Television Holdings Limited v Australian Broadcasting Tribunal

[1992] FCA 177

Re: TELEVISION HOLDINGS LIMITED; THE SEVEN NETWORK LIMITED; WEST CENTRAL SEVEN
LIMITED; ROBERT BERNARD CAMPBELL; PHILIP PATRICK SAGGERS; PETER GREGORY DAY;
IVAN DEVESON; PETER RITCHIE and MICHAEL ROBINSON
And: AUSTRALIAN BROADCASTING TRIBUNAL
No. G772 of 1992
FED No. 177
Post and Telegraph
(1992) 106 ALR 215
(1992) 35 FCR 127

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Beaumont(1) and Einfeld(1) JJ.

CATCHWORDS

Post and Telegraph - case stated by Australian Broadcasting Tribunal - whether directors of companies in breach of s.92C of Broadcasting Act - whether service areas of both a subsidiary and its holding company may be aggregated - meaning of control of a company.

Broadcasting Act 1942 (Cth) - s.92C

HEARING

SYDNEY

#DATE 14:4:1992

Counsel for the Applicants: W.H. Nicholas QC and M.J. Slattery

Solicitors for the Applicants: Mallesons Stephen Jaques

Counsel for the Respondent: P. Roberts and M.K. Minehan

Solicitor for the Respondent: Australian Government Solicitor

ORDER

1. The questions asked in the special case be answered as follows:-

i. Is Mr Robert Campbell, by virtue of being a director of Television Holdings Limited, The Seven Network Limited, Amalgamated Television Services Pty Limited, HSV Channel 7 Pty Limited, Brisbane TV Limited and TVW Enterprises Limited, in contravention of s.92C(1) of the Broadcasting Act 1942 (Cth)?

Answer: No.

ii. Are Mr Philip Saggers and Mr Peter Day, by virtue of being directors of The Seven Network Limited, Amalgamated Television Services Pty Limited, HSV Channel 7 Pty Limited, Brisbane TV Limited and TVW Enterprises Limited, in contravention of s.92C(1) of the Broadcasting Act 1942

(Cth)?

Answer: No.

iii. Are Mr Ivan Deveson, Mr Peter Ritchie and Mr Michael Robinson, by virtue of being directors of Television Holdings Limited and The Seven Network Limited, in contravention of s.92C(1) of the Broadcasting Act 1942

(Cth)?

Answer: No.

2. The Respondent pay the costs of the special case.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The Australian Broadcasting Tribunal has, under the provisions of s.22B of the Broadcasting Act 1942 (Cth), referred the following special case to this Court for its determination:-

"1. The Australian Broadcasting Tribunal (`the Tribunal') is conducting an inquiry pursuant to section 17C(1) of the Broadcasting Act, 1942, (`the Act') into whether it should approve, under s.92FAA of the Act, share transactions which are the subject of applications for approval by inter alia, Television Holdings Limited, The Seven Network Limited and West Central Seven Limited.

2. The Tribunal has received evidence in the course of its inquiry from the parties to the inquiry and from Counsel assisting the Tribunal. During submissions a question arose whether certain directors of Television Holdings Limited and The Seven Network Limited were in contravention of s.92C of the Act. Counsel for the Applicants requested the Tribunal to refer this question to the Full Court of the Federal Court for determination.

3. The facts found by the Tribunal and stated in this Special Case are:

(a) Each of the following

companies holds the commercial television licence which is listed next to its name: * Amalgamated Television Services Pty Limited (`ATS') - ATN Sydney; * HSV Channel 7 Pty Limited (`HSV') - HSV Melbourne;

* Brisbane TV Limited (`BTV') - BTQ Brisbane; * TVW Enterprises Limited (`TVW') - TVW Perth; * South Australian Telecasters Limited

(`SAS') - SAS Adelaide.

(b) The Seven Network Limited owns all the issued shares in ATS and in BTV. ATS and BTV each owns half of the issued shares in TVW and SAS. Television Holdings Limited owns all of the issued shares in The Seven Network Limited which in turn owns all of the issued shares in West Central Seven Limited. A diagram showing the corporate relationship between these companies is Annexure `A' hereto.

(c) Television Holdings Limited and The Seven Network Limited are in a position to exercise control of all the five aforementioned commercial television licences (ATN, HSV, BTQ, TVW and SAS).

(d) West Central Seven Limited is in a position to exercise control of the commercial television licences for TVW and SAS.

(e) Each of the companies holding a commercial television licence set out in paragraph (a) hereof is in a position to exercise control of the licence which it holds.

(f) The service area population of each of the aforementioned five commercial television licences expressed as percentage of the declared population of Australia, pursuant to section 91AAD of the Act, is as follows: ATN 21.57%

HSV 19.94%

BTQ 9.49%

SAS 7.04%

TVW 6.59%

(g) The aggregate of the service area populations of the aforementioned five commercial television licences is 64.63% of the declared population of Australia.

(h) Mr Robert Campbell is a director of Television Holdings Limited, The Seven Network Limited ATS, HSV, BTV and TVW.

(i) Mr Phillip Saggers is a director of The Seven Network Limited, ATS, HSV, BTV and TVW.

(j) Mr Peter Day is a director of The Seven Network Limited, ATS, HSV, BTV and TVW.

(k) Mr Ivan Deveson, Mr Peter Ritchie and Mr Michael Robinson are directors of Television Holdings Limited and The Seven Network Limited.

4. The questions raised by the Special Case are:

(a) Is Mr Robert Campbell, by virtue of being a director of Television Holdings Limited, The Seven Network Limited, ATS, HSV, BTV and TVW, in contravention of section 92C(1) of the Act?

(b) Are Mr Philip Saggers and Mr Peter Day, by virtue of being directors of The Seven Network Limited, ATS, HSV, BTV and TVW, in contravention of s.92C(1) of the Act?

(c) Are Mr Ivan Deveson, Mr Peter Ritchie and Mr Michael Robinson, by virtue of being directors of Television Holdings Limited and The Seven Network Limited, in contravention of S92C(1) of the Act?"

1. The following is the structure to be considered:-
   

Relevant provisions of the Broadcasting Act are:- "92 (1) A person contravenes this section if, and so long as, the person has a prescribed interest in:

(a) a licence whose service area population exceeds, or each of 2 or more commercial television licences the aggregate of whose service area populations exceeds, 60% of the declared population of Australia;

(b) each of 2 or more commercial television licences in the same Territory; or

(c) each of 2 or more metropolitan commercial television licences in the same State. ...

92C (1) A person contravenes this section if, and so long as, the person is a director of 2 or more companies that are, between them, in a position to exercise control of licences the aggregate of whose service area populations exceeds 60% of the declared population of Australia."

The issue is whether the directors or any of them contravene s.92C.

1. Although ss.92(1) and 92C(1) both appear in Subdivision B of Division 3 of the Broadcasting Act and although they both give effect to the same broad policy of the Act to limit the power of a person or persons to own or control commercial television licences the aggregate of whose service area population exceeds 60% of the declared population of Australia, they are not provisions to be read together in an integrated way. Each section must be interpreted according to what it states.

2. Section 92(1) makes it an offence for a person to have a prescribed interest in a licence or licences, the aggregate of whose television service area populations exceeds 60% of the declared population. Section 92C does not make it an offence for a person to be a director of a company which offends s.92(1). Section 92C(1) prescribes different behaviour. It makes it an offence for a person to be a director of two or more companies that are between them in a position to exercise control of licences the aggregate of whose service area population exceeds 60% of the declared population of Australia. Such a director need not hold a prescribed interest, a criterion prescribed for s.92, and it matters not for the purpose of s.92C that the companies of which the person is a director do not infringe s.92(1). Section 92C is concerned with companies which are associated by having common directors.

3. An essential element of s.92C(1) is aggregation. Thus the offence is being a director of two or more companies whose service area, when aggregated, exceed the prescribed limit. The section uses the words "2 or more companies that are, between them,...". These words are clear and require a combination of companies to reach the offending aggregate.

4. Television Holdings Limited ("THL") and The Seven Network Limited ("TSNL") each have a prescribed interest in and control Amalgamated Television Services Pty Limited ("ATS"), HSV Channel 7 Pty Limited ("HSV"), Brisbane TV Limited ("BTV"), TVW Enterprises Limited ("TVW") and South Australian Telecasters Limited ("SAS") which companies hold commercial television licences whose service area populations in aggregate exceed 60% of the declared population of Australia.

5. Mr Robert Campbell is a director of all the companies other than SAS. In order to answer question 4(a) "Yes", it would be necessary to add to Mr Campbell's directorships of ATS, BTV, HSV and TVW, whose total population area aggregate to only 57.59%, his directorship of THL or of TSNL which, in addition to being in control of each of ATS, BTV, HSV and TVW, also has control of or is in a position to control SAS, whose service population area is 7.04%. This service area, if aggregated with the other service areas, would take the total to 64.63%.

6. The issue is whether, in the aggregation which s.92C requires, it is permissible to take into account both a subsidiary company and also its holding company which controls it. The issue is whether such a calculation provides a legitimate aggregation or constitutes double counting.

7. The ordinary understanding of control in relation to a company is control through its shareholding. See e.g. Mendes v. Commissioner of Probate Duties (Victoria) (1967) 122 CLR 152 per Kitto J. at 161-5. As Lord Macmillan said in Inland Revenue Commissioners v. J. Bibby and Sons Ltd (1945) 1 All ER 667 at 670:-
   

"The control of a company resides in the voting power of its shareholders."

The concept is further expanded for the purposes of the Broadcasting Act by s.89H which provides inter alia:-

"89H(1) For the purposes of this Part, a person shall be deemed to be in a position to exercise control of a commercial licence if the person is:

(a) the holder of the licence;

(b) in a position to exercise control of the company that holds the licence; or

(c) in a position to exercise control of:

(i) the operations of the

licensee in providing the service pursuant to the licence; or

(ii) the selection or provision of the programs to be

broadcast pursuant to the licence."

This concept is brought into s.92C(1) by the expression "in a position to exercise control of licences". Necessarily, because of s.89H, the concept of being in a position to exercise control of a commercial licence comprehends being in a position to exercise control of the company that holds the licence.

1. In our opinion, in the application of s.92C, it is not proper to aggregate both a subsidiary company and a holding company which controls it. If the holding company is counted in the calculation, it comprehends all the subsidiary companies over which it is in a position to exercise control. Thus, if TSNL is taken into account, then necessarily all the companies and licences which it is in a position to control are thereby brought into the computation. To then bring any of the subsidiary companies into account to boost the aggregate is to count the same factors twice, for their licences and the service populations of their licences are already included by the counting of the holding company.

2. It follows that, in our opinion, neither THL nor TSNL should be added to its subsidiaries, ATS, BTV, HSV and TVW so as to reach an aggregate which breaches s.92C.

3. The structure of the Seven Network is not within the mischief with which s.92C is intended to deal. Each of THL and TSNL, on its own, controls companies and licences which have a service population exceeding more than 60% of the Australian population. But s.92C is concerned with the aggregation of companies which are not connected, save by having one or more common directors, or which, if associated, do not have a relationship whereby one of them controls another or others of them. For the purposes of s.92C, a company should not be aggregated with the subsidiaries which it controls.

4. Thus, Mr Campbell's common directorships of holding and subsidiary companies do not result in a contravention of s.92C. Nor do Messrs Philip Saggers and Peter Day contravene s.92C(1) unless TSNL were aggregated with the subsidiary companies which it controls. Of course, were Messrs Campbell, Saggers and Day also directors of SAS, they would breach s.92C for ATS, BTV, HSV, TVW and SAS could be aggregated without taking into account the holding company TSNL. But that is not what occurred in the present case.

5. The position of Mr Ivan Deveson, Mr Peter Ritchie and Mr Michael Robinson is even clearer. They are directors of two companies, THL and TSNL, each of which is in a position to exercise control of licences the aggregate of whose service are population exceeds the 60% limit. But this result does not arise through aggregation, by applying the words "between them". It is agreed that directorship of either company would achieve that result. It was not contended that Messrs Deveson, Ritchie and Robinson contravened s.92C(1).

6. For these reasons, we would answer questions 4(a) and (b) and (c) "no".

7. The Australian Broadcasting Tribunal should pay the costs of the special case.