36 a] 453 CATCHWORDS TRADE PRACTICES - Victorian Football League clubs competing for spectators and players - whether VFL Rules contain exclusionary provisions or substantially lessen competition - whether VFL has taken advantage of power in market - relevance of definition of "services" excluding contracts of service. be i A pl RE adil en ot NO ae mal maakt PRACTICE AND PROCEDURE - application by respondent for proceeding to be stayed or. dismissed - relevant tests. Trade Practices Act 1974 ss.4 "services", 4D, 45(2) and 46 Federal Court Rules Ord.20 r.2 ee hk aoe abi th ae PHILLIP WALSH v VICTORIAN FOOTBALL LEAGUE and RANALD MacDONALD VG No. 231 of 1983 Woodward J. Melbourne 6 December 1983 *, . awe ae * welt Py " IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No. 231 of 1983 wwe rev wv GENERAL DIVISION BETWEEN: PHILLIP WALSH Applicant and VICTORIAN FOOTBALL LEAGUE and RANALD MacDONALD (who is sued on his own behalf and as President of the Collingwood Football Club and as representing all other members of the Committee of the Club and of the Club at the date hereof) Respondents ORDER JUDGE MAKING ORDER : Woodward J. clin acini a allen ak At ANNs bilabial ahaa, Nia Nenana DATE OF ORDER & December 1983 o WHERE MADE : Melbourne THE COURT ORDERS THAT: 1. The application that the proceeding be stayed or dismissed be dismissed. 2. The costs of that application be reserved. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY ~ ) VG No. 231 of 1983 ) ) GENERAL DIVISION BETWEEN: PHILLIP WALSH ~ Applicant and VICTORIAN FOOTBALL LEAGUB and RANALD MacDONALD (who is sued on his own behalf and as President of the Collingwood Football Club and as representing. all other members of the Committee of the Club arid of the Club at the date hereof) Respondents CORAM: Woodward J. DATE: 6 December 1983 WOODWARD J. REASONS FOR JUDGMENT In this matter the second-named respondent, Ranald MacDonald, supported by the first-named respondent, the Victorian Football League ('VFL') has. applied by way of notice of motion to have the proceeding stayed or dismissed. The grounds stated use the language of Order 20 rule 2 of the Federal Court Rules, but the substance of the case argued by counsel was that the statement of claim discloses no reasonable cause of action under the Trade Practices Act 1974 ("the Act"). The Court's jurisdiction to strike out the offending paragraphs of the statement of claim, pursuant to Ord.1ll r.16, was also called in aid; but this adds nothing to the substance of the application. 'After hearing argument on November 22nd, I indicated that I intended to dismiss the application but forbore to do so until I had prepared these reasons for my decision. ~The amended application of the applicant claims declarations that the VFL has engaged in restrictive trade practices contrary to ss.45 and 46 of the Act. Relying upon the accrued common law jurisdiction of the Court, he also seeks a declaration that the VFL Rules are void as being in restraint of trade. Injunctions are also sought which would have the effect of enabling the applicant to play for the VFL club of his choice. No relief is sought against the second respondent who is sued as representing the Collingwood Football Club, to which the applicant appears to be bound by the operation of the VFL Rules. The present notice of motion must succeed or fail on the issue as to whether the applicant has an arguable cause of action under ss.45 and 46 of the Act. I expressed the tentative view, in the course of argument, that if the jurisdiction under the Act could not be supported, there would be nothing to which the common law action could accrue and so that action was irrelevant for present purposes. No argument to the contrary was attempted. we The leading authorities on the way 'in' which courts should approach applications by respondents for summary relief from proceedings are Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125. I had occasion to consider these authorities in Inglis v Commonwealth Trading Bank of Australia (1972) 20 FLR 30 at 32-36 and drew from them the following principles relevant for present purposes "(a) an application for summary judgment for a defendant should be approached with great caution; (b>) if it becomes apparent at any stage of the proceedings that there is a substantial and difficult question of law involved in deciding the matter, the application should be dismissed and -the defendant left to proceed pursuant to 0.29, r.2, or in such other way as he may be advised ...." Since then the Full Court of this Court, in Universal Telecasters Queensland Ltd. v Ainsworth Consolidated Industries Ltd. and Anor. (19 August 1983, unreported) has adopted the test 'as to whether the applicant's case "is so clearly untenable that it cannot possibly succeed" (Barwick C.J. in General Steel Industries Case, above). The statement of claim has already been amended several times, the last occasion being after the hearing of this notice of motion. However these latest amendments have not altered the substance of the claims and it is convenient to refer to the document in its present form. The statement of claim alleges that the member clubs of the VFL are bound by a contract, arrangement or understanding which is constituted by the Memorandum and Articles of Association and the Rules and Regulations of the VFL, all of which are comprehended by the expression "the Rules". Those Rules are said to provide that a player can only play with a football club other than that *with which he is registered if he first obtains the permission of the VFL (and, in certain cases, a clearance from his club of registration). The relevant markets for purposes of the Act are said to be, first, the 'spectator market' in which VFL clubs compete amongst themselves for spectators for the entertainment provided by the skills of their players, and in which the VFL clubs together compete against the Victorian Football Association ('VFA') and its member clubs. This, 'spectator market' is concerned not only with the selling of club memberships and seats at games but also with such things as the receipt of commercial sponsorships, the sale of television and broadcasting rights and the granting of concessions to refreshment sellers and others. The second relevant market is the 'player market' in which VFL clubs compete for the services of capable players. The nature and extent of each of these markets would, of course, be a matter for evidence. It may be also that the 'spectator market' is capable of further sub-division, as the statement of claim seems to suggest (see paragraphs 7 and 18), but for present purposes it is convenient to consider it as a whole, along the lines set out above. The statement of claim alleges (a) the VFL has contravened s.45(2)(a)(i) of the Act in that its Rules contain an exclusionary provision, as defined in s.4D, (bo) that the VFL has contravened s.45(2)(b) (ii) of the Act in that its Rules have the purpose or effect of substantially lessening competition in the relevant markets, and (c) that the VFL has contravened s.46 of the Act by taking advantage of the power it has in the 'spectator market' for the anti-competitive purposes proscribed by that section. The substance of the argument for the respondents that the statement of claim discloses no cause of action may be summarized in the following terms: (i) although the statement of claim makes no reference to the fact, the Rules provide, and the nature of the game requires, that all VFL football players must be employed by their respective clubs under contracts of service; (ii) the Act defines "services", for its purposes, so as not to include "rights or benefits being the ~supply of goods or the performance of work under a contract of service" (see s.4), and the definition of "services" is central, and thus fatal, to each of the alleged breaches of the Act by the VFL. In examining this argument of the respondents it is convenient to take this second point first. An exclusionary provision, for purposes of s.45(2)(a)(i) of the Act is defined in s.4D as one which "has the purpose of preventing, restricting or limiting ... the supply of goods or services to, or the acquisition of goods or services from, particular persons". Counsel for the applicant said that the exclusionary provision relied upon was that which gave a particular VFL club the exclusive right to acquire the services of certain players, thus denying those services to the other eleven clubs in the VFL. Obviously the definition of ""services" is directly relevant to this claim, referred to in paragraph (a) above. In the same way there can be no 'doubt that the definition is central to that part of the claim in paragraph (b) above which relates to the 'player market'. It is a market for the services of players in which it is alleged that competition has been substantially lessened. However, Counsel for the. applicant deny that the same can be said of the 'spectator market' ., They say that market "has nothing to do with the definition of 'services'; it is to do with the entertainment provided by the clubs of the League". They 'say that when the Rules are looked at in their entirety, they prevent clubs from obtaining the footballers they need to improve the quality of their performance, and thus of the spectacle they provide. As I understand this submission, it means that the individual VFL clubs, and the VFA and its member clubs, are all inhibited in competing for spectators, and the other financial benefits which flow from the provision of a spectacle, because their ability to compete "is substantially dependant upon the quality of the players playing in the spectacles or games which they organize" (paragraph 19 of the statement of claim). To put the matter at its simplest, the applicant would be setting out to prove that the Rules were likely to have the effect of substantially lessening competition in the market in which the clubs, or related corporations, supply goods or services to spectators. The services referred to here seem to be "rights, benefits, privileges or facilities .... provided .... under a contract for .... the provision of .... amusement, entertainment, recreation ....". They do not appear to be "rights or benefits being ... the performance of work under a contract of service" (s.4, definition of "services"). In other words, it is at least arguable that an arrangement between competitors in the field of entertainment can have the effect of substantially lessening competition, and so contravene s.45(2)(b) (ii) of the Act, even though the arrangement relates to the employment of individual entertainers pursuant to contracts of service. a The same arguments apply to the applicant's claim under s.46 of the Act (see paragraph (c) above). Here the claim relates to the VFL taking advantage of its power to control the 'spectator market'. Again it would seem at least arguable that a corporation can be in breach of s.46 of the Act by abusing its power in the market for spectators at entertainments, even though it does so by manipulating the service contracts of individual entertainers. Even in those parts of the claim which relate to the 'player market', I think it is open to argument that an arrangement between corporations which dictates which corporation a particular potential employee can offer his services to, can "have the purpose of ... limiting ... the acquisition of .... services from particular persons" even though those services may, if they are ever availed of and put into contractual form, be governed by contracts of service which would themselves be beyond the purview of the Act. Northrop J. rejected this argument, so far as it relates to s.45(2)(b) (ii) of the Act, in Adamson v West Perth Football Club (Incorporated) (1979) 39 FLR 199 at 228; 27 ALR 475 at 508. However that rejection was based in part on the facts of the case, and insofar as his Honour was construing the Act, the applicant in the present matter has indicated that it would seek to challenge his Honour's construction. Without wishing to indicate any dissent from Northrop J's view, I believe that the applicant should not be summarily deprived of that right. oad ' So far I have been dealing with the second contention of the respondents, that the definition of 'services', which excludes contracts of service, is both central and fatal to all the applicant's claims. As I have said, I am not satisfied that this is so. This still leaves the question of fact whether all VFL footballers are employed under contracts of service. Io was informed that the Rules require that they should be, and the nature of the services they provide certainly seem to be more appropriate to contracts of service than contracts for services, in view of the detailed control which one would expect to be exercised over the way in which they perform their work. (C£. Commissioner of Taxation v Maddalena (1971) 45 ALUJR 426). However, the point is not conceded by the applicant, who is said not to be under contract at all at the present time, and other possibilities were suggested by his counsel. In the final acai aia a a A SO OEE - 10 - analysis, although it would seem that most, if not all, VFL footballers are employed under contracts of service, evidence will be necessary to determine the issue. For the reasons I have given, I am satisfied that there are substantial and difficult questions of law involved in deciding this matter, and that the applicant's case is not so clearly untenable that it cannot possibly succeed. I am confirmed in this view by the decision of the Full Court of this Court: in Adamson v Western Australian National ' Football League (Incorporated) (1978) 38 FLR 237; 20 ALR 191. There, in an application for interlocutory injunctions, the same type of 'spectator market' was postulated by the applicant and the same argument about footballers being employed by contracts of service was put on behalf of the respondent. The Court said, at p-.242 (ALR p.195), "It was further argued on behalf of the respondents that even though the relevant restrictions, according to the appellant's primary argument, were upon competition between the clubs in terms of the quality of their participation in the relevant games or spectacles, the exclusion in the definition of ""services", to which reference has already been made, prevented any breach of the provisions of s.45(2)(b)(ii) of the Act being involved. See the definition of "competition" contained in s.45(3)." -ll- The Court concluded, at p.243 (ALR p.196), "We can see great force in a number of the arguments advanced on behalf of the respondents and, if it were necessary for us to reach a firm view as to what the ultimate outcome of the proceedings will be, we would have no alternative but to reserve our decision. It is not, in the view we take, either necessary, or indeed, proper that we reach or express such a firm view at this stage of the proceedings. It is only necessary that, as has been said, we be persuaded that there sare serious and difficult questions of fact or law - involved in the proceedings and that the appellant _ has a real prospect of ultimate success. We are so persuaded," As I have mentioned earlier, Adamson's Case was later heard by Northrop J. His Honour found that, on the evidence led before him, the applicant had not established that there existed any relevant market which was affected by the regulations the subject of the action. That decision is likely to be of importance to the decision of the present case, but just how important it will prove depends on the evidence to be led in this matter. I am satisfied that this is not a case in which the proceeding should be stayed or dismissed and the application to do so is refused. Because the notice of motion sought alternative relief, some of which has been given in effect by the amendment of pleadings, I have indicated a tentative view that costs should be costs in the cause. However, in case counsel for the applicant wishes to contest this approach, I shall reserve the question of costs. I certify that the 11 preceding pages are a true and accurate copy of the Reasons for Judgment herein The Hon. Mr. Justice Woodward. ssociate Dated: 6 December 1983 i | Ae edi Shaan nce a a -'