Sportsbet Pty Ltd v New South Wales
[2010] FCA 604
•16 June 2010
FEDERAL COURT OF AUSTRALIA
Sportsbet Pty Ltd v New South Wales [2010] FCA 604
Citation: Sportsbet Pty Ltd v New South Wales [2010] FCA 604 Parties: SPORTSBET PTY LTD v STATE OF NEW SOUTH WALES, RACING NEW SOUTH WALES and HARNESS RACING NEW SOUTH WALES File number(s): NSD 1821 of 2008 Judges: PERRAM J Date of judgment: 16 June 2010 Catchwords: CONSTITUTIONAL LAW – Freedom of interstate trade – New South Wales law authorising imposition of licence condition requiring fee to be paid to New South Wales racing control bodies – Racing control bodies impose fee condition on all wagering operators regardless of the State or Territory of operation – Racing control bodies put in place exemptions and subsidies reducing number of New South Wales wagering operators economically exposed to fee to negligible number – Whether the fee condition, subsidies and exemptions inseverable aspects of single measure – Whether fee effectively only borne by interstate traders
CONSTITUTIONAL LAW – Inconsistency of laws – s 49 of Northern Territory (Self-Government) Act 1978 (Cth) requires trade, commerce and intercourse between the North Territory and a State to be free – New South Wales law prohibits racing control bodies from imposing fee on wagering operators which interferes with freedom of trade between New South Wales and the Territory – Racing control bodies impose such a fee – Whether conduct contravenes s 49
Legislation: Authorised Betting Operations Act 2000 (SA) s 34
Betting Control Act 1954 (WA) s 11C
Betting Tax Act 2001 (NSW) ss 8, 9
Commonwealth of Australia Constitution Act 1900 (63 & 64 Vic) (Imp) Cl V
Constitution ss 92, 109
Evidence Act 1995 (Cth) ss 140, 144
Federal Court of Australia Act 1976 (Cth) ss 50, 51A
Gaming Control Act 1993 (Tas) s 76C
Harness Racing Act 2002 (NSW) s 6
Harness Racing Act 2009 (NSW) ss 4, 5, 6, 7
Interpretation Act 1987 (NSW) ss 31, 35
Northern Territory (Self-Government) Act 1978 (Cth) s 49
Racing Act 2002 (Qld) s 202
Racing Administration Act 1998 (NSW) ss 4, 5, 16, 19, 27, 32A, 33, 33A
Racing Administration Amendment Act 2006 (NSW)
Racing Administration Amendment Act 2008 (NSW) Sch 1[11], 2[10]
Racing Administration Regulation 2005 (NSW) Prt 3; rs 14, 16, 25
Racing Administration Amendment (Publication of Race Fields) Regulation 2008 (NSW)
Racing Administration Amendment (Race Field Publications Approvals) Regulation 2008 (NSW)
Racing and Betting Act 1989 (NT) s 89
Race and Sports Betting Act 2001 (ACT) s 25
Recovery of Imposts Act 1963 (NSW) s 4
Thoroughbred Racing Act 1996 (NSW) Prt 2A; ss 4, 5, 6, 7, 10, 14A, 29, 29M
Thoroughbred Racing Amendment Act 2008 (NSW) Sch 1[3]
Thoroughbred Racing Further Amendment Act 2008 (NSW) Sch 1[2]
Trade Practices Act 1974 (Cth) Prt IV
Totalizator Act 1997 (NSW) ss 13, 17, 17A, 21A, 43A
Uniform Civil Procedure Rules 2005 (NSW) Sch 5
Unlawful Gambling Act 1998 (NSW) s 8Cases cited: Air Caledonie International v Commonwealth (1988) 165 CLR 462 cited
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 cited
Armco Inc v Hardesty 467 US 638 (1984) cited
Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 applied
Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 applied
Betfair Pty Ltd v Racing New South Wales [2010] FCA 603 cited
Betfair Pty Ltd v Racing New South Wales (No 1) [2009] FCA 111 cited
Boardman v Duddington (1959) 104 CLR 456 not followed
Browns Transport Pty Ltd v Kropp (1958) 100 CLR 117 cited
Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 applied
Cole v Whitfield (1988) 165 CLR 360 applied
Cross v Barnes Towing and Salvage (Qld) Pty Ltd (2005) 65 NSWLR 331 cited
Ex parte McLean (1930) 43 CLR 472 cited
Fox v Robbins (1909) 8 CLR 115 cited
Fulton Corp v Faulkner 516 US 325 (1996) cited
Hinson v Lott 75 US (8 Wallace) 148 (1868) cited
Maryland v Louisiana 451 US 725 (1981) cited
Mason v New South Wales (1959) 102 CLR 108 cited
Namol Pty Ltd v A W Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388 applied
Oregon Waste Systems Inc v Department of Environmental Quality of Oregon 511 US 93 (1994) cited
Peters v Attorney-General (New South Wales) (1988) 16 NSWLR 24 applied
Sportodds System Pty Ltd v State of New South Wales (2003) 133 FCR 63 cited
TAB Ltd v Racing Victoria Ltd [2009] VSC 338 cited
Tom & Bill Waterhouse Pty Ltd v Racing New South Wales (2008) 72 NSWLR 577 cited
Tyler Pipe Industries Inc v Washington State Department of Revenue 483 US 232 (1987) citedTexts cited: L H Tribe, American Constitutional Law (3rd ed, 2000)
W Hellerstein, “Complementary Taxes as a Defense to Unconstitutional State Tax Discrimination” (1986) 39 Tax Lawyer 405Date of hearing: 4-5, 8-10, 12, 15-16 & 19 February 2010 Date of last submissions: 27 May 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 173 Counsel for the Applicant: Mr D M J Bennett QC with Mr T North SC, Mr A Tokley, Mr A Paterson and Mr P Nugent Solicitor for the Applicant: Fitzpatrick Legal Counsel for the First Respondent: Mr S B Lloyd SC with Ms A Mitchelmore Solicitor for the First Respondent: New South Wales Crown Solicitor's Office Counsel for the Second and Third Respondents: Mr J T Gleeson SC with Mr S A Kerr SC, Mr J Emmett and Mr S Robertson Solicitor for the Second and Third Respondents: Yeldham Price O'Brien Lusk
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1821 of 2008
BETWEEN: SPORTSBET PTY LTD
Applicant
AND: STATE OF NEW SOUTH WALES
First RespondentRACING NEW SOUTH WALES
Second RespondentHARNESS RACING NEW SOUTH WALES
Third Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
16 JUNE 2010
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Declare the approval granted by the second respondent to the applicant on 15 August 2008 to be invalid.
2.Judgment against the second respondent for $2,061,000 together with interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) to be calculated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005 (NSW).
3.Declare the approval granted by the third respondent to the applicant on 1 September 2008 to be invalid.
4.The application be otherwise dismissed
5.Vary all pre-existing orders made pursuant to s 50 of the Federal Court of AustraliaAct 1976 (Cth) to permit the publication of these reasons.
6.Stand over for further directions at 9.30am on 24 June 2010.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1821 of 2008
BETWEEN: SPORTSBET PTY LTD
Applicant
AND: STATE OF NEW SOUTH WALES
First RespondentRACING NEW SOUTH WALES
Second RespondentHARNESS RACING NEW SOUTH WALES
Third Respondent
JUDGE:
PERRAM J
DATE:
16 JUNE 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Introduction
The applicant, Sportsbet, is a bookmaker conducting business from the Northern Territory via the internet and the telephone. It takes bets from the public on, inter alia, the outcome of thoroughbred horse races and harness races conducted in New South Wales. The second and third respondents, Racing New South Wales (“RNSW”) and Harness Racing New South Wales (“HRNSW”) respectively, are the regulators of thoroughbred and harness racing in New South Wales. TAB Limited (“the TAB”) is the largest wagering operator in New South Wales. RNSW and HRNSW have imposed an impost of 1.5% of the total of all bets placed with any wagering operator on New South Wales thoroughbred and harness races. The fee is payable regardless of the domicile of the operator and, therefore, is payable by Sportsbet and the TAB. As these reasons will show RNSW and HRNSW have paid the impost raised from the TAB back to it and there is no reason to think that this practice is likely to cease in the future. A similar, but more complex, rebating arrangement has been reached with New South Wales on-course bookmakers. Sportsbet alleges that the 1.5% impost interferes with freedom of trade between New South Wales and the Northern Territory by placing a burden on interstate trade from which almost all New South Wales wagering operators are exempted, in substance, by the rebating of the impost. It claims that the impost, in such circumstances, is protectionist and infringes s 49 of the Northern Territory (Self-Government) Act 1978 (Cth) which provides:
Trade, commerce and intercourse between the Territory and the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.
Sportsbet’s contention is well-founded. The impost is a protectionist burden which discriminates against traders in the Northern Territory and is unlawful. The approvals issued by RNSW and HRNSW to Sportsbet subjecting it to a condition that it must pay the 1.5% impost are invalid and Sportsbet is entitled to a refund of the money it has paid under protest.
Sportsbet also pursued a claim against the State of New South Wales that the Act and Regulations authorising the imposition of the impost, which takes the form of a fee, were invalid. In fact, the fee was not authorised by those enactments. The unlawful conduct occurred at the level of its imposition by RNSW and HRNSW and not at the level of the legislation. The claim against the State of New South Wales is, therefore, to be dismissed.
These reasons are divided as follows:
I
Facts
………………………………………....
[5]
II
Law
………………………………………....
[106]
III
Other matters
………………………………………....
[152]
IV
The case against New South Wales
………………………………………....
[155]
V
Relief
………………………………………....
[157]
VI
Interlocutory matters
………………………………………....
[164]
I – Facts
Relevant Persons
Sportsbet is licensed by the Northern Territory Racing Commission as a sports bookmaker.It is licensed to engage in interstate trade and commerce between the Northern Territory and New South Wales when accepting wagers or bets over the telephone and the internet. Sportsbet’s wagering activities are under the regulatory supervision of the Northern Territory Racing Commission. Sportsbet engages in trade and commerce between the Northern Territory and the various States of Australia, including between the Northern Territory and the State of New South Wales. Sportsbet operates a call centre from its premises at the race track at Fannie Bay in Darwin. It operates 24 hours a day, seven days a week. In addition to accepting or taking wagers over the telephone it also takes bets placed through the internet. Sportsbet describes this as “online” betting.
Sportsbet offers “fixed odds” betting on thoroughbred and harness races occurring in New South Wales and elsewhere throughout Australia. Fixed price betting occurs when a bookmaker and a punter agree on the price or premium to be paid by the bookmaker in the event of a win by the punter at a time antecedent to the commencement of the event upon which the wager is placed. The expression is to be contrasted with totalizator betting where the winning punters take their prizes from a pool of all bets placed but from which the totalizator operator’s commission has first been deducted. It follows that with totalizator betting the actual price cannot be known until the outcome of the event is determined and with it the number of successful punters.
Viewed in that strict sense, I have no doubt that Sportsbet engages in fixed price betting. Sportsbet called one of its officers, a Mr Tyshing, and he was cross-examined about the various products offered by Sportsbet. That evidence disclosed that Sportsbet offers a number of fixed price products which, in effect, match the implied prevailing totalizator price at that time. There is more than one totalizator operating in this country and Sportsbet offers, as I discuss below, more than one such product. The practice of offering a fixed price product which matches totalizator prices is called “tote-matching”. Although the actual price payable on a totalizator cannot be known until the race is won it is nevertheless possible to see, at any given moment, what the current prices are which, in effect, are the prices which would apply if the race were run that very moment. The effect of Sportsbet’s tote-matching products is to allow a punter to place a fixed price bet at the then prevailing totalizator price. It my opinion, there is no doubt that this is fixed price betting albeit plainly intended to compete with totalizators. The cross-examination of Mr Tyshing showed that, at least in relation to harness racing in New South Wales, it was probable that the only fixed price product Sportsbet offered in that market was a totalizator matching product known as “HomeTAB”. Mr Tyshing also gave evidence that Sportsbet provided four price matching products known as “HomeTote”, “Unitab”, “Country Best” and “City Best Plus” on thoroughbred races. RNSW and HRNSW submitted that these totalizator matching products were not fixed odds betting. For the reasons which I have just given I reject that submission.
For completeness, I should note the Mr Tyshing is the chief financial officer and chief operating officer of Sportsbet. At paragraphs 40-43 of his affidavit Mr Tyshing gave an explanation of the business of a bookmaker. Mr Tyshing is not a bookmaker as he readily conceded. Indeed, his background is in accountancy. He has never been to a harness race. His cross-examination demonstrated that Mr Tyshing had obtained his account of the business of a bookmaker from the online encyclopaedia at (“Wikipedia”). The ensuing line of questions from Mr Gleeson SC, who appeared on behalf of RNSW and HRNSW, resulted in Mr Tyshing “recanting” from those paragraphs. I attach little significance to this either as a matter going to Mr Tyshing’s credit or as a matter of substance. As to the former, it is undoubtedly to be regretted that Mr Tyshing did not explain in his affidavit that he had obtained the information from Wikipedia. But the material was not in any way controversial and I do not think that Mr Tyshing was seeking to mislead anybody. Nor do I think that the fact that he was prepared to “recant” from those paragraphs reflected adversely on his credit. This is because, first, the word “recant” was suggested by me as an alternative question to be asked when Mr Bennett QC, who appeared on behalf of Sportsbet, objected to Mr Tyshing being asked whether he withdrew paragraphs 40 to 43 on the basis that a witness could not withdraw a paragraph of an affidavit. I suggested the word “recant” and Mr Gleeson SC adopted it as his question. It has an inquisitorial air about it which I do not think accurately reflected the nature of Mr Tyshing’s evidence. Secondly, it was to Mr Tyshing’s credit that he was willing, in the face of the obvious no doubt, to admit that the paragraphs were not his.
Sportsbet provides the same sorts of services as those offered by New South Wales licensed bookmakers including the TAB. Whilst it is true that Mr Tyshing accepted that Sportsbet only offered the HomeTAB product on harness racing that evidence, in fairness, has to be read in light of his other statement given in cross-examination:
Does your company offer any other wagering product on New South Wales harness racing? - - - I am not the bookmaking representative of the company, so I can’t answer that question.
RNSW is a body corporate established by s 4 of the Thoroughbred Racing Act 1996 (NSW). It is the controlling body for thoroughbred horse racing, other than harness racing, in NSW pursuant to s 4 of the Racing Administration Act 1998 (NSW). Prior to the commencement of the Thoroughbred Racing Amendment Act 2008 (NSW) the board of RNSW was a nominee board whose members were nominated by industry participants, for example, the Sydney Turf Club (“STC”), the Australian Jockey Club (“AJC”) and the owners and breeders of thoroughbred race horses. The insertion of s 6 into the Thoroughbred Racing Act 1996 by Schedule 1[3] of the Thoroughbred Racing Amendment Act 2008 and the later amendments contained in Schedule 1[2] of the Thoroughbred Racing Further Amendment Act 2008 (NSW) had the effect that the board was to consist of a chief executive officer together with five persons appointed by the Minister on the recommendation of a selection panel which, by s 7, was to be appointed by the Minister. Section 5 of the Act provides that RNSW is to be independent of the government. This statement, however, has to be read in light of the facts that its membership is indirectly controlled by the Minister through his appointments to the selection panel, the remuneration of its members is under the control of the Statutory and Other Offices Remuneration Tribunal (s 10), a number of its decisions are susceptible to appeal to the New South Wales Administrative Decisions Tribunal (s 29M) and an annual report must be prepared for the Minister who is to table it before both Houses of Parliament (s 29). Whilst, therefore, I accept that RNSW is independent of direct control by the executive government of New South Wales I do not accept that it is not part of the State of New South Wales. Its correct characterisation is that of an independent statutory authority. Consistent with that conclusion is the conference upon it of a series of regulatory functions by Part 2A of the Thoroughbred Racing Act1996 including, for example, the control, supervision and regulation of horse racing.
HRNSW is a body corporate established by s 4 of the Harness Racing Act 2009 (NSW). It is a continuation of the body formerly constituted by s 6 of the Harness Racing Act 2002 (NSW). It is the controlling body for harness racing in New South Wales pursuant to s 4 of the Racing Administration Act 1998. Its structure and function is not relevantly different to that of RNSW; that is, it is said to be independent of the State (s 5) but its members are appointed by the Minister pursuant to s 6 of the Harness Racing Act 2009 on the recommendation of a selection panel also appointed by the Minister (s 7). HRNSW is given the functions of controlling, supervising and regulating harness racing in New South Wales. As in the case of RNSW, I conclude that HRNSW is an emanation of the State of New South Wales although it does not represent that State. In effect, it is an independent statutory authority with regulatory functions and powers.
Prior to 1998 the State of New South Wales conducted an off-course totalizator on New South Wales racing events through the then Totalizator Agency Board. In 1998 this aspect of the State was privatised and became the TAB. Under the privatisation arrangements it presently has an entitlement to conduct an off-course totalizator on New South Wales racing events until 6 March 2097. Further, the licence to conduct that off-course totalizator is sole and exclusive until 2013, a fact reflected in the substantial price paid by the TAB for that monopoly.Although race clubs are permitted to operate their own on-course totalizators, when they do so on an event upon which the TAB is operating its totalizator they are obliged to act as the TAB’s agent: s 17(3) Totalizator Act 1997 (NSW). Thus, when it chooses to do so the TAB’s totalizator is the only totalizator authorised under New South Wales law to operate whether on-course or off-course. The TAB takes bets through its various retail outlets, via the internet and telephone. It is permitted, when in receipt of an appropriate ministerial approval, to accept bets on other sporting events too: s 13 Totalizator Act 1997. The TAB has a complex relationship with RNSW and HRNSW to which I return below. For present purposes, that relationship may be summarised by observing that the industry and the TAB are involved in what might be called a symbiosis. The industry provides the spectacle of races and the TAB operates its totalizator on those races. The TAB and the industry then share the ensuing revenues.
The wagering turnover of the TAB in 2008/09 was in excess of $3.3 billion. Unsurprisingly, it is the dominant operator in New South Wales accounting for 95% of the total amount wagered by domestic and international customers on NSW thoroughbred, harness and greyhound racing in the three years to July 2008. This was submitted on HRNSW’s behalf to the Cameron Commission of Inquiry into wagering in New South Wales by means of a report prepared on its behalf by BIS Shrapnel Pty Ltd. I see no reason not to accept the veracity of its contents.
The TAB is presently a wholly owned subsidiary of a publicly listed company known as Tabcorp Holdings Limited. That entity itself operates a similar totalizator business in Victoria together with a large number of other gambling interests which are not presently material.
Wagering operators and wagering market
New South Wales has a long tradition of bookmaking. Presently a bookmaker must be a natural person or a proprietary company: s 14A Thoroughbred Racing Act 1996. Bookmakers may take bets from the public but only whilst the bookmaker is physically situated at a racecourse or at a betting auditorium (which itself must be physically situated at a racecourse): s 16 Racing Administration Act 1998; s 8 Unlawful Gambling Act 1998 (NSW). If the bookmaker is appropriately approved he or she may also take bets on sporting events other than horse or hound racing: s 19 Racing Administration Act 1998. However, this business, like ordinary bookmaking, must be conducted from a racecourse or a betting auditorium: s 8 Unlawful Gambling Act. If authorised by the Minister a bookmaker may take bets by telephone or over the internet but only so long as the bookmaker is at a racecourse and only whilst it is otherwise lawful to gamble: s 16 Racing Administration Act 1998, s 8 Unlawful Gambling Act 1998. Generally, this will be during the pendency of a race meeting or during the period when such a meeting could have been held but for its cancellation.
Bookmakers in New South Wales may also be corporations but only if they are proprietary companies and only if the directors and shareholders are themselves bookmakers or close relatives of bookmakers: s 14A Thoroughbred Racing Act 1996. Accordingly, the capital structure contemplated does not permit substantial equity investment by persons not involved in the racing industry.
It is lawful to place a bet in New South Wales with an interstate bookmaker so long as the bookmaker is authorised to carry out that activity under the law of his or her State: s 8(4)(b) Unlawful Gambling Act 1998. Most States provide for the licensing of corporate bookmakers: s 11C Betting Control Act 1954 (WA); s 34(2) Authorised Betting Operations Act 2000 (SA) and s 202 Racing Act 2002 (Qld); s 76C Gaming Control Act 1993 (Tas) which allows “persons” but with no specific reference to corporations. Importantly both the Northern Territory and the Australian Capital Territory permit corporate bookmakers: s 89 Racing and Betting Act 1989 (NT) and s 25 Race and Sports Betting Act 2001 (ACT). Provision is also made in each State and Territory for internet and telephone betting.
During the mid-1990s the Northern Territory and the Australia Capital Territory established different regimes for traditional or “stand-up” bookmakers fielding only at race meetings, on the one hand, and, on the other, corporate bookmakers licensed to operate seven days a week from a racecourse office. Sportsbet is one such bookmaker.
As already noted, Sportsbet offers fixed price betting on New South Wales racing events. For reasons I have already given, I include within that expression fixed price bets which are offered by Sportsbet at the same price then being offered on various totalizators around the country. Whilst such products may be seen as competing with totalizators they do so by offering that which totalizators cannot viz fixed prices. Contrary to the submission of RNSW and HRNSW it cannot be said that this is not fixed price betting.
Reference has already been made to totalizators operating in other States. Initially these were government controlled monopolies, all (with the exception of Western Australia) have now been privatised, all accept bets on interstate events and sports and all do so by telephone or internet.
It is then useful to say something of competition between Sportsbet, the TAB and other totalizators and bookmakers. One begins with the proposition that there is a national market for wagering services. So much was admitted by RNSW and HRNSW in their defence. There is also a national market for internet and telephone wagering as was recognised by the High Court in Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 480 [114] per Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ (hereafter “Betfair”). Within that market it is plain that Sportsbet is competing with the TAB and other interstate totalizators. This it does through its fixed price betting and, more particularly, through the offer of its various totalizator price matching products which I infer, at the risk of being obvious, are specifically designed to compete with totalizators.
I also accept that Sportsbet competes with New South Wales bookmakers. A report prepared by the Boston Consulting Group for RNSW concluded that the market share of the TAB and on-course bookmakers was being diminished by the activities of the interstate corporate bookmakers. Plainly Sportsbet competes with those on-course bookmakers who offer telephone or internet services. However, I also accept that it is likely to be competing directly with bookmakers at the track. There are those who, for one reason or another, would not want to go to the track to place a bet. There will be those also who, whilst being at the track, may choose nevertheless to place a bet online through a handheld device. I can by no means be persuaded that this competition is at the forefront of Sportsbet’s competitive endeavours but nor can it be said that the effect is de minimis either.
RNSW and HRNSW submitted that the conclusion should not be drawn that Sportsbet competed with on-course bookmakers at harness racing events. They pointed to Mr Tyshing’s answer that the only product offered by Sportsbet on New South Wales Harness racing was the tote matching product HomeTAB. In fairness, Mr Tyshing’s evidence has to be read in the light of his plain statement that he was not one of Sportsbet’s bookmakers and he truthfully was not aware of the actual position. He did, however, indicate that he thought that the product involved was the HomeTAB product.
The issue is to be resolved as best it can be. No party suggested that I should examine the website for myself. In any event, s 144 of the Evidence Act 1995 (Cth), whilst authorising a judge to acquire knowledge of matters of common knowledge, requires in the first instance either that the knowledge be common in the locality in which the proceeding is being held – here Sydney – or otherwise to be capable of verification by reference to a document the authority of which cannot be questioned. I do not think that the question of whether Sportsbet takes ordinary fixed price bets on New South Wales harness racing events is a matter of common knowledge, even in Sydney. Nor, even though I could easily check the website for myself, do I think that I can describe that website as a source which cannot reasonably be questioned. In those circumstances, it seems that I have little choice but to act on Mr Tyshing’s self-admittedly unreliable opinion that the HomeTAB product is the only one offered by Sportsbet on harness racing events.
Despite that, I have little difficulty concluding, contrary to the submissions of RNSW and HRNSW, that Sportsbet does compete with harness racing bookmakers. My reasons for this are thus: first, clearly insofar as the harness racing bookmakers are taking bets by internet or telephone they are in direct competition with Sportsbet. The HomeTAB product might be principally directed at totalizators but this does not mean that other operators are not affected as well. Secondly, for similar reasons to those I have already given in the case of thoroughbred bookmakers, I can readily see how a punter may choose to stay at home and bet with Sportsbet rather then make the arduous journey to Harold Park Paceway. Again, I do not imagine that such bookmakers are at the forefront of Sportsbet’s competitive endeavours but it would be unrealistic to think that there was no competitive effect at all.
The racing events upon which all of this wagering activity takes place occur at race meetings. As might be expected, race meetings too are regulated. It is an offence to hold a race meeting without a licence: s 5 Racing Administration Act 1998. A licence may be held only by a “non-proprietary association” which, in practice, means clubs and the like: s 4. They must be not-for-profit organisations and they must not pay dividends to their shareholders if they have any. Two well-known clubs are, of course, the AJC which is licensed to operate Randwick Racecourse and the STC which is licensed to operate Rose Hill Racecourse. It is upon the premises of such clubs that racing takes place and, of course, those who attend such meetings, including the public and bookmakers, are licensees of the clubs.
It is useful then to say something of the Gentleman’s Agreement. RNSW and HRNWS submitted that it was not relevant to Sportsbet’s case but I do not agree. The Gentleman’s Agreement is a misnomer for it is neither between gentlemen nor an agreement in the contractual sense. Rather, it is a political arrangement or understanding between the States and the Territories that wagering operators will only be required to pay taxes and levies in their State of operation even if the wagering activity takes place on events in other States.
The High Court summarised it this way in Betfair at 234 CLR at 470 [69]:
This acceptance by Western Australia of the licensing systems of the other States and Territories reflects what has been called the “Gentleman’s Agreement” between these polities. All wagering operations are free to accept bets on events held in any State or Territory, but each polity collects fees and taxes only from wagering operators which they have licensed.
The report of Mr Alan Cameron AM for the Minister for Gaming and Racing of 28 November 2008 noted that the effect of the Gentleman’s Agreement was that wagering turnover received by an individual State totalizator for an event occurring in another jurisdiction would be considered the turnover of the TAB accepting the bet for the purposes of calculating racing industry distributions. Unless all States had wagering markets of the same size this was likely to prove an unbalanced arrangement. The position of Sportsbet illustrates, from the industry’s perspective, that imbalance. A State or Territory with a small racing industry might support a large wagering industry operating principally on racing events in another larger State. The small State would be in a position to collect the revenue generated on interstate wagering in the larger State while the larger State, on whose events the money in question was wagered, would not.
With increasing internet and telephone betting this situation was only likely to break down. The present litigation arises from its collapse in New South Wales. From 1 July 2008 the New South Wales racing authorities – RNSW, HRNSW and the greyhound racing control body, GRNSW – have sought to impose a fee on any wagering operator anywhere in the world accepting or placing bets on New South Wales’ racing events. Further, the arrangements introducing that fee do not provide for any credit in respect of interstate taxes or fees which have been paid.
Prior to the privatisation of the Totalizator Agency Board, the racing industry in New South Wales was funded by the New South Wales government. The Board was converted upon privatisation into a company, the TAB, and all of its issued share capital sold. Under the privatisation arrangements it was granted the exclusive right to conduct the only off-course totalizator permitted in New South Wales. It paid substantial consideration for that right. The issue of the exclusive licence was accompanied, however, by a statutory obligation to enter into a satisfactory commercial arrangement with the New South Wales racing industry: s 21A Totalizator Act 1997. That section prevented the responsible minister from issuing the licence until provided first with a copy of the proposed arrangement and unless informed by the industry of its satisfaction with that arrangement.
Further, s 43A of the Totalizator Act1997 provides:
43A Additional conditions of TAB Limited licences
(1) It is a condition of every licence of TAB Limited that both TAB Limited and the nominated company must put in place and must give effect to such commercial arrangements (being arrangements that the racing industry has acknowledged in writing to the Minister are satisfactory to the racing industry) as the racing industry considers necessary to ensure that the racing industry is in no less favourable a position under the relevant arrangements in force under section 43(2) than it was under those arrangements as in force immediately before the nominated company was nominated.
(2) It is also a condition of every licence of TAB Limited that, if TAB Limited and the racing industry enter into new arrangements under section 43(2) on or after the date on which the nominated company was nominated, the nominated company must put in place and give effect to arrangements made by the nominated company and the racing industry for ensuring that the new arrangements, with respect to TAB Limited as licensee, are effectively carried out.
(3) If the nominated company is a company referred to in paragraph (c) of the definition of “nominated company” in section 37A(6) of the Totalizator Agency Board Privatisation Act 1997, subsections (1) and (2) apply as if the reference in those subsections to the nominated company were a reference to the ultimate holding company (within the meaning of the Corporations Act 2001 of the Commonwealth) of the nominated company.
(4) In this section:
“nominated” means nominated under section 37A(6) of the Totalizator Agency Board Privatisation Act 1997.
“the racing industry” has the same meaning as it has in section 43(2A).
Thus, the TAB is obliged by force of law to comply with the arrangements by reason of the licence conditions. Further, the Minister was also given the power to exempt any such arrangement from the operation of the Trade Practices Act 1974 (Cth): s 17A.
The Racing Distribution Agreement (“RDA”)
Satisfactory commercial arrangements were apparently in place by 11 December 1997. The original parties to the arrangement were TAB, RNSW, HRNSW, GRNSW and Racingcorp Pty Ltd (“Racingcorp”) or predecessors in title to those entities. Racingcorp (originally NSW Racing Pty Ltd) was appointed by the three industry body parties – RNSW, HRNSW and GRNSW – as their agent for the purposes of meeting their obligations and securing their entitlements under the RDA: Recital C of the RDA. The RDA is a long term arrangement. Because compliance with the RDA is a condition of the TAB’s totalizator licence the contractual nature of the agreement is of less moment than it might otherwise be. The RDA has four inter-related aspects which may be summarised shortly in this way. First, the racing industry through its industry bodies must provide the spectacle of New South Wales racing by staging a significant number of race meetings. Secondly, the TAB must make its off-course totalizator available for each such race mounted. Thirdly, the racing industry is to provide the names of the runners, the riders (if relevant), the starting draw and other such related information to the TAB for each race held. Fourthly, the TAB, in return, promises to pay the racing industry a substantial fee. The precise details of this are as follows.
As to spectacle, the racing authorities must prepare, at least five months in advance, the “New South Wales racing programme”: cl 5.2. The racing programme must include, at least, the minimum programme which is set out in Schedule A. The minimum programme is 491 galloping race meetings, 342 harness racing meetings and 593 greyhound meetings. Not only must the programme be prepared, it must also, as one might naturally expect, be staged: cl 5.8(a); and, if it is not staged the industry must compensate the TAB for the revenue lost thereby: cl 5.9. As for the TAB, it must operate its off-course totalizator on all events in the programme: cl 5.8(b); and, if it does not, it must pay compensation: cl 5.9. The industry must provide race fields information to the TAB so that it may operate its totalizator on the events which the industry must stage: cl 6.1. As for fees, the TAB must pay the industry pursuant to cls 9, 9B and 11AA a fixed product fee of at least $12 million, 21.9965% of its net wagering turnover (a term of some complexity but including revenue streams of the TAB coming from sports, i.e. not races) and a wagering incentive fee. In the year 2006/07 these fees amounted to $221 million.
Once this rich harvest from loosing punters has passed through the TAB and on to the industry it is split within the industry by an apparatus known as the “Intercode Agreement”. Under that instrument a complex sharing arrangement exists which, in its practical operation, has resulted in the revenues being divided such that, on average over several years, RNSW gets 72.3%, HRNSW 14.6% and GRNSW 13.1%. Further intracode agreements govern how the money is divided between racing clubs and the like.
Although the RDA contains a provision making plain that the parties are not in partnership with each other – cl 3.1 – they are plainly economically intertwined in a profound way. The commercial fortunes of the TAB directly affect the size of the very substantial fees earned by the industry through Racingcorp. Although from time to time in this litigation RNSW and HRNSW attempted to paint themselves as independent regulators concerned only to be even-handed I regard that as an untenable posture in light of the RDA.
Naturally, therefore, the migration of punters from the TAB to other wagering operators has the capacity to harm the TAB’s commercial interests. There seems to be little question that in the years leading up to 2008 just such a migration was taking place and, further, that it was affecting the revenues of the TAB. The BIS Shrapnel submission to the Cameron Commission of Inquiry, prepared on HRNSW’s behalf, contained these statements which were based on the firm’s own modelling:
[Wagering revenue] of Northern Territory on-course bookmakers will increase from an estimated $118 million (constant 2005/06 prices) in 2006/07 to $719 million (constant 2005/06 prices) by 2028, an increase of around $600 million over the next 20 years.
BIS Shrapnel concluded that the TAB could potentially lose in excess of $150 million in revenue (in real terms) to other online betting agencies over the next 10 years and over $200 million (in real terms) over the 2018 to 2028 period.
RNSW was also cognisant of the risk of a revenue drop for the TAB. A paper presented to its board on or around 21 November 2008 said:
A reduction in NSW TAB turnover in the order of 20% is possible over the next few years and, could be greater, particularly if there is further deregulation, no changes to NSW wagering tax and “tote-odds betting” by bookmakers continues to grow.
Intention
I below reach the conclusion that intention has no direct part to play in s 92 jurisprudence. A good portion of Sportsbet’s case was directed to seeking to demonstrate that the respondents’ actions were intentionally protectionist and I was, in the course of that endeavour, taken to a large volume of documentation by Sportsbet. The records of the respondents hold statements by many people about the loss of revenue from the TAB. Broadly speaking those concerns fall into two classes:
(a) statements that the revenue leakage away from the TAB needed to be staunched; and
(b)statements that the “free riders” on the New South Wales racing industry – I interpolate, the Northern Territory and the Australian Capital Territory corporate bookmakers – had to be made to pay their way.
Sportsbet seized on statements of the first kind to make good the mens rea of the perceived constitutional crime. The respondents, on the other hand, stressed the fairness – and, so it was put, constitutional propriety – of statements of the second.
I am by no means certain that the two motives are mutually exclusive. One might well imagine that the desire to prevent revenue leakage might be served by a wish to fetter the free riders who were the ultimate sinkhole into which the leaking revenue was draining. Further, it is entirely possible that different members of the constituent bodies might have held different understandings; some might have desired to plug the leak, in the general sense, while others might have desired to plug it by turning the flow around and returning it to New South Wales. Worse, the concepts in play are constitutional concepts and one can have little confidence that the jurisprudence underpinning s 92, with its particular emphasis on the notions of political economy inherent in protectionism, would have been at the forefront of the decision makers’ minds.
Nevertheless, to the extent that it might be relevant, I conclude that each of the State of New South Wales, RNSW and HRNSW intended to engage in discriminatory protectionism. Insofar as RNSW and HRNSW are concerned, I draw this conclusion because:
(a)their members either wished to prevent revenue leakage or to impose an equalising burden on free riders;
(b) an intention to prevent leakage away from a local trader to out-of-State traders is an intention to engage in conduct barred by the High Court’s decision in Fox v Robbins (1909) 8 CLR 115; and
(c)an intention to level the playing field and to ensure that the interstate free riders pay their way is also a protectionist intention. I discuss this further below. In short, whilst there is support in the United States’ authorities for the permissibility of State equalisation arrangements of the present kind, the decision of the High Court in Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 is emphatically against their validity in this country. In Australia, at least, a desire to level the playing field by imposing equal burdens on interstate free riders is an established species of protectionism.
Had it been necessary to decide whether RNSW and HRNSW intended to prevent revenue leakage or to catch free riders I would have preferred the former conclusion. The consequence of the RDA was to connect the commercial fortunes of the TAB to those of the racing industry. Revenue which migrated from the TAB, in a real sense, migrated from RNSW and HRNSW. Such bottom line concerns are much more likely to have been in contemplation by those running the industry than highminded worries that other people were not paying their share. I prefer this inference because it is more consistent with the commercial realities of the situation. Further, the problem of freeriders – at the level of principle – had not been a problem during the currency of the Gentleman’s Agreement. Every State had endured freeriders at that time. That rather suggests that the concern leading to the fee was not freeriding in the abstract but rather some other concern. The only other concern which makes any sense is the one suggested by following the flow of revenue, that is, the maintenance of the TAB’s revenues by protecting it from competition from interstate traders. I so conclude. I may more readily draw that inference where no witness was called for RNSW or HRNSW to give evidence about this matter.
In the case of New South Wales, I conclude from the Minister’s second reading speech on the introduction of the Racing Administration Amendment Act 2006 on 20 October 2006 that the State’s expressed concern was to address the problem of free riders all of whom, it was known, were interstate traders. For the reasons already given I would conclude, if it were relevant, that this was a protectionist purpose.
I was taken to a large number of other documents of the State’s such as notes of the drafting working parties and memoranda to ministers and the like to show the purpose of the State. I do not think that this material can throw light on Parliament’s intention since, so far as I can see, Parliament never saw any of it.
The problem of revenue leakage and the protectionist sentiment that that problem understandably engenders underscores the highly unsatisfactory situation in which the Parliament has placed RNSW and HRNSW. They are given regulatory functions by statute yet they are locked into a commercial arrangement with the largest operator which they regulate. The conferral on RNSW and HRNSW of a power to impose a fee on wagering operators in circumstances where they themselves have a substantial commercial interest in the largest operator in the market erects an unavoidable conflict of interest. It is almost impossible to understand how the members of the boards of these bodies can be expected safely to navigate the perilous shoals constituted by such a conflict. There can be little confidence in the instrumental capabilities of a system which puts a power of taxation in the hands of entities dependent substantially for their funding on the commercial fortunes of one of the taxpayers.
The Race Fields Fees
I turn then to the legislation. The provisions in question were original introduced into the Racing Administration Act1998 by the Racing Legislation Amendment Act 2006. It inserted, inter alia, a new Part IV, Division 3. It exhibited a familiar structure of prohibiting an activity, of lifting the prohibition under licence and of imposing fee obligations upon the issue of that licence. The present form of the prohibition is to be found in s 33:
33 Use of NSW race field information restricted
(1) A wagering operator or prescribed person must not use NSW race field information unless the wagering operator or person:
(a) is authorised to do so by a race field information use approval and complies with the conditions (if any) to which the approval is subject, or
(b)is authorised to do so by or under the regulations.
Maximum penalty:
(a) in the case of a corporation – 500 penalty units, or
(b) in any other case:
(i) for a first offence – 50 penalty units or imprisonment for 12 months (or both), and
(ii) for a second or subsequent offence – 100 penalty units or imprisonment for 2 years (or both).
(2) It is a defence to a prosecution for an offence against this section if a wagering operator proves that the use of NSW race field information:
(a) did not occur in connection with the making or accepting of a bet (or the offer to make or accept a bet), and
(b) did not occur in the course of the business of the wagering operator.
(3) In this section, “prescribed person” means a person (or a person belonging to a class of persons) prescribed by the regulations.
The expression “use NSW race field information” is defined in s 32A:
32A Meaning of “use NSW race field information”
For the purposes of this Division, a person “uses NSW race field information” only if the person, whether in Australia or elsewhere:
(a) publishes any NSW race field information, or
(b)communicates any NSW race field information to a person (regardless of whether the person already knew the information), or
(c) acknowledges or confirms any NSW race field information communicated to the person (including acknowledging or confirming the information by accepting, or facilitating the making of, a bet), or
(d) makes a written or electronic record (such as a betting ticket, statement of account or notice) that contains or refers to any NSW race field information (regardless of whether the record is communicated to any person), or
(e) uses any NSW race field information in a manner prescribed by the regulations, or
(f) causes any of the activities referred to in paragraphs (a) – ( e) to occur.
The expression “NSW race field information” is defined in s 27:
27 Definitions
…
“NSW race field information” means information that identifies, or is capable of identifying, the name or number of a horse or greyhound:
(a) as a horse or greyhound that has been nominated for, or is otherwise taking part in, an intended race to be held at any race meeting on a licensed racecourse in New South Wales, or
(b) as a horse or greyhound that has been scratched or withdrawn from an intended race to be held at any race meeting on a licensed racecourse in New South Wales.
The licensing provision is to be found in s 33A, which also empowers the relevant racing body to attach conditions to the approval to use NSW race field information:
33A Relevant racing control body may grant race field information use approvals
(1) The relevant racing control body in relation to an intended race (or class of races) to be held at any race meeting on a licensed racecourse in New South Wales may grant approval to a person to use NSW race field information (a “race field information use approval”) in respect of that race or class of races if the person has made an application for that approval under this Division.
(2) A relevant racing control body may (but need not) impose any of the following kinds of conditions on a race field information use approval that it grants:
(a) a condition that the holder of the approval pay a fee or a series of fees of an amount or amounts and in the manner specified in the approval (being a fee or fees imposed in accordance with any requirements prescribed by the regulations),
(b) such other conditions as may be specified in the approval (being conditions of a kind that are prescribed as permissible conditions by the regulations).
(3) Any fee that is payable under a race field information use approval is a debt due to the relevant racing control body that granted the approval and is recoverable as such in a court of competent jurisdiction.
(4) A relevant racing control body that grants a race field information use approval may, by written notice to the holder of the approval, cancel or vary the terms of the approval on any grounds prescribed by the regulations.
(5) If a relevant racing control body cancels or varies a race field information use approval, the body must provide the holder of the approval with written reasons indicating why the approval was cancelled or varied (as the case may be).
It will be noted that the Act does not indicate anything about the nature, quantum or calculation of the fee. This is left to the Regulations. What is plain, however, is that the Act does not contemplate that RNSW or HRNSW will provide the race fields information to the licence holder or that the State of New South Wales will. The fee paid is a fee for the right to use the information, not the right to acquire it. The statute does not seek to regulate the provision of goods or services by one group to another. Rather, it is in substance a franchise fee paid for the right to carry on a business, namely, that of a wagering operator. It is true that the provision is not so precisely expressed but, without such an approval, the business of a wagering operator simply cannot be conducted. Useful comparison may, I think, be made to the former retail tobacco franchise licence schemes considered, inter alia, in Bath v Alston Holdings 165 CLR 411. Under those arrangements one might be a tobacconist without a licence but one could not sell tobacco. Similarly, one may be a wagering operator on New South Wales races but, without an approval, one cannot take bets (scil: use New South Wales race fields information). It is not necessary to determine whether this franchise fee is a tax. Certainly it is a compulsory exaction of money not being a payment for services rendered: cf. Browns Transport Pty Ltd v Kropp (1958) 100 CLR 117 at 129 per Dixon CJ, McTiernan, Fullagar, Kitto, Taylor and Windeyer JJ; Air Caledonie International v Commonwealth (1998) 165 CLR 462 at 467 per Mason CJ, Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ. But it is probably also a fee for a privilege, namely, the privilege of using particular information the use of which would otherwise be criminal and this would usually be enough to deny it the quality of being a tax: Air Caledonie 165 CLR at 467.
As has already been mentioned the legislation was introduced by the Minister with the purpose of catching “free riders” as the second reading speech on 20 October 2006 shows. The relevant amendments commenced on 1 July 2008: see Commencement Proclamation 25 June 2008, New South Wales Government Gazette No 76, 27 June 2008 at p 5869. Many of the important factual conclusions I draw below happen near that date.
As initially implemented Part IV, Division 3 prohibited the “publication” of race fields information but a decision of Palmer J in Tom & Bill Waterhouse Pty Ltd v Racing New South Wales (2008) 72 NSWLR 577 established that that expression was not apt to describe certain features of telephone betting. Consequently, there was enacted, by means of Schedule 1[11] of the Racing Administration Amendment Act 2008 (NSW), provisions putting in place the present prohibition on “use”. These amendments commenced on 3 December 2008. The commencement of the criminal provisions was purportedly delayed by regulation until 1 September 2008: cl 25(1) Racing Administration Regulation 2005 (NSW).
As contemplated by s 33A(2) of the Act, regulations were proclaimed permitting the levy of a fee. This was achieved by the Racing Administration Amendment (Publication of Race Fields) Regulation 2008 (NSW), the Racing Administration Amendment (Race Field Publications Approvals) Regulation 2008 (NSW), and Schedule 2[10] of the Racing Administration Amendment Act 2008 (which was enacted to recognise the effect of the decision of Palmer J in Waterhouse v Racing New South Wales 72 NSWLR 577), all of which amended the Racing Regulation 2005. There was now a cl 16 as follows:
16 Fees for race field information use approvals: section 33A(2)(a)
(1) A relevant racing control body may impose a condition on an approval (in addition to any other condition relating to fees) that the holder of the approval must pay a fee to cover the cost of assessing the application for the approval.
(2) A relevant racing control body may impose a condition on an approval that the holder of the approval must pay the following fees:
(a) in relation to a use in Australia of NSW race field information made in the course of the wagering operations of a licensed wagering operator – a fee that does not exceed 1.5% of the holder’s wagering turnover that relates to the race (or class of races) covered by the approval plus any amount of GST payable in respect of the fee,
(b) in relation to any other use of NSW race field information – a fee determined by the relevant racing control body.
(3) In this clause, “GST” has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth.
Note: In granting race field information use approvals, and imposing conditions on those approvals, relevant racing control bodies are subject to section 92 of the Commonwealth Constitution (Trade within the Commonwealth to be free etc).
The expression “wagering turnover” was defined in cl 14:
14 Interpretation
(1)In this Part:
…
“wagering turnover”, in relation to a race or class of races, means the total amount of wagers made on the backers side of wagering transactions made in connection with that race or class of races.
The notation to cl 16 suggested (despite not technically being apart of the Act: s 35(2)(c) Interpretation Act 1987 (NSW)) that the fee condition could not be use to contravene s 92 of the Constitution. This is true in light of s 31 of the Interpretation Act 1987 which provides:
31 Acts and instruments to be construed so as not to exceed the legislative power of Parliament
(1) An Act or instrument shall be construed as operating to the full extent of, but so as not to exceed, the legislative power of Parliament.
(2) If any provision of an Act or instrument, or the application of any such provision to any person, subject-matter or circumstance, would, but for this section, be construed as being in excess of the legislative power of Parliament:
(a) it shall be a valid provision to the extent to which it is not in excess of that power, and
(b) the remainder of the Act or instrument, and the application of the provision to other persons, subject-matters or circumstances, shall not be affected.
(3) This section applies to an Act or instrument in addition to, and without limiting the effect of, any provision of the Act or instrument.
I reject the submission made by RNSW and HRNSW that s 31 cannot apply where invalidity is said to arise from s 109 of the Constitution. I do so for two reasons. First, s 31 is a provision designed with practical matters in mind. Its purpose is to preserve, so far as possible, the workability of State statutes. Although the better view is probably that a State law which encounters s 109 is not beyond State legislative power I nevertheless would not interpret s 31 as not applying to such situations unless no other alternative was available. But I see no particular difficulties with construing the expression “exceed the legislative power of Parliament” as including situations thrown up where a state law encounters a federal law under the steely gaze of s 109. Secondly, I am fortified in that conclusion by the comments of Mahoney JA in Peters v Attorney-General (New South Wales) (1988) 16 NSWLR 24 at 30 where a similar analysis was embraced.
The Introduction of the Fee by RNSW
One of the persons who was instrumental in the introduction of the fee was Mr Peter V’landys, the chief executive officer of RNSW. Mr V’landys, I infer, had a keen understanding of the constitutional niceties of the situation which the race fields fee potentially presented. On 10 June 2008 he received a carefully written memorandum from an RNSW employee, Mr Vance, in which the situation was described as follows:
Proposed “race fields” model
-Under the race fields legislation, the fees charged by a controlling body must comply with any requirements imposed under the regulations.
-The Minister obtained legal advice on the implications of the High Court decision in Betfair v WA on the NSW race fields legislation. That advice was to the effect that the race fields legislation should be permissible under section 92 of the Constitution provided any fees are neutral in form and practical impact as between NSW and inter-State wagering operators and as between different wagering operators. In light of that advice the Government indicated that the regulations will require the same rate of fees to be applied for all Australian wagering operators. The final terms of that regulation are still being drafted.
-As advised to the Board at the May 2008 meeting, it is proposed that the fees charged by Racing NSW under race fields be applied equally to all Australian wagering operators, irrespective of the type of betting they conduct, the distribution mechanism used or in which Australian jurisdiction they are licensed and that the fee be:
§ A fixed percentage of turnover – proposed at 1.5%;
§ Apply to all turnover of a wagering operator (taking corporate groups and associates as a single operator) on NSW race meetings above “fee free” threshold – proposed $5m.
(emphasis added)
I infer from this that Mr V’landys precisely understood the need not only for formal neutrality but also for neutrality as a matter of “practical impact”. I do so because this is what the memorandum says and because, as the chief executive officer, it is impossible to imagine that he was not acutely sensitive to the issue. Mr V’landys, it should be noted, did not give evidence before me.
The board too was aware of the necessity of ensuring that the fee be charged on a non-discriminatory basis. I draw that conclusion because Mr V’landys reported this to the board in a report dated 19 May 2008:
A preliminary draft of the regulations to implement the “race fields legislation” was provided to Racing NSW on a confidential basis on 9 May 2008. That document will be reviewed and an oral update provided at the Board meeting.
The critical issue from a commercial and “enforceability” perspective will be the structure and level of fee to be charged by Racing NSW.
In that context, to mitigate the potential for a Constitutional challenge it is critical that the fee be charged on a non-discriminatory basis.
…
The basis of charging now proposed will apply uniformly to all operators without any form of discrimination by jurisdiction of licence (within Australia), by type of operator, by bet type or by distribution mechanism.
(emphasis added)
I infer that each member of the board was well aware that it will be constitutionally impermissible – illegal – to impose the fee in a discriminatory manner. I note also that no member of the board gave evidence before me.
On 18 June 2008, that is before the legislation came into force, the board determined that it would impose a fee of 1.5% on turnover in excess of $5 million per annum on all wagering operators regardless of location. Formal conditions for the approvals had as yet not been agreed and this decision was at the level of principle. I return below to what the board knew and understood at that precise time. For present purposes, it may be observed that the Chairman voted against the resolution and explicitly asked that his dissent be noted.
On its face that decision was apparently neutral. However, its practical impacts were understood by Mr V’landys and the board not to be neutral. In summary, for reasons shortly to be given, RNSW had by 18 June 2008:
(a)reached an agreement, arrangement or understanding with the TAB that it would have refunded to it the full amount of the race fields fee it was obliged to pay under the terms of any approval granted to it;
(b)reached an agreement, arrangement or understanding with New South Wales on-course bookmakers such that the overwhelming majority of them would be insulated entirely from the effect of the fee by a combination of the operation of:
(i) the imposition of an apparently equal threshold of $5 million of turnover; and
(ii)a rebate to them constituted by a reduction in fees paid by them to racing clubs which would be paid for by RNSW out of the proceeds of the 1.5% fee;
(c)reached an agreement, arrangement or understanding with the racing clubs that they would reduce the levies imposed by them upon on-course bookmakers and, in return, RNSW would fund the ensuing reduction in their income out of the proceeds of the race fields fee.
It is useful to deal first with the agreement or understanding reached between RNSW and the TAB. There were a number of circumstantial matters pointing to the existence of this agreement, arrangement or understanding. The circumstances were as follows:
(a)Mr V’landys’ report to the board of 18 June 2008 included an analysis of the revenue impact that the fee would have. That analysis, in part, provided:
Wagering Operator Race fields revenue (based on FY07 turnover Comment NSW TAB (Net) 0 No net impact as any fees imposed under race fields would be offset by compensation required to be paid to NSW TAB by the racing industry under clause 8 of the RDA and under the Inter-Code Rcing [sic] NSW could carry the cost of compensation related to race fields fees on NSW thoroughbred. Interstate TABs
Victoria (TABCORP)0
Clause 8 of the RDA applies to all Australian wagering operations of TAB and its related body corporate (with limited exceptions not relevant to the Victorian operation). Position for Victoria is therefore the same as for NSW. UniTAB States (Qld, NT, SA) 7,875,000 Allocation of fees across the relevant States is $5.7m to Qld, $1.8m to SA and $0.4m to NT. Under the TAB privatisation agreements in those States, the full cost of these fees would not be incurred by UniTAB but rather by the Qld and SA racing industries. It is understood that there is some form of Government subsidy arrangement in NT which may insulate the NT racing industry from some or all of that impact. WA (RWWA) 2,500,000 As RWWA operates the TAB and controls racing in WA, these costs are ultimately bourn [sic] by the industry Tas 965,000 Burden of these costs between local racing industry, the respective TABs and Government is not clear as impacted by the statutory schemes. ACT 460,000
11,800,000
NSW Bookmakers (Net) -675,000 Assumes current club turnover fee removed on NSW racing events but retained on other racing. The introduction of a $5m threshold more than offsets the move from 1% to 1.5% of turnover for 95%+ of NSW bookmakers. Interstate “on-course” Bookmakers 0 Assumes similar turnover levels and patterns to NSW bookmakers so the turnover of traditional inter-State on-course bookmakers on NSW thoroughbred racing does not exceed the $5m threshold. Corporate Bookmakers 11,400,000 Based on FY07 racing turnover, with estimated proportion of turnover on NSW thoroughbred racing verified with corporate bookmakers’ representatives. Betting Exchanges 1,425,000 Based on $100m of “backers’ stakes”. “Lay”-side excluded. Total 23,950,000 (emphasis added)
It will be seen that nothing was expected to be raised from the TAB and the bookmakers looked to be better offer as a result of it.
(b)Clause 8 of the RDA required RNSW to provide race fields information to the TAB. A possible view – one apparently shared by Mr V’landys – was that this might impinge on the ability of RNSW to impose such a fee. His views appear in the table above.
(c)The TAB itself appears to have articulated the need for a 1.5-2.0% fee on turnover as early as November 2007. In a presentation which was tabled at a meeting of the business and strategy committee formed under the RDA, the following was put before the board of RNSW by Mr Nason of Tabcorp:
Ensure that all competitors pay a fair price for the racing products.
ØIntroduce a fee of 1.5-2.0% of turnover on all corporate bookmakers and betting exchanges who wish to publish NSW race fields. The charge should be the same irrespective of the operator’s betting model.
(d)I infer the minutes of that meeting, at which Mr V’landys was present, came to the notice of the board. That proposal, in substance, is the one which is now in place. As these reasons will show, the TAB does not pay the fee and only a tiny minority of New South Wales on-course bookmakers pay it either.
(e)The TAB and RNSW share through the RDA a common commercial interest in ensuring that the revenues of the TAB are protected.
(f)In fact, in 2008/09 RNSW refunded the fee paid to it by the TAB in full. It is true that it only refunded 50% of the fee paid by Tabcorp (the Victorian parent). However, the issues relating to the position of that company – which does not operate the New South Wales off-course totalizator – is quite different and, in particular, is complicated by the potential for Victorian race fields legislation. In relation to the company which does operate that totalizator – the TAB – the capitulation by RNSW was complete and discloses no element of compromise. That, of course, is consistent with Mr V’landys’ advice to the board that no fee would be recovered from the TAB. The actual sums refunded to the TAB were, in respect of RNSW $13,882,935, in respect of HRNSW $2,587,724 and for GRNSW, $3,354,950. It is true that cl 3(a)(5) of the accompanying Deed of Release says:
The Payment Amount is not a refund or return of any part of Applicable New South Wales Race Fields Fees.
However, there is no other conceivable explanation for why RNSW, HRNSW and GRNSW might give the TAB just under $20 million. I regard the statement in that clause as not according with the actual situation.
(g)This settlement between RNSW and TAB was likely to be repeated in the future. Mr V’landys referred to negotiations between himself and Mr Nason of Tabcorp and to the fact that Mr Nason regarded the Deed of Release as a “template” for the following year. So much appears in an email from Mr V’landys to Messrs Kennedy, Bulloch and Brown of 1 June 2009.
I accept that it is possible that the above matters could sustain the opposite inference to the one I am minded to draw. On this view, there is a substantial debate between the TAB and RNSW as to whether the fee has to be returned and what has occurred is not a refund but a compromise of a complex commercial dispute. On that view, the Deed of Release is precisely what it seems to be. There are difficulties with this view, however. There is a gulf between accepting the existence of the dispute contended for and Mr V’landys’ (and I infer the board’s) plain understanding that it was expected that $0 would be received from the TAB because of cl 8 of the RDA. I detect in the 18 June 2008 board paper simply no trace of the complex commercial dispute now contended for. So too, whilst it is possible that the fact that the fee structure, in its practical operation, is more or less as the TAB suggested in 2007 is an unfortunate coincidence, it seems to me to be more than a little passing strange. Nor do I think that that sense of strangeness or oddity is abated because the proposal itself predated the High Court’s decision in Betfair 234 CLR 418 for in its execution it seems not to have been affected by that decision.
It is also relevant to note that the conclusion that Sportsbet contends for involves, implicitly, the proposition that RNSW has engaged in behaviour to generate the appearance of having a commercial dispute when, in truth, one does not really exist. That implicit inference is properly to be regarded as a grave conclusion to which the provisions of s 140(2)(c) of the Evidence Act 1995 apply. The significance of that is, of course, the need to take account of the gravity of the conclusion in drawing the relevant inferences. I do so.
Be that as it may, I think it is likely – much more likely in fact – that the TAB and RNSW have an in principle understanding or arrangement that the TAB will have the race fields fee refunded to it. I can more comfortably draw that inference in circumstances where no witness has been produced by RNSW about the circumstances in which these payments were made and I do so.
I turn then to RNSW’s understanding of the position that the on-course bookmakers would be placed in. I infer that RNSW understood and intended that the vast majority of on-course bookmakers would not be economically affected by the imposition of the fee. In his report to the board of 19 May 2008 Mr V’landys said:
The principal changes relative to the previous proposal are:
…
the introduction of a uniform $5 million threshold for commencement of fees – the net impact of which is that most inter-state on-course bookmakers will pay no fees as the turnover of most of those bookmakers on NSW thoroughbred racing will not exceed the $5m threshold. …
However, by 10 June 2008 it was clear that this process of ensuring that the bookmakers were not affected would involve more than mere threshold setting. Mr Vance told Mr V’landys on that date in a memorandum:
NSW racing clubs’ bookmaker levies
Racing NSW’s fee structure is predicated on the assumption that NSW thoroughbred racing clubs will rebate or eliminate their turnover fee to NSW bookmakers who pay the race field levy to Racing NSW. This will require agreement with the clubs. It is understood that the clubs have indicated that they would agree to such a reduction but that agreement has not yet been documented.
The footnote attached to that passage says:
The reduction in clubs’ turnover-based fees may be one of the factors taken into account by Racing NSW in its proposed scheme of distribution of revenue from race fields fees. The reduction in clubs’ turnover based fees for NSW bookmakers in association with the introduction of race fields fees could be argued by persons seeking to challenge Racing NSW’s race fields fee structure to result in more favourable treatment for NSW bookmakers than for certain inter-State wagering operators. It is however understood that Racing NSW considers that any incremental legal risk associated with that element of the proposed structure is offset by commercial considerations (including administration of the race fields regime and other commercial considerations).
(emphasis added)
The reference to administration is to be noted; below I conclude that any attempts to justify the thresholds by reference to administration cost are untenable.
On 10 June 2008 Mr V’landys met with representatives of the AJC, the STC, the Provincial Association of NSW and Racing NSW Country. He indicated to that meeting, according to draft minutes:
Mr V’landys provided the delegates with an overview of the proposed Race Field Legislation and an update on the status of the proposed regulations under that legislation.
…
It was also pointed out that as the scheme would involve Racing NSW imposing a levy on NSW bookmakers it would be necessary for the race clubs to remove the fee they currently levy on bookmakers operating on NSW racing events. No change will be necessary for fees levied by clubs on interstate meeting turnover.
This might suggest an anticipation that an agreement would be reached with the race clubs that they would reduce their levies to diminish or extinguish the effects of the fee. The board was informed, on 18 June 2008, that such an arrangement had been reached with the clubs. Mr V’landys’ report of that day (apparently copied from Mr Vance’s note) said:
NSW racing clubs’ bookmakers levies
-Racing NSW’s fee structure is predicated on the assumption that NSW thoroughbred racing clubs will rebate or eliminate their turnover fee to NSW bookmakers who pay the race field levy to Racing NSW. This will require agreement with the clubs. It is understood that the clubs have indicated that they would agree to such a reduction but that agreement has not yet been documented.
As already noted, it was on that day – 18 June 2008 – that the board determined to impose the 1.5% fee along with the $5 million threshold. In the circumstances, I regret I am impelled to conclude that it reached that decision knowing at the very same time that it was participating in a compensation arrangement with New South Wales racing clubs the net effect of which, combined with the turnover threshold, was to exempt almost all New South Wales on-course bookmakers from having to pay the fee and that the TAB would have the fee refunded to it. Both these matters were before them at that meeting.
Further, just as RNSW’s understanding that the TAB would have the fee refunded to it came to pass, so too was it the case that almost no New South Wales on-course bookmakers were affected by this fee. The consequence of the clubs’ agreement to reduce their fees together with the $5 million threshold ultimately resulted in a state of affairs where no bookmaker was worse off as a result of the 1.5% race fields fee unless his or her turnover was more than $11.7 million, at least in the case of metropolitan bookmakers. Certainly, this is what RNSW told the racing press as is shown by one of its background briefing notes formulated for the Daily Telegraph.
The actual agreement in the case of the metropolitan clubs was that their levies would be reduced from 1% of turnover to 0.33% on the first $5 million and zero thereafter. Again, that is known because of RNSW’s background briefing paper to the Daily Telegraph which said just that. The precise agreement in the case of the provincial clubs is less clear. A report tabled by Mr V’landys to the board members at the 21 May 2007 meeting suggested that the provincial clubs levied a fee of 0.5% on on-course bookmakers. I am unable to determine the final fee reduction agreed to by the provincial clubs. However, whatever it was the bottom line effect was clear and, I infer, was the one contemplated by Mr V’landys, namely, the insulation of the on-course bookmakers from the fee.
The effect on them was plain. RNSW admitted in its defence that there were 210 licensed thoroughbred bookmakers in New South Wales. Its annual report for 2009 stated that there were 213. A summary document tendered by RNSW suggested that there were 182. I propose to proceed on the basis of the annual report which has the virtue of not having been directly prepared in contemplation of this litigation. I conclude therefore that there are relevantly 213 licensed bookmakers. In Betfair Pty Ltd v Racing New South Wales [2010] FCA 603, I have concluded that there are 267. This disparity is driven by the fact that the pleadings and evidence in the two cases is not the same. The memorandum prepared by RNSW suggests that there are presently 39 licensed bookmakers with turnovers in excess of $5 million which I accept. Only 17 of those are based in New South Wales and one of those is the TAB, which, as I have already indicated, has an arrangement with RNSW whereby the fee is refunded to it. Of the remaining 16 bookmakers, only eight have a turnover in excess of $11.7 million. The number of New South Wales bookmakers paying the fee, therefore, is negligible (in the vicinity of 1%) as is further the number of New South Wales bookmakers who are worse off under the new scheme.
Nor do I have any doubt that RNSW always intended to and to the extent presently possible has rebated these fee reductions back to the clubs. There are but two references to this arrangement in RNSW’s documents and these are early in the piece. On 20 December 2006 Mr V’landys told the board:
… it will be imperative that [NSW] bookmakers are not double taxed and that NSW race clubs are not adversely affected.
He told the board much the same thing on 23 April 2007 and informed them that the clubs’ levy would be discontinued and that it was necessary for “race clubs to be compensated for the loss of bookmakers’ fees from new revenue”. I interpolate that “new revenue” must refer to the proceeds of the 1.5% fee. That became explicit on 21 May 2007 when he told the board that fees should be expended “firstly towards reimbursing clubs for the loss of revenue previously generated from the levy on on-course bookmakers (1% metropolitan, 0.5% country and provincial)”.
Thereafter, discussion of this compensating arrangement disappears entirely from RNSW’s documents. There can be no doubt, however, that it remained in play. This is for two reasons. First, it is now obvious that RNSW, although no longer referring to the reduction in the clubs’ levies in its internal correspondence, was orally informing the industry of the undertaking. There is little doubt about this because its statements to that effect are recorded in third party documents. Secondly, because it has in fact paid the clubs moneys from the proceeds of the fees in circumstances which make no sense unless such a compensatory arrangement is in place. As to the first matter, Mr V’landys met the AJC, the STC and others on 10 June 2008. The draft minutes of that meeting record, inter alia, Mr V’landys saying:
In addition it was confirmed that the clubs would be consulted in the determination of an appropriate scheme for the disbursement of revenue gained under the race fields proposal. In any event Mr V’landys confirmed that in the 1st instance race clubs should be recompensed for revenue foregone as a result of the abolition of on-course levies.
The board of STC met on 13 August 2008 at which time the CEO reported:
We have indicated to bookmakers that we prefer them not to be worse off as a result of this RFL and we may need to reimburse some bookmakers who are worse off. We do not know however how the RFL revenue will be split by RNSW, with the exception that they have verbally advised us that we will be made whole i.e back to the 1% level, however we do not know how the ‘overs’ will be split
It is perhaps true that the decision by RNSW and HRNSW to repay the fee back to the TAB and to compensate clubs for their reduction in levies might be characterised as subsidies. It is also true that subsidies are one of the identified measures in Cole v Whitfield 165 CLR at 393 which can infringe s 92. But I see no difficulties in Sportsbet’s complaint that the practical effect of the fee includes, by reason of their inseverable nature, the accompanying rebating arrangements. To conclude otherwise would frustrate completely the purpose of s 92. It would lead to situations where no one measure could be seen as infringing s 92 yet the totality of relevant mechanisms implemented a protectionist scheme. The illogicality of the argument can be seen better if Sportsbet had challenged instead the rebating and compensation arrangements rather than the fee. In this case, on the respondents’ argument, the infringing measure would be the fee as it is (and has been noted earlier) entirely within a State’s powers to relieve its own in-State traders from pre-existing burdens which it has imposed. Such an argument would result in Sportsbet being unsuccessful regardless of which measure was impugned. Given its practical focus on questions of political economy, it is unlikely that s 92 can fall between two stools in this way.
In any event, the fact that the payment to the TAB may well be a subsidy says nothing about the TAB’s rights. To conclude that the rebate to the TAB is a subsidy says nothing at all about whether the RDA is also itself a form of subsidy.
RNSW and HRNSW also relied upon Boardman v Duddington (1959) 104 CLR 456 which provides some comfort in attempting to justify equalisation arrangements. However, Sportsbet correctly submitted that decision must be regarded as overruled by Cole v Whitfield 165 CLR at 400-401.
Finally, RNSW and HRNSW spent some time trying to show that Sportsbet did not compete with the harness racing on-course bookmakers. I have already indicated that I have rejected that argument on the facts.
In those circumstances, I conclude that the imposition of both fees by RNSW and HRNSW was an act of discriminatory protectionism of the precise kind to which s 49 is evidently directed to prohibiting.
Acceptable Explanation or Justification
The respondents contended that the fee served the legitimate object of ensuring that those who used the products of the New South Wales racing industry for profit made a contribution to that industry commensurate with their use of those products, having regard to the following considerations:
(a)the extent to which each wagering operator uses the product in question, being race fields information;
(b) the administrative ease of quantifying and enforcing any fee;
(c)the importance of the second and third respondent being impartial, and being seen to be impartial, in its position as regulator of the New South Wales racing industry;
Of course, those who are not contributing are the interstate free riders. Mr Bennett QC submitted that this was inherently protectionist and that it could not be a legitimate object for the purposes s 92. For sometime I was disposed to agree with this. However, as I have noted above at [136], there may be ways in which the free rider problem may be solved without infringing s 92. For example, the State could abolish entirely its regime of betting taxes on wagering operators, release the TAB from the burden of the RDA, sever the inappropriate dependence of the statutory regulators on the TAB and then impose on all wagering operators a fee sufficient to fund the industry. Such an arrangement would catch interstate and intrastate traders alike and would be likely to have about it no element of protectionism. There may, of course, be practical difficulties in bringing about such a state of affairs but that is not relevant to the constitutional questions which arise. It follows that, at least at a high level of generality, I am prepared to accept that seeking to catch the free riders may be a legitimate object.
The difficulty lies, so it seems to me, in the method adopted to achieve that object. At the moment, the New South Wales wagering market is distorted by the fact that the industry derives most of its revenue from a single wagering operator, the local totalizator, which correspondingly labours under a significant burden from which interstate wagering operators are free. No doubt, this is not a level playing field. The pursuit of a level playing field is not forbidden by s 92. What is forbidden by s 92, however, are various methods of levelling the playfield and, in particular, making interstate traders pay compensatory imposts to reduce the disadvantage of an intrastate trader. What are the ways in which the free rider problem may be addressed? The conceivable ones are:
(a) imposing an equalizing burden upon the interstate free riders to reduce the disadvantage suffered by the TAB by its having to pay New South Wales betting taxes and contributions to the industry under the RDA; or
(b)imposing a fee equally on all wagering operators;
(c) imposing a fee which is apparently equal on all wagering operators but ensuring that the TAB and the local bookmakers are not affected by the fee;
(d) removing New South Wales betting taxes and rewriting the RDA so that the TAB no longer funds the racing industry and then imposing a fee equally on all operators the proceeds of which are then used to fund the industry.
Of these options, only (b) and (d) are compatible with s 92 (or s 49) and, even in those cases, difficulties may still be encountered depending upon the choice of money flow upon which the fee is to be imposed. The decision in Betfair Pty Ltd v Racing New South Wales [2010] FCA 603, delivered at the same time as these reasons, illustrates some of the potential pitfalls which may arise from an inappropriate selection of the money flow on which the fee is calculated. Because the business models of wagering operators differ substantially – some, like totalizators, earning commission on back bet turnover, others like bookmakers, on overround or by tote matching and yet others, like betting exchanges, on a customer's net winnings – this is likely to mean that unless the fee is imposed on a money flow which fulfils a similar role in each business model, discrimination is likely to occur and, with it, the risk of protectionism.
The first and third options, (a) and (c), plainly infringe s 92 and, in the case of (c) – which is the facts of this case – involve a transparent attempt to evade the requirements of s 92 in a way which, I regret to say, does not deserve the appellation sophisticated. Given the clear understanding that was held by the board of RNSW and Mr V'landys, that fee could only be applied neutrally and that this had to be so as a matter of substance, and not merely form. I must say that I am entirely puzzled as to how it was thought to be permissible, still less prudent as a statutory authority with the public responsibilities attendant thereon, to assume that the TAB or the New South Wales on-course bookmakers could be relieved from the economic burden of the fee. In any event, it is not presently necessary to determine why this reckless folly was chanced; it suffices only to conclude that it was.
For those reasons, although the respondents’ nominated object of reducing the free rider problem may well be legitimate, the means adopted to achieve it were inherently protectionist and, hence, cannot be a reasonable means of achieving that object.
III – Other Matters
Part of Sportsbet’s argument turned on the suggestion that RNSW and HRNSW’s actions were deliberate. I have concluded that they were deliberate and that has formed part of my reasons for treating the fee, the thresholds, the rebates and the compensation arrangements as one set of inseverable events for the purposes of determining the question of practical operation.
However, the deliberate nature of that conduct does not have any direct consequences in s 92 jurisprudence. Discriminatory protectionism is to be discerned either on the face of the impugned measure or by a consideration of its practical operation. There is simply no room in that analysis for notions of intent. A measure which is not discriminatory in a protectionist sense does not become so because it was intended so to be. So too, a measure which does infringe is not valid because the protectionist effect was not intended. In cases where the nature of the effect is unclear, intention might have a part to play as a factual indicator on the basis that the correct characterisation of a set of events often bears some relationship with the intentions of those events’ authors. See: Betfair Pty Ltd v Racing New South Wales [2010] FCA 603 at [212]. But this too is an indirect use of intention.
Sportsbet also argued that s 33A only permitted the imposition of an “amount” and that this could not involve a formula like 1.5% of turnover. In the view I take of things it is not necessary to answer this question. However, I would observe that Sportsbet’s approval from RNSW does impose a monthly fee of $229,000 which may be an answer to this argument. If that were not so, however, it is difficult to see how the reasoning of Davies J in TAB Ltd v Racing Victoria Ltd [2009] VSC 338 at [27]-[31] who held that a very similarly worded provision required specification of an actual amount can be distinguished. RNSW and HRNSW did not argue that it was incorrectly decided and I need not consider it here.
IV – Case against the State of New South Wales
Sportsbet argued that both ss 33 and 33A of the Act and Part 3 of the Regulation were invalid. This was put on the basis of those provisions’ legal or practical operation. It was also put on the basis that the State intended those provisions to be used to rein in the free riding interstate corporate bookmakers, no doubt an engaging mental image.
I have already given my reasons for rejecting subjective purpose as a criteria of validity in a s 92 context. Quite apart from that, however, both of these claims fail because of s 31 of the Interpretation Act 1987. In light of that provision, ss 33, 33A and Part 3 of the Regulation simply do not authorise the imposition of fee conditions which infringe s 49 of the Northern Territory (Self-Government) Act 1978. If that be their proper construction – and I cannot see how it is not – I am unable to discern how they may be invalid. It is true that in Betfair 234 CLR 418 the High Court took the view that the provisions of the Western Australian statute which permitted Betfair to apply for a licence were illusory because Betfair had no possibility of getting such a licence: Betfair 234 CLR at 481 [119]. But this was because of the preamble to the Act recited as its express purpose the prohibition altogether of betting exchanges. In this case, the present provisions may operate validly. The practical operation problems in this case do not arise at the level of the law and the regulations. The claim against New South Wales must be rejected.
V – Relief
Plainly, Sportsbet is entitled to relief. It seeks declaratory orders which would hold invalid the 1.5% fee condition. There are two difficulties with that course. First, the constitutional infirmity springs from the practical operation of the fee condition and I have held that to be an inseverable part of a set of arrangements which includes the thresholds together with the rebates to the TAB and compensation arrangements with the clubs. If a measure is to be the subject of a declaration then it should involve, as RNSW and HRNSW point out, at least each element of the practical operation case. Secondly, there are significant problems with declaring only parts of the relevant instruments invalid. It would not, for example, be correct to leave operational the approvals with no condition as to fee attaching to them altogether. This raises the question of what the appropriate condition would be and that, so it seems to me, is not a judicial function. The appropriate course, therefore, is to declare each approval wholly invalid.
Sportsbet claims a refund of the fee that it has paid. RNSW and HRNSW submit that the nature of the cause of action is not explained but I think that submission to be of little merit. The cause of action is the well-known one discussed in Mason v New South Wales (1959) 102 CLR 108. More substantially, RNSW and HRNSW invoke s 4(1) of the Recovery of Imposts Act 1963 (NSW) which provides:
Proceedings referred to in section 2 or 3(4) to recover an amount paid are however maintainable only to the extent that the person bringing the proceedings (“the claimant”) satisfies the court that the claimant has not charged to or recovered from, and will not charge to or recover from, any other person any amount in respect of the whole or any part of the amount paid. This applies whether or not any such amount has been itemised or otherwise separately identified in any invoice or other documentation.
Mr Tyshing gave evidence that Sportsbet has not done anything to change its business arrangements since the fee was introduced. I infer that it has not adjusted its prices and hence that the fee has not been passed on and will not be passed on to its customers. Accordingly, s 4 is satisfied and relief may, in principle, be granted.
The evidence about what Sportsbet has in fact paid under the 2008 approvals was not altogether satisfactory. One begins by noting that it is only the 2008 approvals which are challenged. The RNSW 2008 approval provided for a monthly payment of $229,000 commencing on 1 September 2008 and concluding on 30 June 2009. Assuming it was paid, that would amount to $2,061,000. I conclude that that sum was paid because the Act required it to be paid. There is no corresponding evidence that I have been taken to that indicates that the fee was, in fact, paid by Sportsbet to HRNSW at all and the corresponding approval issued by it does not include a monthly instalment sum. Mr Tyshing’s evidence was that paying the fee was causing Sportsbet some strain but he did not say how much had been paid. RNSW and HRNSW argued that RNSW had been paid $3,894,530 (exclusive of GST) under Sportsbet’s approval which I infer includes payments under the (unchallenged) 2009/10 approval. HRNSW submits that it has not been paid any money which is consistent with the evidence so far as I can see.
The appropriate course in those circumstances is to enter judgement against RNSW in the sum of $2,061,00 together with interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). In accordance with Namol Pty Ltd v A W Baulderstone Pty Ltd (No 2) (1993) 47 FCR 388 at 389 per Davies J it is appropriate to apply the prevailing New South Wales rates of interest, that is, the rate set out in Schedule 5 to the Uniform Civil Procedure Rules 2005 (NSW). I will not give judgment for any sum against HRNSW.
The orders I make are:
1.Declare the approval granted by the second respondent to the applicant on 15 August 2008 to be invalid.
2.Judgment against the second respondent for $2,061,000 together with interest pursuant to s 51A of the Federal Court of Australia Act 1976 to be calculated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005.
3.Declare the approval granted by the third respondent to the applicant on 1 September 2008 to be invalid.
4.The application be otherwise dismissed.
5.Vary all pre-existing orders pursuant to s 50 of the Federal Court of Australia Act 1976 to permit the publication of these reasons.
The parties may file agreed orders as to costs by 30 June 2010 otherwise they may arrange with my Associate to fix a time for that matter to be argued. I will list the matter for further directions alongside the proceedings in NSD 1566 of 2008, being Betfair Pty Ltd v Racing New South Wales, on Thursday 24 June 2010 at 9.30 am.
VI – Interlocutory rulings
On 17 December 2009 I granted leave to Sportsbet to amend its application and pleading. This amendment was not consented to by any of the respondents. Broadly speaking, the amendments sought to do the following:
(a) add further particulars to certain paragraphs;
(b)to make allegations, in a variety of permutations, that the TAB was not required economically to pay the fee;
(c) to make allegations, in a variety of permutations, that the New South Wales bookmakers were not required to pay the fee;
(d) to make allegations that the thresholds were set with a view to, or with the practical effect that, New South Wales bookmakers did not pay the fee; and
(e) to make allegations seeking to connect the allegations in (b) and (c) to the validity of s 33A Racing Administration Act 1998 and the Racing Administration Regulation 2005.
Mr Kirk, who appeared for New South Wales, outlined a number of alleged pleading deficiencies against his client. I will not set them all out. The principal one was that it was impossible to understand how allegations made about the actions of RNSW and HRNSW in setting thresholds or entering into rebate arrangements with the TAB could affect the validity of the Racing Administration Act 1998 or the regulations thereunder. A number of cognate complaints about the pleading were made.
In an ordinary case, I would have been inclined to embrace these concerns. The difficulty I have is that the jurisprudence in s 92 cases does not exhibit sufficient normative certainty to permit one to conclude that such arguments – which are otherwise quite plausible on their face – can justify denying an amendment. Three particular matters warrant reference. The first is the fact that the test of practical operation or effect has an inherently uncertain nature which makes it difficult to be dogmatic about what material is proscribed in a s 92 case.
The second, allied to the first, is an example of that uncertainty in action and is the determination by the High Court in Betfair 234 CLR 418 that it was not moved by the fact that Betfair could apply in that case for a licence since it was not possible that the licence would be granted. That conclusion rested on the Court’s analysis of the preamble which recited the purpose of the statute as banning betting exchanges such as Betfair’s. As an exercise in statutory interpretation this outcome is far from obvious – the text of the licence provision contained no hint of such a limitation – and leaves open the possibility that the Court was really saying that the practical operation of the provision was such that it was unlikely that a licence would be issued. That kind of analysis – which, for present purposes, need only be arguable and not necessarily correct – suggests a somewhat more holistic approach to the issues raised that the State’s submissions can permit.
The third matter is a principle of restraint in s 92 litigation which I identified in Betfair Pty Ltd v Racing New South Wales (No 1) [2009] FCA 111 at [29] as being a caution “at pre-emptorily excluding as irrelevant factual material in an area of discourse in which the threshold between the pertinent and the extraneous is indistinct.” Whilst I was sympathetic to many of the complaints made by the State it was not appropriate, in those circumstances, to accede to them.
The submissions of RNSW and HRNSW were:
(a) to adopt the submissions of the State;
(b) that the matters now relied upon could have been raised at an earlier time and that the High Court’s decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 meant that, absent explanation, no amendment should be allowed;
(c)that the case mounted was unclear, poorly pleaded and undeserving of a grant of leave.
I need not deal further with (a). As to (b), the submission should be rejected. The proceeding was expedited and the precise circumstances surrounding the payments to the TAB and arrangements with the racing clubs only became apparent relatively recently. Even if I had thought there had been any default on the part of Sportsbet, in the context of the urgency and pressure under which all parties have been obliged to operate, it would not have been a sufficient reason to refuse leave. Nor was there, in any event, delay which needed to be explained. To the contrary, if any explanation was required it lay with RNSW and HRNSW to explain how, in a case about the validity of a measure apparently imposed on interstate and intrastate trade alike, the fact of various agreements relating to repayment and compensation to intrastate traders were not at once revealed to Sportsbet as they became known. As presently advised, and I emphasise, not having heard substantive argument on the matter, I do not really understand how such a fact would not have been disclosed to Sportsbet at the first available opportunity. This is especially so given the role of RNSW and HRNSW as regulators and emanations of the State.
As to (c), I do not perceive the uncertainties involved. The proposed case, although variously expressed, was straightforward. The intrastate traders were refunded or compensated for paying the fee; the interstate traders were not. Various consequences – some likely, some not – were said to arise. The respondents were not presented with any difficulty in meeting such a case.
It was for those reasons that I permitted the amendment.
Finally, I have varied the complex pre-existing confidentiality regimes sufficiently to permit the publication of these reasons.
I certify that the preceding one hundred and seventy-three (173) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate:
Dated: 16 June 2010
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