WIN Corporation Pty Ltd -v- Nine Network Australia Pty Limited

1. [1]

   HIS HONOUR: Clause 2.1 of a written Program Supply Agreement (the PSA) entered into by the plaintiff (WIN) and the defendant (Nine) on 3 June 2013 provides:

2. [2]

   The PSA was to expire on 31 December 2015. However, by Variation Agreement signed by the parties on 31 December 2015, amongst others, its term was extended to 30 June this year.

3. [3]

   Nine is transmitting its program schedule by live internet streaming, which is available to recipients in the licence areas covered by the WIN Stations (the WIN licence areas). WIN claims that Nine is in breach of the PSA by broadcasting within the meaning of clause 2.1. WIN says that even if Nine is not broadcasting, it is still in breach of an implied obligation not to do what it is doing. WIN moves the Court for an injunction restraining Nine from continuing to live stream into the WIN licence areas for the remainder of the life of the PSA.

4. [4]

   For the reasons which follow, I have concluded that live streaming is not broadcasting within the meaning of the PSA, and that Nine is under no express or implied obligation not to do it. WIN’s claim for an injunction must therefore be refused.

The parties

1. [5]

   WIN itself, and through related corporate entities, owns and operates television stations. It is Australia’s largest regional television broadcaster (using the term neutrally). It delivers the television programs using broadcasting services bands, that is, by terrestrial transmission to the general public free of charge. It does this under commercial television broadcasting licences issued by the Australian Communication Media Authority (ACMA) under the Broadcasting Services Act 1992 (Cth) (the BSA). The licences authorise the licensee to provide this service within a geographical “licence area” shown on a map which is a part of each licence. This form of broadcast is commonly known as “free-to-air”. WIN does not currently live internet stream, nor does it presently intend to do so in the future.

2. [6]

   Nine is an Australian national television broadcaster.

Previous arrangements

1. [7]

   Over many years, under different written program supply agreements entered into at different times and on different terms, Nine has supplied WIN with programming and licenced WIN the right to broadcast it. There are written agreements between them in evidence which go back to as early as 1997. Some of the agreements are in what the parties call “long form”, containing, amongst others, detailed definitions. Others are in “short form”. The long form agreements, using different but not materially different terminology, invariably define “broadcast” to exclude transmission by distribution technology other than pursuant to a commercial television broadcasting licence under the BSA, whether now known or later developed. This is not surprising, given that WIN has only ever broadcast free-to-air.

2. [8]

   The program supply agreement which governed the parties’ relationship, prior to entering the PSA, was in short form signed by them on 7 September 2007, with a commencement date of 1 July 2007 and a period of five years. This agreement contained no definition of broadcast, and contemplated the parties moving in good faith to complete long form documents within 14 days. However, and notwithstanding a lengthy course of negotiations, this was never achieved. For reasons which will appear below, it is necessary to set out in some detail the course of those negotiations.

3. [9]

   On 25 September 2007, Nine proffered a draft long form agreement which contained the following definition of “broadcast”, which meant free-to-air and nothing else:

4. [10]

   WIN responded on 2 November 2007 by proffering a definition of broadcast meaning transmission by any means. The draft deleted the words which expressly excluded from the definition transmission by a computer, computer network or other technology.

5. [11]

   Nine responded on 30 November 2007 by rejecting WIN’s expanded definition. By notation in a marked up draft, Nine stated that:

6. [12]

   Nine proffered a further draft on 1 September 2008, which included the definition of broadcast first insisted upon by it.

7. [13]

   In a draft proffered by WIN on 16 October 2008, it apparently accepted Nine’s definition.

8. [14]

   The parties, however, continued to negotiate on various aspects including rights with respect to other forms of transmission.

9. [15]

   In an email dated 12 November 2008, following a meeting between them, WIN’s then Managing Director, David Butorac, wrote to Nine’s then Chief Executive Officer, David Gyngell, that:

10. [16]

    In a response dated 29 December 2008, Amanda Laing, Nine Group’s General Counsel, wrote to Butorac:

11. [17]

    Butorac replied on 12 January 2009 as follows:

12. [18]

    Separately, on 26 May 2009, the parties entered into a short form agreement under which Nine licenced WIN to broadcast its programming in WIN’s South Australian licence areas. The agreement defined “broadcast” as meaning free-to-air transmission.

13. [19]

    The negotiations towards a long form of the 7 September 2007 short form agreement were never concluded.

14. [20]

    On 24 July 2009, Butorac emailed Jeffrey Browne, an executive director of Nine, enquiring how he proposed to move forward to put in place a binding agreement.

15. [21]

    On 24 July 2009, Browne replied, saying “Thank you. We do have a binding agreement, what we don’t have is a long form document. It seems we might just have to live with what we have. Like you, I welcome any other suggestions.”

Rugby League

1. [22]

   On 21 August 2012, Nine announced a “new deal” with the Australian Rugby League Commission to hold the free-to-air television broadcast rights for the National Rugby League (NRL) for the next five years, with Fox Sports taking the rights for subscription television. An article in the Australian Financial Review on 11 December 2012 revealed that Telstra had required digital rights from the NRL which included “rights to broadcast NRL matches live via mobiles, tablets and Internet protocol TV”. By formal admission in the proceedings, WIN admits that it knew in and from December 2012 that Telstra had acquired such rights, and that it knew as at and from 3 June 2013 that Nine did not hold those internet broadcast rights, but that it also knew that Nine had been actively seeking to obtain internet broadcast rights.

Events leading up to the PSA

1. [23]

   In mid-2012, it seems that negotiations for a new program supply agreement commenced. WIN proffered a draft on 24 December 2012, under which Nine would grant to WIN “the exclusive and irrevocable right and licence to Broadcast in the Territory the Program Material of Nine (other than the Excluded Programs) pursuant to the Licensee’s Broadcasting Licence”. The draft defined “Broadcast” to mean:

2. [24]

   The draft contained a proposed clause 33.6, which would have obliged Nine to keep WIN informed of developments relating to its intended future plans for internet programming. By way of a letter dated 19 January 2013 from Laing to Bruce Gordon, Deputy Chairman of WIN, with an accompanying marked up draft, Nine’s response was to delete the proffered provision. In the letter, Laing stated:

3. [25]

   The proffered draft included a definition of “Broadcast” which excluded transmission or distribution by any means to any computer or computer network through any interface, protocol or other technology.

4. [26]

   There were apparently meetings between the parties in the week of 4 March 2013. WIN’s solicitors sent Laing a marked up draft on 12 March 2013 which did not take issue with the definition of broadcast in Nine’s preceding draft.

5. [27]

   On 5 April 2013, apparently against the background of a possible takeover of Nine, Browne wrote to Andrew Lancaster, WIN’s Chief Executive Officer, proposing discussion on a different agreement, or series of agreements, for Nine “to re-affiliate” with WIN. This drew a lengthy (and perhaps understandably acerbic) response from WIN in a letter from Gordon to Gyngell dated 9 April 2013. There was a further exchange of correspondence and apparently meetings between the parties.

6. [28]

   Around 28 May 2013, WIN proffered a short form draft agreement, which contained no definition of broadcast.

The PSA

1. [29]

   On 3 June 2013, the parties entered into the PSA.

2. [30]

   On 31 December 2015, the parties entered into the Variation Agreement which extended the life of the PSA so as to expire on 30 June 2016. It accordingly has just over two months to go.

3. [31]

   Centrally relevant clauses are set out below.

4. [32]

   Clause 2 of the PSA (as varied by the Variation Agreement) is in the following terms:

5. [33]

   Clause 3.1 provides:

6. [34]

   Clause 3.6 provides relevantly:

7. [35]

   Clause 6 provides:

8. [36]

   Clause 9.6 provides:

Live streaming

1. [37]

   In late October 2015, Nine announced the launch, in early 2016, of 9Now (the service), a new streaming and video on demand product which allows members of the public (users) to log in via an internet website or application to view via the internet live or near live streaming (commonly referred to as live streaming) of Nine's programming, or on a video on demand basis.

2. [38]

   The latter allows users to watch that programming at a time of their choosing. The service is available to users who have access to the internet. This includes people who happen to be located in the WIN licence areas.

3. [39]

   The service went live on 27 January 2016, and has since then been available to users on a range of devices, including personal computers, smart phones and tablets.

4. [40]

   There is no issue that the grant by Nine to WIN of the exclusive licence under clause 2.1 of the PSA brings with it the implied negative stipulation by Nine that it will itself not do what it has licenced WIN to do.

Meaning of “broadcast” – construction

1. [41]

   WIN contends that the natural and ordinary meaning of the word “broadcast” is a wide one, encompassing the broad dissemination of material, including sound and images by any medium, including internet. One meaning given to the term in the Macquarie Dictionary is “to spread or disseminate widely”.

2. [42]

   WIN argues that in the absence of a bespoke definition of the term in the PSA, it is to be given this wide meaning. In support of this submission, it refers to statutory enactments which define the term to include by and through means of the internet. For example, s 127 of the Supreme Court Act 1970 (NSW) defines “broadcast” as:

3. [43]

   Another example is s 6 of the BSA, which contains the following definition:

4. [44]

   Following an investigation by ACMA into the content of online-services and a report to the Minister for Communications and the Arts dated 30 June 1996, on 12 September 2000, the Minister for Communications, Information Technology and the Arts determined that under paragraph (c), the following class of services does not fall within the definition of “broadcasting service”:

5. [45]

   WIN argues that the apparent necessity for a determination by the Minister excluding internet delivery supports the proposition that such delivery is actually broadcasting.

6. [46]

   Win argues that a construction of the word “broadcast” which would allow Nine to internet stream the same program schedule in real time to viewers in the WIN licence areas is inconsistent with the separate and complementary broadcast rights contemplated by clause 2.2 of the PSA, which requires parallel broadcasting of Nine programs by WIN and Nine, and with the requirement in clause 6 for Nine to recognise WIN in the broadcast of sporting events.

7. [47]

   It argues that at the time of the PSA television programming was being delivered through the internet by competing channels. Channel Seven (another Australian national channel) had launched an internet service in around 2010. The BBC had done so as early as 2008. It puts that it would be odd if the parties, knowing of the potential to deliver Nine programming by various means (such as through the internet or by cable), intended to limit the exclusivity granted to WIN in its licence areas to one means of transmission only, being traditional free-to-air transmission.

8. [48]

   WIN argues that the commercial object of the PSA would be frustrated if the exclusivity granted in clause 2.1 were limited to only one mode of transmission of the Nine program schedule. It submits that the exclusive licence granted under the clause is the primary, if not sole, benefit WIN obtains under the PSA, and that WIN pays substantial amounts by way of “affiliation fees” as consideration for that exclusivity. While the payments to Nine are fixed and not affected by a drop in WIN’s ratings, WIN’s advertising revenue is highly sensitive to ratings performance.

9. [49]

   It submits that unless “broadcast” is given a wide meaning, including internet transmission, the effect would be that WIN agreed that Nine could compete with WIN in WIN’s licence areas with the same program content (potentially watched on the same television screens), thereby affecting WIN’s ratings and advertising revenue, but that WIN remained obliged to pay guaranteed affiliation fees to Nine. It puts that it would have been commercially illogical, and unlikely, for WIN to have agreed to pay guaranteed affiliation fees for exclusivity which Nine could “sidestep” through its own choice of broadcast medium. It went so far as to put that a different outcome would be perverse.

10. [50]

    Initially, WIN argued as its main contention that clause 2.1 operates so as to give it the right to disseminate by any means, including live streaming, Nine programming in the WIN licence areas, and correspondingly to deny Nine the ability to do so. A significant hurdle in the way of this argument is that at the time of the PSA, Nine was not, to the knowledge of both parties, in a position to licence WIN to internet live stream NRL games, because Nine itself did not have the right to do so. Also, under clause 2.2 of the PSA, WIN undertook that the WIN Stations would broadcast Nine programs in parallel with Nine’s schedule. If WIN did this by live streaming, Nine would have been in breach of the licencing arrangements for NRL. No doubt recognising this impediment, WIN shifted emphasis in final submissions.

11. [51]

    Although it did not abandon its initial stance, WIN finally put as its preferred construction that whilst “broadcast” is to be given a wide meaning, WIN’s right to broadcast is limited to doing so free-to-air. It reasoned that Nine has given it an exclusive licence to broadcast, that is, WIN is the only person who is permitted to broadcast (in any fashion), but that the exercise of its right is limited to broadcasting on and in the licence areas covered by the WIN Stations, which means free-to-air, because the WIN Stations only, and only ever have, broadcast in this way. If this construction is correct, WIN cannot live stream in the WIN licence areas, but neither can Nine.

12. [52]

    Nine argues that in its natural and ordinary meaning, “broadcast” means transmission by radio or television, and that as used in the context of the whole of the PSA, it can mean, and only means, free-to-air.

13. [53]

    It argues that this construction accords with the commercial purpose and objects of the PSA, and is revealed as the correct construction when regard is had to the genesis of the transaction, the background, the context and the market in which the parties were operating. It puts that the evidence establishes that the parties united in rejecting WIN’s wider definition. It also puts that the evidence identifies that the subject matter of the parties’ agreement was free-to-air broadcasting.

14. [54]

    It puts that the commercial purpose and object was to give WIN a licence only to broadcast free-to-air, and Nine’s arrangements with WIN had only ever been for free-to-air rights.

15. [55]

    It puts that Nine had rejected WIN’s attempt to extend the meaning of broadcast beyond free-to-air and that by 12 March 2013, WIN had accepted Nine’s changes to its draft PSA, including the free-to-air definition, and that there is no evidence of any discussion or negotiation prior to the entry of the PSA indicating that a wider definition was in contemplation or play.

16. [56]

    It puts that at the time of the PSA both parties knew that:

17. [57]

    It puts that resort to other instruments does not assist. With respect to the definition of “broadcasting services” in s 6 of the BSA, it puts that at the time of the PSA, and for years before, both parties knew that internet delivery had been excluded from the definition by ministerial direction.

Implied term

1. [58]

   WIN argues that if “broadcast” is, contrary to its contention, to be given the narrower meaning contended for by Nine, there is to be implied into the PSA a term that each party will not do anything which would deprive the other of that benefit, and by live streaming, Nine is in breach of this term. The purpose of the exclusivity granted to WIN, and the benefit WIN obtains under the PSA, is the ability to derive advertising revenue through carriage of Nine’s programming. It puts that it would be antithetical to the purpose of the express provisions of the PSA if Nine could distribute the very same program schedule to viewers in the WIN licence areas, but with Nine’s own advertising.

2. [59]

   Nine puts that no such term is to be implied, because such a term does not meet the requirements for the implication of a term, and that in any event, WIN did not acquire any rights beyond that which the PSA on its proper construction gives it, and such rights extend to free-to-air transmission only.

Relief

1. [60]

   Nine argues that even if it is in breach of the PSA, injunctive relief should be withheld on discretionary grounds because:

2. [61]

   WIN’s position is that if Nine is in breach, an injunction to enforce a negative stipulation should not be refused unless there are good reasons to do so, and Nine has not established that there are good reasons to do so in this case.

Construction

1. [62]

   As a commercial agreement, the meaning of the PSA is to be determined by what a reasonable businessperson would have understood it to mean. It is to be construed by reference to the language used, the surrounding circumstances and the commercial purpose or object of the contract. Reference must be had to its entire text, context and purpose. It is to be construed so as to avoid making commercial nonsense or working commercial inconvenience: Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640 at [35].

2. [63]

   In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 French CJ, Nettle and Gordon JJ said at [46]–[51]:

3. [64]

   In Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352–353 Mason J (as his Honour then was) held as follows, in a well-known passage:

4. [65]

   In Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23 at [97] McLeish JA said of the exception, and in reference to Mason J’s statement, that:

5. [66]

   General evidence of surrounding circumstances is admissible to identify the persons or things referred to in a written contract: Giliberto v Kenny (1983) 48 ALR 620 at 623 [30]; Prenn v Simmonds [1971] 1 WLR 1381 at 1383–1384.

Implied terms

1. [67]

   The requirements for the implication in fact of a term into a written contract which is complete on its face are well established. They are that the term must be reasonable and equitable, be necessary to give business efficacy to the contract, be so obvious that it goes without saying, be capable of clear expression and not contradict any express term of the contract: Codelfa at 347; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282–283.

2. [68]

   There is readily implied into contracts an obligation on each party to do all that is reasonably necessary to secure performance of the contract, and generally, it will be implied that each party agrees by implication to do all such things as are necessary on that party’s part to enable the other party to have the benefit of the contract: Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 (Mason J). However, Mason J went on to say:

Meaning of “broadcast” – construction

1. [69]

   The constructional choice is a simple one.

2. [70]

   Only two possible meanings of the term “broadcast” are contended for, the first being dissemination of Nine’s programming by any means, the second being terrestrial transmission via the WIN Stations, that is, pursuant to broadcasting licences issued under the BSA.

3. [71]

   The parties had the now almost customary debate in significant commercial contract construction disputes about the extent to which evidence led, supposedly of surrounding circumstances, was admissible in aid of construction.

4. [72]

   Much of the evidence adduced by Nine related to precontractual negotiations and was submitted by it to be admissible either under the exception articulated by Mason J in Codelfa, or because it identified the subject matter of the parties’ arrangement. I reject both of these submissions.

5. [73]

   As to the first argument, the evidence of precontractual negotiations does not rebut any relevant evidence of surrounding circumstances sought to be relied on by WIN.

6. [74]

   In any event, the evidence does not sufficiently establish the existence of any consensus outside the one objectively established by the PSA itself.

7. [75]

   Where rectification of a written instrument is sought, actual intention as to the effect which the instrument would have, which was inconsistent with the effect the instrument did have in some clearly identified way, must be established by clear and convincing proof: Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345 (McLelland A-JA). I consider that the same approach applies to assessing whether there has been concurrence for the purpose of the exception.

8. [76]

   The evidence does establish that Nine had rejected WIN’s wider definition of the term on 30 November 2007, and WIN had apparently accepted the narrower definition on 16 October 2008. But this was in relation to negotiation of a long form agreement to expand on the 7 September 2007 one, not in relation to the PSA. Additionally, after WIN had apparently accepted Nine’s definition, negotiations continued with respect to other forms of transmission, and a long form agreement was never finalised.

9. [77]

   As to the PSA itself, the evidence establishes that as at 12 March 2013, there was apparent consensus on the narrower definition. However, the evidentiary material is incomplete. For example, WIN’s letter of 24 December 2012 refers to a number of other letters which are not in evidence. More than this, neither party led evidence as to the course of negotiations which resulted in the use of the word “broadcast” in the PSA with no definition.

10. [78]

    Whilst there is no evidence revealing that the parties departed from what appeared to be an earlier consensus that the narrower definition was to apply, there is no clear and cogent proof of any consensus between the parties to reject the wider definition beyond that which the written words of the PSA reflect. The present case demonstrates the wisdom of the policy behind the inadmissibility of precontractual negotiations as an aid to construction.

11. [79]

    As to the second submission, the so called evidence of surrounding circumstances, properly characterised, is not evidence identifying the subject matter of the parties’ arrangement. The PSA itself identifies the subject matter by using the word “broadcast”. This raises a matter of construction, not identification of subject matter.

12. [80]

    It is in any event not necessary to resolve the contest with respect to the admissibility of evidence in aid of construction in this case.

13. [81]

    A reading of clause 2.1, in the context of the legislative framework and the undisputed factual context in which it has always operated, reveals with clarity that the construction contended for by Nine is the correct one.

14. [82]

    Where clause 2.1 refers to broadcasting on and in the licence areas covered by the WIN Stations this is, and can only be, a reference to free-to-air. The licence areas are the geographical delimitations imposed on WIN by its licences under the BSA. These licences cover only free-to-air. Unsurprisingly, it is common cause that the WIN Stations have only ever broadcasted free-to-air and under such licences. They are traditional television stations. They do not deliver by internet. Internet delivery is not geographically based in the same way as is free-to-air.

15. [83]

    Additional contextual corroboration, if any is needed, is supplied by the fact that both parties knew that Nine was not in a position to give internet streaming rights to WIN, at least in relation to the NRL.

16. [84]

    Bespoke definitions of “broadcast” in various legislative enactments are not of assistance in the construction of the particular instrument under consideration here. In relation to WIN’s submission that some guidance is to be derived from the definition of “broadcasting services” in the BSA, and the ministerial direction excluding internet services, it is appropriate to observe that the 1996 ACMA report, which led to the ministerial direction, contains the following statement (ABA, being the former name of ACMA):

17. [85]

    My conclusion that “broadcast” means free-to-air disposes of the necessity to consider WIN’s ultimate preferred construction of clause 2.1, being that broadcast means by any means, but that it can only exercise the right free-to-air. However, I consider it commercially highly unlikely that the parties would have intended to achieve such a result by the use of and through the words which they chose. The only exclusivity Nine was giving was broadcasting on the WIN Stations in the WIN licence areas.

18. [86]

    The implied negative stipulation relates only to Nine broadcasting free-to-air. There is nothing to inhibit it from internet live streaming to areas covered by the WIN licence areas, or at all. This is what the parties bargained for. There is nothing perverse, irrational, commercially nonsensical or commercially inconvenient about it. Indeed, this is clearly the position under the agreement entered into on 26 May 2009.

19. [87]

    WIN’s proposition that its exclusivity is undermined by Nine being able to internet live stream begs the question as to what exclusivity it got. On the construction I have found, the only exclusivity it got was to broadcast free-to-air in the WIN licence areas. There is no suggestion that Nine can do this.

20. [88]

    WIN’s proposition that the affiliation fees it must pay for exclusivity, which are highly sensitive to its advertising revenue, will be adversely affected if Nine is permitted to stream its own advertising into the licence areas, is counterbalanced by the fact that it would, in that event, pay reduced affiliation fees, and more importantly, advertising revenue generated by WIN through internet streaming would be left out of account in calculating the affiliation fees payable by it to Nine. The definition of Monthly Gross Revenue in clause 3.6, which must be reported to the Australian Communications and Media Authority (or ACMA), clearly relates to free-to-air.

21. [89]

    WIN’s proposition that internet streaming was covered because it was technologically available at the time of the PSA is counterbalanced by the fact that the PSA makes no express reference to it.

22. [90]

    In Bowes v Chaleyer (1923) 32 CLR 159 at 191, Higgins J said that it is not for the Court to weigh the importance of conditions which the parties have put into their contracts.

Implied term

1. [91]

   On the footing that there is to be implied into the PSA the term contended for, namely, that each party will not do anything which would deprive the other of the benefit of the contract, Nine is not in breach of any such term.

2. [92]

   WIN’s relevant benefit is the exclusive licence. It gets to broadcast free-to-air into the WIN licence areas. Nine is not depriving it of this benefit.

3. [93]

   Put another way, given the construction of clause 2.1 that I have found, the proposed implied term restricting Nine from internet streaming is not necessary to give business efficacy to the PSA, and contradicts its express terms.

Discretionary grounds

1. [94]

   Having regard to my finding that Nine is not in breach of the PSA, it is unnecessary to consider whether injunctive relief should be withheld in any event.

2. [95]

   I record, however, that I do not consider that I would have exercised my discretion to withhold relief if WIN had otherwise succeeded. This is primarily because if Nine had been in breach, it undoubtedly went ahead with the service with its eyes wide open. WIN’s delay in bringing the proceedings would not have been sufficient to deprive it from relief that it was otherwise entitled. As to evidence of damage, the Court was not hearing any claim for damages, and I would be prepared to infer that if Nine was in breach of the PSA, it must follow that some damage would be suffered by WIN, even if quantification might transpire to be difficult.

3. [96]

   It follows that the proceedings must be dismissed, and I so order.

4. [97]

   I will hear the parties on costs should that prove necessary.

5. [98]

   The exhibits are to be returned.