Post by Flash on Jul 28, 2007 9:41:46 GMT -5
Taxpayers aid Seven's bill
Susannah Moran | July 28, 2007
THE Seven Network, "the author of its own misfortune", yesterday suffered a devastating blow in its pursuit of Australia's biggest media companies, losing its $1.1 billion court case over pay-TV football rights.
Seven chairman and controlling shareholder Kerry Stokes was harshly criticised by the Federal Court judge hearing the case, Ronald Sackville, who labelled Mr Stokes untruthful during his stint in the witness box, saying at times his evidence was "deliberately false" and "implausible".
The network is facing a potential $200million legal bill for the failed court action, as it is likely to foot the bill for all parties' legal costs.
Justice Sackville was scathing of the amount of money spent on the case -- at 120 hearing days one of the longest in Australian corporate history -- saying it was "extraordinarily wasteful" and "bordering on the scandalous".
Media buyers estimated Seven would have to sell more than 6000 prime time television commercials to recoup the potential $200 million cost of the case -- more than 50 hours of advertising.
But because legal costs are a tax deduction, in effect, the public also bore the cost of the case, the judge said.
Seven's share price tumbled 4.3 per cent during trade yesterday, closing down 49c at $10.91.
Seven's case revolved around allegations that several major companies including News Limited (publisher of The Weekend Australian), Telstra, Publishing and Broadcasting Ltd and Foxtel conspired in 2000 to prevent Seven's pay-TV arm, C7, from buying the AFL football rights -- a move designed to "kill C7", and put it out of business.
But Justice Sackville rejected this claim.
"The evidence clearly establishes that Seven failed to make its best offer for the rights when they became available," Justice Sackville said. "Seven was the author of its own misfortune."
Seven had initially claimed more than $1 billion in damages but this was reduced to $212million by the end of the case.
As well as rejecting Seven's claims, Justice Sackville criticised several key witness, primarily Mr Stokes and News Limited's chief general counsel Ian Philip.
"A firm grasp of the facts, in the lawyer's sense, is evidently not a prerequisite to business success," Justice Sackville said in relation to Mr Stokes, noting "there were simply too many occasions on which Mr Stokes's evidence was implausible for me to regard him as a reliable witness on disputed issues".
"Sometimes it is extremely difficult or impossible to reconcile his version of events with the contemporaneous records, the reliability of which there is no good reason to doubt. Sometimes Mr Stokes's evidence flies in the face of incontrovertible facts."
Mr Philip "dishonestly attempted to mislead Telstra into contributing additional support to Fox Sports' bid for the NRL pay-television rights", Justice Sackville said.
But News Limited chairman and chief executive John Hartigan rejected criticism of Mr Philip, and said the NSW Legal Services Commissioner had already investigated -- and dismissed -- a complaint against him.
After reading his summary judgment -- the total judgment runs to 1120 pages -- Justice Sackville urged the parties, in effect Seven, to seriously consider any potential appeal, noting "the transactions that gave rise to this litigation are long passed".
Mr Stokes issued a statement saying the station was "completely justified" in bringing the case but that it was disappointed with the result. The station is considering an appeal.
Mr Hartigan welcomed the decision and said in a statement that News had tried to settle the case along the way.
"Seven's commercial conduct, its willingness to employ litigation as a commercial strategy and its attempts to manipulate the courts as well as the media covering this case have been a disgrace," Mr Hartigan said.
Foxtel chief executive Kim Williams described the court action as "commercial sour grapes" on behalf of Seven and said Foxtel had been vindicated by the decision.
"I can tell you I have a very unforgiving attitude on this," Mr Williams said.
"In what way do consumers profit from this carry-on? (Seven) is a very odd company.
"We agree with Justice Sackville that the litigation launched by Seven was a great waste of executive energy and creative and financial capital across the Australian media sector for the past five years."
Telstra group general counsel Will Irving said Telstra was pleased with the outcome.
"But it must be said that we should never have had to fight this futile claim in the first place," he said. "It was a waste of Telstra's shareholders' money and current and former senior executives' time."
PBL declined to comment.