Foxtel Management Pty Ltd v Seven Cable Television Pty Ltd - [2000] FCA 1159

FEDERAL COURT OF AUSTRALIA
Foxtel Management Pty Ltd v Seven Cable Television Pty Ltd
[2000] FCA 1159
CONTRACT - formation - whether agreement reached on terms - parties negotiating complex broadcasting contract under joint venture arrangement - whether relationship of fiduciary nature resulted - whether had reached agreement on terms of an exclusive relationship - whether uncertainty in terms and from negotiations - whether indicates parties had not reached agreement at given date - whether agreement unenforceable - alleged contract executed on date parties commenced broadcasting business - parties continued negotiations regarding terms of business - parties later executed a contract covering the same subject matter - whether variation or recission of any prior contract
TRADE PRACTICES - telecommunications - access regime created by Part XIC of Trade Practices Act 1974 - s 152AR(4)(d) creates a limitation on obligations under access regime where granting access would had the effect of depriving a person of a "protected contractual right" - whether parties to broadcasting joint venture had a contract giving rise to a "protected contractual right" as at statutory date nominated - whether grant of access would have the effect of "depriving" any party of a "protected contractual right"
WORDS AND PHRASES - 'substantially', 'deprive', 'effect'
Trade Practices Act1974 (Cth)
Telecommunications Act 1991 (Cth)
Radiocommunications Act 1992 (Cth)
Telecommunications Act 1991
Trade Practices Amendment (Telecommunications) Act1997 (Cth)
Telecommunications (Transitional Provisions and Consequential Amendments) Act1997 (Cth)
Competition Policy Reform Act1995
Telecommunications (Service Providers Class Licence) Direction No. 1 of 1995
Seven Cable Television Pty Ltd v Telstra Corporation Ltd [2000] 171 ALR 89
FOXTEL Management Pty Ltd v Australian Competition & Consumer Commission [2000] FCA 589
Amadio Pty Ltd v Henderson (1998) 81 FCR 149
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
Masters v Cameron (1954) 91 CLR 353
Liverpool City Council v Irwin [1977] AC 239
Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25
Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 74 ALJR 1094
Re Black Bolt & Nut Association of Great Britain’s Agreement [1961] 2 All ER 316
Stenhouse Ltd v Phillips [1974] AC 390
Sinclair, Scott & Co. Ltd v Naughton (1929) 43 CLR 310
G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
Pagnan S.p.A. v Feed Products Ltd (1987) 2 Lloyd’s Rep 601
Georgiadis v Australia & Overseas Telecommunications Corporation (1993-1994) 179 CLR 297
Belfast Corporation v O D Cars Ltd [1960] AC 490
Trade Practices Commission v Tooth & Co Ltd (1979) 142 CLR 397
Masters v Cameron (1954) 91 CLR 353
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Seddon and Ellinghaus, Cheshire & Fifoot’s Law of Contract, 7^th Aust ed, 1997
Carter and Harland, Contract Law in Australia, 3^rd ed, 1995
FOXTEL MANAGEMENT PTY LIMITED, SKY CABLE PTY LIMITED, THE NEWS CORPORATION LIMITED AND NEWS LIMITED v SEVEN CABLE TELEVISION PTY LIMITED, TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED, AUSTRALIAN COMPETITION & CONSUMER COMMISSION, TELSTRA CORPORATION LIMITED, TELSTRA MULTIMEDIA PTY LIMITED AND TELSTRA MEDIA PTY LIMITED
NO. N 309 of 2000
TELSTRA CORPORATION LIMITED, TELSTRA MULTIMEDIA PTY LIMITED AND TELSTRA MEDIA PTY LIMITED v SEVEN CABLE TELEVISION PTY LIMITED, TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED, AUSTRALIAN COMPETITION & CONSUMER COMMISSION, FOXTEL MANAGEMENT PTY LIMITED, SKY CABLE PTY LIMITED, THE NEWS CORPORATION LIMITED AND NEWS LIMITED
NO. N 324 of 2000
JUDGES:      BEAUMONT, MOORE & GYLES JJ
DATE:           18 AUGUST 2000
PLACE:         SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 309 of 2000

BETWEEN:

FOXTEL MANAGEMENT PTY LIMITED
First Appellant

SKY CABLE PTY LIMITED
Second Appellant

THE NEWS CORPORATION LIMITED
Third Appellant

NEWS LIMITED
Fourth Appellant

AND:

SEVEN CABLE TELEVISION PTY LIMITED
First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Third Respondent

TELSTRA CORPORATION LIMITED
Fourth Respondent

TELSTRA MULTIMEDIA PTY LIMITED
Fifth Respondent

TELSTRA MEDIA PTY LIMITED
Sixth Respondent

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 324 of 2000

BETWEEN:

TELSTRA CORPORATION LIMITED
First Appellant

TELSTRA MULTIMEDIA PTY LIMITED
Second Appellant

TELSTRA MEDIA PTY LIMITED
Third Appellant

AND:

SEVEN CABLE TELEVISION PTY LIMITED
First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Third Respondent

FOXTEL MANAGEMENT PTY LIMITED
Fourth Respondent

SKY CABLE PTY LIMITED
Fifth Respondent

THE NEWS CORPORATION LIMITED
Sixth Respondent

NEWS LIMITED
Seventh Respondent

JUDGES:

BEAUMONT, MOORE & GYLES JJ

DATE OF ORDER:

18 AUGUST 2000

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
Appeals dismissed, with costs.
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

N 309 of 2000

BETWEEN:

FOXTEL MANAGEMENT PTY LIMITED
First Appellant

SKY CABLE PTY LIMITED
Second Appellant

THE NEWS CORPORATION LIMITED
Third Appellant

NEWS LIMITED
Fourth Appellant

AND:

SEVEN CABLE TELEVISION PTY LIMITED
First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Third Respondent

TELSTRA CORPORATION LIMITED
Fourth Respondent

TELSTRA MULTIMEDIA PTY LIMITED
Fifth Respondent

TELSTRA MEDIA PTY LIMITED
Sixth Respondent

JUDGES:

BEAUMONT, MOORE & GYLES JJ

DATE OF ORDER:

18 AUGUST 2000

WHERE MADE:

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 324 of 2000

BETWEEN:

TELSTRA CORPORATION LIMITED
First Appellant

TELSTRA MULTIMEDIA PTY LIMITED
Second Appellant

TELSTRA MEDIA PTY LIMITED
Third Appellant

AND:

SEVEN CABLE TELEVISION PTY LIMITED
First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Third Respondent

FOXTEL MANAGEMENT PTY LIMITED
Fourth Respondent

SKY CABLE PTY LIMITED
Fifth Respondent

THE NEWS CORPORATION LIMITED
Sixth Respondent

NEWS LIMITED
Seventh Respondent

JUDGES:

BEAUMONT, MOORE & GYLES JJ

DATE:

18 AUGUST 2000

PLACE:

SYDNEY

INDEX
Introduction........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . 3
The statutory framework........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... 5
The identity of the parties to the litigation and the nature of the relevant relief claimed at first instance 7
The technical (operational) context........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... 8
The basis upon which the claims were propounded at first instance........ ........ ........ ........ ........ ...... 10
The documentation relied upon by the appellants........ ........ ........ ........ ........ ........ ........ ........ ........ . 13
(1)    The Umbrella Agreement dated 9 March 1995........ ........ ........ ........ ........ ........ ........ ....... 13
(2)    The July 1995 BCA........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... 17
(3)    The letter dated 23 October 1995........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. 21
(4)    The December 1995 BCA........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... 22
(5)    The April 1997 BCA........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... 22
The reasoning at first instance........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... 35
The declaratory orders made at first instance........ ........ ........ ........ ........ ........ ........ ........ ........ ...... 40
The history of the regulatory regime for pay TV services over the period in question........ ........ .... 40
Grounds of the Appeals........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... 44
Seven’s Notice of Contention........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... 44
Conclusions on the appeals........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ 46
REASONS FOR JUDGMENT
BEAUMONT J
Introduction

These appeals, which were heard together, raise important questions as to the meaning and operation of some of the provisions of Part XIC of the Trade Practices Act1974 (Cth) (“the TPA”). Part XIC (which was inserted into the TPA with effect from 30 April 1997) establishes a telecommunications access regime whereby carriers, and carriage service providers who provide declared services, are required to meet “standard access obligations” in relation to those services. However, Part XIC limits these obligations in several respects. One limitation is that the Part does not impose an obligation to provide access to the extent (if any) to which its imposition “would have the….effect[ ] … [of] depriving any person of a protected contractual right” (s 152AR(4)(d)). Such a right is defined to mean a right “under a contract that was in force at the beginning of 13 September 1996” (s 152AR(12)).
The background to this litigation is that two service providers requested access to declared services. Access was refused on the ground that its grant would have the effect of depriving a party or parties of a “protected contractual right” (“PCR”). In proceedings in this Court for declaratory or other relief, declaratory orders were made at first instance that the party (or parties) did not have a PCR within the meaning of Part XIC. These are appeals, by leave granted by the primary Judge, from those orders. His Honour’s reasons for judgment are now reported (Seven Cable Television Pty Ltd v Telstra Corporation Ltd [2000] 171 ALR 89 (Tamberlin J)).
The services in question may be described as subscription television (“pay TV”) services broadcast over broadband cable networks using analogue transmission technology. These analogue pay TV cable carriage services may be said to involve, for present purposes, the following elements:
·Receipt by the carrier of a pay TV service in the form of a sequence of video, audio and related signals.
·Modulation and encryption of the signals for analogue transmission over the carrier’s cable network.
·Carriage of the signals over the carrier’s cable network.
·Demodulation and decryption of the signals in the end-users’ conditional access equipment.
In order to understand the issues that arise in the appeals, it will be necessary to explain the statutory framework, the identity of the parties and the nature of the relevant relief claimed at first instance, the particular technical (i.e. operational) context, and the basis upon which the claims were propounded at first instance. Reference will then be made to the substantial documentation relied upon by the appellants in support of their claim that a PCR existed; to his Honour’s reasons and orders; and to the regulatory regime for the relevant subscription television services as it existed at the time that the relevant negotiations between the parties took place, that is, prior to the enactment of Part XIC of the TPA.
The statutory framework
Part XIC of the TPA (ss 152AA – 152BB) is headed “Telecommunications Access Regime”. Section 152AA provides a simplified outline of the Part, stating, inter alia:
“The [Australian Competition and Consumer] Commission [“the ACCC”] may declare carriage services and related services to be ‘declared services’.
Carriers and carriage service providers who provide declared services are required to comply with ‘standard access obligations’ in relation to those services.
The ‘standard access obligations’ facilitate the provision of access to declared services by service providers in order that service providers can provide carriage services and/or content services.”
The outline explains that the terms and conditions on which carriers and carriage service providers are required to comply with the “standard access obligations” are subject to agreement, but that if agreement cannot be reached, and no “access undertaking” is in operation, the terms and conditions of the provision of access are to be determined by the ACCC acting as an arbitrator. The determination on the arbitration must not be inconsistent with the standard access obligations or an access undertaking. The ACCC may register agreements about access to declared services. A carrier or a carriage service provider must not prevent or hinder access to a declared service.
Section 152AB states the objects of Part XIC. Subsection (1) provides:
“The object of this Part is to promote the long-term interests of end-users of carriage services or of services provided by means of carriage services.”
The “standard access obligations”, and the exception to the obligations said to be operative in this case (i.e. ss (4)(d)), are found in s 152AR, which relevantly provides as follows:
“152AR Standard access obligations
(1)       This section sets out the ‘standard access obligations’.
Access provider and active declared services
(2)For the purposes of this section, if a carrier or a carriage service provider supplies declared services, whether to itself or to other persons:
(a)      the carrier or provider is an ‘access provider’; and
(b)      the declared services are ‘active declared services’.
Supply of active declared service to service provider
(3)      An access provider must, if requested to do so by a service provider:
(a)supply an active declared service to the service provider in order that the service provider can provide carriage services and/or content services; and
(b)…
(c)…
Limit on paragraph (3)(a) obligation
(4)Paragraph (3)(a) does not impose an obligation to the extent (if any) to which the imposition of the obligation would have any of the following effects:
(a)preventing a service provider who already has access to the declared service from obtaining a sufficient amount of the service to be able to meet the service provider’s reasonably anticipated requirements, measured at the time when the request was made;
(b)preventing the access provider from obtaining a sufficient amount of the service to be able to meet the access provider’s reasonably anticipated requirements, measured at the time when the request was made;
(c)preventing a person from obtaining, by the exercise of a pre-request right, a sufficient level of access to the declared service to be able to meet the person’s actual requirements;
(d)       depriving any person of a protected contractual right.
….”   [Emphasis added]
For the purposes of the argument in these appeals, it is accepted that the services in question are “active declared services” within the meaning of ss (2)(b). Subsection (12) of s 152AR contains the statutory definition of the term “protected contractual right”:
“(12)   In this section:
           …
“protected contractual right” means a right under a contract that was in force at the beginning of 13 September 1996.”   [Emphasis added]
That is to say, the issue here is whether the supply of access to the service providers “would have … the effect[ ] … [of] depriving [a] person of a protected contractual right”, i.e. “a right under a contract that was in force at the beginning of 13 September 1996.”
The identity of the parties to the litigation and the nature of the relevant relief claimed at first instance
Telstra Media Pty Limited, a subsidiary of Telstra Corporation Limited (“Telstra”), and Sky Cable Pty Limited (“Sky Cable”), a subsidiary of News Limited, are partners (“the FOXTEL Partnership”) in the operation of a pay TV business in Australia under the name “FOXTEL”. The FOXTEL business is operated by FOXTEL Management Pty Limited (“FOXTEL Management”) as the agent of the partners. Telstra Multimedia Pty Limited (“Telstra Multimedia”), another subsidiary of Telstra, owns the Broadband Cable Network (“BCN”) used to broadcast FOXTEL programs.
Under the provisions of the Telecommunications Act 1991 (Cth), there were only two “general carriers” designated, i.e. Telstra and C & W Optus. By the legislative scheme enacted in ss 90 – 95 of that Act, persons other than “carriers” were prohibited from installing, maintaining and operating telecommunications networks.
By two instruments made in 1997 and 1999 respectively, the ACCC purported to specify and declare that certain broadcast access and carriage services are “declared services” for the purposes of s 152AL of the TPA and thus for the purposes of access obligations to other service providers under s 152AR of the TPA. The validity and effect of these instruments were considered by Wilcox J in reasons for judgment given in associated proceedings on 8 May 2000 (FOXTEL Management Pty Ltd v Australian Competition & Consumer Commission [2000] FCA 589). Appeals from his Honour’s orders were heard by us upon the conclusion of the hearing of these appeals. We have also given judgment in those appeals today.
Seven Cable Television Pty Limited (“Seven”) is a “service provider” within the meaning of the TPA. In 1999 it requested access to (1) the broadcast access services; and (2) the carriage services provided by Telstra Multimedia. Television and Radio Broadcasting Services Australia Pty Limited (“TARBS”) is another “service provider” which also sought access from Telstra, The News Corporation Limited (“News”) and FOXTEL to telecommunications networks and facilities. Telstra Multimedia refused both sets of requests, claiming (relevantly) that to grant the requests would deprive FOXTEL Management of a PCR.
Several forms of relief were sought at first instance. Seven (relevantly) sought a negative declaration that FOXTEL did not have a PCR. For their part, FOXTEL Management and Sky Cable (relevantly) sought a declaration that FOXTEL Management and the FOXTEL Partnership had PCR’s, and that they would be deprived of those rights if the requests made by Seven and TARBS were granted. The Telstra parties sought similar relief. By consent, Tamberlin J ordered that these claims and cross-claims for relief be reduced to the form of separate questions for determination, noting (at para 18) that the essential issues for his determination were:
“(1)whether FOXTEL had any protected rights under a contract that was in force at the beginning of 13 September 1996 within the meaning of s 152AR(4) and (12); and, if so,
(2)whether those rights survived until the time when Seven and TARBS requested access; and, if so
(3)whether the granting of any of the requests from Seven or TARBS would deprive FOXTEL of such rights.”
The technical (operational) context
The method of operation of the FOXTEL broadcast and subscriber system was described by Tamberlin J to the following effect (paras 10-17):
·There are two components to FOXTEL’s business that enable it to provide subscription television services to customers (subscribers). The first is the supply of content (television programs) for broadcast. The second is the provision of information and associated facilities that enable FOXTEL to control subscriber access and to confine access to those channels for which a subscriber has subscribed. Accordingly, two streams of information or signals are transmitted. One is the program content itself. The other stream contains “conditional access data” as to the subscriber’s program entitlements.
·Both streams of information are provided by FOXTEL. Programs are assembled as a continuous stream of information at FOXTEL’s playout centre at Pyrmont. The programs are broadcast from Pyrmont in digital form (using the hybrid fibre coaxial (“HFC”) network owned by Telstra Multimedia) to headends located in Sydney, Melbourne, Brisbane, Perth, Adelaide and Gold Coast.
·A FOXTEL subscriber may view a number of different television programs, depending on the specific program “package” for which they subscribed. The conditional access system is necessary to enable FOXTEL to control subscribers’ access. The components of the access system are the subscriber management system and the conditional access gateway, both operating from the Telstra Computer Centre at Southbank, and a smart card and set top unit (“STU”) located at each subscriber’s premises. The subscriber management system is a computer system for subscriber information, owned and maintained by Telstra Multimedia, using software licensed from a third party.
·The subscriber management system transmits access information in respect of each subscriber to the conditional access gateway. The gateway then generates conditional access data which is received at the headends. The headends encrypt the program signal broadcast to it from the playout centre, and combine that encrypted signal with the conditional access data, so as to provide a combined information stream.
·The combined information stream is broadcast from the headends to all subscribers over the HFC network. Telstra Multimedia’s cable network passes about 2.5 million homes in Sydney, Melbourne, Brisbane, Perth, Adelaide and Gold Coast.
·Persons who wish to subscribe to FOXTEL and whose home is passed by the cable network will be connected by a lead-in cable (from the passing HFC network) to a wall plate on the subscriber’s property. Both the lead-in cable and the wall plate are installed by Telstra Multimedia. Beyond the wall plate is the FOXTEL equipment, consisting of a fly cable that connects the wall plate to the STU, the STU itself, and a fly cable between the STU and the subscriber’s television receiver (set). The STU receives the combined information stream from the HFC network. It usually sits on or by the subscriber’s set. The STU is fitted with a “smartcard”, a secure microprocessor with a memory function configured for FOXTEL operations. In conjunction with the smart card, the STU decrypts the program signal component of the combined information stream in accordance with the subscriber’s entitlements. The decrypted program signal is then transmitted from the STU to the set.

In the instrument made in August 1999 by which the relevant carriage service was declared to be a “declared service”, the ACCC said (Ch 4.1.2) that its understanding was that both the Telstra and C & W Optus networks are capable of transmitting around sixty four analogue channels on the bandwidth reserved for pay TV (although this capacity could be greatly increased with the use of digital transmission). Counsel for Telstra told the Court that the statutory basis for the reservation of this capacity was probably an instrument made pursuant to s 31 of the Radiocommunications Act 1992 (Cth), although no party has produced the relevant instrument.
The basis upon which the claims were propounded at first instance
At first instance, Seven claimed that no PCR was in force between the FOXTEL partners as at 13 September 1996; and that, in any event, the grant of Seven’s request regarding access would not “deprive” the FOXTEL partners of any such right.
On the other hand, the FOXTEL parties (described by his Honour as the “News” parties) submitted that their letter of agreement dated 23 October 1995 (“the 23 October letter”), which incorporated their draft Broadband Co-operation Agreement dated 12 July 1995 (“the July 1995 BCA”) constituted a contract (“the October letter agreement”) giving rise to FOXTEL’s PCR, a right which, they contended, had continued in existence through the critical 13 September 1996 date to the time of the request. They further submitted that a later BCA made between them in April 1997 expressed a confirmation of the right previously created; and that, since it did not effect any substantial variation of the previous right, the April 1997 BCA was to be treated as in force at 13 September 1996. The terms of each of these instruments are stated below.
The Telstra parties made similar claims to those advanced by the FOXTEL parties, relying also upon an Umbrella Agreement dated 9 March 1995 between News and Telstra.
The Telstra parties claimed both “exclusivity” rights and “bundling” rights as follows:
The “exclusivity” rights claimed were (as his Honour noted at para 44) formulated in two ways:
(i)A right, vesting in FOXTEL Management and the FOXTEL Partnership together, to prevent Telstra Multimedia from using (or permitting the use of) its facilities to deliver a subscription television service that would be provided by another service provider;
(ii)A right arising from the 23 October letter and cl 3.2 of the July 1995 BCA, by virtue of which FOXTEL was said to have the exclusive right to provide (or manage the provision of) services delivered to subscribers through the use of the “broadband system service”, and to utilise or otherwise exploit the functions comprised in the entire “broadband system” only for that purpose; and by which Telstra Multimedia agreed not to use (or permit the use of) facilities controlled by it for the delivery of services by any other service provider. It was said that cl. 5.2 of the April 1997 (“Restatement”) BCA conferred the same, or substantially the same, rights on FOXTEL.
The “bundling” right was propounded by Telstra in these terms:
“Pursuant to the [23 October letter] and clause 3.10 of the [July 1995] BCA, unless otherwise required by Law and permitted by both technological developments and network system reconfiguration, Telstra Multimedia may not provide a broadband system service, utilising STU functionality, to deliver a service which is not a Service unless the broadband system service includes a conditional access function and a subscriber database function equivalent to the conditional access function and the subscriber database function, as defined . Clause 5.12 of the April 1997 Restatement BCA confers the same or substantially the same, right on FOXTEL ….”
The “protected” rights claimed on behalf of the FOXTEL parties were expressed somewhat differently as follows.
In addition to a claim of “exclusivity” and “bundling” rights (i.e. rights 1 and 2 set out below), a “standard quality” right and a “channels number” right were claimed (i.e. rights 3 and 4 below) in these terms:
“1.The right to prevent Telstra Multimedia from using, or permitting use of its broadband telecommunications network to deliver a subscription television service which is not provided by FOXTEL or the provision of which is not managed by FOXTEL (by virtue of its having entered into an agreement with a third party to do so) except where Telstra Multimedia is required by law to so use or permit the use of that network.
2.The right to prevent Telstra Multimedia from providing any broadband system service utilising set top functionality to deliver a service, other than one which delivers to a person in a private residential dwelling either a video program on a television or an audio program via a [STU], unless that service includes conditional access and subscriber database functions equivalent to those functions currently provided by Telstra Multimedia to FOXTEL.
3.The right to require Telstra Multimedia to establish, maintain and supply its broadband system service to FOXTEL to a standard which meets world’s best practice for comparable services as to signal, quality and transmission reliability.
4.The right to require Telstra Multimedia to supply to FOXTEL the number and type of channels required by FOXTEL’s business plan from time to time.”
His Honour’s judgment concentrated upon the claim of the existence of “exclusivity” rights said to have been conferred on FOXTEL by the October letter agreement. Tamberlin J observed (para 70) that this claim was the principal right for consideration and that the existence and operation of the other rights claimed would follow from the conclusions reached upon the claim of the exclusivity rights.
As mentioned, the documentation relied upon by the appellants is substantial and needs to be explained in order to understand his Honour’s process of reasoning.
The documentation relied upon by the appellants
It will be necessary to refer to the principal documents (some of which have already been mentioned) relied upon in argument. These documents are:
(1)An “Umbrella Agreement” between News and Telstra, dated 9 March 1995;
(2)A version of a Broadband Co-operation Agreement, dated 12 July 1995 (the July 1995 BCA);
(3)A letter dated 23 October 1995, signed by and on behalf of Telstra Multimedia and FOXTEL Management (the 23 October letter);
(4)A version of a BCA between Telstra Multimedia, Telstra and Australis Media Limited (“Australis”) dated 22 December 1995 (“the December 1995 BCA”); and
(6)Another version of a BCA executed by Telstra Multimedia and FOXTEL Management, dated 14 April 1997 (“the April 1997 BCA”).
(1) The Umbrella Agreement dated 9 March 1995
On 9 March 1995, News and Telstra entered into an “Umbrella Agreement”, establishing a long-term “Alliance” between them. The Umbrella Agreement’s principal purpose, as stated in the Recitals, is –
“News and Telstra have agreed to establish an alliance for the principal purpose of establishing a number of businesses in the broadband video home entertainment sector in Australia and are entering into this agreement to record the overall terms of that alliance.” [Recital D]
The “Alliance” is defined to mean:
“The overall relationship established by this agreement between News and its subsidiaries on the one hand and Telstra and its subsidiaries on the other.”
The objects and basic principles of the Alliance are elaborated in cll 2.1 and 2.2:
“2.1This agreement is intended to set out the terms of the Alliance between News and Telstra and the overall structure of the businesses to be established within the scope of the Alliance and to identify the relevant entities and contractual arrangements that will initially be established in order to accomplish the business objectives set out in clause 2.2.
2.2The parties agree that the objectives of the Alliance are:
(a)to establish through Joint Venture Entities, leading businesses
within the broadband video home entertainment sector in
Australia; …”
Clause 3 describes the scope of the Alliance and defines the “Services” to be provided:
“3.1The scope of the Alliance is all businesses within the broadband video home entertainment sector which comprise businesses which provide or manage the provision of Services. The purpose of this clause 3 is to define Services and by doing so to define the scope of the Alliance.
3.2In this agreement Service means, subject to clauses 3.3, 3.4 and 3.5, a service that:
(a)delivers to a Residential Subscriber either a Video Program
on a Television or an Audio Program via a [STU];
(b)is not provided with an Associated Return Path Service other
than a Limited Return Path Service; and
(c)is not a Narrowband Service.”
Clause 3.3 states a number of services delivered to a Residential Subscriber on a Television that were deemed by the parties to be “Services”, notwithstanding that they do not satisfy all the criteria specified in the definition of Services in cl 3.2. These include advertising and all forms of sponsorship delivered by broadcast transmission, “teletext” and all future similar services, certain classes of games, betting and gaming services, etc. Clause 3.6 sets out, for the avoidance of doubt and notwithstanding any other provision, a number of services that did not satisfy the criteria set out in cl. 3.2 and were not therefore “Services”. These included “telephony” and other non-content based telecommunications services, content based Narrowband services, On-line Services, etc.
Clause 4 explains the ownership and operational structure of those businesses called “Joint Venture Entities” that were to be established initially as part of the Alliance in accordance with the agreement. Clause 4.2(d) states:
“The Alliance Businesses will be conducted by a number of entities established by the parties in accordance with the terms of this agreement as and when required in order to carry out the objectives of the Alliance. As at the date of this agreement the parties contemplate the establishment of the following Businesses and Joint Venture Entities:
……
(d)a business providing a Broadband System Service by means of a Broadband System to be carried by the Broadbandco Partnership in accordance with the Broadbandco Partnership Agreement, the principal terms of which are set out in annexure 2 and as more fully defined in that agreement.”
The “Broadbandco Partnership” is defined as a partnership in which the capital was owned as to 999,999,999 shares by a wholly-owned subsidiary of Telstra, with one share of the capital being held by Moco (later, FOXTEL) Management as agent for the Moco (later, FOXTEL) Partnership. The Moco Partnership was a partnership in which subsidiaries of Telstra and News held equal interests. Clause 4.4(a) describes one of the agreements that would govern the operational relationships of the Joint Venture Entities:
“4.4The operational relationship between the Joint Venture Entities will be governed by the following agreements:
(a)an agreement between Broadbandco Partnership and [FOXTEL] Management as agent for [FOXTEL] Partnership setting out the terms on which Broadbandco Partnership and the [FOXTEL] Partnership will co-operate in the establishment of their respective businesses substantially in the form of annexure 3 (‘Broadband Co-operation Agreement’);” (Emphasis added)
The annexed agreement referred to in cl 4.4(a) as the Broadband Co-operation Agreement included a clause (cl 3) headed “Exclusive Relationship”. Clause 3.1 provided:
“3.1 Subject to this clause, [FOXTEL] shall:
(a)exclusively provide and manage the provision of Services delivered to subscribers through use of the Broadband System Service; and
(b)utilise or otherwise exploit the functions comprised in the entire Broadband System Service only for the purpose of paragraph (a) above.
3.2To give effect to clause 3.1 and subject to clause 3.7, Broadbandco will not permit the use of facilities controlled by Broadbandco for the delivery of Services by any service provider other than [FOXTEL].
3.3Whenever Broadbandco may be required by Law to use or permit an entity other than [FOXTEL] to use facilities controlled by Broadbandco to deliver Services, Broadbandco shall arrange for [FOXTEL] to satisfy that legal requirement and [FOXTEL] undertakes to provide that service and to satisfy, to the extent necessary, on behalf of Broadbanco any legal requirements imposed upon Broadbandco.”
This BCA was subsequently revised. The trial Judge’s reasons proceed on the footing that the relevant version was “Revised Version 5” of 12 July 1995 (i.e. the July 1995 BCA). (The material provisions of this version will be explained shortly.)
In cll 2.11 and 2.12 of the Umbrella Agreement the parties set out their “Commitment to Broadbandco’s Broadband System” in the following terms:
“2.11The parties agree that Telstra and Broadbandco must be the exclusive supplier of all Broadband System Services used by any Joint Venture Entity. Any use by a Joint Venture Entity of a Broadband System Service other than by Telstra or Broadbandco must be approved by both parties.
2.12Telstra and News each must procure that for all services provided by means of the Broadband System operated by Broadbandco and delivered through the [STU], whether or not they are Services, all conditional access functions must be provided by the Broadbandco Partnership.”
The Term of the Alliance was for a period of some fifteen years commencing on the date of the Umbrella Agreement and continuing, unless earlier terminated in accordance with the Umbrella Agreement or by agreement between the parties, until either 1 March 2010 or the termination of the Alliance pursuant to cl 14, whichever was the later. Relevantly cl 14 reads:
“14.1From 6 months prior to the expiration of the Term, the parties must negotiate in good faith, either:
(a)for an extension of the term together with any modifications of the agreements reasonably required;
(b)for one party to purchase the other party’s Interest, on the basis of the terms listed in clause 14.10; or
(c)for one or more of the Joint Venture Entities to be floated in whole or in part.
14.2If the parties have not concluded an agreement in accordance with clause 14.1 by the expiration of the Term then either party may by notice to the other invoke the tendering procedure described in clause 14.3.”
(2) The July 1995 BCA
The draft July 1995 BCA, was between Telstra Broadband Pty Limited (later Telstra Multimedia) on behalf of Broadbandco (the Broadband Partnership), and FOXTEL Management on behalf of the FOXTEL Partnership (FOXTEL). News was a third party to the agreement. The Recitals read:
“A.Broadbandco proposes to establish business as a broadband system operator delivering broadband system services to customers in Australia.
B.FOXTEL proposes to establish a business of providing and managing the provision of broadband video home entertainment services in Australia.
C.FOXTEL Digital Cable Television Pty Limited, the holder of Subscription Television Broadcasting licenses under the [Broadcasting Services Act 1992 (Cth) (“the BSA”)], proposes to establish a business of providing a Subscription Television Broadcasting Service to residential subscribers in Australia to be managed by FOXTEL Television.
D.Broadbandco, FOXTEL Digital Cable Television Pty Limited and FOXTEL Television have acknowledged to each other that the successful establishment of each of their respective businesses is in turn dependent on the successful establishment of each other’s business in that:
(a)FOXTEL will be the founding customer for Broadbandco’s broadband system service; and
(b)FOXTEL Television will be the founding customer for FOXTEL’s management of the provision of broadband video home entertainment services (to the extent those broadband video home entertainment services include Subscription Television Broadcasting Services to residential subscribers in Australia).
E.In this connection Broadbandco and FOXTEL have agreed to co-operate in the establishment of their respective businesses on the terms and subject to the conditions of this agreement and in the knowledge that FOXTEL Digital Cable Television Pty Limited, FOXTEL Television, FOXTEL and FOXTEL Management have agreed to enter into the FOXTEL Management Agreement in connection with the management by FOXTEL of the provision of FOXTEL Digital Cable Television Pty Limited’s Subscription Television Broadcasting Service to residential subscribers in Australia.”
In addition to common contractual provisions dealing with matters such as “force majeure”, the July 1995 BCA addressed the following subjects:
·Broadband system service availability
·Design of conditional access function and technology choice
·Broadband system service
·Customer service centre
·Smartcard changeout
·Revenue sharing
·Marketing incentives and bonuses
·Installations, maintenance and re-connections
Importantly for present purposes, the July 1995 BCA also addressed the subject “exclusive relationship” in cl 3, relevantly as follows:
“3       EXCLUSIVE RELATIONSHIP
3.1
(a)Broadbandco and FOXTEL acknowledge that they have decided to establish their respective businesses on the basis of the Initial Business Plan and the forecast revenues set out in that plan. [The ‘Initial Business Plan’ is not there defined, although it is defined in the Umbrella Agreement (cl 1.1) to mean the initial ten year financial forecasts for the Alliance Business, which means (cl 1.1) any business agreed to be carried on in a manner contemplated by the Umbrella Agreement within the scope of the Alliance.]
(b)That plan depends, amongst other things, on FOXTEL’s exclusive entitlement to provide or manage the provision of Services [defined as having the meaning given in the Umbrella Agreement] delivered to Subscribers by means of the Broadband System Service in accordance with this clause 3. [The Broadband System Service is there defined to mean the service provided by Broadbandco to enable the delivery, and the management of the delivery, of Services to Subscribers in accordance with the agreement.]
(c) Broadbandco and FOXTEL further acknowledge that this exclusive entitlement enables FOXTEL to provide and manage the provision of Services to Subscribers on an attractive, marketable, co-ordinated and efficient basis. This, in turn, directly affects the forecast revenues set out in the Initial Business Plan.
(d)FOXTEL intends, on reasonable commercial terms, to offer to provide and manage the provision of Services of Other Service Providers [defined as a person who provides or manages the provision of Services other than FOXTEL or a Joint Venture Entity] subject to FOXTEL’s requirement that it be able to provide and manage the provision of Services to Subscribers on an attractive, marketable, co-ordinated and efficient basis.
[Check language with RGF][sic]
(e)Subject only to clauses 3.10 and 3.11, for the avoidance of doubt, and to emphasise the intention of both Broadbandco and FOXTEL, nothing in this agreement in any way restricts or otherwise affects Broadbandco’s right in its absolute discretion to use or permit the use of facilities controlled by it for or in connection with the delivery of services which are not Services to any person on Broadbandco’s own behalf or on behalf of any other person.
3.2      Subject to this clause, FOXTEL shall:
(a)exclusively provide or manage the provision of Services delivered to Subscribers through use of the Broadband System Service; and
(b)utilise or otherwise exploit the functions comprised in the entire Broadband System Service only for the purpose of paragraph (a) above.
3.3To give effect to clause 3.2 and subject to clause 3.7, Broadbandco will not use or permit the use of facilities controlled by Broadbandco for the delivery of Services by any Other Service Provider.
3.4Subject to this clause 3, whenever Broadbandco may be required by Law to use or permit any Other Service provider to use facilities controlled by Broadbandco to deliver Services, Broadbandco shall arrange for FOXTEL to satisfy that legal requirement and FOXTEL undertakes to provide that service and to satisfy, to the extent necessary, on behalf of Broadbandco any legal requirements imposed upon Broadbandco.
…
3.7Broadbandco may use or permit an entity other than FOXTEL to use the facilities controlled by Broadbandco to deliver Services if FOXTEL after a reasonable period has not, in Broadbandco’s reasonable estimation after consultation with FOXTEL Management, complied with clause 3.4.
…
3.8Whenever Broadbandco provides a service pursuant to clause 3.7, Broadbandco shall:
(a)inform and consult with FOXTEL Management;
(b)provide services on terms and conditions established after consideration of, inter alia, their effect upon FOXTEL; and
(c)provide to FOXTEL, after deducting a reasonable proportion of Broadbandco’s operational expense in managing the provision of those services having regard to the extent of use of Broadbandco’s facilities, any revenue received for such services in excess of the amount that would have been due to Broadbandco pursuant to clause 8 had FOXTEL provided such services in like terms.
Such amounts payable to FOXTEL shall not be included in the definition of “Total Revenue” for the purposes of clause 8.
Broadbandco must use its reasonable endeavours to maximise the revenue derived from a service provided pursuant to clause 3.7 having regard to the overall circumstances of the particular transaction.
...
3.10Unless required by Law and permitted by both technological developments and network system reconfiguration, Broadbandco may not provide a broadband system service, utilising STU Functionality, to deliver a service which is not a Service unless that broadband system service includes a conditional access function and a subscriber database function equivalent to the Conditional Access Function and the Subscriber Database Function.
[Law is defined [cl 1] to mean any Commonwealth, State or Territory law or regulation, or any lawful Government authorisation, notification, licence condition or direction, including any made by AUSTEL or the Trade Practices Commission.]
…
Broadbandco as exclusive provider
3.12Unless the parties otherwise agree, FOXTEL must obtain from Broadbandco all of the services required to deliver Services to Subscribers.”
(3)       The letter dated 23 October 1995

The letter is addressed to FOXTEL Management (relevantly) in these terms:
“Broadband Cooperation Agreement – Interim Arrangements
As you know, Telstra and News have recently entered into a Head of Agreement with Australis. The purpose of this letter is to record the terms on which Telstra Multimedia Pty Limited (‘Telstra Multimedia’) proposes to provide the Broadband System Service to FOXTEL Management, pending completion of the merger contemplated by that Heads of Agreement.
Interim Arrangements
Pending completion of the Australis merger, Telstra Multimedia will provide the Broadband System Service to FOXTEL Management on a monthly basis substantially on the terms of the draft Broadband Cooperation Agreement dated 12 July 1995, as supplemented by correspondence and negotiations between us (‘BCA’).
If the Australis Merger is Completed
If the Australis merger is completed, the arrangements set out in this letter will terminate on completion of that merger.
If the Australis Merger is Not Completed
If the Australis merger is not completed, either Telstra Multimedia or FOXTEL Management may require the other to enter into a long form Broadband Cooperation Agreement, substantially in the terms of the BCA.”
The letter also provides that FOXTEL Management gives warranties to Telstra Multimedia in connection with re-transmitted free-to-air programs; and indemnifies Telstra Multimedia in that behalf.
The letter notes that terms used in it, and not otherwise defined, have the meaning given in the BCA. The letter concludes in this way:
“If you agree to the terms contained in this letter, I would be grateful if you would sign the enclosed copy of the letter and return it to me.
Kind regards,
[Signature]
Gerry Moriarty
Chief Executive Officer
[Signature]
T. Mockridge
Duly Authorised Representative of FOXTEL Management Pty Ltd”
(4) The December 1995 BCA
On 18 October 1995 Telstra, News, News Limited, Australis and various subsidiary entities executed “Heads of Agreement” which contemplated the issue of a large number of shares in Australis to subsidiaries of Telstra and News, in return for the sale of FOXTEL assets to Australis. The Heads of Agreement provided that one of the conditions precedent to the merger was the grant of approval by the ACCC. In anticipation of the proposed merger, which was still under negotiation, a new BCA was drafted with Australis as a party in lieu of FOXTEL. The terms of this BCA were finalised on 22 December 1995. However, the merger could not proceed at the time, because regulatory approval was not then forthcoming. By the end of April 1996, the appellant parties had acknowledged that the Australis merger was no longer feasible, and they resumed their negotiations; this was to lead to the execution of the April 1997 BCA.
(5) The April 1997 BCA
The parties to this BCA, dated 14 April 1997, were Telstra Multimedia, and FOXTEL Management, for and on behalf of FOXTEL. It recites ((A) and (B)) that on the “Commencement Date” (defined (cl 1) as 23 October 1995 - the date of the October letter agreement), Telstra Multimedia was establishing a business as a broadband system operator delivering broadband system services to customers in Australia, while FOXTEL was establishing a business of providing (and managing the provision of) broadband video home entertainment services in Australia. It further recites ((C)) that, on the Commencement Date, FOXTEL Cable Television Pty Limited, as holder of Subscription Television Broadcasting licences under the BSA, was establishing the business of providing “Subscription Television Broadcast Services” (pay TV) to residential subscribers, to be managed by FOXTEL Television. It is then recited:
“(D)On the Commencement Date, Telstra Multimedia, FOXTEL, FOXTEL Cable Television and FOXTEL Television had acknowledged to each other that the successful establishment of each of their respective businesses would in turn be dependent on the successful establishment of each other's business in that:
(a)FOXTEL would be the founding customer for Telstra Multimedia's broadband system service; and
(b)FOXTEL Television would be the founding customer for FOXTEL's management of the provision of broadband video home entertainment services (to the extent those broadband video home entertainment services include Subscription Television Broadcasting Services to residential subscribers in Australia).
(D)In this connection Telstra Multimedia and FOXTEL agreed to co-operate in the establishment of their respective businesses on terms and subject to the conditions which this agreement records and in the knowledge that FOXTEL Cable Television, FOXTEL Television, FOXTEL and FOXTEL Management had agreed to enter into the FOXTEL Management Agreement in connection with the management by FOXTEL of the provisions of FOXTEL Cable Television’s Subscription Television Broadcasting Service to residential subscribers in Australia.”
Provisions (cll 1.10 and 1.11) of the April 1997 BCA purport to deal as follows with the “Effect” of the instrument with respect to the operation of the 23 October letter and the July 1995 BCA.
Clause 1.10(a) (relevantly) provides that, without prejudice to cl 1.11, the document “records the entire agreement of the parties from at least the Commencement Date in relation to its subject matter. The parties have, since that date, conducted themselves substantially in accordance with that agreement”.
Clause 1.10(d) then states:
“(d)By recording their agreement in this document, the parties do not intend to vary, terminate, discharge or rescind their agreement. … To the extent (if any) that the parties have otherwise varied their agreement since the Commencement Date, the parties did not intend any such variation to terminate discharge or rescind their agreement. This document is to be interpreted to give effect to the parties intention as set out in this clause 1.10(d).”
Clause 1.11 anticipates the coming into force of Part XIC of the TPA (as foreshadowed in a Ministerial statement made on 1 August 1995) and reiterates, with particular reference to the exclusivity issue, the intention of the parties not to vary their agreement. It also purports to state the history of the parties’ negotiations and dealings. It provides:
“1.11
(a)Division 3 of Part XIC of the Trade Practices Amendment (Telecommunications) Act 1997 will impose a standard access obligation on an access provider except to the extent to which the imposition of that obligation would have the effect of depriving a person of a right under a contract in force at the beginning of 13 September 1996.
(b)Without limiting the generality of clause 1. 10(a), clauses 5.2 and 5.12 record the agreement of the parties on their subject matters as at the beginning of 13 September 1996. The purpose of the following provisions of this clause is to record the parties’ common understanding as to the existence, history and continuity of their agreement on those subject matters since at least the Commencement Date (but without prejudice to any conclusion as a matter of fact as to the existence of that agreement on those subject matters prior to that date).
(c)On 18 October 1995, Telstra and News entered into a Heads of Agreement with [Australis] to merge FOXTEL’s business with Australis' business (“Australis Merger”). At that time, Telstra and News each agreed by letters (“Forebearance Letters”) to forebear from enforcing the Umbrella Agreement against the other pending the consummation of the merger and to continue during the interim period to work to establish the FOXTEL business and to conduct themselves in accordance with the Umbrella Agreement.
(d)On the Commencement Date:
(i)FOXTEL Cable Television commenced broadcasting Services to Subscribers. In connection with that, FOXTEL Television had commenced the business of establishing and managing FOXTEL Cable Television’s business. In turn, FOXTEL had commenced business providing and managing the provision of broadband video home entertainment services in Australia by establishing and managing FOXTEL Cable Television’s business on behalf of FOXTEL Television.
(ii)The Services were delivered to Subscribers by Telstra Multimedia by means of the Broadband System Service.
(iii)The parties agreed by letter (“23 October Letter”) that the Broadband System Service was to be provided:
(A)pending consummation of the Australis merger, month to month, on the basis of version 5 of the broadband co-operation agreement dated 12 July 1995 (“July BCA”) as supplemented by correspondence and negotiations between the parties as at 23 October 1995 (collectively with the July BCA “BCA”); and
(B)if the merger was not consummated, on the basis of the BCA.
The parties also agreed that if the Australis Merger was not consummated. either party could require the other to enter into a long form agreement substantially in the terms of the BCA.”
Subclauses (e), (f) and (g) address the history of the proposed Australis merger:
“(e)In the context of negotiations between Telstra, News, Telstra Multimedia, FOXTEL and Australis in connection with the Australis Merger in November and December 1995, a draft agreement (“Merger BCA”) was prepared to be entered into between Telstra Multimedia and Australis in relation to a variety of subject matters including several addressed by the BCA. In the Merger BCA, a number of provisions of the BCA covering subject matters relevant to the Merger BCA were supplemented or refined for the purpose of either supplying technical drafting deficiencies, supplying drafting clarifications or addressing operational exigencies identified after the commencement of FOXTEL operations on 23 October 1995. The principal (but not the only) clauses so supplemented and refined were clauses 3, 8 and 10 of the BCA (clauses 7, 12 and 14 respectively of the Merger BCA).
(f)On 22 December 1995, Australis, Telstra and News (amongst others) entered an agreement to effect the Australis Merger (“Merger Agreement”) subject to certain conditions precedent and initialled the Merger BCA for identification.
(g)In April 1996, following failure of some of those conditions [to] be fulfilled, the Merger Agreement was terminated. On termination of the Merger Agreement pursuant to the 23 October Letter and the continued conduct of the parties in performance of the BCA, the BCA became the basis upon which Telstra Multimedia provided the Broadband System Service to FOXTEL.”
The following provisions (cl 1.11(h) – (l)) record that since 23 October 1995 the parties operated on the basis of “the BCA” and that, pursuant to their agreement, they conducted themselves substantially in accordance with it:
“(h)Since the Commencement Date, when seeking to define what their rights and obligations to me another are in relation to the subject matter of the BCA, the parties have relied upon the BCA.
(i)Pursuant to their agreement, the parties have conducted themselves substantially in accordance with terms from time to time identified in that manner. In particular, on termination of the Merger Agreement, the parties continued to conduct themselves in accordance in all material commercial respects with the obligations reflected in the BCA.
(j)On 15 July 1996, Telstra and News agreed to cancel the arrangements under the Forebearance Letters. [This is a reference to a meeting of the appellant parties’ representatives held in Sydney on 26 July 1996.]
(k)On about 26 July 1996 the parties confirmed that the document recording their agreement on the subject matters of the BCA was the BCA.
(l)Also at about that time, pursuant to the 23 October Letter, the parties commenced discussions to settle the terms on which they would record the terms of the BCA in a long form agreement. In the meantime, the parties continued to conduct themselves in accordance in all material commercial respects with the obligations reflected in the BCA.”
There is then a reference to a meeting of the appellant parties’ representatives on 11 September 1996 (two days before the date nominated in s 152AR(12)). The parties then record their recognition that the exclusivity clauses of the July 1995 BCA are in all “material commercial respects identical” to the corresponding clauses (cll 3.2 and 3.3) in the BCA initially annexed to the Umbrella Agreement, and to the exclusivity clause, cl 5, of the April 1997 BCA:
“(m)On 11 September 1996, at a meeting held at the offices of Mallesons Stephen Jaques at which both Telstra Multimedia and FOXTEL and their respective legal advisers were represented, Telstra Multimedia and FOXTEL, through their respective legal advisers, agreed to record their agreement on the subject matters of, inter alia, clauses 3.2, 3.3 and 3.10 of the BCA, in terms reflecting the refinements made to those clauses by clause 7 of the Merger BCA.
(n) Clauses 3.2 and 3.3 of the BCA provided that:
‘3.2 Subject to this clause, FOXTEL shall:
(a)exclusively provide or manage the provision of Services to be delivered to Subscribers for use of the Broadband System Services; and
(b)utilise or otherwise exploit the functions comprised in the Broadband System Service only for the purpose of paragraph (a) above.
3.3To give effect to clause 3.2 and subject to Clause 3 (Telstra Multimedia) will not use or permit the use of facilities controlled by (Telstra Multimedia) for the delivery of Services by any Other Service Provider.’
The parties recognise that that clause is in all material commercial respects identical to clauses 3.2 and 3.3 of the broadband co‑operation agreement annexed to the Umbrella Agreement and clause 5.2 of this document.”
Clause 3.10 of the July 1995 BCA is then recited – it dealt with the “bundling” right:
“(o) Clause 3.10 of the BCA provided that:
‘Unless required by Law and permitted by both technological developments and network system reconfiguration (Telstra Multimedia) may not provide a Broadband System Service, utilising STU Functionality, to deliver a service which is not a Service unless that Broadband System Service includes a conditional access function and a subscriber data base function equivalent to the Conditional Access Function and the Subscriber Data Function.’
The parties recognise that that clause is in all material commercial respects identical to the second sentence of clause 4.6 of the broadband co‑operation agreement annexed to the Umbrella Agreement and clause 5. 12 of this document.”
Sub-clause (p) next states:
“(p)Without limiting the generality of clause 1.10(d) by agreeing to record their agreement on the subject matters of clauses 3.2, 3.3 and 3.10 of the BCA in the manner set out in clauses 5.2 and 5.12 of this document, the parties did not intend to vary, terminate, discharge or rescind their agreement on those subject matters. If, in fact, they did vary their agreement on those subject matters, they did not intend that variation to terminate, discharge or rescind their agreement on those subject matters and any such variation is to be interpreted accordingly.”
Clause 1.11 concludes by recording the parties’ common understanding and intent as at 13 September 1996:
“(q)Against this background, (but without prejudice to the relevance of any additional matters that support the facts set out above) it was the parties’ common understanding and intent as at 11 September 1996 that:
(i)by virtue of the 23 October Letter, the termination of the Merger Agreement and their conduct following termination of the Merger Agreement, they had agreed the subject matters of clauses 3.2, 3.3 and 3. 10 of the BCA at least since the Commencement Date;
(ii)their agreement on those subject matters was in all material commercial respects reflected in clauses 3.2, 3.3 and 3.10 of the BCA.
(iii)their agreement on those subject matters would be recorded in terms reflecting the refinements made to clauses 3.2, 3.3 and 3.10 of the BCA by clause 7 of the Merger BCA;
(iv)they had not then nor at any other time terminated their agreement on the subject matters of clauses 3.2, 3.3 or 3.10 of the BCA nor varied their agreement on the subject matters of those clauses and, if they had, they had not intended to terminate, discharge or rescind their agreement on those subject matters and had intended any such variation to be interpreted accordingly.
(r)Accordingly clauses 5.2 and 5.12 record the terms of the agreement of the parties on their subject matters as at 11 September 1996.”
The topic “Exclusive Relationship” is dealt with by cl 5. Clause 5.1 provides:
“(a)Telstra Multimedia and FOXTEL acknowledge that they have decided to establish and consolidate their respective businesses on the basis of the initial Business Plan and the forecast revenues set out in that plan.
[The “Business Plan” is defined (cl 1.1) to mean “ a business plan for the business to be conducted by FOXTEL which has been approved by the FOXTEL partners in accordance with the FOXTEL Partnership Agreement and as modified from time to time in accordance with [that] agreement”.]
(b)That plan depends, amongst other things, on FOXTEL’s exclusive entitlement to provide or manage the provision of Services delivered to Subscribers in accordance with this clause 5.
[“Services” is defined (cl 1.1) in terms similar to cl 3.2 of the Umbrella Agreement.]
(c)Telstra Multimedia and FOXTEL further acknowledge that this exclusive entitlement enables FOXTEL to provide and manage the provision of Services to Subscribers on an attractive, marketable, co‑ordinated and efficient basis. This, in turn, directly affects the forecast revenues set put in the initial Business Plan.
(d)FOXTEL intends, on reasonable commercial terms, to offer to manage the provision of Services of Other Service Providers subject to FOXTEL’s requirement that it be able to provide and manage the provision of Services to FOXTEL Subscribers on an attractive, marketable, co‑ordinated and efficient basis.”
(“Other Service Provider” is defined (cl 1.1) to mean a person who provides, proposes to provide or manages the provision of Services where FOXTEL or a Joint Venture Entity does not, or is not, proposed to have the retail relationship with subscribers for the provision of those services.)
Clause 5.1 proceeds:
“(e)Subject only to clauses 5.12 and 5.13, for the avoidance of doubt, and to emphasise the intention of both Telstra Multimedia and FOXTEL, nothing in this agreement in any way restricts or otherwise affects Telstra Multimedia’s right in its absolute discretion to use or permit the use of facilities controlled to any person on Telstra Multimedia’s own behalf or on behalf of any other person.”
Clause 5.2 provides for the grant of an exclusive right to FOXTEL by Telstra Multimedia:
“(a)     Subject to Law and this clause 5, Telstra Multimedia:
(i)grants to FOXTEL the sole and exclusive right to provide and manage the provision by Other Service Providers of Services delivered by means of the Broadband System Service; and
(ii)may not, except in accordance with this clause 5:
(A)use or permit the use of Telstra Multimedia’s Broadband System to deliver the Services of any Other Service Providers; or
(B)manage the provision of the Services of any Other Service Providers.
[“Law” is defined (cl 1.1) in terms similar to the definition in the July 1995 BCA.]
(b)Subject to Law, FOXTEL may not use or permit use of the Broadband  System Service except as the means of delivering to Residential Subscribers who are Subscribers:
(i)Services provided by FOXTEL; and
(ii)Services provided by an Other Service Provider where            provision of those Services is managed by FOXTEL for the Other Service Provider.
(c)Subject to Law, Telstra Multimedia may not provide Broadband Transmission Services to a Non‑Service Provider except subject to a condition that the Non‑Service Provider may only use that Broadband Transmission Service to deliver services which are not Services.”

(“Non-Service Provider” is defined (cl 1.1) as a person who provides or manages the provision of services which are not Services.)
Clause 5.3 provides that if required by Law to allow the use of its network or facilities to Other Service Providers, Telstra Multimedia must arrange for FOXTEL to satisfy that requirement:
“(a)Where a Law requires Telstra Multimedia to use or permit the use of Telstra Multimedia’s Broadband System or a facility controlled by Telstra Multimedia to deliver Services provided by an Other Service Provider, Telstra Multimedia must request and arrange for FOXTEL to satisfy that requirement.
(b)Upon a request being made by Telstra Multimedia, FOXTEL must arrange for the delivery by suitable means of the Services provided by the Other Service Provider and satisfy to the extent necessary on behalf of Telstra Multimedia the relevant requirement imposed by Law on Telstra Multimedia. In doing so, FOXTEL may only conclude an agreement relating to the delivery of Services provided by the Other Service Provider after consulting with Telstra Multimedia and securing Telstra Multimedia’s reasonable agreement regarding the terms and conditions under which FOXTEL will arrange delivery of the Services.
(d)To the extent the Law requires Telstra Multimedia to use or permit the use of Telstra Multimedia’s Broadband System or facilities controlled by Telstra Multimedia to deliver Services provided by an Other Service Provider, FOXTEL may only act as Telstra Multimedia’s agent in relation to that use and FOXTEL must act in accordance with Telstra Multimedia’s policies regarding capacity, pricing and other conditions attaching to that use.
Clause 5.5 imposes obligations on FOXTEL with respect to Other Service Providers:
“5.5Where a Law requires FOXTEL to provide a Broadband Transmission Service by means of or including Telstra Multimedia’s Broadband System which is capable of being used to deliver Services, FOXTEL must:
(a)inform Telstra Multimedia promptly of any claim presented to FOXTEL of a legal entitlement in relation to the provision by FOXTEL of that Broadband Transmission Service;
(b)to the extent permitted by the relevant Law, comply with the relevant Law in a way that does not involve providing a Broadband Transmission Service in a manner inconsistent with clause 5.12;
(c)to the extent it is provided by means of Telstra. Multimedia’s Broadband System act only as Telstra Multimedia’s agent in relation to the provision of that Broadband Transmission Service and pursuant to Telstra Multimedia’s policies regarding capacity, pricing and other conditions attaching to that Broadband Transmission Service; and
(d)to the extent it is provided by means of Telstra Multimedia’s Broadband System, conclude an agreement relating to delivery of that Broadband Transmission Service only after consulting with Telstra Multimedia and securing Telstra Multimedia’s reasonable agreement regarding the terms and conditions under which FOXTEL will arrange delivery of the Services.”
Clauses 5.7 and 5.8 deal with the “permitted use” of facilities by Telstra Multimedia and consultation before this permitted use:
“5.7Telstra Multimedia may use or permit the use of Telstra Multimedia’s Broadband System or any facility controlled by Telstra Multimedia to deliver Services provided by any Other Service Provider where:
(a)FOXTEL does not within a reasonable period comply in accordance with clause 5.3 with a request by Telstra Multimedia under clause 5.3(a); or
(b)Law does not permit the relevant requirement imposed by Law upon Telstra Multimedia to be satisfied by FOXTEL in the manner stipulated in clause 5.3(b).
Consultation before permitted use
5.8Where Telstra Multimedia wishes under clause 5.7 to use or permit the use of Telstra Multimedia’s Broadband System or any facility controlled by Telstra Multimedia to deliver Services provided by an Other Service Provider, Telstra Multimedia:
(a)may only do so if in its reasonable opinion after consultation with FOXTEL the circumstances in clause 5.7(a), or (b) exist; and
(b)must do so on terms and conditions which minimise any adverse impact on the FOXTEL’s business of providing and managing the provision of Services.”
Revenues from any “permitted use” is provided for by cll 5.9 – 5.11:
“5.9Where Telstra Multimedia uses or permits the use of Telstra Multimedia’s Broadband System or any facility controlled by Telstra Multimedia to deliver Services provided by an Other Service Provider pursuant to clauses 5.3, 5.5 or 5.7, Telstra Multimedia must, after deducting a reasonable proportion of Telstra Multimedia’s operational expenses (having regard to the extent of use of Telstra Multimedia’s Broadband System or any facility) in delivering those Services, account to FOXTEL for any revenue received by Telstra Multimedia in connection with the delivery of those Services which exceeds the amount that would have been due to Telstra Multimedia by FOXTEL pursuant to clause 10 had FOXTEL provided those Services to Subscribers on the basis of the subscription price for those Services charged by the Other Service Provider.
Treatment of revenues from permitted use for purpose of Revenue Share
5.10No amount payable to FOXTEL under clause 5.9 may be included in the calculation of Total Revenue or Operating Cash Flow for the purposes of clause 10.
Maximisation of revenue for permitted use
5.11Telstra Multimedia must use its reasonable commercial endeavours to maximise the revenue derived by Telstra Multimedia from use of Telstra Multimedia’s Broadband System or a facility controlled by Telstra Multimedia in connection with the delivery of those Services to which clause 5.9 applies having regard to the overall circumstances of the particular transaction.”
Clause 5.12 provides for the “service configuration” (“bundling” right):
“5.12 Unless:
(a)required by Law; and
(b)permitted by both technological developments and network system reconfiguration,
neither Telstra Multimedia nor FOXTEL (as agent of Telstra Multimedia or otherwise) may provide a Broadband Transmission Service, utilising STU Functionality, as the means of delivering a service (including, without limitation, an Other Service and a service which is not a Service) unless that Broadband Transmission Service includes a conditional access function and a subscriber database function equivalent to the Conditional Access Function and the Subscriber Database Function.”
Clause 5.13 deals with the provision of services to Non‑Service Providers, and cll 5.14 and 5.15 treat Telstra Multimedia as “exclusive” provider or “preferred” supplier, whilst cl 5.16 describes FOXTEL’s role in relation to the entry of a party other than FOXTEL to deliver services, other than those designated as “Services” in the BCA:
“5.13Without limiting clause 9.12, where Telstra Multimedia proposes to provide to a Non‑Service Provider a Broadband Transmission Service capable of being used to deliver Services, Telstra Multimedia must consult with FOXTEL on the regulatory impact of that proposal before implementing it.
Telstra Multimedia as exclusive provider
5.14
(a)Unless the parties otherwise agree, FOXTEL must obtain from Telstra Multimedia all Broadband Transmission Services required to transmit signals for and deliver Services provided to Subscribers except that this clause 5.14(a) does not apply to Broadband Transmission Services that are used for or in connection with transmission of signals for Services to Head Ends.
(b)FOXTEL may not use any means to deliver Services except the Broadband System Service.
Telstra Multimedia as preferred supplier
5.15Where FOXTEL wishes to acquire telecommunications services other than to deliver Services from each Head End to Subscribers FOXTEL must give Telstra Multimedia and its Related Bodies Corporate the opportunity to offer to supply those telecommunications services. If the terms offered are equal to or better than offers to supply the same telecommunications services by other telecommunications services suppliers, FOXTEL must acquire those telecommunications services from Telstra Multimedia or the relevant Related Body Corporate of Telstra Multimedia.
FOXTEL role in relation to Non-Services
5.16Wherever Telstra Multimedia wishes to use or to permit an entry other than FOXTEL to use the facilities controlled by Telstra Multimedia to deliver services other than Services, Telstra Multimedia may arrange for FOXTEL to provide those services.”
The standards of the Service and channel numbers are dealt with in cll 7.2 and 7.4:
“7.1Telstra Multimedia must establish, maintain and supply to FOXTEL the Broadband System Service for the Term. Subject to clauses 7.6 to 7.12, Telstra Multimedia must supply the Broadband System Service in accordance with this agreement and to a standard which meets world’s best practice for comparable services (including in terms of delivery technology) as to signal quality and transmission reliability. In connection with the Broadband System Service, Telstra Multimedia must, among other things:
(a)receive signals for the Channels at each Head End and scramble those signals, in the case of Digital Channels, at the relevant play out centre and, in the case of Analogue Channels, at the Head End;
(b)modulate those signals at each Head End and transmit them to Subscribers’ STU’s;
(c)deliver STU’s to Subscribers and connect them; and
(d)subject to clause 12, remedy faults affecting the delivery of Channels to Subscribers;
to enable FOXTEL to provide or manage the provision of Services in accordance with its Business Plan.
……
7.4Telstra Multimedia must supply FOXTEL with the number and type of Digital Channels and Analogue Channels required by FOXTEL’s Business Plan from time to time.”
Termination is dealt with by cl 15. It provides that the agreement remains in effect for “the Term” unless terminated for cause. “The Term” is defined (cl 1.1) to mean the period from the Commencement Date to the End Date, which is defined as the date ten years after the termination of the Alliance in accordance with the Umbrella Agreement – there is an exception in relation to cl 5. It will be recalled that the Alliance established under the Umbrella Agreement was to continue until either 1 March 2010, or the termination of the Alliance pursuant to cl 14 of the Umbrella Agreement.
The reasoning at first instance
It will be recalled that his Honour had noted (para 18) that the issues for determination were: whether FOXTEL had any PCR under a contract that was in force as at the beginning of 13 September 1996; whether those rights were then still in existence when Seven and TARBS requested access: and, if so, whether the granting any of these requests would have deprived FOXTEL of such rights. His Honour said (para 71) that a number of questions arise as matters of interpretation when determining whether there is a PCR, as follows:
·whether the term “protected contractual right” should be given a “strict” or narrow meaning, having regard to the legislative background and the stated objects of Part XIC of the TPA.
·whether there must have been a right in existence as at 13 September 1996, and whether this must be in existence at the time that it is sought to be enforced.
·whether it is necessary that an identical contract must have continued in force, unaltered, through those times.
·whether the right sought to be enforced must be identical to the right in existence in September 1996.
Citing the legislative background to Part XIC and the statement of objective of promoting competition made in s 152AB(2), Tamberlin J adopted (para 75) a “strict” construction to the statutory term “protected contractual right”; but, went on to say that no reference to the character, quality or extent of the type of the statutory right contemplated could be discerned; and thus there was no indication that the term could not sensibly include a right of exclusivity or bundling.
His Honour rejected (para 77) a submission by Seven that s 152 AR(4)(d) should be read down by reference to the other sub-paras of ss (4). It will be recalled that the statutory object is to ensure that existing access arrangements may be maintained at a sufficient level so as to meet reasonable requirements. Seven’s argument, then rejected, was that the only rights protected by sub-para (d) were those concerned with sufficiency of access.
Tamberlin J said that what is to be protected is the right, and not the contract; so that it is only the right in question that needs to have had a continual existence between 13 September 1996 and the date of reliance on that right; it was not the case that the contract which originally created that right needed itself to have had such a continual existence (para 83). Looking at the substance of the right, rather than its linguistic form, Tamberlin J held (para 85) that whether a variation led to the extinguishment of the right, by the creation in its stead of a new and different right, would depend upon the nature and extent of any alleged variation, considered as a matter of its substance and effect.
Tamberlin J held that in a number of significant areas, the parties had failed to reach finality; and this was relevant to the question whether the parties intended to reach, and did reach, an agreement capable of forming a binding and enforceable contract. His Honour said (para 94) that the parties’ intention to make a concluded agreement did not necessarily indicate that they had actually reached agreement on such terms as are, “in the circumstances”, legally necessary to constitute a contract. A “substantial number of significant issues” remained open and undetermined as at 23 October 1995; and given the complexity and wide ranging nature of the arrangements, on the material available as at 23 October 1995 “a court could not resolve the essential terms of the agreement for the parties” (paras 101-105). His Honour referred in particular to the interim or temporary character of the arrangements described in the 23 October letter, corresponding to their contingent relationship with the proposed Australis merger.
In order to determine whether, as at 23 October 1995, the parties had agreed “on all the important terms of the BCA sufficient to establish a binding contract”, and in order to discover “what in fact the parties considered was important before committing to a binding contract”, Tamberlin J made (para 110 and following) a comparison of the provisions of the July 1995 BCA relied on, and the April 1997 BCA. His Honour catalogued what he had found to be a number of significant differences between the two instruments; and this exercise showed that there had been many substantial alterations to the provisions in the intervening period. Express statements in cll 1.10(d), 1.11(n), (o) and (p) in the April 1997 BCA that it was not the parties’ intention that this BCA alter or vary the July 1995 BCA were “not sufficient to override the clear differences between the two BCA’s” (para 111). The variations and drafting of the April 1997 BCA were not (para 113) merely a matter of “fleshing out an earlier skeletal agreement but were part of a process of moving towards an original and greatly expanded agreement.” His Honour concluded that, as at 23 October 1995, the parties had not reached an enforceable agreement on all the essential terms to govern their arrangement, and (para 132) that the rights under the April 1997 BCA were so significantly different in substance to those of the July 1995 BCA, as to amount to a variation which had replaced and extinguished any rights claimed under the October letter agreement.
His Honour found that, when the Australis merger did not proceed, the parties resumed discussions in April 1996 about reformulating the BCA (para 115). The parties at that time disagreed on the starting (or reference) point for resumed negotiations – whether it should be the July 1995 BCA, on one view; or the December 1995 BCA (that had been drawn up in anticipation of the Australis merger) on the other. This “uncertainty and disagreement”, Tamberlin J held, indicated that, even in mid-1996, the parties could not agree on a starting point for further negotiations. This suggested that the July 1995 BCA (as incorporated in the October letter agreement) did not constitute a binding contract. In his Honour’s view, the continuation of negotiations after October 1995, and the references in 1996 correspondence to aspirations for final drafts, reinforced the conclusion that there was no final agreement in October 1995.
Tamberlin J noted that the 23 October letter was signed on the day when the FOXTEL joint venture business and its services commenced, and that the parties had proceeded with a commitment which involved the expenditure of millions of dollars. But his Honour’s view of the correspondence was that the parties were “prepared to act on the basis of this extensive commercial commitment in the absence of a finalised legal commitment” (para 117); and that, in any case, they were thus committed “in a general way” under the Alliance constituted by the Umbrella Agreement made in March 1995. His Honour said (paras 121-123):
“The negotiations between the parties both before and after 23 October 1995, and the nature and extent of the variations noted above, lead me to the conclusion that as at 23 October 1995 the parties had not reached agreement on many important matters. While it is always open to parties to negotiate to vary their agreements, in my view this is not what the parties did.
The extensive negotiations in the eighteen month period after 23 October 1995, on matters obviously regarded as of considerable importance, also serve to support a conclusion that there was no binding agreement either during that time or as at 13 September 1996. They cannot be properly regarded as simply a working out of the detail or formalisation of the arrangements referred to in the 23 October letter.
Having regard to the foregoing considerations I do not consider that the 23 October letter was a contract or gave rise to any binding contractual rights. The parties to the July 1995 BCA were still in negotiations on 23 October 1995, and for some time afterwards. While there was no doubt a commercial commitment to the arrangement referred to in that letter, the negotiations had not reached the stage where a contract was activated. The letter did not confer any contractual right on FOXTEL Management or any obligation on the part of Telstra Multimedia to FOXTEL Management as to exclusivity, bundling or otherwise. The parties, of course, had the benefit of the March 1995 Umbrella Agreement setting up the “Alliance” and the substantial commercial commitment they had already made towards their joint project, but they did not have a contract by the 23 October letter. Accordingly, FOXTEL Management had no protected contractual rights at the critical date.”
His Honour did not accept that, to the extent that a variation was effected by the April 1997 BCA, the parties must be taken to have reverted to the July 1995 BCA, so that there was in law no variation or extinguishment of rights, in accordance with the intention of non-variation expressed in the April 1997 BCA; this would have the Court “ignore the subsequent negotiated changes”; and would lead to a result “manifestly contrary to the course of conduct” and the intention of the parties evident from their negotiations since July 1995. In addition, partial reversion to some July 1995 clauses would lead to the introduction of considerable uncertainty into the April 1997 BCA (para 137).
Although it was not strictly necessary for him to do so, Tamberlin J proceeded to deal with the question whether, if the 23 October letter had created a legally binding contract giving FOXTEL a PCR of exclusivity, that right continued in existence until the time of the execution of the April 1997 BCA. His Honour observed that the 23 October letter stated that if the Australis merger was not completed, each party had the right to require the other to enter into a long form BCA based on the July 1995 BCA, although no time was set for exercising that right. He concluded that neither party had exercised this right. Instead, once the Australis merger fell through, any right that FOXTEL had as a result of the 23 October letter was “converted” into an entitlement to require the execution of a long form BCA, a right of a different nature (para 129). In other words, any PCR that might have arisen under the October letter agreement expired, or was extinguished, by the failure of the parties to execute a long form BCA within a reasonable time after the Australis merger had fallen through (para 130). Since a final BCA was not completed until April 1997, there was therefore no right in existence as at 13 September 1996.

After the July 1995 BCA came into existence (as a draft agreement), discussions continued between the parties about its terms. In a letter dated 15 August 1995, a solicitor from the firm retained by the Telstra interests wrote to its clients, the FOXTEL interests and their solicitors, setting out matters that needed further discussion. One matter covered by the draft agreement which needed to be discussed was described as:
“Clause 3. This clause needs to be reviewed and discussed in the light of the policy principles for reform of the Telecommunications Act endorsed by cabinet on 31 July 1995. In addition, for the purposes of the Ministerial Direction and the recent amendments to the Trade Practices Act, the capacity in which FOXTEL exercises its rights under clause 3 needs to be considered.”
The policy principles referred to in the letter were announced by the Minister for Communications and the Arts on 1 August 1995. A fundamental feature of the policy was that in due course access to existing networks would be made available to all service providers.
On 24 August 1995 a meeting took place between the relevant parties. An agenda for the meeting prepared by Ms Judy Slatyer, representing Telstra interests, identified the “1997 impact (clause 3)” as an outstanding issue from the perspective of Telstra that needed to be addressed, or for which, at a minimum, principles had to be agreed to be incorporated in the agreement to replace the draft BCA. In an e-mail dated 28 August 1995, Ms Slatyer said:
“… we (News & Telstra) agreed last week that given the uncertainty we should include an additional point in clause 3 that the parties will review and renegotiate the entire clause 3 in good faith once the 1997 arrangements are clearer. The caveat was that the parties would use best endeavours to keep similar commercial principles. I think given the uncertainty that is the best we can do”
This e-mail was in response to a query about the protection afforded, it can be inferred, by the Ministerial Direction for bundled services not previously separately supplied. Ms Slatyer was being asked whether the obligation not to unbundle under the BCA should be similarly limited, viz. limited to services not previously separately supplied. This e-mail was relied on by Telstra in this appeal as demonstrating agreement concerning clause 3 prior to the letter of 23 October 1995. However not only does this not manifest unqualified agreement, subsequent discussions between the parties illustrate the proposed exclusivity arrangements remained unsettled.
It may be accepted that in correspondence between the parties on 20 September, 22 September and 17 October 1995 discussing matters in issue, no mention was made of clause 3 or exclusivity as outstanding issues. However a further draft BCA was forwarded to the Telstra interests in a letter from their solicitors dated 20 October 1995. The letter stated that the “draft attempt[ed] to address the key issues agreed on Wednesday”. One of the key issues identified in the letter was “Other Service Providers”. It is apparent from notes in evidence which were created at this time (15 to 20 October 1995) that there was an issue about whether Telstra should have a veto in relation to other service providers. In the draft BCA enclosed with the the letter of 20 October 1995 there are a series of notations following several of the sub-clauses in clause 3 which are “comments on various of News’ and Australis’ questions, comments and requests for changes” (that is the expression used in the letter from the solicitors). We were not taken to any documentary or oral evidence which disclosed whether, and on what basis, these matters were settled before 23 October 1995, all of which was within the knowledge and control of the Telstra and FOXTEL interests.
In further drafts of the BCA circulated on 6 and 9 November 1995 further changes were proposed to clause 3 (which by then had become clause 7). In a note of a meeting held on 9 November 1995, the topic of “Exclusivity” is listed under a heading “Major Commercial Issues” and in a specific note under the “Exclusivity” sub-heading it is recorded that Ms Slatyer said or indicated: “don't want T involved in [probably the word “pay”] TV”. Plainly the reference to “T” is a reference to Telstra.
This background is important when considering whether the exclusivity provisions of the July 1995 BCA were agreed to by the letter of 23 October 1995. The critical part of that letter read:
“Interim Arrangements
Pending completion of the Australis merger, Telstra Multimedia will provide the Broadband System Service to FOXTEL Management on a monthly basis substantially on the terms of the draft Broadband Cooperation Agreement dated 12 July 1995, as supplemented by correspondence and negotiations between us (“BCA”).”
It is clear that this reference to the July 1995 BCA is qualified in three material respects. First, the July 1995 BCA is identified as (at least potentially) the source of rights and obligations concerning the provision of the broadband service by Telstra Multimedia. Secondly, the provision of that service was to be “substantially” on the terms of the July 1995 BCA. Thirdly, the adoption of the terms of the July 1995 BCA was subject to the proviso concerning the supplementation of the draft agreement by correspondence and negotiations. The acronym “BCA” was adopted in the letter as a description of the July 1995 BCA but as it had been supplemented in the way described in the last sentence.
The substance of the exclusivity provisions in clause 3 of the July 1995 BCA were directed not to the provision of the broadband service to FOXTEL Management in any direct or immediate sense, but rather to the use Telstra Multimedia might otherwise make of the broadband service. However other provisions in the July 1995 BCA were concerned, both in positive terms and in a direct way, with the provision of the broadband service by Telstra Multimedia. An obvious example of such a provision was clause 5 of the July 1995 BCA, “BROADBAND SYSTEM SERVICE”, which dealt with the manner in which and terms on which Telstra Multimedia (then described as Broadbandco) was to supply the broadband service. It dealt with matters such as signal quality and transmission reliability, inspection and testing of facilities and the number of channels to be provided. Other clauses such as clause 4, “SPECIFICATION OF CONDITIONAL ACCESS FUNCTION AND TECHNOLOGY CHOICE”, clause 8, “REVENUE SHARING” and clause 10, “INSTALLATION, MAINTENANCE AND RECONNECTIONS” were also concerned, in a positive and direct way, with the provision of the broadband service. Having regard to the way these appeals were argued, it is unnecessary to determine which (if any) of these clauses were intended to apply and the extent to which they may have been modified by negotiations and correspondence. It is sufficient to point to them as clauses comparatively clearly comprehended by the extract from the letter of 23 October 1995 (set out in par 13 above) and also as clauses different in character to clause 3 which was essentially negative in its effect. That is, it restrained Telstra Multimedia from utilising the broadband service in a way that would deprive FOXTEL of an exclusive right to provide and/or manage the services to subscribers.
The use of the word “substantially” in the quoted extract from the letter, together with the proviso concerning supplementation by correspondence and negotiations, point to a qualified adoption of the July 1995 BCA. That word and the proviso appear to contemplate that some terms in the draft document, the July 1995 BCA, were not to regulate, from month to month, the relationship between the parties. Moreover the proviso contemplated the modification of the proposed terms in the draft document by subsequent correspondence or negotiations (if not earlier correspondence and negotiations as well). It is consistent with the language used and the apparent intention of the parties that if there remained substantial disagreement about, or at least unresolved issues concerning, the subject matter of a particular provision then that provision was not intended to apply, on a monthly basis, to the provision by Telstra Multimedia of the broadband service. This is reinforced by other parts of the letter including the sentence indicating that the “arrangements” set out in the letter would terminate with the Australis merger and another sentence indicating that if a merger did not go ahead, Telstra Multimedia or FOXTEL Management could require the other to enter into a “long form Broadband Cooperation Agreement” which was “substantially in the terms of the BCA”. What the parties appear to have had in mind with this last provision is that the July 1995 BCA, as modified by, and viewed in the context of, subsequent correspondence and negotiations would become the framework for negotiations for an agreement which would operate in the longer term.
In my opinion, the exclusivity provisions were, at 23 October 1995, still unresolved and were the subject of ongoing discussions. No oral evidence was called to establish that the picture emerging from the documents was any clearer or more resolved than the documents themselves suggest. Counsel for the Telstra interests accepted that they had the evidentiary burden of proving the existence of the asserted rights. They have not, in my opinion, done so. In addition, the exclusivity provisions did not concern, in a direct and immediate way, the actual provision of the broadband service by Telstra Multimedia. It may be doubted, in my opinion, that even if the exclusivity provisions had been settled by 23 October 1995, the parties intended by their letter to create, at that time, legally enforceable rights concerning exclusivity. I am not satisfied that the exclusivity provisions became, by the letter of 23 October 1995, a term of any contract between Telstra Multimedia and FOXTEL Management conferring rights of exclusivity of the type relied upon by the appellants. Accordingly I am not satisfied that any protected right arose in the way contended for by the appellants.
The appeals should be dismissed with costs.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.
Associate:
Dated: 18 August 2000

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 309 of 2000

BETWEEN:

FOXTEL MANAGEMENT PTY LIMITED
First Applicant

SKY CABLE PTY LIMITED
Second Applicant

THE NEWS CORPORATION LIMITED
Third Applicant

NEWS LIMITED
Fourth Applicant

AND:

SEVEN CABLE TELEVISION PTY LIMITED
First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Third Respondent

TELSTRA CORPORATION LIMITED
Fourth Respondent

TELSTRA MULTIMEDIA PTY LIMITED
Fifth Respondent

TELSTRA MEDIA PTY LIMITED
Sixth Respondent

N 324 OF 2000

BETWEEN:

TELSTRA CORPORATION LIMITED
First Applicant

TELSTRA MULTIMEDIA PTY LIMITED
Second Applicant

TELSTRA MEDIA PTY LIMITED
Third Applicant

AND:

SEVEN CABLE TELEVISION PTY LIMITED
First Respondent

TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondent

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Third Respondent

FOXTEL MANAGEMENT PTY LIMITED
Fourth Respondent

SKY CABLE PTY LIMITED
Fifth Respondent

THE NEWS CORPORATION LIMITED
Sixth Respondent

NEWS LIMITED
Seventh Respondent

JUDGE:

BEAUMONT, MOORE & GYLES JJ

DATE:

18 AUGUST 2000

PLACE:

SYDNEY

REASONS FOR JUDGMENT
GYLES J:

I have had the advantage of reading the judgment of Beaumont J in draft. His Honour’s lucid explanation of the facts and the issues, and the fact that the judgment below is now reported ((2000)171 ALR 89), relieve me of the necessity of setting these out for myself.
I have also had the advantage of reading the judgment of Moore J in draft and agree with the substance of it. I also agree with the similar approach and conclusions by Tamberlin J (see particularly pars 101-124) subject to one qualification, relating to the interim period pending completion (or abandonment) of the Australis merger, to which I return later. As I am differing from the opinion of Beaumont J on an important aspect of the matter, I should add some remarks of my own.
It is clear, in my opinion, that the case made by each of FOXTEL and Telstra below, and on appeal, was founded upon the 23 October 1995 letter. The evident purpose of that letter was to deal with interim arrangements pending completion of the Australis merger. That is what the letter says, and it closely followed upon the 18 October 1995 heads of agreement involving Australis to which the letter refers. The only part of the letter which deals with the failure of the Australis merger especially provides that, in that event, “either Telstra Multimedia or FOXTEL Management may require the other to enter into a long form Broadband Co-operation Agreement, substantially in the terms of the BCA”. If there are any relevant contractual rights created, it is by that clause. Even if it does have contractual effect, it is not as the substantive agreement which itself governs the rights of the parties as to the operation of the venture. It would create a right to have such an agreement entered into. If it fell to be enforced, it would be enforced by an order for specific performance directing the parties to enter into the actual substantive agreement. In point of fact, the parties did not enter into any such substantive agreement prior to the relevant statutory date. I have considerable difficulty in grasping how a right to specific performance of this kind could be seen as a “protected contractual right”, within the meaning of the statute, of which FOXTEL would be deprived.
Whether that be so or not, in my opinion, specific performance could not have been obtained of the relevant clause of the 23 October letter because of uncertainty. Put another way, to say that a further agreement would be entered into “substantially in the terms of” an earlier agreement necessarily involves the proposition that the later agreement will not be, or will not necessarily be, in the terms of the former agreement. In simple language, this means that further agreement is required between the parties. There is no formula or other machinery provided to make a default selection. There is no provision here, for example, for a third party to settle any dispute or difference, or for one of the parties to have the final say. There is no objective yardstick which could be applied by a Court; see Seddon and Ellinghaus, Cheshire & Fifoot’s Law of Contract, 7^th Aust ed, 1997, pars [6.8]-[6.11]; Carter and Harland, Contract Law in Australia, 3^rd ed, 1995, pars [261] and [262].
Furthermore, this clause, in my opinion, necessarily involved the parties intending to enter into one complete and comprehensive written agreement if the Australis merger did not proceed. It does not contemplate a two-stage process whereby somebody selects those provisions of the draft which are taken to be agreed and those which are not, leaving the parties to be bound by that selection no matter what happens about the other matters. As I have pointed out, the letter draws a clear distinction between interim arrangements pending completion of the Australis agreement merger on the one hand, and what should happen if the merger is not completed, on the other. In my opinion, the express terms of the letter place the situation in the third class in Masters v Cameron (1954) 91 CLR 353 (at 360). See also Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, particularly at 548-9.
It is to be borne in mind that this was a novel joint venture in a new field for Australia. The Telstra and Optus cables were new developments, opening up a new form of communication. Telstra, in particular, had no experience in matters other than telephony, and then not telephony via cable. Apart from the complex technical and commercial issues to be worked through, the regulatory regime was also changing in ways which could not be safely predicted and which, in any event, were new. The parties could not afford to bind themselves in a manner inconsistent with that regime. The fact that it took from the March 1995 Umbrella Agreement until April 1997 to enter into a comprehensive agreement illustrates the point. The July 1995 BCA was the fifth version to that time, and the subsequent negotiations, which are sketched in the judgments to which I have referred and which appear in much greater detail in the evidence in the case, involved a great number of issues, many of which can be seen to be significant.
The parties did not need broad generalities agreed, partial agreements or implied agreements to negotiate in good faith. The Umbrella Agreement between the principals served that purpose. The existence of the Umbrella Agreement was why, in a sense, the actual parties to the BCA could take the time to get the detail right once and for all. In the meantime, the Umbrella Agreement remained in place, requiring (amongst other things) continuing negotiation towards the BCA, although it, of course, could not give rise to any “protected contractual right” as the parties to it (although the principals) are not the parties claiming the relevant contractual right.
The difficulty of obtaining specific performance would be compounded if the 23 October letter is construed so that the “BCA” there referred to includes correspondence and negotiations between 12 July and 23 October. The better view is that “BCA” should be so understood. That is the ordinary meaning of the language used. No evidence was called to establish any different understanding. It is not irrational, indeed it represents a sensible position. As Moore J has demonstrated, even focusing upon exclusivity during that period reveals the issues which existed at the time of the 23 October letter. Whilst it is convenient to concentrate upon that aspect, it was only one of many requiring settlement before a comprehensive agreement could be entered into. It is worth observing in this connection that all the facts relating to those negotiations lie in the hands of the Telstra and FOXTEL parties. They have chosen to satisfy that onus by the tender of documents, many of which are by no means self-explanatory, rather than, for example, calling evidence as to what happened at the relevant meetings. It is no answer to say that the July 1995 BCA was clear as to exclusivity. That was a draft agreement, not an agreement. That clause was one amongst many. As Moore J demonstrates, there are clauses, other than cl 3, which impinge upon exclusivity. Given the obligation to enter into a document substantially in accordance with that draft (even if not supplemented by correspondence and negotiations), who could say what the final form of clauses relating to exclusivity might be in a later comprehensive agreement?
I should mention the qualification which may need to be made in relation to the primary decision if it is to be construed as finding that no contractual relations at all arose out of the 23 October letter. I would by no means rule out the possibility that the letter did create binding obligations in relation to the interim period. During that period it was contemplated that the parties would actually be conducting business involving substantial revenue and expenditure. In those circumstances, there would be a strong imperative to spell out an agreement sufficient to cope with matters essential to that undertaking for the time being. In this connection, there would be no doubt that the post-July correspondence and negotiations would be relevant. It is not necessary to pursue this issue. The interim period ended long before 13 September 1996. Furthermore, I agree with Moore J that exclusivity was well and truly “up in the air” on 23 October 1995. In addition to creating the problem of uncertainty, this would strongly indicate that agreement on this matter was not essential to enable business to be done in the interim.

It is also possible that some obligation to bargain in good faith could be implied from the 23 October letter. This was not pleaded, and, in any event, would not produce a “protected contractual right” susceptible to deprivation by the affording of access as sought.
If, contrary to my view, it could be taken that cl 3 of the July 1995 BCA spelled out substantive contractual rights between the parties as at 13 September 1996, then I agree with Beaumont J that it has not been shown that FOXTEL would be deprived of any relevant “protected contractual right” by the granting of access pursuant to a statutory obligation.
These conclusions render it unnecessary to consider the points of contention raised by Seven. It should not be assumed, however, that there is not substance in those arguments. For example, I have doubts as to whether the legislature had in contemplation this kind of joint venture agreement when formulating the concept of “protected contractual right”.
I would dismiss the appeals with costs.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.
Associate:
Dated: 18 August 2000

Counsel for Seven Cable Television Pty Ltd: Mr RJ Ellicott QC
Mr CA Moore

Solicitor for the Seven Cable Television Pty Ltd: Freehill Hollingdale & Page

Counsel for Telstra Corporation Limited, Telstra Multimedia Pty Limited, Telstra Media Pty Limited Mr TF Bathurst QC
Mr MA Pembroke SC
Mr JE Griffiths

Solicitor for Telstra Corporation Limited, Telstra Multimedia Pty Limited, Telstra Media Pty Limited Mallesons Stephen Jaques

Counsel for Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited and Sky Cable Pty Limited Mr AJ Meagher SC
Mr MC Dicker

Solicitors for Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited and Sky Cable Pty Limited Allen Allen & Hemsley

Counsel for Television & Radio Broadcasting Australia Pty Limited Mr N Cotman SC

Solicitor for Television & Radio Broadcasting Australia Pty Limited Peter Cornelius & Partners

Counsel for the ACCC: Mr N J Williams

Solicitor for the ACCC: Australian Government Solicitor

Date of Hearing: 1, 2, 5 and 6 June 2000

Date of Judgment: 18 August 2000

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY		N 309 of 2000
BETWEEN:	FOXTEL MANAGEMENT PTY LIMITED First Appellant SKY CABLE PTY LIMITED Second Appellant THE NEWS CORPORATION LIMITED Third Appellant NEWS LIMITED Fourth Appellant
AND:	SEVEN CABLE TELEVISION PTY LIMITED First Respondent TELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED Second Respondent AUSTRALIAN COMPETITION & CONSUMER COMMISSION Third Respondent TELSTRA CORPORATION LIMITED Fourth Respondent TELSTRA MULTIMEDIA PTY LIMITED Fifth Respondent TELSTRA MEDIA PTY LIMITED Sixth Respondent

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 324 of 2000

JUDGES:	BEAUMONT, MOORE & GYLES JJ
DATE OF ORDER:	18 AUGUST 2000
WHERE MADE:	SYDNEY

JUDGES:	BEAUMONT, MOORE & GYLES JJ
DATE:	18 AUGUST 2000
PLACE:	SYDNEY

JUDGE:	BEAUMONT, MOORE & GYLES JJ
DATE:	18 AUGUST 2000
PLACE:	SYDNEY

Counsel for Seven Cable Television Pty Ltd:	Mr RJ Ellicott QC Mr CA Moore
Solicitor for the Seven Cable Television Pty Ltd:	Freehill Hollingdale & Page
Counsel for Telstra Corporation Limited, Telstra Multimedia Pty Limited, Telstra Media Pty Limited	Mr TF Bathurst QC Mr MA Pembroke SC Mr JE Griffiths
Solicitor for Telstra Corporation Limited, Telstra Multimedia Pty Limited, Telstra Media Pty Limited	Mallesons Stephen Jaques
Counsel for Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited and Sky Cable Pty Limited	Mr AJ Meagher SC Mr MC Dicker
Solicitors for Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited and Sky Cable Pty Limited	Allen Allen & Hemsley
Counsel for Television & Radio Broadcasting Australia Pty Limited	Mr N Cotman SC
Solicitor for Television & Radio Broadcasting Australia Pty Limited	Peter Cornelius & Partners
Counsel for the ACCC:	Mr N J Williams
Solicitor for the ACCC:	Australian Government Solicitor
Date of Hearing:	1, 2, 5 and 6 June 2000
Date of Judgment:	18 August 2000