Supreme Court New South Wales Medium Neutral Citation: Sharp v National Rugby League Ltd [2016] NSWSC 730 Hearing dates: 31 May 2016 Decision date: 07 June 2016 Before: Stevenson J Decision: Proceedings dismissed Catchwords: ASSOCIATIONS AND CLUBS - interim suspension of registration as Club Official pending final determination - natural justice - procedural fairness - whether Club Official entitled to be heard before interim suspension - proper construction of rules - whether right to be heard before interim suspension excluded by language of the rules Cases Cited: Australian Workers' Union v Bowen (No 2) (1948) 77 CLR 601 Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 Dickason v Edwards [1910] HCA7; 10 CLR 243 McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470 Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202 Fitzgerald v Masters (1956) 95 CLR 420 Westpac Banking Corporation v Tanzone Pty Limited [2000] NSWCA 25 Texts Cited: K Lewison and D Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) Butterworths Concise Australian Legal Dictionary (3rd ed 2004, LexisNexis Butterworths) Concise Oxford Dictionary (2011, Oxford University Press) Category: Principal judgment Parties: Stephen Sharp (First Plaintiff) Tom Issa (Second Plaintiff) Peter Serrao (Third Plaintiff) John Boulous (Fourth Plaintiff) Daniel Anderson (Fifth Plaintiff) National Rugby League Limited (Defendant) Representation: Counsel: A R Moses SC with R L Gall (Plaintiffs) L V Gyles SC with C Colquhoun (Defendant) Solicitors: Thompson Eslick Solicitors (Plaintiffs) Kennedys (Australasia) Pty Ltd (Defendant) File Number(s): SC 2016/135088 Judgment 1. Parramatta National Rugby League Club Limited ("the Club") participates in the national rugby league competition as the "Parramatta Eels". 2. Mr Stephen Sharp, Mr Tom Issa, and Mr Peter Serrao, the first to third plaintiffs, are directors of the Club. 3. Mr John Boulous, the fourth plaintiff, is the Chief Executive Officer of the Club. Mr Daniel Anderson, the fifth plaintiff, is the General Manager, Football Operations of the Club. 4. The defendant, National Rugby League Limited ("NRL") administers the national rugby league competition in which the Club competes. 5. The NRL publishes, amongst other documents, the "National Rugby League Rules" ("the Rules"). 6. Each of the plaintiffs is registered with the NRL as a "Club Official" and is, as a matter of contract, bound to comply with the Rules. 7. For some time, prior to 3 May 2016, the NRL has been investigating whether the Club, and Club Officials, including the plaintiffs, have been in breach of the Rules. 8. Rule 22 sets out a procedure to be followed if the CEO of the NRL (currently Mr Todd Greenberg) forms the opinion that a Club Official has failed to comply with the Rules, or is otherwise not a fit and proper person to remain registered as a Club Official. 9. Rule 22 is critical to a determination of this case and, relevantly, is in the following terms: "(1) Should the…Chief Executive Officer form the opinion, in [his or her] absolute discretion, that a [Club Official]: (a) Has failed…to comply with these Rules…; or (c) Is otherwise not a fit and proper person to remain registered under this Part; and, further, considers in [his or her] absolute discretion that the registration of the person should be cancelled or suspended, then the…Chief Executive Officer shall proceed in accordance with sub-Rule (2). (2) Where the…Chief Executive [Officer] considers that the registration of a person should be cancelled or suspended pursuant to sub-Rule (1), then the…Chief Executive Officer shall: (a) Notify the person in writing of that intention, which notice shall contain a brief outline of the reason or reasons for that intention; (b) Advise the person in writing that the person's registration is suspended until a determination under sub-Rule (3) is made; and (c) Invite the person to show cause in writing within five Business Days why the person's registration should not be cancelled or suspended, as the case may be; in which event, the person's registration shall immediately be cancelled or suspended until the…Chief Executive Officer makes a determination under sub-Rule (3). (3) After the expiration of the period specified in sub-Rule (2)(c), the…Chief Executive Officer shall consider any written response from the person and thereafter determine, in their absolute discretion, whether to: (a) Take no further action; (b) Caution the person; (c) Commence breach proceedings against the person…; (d) Suspend the registration of the person for such period as, in [his or her] absolute discretion, is thought fit; or (e) Cancel the registration of the person." 1. On 3 May 2016, in a purported exercise of his power under Rule 22, Mr Greenberg sent to each of the plaintiffs a document headed "Notice of Intention to Cancel your Registration" ("the Notices") in which he: 1. notified each of the plaintiffs that he had formed the opinion that their registration as a Club Official should be cancelled, and gave reasons for having formed that opinion; 2. stated that each of the plaintiffs should within five days (the time prescribed by Rule 22(2)(c)), or "such other time as I may agree" show cause under Rule 22(2) why that should not occur; and 3. stated that, "in the meantime" the plaintiffs' registration was "suspended until I make a determination under Rule 22(3) of the NRL Rules" ("the Suspension Statement"). 1. The Notices concluded: "In saying this the NRL will until it has made its determination of this Notice, and the Breach Notice that it has today issued to the Club, permit you to continue to participate in the management of the Club to: (a) enable you to prepare your response to this Notice; and (b) assist the Club to prepare its response to the Breach Notice." 1. On the same day, the NRL sent the Club the "Breach Notice" referred to in the passage set out at [11]. 2. The plaintiffs contend that, prior to making the Suspension Statement, the NRL was obliged "as a matter of procedural fairness and affording natural justice" to notify the plaintiffs of its intention to make the Suspension Statement and to give the plaintiffs an opportunity to be heard as to whether they be suspended as Club Officials. 3. The plaintiffs contend that this is because the Rules, on their proper construction, either expressly provide such a right, or at least did not exclude such a right which, in those circumstances, is to be implied. 4. It follows, the plaintiffs contend, that the NRL had no power to suspend the plaintiffs, and that the Notices are void. 5. The plaintiffs also contend that the statement made at the conclusion of the Notices, that I have set out at [11] above, impermissibly purported to impose on the plaintiffs restrictions on their ability to perform their functions or duties as directors or officers of the Club. 6. The plaintiffs seek declaratory relief in that regard. Decision 1. On the proper construction of the Rules, the plaintiffs did not have any right to be heard before the NRL made the Suspension Statement or issued the Notices. 2. The Notices are valid. 3. In light of the statement made to me by Mr Gyles SC, who appeared for the NRL with Mr Colquhoun, as to the NRL's position concerning the concluding sentence of the Notices (set out at [11]), I see no utility in making any declaration about that matter. I will, at the conclusion of this judgment, note what was said to me by Mr Gyles. A breach of procedural fairness? 1. The NRL does not dispute that the plaintiffs' claims are justiciable by reason of the plaintiffs' contractual relationship with the NRL. 2. The obligation of procedural fairness for which the plaintiffs contend is a right to be heard before being suspended under Rule 22(2)(b). 3. It is common ground that the question of whether the plaintiffs had any such right depends on the proper construction of Rule 22. 4. The relevant principles were stated by O'Connor J in Dickason v Edwards [1910] HCA 7; 10 CLR 243 at 255 as follows: "Whether a domestic tribunal has exceeded its powers is entirely a question of the construction of the contract which creates it. The rules of a society may give power to decide disputes on any principle the members think fit. The rules may be of such a nature as to empower a judicial body to decide in violation of all principles of natural justice. If the parties choose to agree to a tribunal having power of that kind the Courts will not interfere. But in the interpretation of such a contract there are some leading principles to be borne in mind. The first is that in interpreting rules which give jurisdiction to any tribunal there is always to be read into them the underlying condition that the proceedings shall be carried on in accordance with the fundamental principles of common justice. It is upon a party who wishes to shut out the implication of that basic condition to show that the rules expressly or by necessary implication negative the implication of its existence." 1. More recently the matter was considered by Campbell J in McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470 at [97] as follows: "In Australia, the preferable view is that natural justice comes to operate in private clubs and associations by the rules of those private organisations being construed on the basis that fair procedures are intended, but recognising the possibility that express words or necessary implication in the rules could exclude natural justice in whole or part. The judgments in Dickason v Edwards support that view. Further, in Australian Workers' Union v Bowen (No 2) (1948) 77 CLR 601 the statement of O'Connor J in Dickason v Edwards to that effect…was approved by Latham CJ at 617, and also by Dixon J (with whom Starke J agreed) at 631. Williams J, at 638 said: 'But the principles of natural justice cannot override the express provisions of the rules, and it could not be "contrary to the essence of justice" for the executive council honestly and bona fide to exercise all its powers and duties under the rules'." 1. There is no dispute that Mr Greenberg, as CEO of the NRL, formed an opinion ("the Opinion") of the kind contemplated by Rule 22(1), namely that the plaintiffs had failed to comply with the Rules and were not fit and proper to remain registered as Club Officials and that he considered that their registration as Club Officials should be cancelled. 2. Rule 22(2) states that if the CEO forms an opinion of the kind referred to in Rule 22(1), then he or she "shall" take the steps set out in Rule 22(2)(a), (b) and (c) "in which event" the relevant person's registration "shall" be, relevantly, suspended. (The rule here uses the words "cancelled or" suspended. I think this is a mistake in the language. I discuss this below). 3. Mr Moses SC, who appeared with Ms Gall, for the plaintiffs, submitted that the word "shall" should, in this context, be read as being directory rather than mandatory. I do not agree. Mr Moses referred to Butterworths Concise Australian Legal Dictionary (3rd ed 2004, LexisNexis Butterworths). But as that work makes clear, the usual meaning of "shall" in a legal context is "has a duty to". The natural meaning of "shall", in this context is "expressing an instruction or command" (Concise Oxford Dictionary (2011, Oxford University Press)). I think it clear that, as used in Rule 22(2), "shall" has this meaning. 4. Thus, having formed the Opinion, Mr Greenberg had no option in my view but to follow the procedure set out in Rule 22(2). 5. The first matter that Rule 22(2) provides that the CEO "shall" do is to notify the person in writing of his state of mind and to give a brief outline of his reasons. There is no dispute that Mr Greenberg did that in the Notices. 6. The next thing that Rule 22(2) stated that the CEO "shall" do was to: "Advise the person in writing that the person's registration is suspended until a determination under sub-Rule (3) is made". [My emphasis] 1. In my opinion, that language is intractable. Once Mr Greenberg formed the Opinion, he was obliged to inform the plaintiffs that their registration "is" (that is, was from the moment the Notice was given) suspended. This did not involve Mr Greenberg making any decision to suspend the plaintiffs' registration. It simply involved him giving the plaintiffs the advice that the Rules mandated. 2. Such suspension is of an interim nature. It is twice expressed to be "until a determination" under Rule 22(2); first in Rule 22(2)(b) itself and then in the concluding words of Rule 22(2). 3. The third thing that Mr Greenberg was obliged to do, having formed the Opinion, was to invite the plaintiffs to show cause why their registration should not be, relevantly, cancelled; that is, on a final basis under Rule 22(3). He did that, in the Notices. 4. Mr Moses and Ms Gall submitted that Rule 22(2)(b): "…does not provide that suspension of a registration is to: (i) take effect immediately; or (ii) take effect prior to sub-clause (c) being complied with or the person otherwise having an opportunity to be heard". 1. But it does. 2. Rule 22(2)(b) obliges the CEO to advise the person that the person's registration "is" suspended; and that such suspension is "until" a determination is made under Rule 22(3). It obviously takes effect prior to the person showing cause under Rule 22(2)(c); otherwise there would be no point stating that it was "until" the event the subject of the opportunity to show cause. 3. Overall, Rule 22 provides that, once the CEO has formed the opinion that the registration of a Club Official should be cancelled or suspended there is an automatic, interim suspension of the Club Official pending: 1. the Club Official showing cause why his or her registration should not be cancelled or suspended; 2. final determination by the CEO of that question. 1. The Rule thus provides for a two stage process. 2. The first stage occurs automatically on the CEO forming the relevant opinion; an interim suspension pending final determination of the Club Official's position. 3. The words of the Rule in my opinion leave no room for the implication of a show cause process at this first stage. 4. The second stage involves the final determination of the Club Official's position, following the Club Official availing him or herself of the show cause process provided for in Rule 22(2)(c). 5. It follows that, having formed the Opinion, Mr Greenberg was obliged to follow the course he did. He was constrained by the language of Rule 22(2) from providing the plaintiffs with a show cause opportunity prior to their interim suspension under Rule 22(2)(b). To use the language of the authorities to which I have referred, not only is the "necessary implication" of the Rules that there was no show cause opportunity at this stage; the "express words" of the Rules exclude it. 6. The opportunity for the plaintiffs to show cause is that provided for in Rule 22(2)(c); they are currently availing themselves of that right. 7. If Mr Greenberg's determination under Rule 22(3) is adverse to them, they have available the right to seek to have Mr Greenberg's decision reviewed by the NRL Appeals Committee, subject to the NRL Appeals Committee Procedural Rules. Has "something gone wrong with the language"? 1. After setting out, in Rules 22(2) (a), (b) and (c), the things that, having formed the opinion referred to in Rule 22(1), the CEO "shall" do, Rule 22(2) goes on to state "in which event" (which I read as meaning no more than "and accordingly") the person's registration shall be "cancelled or" suspended. 2. The "event" referred to is the taking of the three steps in Rules 22(2) (a), (b) and (c). The outcome of the taking of those steps includes the interim suspension of the registration of the Club Official in question. But it could not possibly result in the cancellation of that registration. That could only occur as a result of the CEO's determination under Rule 22(3). 3. As Mr Gyles submitted, the references to "cancelled or suspended" in Rule 22(1), in the chapeau to Rule 22(2) and in Rule 22(2)(c) are apt, as they refer to suspension or cancellation on a final basis under Rule 22(3). 4. But the concluding lines of Rule 22(2) are only directed to the consequences of the "events" described in Rule 22(2) itself; and those events do not include cancellation of the Club Official's registration. 5. "Something has gone wrong with the language" (per Lord Hoffman in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 at [25] such as to warrant the words "cancelled or" being ignored, as a matter of construction (see Fitzgerald v Masters (1956) 95 CLR 420 at 426-427; Westpac Banking Corporation v Tanzone Pty Limited [2000] NSWCA 25 at [20]-[21]; and Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202 at [46] and generally K Lewison and D Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) at [9.01]. 6. In any event, even if that is wrong, I cannot see what work the words "cancelled or" would do in relation to the critical question of whether the plaintiffs were entitled to be heard before the making of the Suspension Statement. I invited Mr Moses and Ms Gall to explain, in a note delivered after conclusion of oral argument, what difference to their argument inclusion of those words in Rule 22(2) made. I am not able to see anything in their note that casts light on that question. Indeed, the note seems to accept that the words make no difference to the plaintiffs' argument. Alleged fetter on the plaintiffs as directors and officers 1. The plaintiffs contend that by making the statement in the Notices that I have set out at [11] above, the NRL "purported to direct each of the plaintiffs to cease operating as Club Officials and therefore restrict them from exercising their powers, duties, or discretions other than in the limited manner set out" at [11] above. 2. It is not clear to me that the sentence should be read that way. On one view, the sentence does no more than state that the NRL does not regard the Rule 22(2)(b) suspension as preventing the plaintiffs from preparing their response to the Notice or assisting the Club to respond to the Breach Notice directed to it. 3. In any event, the NRL made its position clear on 9 May 2016 when, during the hearing of an interlocutory application before me, it stated that: "The [NRL] will not submit in these proceedings (2016/135088) that the purpose or effect of the suspension notices issued by the [NRL] to the plaintiffs on 3 May 2016 (Suspension Notices) was to: 1. restrict the plaintiffs from continuing to participate in the management of the Parramatta National Rugby League Club Limited (Club) to: a. enable the plaintiffs to prepare their response to the Suspension Notices; b. assist the Club to prepare its response to the Suspension Notices; or 2. direct the plaintiffs as to how they are to discharge their duties as directors and officers of the Club during the period of their suspension." 1. The position was made even clearer during the hearing of this application on 31 May 2016, when Mr Gyles confirmed that his instructions were that the NRL did not, and does not intend that this was the purpose of the statement. 2. As there is now no controversy about this matter (if there ever was) I do not consider it appropriate to make a declaration to this effect. Conclusion 1. The proceedings should be dismissed. 2. I will hear the parties as to costs and as to any further orders that should be made. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 June 2016