Australian Competition and Consumer Commission v News Corporation Ltd

[1997] FCA 1123

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - joinder of parties - whether necessary to join a person commercially interested in the outcome of proceedings brought by the Australian Competition and Consumer Commission to restrain merger of respondent corporations on the ground that the merger was likely to result in a substantial lessening of competition in pay television or telephony market - person seeking to be joined no standing to bring proceedings for injunction and not a person whose rights or liabilities directly affected by the injunctive relief if granted - joinder application refused.

Trade Practices Act 1974 (Cth), ss 50, 80(1A)
Federal Court Rules, O 6, r 8

Vandervell Trustees Ltd v White [1971] AC 912, considered.
Re Great Eastern Cleaning Services Pty Ltd [1978] 2 NSWLR 278, distinguished.
Australian Tape Manufacturers Association Ltd v Commonwealth (1990) 84 ALR 641, considered and affirmed.
News Ltd v Australian Rugby Leage Ltd (1996) 139 ALR 193, considered and applied.
Trade Practices Commission v Santos Ltd (1992) 14 ATPR 41-194 considered; (1992) 110 ALR 517 (on appeal), considered and applied.
Telstra Corporation Ltd v Australian Telecommunications Authority (unreported, Vict Sup Ct, 7 October 1993), considered and distinguished.
Irish Country Bacon (Cooked Meats) Ltd v Comptroller-General of Customs (1991) 194 ALR 661, considered and distinguished.

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v THE NEWS CORPORATION LIMITED & ORS

NG 851 of 1997

HILL J
SYDNEY
28 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 851  of   1997

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

THE NEWS CORPORATION LIMITED
FIRST RESPONDENT

TELSTRA CORPORATION LIMITED
SECOND RESPONDENT

AUSTRALIA MEDIA LIMITTED
THIRD RESPONDENT

JUDGE:

HILL J

DATE OF ORDER:

28 OCTOBER 1997

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. Motion brought by Optus Communications Pty Ltd and others be dismissed.

1. Applicants to the Motion to pay the respondents’ costs of the Motion.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 851 of 1997

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

THE NEWS CORPORATION LIMITED
FIRST RESPONDENT

TELSTRA CORPORATION LIMITED
SECOND RESPONDENT

AUSTRALIA MEDIA LIMITTED
THIRD RESPONDENT

JUDGE:	HILL J
DATE:	28 OCTOBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Before the Court is a motion filed by Optus Communications Pty Limited, Optus Vision Pty Limited and Optus Networks Pty Limited.  For present purposes there is no reason to differentiate the one from the other and I propose henceforth to refer to the three moving parties as “Optus”.  The motion is that Optus be joined as a party to the proceedings.

The proceedings were commenced by the applicant, the Australian Competition and Consumer Commission (“the Commission”) on 14 October 1997 in reliance upon s 50 of the Trade Practices Act 1974 (“the Act”) seeking an injunction restraining The News Corporation Limited (“News”), the first respondent and Telstra Corporation Limited (“Telstra”) the second respondent, from acquiring any shares in or any assets of Australis Media Limited (“Australis”), the third respondent. Relief is also sought restraining Australis from offering to acquire or acquiring any shares in or assets of News or Telstra and restraining all parties from implementing certain heads of agreement entered into on 25 July 1997 said to contravene s 50 of the Act.

It is alleged in the statement of claim that Telstra, through a subsidiary Telstra Media Pty Limited, and News, through a subsidiary Sky Cable Pty Limited, carry on business in partnership under the name Foxtel Television Partnership providing pay television services.  Australis carries on business through subsidiary companies supplying pay television broadcasting services by means of satellite and MDS licences.  Optus is a competitor in the pay television market supplying pay television broadcasting services over a hybrid fibre coaxial cable network.  The cable is used also by Optus in supplying telecommunication services.  In the telephony market, Optus supplies public switched telephone services.  It is, in this market, a competitor of Telstra.

The Heads of agreement (dated 25 July 1997), which it is alleged are a continuation of an agreement entered into in December 1995, provide, so it is alleged, for an effective merger of the Foxtel and Australis businesses.  They involve Australis acquiring, inter alia, all shares or other securities in the companies carrying on the Foxtel partnership in consideration of Australis issuing securities and options in Australis to News and Telstra, with the consequence that News and Telstra would hold not less than 60.5% of all of the Australis shares and convertible notes and that News and Telstra would be entitled to appoint a majority of the board of directors of Australis and to appoint the chief executive officer of that company.

It is alleged that the merger would result in a substantial lessening of competition in the pay television market, removing Foxtel as an independent competitor of Australis and Optus.  It is also alleged that the merger would have the likely effect of precluding Optus from operating a viable local call telephony service and thus substantially lessen, hinder or prevent competition in the local call telephony market.  I should, perhaps, say here that the statement of claim as presently filed is acknowledged by the applicant to be defective so far as it relates to the telephony market and that a further amended statement of claim is presently in the course of preparation which will stipulate the case of the applicant so far as the effect the merger is said to have on the telephony, or local telephony markets.

What is important to note, for present purposes, is that the Commission’s case as pleaded makes it clear that the detriment brought about by the alleged diminishing in competition will accrue to Optus who is a competitor of the respondents in the pay television market and either a competitor in the telephony market or at least an entrant in the local telephony market, if it be necessary to differentiate the two.

A substantial body of evidence has already been filed by the Commission.  Much of that evidence consists of affidavits deposed to by officers or employees of Optus.  The material in those affidavits is the subject of confidentiality orders which I have made from time to time, hence I will not endeavour to set out here the detail of it.  However, it should be mentioned here that portions of a number of the affidavits filed were read without objection in the motion as evidence of what Optus would submit were it a party.  Of course there is no suggestion that in so doing it is accepted that the evidence, presently uncontested and not examined upon, will ultimately be accepted.  It suffices to say that the evidence if accepted indicates that the merger would have adverse commercial and fiscal consequences to Optus.

Optus relies in making its application for joinder upon O 6 r 8 of the Federal Court Rules.  That rule, which has its counterpart in the rules of courts in the United Kingdom and throughout Australia, is in the following terms:

“(1)     Where a person who is not a party -

(a)       ought to have been joined as a party; or

(b)is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated upon,

the Court, on application by him or by any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceeding.”

When referring to the case law on joinder of parties it is important to note that in some jurisdictions the rule, in the form stated above, has been supplemented by a rule (for example, RSC O 15, r6(2)(b)(ii) in the United Kingdom and see too r 9.06 (b)(ii) of the Rules of the Supreme Court of Victoria) which directs attention to whether there is an issue arising out of or relating to or connected with the relief claimed which:

“it would be just and convenient to determine as between him and the party as well as between the parties to the cause or matter”.

This additional rule was, apparently, introduced following the decision in Vandervell Trustees Ltd v White [1971] AC 912 where joinder of the Inland Revenue Commissioners was refused in respect of proceedings for interpretation of a settlement, because there was no remedy sought against the Commissioners, and although the Commissioners no doubt had an interest in the sense that the proper interpretation of the settlement had potential surtax consequences so that it might have been just or convenient to add them as parties, the addition was not “necessary”.

Lord Morris in that case was quite short in his dismissal of the application.  His Lordship said (at 930):

“I do not think that any process of giving a wide or liberal interpretation to the rule can be employed to alter it or to give it an enlarged meaning which, on a fair and reasonable interpretation, it does not bear”.

Viscount Dilhorne was equally brief.  His Lordship said (at 935):

“I cannot construe the language of the rule as meaning that a party can be added whenever it is just or convenient to do so.  That could have been simply stated if the rule was intended to mean that.”

A similar approach was taken by the Full Court of the Supreme Court of Queensland in Coolibah Pty Ltd v Federal Commissioner of Taxation (1980) 80 ATC 4469 in refusing to add as a party to an application for validation of a corporate resolution filed out of time the Commissioner of Taxation, whose assessment, it was argued, might have been affected by the validity or otherwise of the resolution. However, Vandervell Trustees was distinguished by Needham J in Re Great Eastern Cleaning Services Pty Ltd [1978] 2 NSWLR 278 in permitting the joinder of the Commissioner of Taxation to proceedings to restore to the register a company which had been struck off in circumstances where the Commissioner had commenced proceedings against a person who had effectively been running the company for unpaid group tax and where the Corporate Affairs Commission had no interest in arguing against the restoration of the company to the register.

It appears that there has been a conflict of authority as to the proper interpretation of the Rule.  The cases forming part of this controversy are listed in both the judgments of Mason J in Foxe v Brown (1984) 58 ALR 542 at 545 and Dawson J in Australian Tape Manufacturers Association Ltd v Commonwealth (1990) 94 ALR 641 at 644. The controversy is as to whether joinder is limited to persons whose legal rights will be affected by the proceedings (as for example Vandervell Trustees would suggest, or whether persons whose commercial interest are affected (or as Lord Denning MR in his customary colourful way put it a person with a direct affectation “in his pocket”) may be joined. 

As appears from Australian Tape, at least where a constitutional argument is the subject of the proceedings, the fact that the person seeking to be added might himself have brought proceedings raising the same point will not make it necessary to add that person as a party.  In such a context it is not sufficient that the person seeking to be joined has an interest in the outcome of the litigation sufficient himself to maintain an action.

While Dawson J in that case eschewed a resolution of the controversy the approach taken by his Honour as to the significance of the fact that the party seeking to be added might be in the best position to call evidence has resonance in the present circumstances.  At 645 his Honour said:

“All that the applicants seek to do is to support the defendant in its contentions, in particular by calling evidence in support of its case.  For all I know, the evidence which the applicants seek to place before the court is essential to the defendant’s case.  But that does not make the applicants necessary parties in the action, even if it makes them, or those they seek to put forward, necessary witnesses.  Perhaps it is convenient that the applicants be joined as defendants.  The existing defendant regards it as so and for that reason supports the application.  But however convenient it is, that does not make the joinder of the applicants as parties necessary to determine the question which arises.”

The history and application of O 6 r 8(1) is discussed by a Full Court of this Court in News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 297-298. In the passage cited their Honours refer with approval to what was written by Lord Diplock in delivering the opinion of the Privy Council in Pegang Mining Co Ltd v Choon Sam [1969] 2 MLJ 52 at 55-6:

“The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action.  In their Lordships’ view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard.  To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.

It has been sometimes said as in Moser v Marsden [1892] 1 Ch 487 and in Re IG Farbenindustrie AG [1964] Ch 41 that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between ‘legal’ and ‘commercial’ interests helpful.  A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?”

The Full Court then applied the test stipulated in the last paragraph of the passage cited.  Their Honours said at 298-299:

“The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected.  The requirement that a third party’s rights against, or liability to, any party to the proceeding be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent.  This is particularly so with remedies in the nature of an injunction. ... The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential.

Where, before trial, a  question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings.  It is the effect of the orders upon the third party that must be determined.  The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties.  Where the question arises after final orders have been made in the proceedings, the inquiry must be directed to the orders actually made...”

Although drawing attention to the Rugby League case, although more for a distinction between permitting a person to make submissions and permitting a person to adduce evidence at p300 than for the proposition to which reference is made above, Counsel for Optus sought comfort from three cases to which the Court was referred: Trade Practices Commission v Santos Ltd (1992) 14 ATPR 41-194; on appeal (1992) 110 ALR 517; Telstra Corporation Limited v Australian Telecommunications Authority (unreported, Vict Sup Ct, 7 October 1993); and Irish Country Bacon (Cooked Meats) Ltd v Comptroller-General of Customs (1991) 194 ALR 661. I turn to consider these cases.

In the first of them Sagasco Holdings Ltd (“Sagasco”) had been joined in the initial application brought by the Trade Practices Commission for the granting of interlocutory relief against Santos Ltd (“Santos”) seeking to restrain the acquisition of shares by Santos in Sagasco as involving a breach of s 50 of the Act. Subsequently an application was made by Santos to discharge Sagasco from the proceedings. There seems to have been little argument before Heerey J on the matter. Having regard to the urgency with which his Honour heard the application for interlocutory relief, that is not surprising. However his Honour took the view that Sagasco was entitled to be heard because in granting injunctive relief the court could take into account any detriment to Sagasco and Sagasco would be directly affected by the relief which was granted. Also it was proposed that Santos give certain undertakings to the Court in lieu of interlocutory relief, which undertakings had a material effect on the way Sagasco would continue to carry on its business.

On appeal an application was made to the Full Court of this Court that Sagasco was not a proper party to appeal. Not that anything turns upon this but there was no direct appeal from the order of Heerey J dismissing the application of Santos that Sagasco be removed as a party. The Full Court, by majority, was of the view that Sagasco was not a proper party to appeal. The argument that it was not centred largely upon s 80(1A) of the Act which makes it clear that only the Minister or the Trade Practices Commission, as it then was, was entitled to apply for injunctive relief for a breach of s 50 of the Act. Davies J, who dissented on this aspect of the case, was of the view that, having been heard as a party, Sagasco was entitled to participate in the appeal, especially as it was affected by the proceedings and the injunctive relief sought.

In a judgment, with which Sweeney J agreed, I said (at 583) that Sagasco had been entitled to participate in the hearing as a person potentially affected by the grant of injunctive relief, referring to Miller v Jackson [1977] QB 966. I then dealt with the more difficult question, which had been the subject of argument, namely whether Sagasco should be granted leave to appeal where that company could not have been permitted to be an applicant in the proceedings below. I took the view that Sagasco should be refused leave to appeal. Since, in any event, Santos was refused leave to appeal on other grounds, the refusal to Sagsco did not figure greatly in the case.

I should say, however, that I adhere to the view that Sagasco was a proper Respondent in the original proceedings for interlocutory relief as the target of the take over which the Trade Practices Commission sought to enjoin.  In some respects its position in the litigation was similar to the position of Australis in the present proceedings.  It is clear that Australis would be affected by injunctive relief against News and Telstra, even were no injunction to be granted against it.  An injunction would have a direct affect on Australis.  It would not have a direct affect upon Optus.

The second case, Telstra Corporation Limited v Australian Telecommunications Authority concerned an application by Telstra for a declaration that Telstra was not “dominant” within the meaning of the Telecommunications Act 1991 (Cth) in the market for the supply to the public of public mobile telecommunications services.  Optus sought to be joined as a party, that company being, at that time the only other participant in the relevant market apart from Telstra.  Hayne J, then of the Supreme Court of Victoria, made an order that Optus be joined because it was just and convenient so to do.  The decision was not founded upon the ability of Optus to supply evidence because such evidence could be made available whether Optus was a party or not.  Rather it stemmed, as his Honour said (at 5-6), from the nature of the issues raised and the interest Optus had in those issues, that being a “commercial interest” not divorced from the subject matter of the action, for it affected Optus’ rights under the relevant legislation.

Reliance by Optus on this case is, in my opinion, misconceived.  If anything the case supports the view that Optus should not be joined in the present proceedings.  In the Victorian case joinder was allowed under r 9.06(b)(ii), as to which there is no equivalent in the Federal Court Rules.  Rule 9.06 (b)(i) of the Victorian Rules of Court was in the same terms as O 6 r 8 of the Federal Court Rules, but Hayne J appears rather to have been of the view that this Rule did not authorise the joinder. His Honour said (at 3):

“I doubt greatly that joinder of the Optus companies could be justified under Rule 9.06(b)(i) for I doubt that their joinder is “necessary’ as that expression is to be understood in this context...  However, in light of the conclusion that I have formed about the applicability of Rule 9.06 (b)(ii) it is unnecessary to stay to consider further the application of sub-paragraph (i).”

Among the cases cited by his Honour for the “doubt” that his Honour held were Vandervell Trustees and Australian Tape to which reference has already been made.

The third case upon which especial reliance was placed was a decision of Foster J in Irish Country Bacon.  This was a case in which proceedings were brought for judicial review by an Irish manufacturer to set aside the decision of the Comptroller-General of Customs to impose security on Irish canned ham.  An Australian company, which was the only domestic manufacturer of canned ham, sought to be added as a party.  According to the report the Australian company was added as a party on a limited basis.  The basis upon which this was done does not appear in the report.  However, it appears from an unreported judgment of Foster J (25 October 1991) that the basis the Australian company was joined was the significant commercial interest it had, having regard to the fact that the order sought to be impugned operated directly in its favour.  The participation was limited to giving evidence and making submissions as to the exercise of the Court’s discretion in the event of the Court’s decision being reserved.

While it  is possible to see an analogy between the present case and the Irish Country Bacon case, in that there is little doubt that Optus has a real commercial interest in the present case, there is also a distinction of some relevance. In the present case Optus could not itself have commenced proceedings or obtained an injunction because of the provisions of s 80(1A) of the Act. On the other hand, it may well be that the Australian company in Irish Country Bacon could have brought proceedings in its own right as having a sufficient interest so to do.  It is not necessary in any event to decide that matter, for the Australian company was added not as an applicant, but as a respondent.

In my view, I am bound by the Rugby League case to apply as the relevant test the question not whether Optus has a commercial interest which is affected (the test which, it seems was applied by FosterJ, but before the decision was given in the Rugby League case) but whether its right against or liabilities to any of the respondents, or the Commission, in respect of the subject matter of the action (the legality of the proposed merger) would be directly affected by any order which may be made in the proceedings.

Optus points in its submissions to various commercial matters which it says bring about the result that its interests are affected by the grant or refusal to grant relief. Since these matters are presently the subject of a confidentiality order I do not set them out here. However, the judgment should be read as if they were. Optus argues that it should be added as a party because the Commission, the regulator acting in the public interest, might settle the litigation leaving Optus lamenting. It points out that if the merger were to proceed Optus could bring proceedings for divestiture and there would be no issue estoppel against it as to whether there had been a breach of s 50 of the Act. It says, that having regard to its position in the industry it is in a unique position to assist the Court with factual material. It says that the Commission should not be a barrier or filter of the evidence which Optus is able to supply.

None of these matters ultimately compel me to the conclusion that it is necessary that Optus be joined as a party as that word in used in O 6 r 8.  The matters which lead me to this conclusion, and which would also be relevant to discretion should I be wrong in the construction I have given to the Rule are as follows:

• No relief is sought against Optus.

• Optus could not have commenced proceedings for injunctive relief having regard to s 80(1A) of the Act. This is, although not determinative, highly persuasive since s 80(1A) represents a legislative prescription that competitors not take proceedings for injunctive relief.

• An injunction, if ultimately granted would have no direct or for that matter indirect affect on any right or liability of Optus.  Nor would any interlocutory relief affect in any way the manner in which Optus carries on its business.

• The Commission as the statutory regulator to whom the exclusive right to seek an injunction is entrusted by statute has a real interest in the proceedings, as evidenced by the fact that it has commenced them.  The present is not a case such as Re Great Eastern Cleaning where the government authority had, and expressed that it had, no interest in the outcome.

• The mere fact that in the event no relief is granted Optus could commence proceedings for divestiture provides no foundation for the present jurisdiction any more than the fact that a copyright owner might commence proceedings for invalidity of the law sought to be impugned in Australian Tape provided Dawson J with no foundation for joinder in that case.

• There is no suggestion in the present case that evidence will not be forthcoming to the court in the event Optus is not joined.  To the contrary, there is a considerable body of evidence filed by the Commission which has emanated from Optus.  There is no real suggestion that that evidence is being filtered, even if that were a matter to be taken into account.

• Although the O 6 r 8 should not be given a narrow interpretation attention must be paid to the way the Rule is worded.  If the question was whether it was desirable or convenient for Optus to be added as a party that would be one matter.  But once there is concentration on the necessity of Optus being joined in the circumstances nothing has been demonstrated to show that it is.

One additional matter would need to be taken into account as a discretionary matter, if the Rule were, contrary to my view, to permit joinder.  There is great urgency with the conduct of the proceedings.  The respondents seek an expedited trial of the merits rather than an interlocutory hearing followed by a final hearing.  Whether that is possible will depend upon argument which has not yet been heard.  However, the Court has set aside at the request of the parties the three weeks from and including 24 November 1997, if possible, for a final hearing.  Evidence is, at this very moment, being prepared by the present parties to the proceeding on an urgent basis, having in mind the possibility of a final hearing in that period.  Even if there is no final hearing then there will be a protracted interlocutory hearing in which the evidence presently being collected will be adduced.  The addition of Optus as a party may well have an impact both on the time which might be required to file evidence and the time the hearing lasts.  I am conscious of the fact that limits could be placed upon Optus both in respect of the timetabling of evidence and submissions.  That would be undesirable were Optus to participate.  However, the very tightness of the timetable, whether ultimately for a final hearing or an interlocutory hearing, and in circumstances where all relevant evidence and argument could be expected to be adduced by the Commission would point against exercising now the discretion against joining Optus as a party, even if otherwise there was power so to do.

I would accordingly dismiss the motion.  I note that no application has been made that Optus be permitted to act as amicus curiae.  I do not wish in mentioning this to suggest that such an application would have succeeded.  The motion has been argued on an all or nothing basis. 

The applicants in the Motion should pay the respondents’ costs.

I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill

Associate:

Dated:             28 October 1997

Counsel for the Applicant:	J R Sackar QC and S T White
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the First Respondent:	F M Douglas QC and R J H Darke
Solicitor for the First Respondent:	Allen Allen Hemsley
Counsel for the Second Respondent:	T F Bathurst QC and N Manousaridis
Solicitors for the Second Respondent:	Mallesons Stephen Jaques
Counsel for the Third Respondent:	J J Spiegelman QC and R W White
Solicitors for the Third Respondent:	Norton Smith & Co
Counsel for Applicants in the Motion:	R V Gyles QC and A J Payne
Solicitors for Applicants in the Motion:	Gilbert & Tobin
Date of Hearing:	24 October 1997
Date of Judgment:	28 October 1997