WIN v Nine: Court of Appeal confirms Justice Hammerschlag’s decision

Prepared by:    Helena Kanton and Michael Swinson

This month, the New South Wales Court of Appeal dismissed an appeal by regional TV broadcaster WIN against an earlier decision by the New South Wales Supreme Court that the Nine Network was not prohibited under an exclusive licence agreement with WIN from live streaming Nine’s TV programming over the internet in WIN’s broadcast licence area. These decisions illustrate the importance on using clear and explicit language in contracts, so that there is no room for misunderstanding between the parties as to the scope of their commitments.

You can access a copy of our article on the original decision by Hammerschlag J here. And you can access a copy of the Court of Appeal’s decision (WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297 (4 November 2016)) here.

Facts and first instance decision

The fundamental dispute in this case surrounded the interpretation of the meaning of “broadcast” in clause 2.1 of a Program Supply Agreement (“PSA”) between WIN and Nine. This clause provided:

Nine grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as “Nine”, “Nine HD”, “9Go”, “9Gem”, Extra” and “9Life” (“the Nine Channels”), to be picked up by WIN at Nine’s NPC.

In early February 2016, WIN commenced proceedings against Nine for breach of this clause. WIN contended that live streaming via the 9Now (an online service allowing members of the public to live stream or view, on an on demand basis, Nine’s programming via the internet) service amounted to “broadcasting” under the clause, and that Nine was in breach of the PSA by offering the 9Now service in areas covered by WIN’s “exclusive licence to broadcast”. WIN’s alternative argument was that even if live streaming via 9Now was not “broadcasting” for the purposes of clause 2.1, Nine was subject to an implied obligation not to live stream the areas covered by the licence granted to WIN under the PSA.

At first instance, Hammerschlag J rejected WIN’s arguments, concluding that live streaming via the internet was not “broadcasting” within the meaning of the PSA (which in that context referred only to free-to-air programming) and that Nine was under no express or implied contractual obligation not to live stream its content via the internet.

Court of Appeal decision

WIN appealed the decision of Hammerschlag J on seven different grounds relating to contractual interpretation, and one alternate ground based on an implied term. Each was ultimately unsuccessful, and the Court of Appeal held that the word “broadcast” was correctly interpreted by Hammerschlag J to mean only free-to-air transmission.

Most importantly, the Court of Appeal found that:

1    Terms used in a contract may have a different meaning depending on context
WIN argued that the plain, natural or ordinary meaning of the word “broadcast” includes the concept of live streaming. Nine countered this argument, arguing that “broadcast” is properly interpreted in the “narrow free-to-air sense of transmission by radio waves”. Ultimately, Barrett AJA concluded that the word “broadcast” can have different meanings depending on the context, so it is not possible to say that in all circumstances the meaning of “broadcast” was as broad as contended by WIN or as narrow as contended by Nine. Barrett AJA concluded that there is “no single, fixed meaning that can be said to be the plain, natural or ordinary meaning”.

2    The interpretation of the contract may be informed by the underlying commercial purpose of the contract, but this did not help WIN
WIN argued that Hammerschlag J had failed to appreciate and give sufficient weight to the “commercial purpose or objects to be secured by the contract” to inform the meaning of the words used in the PSA.

In addressing this submission, Barrett AJA considered general principles of contractual interpretation, and the circumstances in which reference may be had to evidence of prior negotiations in construing the terms of a contract. His Honour confirmed that “as a general principle of construction, the rights and liabilities of parties under a contractual provision fall to be determined by objective consideration of its text, context and purpose”, by asking what a “reasonable businessperson” would have understood the terms to mean “in light of the particular language used by the parties, the circumstances addressed by the contract and its commercial purpose”. While such an interpretative process may be (and commonly will be) undertaken without reference to evidence of surrounding circumstances, surrounding circumstances may be useful in establishing objective facts and identifying the commercial purpose or subject matter of the contract (which can aid in its interpretation).

Barrett AJA sought to reconcile this position with the “true rule” of construction in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (being the rule that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous, but is not admissible to contradict the language of the contract when it has plain meaning), and stated:

A potential tension that inheres in this proposition is that to recognise words as bearing a “plain meaning” is merely to state a conclusion arrived at by some process of interpretation which cannot, as a matter of logic, exclude context. … It therefore becomes clear that the notion that it may first be necessary to consider context when construing a contract is not inconsistent with Mason J’s “true rule”. On this footing, it does not follow that the task of assessing whether a phrase or expression is ambiguous or susceptible of more than one meaning must be undertaken without regard to evidence of surrounding circumstances.

While WIN argued that the commercial purpose and objects of the PSA included securing for WIN the advantage of freedom from any kind of competition by Nine in the WIN licence area, the Court of Appeal rejected this argument. Barrett AJA said that “[t]here is nothing commercially incoherent about a program supply agreement that deals with free-to-air transmission only and says nothing, expressly or by implication, about live-streaming”.

3   There was no basis on which to imply into the contract an extended exclusivity commitment from Nine
WIN argued that even if its position on the construction of the express terms of the contract was not correct, there should still be implied into the PSA a commitment from Nine to not undertake live-streaming in WIN’s licence area. In particular, WIN argued that Nine was prohibited from internet-streaming in the WIN licence area because of an implied term not to do anything that would deprive WIN of the benefit under the contract (where the “benefit” WIN had contracted to acquire was freedom from competition).

Barret AJA disagreed that such a term could be implied into the PSA, saying that:

The “benefit” of the contract, from WIN’s perspective, was the right to transmit the Nine programs free-to-air in the WIN areas without free-to-air competition by Nine or anyone to whom Nine had given transmission rights. Extension of the negative stipulation binding on Nine so as to forbid live-streaming would entail a restriction on Nine and a corresponding “benefit” to WIN over and above those created by the contract and, in that way, enlarge rather than support and underwrite WIN’s contracted benefit. The value of the benefit of the contract to WIN was … dependent on many contingencies, some of which were in Nine’s control. But Nine was not obliged to maximise WIN’s return from the contract.

As a result, WIN’s argument based on an implied term prohibiting Nine from live-streaming was unsuccessful.

Implications of the decision

This case is a good illustration of the importance of clear contractual drafting. It is critical that key terms that set the scope of each party’s rights and obligations are clearly defined in the contract in order to limit the risk that the parties will walk away with a different understanding of the bargain they have just struck.

In the context of the PSA, the term “broadcast” could be given different meanings and, ultimately, the court decided that the proper meaning in this case was the one preferred by Nine rather than WIN. The shorthand reference to “broadcast” was insufficient to sweep up the full scope of communication rights that exist under the copyright legislation, so that WIN had a narrower scope of protection than it may have anticipated.

This is not to say that the term “broadcast” will always be interpreted in this way. As the Court of Appeal’s decision indicates, interpretation is often a matter of context and while the term “broadcast” in this instance did not include live-streaming over the internet, it may be that in a different context it could be given a broader meaning.

The key lesson for copyright licensees is that if they wish to pursue an exclusive licence, they should take great care to ensure that the scope of their exclusivity is very explicitly defined using language that captures the full range of rights that they wish to protect. In particular, they should take care to consider and address future contingencies such as the emergence of new technologies that may not be in use at the time of signing. The best way to do this is to use technology neutral language that reflects the terminology used in the copyright legislation.