Chris Huhne, a Liberal Democrat member of the British cabinet, says Rupert Murdoch “has to pass the ‘fit and proper’ test as a person to own a broadcasting organisation like Sky … and if he doesn’t pass that, it’s not a question of just stopping the BSkyB deal, it will be a question of him getting rid of Sky altogether”.

Of course overnight it was announced that News has withdrawn the bid for BSkyB, but what does being a “fit and proper” person mean?

Australia became one of the few countries to test what fit and proper might mean when it comes to being a media licensee, when in 1989, the Australian Broadcasting Tribunal (ABT) took on Alan Bond, who had become the owner of the Nine Network several years earlier. Kerry Packer had sold Bond the jewel in the Packer family media interests at a very favourable price, remarking that “you only get one Alan Bond in your lifetime”.

The concept of the fit and proper person turns up in much legislation that regulates the private use of a public resource or public good. The Mineral Resources Development Act 1990 of Victoria demands it as a quality of anyone seeking a miner’s licence. In fact, auctioneers, builders, plumbers, gasfitters and drainers, tobacco wholesalers, estate agents, fishermen, food processors, surveyors, travel agents, motor car traders, second-hand dealers, pawnbrokers, teachers and solicitors, must all be fit and proper persons to hold a licence or carry on a business under Victorian legislation.

But, of course, Alan Bond was a citizen of the world and Western Australia.

Bond was hauled before the ABT on two quite serious allegations.

The first was that an out-of-court settlement, in 1985, of a defamation action by Queensland premier Joh Bjelke-Petersen against a Bond Media-owned television station was, in fact, a backhander for favours done by Sir Joh for other Bond interests. The deal had been negotiated privately by Bond and Sir Joh and was thought to be generous, given the nature of the complaint and its chances of success if the action went to court.

The second was that threats were made by Bond to a Leigh Hall, an executive of the AMP Society, that Bond would use his television staff to gather information unfavourable to the AMP, and expose the AMP’s alleged wrongdoings by disclosing the material on television.

Among three lesser issues was the question of the authenticity of audio tapes that Bond Media radio stations had submitted to the hearing. Had they been faked to support Bond’s defence?

The tribunal had found that Bond was no longer a “fit and proper” person for the purposes of the licensing provisions of the Broadcasting Act 1942. But things did not stop there. Bond appealed the finding to a Full Court of the Federal Court, which partially overturned findings of the Australian Broadcasting Tribunal and then to a Full Court of the High Court of Australia.

At issue were two related matters: the personal qualities of Bond as a fit and proper person, and whether the lack of fitness as judged by the ABT also tainted Bond Media, the group of companies that actually held the licences. This had been seen as the direct consequence of the findings.

The High Court found that the Federal Court was wrong in setting aside the ABT’s decision that the licensee companies were no longer “fit and proper” persons, but wrong for the wrong reasons.

Mason CJ considered the association between a corporate licensee and an individual:

“The degree of an individual’s capacity for control may not be so great as to warrant an inference that his character should be identified automatically with that of the licensee; in that event it would be necessary to look to the character and performance of the directors and management. In another case, where the capacity of the individual for control of the licensee is great, the inference may be justified without examining the character and performance of the directors and the management of the licensee. Especially is this so when it is established that the person having the capacity to control participates in the decision-making processes of a licensee and procures the making of reprehensible decisions which are designed to enhance and protect his own interests.” (Australian Broadcasting Tribunal v Bond (1990) 64 ALJR 462 at 474.)

The High Court held that the finding that the companies were not “fit and proper persons” was provided for by the Act, and hence a “decision” under the Act, but that the principal ground for that decision — the finding that Bond himself was not a “fit and proper person” — was not required or authorised by the Broadcasting Act, and as such, was not a decision.

Thus Alan Bond was not a “fit and proper” person to hold a TV licence but companies that he had a substantial interest in could continue to be fit and proper corporate persons and hold TV licences.

However Bond Media share prices had taken a battering, falling from $1.55 to just over 30 cents at the time of the first finding by the ABT, and the writing was on the stockmarket wall. Kerry Packer bought back the Nine Network for a third of what Bond had paid Packer a decade earlier.

These proceeding are doubtless being pored over by News Corporation lawyers in case the 80-year-old Rupert Murdoch is asked to demonstrate his fitness and properness to have command of one of the world’s most diversified, powerful and influential media empires.