The Israel Folau saga: could Rugby Australia's sponsors be dragged into it?

Key issues:

• Israel Folau’s employment contract with Rugby Australia was terminated following a finding by the Code of Conduct Tribunal (constituted by Rugby Australia) that he had committed a high level breach under the Professional Players’ Code of Conduct (which Folau had agreed to observe).
• As anticipated, Folau applied to the Fair Work Commission alleging that, in contravention of section 772 of the Fair Work Act 2009 (Cth), Rugby Australia unlawfully terminated his employment contract because of his religion. Following an unsuccessful conciliation conference, the dispute is destined to be determined by the Federal Court (unless settled out of court beforehand).
• The possibility of the involvement of Rugby Australia’s sponsors, as a result of any unlawful conduct on their part, raises a number of interesting legal avenues which may be available to Folau.

The topical dispute between Rugby Australia (RA) and Israel Folau is presently one between two parties. However, recent comments made to the media by RA’s Chairman, Cameron Clyne - to the effect that RA’s corporate sponsors left RA with no choice but to terminate Folau’s contract - have given rise to speculation that RA’s sponsors may have played a significant part in Folau’s dismissal. If it is found that RA acted unlawfully by terminating Folau’s contract, Folau may attempt to seek compensation from not only RA, but also its sponsors as accessories to his dismissal. In this article we discuss the potential bases upon which the sponsors could be dragged into this ongoing dispute. 

Earlier this year, Israel Folau’s employment contract with RA was terminated following a finding by the Code of Conduct Tribunal (constituted by RA) that he had committed a high level breach under the Professional Players’ Code of Conduct (which Folau had agreed to observe).  You can read more of the background to the dispute between RA and Folau in our previous article.

As anticipated, Folau applied to the Fair Work Commission alleging that, in contravention of section 772 of the Fair Work Act 2009 (Cth) (FW Act), RA unlawfully terminated his employment contract because of his religion. Following an unsuccessful conciliation conference, the dispute is destined to be determined by the Federal Court (unless settled out of court beforehand).

The possibility of the involvement of RA’s sponsors, as a result of any unlawful conduct on their part, raises a number of interesting legal avenues which may be available to Folau, as outlined below.  

Involvement in unlawful termination of employment 

In the event that a court finds RA unlawfully terminated Folau’s contract, at least partly on the basis of his religion (or there is otherwise a legal basis for such a finding), Folau may pursue one or more of RA’s sponsors if there is reason to believe that a sponsor was, or sponsors were “involved in” RA’s contravention of the FW Act. 

Section 550 of the FW Act operates to extend liability for the contravention of any civil penalty provision of the FW Act (which includes section 772) to any person or entity involved in the contravention. The phrase “involved in” (in relation to a contravention) is defined in the FW Act as aiding, abetting, counselling or procuring the contravention, inducing the contravention, being knowingly concerned in or party to the contravention, or, conspiring with others to effect the contravention. The inclusion in the definition of terms such as “counselling” and “procuring” demonstrates how broadly section 550 of the FW Act may be applied.  

Accessorial liability requires a party to intentionally participate in, with actual knowledge of, the essential elements constituting the contravention (although, the party need not know that the matters in question constituted a contravention - Yorke v Lucas (1985) 158 CLR 661). Practically, to be found to be an accessory to a contravention by a court, a party must assist or encourage the primary contravener on the matters which go to the central feature of the contravention. Possible arguments for Folau may be that the sponsors were involved in the contravention by threatening to withdraw their sponsorship if RA did not terminate Folau’s contract, or by otherwise encouraging or pressuring RA to terminate the contract. 

If Folau is successful in pursuing the sponsors for accessorial liability, the sponsors will be deemed to have contravened the Act and may be ordered to pay a civil penalty and/or compensation to Folau.  Folau has sought compensation from RA in the amount of $10 million, which is reflective of the compensation he could seek from any sponsors that were involved in the unlawful termination of his employment contract. 

Inducement to breach contract

Another cause of action potentially available to Folau is that one or more of the sponsors unlawfully induced a breach of contract (commonly known as “tortious interference”), by encouraging or persuading RA to terminate Folau’s employment in breach of his employment contract. To be actionable in a court, a person engaging in the inducement must have induced a breach of contract, as opposed to a lawful termination of a contract (Sanders v Snell (1988) 196 CLR 329, 339-340). Accordingly, the ability for Folau to pursue this cause of action will depend upon a finding that RA’s termination of his contract was unlawful. 

For Folau to successfully allege tortious interference against one or more of the sponsors, he would need to establish that: 

1. he had a valid contract with RA;
2. the sponsor or sponsors knew about the contract (at least in broad terms);
3. the sponsor or sponsors knowingly and intentionally induced RA to breach the contract; and
4. he suffered significant damage as a result. 

The challenge for Folau in pursuing a claim for tortious interference is that he would have to prove that the sponsors knew of, and intended to induce, the breach of contract. This could be difficult in circumstances where RA purported to terminate Folau’s contract on the basis that he committed a high level breach of the Code, which warranted his dismissal. Accordingly, assuming the sponsors were not recklessly indifferent as to whether RA’s conduct might constitute a breach of contract, the sponsors would likely defend any claim on the basis they held a reasonable and bona fide belief that RA could lawfully terminate Folau’s employment without breaching the employment contract (Short v City Bank of Sydney [1912] HCA 54; 15 CLR 148). 

If Folau can prove that the sponsors engaged in tortious interference, they will be liable for damages in respect of any losses suffered by Folau.

Secondary boycott under the Competition and Consumer Act

Finally, there has been speculation in the media that Folau could seek to pursue RA’s sponsors for their involvement in the termination of his contract by alleging that two or more sponsors, or potentially one or more sponsors together with RA, engaged in conduct amounting to a secondary boycott in contravention of section 45D of the Competition and Consumer Act 2010 (Cth). In essence, section 45D makes it unlawful for two or more people (including corporations) to engage in conduct “in concert” which hinders or prevents a “corporation” (which RA is for present purposes) from:

1. supplying goods or services to a fourth person; or 
2. acquiring goods or services from a fourth person, 

if one of the purposes for doing so is to cause substantial loss or damage to the business of the corporation, and the conduct would have, or is likely to have, that effect. 

For Folau to pursue a cause of action pursuant to section 45D in the context of his dispute with RA would be novel, to say the least, in circumstances where section 45D was created for the purpose of preventing boycotts in the context of industrial relations disputes, and particularly those involving the conduct of trade unions. However, there could be compelling strategic and forensic reasons for Folau to pursue such a claim because the success (or otherwise) of any such claim would not depend upon a finding that RA unlawfully terminated Folau’s contract. 

Theoretically, the following arguments could be pursued by Folau in an effort to establish a breach of section 45D:

1. that two (or more) sponsors acted in concert to prevent RA from acquiring Folau’s services as a professional athlete, and that was done for a purpose of causing substantial loss or damage to Folau, in circumstances where such conduct would have or would likely have the effect of causing substantial loss or damage to Folau and RA; or
2. that one (or more) sponsors acted in concert with RA to prevent Folau from providing services (i.e. playing rugby) to his club, the New South Wales Waratahs. 

The difficulty which Folau would face in pursuing either of the above arguments is that there would be a high evidentiary burden to meet in proving the necessary elements required by section 45D. For example:

1. in relation to argument 1 above, Folau would have to prove (amongst other things) that:
   1. two or more sponsors engaged in offending conduct “in concert” - it will not be enough  to prove that the sponsors acted independently to achieve the same or similar purpose;
   2. Folau carried on a “business”, as required by section 45D(1)(b);
   3. the “purpose” of the conduct was to cause Folau’s “business” substantial loss or damage (as opposed to any such loss or damage simply being an indirect and unintended consequence of the conduct); and
   4. the conduct would have or would likely have had the effect of causing substantial loss or damage to RA’s business; 
2. in relation to argument 2 above, Folau would have to prove (amongst other things) that:
   1. a sponsor and RA engaged in offending conduct “in concert”; and
   2. the purpose of the conduct was to cause the Waratahs’ “business” substantial loss or damage (as opposed to such loss or damage simply being an indirect and unintended consequence of the conduct).

The above are merely some of the hurdles Folau would need to overcome in order to successfully pursue a claim pursuant to section 45D. Typically, section 45D proceedings hinge on whether or not there is sufficient evidence to enable a plaintiff to properly plead its case. At this stage, it seems that the evidentiary burden of proving a claim pursuant to section 45D would be a very difficult hurdle to overcome such that, if Folau is advised to take steps to pursue RA’s sponsors, he should do so via other legal avenues. 

Final thoughts

It remains to be seen whether there is any substance to the theories currently circulating in the media. Whilst the RA Chairman’s comments certainly raise the question as to the sponsors’ potential involvement in Folau’s sacking, Qantas chief executive Alan Joyce was quick to dismiss any allegation of Qantas’ involvement as “outrageous”. With available funding in excess of $2 million, Folau will no doubt be casting the net as wide as possible in an effort to obtain the further necessary evidence to support any claim that he may have against the sponsors, through the court’s discovery process. 

Notwithstanding the potential difficulties which may be involved in successfully pursuing RA’s sponsors, as outlined above, it seems likely that we will hear more about the sponsors’ involvement (if any) as this ongoing dispute continues to evolve. We will continue to monitor the case and provide you with updates along the way.

For more information or discussion, please contact HopgoodGanim Lawyers’ Workplace and Employment or Leisure, Sport and Entertainment teams.