Preston Lions Football Club Inc v Football Victoria Inc

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2022 00437

PRESTON LIONS FOOTBALL CLUB INC (ABN 19 014 076 095)	Plaintiff
v
FOOTBALL VICTORIA INC (ABN 97 592 993 965)	Defendant

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JUDGE:	Riordan J
WHERE HELD:	Melbourne
DATE OF HEARING:	16-17 March 2022
DATE OF RULING:	17 March 2022 (Ex tempore)
CASE MAY BE CITED AS:	Preston Lions Football Club Inc v Football Victoria Inc
MEDIUM NEUTRAL CITATION:	[2022] VSC 325

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CONTRACT – Whether the plaintiff finished on top of the ladder at the end of a regular season – Whether the defendant obliged to promote the team finishing top of the ladder at the end of a regular season – Principles of interpretation of commercial contracts considered.

OBLIGATION OF GOOD FAITH – Whether the defendant’s exercise of its discretion to refuse to promote the plaintiff was a breach of its contractual obligation to act in good faith – Principles of the obligation to act in good faith considered.

ESTOPPEL – Whether the defendant represented that the promotion system would be applied if season not completed – Whether plaintiff suffered substantial detriment in reliance on the representation – Principles of equitable estoppel considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Richardson	Milicevic Lawyers
For the Defendant	Mr T Mitchell	Lex Sportiva

Contents

Background

Issues for determination

Did the plaintiff finish top of the NPL 3 ladder at the end of the NPL 3 ‘Regular Season’?

Plaintiff’s submissions
Defendant’s submissions
Conclusion
Principles of contractual construction
Conclusion

Is the promotion of the plaintiff in the discretion of the defendant?

If the defendant’s refusal of the promotion was an exercise of discretion, was the defendant’s decision contrary to its contractual obligation to act in good faith?

Plaintiff’s submissions
Defendant’s submissions
Principles
Conclusion

Should the defendant be estopped from refusing to promote the plaintiff’s men’s and women’s teams because of a representation that, if the regular season was not completed, the promotion/relegation system would be applied in any event?

Plaintiff’s submissions
Defendant’s submissions
Principles
Did the defendant make the representation that, if the regular season was not completed, the promotion/relegation system would be applied in any event?
Did the plaintiff rely on the representation to its substantial detriment.

Should the Court decline discretionary relief on the grounds of delay or failure to join interested parties?

Orders

HIS HONOUR:

By originating motion filed 15 February 2022, the plaintiff seeks the following declarations:
a.The Plaintiff is entitled to be crowned premiers for the 2021 Season of the National Premier League 3 competition in accordance with Rule 10.4.4 of the Defendant’s 2021 Rules of Competition – NPL Men’s & Boys;
b.The Defendant is obliged to do all such things and carry out all necessary acts in order to crown the Plaintiff as National Premier League 3 Men’s premiers for the 2021 season;
c.The Plaintiff is entitled to be promoted into the National Premier League 2 competition for the 2022 Season in accordance with Rule 10.4.4 of the Defendant’s 2021 Rules of Competition – Men’s & Boys;
d.The Defendant is obliged to do all such things and carry out all necessary acts in order to facilitate the promotion of the Plaintiff from National Premier League 3 Men’s to National Premier League 2 Men’s for the 2022 Season;
e.The Plaintiff is entitled to be promoted into the National Premier League Women’s competition for the 2022 Season in accordance with Rule 15.5.1 of Schedule 2 – 2021 Women’s Competition Regulations – VPLW & Women’s State Leagues; and
f.The Defendant is obliged to do all such things and carry out all necessary acts in order to facilitate the promotion of the Plaintiff from the Women’s Victorian Premier League competition to the National Premier League Women’s competition for the 2022 season.
In essence, the plaintiff’s claims are based on the fact that, at the time of the cancellation of the 2021 season on 1 September 2021:
(a)the plaintiff’s men’s team was in first position on the ladder of the National Premier League 3 Men’s Competition (‘NPL 3’); and
(b)the women’s team was in second position on the ladder of the Victorian Women’s Premier League (‘VPLW’).
The plaintiff is an incorporated association within the meaning of the Association Incorporation Reform Act 2012 (Vic) (‘the Act’) and is an amateur football club competing in the NPL 3 and the VPLW.
The defendant is an incorporated association within the meaning of the Act and is:
(a)a member of Football Federation Australia; and
(b)the controlling body of football in Victoria.[1]
[1]By ‘football’, I refer to the sport also known in Australia as ‘soccer’.

Background

In about November 2019, the plaintiff entered into a participation licence with the defendant (‘the Licence Agreement’) in which the defendant granted the plaintiff the right to participate in a football competition and the plaintiff paid a participation fee. The terms of the agreement included the following:
2.1Grant of Participation Licence
...
(b)The Club acknowledges and agrees that the Participation Licence is subject to the Club paying the Participation Fee and complying with:
(i)the terns of this Agreement;
(ii)Football Victoria’s Rules and Regulations; and
(iii)any other conditions imposed on the Club …
2.4      Competition Format
(a)The Club acknowledges and agrees that Football Victoria may review and vary the Competition structure and format at any time during the Term including:
…
(iv)the number of clubs in the competition including either a reduction or expansion in the number of clubs;
(v)promotion and/or relegation between the Competition and community football leagues in Victoria (including Men’s State Leagues) after completion of the 2020 Season;
…
(b)Football Victoria will, as appropriate, consult with all clubs participating in the Competition regarding the matters outlined in Clause 2.4(a) and seek their feedback, however all final determinations in relation to these matters remain at the discretion of Football Victoria reasonably exercised.
3.1Football Victoria Obligations
Football Victoria will:
…
(b)act reasonably and in good faith at all times in exercising its rights under this Agreement and in managing the Competition more generally;
…
(d)determine a Competition Schedule for the Competition each year and circulate a draft to the Club for comment. For the avoidance of doubt all final decisions on the Competition Schedule rest with Football Victoria;
4.1      Club Obligations
The Club must:
(a)       implement and comply with
(i)        this Agreement…
(ii)FFA Rules and Regulations including any code of conduct;
(iii)Football Victoria’s Rules and Regulations including any code of conduct; …
…
19.2     Entire Agreement
(a)       This Agreement:
(i)constitutes the entire agreement between the parties relating to its subject matter and replaces all previous representations and agreements, whether oral or in writing, on the subject matter, save for the representations relied upon by Football Victoria as per Clause 9.1(a); and
(ii)may be varied only by a document signed by both parties.
At the completion of the 2019 season:
(a)the plaintiff’s men’s team was promoted from the State League 1 North-West to NPL 3; and
(b)the plaintiff’s women’s team was promoted from the Women’s State League 1 North-West to the VPLW.
By letter dated 18 June 2020 to the presidents of clubs competing in NPL 3 and National Premier League 2 Men’s Competition (‘NPL 2’), the defendant stated:
Football Victoria is currently working on revised rules of competition (including Covid-19 IFAB Law Changes), a revised Covid-19 player exemption process and a revised fixture.
Please Note: The first 11 games as fixtured do not change in the revised competition. Our competitions team will confirm revised match day dates and kick off times.
In September 2020, the defendant cancelled all 2020 competitions as a result of the lockdown in Victoria consequent on the Covid-19 pandemic.
By letter dated 14 October 2020 to the NPL 2 and NPL 3 clubs, the defendant relevantly announced that, for season 2021:
Relegation will apply from the commencement of season 2021. For the avoidance of doubt the 2 teams that finish first and second on the table at the conclusion of season 2021 will be promoted and the 2 bottom finishing teams will be relegated.
Also on 14 October 2020, the defendant published:
(a)the FV Men’s & Boys 2021 Start Up Rules (‘the Men’s Start Up Rules’); and
(b)the FV Women & Girls 2021 Start Up Rules (‘the Women’s Start Up Rules’).
The Men’s Start Up Rules relevantly provided:
1.1Relegation will apply from the commencement of season 2021 for all top tier NPL clubs. For the avoidance of doubt the 2 teams that finish bottom and second bottom on the table at the conclusion of season 2021 will be relegated into NPL 2.
…
1.5Promotion and relegation will apply from the commencement of season 2021 for all NPL 2 & NPL 3 clubs. For the avoidance of doubt the top 2 finishing teams on the table at the conclusion of season 2021 will be promoted into the next tier of competition and the bottom 2 finishing teams will be relegated into the next tier of competition.
The Women’s Start Up Rules relevantly provided:
1.6To fulfil the requirements of a 12-team league for NPLW from the commencement of season 2023, the two top finishing teams on the table at the conclusion of season 2021 and season 2022 in the VPLW competition, will be eligible for promotion into the NPLW.
By email of 25 February 2021 to, relevantly, the NPL 2 and NPL 3 clubs, the defendant advised that it had published ‘relevant updated documents’ on the ‘NPL Website’, including the 2021 Rules of Competition NPL Men’s & Boys (‘the Men’s Rules’). At some point around that time, the defendant also published the 2021 Rules of Competition for the women’s leagues (‘the Women’s Rules’). The Women’s Rules included, as Schedule 2, the Women’s Competition Regulations – VPLW & Women’s State Leagues (‘the Women’s Regulations’).
The Men’s Rules included the following terms:
pp.Regular Season means the time and Competition Fixtures between the first and last round of the relevant competition in addition to any Play Off Match(es) required for the League in question.
…
10.4.2Each NPL3 Team will play a total of 22 Regular Season matches comprising:
a.Home and Away Competition Fixtures against the eleven (11) remaining NPL3 Teams.
…
10.4.4The NPL3 Team finishing top of the NPL3 ladder at the end of the NPL3 Regular Season will be crowned NPL3 Premiers and may be promoted to NPL2 in the following season.
The Women’s Regulations included the following terms:
15.1.2Subject to these Rules and Regulations, at the end of the Regular Season including any Finals or Play Off Matches, the final standings of each League will determine which Teams have earned the right to be promoted or relegated between Divisions. A Team that earns the right to be promoted shall only be promoted for the following season provided it [has met certain conditions, not presently relevant].
…
15.5.1The champions and runners up of VPLW may be eligible for promotion from VPLW to NPLW in the following season, provided those Clubs meet the requirements outlined in the NPLW license agreement as promulgated by FV from time to time.
…
15.5.11Promotion and relegation positions are at the sole discretion of FV and may be amended at any time prior to the commencement of the competition season, during the competition season or post competition season.
On 24 February 2021, the defendant published an article entitled ‘NPL Victoria Season Preview Part 2’ which stated that ‘the two-up, two-down model of promotion and relegation will be in effect across the competitions’.
On 19 March 2021, the season started and Mr Gruevski spoke to an audience before the game stating that:
(a)the plaintiff’s ambition was to ‘secure promotion for our men's and women's teams in 2021, given the proposed structural reforms communicated by Football Victoria during 2020 and in early 2021 (in the lead up to the start of the season in March 2021)’;
(b)the plaintiff had made a ‘significant investment in order to achieve those aims, including the improvement in infrastructure, for example, the new pavilion and electronic scoreboard’; and
(c)the plaintiff had ‘invested in coaches, players and other support staff’.
On 31 July 2021 and 1 August 2021 respectively, the plaintiff’s senior men’s and women’s teams played their last game before the competition was suspended as a result of the re-imposition of a Covid-19 lockdown in Victoria. As at the time:
(a)the plaintiff’s senior women’s team:
(i)had played 11 games from a total of 18 scheduled games for the 2021 season; and
(ii)was in second position on the VPLW ladder; and
(b)the plaintiff’s Senior Men’s team:
(i)had played 14 games from a total of 22 scheduled games for the 2021 season; and
(ii)was in first position on the NPL 3 ladder.
By memorandum dated 9 August 2021 issued to NPL clubs, the defendant set out a table which listed the ‘number of teams’ for the 2022, NPL 2 season as 14, and stated: ‘For the avoidance of doubt, four (4) Teams will be promoted from MSL1 to NPL3 at the completion of season 2021’.
On 19 August 2021, the defendant hosted an information session with representatives of the NPL 2 and NPL 3 clubs at which the plaintiff was represented. The defendant presented a document entitled ‘NPL Competitions Remainder of the 2021 Season Roadmap’. Relevantly, under the heading ‘Competitions Guiding Principles’, the document stated:
Consider no relegation should a full regular season not be completed for leagues with strict promotion and/or relegation systems in place (NPL Men’s, NPL Womens [sic], VPLW, Men’s State League & Women’s State League). Promotion system in place to be considered and evaluated.
By email of 26 August 2021 to the NPL clubs, the defendant stated:
[T]he board has determined to hold a final decision on each competition until further visibility is provided on the extension or relaxation of restrictions, and the impact on Return To Play conditions.
At a meeting of the defendant’s Board of Directors (‘the Board’) on 1 September 2021, the Board approved the following resolution:
The Board has considered all the information presented and have decided, in the interest of fairness and uncertainty of Government restrictions that they will declare Season 21 incomplete and thus postponing all promotion and relegation for this year
On 3 September 2021, the defendant issued a media release which included:
Unfortunately, the most recent Government announcement means our options to complete the 2021 season for our metropolitan Melbourne competitions have now reached an end.
The lockdown extension through September, with no guaranteed timeframe for a safe return to football, leaves us with no choice but to cancel the 2021 season for all metropolitan Melbourne competitions:
By letter dated 2 September 2021 to the defendant, Mr David Cvetkovski of the plaintiff urged that the first and second place teams be promoted regardless of how the season ends.
On 8 September 2021, the plaintiff engaged solicitors.
At a meeting on 16 September 2021 between:
(a)Mr Zak Gruevski of the plaintiff and the plaintiff’s solicitor on the one part; and
(b)the defendant’s chief executive officer Mr Kimon Taliadoros and the chairman of the football committee Mr Harry Zaitman of the defendant,
the plaintiff expressed disappointment and wanted to attend a full board meeting to have the plaintiff’s concerns heard.
By email of 17 September 2021 to Mr Gruevski, Mr Taliadoros invited the plaintiff to provide a written submission to be tabled at a full board meeting of the defendant.
By email of 20 September 2021 to the defendant, Mr Gruevski attached a submission which included a number of options for effecting promotion at the conclusion of the 2021 season.
At the Board meeting on 27 September 2021, the Board confirmed its decision made on 1 September 2021 not to promote or relegate teams following the 2021 season.
By email exchange on 28 and 30 September 2021, Mr Gruevski requested feedback from the submission. Mr Taliadoros stated: ‘The Board is considering its options. No further feedback will be provided until the Board has determined its position’.
By text message of 14 October 2021 to Mr Gruevski, Mr Zaitman requested that Mr Gruevski be patient pending information released by the Board.
At the Board meeting on 14 October 2021, the Board resolved as follows:
The FV Board proceeds with the 2022 restructure in accordance with revised structure 1W and 2M, subject to a communications narrative that does not compromise or repeal the Boards previous position regarding promotion.
AC, HZ and JB delegated to consider and approve satisfactory communications narrative .
By telephone conversation on 19 October 2021, Mr Taliadoros told Mr Gruevski that the Board had made a decision to uphold its decision.
By letter dated 10 November 2021 to the defendant, the plaintiff’s solicitors set out the plaintiff’s demands and threatened proceedings.
By email of 26 November 2021 to the plaintiff, the defendant’s solicitors stated that it could not agree to mediate at this time.
On 21 December 2021, the defendant published the fixtures for the 2022 season of NPL 2 and NPL 3.
On 15 February 2021, the plaintiff filed the originating motion in this proceeding.

Issues for determination

The following questions arose for determination:
(a)Did the plaintiff finish top of the NPL 3 ladder at the end of the NPL 3 ‘Regular Season’?
-     More particularly, was the end of the NPL 3 ‘Regular Season’ reached in 2021?
(b)Is the promotion of the plaintiff in the discretion of the defendant?
-     More particularly do the words ‘may be promoted’ in cl 10.4.4 confer a discretion of the defendant?
(c)If the defendant’s refusal of the promotion was an exercise of discretion, was the defendant’s decision contrary to its contractual obligation to act in good faith?
(d)Should the defendant be estopped from refusing to promote the plaintiff’s men’s and women’s teams because of a representation that, if the regular season was not completed, the promotion/relegation system would be applied in any event?
-     More particularly:
(1)Did the defendant make the alleged representation?
(2)Did the plaintiff rely on the representation to its substantial detriment?
(e)Should the Court decline discretionary relief on the ground of:
(i)delay; or
(ii)the failure to join interested parties.

Did the plaintiff finish top of the NPL 3 ladder at the end of the NPL 3 ‘Regular Season’?

Plaintiff’s submissions

The plaintiff submitted that the cancellation of the season by the defendant on 1 September 2021 was the end of the regular season for the following reasons:
(a)The ‘regular season’ is defined to mean the time between the first and last round of the relevant competition in addition to any play off matches required for the league in question.
(b)The term 'competition fixture' is defined as any match that is administered by the defendant and includes matches to which Football Victoria appoints match officials.
(c)With regard to those definitions, the term 'fixture' must mean ‘one match only’. The words 'relevant competition' are not defined. The last round should be interpreted as the last round played and not the completion of all scheduled games.

The plaintiff further submitted that it would be an absurd result if no premier was to be crowned after, for example, 20 of 22 scheduled games were completed.

Defendant’s submissions

The defendant submitted that clause 2.4.4 should be interpreted so that the word 'end' means completion of the 22 competition fixtures for the following reasons:
(a)The reference in clause 10.4.2 that the NPL 3 teams will play a total of 22 regular season matches speaks heavily against crowing a premier at whichever point the season may be cancelled by external events.
(b)An event which is prematurely cancelled does not have a winner. A marathon has no winner when it is abandoned partway through – even if it might be said that the race has ended.
(c)There would be consequences from the plaintiff's construction being that teams that have played an unequal number of games before the season was abandoned would nonetheless be entitled to be crowned premiers and the defendant would be required to recognise a premier after a single round in an incomplete season.

Conclusion

As a result of the clauses in the Men’s Rules set out in paragraph 14 above, the answer to this question depends on construction of the following parts of the Men’s Rules:
(a)the definition of the words ‘Regular Season’; and
(b)clause 10.4.4, which states that the team that finishes top of the table at the end the ‘Regular Season’ will be ‘crowned NPL3 Premiers and may be promoted’.

Principles of contractual construction

To determine the meaning of the terms of a commercial contract, the Court will ask the question: ‘What would a reasonable businessperson have understood those terms to mean?’.[2] For the purpose of answering that question, ‘the reasonable businessperson [is] placed in the position of the parties’,[3] and the Court applies the following principles:
(a)The terms are construed objectively and the subjective intentions of the parties are irrelevant.[4] A court ‘cannot receive oral evidence from one party as to its intentions and construe the contract by reference to those intentions’.[5]
(b)The Court will apply an objective approach and consider not only the text and the ordinary meaning, but also:
(i)the context, being the entire text of the contract including matters referred to in the text of the contract; and
(ii)the commercial purpose and object of the contract.[6]
[2]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ) (‘Electricity’); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [47] (French CJ, Nettle and Gordon JJ) (‘Mount Bruce’).
[3]Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551 [16] (Kiefel, Bell and Gordon JJ) (‘Ecosse’).
[4]Ibid.
[5]DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 429 (Stephen, Mason and Jacobs JJ).
[6]Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95, [45]–[47] (Santamaria, Ferguson and McLeish JJA).
The identification of the commercial purpose and object of a contract ‘presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating’.[7] For this purpose, the Court may have regard to the surrounding circumstances known to the parties.[8] It is entitled to assume ‘that the parties intended to produce a commercial result’;^[9] and will avoid a construction that renders it ‘commercial nonsense or working commercial inconvenience’.[10] To this end ‘words may generally be supplied, omitted or corrected … in order to avoid absurdity or inconsistency’.[11]
[7]Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, 995–6 (Lord Wilberforce), cited with approval by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 350 which in turn was cited in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45, 52–3 [10] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) (‘Royal Botanic’) and Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ).
[8]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
[9]Ecosse (2017) 261 CLR 544, 551 [17] (Keifel, Bell and Gordon JJ).
[10]Zhu v Treasurer of New South Wales (2004) 218 CLR 530, 559 [82] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ); quoted with approval in Electricity (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne , Crennan and Kiefel JJ) and Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85, 111 [78] (Gageler, Nettle and Gordon JJ).
[11]Fitzgerald v Masters (1956) 95 CLR 420, 426-7 (Dixon CJ and Fullagar J). See also MAAG Developments v Oxanda Childcare Pty Ltd (As Trustee For Oxanda Education Services Trust) [2018] VSCA 289, [55] (McLeish and Hargrave JJA and Almond AJA).
Accordingly, the Court may ‘have regard to more than internal linguistic considerations’,[12] but ordinarily, where there is no ambiguity, the intention can be discerned by reference to the contract alone. As French CJ, Nettle and Gordon JJ observed in Mount Bruce:
Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.[13]
[12]Royal Botanic (2002) 240 CLR 45, 52 [10] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).
[13]Mount Bruce (2015) 256 CLR 104, 116 [48] (French CJ, Nettle and Gordon JJ).

Conclusion

In my opinion, a reasonable business person would interpret the end of a ‘Regular Season’ as being the completion of the 22 scheduled games, for the following reasons:
(a)The first definition of ‘regular’ in the Macquarie Dictionary is ‘usual; normal; customary’.[14]
(b)In my opinion, in this context, the use of the word ‘regular’ is intended to refer to a regular, as in usual, normal, customary, season. A reasonable business person would not consider a football season cancelled after approximately 60% of the matches had been played as ‘regular’. On the contrary, the 2021 season was extremely irregular. This interpretation gives meaning to the adjective ‘regular’, whereas the plaintiff’s construction would have been arguable if the parties had simply referred instead to the ‘end of season’.
(c)With respect to the Men’s Rules, the requirement to play 22 regular season matches is consistent with the parties intending that a regular season was 22 matches.
(d)The plaintiff’s construction could result in a nonsense in which a premiership would have to be declared, after cancellation of a season, where:
(i)even fewer matches had been played; and/or
(ii)different teams had played a different numbers of games.
[14]Macquarie Dictionary (online at 13 May 2022) ‘regular’.

Is the promotion of the plaintiff in the discretion of the defendant?

As noted above, cl 10.4.4 of the Men’s Rules states:
The NPL3 Team finishing top of the NPL3 ladder at the end of the NPL3 Regular Season will be crowned NPL3 Premiers and may be promoted to NPL2 in the following season.
The use of the word ‘may’ in the text, prima facie supports an intention to confer a discretion.[15]
[15]Ward v Williams (1955) 92 CLR 496, 505 (Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ).
Such an interpretation is strengthened by the fact that the text of cl 10.4.4 uses the word ‘will’ to make the conferral of the premiership mandatory, but uses the word ‘may’ with respect to promotion.
The interpretation of ‘may’ as permissive is consistent with cl 2.4 of the Licence Agreement which similarly provides:
(a)The Club acknowledges and agrees the Football Victoria may review and vary the Competition structure and format at any time during the Term including:
…
iv.the number of clubs in the competition including either a reduction or expansion in the number of clubs;
v.promotion and/or relegation between the Competition and community football leagues in Victoria …
(b)Football Victoria will, as appropriate, consult with all clubs competing in the Competition regarding the matters outlined in Clause 2.4(a) and seek their feedback, however all final determinations in relation to these matters remain at the discretion of Football Victoria reasonably exercised.[16]
[16]Cl 1.16 of the Men’s Rules provides: ‘The terms of the [Licence Agreement] are incorporated into and shall form part of these Rules of Competition. To the extent of any inconsistency between the terms of these Rules of Competition and the terms of the [Licence Agreement], the terms of the [Licence Agreement] will prevail.’
The conferral of a discretion with respect to promotion and relegation is commercially sensible because management of the competition may be enhanced by none or only one team be promoted or relegated. For example, if a team withdraws from a competition, it may be preferable to promote only one club to maintain even numbers and avoid byes in the draw.

If the defendant’s refusal of the promotion was an exercise of discretion, was the defendant’s decision contrary to its contractual obligation to act in good faith?

Plaintiff’s submissions

The plaintiff submitted that the decision to refuse to promote the plaintiff was made in bad faith, for the following reasons:
(a)The representations made between 14 October 2020 and 19 August 2021 created a reasonable expectation on behalf of the plaintiff that, in the absence of any notification or advice to the contrary, the defendant would implement promotion and relegation at the end of 2021.
(b)Contrary to their obligations under the participation licence, the defendant did not consult with the plaintiff regarding the decision to cancel the season and not to implement promotion or relegation.

Defendant’s submissions

The defendant submitted that the plaintiff’s allegation that the decision was made in bad faith was without merit, for the following reasons:
(a)The defendant was well within the bounds of sensible thinking to decide that teams would not be promoted or relegated after an incomplete season.
(b)The defendant’s reasons of fairness and certainty, expressed in its resolution of 1 September, is consistent with acting in good faith.
(c)The defendant consulted extensively with clubs.

Principles

In summary, in determining whether a party has acted without good faith, the Court should adopt an evaluative process that has regard to parties’ respective circumstances, as well as:
(a)whether the party has acted honestly, co-operatively, not arbitrarily and with due regard to the interests of the parties with respect to the agreement and its performance;
(b)whether the party has been motivated by considerations collateral to the agreement; and
(c)whether the party was acting in its legitimate commercial interests.[17]
[17]Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a deed of company arrangement) (No 3) (2019) 368 ALR 441 , 565–7 [746]-[750].
Although questions of reasonableness and fair dealing may be relevant in determining whether a party has acted without good faith, they are not sufficient of themselves to support such a claim and are subject to the party’s ability to pursue its own legitimate interests.[18]
[18]Ibid.

Conclusion

On any view, in exercising its discretion, the defendant was required to balance the interests of all the clubs in the unprecedented circumstances of the Covid-19 pandemic. To apply a system of promotion and relegation with only approximately 60% of the scheduled fixtures completed would have disadvantaged as many teams as it advantaged.
In my opinion, the decision to cancel the season was reasonable in the following circumstances:
(a)It is common ground that neither the plaintiff’s Senior Men’s nor Women’s teams were guaranteed to finish in the top two spots if the remaining matches were completed.
(b)The teams had not played each of the other teams twice, which appears to have been contemplated by the fixtures.
(c)Although the Men’s Rules provided for the abandonment of particular matches, they had not made provision for the event of the forced cancellation of the season prior to its completion.
(d)The expression of the Board’s reasons for the decision in its resolution of 1 September 2021 as being in the interests of fairness and certainty were reasonable.
(e)I consider that the defendant appropriately fulfilled its obligation to consult with the clubs under the Licence Agreement by the Microsoft Teams video session on 19 August 2021 with representatives of the NPL 2 and NPL 3 clubs, at which the clubs were informed:
(i)that the defendant would ‘[c]onsider no relegation should a full season not be completed’; and
(ii)that the promotion system in place was ‘to be considered and evaluated’.

Should the defendant be estopped from refusing to promote the plaintiff’s men’s and women’s teams because of a representation that, if the regular season was not completed, the promotion/relegation system would be applied in any event?

Plaintiff’s submissions

The plaintiff submitted that the defendant should be estopped from refusing to promote the plaintiff because of the fact that the plaintiff, in reliance on the defendant’s representations, made significant financial investments in readiness for the 2021/2022 seasons.

Defendant’s submissions

The defendant submitted that no estoppel arose, for the following reasons:
(a)The plaintiff did not assume that the defendant would be compelled to exercise its discretion with respect to promotion.
(b)The plaintiff knew that as soon as the season was interrupted by the pandemic, promotion and relegation would be uncertain. It simply hoped to be promoted.
(c)The representation relied upon by the plaintiff did not justify the necessary assumption that the defendant would not exercise its discretion with respect to promotion and relegation.
(d)The alleged representations were not to the effect that, regardless of whether the season was completed, the two top teams in the VPL and the NPL 3 would be promoted. Any representation of promotion would occur amounted to a statement that promotion will occur in accordance with the respective competition rules. That includes the defendant’s discretion to act otherwise in exceptional circumstances such as a global pandemic
(e)
The plaintiff has not proved relevant detriment. There is no evidence that expenditure has been wasted or has not otherwise benefited the club. With respect to the sponsors not paying commitments, that is a debt that flows from

non-fulfilment of the assumption rather than change of position. Good conscience does not require the defendant be estopped because the defendant had to balance all of the interests of the club arising out of the cancellation of the season. If the defendant is compelled to promote the plaintiff’s men’s and women’s teams, there will be a severe disruption to the draw including the extension of the season by two weeks.

Principles

The various categories of estoppel all serve the ‘fundamental purpose, namely “protection against the detriment which would flow from a party’s change of position if the assumption (or expectation) that led to it were deserted”’.[19]
[19]The Commonwealth v Verwayen (1990) 170 CLR 394, 409 (Mason CJ), quoting Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 419 (Brennan J) (‘Waltons Stores’), and quoted with approval in Sidhu v Van Dyke (2014) 251 CLR 505, 511 [1] (French CJ, Kiefel, Bell and Keane JJ) (‘Sidhu’).
In Giumelli v Giumelli, the plurality stated that the ‘well recognised variety’ of equitable estoppel was founded in an ‘assumption … which had been induced by representations upon which there had been detrimental reliance by the plaintiff’.[20] Further, because the ‘fundamental purpose’ of equitable estoppel is to ‘protect the plaintiff from the detriment which would flow from the defendant’s change of position if the defendant were to be permitted to resile from his or her promise, the relief granted may require … the performance of the promise and the performance of the expectation generated by the promise.’[21]
[20](1999) 196 CLR 101, 112 [6] (Gleeson CJ, McHugh, Gummow and Callinan JJ).
[21]Sidhu (2014) 251 CLR 505, 529 [82] (French CJ, Kiefel, Bell and Keane JJ), citing Giumelli v Giumelli (1999) 196 CLR 101, 112 [6], 123-5 [40]-[48].
In Grundt v Great Boulder Pty Gold Mines Ltd, Dixon J explained the principle upon which estoppel in pais is founded as follows:
[T]he law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. … [providing] [t]hat other … [has] so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption.[22]
[22](1937) 59 CLR 641, 674 (‘Grundt’s case’). Estoppel in pais includes both common law conventional estoppel and those recognised in equity including estoppel by representation, proprietary estoppel and estoppel by acquiescence or encouragement: Legione v Hateley (1983) 152 CLR 406, 430 (Mason and Deane JJ).
Dixon J acknowledged that this was a very general statement; but said that ‘it is the basis of the rules governing estoppel’ and that ‘[t]hose rules work out the more precise grounds upon which the law holds a party disentitled to depart from an assumption in the assertion of rights against another’.[23]
[23]Grundt’s case (1937) 59 CLR 641, 674.
Grundt’s case concerned an estoppel at common law, but Dixon J’s analysis has been held by the High Court to be applicable to promissory estoppel,[24] and equitable estoppel.[25] In Walsh v Walsh, Meagher JA also held that this analysis extended to equitable claims for promissory and proprietary estoppels stating:
The action or abstaining from action in reliance upon the assumption or expectation encouraged is what invites the intervention of equity … and the detriment that makes the estoppel enforceable is that which ‘would flow from the change of position if the assumption were deserted that led to it’.
Although that statement [of Dixon J in Grundt’s case at 674] was made in relation to common law estoppel, it has been held to apply equally to promissory and proprietary estoppels.[26]
[24]Legione v Hateley (1983) 152 CLR 406, 437 (Mason and Deane JJ).
[25]Sidhu (2014) 251 CLR 505, 528-9 [80]-[81] (French CJ, Kiefel, Bell and Keane JJ).
[26][2012] NSWCA 57, [13] (citations omitted). See also Donis v Donis (2007) 19 VR 577, 593-4 [54] (Nettle JA, with whom Maxwell AJC and Ashley JA agreed), quoting with approval the statement of Robert Walker LJ in Gillett v Holt [2001] Ch 210, 233. Many of these authorities were endorsed by Handley AJA (with whom Allsop P and Giles JA agreed) in Delaforce v Simpson-Cook (2010) 78 NSWLR 483, 491 [43].
The elements which plaintiffs must prove to found a claim for estoppel in equity have been set out in various ways.[27] After considering these authorities, in my opinion, whether the necessary elements of estoppel have been established in this case can be determined by answering the following questions:
[27]See, eg, Waltons Stores (1988) 164 CLR 387, 404 (Mason CJ and Wilson J); The Commonwealth v Verwayen (1990) 170 CLR 394, 445 (Deane J); Grundt’s case (1937) 59 CLR 641, 674-5 (Dixon J); Thompson v Palmer (1933) 49 CLR 547 (Dixon J). In particular, the formulation by Brennan J in Waltons Stores (1988) 164 CLR 387, 428-9 has been widely applied, including by Ginnane J in Moala v Free Wesleyan Church (Ruling No 4) [2017] VSC 635, [53] and Hargrave J in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40, [108]. An appeal from Hargrave J’s decision was allowed, but the Court of Appeal also adopted Brennan J’s elements in Waltons Stores: see (2008) 66 ACSR 325, 342 [125] (Dodds-Streeton JA, with whom Ashley JA and Forrest AJA agreed). In Bullhead Pty Ltd v Brickmakers Place Pty Ltd [2017] VSC 206, [184] Sifris J considered Brennan J’s elements to be a ‘useful starting point, although not universally accepted, but sufficient for present purposes’. This aspect was not disturbed on appeal: (2018) 58 VR 91 (Kyrou, McLeish and Hargrave JJA).
(a)Question 1: Did the plaintiff assume or expect that a state of affairs or a particular legal relationship existed, or would exist?
(b)Question 2: Did the defendant play a part in the adoption of the assumption or expectation?
(c)Question 3: Has the plaintiff changed its position to its detriment on the basis of the assumption or expectation?
(d)Question 4: Did the defendant know or intend the plaintiff to do so?
(e)Question 5: Is the defendant’s departure from the assumption or expectation unconscientious in all the circumstances, including:
(i)the part played by the defendant in the adoption of the assumption or expectation;
(ii)the nature and extent of the detriment;
(iii)how the detriment can be cured;
(iv)the proportionality of such cure to the terms and character of the part played by the defendant in the adoption of the assumption or expectation; and
(v)the conformity with good conscience of keeping a party to the relevant assumption or expectation?[28]
[28]Delaforce v Simpson-Cook (2010) 78 NSWLR 483, 485 [3] (Allsop P).

With respect to playing a part in the adoption of the assumption or expectation, where a party relies on a representation, promise or assurance to found an estoppel, it is necessary to establish that:
(a)the representation, promise or assurance was clear; and
(b)the language used was precise and unambiguous.[29]
[29]Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1, 16 [35] (French CJ, Kiefel and Bell JJ).
As was explained by the plurality in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd:
This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled.[30]
[30]Ibid (citations omitted).
With respect to the change of position, it is not necessary that the conduct of the party to be estopped was the sole inducement operating on the mind of the claimant.[31] Rather, the question is whether the conduct of the party to be estopped:
(a)was a significant factor in; or
(b)influenced the claimant’s decision to act,
so that it would be unconscionable for the representor thereafter to enforce their strict legal rights.[32]
[31]Sidhu (2014) 251 CLR 505, 526 [71] (French CJ, Kiefel, Bell and Keane JJ).
[32]Ibid [72]-[73].
With respect to detriment, the following general propositions apply:
(a)The detriment, which is sufficient to found a claim in estoppel, has been variously described as real,[33] significant,[34] material and substantial.[35] It does not need to be quantifiable in the same way as an award of damages.[36] As was explained by the plurality in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd:
[33]Ibid 531 [92] (Gageler J).
[34] The Commonwealth v Verwayen (1990) 170 CLR 394, 442 (Deane J).
[35] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 600 [88] (Hayne, Crennan, Kiefel, Bell and Keane JJ), 622-3 [150] (Gageler J).
[36]Ibid 622 [150] (Gageler J).
Detriment has not been considered to be a narrow or technical concept in connection with estoppel. So long as it is substantial, it need not consist of expenditure of money or other quantifiable financial detriment, as Robert Walker LJ observed in Gillett v Holt. His Lordship went on to say that the requirement of detriment must be approached as ‘part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances’.[37]
[37]Ibid 600 [88] (Hayne, Crennan, Kiefel, Bell and Keane JJ).
(b)The detriment is that which flows from the change of position in reliance on the assumption or expectation. The relevant detriment is not that which flows from the non-fulfilment of the promise or assurance,[38] although that may be the appropriate relief if the estoppel is established.[39]
[38]Delaforce v Simpson-Cook (2010) 78 NSWLR 483, 491 [41]-[42] (Handley AJA, with whom Allsop P and Giles JA agreed).
[39]See paragraphs 70 and 71 below.
(c)The representation (in the case of equitable estoppel) or assumption (in the case of conventional estoppel) must be a cause of the plaintiff acting to its detriment and ‘it is necessary for a person claiming the benefit of a conventional estoppel to demonstrate that he or she would have acted differently but for the agreed assumption’.[40] As was explained by Gageler J in Sidhu, ‘[t]here can be no real detriment if the party asserting the estoppel would have been in the same position in any event’.[41] As he explained:
[40]Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500, 510 [49] (Macfarlan JA, with whom McColl JA and Sackville AJA agreed). See also Q (A Pseudonym) v E Co (A Pseudonym) (2020) 383 ALR 469, 492 [88] (Meagher JA, with whom Leeming and Payne JJA agreed).
[41]Sidhu (2014) 251 CLR 505, 531 [92].
To establish that the belief to which she was induced by the appellant’s representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief.[42]
(d)On the basis of this statement and statements by the plurality in Sidhu,[43] the New South Wales Court of Appeal in Miller Heiman Pty Ltd v Sales Principles Pty Ltd concluded that it was necessary for a plaintiff to establish that, but for the assumption or expectation, it would not have acted as it did.[44]
(e)I am mindful of the debate about whether it is incumbent on the claimant to prove that, but for the conduct of the party to be estopped, he or she would have acted differently.[45] In E Co v Q,[46] Ward CJ in Eq, after a detailed consideration of the relevant authorities, found there was no inconsistency between a ‘contributing cause’ test and a ‘but for’ test, and concluded:
On this view, it is necessary for each of the plaintiffs to establish, on the balance of probabilities, that the relevant assumption was a ‘contributing cause’ to this or its course of action or inaction in the sense that he or it would have acted differently but for that (actively or passively encouraged) assumption.[47]
With respect, I agree with and would adopt her Honour’s reasoning and conclusion.
(f)Detriment is not limited to the expenditure of money or other financial costs.[48] The detriment may well result from personal, non-financial consequences.
(g)The time for judging the issue of detriment is the moment when the person who is giving the assurance seeks to go back on it.[49]
[42]Ibid 531 [91].
[43]Ibid 525 [67], 528 [78] (French CJ, Kiefel, Bell and Keane JJ).
[44](2017) 94 NSWLR 500, 510 [45]-[49] (Macfarlan JA, with whom McColl JA and Sackville AJA agreed).
[45]See, eg, Mineralogy v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1, 121-4 [770]-[779] (Edelman J); K Handley, ‘Recent Cases: Estoppel’ (2017) 91 Australian Law Journal 812.
[46][2018] NSWSC 442, [1039]-[1072].
[47]Ibid [1056] (citations omitted).
[48]Walsh v Walsh [2012] NSWCA 57, [14] (Meagher JA, with whom Macfarlan and Barrett JJA agreed).
[49]Gillett v Holt [2001] Ch 210, 232 (Robert Walker LJ, with whom Waller and Beldam LJJ agreed); DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728, 746-7 [72]-[73] (Meagher JA, with whom Macfarlan JA agreed).
With respect to the appropriate relief, although the relevant detriment is measured by reference to the established change of position, ‘the relief granted may require the taking of active steps by the defendant including the performance of the promise and the performance of the expectation generated by the promise’.[50] However, this is not always the case. As was stated by the plurality in Sidhu:
The requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief. In The Commonwealth v Verwayen, Deane J noted that:
There could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party.
If the respondent had been induced to make a relatively small, readily quantifiable monetary outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for her outlay.[51]
[50]Sidhu (2014) 251 CLR 505, 529 [82] (French CJ, Kiefel, Bell and Keane JJ), citing Giumelli v Giumelli (1999) 196 CLR 101, 112 [6], 123-5 [40]-[48] (Gleeson CJ, McHugh, Gummow and Callinan JJ).
[51]Sidhu (2014) 251 CLR 505, 529 [83]-[84] (citations omitted).
Although the plurality in Sidhu noted there may be cases where it would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption, their Honours identified the proper approach as follows:
While it is true to say that ‘the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct’, where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise.[52]

Did the defendant make the representation that, if the regular season was not completed, the promotion/relegation system would be applied in any event?

[52]Ibid 530 [85] (citations omitted).

In my opinion, the defendant did not make the representation, for the following reasons:
(a)In terms it was not a representation of what would occur if the season was cancelled. None of the defendant’s representations stated that if the season was not completed, the relevant system would be applied in any event. A reasonable person would not understand the representation as being that promotion/relegation would be applied regardless of how few matches were played.
(b)It was a statement of future intention, not of fact. It is not alleged that at the time that the statement was made, they had no reasonable grounds for it to be made.

Did the plaintiff rely on the representation to its substantial detriment.

In my opinion, the plaintiff did not rely on the representation to its detriment, for the following reasons:
(a)There was no evidence about when the decisions were made in relation to expenditure.
(b)There was no evidence to the effect that, but for representation, any particular expenditure would not have been made.
(c)Mr Gruevski did give evidence that the plaintiff would have been more conservative with its expenditure if it had known that the policy would not apply in 2021. However, the relevant question is whether the plaintiff would have been affected or made a different decision or changed its position if it had known that the season might be cancelled, and that there was a risk that the policy would not be applied if the season was cancelled due to Covid-19. Accordingly, the plaintiff suffered no detriment by reason of the expenditure.
(d)I do not accept that, after the cancellation of the 2020 season, the plaintiff was unaware of the risk that if the 2021 was not completed, the promotion/relegation regime may not be applied. I am not satisfied that the plaintiff had suffered any detriment by reason of that risk not being stated by the defendant.

Should the Court decline discretionary relief on the grounds of delay or failure to join interested parties?

It is not necessary for me to answer this question. Nonetheless, I make the following observation.
There are serious questions about whether the defendant should be denied relief on discretionary grounds by reason of the delay in bringing this proceeding only one month before the 2022 season was to commence, in circumstances where:
(a)all of the clubs have been provided with the fixtures and presumably made arrangements on that basis; and
(b)other clubs who may have to be relegated if in fact the promotion or relegation policy was to be applied, have not been given the opportunity to be heard.

Orders

For the reasons outlined above, the plaintiff’s originating motion filed 15 February 2022 and the plaintiff’s summons filed 15 February 2022 should be dismissed.

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[2022] VSC 325

17 March 2022 (Ex tempore)