Betfair Pty Limited v Racing New South Wales & Ors; Sportsbet v State of New South Wales & Ors

[2011] HCATrans 232

[2011] HCATrans 232

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S116 of 2011

B e t w e e n -

BETFAIR PTY LIMITED (ACN 110 084 985)

Appellant

and

RACING NEW SOUTH WALES (ABN 86 281 604 417)

First Respondent

HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373)

Second Respondent

ATTORNEY-GENERAL (NEW SOUTH WALES)

Third Respondent

Office of the Registry
  Sydney  No S118 of 2011

B e t w e e n -

SPORTSBET PTY LTD (ACN 088 326 612)

Appellant

and

STATE OF NEW SOUTH WALES

First Respondent

RACING NEW SOUTH WALES (ABN 86 281 604 417)

Second Respondent

HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373)

Third Respondent

ATTORNEY-GENERAL FOR SOUTH AUSTRALIA

Fourth Respondent

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 1 SEPTEMBER 2011, AT 10.02 AM

(Continued from 31/8/11)

Copyright in the High Court of Australia

FRENCH CJ:   Before we hear from you, Mr Kirk, I think we have before us a proposed consent order in relation to confidential material in the Betfair matter.  That just covers some of the Betfair information, I think.

MR YOUNG:   That is necessary to cover all of the information in the appeal books, your Honour.

FRENCH CJ:   When you say “all of the information in the appeal book” ‑ ‑ ‑

MR YOUNG:   No, I did not mean to suggest we are claiming confidentiality in the appeal books.  This is to ensure that ‑ ‑ ‑

FRENCH CJ:   No, these are the pages.

MR YOUNG:   ‑ ‑ ‑ material in the appeal books is no longer confidential, your Honour.  But it varies the orders otherwise so it does not affect material lying outside the appeal.

FRENCH CJ:   Yes, all right, we will have that order.  I understand that in relation to the Sportsbet matter, the agreement is that the order should stand.

MR SHEAHAN:   …..so, your Honour.

FRENCH CJ:   Yes, all right, thank you.  Yes, Mr Kirk.

MR KIRK:   Thank you, your Honour.  Your Honours, I was within topic 8 in our outline and I will seek to be only a few minutes.  I was seeking to address at the end of yesterday the proposition put by Sportsbet accepted by the trial judge that this Court’s majority decision in Bath v Alston Holdings precluded a State from, to use his Honour’s phrase, “levelling up” by imposing new burdens on interstate traders.  Could I take your Honours briefly to Bath v Alston Holdings 165 CLR 411. At page 424, your Honour Justice Gummow pointed out the sentence at about point 2, five lines into the second paragraph:

If the tax had been imposed directly on all retail sales of tobacco products in Victoria, it would not have infringed the injunction of s. 92 of the Constitution.

That point was of sufficient significance to have been reiterated by the majority at the bottom of page 424, in the last four and a half lines, beginning:

If the Act imposed the ad valorem licence fee –

and an analogous point is made at page 426 at point 9, the last six lines:

The wholesaler’s licence fee, imposed on local wholesalers by reference to all their local sales, does not infringe s. 92 in that it does not discriminate against goods coming from another State.

That is an equivalent point because that wholesale licence fee might be imposed equally regardless of burdens imposed on manufacturers or producers in other States.  I pause to note about all three of those expressions that there is no qualification there about the effect it might have on low margin operators or so forth whilst recognising that that point was not argued.  That raises the question of why the measure was held invalid in Bath v Alston Holdings even though the majority accepted that the measure could have been imposed at retail level in what was, as was argued, an economically equivalent way.  The key, in our respectful submission, to understanding the majority judgment is what is expressed at the bottom of page 428 over to page 429 beginning at about the last four lines of 428, “If the tax is imposed on transactions in a particular market”.  I will not read it all to your Honours.  Then over to the quote from his Honour Justice Barton in Fox v Robbins over the page.

HAYNE J:   All this in a context, is it, where the market is identified as a State market?

MR KIRK:   Yes, I think that was true, your Honour.  Although again I think there was not a clear focus on that issue which is now appropriate.  The point I was going to make about this is to, in a sense, develop your Honour’s point.  It is a statement of the obvious, of course, that a market has a number of dimensions.  It has the geographic dimension your Honour has referred to.  It has a product dimension.  It may have a temporal dimension and it has a functional level dimension and the issue the majority is picking up here, in our respectful submission, is the functional level, that the tax could have been imposed equally at the same functional level, retail level, but one could not impose it differentially between the retail level and a different functional level, the wholesale level, which is what had occurred here. 

In the majority’s view it appears, as shown by the discussion at the top of page 429, to impose it at that different functional level was something akin to imposing a border duty which their Honours regarded as completely contrary to section 92. The difference from the minority, of course, is that the minority saw that as economically equivalent and thus did not see that as breaching section 92, but the key point is that emphasis on the difference between where it was imposed, retail or wholesale level. The discussion by Professor Zines in his book at pages 183 to 186, which we have provided your Honours a copy of, particularly at page 185. I will not

read it to your Honours, but at 185 in particular it is an illuminating discussion, in our respectful submission.

What that illustrates is that the majority did not hold that there could not be a levelling up.  Rather, as I said, the issue was functional level and, in that sense, his Honour the trial judge misunderstood what Bath had stood for. To develop that one step further, if Victoria had taken up the possibility the majority envisaged of imposing an equal retail tax on all retailers in Victoria and at the same time repealed its wholesale tax, although the court did not expressly address that, that could not be, in our submission, offensive to section 92. It would serve no necessary or rational constitutional purpose. Indeed, for the reasons I sought to explain yesterday, to take that view would be to maintain a distortion in the market, a preclusion of full‑blooded competition from locals which would not be itself consistent with one of the purposes served by section 92.

Your Honours, that is all I wanted to say on Bath and on topic 8.  As to West Lynn, we are content to rely on what we say in our written submissions at paragraphs 61 and 62 which goes a little bit further than Mr Walker has done but we are content to rely on the writing.  If it please the Court.

FRENCH CJ:   Thank you, Mr Kirk. 

MR GAGELER: Your Honours, our submissions are limited to the conceptual or analytical framework within which section 92 of the Constitution and section 49 of the Self Government Act are to be considered. We say nothing about the facts and we say nothing about the outcome in either case. Section 92 was recognised in Cole v Whitfield at page 394 as a limitation on legislative and executive power. It was held in Cole v Whitfield at page 396 the limitation on Commonwealth legislative and executive power as well as on State legislative and executive power.

That it is also a limitation on the legislative and executive power of a self‑governing Territory follows from it unqualified language and is supported post‑Cole v Whitfield by the reasoning of the Court in Capital Duplicators [No 1] 177 CLR 248, particularly in one of the joint judgments at pages 275 to 276. What is there said is in the context of section 90. The reasoning is equally applicable to section 92 and the gist of the reasoning is this. The objective identified in Cole v Whitfield of creating a free trade area would be undermined if the acts of a legislature or an executive created under section 122 were not within its scope. But within Capital Duplicators [No 1] at page 275, point 5, there is a reference to the judgment of Chief Justice Dixon in Lamshed v Lake and it is said that:

Dixon C.J. correctly observed in Lamshed v Lake in reference to the Northern Territory that s. 92 does not in terms protect trade between a State and a Territory.

That is the function that is now served by section 49 of the Self‑Government Act in respect of trade between the Northern Territory and States, and there is a complementary provision that your Honours might note within the Australian Capital Territory (Self‑Government) Act of 1988. It is section 69(1) which makes similar provision relevantly with respect to trade between the ACT and the Northern Territory.

It was the predecessor of section 49 of the Self‑Government Act that was held in Lamshed v Lake to be a valid exercise of legislative power under section 122 of the Constitution, and it was section 49 itself that was held in AMS v AIF 199 CLR 160 at paragraphs 36 and 121 to have an ambulatory meaning consistent with section 92. Having an ambulatory meaning consistent with 92, it obviously operates as a limitation on the valid or operative exercise of Commonwealth State and Territory executive power and of State and Territory legislative power.

Insofar as it operates as a limitation on the exercise of Territory legislative power, the limitation is imposed through the doctrine of repugnancy discussed in GPAO 196 CLR 553 in some depth by your Honour Justice Gummow with the Chief Justice. So far as it operates as a limitation on the exercise of State legislative power, it does so through the operation of section 109, so held in Lamshed v Lake, and so explained in AMS v AIF, particularly at paragraph 37.

The test in each case is whether the law, whether it be a Territory law or a State law, if valid or operative, would detract from or impair the freedom that section 49 on its proper construction declares.  In that respect the operation of section 49 is no different in principle from the provision of the Telecommunications Act that the Court considered in Bayside City Council v Telstra Corporation 216 CLR 595 – a provision that was upheld as an exercise of legislative power under section 51(v) operating validly in conjunction with section 109 of the Constitution.

These cases are ultimately about the validity of a condition that purports to take its force from section 33A(2)(a) of the Racing Administration Act (NSW). It has been said in some of the submissions put to your Honours that it is a case about the exercise of State executive power. It is not. It is a case about the exercise of State legislative power.

Section 92 of the Constitution and section 49 of the Self‑Government Act in such a case both operate at the level of the relevant State law. They do so, in ways that I will come to with some precision in a moment, to reduce the ambit of the valid operation of section 32A(2)(a) so as not to authorise the imposition of a condition that would, if valid, give that provision an operation that would be invalid by virtue of section 92 or inoperative by virtue of section 49 of the Self‑Government Act operating through section 109 of the Constitution.

If the condition is invalid it is because it is beyond the power that section 32A(2)(a) on its proper construction validly confers and not because the condition is itself in some way independently in breach of section 92 or section 49. That is simply to apply in this context the analysis that one sees originating or at least strongly reflected in the judgment of Sir Owen Dixon in Shrimpton 69 CLR 613 at 629 to 630 and also in your Honour Justice Hayne’s judgment in AMS 199 CLR 160 at 221.

Now, precisely how the ambit of the valid operation of section 33A(2)(a) is reduced is a little complicated. In respect of section 92 of the Constitution, which operates as a limitation on State legislative power, one applies section 31 of the Interpretation Act to read down section 33A(2)(a) so as not to authorise a condition that would cause section 33A(2)(a) itself to impair or detract from the freedom of trade amongst the States. That is simply to apply the reasoning of the Court in any number of section 92 cases as captured in the judgment of Justice Brennan in Miller v TCN Nine at the passages referred to in AMS at paragraph 37.

GUMMOW J:   We are fairly familiar with this, given your submissions in Wotton, I think.

MR GAGELER:   That is right. I thought your Honour would see a similarity. So far as section 49 is concerned, operating only through section 109 of the Constitution, it is not a limitation on State legislative power. Section 31 of the State Interpretation Act has no application.  The reasoning of Justice Mahoney to which your Honours were taken yesterday in Peters and Love is, in our respectful submission, wrong in that respect.  The correct view is one that emerges from the judgment of Sir Owen Dixon in Wenn v Attorney General 77 CLR 84 and sufficiently in the last page of the report, page 122, beginning with the second full sentence on that page and continuing to the end of the paragraph.

The gist of the point is this, that section 109 itself provides the measure of inoperability, that is, to the extent of the inconsistency, and applying that approach one would say that section 33A(2)(a) is inoperative by virtue of section 109 of the Constitution, invalid in the language of section 109 to the extent that it would authorise a condition that would impair or detract from the freedom of trade between a State and a Northern Territory that is declared by section 49 of the Self‑Government Act. So one achieves the same functional result, and this is really recognised in AMS at paragraph 37 but by two technically different routes.

Your Honours, moving to the scope of the absolute freedom that is declared by section 92 of the Constitution and equivalently by section 49 of the Self‑Government Act, it was held in Cole v Whitfield in terms that are reflected in the conclusions stated in Betfair at paragraphs 118 and 121 that the freedom is freedom from protectionism which can be expanded to freedom from a discriminatory burden of a protectionist kind. It may well be that stating the freedom in those terms and applying those terms to a particular provision can amount to little more than a statement of conclusion, that is, those terms do not in themselves reflect a particular tool of analysis, but as a statement of conclusion, in our respectful submission, that is appropriate terminology because it captures the mischief to which section 92 is directed.

The two elements involved generally in an analysis that gets one to the conclusion that there is a discriminatory burden of a protectionist kind, in our submission, are well captured in the judgment in Betfair at paragraph 105. What is captured in paragraph 105 is part of the language used in the larger of the judgments in Castlemaine Tooheys.  The two paragraphs there, in our submission, capture in appropriate language what is described in the submissions of Victoria before the Court as the positive and negative elements involved in reaching a conclusion of the discriminatory burden of a protectionist kind.  The positive element captured in the first of the paragraphs quoted in paragraph 105 is the subjection of interstate trade to what is described there as a serious competitive disadvantage.

GUMMOW J:   Mr Young says a passage like this fixes upon a particular trader, namely, the Bond brewing companies.  It is not talking, at least immediately, in terms of competition, as it were, in a general sense.

MR GAGELER:   We would generalise it, your Honour.  It was in context focusing on interstate trade.  There it was the interstate trade in particular a brewing company, but its focus was on interstate trade and its focus ‑ ‑ ‑

GUMMOW J:   Well, it seemed that the Bond companies were the only relevant entrant, as it were.

MR GAGELER:   Indeed, in the Betfair Case itself.  Betfair at that stage was the only relevant competitor.  The other element is the ‑ ‑ ‑

GUMMOW J:   That is not true in this case.

MR GAGELER:   It is not true in this case, no.

GUMMOW J:   The question then is, where do we go?

MR GAGELER:   I am about to offer your Honours a little guidance.  If one takes that first notion, that is, the serious competitive disadvantage, it is, in our respectful submission, the same notion as is captured in his Honour Justice Heydon’s judgment at paragraph 131 where his Honour is referring to:

the practical effect of a law is to burden inter‑State trade –

which, in our respectful submission, is the absolutely correct focus –

to a significantly greater extent than it burden intra‑State trade –

The points to draw, in our respectful submission, are these, that the Court in Betfair, consistently with the Court in all of the earlier cases going back to Cole v Whitfield, was looking first to effect, not purpose, in looking at the burden on trade.  That is contrary to the submission put by Victoria in paragraph 51(a) of their written submissions.  It is looking to trade, not traders, and it is looking to a substantial or meaningful impediment to competition in a national market which need not rise to the level of a barrier to entry.

FRENCH CJ:   Impact on a trader, of course, may be a basis for analysing impact on trade.

MR GAGELER:   Exactly.  As it was in ‑ ‑ ‑

FRENCH CJ:   A trader may be, as it were, a surrogate or representative of a particular class of activity. 

MR GAGELER:   Yes, exactly.  As it was both in Castlemaine Tooheys and in Betfair – the case I will call Betfair (No 1).  It is important to recognise, your Honours, that in Betfair (No 1), one of the two provisions was not a barrier to entry in any meaningful sense.  One of the two provisions was section 27D(1) which really was very similar in one respect to the provisions with which your Honours are concerned here. 

That is, it was concerned with the State race field information being provided to wagering operators who then used that race field information as, if you like, a raw material in their trading operations throughout Australia.  There it was a complete withholding of that race field information.  Here it is a provision on particular terms and conditions.  But if you look at the way in which section 27D(1) was analysed in the joint judgment at paragraph 118, what it says is that the burden imposed by section 27D(1), in the second sentence:

burdens interstate trade and commerce, both directly and indirectly.  It does so directly because it denies to Betfair use of an element in Betfair’s trading operations.  It does so indirectly by denying to Betfair’s registered players receipt and consideration of the information respecting the latest WA race fields – 

Your Honour Justice Heydon in paragraph 131, where your Honour said that:

The plaintiffs correctly submitted –

in respect of the “practical effect”.  It is worth just looking at the way in which the submission was put in this respect.  If you look at the bottom of page 425, four lines from the bottom, in our submission, consistently with the way in which the point was analysed in the joint judgment the submission was that:

Betfair is prevented from competing throughout Australia with RWWA and Western Australian bookmakers for customers who wish to place bets on Western Australian races – 

et cetera.  So it can be seen as a withholding of in-State raw material from an out‑of‑State trader who competed on a national market with in‑State traders.  Now, there is no reason in competition theory why one could not have a substantial or meaningful impediment to competition in a national market that arises from a supply on standard conditions that are nevertheless framed in a way that raises the cost to an out‑of‑State trader more than they raise the cost to an in‑State trader.  Now, whether or not that is so is a question of fact and, no doubt, a question of degree.  It may be that a difference in cost in a particular case will be sufficient without more to infer a serious competitive disadvantage and that may be the case in ‑ ‑ ‑

GUMMOW J:   When you say difference in cost ‑ ‑ ‑

MR GAGELER:   A difference in cost imposed on an interstate trade operation as opposed to an intrastate trade operation.  If you take Fox v Robbins, for example, there was a difference between a £2 intrastate wine licence fee and a £50 out‑of‑State wine licence fee, or if you take Bath v Alston Holdings it was a difference between a zero intrastate retail licence fee and a 25 per cent interstate retail licence fee. 

It may well be that in cases like that one need go no further than the face of the imposition to infer a serious competitive disadvantage, but that is not necessarily so, and it ought not be surprising, in our submission, that the existence or non‑existence of the relevant burden on interstate trade, that is one that rises to the level of a serious competitive disadvantage, should involve contestable questions of fact.  Indeed, that was what was said in Cole v Whitfield itself at pages 408 to 409, and the passage quoted in Betfair at paragraph 17.

Mr Young referred to the position of border impost which he said must be per se prohibited by section 92. It is important in dealing with a submission like that to recognise that section 92 does not do all the work; section 92 fits within a series of provisions within the same chapter that complement in various ways the existence of the free trade area that was identified in Cole v Whitfield, and it is clearer now, after Capital Duplicators [No 1] and after Ha v New South Wales, that section 90 contributes significantly to the maintenance of the free trade area, and border imposts are prohibited by section 90.

The State customs duty is prohibited, as is a State excise duty, both per se prohibited by section 90, and the point really, and it is a point of the difference between the majority and the minority in Ha, is that to have an excise one does not need to find any discrimination against interstate trade.  So the point is not particularly well brought out in Cole v Whitfield, but Cole v Whitfield was before Capital Duplicators [No 1] and before Ha.  Border imposts, insofar as they can be characterised as either an excise duty or a customs duty, are the subject matter of the per se prohibition in section 90.

Other imposts that might not be able to be characterised in either of those ways are dealt with under section 92 and there is no reason, in our submission, why the analysis under section 92 should not involve the same factual inquiry as to substantiality or materiality as to the effect on interstate competition.

The other element well captured in what is said in Betfair (No 1) at paragraph 105 is what is there referred to in italics as the absence of “an acceptable explanation or justification” and is that language that is then used as the heading for the joint judgment’s analysis that begins at 106.

The determination of whether a serious competitive disadvantage admits of an acceptable explanation or justification necessarily starts with the identification of the object or end to be achieved by the measure that imposes the disadvantage.  In the case of a law, that is necessarily objectively determined.  We have given your Honours the references in our written submissions but we remind your Honours of APLA 224 CLR 322 at paragraphs 178 and 423, but in the case of a measure imposed through the exercise of a discretion conferred by law, in our submission, the identification of the end or object is not so limited. We have dealt with that in our written submissions, paragraphs 40 to 44.

Having identified the object or end, what is then necessary is the evaluation of the fit between the measure and that end.  In that respect, the joint judgment on the previous page at paragraphs 101 through to 102 referred to the language of proportionality and also to the language of reasonable necessity, referencing in that respect the judgment of Chief Justice Gleeson in Thomas v Mowbray which, in turn, referenced his Honour’s own judgment in Mulholland 220 CLR 181, particularly at paragraphs 39 and 40. What his Honour was saying in Mulholland and picking up Thomas v Mowbray was that necessity in this sort of context, that was a Lange context, has shades of meaning.  It may imply different degrees of scrutiny and it may imply different degrees of scrutiny depending on the nature and degree of the burden that is imposed. 

The point that we want to make here, which is really contrary to what might appear to be common ground in much of the written material before your Honours, is that this is not a one size fits all test of an acceptable explanation or justification.  The test of fit would, in principle, vary with the seriousness of the competitive disadvantage that is involved.  The particular test of strict necessity that was applied in Betfair, and one sees that applied in Betfair, for example, at paragraph 112, is entirely appropriate where the competitive burden amounts in substance to an outright prohibition of a product of an interstate trader entering a State market.

That was certainly the case in relation to section 24(1aa) in Betfair and it was also the case that Justice Mason was considering in North Eastern Dairy, the case that is referred to in paragraph 102 of Betfair.  His Honour is quoted in paragraph 102 as saying:

“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 –

If you look at the passage in context, what his Honour is saying by way of introduction to the application of that very strict test of necessity is that the burden in that case amounted in practical terms to a complete prohibition on interstate milk entering New South Wales.  Where the burden on interstate competition is less than an outright prohibition, in our submission, the appropriate and adapted language used in Castlemaine Tooheys is entirely appropriate.

KIEFEL J:   In relation to reasonable necessity, paragraph 110 of Betfair, in its reference to the legislative choice of Tasmania, might be taken to refer to reasonable alternative practicable measures.

MR GAGELER:   Yes, that is right.

KIEFEL J:   That is consistent with North Eastern Dairy.

MR GAGELER:   Yes, and in a context of prohibition.

KIEFEL J:   Yes.

MR GAGELER:   But outside prohibition then, in our respectful submission, the test of it need not rise to that strict level.  Can I remind your Honour of the way in which the second limb of Lange has been analysed in a case of regulation rather than prohibition of political communication just by giving your Honours a reference to Hogan v Hinch 275 ALR 408 at paragraphs [95] and [96]. Can I also remind your Honours in a very similar, really quite analogous context of the way in which discrimination under section 51(ii) and preference under section 99 were analysed in Permanent Trustees 220 CLR 388 at paragraph 89, again in the language of a differential burden being justified if it is seen as appropriate and adapted to a legitimate end.

Your Honours, the last point that we have in our outline of submissions relates to constitutional fact and we simply make one point.  Accepting everything that your Honour Justice Heydon said in Thomas v Mowbray and taking as a starting point what your Honour said at paragraph 635, “that if a criterion of constitutional validity consists in a matter of fact”, that fact is to be ascertained as best it can, we simply make the point that in ascertaining facts as best it can on the material available a court is acting in an adversarial context even in a case that involves constitutional fact.

GUMMOW J:   A constitutional fact here would be the presence or absence of a serious competitive disadvantage to interstate trade?

MR GAGELER:   There are two high level constitutional facts.  One is the serious competitive disadvantage to interstate trade and the other is the absence of an acceptable explanation or justification in evaluating such material as is available to inform a judgment as to those constitutional facts.  Your Honours should, in our submission, be guided by Lord Mansfield’s dictum that we have set out in our outline, and that is all evidence – we would say all material – is to be weighed according to the proof which it is in the power of one side to produce and the power of the other side to contradict, which explains in a very principled way why the evidentiary or persuasive onus is seen to shift in these cases; the first limb of the test that the burden on competition generally being seen to be one where the onus lies on the party complaining about the law and then the second limb of the test, the justification generally seen to have the onus on the party seeking to

uphold the law, but we do make the point that if a party has the capacity to prove a constitutional fact in a traditional way and does not do so, a court should not be straining to infer that constitutional fact from vague materials.  If the Court pleases.

FRENCH CJ:   Thank you, Mr Solicitor.

MR HINTON:   If the Court pleases, a preliminary glance of our three pages might cause some of your Honours to take a deep breath and think “No, not again”.

FRENCH CJ:   Or to bring in a font rule.

HAYNE J:   Which is there already.

MR HINTON:   Sorry?

HAYNE J:   The font rule is there already, Mr Solicitor, and we are familiar with the compress function on Word, you know.

MR HINTON:   That is not quite the shock I was attempting to ameliorate.  Can I put your Honours’ minds at rest immediately?  With respect to point 3, which I intended to address I will not.  I am happy to adopt the submissions of Dr Kirk and New South Wales and, indeed, those of the first and second respondent in the Sportsbet appeal.

GUMMOW J:   What is your response to what was just put to us by the Commonwealth Solicitor‑General?

MR HINTON:   With respect to Bath v Alston, your Honour?  I did not understand him to address that, sorry.

GUMMOW J:   No, with respect to his points 4 and 5, which may be critical for this case?  We can read Bath v Alston from here to kingdom come, but at the end of the day, we have to decide this case.

MR HINTON:   Sorry, your Honour, in the course of having to move to the back blocks, I have misplaced it.  If your Honour pleases, South Australia accepts what the Commonwealth Solicitor‑General has put at point 4 of the oral submission today.  With respect to point 5, I will seek to supplement that with some brief submissions in a moment.

I was also going to at the outset put the Court’s mind at rest.  I do not propose to say any more about Boardman v Duddington, save that, of course, a point raised by your Honour Justice Gummow, I think, on day one, of course, it is a case to be seen in the context of the Road Tax Cases.  The Road Tax Cases were themselves not a group of cases that fitted within the criterion of operation doctrine.  They were a group of cases that imported a notion of reasonableness in terms of the calculation of the contribution to be made towards the wear and tear of State roads.  Boardman v Duddington, for the reasons advanced by Mr Walker, is analogous to this case and that analogy is clear and I do not intend to say any more than that. 

With respect to point 5, the Commonwealth Solicitor‑General has just stolen my thunder on that point as well.  I do not propose to add to it.  I adopt his submissions.  We agree with them entirely and with respect to Justice Mahoney, he is incorrect insofar as he held there was a role to play for section 31(1) of the Interpretation Act where section 109 is engaged.

It is just the first two points then that I wish to say something briefly on this morning.  With respect to constitutional facts, my submission again accepts, like the Commonwealth, what your Honour Justice Heydon said in Thomas v Mowbray.  What we attempt here to do is to tease out, however, constitutional facts which your Honour Justice Heydon identified as category 2 facts, and constitutional facts that also are category 1 facts in that they are facts in dispute between the parties, facts that are contestable, facts on some occasions that are particular to the parties. 

Where constitutional validity is depended upon constitutional facts that fall within the two categories, there must, in our submission, be both an evidential and persuasive onus borne by the party.  If it is a fact that is contestable or particular, it is not a fact that this Court can, with the resources available to it, arrive at a conclusion.  The evidence needs to be heard.  A decision upon hearing the evidence needs to be made. 

Uebergang and Others v Australian Wheat Board is an example of where such evidence was required, and yet was not forthcoming.  It was an example of where in those circumstances the duty of this Court to find constitutional facts where necessary to a question of invalidity was one that could not be fulfilled.  This is such a case.  The constitutional facts, the two primary constitutional facts which my learned friend the Commonwealth Solicitor‑General just put to the Court, are of a type that fall within both category 1 and 2 of your Honour Justice Heydon’s classification.  They required the calling of evidence.  Without it, the ultimate decision could not be arrived at as to the necessary constitutional facts to be found in order to determine validity.

In my submission, an assessment of onus and burden in relation to constitutional facts that fall within categories 1 and 2 of your Honour Justice Heydon’s classification also dictates the response that the Court should make to the application of Mr Young with respect to the productivity commission report. 

If the Court pleases, I do not intend to say any more on constitutional facts other than that which we have produced in our oral submission. Can I turn to the second point and it is to perhaps reinforce the submission of Dr Kirk as to the significance of the words in section 92 “among the States”. It requires, in our submission, clearly an element of interstatedness. It requires, in our submission, a necessity then to locate the in‑State and out‑of‑State trader which supply the prism through which one assesses the impact of the in‑State law or executive Act upon trade.

I appreciate the issues raised by your Honour Justice Hayne as to the difficulty of doing so in the electronic age.  Location in a case where the market involves the provision of services on the internet may be difficult to establish as a matter of evidence, but in a given case such as this it is not.  Betfair, it is accepted by the parties, is located in Tasmania.  Sportsbet, it is accepted by the parties, is located in the Northern Territory.  The impugned law Act is located, or the law area in which it operates is New South Wales.  The greater question and the larger question does not arise in this case.  Here the contracts, of which Mr Gleeson spoke, are entered over the internet which functions, in a sense, in a manner no different to the telephone, to the telegraph, to radio, to semaphore.

There might be questions then of sufficiency of connection between one law area and a trader and another law area in which there is the law or Act, for example, if the particular trader just had a server in a particular State, is that enough?  They are questions of fact which will arise in the particular case for the future.  They do not, in my submission, arise in this case.  In that case the Court will have to hear evidence such as the Court dealt with, admittedly on an unrelated point, but not too dissimilar, in Dow Jones v Gutnick as to the operation of the World Wide Web, email and the internet.

It is possible, as that case shows, to identify where the particular server is, where the information is uploaded, where the particular server is, where the service is accepted, and of course in cases such as this it is quite easy, with respect, to prove the market because, of course, Betfair has the pay details, and so does Sportsbet, of everybody that puts a bet with them.  So the moment you hand over an identifier it can be proven where you are, and so the nature of the market can easily be proven.

In short, “among the States” requires, in our submission, the necessary element of interstatedness.  The Convention debates support that in the amendment of an earlier draft of the words “throughout the Commonwealth”, their deletion and substitution by the words “among the

States”, for the very reason that there was to be permitted intrastate regulation.

I adopt also the Commonwealth Solicitor‑General’s submission to the effect that section 92 is not expected to do all the work. Its function is far more limited. It is to be looked at in the context of Chapter IV and against the background of section 90. It is not, then, the duty of this Court, it is not its responsibility, to foster the development of national or interstate markets. So the notion of protectionism continues to play an important role. If the Court pleases, those are our submissions and we adopt our written submissions.

FRENCH CJ:   Thank you, Mr Solicitor. 

MR McLEISH:   If the Court pleases.  Your Honours, I will be concentrating on some submissions made in our written submissions in the Betfair Case or by those submissions we adopt in both cases. There are three topics I wanted to cover. The first is about the nature of the task before the Court when addressing the proposed law under section 92 and our submission to the effect that what the Court is doing is a process of characterisation. The second topic concerns how the burden on a single interstate trader ought to be analysed. That is particularly relevant to the Betfair Case.  The third topic focuses on the need to identify the interstate trade and commerce that is affected and in that context we draw the distinction that has already been drawn by others between interstate trade and interstate traders and that that distinction with those two approaches based on trade and traders perhaps coalesce when one is looking at a single interstate trader, which is the second topic I was proposing to address.

We have submitted at some length in our written submissions that the process required by section 92 is one of characterising an impugned law as protectionist or otherwise. That emerges most clearly from the larger judgment in Castlemaine Tooheys 169 CLR 436. I wanted to take your Honours, in particular, to pages 471 and 472. Their Honours, in the middle of page 471, are concerned to distinguish the American approach to that laid down by Cole v Whitfield.  Without reading it all to your Honours, at about point 5 of the page, their Honours say:

In contrast, we are concerned only with the proper characterization of the law as protectionist or not, in the sense described in Cole v Whitfield.  Hence there is no place for a secondary test to invalidate laws which have been found to lack a protectionist purpose or effect.  Rather, the two tests are combined as one inquiry into the characterization of the law as protectionist or otherwise.

Their Honours go on to identify ways in which the American cases do identify considerations that may be relevant to that task without being decisive, and jumping down to about point 8 of the page, one of the examples their Honours give is:

the fact that a law, whose effects include the burdening of the trade of a particular interstate trader, does not necessarily benefit local traders, as distinct from other interstate traders, suggests that the purposes of the law are not protectionist.  On the other hand, where a law on its face is apt to secure a legitimate object but its effect is to impose a discriminatory burden upon interstate trade as against intrastate trade, the existence of reasonable non‑discriminatory alternative means of securing that legitimate object suggests that the purpose of the law is not to achieve that legitimate object but rather to effect a form of prohibited discrimination.

So again, the justification part of the analysis, reasonably appropriate and adapted or reasonably necessary, is treated by their Honours as part of the whole process of characterisation.  Their Honours go on:

The fact that a law imposes a burden upon interstate trade and commerce that is not incidental or that is disproportionate to the attainment of the legitimate object of the law may show that the true purpose of the law is not to attain that object but to impose the impermissible burden.

The particular significance we draw from the fact that the task is one of characterisation is that that is the rubric, we would submit, under which practical operation comes in because the legal and practical operation of a law is ordinarily relevant to any process of characterising a law for section 51 purposes, for example.  It is for that reason that a law that is facially neutral may nonetheless be characterised as discriminatory and protectionist.

The cases, on the other hand, which display facial discrimination do not require inquiry into the practical effect of the law at the stage of asking about discrimination because the discrimination is plain on the face of the law.  Unless there is a justification - acceptable explanation, or a justification of that kind, the facial discrimination will suffice to enable the law to be characterised as protectionist. 

Your Honours have already been referred to Fox v Robbins and Bath v Alston as cases of that kind where the law on its face was able to be characterised without reference to more, and the Full Court, we submit, correctly in the Betfair Case, and I will not take your Honours to it, but at paragraphs 91, 92 and 101 to 103, explained those cases in that way.

The process which the Court has undertaken in some of the cases has relied on the position of a single interstate trader, and I refer in particular to Castlemaine Tooheys and Betfair v Western Australia.  In our submission, both of those are properly seen as cases where a burden was imposed on a new interstate trader who threatened the market share of the domestic traders.

That is quite clear in Castlemaine Tooheys, if your Honours still have the judgment, at page 475.  At about the middle of the page their Honours say:

As for the second reason, the impact of the provision on C.U.B. might tend to suggest that the intended legislative object was not to discriminate against interstate brewers.  However, it is not a conclusive consideration.  It does not negate the purpose of discriminating against interstate trade consisting, in the main, of the trade of the Bond brewing companies –

The next sentence is critical, we submit:

After all, it was the growing market share of those companies, not C.U.B., that threatened the market share of the domestic brewers.

Too much ought not to be read into the following sentence, we submit:

Discrimination in the relevant sense against interstate trade is inconsistent with s. 92, regardless of whether the discrimination is directed at, or sustained by, all, some or only one of the relevant interstate traders.

That is not to state the proposition that it is sufficient to demonstrate discrimination against one interstate trader.  What their Honours have done in the preceding sentence is to conclude that that discrimination against that trader was in fact the object or purpose of the law.  Similarly, in Betfairv Western Australia 234 CLR 418, the joint judgment at paragraph 121 on page 481 emphasised the competition that Betfair would otherwise present. Their Honours say:

The subsection operates to protect the established wagering operators in Western Australia, including RWWA, from the competition Betfair otherwise would present.

In the following paragraph, again at the bottom of the page:

The effect of s 24(1aa) is to prohibit Betfair, an out‑of‑State wagering operator, from providing a betting exchange for registered players in Western Australia, leaving the in‑State operators able to supply customers with their services without the competition to their revenue which Betfair would present.

We submit that the race field provisions cannot be treated distinctly because it was the prohibition on a betting exchange that made the prospect of Betfair not requiring race fields’ approval illusory.  In our submission, these were both cases where a new interstate trader was prevented from entering the market or, in Castlemaine Tooheys, restricted to an exceptionally low market share as a result of the laws.

Another way of putting this is to say that the mischief to which the law was impermissibly directed in both cases was the effect on the domestic market which the new interstate trader was seeking to have.  Your Honours have been referred to APLA and I will not take your Honours back to it.  We have referred to it in paragraph 5 of the oral outline, APLA Ltd v Legal Services Commissioner 224 CLR 322. I would refer your Honours particularly to the judgment of your Honour Justice Gummow at paragraph 178 and Justice Hayne at paragraphs 416 and 424, both explaining the notion of objective intention and using the language of mischief.

In other words, what was being done in both of those cases was still a process of characterising the laws identifying the object of them and in each case it was to exclude a new interstate entrant into the domestic market.  We submit that no case since Cole v Whitfield has held that it is sufficient to establish protectionism, that a law imposes a burden on a single interstate trader but it does not impose on interstate traders and that, as I have already submitted, the sentence about all, some or one interstate traders, at page 475 Castlemaine Tooheys, is not support for that proposition.  We rely also, without taking your Honours to it, to the dictum in Exxon Corp v Maryland 437 US 117 at 126 which we have set out in a footnote in our written submissions, footnote 30 on page 6, which said:

The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.

That leads into the third point I wish to make submissions about which is the need to identify the interstate trade or commerce ‑ ‑ ‑

GUMMOW J:   Just explain to us what you get out of the Exxon Case.

MR McLEISH:   Only the fact that more than a burden on some interstate companies must be shown. 

GUMMOW J:   So you have to read the text supporting footnote 16 on page 126?

MR McLEISH:   Yes, your Honour. 

The examination of a burden, as your Honour the Chief Justice put it earlier this morning, on a particular interstate trader may stand as a proxy for interstate trade, but the question that still needs to be asked is what is the burden on interstate trade or commerce? Your Honours have heard several submissions to the effect that section 92 is about trade rather than traders and I wanted to amplify on that somewhat. If I could take your Honours to Australian Coarse Grains Pool v Barley Marketing Board 157 CLR 605 Justice Brennan at page 649 dissenting but, in my submission, not in way that is relevant, certainly not after Cole v Whitfield, says the following:

Where a legislative or executive measure operates to burden a particular transaction, an examination of the validity of the measure calls first for an examination of the character of the transaction:  is it part of the interstate trade, commerce or intercourse . . . The subject of immunity is trade, not persons, although a trader who engages in an interstate trading transaction which is immune from an invalid burden is entitled to the benefit of that immunity.

His Honour say he respectfully agrees with what Justices Mason and Jacobs said in Clark King, which is to the same effect, that the way that section 92 confers rights on an individual is because they engage in a transaction which is entitled to be immunity, not because they themselves are entitled to the immunity.

When reliance is sought to be placed on the circumstances of particular intestate traders, in our submission that risks extrapolating from their individual circumstances and perhaps from features that are accidental to those circumstances to the transactions in which they engage and the risk in doing so is that the law comes to be characterised not by its effect on interstate trade, which is the constitutional question, but its effect on particular individuals.

FRENCH CJ:   That proposition has more bite with respect to Betfair than with respect to Sportsbet, does it not?

MR McLEISH:   It does in particular in this case, your Honour, because of the reliance on its individual circumstances which is at the heart of its case.  But in addition to being perhaps calculated to leading the Court into looking at the wrong question, the very question of identifying whether a trader is interstate or not is, we would submit, fraught with difficulty and that is especially so in the case where now corporations are registered under national legislation and apt to have their operations in more than one place.,  For example, it is far from clear, we would submit, why it is to be assumed that TAB in New South Wales is a New South Wales company.  That assumption has been made by the parties notwithstanding the fact that it is a subsidiary of a Victorian listed public company.  We are not suggesting answers to these questions.  My submission is directed at the dangers that are involved in placing too much weight on the question of where a trader is located. 

GUMMOW J:   I think there seems to be some sub silentio intrusion really of European ideas of what the siege sociale is.  What is its seat of its activities, assuming you can find a seat and isolate it, not necessarily its place of incorporation.

MR McLEISH:   Your Honour, the seat of its activities may not be the place from which trade is conducted.

GUMMOW J:   Indeed.

MR McLEISH:   That is part of the danger, that by identifying the seat of an entity ‑ ‑ ‑

GUMMOW J:   It could be a call centre in a third country.

MR McLEISH:   It could be a call centre.  It could be a computer server.  It could be anything that happens to be fastened on in a particular case that does not really tell one anything about the interstate nature of the actual trade or commerce.

FRENCH CJ:   Even with the internet, the communing can be seen as crossing the borders, can they not?

MR McLEISH:   Quite so, your Honour, and the point that we want to make is that ‑ ‑ ‑

GUMMOW J:   The problem is that there is this dichotomy assumed between an inter and an intrastate trader.

MR McLEISH:   Indeed, your Honour. 

GUMMOW J:   It seems to me the TAB, for example, is engaged in national commerce, is it not?

MR McLEISH:   We would submit it is engaged in, no doubt, some interstate commerce and some intrastate commerce and not much is gained by agglomerating it all under the heading of TAB and saying it is given preferential treatment in this case in a protectionist sense.

GUMMOW J:   It is a world away from growing a primary product in one geographical location and transporting it to another geographical location.  That is the problem, I think.

MR McLEISH:   That is the problem, your Honour.  That is where we wanted to at least explore the application of the Hospital Provident Fund decision. That is 87 CLR 1. The reason we submit this decision has continuing relevance is that unlike in most of the section 92 cases, it is a case not involving commodities.

GUMMOW J:   There has always been a question mark over this case, has there not?

MR McLEISH:   There is, your Honour.  It applies the criterion of operation test and it was disapproved in Cole v Whitfield on that ground.  The criterion of operation test is the reason why the Court examined what was the interstate trade and distinguished the interstate trade from the interstate communication and found that there was a burden on the interstate communication but that was ancillary to a burden on trade which was not interstate.

Now, the reason that the Court asked the question what is interstate trade and commerce was to put it to a use which is now seen to be incorrect.  But the question remains the same, in our submission, that there still needs to be an identification of what it is that is interstate and is it the trade and commerce of the entity, or between the two entities, or is it the communications between two different places, and in some cases it will not matter, but in other cases it will and the starting point of the analysis, we would submit, needs to be what is it that is that interstate and that allows one then to proceed to the question, what is the burden on that which is interstate.

It is true that section 92 does not lend itself especially easily to cases about services or intangible things except insofar as the provision of those services, for example, over the telephone or the sending of some intangible communication crosses State lines. But the analysis of Chief Justice Dixon at pages 14 to 15 has been picked up in subsequent cases, which I will not be taking your Honour right through, but I do want to take your Honours to page 14. This was a case about the need for insurance funds or benefit associations to be registered under State laws, and the associations in question, as appears in the headnote at page 2, they were incorporated in Victoria but:

carried on certain inter‑State activities, e.g. moneys were payable and paid by the company from its office in one State to contributors in other States . . . sums were payable and paid by contributors in one State to the company at its office in another State; the company maintained offices, staffs, equipment and funds in other States ‑ ‑ ‑

GUMMOW J:   I think the problem, Mr McLeish, is at the bottom of page 14:

If it is found necessary or convenient by either party to communicate with the other across a boundary between two States in the course of making the contract, that is an accidental feature which cannot make it an inter‑State contract ‑ ‑ ‑

MR McLEISH:   The notion of accidental feature ‑ ‑ ‑

GUMMOW J:   It will be said against you that it is not an accidental feature that the Betfair operation requires examination of what comes up on the screen with the information that that conveys and the reaction of that and so on and so forth.

MR McLEISH:   It may be in this case, your Honour, that the two are the same, we accept that.  It is a matter of how the analysis proceeds in a case where nothing is passing except the communication and it may be that there is effectively no difference in some cases, but what Chief Justice Dixon says at ‑ ‑ ‑

GUMMOW J:   This reference to “accidental” is seen as the other half of the essential, which has run through Sir Owen Dixon’s thinking in lots of respects.

MR McLEISH:   We accept that, your Honour, but that is not, we would submit, central to the way in which the preceding part of the exposition proceeds.  So his Honour says:

The essence of the business from the point of view of the persons engaged in it is the making of contracts involving on the one hand the receipt of money and on the other hand the payment of money on the occurrence of certain contingencies.

We say that is apt to describe a betting contact just as much as an insurance contract.  From the point of view of the statute no doubt it is the character of the contingencies that forms the distinguishing important feature of the business, but as he says:

neither the character of the contingencies nor the character of the monetary side of the contract could bring the transaction within the conception of inter‑State trade commerce or intercourse.  For a company to contract with a man that, in consideration of the latter making payments to it at any given place, the company will in a specified contingency make a payment to him at some other place is not to engage in inter‑State commerce.

HAYNE J:   The alternative point of view is that in the betting case the communication is the commerce.

MR McLEISH:   We accept that, your Honour, and the communication then is, as he says, at ‑ ‑ ‑

FRENCH CJ:   That can be generalised a wider range of activities than betting.

MR McLEISH:   Your Honour, it may then make a difference as to where the burden lies because his Honour says at the top of 15 it:

cannot make it an inter‑State contract, although the sending of the communication itself will, of course, form an act of inter‑State commerce or intercourse.

So his Honour does not dispute the sending of the communication can constitute interstate commerce or intercourse.  It is just that if the law does not burden the communication, there is nothing interstate that is the subject of the burden.  In our submission, one must start with identifying what it is that is interstate trade commerce or intercourse and what Hospital Provident Fund stands for is to say that it is the act of communication and not anything else in a case where there are simply contracts for the payments of money.  Now, as has been put to me, the analogies may lead to the same end point but we submit it is important to distinguish what it is the interstate thing, if I can use that term, upon which the burden lies.

FRENCH CJ:   Well, if you have a set of market actors whose commercial activities necessarily involve communication across a State border, then that forms an act of interstate trade or commerce or an activity which you could characterise as interstate trade or commerce, does it not?

MR McLEISH:   It depends what sorts of communications they are, your Honour.

FRENCH CJ:   Well, the communications, say, giving effect to transactions or by which transactions are carried out.

MR McLEISH:   Well, your Honour, we would submit not if the transaction is one for the delivery of goods within the same State.  If a person in Victoria seeks to have apples delivered to them from a place in Victoria and contacts the Victorian apple growers’ Sydney representative to arrange for the sale, a burden on the selling of those apples is not a burden on interstate trade.  It would be necessary then to look at the burden on the communications.

FRENCH CJ:   What communications?

MR McLEISH:   The interstate communications.  So that is why we submit in some cases it will not make a difference, but in others we would submit it may well.  Your Honour, I will not take more time on the other cases in which a similar analysis to that of Chief Justice Dixon has been undertaken.  I just wanted to refer your Honours to pages 37 and 38 to 39 without taking your Honours to them in the judgment of Justice Fullagar.  Justice Kitto agrees at page 41 with Chief Justice Dixon and Justice Taylor as to similar effect at pages 44 and 45 and in each case, we submit, identifying what is the interstate trade commerce or intercourse as a prelude, we accept, to applying the inappropriate criterion of operation test but, nonetheless, performing the task that it is submitted is still necessary because of the requirement that the trade commerce or intercourse be among the States. 

The other cases to which I would refer in this context are HC Sleigh v South Australia 136 CLR 475 – and I will not take your Honours to any of them. This was a case in which different oil companies had arrangements among themselves in different States for the supply of petroleum products from refineries within one State to persons still within that State and, in other words, the petroleum products were supplied perhaps a little like my apple example, within one State, but the contracts that were made for the provision of those products were made across State lines.

The case is mainly about section 90, of course, but the section 92 challenge was dismissed on the basis that a burden placed on the actual retail sales was not a burden on interstate trade and commerce because the petroleum was supplied and provided within one State, notwithstanding that supply was arranged between different States. In that case, the burden did not fall on the communications between more than one State.

Justice Mason cited pages to which I have referred from Hospital Provident Fund in Miller v TCN Channel Nine 161 CLR 556 at 571 to 572, really for the latter part of Chief Justice Dixon’s proposition to the effect that communication of intangible things across that board constitutes trade, commerce or intercourse among the States.

Finally, Justice Dawson, as we have outlined at greater length in our written submissions, applied the same reasoning in Street v Queensland Bar Association 168 CLR 461 at 539 to 540 in a post-Cole v Whitfield context to hold that a barrister from New South Wales providing services in Queensland was not engaged in interstate trade or commerce, notwithstanding that the barrister’s travel from one State to the other would be interstate intercourse, so that a practicing requirement in Queensland applicable to the barrister from New South Wales had no effect on that barrister’s interstate intercourse, and there was no interstate trade or commerce involved.

I would submit that these considerations direct attention consistently with the joint judgment in Betfair v Western Australia to the particular transactions that are said to constitute interstate trade and commerce, and that includes focusing on whether those transactions are between persons on the supply or demand side who are present at different States at either end of the transactions in question, and I am paraphrasing there from paragraph 18 of the joint judgment in Betfair.

We submit it is also consistent with the rather pithy reminder of Justice Isaacs in New South Wales v The Commonwealth 20 CLR 54 at 100. This predates the criterion of operation test and it has some passages that seem rather modern, given Cole v Whitfield, but the particular passage on page 100 towards the top of the page is where his Honour says ‑ ‑ ‑

FRENCH CJ:   He wrote one of the first major competition law judgments, I think.

MR McLEISH:   Yes, your Honour.  It was mainly, of course, about the Inter‑State Commission but his Honour says:

The key to the matter lies, in my opinion, in the fact that trade and commerce consists of acts not things.  The things themselves are indispensable, just as the human actors are ; but they do not form part of the trade and commerce itself.

Our submission is that one looks at what it is that actually is interstate and whether that thing is trade, commerce or intercourse.  Finally, your Honours, we have noted at the end of our submissions what was a reserved judgment in Sportsbet v Victoria in which the Hospital Provident Fund Case (2011) FCR 961 was raised. I should inform your Honours that that case was decided last week. All I wanted to tell your Honour was that the case was distinguished on its facts in a way which does not bear on this

argument.  Essentially, the analogy I sought to draw at the outset between the insurance activities in Hospital Provident and wagering was not accepted by the learned trial judge.

We otherwise rely on the written submissions and, for the sake of completeness, I would note that we do also adopt points 4 and 5 of the Solicitor‑General of the Commonwealth’s submissions.  Unless there are other matters, those are the submissions.

FRENCH CJ:   Thank you very much, Mr Solicitor.  Yes, Mr Mitchell.

MR MITCHELL:   May it please the Court, we adopt our written submissions and only wish to make three points which are identified in our outline of propositions.  The first is to say that a law is protectionist is not merely to state a conclusion about the effect of the law, but rather it is to state a conclusion about its object – object, of course, objectively determined as a matter of statutory construction having regard to matters which include the effect of the law but not attempting an exercise of defining the subjective intention of the legislators.  One sees that from the passages of Cole v Whitfield 165 CLR 360 at 407 to 408, to which we have referred. At point 7 on the page the Court says:

we must say something about the resolution of cases in which no impermissible purpose appears on the face of the impugned law, but the effect is discriminatory in that it discriminates against interstate trade and commerce and thereby protects intrastate trade and commerce of the same kind.  We mention first Commonwealth laws enacted under s. 51(i) –

noting that it is:

possible for a general law enacted under s. 51(i) to offend s. 92 –

saying:

Whether such a law is discriminatory in effect and whether the discrimination is of a protectionist character are questions raising issues of fact and degree.

Those are not necessary then to determine a finding in that case. But, of course, any theory of section 92 must accommodate the fact that a Commonwealth law imposing a burdensome regulation only on interstate trade and commerce by virtue of the fact that the law is made under section 51(i) may, and ordinarily will, have an effect on interstate trade and commerce and perhaps competition in the market which is not subject – or is not imposed upon intrastate commerce of the same kind. So it is necessary then to look to the question of object. In the second paragraph on page 408 their Honours say:

In the case of a State law, the resolution of the case must start with a consideration of the nature o the law impugned. If it applies to all trade and commerce, interstate and intrastate alike, it is less likely to be protectionist than if there is discrimination appearing on the face of the law. But 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.

Then it talks about what the real object of the law may be.  Likewise, in Castlemaine Tooheys in the passage at 471 to 472 to which my learned friend, the Solicitor for Victoria, took your Honours, one sees the concept of proportionality feeding into a conclusion about the true object of the Act.  So that, for example, totally prohibiting a kind of interstate trade when it is not reasonably necessary to do so in pursuit of some non‑competitive object may lead to the conclusion that the true object of the law is protectionist.

The second point I would seek to make is that a law does not infringe section 92 of the Constitution merely because it has an effect of reducing competition in a national market. Rather, it is necessary to show that the law confers a competitive or market advantage to intrastate trade over interstate trade. It may be necessary for a plaintiff in a case where impugned law does not discriminate on its terms to show some competitive effect of the law in the national market. The reason why it may be necessary to do so is because if there is no competitive effect then one cannot say that there is any competitive or market advantage conferred on intrastate trade over interstate trade. But that, we say, is not sufficient. As this Court recognised in Betfair in one of the few submissions in that case advanced by Western Australia which the Court did accept in 234 CLR 418 page 460, paragraph 36, the Court accepted the submission:

that s 92 was not designed “a laissez-faire economy in Australia”; rather, it had a more limited operation, to prevent the use of State boundaries as trade borders or barriers for the protection of intrastate players in a market from competition from interstate players in that market.

The Court accepts that and notes that that does not deny the utility of the United States decisions to which it then refers.

The third point we make is that section 92 is concerned with discrimination against interstate trade rather than interstate traders. In a case like Castlemaine Tooheys where the interstate trade, which is affected by the State law, is that of a person located in another State the two may

coalesce but that will not necessarily be the case.  If it please the Court, those are our submissions.

FRENCH CJ:   Yes, thank you, Mr Solicitor.  Yes, Mr del Villar.

MR DEL VILLAR:   May it please the Court.  Your Honours, may I ask you to turn to paragraph 31 of Betfair’s reply.  Your Honours will notice that in paragraph 31 they outline the basic facts of the case of American Trucking Association v Scheiner and at the end of that paragraph they seek to rely on that and draw some sort of analogy between the tax in Scheiner and the fee condition that we are dealing with here.  Your Honours, in my respectful submission, any reliance upon Scheiner is misplaced for the simple reason that that case was decided by reference to doctrines which find no counterpart in our jurisprudence on section 92 and, in my respectful submission, should find no counterpart in respect of section 92.

Your Honours will notice on the oral outline I have provided references to the pages in Scheiner.  Could I ask your Honours to quickly look at that case.  Your Honours will see starting from page 284 the US Supreme Court discusses what it is about this particular axle tax, which is a tax on the weight of trucks, that they find objectionable, but one notices at the bottom of page 284 where they say:

Whether the full brunt, or only a major portion, of their burden is imposed on the out-of-state carriers, their inevitable effect is to threaten the free movement of commerce by placing a financial barrier around the State of Pennsylvania.

In the following sentence, your Honour, they then make mention of what is known as the “internal consistency” test, which is –

a state tax must be of a kind that, “if applied by every jurisdiction, there would be no impermissible interference with free trade.”

They then extrapolate from the fact that if this tax were applied across all 50 states in the United States, there would be a deterrence of free trade and a distortion of free trade and therefore the tax is struck down.  So, your Honours, in my respectful submission, Scheiner needs to be understood in the light of that particular doctrine which has no counterpart thus far under section 92 jurisprudence and, moreover, your Honours, that doctrine itself has been significantly qualified in a subsequent trucking case which I have referred to in the outline, and that is the case of American Trucking Associations v Michigan Public Service Commission.  That case, your Honours, if I could just ask you to quickly look at that, involved a $100 annual fee on local intrastate commercial hauling.

The argument was again made that by virtue of the internal consistency test, if each State in the United States were to enact such a provision, then the burden on interstate traders who entered particular jurisdictions to do a little bit of commercial hauling would be incredibly burdensome, but the Court rejected that and it drew a distinction between taxes that were imposed on local jurisdictions and with which commercial interstate traders had to comply and could be expected to comply and other sorts of taxes.  That is, in particular, at page 438, your Honours, there is the sentence:

An interstate firm with local outlets normally expects to pay local fees that are uniformly assessed upon all those who engage in local business, interstate and domestic firms alike.

Your Honours, we have provided an article by Professor Hellerstein called Is “Internal Consistency” Dead outlining some of the issues that arise as a result of the American Trucking Associations v Michigan Public Service Commission case.  I have no need to take your Honours to it, save to indicate that the reliance of Betfair on this particular line of authorities can only be understood in light of the doctrines in the United States and there is no easy extrapolation to the facts here.  Your Honours, Justice Gummow referred to the case of Exxon Corporation v Governor of Maryland the citation of which I have provided in the outline, (1978) 437 US 117. Your Honour Justice Gummow rightly pointed out the references there to:

The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.

Could I take your Honours not to page 126 on which that sentence is found, but to pages 127 to 128.  On those pages, your Honours, there is a discussion of another limb in the dormant commerce clause jurisprudence in the United States which is not the discrimination limb, but the limb which says if you burden interstate commerce and that burden is excessive, then it can be struck down.  At pages 127 to 128 the majority judgment of Justice Stevens says:

We cannot, however, accept appellants’ underlying notion that the Commerce Clause protects the particular structure or methods of operation in a retail market.

Then they reiterate this point a little bit further down:

the Clause protects the interstate market, not particular interstate firms, from prohibitive or burdensome regulations.

Your Honours, although Justice Blackmun dissented, that particular principle he seems to accept at page 149 of the judgment where he points out that merely demonstrating a burden on out‑of‑state actors does not prove constitutional discrimination, but he dissents on the particular facts.

Your Honours, that principle that the mere burden on a particular trader cannot necessarily be equated with a burden on interstate trade has been accepted and applied in subsequent cases.  In Minnesota v Clover Leaf Creamery Co, reference to which is in the oral outline of argument at page 474, and at CTS Corporation v Dynamics Corporation of America at page 88.  So, your Honours, in my submission, those authorities support the view that has been put forward by the Commonwealth, New South Wales and others here that one is not necessarily concerned with the impact on particular traders.  One is concerned with interstate trade.  They dovetail well with the jurisprudence in those propositions. 

Your Honours, in respect of the Sportsbet appeal, the Attorney‑General for Queensland adopts the submissions of New South Wales, save for one matter and that is section 31 of the Interpretation Act. In that respect we submit briefly and we accept the submissions of the other parties who submit that section 31 does not apply where section 109 is involved. Unless your Honours have any further questions.

FRENCH CJ:   Thank you, Mr del Villar.  Yes, Mr Sheahan. 

MR SHEAHAN:   Your Honours, orally we would seek to briefly address two topics, both of a factual kind.  The first relates to TAB’s right to compensation consequent upon the introduction of the race fields fee scheme.  Now, as to that, we very happy to embrace Sportsbet’s most recent position, which is that the racing control bodies were empowered and obliged to compensate or indemnify us in respect of those fees, but we need to draw the Court’s attention to five aspects of the matter. 

The first two really require no elaboration.  They are that the source of any obligation to compensate or indemnify is the racing distribution agreement and we do not believe that Sportsbet has identified any other source for such an obligation.  The second is that that obligation has been and is disputed by the racing control bodies.  The third, which we mention in paragraph 5 of our outline of oral submissions, requires a little elaboration.  Clause 8.2 of the racing distribution agreement gave TAB a royalty free licence of New South Wales racing information, but it also gave it a right to permit others to use that information.  One sees that from the terms of clause 8.2 itself which is in volume 2 of the appeal books at page 716. 

Now, TAB exercised that right by permitting Tabcorp Holdings, its parent company, and Luxbet, which was another related corporation, to use this information for the purposes of their wagering activities.  When the scheme that is in question was introduced, it had the consequence of requiring Tabcorp Holdings and Luxbet themselves also to pay fees for their use of the information that TAB had permitted them to use up to that point.  Now, consequent upon the introduction of a scheme, a dispute arose between TAB and the racing control bodies as to whether TAB was entitled to compensation. 

TAB’s claim was that it was entitled to an indemnity, in effect, in respect of the fees that were payable by all three of the related entities, not just itself.  One can see that from the letter of complaint which commenced the dispute, which is in volume 6 of the appeal record at page 2048.  It is a letter from TAB, but at about line 35 it identifies the monthly payments required by the three entities I mentioned; TAB, Tabcorp Holdings and Tabcorp Online, which was the earlier name for Luxbet, that were anticipated to be payable to Racing New South Wales.  It then sets out the relevant obligations under the RDA, and at the top of the next page sets out the two limbs relevantly of clause 8.2 to use the race fields information and to sub‑licence or otherwise permit the use of the race fields information, and the letter goes on to make a suggestion about how this complaint might be dealt with.

The racing distribution agreement has a formal dispute resolution mechanism in it in clause 24.  Pursuant to that mechanism, TAB issued three separate dispute notices.  They commence at 2207 in the same volume.  Each is a claim by TAB, but the first at 2207 is a claim by TAB in relation to the fees it paid.  The second, which commences at 2210, is a claim by TAB for the fees paid by Tabcorp Online or Luxbet, and the third is a claim at 2213 by TAB for the fees paid by Tabcorp Holdings Limited.  The underlying forensic theory was no doubt something of the kind discussed by Sir Victor Windeyer in Coulls v Bagot’s, a long time ago now.  The dispute was settled.  The amount paid under the deed of release was $19 million‑odd, and you can see the amount in volume 7 at 2576 at line 20.

It is common ground that that sum reflected only TAB’s own payments and not the additional payments of Tabcorp and Luxbet that TAB had claimed in the disputes.  What follows from this is that the deed of release was a true compromise of a genuine dispute.  In this respect, I need to point out one very small error in the reasons of the trial judge in paragraph 66(f) in volume 8 of the record at 2728 in the second sentence.  He says that under the deed, the racing control bodies “refunded 50% of the fee paid by Tabcorp”.  There was nothing refunded in respect of the fees paid by Tabcorp and his Honour seems to have misinterpreted a provision of the deed of release, clause 6(c).

HEYDON J:   Could you give me that reference again to the trial judge’s reasons for judgment?

MR SHEAHAN:   The trial judge’s reasons at 2728 in volume 8, paragraph (f) at the bottom of the page, about line 45, the second sentence.

HEYDON J:   Thank you.

GUMMOW J:   Is it the whole of paragraph (f)?

MR SHEAHAN:   It is just the second sentence, your Honour, commencing, “The true position is that none of the fee paid by Tabcorp was refunded”.

Your Honours, the fourth point under this topic is that the deed of release related only to payments for the period ending 30 June 2009.  It is absolutely clear from the terms of the deed that nothing beyond that was compromised or resolved.  One sees that from the deed of release which is in volume 7 of the record, commencing with the recitals on 2574, recitals 1, 2 and 3, each of which refer to the various claims defining them temporally.  Recital 6 makes it plain that the resolution is without prejudice to the rights of the parties from 1 July.  Those recitals are given effect by the operative provisions, which I do not need to take your Honours to, except to note clause 8(b) on page 2578.

That matter might, your Honours, have some significance for Sportsbet’s application to extend the relief it had sought in these proceedings to cover periods after 30 June 2009 and, indeed, for its wider argument insofar as it seems to depend upon the deed of release or the anticipation of some transaction like it as supporting a conclusion that there is discriminatory and protectionist work being done by the measures in question.

The fifth aspect of this first topic requires us simply to note that all this was happening – all these fees were being imposed and the compensation was being given – in the same functional level of the market – that is, in the same market.  I do not need to say anything more about that because it has been addressed in the oral submissions this morning by our learned friend, Mr Kirk.

The second topic we would address is the real value to TAB of the promise of a royalty‑free licence.  That promise was given at a time when the information, it may be accepted, was generally and freely available, but there is no doubt, or no reason to doubt, that that promise had enormous value for my clients in a context where that information was an essential

element of its ability to conduct its business and the racing distribution agreement contemplated that it would subsist for 99 years throughout which my client would be obliged, on an annual basis, to make very substantial payments to the other parties.

The term of the licence does not appear in a single spot.  Clause 19.1 of the agreement in volume 2 at page 352 directs attention to the term of the licence that my client had.  The term of the licence is in volume 2 at page 415 in clause 1 and it expires in 2097.

In addition, your Honours, in advance of the time of this scheme being implemented there seems to have been express contemplation between the parties that TAB might become subject to some kind of extra contractual fee for the use in wagering of information of the kind in question.  One sees a reflection of that in some of the amendments to the racing distribution agreement that occurred prior to 2004, in particular at page 716 of the book in clause 8.2(c)(ii)A, which makes some provision for how such fees might be dealt with in a particular context.  Those are our submissions, your Honour.

FRENCH CJ:   Thank you, Mr Sheahan.  Yes, Mr Young.

MR YOUNG:   May it please the Court.  I wish to direct the reply submissions firstly to Betfair.  Some of the topics though will be relevant to both cases and I will not, of course, repeat them.  Then I will follow with reply submissions about issues that relate to Sportsbet only. I want to commence by dealing with the questions that Justice Hayne put to Mr Gleeson and others, and there have been follow‑up questions and submissions concerning the criteria to be applied to identify the kind of interference with interstate trade that triggers the operation of section 92.

A variety of submissions have been put. When Mr Gleeson was asked those questions he made essentially two responses at paragraph 88 of the transcript. The first set of circumstances that in his submission would satisfy the operation of section 92 was this:

If the fee makes an addition to the cost base of one trader but not to another which is so significant that it is likely to alter the competitive behaviour of the first trader such that the second trader can either preserve or build its turnover and market share –

Now, that encapsulates the case we present in Betfair.  It is an aspect of the Sportsbet Case as well.  The fees imposed under the race fields legislation are in the case of Betfair six times greater than those imposed on TAB and many times greater than those imposed on New South Wales bookmakers.  That is the consequence of the structure of the market and the structure of Betfair’s betting exchange operation, being intrinsically different from other wagering operators who work on turnover and derive their revenue from turnover.  That does not apply to Betfair. 

The second way in which the test could be satisfied according to Mr Gleeson’s submission was this.  Does the fee attack a true competitive advantage which an interstate trader holds?  Does it undermine or burden or negate a true competitive advantage and thereby operate to distort competition in the national economy?  That description aptly applies to the case presented by Betfair.  It also applies to the case presented by Sportsbet.  Both have a differential, a vastly different impost imposed on them effectively as a tax on their interstate transactions. 

It might be structured as a – like the franchise cases were – as a prohibition on engaging in a particular form of wagering with an approval condition to which a fee is attached.  But in substance, it is effectively a tax imposed on betting transactions and the relevant betting transactions are all betting transactions anywhere in Australia whose subject matter is a New South Wales race event.  Those transactions are cross‑border transactions between various States and Tasmania in the case of Betfair, and various States and the Northern Territory in the case of Sportsbet. 

The requirement that there be a burden altering the competitive position of the parties is satisfied by reason of the very fact that it is such a differential impost, imposing costs that are six times greater in Betfair’s case that it necessarily restricts competition, necessarily restricts its ability to compete, and at the same time it necessarily favours TAB and in‑State bookmakers. 

HAYNE J:   That is a submission that treats Betfair as an interstate trader and TAB and in‑State bookmakers as intrastate traders, I think, is it?

MR YOUNG:   Can I deal with it in two steps, your Honour.  In relation to Betfair, it focuses on its commerce, the betting transactions which are the subject of the tax.  This is tax on transactions whose subject matter is New South Wales race events.  So in Betfair’s case they are cross‑border transactions conducted largely by the internet.  In the case of TAB, it is, in our submission, relevantly to be regarded as an intrastate operator, not because of concepts of physical location.  What is most important, in our submission, relevantly, is that TAB is licensed to conduct wagering operations by New South Wales and as the price of that licence, is required to pay fees for all wagering operations under its New South Wales licences to, effectively, the New South Wales racing industry.

We say that is the relevant concept that determines TAB status as an interstate trader.  It is not the whole of it for reasons that I will come on to, but it is licensed in New South Wales and it pays fees to the New South Wales industry and it is existence of those fees which is the very subject matter of the protection that we allege.  Concepts of physical location are being eroded in the internet age.  TAB conducts a business that is partly local in its transactions.  It has retail outlets within New South Wales and only within New South Wales.  It operates the oncourse totalizators effectively, because the clubs operate those as agent for TAB, and it conducts betting operations solely with citizens of New South Wales, but in addition, it conducts betting operations more widely than New South Wales because it accepts bets over the internet or by telephone from punters in other States both on New South Wales races and on racing events that are going to take place in other States and Territories. 

So an aspect of its operations is localised, but that is only part of its operations. It does conduct activities in the wider national market. In addition, it conducts wagering activities that go beyond horseracing and other hounds and dog races, as the Chief Justice put to me the other day, and those transactions conducted under its licences attract fees payable to New South Wales. In those circumstances, whilst its operations are diverse in the way I have described, it is, relevantly for the purposes of section 92, to be regarded as an in‑State trader, the object of protection, because what is being protected are the revenues that it derives under its New South Wales licences and then pays to the New South Wales authorities or, in some cases, directly to the New South Wales racing industry via the control bodies or via the clubs.

That is the relevant sense in which it is an in‑State operator just as the racing – I forget the precise name of the organisation.  RWWA, was the in‑State totalizator operator and racing control body in Western Australia.  It was relevantly interstate, not because its entire operations were localised in WA, but because many were, but, fundamentally, it operated under a licence granted by the West Australian Government and the revenues it derived from wagering were shared, part of them were paid to the West Australian Government.  It was government owned in that case rather than privately owned as TAB now is in New South Wales, but effectively that is not a relevant difference to its categorisation.  That is the sense in which we say one should define the relevant concept of interstatedness for the purpose of considering protection. 

I have, in the submission I have just made, focused on interstate transactions.  That is the appropriate focus, not as Mr McLeish was putting it, the location of the business considered as some kind of agglomeration of activities and trying to find some kind of central locus for it.  Hospital Provident and its reasoning has no application because the very subject matter of the transaction to which attached here are interstate commerce, they are incidental or accidental and, secondly, this is not an inquiry into where the business is located which was the inquiry in Hospital Provident.  This is concerned with a tax on transactions and those transactions are conducted only by internet and very many of them across borders and many of them never touch New South Wales save for the fact that the subject matter of the wager is a New South Wales racing event.

I have made, in the course of those submissions, some statements about the subject matter of the payments that TAB makes.  For the convenience of the Court can I simply give these references.  The Court may recall there was a summary by Racing New South Wales of the payments under the RDA.  That is at volume 3, 1102 to 1107.  The actual definitions of the payments are in the consolidated RDA at volume 2, pages 555 and 570. 

Beyond that, can I add some submissions about the concept of a trader.  Various submissions were made to the effect that the cases we have presented, or I have presented, for Betfair and Sportsbet focus on the position of a particular trader.  In our submission, it is appropriate when the trader can be seen to be a representative of interstate trade or a representative of a class of activity in interstate trade, which Betfair is.  It is effectively the lens through which one looks at the effect on interstate trade and commerce and competition in the national market that you ‑ ‑ ‑

FRENCH CJ:   How do you get to that characterisation?  Do you just look at the character of the trader itself or do you have some wider evidentiary basis for treating the trader perhaps, to use, I think, Mr McLeish’s expression, as a proxy for trade?

MR YOUNG:   In‑chief, your Honour, I made a series of submissions about that that picked up the very factors that were relied upon in Castlemaine Tooheys for focusing on Bond, namely, it was a very substantial trader in the national market in the case of Betfair and Sportsbet.  Both have been gaining substantial market share.  The gaining of that substantial market share at accelerating rates was the reason for the imposition of the measure.  Their presence in the market was a real source of competitive energy, if I can describe it that way, in the betting market.  They were an appropriate lens or representation through which one can identify the effect of the measure on interstate trade and commerce.  They are exactly the factors that were brought to bear in Castlemaine Tooheys, indeed, they are more fundamental than in Castlemaine Tooheys, because the market share and the gaining of market share has been more aggressive and increasing at a greater rate in the internet age in the case of Sportsbet and Betfair as the betting market changes.

FRENCH CJ:   Are you putting some sort of quantitative overlay on that?

MR YOUNG:   No, your Honour.  The expression used in Castlemaine was that Bond’s trading activities, which were only in the order of 1 to 4 per cent of the market, were regarded as representative in the main of interstate trade and commerce.  There is more reason in these cases to think that the appellants are appropriate representatives, to use your Honour’s word, and that is found in the fact that they are present in the market in Castlemaine Tooheys.  It was not a new entrant.  That is a misconception of the facts.

Bond Brewing had been in the market for three years, as page 438 of Castlemaine says.  Their market share had fluctuated over that period of time.  There were not three competitors, as I think Dr Kirk said.  The market shares at page 438 show that there were a variety of other competitors.  But in Castlemaine the major interstate competitor was CUB.  It had, I think, 17 per cent of the market or thereabouts compared to Bond Brewing’s 1 to 4 per cent during the relevant period.  It used refillable bottles.  It was a major source of interstate competition.  It was not affected by the measure in the same way that the small interstate trader, Bond, was.

Now, here there is no more important source of interstate competition in the national wagering market, standing against the New South Wales operatives in relation to New South Wales Racing events, than Betfair or the corporate bookmakers.  That is why we say, if anything, it is the stronger case than Castlemaine.  It is a stronger case than Betfair v WA because in Betfair v WA, Betfair was very largely a potential threat.  It had not entered.  It was a potential competitor.  Its competitive abilities were at that time restrained because there were State restrictions on advertising that fell away after the decision in Betfair v WA.  But it was no more than a potential threat. 

Yes, it was excluded from the market by the measures, but it cannot be the case that an actual participant in the market is to be subject to some more onerous test in terms of demonstrating an impact on competition than the potential entrant.  They are in the market, they are a proven source of competition and the competition is accelerated.

HAYNE J:   Well, the agreed fact in Castlemaine at 449 was – agreed fact 79:

The object and effect of the Amendment Act has been to make the sale of beer in non-refillable bottles commercially disadvantageous.

The object and effect of the Act was agreed to be that.

MR YOUNG:   Yes.

HAYNE J:   Do you have to go so far as to say that the object and effect of the regulations, or the fee structures that have been imposed, is to make the conduct of a betting exchange commercially disadvantageous?

MR YOUNG:   Your Honour, we would accept, at least we would have to demonstrate that the effect of the imposition of the vastly greater costs is to impose a competitive disadvantage on Betfair, dealing with Betfair firstly. We do allege both object and effect but it would suffice, surely, for the operation of section 92 if you simply demonstrate effect and the object is not so clear.

In the case of Sportsbet, likewise, the argument is that the offsetting payments had the consequence that the impost was borne solely by the interstate competitors and that imposed a commercial or competitive disadvantage on them.  That was the very subject of the analysis by Racing New South Wales in their 18 June report which was the foundation of the decision, that is, if we impose this fee according to our stratagem which is nothing will be raised from TAB or in‑State bookmakers and the only revenue will be raised from corporate bookmakers and Betfair, the imposition of that additional cost on them with an insulation of any costs to be borne by TAB and the in‑State bookmakers will have the consequence of imposing additional costs. 

That will force the corporate bookmakers to raise their prices.  That is likely to reduce their turnover.  It is likely to provoke difficulties for the corporate bookmakers such that they may face financial difficulties, may be forced to consolidate and that will inure to the benefit of the strong players, namely TAB.  That is the way it is analysed in terms of competitive effect.  Surely that is (a) the effect of it and (b) the intended effect.  So the answer to your Honour is yes for those reasons. 

CRENNAN J:   What if the resolution of the competitive disadvantage lies in your own hands, for example, charging commission on every bet rather than just on back bets?

MR YOUNG:   Your Honour, it cannot be in answer to section 92 that the trader claiming its protection cannot get the protection unless he first abandons the very competitive aspects of his business that are in issue.

That is to say no more than Betfair should adjust its commissions, cease to charge such competitive prices to the disadvantage of consumers and the national market on the demand side and, because it can do that, and because it might be possible for it to petition the Tasmanian Gaming Commission to raise the 5 per cent cap, it should be forced to abandon its competitive activities, or at least restrict them because it is able to do that, and so long as it is able to do that it is not entitled to the protection of section 92. That is to rob section 92 of its intended role. It cannot possibly be an answer to say, “You should stop being so competitive.”

I was going to say that the position by the respondents about who is a trader as a representative seemed to differ somewhat.  Mr Gleeson at transcript 90 said that the measure can be seen to affect interstate trade by its impact on a particular trader.  We say that is correct, but others - Dr Kirk and Mr McLeish - seem to urge that it is not possible to analyse market effects by looking through the impact on a particular trader to understand the wider impact on the market.  There is no other way of analysing the effect on the market other than via its effect on particular traders, otherwise it becomes an abstract exercise, an artificial one.

I want to return to some of Mr Gleeson’s answers to Justice Hayne’s questions about how do we assess whether there has been the imposition of a competitive disadvantage.  Another way in which Mr Gleeson put it at transcript 92 was this:

What would be significant is if there was some comparative inability between Betfair and another trader to respond by passing on.  It would be the comparative position –

that one needs to look at.  He also said on the next page, page 94, of the transcript that it would be relevant to note whether a fee had been “differentially imposed in respect of a common activity” or a differential cost in respect of a common activity.  Now, quite clearly, the common activity here is wagering on New South Wales races.  A fee is differentially imposed, one imposed to six times greater than the other in the case of a comparison with TAB and Betfair on a neutral basis.

In terms of passing it on and a comparative inability to pass it on, it is quite clear that if this fee were to be passed on, Betfair would have to increase its prices by 60 per cent to cover the extra cost and TAB would have to increase its prices by 10 per cent to cover the extra costs; in fact, 9.375 per cent.  So to pass it on necessarily means that the competitive position for Betfair in a market where competition is all about price is seriously disadvantaged. 

As for the in‑State bookmakers, the evidence – and I went to it the other day – included Racing New South Wales assessment that the vast majority of in‑State bookmakers were sheltered by the five million threshold and for those who were not, they had their stand fees reduced.  So in the end result the measure raised no revenue from in‑State bookmakers.  There, compared to Betfair, Betfair is far more disadvantaged by this impost and it affects its competitive position either way. 

Now, I did want to go to Mr Twaits’ third affidavit.  That is in volume 1, but the relevant exhibit to his affidavit is in volume 5.  Can I go to volume 1.  The third affidavit by Mr Twaits commences at page 354.  The passage I want to go to is at 361 to 362.  This deals with the evidence that there was a very substantial impost on Betfair affecting its competitive position.  In paragraph 26, Mr Twaits explains that he has generated a table of financial information comprising:

monthly figures for the period 1 February 2006 to 31 August 2009, in relation to wagering with Betfair on New South Wales Racing. 

I will turn to the table that sets out those results in a moment, but before I do that paragraph 27 says there are three spreadsheets in particular that are set out in exhibit AJT‑4 and in paragraph 28 he says that the figures:

are the same as in Betfair Australia’s Annual Report for the year ended April 2009.

Those figures I referred briefly to, but Mr Gleeson has asserted that there was no evidence about cost impact.  There was, and it was detailed, and it was from Betfair’s records confirmed by its annual report.  In volume 5 the pages are at 2078 and 2079.  These are spreadsheets from AJT‑4.  They are in landscape.  The first page, 2078, is the first spreadsheet which Mr Twaits had numbered 1073.  What it shows is month by month the actual financial results for Betfair through the period pre and post in position of race field fees in New South Wales.  It shows the various categories of revenue, most of which is the exchange revenue, the Court can see, exchange revenues on Australian events.  The premium charge only commenced in October 2008 and when you do the figures, it is 1.5 per cent of gross revenue.  So, effectively, it has very little impact on the six times comparison.

The other fees unrelated to New South Wales Racing events that Mr Gleeson has sought to rely upon, the API fee, for instance, that is 0.45 per cent of revenue.  Transaction charges are 0.23 per cent.  They are de minimus, they do not affect the six times greater impost that is in issue in these proceedings.  The second half of that spreadsheet, “Variable Costs” shows, in fact, the costs of the Betfair operation.

FRENCH CJ:   I think you took us to these before, did you not?

MR YOUNG:   I took the Court to 2079 to make a narrower point, your Honour.  But all of the variable costs are shown.  I am not going to go through in detail but it is clear that the main costs are government levies.  The next page compares – it is one of Mr Twaits’ spreadsheets numbered 1075.  What it does is to show the impact of the Racing New South Wales’ impost on gross profit.  It is a massive increase in costs as a comparison of the first column and the second column shows.  Total betting taxes go up very substantially so comparison across those two periods is that the margin on gross revenue falls from 56 per cent to 2 per cent.  The gross profit falls from $623,536 for a four‑month period to some 46,000 for – it is a seven‑month period, September 2008 to April 2009.

So the ability of Betfair to compete, the disadvantage that it is placed at by this impost which represents a very substantial portion of its costs is manifest, in our submission. 

Now, I want to turn to another aspect of the general inquiry about what kind of competitive disadvantage triggers the operation of section 92. Can I do that by reference to Mr Gageler’s outline. In paragraph 4, Mr Gageler, on behalf of the Commonwealth, put the submission that:

A State law is only contrary to s 92 if it results in a ‘serious competitive disadvantage’ to interstate trade and commerce, and there is no ‘acceptable explanation –

I want to focus on the first limb of that submission.  The avocation of a test of serious competitive advantage is a departure from what the Commonwealth put in writing.  In their written submissions, the standard was that the competitive disadvantage be “meaningful”, that is to say, “not insubstantial or de minimis” – that is paragraph 16.  I want to make two submissions. 

Although Betfair quoted words from Castlemaine that use the word “serious”, the actual reasoning in Betfair v WA did not stipulate such a high standard as one that needed to be demonstrated.  There the Court expressed itself in terms of restricting competition - that is the plurality’s judgment at 116 and at 118, again the plurality, the reference was to the measure operating to the competitive disadvantage.  No particular standard was laid down in Betfair. 

In addition, the proposition advanced by most of our opponents is that a different standard applies to facial discrimination than applies to discrimination by practical affect. That is the effect of most of the submissions that have been made, not Mr Gageler, but most of them. In our submission that cannot be right. There is a single exercise in characterisation and it is the same whether the law is one that operates on its face to impose a discriminatory burden on interstate trade and commerce, or whether it has that result, that effect, by way of practical operation. There are not two different standards according to which section 92 is applied.

Mr Gageler made the submission that in cases of facial discrimination such as Fox v Robbins, although no court has gone further than simply identifying the facial discrimination, he seemed to be suggesting that now this Court should abandon Fox v Robbins and those cases and reach the result that even in cases of facial discrimination, it is necessary to adduce proof of serious competitive disadvantage.  That, as the debate with the Court showed, would stand in some tension with border imposts.  It would stand in tension with cases such as Fox v Robbins, which was endorsed in Cole v Whitfield and Betfair.  It is not possible to say that border imposts are to be explained by section 90 because they are physical goods that are in question and their movement is what triggers the exercise because that leaves aside services and commerce conducted wholly consisting of electronic communications.

In our submission, the correct answer is the opposite one, that is to say, as soon as one demonstrates a discriminatory burden on interstate trade and commerce of a kind likely to have a meaningful effect on competition in a national market that is sufficient.  It was demonstrable in Fox v Robbins on the face of the legislation because out‑of‑state grapes carried a greater fee than Western Australian grapes.  There was no investigation about whether that could be passed on successfully, or about what effect it had on competition.

The very existence of the discrimination, the different burden on the different classes of commerce, was sufficient to attract the wrath of section 92. In our submission, that is the test that should be applied consistently, whether the discrimination is facial or practical. I can put aside Mr Gageler’s submission for the moment.

I want to turn to one of the matters which was a centrepiece of the argument put by the respondents in Betfair by Mr Gleeson.  He made a series of submissions about the fact that back‑bet turnover was an equal and fair measure.  He made those submissions largely without referring to the evidence and without referring to the findings of the trial judge.  The submissions are contrary to the findings of the trial judge and they are contrary to the evidence.  If I can turn to Mr Gleeson’s propositional document, his outline, I want to identify two matters that I am going to make submissions about.  I do notice the time, your Honours.

FRENCH CJ:   I think we were going to go through to 1 o’clock.

MR YOUNG:   Thank you, your Honour.  The first matter that is advanced here concerns volume.  That is the first matter I want to address.  These are all in pursuit of his submission that back‑bet turnover is a criterion of quality, which is paragraph 2d.  In paragraph 4a it is asserted:

Turnover is a measure of volume or quantity of the use by the traders of the race field information.

The evidence was that that was so in the case of TAB and in‑State bookmakers but not so in the case of Betfair. I want to go to some of the evidence about that matter. Before I do, though, can I mention this. Mr Gleeson then took the argument further to assert that our argument was that section 92 prevents any form of volume charge. Of course, that is not so. Our submission is that discriminatory imposts adversely affecting interstate trade attract section 92. A volume charge can be perfectly appropriate and that is because in ordinary commerce the volume of sales is normally a reflex of revenue; sales volume by price equals revenue.

On a royalty, tons of ore extracted represents one measure of the value and hence the revenue derived from that which is going to be extracted.  That will ordinarily be the case.  All these historical examples of choosing volume or value is simply a surrogate for benefit derived and revenue, but it is not so when one goes to a betting exchange.  Mr Gleeson’s argument continued by assuming or asserting that there was a relationship for all traders that we are concerned with between volume and revenue.  For Betfair there is no relationship between volume in the sense of back‑bet turnover and revenue.  So we submit that his assertive submissions at page 81, for instance, are in error.

Can I go to some pieces of evidence.  I want to go firstly to Mr Twaits’ affidavit in volume 1 at page 336 to 337.  He gave very clear evidence, which the judge acted on, that turnover does not explain the way in which Betfair derives its revenue.  In paragraph 151 Mr Twaits explained why that is so and why, in the case of Betfair, there can be a very high turnover with very little revenue.  That is not the case, of course, with TAB.  They take 16 per cent of the pool and the pool is the wagering turnover.  For bookmakers, they take bets, they take the turnover and they return the winnings and they keep the difference, but it is all turnover what they keep. 

Mr Twaits further explains that position in paragraph 152.  The other contention in the propositional document I want to deal with appears in several places.  In paragraph 4a there is an assertion that the operators, including Betfair, compete to win turnover.  It is three lines from the bottom of the first page.  In paragraph 5 the same assertion is made, the second sentence of paragraph 5:

All wagering operators are equal in the sense that they all use the information to compete for back‑bet turnover –

There is no finding that would support that and it is contrary to the evidence.  I want to go to the evidence of Mr Twaits in his cross‑examination which is in volume 1 commencing at pages 135 to 136, last question and answer, continuing to line 15 on the next page.  This was the only evidence in the matter, I should say.  Then at page 145 between lines 17 and 33, particularly the answers at 30 and 33.  Then at pages 148 to 149 commencing at line 40 at 148, but especially the questions and answers at the top of 149.  Mr Twaits’ answer at line 8 is, “We don’t consider that we’re competing for wagering turnover”, and he disagreed with that proposition at line 13. 

Then at page 210 there is another passage at line 18.  It is put to him he is competing for volume, back‑bet volume.  Mr Twaits’ answer was, “I think we’re competing for revenue.”  The answer at line 25, the answer at line 30, and then at line 33:

Volume and competition for volume is critical to Betfair, you agree?‑‑‑No. 

In the course of these submissions by Mr Gleeson, your Honour Justice Kiefel asked a question about market share.  It is at transcript page 81, line 3492.  Mr Gleeson’s response was that turnover is one very convenient measure of market share.  It is not having regard to the evidence.  It is quite clear that Betfair’s operations, because of their essential nature, their structure, can generate a very high level of turnover perhaps because one punter is, as you do on a futures exchange, opening a position and then perhaps closing it off and making another bet.  There can be a very high level of turnover, but it does not necessarily represent anything to do with market share.  It is the nature of Betfair’s operations that it can generate a very high level of turnover but no revenue out of it.

KIEFEL J:   Are you saying it applies more to its competitors rather than to Betfair?

MR YOUNG:   It does.  It applies to its competitors because for them turnover is their source of revenue and it is a measure of their market share, but it does not apply to Betfair.  Now, there are two other documents I wanted to mention in this connection in the evidence, so there was other evidence about turnover, relevantly, at volume 3 of the appeal book at 1298 there is an economic submission to the Cameron inquiry into wagering in New South Wales by Allen Consulting.  Turnover is discussed at 1298 commencing at about point 4 on the page with the paragraph, “It is centrally important”.

HEYDON J:   On what basis was this admitted on?  It is some sort of expert evidence, is it?  It is a submission.

MR YOUNG:   It was admitted into evidence, I think, your Honour, without identifying the basis and there were no objections taken to the series of reports, such as, I think I have earlier mentioned, the Access Economics report, the Boston Consulting ‑ ‑ ‑

HAYNE J:   That is perhaps, unsurprisingly, your side is running a case of purpose or motive, but were these reports admitted as, in effect, truth of the opinions of ‑ ‑ ‑

MR YOUNG:   No.  Our case of purpose is not related to these reports.  The case and purpose was founded on the decision‑making documents of Racing New South Wales, your Honour, and Harness Racing New South Wales, I should not forget.  We rely upon that paragraph on this question of the inapplicability of back‑bet turnover to achieve any of the elements of equality asserted by Mr Gleeson. 

The other document is at 1136.  This is a Racing New South Wales document.  It is the last section on the page headed “Diversity of bet types and margins”.  There is an explanation about why you cannot simply equate $1 of turnover across different types of wagering.  Justice Perram made some findings about these matters in paragraph 141 at 2253 and the last paragraph on 2253.  Also 142 makes the same point.  There is also another passage by Justice Perram at 323 at page 2306.  I have given an incorrect reference, but while the Court has it, that is an acceptance of Mr Twaits’ evidence by the trial judge.  I should have referred to that earlier.

GUMMOW J:   What is the correct reference?

MR YOUNG:   Page 323 of Justice Perram’s judgment in Betfair at 2306 of the Betfair appeal book.

FRENCH CJ:   I think we are looking to what you were intending to take us to.

MR YOUNG:   I am told I do not need to.  Is that a convenient, moment?

HEYDON J:   Of course, in 322 the trial judge said:

With no disrespect to Mr Twaits I do not regard his evidence about these matters as especially cogent.

That was an attempt to remedy a gap left by an absence of any expert witness skilled in economics.  Is that what we are talking about or are we talking about trade evidence here?

MR YOUNG:   No, that is not this evidence.  That was directed at something else.  These questions were about the irrelevance of turnover in Betfair’s business.  Paragraph 322 is directed to something else.

FRENCH CJ:   Mr Young, could you give us an estimate of how much longer you think you will be?

MR YOUNG:   I think I will probably take something in the order of an hour, an hour and 15 minutes.

FRENCH CJ:   Yes, all right.  We will adjourn until 2.15 pm.

AT 12.59 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

FRENCH CJ:   Yes, Mr Young.

MR YOUNG:   Can I first elaborate on my answer to Justice Heydon immediately before the adjournment?  Your Honour asked me about the findings by the trial judge at page 2306 in volume 6, paragraph 323.

HEYDON J:   I think you had just better tell me about it, I do not seem to be able to find it.

MR YOUNG:   The paragraph said that Mr Twaits’ evidence was otherwise accepted by the judge and your Honour asked me what was the exception to it.  It did relate to other matters than the ones I have taken the Court to.  It related to a matter pressed in cross‑examination described in the first two sentences of 321.  What was being put to Mr Twaits was that:

Betfair would continue to compete . . . using such competitive advantages as were available to it –

In the trial judge’s remarks the exception was directed towards that cross‑examination and its failure to clearly elucidate what those alleged advantages were.  At about line 32 his Honour said he simply took Mr Twaits’ evidence to mean that Betfair would continue to try to compete.  At 322, lines 8 to 10:

The cross‑examination never revealed the import of the questions being asked –

et cetera.  So that was the exception.  It does not go to Mr Twaits’ statements about Betfair’s operations and how it conducts business, derives revenue and treats turnover.

HEYDON J:   I think there was one more passage you were going to refer to.  You remember you went to 323 and said that was a wrong reference, but a good one.

MR YOUNG:   I am going to come to that when I deal with the submissions about purpose and object.  The next point I want to address also arises from Mr Gleeson’s submissions.  After making the submissions about back‑bet turnover, his submissions then moved to different concepts, in our submission.  He submitted, in effect, that our complaint was about a matter that fell into the realm of discretionary pricing decisions, saying, amongst other things, that prices often increase in consequence of a tax.  The Attorney‑General for New South Wales made a similar submission at page 130 of the transcript, to this effect:

If all the participants increased their commission rate so as to maintain their net margin, there would be no change in the relative competitive positions -

That is simply not so for the reasons I gave this morning.  To recoup its additional cost, Betfair would have to increase its prices sixfold, whereas TAB, it would be by 60 per cent compared to 10 per cent.  The next matter I want to go to concerns Mr Gleeson’s proposition about compensation, which is 2a:

require Betfair to pay compensation . . . for the use of a product –

and 3 –

compensation for the use of a product –

Proposition 8 is related, a fee related to benefiting.  These submissions miss their mark in relation to the allegation that back‑bet turnover is equal and fair and non‑discriminatory as a measure for the imposition of the tax, bearing in mind the second reading speech that introduced the legislation in which it was said that the primary purpose was to catch free riders who use New South Wales race events to make profits, and that:

There is no intention to change the status quo except –

catching wagering operators who profit.  The focus is on that use which generates a profit to the wagering operator.  Back‑bet turnover does not perform that function or role in relation to any betting exchange.  It is not a measure, as the trial judge found, measuring either use or profit earned from the activity of wagering on New South Wales races.  It is for TAB and for in‑State bookmakers, but it is not for a betting exchange.  The trial judge’s findings made that clear.  Can I go first to page 2282?  His Honour at paragraph 240 deals with the alleged legitimate objective, having just before at paragraph 239 said that he found that:

their actual purpose was to protect the revenues of the TAB –

But his Honour then proceeded to deal with the argument on the assumption that the objective was, in paragraph 240, to obtain a contribution “commensurate with their use” and his Honour found that back‑bet turnover as a basis for the fee neither measured use, nor measured commercial benefit.  That is subparagraphs (a) and (b).  His Honour at paragraph 242 said turnover had no utility as “the number of times race fields information is used” and in relation to benefit derived in paragraph 244, in the last few sentences, his Honour said it is a “poor and unattractive” proxy.  It is at its best for a totalizator.

It is at its worst when a wagering operator does not generate income on back bet turnover but instead, as in Betfair’s case, on some other quantity such as the net winning positions of its customers.

His Honour concluded in 246:

it is impossible to form the view that back bet turnover is a reasonably appropriate method of measuring the commercial benefit derived from the use of race fields information ‑

His Honour went on in one or two passages to refer to this 2.5 per cent margin in the specialised sense in which it is used as simply a statistical comparison and Mr Gleeson accepts that.  Those findings are another reason why the assertion that back‑bet turnover is equal and fair simply breaks down.  It is not supported by the evidence.  It is contradicted by the evidence and it is contradicted by the judge’s findings.

BELL J:   The fact that it may not be a measure quantifying the commercial benefit derived by wagering operators for their use of the information would not address the submissions that Mr Gleeson took us to concerning the reasons, in terms of good administrative sense, for selecting back‑bet turnover.

MR YOUNG:   Yes, your Honour is right.  That is a separate matter.  The trial judge also dealt with that and rejected all of those arguments and reasons, having heard a lot more evidence than this Court has been taken to about those matters, because it is traversed in quite a lot of documents.  There was no oral evidence from Racing New South Wales.  His Honour deals with that at paragraphs 249 and following.  His Honour gives a series of reasons.  A fee based on commission is non‑discriminatory, readily calculable, not subject to difficulties in terms of operators seeking to increase their expenses.  Does it mean hostage to commercial fortune?

Can I add to those matters his Honour relied upon a series of other things.  The first is that the terms of the approval and the other licensing powers associated with totalizators and in‑State bookmakers provide powers in relation to monitoring and auditing of the financial returns and position of the bookmakers.

Secondly, in New South Wales TAB pays RDA fees, as Justice Crennan pointed out yesterday, calculated on the basis of net wagering earnings and another fee paid on the basis of earnings before interest and tax.  So the major fees it pays to New South Wales under the RDA are calculated on a revenue basis.  It is not suggested there is any difficulty about that.

Further, we have a document that records these matters to provide, but aside from Queensland and New South Wales, whose race fields legislation operates by reference to back‑bet turnover, the other States levy it on gross commission.  Queensland has changed to commission as well now.  Further, you have the decision of Greyhound Racing New South Wales which imposed it on commission, on revenue, with no indication that they saw any difficulty about the matter.  So the administrative convenience issues were canvassed.  They were considered by his Honour and rejected and, in addition to the matters his Honour mentions, there are powerful reasons for considering that there is no real weight in any of those matters, your Honour.

Can I make available to the Court two documents?  They record references – I am not going to go through them, but it is more satisfactory than me reading references to the Court.

MR GLEESON:   Your Honour, we preserve our position as to whether this material is true reply.  It does not appear to be.

FRENCH CJ:   What are these references to, Mr Young?

MR YOUNG:   Can I explain it by reference to the document in a moment, your Honour?  Can I deal with the document headed – it is the non‑tabular document.  This is a list ‑ ‑ ‑

GUMMOW J:   Do you accept that Mr Gleeson would have to have an opportunity to reply to this?

MR YOUNG:   I do not oppose it, your Honour.  The first document is a listing of the references in the evidence to those ‑ ‑ ‑

GUMMOW J:   What is all this going to show us anyway?

MR YOUNG:   It is in furtherance of my answer to Justice Bell, your Honour, that gross revenue is used as the basis for charging fees on race fields around the country.  That is the simple purpose of the first document.  It is factual.

GUMMOW J:   That raises something that has been going through my mind.  Most, if not all, of the players in this story seem to be operating on a nationwide basis of activity.  How then does one readily introduce notions of protectionism of particular markets based on geographic lines?

MR YOUNG:   In the way that I endeavoured to explain using Justice Hayne’s questions yesterday as the basis, and Mr Gleeson’s answers, that is to say that even though many of the operators have a State focus but conduct as well very substantial interstate operations, they pay revenues under their State licences to the State licensing authorities on their wagering revenue, and it is those revenues that are the subject matter of the protection, and they flow from the State licensee to the State industry.

GUMMOW J:   Do we have findings about this?

MR YOUNG:   You have findings in relation to New South Wales.

GUMMOW J:   I know. That is not what I asked. The answer, I think, is no. It seemed to me we may be invited to launch ourselves on a very significant section 92 case upon an inadequate basis.

MR YOUNG:   With respect, your Honour, we would submit that ‑ ‑ ‑

GUMMOW J:   One in which you have all colluded, if I may say so.

MR YOUNG:   We would submit that the findings of fact concerning the distribution of revenues in New South Wales under the licensing regime do address the matter.  There is some evidence relating to the operations of Tabcorp and the interstate totalizators ‑ ‑ ‑

GUMMOW J:   We should not have to scratch around trying some evidence this and some evidence that.  We should have some findings, both at trial and, if need be, in the Full Court, upon which we can then deliberate.  We should not be engaged in this activity on the third day of a High Court appeal.  I have never seen anything like it.  Anyhow, go on.

MR YOUNG:   The second of the two documents sets out information summarised in footnotes 4 and 7 of our reply submissions, in very small type, and it cross‑references those matters dealing with premium charge and other amounts which was something that Mr Gleeson advanced submissions about for these other revenue items, and it simply collects the evidentiary references about those matters that he addressed.

The second document is, in our submission, properly by way of reply.  The broad submission about the other revenue items is that none of them affect the basic discrimination that Betfair bases its case upon.  It makes a de minimus difference to the contention that the impost is six times greater than that imposed on TAB and most of the items, with the exception of the premium charge, have no relationship to New South Wales race events and wagering on New South Wales Racing, so they are extraneous and immaterial in any event.

Mr Gleesons’s submission appeared to be that the existence of these other items cast some doubt on the contention that revenue was the neutral comparator.  In our submission they do not.  The only one that relates to New South Wales Racing events is premium charge.  Mr Twaits’ affidavit before he was cross‑examined accepted that that was part of commission and should be included and the six times comparison is not affected by these items.  Can I turn to purpose?  I want to go firstly to the trial judge’s findings that Mr Gleeson took the Court to.

GUMMOW J:   Are you still persisting with an argument about subjective purpose, are you?

MR YOUNG:   Your Honour, the point I am going to make is that we have not relied upon purpose in the sense of any kind of substituted test for a characterisation test.  Mr Gleeson took the Court to the judge’s rejection of that, but the judge was careful to exclude from it a reference to purpose and intention as an aid to characterisation.

FRENCH CJ:   Well, we went through that territory.  We had some exchange in that matter, as I recall.

MR YOUNG:   I am sorry, your Honour.

FRENCH CJ:   We went through that territory, I thought ‑ ‑ ‑

MR YOUNG:   We did.

FRENCH CJ:   I just do not want to have us involved in Groundhog Day here.

MR YOUNG:   No, of course not, your Honour.  There is one ‑ ‑ ‑

CRENNAN J:   Is your position that your effect case is enough to succeed?

MR YOUNG:   Yes, your Honour.  But that does not mean that purpose is not relevant.  There is one aspect I do need to deal with.  Mr Gleeson went to 222 – to the judgment of Justice Perram and made some criticism of his finding there.  This concerns one of the documents the trial judge relied upon.  His submission, in effect, was that the judge had mistaken the reference in the minutes referred to in paragraph 222 and that was to a different document than the document referred to at 223.

Thus far Mr Gleeson is right, his Honour did mistake the reference to tabling a report.  What Mr Gleeson did not make clear though was that the document his Honour extracted in 223 was in fact tabled at a different meeting of the Racing New South Wales Board, so his Honour’s only mistake was to get the date of meeting wrong, not the substance of the document or its tabling.

That document is tabled at the meeting which is the subject of the chief executive’s report at volume 3, pages 1032 and following.  That CEO’s report attaches a copy of the Tabcorp document to the Racing New South Wales Board at 1033 and then the attachment follows, which is the Tabcorp document.  The page his Honour extracted from that attachment to the CEO report is at page 1068.

There are two matters to mention to complete what I wanted to say about Betfair.  They are very brief.  The first concerned Mr Gleeson’s submission that there was some benefit that Betfair was conferring upon layers through what he described as a layers over‑round.  I go to Justice Perram’s judgment at paragraph 52.  There was an elaborate argument built upon this matter to the effect that this was a benefit that Betfair was giving away to layers.  It was based on the end of paragraph 52 where his Honour said:

This curious result indicates that, taken as a class altogether, the layers are bound to make a profit –

But his Honour goes on to say there was no evidence about that matter.  It is counterintuitive because if you could be guaranteed a win by backing every horse in the lay column, playing every one of those horses, the business would fold.  It is a misinterpretation.  It is explained in footnote 5 of our reply statement.  But the important point is the argument Mr Gleeson built was on a comment by his Honour on the interpretation of a document about which there was no evidence.  The other matter I wanted to say ‑ ‑ ‑

BELL J:   I am sorry, did you say that it is in footnote 5 of your reply submissions that you pick this up?

MR YOUNG:   Yes, your Honour.

BELL J:   Thank you.

MR YOUNG:   Can I agree with what Mr Gageler said on behalf of the Commonwealth in relation to the productivity commission report and constitutional facts.  We agree with his description of what would be constitutional facts.  We do also agree that Justice Heydon summarises the relevant principles in Thomas v Mowbray.  The concept of constitutional fact includes opinion, expert analysis as well as fact.

We note Justice Perram deals with a draft productivity commission report which was in contention at the trial at paragraph 334.  So the matter of the analysis was the subject of debate.  His Honour did not find it necessary to or did not rely upon the material for a reason I want to go to, at the very bottom of page 2308.  The reason why his Honour said he would not act on it was because he said it was:

not the case that Betfair pleaded –

that it “enjoyed competitive advantages”.  Now, in the context of his Honour’s judgment that is a reference to the failure to prove pre‑existing or extraneous competitive advantages aside from the impost of a six times greater cost.  We say the document is relevant to the analysis of the consequences of the six times greater cost.

FRENCH CJ:   What is the constitutional fact, if it is possible to encapsulate it, that you seek to extract from that document?  I think I actually asked the question yesterday.

MR YOUNG:   It is the first of those mentioned by Mr Gageler and that is that the document sheds light on the question whether the measure imposes a serious disadvantage to interstate trade.

HAYNE J:   That is not the constitutional fact.  That is telling us it is relevant to a constitutional fact.  What is the constitutional fact?

MR YOUNG:   The constitutional fact is that the imposition of a six times greater impost based on a turnover calculation will have adverse consequences for competition in the market in the ways explained in the productivity commission report.  Now, we accept that it is a matter in the Court’s discretion.  I do not want to say anything further. 

GUMMOW J:   Can you assist by indicating what you see as the principal issue joined as to the principles and doctrine of the application of section 92 in this case? That is what we have to think about.

MR YOUNG:   Yes.

GUMMOW J:   Not scratching around in this wretched report. 

MR YOUNG:   Of course, your Honour.  The first question is whether a measure which imposes a cost per revenue dollar on an interstate trader, which is six times greater than that imposed on others, is sufficient to demonstrate ‑ ‑ ‑

CRENNAN J:   When you say “others”, are you talking about intrastate traders?

MR YOUNG:   Yes, I am, your Honour.  That was shorthand for TAB and other intrastate traders - whether that is sufficient to demonstrate the necessary restriction of competition, the necessary interference with interstate trade of the kind described in Betfair.  Now, that is the centrepiece of the joinder of issue.  We say it is sufficient by itself and supported by the evidence that that necessarily reduces Betfair’s competitive position and ability to compete in this national wagering market.

FRENCH CJ:   Are you equating trade with competition here?

MR YOUNG:   I am equating Betfair’s interstate commerce with ‑ ‑ ‑

FRENCH CJ:   At the level of principle that Justice Gummow asked you to address?

MR YOUNG:   Yes, I am equating interstate trade with that area of commerce that we have to focus on and assess the competitive restraints that are applied to it from both a supply side and the demand side perspective.  Ultimately in Betfair, in our submission, the question was whether the measures restricted competition by excluding a potential entrant.  In this case the question is whether the measures restrict competition by virtue of the discriminatory costs burden placed on one of the most aggressive competitors in the field of these interstate wagering transactions.

Now, there are subsidiary points that are joined, your Honour will have seen.  One is whether there is any discrimination, which is Mr Gleeson’s point – back‑bet turnover involves no discrimination.  Another point is whether the circumstances of Betfair are an appropriate lens to examine interstate trade and commerce.

CRENNAN J:   Do you draw some distinction for these purposes between the different sorts of licenses you have in respect of intrastate traders and interstate traders because interstate traders are also paying a fee for the use of the race field information, although it is a different licensing fee from the fees that the persons you are calling intrastate traders, the bookmakers and the local TAB, seem to pay.

MR YOUNG:   Well, if we leave aside the facts of the Sportsbet Case, facially everyone who engages in wagering operations on New South Wales race events, wherever they are situated in Australia and whomsoever the transactions take place between, are the subject of the New South Wales fee.  So it may be that ‑ ‑ ‑

GUMMOW J:   Because they are using the field information?

MR YOUNG:   Yes, that is the nexus with New South Wales.

CRENNAN J:   But then you want to have some distinction erected in relation to the intrastate traders, otherwise how do we categorise them as intrastate traders given the fact that, like Betfair, they conduct all sorts of wagering, and so the acts of trade, if you like, presumably include internet trade.

MR YOUNG:   Yes, well, they are identified because they are licensed by and they fund the New South Wales racing industry and the discrimination operates to preserve that revenue stream from those New South Wales licensed operators to the New South Wales industry.

CRENNAN J:   So their trade, including their acts of trade, including those relating to the internet, cannot be engaged in without the licence you have described?

MR YOUNG:   That is so.  This is all a franchise‑like fee or tax built upon a prohibition on engaging in a particular kind of wagering transaction across State borders or around the country.

GUMMOW J:   But it seems to be replicated across the country, this proprietary notion of field information.

MR YOUNG:   It has.  It has been a race to whether we call it the bottom, or the end, but it has been a race, your Honour.  Factually, most States and Territories have used the neutral revenue‑based means of assessing the fee, because it is non‑discriminatory and neutral.

HAYNE J:   The discrimination of which you complain is ultimately a discrimination between a betting exchange and other form of traders?

MR YOUNG:   Yes, it is.

HAYNE J:   And the location of the betting exchange happens to be Tasmania.

MR YOUNG:   But it has to be somewhere, your Honour, and no matter where it is ‑ ‑ ‑

HAYNE J:   Exactly so.

MR YOUNG:   No matter where it is located, it will, in this national market, engage in interstate trade and commerce.

HAYNE J:   Because the market now, for betting product, is national and is not localised.

MR YOUNG:   In the case of a betting exchange, especially so, your Honour, yes.

HAYNE J:   But so too in the case of the bookie who stands at Rosehill on a Saturday.

MR YOUNG:   I doubt that is so.  If it is so, it is only to a very limited extent, your Honour, because the function of a bookmaker is essentially local when standing at a racecourse.

CRENNAN J:   So a betting exchange which just happened to be located in New South Wales would be able to raise the same complaint on that analysis?

MR YOUNG:   Yes.

FRENCH CJ:   That leads to a more general question, I suppose.  Is any trade in a national market interstate trade?

MR YOUNG:   Yes, your Honour.  Where it consists of commerce comprising communications across State boundaries, it is necessarily interstate trade, even if it is transpiring in a national market.

FRENCH CJ:   Let us suppose you are just operating within a State.  You happen to be operating within a State but it is, properly analysed, part of a national market.  You are competing with national players, and local players, and so forth.

MR YOUNG:   Assuming the latter, yes, your Honour, but the existence of national markets do not avoid the need to consider the existence of discriminatory and protectionist measures by a State to protect their revenues or industries ‑ ‑ ‑

HAYNE J:   Which is it?  It is to protect local traders, is it not?  Is not the core of protectionism to protect the in‑State industry, to protect the local trader?

MR YOUNG:   I would widen it to the local industry or the local commerce, your Honour.

HAYNE J:   How then does that engage with the fact that the industry or traders with which we are concerned are participating in a national market?

MR YOUNG: The answer is, your Honour, that even though they are participating in a national market they have certain features that qualify them relevantly for section 92 purposes as intrastate traders, those matters being the fact that they are licensed in New South Wales, they pay licence fees for the benefit of the New South Wales industry. That string of fees is the subject matter of protection, and by protecting that string of fees, you protect the local industry, and further they have a core – sometimes a bulk, sometimes perhaps 99 per cent of their operations in the case of bookies – located within the State.

Can I turn to the Sportsbet matter?  I will be much briefer because I have covered many of the issues of principle.  In Sportsbet the submissions on behalf of the respondents, in our submission, do not grapple with the core of the case that Sportsbet advanced. Mr Walker, for instance, made submissions concerning the removal of anti‑protectionist measures in paragraph 3 and contended that we were seeking to permanently entrench some kind of position. Elsewhere, in paragraph 4 and following, he addressed the notion that pre‑existing burdens must be capable of being adjusted or relieved without triggering the operation in this case of section 109 relating to section 49.

Now, nowhere did Mr Walker refer to the fact that the exactly offsetting payments made to TAB come out of the proceeds of the fee or tax.  That is a critical aspect of this legislation.  It arises under section 33A(3) and it is inseparable from the way in which the tax is to be characterised.  Here there is no doubt about the facts.  The control bodies acting under statutory authority imposed the fee, took the proceeds as their own and applied the proceeds to make exactly offsetting payments.

It is the use and application of the proceeds of the fee or tax which was the decisive consideration in West Lynn, the US Supreme Court case, and, in our submission, it should be decisive in the characterisation of this legislative scheme as well.

FRENCH CJ: Does this fall into some larger principle or proposition which might be relevant to both cases and, given we are dealing with effectively national markets, whether one way of approaching a certain infringement of section 92 is to say that any burden on any act or in a national market which has the effect of reducing competition within that market is a burden on interstate trade and commerce on a proper understanding? It gets us out of all of this local versus national distinction.

MR YOUNG:   Yes, it is possible, your Honour, but the concept of protection would need some further articulation beyond ‑ ‑ ‑

FRENCH CJ:   Well that word is not actually used in ‑ ‑ ‑

MR YOUNG:   No, I know, your Honour, but it would need some further articulation beyond that which it has received in Cole v Whitfield, Castlemaine Tooheys and Betfair.  Yes, it is possible, but ‑ ‑ ‑

KIEFEL J:   But trade between the States would be free if it were free of anti‑competitive effects.  That is the European approach.

MR YOUNG:   Yes, and the approach does have some echoes of the reference in Betfair to the national competition principles as being a consideration that needs to be borne in mind, at least in the background in applying section 92. It would be supported by the concepts of national unity and national political economy which underpin the framing of the provision in the first place. We have not sought to put our case at such an ambitious level, your Honour, because ‑ ‑ ‑

FRENCH CJ:   Well, how does a differential subsidy fit into that framework, which is what you are really talking about, or the equivalent of a subsidy, the economic equivalent.

MR YOUNG:   Well, it is a little bit more than that, your Honour, and that is what Justice Scalia said in West Lynn, that it is here an exercise of the taxing power coupled with a return of the tax raised, at least on the surface, on a neutral basis in respect of that case was milk from anywhere, Vermont or Massachusetts, but a return of some of the tax moneys to the Massachusetts dairy farmers, and it was that circularity of the flow that led the US Supreme Court to say what is the difference between that and a discriminatory tax where, instead of taking the money and giving it back, you simply tax those who alone are going to ultimately bear the burden, and you exempt the others?

It is not just a question of a protectionist subsidy, your Honour.  It has elements of that as well but, in our submission, the key flaw in the scheme in the legislative package is that they give the taxing power to an industry body and they say, by 33A(3), “That money is yours, and you have an unfettered discretion as to its disposition”.  That discretion is completely uncontrolled because a private party is given the taxing power, they raise the money, it becomes their money and they are given an unfettered discretion as to its application.

Now, that is not controlled by the administrative review provisions, it lies outside that entirely.  It would not even seem to be perhaps susceptible of judicial review given that provision about a debt due to the racing control bodies.  It belongs to them, but it is certainly an unfettered discretion and they have a power of application by virtue of that provision.

If they utilise that power to apply the tax moneys in ways which achieve the same consequences, the same practical effect as a discriminatory tax would in the first place, then our submission is that surely contravenes – that surely imposes a restrictive burden on interstate trade and commerce and favours the local trade and commerce in ways that are inconsistent with the protection that section 49 applies to trade and commerce between the Territory and other States.

That is the way, in our submission, in which this needs to be analysed.  There is an unfettered discretion, not just as to the nature and quantum of the fees that would be determined, but as to the ownership and application of the proceeds.  There is no element of regulation further about this scheme.  As a matter of substance, it is a revenue‑raising scheme, for the reasons I have earlier referred to. 

So it does not get the comfort of the analysis of Justice Brennan, as his Honour then was in Miller.  It is a completely unfettered discretion not for a regulatory purpose but for tax‑raising purposes and then the moneys are turned around and given back to one of the taxpayers.  There is no doubt that that is what happened.  The moneys were refunded.  It was an exactly equal amount to the payments made by TAB.  Its own payments under the RDA, as Justice Crennan pointed out, were (a) global, (b) calculated on a revenue basis at different rates, and (c) as I pointed out in-chief, in lieu of annual licence fees payable to the government. 

So it is quite clearly a return, a refund of the taxpayers.  In our submission, Justice Perram was quite right to look at the substance of the matter in his judgment.  In our submission, that characterisation can be arrived at without looking at the decision‑making documents that support our purpose case.  It is manifest in the provisions of the Act, and the Act cannot authorise the imposition of a restrictive burden on interstate trade and commerce contrary to a Commonwealth law.  To the extent it does, the State law is invalid.

Now, I want to add one point to what I said about West Lynn.  Mr McLeish in writing and Dr Kirk orally attempted to distinguish West Lynn on the ground that the protection occurred, according to their analysis, at a different functional level.  That is somehow said to make that case distinguishable.  Can I explain that reference to functional level more fully? 

In West Lynn, a tax was imposed on milk processors at a rate equal to a certain number of dollars per hundredweight, I think, of milk that was the subject of processing, regardless of whether the milk came into Massachusetts from interstate or was produced by Massachusetts dairy farmers.  But it was a tax on milk levied on the processors.  The proceeds of the tax were distributed entirely to Massachusetts dairy farmers.  The effect was as if the only milk that bore the tax was the interstate milk. 

Now, the distinction is said to be that the tax fell on milk processors and the people protected were upstream, they were the milk producers, as if that is a relevant distinction.  In our submission, it is not.  It can make no difference that the protection is to someone earlier in the chain of production of the very commodity that is taxed.

In our case, the protection is for wagering operators and their revenues, thereby securing payments to the local industry, and it is also wagering operators who are the subject of the tax.  It is even more clearly protectionist, if you like, but we do not see a difference between what function or level of the chain of production the protection operates at.

It was also said by Dr Kirk that Bath v Alston turns on this functional distinction and that is why it is of no assistance.  I do not want to go to the case.  I want to say just one thing about it.  Bath v Alston concerned franchise fees, a device to get around the imposition of an excise, but separate franchise fees were levied on the retailer and on the wholesaler.  They were payments for the right to conduct a retail business or alternatively the right to conduct a wholesale business.  So you had different taxes on different parties.  All that the High Court said is that you cannot tax retailers on a basis that exempts Victorian tobacco so that the tax on retailers is discriminatory against interstate tobacco.

Now, there is no support in Bath v Alston for the proposition that there is anything wrong with our arguments or that there is anything about functional levels that prevents you looking at what really occurred and whether there was discrimination and protection in the application of the tax proceeds.

Next, I want to deal with the question of thresholds that Mr Walker deals with in his short outline in paragraph 1e.  I want to say just a few short things about thresholds. In the way in which the legislation operates to authorise regulations, the regulations set fee‑free thresholds.  In the case of Harness Racing, Justice Perram found that they protected all in‑State bookmakers.  No one paid a fee because of the 2.5 million threshold.  That is Justice Perram at paragraph 104 at page 2740. 

Mr Walker is dealing largely with Racing New South Wales in 1.  We do not understand what he said about Harness Racing thresholds.  He was saying, in effect, that was explicable by the dominance of TAB, but the finding was that it completely insulated in‑State bookmakers on harness racing.  But in relation to Racing New South Wales, the submission is not supported by any evidence.  The citation provided in the marginal note is appeal book 2593 – that is volume 7.  That is not to evidence.  It is to a submission which was unsupported by evidence.  Indeed, the only material going to it was specifically rejected by the trial judge.  So the document in question is the submission at 2593 of volume 7.  The trial judge rejected that document in paragraph 78 at page 2732.  In about the third line of paragraph 78, his Honour said:

A summary document tendered by RNSW suggested that there were 182 –

bookmakers and that was what the figures were based on, and his Honour rejected that.  More generally, can I give the Court a reference to our submissions in reply, dealing with thresholds?  It is paragraphs 26 to 35, and that collects the evidence that demonstrates that the vast majority of New South Wales bookmakers were protected by the 5 million threshold, and the balance would not be advantage by virtue of the other steps that were taken to apply some further proceeds to reimburse the clubs for the abolition of the stamp fees.

In relation to purpose, I simply want to give the Court a reference to the way in which Justice Perram dealt with it, which we say was correct and supported by authorities that I mentioned in‑chief.  His Honour dealt with purpose at 101 to 104 – that is 2740 - and at 152.  The second reference is at 2754.  His Honour took into account subjective purpose in assessing practical effect at 101 to 104.  At 104, he applied effectively the public law approach to determining the existence of an improper purpose, that is, it must be so substantial that the power would not have been exercised in the way it would, but for that purpose.  He adopted that approach in 102.  These fees would not have gone ahead without the economic insulation and the other offsets referred to in paragraphs 101.1 and 101.2.  At 152 his Honour said that intention formed part of his reasons for treating:

the thresholds, the rebates and the compensation arrangements as one set of inseverable –

arrangements and that is done in the context of determining practical operation.  In our submission, that is an appropriate way to determine practical operation.  It coincides with what this Court has done previously, particularly, the best example we could find was James v Cowan, and I mentioned that in‑chief. 

Now, can I deal with the submissions made on behalf of Tabcorp and as well Mr Walker’s reliance upon the fact that there had been no compensation payment to Tabcorp Holdings?  I will deal with that matter first.  In Mr Sheahan’s outline on behalf of Tabcorp it is paragraph 5.  In Mr Walker’s outline it is paragraph 1.c.iv.

The Victorian totalizator is operated by a related company of TAB.  It is not operated by TAB, it is a related company, Tabcorp Holdings.  It is not a company whose activities are relevant to this proceeding.  It is not relevantly the beneficiary of protectionist payments.  No payments were made to it.  Indeed, it was not entitled to any.  That is clear for reasons I will mention in a moment, but it did not receive any and there is no allegation that it was the beneficiary of protection.

Its position is simply irrelevant, but the issue is whether TAB, the New South Wales operator, which did pay fees and receive them back in exact dollars down to the last cent, whether that turnaround of the fees is restrictive of competition in the relevant sense.  Now, Mr Sheahan spoke of a sub‑licence from TAB to Tabcorp relating to the use of race fields information.  There was no evidence in the case of any such arrangement, none at all. 

I should explain who Luxbet is, that Mr Sheahan refers to.  That is a company which Tabcorp Holdings established in the Northern Territory to operate as an interstate corporate bookmaker.  It is not relevantly the subject of any protection and did not receive any payments so it too is irrelevant to the analysis in this case.  There is no entitlement to any compensation on the part of these non‑New South Welsh entities.  That is clear under clause 8.2 of the consolidated RDA, which the Court will find at page 716 of volume 2 of the appeal book here. 

GUMMOW J:   Which clause?

MR YOUNG:   It is volume 2 ‑ ‑ ‑

GUMMOW J:   Yes, page 709?

MR YOUNG:   Page 716 is clause 8.2, your Honour.  The entitlement is one belonging to TAB, that is the New South Wales TAB, under 8.2.  Apparently reliance is placed on (b) from what Mr Sheahan said. 

TAB shall be entitled ‑

to permit others to use.  There is no evidence of any sub‑licence or permission to use:

on the following conditions:

One of those conditions is paragraph (d) at 717:

that no fee is charged –

So if Tabcorp Holdings or Luxbet did get access to racing information via TAB, of which there is no evidence, it costs them nothing.  The entitlement under clause 2 is that of TAB alone.

Now, can I turn to another point made by Tabcorp in its outline of oral submissions.  The deed of release, in our submission, is relevant only as confirmation of the fact that a payment was made exactly equal to the race field fees.  That payment was made in compromise of a claim made by TAB, New South Wales TAB, that it ought not to be doubly burdened.  It does not matter whether that occurred because of perceptions, whatever the perceptions were.  But the fact is our concession that those matters occurred was no concession that there was in fact a breach of the RDA. 

We do not accept the breach for damages analysis.  There was supervening legislation.  The control bodies were empowered by the legislation to impose fees.  Acting under that legislation to impose fees, in our submission, would not amount to a breach, particularly in the face of clause 3.10 of the RDA, which appears at page 697.  There was no breach by reason of the exercise of regulatory functions. 

All these matters, in our submission, are really beside the point.  The fact is that because of the RDA, and one does not need to go further than that, the taxing authority, the control bodies, in a position of conflict, turned the fees around and paid them to TAB.  That is as far as one needs to go.  The deed of release is dealt with in our reply submission.

There is one other point that Mr Sheahan made, relevantly, to the RDA.  It is paragraph 6 of his outline.  Mr Sheahan submitted that there was a compromise only in relation to the 2008/2009 period and not the following year.  The judge made a finding to the contrary at 2729 in paragraph 66(g).  The document relating to the template for the next financial year is at volume 7, 2485.

Mr Walker also referred to contracts, arrangements or understandings in paragraph 1.a.  We have dealt with that in our written submission.  There was, in our submission, no concession of the kind indicated by the Full Court but, as I indicated in‑chief, that matter is not required for the arguments we have advanced.

There is one final matter.  It relates to a question that Justice Gummow asked of me in-chief.  It is not by way of reply.  I only want to give a reference, your Honour.  Your Honour asked me about Armstrong.  Armstrong concluded that the charge for the use of roads is not necessarily inconsistent with section 92 unless it singles out and discriminates against interstate traders. The references are in Armstrong 99 CLR 28. It is Sir Owen Dixon at pages 46 to 47 and Justice Williams at page 65.

GUMMOW J:   I think there was some reference in some of the oral submissions this morning, not identifying Armstrong by name, but saying that there was a notion of user pay involved here.  I think it might have been South Australia actually.  Yes, I think it is South Australia at paragraph 13.

MR YOUNG:   Yes, but, your Honour, the answer I gave in-chief was supported by these references, that is, we are concerned with discriminatory impost, not the earlier proposition of can you make people pay for the use of a road or for the use of a product.  The question is the next step that Sir Owen Dixon and Justice Williams addressed, that is, that you cannot do that if you do it in a way that singles out or discriminates against the interstate trader.  That is the sense in which, in my submission, the discussion in Armstrong is most relevant.  If it please the Court, those are our submissions.

FRENCH CJ:   Yes, thank you, Mr Young.

MR GLEESON:   Your Honours, in Betfair, could I make two applications.  One is seven days to respond to the two documents handed up this afternoon and the second is for leave to hand up a one‑page document identifying four matters which are outside the appeal but which were dealt with in this morning’s reply submission.

FRENCH CJ:   Yes, we will have a look at the document.  You have seven days to respond to the documents handed up.

MR GLEESON:   Thank you, your Honour.

MR YOUNG:   Your Honour, I have just seen this now.  We disagree with it entirely.

FRENCH CJ:   Right.  Well, give us a note within seven days, please.

MR YOUNG:   Yes, if your Honour please.

FRENCH CJ:   Thank you.  The Court will reserve its decision.  The Court adjourns to 9.30 tomorrow morning in Sydney and 9.30 tomorrow morning in Melbourne.

AT 3.28 PM THE MATTER WAS ADJOURNED