Betfair Pty Limited & Anor v State of WA

[2007] HCATrans 659

[2007] HCATrans 659

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  No C2 of 2007

B e t w e e n -

BETFAIR PTY LIMITED

First Plaintiff

MATTHEW EDWARD ERCEG

Second Plaintiff

and

STATE OF WESTERN AUSTRALIA

Defendant

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 8 NOVEMBER 2007, AT 10.06 AM

(Continued from 7/11/07)

Copyright in the High Court of Australia

GLEESON CJ:   Yes, Mr Gageler.

MR GAGELER:   Your Honours, there are four points arising from yesterday.  Firstly, your Honour the Chief Justice asked about RWWA’s liability to income tax.  It appears from the accounts in volume 3, tab 51 that RWWA does not pay federal income tax.

GLEESON CJ:   Do you mean it is not liable to pay?  There are a lot of people who do not pay tax.

MR GAGELER:   I would have to assume that, your Honour.  Certainly there is no entry in those accounts that indicates the actual payment of income tax.

GLEESON CJ:   Is that because the distributions dictated by statute constitute allowable deductions?

MR GAGELER:   I simply do not know.  I suspect somebody else at the Bar table would have better information.  It could well be because it is an authority which is exempt from federal income tax, but I cannot tell you exactly.  Secondly, your Honour Justice Heydon asked whether there was any evidence in the special case material about how customers wager.  One finds quite a deal of that in the Betting Exchange Task Force report volume 2, tab 33, pages 1346 to 1352, the betting habits of various categories of customer.

Thirdly, your Honour Justice Gummow asked me a question about defining the market, which I defined as the Australian wagering market, a submarket, I suggested, of the Australian gambling market.  That view is supported by the material before your Honours in two places.  One is the Access Economics Report, volume 2, tab 37 at pages 1539 to 1541.  It is separately supported, although less analytically rigorously, by what one sees in the Betting Exchange Task Force report itself, volume 2, tab 33, pages 1346 to 1362.  If one were to state it in what have become now traditional Part 4 terms, one would say that the product dimension of the market is all forms of betting on racing and sporting events, one would identify the incumbent producers as totalisators and bookmakers and one would see Betfair as the new entrant.

Features of the market that are mentioned in the material that I have just referred to but which I sought to draw attention to yesterday are these.  First, that there is State and Territory based licensing ownership and taxing of those incumbent producers, bookmakers and totalisators.  There is a pooling of totalisators that one sees in the special case at paragraphs 50 and 51, that is, different States and Territory totes combine for different purposes, and there is the gentlemen’s agreement to which I referred to yesterday, the only evidence of which before your Honours is in volume 2, tab 33, page 1237. 

Then the first point is your Honour Justice Hayne asked me about the meaning of the term “bookmaker” and I referred in part in answer to that to the reasons that one sees from Western Australian history for licensing of bookmakers.  We have prepared a note on that and we will provide your Honours with it.  Coming up in my discussion with your Honour was the question of whether bookmakers can match bets in the sense of taking opposite positions on the one outcome and the answer to that, which I hope I gave yesterday, but which I hope to reinforce, is, yes, they can, and yes, they do, in practice. 

If your Honours have to hand the Western Australian submissions, the written submissions of the defendant, in paragraph 23, a justification sought to be advanced for carving out bookmakers from the operation of the prohibition in section 27B is precisely that the traditional operations of a bookmaker may well involve the matching of bets. That is in the chapeau to paragraph 23 and spelt out in subparagraph (a), which refers to:

The situation where a bookmaker is prepared to accept a “back” bet from a punter above the “minimum wager obligations” only if they are able to “lay off” part of the bet to another bookmaker.

That is, as the footnote suggests, something contemplated by regulation 63 and rule 44 of the Rules of Wagering.  Also coming up in my discussion was can a bookmaker accept lay bets?  I referred in part in that context to regulation 50 of the Betting Control Regulations.  That is in volume 1, behind tab 4 at page 380.  What one sees in regulation 50 is that:

A bookmaker shall bet either against a first runner or for a win and a place –

That positive requirement in relation to a race is one which, at least implicitly, prevents the acceptance of a lay bet.  But it then goes on -

except in so far as . . . 

(b)in the context of a sporting event an approval under section 4B provides otherwise; or

(c)these regulations or the rules of wagering provide otherwise –

As I mentioned yesterday, and I do not ask your Honours to go back to it, it is at the end of the day rule 51(d) of the Rules of Wagering that expressly prohibit a bookmaker in Western Australia from carrying on the business of a betting exchange.  In the context of sporting events, which are referred to in regulation 50(b) your Honours will recall that it all depends on how you define the outcome of a particular event whether what is called the back is in substance a lay or not, Agassi, Federer, pretty much the same thing.

The final aspect of the factual context that I simply wanted to mention to your Honours before moving on to the law is this.  In our submissions in paragraph 41 we refer to a second resolution of the Australasian Racing Ministers and we point out in paragraph 40 that that resolution followed a presentation by participants in the racing industry.  The written version of that presentation to Ministers one finds in volume 2 of the book of documents, tab 35.

KIRBY J:   This is in case your written and oral submissions are inadequate to persuade us?  You are now giving us presentations of meetings by dissidents?

MR GAGELER:   This is not dissidents; this formed the basis of the resolution made by the Ministers on the second occasion.  No, it is not dissidents at all.

KIRBY J:   What is the reference?

MR GAGELER:   Volume 2, tab 35.  I just want to refer your Honours to two pages here, page 1482, the “EXECUTIVE SUMMARY”, the fourth paragraph, “For the racing industry itself,” and the fifth paragraph, “To put this into perspective” and across the page it is said, 1483:

This report also identifies a package of legislative measures available to State and Territory Governments –

If you go then to page 1508 you see just what that package of legislative measures to prohibit betting exchanges involves. On the left at page 1508 under 5.1.1 there is a heading “Addition of Section re Unauthorised Race Program”. Your Honours can call that section 27D. At page 1509 there is a heading 5.3.1 “Addition of Section re Betting with an Unlicensed Operator”. One could call that, although it has become more explicit, section 24(1aa).

KIRBY J:   Is this the source of the Western Australian provisions?

MR GAGELER:   It is obviously the inspiration, your Honour.

CRENNAN J:   What about the customers of an intrastate betting exchange?

MR GAGELER:   Mr Erceg, for example, was happily betting with us until this legislation came in.  The American cases really made quite clear that an effect of protectionist legislation is not simply to protect the local industry but to protect the local industry at the expense of local consumers, as it always is.

CRENNAN J:   There is always the demand side as well as the supply side in relation to a new product.

MR GAGELER:   That is exactly right.  Yes, so protect a producer, you harm the consumer.

KIRBY J:   I will read this but it looks a little bit protectionist in the sense that they are protecting licensed bookmakers and others in the business.

MR GAGELER:   Yes.

KIRBY J:   I do not assume that that is the way it is presented.

MR GAGELER:   No, they do not use that language, your Honour, but what they are saying is that we need to protect the income streams of the bookies and the TABs because by protecting the income streams of the bookies and the TABs we make sure that this traditional scheme of distribution of income from those wagering operators can continue to assist the industries that produce the racing and sporting products.

KIRBY J:   Is there anything in any of this voluminous material which tells us what has happened in the United States of America or in Canada or in other countries that ‑ ‑ ‑

MR GAGELER:   The answer is, yes.  We have dealt with those two jurisdictions in our submissions in reply in paragraph 2.  We dealt with the United States and Canada.  Your Honour has mentioned other countries.  We have done a few other countries, the ones that one usually looks at in constitutional contexts.

KIRBY J: Or Europe because the Europeans now have a sort of section 92 type integrated economy.

MR GAGELER:   They do and there is a process going on in Europe at the moment.  If your Honour wants some information, we can provide that.

KIRBY J:   I would like it.

MR GAGELER:   We will provide that. Section 92, your Honours, if I can deal with it conceptually, then its application to the particular prohibitions. We do not propose to read to your Honours from Cole v Whitfield, from Bath v Alston Holdings nor from Castlemaine Tooheys v South Australia.  The propositions that we take, we think, directly from those cases are these, if I may state them.

One is that section 92 is concerned with substance not form. Two is that the absolute freedom of interstate trade and commerce that is guaranteed by section 92 is an absolute freedom from protectionist laws. Three, that a protectionist law is a law that protects a producer in one State from competition with a producer in another State. Four, that the categories of protectionist laws are not closed. Five, that one category of protectionist law is a State law that burdens a product of another State more than it burdens a competing product of the home State unless that differential burden can be wholly justified and explained as incidental to the law setting out to achieve some legitimate object by proportionate means.

Six, that it matters not whether that differential burden arises from the facial operation of the law or from its practical operation.  Seven, that once the differential burden is shown to exist, the persuasive and evidentiary onus of showing that it is wholly justified and explained as incidental in the relevant sense falls on the party seeking to uphold the law.  Eight, that the protection of State revenue is not an object that is legitimate in the sense of being able to be employed to justify a differential burden.  That is the effect of Bath v Alston Holdings applying Fox v Robbins, the very first section 92 case. And nine, and finally, even where a legitimate non-discriminatory object is shown to exist, the degree of fit between the means and the ends needs to be more than simply rational or reasonable. It must be such as to wholly explain or justify the differential burden.

Applying that to Cole v Whitfield, the competing products in Cole v Whitfield were the larger South Australian crayfish and the smaller Tasmanian crayfish, one had a facially neutral law that in its practical operation totally prohibited the sale of the larger South Australian crayfish.  The identified object and the only one in play in that case was the conservation of a natural resource, undoubtedly accepted by everyone as a legitimate object and the agreed fact on which the case ultimately turned was that that total prohibition, by reference to size, was necessary to achieve that object.  That was the essence of the agreed fact.

In Castlemaine Tooheys, on the other hand, the competing products were the Western Australian beer sold in non‑refillable bottles and the South Australian beer sold in refillable bottles.  Again you had a facially‑neutral law but the practical operation of that law was to increase the price, make less competitive the Western Australian beer in the non‑refillable bottles.  The identified objects again – and there were a couple in play there but they were undoubtedly accepted as legitimate – they were related to conservation of the environment and the prevention of the litter problem.  Yet those identified objects were still held not to provide – and I am quoting here from the judgment:

an acceptable explanation or justification for the differential treatment -

When I say “quoting from the judgment”, those precise words appear both in the judgment of five and in the judgment of two in that case.  In the judgment of five, they appear at page 477 point 7, in the judgment of two they appear at page 480 point 9.  That in the end is what one is looking for and in the course of getting to that conclusion, what the Court examined in some detail, and with some scepticism about the material that was placed before it, was the availability of alternative and less restrictive means of achieving the same legitimate object.

What was not addressed in any of the three cases to which I have just referred was a situation where the true object, or a true object, of the law in question can be seen itself to be simply the preference, for whatever reason, of an in‑State producer over an out‑of‑State producer or, if you like, the protection of the revenue stream or income stream of the in‑State producer.  In our submission, where one finds that object – and I will come to what I mean by “object” in a moment – it is impossible to say that the law can be explained as being simply the by‑product of the pursuit of some other object.  The disqualifying protectionist object is itself enough to characterise the law, and one need not go any further.

What do I mean by “object”?  I mean by that the objectively determined, intended, practical operation of the law.  I am saying, using that language – I hope it is close to what I put in the written submissions – but it is supported by the approach taken by Sir Owen Dixon in Stenhouse v Coleman (1944) 69 CLR at page 471.  It is essentially the approach that your Honour Justice Gummow, as we read you, took in APLA v the Legal Services Commissioner 224 CLR 322 at paragraph 178.

In our submissions in reply, and to link this to the original intent of the Constitution that Cole v Whitfield pointed out, it was returning to – if your Honours could turn to paragraph 12 of our written submissions in reply – we have a quotation from Quick and Garran referring to the American case law of the last couple of decades of the 19th century.  This is indicative of how the American cases were viewed and well enough understood by the founders.

The following are examples of State laws, passed in the exercise of police powers, which obstruct and restrict inter‑state commerce, and which consequently violate the rule of commercial freedom, viz, a law prohibiting the introduction into a State of cattle or goods during certain periods of the year, ostensibly for sanitary purposes, but in reality for State protective purposes, held unconstitutional…prohibiting the introduction into a State of certain kinds of human food, unless inspected before its preparation, ostensibly for sanitary reasons, but in reality for State protective purposes ‑

Then there is a reference to Minnesota v Barber and further on there is a reference to Leisy v Hardin.

I want to say something about those cases.  Leisy v Hardin is referred to in Fox v Robbins in all of the judgments as the origin of our section 133 of the Constitution. It dealt with liquor. Section 113 dealt with liquor and it was really in ‑ ‑ ‑

GUMMOW J:   The Wilson Act.

MR GAGELER:   The Wilson Act, exactly. Well known, so much so that in the light of section 92 it was seen to be appropriate to put in section 113 just to deal specifically with liquor. That is discussed in Fox v Robbins.  We have also given your Honours a bundle of historical material, which I will not go to, but we have sought to extract pretty much all the relevant parts of the Convention Debates. 

What one does see in those Convention Debates though, going to the other case that I wanted to mention, Minnesota v Barber, Minnesota v Barber is referred to in the Convention Debates at least twice, one at page 151 by Mr Higgins – I am referring to our bundle of historical materials – and on another occasion at pages 162 to 163 by Mr Barton who said that Mr Isaacs had referred him to the case. This was a case which was really quite well known at the time and it came to be cited later, as we mention in footnote 35 to our submissions in reply, by Justice Barton in his discussion of section 92 in Duncan’s Case 22 CLR 598, a case very well known.

We have given your Honours that case in the plaintiffs’ bundle of US case law behind tab 3.  It is a case that would bear more time that I am proposing to give it.  What it concerned, if you look at page 314 – I am here in the plaintiffs’ bundle of US case law behind tab 3 – there is the statute in question which ostensibly for the protection of the public health prohibited the sale of meat in the State which had not been inspected in the State before it was slaughtered.  What one sees at page 319 and following is a very interesting analysis of the purpose of that legislation.  In the middle of the page it is said:

The presumption that this statute was enacted, in good faith, for the purpose expressed in the title, namely, to protect the health of the people of Minnesota, cannot control the final determination of the question whether it is not repugnant to the Constitution of the United States . . . “in whatever language a statute may be framed, its purpose must be determined by its natural and reasonable effect.”

Over the page at page 320 there is very interesting quotation from Soon Hing v Crowley, the general effect of which is where you find a statute that has a number of practical operations, one presumes that it is intended to have each of those practical operations and, omitting some very interesting discussion, leads to the point at page 323.  About the sixth line it is said:

Our duty to maintain the Constitution will not permit us to shut our eyes to these obvious and necessary results of the Minnesota statute. If this legislation does not make such discrimination against the products and business of other States in favor of the products and business of Minnesota as interferes with and burdens commerce among the several States, it would be difficult to enact legislation that would have that result.

An application of that case in circumstances not hugely different from the present is in the case at tab 5 of the same bundle.  This was a case where a State sought to prohibit that oleaginous substance known as margarine, which, of course, was going to ruin life as some people knew it at that time.  The prohibition was on the manufacture and the sale and the prohibition in that very broad term had the effect of preventing interstate produced margarine from entering the State.

At page 6 – and this could, if you change some of the words, be treated as a mirror of the arguments that we are presented with in the present case – it was said:

Counsel in behalf of the Commonwealth –

that is the State –

rests the validity of the statute in question upon two principal grounds:

(1.)    That oleomargarine is a newly invented or discovered article, and that each State has the right in the case of a newly invented or discovered food product to determine for its citizens the question whether it is wholesome –

et cetera.  At page 14 and 15 there is a discussion of that – and I should say, that the court had a pretty close look at what oleomargarine was like in the second half of last quarter of the 19th century and had no particular difficulty in forming a view that it was not always a problem.  At the top of page 14 it said:

We do not think the fact that the article is subject to be adulterated by dishonest persons, in the course of its manufacture with other substances, which it is claimed may in some instances become deleterious to health, creates the right in any State through its legislature to forbid the introduction of the unadulterated article into the State.

One can see that then developed over that page and the next page.  But the point is the fact that in some circumstances some criminal elements may cause a problem does not ‑ ‑ ‑

KIRBY J:   That looks to be the basis of the dissenting opinion which I note Justice Harlan agreed where he says at 30 that essentially this is a matter:

of public policy, the determination of which belongs to the legislative department, and not to the judiciary ‑ ‑ ‑

MR GAGELER:   Yes.

KIRBY J:   So there is nothing new under the sun?

MR GAGELER:   No, no, there is always a range of views.

KIRBY J:   They were debating this in 1897 and here we are more than a century later debating the same things.

MR GAGELER:   That is right.  There you go, your Honour.  I am just making the point that that is the dissent.

GLEESON CJ:   Suppose you had in a State a flourishing tobacco industry which employed a lot of people and contributed a lot to the revenues of the State because it was heavily taxed and suppose for purposes which included a purpose of protecting its local tobacco industry a State prohibited the importation and sale of marijuana, how would you test the validity of that legislation, that prohibition, the prohibition being, for amongst other purposes, a protectionist purpose?

MR GAGELER:   We would say, if an object of the law – I think the way your Honour framed the question is “the object of the law”. 

GLEESON CJ:   No, an object.

MR GAGELER:   An object and I will take it as that.  If an object of the law can be seen from the totality of the context to be the protection of the local competing product – it is a big assumption but there is a competition between those two products but assuming that to be the case then the law would be protectionist and the whole world can see it is protectionist and the Court would find, in those circumstances, it to be protectionist.

Your Honour’s example is not hugely different from the Vacuum Oil Case that I think Mr Young will say something about in due course.  I just wanted to go to one other case – one other Australian case.  This is the case that precedes Cole v Whitfield but is endorsed in Cole v Whitfield as an example of the application of the reasoning thenceforth proclaimed as appropriate to the one for section 92. It is North Eastern Dairy 134 CLR 559. Amongst the provisions in issue in that case and held to be invalid under section 92, one sees at page 594 regulation 79(10)(c) which prohibited the sale of:

pasteurised milk for human consumption or use by man in New South Wales that has not been pasteurised by a holder of a certificate -

under the local Act.  That was dealt with in a rather robust way by Chief Justice Barwick at page 578 where he said in the second paragraph:

It is, in my opinion, quite apparent that the sole purpose of any attempt by expropriation or by prohibition of sale to prevent the entry into New South Wales from Victoria of milk and milk products is the protection of the monopoly of supply which the producers in New South Wales of milk and milk products and the Authority itself would consequently enjoy:  in other words, the grounds of the exclusion are economic.  To use Sir John Latham’s phrase . . . what, in my opinion, is sought by the statutory provisions, so far as concerns milk produced and pasteurized outside New South Wales is a “cordon economique”.  No question of a “cordon sanitaire” arises in these cases.

At page 635 in the judgment of Justice Jacobs in the fourth line it is said that:

There is nothing in the cases or the material before the Court to suggest that Victoria has a defective or ineffective system of hygienic control of its milk production and treatment.

If one goes back to the judgment of Justice Mason one sees the structure of reasoning that later became reflected in Cole v Whitfield.  At page 607, dealing with regulation 79(10)(c) he says, in the middle of the page:

The regulation prohibits the sale of the product of another State whilst permitting the sale of the competitive product produced within the State. As the prohibition discriminates against the products of other States, unless it can be justified as a regulation of interstate trade, it falls within the field of operation of s 92.

Going across to page 608 and picking it up in the middle of the page:

The defendant’s case was that it was for the legislature to choose the method of regulation which it thought necessary or desirable.  This is to disregard the constitutional injunction as it has been interpreted by the Court.  It is for the defendant to show that the regulation is permissible and, to do so, it must satisfy the Court as a matter of fact that the method of regulation selected, because it protects public health, is a reasonable regulation of interstate trade.

Here the legislature has selected a mode of regulation which, perhaps advisedly, is calculated to burden, indeed to destroy, the interstate trade in pasteurized milk, in preference to other modes of regulation which would involve no discrimination against the Victorian product.  As the defendant has failed to show that the discriminatory mode of regulation selected is necessary for the protection of public health, it is in my judgment not a reasonable regulation –

That is the notion of reasonable regulation that feeds through in the test as stated in Cole v Whitfield and as applied to strike down the law in the Castlemaine Tooheys’ Case.

GLEESON CJ:   Just before you leave that decision of Justice Mason, I think you referred to a passage where he said the law prohibits and permits, prohibits the interstate and permits the local, is that right?

MR GAGELER:   That is at page 607 at about point 6, your Honour.

GLEESON CJ:   Yes.  Now, the relevant permission in the present case, is that to be found in ‑ ‑ ‑

MR GAGELER:   There are two of them, they just achieve the purpose in slightly different ways. The first prohibition is in section 24(1aa) ‑ ‑ ‑

GLEESON CJ:   No, it is a permission I was looking for.

MR GAGELER:   Sorry, the permission. The permission is contained in the scheme of the legislation that pre-exist this prohibition, that is, the permission for bookmakers to provide a wagering product and permission for RWWA to provide a wagering product. We do not have to go any further than that, your Honour. Can I come then to the prohibitions. If your Honours turn to section 24(1aa), the prohibition is that:

A person who bets through the use of a betting exchange commits an offence.

Penalty: $10 000, or 24 months imprisonment, or both. 

Then “bets” is defined in subsection (2) to include “negotiating bets” or “settling bets”:

on or in connection with the result of any race or sporting event –

There is no express territorial nexus in section 24. For that purpose one needs to go to section 12(1) of the Criminal Code, which your Honours have in our bundle of materials, volume 1, tab 6, page 484.

GUMMOW J:   We looked at this in Pinkstone v The Queen.

MR GAGELER:   Your Honour looked at?

GUMMOW J:   The Court looked at that provision in Pinkstone v The Queen 219 CLR 444, case of importation of drugs from New South Wales to Western Australia.

MR GAGELER:   Yes. I will have a look at that, your Honour. I had overlooked it. The gist of section 12(1) is that an offence will be committed if all elements necessary to constitute the offence exist and at least one of the acts, permissions or events that make up the events occurs in Western Australia. So we read and it is common ground between the parties that the operation of section 24(1aa), that is, the legal operation of section 24(1aa), is to prohibit any person in Western Australia ‑ ‑ ‑

GUMMOW J:   Is what?

MR GAGELER:   To prohibit any person in Western Australia from betting through the use of a betting exchange ‑ ‑ ‑

GUMMOW J:   From negotiating a bet.

MR GAGELER:   From doing any of the things that amount to “bet” within the definition of subsection (2) in Western Australia but with a betting exchange existing anywhere in the world and on a race or a sporting event anywhere in the world.

GUMMOW J:   So what the second plaintiff was doing would be caught, in other words.

MR GAGELER:   What he was doing, yes.

GUMMOW J:   Would now be caught?

MR GAGELER:   Yes.  He would be risking a $10,000 fine or imprisonment, that is right.  Obviously the immediate effect of a prohibition, even treating it as a facially neutral prohibition, the immediate effect of that prohibition and presumptively, if you apply the American cases, its purpose or object is to prevent a person in Western Australia from betting by internet or telephone with Betfair Australia situated in Tasmania to the obvious competitive advantage of RWWA and Western Australian bookmakers.

We point to substantive discrimination which I was just touching upon, but there is also a pretty obvious facial discrimination where, if one goes back to the definition of “betting exchange” in section 4AA, page 7, it expressly carves out a betting exchange or a facility operated by a bookmaker.  That facility operated by a bookmaker or for a bookmaker would allow someone to bet with a bookmaker is not a betting exchange. 

Read that with section 27B and one sees that this prohibition on establishing or operating a betting exchange in Western Australia as pretty odd prohibition because subsection (2) carves out anything done by the holder of a current bookmaker’s licence so a bookie is not prohibited by this Act from establishing or operating a betting exchange. The only thing that prevents a bookie from doing so at the moment is that little paragraph in the rules of wagering made by RWWA.

CRENNAN J:   But you will not have intrastate customers.  That is a point I have been trying to raise with you a couple of times.

MR GAGELER:   I am sorry, your Honour.

CRENNAN J:   Just how you construe 27B(1) and the carve out, how does it really operate realistically?

MR GAGELER:   It does not really matter for my purposes, but I see where your Honour is going.  I had not appreciated it before.

CRENNAN J:   No, it may not matter for your purposes.  I have just been trying to tease out from you how it all works in terms of there being a point to an intrastate producer of betting exchange services.

MR GAGELER: If I can just spell out where I think your Honour is going with it, one can see that in section 27B a bookmaker can establish and operate a betting exchange. Given that, your Honour’s question is how then does the prohibition in section 24(1aa) operate? Does that mean that a person in Western Australia is still prohibited from betting through a Western Australian bookie’s betting exchange? We think the answer to that is, no, simply as a matter of construction because betting exchange, for the purpose of section 24(1aa), is the betting exchange defined in section 4AA and when the facility in question allows only the placing of bets with a bookmaker, that is, a Western Australian bookmaker as defined, then it is not a betting exchange for the purposes of section 24(1aa) and therefore does not fall within the prohibition.

Your Honour’s question is very interesting. Even if that were not right so that the prohibition in section 24(1aa) still applied, it prevented a person in Western Australia betting with RWWA ‑ ‑ ‑

CRENNAN J:   Or a bookmaker.

MR GAGELER:   Or a bookmaker, what you would still have is a very odd but protectionist measure which allowed the local producer to set up a betting exchange in competition with the interstate betting exchange everywhere else except in this State, but which kept the State market, the consumers within the State market, to betting with those same producers but by 19th century or 20th century means, not 21st century means.  That is what you would have.  It would still be protectionist but a little bit more subtle.

HAYNE J:   The resolution of the conundrum that Justice Crennan puts to you may possibly be an important intermediate step in considering what is I think the fifth of your propositions.  The hypothesis put against you is that the product which you sell is, to use a general and non-specific term, a bad product because it facilitates or encourages other unlawful conduct.

MR GAGELER:   Yes.

HAYNE J:   You deny the truth or the accuracy of the proposition about facilitation or encouragement?

MR GAGELER:   Yes.

HAYNE J:   I understand that, that is one area for debate.  In your fifth proposition you speak of justification and explanation of the legislation as being incidental to a legitimate object by proportionate means.  Is it an essential step in your argument that we pass upon the accuracy or the strength of the proposition about facilitation or encouragement of unlawful conduct that underpins the characterisation of the product as bad?

MR GAGELER:   No.  Your Honour, I was just dealing at this point with the facial discrimination that one sees.  I am going to come to substantive discrimination in a moment, but just dealing with the facial discrimination, it is impossible for our learned friends to assert that there is something inherently problematic about the establishment of a betting exchange if it is true that they are permitting their own in-State wagering ‑ ‑ ‑

HAYNE J:   Exactly so, and it was at this point that Justice Crennan’s inquiry touched directly upon ‑ ‑ ‑

MR GAGELER:   Yes, your Honour is exactly right, and it is a point that I think ‑ ‑ ‑

GUMMOW J:   It is an approbation and reprobation point really.

HAYNE J:   Just so.

MR GAGELER:   Exactly, and it is a point that we have made in our written submissions, but, yes, very much.  But I am not sure whether your Honour’s question was, is it essential to my argument?  No, but it certainly helps my argument.

HAYNE J:   Well, if there is no approbation and reprobation, if they are not speaking with forked tongue, that is, assume your facial discrimination fails, is it nonetheless an essential part of your argument that we pass upon then the facilitation or encouragement aspect?

MR GAGELER:   No, because another limb of my argument – let me move to it directly?

HAYNE J:   Take it in whatever order is best.

MR GAGELER:   Your Honour, I was about to come to it in about three sentences.

HAYNE J:   Yes.

MR GAGELER:   I was just going to point out that as well as the facial discrimination in respect of bookmakers, that is, on our construction bookmakers are not prevented from setting up a betting exchange and they are not prevented from operating a betting exchange and a person betting in Western Australia is not prevented by section 24(1aa) from betting through the use of such a betting exchange.

There is by the operation of RWWA’s own Act a similar facial discrimination that one gets from the law in that RWWA is not prevented from setting up its own betting exchange and a person betting with the RWWA – and I am told that is how you say it – is not prevented by section 24(1aa) from betting on RWWA’s betting exchange and that is through the operation of section 56(1)(a) of RWWA’s own Act which prevents the betting with RWWA being an offence under any other Act. We read that as including section 24(1aa).

If that were not so, it would be extremely odd that section 27B(2) would carve out from the prohibition on establishing or operating a betting exchange anything done by RWWA, but the prohibition in section 24(1aa) would still apply to the betting exchange set up by RWWA does not make much sense, it certainly does not make much commercial sense, and I will not say any more about that.

Can I come to your Honour Justice Hayne’s question and answer it in a structured way.  Forget about all that, just treat these as differing wagering products and ignore the ability of Western Australian bookmakers and RWWA to set up a facility that produces an exact equivalent product.  They still produce a 19th or 20th century competing product.  What you have here then is a facially‑neutral law by hypothesis that in fact imposes a differential burden on an out‑of‑State product.  This differential burden is extreme; it is total prohibition, a prohibition that simply does not apply to the in‑State product. 

You find, in our submission, that an object, a substantial object, is to protect the turnover of RWWA and Western Australian bookmakers from the competitive impact of Betfair.  That is per se protectionist.  You do not need to go further.  That is our first argument.  On that view your Honour does not need to go any further.  But, additionally, or alternatively, if one accepts, as we do, that a legitimate non‑discriminatory object of State legislation is to protect the integrity of racing and sporting events in the State, then, yes, one does need to ask whether the pursuit of that object by proportionate means does justify the differential burden. 

Does it justify leaving provisions that simply regulate bookmakers and RWWA in the production and sale of their 20th century product but totally prohibit the sale of the 21st century product produced out of State?  In dealing with that question, we draw your Honours’ attention to our written submissions at paragraph 98 – they are our submissions in‑chief – where we have set out what we ask the Court to find on the basis of the material. 

The first of the matters we put forward – bearing in mind that it is not our onus, and perhaps this is not clearly enough expressed in the written submissions but I have sought to make it clear.  Once you find the discriminatory burden, then it is for your Honours to be satisfied of the legitimate object and the proportionate means, as spelt out in the North Eastern Dairy Case and as illustrated in Castlemaine Tooheys.

HAYNE J:   Both of those were dealing with identical products where neither was said to wear the hat “bad product”.  NEDCO works from the premise that you cannot say the pasteurised milk produced in Victoria is somehow imperfect.  That was the premise for NEDCO.

MR GAGELER:   If your Honour is asking me is this a slightly different case, yes, of course it is and was it easier for the court really to take a common sense approach and say obviously pasteurised milk from Victoria is going to be the same as pasteurised milk from New South Wales, which is the premise, but it is a factual premise, your Honour.  Here your Honour has a great deal of material that demonstrates the substantial similarity between these products.  If one looks at this integrity issue, your Honour also has a great deal of material, as referred to in our written submissions, that goes to the question of whether or not the integrity issue with betting on a betting exchange is really any different from the integrity issue of betting by other means.

That is what we have dealt with in paragraphs 69 through to 78 and was really what I was seeking to address at some length yesterday.  Probably the crunch point is paragraph 75 where we have really made the point that it is pretty easy to lay a horse with a bookie or with RWWA.  What prevents it from being really easy to lay a horse with RWWA or a bookie?  Two things.  One are the odds and the other is the over‑round.  What do they really come down to?  The price.  It is because of the high prices of RWWA and Best Bookies that a person with the appropriate technology cannot lay more outcomes.  As those competitors become more competitive, as their price reduces, it becomes more possible.  In a sense, what is it that prevents the laying of outcomes being more of a problem?   It is the higher prices.

The reality is this, that there is a risk to the integrity of a racing or sporting event that arises from any form of betting.  There is, and one can fairly easily see, a high risk that comes from laying than comes from backing.  What is the risk?  It is the risk that someone who is able to lay can manipulate or profit from inside knowledge of a racing or sporting event.  Who is that someone?  It is some corrupt or criminal element within the racing or sporting body conducting the race itself or someone very closely associated.  That is the sort of person you are talking about.

CRENNAN J:   You have not made much of it.  I mean, it is a very product-centric argument, but I have assumed from something you said before that you are also relying on the evidence about the demand side as well as the product side.

MR GAGELER:   Yes.

CRENNAN J:   Because in a sense that is a stronger point for you, possibly, if the Court does not accept everything you say about what I call the product substitutability.

MR GAGELER:   We certainly do embrace the demand side.  As I said, a point made in the American cases, which I was not going to – and I am conscious of the time, but if your Honours were to go back to paragraph 98 of our written submissions, that is the point we make in the first subparagraph.  We go on though to point out in the second subparagraph that there are other ways, less restrictive means, of dealing with questions of integrity in respect of betting exchanges.  There are two places in the world where betting exchanges have been specifically regulated before Western Australia.  One was United Kingdom and two was Tasmania.  You are looking for less restrictive means, there you see it. 

Then, finally, in subparagraph (4) we make the point – and it is really quite an important point – that even if it were thought appropriate to go alone and to seek to protect the integrity of sporting and racing events in Western Australia, this is a very odd way to go about it.  It is a sledgehammer to crack a nut by stopping a person in Western Australia – that is all you are doing, stopping a person in Western Australia – from betting upon a tennis match in Sydney in circumstances where Tennis Australia, referred to in footnote 282, is perfectly happy for Betfair to offer its Betfair product in respect of its sporting event or, to expand it a little further, to prevent a person in Western Australia, as was the case just a couple of days ago, from betting on the Melbourne Cup in circumstances where the Victorian body responsible for racing is perfectly happy – I will show your Honours this in a moment – to allow Betfair to offer its product in respect of its race.  It is absurd, in our submission.

Section 27D I need to deal with and then I will stop, your Honours.  I need to give Mr Young some time.  Section 27D(1) prohibits “A person to whom this section applies”, that is a person referred to in subsection (2) ostensibly - and I use that word advisedly in the American sense – a bookmaker or a tote or the operator of a betting exchange anywhere in the world.  So it prohibits such a person publishing or otherwise making available a Western Australian race field unless authorised to do so by an approval.

There is in subsection (2) then a requirement for an application in writing to be made; in subsection (3) for an approval to be conditional; in subsection (5) for the Minister before deciding upon an approval to have regard to prescribed criteria, and in subsection (6) a provision allowing the Minister to refuse to give an approval if satisfied that the approval would not be in the public interest ‑ ‑ ‑

GLEESON CJ:   These race fields are commonly published in the newspapers, are they not?

MR GAGELER:   Yes.  It is not as if the information is not readily available, yes.

GLEESON CJ:   The newspaper information is all available on the internet.

MR GAGELER:   Yes, that is exactly right. It is just the wagering provided, that is, the person carrying on the business is ostensibly prohibited by this. Your Honours recall that this was introduced together with the prohibition in section 24(1aa) as part of the same package and also at the same time those provisions to which I had referred in the RWWA Act were inserted.

GUMMOW J:   What is the force of this phrase, “in the course of business” in 27D(1)?

MR GAGELER:   I beg your pardon, your Honour?

GUMMOW J:   What is the reach of this expression “in the course of business”?  Why does the newspaper publish it in the course of its business?

MR GAGELER:   It has to be a person ‑ ‑ ‑

GUMMOW J:   It has to be a person to whom the section applies?

MR GAGELER:   Yes, a person to whom the section applies.  I do not want to do too much to defend this law but I do not think I can bring the newspaper into it.

GUMMOW J:   That brings you back to section 27C(2).

MR GAGELER:   Yes, that is right. I was going to point out that this provision went in at the time of the RWWA Act being amended to confer in section 35(1)(ba) the function and in section 35(2) the power on RWWA to enter into commercial arrangements for the exploitation of race fields. If you go to our written submissions in paragraph 47 you see the second reading speech extracted. The second reading speech deals initially with section 24(1aa) and it gets to section 27D at the top of our page 17. There are a couple of things to point out about it. It said:

The bill includes another measure intended to protect the integrity of Western Australia racing.

Remember, this was really another suggestion that had been put forward to racing Ministers and formed the basis of the second of the resolutions that I have drawn your Honours to.

GLEESON CJ:   All this information is readily available in other forms, however, as the Western Australian equivalent of what used to be Dymocks, presumably, sells race books at the track?

MR GAGELER:   Exactly.

GLEESON CJ:   So this prohibition on publication of this generally available information is aimed at ‑ ‑ ‑

MR GAGELER:   Your Honour will see it is just aimed at Betfair.  That is the long and the short of it.  You see that in that passage – I will not read it – at page 17, the whole idea of this, the public interest test, the prescribed criteria, the whole idea of it was to get at Betfair.  If your Honours have the special case addendum which is a slim volume – let me just go to the punch line – if you go to paragraph 8 of the special case addendum the statistics tell it all:

As at 26 October 2007, 115 applications for approval to publish or otherwise make available WA race fields had been made pursuant to s 27D of the BC Act.  As at 26 October 2007, the Western Australian Minister for Racing and Gaming or her delegate (the Gaming and Wagering Commission of Western Australia) had approved 110 of those applications and refused 1.  The remaining applications had not yet been determined.

Guess who the “1” is and guess why we did not get approval?  The Minister has really spelt that out behind tab 55 at page 2437 and really she would not have needed to go beyond 21.1, “the regulatory policy of the Act”.  It was obvious and intended at the time this discretion was inserted.

We do not make a case that every executive discretion is going to be contrary to section 92 as you find in some of the old transport cases, for example. There are some very strong statements to that effect. We do not need to go that far. We say when you find a discretion that is simply a smokescreen for a prohibition, you call it as it is.

Your Honours, we have said as much in our written submissions in paragraph 87, but having prepared those written submissions, we came across another passage that we want to refer your Honours to.  If your Honours go to page 626, this is in the judgment of Justice Evatt quoting Lord Atkin in James v Cowan:

“If,” said Lord Atkin, “the real object of arming the Minister with the power of acquisition is to enable him to place restrictions on inter-State commerce, as opposed to a real object of taking preventive measures against famine or disease and the like, the legislation is as invalid as if the legislature itself had imposed the commercial restrictions. The Constitution is not to be mocked by substituting executive for legislative interference with freedom.”

GUMMOW J:   That last sentence is pretty famous, is it not?

MR GAGELER:   Well, it had just escaped me until recently.  That in itself is a complete show stopper, in our submission, in relation to section 27D(1).  There is one other form of discrimination that is inherent in the section and that is that the imposition of conditions is in the very design of the section in the context spelt out in the second reading speech and in the context of those provisions going into the RWWA Act, a method of allowing RWWA to have a commercial veto of the use of any Western Australian racing product into a competitor’s wagering product.  That is the effect of the imposition of the prohibitions.  Of all of those 110 approvals that have been granted, all of them have been subject to a condition that the user enter into a commercial arrangement with RWWA.  That, in our submission, is per se protectionist.

Your Honours, I am told I had better stop.  I have not dealt with the conflict of State laws.  It is pretty fully set out in our written submissions.

GLEESON CJ:   Yes, thank you, Mr Gageler.  Yes, Mr Young.

MR YOUNG:   If the Court pleases, we generally adopt Mr Gageler’s submissions in support of the arguments he has advanced. We wish to present a framework of analysis that differs in some respects. They might be described as matters of emphasis but they do provide a different way of analysing the application of section 92 to these two provisions. We start with a remark by Justice Hayne in APLA at paragraph 416. It is not necessary to go to it, I can read it, it is very short. His Honour said:

s 92 may be understood as striking down laws aimed at interstate trade, commerce, or intercourse.

The striking characteristic of both section 24(1aa) and section 27D is that each is aimed at interstate commercial communications.

KIRBY J:   Could you explain to me just briefly what the interest of the government of Tasmania is to support the present plaintiff?  I do not doubt that there is an interest, but ‑ ‑ ‑

MR YOUNG:   Yes.  Both sections impinge upon the operations of Betfair, which has been licensed by Tasmania to conduct its commercial operations in and from Tasmania.

KIRBY J:   Do you have some obligation to facilitate their activities with respect to Western Australia, a fellow State?

MR YOUNG:   Wherever their activities reach, your Honour, those activities produce revenues for the State of Tasmania and revenues for the Tasmanian national racing industries.

KIRBY J:   One of the suggested reasons that are put forward to support the Western Australia legislation is the fear that the revenues which flow to the State will be affected by Betfair’s operations.

MR YOUNG:   That is so, your Honour, but the revenues that flow to the State - in a sense the State Government - are secondary to the industry revenues.

KIRBY J:   So they have to get close and cosy with Betfair in order to get the revenue - is that it - as you have done?

MR YOUNG:   No, your Honour.  By licensing Betfair – and it is open to other jurisdictions to licence Betfair, and each jurisdiction can then take their respective share of whatever tax take affects Betfair’s revenues, but by licensing Betfair, Tasmania has done two things.  It has led to the creation of a business in Tasmania which employs substantial numbers of Tasmanians.  Secondly, it generates revenues for Tasmania in the form of a tax take, but also revenues that are then directed to some extent by way of a contribution to the local racing industry, and it is open to any State to licence a betting exchange, just as they have established totalisators, and to derive revenues from the operations and income and employment opportunities for the State.

Under the arrangements that have been in place where you have totalisators in each State, there is effectively a revenue‑sharing arrangement in place between the various States.  The only reason that Tasmania is seen as solely deriving the revenue is that it is the only State which has licensed a betting exchange, namely Betfair ‑ ‑ ‑

KIRBY J:   So far.

MR YOUNG:   So far.

GLEESON CJ:   It broke ranks. But the consideration from the point of view of Betfair is that Betfair then got a product which, like the old margarine in the former days, had section 92 margarine on it.

MR YOUNG:   Yes, that is so.

KIRBY J:   It is a product and it is now in the Australian market, but on the other hand, there are words of wisdom in what Justices Gray and Harlan said in the Margarine Case.  They really said two things.  First, that it really is up to the party that is seeking relief to establish – and they cannot rely on judicial notice – the damage which they contend for and it cannot just be left to assumptions.  Secondly, that these matters of protection and discrimination are generally better dealt with in the legislative branch.  You may have reached your agreement with Betfair, but why is it not open to other States to say, “Well, we are concerned with issues of revenue, prize money, employment and also, perhaps, the exposure of little people to small bets and the peril of overreaching themselves in gambling and to take views on that which we are not really very competent to judge”?

MR YOUNG:   Yes. The framework I wish to present to your Honour addresses those questions. It starts with a proposition that both these sections impose a prohibition on interstate commercial communications and they do so with protectionist consequences and, we would say, purposes. Now, if we are right about that, that has the consequence, in our submission, that section 92 is engaged, so that the particular means, that is, prohibition of interstate commercial communications that have been chosen by WA to address this area of integrity, are impermissible means.

I can find some other means compliant with section 92 of the Constitution, but the choice of this particular set of means for protectionist purposes is, in our submission, foreclosed by section 92. It does not mean that the concerns cannot be addressed by means or methods compliant with section 92. That is what Tasmania ‑ ‑ ‑

KIRBY J:   The key, though, is your expression “for protectionist purposes”, and that requires characterisation.  There is evidence before us that there are other purposes that are of concern to those who have taken a different course to your government.

MR YOUNG:   Yes, your Honour, that is so, but the characterisation required by section 92 is a characterisation as to whether the law is protectionist or not. Even if the law has, assumedly, several objects or purposes, if one of them is a substantial object or purpose of protection, the question arises, do you characterise the law by reason of that as a protectionist law, falling foul of section 92. Our submission is that you do, and it is unnecessary to engage in any weighing up of the strength or thinness of the concerns about integrity in that regard. That is where our framework that we hope to summarise at least in the time available perhaps differs in emphasis somewhat from the plaintiffs’.

HAYNE J:   But that characterisation of protectionist consequences and purposes is, I assume – is it – a characterisation founded on the legal and practical operation of the law, not some inquiry into motives of legislators.

MR YOUNG:   Exactly so, your Honour; yes.

HAYNE J:   Is it not the case, then, that where differing opinions are formed in different State legislatures about the badness of a particular commercial product, that if one State permits its sale and another State seeks to prohibit its acquisition in its State, there is inevitably a protectionist consequence?

MR YOUNG:   There may be a protectionist consequence, but one question which arises is whether that consequence is incidental to an objective of the legislation which is non‑ protectionist.  If it is not incidental, but a substantial object of imposing that burden or restriction is to bring down protection for the benefit of competing traders intrastate, then you are in a realm where, in our submission, it is possible to characterise the law as protectionist without going the next step of engaging in a proportionality assessment of weighing the strength of the concerns about integrity and the reasonableness of the methods of protection introduced under the Tasmanian legislation to deal with the issue against the nature of the restriction that is imposed.

That is all well and good to engage in a proportionality analysis where the impact on interstate trade and commerce is incidental to a legitimate non‑protectionist objective, but when it is central to the objectives of the legislation, in our submission, that proportionality analysis may not need to be undertaken.

GLEESON CJ:   One of your opponents says against you, as I understand it, that this produces a lowest common denominator effect; this produces the consequence that you only have to persuade one State that your product is not so bad as to require prohibition that you then put the rest of the States, by force of section 92, in a position where they cannot prevent interstate trade in that product.

MR YOUNG:   I could argue about the terminology used by my opponents, your Honour, but I will not. Another way of putting that argument would be that it produces a national economic union in which one product cannot be banned for protectionist reasons from reaching into another State. That, we would say, is the underlying purpose of section 92 of the Constitution.

GUMMOW J:   Yes.  They said in America that States have to sink or swim together, and that is what happens.

MR YOUNG:   Yes.

GUMMOW J:   They also say that electors in one State cannot, through their connections or influence over legislators in one State, stand out against the impact of section 92.

MR YOUNG:   Yes. We would say the argument that the Chief Justice drew to my attention is really in a different form of words simply putting an argument against section 92 being construed in the way it was in Cole v Whitfield as a section designed to bring about a national economic union and to deny to the States the ability to impose burdens on interstate trade for protectionist reasons.

KIRBY J:   You are on the winning side in this matter, but next time you are up here you might be on the losing side.  You might have some environmental friendly thing or crayfish or something that you ‑ ‑ ‑

MR YOUNG:   Your Honour, if we have legitimate non‑protectionist purposes for the legislation, then you do need to engage in a process of analysis that involves questions like, is the burden adapted and appropriate? Is it proportionate?  Is it sufficiently justified or explained?  Are there alternative mechanisms available and so forth?  So that exercise will, in those sorts of cases, have to be undertaken.  But our first point is, it is, we submit at least, a different case where you have a direct prohibition on interstate commercial communications with protectionist effect and, we say, with protectionist objects.  Now, that is quite an unusual case ‑ ‑ ‑

KIRBY J:   By saying “the winning side” I was not of course foreshadowing this case.  I was simply saying, on your hypothesis you have put the product in the market and the argument is that can that then undo the right of the different States of the Federation to go a different way for good reasons that seem to them appropriate.

MR YOUNG:   I understood your Honour was putting the question that way.  Can I move to the steps in what we say is an appropriate framework of analysis in this case given the nature of these prohibitions.  First, we adopt what Mr Gageler said about the meaning of the term “object of legislation” as used in these cases.  It is objective.  It looks to the end results, the practical outcomes that the legislation seeks to achieve.  It is not merely a question of construction of the terms of the legislation.  It encompasses the mischief or concerns to which the legislation is directed, but it is not necessarily limited.  That is an example of an objective. 

Here can I very briefly just make some observations about the landscape that existed before the 2006 West Australian amendments?  This has largely been covered, but for the sake of clarity or emphasis can I make a few brief points without going to the source documents?  Pre these amendments, any person in WA could bet with authorised interstate operators, that is, totalisators or bookmakers in other States, including Betfair, throughout 2006.  WA in fact authorised several interstate bookmakers, Sport Odds is one, to operate from their base in New South Wales into Western Australia.

Section 27A(1), which is concerned with offshore betting from Western Australia to other parts of the country or overseas, contains in the concept of authorised interstate operators a reference to totalisators and bookmakers in other States.  That is a respect in which WA trust to the regulatory regimes existing in those other States.  It allows its citizens to bet with a bookmaker in Sydney but it trust the integrity regime that exists under New South Wales legislation to protect its citizens when bets are placed with such a bookmaker.

GLEESON CJ:   A bit like reciprocity of recognition of senior counsel?

MR YOUNG:   Yes, it is.  The gentlemen’s agreement also found reflection not just in an agreement about take, government take being equalised, but in these reciprocal authorisation and licensing arrangements of the kind embodied in section 27A(1) of the WA Act.  Likewise, WA licensed, or WA allowed its citizens to bet with Tasmanian bookmakers because they are authorised under Tasmanian legislation and the Tasmanian tote and they trusted to Tasmania’s integrity provisions in that regard.

Betfair was one of those licensed providers that the WA legislation contemplated for that period in 2006 and there is no suggestion of any integrity issues arising during that 12 months when Betfair received bets from WA persons.  WA also trusts large revenues emanating from WA to a TAB pool comprising the TABs of Victoria, Tasmania, ACT and WA.‑

KIRBY J:   I read somewhere, I hope it was in the record, that the revenue received from Betfair is very considerably lower than the revenue received from the totalisator board, very considerably lower.

MR YOUNG:   Yes, at the moment, but the effect of the task force report and the ministerial considerations that followed it was that there was a concern that Betfair’s share of the revenue would significantly increase in future years, so much so that 20 to 30 per cent of the revenues of WA or other licensed operators, bookmakers and totes in each State would be diverted to Betfair.  That is in the task force report, in the conclusion in the early part of it.

GLEESON CJ:   And hence to the Commonwealth Government by way of income tax paid by Betfair.

MR YOUNG:   Yes.

KIRBY J:   I do not know that the States would be all that tender about the Commonwealth’s revenue.

MR YOUNG:   Can I move to another point about the landscape pre-2006 amendments. A review of the WA legislation makes it clear that the establishment of a betting exchange in Western Australia pre the 2006 amendments other than by RWWA was already precluded by existing legislation, including sections 23 and 24 of the Betting Control Act (WA), section 43A of the Gaming and Wagering Commission Act 1987 (WA). If Betfair tried to get a license with a bookmaker in WA to conduct its operations, as Mr Gageler has said, that would be precluded by the existing rules of wagering. So Betfair could not establish a betting exchange in WA even before these amendments without becoming a licensed person in some way.

KIRBY J:   I suppose there is nothing that would stop the totalisator agency boards of the different States, or whatever they are called now, going into this market of internet betting.

MR YOUNG:   That is so, your Honour.

KIRBY J:   In Tasmania you have no doubt reached some agreement that would maybe prevent it there, but at the present state of play in the other States presumably if they can shake off their 1950s thinking, that is something which the totalisator boards could do.

MR YOUNG:   That was deliberately left open in Western Australia’s case by the provisions of the amendments and the RWWA Act.  Particularly sections 55 and 56 of that Act would entitle it to establish a betting exchange.  So that was left open.

KIRBY J:   Maybe the reason they have not is social policy, that they have come to a view that the peril of little people putting multiple, some very small bets on the internet and then getting sucked into further and further gambling beyond their means is not socially good.

MR YOUNG:   I doubt that was the explanation, your Honour.  The more likely explanation of this option being left open to RWWA was that if prohibition did not succeed, for constitutional reasons they would join the party.

KIRBY J:   There is a real debate in our society, though, and we cannot get away from it.  There are people who think there is too much gambling and that it is not good for people with small incomes.  It is very bad for some.  It is an addiction.

MR YOUNG:   Yes, I understand that, your Honour, but that is not generally the view that has been taken by the State Governments concerning the racing industry.  They see it as a large employer ‑ ‑ ‑

KIRBY J:   Their motives may not have been entirely pure.

MR YOUNG:   No. The point I make in these references is simply this. There was no need for the enactment of section 27B in 2006 to preclude the establishment of a betting exchange in WA. It was already precluded by existing legislation, other than by RWWA, which is carved out of section 27B anyway. Section 27B gives the appearance of facial neutrality in terms of generally regulating betting exchanges but that provision was unnecessary because it was already prohibited.

The third part of the landscape before the 2006 amendments I do not need to stress.  There was competition happening from Betfair.  Betfair was diverting revenues from WA bookmakers and WA tote.  It was offering lower commissions than the WA totalisator or WA bookmakers and the fear through all those industry documents is that the diversion of revenues towards Betfair would accelerate greatly and that bookmakers and totalisators operating in WA in relation to racing would lose a lot of revenue to Betfair.

KIRBY J:   That is a pretty legitimate concern for a State Government and Parliament.

MR YOUNG:   Yes, your Honour, but if they pursue that by prohibitions on interstate commercial communications for a protectionist reason, then that means of addressing that concern is not legitimate. 

The next step in the framework we submit might be adopted is this. An appropriate starting point for the analysis of section 92 is to inquire whether the particular provisions in question have a protectionist effect. In other words, you start with practical effect and the facts on the ground. That is the starting point that was adopted in Castlemaine Tooheys and in Bath v Alston.  Here there is no doubt that Betfair was in competition and these provisions prevent that competition continuing.  The effect of the legislation is protectionist in that sense and any view of the material would lead to the conclusion that one substantial object of the legislation is to protect WA’s licensed operators from a loss of revenue to Betfair.

Mr Gageler foreshadowed that I was going to ask the Court to go briefly to the Vacuum Oil Case 51 CLR 108. This is a decision that reflects, in our submission, an earlier approach to section 92 before criterion of operation took over, as it were, for a period. The legislation is summarised in the headnote. It was a prohibition on the sale of motor spirit in Queensland unless the seller held a particular licence and there was an ancillary provision requiring a holder of the licence to purchase and pay for a different product, power alcohol, manufactured from cane sugar and molasses. A majority of the Court struck the provision down as contrary to section 92.

I wanted to direct the Court to Justice Dixon’s analysis.  The facts are first mentioned at the outset of his Honour’s judgment at 123.  So the two critical landscaped facts were power alcohol was produced in Queensland, and there was no production of petrol motor fuel in Queensland.  It is all imported either from other States or from overseas, as his Honour goes on to explain.  So the only motor spirit to which the section, the prohibition, could apply was imported motor spirit, including importations from interstate.

His Honour’s analysis is to look at the practical effects of the prohibition.  The analysis is at page 128, commencing at about line 7.  His Honour first points out that the statute was facially neutral.  He then observed that “petrol is not produced in Queensland” and his Honour then deals with the true purpose and effect of the two provisions.

It is our submission that that kind of analysis is entirely in line with Cole v Whitfield and the cases that have followed it.  You examine the true factual situation into which the legislation is pitched and if it involves a prohibition on interstate movement of goods, interstate commerce, and it is for a protectionist purpose, that is the end of the analysis.  It is unnecessary to go into any kind of proportionality assessment.  That is much the same analysis as was undertaken in NEDCO, and it is much the same analysis as ‑ ‑ ‑

KIRBY J:   Is that a correct approach, though? I mean, that really looks into the motivations as distinct from the effects of legislation. First of all, there is a problem finding out what the motivations are, but assuming that you took the view that Parliament’s purposes were impure, if it did not have any prohibitionist effect, why would a court be concerned to apply section 92?

MR YOUNG:   Several answers, your Honour.  First, with respect, we say that his Honour is not inquiring into the motives of the legislators.  His Honour is examining the practical result sought to be achieved by the legislation in circumstances where, practically speaking, the legislation could only apply to imported fuel.

KIRBY J:   That I understand.  I was reacting to the way you were explaining the case.

The second observation, your Honour, I was going to make is that where the practical effect of the legislation is to, in this case, prohibit importation except on pain of purchasing a quantity of power alcohol, that discloses in practical effect a protectionist objective.

GLEESON CJ:   You said that this was before the criterion of operation line of authority but if you look at the last sentence of the paragraph on page 128 is not that the ‑ ‑ ‑

MR YOUNG:   That certainly at least foreshadows it, your Honour.  I do not doubt that.  But this analysis seemed to be less concerned with the particular criterion chosen on the face of the legislation and looked more to the underlying protectionist effects.

GLEESON CJ:   It was the criterion of operation test that was rejected in Cole v Whitfield, was it not?

MR YOUNG:   Yes, because it elevated the formality of the legislation and the artificiality of searching for a criterion above the practical consequences of the legislation, or at least that was one of the reasons. WA argues that what we say about a protectionist effect was a mere happenstance and from there they argue that section 24(1aa) was not aimed at and does not discriminate against interstate trade.

KIRBY J:   Why are you calling them WA?  They are not calling you Tas.

MR YOUNG:   I am really seeking to shorten and abbreviate my submissions, your Honour.  I am just conscious of the time.  In our submission, the notion that it is a happenstance that this legislation prohibits these particular interstate commercial communications and that it just happens to impact Betfair’s operations is really denied by the facts and circumstances that called forth the legislation. 

Can I take the question of characterisation one step further in this framework I am putting forward.  Where you have a substantial protectionist purpose or objective of the legislation, where the legislation operates to prohibit interstate commercial communications and where that in fact advantages intrastate former competitors of affected betting exchanges, that is enough, in our submission, to lead to the law being characterised as protectionist. 

Can I go briefly to what this Court said in both Cole v Whitfield and Castlemaine Tooheys about the characterisation step.  In Cole v Whitfield 165 CLR 360 at 408, the middle paragraph on the page indicates, in our submission, that the steps of examining facial discrimination, practical discrimination and whether protection is brought about are really steps in a process of characterisation of the law as to whether it is protectionist or not.

The same approach was adopted in Castlemaine Tooheys 169 CLR and the passage I wish to go to is at page 471.  Again, it is the middle paragraph at 471.  The paragraph contrasts the American two‑step approach with Cole v Whitfield.  The American process involves, first, an ascertainment of whether there is a burden on interstate commerce that is incidental to a non‑protectionist purpose, and then applies a proportionality test to the assessment of whether that incidental effect infringes the commerce clause.

Their Honour’s approach seems to indicate that the two steps should properly be seen as part of one inquiry under Cole v Whitfield, which is to characterise the law as protectionist or otherwise.  Our submission is that this law can be so characterised without the necessity of undertaking any weighing of the thinness or strength of the integrity concerns articulated in the papers about betting to lose.

Once it is concluded that the substantial purpose or objective of these two sections is to prevent interstate commercial communications and that the effect is protectionist and that that effect was sought, it is not incidental, it is not accidental, but it was an objective of the legislation to bring it about, then the law can be characterised as protectionist and section 92 is infringed.

In our submission, if I take section 24(1aa) it might be said on its face that it purports to apply generally without singling out interstate commercial communications. It obviously applies to interstate commercial communications, and if there were any local communications within range it would apply to them, but there could not be under the pre‑existing legislation. There could only be interstate communications so long as WA’s legislative package remained as it was.

In our submission, there is discrimination, in effect, because betting transactions can occur between a person in WA and an operator in another State licensed in New South Wales as a bookmaker or operating in Queensland as a totalisator. Those transactions are not affected. It is only transactions or communications of the kind referred to in section 24(1aa) with this newer form of betting which is prohibited by section 24(1aa). That relevantly, in our submission, is discrimination in effect of the kind spoken of in Cole v Whitfield.

GLEESON CJ:   That is not because, is it, one of the facts at the time the legislation was introduced was that Betfair was carrying on a betting exchange in Tasmania?

MR YOUNG:   No, it is because all betting exchanges, including Betfair, are the subject of a prohibition that affects their business under 24(1aa) and no such prohibition applies to licensed betting operators in other States who do not carry on this new form of betting.

GLEESON CJ:   Because the prohibition also applied to betting with Betfair UK and any other overseas betting exchange.

MR YOUNG:   Yes, the prohibition does apply equally to overseas betting exchanges, but it does not apply to overseas betting in a fixed odds manner with other organisations and, of course, Betfair accepts back bets at fixed odds.  It is just that additionally it accepts lay bets and secondarily, in order to accept a back bet, it needs to match it with a lay bet.  So there is a different characteristic of Betfair’s operations. 

The Barley Marketing Board v Norman was a case in which the Court said, just because legislation seizes on a particular characteristic that affects one trader rather than another, does not mean that it is not seeking to achieve protectionist purposes.  In Castlemaine Tooheys, what was seized upon was refillable bottles.  That was simply the means to an end of imposing protection on South Australian brewers versus the Bond brewing companies.  That is because refillable bottles were a characteristic of the Bond businesses that was not in reality shared in the same way by the local brewers.  So, therefore, you seized on a characteristic that appeared to be neutral in affecting all brewers knowing that in reality it affected one group, the interstate operator rather than the intrastate operator. 

That kind of choice of a characteristic to bring about protection is within the scope of Cole v Whitfield.  Barley Marketing Board made that clear.  So the commodities do not have to be identical commodities.          Simply because there is some characteristic of a betting exchange that differs does not meant that there is not protection being brought down by legislation that appears to strike out some characteristic of a general kind.  The passage in Barley Marketing Board v Norman was at page 204, to which I referred. 

I wanted to give the Court another reference to Cole v Whitfield.  There are several passages in Cole v Whitfield that suggest that discrimination is a valuable tool to be used in characterising a law as protectionist or not.  It will normally appear in such a law but there may be cases in which it is harder to identify discrimination but the law is nonetheless to be characterised as protectionist law. 

I go back to Cole v Whitfield 165 CLR 360. There are two passages. One is at 397. That is a set of comments commencing at about point 2 on the page about the Privy Council decision in James v The Commonwealth.  It is a little unclear whether that is to be read as an approving citation.  However, over at 399 at about point 6 on the page the Court says:

Even a law which applies indiscriminately to all trade and commerce within the reach of the Commonwealth legislative power might, in some circumstances, impose a discriminatory burden upon interstate trade and commerce.

GUMMOW J:   You have to read the preceding sentence there – nervous.  Some members of that Court are nervous about where this leaves the Commonwealth – whether it is open slather for the Commonwealth.  So you then get that paragraph put in there.

MR YOUNG:   Yes.  If your Honour reads on ‑ ‑ ‑

GUMMOW J:   No, you have to read back, “That is not to deny” - you see - “that a Commonwealth law”, et cetera.

MR YOUNG:   That is confirmed across the page, your Honour, at 400 on the first part of the page, after referring to practical effects, they go on to make a further comment concerning Commonwealth law.

GUMMOW J:   I realise that, but look at line 8:

For reasons already given, we should not venture into this topic in any depth.

GLEESON CJ:   Why would the Commonwealth be setting out to discriminate against interstate trade and commerce?  In whose favour would they be doing that?

GUMMOW J:   Exactly.

MR YOUNG:   It is hard to see now.  Previously, with national marketing schemes, which were thought to impinge on the desire of people to trade outside the marketing scheme – that might be one instance, your Honour, but aside from that case, it is difficult to think of any.

GUMMOW J:   Anyhow, it does not follow from that that as between States, discrimination is not required.

MR YOUNG:   That is so, your Honour.  I am only observing that the reference in Cole v Whitfield to discriminatory burdens of a protectionist kind, which is repeated several times, is really a formula used to describe the essential ingredients of what goes into a characterisation of the law as protectionist or not.

GUMMOW J:   I do not think that is right.  I think it was put in to mark the Australian cases off from the US cases on the negative commerce laws which they discussed at some length.  They were saying, “We are not like that”, because in America you do not necessarily have to have discrimination.

MR YOUNG:   That may be so, your Honour, but there is also a question of what you mean by “discrimination”.

GUMMOW J:   Of course there is.

MR YOUNG:   Here it is our submission that the law is discriminatory, even if, to take 24(1aa), on its face it appears to be facially neutral and even if it addresses betting exchanges generally, it is discriminatory in effect.  That concept is within the analysis in Cole v Whitfield because of the way in which it prevents interstate commercial communications with a betting exchange in another State to the advantage ‑ ‑ ‑

HAYNE J:Can you elucidate what you say is the discriminatory feature?

MR YOUNG:   Of this legislation?

HAYNE J:   You said it was discriminatory.  What I want to understand is, or have a better elucidation of the way in which you say it is discriminatory if it is, as you take as your present hypothesis, facially neutral.

GUMMOW J:   Could I just add to that, Mr Gageler’s formulation of one to nine, as I listened to it, did not use the word “discriminatory”.

MR YOUNG:   I cannot recall that it did, your Honour.

GUMMOW J:   So it has come home to roost with you.

MR YOUNG:   In this case, interstate betting operators are permitted by WA law to accept bets from persons in WA, leaving aside betting exchanges for the moment. That has been the case for a long time. That implicitly trusts to the regulatory and integrity regimes of the other States in their licensing of bookmakers, et cetera. Betfair qualified in 2006, under that regime, to accept bets from Western Australians. With the passage of section 24(1aa), persons in WA can bet on fixed odds in other parts of the country but they cannot bet with Betfair. That advantages WA operators and protects their revenues against competition from betting exchanges. WA, as well, has made provision in its legislation for RWWA to commence a betting exchange if it is so minded. That facility is preserved. Those circumstances taken together add up, in our submission, to discrimination in effect brought about by this provision of section 24(1aa).

GUMMOW J:   But what are the comparators?

MR YOUNG:   What are the comparators?

GUMMOW J:   Yes.  This Court has looked at this notion of discrimination quite a lot in the 20 years since Cole v Whitfield.

MR YOUNG:   It is easier if I identify the dissimilarity perhaps, your Honour, the difference, if I may, rather than listing the things that are similar.

GUMMOW J:   What is it that is unalike that is being treated as like and what is it, if any that is like that is being treated as unalike?

MR YOUNG:   The thing that is alike that is being treated differently is that this is a form of accepting fixed odds bets from persons in WA and many fixed odds bets are simply back bets.  It is a form of accepting bets on both races and sporting events and many sporting events are simply two‑headed contests in which there is no relevant different between a back bet and a lay bet.  So, it is another form of betting that in the respects I have just mentioned is exactly alike.

The relevant difference is that the operator of a betting exchange (a) accepts lay bets and (b) matches lay bets against back bets.  The question is whether that difference explains this legislative prohibition which is a total prohibition on persons in WA betting interstate.  If it does not explain it and if there are protectionist reasons and effects, then it is open to characterise the law as discriminatory in effect.  I do not think I can do it more clearly than that.

Section 27D, the discrimination is more extensive and more obvious, that is because race fields are generally available, published in the media, accessible on websites, capable of being downloaded, et cetera.  They are in the public domain.  Secondly, it is not a case of protecting copyright or anything like that in relation to the race fields.  The WA Government or Minister exercising this power of approval is not protecting copyright.  It is facially discriminatory as well because 27D exempts RWWA and bookmakers.  So the discrimination is patent in the case of section 27D but they are both to be seen as part of a single legislative scheme actuated by the same legislative policy to prohibit interstate commercial communications of this kind.

Direct bets from Western Australians or inquiries about bets in the case of 24(1aa), and in the case of 27D, the use by Betfair of race fields is intrinsic in the language of the special case to its commercial operations, so the purpose is to prevent Betfair operating its activities in relation to WA races.  The discretion is entirely hollow.  It is illusory.  First, there is an absolute prohibition, so if the prohibition is bad, an absolute discretion to relieve the prohibition cannot make it any better.

Justice Fullagar said as much in McCarter v Brodie and, in any event, the discretion is not controlled by any criteria that would require it to be exercised in accordance with section 92. The only criteria, relevantly, are fit and proper operator and, secondly, public interest and, as the reasons for the ministerial refusal that Betfair demonstrates, the public interest was given effect to by the Minister saying, “The clear cut policy of the Act enshrined in 4AA, 24(1aa), 27D is that there shall be no dealings with betting exchanges therefore I must necessarily refuse approval to Betfair” even though under exactly similar legislation Racing Victoria Limited approved Betfair’s application to use race fields relating to Victorian races, Victoria saying “We could not discriminate against Betfair. They have satisfied us as to the fit and proper criteria. They are prepared to make a contribution to Victorian racing. We therefore give approval for the use of Victorian race forms.” The WA legislation in 27D is designed to prevent that occurring.

KIRBY J:   It is one of those funny things in democracy that tends to come up with different solutions to the same problem, and that used to be said, and I once believed it, to be an advantage of Federation, and on other occasions you or your government have been standing there asserting it before this Court. All of this is subject to the Constitution and subject to section 92, of course.

MR YOUNG:   Yes, and that is the observation I was about to make, your Honour, that the choices available to the State Governments are constrained. They can choose which businesses to promote or license but always within the constraints of section 92.

GLEESON CJ:   Well, that is the consequence of having a common market.

MR YOUNG:   Yes.

GLEESON CJ:   Presumably, if discrimination in the protectionist sense discriminates against interstate trade it is simply irrelevant, but it also discriminates against overseas trade.

MR YOUNG:   Yes, your Honour, we would say that.

GLEESON CJ:   There is nothing in section 92 that pre‑empted the great protectionist free trade debate in relation to the way Australia would deal with the rest of the world.

MR YOUNG:   Yes.  That is part and parcel of the common market approach, your Honour, because as reflected in the earlier legislation each State has trusted hitherto the probity regimes and licensing regimes of the other States for their respective bookmakers permitting interstate betting to proceed.  This is a departure because Tasmania has the most rigorous probity regime applicable to Betfair and its operations with full monitoring of its bet matching operations, and that means has been eschewed by WA, they have gone for total prohibition of any betting exchange instead.

One tends to constantly think of this in terms of horseracing, or at least I do, but its impact on other sporting events is not to be diminished. Those sporting events seem to have the most remote connection with WA issues of integrity, yet any person in WA who wishes to bet on a sporting event in Sydney is precluded by section 24(1aa) from doing so with Betfair or another betting exchange.

We adopt what Mr Gageler said about onus.  If we go beyond the point that I have put so far, that is, the characterisation is answered by the matters I have advanced and it is unnecessary then to go to an assessment of proportionality, you do not reach the question of how you undertake the assessment of is this a proportional response to the perceived concern of integrity.  You simply do not get there.  You only get there if the law only affects interstate commercial communications incidentally to the pursuit of a non‑protectionist objective.

Rather than incidental, if that is the main objective of the legislation, or even if it is simply an objective provided it is a substantial objective, a material objective, you do not need, in our submission, to go further. But assuming you do, we adopt what our learned friend says about the width of section 24(1aa). It is all persons in WA regardless of the form of betting, regardless of whether they are insiders associated with some trainer or jockey or other licensed person. It is not confined to bets on WA events. The background circumstances do not identify any integrity issues about sporting events outside racing as being the concern of the WA legislature.

GLEESON CJ:   Do I gather from what you say that section 24(1aa) would prevent somebody in Western Australia placing with Betfair a lay bet on the outcome of the New South Wales rugby league competition?

MR YOUNG:   Yes, or a back bet on the outcome of the competition or a back bet on the outcome of a particular match between two teams.

GLEESON CJ:   Or a bet on the outcome of the New South Wales Open Tennis Championships.

MR YOUNG:   Yes, that is all prohibited, and the prohibition applies to all persons in WA, presumably even lawyers there temporarily or people passing through the State.

GUMMOW J:   But if they used an out‑of‑State mechanism permitted by 27A, it would be all right, would it not?  If it was an offshore bet within the section 27A system, it would be permitted under the gentlemen’s agreement, would it not?

MR YOUNG:   It is, and under 27A(1)(b), that is the legislative provision that effectively gives effect to that, your Honour.  They are authorised persons and that is how Betfair qualified to receive bets from WA during 2006.  It was an “authorised person” in terms of 27A(1)(a), having been licensed by Tasmania to accept bets.

GUMMOW J:   So that is how the second plaintiff was operating legally in that period?

MR YOUNG:   Yes.

GLEESON CJ:   But if a Tasmanian lawyer were in Perth temporarily and wanted to place a bet through Betfair on the outcome of the Tasmanian football competition, whatever it is, that would be prohibited by section 24(1aa)?

MR YOUNG:   Yes, as we read it.  It is all persons in Western Australia.  It is not all residents of Western Australia.  That is a further way in which it interferes with the intended economic unity of the country.

GLEESON CJ:   Similarly, if a resident of the United Kingdom temporarily in Perth wanted to place a bet through Betfair UK on the outcome of the English soccer competition, that would be prohibited?

MR YOUNG:   Yes.  The contrast, speaking of the national economic union, is that persons in other States other than Western Australia, including Tasmania, but including New South Wales, can at the moment bet with a betting exchange in Tasmania on all events, subject only to the difficulty of betting on WA race fields because Betfair’s presentation of the WA race field is denied by 27D.

GUMMOW J:   Am I understanding that people in New South Wales, Victoria and other States who are in the position of the second plaintiff pre‑2000 and whatever the date is, they can do now what he was then doing and deal with Betfair in Tasmania?

MR YOUNG:   Yes, they could do it then, they can still do it now.  Mr Erceg and others in Western Australia can no longer do that, and nor can anyone who temporarily visits WA and wishes to place a bet on the Melbourne Cup from Western Australia while they are temporarily there.  So the width of 24(1aa) is extreme, wider than could be justified or explained by the perceived concern about consequential effects on the integrity of racing or sporting events in Western Australia.

GUMMOW J:   So on one way of looking at it, a relevant pool of people is people within Australia who want to bet with Betfair in Tasmania.  The effect of the Western Australian Act is that some of them, if they happen to be in Western Australia, cannot?

MR YOUNG:   Yes.

GUMMOW J:   The question is, is that a relevant form of discrimination, amongst other things?

MR YOUNG:   It would be.  It should, if I can retrospectively adjust my list, your Honour, I should add it to it.  Can I mention some other aspects about this?  Undertaking the assessment of proportionality, the Court in Castlemaine Tooheys said it is relevant to consider whether there are reasonably non‑discriminatory alternative means of securing the contended for non‑protectionist objective, in this case, the integrity of racing.

Here it is known that Betfair has been licensed in Tasmania subject to strict regulatory and monitoring requirements.  That has been so for almost two years with no adverse integrity issues arising in Australia.  Betfair has been subject to licensing and monitoring requirements in the UK for some years as well. 

The background documents, including the task force report, contained a submission from the Australian Racing Board that managed regulation was the appropriate response, not banning.  That is book of documents, volume 2, tab 33 at pages 1252 and 1315.  You had the dissenting views voiced by both Northern Territory, 1255 in the same tab, and Tasmania in the next ministerial meeting at pages 1471 to 1473 of the volume.  So there are reasonable alternative means of securing integrity of racing. 

It is also necessary, if the analysis goes this far and one starts to consider proportionality, to undertake the exercise that Justice Kiefel referred to, that is, you cannot assess whether the response is proportionate, adapted and reasonable without understanding the true nature of the integrity concern that is said to justify the prohibition.

Mr Gageler has touched on this and I will be very brief.  Integrity concern is not with Betfair, the operator.  The background documents make that clear.  The concern is about racing, in particular, and the potential for two forms of conduct to be engaged in.  One is lay betting by people possessing inside information and the second is criminal interference with the conduct of a race, effectively. 

Can I deal with inside information?  The racing industry does not really operate a fully informed market under which there are mechanisms for everybody to have equal information about the chances ‑ ‑ ‑

GLEESON CJ:   There are no requirements for continuous disclosure.

MR YOUNG:   No, your Honour.  There is a prohibition on jockeys betting.  There is no prohibition on owners betting or on trainers betting in WA, if I can just use WA as an example?  Owners and trainers normally have better information than your average punter.  The licensing and regulatory regime in WA in place at the moment and at all relevant times permitted them to bet possessing inside information.

Everyone really on a racecourse thinks they have, or perceives they have, inside information or better information than the next person.  That is the whole notion of tipping.  So the idea that there is an integrity concern because someone with inside information might bet does not really withstand much close analysis because inside information is permitted for other forms of betting, and if it is permitted for back betting or spread betting - that is laying every horse other than the short priced favourite – what is so egregious by inside information being used for lay betting?  It might be said to be a more effective way of producing a return.  Well, that may or may not be so, but if the vice is inside information and betting with inside information it is not banned, it is permitted under the existing scheme of racing regulation.

Moving to the second suggested concern, the potential for someone to interfere with the running of a race or with the health or condition of a race horse or jockey, that kind of interference would be criminal, it is also as old as racing, pre-dating betting to lose as a concept.  Episodes even in this country are notorious.  I am tempted to say everybody recalls Big Philou, but there may be some who do not.  That was a favourite who was doped on the morning of the Melbourne Cup in 1969.  In another State everybody may remember Fine Cotton.

So criminal interference with racehorses or jockeys does occur, but it is not the product of betting to lose.  So if you go beyond where we say the analysis stops, there is a question of how far do you weigh up sceptically, with a healthy scepticism, examine these claims about potential for corrupt practices because the corrupt practices are not caused by this form of betting.  We would say and join with Mr Gageler in saying that there is reason to subject the suggested concerns and this suggested non‑protectionist object to scrutiny, just like litter and conservation were subjected to scrutiny in Castlemaine Tooheys.

Perhaps it cannot be taken too far because the legislature has made a judgment that it is a sufficient concern to warrant legislation.  But even accepting that it is a concern, one then balances against it the width of the prohibition, the protectionist aims of the prohibition, the departure from the model of accepting the probity regimes of other States, the existence of reasonable non‑discriminatory alternatives in the Tasmanian regulatory system, and one concludes that the total prohibition in these two sections cannot really be justified or explained by this suggested integrity concern, even accepting that it was a real concern and was an object of the legislation.

KIEFEL J:   Is it consistent to accept that it was a real concern if you come to the conclusion it cannot be justified?

MR YOUNG:   No.

KIEFEL J:   Does not the conclusion really then tell you that it cannot be a legitimate claim and therefore you are left only with the protectionist aspect of the legislation?

MR YOUNG:   Yes. The Court’s duty at the end of the day is to apply section 92 and to scrutinise any legislation that prohibits interstate commercial communications. State of Tasmania v Victoria was a case about potatoes being imported from Tasmania to Victoria and the Victorian Government by a proclamation prohibited the transhipment of potatoes from Tasmania to Victoria and there was no evidence that it was for a bona fide non‑protectionist reason other than a few lines recorded in the proclamation itself.

The Court did not accept those few lines in the proclamation. The High Court looked behind it and said, “There is really nothing we can see to justify or explain this, except protection” and therefore the ban was struck down as contrary to section 92.

HAYNE J:   Could I go back a moment, Mr Young, to questions of discriminatory treatment by reference to Castlemaine Tooheys, you would need – 169, particularly at 480 in the joint reasons of Justices Gaudron and McHugh, in the paragraph commencing at about line 15 or thereabouts their Honours refer to the questions posed in the joint judgment:

often sufficiently reveal that the law is discriminatory in a protectionist sense.

It is the next two sentences to which I draw your attention, particularly the second of them commencing, “Thus, if there is no inequality or relevant difference” et cetera, that sentence.  Now, I would understand a part, perhaps the part of the case against you is that there is identified a relevant difference between the subject matter of interstate trade and intrastate trade here being the difference in the subject matter constituted by the matching of bets.

MR YOUNG:   Yes.

HAYNE J:   There is a debate about whether that is a significant difference, I understand that, but if the subject matter of the trades is different and is relevantly different – who knows what relevantly is carrying here - how am I to understand what their Honours are there saying, on your submission?

MR YOUNG:   It is a little dense in the sense of difficult to penetrate what their Honours are saying but they seem to make two points, though, in this passage.  The first is the incidentality of the burden.  They are, from the first sentence onwards, dealing with an assumption that the burden is incidental or at least under the argument that is advanced it is said that the burden is incidental to some non‑protectionist objective.  I know that is said by Western Australia here against us, your Honour, but at that first stage we say, when closely scrutinised, that first leg of Western Australia’s argument fails because this legislation is not one that only incidentally affects interstate trade or commerce.  There it was aimed at the re‑use of bottles for beer.

On the second point, the difference that their Honours thought in question related to the use or non‑use of refillable bottles being taken as the criterion for the imposition of two things.  One, a large refund imposition.  I think it differed by about nine cents between refillable and non‑refillable bottles.  The other was a particular exemption that was granted to certain other operators in the market. 

Their Honours’ ultimate conclusion is that the difference in financial impost between refillable bottles and non‑refillable bottles could not be acceptably explained or justified – that is the fourth‑last line of the judgment – for the different treatment.  So their Honours essentially are saying that different treatment is not explained by the claimed objectives of litter and energy conservation.  They are not saying that there was no relevant difference, as I understand them.

HAYNE J:   What I invite your attention to is whether their Honours are speaking of an intersection between notions of market which underpin at least parts of the argument we have heard thus far in this case, that you have a substitutability of betting product and the market relevantly is either betting or a segment of betting in which no relevant difference lies between Betfair and other betting providers, but what is the intersection between these market or economic concepts and this focus upon relevant difference which necessarily, I suspect, must be understood as underpinning the notion of discrimination, at least discrimination as has been articulated in decisions of the Court after Cole, Castlemaine Tooheys and the like.

MR YOUNG:   Your Honour, the other view is this, that the first step in the reasoning of Justices Gaudron and McHugh was to point to the practical effect.  If I could take your Honour to 478, the opening paragraph, about point 4 on the page their Honours say that:

the practical effect of [these provisions] is to confer a significant competitive advantage in the South Australian market upon beer produced in that State over beer brewed by the first three ‑ ‑ ‑

HAYNE J:   Yes, and I understand that to be a lynch pin of the argument of the plaintiffs here.  I can well understand that there is competitive advantage.  The answer to it that is made, be it good or bad, includes at least this notion the product they are selling is bad because.  Now, simply pointing to the fact that prohibiting someone within Western Australia acquiring from out of State a product that, rightly or wrongly, Western Australia classifies as a bad product has an economic consequence that can be described as protecting traders in substitutable product within Western Australia is the conundrum that seems then to be presented.

MR YOUNG:   But there are differences, your Honour.  In that case there was no prohibition on interstate communications or movement and, hence, one was concerned simply with an impost on refillable bottles and associated provisions.  The Court therefore engaged in an analysis that accepted that there was an objective of litter, control and energy conservation and that the impact on the interstate trade of Bond Brewing was incidental to the pursuit of those objectives. 

It is not a case in which they found the objective was to prevent the interstate trade or communication, so they are assuming it is a case of incidental affection.  They therefore embark, your Honour, having first identified that in practical effect it is projectionist, they do though embark on the appropriate and adapted analysis.  That is page 478 at about point 6 on the page.

It is within the framework of that analysis that their Honours ask at 479 point 4 whether:

the distinction between refillable and non‑refillable beer bottles is a relevant distinction supported by the objectives of conserving energy and of ameliorating litter –

and their Honours conclude that the distinction that is made, particularly given the size of the imposts, is not such to support those objectives. They do not acceptably explain it. Inferentially there must be another objective which is protectionist and therefore section 92 applies.

When their Honours are talking about discrimination, they are talking about it within the context of that analysis in asking the question whether this distinction between refillable and non‑refillable bottles is a relevant difference that explains the difference in treatment, and their Honours essentially conclude it is not.

GLEESON CJ:   Is it an over‑simplification to say that if you have two products which are potentially competitive in a market and one of them is banned, total prohibition on providing the product, then you have discrimination?  The question is whether you have discrimination is a protectionist sense.

MR YOUNG:   Yes.

GLEESON CJ:   Where product A is on the market in Western Australia and product B is potentially competitive with product A and there is an interstate producer or supplier of product B and you have a total prohibition upon the sale of product B in Western Australia, then you have discrimination imposing a burden on the interstate supplier of product B.  The question for decision then is whether that is discrimination imposing a burden in a protectionist sense.

MR YOUNG:   Yes, we agree with that analysis.  That was essentially what I tried to explain as our approach, your Honour, in answer to Justice Gummow earlier.  I see the time.  I will need to move on to the last step of our argument.

GLEESON CJ:   How long do you think you will require to complete your argument?

MR YOUNG:   I think I could do it in 15 minutes, your Honour.

GLEESON CJ:   We will adjourn until 2.00 pm.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.03 PM:

GLEESON CJ:   Yes, Mr Young.

MR YOUNG:   If the Court pleases, to complete our submissions on section 27D can I make two points.  First I said that Victoria had granted approval to Betfair for access to Victorian racing fields.  That appears at the book of documents volume 2, pages 1176 to 1177.  The approval was granted by Racing Victoria Limited, which is the industry body in Victoria.  It is purely an industry body.  It does not conduct wagering operations like RWWA.

The equivalent Victorian provision is section 2.5.16A of the Gambling Regulation Act 2003 (Vic). That is in the defendant’s book of comparative legislation, volume 1, pages 98 to 102. The second point is that the guide to the application of section 27D published by the Gaming and Wagering Commission of WA appears at page 2417 of the addendum to the special case. This is the only document that suggests that a standard condition of approval to use race fields from WA will be a commercial agreement with Racing and Wagering Western Australia.

There is no reference to such a requirement on the face of section 27D. It refers only to an approval on conditions. In other States Betfair has negotiated and is paying a contribution. In Tasmania under section 150AC of the Betting Control Act, 20 per cent of its commission.  In Victoria, by agreement with Racing Victoria Limited Betfair pays a contribution to Victorian Racing.  That is book of documents page 1 at 758 and volume 2 at 1177 and 1175.

There is no suggestion that an appropriate arrangement could not be negotiated with the West Australian racing industry, but the way in which section 27D operates is that administratively it seems to have been made a condition of the operation of the section in terms of the dispensation that Betfair negotiate an agreement with its competitor, RWWA, and the setting of any appropriate contribution is for RWWA.  That would seem to be another special and, we would say, discriminatory feature of section 27D.

Can I move to the last point, the last leg of the argument.  It concerns the conflict that arises between the Tasmanian provisions 76A, 76VA and 76B of the Gaming Control Act of Tasmania and the provisions of section 27D of the West Australian legislation.  The Tasmanian Act has the consequence that under its license from the Tasmanian State Betfair has a right under Tasmanian law to use race fields in its business, to upload them onto its server and thereby make them available to potential customers.

Section 76A commences with the words “Despite any other law”. That means at least despite any other law operating or purporting to operate in Tasmania, whatever its source. On the other hand, section 27D purports to prohibit a person in Western Australia or elsewhere publishing or otherwise making available the WA race field in the course of its business. That section applies under section 27C to persons who in Western Australia or elsewhere operate a betting exchange.

It is our submission that Betfair’s operations involve a publishing or otherwise making available of WA race fields.  Certainly it did before this legislation came into force during 2006.  That publishing or making available occurs when Betfair uploads a WA race field onto its computer server in Tasmania.  At that point, Betfair’s actions of publishing or making available are complete.  Once uploaded onto Betfair’s bet server, the race field information is available to be downloaded by a person somewhere else using his or her computer to download the relevant information, but the publishing or making available has occurred before any downloading.

In our submission, Dow Jones v Gutnick 210 CLR is distinguishable.  That was concerned with publication in a special incidence of defamation where defamation and damage involved publication in a place that would damage the reputation of the plaintiff.  It does not apply to a criminal offence here of publishing or otherwise making available the field.  The actions of Betfair constituting the elements of that offence would be complete when Betfair’s last action takes place, which is the uploading and the making available of the information for downloading.

That means at the very least there is a conflict between section 27D in its purported application elsewhere than Western Australia and the provisions of section 76A and 76VA authorising Betfair to conduct its business which intrinsically or integrally involves making publicly available information comprising a list of runners in a Western Australian horserace for uploading on to its internet server.

We submit there is, therefore, a direct inconsistency between these two provisions.  So much is conceded by Western Australia in its submissions, in paragraph 84.  It also seems to be accepted by a number of other intervenors with the exception of the Commonwealth and Victoria.  I think I should add New South Wales to that.  The argument ranged against the conflict argument is that the Tasmanian legislation confers a permission or legal liberty or authorisation – it does not matter which term you pick – whereas section 27D imposes a criminal prohibition.  It is said that those different characterisations mean that there is no conflict. 

In our submission, there is a conflict in a real and substantive sense because section 27D impairs or restricts or detracts from the rights given to Betfair by Tasmanian legislation to conduct a betting exchange which integrally includes uploading onto its server publicly available information concerning race fields in Western Australia.  That conflict is not denied by saying that Betfair could refrain from exercising its licence authority in relation to Western Australian races and by refraining from operating on Western Australian races thereby avoid committing a criminal offence under the Western Australian legislation so that there is no conflict, it is said. 

In our submission, it is the negation or impairment of the rights conferred by the Tasmanian legislation that gives rise to the conflict and that is not answered by saying it is possible for Betfair to comply, as it is now, by refraining from operating in relation to Western Australian race fields.  There is an impairment of the rights conferred by the Tasmanian statute.

The Commonwealth argument goes so far as to say that there is no conflict of any kind that requires some kind of constitutional resolution. We submit that there is. The Commonwealth attaches no significance to section 118 of the Constitution. It is true, as the Commonwealth says, that section 118 does not provide a rule for the resolution of conflict between conflicting State laws in the way that section 109 of the Constitution does, but, in our submission, section 118 nonetheless assumes that such a conflict is not to persist, that it is to be resolved, if necessary, by this Court applying a constitutional principle. Section 118 assumes that one body of law, a single body of law, is going to apply to a set of actions by a party in one particular State and the citizens or corporations are not going to be placed in the position of having to refrain from exercising their rights under one State’s legislation because another State reaches in and purports to make that conduct, when carried out in Tasmania, criminal.

I do not have time to go to the cases, but, in our submission, Mobil 211 CLR at paragraphs 15 to 16 and 109 to 112 in respectively the judgments of the Chief Justice and Justice Kirby, Breavington at page 98 and the judgment of Justices Wilson and Gaudron, Pfeiffer at paragraph 64 and Sweedman 226 CLR in the judgment of Justice Callinan at 101 and 123, all point in the direction of saying that one body of law is to apply, not two conflicting State enactments to one set of actions in one State, as does section 118 of the Constitution.

At the very least, in our submission, there is a constitutional implication that no State can, inconsistently with the laws of another State, purport to regulate events in that other State, in this case by means of criminal legislation.  So, in short, we say there is a conflict requiring resolution by the application of that constitutional principle. 

Victoria and Queensland mount another argument as to why there is no conflict requiring resolution.  It draws attention to the fact that WA’s law, section 27D, imposes criminal sanctions.  It says by reason of that fact alone, there is no conflict requiring resolution, the reason being that WA courts will apply WA criminal law without regard to any choice of law principles.  They will simply ignore any conflicting Tasmanian statute which authorised the conduct in question in Tasmania. 

That approach, in our submission, is unsatisfactory in several respects. It is repugnant, in our submission, to the constitutional assumption that State authority is essentially territorial and that one body of law will apply to a set of actions in one State and you will not have inconsistent statutory enactments of the home State, as it were, and another State reaching into and purporting to criminalise that conduct. It is repugnant to the assumption that underpins section 118, that one can always ascertain a single body of applicable law.

Thirdly, it invites the States, whenever they wish to intrude into the jurisdiction of another State inconsistently with the law of that other State, to make their intrusion effective by the expedient of attaching a criminal sanction to the legislation rather than some norm of conduct that might result in civil proceedings.

The Constitution itself, it is difficult to see, would really draw a distinction between conflicts between State enactments giving rise to civil consequences and conflicting State enactments where one is criminal and one is civil. The position of the individual affected is equally compromised in each situation, perhaps more so by the criminal intrusion. So, in our submission, the relevant actions in Tasmania that might give rise to section 27B contraventions are governed solely by Tasmanian law to the exclusion of section 27D. Tasmania in those circumstances has the territorial authority and it alone determines the legality of the conduct in a situation where you have a conflict of State statutes.

That leaves, relevantly, a question of how the conflict is to be resolved outside Tasmanian, in particular in a third State.  Section 27D purports to criminalise conduct in, say, New South Wales if Betfair’s actions in Tasmania are not confined to Tasmania but its actions involve publishing or otherwise making available in another State when information is downloaded in that other State from the Tasmanian server of Betfair or when a telephonic communication is received in another State.

Even if one looks to the position of a third State, it is our submission that Tasmania has the predominant territorial nexus in relation to Betfair’s licensed operations in Australia. That is because all or most of Betfair’s actions take place in Tasmania pursuant to its Tasmanian license and therefore section 76A and the authority it confers should prevail in a third State over inconsistent legislation of the kind found in section 27D.

It is difficult to find, we would say, a way of resolving a conflict that does need resolution other than the criterion of territorial nexus or predominant territorial nexus.  If the Court pleases, those are our submissions.

GLEESON CJ:   Mr Young, could I just ask you a question about a matter that Mr Gageler was explaining to us yesterday, and I am sorry I did not realise during the course of his explanation that there was something I did not understand.  Since you have authorised his business I am sure you do understand it.

MR YOUNG:   Yes.

GLEESON CJ:   Suppose you have a race field with 10 starters, one short priced favourite and the rest at various levels of odds against.  If a horse is at 7/1 against, that presumably reflects the opinion of the market that there is one chance in eight that the horse will win.

MR YOUNG:   Yes.

GLEESON CJ:   And presumably the corollary of that is that to wager that the horse will lose your odds would be 7/1 on, is that right?

MR YOUNG:   I think that is correct, your Honour, yes.

GLEESON CJ:   My question is this.  Why would you lay a horse other than a short priced favourite?  Or to put it another way, if you are laying a horse other than a short priced favourite, you are always doing it at odds on, are you not?

MR YOUNG:   I think that is correct, yes, your Honour.

GLEESON CJ:   Well, now, all these matching bets when people back a horse on a betting exchange are bets placed, are they, by individuals who are laying the horse?

MR YOUNG:   No, people betting on a betting exchange have the choice of backing to win ‑ ‑ ‑

GLEESON CJ:   Yes, but I want you now to assume a case where somebody is backing to win the horse that is at 7/1, 7/1 against.

MR YOUNG:   Yes.

GLEESON CJ:   That is matched with somebody who is laying the horse, presumably at odds approximately 7/1 on.

MR YOUNG:   Yes, I think that is correct.

GLEESON CJ:   I understand why a bookmaker who is making a book and who is gambling on a field with people who have opinions about every horse in the field or most horses in the field will act as the bookmaker does, but does the betting exchange assume that for every individual who wants to back a horse at, say, 7/1 against there will be an individual who wants to lay the horse at 7/1 on.

MR YOUNG:   Largely the answer is “yes” but, as I understand it, they may group together on the other side of the book, as it were, two or three individuals who wish to lay the horse who in combination can be matched.

GLEESON CJ:   That is what I was going to ask you.  It could not be the case, could it, that on the other side of the book there is someone who is for all practical purposes in the same business as a bookmaker?

MR YOUNG:   Well, there might be.  I mean, bookmakers often, if the book is lopsided and they stand to lose too much money on a particular horse, they might actually go and back that horse with another bookmaker or with the totalisator.

GLEESON CJ:   It just occurred to me as a possibility that there are not a lot of individual punters who consistently bet at odds on.

MR YOUNG:   There may be some, your Honour.  It depends on their perception of how sure a thing the horse is.

GLEESON CJ:   So 7/1, odds on?

MR YOUNG:   No, rarely.  One of the reasons, your Honour, why we say an appropriate method of analysis is what we have advanced is that we do not think it is necessary where a law has the features of this prohibitory law with the protectionist objectives it seeks to achieve to descend to the proportionality analysis that may involve making decisions about how close laying a horse is to spread betting, as it were, backing every horse in the race.  There are obviously going to be practical differences between the two.  Your Honour is right that it is going to be the usual case where somebody backs all other horses in a race other than one that the one not backed is going to be a fairly short‑priced favourite, where the mathematics works in favour of a good return if one of the other horses gets up and that horse loses.

GLEESON CJ:   I was only wondering whether, while the system theoretically operates on the basis of matching of individual bets, for it to work in practice you require for the laying of the bets – that is to match the people who back the horses – a group of people, or perhaps even an individual or perhaps even a corporation, whose approach is somewhat like that of a bookmaker.

MR YOUNG:   I think the answer is not necessarily, your Honour.  The matching is done by sophisticated computer programs, and you can pluck out an exactly matching lay bet or you might combine several lay bets to match a single back bet.  It may be that some who make lay bets are fairly

sophisticated professional punter types.  But they may not be; they may simply be ordinary punters.  It does not necessarily follow.

GLEESON CJ:   But in relation to all but the favourite, they are laying at low odds on, are they not?

MR YOUNG:   Usually, yes.

GLEESON CJ:   Thank you.  That is what I wanted to understand.

MR YOUNG:   Thank you.

GLEESON CJ:   Yes, Mr Solicitor.

MR MEADOWS:   May it please the Court. We propose to present our submissions in three segments. The first will deal with the area of facial discrimination. In doing that I will be seeking to demonstrate that the operation of a betting exchange in Western Australia is precluded in the case of bookmakers, totalisators and RWWA, as we call it. Secondly, we would propose to deal with the issue of whether there is any discrimination in terms of the substantive effect of the legislation. Thirdly, we would propose to deal with the section 27D issue, both in terms of section 92 and also in terms of the conflict between the Western Australian provision and the Tasmanian provisions.

Perhaps I could begin with a little bit of background.  As we have heard, there are two sides to a wagering contract and generally speaking they are a back bet that an outcome will occur and a lay bet that an outcome will not occur.  Traditionally, in wagering operations conducted by bookmakers and statutory authorities those wagering operators have only been authorised to take back bets, however, it needs to be understood that when a wagering operator takes a back bet it in fact makes a lay bet itself.

GLEESON CJ:   Yes, but if it is a bookmaker or a totalisator it does that in the context of taking a whole lot of other bets from other people, too.

MR MEADOWS:   It does but when it accepts a back bet it makes a lay bet that the horse will not be successful or the competitor will not be successful.  The important difference with a betting exchange, of course, as we have heard, is that in the case of a betting exchange it allows any person, not just an authorised wagering operator, to lay a bet that a participant will not be successful. 

Just going to the provisions of the Western Australia Act, the mischief that this legislation was directed at was identified by the Minister in his second reading speech.  Your Honours have already been referred to the speech but essentially in relation to section 27D, but it can be seen from the second reading speech, which you will find in the book of documents, volume 1 at tab 20, page 753, the Minister makes it perfectly plain that the reason for the prohibition against betting exchanges is related to integrity issues. 

If I could take your Honours to the final paragraph on that page you can see that the Minister asks the question, “Why do we need to be worried about betting exchanges?”  He goes on to explain that the key reason is the ability to bet on a runner to lose and to point out that:

Punters who bet with bookmakers cannot back a runner to lose.  With a betting exchange, however, the average punter can back a runner to lose.  If that person has the capacity or opportunity to affect the performance of a runner, or knows someone who does, that person can profit by laying bets against the runner on a betting exchange.  This presents a considerable threat to the integrity of racing because it is much easier to make a horse or greyhound lose than it is to make it win.

and so that theme continues.  If one goes to the Act itself and looks at the objective of the amendment Act, which brought in these provisions – and this is reflected in section 4 ‑ ‑ ‑

KIRBY J:   Do I understand correctly that this measure had the support also of the Opposition?

MR MEADOWS:   Yes, it did, although ‑ ‑ ‑

KIRBY J:   I think there is a minister called on the - a member who I assume must have been speaking for the Opposition.

MR MEADOWS:   Yes, although they did have some reservations about the way it was being done, but they supported the legislation.  Section 4 of the amendment Act, which amended the long title to the Act, which can be found at page 1 of the reprint, you can see that the final object of the Act as set out in the long title is:

to prohibit betting through, and the establishment and operation of, betting exchanges –

and for other purposes. Now, as the Court has already heard, the effect of the amendment Act was to introduce provisions which prohibited the operation of betting exchanges and it did so by creating the two offences: one, betting through the use of a betting exchange in 24(1aa) and secondly, the establishment or operation of a betting exchange in section 27B.

KIRBY J:   The problem with creating offences was that you virtually forced the plaintiff, as a company which had brought its product into Australia and which had been authorised to do so by the law of Tasmania, to fight this case because otherwise as a respectable corporation, it was rendering itself liable to prosecution for criminal offences and would not easily want to do that.

MR MEADOWS:   It could easily have accepted the policy of the West Australian legislature that this type of activity was not to be allowed to occur in Western Australia.

KIRBY J:   The mind immediately asks the question why you did not take a solution similar to that of the State of Tasmania and apparently under consideration elsewhere now.

MR MEADOWS:   It was certainly an option that could have been undertaken, and I am going to come to that further on in my submissions to illustrate that in the area of whether this has a protectionist effect, that the opportunity would have been open for Western Australia to go down the same path as Tasmania, whereas Western Australia chose to prohibit the activity in its entirety.

GLEESON CJ:   You said a little time ago that every time a bookmaker takes a bet, the bookmaker is laying the horse.

MR MEADOWS:   Yes.

GLEESON CJ:   If what the Minister says is right, bookmakers must be exposed to a great deal of temptation.

MR MEADOWS:   Of course they are highly regulated and they operate on course and in an environment where they are under the supervision of the stewards at all times and in a highly regulated environment.  I think that is important from this point of view, that you have here an industry which it has been recognised must be highly regulated.

KIRBY J:   The Fine Cotton affair is probably the best known instance where people fell victim to the temptation.

MR MEADOWS:   Yes, your Honour.  We have a couple of very good examples in Western Australia, which I will not go to, but ‑ ‑ ‑

HAYNE J:   Still running.

MR MEADOWS:   The point is, you have a highly regulated industry which has been able to operate satisfactorily subject to the integrity requirements that are currently in place, but then you have introduced into the market something which the regulators, or the legislators, perceive to be one which is not capable of being regulated in a satisfactory manner and legislature has chosen to prohibit it.

Now, in enacting these provisions it was not intended by the legislature to affect existing operations in Western Australia or elsewhere in the case of those operations which did not involve the mischief, or the perceived mischief, relating to betting exchanges.

GLEESON CJ:   Is it your submission that a desire to protect a Western Australian industry was not a reason for the legislation?

MR MEADOWS:   Let me put it this way, your Honour.  The stated objective was to prevent the operation of betting exchanges because of the integrity issues, but it certainly has to be recognised that an incidental effect of the prohibition of betting exchanges may be to protect the existing operators in Western Australia, but not just in Western Australia but elsewhere in Australia in terms of the activities of racing in Western Australia.  It is important to realise that under the Western Australian legislation, operators of wagering organisations in other States are permitted to conduct their activities in Western Australia and Western Australians are permitted to engage in betting transactions with those wagering operators.

So it is not just a case of protecting the operators in Western Australia, be they bookmakers, totalisators or RWWA, it is a case, so far as the Western Australian legislature was concerned, of protecting the integrity of wagering operators nationally.  As has been stated, one of the reasons for affecting the operation of betting exchanges nationally was because of the perception that if betting exchanges were allowed to operate in Australia, it would result in the risk of integrity problems, which would bring the industry into disrepute, which would make this Western Australian industry tarred with the same brush.

Now, if I could start with the proposition that our submission is that both section 24(1aa) and 27B, which prohibit the operation of betting exchanges and people using betting exchanges, is the law which does not discriminate against interstate trade and commerce in its legal operation. In other words, that there is no facial discrimination. If I could seek to address that to begin with by looking at some of the provisions of the Western Australia Act, starting with section 4AA, because the starting point of my learned friend’s submissions is that the concluding words of the definition of betting exchange in section 4AA mean that the legislation does discriminate against interstate trade and commerce.

It has been accepted by my learned friends, and we would agree, that paragraph (a) is not an area of betting exchange operation which is conducted by or through Betfair, that Betfair’s operation falls within paragraph (b), that is, it acts as an intermediary, a facilitator, a broker, as the Tasmanian legislation describes it, for matching back bets with lay bets made by third parties.  The qualification in section 4AA is it:

does not include a facility, electronic or otherwise, that enables persons to place bets only with a bookmaker or a totalisator.

It is not directed to the possibility that a Western Australian licensed bookmaker or a totalisator would have the ability to operate a betting exchange.  What that qualification is directed at is the kind of operation which is conducted by the Best Bookies operator.  The Court was given an exhibition of how the Best Bookies site operates.  That is the site that operates out of the Cannington greyhound racetrack.  It was done as a comparison with the way in which the Betfair operation operates.

Perhaps while I am just touching on this subject I might mention for Justice Kirby’s edification that the way in which the Best Bookies website operates is very, very similar to the Betfair website in terms of the fact that it is online and it is available to punters generally throughout the country and it is ‑ ‑ ‑

KIRBY J:   That point about “throughout the country” is important, though.  Once you have a product in the nation, the most important point Chief Justice Griffith said was we were a common market.  We were a common market, essentially, before Europe.

MR MEADOWS:   But this is for back betting.  The point I am seeking to make is that we are not in the 19th century or even the 20th century, we are in the 21st century in terms of the ability to operate online and placing back bets in Western Australia, not just bets with Western Australian bookmakers but with totalisators both in Western Australia and elsewhere.  I will come back to the point I was trying to ‑ ‑ ‑

KIRBY J:   It just becomes harder for you to argue that the plaintiff is being kept out because it is somehow going to undermine integrity in the industry when one of the States of the Commonwealth has let it in and it is operating there and can be accessed online in that State.

MR MEADOWS:   The answer to that, your Honour, is that it certainly was open to Tasmania to do that but equally we would say it was open to Western Australia to prohibit it.  But let me return to the Best Bookies operation.

GUMMOW J:   Would Best Bookies fall within paragraph (a) or (b)?

MR MEADOWS:   No, paragraph (b).

GUMMOW J:   Of that definition?

MR MEADOWS:   I am sorry, in paragraph (a), I beg your pardon.

GUMMOW J:   Yes.

MR MEADOWS:   In paragraph (a).  Because the way it would work would be, the Best Bookies site does not allow a person to bet with other than a licensed bookmaker or the operator of a totalisator.  It certainly does not allow a lay bet to be placed by somebody else.  So punters using the website are only able to place a back bet with a licensed wagering operator.  This kind of operation does not have the feature which prompted the objection to the use and establishment of betting exchanges which is that they enable a person to place a lay bet on a participant.  But if you analyse it, the concluding words of the definition, if you apply them to the Best Bookies website, it would have been an electronic facility which enabled persons, they being punters, to place through the operator of a betting exchange, which is Best Bookies, bets with other persons, that is, licensed bookmakers or totalisators. 

So Best Bookies could have been regarded as a betting exchange under (a) but for the qualification in the final paragraph and, in our submission, the exclusion of an operation of that kind operates both for the purposes of section 24(1aa) and section 27B of the Betting Control Act.  We would submit that the suggestion to the contrary, which is in footnote 45 of the plaintiff’s reply, should not be accepted, that is to say the concluding words of section 4AA only exclude from the definition of “betting exchange” a facility operated by a person other than a bookmaker or operator of a totalisator which enables persons to place bets with a bookmaker or the operator of a totalisator. 

The result of this is that a betting exchange operated by a bookmaker who enabled persons only to place bets with the bookmaker which were matched with other bets made with the bookmaker would still be a betting exchange for the purposes of the definition in paragraph (b).  So even if Betfair was to obtain a bookmaker’s licence in Western Australia, it would still be a betting exchange for the purposes of the definition.  In paragraph 17 of the plaintiff’s submissions they assert that there are two reasons why the construction which I have just placed on section 4AA(a) and (b) ‑ ‑ ‑

HAYNE J:   This is paragraph 17 of their reply?

MR MEADOWS:   Reply, yes, I beg your pardon.  They say that our construction is “impossible”.  They say that for two reasons:  one, that the definition of “to bet” in section 4(1) includes both sides of a betting transaction and therefore encompasses lay bets and back bets.  Now, we accept that that definition does encompass both sides of the betting transaction.  However, that does not affect the construction argument, because it remains the case that only bookmakers are able to accept back bets.  Secondly, they assert that there is an anomalous effect of our construction, and they say that it would mean that a person in Western Australia would be prohibited from betting with a bookmaker through a betting exchange lawfully operated by the bookmaker, but would not be prohibited from betting with a bookmaker through an exchange unlawfully operated by a third party. 

On our submission, that is not a correct statement of the position, because it remains the case that a bookmaker can only accept back bets.  A facility that enables a person to place bets with a bookmaker does not enable the person to place a lay bet.  So we would say, quite apart from the construction of the concluding words of section 4AA, there are other provisions of Western Australian legislation which make it clear that betting with a licensed bookmaker or a totalisator could not involve a bet through the use of a betting exchange.

First of all, in regard to totalisators, the nature of a totalisator simply does not accommodate the concept of a betting exchange and although some submissions have been directed to this in the submissions of the plaintiffs, it does not seem to have been pushed as an issue in the course of the plaintiffs’ oral submissions.  A totalisator is a form of parimutuel betting and just does not lend itself to a betting exchange operation.  I would direct the Court’s attention to the definition of “totalisator” in section 4(1) and you will find there that it refers you to the RWWA Act.

KIRBY J:   The totalisator system was invented in New Zealand, I think, and introduced in Australia a decade later.  I understand there is some special arrangement between the totalisator systems across the Tasman.  Is that correct?

MR MEADOWS:   I do not know about that.

KIRBY J:   Do we know anything about what New Zealand is doing in respect of the matter that is before this Court?

MR MEADOWS:   I am told, to answer your Honour’s first question, there is no relationship between Australian totalisator operators and New Zealand, and I cannot answer the question about what is happening in New Zealand with regard to betting exchanges.

KIRBY J:   They are probably watching this case, although they do not have section 92.

MR MEADOWS: They do not have section 92 to worry about.

GUMMOW J:   There is a way they could get it.

MR MEADOWS:   I beg your pardon?

GUMMOW J:   There is a way they could get it.

MR MEADOWS:   Yes, that is true.

KIRBY J:   So far they have resisted.  Perhaps they take a look at this Court full of so many counsel they would have to send over.

MR MEADOWS:   Yes.  We do have the New Zealand legislation in our book of comparative legislation and there is no reference to betting exchanges in their wagering legislation.

GUMMOW J:   A totalisator seems to be a machine or an instrument?

MR MEADOWS:   Yes, it is, it is a calculator in a way which ‑ ‑ ‑

KIRBY J:   Old technology.

MR MEADOWS:   A computer is just a glorified calculator, your Honour, in some of its operations.

KIRBY J:   There has been some progress though.

MR MEADOWS:   Anyway, you have a pool and the pool is divided up according to a formula, commission is taken out and the pool is distributed so that the people who have backed the winner and the placegetters in the race receive a dividend.

KIRBY J:   Sometimes as I look down on you, solicitor, I think of King Canute.  I think it may merely be your distinctive appearance.

MR MEADOWS:   I am deeply hurt by your Honour’s remark, your Honour.  I regard myself as extremely progressive.

HAYNE J:   Just on this question of proper construction of 4AA.  Paragraph 14 of your submissions, which is met or answered by paragraph 17 of the plaintiffs’ reply, seems to set up an issue that, at least on one view of the section, seems a false issue to me.  Section 4AA(a) of the definition of “betting exchange” assumes that the operator of the betting exchange is not the person with whom the bet is either placed or accepted, not the person with whom it is placed and is not the person who accepts the bet.  Is there any deeper point to be made such as you seek to make in 14 about whether that operator is or is not a bookie or operator of a tote or anything else?  Is not the core point that the operator is not the person taking or laying the bet?

MR MEADOWS:   The core point is that in (a) and (b) it must be through the operator of a betting exchange or placed with the operator of a betting exchange.

HAYNE J:   Well, (a) and (b) have radically different operations.  The key to (b) is matching because the person with whom you are betting is the operator.  In this case it is Betfair that the punter bets with and Betfair will take the bet if and only if Betfair can match.

MR MEADOWS:   I would disagree with that, your Honour.  All it does, it acts as an intermediary, it does not ‑ ‑ ‑

HAYNE J:   That is not my understanding of the facts, Mr Solicitor, and you would need to take me to chapter and verse.  My understanding is that Betfair is the contracting party with the punter and true it is it will not contract unless it can match, but the punter bets with Betfair.

MR MEADOWS:   Yes, I accept that that happens.

HAYNE J:   Yes.

MR MEADOWS:   But Betfair does not accept anything other than the liability that is created by the matching bet.

GLEESON CJ:   You would test this in the event of insolvency, would you not?

HAYNE J:   The punter takes the risk of Betfair going insolvent, not the risk of Joe Soap’s bet on Hay Burner in the third.

MR MEADOWS:   I accept that, your Honour, but the point is that if one looks at (a) and (b), it is through the operator of a betting exchange and if you look at the qualification, it is talking about other people besides the operator of a betting exchange.

GLEESON CJ:   Is all this aimed to demonstrate that 24(1aa) is not discriminatory?

MR MEADOWS:   Yes, your Honour.

GLEESON CJ:   And the law in Cole v Whitfield that was held to be discriminatory in a protectionist sense was perfectly general in its application, was it not?  It applied to under-sized crayfish in Tasmania and under-sized crayfish that came from South Australia and wherever.

MR MEADOWS:   It was non-discriminatory.  It did not discriminate between intrastate trade in that commodity and interstate trade in that commodity.

GLEESON CJ:   It was non‑protectionist, was it not, because it was for the purpose of stopping something bad that would happen if you allowed people to eat undersized crayfish?

MR MEADOWS:   Yes.

GLEESON CJ:   That expression “discriminatory in a protectionist sense”, does that refer to two things or one thing?  In other words, is it a compound concept or are there two separate integers?

MR MEADOWS:   I do not think you can read it either way.  It must protect the intrastate party in a way which is protectionist.  As I say, it is a bit circular.

GLEESON CJ:   Let us go back to a time 30 or 40 years ago when New South Wales attached a lot of importance to looking after, if I can use that neutral expression, its dairy industry and there was competition from various sources, including competition from margarine.  Suppose New South Wales had simply enacted a law saying nobody may sell margarine in New South Wales, full stop, and there were people who had interstate production of margarine who wanted to import it into New South Wales and sell it.  Would that law have been discriminatory in a protectionist sense?   Assume that there was no difficulty in deducing that the object of the law was to protect the New South Wales dairy industry.  In other words, forget any issues about whether there was something wrong with margarine.

MR MEADOWS:   On its face, it would not be because it applied equally to margarine produced in New South Wales.

GLEESON CJ:   That would have survived the Cole v Whitfield test?

MR MEADOWS:   It would have at that point of the process, but then you have to look at the second question, which is, was the purpose or the real purpose or objective of the provision to protect?

GLEESON CJ:   Let me assume that there is dairy production going on in New South Wales and let me assume that there is a legislative blanket prohibition on selling margarine in New South Wales and I am also assuming, to get the possibility of section 92 working, interstate production of margarine that somebody wants to bring into New South Wales, somebody has committed it to New South Wales, and assume that the object of the legislation is to protect the New South Wales dairy industry. There is nothing wrong with margarine. Nobody is suggesting there is anything else wrong with margarine. How would that measure up against the Cole v Whitfield test?

MR MEADOWS:   Even if in its practical effect – and if you looked at the context of the legislation in order to reach that position – it had the effect of protecting the dairy industry in New South Wales, then it may well be discriminatory in a protectionist sense.

GLEESON CJ:   How was it discriminatory?

MR MEADOWS:   Because it discriminated against the importers for the interstate traders in the product.

GLEESON CJ:   Exactly.  Now why is 24(1aa) not discriminatory in the same way?

MR MEADOWS: Section 24(1aa) is directed at persons in Western Australia ‑ ‑ ‑

GLEESON CJ:   The other section, the one that has RWWA as the exception to it.

MR MEADOWS:   We say it does not have an exception ‑ ‑ ‑

GLEESON CJ:   Subject to that.  Why is not the effect of this legislation, assuming that it applies to Western Australian betting exchanges as well as to Tasmanian betting exchanges, why is it not discriminatory in the same sense as the law about margarine that I postulated?

MR MEADOWS:   Because we are dealing there with the matter of making lay bets when you are talking about a betting exchange and we submit that it is permissible for a State legislature to pick a distinct form of wagering and to determine that it is harmful and to prohibit it ‑ ‑ ‑

GLEESON CJ:   I understand why you say ‑ ‑ ‑

MR MEADOWS:   ‑ ‑ ‑ and that is notwithstanding that there might be a broader wagering industry.

GLEESON CJ:   That seems to suggest that the concept of discriminatory in a protectionist sense is a compound concept.

MR MEADOWS:   It may well do, but I think you can look at it either way.  Now, I think I was answering a question from Justice Hayne.

HAYNE J:   I think you have answered it, Mr Solicitor.

MR MEADOWS:   Thank you.  On the issue of totalisators, perhaps I could just complete what I had to say about that by referring to section 3(1) of the RWWA Act where there is a definition of “totalisator” which is rather unhelpful, but we would submit that the legislation needs to be construed against the background of the case law in Western Australia and we refer ‑ ‑ ‑

GUMMOW J:   It means the instrument and it includes a scheme.

HAYNE J:   It makes Part 4A look easy.

MR MEADOWS:   I am about to suggest that the drafter of the legislation had in mind the decision of the Full Court of the Supreme Court in TotalisatorAgency Board v Wagner [1963] WAR 180 and to the remarks of Justice Hale at page 192 and Justice D’Arcy at page 196, where the operation of a totalisator is explained rather lucidly, if I might be permitted to say.

Mind you, what I have just put to your Honours is somewhat the same as the understanding of the nature of a totalisator as set out in paragraphs 67 and 69 of the amended special case.  I refer to the special case book at tab 8 at pages 177 to 178.  What it does make clear is that because of the parimutuel nature of its operation it cannot be used as a betting exchange of the kind described in section 4AA.  The pooling arrangement would simply not let it be such.

Nor can a bookmaker licensed in Western Australia operate a betting exchange in the course of his or her licensed business because to do so would be contrary to the rules applying to those operations under other Western Australian laws.  I am going to take your Honours to the Betting Control Regulations to begin with.  This is to be found in the plaintiffs’ bundle of legislation, volume 1, tab 4 and I am referring to pages 379 to 340.

GUMMOW J:   What is this designed to show, Mr Solicitor?

MR MEADOWS:   That bookmakers are prohibited from taking lay bets or operating a betting exchange as well.  Rule 48 says:

Subject to these regulations, all bets shall be in accordance with the Rules of Betting set out in the Appendix and the rules of wagering.

And in 48A:

A bookmaker is to comply with any minimum bet obligations imposed as a condition of a permit granted to the bookmaker under section 12 of the Act or imposed under the rules of wagering.

I now wish to take your Honours to the Rules of Wagering which can be found in the plaintiff’s book of legislation, volume 2 at tab 10 and I wish to take your Honours to page 947 – I am sorry, page 947 is section 120 of the RWWA Act, I beg your pardon, subsection (4) of which provides for the rules of wagering.  The Rules of Wagering are in the plaintiffs’ bundle of legislation again in volume 2 but at tab 13.  The first rule to note is rule 40 which is at page 1055.

Rule 40 is to the effect that a bookmaker must field all runners in the race.  In other words, the bookmaker must lay odds or set fixed odds for all runners in the race.  Secondly, rule 43(1) and (2) which require the bookmaker to accept all wagers on a runner at posted odds unless the amount sought to be bet is more than the minimum wager obligation.  Then in rule 44(1) and (2) deal with wagers with other bookmakers.  Of course, when it is said that a bookmaker lays off with another bookmaker he is making a back bet with the other bookmaker.

GLEESON CJ:   He just bets with another bookmaker.

MR MEADOWS:   Rule 50 outlines the permitted kinds of wagers.  You can see there that the only wagers that are permitted are win wagers, place wagers, each‑way wagers and concession wagers and doubles wagers.  In subrule (2) – and I will not go through them all in detail – it is sufficient if we refer to (a):

For the purpose of this Part –

(a)in a win wager the bookmarker offers odds against a runner winning a particular race -

Rule 51 provides that:

Bookmakers not to offer, make or accept certain wagers –

and if one looks at paragraph (d), you will see that one of the forbidden kinds of wagers is:

(d)a wager, whether or not as a –

back bet or “bet back,” as it is called here – 

in relation to a race by means of a betting exchange.

There is a definition of “betting exchange” in rule 3(1), which is at page 1015, which is not precisely the same as the definition in the Betting Control Act, but you can see that it:

means a facility provided by the operator of the betting exchange, for fee, commission or other reward, under which offers to back a runner are matched with offers to lay against the runner with the result that wagers are made between those offering to back and those offering to lay -

So a bookmaker is unable to conduct such a betting activity in Western Australia.

CRENNAN J:   What is the point of the exception to the prohibition, 27B(2)?

MR MEADOWS: We deal with this at paragraph 23 of our written submissions where we submit that qualification is inserted out of an abundance of caution to avoid any argument that technically the existing operations of a bookmaker or RWWA, which I am about to come to, constitute the establishment or operation of a betting exchange, because as I think I have illustrated, a bookmaker is forbidden from conducting a betting exchange, and that this provision is there no more than to avoid the possibility of an argument that situations such as the ones we have outlined in that paragraph might be regarded as contravening section 27B(1).

If one looks at the provisions relating to bookmakers, they are required to post odds on all runners in a race, they are required to accept all bets subject to the minimum wager obligation, they cannot contingently accept a bet or accept a bet only if there has already been a matching bet and nor could a bookmaker accept a lay bet from a punter as it is not one of the permitted wagers which are provided for in rule 50.

Now, one of the points which the plaintiffs make in their submissions is that it would be a relatively easy matter for RWWA to amend the rules of wagering so as to allow bookmakers to bet on betting exchanges.  Whether or not it would be relatively easy is beside the point, in our submission.  If that were to occur, then there might be an issue in this regard but whilst that remains the law in Western Australia, then bookmakers are not able to conduct a betting exchange operation.

GUMMOW J:   What was your answer again to Justice Crennan’s query about what is the reason for the concluding words of the definition of betting exchange in 4AA?

MR MEADOWS:   That was 27B that Justice Crennan was asking about.

GUMMOW J:   Yes, well, what is the point of the concluding words of 4AA?

MR MEADOWS:   Of 4AA?

GUMMOW J:   Yes, the definition of “betting exchange”.

MR MEADOWS:   Well, as I submitted, it was in relation to the Best Bookies type of operation.

GUMMOW J:   And nothing else?

MR MEADOWS:   We cannot think of any other instance where it would be applicable.

GUMMOW J:   Yes, thank you.

MR MEADOWS:   So, in our submission, this can only be judged against the law as currently in force in Western Australia.  If the rules of wagering were the subject of legislation, obviously the Act could be amended.  It might be more easy to amend the rules of wagering than to put through an amendment but, nevertheless, those are the legislative arrangements in Western Australia.  Section 120(4) of the RWWA Act makes it clear that the rules of wagering are subsidiary legislation.  I suppose that directs attention to section 5 of the Interpretation Act 1984 (WA) which makes it clear that subsidiary legislation is a written law.

Might I turn to RWWA because it has been suggested by the plaintiffs and by Tasmania that the statutory authority, which is RWWA, could conduct a betting exchange operation if it so desired. We would contend that that is not the case, that RWWA is not able to operate a betting exchange and that there is nobody in Western Australia authorised to conduct the operation of a betting exchange, leaving aside the provisions of 24(1aa) and section 27B.

I am going to come to section 27B shortly, but we would contend that section 27B itself precludes RWWA from becoming a betting exchange operator. Incidentally, while I am about to address RWWA, a question was raised about the income tax position of RWWA. My instructions are that it is not liable for income tax in that under Division 1AB of the Income Tax Assessment Act 1936, which exempts certain State and Territory bodies from income tax, RWWA is a statutory authority which is exempt under that provision.

GLEESON CJ:   Thank you.

MR MEADOWS:   If I could turn then to the RWWA Act and ask the Court to go to that, which is at volume 2 of the plaintiff’s bundle of legislation.

GUMMOW J:   Just before you do that, Mr Solicitor, what was that reference to the tax Act again?

MR MEADOWS:   It is Division 1AB under the heading “Certain State”, “State/Territory body (an STB) is exempt from income tax”.

GUMMOW J:   Thank you.

KIRBY J:   What is the tab we are looking at in this volume?

MR MEADOWS:   It is at tab 10 and page 904 I wish to take your Honours to which deals with the functions of RWWA in relation to gambling.  It provides that:

Without limiting the functions and powers of RWWA under Parts 3 and 4, the functions of RWWA in relation to gambling include the following –

If I could take your Honours to paragraph (b)(iii):

the business of setting, accepting and making fixed odds wagers in relation to races and certain sporting and other events –

So that when it comes to fixed odds wagers, the business which RWWA is authorised to conduct is that of setting, accepting and making fixed odds wagers.  In our submission, what that authorises is what is in effect a bookmaking operation in the traditional sense, that RWWA must set the fixed odds, it must accept bets for fixed odds and make fixed odds wagers, that is, it is required to conduct fixed odds wagering in the traditional sense.  It is not authorised to conduct a betting exchange operation.

GUMMOW J:   What about (iv), “any other business”?

MR MEADOWS:   There is no other business related to gambling authorised under this Act to be carried on by RWWA which would in any way fall within the ambit of a betting exchange.  If one goes to section 54(2)(a) and sees that:

RWWA may conduct –

(a)     totalisator wagering and fixed odds wagering on –

(i)any race or series of races, whether conducted in Western Australia or elsewhere -

et cetera.  In our submission, when that provision refers to “fixed odds wagering”, you are taken back to section 50(1)(b)(iii) to the description of fixed odds wagering as “setting, accepting and making fixed odds wagers”.

Now, my learned friend has suggested that section 56(1)(a) of the RWWA Act permits RWWA to conduct a betting exchange operation because that section provides that the mere fact of a person wagering at fixed price odds through RWWA or wagering with RWWA under this Act does not make the wagering an offence.  It is said that that creates a situation where RWWA effectively can do what it likes when it comes to wagering.  Once again, I would take the Court back to the fixed price odds provisions that I have already directed attention to and suggest that it could only be in relation to where the odds are set, accepted and made.

Be that as it may, section 56, in our submission, does not have the effect for which my learned friends contend. That is because it is really no more than a provision which says that the fact that you have wagered with RWWA is not of itself something which can be capable of constituting an offence. That is, the mere fact of wagering with RWWA cannot constitute an offence. But if there is some other provision which creates an offence, then that offence will still have been committed. So this provision goes back to what was in section 20 of the Totalisator Agency Board Betting Act 1960, which is in the defendant’s materials, volume 2, tab 15 at pages 189 to 190 and at 211 to 212.

It is probably not necessary for the Court to go to that volume, but that Act provided for the establishment of off‑course betting at TAB outlets. The kind of provision which section 20 was directed to at that time was the provisions of the Police Act and the Criminal Code.  The Criminal Code provisions were amended and they are now set out in the defendant’s materials, volume 2, tab 8 at pages 44 to 47.  They deal with common gaming houses and common betting houses.

The amended provisions of the Police Act are found in the defendants’ materials in volume 2 again, at tab 4 in relation to “common gaming” houses.  That is at pages 32 to 34.  At tab 13 at page 118 where it is provided that the Act is to be read subject to the betting legislation.  Provisions of this kind are now found in Part IV Gaming and Wagering Commission Act 1987.

The purpose of section 56 is to prevent betting with a totalisator, the TAB and RWWA from being illegal per se.  Without derogating from the provisions to which I have referred, let me illustrate the point by referring to section 21 and sections 22 and 22A of the Betting Control Act.  Section 21 prohibits betting with minors and intoxicated persons.  Section 22 prohibits minors from betting and section 22A prohibits people from assisting minors to bet.

In our submission, betting with RWWA by a minor would still constitute an offence under section 22 even though section 56 makes the provision that it does because the mere fact that it is with RWWA does not excuse the commission of the offence which is to be found in section 22 of the Betting Control Act.  Likewise, with section 29 which forbids credit betting.  A person:

who accepts a bet through RWWA involving the provision of credit by RWWA, contrary to the provisions of section 63 of the RWWA Act, commits an offence.

Section 56 would not excuse that activity because the mere fact of betting through RWWA does not excuse the commission of an offence under other provisions. We would submit that when one turns to section 24(1aa), which prohibits persons in Western Australia from betting with a betting exchange, that if RWWA were to operate a betting exchange, that would not excuse the person betting with RWWA.

In the plaintiff’s reply, and this is at paragraph 18, the plaintiffs suggest that:

to treat s 56(1)(a) of the RWWA Act as inapplicable to s 24(1aa) of the WA Act would lead to the absurd results -

Now, the results which the plaintiffs seek to classify as absurd are that if RWWA could lawfully establish a betting exchange it would be an offence for a person in WA to bet through that exchange and an offence for RWWA to accept that bet.

Now, we accept that that is the result of the construction which we contend for, but deny that the result is absurd. It is merely a reflection of the policy of section 24(1aa) which is to prohibit the use of a betting exchange by persons in Western Australia regardless of where or by whom the exchange is operated.

So if I could now turn to section 27B in order to make the submission that section 27B does preclude RWWA from operating a betting exchange. If I could take the Court to subsection (2), subsection (1) having, of course, created the offence of establishing or operating a betting exchange, and to refer to subsection (2) which provides that:

For the purposes of subsection (1) . . . 

(b)anything done by RWWA in accordance with the

RWWA Act or another written law, or . . . 

does not constitute the establishment or operation of a betting exchange.

So for the reasons which I have sought to explain in the last few minutes RWWA is not authorised to do anything which would constitute the operation of a betting exchange, either under the RWWA Act or any other written law. So, in our submission, section 27B, when read in light of the RWWA Act and the other legislation to which I have referred, precludes RWWA from establishing or operating a betting exchange.

GUMMOW J:   So what is the work done by 27B(2)?  What is the point of section ‑ ‑ ‑

MR MEADOWS:   Well, once again I come back to paragraph 23 of our submissions where we say that that provision is there out of an abundance of caution.

GUMMOW J:   One says on your side of the case that it is an abundant caution provision.

MR MEADOWS:   It is, and we do give – if you look at page 9 of our submissions we do set out there a situation where it might be possible to argue that what RWWA is doing would fall - under the things that it is authorised to do – within the ambit of what is a betting exchange as defined in section 4AA.  If I could take your Honour specifically to the examples in (c) and (d)?

GUMMOW J:   What page of your submissions?

MR MEADOWS:   Page 9.

GUMMOW J:   Yes, we looked at that before.

MR MEADOWS:   We would say that those activities would not fall within the definition but it would certainly be arguable and the purpose of that qualification in 27B(2)(b) is to preclude any argument to that effect.

GUMMOW J:   Thank you.

MR MEADOWS: Leaving aside section 27B, we would say that irrespective of the provisions of section 27D, section 24(1aa) of the Act would prevent RWWA from operating a betting exchange and accepting lay bets from a person who wished to place a bet in that fashion. Just as with Betfair, RWWA would be precluded from accepting a bet through a betting exchange operation. Perhaps in this connection I should draw attention to footnote 150 in the plaintiffs’ submissions, which is at page 20, and that takes you to the second sentence in the second paragraph of paragraph 54, which says:

The operator of the betting exchange would thereby itself also be likely to be subjected to accessorial liability.

Reference is made to section 7 and 13 of the Criminal Code (WA). We would submit that, likewise, RWWA and its personnel could also be subject to accessorial liability if a bet were accepted from a punter in the circumstances where RWWA was conducting a betting exchange. In other words, even if they could establish a betting exchange, no person in Western Australia could lawfully use it. Having reached that point, we submit that no wagering operator in Western Australia can lawfully operate a betting exchange or obtain an authority to conduct a betting exchange.

GUMMOW J:   You refer to section 13 of the Criminal Code which is quite an important provision, is it not?

MR MEADOWS:   Yes.

GUMMOW J:   It says:

When an offence under this Code or any other law of Western Australia is committed, section 7 of this Code applies to a person even if all the acts or omissions –

in aiding and abetting, to put it shortly –

occurred outside Western Australia.

MR MEADOWS:   Yes.  And your Honour referred to Pilkington’s Case, which is an illustration of where most of the activity occurred outside the State but one crucial component of the offence was committed in Western Australia.

GLEESON CJ:   Insofar as section 24(1aa) prohibits a resident of Victoria who is temporarily in Perth betting through Betfair on the outcome of the Melbourne Cup, what integrity interest is being protected there?

MR MEADOWS:   The integrity interest is of the racing industry in Western Australia being affected by the tarnished reputation of other racing bodies in Australia through ‑ ‑ ‑

GLEESON CJ:   And insofar as it operates to prevent a resident of New South Wales placing a bet with Betfair in relation to the rugby league competition?

MR MEADOWS:   Well, you can have corruption in rugby league as well.

GLEESON CJ:   Is rugby league played in Western Australia?

MR MEADOWS:   In a minor way, your Honour, yes.  As I directed the Court’s attention early in my submissions – and there will be differing views on this – it is seen in Western Australia that betting exchanges carry with them an insidious side effect of encouraging corruption and illegal activity in whatever activity it applies to in terms of wagers that are placed.  I will probably come to this a little bit later, but it is trite to say that it is much easier to get a horse to lose than it is to get a horse to win.

GLEESON CJ:   It depends what is happening to the other horses.

MR MEADOWS:   Yes, of course.  If every other horse in the race is being pulled, well, quite so.  But even if everything is equal and the trainer, the jockey and everybody associated with the horse believes that it is ready to win, it may not, but if those people decide that the horse should not win, then that is very easily achieved.

We come back to the point which I began with, and that is that in its legal operation, these provisions of the Betting Control Act do not discriminate against interstate wagering operators as compared to domestic wagering operators in Western Australia. 

GUMMOW J:   That is the question, is it not?  What are the two comparators?  That is what I am worried about?

MR MEADOWS:   Neither ‑ ‑ ‑

GUMMOW J:   I take the point you make about no betting exchange exists. There is no such commerce in betting exchanges in WA, but is that enough to take you outside the possibility of the application of section 92?

MR MEADOWS:   When we are talking about ‑ ‑ ‑

GUMMOW J:   What is the commerce?  What are the two species of commerce we are comparing?  That is what I am trying to ask.

MR MEADOWS:   Yes, I will be coming to that, but essentially, we would say, in this instance we are talking about betting exchanges which allow lay bets to be placed.  That is the activity which this legislation is directed to and it prevents that activity from taking place in Western Australia.  It prevents the establishment or operation of such an activity in Western Australia and it also precludes people in Western Australia from wagering with such an entity wherever.

CRENNAN J:   The potential competition is in relation to customers.  In other words, it is on the demand side, not on the product side necessarily.

MR MEADOWS:   I hear what your Honour says about the demand side, but the customers are not engaged in interstate trade or commerce which would be the subject of protection by this legislation.

CRENNAN J:   No.  I was just thinking about the point that the concern about letting in Betfair is that Betfair will take some customers away who presently cannot lodge a bet with a betting exchange, but might find just as attractive as laying a bet to win, laying a bet to lose.

MR MEADOWS:   They may find it attractive, but the legislature in Western Australia has seen that activity as having this insidious component ‑ ‑ ‑

CRENNAN J:   Yes, I am not challenging that.  I am just trying to understand properly what the comparators are, what the competition is, if there is ‑ ‑ ‑

MR MEADOWS:   The competition that would – in fact, there is no competition, because there is nothing in Western Australia to compete ‑ ‑ ‑

GLEESON CJ:   That is the point.  The whole idea of protectionism is related to competition, is it not, to precluding competition?

MR MEADOWS:   Yes.

GLEESON CJ:   What competitors compete for is customers.

MR MEADOWS:   Yes, but we are talking here about customers who wish to place lay bets.

GLEESON CJ:   The argument against you, right or wrong, is that the relevant market or submarket is the market for wagering on horseraces or horseraces and sporting events, and that the form of competition which this legislation aims to prevent is the competition for customers which a betting exchange offers to a bookmaker or a TAB.

MR MEADOWS:   Your Honour, when you are talking about a market there you are really talking about a market in Trade Practices Act terms?

GLEESON CJ:   Yes, I was.

MR MEADOWS: In our submission, section 92 is not directed to that concept which is really, if we are looking at the Trade Practices Act it is talking about competition in a market and that there should be no anticompetitive conduct in that market.  Here we are talking about interstate trade and commerce and setting up protectionist barriers in relation to some aspect of that trade and commerce.

GLEESON CJ:   But we are told by Cole v Whitfield that the key to the understanding of all this is the concept of protectionism.

MR MEADOWS:   Yes.

GLEESON CJ:   Which is a concept about precluding competition, is it not?

MR MEADOWS:   Yes, as matters stand, there is no betting exchange operation in Western Australia.  There is one in Tasmania.  So, our provision applies even-handedly to intrastate as well as interstate operators so that if anyone wanted to set up a betting exchange in Western Australia it would be prevented from doing so and in our submission Betfair is precluded from establishing or conducting its operation in Western Australia.

GLEESON CJ:   In Cole v Whitfield on page 408 in the middle of the page it says:

where the law in effect, if not in form, discriminates in favour of intrastate trade, it will nevertheless offend against s. 92 if the discrimination is of a protectionist character.

Could you give an example of a law that did not inform but did in effect discriminate against interstate trade?

MR MEADOWS:   Yes, I think I can, your Honour.  I can give you an example, if I may, your Honour.  It is this, suppose that a State law prohibited the sale of a certain kind of barley in the State.  If we want to have a Tasmanian component to it, perhaps, we can call it “Franklin barley”.  Let us assume that barley of that kind was not grown in the enacting State, say, Western Australia, because it was not suitable in the climatic conditions that prevailed in that State.  However, it is a barley which is commonly grown and marketed by producers in other States, including Tasmania.

Now, the law was not enacted by reason of any matter such as a threat to the agricultural industry in Western Australia, so even though it applied both to Franklin barley that might be produced out of the State it, on its face, applies equally to barley produced in the State and it is apparent that the purpose of the provision is not to protect agriculture, but effectively to preclude the importation and sale of that barley in Western Australia.  Such a provision may well be characterised as having been enacted for no reason other than to confer a competitive advantage on West Australian barley growers.

GLEESON CJ:   What is the provision?

MR MEADOWS:   The provision is that you may not sell that barley in Western Australia.

GLEESON CJ:   Franklin barley?

MR MEADOWS:   Yes, you can probably say may not bring it in or sell.

GLEESON CJ:   You say that is not discriminatory in form because ‑ ‑ ‑

MR MEADOWS: On its face it is not, because unless you go behind the provision, you are unable to see – because on its face it is not discriminatory. It applies to all the sale of Franklin barley wherever produced. On the other hand, suppose that the State prohibited the importation and sale of genetically modified barley from whatever source and the reason advanced for this was that there was a legitimate concern that the importation and sale of genetically modified barley might contaminate local crops and affect the marketing of local barley as GMO free, which is seen as having a marketing advantage, in one sense, that type of provision could be seen to protect the domestic market. However, its purpose is to protect the domestic market from the effects of the introduction of genetically modified organisms rather than competition from interstate barley producers and in that instance such a law would not infringe section 92. On their face, both of those laws apply equally to interstate and intrastate barley.

GLEESON CJ:   What would you say about the validity of the laws in the present case if there was no suggestion that there was any extra threat to the integrity of racing from exchange betting?

MR MEADOWS:   The whole foundation for the provision is the ‑ ‑ ‑

GLEESON CJ:   Assume that foundation did not exist, yet the law was, as you say, not discriminatory in form, the laws were the same in the form in which we have them but there was not any argument about industry integrity, how would you say section 92 would apply?

MR MEADOWS:   You would have to look for some protectionist purpose ‑ ‑ ‑

GLEESON CJ:   Why?  There is no discrimination, you say.

MR MEADOWS:   There is not, so there is no facial discrimination but you still, nevertheless, have to look at the law from the point of view of whether, notwithstanding the fact that it lacks facial discrimination, there is not some basis upon which it has a protectionist effect.

GLEESON CJ:   Even though there is no discrimination at all?  On the hypothesis I put to you, that is, facts of the case are exactly as they are except that there is no argument about integrity, would that law be discriminatory in any sense?

MR MEADOWS:   It is certainly not on its face discriminatory and that, in many instances, will be the end of the journey, but it may be possible, and I have to accept that and it flows from Cole v Whitfield, that you can discern from the context that it has some protectionist purpose.

GLEESON CJ:   That again seems to suggest – I am not saying whether I think this is right or wrong.  I have no view on it at the moment – that this concept of being discriminatory in a protectionist sense is a compound concept, not a concept with two elements.  You do not have to give two ticks.

MR MEADOWS:   Yes, except that the way in which it is approached in Cole v Whitfield is to give it two ticks, it seems to me.  They say once you have reached the point where you can say there is no discriminatory effect on its face that may be enough, but you still have to take the next step and have it ticked off on the basis that, if you look at its context, there is no protectionist effect.

CRENNAN J:   I suppose it is really the suppression of a new product applying indifferently without discrimination.

MR MEADOWS:   Yes.

CRENNAN J:   But then the product is available, coming from another State.

MR MEADOWS:   It is a product that is available from another State, but it is prohibited in Western Australia.  Without actually going to the detail of the submission – I will come to it in due course – the effect of the plaintiff’s argument is that if one State permits an activity such as this no other State can prevent it or prohibit it.

GLEESON CJ:   I could understand, I think, easily why a law would have a State prohibiting people from gambling on the outcome of a dog fight. If you had a law in Western Australia that prohibited that and somebody persuaded the authorities in some other part of Australia to permit such contests and to permit betting on them, it would not necessarily, I imagine, offend section 92 for Western Australia to maintain its stand against that kind of offensive gambling, for humanitarian reasons.

MR MEADOWS:   Yes.  In some people’s eyes, preventing the kind of corruption which betting to lose can lead to is probably equally insidious.  Your Honour gave the example of cannabis.  Perhaps I could address that as another illustration of the kind of point that I am trying to make.  Suppose, for example, that Tasmania were to legalise the sale of cannabis subject to the issue of a licence:

KIRBY J:   South Australia did in fact introduce breach notices of some kind and dealt with it in quite a different way to other States at one stage.

MR MEADOWS:   It certainly has happened in Western Australia too, but this is a hypothetical example.  The grant of that licence may result in the only lawfully authorised sellers of cannabis being located in Tasmania; that is in the Australian context.  We would submit that it would not follow from that fact that Western Australia could not enact a law which prohibited the sale or purchase of cannabis by a person in Western Australia.  It clearly would affect the ability of the person licensed in Tasmania from selling that product in Western Australia.  It would certainly prevent a person in Western Australia from purchasing that product from a person licensed to sell cannabis in Tasmania.  So in a sense it would be discriminatory.

We would say that, nevertheless, Western Australia, or its legislature, could choose a distinct kind of drug, whatever it might be, and say that that drug may not be sold in Western Australia or purchased by someone in Western Australia, even though in this particular context it might be said that that provided a market advantage to intrastate sellers of other drugs, whether it be alcohol, tobacco or other drugs which are capable of having an intoxicating or euphoric effect.

In that instance, the legislature of the State would be entitled to seize upon a particular drug and say that for the protection of the public health of the people of Western Australia it would prohibit the sale or consumption of that product.

KIRBY J:   I do not know why but I do not feel that that is really an analogous case.  It may be bound up in the fact that the sale of cannabis, at least in Australia, is in a very small dimension because of the way the criminal law has operated until now but no one can say that about internet gambling.  It is a very big dimension and it is potentially billions of dollars.

MR MEADOWS:   I think the drug trade is also measured in millions of dollars.  But let us take perhaps another example, and we are looking at, say, amphetamines, and it is conceivable at some stage somebody may say, well, we would rather control the sale of amphetamines and we will have a licensing arrangement and some sort of control and a State decides to go down that path, but a State such as Western Australia might say, well, we are not going to allow that to occur in our State.  We are talking about a multi-million dollar industry.

KIRBY J:   That is true, but it is a bit like the case of the confiscation of property that was considered in Theophanous, for example, and the jurisprudence has been criticised as not providing a fine line and it may be that in some cases it is very difficult to explain why something falls on the line of forfeiture under criminal law or criminal‑type law as distinct from confiscation of somebody’s property interest that gives rise to the constitutional entitlement for protection, but the distinction exists.

MR MEADOWS:   Yes.  I hope to develop this a little bit further tomorrow but we would submit that for the legislative choice as to whether or not this particular activity should be prohibited is one which should be given due respect, that it is not really for the Court to second guess whether what the legislature has decided is an appropriate measure for the protection – and I use protection not in a protectionist sense but the

protection of the public of Western Australia from the operations of a betting exchange.

KIRBY J:   That can only go so far though because of section 92. I mean, every one of the measures which over a century have been considered by this Court have recommended themselves for various reasons, often quite good, and perhaps would be sustained today by reference to domestic policy concerns of the State Parliament concerned.

MR MEADOWS:   Yes, I would not deny that, but here it is in the context of whether there is a legitimate purpose for the prohibition and provided on its face the particular purpose is one which could be justifiably, if I could use that word, entertained by the legislature as providing a basis for the legislation and in terms of the tests in Cole v Whitfield and subsequent cases, then that should be sufficient to sustain the legislation as having a legitimate purpose.

This can be contrasted with the situation in Castlemaine Tooheys where, as my learned friends have already indicated, the real purpose of the impugned law was merely to protect South Australian brewers from competition from a Western Australian brewer. It really just is a question of characterisation of the impugned law having regard to its form and practical effect. Regard has to be had to the policy justifications and the factual background against which it is enacted, so that if the real reason for the prohibition or restriction is other than protecting domestic traders from interstate competition, the law will not infringe section 92.

Coming back to where I started, in our submission, the clear intent of the legislation is to prohibit betting exchanges wherever they operate.  I notice the time, your Honour.

GLEESON CJ:   Yes.  We will adjourn until 10 o’clock tomorrow morning.

AT 4.15 PM THE MATTER WAS ADJOURNED
UNTIL FRIDAY, 9 NOVEMBER 2007