honour, it has not been reproduced in the appeal books.
KIRBY J: If it is not - - -
MR MEAGHER: In relation to this question of "particular" and the point which your Honour Justice McHugh was making, could I refer to tab 6 of our supplementary materials, which contains the explanatory memorandum for the 1986 Revision Bill. The words "or classes of persons" were inserted by the 1986 Revision Bill, following two decisions in the Federal Court. Those decisions are referred to by the Full Federal Court in Pont Data. If I could take your Honour to paragraph 15 and 16.
GLEESON CJ: Is "primary boycott" the expression that has been used about 4D, as compared with "secondary boycotts"?
MR MEAGHER: Yes, your Honour.
McHUGH J: Well, that tends to be against you, is it not?
MR MEAGHER: I did not read it as against us, your Honour. In paragraph 16 it is said to be:
amended to clarify that the provision includes particular classes of persons -
so that the adjective qualifies classes as well as persons. In relation to this question of purpose and whether it is subjective or not, could I take the Court to the decision of the Full Court in ASX v Pont Data.
GUMMOW J: Before we go to Pont Data, could we look at Justice Finn's judgment for a minute, at paragraphs [282] and [283]. It may highlight this problem, I think. It is in [2000] FCA 1541; 177 ALR 611 at 675, paragraphs [282] and [283]. Now, you say that is correct, I guess?
MR MEAGHER: Yes.
GUMMOW J: But it depends upon the construction of [283], does it not, as to purpose?
MR MEAGHER: Yes, it does.
GUMMOW J: Does it not also perhaps telescope impermissibly the difference between making and giving effect to? Making it in one year, giving effect to it two years later? Then applying notions of objective purpose at both stages?
MR MEAGHER: With respect, no, your Honour, because an exclusionary provision takes its definition from the purpose at the time it is included in the agreement, so that the inquiry is as to, we would submit, subjective purpose - to use that shorthand expression - at the time the arrangement is made.
GUMMOW J: Yes, but you are subject to an injunction at the moment, are you not?
MR MEAGHER: Yes.
GUMMOW J: What happened to that? Is that still in force?
MR MEAGHER: Yes, it is still in force.
GUMMOW J: The injunction restrains you from giving effect to the 14-team term. So I do not know quite what that means. It seems to mean you have to let them in.
MR MEAGHER: Well, on one view it did, but that question is not before this Court and, as your Honours would appreciate, Souths in fact are participating in the competition this year.
GLEESON CJ: Does it mean you have to let anybody else who wants to come in too?
MR MEAGHER: That does not necessarily follow, but to the extent that we would be in any way seeking to give effect to the 14-team term by excluding others, yes.
GLEESON CJ: In paragraph [283] that Justice Gummow referred your attention to, Justice Finn only talks about preventing supply of services. Was reliance placed by your opponents on the word "limiting"?
MR MEAGHER: Yes, it was, and that case was rejected by Justice Heerey and Justice Merkel, but accepted by Justice Moore, but on a basis which was not argued. I will deal with that.
GUMMOW J: There was a debate about whether it was argued.
MR MEAGHER: There was, and we can deal with the substance of the way it was decided, rather than the answer to that debate.
KIRBY J: Now, what does that last statement mean, because your second ground of appeal directly complains that matters were dealt with in the Full Court on a basis that it was not argued or pleaded in the Federal Court.
MR MEAGHER: We say that with respect to the way Justice Moore decided the case, and we rely on that ground, but we put other grounds at the forefront.
KIRBY J: So your complaint of procedural unfairness is against Justice Moore, not against Justice Merkel?
MR MEAGHER: That is so.
KIRBY J: I see. At some stage, I will be grateful if you will explain that, because I did not quite understand it on the written submissions. Not now, but when you get to it.
MR MEAGHER: It may be convenient - I was going to go to ASX v Pont Data 27 FCR 460. I will do that briefly.
KIRBY J: This is on which point? Is this on the subjective point, or on the - - -
MR MEAGHER: This is on the subjective point, your Honours. The relevant discussion starts at page 474. At the bottom of the page, there is reference to section 46, and at the top of page 475 - - -
GUMMOW J: Wait a minute, look at the bottom of 474:
There was no dispute that in s 46 "purpose" -
et cetera.
GLEESON CJ: That follows from the language of 46 which talks about the purpose of the corporation.
MR MEAGHER: That is so. Then, over the page there is reference to the passage from the Privy Council judgment in Newton v Commissioner of Taxation, the distinction drawn between "purpose" and "effect", then an observation at the end of the page, that:
s 260 is concerned with very different subject matter to that of s 45 of the TP Act -
And we would add that the wording of section 260 is different to the extent that it directs attention to the arrangement and to an effect or purpose which it has or purports to have.
Then the court, at the top of page 476, directs attention to section 4F:
Section 4F makes it plain that it is sufficient that a purpose was or is a substantial purpose . . . It also makes it clear that it is sufficient that the proscribed purpose was included in other purposes.
In its operation upon provisions stated to have a particular purpose, s 4F uses the words "the provision was included . . . This indicates that s 4F, in this operation, requires one to look to the purposes o the individuals by whom the provision was included in the contract, arrangement or understanding . . . therefore directs attention to the "subjective" purposes of those individuals.
There is then reference made to the difficulties which sometimes arise because the inquiry may be as to the purposes of parties which are not the same as between the parties. Then, at the bottom of the page:
But it would be an odd result if the details in s 4F only applied in the circumstances postulated by counsel . . . It would mean that, when dealing with s 45 in its primary "objective" mode, one was left without the guidance given by s 4F on such matters . . . of a plurality of purposes, and the sufficiency of a substantial purpose.
Then it is said:
Further, the "subjective" treatment of purpose in s 4F is consistent with the distinction drawn in s 45 itself between purpose and effect.
Which is a distinction commented on by Justice Toohey. For those reasons the court agrees that:
the references in s 45(2) to the purpose . . . are to be constructed as Toohey J indicated.
GLEESON CJ: I would have thought it is the following paragraph that you rely on.
MR MEAGHER: And then notes that "Section 4F is applicable to s 45(2)". Then, in the following paragraph, again your Honours see the way that the court there dealt with problems of identifying purpose as between the two parties to the arrangement.
McHUGH J: I appreciate the force of that reasoning but even - take a tax arrangement - it may have two purposes even though one looks at it objectively.
MR MEAGHER: If section 4D is construed as satisfied by identifying the objective purpose or the effect of the provision, then section 4D prohibits arrangements which may have no anti-competitive effect, which have no consequence on competitors of the parties to the arrangement.
McHUGH J: I was going to say that; on any view of it, it does?
MR MEAGHER: I am sorry, your Honour.
McHUGH J: It does that on any view of it.
MR MEAGHER: In our submission it only does that if there is concerted action to an end. It is designed to prohibit conduct which is concerted conduct between competitors which is directed to preventing supply or interfering with supply to third parties.
GLEESON CJ: Pont Data does not deny the distinction between purpose and motive. Now, leaving aside any question of motive in the present case, why was not there subjectively a purpose of limiting the supply of services to rugby league clubs who were the 19 or the 20 or whatever there were by reducing the number who could qualify for supply in the future to 14? There might have been perfectly good reason for doing that but why was that not the purpose?
MR MEAGHER: The purpose was to limit the number who would be supplied.
GLEESON CJ: Yes. So if you treat them as a class before the limitation operates on them, the purpose is to limit the services that will be supplied to them as a class.
MR MEAGHER: But they do not receive the services collectively. Some will be supplied, some will not be supplied. The effect is that if there are more than 14 who apply, some will not be supplied.
GUMMOW J: Sorry, could you say that again, Mr Meagher.
MR MEAGHER: The effect of the provision is that if more than 14 apply, some will be supplied and some will not.
McHUGH J: That looks at it from the point of view of the competitors, but what about looking at it from the point of view of supplying services?
MR MEAGHER: In our submission, one has - - -
McHUGH J: From the clubs, acquiring services?
MR MEAGHER: The position is the same. Services will be acquired from some but not from others if more than 14 apply.
McHUGH J: Yes, but it still limits the services that they either supply - I mean, one of the problems perhaps is talking about in abstract terms supply of services that dropped down to the concrete, supply of grounds - - -
GLEESON CJ: Money.
McHUGH J: - - - money, matches.
KIRBY J: Publicity.
MR MEAGHER: Those arrangements, if you like, are evidenced by and recorded in a franchise agreement or a contract with each club. Whereas in 1998 there may have been 20 such arrangements, in 2000 it was proposed there only be 14.
McHUGH J: But the competitors say to Souths, "We're not going to supply you with this particular ground to play on against such-and-such a club". Why is that not a limiting of the supply of the services which the competitors furnished?
MR MEAGHER: Those are not the facts of this case, your Honour. The effect of Souths missing out, the effect of the 14 team term and a consequence which the trial judge found these parties foresaw is that it is not supplied at all in 2000.
McHUGH J: Yes.
MR MEAGHER: There is no question of limiting services to Souths; it simply is not supplied. Take this example: two restaurant owners decide that they want to merge their business and, for one reason or another, they decide they want to limit the number of customers who they will supply by the new business to 30, but they are indifferent as to who the 30 are. That - - -
KIRBY J: That is not quite analogous, is it? It would be more relevant to say restaurant chains merge and remove certain franchisees who previously enjoyed benefits from the possibility of maintaining their business, maintaining their publicity and maintaining their employments, maintaining their access to income - - -
MR MEAGHER: These franchisees have no continuing rights to participate or to enjoy those advantages. In this case, ultimately the parties foresaw that a consequence of this term may be that some would miss out and they sought to address that consequence because it was not a consequence they wanted to achieve. The trial judge made specific findings to that effect because if a club was left out, its supporter base was lost - - -
McHUGH J: That is only a half truth, it is not? In the end, that is what they wanted to do. It was not something that they were very happy about, but right at the end of the day, that was what was going to happen. In fact, that is what did happen.
MR MEAGHER: It was an unwanted consequence, your Honour. This is not a - - -
GUMMOW J: There is a certain Uriah Heep about all this.
MR MEAGHER: This is not a case where there were different alternatives available to these parties to achieve the result they were seeking to achieve. Again, the trial judge made findings to that effect. They had to fix a number - - -
KIRBY J: I think you had better take us to those because that is the strength of your case, it seems to me. This is a problem of classification. You say the effect of this arrangement, okay, was to remove Souths, but that was not the purpose and the judge has classified the purpose and that is the strength of your case, it seems to me.
MR MEAGHER: Could I take the Court to our written submissions which summarise in paragraphs 19 and 20 some of the findings which the trial judge made. He held that this 14-team limitation was a defining characteristic of the competition and that it was arrived at - that is, that number was - for a range of objectives. They were to have one competition which was financially viable and sustainable to avert continuing damage to the game caused by reason of the two competitions to satisfy - - -
GUMMOW J: What does "damage to the game" mean? What is "the game" in the first place?
MR MEAGHER: The game is the game - - -
GUMMOW J: An abstract noun for something, is it?
MR MEAGHER: It was a reference to the game of rugby league and the "damage" was loss of supporter base, loss of funding from sponsors and the like.
GUMMOW J: Yes. We start to get down to money fairly quickly.
MR MEAGHER: The parties arrived at the position, your Honours, that if there was no merger, the probability was that neither of these competitions would survive.
GUMMOW J: Would be financially viable.
MR MEAGHER: And therefore survive, on the assumption that they are designed to at least break even.
GUMMOW J: There is nothing wrong with that view.
McHUGH J: That is one view, but you might have had to cut salaries to players.
MR MEAGHER: If I could return to paragraph 19 - - -
McHUGH J: Then they each may have survived.
MR MEAGHER: The trial judge found that a clear and intended effect of the 14-team term was that the partnership would not provide competition-organising services to more than 14 teams and that a foreseeable and foreseen consequence was that if more than that number sought participation, the excess over that number would be denied the provision of the services. He also found that the two people who were responsible for negotiating this arrangement, Mr Whittaker and Mr Frykberg, believed that they could achieve reduction to 14 teams in 2000 without the need for any clubs to miss out.
Could I take your Honours to the findings which were made about that in the judgment of the trial judge. First of all, if I go to paragraph 256, which is with respect to Mr Frykberg, he was the principal negotiator for News. He accepted that it was an essential element of the arrangement that:
in the absence of being able to reach a fourteen team competition naturally, there had to be a mechanism in place which would arrive at a fourteen team as agreed by both sides.
That mechanism was the selection criteria.
He also agreed that he was aware of the possibility of supporter loss should a club be excluded but that it was his "fervent view . . . that no club would be excluded".
McHUGH J: Can I just interrupt. It is fairly difficult to accept that, is it not, because they have to be excluded by being forced into amalgamations? If this does not have an anti-competitive effect at the competition level, it certainly did have down at the next level because you were going to amalgamate clubs, shed one coach, shed players, so it was going to have an effect down the line.
KIRBY J: But in fact his fervent desire almost succeeded because there were mergers and there was really in the end only one that had to miss out.
MR MEAGHER: That is so.
GLEESON CJ: Rationalisation commonly takes the form of limiting the supply of services.
MR MEAGHER: But in this case the ultimate objective was not served by clubs missing out, so the parties put in place as part of their arrangement provisions which provided incentives to avoid that result. In paragraph 257 his Honour found:
Mr Frykberg accepted . . . there was a significant chance that, if a club was excluded from the competition, they would be lost to the game as spectators. He confirmed his belief that News' aim was to encourage joint ventures so that all clubs could continue to participate in the competition. This was to ensure the competition was sustainable by minimising the possibility of supporter loss.
And then similarly, in relation to Mr Whittaker, paragraph 259, Mr Whittaker was the man who negotiated for the ARL. He said:
he hoped to achieve a reduction in team numbers to fourteen through mergers and joint ventures and a reason for encouraging this especially among Sydney clubs was to preserve, so far as possible, the fan base of all of the Sydney clubs . . . his view was that a fourteen team term could be achieved without clubs who wished to participate in the competition being excluded . . . He accepted that it was necessary to have a mechanism in place to determine . . . which teams would gain admission -
again, that was the selection criteria:
He indicated that there was at the time a lot of people around who thought attrition should have been the way rationalisation occurred but his view was that competition rationalisation should not be based on who had the most money.
And then in paragraph 260 he:
acknowledged the existence of such supporters of clubs; he appreciated that if a club was excluded . . . its fans could be lost to the game; he regarded . . . as an undesirable outcome but it was a price which, if it had to be paid, was unfortunate but which might have to be paid for the overall interests of the game.
Then, his Honour also made express findings that they provided merger incentives to avoid that result. If your Honours go to paragraphs 271 and 272, towards the end of paragraph 271:
The merger/joint venture option came to be seen, as both Mr Whittaker and Mr Frykberg attest, as the means available to clubs to avert the foreseeable consequence of the fourteen team term should there be more than that number of teams wishing to participate in the 2000 season.
Then could I refer your Honours to the findings at paragraphs 283 and 284, which is one of the findings that Justice Gummow referred to, the second at 284. The trial judge accepted the evidence of Mr Whittaker that he believed that it could be achieved and that Mr Frykberg said that it would be achieved without resort to exclusion, the significance attached to mergers, evidenced a form of recognition of both, of the need and wish:
to maintain some level of participation of the established clubs in a competition not designed to accommodate them all individually.
Now, in those circumstances, the findings of the trial judge were that neither of the parties wanted to prevent any club from receiving supply and indeed took steps to avoid that result and those findings are inconsistent with any purpose of seeking to include.
KIRBY J: Are you sure that is not taking "purpose" as meaning "motive"? See, their motive was not to destroy but the inevitable consequence of what they were doing was going to be that any over 14 that were left would be removed?
MR MEAGHER: Your Honour, even if one accepts that one has to look at the intended effect of the clause, the trial judge found that the parties had to arrive at a number. They could not avoid arriving at a number. They chose that number because that would produce a merger and produce a sustainable competition. They also appreciated that by arriving at that number there was a consequence, but that was not a consequence they sought to achieve by the inclusion of the term.
GLEESON CJ: I would have thought that downsizing was the main consequence they sought to achieve.
MR MEAGHER: But not with the result that specific clubs would miss out. They accepted downsizing was necessary.
GLEESON CJ: Would it have made any difference in point of law if they had decided which clubs would be left in the competition by conducting a ballot?
MR MEAGHER: To what in fact happened?
GLEESON CJ: Yes.
MR MEAGHER: No, your Honour. That is, in effect, what we say was the effect of the clause.
GLEESON CJ: If they did it by way of ballot it would then be impossible to argue that they were aiming this at any particular club?
MR MEAGHER: That is so.
GLEESON CJ: But it would be difficult to deny, would not it, that they had the purpose of limiting the supply of services to the clubs as a class, that is, the people who are going to have to participate in a ballot and take their chances?
MR MEAGHER: There are two responses to that, your Honour. First, looking at in terms of the opportunity which was being provided to the clubs in 1997, that is, at that stage they had the opportunity to all be supplied. In 2000 it was being proposed that only 14 would be supplies. But, in 2000 it was proposed that some would and some would not be supplied. That was the effect of the clause. It is not a question of limiting at all.
McHUGH J: But it had to be rationalised. Once News Limited came in, to get their competition going there was an explosion in player salaries which the revenues from the game just could not sustain long term and a number of the clubs trying to match these salaries were in dire financial straits and to the extent that they could not match them their position was weaker so something had to be done. There had to be rationalisation. They had to reduce the number of teams. They had to reduce travelling expenses and the way it was to be done was ultimately to get it down to 14, somehow or other, by merger or otherwise, but why was it not a limiting of the supply of services from 19 to 14?
MR MEAGHER: If one looked at it globally, there was, but it was not a limiting to which section 4D would apply. It was not intended to operate on any specific club.
KIRBY J: Now, that is the particular point. That is your second point but we are concentrating on the first point at the moment, the purpose.
MR MEAGHER: Your Honour, as I have submitted earlier, one cannot separate purpose and particular because the particular identifies those to whom the purpose is directed.
McHUGH J: Why is not the particular class the 19 clubs?
MR MEAGHER: Because the clause was equally likely to have operation on the 20th club, Melbourne, and that represented the relevant universe. That is the answer, your Honour. If one looks at it in terms of effect, to the extend that it had effect, it was capable of operating on the universe. It was not designed to identify any particular club or class in the universe and that is what section 4D is directed to.
McHUGH J: The game was only being maintained by subsidies, was it not, from News Limited and Optus, something like about $140 million a year, was it not?
MR MEAGHER: I think that is correct, in the period where the two competitions ran. The two competitions only ran for one year.
McHUGH J: Yes.
MR MEAGHER: Your Honours, I have taken more time than I thought I would. I was proposing to address your Honours briefly about the judgments of Justice Merkel and Justice Moore to identify the respects in which we submit that they are wrong. We have addressed those subjects in our written submissions but there were some things I wished to say, orally.
GUMMOW J: Do you want to say any more about "particular"? I am not saying you should but have you dealt with that?
MR MEAGHER: I do not think there is, your Honour. Could I deal first with the judgment of Justice Merkel and specifically his - - -
GUMMOW J: To what end?
MR MEAGHER: To identify the respects in which we submit that he was wrong both as to the purpose which he identified and as to the particular class which he identified. The relevant finding as to purpose is at paragraph 278.
KIRBY J: And you say that Justice Heerey really endorsed the approach of Justice Finn so that you have a common ground of the two of that view in the reasoning towards the conclusion you urge on us?
MR MEAGHER: Yes, your Honour. Could I take the Court to paragraph 278. His Honour concluded in the second sentence of that paragraph:
The ultimate purpose of the term (the end) is the achievement of a viable and sustainable national competition, but its immediate purpose (the means) is to exclude any clubs or entities in excess of the fourteen selected to provide teams to participate in the 2000 NRL competition. Put another way, the immediate purpose is to limit or restrict the supply or acquisition of the relevant services to or from (as the case may be) the fourteen clubs or entities selected to provide the fourteen teams.
Now, with respect to that finding as to immediate purpose, we make two submissions.
MR MEAGHER: The first is, we submit, that it was inconsistent with the unchallenged findings of primary fact and the second is that it - - -
GUMMOW J: But there was no issue about anybody's credit, was there?
MR MEAGHER: No, your Honour.
GUMMOW J: It was really just what you made of it, as it were.
MR MEAGHER: What his Honour undertook in order to arrive at that conclusion was a means and end analysis and in a means and end analysis one can identify an intermediate and ultimate purpose and the facts of Devenish v Jewel Food Stores provide a good example. There the milk suppliers withheld supply to the retailer, Jewel Food Stores, to discourage them from taking supply from the competing suppliers in Victoria. The ultimate purpose was to have Jewel take supply from the New South Wales suppliers. The means adopted was to refuse supply so as to cause damage. So that the immediate purpose was to cause damage with a view to obtaining the ultimate purpose.
If one looks at the position with respect to the 14-team term, Justice Merkel described the immediate purpose is to exclude, but he does not explain how or why that immediate purpose was seen by ARL and News as likely to secure or further the attainment of the ultimate purpose, which was said to be the viable and sustainable national competition. It is contrary to two findings of the trial judge: first, there was no need for the ARL and News to exclude any clubs to arrive at the number 14 and that was because none of the clubs had any entitlement to participate in 2000. Each could apply for selection and the selection criteria would determine who participated, but it was not a case of exclusion in that sense of having to remove participants who were otherwise entitled to participate and the finding of the trial judge, to that effect, is at paragraph 273 of his judgment.
The second respect in which the conclusion is not consistent with the findings of the trial judge is that exclusion, that is preventing supply to clubs other than the 14, was not something which was believed to secure or further the attainment of the ultimate purpose and that is clear, in our submission, from the passages that I have taken your Honours to. Mr Frykberg and Mr Whittaker believed that exclusion would result in the loss of supporters and would effect the ongoing sustainability of the competition. It was not a desired outcome. The findings of the trial judge are at paragraphs 256 and 257, and 259 and 260. The trial judge also found that the parties took positive steps to avoid the possibility of exclusion and I have referred your Honours to the paragraphs at 271, 272 and 284. The provisions which were designed to produce that result were the merger incentives.
Then could I next, by reference to our written submissions, identify the significant flaws in the analysis of Justice Merkel in arriving at the conclusion as to immediate purpose. First, he asserts that the trial judge did not consider whether the 14-team term had any other purpose. We submit that is wrong and we have dealt with that argument in paragraph 32 of our written submissions. Next, he asserts that the trial judge did not distinguish between the purpose of the 14-team term and the merger incentives and, we submit, that that is not correct on analysis and we have dealt with that in paragraph 28 of our written submissions.
Thirdly, in the "carrot and stick" analysis, which Justice Merkel undertakes by reference to the findings of the trial judge, he attributes the purpose for inclusion of the selection criteria as the purpose for inclusion of the 14-team term.
In other words he takes the findings that the selection criteria were the means of identifying those who would participate and attributes those as purposes of the 14-team term with the suggested consequence that they exclude it. Our written submissions addressing that are in paragraphs 29 and 30. And, finally, Justice Merkel misstates the trial judge's findings as to the effect of the evidence of Mr Frykberg and Mr Whittaker and we have addressed that in paragraphs 31 and 34 of the written submissions.
GLEESON CJ: Do you submit that for the application of the words "particular persons or class of persons" in section 4D, in this case there is no legally relevant difference between the 19 clubs and all the other rugby league clubs in Australia?
MR MEAGHER: That is so, and in the sense that the term was going to operate without discriminating - that is the 14 team limit - without discriminating between someone who was in the competition and someone who was proposing to seek entry to the competition.
Could I next turn to the finding of Justice Heerey with respect to "particular class" because your Honours may recall that before the trial judge Souths put their case in two ways. First, a case of preventing supply to a particular class, and that was dealt with by Justice Merkel; and secondly, a case of restricting or limiting supply to particular persons. There was never a - - -
GUMMOW J: What do you say is the logical universe? You said that the argument against you fixed upon the whole of the logical universe so there was no particularity.
MR MEAGHER: The logical universe is either the 20 clubs who were participating - - -
GUMMOW J: Logical is not the right word, but the relevant universe.
MR MEAGHER: The relevant universe is either the 20 clubs who were participating in 1998 or those 20 clubs and any other clubs who sought participation.
GUMMOW J: At any time thereafter?
MR MEAGHER: At any time thereafter.
GUMMOW J: I cannot see why a particular class is not the persons who are presently there.
MR MEAGHER: They may be a class, your Honour. The question then is the question - - -
GUMMOW J: Yes, a relevant universe has a spatial dimension to it too -time.
MR MEAGHER: The question then is whether the clause is limited in its possible operation upon that class or whether it operates or is intended to operate on them and any others without discrimination.
GLEESON CJ: There is an intermediate possibility. I am not suggesting it is right but it is that in so far as it operates on the 20 or the 19, 4D applies, and in so far as it operates on everybody else, it does not.
MR MEAGHER: I suppose that is possible, your Honour.
Could I address Justice Merkel's findings on particular class. The relevant finding is at paragraph - - -
GUMMOW J: It does not go into these construction questions, does it?
MR MEAGHER: I am sorry, your Honour.
GUMMOW J: It does not go into these constructions questions?
MR MEAGHER: No, it does not.
GUMMOW J: I know you want to get rid of the judgment, I can understand that but we have to grapple with thee construction questions, as is usually the case, I am afraid.
MR MEAGHER: Could I just address this and then perhaps come back finally to the decision of the Full Court in Rural Press which is a more recent attempt to address these construction questions?
GUMMOW J: Yes.
MR MEAGHER: Paragraph 294, about halfway through the paragraph, the sentence commencing:
the characteristic that identified and distinguished the class intended to be excluded from participation, and makes it particular, was that its members, the top level rugby league clubs eligible to participate (for example, by meeting the "Basic Criteria") but not achieving the requisite level in the selection criteria achieved by fourteen other clubs or entities, would not be supplied -
Now, one needs to keep in mind that the trial judge found that the selection criteria were not intended to discriminate against a particular applicant or class of applicants and that is at paragraph 292, also at paragraphs 281 and 282. The characteristic that someone was missed out after application of selection criteria, looked at from December 1997 when this provision was arrived at, identifies no characteristic which was inherent in any of the clubs which would permit one to identify that club or those groups of clubs as the object of the purpose.
Could I ask your Honours, in Justice Merkel's judgment, just to go back to paragraph 229 which sets out passages in the judgment of the trial judge and which then sets out clause 7 of the merger agreement so that the Court can follow how the criteria, both generally and with respect to selection, were to operate. If your Honours go to clause 7.3, it was proposed that three clubs - Brisbane, Newcastle and Auckland - receive some priority if they passed what were described as basic criteria.
It was also provided by clause 7.9 that there be no less than six and no more than eight teams from Sydney and, similarly, no less than six and no more than eight teams from regions. It was also provided in clause 7.11 that there would be preference given in an order of priority to:
(a) merged clubs;
(b) regional clubs; and
(c) stand alone Sydney clubs -
and that if it was then necessary to select, it would be done by reference to criteria.
As Justice Heerey observed at paragraph 76 of his reasons, if I could take the Court to those:
Any exclusion of a club from the 2000 14-team competition was two years in the future. It was something hypothetical and dependant on multiple, interacting contingencies. As at 19 December 1997
. the need to exclude a club or clubs in 2000 might not arise
. if it did arise, it could not be determined which club or clubs would not comply with the criteria, since the criteria were yet to be defined
. when the criteria were defined, whether Souths or any other club complied would depend not only on its own compliance but on how its own compliance compared with that of other clubs.
So that to describe, as Justice Merkel does, as the characteristic which identifies the class, the fact that they were rejected after the process of selection criteria is, in our submission, to identify no relevant characteristic and the position would be the same if, instead of providing for criteria, the 14 to be selected were to be identified by drawing of lots.
McHUGH J: In December 1997 were there still 22 teams in existence? There were 10 with Super League, was there not, and there were 12 with ARL?
MR MEAGHER: If your Honour goes to the last page of our written submissions we set out a summary of this. We have set out the teams which competed in 1996 and in 1997 in the separate competitions and then indicated which teams dropped out and which teams were added as the competition moved forward.
McHUGH J: All right.
MR MEAGHER: I am sorry to interrupt your Honour but I think it answers your Honour's question.
McHUGH J: Yes.
MR MEAGHER: For example, if a Sydney club moved to a region it would get the priority that a regional club would get. If there were more than eight regional clubs then there would have to be a selection against regional clubs. If a Sydney club merged, it would get priority, and there was the possibility that clubs would not pass solvency or other criteria, as in fact happened with Norths. There was the possibility that clubs would merge, as happened with St George-Illawarra and Balmain-Wests. The reality was that in December 1997, looking forward, one could not say that this provision was directed to or was going to have the consequence that any particular club or any particular class of clubs was going to be excluded.
For that reason we submit that not only did Justice Merkel arrive at a conclusion as to purpose which was not supported by the unchallenged findings but also that his conclusion as to particularity does not satisfy the requirement that it identifies a feature which distinguishes that club or class from the rest.
McHUGH J: Now, I know you rely on the explanatory memorandum in relation to "particular class" but for my purposes what is the difference between a class and a particular class?
MR MEAGHER: Simply that you can say of that class that it is the object of this purpose of preventing. In other words, in the original legislation the words "or particular classes" was not in section 4D so that one was talking about particular person.
McHUGH J: Yes.
MR MEAGHER: If you had a provision which was included to prevent supply to a person, presumably you could identify the person. The word particular says nothing about the description of the person. It tells you that the purpose is directed to that person as distinct from others. One of the ordinary meanings of "particular" is that something pertains to a person or group as distinct from others. What has to pertain here is the - - -
McHUGH J: Is it referring to a class within a class?
MR MEAGHER: In our submission, no. It is simply identifies that group which share a common characteristic so that they can be described as a class. It identifies them as the object of the prescribed purpose. Whether you describe it as primary boycott purpose or, more generally, as a purpose to prevent supply, but they have to be the object of the purpose. That is all "particular" does. In a sense, it tells you that the purpose has to be aimed at a person or a class of persons.
KIRBY J: What is the problem with the reasoning that the addition of the word "class" meant that even though you could not identify particular persons, namely Souths, you were identifying a particular class, namely, those who at the end of the selection process and the criteria which you say were non-discriminatory you get to, ultimately, one who is in excess of 14 that has to be removed.
MR MEAGHER: But if that is the case, your Honour, one effectively writes out of section 4D the words:
from, particular persons or classes of persons -
because one is simply identifying the particular persons or class of persons by the fact of exclusion or prevention. Any provision which has the effect or purpose of preventing supply will or may ultimately produce the consequence that some are not supplied.
KIRBY J: So you say that cannot be enough and it cannot be what the section is addressing?
MR MEAGHER: That cannot be enough. That is so.
KIRBY J: What is the added value that the section offers, then?
MR MEAGHER: The added value, if I can take your Honour to what was said in the second reading speech - - -
KIRBY J: Can the word "boycott" be used in accordance - it is not part of the section, but can it be used to understand the purpose of the section as being, as it were, targeted at a particular person? That gives some strength to your argument about the subjective.
MR MEAGHER: Indeed, that is - I took your Honours to paragraph 10 of the explanatory memorandum. It describes a collective primary boycott as a boycott which seeks to restrict the dealings of the parties with the target person. Now, we do not say that one approaches the construction of the section with preconceived notions of what a boycott is, but it is the word "particular" which gives it that meaning.
CALLINAN J: Some singling out.
MR MEAGHER: That is so. The point is put well, in our submission, by Justice Heerey. If I take your Honours to paragraphs - - -
KIRBY J: You are not going to read the part about Captain Boycott, who would probably nowadays be regarded as simply an economic rationalist.
MR MEAGHER: No, I was not going to do that, your Honour. I was going to go to paragraph 92, which is below that paragraph. His Honour says:
the components of s 4D, although requiring individual analysis, also have to be considered as part of an organic whole. There must be a purpose of preventing etc supply etc to a particular class of persons. "Particular" in this context means
"pertaining to some one person, thing, group, class, occasion etc, rather than to others or all; special, not general" (Macquarie) -
and then, similarly, the Shorter Oxford:
"relating to a single definite thing or person, a set of things or persons, as distinct from others -
His Honour then says, in paragraph 93:
So there has to be an identified and defined class of persons in the minds of the alleged contravenors at the time the exclusionary provision is included in the contract etc. The class must then be "aimed at specifically".
If I take your Honours back - - -
GUMMOW J: Just a minute. He says
The class must be defined by some shared characteristic -
well?
MR MEAGHER: That must be the case, if one is going to say of a class that it is the object of a purpose.
GUMMOW J: Yes, I know. I do not see how that helps you:
The class must be identified by some shared characteristic -
Well, there would be shared characteristics here.
MR MEAGHER: His Honour says in the previous sentence that:
The class must then be "aimed at specifically" -
and that is what makes it a particular class. That is how we would have understood what his Honour is saying.
GUMMOW J: I am not sure I understand all that.
MR MEAGHER: Could I take your Honours back to paragraph 86, where his Honour extracts a passage from the judgment of Justice Dawson in Applicant A v The Minister. We accept it is in a different context, but in relation to "particular social group", his Honour Justice Dawson said:
"The word `particular' in the definition merely indicates that there must be an identifiable social group . . . A particular social group, therefore, is a collection of persons who share a certain characteristic or element which unites them and enables them to be set apart from society at large.
It is the same notion of having an attribute which pertains to that group or that person, as distinct from others. Here, the attribute is being the object of the purpose.
Could I finally deal briefly with the judgment of Justice Moore. There are three aspects to his Honour's judgment. First, with respect to purpose, second, with respect to restricting or limiting of team services, and third, with respect to particularity. His findings as to purpose is at paragraph 158 and he accepts the finding of the trial judge that the intention of the parties was not to exclude any club and he says, about seven lines into the paragraph:
It can readily be inferred, and it is the preferable inference, that this was a substantial purpose the fourteen team term. That is, a purpose of the fourteen team term, which was a substantial purpose, was to bring about a situation where some o the clubs participating in the rival 1997 competitions would not field their team in the year 2000 as they had done in 1997 but would do so in conjunction or collaboration with other clubs.
We attack that finding as to purpose on two bases: first, it fails to distinguish between the findings of the trial judge as to the purpose of the 14-team term and as to the purpose of the merger provisions and incentives. The purpose of the merger provisions and incentives was to encourage mergers so as to reduce the number of applicants to 14 and his Honour's finding, that is the trial judge's findings, are at paragraphs 271 and 284. Next, the finding fails to take account of the fact that following a merger it is highly likely that a new entity will seek supply and that the old entities who formed the merger will not seek supply at all, so that there is in no sense any restricting or limiting of supply to the old entities. They do not seek supply. A new entity seeks supply and is supplied.
The next element of his Honour's conclusion was with respect to the notion of restricting or limiting and his finding as to that is at paragraph 186. His Honour addressed the question of restricting or limiting not in the way suggested by your Honour the Chief Justice in argument, remembering that here the case was that there was a restricting or limiting to particular persons, not to a class, and it was said:
It may be accepted that the under 19 December Understanding any club, including Souths, would, at the least, be able to continue to provide a team by merging or forming a joint venture. However, the provision of a team of this character was not the provision of the same services that had been provided . . . before the adoption and implementation of the fourteen team term. It would not be a team of that club but a hybrid team of two or more clubs. In this way, the services to be acquired by operation of the fourteen team term, would, as to some of the 1997 clubs, not be the same services that had been acquired formerly when the two competitions conducted the rival competitions. The services acquired would be limited and restricted.
CALLINAN J: Mr Meagher, what the ACCC says in paragraph 37, which I understand you not to adopt, is really an answer to that, is it not? You seem to think you are precluded from relying on that. It seems to me that that might be answer to what Justice Moore has said.
MR MEAGHER: It does - - -
CALLINAN J: I may be wrong but it strikes me - - -
MR MEAGHER: Justice Moore's analysis looks at it from the point of view of the recipient of the service, that is the club or the supplier of the team service, that if it is supplied by a merged entity it is different from that which is supplied by the parts. The same analysis may produce the result that the services provided by the ARL and Super League separately were different from the services provided by the merged entity, NRL. That subject was just not debated at all before the trial judge or even argued.
CALLINAN J: It does not depend upon any disputed facts though, does it?
MR MEAGHER: It would. In the context of section 4D, it requires, first of all, it would require an understanding of exactly what were the respects in which the services were said to be different other than by reference to the identity of the supplier or acquirer. It would then involve an inquiry as to whether a purpose of restricting or limiting in that way was a purpose of Mr Whittaker and Mr Frykberg, in the way the case was conducted, which inquired after subjective purpose. None of those matters were considered because the question was never raised except in the judgment of Justice Moore. As Justice Heerey observes at paragraph 105 of his judgment, this case was not pleaded and not run at first instance; I am not sure it was even put on appeal.
KIRBY J: Justice Moore seeks to rebut that, of course.
MR MEAGHER: He does.
KIRBY J: How do we resolve that? Justice Moore cites the submissions in the parties and refers to the pleadings and it is something of a mess that - - -
MR MEAGHER: But what is clear, your Honour, is that the inquiry, we submit, that section 4D requires is as to the subjective state of mind or reasons of the parties who agree the provision and that inquiry has to be directed to the way in which it is said to be restricted or limited as to supply. There was no such inquiry before the trial judge. Justice Moore does not address that question at all.
KIRBY J: Now that was really necessary because of the line of authority from Pont Data in the Federal Court if however one took the view that that line of authority was incorrect and that the inquiry is objective and then one, in this Court, has to start again.
MR MEAGHER: One then has to ask in what way are the services supplied to a merged entity different from those supplied to the clubs which formed the merger. At one level in 2000 there are no services supplied to the clubs which form the merger. The merged entity receives the supply, the others receive nothing. So that it is not a case of restrict or limit, it is a case of prevent.
KIRBY J: But there is still one left out in the cold.
MR MEAGHER: Well, in the same way that - - -
KIRBY J: It does not get supply at all.
MR MEAGHER: - - -St George and Illawarra separately receive no supply, a new entity is formed, corporate entity, which receives and provides supply in the current competition.
McHUGH J: And Norths disappeared out of the competition.
MR MEAGHER: But for reason that they were insolvent, your Honour.
McHUGH J: Yes, they did not meet the criteria.
MR MEAGHER: That is so. But our submission with respect to his Honour's finding on restricting or limiting is first that there was no factual inquiry at the trial on that subject and, secondly, in any event, it ignores the fact that in 2000 there would in no sense be a restriction or limit. Some would be supplied and some would not.
GLEESON CJ: Is that a convenient time, Mr Meagher?
MR MEAGHER: Yes, your Honour.
GLEESON CJ: We will adjourn until 2.00 pm.
AT 12.45 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.02 PM:
GLEESON CJ: Yes, Mr Meagher.
MR MEAGHER: Your Honours, I was addressing the judgment of Justice Moore and the question of particularity and could I come to that in more detail. Could I ask Your Honours to go to paragraph 158 of his Honour's reasons.
KIRBY J: This will not be important if we take - see, they were bound by the approach in the Federal Court. We would not have to get into this if this Court took an objective approach. That is correct, is not it?
MR MEAGHER: The Court still has to - even if this Court took an objective approach, it is necessary to ask the question whether there is any relevant object of the purpose. We submit that - - -
KIRBY J: Well, just let me get clear. Would you be saying that assuming we found an error in the principle that was applied, is the correct approach for this Court to take then to send the matter back or do we then apply that principle to the facts of the case for ourselves and reach our own conclusions, there being no substantive dispute about primary facts?
MR MEAGHER: Your Honour, the position is likely to be the latter, that is, there would be no dispute as to the findings of primary fact and the question would be determined by reference to the provisions of the arrangement, but one still has to address the question of particularity.
GLEESON CJ: Yes.
KIRBY J: Is it the particularity on which you say you suffered a procedural injustice at the hands of Justice Moore? I thought it was on "purpose".
MR MEAGHER: It was on "purpose", but "purpose" describes conduct which is directed to an end, so that one cannot, in a sense, address purpose without asking what is the end or object of the purpose. "Purpose" describes conduct which is directed and "particular" identifies the object of the direction. That is the way we put it so that one cannot separate "purpose" and "particular".
KIRBY J: I will not pursue it any further but it is a messy thing for us to have to sort out through 16 volumes of appeal papers whether having regard to the....and the matters argued at trial, the judges, the Full Court who disagree about this, which one is correct. I mean, it is not a very congenial task, because Justice Heerey alleged and Justice Moore denied. It is a messy thing for us to have to sort out.
MR MEAGHER: Your Honour is addressing, as I understand it, the specific question as to whether Justice Moore decided the case in a way which was not argued or pleaded. That principally addresses the question whether the team services were the same services when provided by a merged entity as distinct from the individual entities. That question was never debated. Even accepting against us that it was debated, we attack Justice Moore's judgment first because of the issue of purpose and the way he decided that, which we say is inconsistent with the findings of the trial judge and, secondly, that even if one accepts the purpose, there were no clubs who were the object of the purpose so as to answer the description of particular clubs. That is the sole point that I wish to address the Court about now. At the commencement of paragraph 158, his Honour identifies the clubs which were said to be the subject of the purpose of bringing about mergers, and that is "the clubs who participated in the rival 1997 competitions".
In paragraph 158, his Honour accepts that on his analysis the term was also intended to operate on any other clubs entering the new competition after December 1997. So that the universe upon which the clause was to operate, on his Honour's analysis, was the 1997 clubs and any other clubs entering the new competition. Accepting that, his Honour then had to address the problem that it was not known who the clause would operate on, although it was expected that it would operate on some to restrict in the sense he described, and he accepted that it was also intended to operate on clubs other than the 1997 clubs.
His Honour addresses that problem at paragraphs 201 and 202. If I can take your Honours first to paragraph 201, he says:
This leads to a consideration of the second question posed in par 178 above, namely whether it can be said there existed a purpose of restricting or limiting of supply or acquisition to the 1997 clubs -
if I can just stop there, this is an analysis addressed to a particular persons allegation, not a class allegation -
if it was in contemplation that some but not all of the 1997 clubs would field a team in conjunction or collaboration with other clubs though some of the 1997 clubs would continue to field a team in their own right. This really raises the question of whether competitors can have a purpose of restricting or limiting supply of services to particular persons . . . if it is not known, when the exclusionary provision was agreed to, who of the particular persons would bear the burden of the restriction or limitation though it could be expected some of the particular people would not.
His Honour then addresses that question in paragraph 202 and says, in his opinion:
The language of s 4D . . . does not . . . preclude the application in these circumstances -
for the reasons that his Honour gives in that paragraph.
The consequence of that construction of "particular persons" is that his Honour accepts that this provision was included for the purpose of restricting or limiting supply to the 1997 club as particular persons, although one could not say which of them, and would be supplied and who would not, and one could accept that it was also going to have the same effect or consequence on other clubs.
Now, in our submission, what that describes is a clause which is capable of operating upon all of those clubs, the 1997 clubs and any other clubs who wish to participate, in other words, the relevant universe. So that there was no particular person to whom the purpose was directed. For that reason, essentially, which is set out in more length in our written submissions in paragraph 54, we submit his Honour's conclusion about "particular persons" was wrong.
There are two final matters. With some trepidation can I return to section 45 to observe that the prohibition in section 45(2)(a)(ii) and (b)(ii) is with respect to provisions which have a:
purpose, or . . . effect of substantially lessening competition -
So that prohibition is directed to provisions which have an effect on competition or which are, we would submit, proposed to have such an effect. Now, the same expression, that is:
would have or be likely to have the effect -
is not included in the definition of an exclusionary provision, nor is an exclusionary provision required to have any anti-competitive effect, nor is it required to be directed to persons who compete with the parties to the arrangement. All that it addresses is a combination directed, or which seeks to effect or prevent supply to a third party, in the case of 4D, principally.
GLEESON CJ: Is it your submission that in the context of 45(2) the reference to "purpose", in the context of purpose or effect, is like a reference to attempt?
MR MEAGHER: Yes, in the sense that once it is established that the provision was put in there to have a particular effect or operation, irrespective of whether it does, because of changed circumstances or otherwise, it would constitute an exclusionary provision and attract the prohibition. As I put in submissions earlier, in Hughes v Cricket Association, the relevant provision was in general terms but was held to be an exclusionary provision because although in general terms it was included to be directed at the four cricketers who played cricket in South Australia.
If this Court construes `purpose" as meaning objective purpose and what does that mean, a purpose to be divined by reference to effect, then the Court denies the distinction in subsection (2)(a)(ii) and (2)(b)(ii), which is a distinction the legislation draws, and the Court ignores the provisions in the explanatory memorandum which direct attention to what the parties seek to do by the relevant provision. The Court, on one view of it, attributes to people who enter into arrangements an intention to necessarily achieve the natural consequences of their conduct although, in the context of the criminal law, that is plainly not a maxim to be applied.
For those reasons, we submit that the trial judge and Justice Heerey, and, indeed, the other Full Courts of the Federal Court who have considered the question, have correctly concluded that purpose addresses attention to the reason for inclusion of the provision in the sense of the operation or the intended operation of the provision and, similarly, that the members of the minority judgment who addressed a particular in a way which looked at its consequence rather than its intended effect on particular people or specific people also failed to give that word its meaning and context.
Your Honours, one final matter in answer to your Honour Justice Kirby's request. Could I hand up a number of copies of the letter from the - - -
KIRBY J: Not if it was not in the record. I do not want to have it if it was not in the record.
MR MEAGHER: It was in the record, your Honour. It is not in the 17 or so volumes that your Honours - - -
KIRBY J: I would hate to be in breach of Mickelberg and Eastman.
MR MEAGHER: It is a letter of 15 October 1999 from the NRL to Souths.
GLEESON CJ: Thank you.
MR MEAGHER: Your Honours, they are our submissions.
GLEESON CJ: Thank you, Mr Meagher. Mr Jackson, just before I call on Mr Young, I think it is intended that he should go next, is that right?
MR JACKSON: Yes, your Honour.
GLEESON CJ: How long do you expect to require for your submissions?
MR JACKSON: Your Honour, I expect to take about an hour, an hour and a quarter, perhaps a little longer.
GLEESON CJ: We are going to limit the auditory services we provide to you, Mr Young, to half an hour. Yes, Mr Young.
MR YOUNG: May it please the Court, there are several aspects of our written submissions that we thought we could usefully elaborate orally. The first concerns section 4D(2). Could I invite the members of the Court to turn to the section.
We wish to make a number of points concerning the constructions of section 4D(2). The first is that the section directs the readers to a field of competition being that in relation - or that which relates to the supply of "the goods or services to which the relevant provision" relates. I am referring to the concluding words of subsection. The "provision" is the exclusionary provision or the alleged exclusionary provision. In this case, therefore, the section directs attention to these services that are to be provided by News and ARL as part of the new merged competition. Putting that in a more expansive way, the 14-team term was found to be an intrinsic feature of the new competition and the services to which that provision relates are the services provided within the framework of the new merged competition.
The second point of construction we would make is that the question posed by the section is not whether the services provided under the new competition are of the same type as previously provided in the two competitions separately offered by News and ARL prior to December 1997. The question, rather, is whether News and ARL are competitive in relation to the services to which the relevant provision relates. More simply expressed, "Are News and ARL competitive in relation to the services offered as part of the new competition; a competition which they are providing joint in partnership?"
A third point about the construction of the subsection is that the words that one ordinarily goes to when a question arises of services being provided in the future are those appearing after the words:
but for the provision of any contract, arrangement or understanding . . . would be, or would be likely to be, in competition -
The question is not but for the merger or absent the merger would News and ARL be or be likely to be in competition in relation to services only offered as part of the new competition. That shifts the focus. The question is but for the 14-team provision there would be competition, not but for the merger. And we notice that that was a slip that our learned friend, Mr Meagher, made when he addressed those words and it also a slip that both the trial judge made at paragraphs 90, 193 and 200 and which Justice Merkel made at paragraph 235.
GUMMOW J: This seems pretty fundamental.
MR YOUNG: We submit it is and we have raised it, notwithstanding the attitude of the parties, because all of these sections interact to one piece of legislation and it would be unfortunate if a strained meaning were to be given to expressions such as "purpose" and "particular class" in 4D(1) to strive to keep outside section 4D itself a situation which, in our submission, never got through the gateway.
GUMMOW J: You are not the person to ask but would there be an evidentiary question as to whether NRL and News but for the 14-team clause would be in competition? It does not seem to arise given the nature of their business structure.
MR YOUNG: No, we say it would not arise as an evidentiary question. The merger was a fact.
GUMMOW J: Yes.
MR YOUNG: It was, timing wise, consummated at the same time as the 14-team provision, which was an intrinsic feature of the new competition, but the section only invites one to put aside the effect of the provision in assessing likely future competition, not to put aside the effect of a merger.
GUMMOW J: That is the heart of your point really.
MR YOUNG: Yes, your Honour, but it goes a little bit deeper in that the trial judge and Justice Heerey confined themselves to asking this question: were the services provided in the pre-1997 competitions of the same type as the services provided under the new competition? That, with respect to their Honours, is not the question posed by section 4D(2). The question is, were News and ARL in competition or, but for the provision, likely to be in competition in relation to the services to which the 14-team term related? That is to say, services provided as an intrinsic part of a new merged competition, which they were providing in partnership, not in competition with each other. The point is fundamental, but it does have an important bearing on the way in which these sections interact and how they should be construed.
GUMMOW J: Now, how would the Act bite at the time of the merger itself?
MR YOUNG: Well, that is why I said, your Honour, that the first task is to - - -
GUMMOW J: That is not complained of here, but just trying to look at it overall, how would the Act then bite if - - -
MR YOUNG: Well, in the same way, your Honour, for this reason. Section 4D(2) exhaustively defines what the section means when it refers to parties "competitive" with each other. It uses the words in 4D(2) "if, and only if", and then it immediately directs attention, not to pre-existing competition or assumed competition as at December 1997, but to competition:
in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision . . . relates.
So to simplify it, if the relevant provision related to a new category of goods and services that the parties were never competitive in relation to and those services were only to be provided in future, you would ask yourself the question, whether, in relation to those future services never previously provided, the parties are likely to be in competition in the future or, but for the provision, would be or would be likely to be in competition.
The simple fact here, in our submission, which is fundamental, is that because this was a jointly provided competition and a jointly provided set of organising services on and after December 1997, the parties could not be said to be in competition with each other in relation to those services and hence the doorway to section 4D is never achieved.
GUMMOW J: That is not this case, but would the Act in any way operate upon that coming together in the merger so - - -
MR YOUNG: Well, it might through other provisions, your Honour.
GUMMOW J: That is what I am trying to get at. What would they be?
MR YOUNG: Indeed, as I understood it, that is the Chief Justice's point concerning 45(2)(a)(ii) and (2)(b)(ii).
GUMMOW J: Yes.
MR YOUNG: The merger itself could have been challenged as a contract arrangement or understanding that had the purpose or likely effect of substantially lessening competition, but once the merger is not challenged, either under section 45 or under section 50, if there is an acquisition of shares or assets involved, then you have a merged competition and once the merger is not challenged, it seems to us that you have moved past the point at which you can say 4D(2) can be satisfied.
Can I make one final point. Their Honours Justice Finn and Justice Heerey addressed the section 4D(2) argument that was put as if it went solely to timing. The Court might recall there was a heading in Justice Heerey's judgment "TIMING", and the argument seemed to be that, although it was accepted that the services were of the same type and hence competitive, the fact that one set of services was only to be provided in 2000 altered its characteristics.
We submit that the burden of the point goes much deeper than the timing issue. It is simply that ARL and News were not competitive at any time in relation to the services to be offered as part of a jointly provided competition. Now, the second task is really to put a short submission as to why we submit that the High Court should consider - - -
GLEESON CJ: Just before you go further, a small factual matter in relation to that last point you made. I am not sure I understand the facts entirely, but one of the aspects of this new competition was that it was to be a national competition.
MR YOUNG: Yes, your Honour.
GLEESON CJ: Was that the position in relation to the pre-existing competitions? Maybe I should ask Mr Jackson that.
MR YOUNG: I think your Honour is best to ask a New South Welshman.
GLEESON CJ: Yes.
KIRBY J: And not every New South Welshman would know.
MR YOUNG: Perhaps not, your Honour.
McHUGH J: Well, it was national to the extent that people like Gold Coast and - - -
MR YOUNG: I think Perth was in there, your Honour, and - - -
GUMMOW J: We can see by looking at that chart.
MR YOUNG: Yes. There were some interstate teams, most certainly.
GUMMOW J: Yes, there were, but not very many.
MR YOUNG: I think the idea was that it was a unified national competition - - -
McHUGH J: But they were quite separate. The ARL and New South Wales, - they had as interstate teams Gold Coast and South Queensland. Super League, of course, had North Queensland, Perth and Auckland, among other places, and Brisbane. So Super League was much more international, whereas ARL was basically a New South Wales competition at that stage, in 1996 and 1997, I think, except for Gold Coast and South Queensland.
MR YOUNG: Yes, your Honour is correct. I do not think it is the nationality of the competition. It is the unification and the provision of a single competition jointly by a partnership. This issue was identified by both Justice Finn and Justice Heerey as a sort of discomfiture about the idea that section 4D could apply to this situation. They took the analogy of a partnership setting up a new business. It would not ordinarily be expected that section 4D would apply. The way in which their Honours addressed their discomfiture was, in our submission, to strain the meaning of "purpose" and "particular class" to avoid the outcome that section 4D applied. That straining, in our submission, ought not to be undertaken, and if we are correct in the view that section 4D did not apply at all, because the parties were simply not competitive with each other.
I was about to submit and, I think, in the course of putting the argument, I have virtually made all the points that we would make in submitting that this Court should consider the section 4D(2) issues, notwithstanding the attitude displayed by News. In essence, it is because this is a single legislative scheme. The proper construction and operation of all these provisions interact.
KIRBY J: What is your answer to Mr Jackson's point that if the parties do not tender to us in the appeal, which has a constitutional quality, an issue, that the Court should not resolve an issue which is tendered to it only by an intervener? It is true that we, being alerted, would have to take your point into account in construction, but we cannot do more than that, can we?
MR YOUNG: Your Honour, we would accept that a distinction could be drawn between this Court's construction of the legislation as one scheme, taking into account our point, and, on the other hand, the outcome of the appeal. It might produce the extraordinary result that this Court expresses the view, in its reasons, that section 4D(2) was not satisfied, yet dismisses the appeal. But that is a matter for the parties. Our concern is with the - - -
McHUGH J: Well, you are a party, are you not? Do not interveners become parties?
MR YOUNG: Ordinarily, they do, yes, your Honour. I was referring, really, to the fact that - - -
GUMMOW J: You are at hazard of costs.
KIRBY J: You might have to pay all the costs. The cost of the trial, the cost of the appeal - - -
GLEESON CJ: The parties have actually agreed between themselves about the costs, have they not?
MR YOUNG: I think the parties, other than ourselves, have, yes, your Honour.
KIRBY J: But that is on the assumption as between themselves that you are seeking to disrupt.
MR YOUNG: Yes. Well, if we achieve the outcome, your Honour, that we seek, which is a coherent construction of all the relevant provisions, that is really our aim.
GLEESON CJ: I am just trying to check, Mr Young. Did Justice Hely consider this point at the interlocutory stage?
MR YOUNG: I do not believe so, your Honour, but I must say I paid most attention to the trial judgment and the judgments on appeal rather than the interlocutory judgment.
GLEESON CJ: He held there was an arguable case?
MR YOUNG: Yes, he did, your Honour.
GLEESON CJ: But the balance of convenience was against the granting of an interlocutory injunction?
MR YOUNG: Yes. Can I move, if the Court pleases, to a second point. As the Court has observed in argument, both Justice Finn and Justice Heerey made extensive use of the concept of boycott as an aid in construing the provisions of section 4D. Now, in effect - - -
GUMMOW J: Well, the first problem is "boycott" is not a technical legal expression. All sorts of people have different views - - -
MR YOUNG: Well, your Honour, we were about to submit that the approach is erroneous for a number of reasons, and if I can briefly state them. Your Honour's reason is one of them. The reasons are these. The word "boycott" is not used in the section itself and, in our submission, can add nothing useful to the interpretation of the section. Secondly, the meaning given to the term "boycott",which is referred to in the explanatory memorandum and in Hansard, is simply the language used in section 4D itself. There is no other attempt to define the concept.
Thirdly - and this is your Honour Justice Gummow's point - the phrase itself has no settled meaning and an indeterminate ambit. That was an observation made by Sir Anthony Mason in Devenish about the word "boycott", used as an aid to construe or limit section 45(2) and section 45D. The overall effect of the reasons for judgment of this Court in Devenish 172 CLR 33 is that it is a fallacy to import an external notion or understanding of "boycott" and to seek to confine the operation of section 45(2) and section 45D by reference to it.
GLEESON CJ: I do not entirely see the force of that submission. It makes you wonder about explanatory memoranda, does not it? Sometimes there might be a bit of sugar coating applied to some of these pills.
MR YOUNG: Yes. The final point we would make is that in many Federal Court cases, section 4D has been applied to a range of circumstances going far beyond a typical boycott situation, and we have given instances in our written submissions. It is too late now, we would suggest, to attempt to go back and to redraw the section according to some preconceived notion of what a boycott is. We criticise the judgments of Justice Heerey and Justice Finn because of the use they made of "boycott". The same criticism we direct to the recent Full Federal Court decision in Rural Press.
McHUGH J: Now, it is a bit difficult, is not it, to be dealing with this case? What is the situation with respect to - - -
MR YOUNG: The situation is this, that the ACCC proposes to seek special leave to appeal in respect of the section 4D aspects of the case. My client was unsuccessful on those aspects but successful on other aspects of the case. We appreciate the difficulty in dealing with it but can I make this point, your Honour. The court used the concept of "boycott" to go so far as to say that section 4D brings in the necessity to establish a subjective purpose of injuring or discriminating against targeted persons, which is perhaps even going a step further than the kind of targeting required in the judgments of Justice Finn and Justice Heerey, but it shows the slippery slope that one is on once these extraneous notions are imported into the Act.
McHUGH J: Well, all this may be irrelevant if one takes the view that there is an objective purpose. What is your submission about that? Are you going to go for the doctor or - - -
MR YOUNG: No, we are going to have two bob each way, your Honour. Our submission is this, that in Pont Data the Full Federal Court expressed the view that purpose is confined to subjective purpose. They reached that conclusion by reference to section 4F. Our submission is that purpose is not confined to subjective purpose. Section 4F admits of the possibility when it takes account of the purpose for which a provision was included, but it may be in some cases appropriate to have regard to evidence of subjective purpose or intention. But that does not mean that objective purpose is irrelevant. In our submission, it remains - - -
GLEESON CJ: Irrelevant to what?
MR YOUNG: To the application of provisions that use the term "purpose" such as 4D in particular where it speaks of the purpose of the provision.
GLEESON CJ: You say, as I understand it, sometimes it is legitimate to inquire what was the subjective purpose or intention, and a negative or a positive answer to that will conclude the case. On other occasions it is appropriate to look beyond the subjective purpose or intention and go to what you call the objective purpose. Can you give an example.
MR YOUNG: I can give an example of a case where it may be appropriate to go to subjective intention. We would cite the Hughes Case. That case dated from the time when section 4D only referred to particular persons, so you had a seemingly general provision but the evidence indicated that the provision was brought into effect to deal with particular cricketers. That is a case where, in our submission, it would be legitimate to have regard to that evidence of subjective intention.
GLEESON CJ: In the case of Hughes, if you had confined yourself to objective purpose, there would have been no finding of contravention.
MR YOUNG: No, because you would not have been able to satisfy 4D as it then stood, which was limited to particular persons. The converse case - and we would say this may be one - is where you are dealing with 4D, so you are dealing with the purpose of the provision and not the purposes of the parties as in section 46 or section 45D, and the provision on its face has, in the language of Justice Finn, a clear and intended effect and a foreseeable and foreseen consequence.
GLEESON CJ: But is that anything different from saying the best evidence of subjective intention is what the provision achieves - not conclusive necessarily but usually very good evidence?
MR YOUNG: It may be saying that in some cases, your Honour, in the sense that parties when they assert their purpose was different than the obvious aim and objective effect of the provision might not really be accepted on the point, but there may be other cases in which it may be sufficient, perhaps because of the unavailability of any evidence, simply to say the purpose of the provision is that which it reveals on its face.
McHUGH J: I think there are some statements in some of the cases on causation in the criminal law which say that although causation is ordinarily a question of fact, if you intend to reach the result which is reached, then causation is made out. That seems to be the sort of notion that you have in mind.
MR YOUNG: Yes. I think even in the civil law in the area of fraud there are some like cases.
GLEESON CJ: This can be a very touchy subject in the area of homicide, can it not, I think?
McHUGH J: Yes, that is right. That is what I had in mind.
MR YOUNG: In short, our simple submission is that it is not right to say that section 4F purports to confine one to subjective purpose. On its face the language of section 4F does not do that. It has a deeming effect when a particular purpose is established to be the purpose for which provision was included, but that does not seem to cut out of the picture an objective evaluation of purpose.
GLEESON CJ: You have just reminded me: that word "deemed" in section 4D(2), is this one of those situations where the expression "shall be deemed to be competitive . . . if, and only if" means "shall be regarded as competitive if, and only if"?
MR YOUNG: In 4D(2), yes, your Honour.
GLEESON CJ: Yes, it is not the primary sense of the word "deeming"?
MR YOUNG: No, it is not, it is effectively redefining the concept of competition for the purposes of section 4D so as to confine the field to the same field as that which the provision relates to.
McHUGH J: What I had in mind in the criminal law, it comes back to me now, is that ordinarily if a voluntary act of the victim interposes between the wrongful act of the accused and the injuries suffered, there is no causal connection between the two; but if the accused intended to achieve that result, even though there was a voluntary act on the part of the victim, nevertheless, the causal connection.
MR YOUNG: Yes, I understand, your Honour.
KIRBY J: The difficulty I have with that is, first of all, it is postulating a moveable feast in respect of a single word in the statute. The word is the one word.
MR YOUNG: Yes.
KIRBY J: Secondly, it is an extremely difficult concept for the administration of the Act so I am surprised that the ACCC is putting it up to us. Thirdly, the statute talks of the provision having a purpose, so it is not the corporation and, therefore, you are looking at something which is cold on paper. Fourthly, as I suggested to Mr Meagher, the purpose of the provision in this Act is not to be concerned with the subjective beliefs of corporators or their officers but with the consequences for competition which is an objective question. We are not the keepers of the conscience of particular officers.
MR YOUNG: No, your Honour, but there may be cases, your Honour, where the purpose of the provision is not objectively self-evident on the face of the provision, but - - -
KIRBY J: That may be an evidentiary question.
MR YOUNG: Well, it may be, your Honour, but there may be cases where - - -
KIRBY J: It is very difficult to conceive of having two definitions of the one word in the statute. It would be very difficult to administer, I think, and difficult for trial judges to apply and your client to apply, I would have thought.
MR YOUNG: Well, your Honour, the position at the moment under Pont Data would have it that it is only subjective purpose and that has its difficulties as well.
KIRBY J: That is the current state of the law, but, as I read the special leave application, one of the reasons for granting special leave which Justice McHugh made very clear in his statements on the special leave application was to examine just this point.
MR YOUNG: Yes, I think I have made our position as clear as I can, your Honour.
KIRBY J: As clear as you can.
MR YOUNG: We say purpose is not confined by section 4F to subjective purpose. The other provisions of the Act to which your Honour has just referred and those other considerations would indicate that it is appropriate to have regard to objective purpose. We can - - -
GUMMOW J: Section 52 is a good analogy, it is within this Act too. The best evidence of something being apt to mislead or deceive is the subjective intention to achieve that result.
MR YOUNG: Is the intention, yes. We take the stance we do because we conceive of cases where it may be relevant and appropriate to have regard to evidence of subjective purpose and that ought that not to be foreclosed.
There are two other points I wanted to make and I will make them as briefly as I can. First, we submit that the judgment of Justice Finn and the judgment of Justice Heerey which founded itself on Justice Finn's findings as to purpose really did not address the immediate purpose, whether objective or subjective of the 14-team term. We draw attention to Justice Finn's findings at paragraphs 269, 279 and 283 to which mention has been made, namely, that his Honour found a clear and intended effect of the provision it was to exclude, teams beyond the 14 qualifiers and, secondly, that that was a foreseeable and foreseen consequence.
In our submission, whether the correct approach is subjective or objective, it is difficult to see why those findings were not sufficient to provide the purpose required by section 4D, particularly when all judges accepted that the natural meaning of "purpose" was the effect which it is sought to achieve the end in view. One has to fasten on the end in view of that provision if and when it was called into operation, although the parties may have hoped it never would be.
The final point we want to make concerns classes of persons. Mr Meagher's submissions, in the end, as we understood it, was that the expression "particular class of persons" could not be satisfied unless you could identify at the outset those particular individuals or clubs who would not qualify, so if you could not identify the qualifiers at the outset there could not be a particular class. That is, in our submission, to eliminate any real distinction between particular persons on the one hand and a class of persons on the other hand.
The approach our learned friend espoused reflects that of the trial judge, Justice Heerey. Justice Heerey did use the expression "shared characteristic" but, read in conjunction with the earlier paragraph 90, what his Honour said was that one of the defining characteristics of a class could not be exclusion or qualification. Now, in our submission that is wrong. Pont Data correctly approached the question of class. That was a case in which the class was defined as those persons who were prepared to enter, or those persons who would not be supplied with information unless they accepted and became bound by the restraints imposed by a dynamic agreement on resale.
In that case you could not identify the particular members of the class at the outset. It depended on who would or would not agree to a prohibition on resale, and you could not know that at the outset but it was a formula apt to define a class. In our submission, a formula can define a class, selection criteria can define a class and you do not have to know at the outset who qualifies and who does not qualify. That can be left for the application of the criteria or formula.
In our submission, Pont Data was correct in this respect. It is another respect in which we take issue with the decision of the Full Federal Court in Rural Press. Rural Press took two points to a rather extreme conclusion. They took the boycott notion and coupled with the idea that for a class you had to know the particular individuals affected and reached the conclusion that therefore a geographic exclusion would not be within 4D because you would not know the identity of the individuals in the excluded geographic zone.
In our submission, people in a geographic zone constitute a class, a particular class, and an agreement between competitors to exclude all people in a particular geographic zone would fall squarely within section 4D.
KIRBY J: Do you have anything to say on the analogy that was draw with Applicant A - the case of Applicant A?
MR YOUNG: Yes, your Honour. "Particular" there is used in a particular context which really governs the interpretation. Without attempting to state it verbatim, the language refers to by:
reasons of race -
ethnic origin, and some other - and then it goes on to say, or:
a particular social group - - -
KIRBY J:
a particular social group - - -
MR YOUNG: So, in context, the mere fact of persecution itself is not enough to constitute a class. In that context you needed to have some other defining characteristic such as race or social grouping. So, in context, it really cannot be translated across to section 4D to support the proposition that Justice Heerey advanced, that is to say, a formula cannot be used to define a class if qualification or non-qualification is one of the elements of ultimately who falls in and who falls outside the class. It is really to take a set of words in a different words and misapply them, in our submission. Unless I can assist the Court further, those are our submissions.
GLEESON CJ: Thank you, Mr Young. Yes, Mr Jackson.
MR JACKSON: Your Honours, may I go first to the water muddied by my learned friend on behalf of the intervener. In that regard, could I take your Honours immediately to the terms of section 4D. In that regard, what your Honours will see is that section 4D(1) speaks of:
A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding -
It is then said that it is:
taken to be an exclusionary provision for the purposes of this Act if -
and then the first thing one sees, your Honours, in (a), not the provision was made but:
the contract -
the contract or arrangement was made, or the understanding . . . between persons any 2 or more of whom are competitive with each other -
then, as has been observed, already, what is contemplated by - competitive with each other - is defined by subsection (2).
Your Honours, could I just say subsection (2) - and I will take your Honours to where these various operations of it are extrapolated by Justice Finn in just a moment - but it operates in a number of different circumstances and one of them, and the most abbreviated form of it, leaves out altogether the words "but for the provision of any contract". May I take your Honours to the words of subsection (2):
A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person . . . is -
and, your Honours, that is the first of the possibilities. One then goes down approximately three lines:
in competition with the other person . . . in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract . . . or of the proposed contract . . . relates.
So, it is looking at a situation, your Honours, where there is a simplicity of competition between the two persons who enter into the contract. The contract contains the provision. One looks to see then, as a matter of fact, whether the type of services to which the proposed arrangement, for example, it relates, are services of the kind that are presently provided. Your Honours, that is one of the operations of the provision. There are other operations, of course. One can see them set out in the judgment of Justice Finn in the first place, in paragraphs 191 to 201 in volume 15, and your Honours will see paragraph 191 and he says at the end of that:
Because of an argument raised by the respondents . . . I have put the subsection in a recast form so as to highlight the contingencies.
They appear set out in subparagraphs (i) to (iv) of paragraph 192 and then your Honours will see in paragraph 193 and through to - I will not read it all out, but could your Honours go through to paragraph 201 and your Honours will see he discusses the operation of the provisions and in the end arrives at the view that one is not looking at the situation as at, in this case, 2000, but looking at the situation as at the time the agreement was entered into. One then sees at paragraph 200 the contention that:
Underlying the respondents' submission was the contention that ARL was not likely to be in competition with News in relation to the services in question in 2000.
Your Honours will then see through that paragraph and through paragraph 201 that his Honour does not enter upon the factual issue that was raised by the way in which the matter was put before him. So that is a potentially unresolved factual issue and a view of the provision which is against the contention raised by our learned friends.
The second thing, your Honours, is that on appeal Justice Heerey in paragraphs 110 to 116, under the heading "TIMING", discusses the - and, your Honours, the relevant parts are paragraphs 110 to 116. Your Honours will see that - again, I will not read it out - comes to the conclusion in paragraph 116 that he upholds the argument for our clients on the issue and then goes on to say that the two further issues which would need to be discussed - and the second one, your Honours will see about line 26, is whether there was a - is a question of evidence. Again, that is unresolved.
Your Honours will see Justice Moore in paragraph 208 agreed with Justice Heerey in relation to that aspect of the matter and then Justice Merkel in paragraphs 234 to 237. The point we would to seek to make about it is that the provision does not have the operation that my learned friend's contentions would advance but, in any event, this is an issue which, in our submission, the Court should not permit to be taken at this point. These are, if I may say so with respect, a rather curious thing to have a situation where the parties to proceedings, long proceedings as your Honours have seen, have an aspect of the case that has been decided in one party's favour by all the judges in the courts below - it is a point not taken by the applicant for special leave to appeal, there is no application for intervention at that point by the now intervener, and the situation which then obtains is that an issue, the resolution of which is presumably, on their contention, important for the resolution of the ultimate matter which the appellant does not seek to take, is then raised by them without any special leave or justification for doing so.
Now, your Honours, no doubt the Court can do what it likes, but, in our submission, it is an issue into which the Court should not enter. If it be that the Court thinks that the resolution of the question is one which is ultimately important for the resolution of, or would be important for the ultimate resolution of the case, in circumstances where the point is not taken by the appellant, then perhaps the right thing for the Court to do is to say, "This case really is not one where, after examination, we think it is an appropriate case for the Court to deal with it all and special leave should be revoked." Your Honours, that would be the appropriate course. If the Court takes the view that this is a matter which it regards as germane to the resolution of the case, but one that has not been taken.
Your Honours, could I say we would adopt what is said in the courts below and the references that I have given on this point but our submission is that the terms of the provision do not support the contention on behalf of the intervener.
May I come then, your Honours, to the substance of the matter and one starts, in our submission, with the approach to be adopted to the statutory provisions in question. The first aspect, your Honour, is that they are, of course, matters of positive law, which are designed to reduce the freedom of corporations referred to in section 51(xx) of the Constitution to act as they choose. Your Honours, in the exercise of the freedom to Act, absent provisions like section 45, the conduct of corporations can readily be characterised as rationalisation, economic use of resources, preserving support of bases, the good of the game and so on but, your Honours, the freedom to do so is restricted by the provisions of the Act.
Could I refer your Honours to what was said by the Full Court of the Federal Court in an earlier football matter, News Limited v The Australian Rugby Football League [1996] FCA 870; (1996) 64 FCR 410 at page 576 at the bottom of the page.
KIRBY J: What is the proposition?
MR JACKSON: The proposition is simply this that the very point of the sections is to interfere with general freedom of contract and I simply give your Honours a reference to that, at the bottom of page 576 going through to page 577B. That does not mean, of course, your Honours, that section 45 is to be given a meaning wider than it is capable of bearing but it does mean, in our submission, that the provisions should be interpreted according to its terms and without the application of preconceptions, such as the use of the term "boycotts", as to its intended application or ambit.
Could I just observe, your Honour, in passing: there does not seem to be any heading or marginal note "boycott' in relation to section 45. One sees the expression "secondary boycotts" used in relation to section 45(d), now - - -
GLEESON CJ: Certainly not in my print of the Act.
MR JACKSON: In relation to section 45, your Honour.
GLEESON CJ: No, "boycott"; no reference to "boycott".
MR JACKSON: No, your Honour, that is so. That was adverted to by members of the Court in Devenish [1991] HCA 7; 172 CLR 32. Your Honours, when I say that was adverted to, the point that was adverted to was that it is inappropriate to read down provisions by reference to some a priori view as to what they should be. Your Honours, we referred to Devenish in our written submissions in paragraph 5.9, page 13. May I refer your Honours to that and your Honours to the various passages to which we there refer in the judgment of members of the Court.
KIRBY J: Where did Justice Finn and Justice Heerey get it from then; from the explanatory memorandum, was it?
MR JACKSON: It must be I think, your Honour, yes. Now, your Honour, no doubt it covers some cases that one might ordinarily describe as "boycott", but the ambit of the provision is not the same as whatever one might identify as being boycott and, as Chief Justice Mason said in Devenish, the concept of boycott is, itself, one which depends to a great degree on the view of the person using the term.
GLEESON CJ: It may be that the explanation is that so much use is made of the expression "secondary boycott" that people naturally ask, "How does the Act deal with primary boycotts?" and somebody says, "Well, it is covered by the exclusionary provisions." That does not mean that that is all the exclusionary provisions cover.
MR JACKSON: Yes, of course, your Honour. Could I just say one other thing about it because one reason why one sees phrases like that being used from time to time is that the provisions of the Act sometimes - if I may say so, with respect, the frame are not short - and it is necessary to find a few words in talking about them to describe the concept that is there, but to use an expression such as "third line forcing", whatever that may mean, does not define entirely what the provision does.
Your Honours, a further feature, in our submission, which militates against reading down, as it were, section 45, is that its prohibition is not absolute. It is not absolute in that conduct, otherwise within section 45 can be the subject of an authorisation under the Act. Your Honours, I will take your Honours to the provisions in just a moment, but as Justice Merkel observed in his reasons for judgment, at paragraph 303, he referred to the fact that the parties were plainly aware of the possibility that an approval might be needed. Your Honours will see that he said:
Plainly, the parties were aware that the merger of their respective competitions raised issues under Pt IV . . . but they proceeded with the merger without seeking any authorisation for it.
Your Honours will see that the February 1998 memorandum of understanding contemplated specifically the possible need. That is in volume 10 at page 2292 and at page 2300, clause 12, said:
The parties will (if necessary) inform, and make a joint submission to, the ACCC about the Merger.
GLEESON CJ: What is the difference between the way in which this provision, clause 7, operates in relation to your client and the way in which it operates in relation to any other football club that might, at any time, want to join in this competition?
MR JACKSON: Well, your Honour, could I answer that by saying this: I will take your Honour in just a moment to the, for example, the definition of "Club" which refers to the clubs in the schedule, in effect, the existing clubs in the document. One sees also that clause - I think it is 7.1 says:
The Clubs are to be told that the competition is to be reduced -
and your Honour will see the succeeding provisions of clause 7.
The position then comes, in a sense, back to this. There were - if I could just pick a number - 20 clubs which were identified as a particular class in the document, and they could not be more clearly identified because they are the Clubs defined with a capital "C" and referred to in those provisions and in the schedule to it.
Now the 14-team term had, in our submission, a clear operation in respect of them, that class, in the first place. That operation, we would submit, was a purpose and a substantial purpose - I am speaking of section 4F - of the provision. Now, the provision, of course, had an operation in respect of any body which was a new club but it would be a question whether the operation in respect of a new club gave rise to a substantial purpose of the provision, because, your Honours, the question of substantiality of purpose involves a waiting. So that there is a difference, in our submission, your Honour. One sees a class identified. One sees in relation to that class a provision which is to be tested against it. Two elements of it are substantiality of purpose, on the one hand - and if I could move to a slightly different aspect, that is, the question of particularity and, your Honours, it is probably not necessary for the Court to resolve that issue in this case but if I could just explain what I mean by it.
It is one thing to say that the group identified as the 20 clubs is something which one can describe as being a class or a particular class. Probably that may be an emphatic in the circumstances "particular". One can identify them, one sees who they are. On the other hand, if one is speaking about people presently unidentified but people who may seek to do something in the future, then there is a real question about whether that group, in circumstances of that kind, are capable of being defined as a class for the purposes of the provision. Now, your Honours, I do not know that I can take it beyond that, but that is our submission in relation to the point your Honour was putting to me.
Perhaps I should say one more thing. The fact that if the provision does have a larger operation - assuming it has a larger operation, beyond the group of twenty to which I have referred, we would say, in effect, so what? That illustrates perhaps the need for the provision to be one where the parties sought an authorisation where the public interest could be looked at.
GLEESON CJ: Another way of expressing that proposition may be to say that he does not deny that the provision has a purpose in relation to a particular class to demonstrate that it has an effect that goes much wider.
MR JACKSON: Indeed, your Honour. If one speaks just in terms of purpose for the moment, the terms of section 4F recognise that there may be more than one purpose and the purposes may have different - I use the expression loosely - significance. I referred to the question of authorisation a moment ago. Could I take your Honours very briefly to the provisions of the Act relating to it. One goes to section 88 and one sees in section 88(1)(a) the power to grant an authorisation to a corporation:
to make a contract or arrangement, or arrive at an understanding, where a provision of the proposed contract, arrangement or understanding would be, or might be, an exclusionary provision -
One can see reference to the issue also in section 45(9) - I think it is in subsection (9), your Honours. One sees in section 90 the power of the Commission; one sees in sections 90(2) to (5) the procedure, to put it shortly; and in section 90(8)(a)(i) and (ii), the test to be applied. The test to be applied is, one can see, that the Commission has to be:
satisfied in all the circumstances that the proposed provision or the proposed conduct would result, or be likely to result, in such a benefit to the public -
that it should be allowed to be made. Now, how those provisions work, how they are in effect applied, and relevant considerations we have set out in our footnote 56 in our written submissions. I will not take your Honours to it now, but your Honours will see a very short summary of it set out in footnote 56 to our written submissions.
KIRBY J: But the appellant says you do not get to that because if they win on their construction, then they are not troubled with authorisation. Secondly, they say - well, they do not really say it, but one can imagine they might say - "Why should we be submitting our business ventures to the bureaucracy if we do not have to? We'd rather deal with this in the free market ourselves".
MR JACKSON: I would not contest what your Honour put to me, in the sense that - all I am really seeking to say is this. One has a provision, a provision like section 45, 45 picking up 4D and 4F. In relation to that, if it be that there are really two interpretations which can be given to it, one being that it is one narrower, one broader, and if the broader interpretation seems unattractive because, although apparently indicated by the words, it would seem to have a significant effect in changing the way corporations or persons subject to it behave, then, absent a provision like the authorisation provisions, the court might well say, "Well, it just cannot be intended to go so far. We'd adopt the narrower view".
But when there is a provision like the authorisation provisions that give a specific but limited exception, and where the exception requires the test to be, for example, the public interest, the court would more readily say that the words should be given their natural meaning. I do not take it beyond that. I do not say that the provision, if it does not apply, is made applicable by the authorisation. Your Honour, I do not think I can take it beyond that.
But may I just say one more thing about the authorisation provisions and it is this, that they require consideration by an independent body of the public interest. That is hardly surprising in general or in particular in cases to which section 45 would be applicable. Your Honours, if one takes a case like this where you have one body going along happily enough for years conducting a competition, you have a commercial organisation bursting on the scene, as it were, as a competitor, it takes away some of the participants, adds a few new ones, it does not take long for it to emerge that the market is not big enough for the new and the old competitions to run in tandem. Each haemorrhages, as it were, and they agree to go back to one competition, not two, and they say, hardly surprisingly, there would be too many in it. If we let our former suppliers in, we will make, say, two-thirds the maximum and that is whether they are new or old. Your Honours, that, in our submission, is the very thing against which section 45 is directed. To do it, you have to have authorisation.
Now, your Honours, could I go back to section 45 itself. Your Honours will see that it creates a prohibition on making or giving effect to the exclusionary provision defined by section 4D. Now, your Honours, one sees that it simply says, relevantly, that one cannot make a contract, et cetera, if it contains an exclusionary provision and one cannot give effect to the contract if it contains an exclusionary provision.
Now, your Honours, in relation to that, for it to be an exclusionary provision, section 4D has to apply, of course. All that is required by section 4D is that there be the purpose. It does not have to be effectuated, but all that is required is that the purpose have the provision.
GLEESON CJ: What do you mean by purpose?
MR JACKSON: Your Honour, I intend to adopt both and then express a preference, if I may. In our submission, the appropriate test is one which is objective. I will explain what I mean by that in a moment, but perhaps I take the more appropriate test. On either basis, in our submission, our case is one that succeeded and I propose to deal with those aspects of it now, if I may. Your Honours, may I just say one thing before going on. Your Honours will have seen that, as Justice Heerey noted in paragraph 27 of his reasons:
It was not in dispute at the time of the Understanding News and ARL were competitive with each other for the supply of competition organising services and the acquisition of team services.
So that section 4D(1)(a) was satisfied and that took one then to whether 4D(1)(b) was satisfied. Now, your Honours, could I indicate what I would seek to do now and that is I wanted to go, if I may, first to the terms of the merger agreement, looking at the purpose of the provision considered in an objective sense and looking - - -
GLEESON CJ: I would like to know what you mean by that. In the field of tax law, the insistence from Newton's Case that the test be objective was intended to narrow the operation of the legislation and reduce it within manageable limits, not to expand its operation. It was intended to produce the consequence referred to on pages 8 and 9 of 98 CLR, that you did not have the absurdities attributed to the legislation by Sir Garfield Barwick's argument about the way it would operate. So they introduced this concept of an objective idea of purpose in the context of purpose or effect to reign it in, not to expand its operation.
MR JACKSON: I suppose different horses for different courses in a sense, but what one sees, of course section 260 was a general tax avoidance provision. The terms of section 4D, whilst they are of general application of course, they concentrate upon the provision and they look at a provision and ask what is the purpose of that provision. In dealing with the purpose of a provision, one sees very frequently, if I could simply reduce it to contracts to make it simpler, that there are provisions introduced in contracts in relation to which neither party may have any subjective view at all.
GLEESON CJ: Similarly, there are provisions in contract as to which you could not possibly tell their purpose just by looking at the contract but, once you found out why they were put in there, then you might form the conclusion that they are anti-competitive.
MR JACKSON: Your Honour, that is what I was going to say. I said "objective" but if one looked at it, for example, simply from the point of view of, for example, construing a contract, sometimes in order to construe the contract one would need to see the circumstances in relation to which the provision was made. It is possible, although really in a sense fairly unlikely in cases of the present kind, for there to be provisions, the intention, if I could use that term, of the parties to which cannot really be seen by simply taking the term as such. You would have to look to see the kinds of circumstances to which it could refer. It may be, your Honours, that in dealing with some provisions, their breadth is so wide that one would have to say the purpose of them is to deal with the number of things that could occur. That might have the result that the possible number of purposes and the number of circumstances in which they could apply is such that it would be very, very hard to say that one could ever satisfy section 4F, the substantial purpose - have a number of purposes. In most cases, your Honours, what we would say is that if one looks at a particular provision, sees the provision in the context in which it appears, it will be possible to say from the provision in that context whether it does or does not satisfy section 4D.
McHUGH J: "Included in context"? Do you include the background or the mischief which was there?
MR JACKSON: Yes.
McHUGH J: We are now very familiar with seeking a purpose of legislation and sometimes it is necessary, even though it is an objective test, to look at the background, what people have said, reports, what has led up to legislation.
MR JACKSON: Yes. Your Honours, Justice Wilson I think in Transfield v Arlo referred to something along those lines in the passage we have given a short quotation of in our written submissions. I will come back to that in a moment. I said I was going to go to the documents. Could I do it by reference to the merger agreement which your Honours will see in volume 12, page 2518. Your Honours will see that that document at page 2521 - I think the page number is obscured by the logo at the top - refers in recitals A and B to there being two rugby league competitions in 1997. Then in recital B that:
The Parties wish to merge the -
two competitions -
so that there is one premier rugby league competition -
Then your Honours will see if one goes to page 2522, there is the definition of "Clubs" about line 20. It "means the clubs specified in Schedule 1".
GLEESON CJ: Where is schedule 1, Mr Jackson?
MR JACKSON: Schedule 1 is at page 2538, your Honour. It lists the clubs in the two competitions.
GLEESON CJ: "Franchise" is defined to mean "a franchise to participate in the NRL Competition". That is the new competition.
MR JACKSON: Yes. Your Honour used the term earlier "franchise" in relation to the earlier competitions, I am not sure that was a term that was - - -
GLEESON CJ: No, I said they were called licensees in the negotiations at one stage.
MR JACKSON: Yes. I think a number of terms have been used.
GLEESON CJ: The franchise is really a convenient summary of the services to be provided, is it not?
MR JACKSON: Yes, both ways, yes. Your Honours, I was going to say if one looks at Schedule 1, those are the clubs participating in the two competitions in 1997. They are about as clearly identified a group or class as anyone could ever be and the idea that one is somehow speaking about a class which is ephemeral is, in our submission, bizarre. If one goes then back to the text of the agreement and goes to clause 2 - - -
GUMMOW J: One of the things Mr Meagher says is look at the schedule, that is all of the entities sharing this characteristic, therefore, because you have caught the lot, you have not caught a particular class. That is what I understood you to say at one stage.
MR JACKSON: Your Honour, if one listed the names of 20 school children and they all turned out, in fact, to be in the same class and one called the roll of those, you would say that was class one or class two. I do not mean to be trivial in saying that, but one would think, with respect, that the identification of the names of persons - the identification of them not just as names but as, in effect, clearly enough as one sees from the text of it, clubs in both senses of the term, defined or otherwise - and when one knows the background that they were, in fact, the clubs participating in the two competitions referred to in the recitals, our submission is that the relatively undemanding test of whether they do or do not form a class is satisfied.
CALLINAN J: Among the hundreds and hundreds of rugby league clubs in Queensland and New South Wales.
MR JACKSON: Yes, your Honour, and particularly in most country towns, they have one or two or three sometimes, of varying ages. Your Honours, I was going to go back to clause 2 at page 2525. They set out the objective of the parties. Those are worthy objectives, no doubt. They are similar to those and perhaps almost the same words, I think, as those found ultimately by the primary judge in paragraphs 270 to 276 and they may well be potent factors, in our submission, in support of obtaining an authorisation if one was sought. But, your Honours, the reasons why considerations of that kind do not provide the test - the reason why or reasons why competitors will enter into arrangements containing provisions of this kind will, one would expect, almost always be of the genre referred to in clause 2. Phrases such as "rationalisation", "better use of resources", "gaining or maintaining profitability", and so on, will be the sort of phrases one would expect to appear. Justice Merkel adverted to this in paragraph 273 of his reasons for judgment, in our submission, correctly.
Could I come back then, your Honours, to the document itself and to clause 6.1 at page 2528:
The Parties acknowledge that the NRL Competition -
that is, the new competition -
requires a reasonable level of club and player participation, and accordingly each of them must:
(a) use their best efforts to ensure that their respective Clubs participate in the 1998 competition; and
(b) satisfy their existing club and player contract obligations.
That leads one then to clause 7.1, page 2529, and they agree that the structure of the new competition would be as set out in clause 7, and then in 7.2:
Before 30 June 1998, NRL must:
(a) inform Clubs that no less than 16 teams . . . will be entitled to Franchises in 1999, and not more than 14 teams will be entitled to Franchises in 2000.
Now, your Honours, one sees then that elaborated upon by clauses 7.4, 7.5, 7.6, 7.7 and the remaining provisions of clause 7.
GLEESON CJ: This may get back to the argument that you started out on, but from one point of view the primary objective of this agreement was to put an end to competition between the two competitors and they agreed between themselves that they would cease to compete with one another and they then went on to agree upon the structure of the new business that they would jointly carry on. Did anybody ever argue that there was a contravention of section 45 - - -
KIRBY J: It was (1)(b), I think.
GLEESON CJ: (1)(b)?
MR JACKSON: The answer is no, I think, your Honour, and I do not think the point was pleaded.
KIRBY J: So we can completely ignore that subparagraph?
MR JACKSON: Yes, your Honour. The exclusionary provision was the point that was relied on. Your Honour, if one sees, for example, the amended application, page 1 of the record, one sees that provisions relied on being section 45(2)(a)(i) and the cognate provision.
GLEESON CJ: Yes. I am not saying that from your client's point of view we are straining at a gnat, but if your client is right, we have swallowed a camel.
MR JACKSON: Yes. Well, your Honour, the position was - I would not pretend to be able to identify it precisely why the course was taken; I was not in the matter at that time.
GUMMOW J: It was not only (2)(a)(i), was it?
MR JACKSON: I am sorry, I think I said in the cognate provision.
GUMMOW J: It was (2)(b).
MR JACKSON: Yes, I am sorry. I think I said (2)(a)(i) and the cognate provision. That is what I intended, but it was not the substantial lessening of competition provision.
Your Honours, I referred to clause 7.2 before. The purpose of informing clubs would seem to be to let them know that not all of them will be in the competition in 1999 and 2000. Your Honours, one has the carrots of clauses 7.6 and 7.7 and the squeeze to merge, in effect, found in clause 7.11 and as a corollary to the ending of competition one sees clause 13, that each of them agrees that they:
will not be involved in conducting a rugby league competition in Australia other than through -
the new entity.
Your Honours, our learned friend referred in passing to the criteria and your Honours will see those in the last document in the additional bundle of the appellant's materials. There is just one matter I wanted to refer to in them and if one is speaking about purpose, substantiality of purpose and the relevance to the clubs, one sees at the page numbered 8 at the top of the page and 1278 at the bottom of the page a heading "SELECTION CRITERIA".
KIRBY J: Which page is that, I am sorry?
MR JACKSON: It is the page numbered 8 at the top of the page, your Honour, and your Honours will see in the second paragraph:
Subject always to the overriding objective (previously advised to Clubs) of having no more than -
and your Honours will see then essentially the 14-team term - "overriding objective".
Now, your Honours, if one goes then to the essence of the first point raised by our learned friends, it appears to be that because the officers of the companies hoped, and in a sense believed, that the 14-team term would never have to be used and would live in a kind of suspended animation, that its purpose was not that proscribed by section 45. Now, the provision obviously was not to serve no purpose and, in our submission, if one were to adopt the subjective approach, the purpose is described in the evidence.
Your Honours will see in our written submissions we have given references to the relevant parts of the evidence in two places. One is in paragraph 4.3 at pages 3 and 4, the other is in paragraph 5.18 at pages 16 and 17. They demonstrate relatively dramatically, in our submission, that the 14-team term was there to be used if it had to be. May I go very briefly not to all but to some of those passages. The passages I intend to refer to are the ones that are referred to in our written submissions, footnotes 6, 9, 11 and 12.
One sees in volume 4 in the evidence of Mr McCourt at page 561 commencing just about line 36 a passage that commences there and goes through to page 562, the top of the page. You will see also at the bottom of page 562 going over to about line 14 on page 563 and also in relation to Mr McCourt's evidence at page 597 where he was asked about line 9:
The purpose of excluding by criteria a club or clubs if more than 14 applied for admission to the 2000 competition was central to the operation of the peace deal . . . Yes, I think it was, but I - - -
Then he agreed he had answered the question and did not want to add anything.
I would refer your Honours also to Mr Frykberg in volume 4 at page 659 and to Mr Whittaker in volume 5 at pages 878 and 886. Those references that I said are contained in footnotes 6, 9, 11 and 12 of our written submissions and they make it manifest that the provision was there to be used if necessary.
KIRBY J: The judge accepted, as I understand it, that that would be the ultimate position but the primary judge and Justice Heerey said, "Well, I've got to characterise this and I characterise the purpose as being something short of carrying forward this objective that - - -
MR JACKSON: Your Honour, in that regard - - -
KIRBY J: I just wonder if his Honour was not slipping into motive as distinct from purpose.
MR JACKSON: His Honour, really, in our submission, erred in two perhaps overlapping respects. One was that he did not concentrate attention, with respect, upon the provision but concentrated upon the contract. Now, your Honours, we accept, of course, that one has to take a provision as part of a contract; one does not just take it out and look at it in the abstract. The statutory question in the end was: what was the purpose of the provision? The purpose of the provision, on the subjective test, was manifest. If there were more than 14, it applied. It is in relation to the purpose of the provision that one is looking at the question of substantiality for the purpose of section 4F. The second aspect, your Honour, is that he did really slip in a sense, in our submission, into the question of motive.
Your Honours, if I could just go back to our written submissions for a moment, to page 16, paragraph 5.15, our submission is that the appellants' case really is that because they expected that the 14 teams would be achieved through mergers, without the need for exclusion, the term did not have the purpose of excluding. But that really goes to whether it was expected to be used. Again, if I could refer to the next paragraph in our written submissions, paragraph 5.16, we would submit, it does not matter that other provisions of the agreement might have resulted in 14 teams; the 14-team term was there to deal with the situation if they did not.
Now, it is by no means uncommon, of course, to have provisions which one hopes, expects or believes will not have to be used, but the purpose of including them is that they are to operate if the circumstances to which they relate occur. If one takes the very simple, common case of a sale of a house. The vendor wants the money, and does not hope or expect or believe that the occasion will arise to forfeit the deposit. Yet the provision for forfeiture is there, in the event that it has to be used. If one takes the case of a sale of a house on a market that turns out to be falling or a case where the vendor needs the money - the vendor wants the money, not the house or not the deposit.
There are many other examples. What we would submit is that whether the test be subjective or whether it be objective, it was satisfied in this case. We would refer to our written submissions, paragraphs 5.12 to 5.14, pages 14 to 15. Could I come then, your Honours, to the reference to particular persons and particular classes of persons. We would submit, there is really no difference between classes of persons and particular classes of persons, in the context in which the issue appears. We would seek to say that this aspect of the appellants' case is really, in our submission, one based on difficulties which do not exist.
We would submit, it is absolutely clear if one looks at the merger agreement - provisions to which reference has been made already - particularly the definition of "Clubs" in Schedule 1 - that the persons to whom the term was directed were the clubs which had previously been involved in the two competitions. As I submitted earlier, if a new club endeavoured to participate as well, that might mean there was another class of persons. Once again, the Act does not use any expression such as "targeting" or "aiming at"; it simply uses the words of the provision.
Now, your Honours, as we sought to say in paragraph 5.22 of our written submissions, very often the terms of the impugned provision itself will create the class. The provision itself gives rise to a characteristic which identifies the person or class by excluding them. Justices Moore and Merkel were correct, in our submission, in their views that you do not have to be able to identify every member. Could I say something in relation to Justice Moore. If one goes to his Honour's reasons at paragraphs 201 to 204 - I will not read out what his Honour said there but, in our submission, there is really nothing heterodox at all in anything his Honour has there said. He is simply referring to the terms of the provisions and giving an obvious enough meaning, in our submission, to their terms.
GLEESON CJ: Is there a question - and this may explain why the case was approached as it was in the Federal Court - about whether the expression "limiting the supply of services to a particular class of persons" covers reducing the services or reducing the number of persons to whom you will supply services or both?
MR JACKSON: There was an argument, your Honour, which was advanced on behalf of the appellants that the term - when one looked, for example, at 4D(1)(b)(ii), I think, your Honour, and perhaps 4D(1)(b)(i) also, they have referred only to reducing or limiting what was provided, as distinct from the number.....persons to whom it was provided.
GLEESON CJ: Right. If that is right, it is an answer to a problem I was seeking to confront Mr Meagher with.
MR JACKSON: Yes. It is an answer, your Honour, that appealed, I think, to the primary judge, but I think Justice Moore took a different view on the point.
GLEESON CJ: I think it may have also appealed to Justice Hely.
MR JACKSON: Yes, I think that is so, your Honour, but it really again involves, in our submission, a reading down of the provision. But if your Honours look at the terms of the opening words of, for example, 4D(1)(b), it really uses the phrases together, "preventing, restricting or limiting", and they seem to be phrases that are intended to cover a variety of ways in which things might be prevented, restricted, limited, not just limited to the supply of goods or services. Your Honours will see, for example, if one took the words "the purpose of preventing . . . the supply of goods . . . to . . . particular persons", "the purpose of restricting . . . the supply of goods" or perhaps "restricting . . . the acquisition of . . . services from, particular persons" and "limiting the supply of goods . . . to . . . particular persons", your Honours, there is no - - -
GLEESON CJ: As I understand it, the way they reasoned was this. If the class of persons is the list on Schedule 1, there was no intention of preventing the supply of services to that class of persons - they were all potential franchisees. There was no intention of restricting the supply of services to that class of persons. Any of them who succeeded in becoming franchisees because they met the selection criteria would get the full range of franchise services. And there was no intention of limiting the supply of services to them for much the same reason. But that seems to assume that you cannot limit the supply of services to a class by saying "From now on, we are only going to provide services to fourteen-twentieths of you."
MR JACKSON: Yes, your Honour, I accept what your Honour is putting to me. Your Honour, what the provision does do is to, first of all, require they be identified, let us assume, the class of persons, then it looks to see what is done in relation to those and it is a provision that covers a number of possibilities. There is no reason why it should be particularly read down to exclude the case where, having identified the class of person, one says in relation to those that only some of them will now be served. Your Honour, in a case like that one can say that is limiting - one perhaps also can say it is limiting the supply to particular persons, the particular persons being those of the identified ones who miss out. Now, your Honours, could I just - - -
GUMMOW J: Could you just explain that again, Mr Jackson?
MR JACKSON: I am sorry, your Honour, yes. I was endeavouring to go a little beyond what had been put to me and what I was saying, your Honour, was this that in some cases what you have is a situation where you have particular persons who - they may also be a class of persons, but if you have people who are identified, such as a number of listed clubs, and if you have circumstances where you have a provision which says of those persons only a certain number can obtain the services in the future, a provision of that kind is perfectly capable, in our submission, of being characterised as a provision which, on the one hand, prevents the supply of services, say, to particular persons, the particular persons being those of the identified particular list of persons who miss out and then the similar thing with restricting and limiting, your Honour. That is the point I was seeking to make.
GUMMOW J: Now, that construction point is newly in the ring, is it not? It may be a perfectly good one, but it is the first time I have heard it, that is all. That is why I wanted to be sure I understood it.
MR JACKSON: Yes, your Honour. I do not think that it has been put in quite those words before because the pleading, as I recall it, was one dealing with classes of persons but it really does not matter, in our submission, because they would also be identified class.
GLEESON CJ: What is the difference between restricting and limiting?
MR JACKSON: Your Honour, in some contexts restricting would be more apposite to acquisition than to supply, perhaps, the same as with limiting but - well, your Honour, restrict will cover much the same ground as limiting but it allows - it is perhaps an expression that in many cases is more apt to quantities, perhaps, or things of that kind but it is perfectly capable of covering much the same ground as limiting. Sometimes one may be the obverse of the other, in some circumstances.
Your Honours, could I refer to the pleading issue, as it is referred to. We would refer to and rely upon what Justice Moore said in paragraphs 161 and following of his reasons. May I take your Honours to those, briefly. Your Honours will see that his Honour there sets out extracts from the statement of claim and your Honours will see the passages that are referred to, the references to restricting and limited. One sees, then, in paragraph 165 the issues and contentions which had been supplied to the primary judge and one sees paragraphs 11 and 12 and the words emphasised.
Your Honours, correct me if I am wrong, but my recollection is that that document was one at the start of the case, even before the primary judge, and then there were written submissions at the end of the case referred to in paragraph 166.
KIRBY J: It was before Justice Hely, by the look of things.
MR JACKSON: No, I am sorry, your Honour. That is before Justice Finn.
KIRBY J: I see.
MR JACKSON: I am sorry, I am not making myself clear, your Honour. Your Honours will see at paragraph 165 that in the appeal we, on behalf of Souths, handed up in response to the argument of a new point, what had been before the primary judge. That included, relevantly, two things: one being a statement of issues and contentions, the other being written submissions. The former, your Honour, was at the start of the trial before Justice Finn, the latter at the end.
Your Honours will see those submissions set out and then the point we would seek to make is that the issue was an issue by reference to the pleading, by reference to those documents. Each party had the opportunity to adduce whatever evidence it chose on those issues and the matters covered within the ambit of them. Your Honours will see then the protest that we sought to make in paragraph 167 which we would, with respect, repeat.
Your Honours, may I just say one further thing and it is this, and it is in relation to the observation one sees in the judgment of Justice Finn and also Justice Heerey, this is a provision which would stop people opening new businesses and things of that kind. One accepts, of course, that sections 45, 4D and 4F are provisions which have a potentially wide operation. What they do do is to strike out arrangements between competitors, competitors being a broadly defined term as appears from section 4D(2).
McHUGH J: But that is part of the problem I have with this case. It seems to me at the moment that the services to which the exclusionary provision related was altogether different from what was the competition between these parties prior entering into the agreement. ARL and News Limited were no doubt in competition but they were in competition for sponsors, for the public. They were not in competition for individual clubs, for instance. I mean you have an Optus competition run by ARL with a defined number of clubs and you had Super League with its different sets of clubs. There were different funding arrangements.
MR JACKSON: Your Honour, I do not know about that, with respect. They were in competition for clubs and very much in competition to get clubs to move, particularly, of course, ARL across to the newer body. Your Honour, could I just say that that is one aspect of it but what was pleaded and, in a sense, what is the essence of the case as it emerged was that the club supplied team service, services of rugby league teams on the one hand - and this is the briefest fashion of it - and on the other hand the two organisation supplied competition organising services. Your Honour, there are no doubt other aspects of it.
McHUGH J: .....said general propositions do not decide concrete cases. The general propositions in subsection (2) do not decide the cases. You have to drop down from services to see what it is that is actually being acquired or supplied.
MR JACKSON: Your Honour, team services is the services of 13 players who run out on the field, a number of them who sit on the bench and then replace them and play a game.
McHUGH J: Yes, but there is a lot more to it than that, Mr Jackson.
MR JACKSON: Of course there is, your Honour, but - - -
McHUGH J: There were questions of logos, there were questions of funding, where they would come from, the circumstances - I mean there is no doubt that they were in competition, but were they in competition in respect of the matter to which the exclusionary provision related and what you rely on, this 14-team term? I mean, one had 10 teams, the other had 12 teams. They could go on to the end of time. I cannot see how they were ever going to be in competition about having 14 teams in the competition.
MR JACKSON: Your Honour, with respect, has been - my learned friend Mr Young's dulcet tones, with respect, have led your Honour on a little, if I may so, because what one sees is that if one goes to the terms of section 4D(2), that one does not read in that - the way in which my learned friend puts it is not the only part of it. Your Honour, I do not want to go over it, of course, but all that was required is that they be in competition - and one can leave out altogether the words "but for the provision of the contract" - all that is required is that they are in competition with each other:
in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision -
et cetera. Now, "all or any", your Honour. Now, one of the services, one would have to say, lying at the heart of it all - logos, money, bells and whistles - is that 13 people run out on the field and play another 13 people.
McHUGH J: It has to be assumed in your favour that they were in competition, that Super League.....the ARL wanted to get the Bulldogs back in, et cetera, et cetera, whatever it may have been, but the question is, given the agreement that they entered into in May 1998 and it formulated back in December 1997, were they in competition for what is in clause 7.2, 7.9, or would they have been?
MR JACKSON: Well, your Honour, the relevant provision of the contract is one in relation to playing in a series of batches, a competition, and the competition is one involving the teams and involving teams and involving a game of the same kind at the same level and the organisation of that - the provision of the teams on the one hand, the provision of the competition on the other. Now, there is more to it than that, of course, but, your Honour, that is the core of it, and all that one has to have is, as section 4D(2) says, that they be in competition in relation to some - "any" is the word - of the services to which the provision would apply. Your Honour, I think I would be saying the same thing for perhaps a third time if I said more about that.
Your Honours, I was just about to say one thing a moment ago. It is just this, that whilst the provisions are provisions of potentially a wide operation in some circumstances, there are some limitations. The first is, of course, that the purpose has to be a substantial purpose, as section 4F(1)(a)(ii) so requires, so that a question of relative weight is involved, and secondly, there does have to be some element of particularity in the sense of persons or classes of persons. To say, for example, any person who might in the future choose to do some things excluded would tend to elasticise rather than interpret, in our submission, the provision. Those are our submissions, your Honours.
GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Meagher.
MR MEAGHER: I am loath to take up a point in the same line as Mr Jackson, but could I deal with your Honour Justice McHugh's questions about competition. There are express findings of fact by Justice Finn that the ARL and News were in competition for competition organising services and team services.
McHUGH J: But he defines it as high a level of generality as can be alleged. Anything could be covered by it.
MR MEAGHER: Well, the subject is dealt with, for your Honour's reference, at paragraphs 170 through to 175 of Justice Finn's reasons for judgment, and he notes evidence which involved my clients approaching clubs which were participating in the ARL competition, seeking to entice them across to the Super League competition. That was in 1997.
McHUGH J: Yes, I think one has to go and look at the evidence to see whether or not that was not a matter of historical - - -
MR MEAGHER: Could I then just move on briefly to refer your Honours to paragraphs 27 and 28 of Justice Heerey's reasons where he sets out the competition issue as we ran it.
KIRBY J: Which paragraphs are they?
MR MEAGHER: Paragraphs 27 and 28. We accepted that the parties were in competition in 1997 for the services of the existing clubs, but we argued that the relevant services to which 4D directed attention were the services which would be supplied in the year 2000, which was in brief form between the parties referred to as a timing characteristic of the services. We then sought to argue that but for the provision, namely the 14-team term, there would not have been a merger, because the evidence was that there would have been no merger if the parties could not agree on the 14 teams, and that is a finding made by Justice Finn. We argued that, but for the 14-team term, applying the words of section 4D(2), there would have been no merger. The question then was, would these two individual competitors have continued to exist through to the year 2000, which was a factual issue and the trial judge did not get to consider that factual issue, because he determined that the characteristic of the services, which we described as a timing characteristic - - -
McHUGH J: But Mr Young's point is that that just directs you to the wrong issue. It was not a question of if there had not have been this agreement you would have been competing for clubs. You may well have been, but the critical provision here is this 14 team. For instance, Justice Merkel said the 16-team provision was not a breach of 4D. So it was the 14 team that was critical, and that was the term.
MR MEAGHER: Your Honour, just responding briefly, section 45 requires one to consider whether, but for the relevant provision, the parties would have been in competition. The findings made by Justice Finn - and I will give your Honours their reference - specifically the finding at paragraph 285, but more generally findings at paragraphs 245, 269 and 439, were that, but for the 14-team term, there would have been no merger at all.
McHUGH J: I know, but without this merger of agreement you would have been in competition until one of these organisations went into liquidation.
MR MEAGHER: And that is the basis on which the matter was debated below - - -
McHUGH J: But that still seems to me to be different from the point that Mr Young raises. Anyway.
MR MEAGHER: Mr Young's submission, as we understood it, was that one simply asked, "What would the position have been but for the existence of the 14-team term?" Answer: "These parties would still have been merged and still providing the one competition", which was described as the NRL competition. The way the matter was dealt with below, on the findings of fact, was that absent the 14-team term there would not have been a merger.
GUMMOW J: Well, it was all interdependent, you say.
MR MEAGHER: Yes.
GUMMOW J: All these. The merger agreement, the members' agreement, the partnership agreement, they are all linked into one another.
MR MEAGHER: The whole thing turned on his Honour Justice Finn's finding.
GUMMOW J: The execution of one was dependent upon the execution of the other. Is that so?
MR MEAGHER: That is so and he found that if the parties had not agreed on the 14 - - -
GUMMOW J: It is not a question of if they had agreed; they would not have decided.
MR MEAGHER: What your Honour says is right; no, your Honour may be right in respect of the merger agreement, but the original understanding was a 1997 December understanding, which was not recorded in writing in which the subsequent agreement was.
GUMMOW J: I know. The Chief Justice was investigating this with you this morning. We were taken to this clause all the time, as written down.
MR MEAGHER: The other matter that I would wish to point out to the Court is that Schedule 1 to the merger agreement does not identify the 1997 clubs. It identifies the 20 clubs who were going to participate in 1998, and it includes Melbourne.
GUMMOW J: Now, just tell me the nature of this understanding. Was it an understanding that was to be reduced into writing?
MR MEAGHER: Yes.
GUMMOW J: Only then to be effective?
MR MEAGHER: No - - -
GUMMOW J: Surely, it was - was it that species of masters of common law of understanding?
MR MEAGHER: No, it was not, your Honour. It was an arrangement which the parties acted on immediately by making press announcements in December 1997, on the understanding - - -
GUMMOW J: So it has been superseded in May, is it?
MR MEAGHER: It was superseded in May, and the merger agreement expressly refers to the fact that it supersedes a memorandum of understanding of February, which, in turn, replaced the earlier understanding of December 1997. The reason we took the Court to clause 7 was that, in relevant respects, clause 7 reflected exactly what had been arranged and agreed in December 1997.
One final matter: with respect to the question of restrict or limit, as we said in our argument in-chief, the case which was put was "restrict or limit to individual persons" - namely, the 1997 clubs. It was not "restrict or limit to a class". But let me deal with both arguments. In relation to restrict or limit to persons - - -
KIRBY J: That would not raise a procedural fairness question, because the identified subject is clear.
MR MEAGHER: That is probably so, your Honour. In relation to restrict or limit to persons, looking at it from the point of view of the persons, some were to be supplied and some were not to be supplied at all. There was in no relevant sense to be a restriction to any of them. It is only when one looks at the thing collectively that one has this notion of a limiting. The services were not being provided to them as a group, they were being provided to them individually, and the clubs which are identified in Schedule 1 of the merger agreement are individual clubs to whom it is said, "In 2000, we will only take 14 teams". That may have had a consequence that some of them would be supplied, either alone or by merged entities - others would not be supplied at all. In no sense were they to receive supply collectively or was there any restriction on, or limit on, their supply as a collection.
GUMMOW J: Now, what do you say about the point Mr Jackson was raising about the meaning of particularity? The people left out, in other words.
MR MEAGHER: I am not sure - - -
GUMMOW J: We raised it with him about 20 minutes ago.
MR MEAGHER: I understand, your Honour, and I did not precisely follow the point which was being put.
GLEESON CJ: Well, you can be particular without having a name put to you. If a number of recipients of services, or suppliers of services, is to be reduced from 20 to 14 without the six who will miss out being identified, nevertheless the six who ultimately miss out are particular persons.
MR MEAGHER: Well, they are persons who miss out and to that extent share a characteristic, but the question of particular persons has to be answered at the time the arrangement is made, not after the event and after - - -
GLEESON CJ: You do not have to be able to assign a name to them for them to be particular persons - - -
MR MEAGHER: You do not have to assign a name to them, but you must be able to identify them by reference to some characteristic as the object of the purpose, otherwise they are not particular persons.
GLEESON CJ: Well, could you identify them as losers?
CALLINAN J: People without the ability to satisfy the criteria?
MR MEAGHER: Dealing with your Honour the Chief Justice's question first, if one simply identifies particular persons by reference to those who miss out, one in effect writes out of section 4D the words "particular persons or classes of persons" because if it has the effect of preventing supply, section 4D is satisfied. In relation to your Honour Justice Callinan's question about the selection criteria, the submission that we put in-chief and referred your Honour to the passage of the judgment of Justice Heerey, indicates that to say that those who missed out, missed out by application of a selection criteria, really identifies no characteristic or common feature inherent in any class. So that one could say at the outset that those clubs there, the 10 or so of those identified in Schedule 1, are the object of this purpose as distinct from the others.
The reality is to say that some of them miss out by application of a selection criteria in circumstances where the selection criteria was not to be biased or to discriminate is not to attribute any specific characteristic or any common feature.
GLEESON CJ: But it would not have made any difference, would it, if they had had a relegation system? While they could have done this - I am not suggesting it would have been sensible - but it would not have been legally different, would it - would have been to say the 14 teams who will be left in the competition in the year 2000 will be numbered 1 to 14 on the table and the ones who miss out will be numbers 15 to 20.
MR MEAGHER: And if at the outset each of them had an equal opportunity to finish 1 to 14 on the table, then it could not be said at the outset when the arrangement was made, that this provision was inserted to operate on that club there or those group of clubs. What one is really describing is the fact that they miss out.
McHUGH J: Well, the submission seems to neuter the section, does it not? I mean, if two cab companies agree that they will only provide taxi services between 9 am and 6 pm and a lot of people miss out why does not the provision have the effect of limiting the supply of services to particular persons?
MR MEAGHER: It does not have that purpose at the time it is made in the sense that that is not a reason for including it; that it be directed to some rather than the rest and that is the work which we submit the word "particular" does in this section.
GLEESON CJ: That is really the "boycott" argument, is it not?
MR MEAGHER: Well, it can be called a "boycott" argument, but otherwise one asks, when the section was in the form it originally was without the words "or classes", what was the adjective "particular" doing because it was prohibiting provisions which had the purpose of preventing supply to persons. Why was there a need to say "particular persons"?
GLEESON CJ: So you say "particular persons" never included people who did not leave work until after six at night? You may be right about that, but that is the way you put it, as I understand it.
MR MEAGHER: I think that is the result of the submission, your Honour. All people could be people who leave work before or after six o'clock. It may be an accident. It is not a characteristic which permits one to say the person at the outset that that person is an object of this purpose.
GLEESON CJ: Then if the taxi company said, "And we will no longer provide services to barristers. We will only provide services to senior counsel", that was to cover that situation that you needed to include the concept of classes of persons.
MR MEAGHER: Yes. In that case one could say it is directed to a class and one has described the class and for the purpose of 4D that class is a particular class. Why? Because the purpose pertains to that class, as distinct from others. That is the meaning of "particular". In response to your Honour Justice McHugh's taxi cab example, can I refer the Court to the decision in Trade Practices Commission v Garden City Cabs [1995] FCA 1131; (1995) ATPR 41,410 in which I can address that very situation. Those are our submissions.
GLEESON CJ: Thank you.
KIRBY J: There was a special provision relating to costs mentioned at the special leave hearing. Could you remind me what that was?
MR MEAGHER: Yes, your Honour. It is recorded in our written submissions, I believe.
KIRBY J: You do not seek costs from the respondent if you succeed on the appeal?
MR MEAGHER: We do not, your Honour. That is so. It is recorded in paragraph 59 of our written submissions.
GLEESON CJ: Thank you, Mr Meagher. We will reserve our decision in this matter.
AT 4.19 PM THE MATTER WAS ADJOURNED
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