Sportodds Systems Pty Ltd v State of New South Wales

[2004] HCATrans 464

[2004] HCATrans 464

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S573 of 2003

B e t w e e n -

SPORTODDS SYSTEMS PTY LIMITED

Applicant

and

STATE OF NEW SOUTH WALES

Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 NOVEMBER 2004, AT 9.32 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   May it please Your Honours, I appear with my learned friend, MR M.K. CONDON, for the applicant.  (instructed by Coudert Brothers)

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:If the Court pleases, I appear with my learned friend, MR J.K. KIRK, for the respondent.  (instructed by Crown Solicitor’s Office (New South Wales))

GLEESON CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, may I address my remarks primarily to the point that might be called the severability point. This raises the issue of how provisions such as section 31 of the Interpretation Act 1987 of New South Wales, which is verbally similar to section 15A of the Acts Interpretation Act of the Commonwealth, but operates from a different constitutional foundation when there has been invalidation of an important part of a scheme.

The point between the parties is, and with respect to the draftsman of the submission, very neatly thrown up by the submission of the respondents in this Court, paragraph 3.6 on page 83 of the application book.  That is a fair paraphrase of the complaint which, in our submission, justifies the grant of special leave in our favour.

Under the scheme, as your Honours appreciate, bookmakers or would be bookmakers in a class of which my client is a member, were, in effect, prohibited from ever being able to achieve the status of being licensed in New South Wales, which status was necessary in turn for it to enjoy the exemption referred to in that paragraph, from very serious prohibitions on trade, including in particular, advertising and the location where one could trade.

GLEESON CJ:   Well, in substance, the parts that you challenge represent a scheme of regulation of off-course betting, do they not?

MR WALKER:   Yes, they do, and it discriminated in the way that was upheld in our favour so as to invalidate certain provisions of the control Acts.

GLEESON CJ:   But the provisions that were left standing by the Federal Court regulate off-course betting by people who are residents of Darwin and people who are residents of Parramatta.

MR WALKER:   Unquestionably.  May I concentrate on the severability point before introducing the free trade point.  Furthermore, unquestionably, as the respondent has repeatedly pointed out, most recently in this Court, the cardinal elements of that scheme are by no means novel; they have been around for a long time, in fact unchanged, the particular provisions since 1938, but there was a history before then as well.

However, in terms of the scheme for the control of who may be licenced and who, being licenced, may then perform certain actions which are otherwise generally prohibited by laws of the kind that your Honour the Chief Justice has described, there was an invalidation of that which would prevent us from gaining a licence, and they will - what might be called the out of State criteria which were held to be discriminatory in a protectionist sense.

That did have the effect that a scheme which was explicitly interlocked because the Racing Administration Act relevant provisions where we failed to invalidate, themselves refer to the concept of licencing which themselves expressly picks up the control Acts where we did succeed in some invalidation.  That scheme, explicitly interlocking, was one which when finally enacted, that is, when it had assumed by the patchwork accretion and subtraction over the years of parliamentary fiat, of parliamentary decision, had reached the stage where people in my client’s class were singled out, never to obtain the benefit.  There was a red light.

By reason of the invalidation in which we succeeded, the red light turned green.  In our submission, pausing there, it would be impossible to see the turn of a red light to a green light as according with the approach most famously articulated by Sir John Latham in Pidoto, namely, that in determining how much must go in the surgery required by invalidating characteristics, severance so‑called, one asks along the way out of deference to the legislative function discharged by Parliament policy choices and the delimitation of legal authority function exercised by the court’s invalidation, one asks along the way, “Am I left after the surgery, as reticent as the defendant or respondent seeks, am I left with something that can be said in the eyes of the judge, that is, without making judicial policy decisions, am I left with something that represents fairly the intended policy and operation of the statute, making allowance for what has to be removed as being invalid?”

The special leave point here obviously involves close attention to the State constitutional foundations of this as opposed to what might be a different position under the strictures imposed by Chapter III in the Commonwealth Constitution, but there is nonetheless no doubt but that it is for the Parliament of New South Wales, the two Houses and the Crown, to make the laws by way of enacted policy decisions and not the judges.

One question which justifies special leave is whether section 31 of the Interpretation Act, is to be construed in a quasi-constitutional sense, as having handed within the ambit of its operation, a measure of legislative choice to the judges.  Why I say legislative choice is that if one abandons a Pidoto approach which is implicit but certainly not explicit in the reasons of the Full Court, if one abandons it, then you are left with a choice more or less frankly as a matter of policy, by which the judge or judges try to mirror what they can gather, probably from travaux preparatoire as well as from the unsuccessfully enacted text, as to what would have been Parliament’s policy choice.  Worse still, that becomes effectively what would have been the Government’s policy choice, where fallbacks have not been provided. 

In our submission, why this case deserves special leave is that the enterprise of legislating in a federation with at least two layers of potentially invalidating strictures upon law making at the State level, that is, the State Constitution plus the Commonwealth Constitution, it is of the highest importance that the basic tool in the judge’s toolkit, namely, section 31 of the Interpretation Act which is designed to prevent all schemes being swept away, be properly understood.

In our submission, it has not been understood in this case in a way that enables one to say the judges are not making policy decisions.  The facts of this case and the actual result of this case provide an admirable vehicle to test that proposition because, as I say, it has turned a red light into a green light, and so there is no subtle gradation by which one can say this is just a matter of degree as to the move along the severability spectrum to where there might be a frank policy choice by a judge, far from it.  Here is the clearest example possible of Parliament having said, “I intend a red light for these people from out of State”, and the court says by removing those particular provisions which would prevent those people from being licenced, that red light has turned green.  Now that simply does not survive the Pidoto question at all and it raises what would be the fallback.

That is why 3.6 in our learned friend’s written submissions puts the point, with respect, very nicely because they ask, rhetorically, what does one say about an argument where, having pointed out that Parliament did not intend traders such as my client to enjoy the exemptions, now we have the position that Parliament must, instead have intended, they say scornfully against our argument, that nobody be subject to the requirements of Part 4.

Now that, in our submission, is simply not the correct question to ask in the dialectic between courts and Parliaments when invalidation is afoot.  The law or laws in this case because of the explicit and interlocking scheme, the laws are not immovable or unchanging.  The very emergence of the scheme in this case shows exactly how dynamic it is. 

When the court says to Parliament, you have gone too far, you cannot do what you have done, you cannot single out people like Sportodds and say that they cannot come to enjoy the exemption from what would otherwise be a prohibition generally applying, it is not a matter of us saying that means the Court should leave, as it were, as the declared policy of Parliament, that nobody should be subject to the general prohibition, rather, that the court destroys by invalidation that which has to be destroyed in order to reflect what has been identified as the vice.

McHUGH J:   But what you are trying to do is to use the 2002 amendments to destroy provisions that have been there since 1938.

MR WALKER:   To destroy them so that they can no doubt be remade properly, so that Parliament will make the policy choices about how far to go rather than the court will devise ‑ ‑ ‑

McHUGH J:   But the Court only applied the blue pencil rule.

MR WALKER:   There is more than the blue pencil rule because the blue pencil rule, for example, cannot be used to turn a contract from a $100 to a $1,000 contract because the judges think that is what the parties would have agreed.  Applied in the legislative sphere, you cannot use the blue pencil to say, this is a case of a red light to such traders, we are going to turn it into a green light for such traders and tell ourselves along the way that that does not offend Pidoto.  In our submission, it is completely inconsistent with this notion of trying to preserve, by severance, only that which one can see from the enacted text, and it must be from including the unsuccessfully enacted text, what the intended policy and operation was. 

When the intended policy and operation has at its heart as it had here, something which was beyond power, it is not for the courts, in our submission, to devise their own policy fallback given that there will be a range of choices, a spectrum of fallback that would have been available to Parliament.

Your Honour Justice McHugh has fairly, if harshly, characterised what we did.  We did not disguise what we were doing.  The 2002 amendment completed a scheme which had as its aim something which we have succeeded in showing was invalid.  That aim, once invalidated, left the question, would Parliament have desired to make no amendments?  Would Parliament have desired to make different amendments?

McHUGH J:   But your argument seems to come to this, does it not, that because Parliament wrongly intended to limit new entrants to gain exemption, therefore everybody should be exempt.

MR WALKER:   No, it is true, and that is why I have gone to 3.6 because it is a powerful argument against us.  It is true that that is the ostensible initial effect of our success on a severance argument, that is true.

McHUGH J:   That would be a very strange result, that as a result ‑ ‑ ‑

MR WALKER:   I do not suggest for a moment that that would satisfy Pidoto, for example.  That would be as absurd, and this is the – if I have any strength to the argument this is it - that would be as absurd as saying, let us just turn the red light green.

GLEESON CJ:   But your argument has the tail wagging the dog, does it not?

MR WALKER:   Yes, but this is a tail that completed the dog.  Without the tail, the dog just was not the same dog at all.  The 2002 amendments are undoubtedly the most recent, they are the end of the exercise, they are the tail, and our Honour is aware that it is no longer the fashion simply to cut the tails off dogs and say they are the same dog or that nothing serious has been done to the dog. 

This is a scheme which said out of State traders, perceived as your Honours know from the admitted travaux preparatoire, the extrinsic materials, perceived to be in a protectionist sense, a threat to the interstate traders.  This completed a scheme of which the relevant Minister boasted when introducing among other things, the provisions which the Federal Court has struck down as invalid.

GLEESON CJ:   But it is a little difficult, is it not, to regard as in any sense integral to a scheme of regulation of off-course betting, a prohibition on giving licences to people who are not resident in New South Wales?

MR WALKER:   Your Honour, we would contest that.  The Full Court, with respect, identified that once upon a time these systems of regulation may have been seen as what I think is now called harm minimisation, that is, in a milieu of general disapproval of activity called gambling, but an acceptance that it would occur nonetheless, an attempt to corral and control its effects, a bit like that which led alcoholic regulation to be called the licences reduction schemes, et cetera.

But as the Full Court pointed out, times had clearly moved on, and far from being a disapprovable or disapproved activity, it was instead a cosseted and milked industry.  Very important for employment, very important for revenue, and one sees that from the identification of mischief in the Minister’s second reading speech upon which we successfully relied.

In our submission, it is now impossible therefore, to say that singling out people who would compete more effectively, ex hypothesi, that must be why they fear us, singling out them to be prohibited is integral to the scheme by which the New South Wales Parliament intends, for example, to protect the New South Wales industry.

McHUGH J:   How do you distinguish this case from a case like Miller v TCN which concerned a licensing scheme and in which certain provisions were invalid, and yet the rest of the scheme stood?  Why is that any different from this case?

MR WALKER:   In general shape, of course, the problem presented to the Court is exactly the same, but you do not have a category just made up of licensing cases.  It is any case presents the same problem, what do you do when some provisions are unquestionably invalid and must go and you are left with something which, as always, will operate differently from what would have been the scheme had there been no invalid provision.

Now, there is clearly a tension between provisions such as 31 which command reticence and an approach such as Pidoto which commands deference to the legislative function of Parliament, and takes from the judges illegitimate policy choices. In our submission, that is the issue that is worthy of special leave in this case. There will be no single authority of judicial attention to a legislative scheme or a complex licencing program which will dictate the outcome of what should have happened in this case. What is important in this case is, how does one apply provisions such as section 31 where the effect can be seen from this very case itself, to have the striking outcome that a red light had turned green. May it please your Honours.

GLEESON CJ:   Thank you.  We do not need to hear you, Mr Solicitor. 

The Court is of the view that there are insufficient reasons to doubt the correctness of the decision of the Full Court of the Federal Court to warrant a grant of special leave to appeal.  Further, as the Full Court pointed out, having regard to the status of the evidence in the case, the case is an unsuitable vehicle for the resolution of some of the issues that the applicant would wish to agitate.  For those reasons, the application is refused with costs. 

AT 9.51 AM THE MATTER WAS CONCLUDED