N 1295 OF 1999
Federal Court of Australia
South Sydney District Rugby League Football Club Ltd v News Ltd and Others




Two of the respondents had merged their rugby league competitions, and subsequently were aiming to reduce the number of teams playing in the new competition. The teams’ licences were for a one year period and were renewable. In 1999 the appellant was informed that it was not one of the clubs that had met the selection criteria and would therefore be excluded from the competition the following year.

The appellant sought to restrain the respondents from excluding it, relying inter alia on breaches of contract. It argued that the respondents had breached implied terms of a contract, one of which required the respondents to act in good faith.

The judge found that there was no breach of contract, as the implied term of good faith and fair dealing did not restrict actions reasonably taken to promote the legitimate interests of a party. In doing so, itnoted, in rebuttal to a recent court finding (in Aiton Australia Pty Ltd v Transfield Pty Ltd) that there was uncertainty in defining the concept of ‘good faith and fair dealing’, that such “alleged uncertainty” had not prevented every legislature in Australia from enacting into domestic law Art. 7(1) of CISG.


2. The terms of the contract
[390] The twin issues here are: did the contract impose any obligations on the partnership and create any rights in Souths in relation to 2000? If it did then: what were those rights and obligations? Souths' case is premised on an affirmative answer to the first question and, for the second, is based essentially on implied terms. It will be necessary to refer relatively shortly to additional factual material in dealing with some of the alleged implied terms. But before turning to a consideration of the two questions I should first refer to the principles to be applied when implying terms into the Souths/NRL partnership contract.

(a) The implication of terms
[391] 1. Where a term is implied in fact rather than in law, the implication is based upon the presumed or imputed intentions of the parties. Where the contract is a formal one complete on its face, if a term is to be implied it must be reasonable and equitable; necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; so obvious that "it goes without saying"; capable of clear expression; and must not contradict any express term of the contract: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 ; 16 ALR 363; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 ; 41 ALR 367; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 441-2 ; 131 ALR 422. Where the contract is an informal one that has not been reduced to any complete written form, the test for implying a term is whether the implication of it is "necessary for the reasonable or effective operation of the contract" in the circumstances of the case: Breen v Williams (1996) 186 CLR 71 at 123-4 ; 138 ALR 259. In such a case, though, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention: Byrne v Australian Airlines Ltd, above, at CLR 422; on the apparent differences between the tests for formal and informal contracts see Tolhurst and Carter, "The New Law of Implied Terms" (1996) 11 CLJ 76; Tolhurst and Carter, "Implied Terms: Refining the New Law" (1997) 12 CLJ 152; and see generally Cheshire and Fifoot, Law of Contract, 7th Aust ed, 1997, para 10.43ff.
[392] 2.[#0009]Distinct from implication in fact, a term may be implied as a matter of law as a legal incident of a particular class of contract: see Australis Media Holdings Pty Ltd v Telstra Corp Ltd (1998) 43 NSWLR 104 at 122-3. This implication does not depend upon the intention of the parties: Breen v Williams, above, at CLR 103. Its imposition can in the end be explained as resulting from when "the law thinks that policy requires it": Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 348; on this form of implication see generally Cheshire and Fifoot, above, at para 10.39ff.
[393] 3. Australian law has not yet committed itself unqualifiedly to the proposition that every contract imposes on each party a duty of good faith and fair dealing in contract performance and enforcement: cf Restatement, Second,
177 ALR 611 at 696
Contracts, ß 205; and see generally the discussion in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263ff; Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at 95-7 ; 117 ALR 393; Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 at 191ff ; 146 ALR 1. Such a duty has been accepted as an implied legal incident of particular classes of contract: Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Hughes Aircraft Systems International v Airservices Australia, above; and particularly contracts of a commercial character: Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41 at 43,014; notwithstanding the supposed uncertainty in defining the concept of "good faith and fair dealing": see generally Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236 at 255ff. I would note in passing that the supposed uncertainty with "good faith" terminology has not deterred every state and territory legislature in this country from enacting into domestic law the provisions of Art 7(1) of the United Nations Convention on Contracts for the International Sale of Goods: for example, for example, Sale of Goods (Vienna Convention) Act 1986 (NSW).
[394] 4. Importantly for the purposes of the present case, recent decisions suggest that the implied duty of good faith and fair dealing ordinarily would not operate so as to restrict decisions and actions, reasonably taken, which are designed to promote the legitimate interests of a party and which are not otherwise in breach of an express contractual term: Alcatel Australia Ltd v Scarcella, above, at 369-70; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd, above, at 43,014; see also Asia Television Ltd v Tau's Entertainment Pty Ltd (2000) 48 IPR 283 at [77]; Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264; BC9901459 at [122]; Far Horizons Pty Ltd v McDonald's Australia Ltd [2000] VSC 310; BC200004860; and see further below, "Other possibilities".}}


South Sydney District Rugby League Football Club Ltd v News Ltd
[2000] FCA 1541

Published in original:
Australasian Legal Information Institute website,}}