Case: South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862 ; (2001) 111 FCR 456
Outcome: considered
The issue of 'purpose' was investigated by the High Court in South Sydney in the context of s 45 and s 4D of the TPA. The case concerned a sporting club, South Sydney District Rugby League Football Club Ltd ('Souths'), which alleged that News Ltd and the Australian Rugby Football League Ltd ('ARL') had entered into a contract, arrangement or understanding in contravention of s 45 of the TPA. The alleged agreement between News Ltd and ARL was for the merger of two rugby league competitions. It provided for a unified rugby league competition to be conducted between, ultimately, fourteen teams only. The trial judge held that although the fourteen-team term was part of a contract, arrangement or understanding made between News Ltd and ARL, it did not have the purpose of preventing, restricting or limiting the supply or acquisition of services from particular persons or classes of persons. The Full Court overturned the trial judge's decision (Merkel and Moore JJ, Heerey J dissenting): see South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862 ; (2001) 111 FCR 456. Merkel J found that the trial judge had conflated the purpose of the merger, joint venture and regional participation provisions of the agreement, with the purpose of the fourteen-team term provision: at 522-523 [264]. Merkel J held at 531 [295] that the agreement had the purpose of preventing the supply or acquisition of services from a particular class of persons by restricting or limiting supply or acquisition to or from the clubs or entities selected to be included in the merged competition. Moore J found that by operation of the fourteen-team term, the services supplied by Souths and other affected clubs would be limited and restricted: at 501-502 [186]. In dissent, Heerey J held that the exclusion of clubs from the merged competition was not a purpose at all: at 474 [78]. Heerey J agreed with the trial judge that while the fourteen-team term limited, and was intended to limit, the number of clubs in the competition, it did not follow that the provision was included for the purpose of preventing the supply of services to, or the acquisition of services from, clubs in excess of the fourteen: at 467 [37]. 117 The High Court overturned the Full Court's decision (Gleeson CJ, McHugh, Gummow and Callinan JJ, Kirby J dissenting). Each of their Honours' separate reasons for judgment considered the proper approach to assessing the 'purpose' of a provision in a contract, arrangement or understanding for the purposes of ss 45 and 4D of the TPA. Gleeson CJ stressed the distinction between the purpose and the motive for including a provision in a contract, arrangement or understanding at 573 [18]: '... Purpose is to be distinguished from motive. The purpose of conduct is the end sought to be accomplished by the conduct. The motive for conduct is the reason for seeking that end. The appropriate description or characterisation of the end sought to be accomplished (purpose), as distinct from the reason for seeking that end (motive), may depend upon the legislative or other context in which the task is undertaken... [I]n the context of competition law, it is necessary to identify purpose by describing what is sought to be achieved by reference to what is relevant in market terms. The purpose of the fourteen team term was the objective, in relation to the nature of their business arrangements, that News and ARL sought to achieve; not the reason why they sought to achieve that objective. They may have had different, and multiple, reasons for their conduct. The manifest effect of a provision in an agreement, in a given case, may be the clearest indication of its purpose. In other cases, it may be difficult, or even impossible, to determine the purpose (of a kind relevant to the operation of the Act) of a provision in a written contract merely by reading the document. And, of course, the legislation deals with contracts, arrangements or understandings.' His Honour found that, in the circumstances of the case, it was necessary for the agreement to state how many clubs would participate in the merged competition, and by selecting fourteen as the number News Ltd and ARL did not have a purpose of excluding any particular club or clubs: at 575 [23] and at 576 [27]. 118 While the manifest effect of the provision may provide, as Gleeson CJ said, the clearest indication of subjective purpose, care must be taken that evidence of the effect of a provision does not render the test an objective one. Gummow J warned against this danger at 586 [63]. It must be kept in mind that the effect that the parties sought to achieve through inclusion of the provision in a contract, arrangement or understanding is crucial to the test of subjective purpose. 119 Both McHugh and Gummow JJ expressed some hesitation about determining purpose under s 4D by reference to the subjective purpose of the makers of the provision, but in the end they both accepted the correctness of the subjective interpretation of the section: at 580 [41]-[43] per McHugh J and at 585 [59]-[60] per Gummow J, cf Kirby J at 606 [130]. McHugh J agreed with Gummow J that the trial judge applied a subjective test of purpose and his findings should be upheld: at 581 [46]. 120 Section 45E(3) requires consideration of the subjective purpose for inclusion of the provision in a contract, arrangement or understanding, not the purpose of the contract, arrangement or understanding as a whole. As Callinan J said in South Sydney at 638 [216] in relation to purpose under s 45: 'It is the purpose of the provision that is important. The discovery of that purpose is by no means necessarily to be gained by an examination of the provision itself only. As with any term of an agreement or arrangement, a provision may, sometimes must, be read with, and seen for its true meaning, effect and purpose, the relevant agreement or arrangement as a whole.' Gummow J agreed with Callinan J on this point: see at 587 [65].