20 OCTOBER
THE NEW ZEALAND GAZETTE
2761

BEFORE THE BROADCASTING TRIBUNAL

Members: B. H. Slane (Chairman), Lionel R. Sceats, and Janct C. Somerville.

Hearing at Hamilton on the 27th day of June 1977.

Counsel: I. L. McKay for the applicant; J. B. Stevenson for Independent Publishers Limited and Independent News Limited to support; B. L. Darby for Broadcasting Corporation of New Zealand to oppose; C. M. Nicholson for Radio Hauraki Limited to oppose; P. L. Mortlock for Radio Avon Limited to oppose; R. L. Congreve for Radio i Limited to oppose.

DECISION

Independent Broadcasting Company Limited applied to the Tribunal on 12 May 1977 to amend its sound-rad'o warrant to delete condition (d) of the warrant by deleting “30%” and substituting “45%”. The effect of the amendment would be that the condition would then read—

“The total shareholding by a news company as defined by the News Media Ownership Act 1965, whether as beneficial owner or otherwise and whether by one or more such news companies in Independent Broadcasting Company Limited shall not exceed 45% of the authorised capital of the company.”

As a result of certain matters raised during the hearing, the applicant’s counsel agreed that the condition should be further amended in any event to delete “authorised” and substitute “issued” before the words “capital” in the condition.

The application was advertised and the Tribunal directed that a notice of the application be delivered by the company to every shareholder. One shareholder made submissions in writing, prior to the hearing, which were made available to counsel at the hearing. The shareholder opposed the granting of the application.

The application was supported by Independent Publishers Limited and Independent News Limited and was opposed by the Broadcasting Corporation and the warrant holders for three private radio stations, Radio Hauraki, Radio i, and Radio Avon.

The applicant set out the shareholding in the company as follows:

R. B. Waddington ....... 38,500
Harding’s Holdings Ltd. ....... 2,700

E. E. Butcher ....... 14,000
M. I. Butcher ....... 2,200
G. E. Butcher ....... 2,800

M. Lazarus ....... 2,000
Aviation Enterprises ....... 8,000

Independent Publishers Ltd. ....... 10,000 (5.0%)
Balance held by the public ....... 69,800 (34.9%)

Capital 200,000 (100.0%)

It was uncontested that Harding’s Holdings Limited is controlled by Mr R. B. Waddington, and Aviation Enterprises Limited by Mr Lazarus. The four major shareholding groups (called “Waddington”, “Butcher”, “Lazarus”, and “I.P.L.”) have been shareholders since the incorporation of the company.

Messrs Butcher and Lazarus intimated late in 1976 that their groups wished to sell their shares. They offered the shares for sale to Independent Publishers Limited which agreed to purchase them, subject to approval being obtained to the necessary amendment to the warrant. The acquisition of these shares would have brought the holding of Independent Publishers Limited up to 89,000 shares or 44.5% of the total.

Application for the necessary amendment was made to the Minister of Broadcasting on 20 October 1976, pursuant to s. 79 of the Broadcasting Act 1973 which was then in force. The Minister accepted the submissions made to it that Independent Publishers Limited would provide strong management advice and experience and their increased shareholding would provide long term stability, but considered that approval of the proposal could be seen as preempting the establishment of the Broadcasting Tribunal and accordingly agreed that Independent Publishers Limited might take up the shareholding of up to 45% of the capital subject to certain conditions including that voting rights were not to be exercised in respect of a shareholding in excess of 30%. The company would be required to dispose of its shareholding in excess of 30% if the Tribunal did not approve of the increased shareholding. Messrs Lazarus and Butcher retained the voting rights.

The Minister of Broadcasting informed the Tribunal of these facts. The Minister did not inform the Tribunal of any Government policy which could affect the decision of the Tribunal.

The applicant did not rely in any way on the Minister’s temporary approval, pending this application, as a ground for the grant of the amendment requested. At the hearing it was made clear to all parties that the Tribunal was dealing with this application on the basis on which it has been lodged, namely, that the amendment of the warrant itself had not been approved by the Minister under the previous legislation and therefore an application to this Tribunal was necessary for the warrant to be amended.

The application for a radio warrant for Radio Waikato was granted by the Broadcasting Authority, under the Broadcasting Authority Act 1968, on 12 May 1970. The warrant provided for the establishment of two relay stations at Puriri and Hangatiki. Subsequently the warrant was amended to delete the provision for relay stations.

The authority imposed a condition that the total shareholding by a news company as defined by the News Media Ownership Act 1965, whether as beneficial owner or otherwise and whether by one or more such news companies in the applicant should not exceed 35% of the authorised capital of the company without the written consent of the authority. As a result of an appeal to the Administrative Division of the Supreme Court by the New Zealand Broadcasting Corporation, the figure of 35% was amended to 30% by the full Court. (It is accepted that the reference was intended to be to issued capital.).

It is to be noted that the application by Independent Broadcasting Co. Ltd., in this case is not for the consent of this Tribunal for transfer of shares but for an amendment to the Warrant.

However, since it appeared clear that the application was intended to enable the I.N.L. group to acquire these shares and there was no suggestion that the permission was required in order to transfer shares to other companies outside the I.N.L. group, the parties before us dealt with the application on the basis that the amendment of the warrant was to enable a transfer of shares to I.P.L. not to some other news enterprise.

The application was referred to the Post Office which indicated that, as no technical matters were concerned, it had no objection. If the application were granted by the Tribunal, the necessary certificate would therefore be obtained from the Director-General of the Post Office.

In his submissions in support of the application, Mr McKay referred to the decision of the Broadcasting Authority in relation to an application in which two Auckland newspaper companies were to hold 50% of the shares in an applicant company. In declining that application, the Broadcasting Authority had said that large shareholdings by newspaper companies were undesirable in the public interest.

Mr McKay said that the Authority then had no recent experience of private broadcasting stations and took a cautious approach. It was a general indication of the view at that time. At the Radio Waikato hearing before the Authority Professor Ryan’s evidence indicated that 45% of the issued capital would give effective control of a company. Mr McKay submitted that that would be a good thing in this case.

The Broadcasting Authority in its decision said this:

“As to the question of control which would be exercised by Independent Publishers Limited, it is to be observed that section 21 (h) of the Act contains only one of the matters required to be considered by the Authority. It would seem also that the compelling argument produced by Professor Penrose elsewhere in the same thesis, and which have been referred to previously. The degree of effectiveness of any dominance capable of being exercised by a resolute group must depend, as Professor Penrose stated, on the indifference of the remainder, and the proposed capital structure is such that there may not be indifference on the part of the other shareholders, particularly in the case of Messrs Waddington, Butcher, and Lazarus who between them hold 50,000 shares in the company, and could themselves comprise the elements of a resolute group. In the circumstances, the Authority has come to the conclusion that the proposals contemplated by the applicant are such that the establishment of a monopoly in the ownership or control of news media has not been proved particularly as the Corporation itself operates the only service at present disseminating news through the medium of radio.”

In the judgment of the full Court, Wild C. J. on an appeal by the New Zealand Broadcasting Corporation against the decision of the Authority (unreported, 29 July 1970, p. 15) said:

“It is of course true that ‘there may not be indifference’, but it is equally true that there may be indifference.