The State of Victoria v Sportsbet Pty Ltd
[2012] FCAFC 143
•12 October 2012
FEDERAL COURT OF AUSTRALIA
The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
Citation: The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143 Appeal from: Sportsbet Pty Ltd v The State of Victoria [2011] FCA 961 Parties: THE STATE OF VICTORIA v SPORTSBET PTY LTD (ABN 87 088 326 612), EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597), TABCORP HOLDINGS LIMITED (ABN 66 063 780 709) AND THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
TABCORP HOLDINGS LIMITED (ABN 66 063 780 709) v SPORTSBET PTY LTD (ABN 87 088 326 612), EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597), THE STATE OF VICTORIA AND THE VICTORIAN COMMISSION FOR GAMBLING REGULATION
File numbers: VID 1000 of 2011
VID 1002 of 2011Judges: EMMETT, KENNY AND MIDDLETON JJ Date of judgment: 12 October 2012 Date of Corrigendum 23 October 2012 Catchwords: CONSTITUTIONAL LAW — Trade and commerce between the Northern Territory and a State — Northern Territory respondent bookmaker contravened offence provisions of Victorian legislation by installing an electronic device for betting in an hotel in Victoria — Whether respondent engaged in trade and commerce between the Territory and a State — Whether offence provisions imposed a discriminatory burden of a protectionist kind on out-of-state trade and commerce — Whether a licensee holding a statutory monopoly was a proxy for intrastate trade — reasonably necessary and appropriate and adapted — Northern Territory (Self-Government) Act 1978 s 49 — Commonwealth Constitution s 92. Legislation: Constitution ss 92, 109
Corporations Law 1989 (Cth)
Northern Territory (Self-Government) Act 1978 (Cth) s 49
Betting Act 1853 (16 & 17 Vict c 199)
Casino Control Act 1991 (Vic)
Gambling Regulation Act 2003 (Vic) ss 2.1.2, 2.5.1, 2.5.2, 2.5.14, 2.6.1, 4.2.1, 4.2.2, 4.3.1, 4.3.3, 4.5.3, 4.5.6, 4.7.2, 10.5.9(1)(c)
Gaming and Betting Act 1994 (Vic)
Liquor Control Reform Act 1998 (Vic) s 115Corporations (Northern Territory) Act 1990 (NT)
Interpretation of Legislation Act 1984 (Vic)
Lotteries Gaming and Betting Act 1966 (Vic) s 66B
Police Offences Statute Amendment Act 1872 (Vic)
Racing Act 1958 (Vic) s 4
Racing and Betting Act 1983 (NT)
Racing (Totalizators Extension) Act 1960 (Vic)
Unlawful Betting Act (NT) ss 31, 33Cases cited: AMS v AIF (1999) 199 CLR 160
APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322
Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board (1985) 157 CLR 605
Bank of New South Wales v The Commonwealth (1948) 76 CLR 1
Barley Marketing Board (NSW) v Norman (1990) 171 CLR 182
Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411
Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595
Betfair Pty Limited v Racing New South Wales (2012) 286 ALR 221
Betfair Pty Limited v Western Australia (2008) 234 CLR 418
Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356
Bond v Foran (1934) 52 CLR 364
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Castlemaine Tooheys Limited v South Australia (1990) 169 CLR 436
Clark King & Co Pty Ltd v Australian Wheat Board (1978) 140 CLR 120
Cole v Whitfield (1988) 165 CLR 360
Dearman v Dearman (1908) 7 CLR 549
Fox v Percy (2003) 214 CLR 118Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479
HC Sleigh Ltd v South Australia (1977) 136 CLR 475Hogan v Hinch (2011) 85 ALJR 398
Kartinyeri v Commonwealth (1998) 195 CLR 337
Lamshed v Lake (1958) 99 CLR 132
Menashe Business Mercantile Ltd v William Hill Organisation Ltd [2003] 1 WLR 1462
Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556
Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507
Mulholland v Australian Electoral Commission (2004) 220 CLR 181
North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW (1975) 134 CLR 559
O Gilpin Ltd v Commissioner for Taxation (NSW) (1940) 64 CLR 169
Racing NSW v SportsbetPty Ltd (2010) 189 FCR 448Sportsbet Pty Ltd v Harness Racing Victoria (No 6) [2012] FCA 896
Sportsbet Pty Ltd v New South Wales (2012) 286 ALR 404
Sportsbet Pty Ltd v Victoria (2011) 282 ALR 423
Sportsbet v Harness Racing Victoria and Anor (No 6) [2012] FCA 896
Sportsbet v NSW and Betfair Pty Ltd v Racing New South Wales (2012) 286 ALR 221Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63
Street v Queensland Bar Association (1989) 168 CLR 461Thomas v Mowbray (2007) 233 CLR 307
Uebergang v Australian Wheat Board (1980) 145 CLR 266 Hospital Provident Fund Pty Ltd v Victoria (1953) 87 CLR 1Bell AS, “Section 92, Factual Discrimination and the High Court” (1991) 20 FL Rev 240
Hutchinson G (ed), They’re Racing! The Complete Story of Australian Racing (Penguin Books Australia Ltd, 1999)
Lewis GD, A Report on Integrity Assurance in the Victorian Racing Industry, 1 August 2008
O’Hara J, A Mug’s Game. A History of Gaming and Betting in Australia (New South Wales University Press, 1988)
Pacini J, A Century Galloped By. The First Hundred Years of the Victoria Racing Club (Victoria Racing Club, 1988)
Simpson A, “Grounding the High Court’s Modern Section 92 Jurisprudence: the Case for Improper Purpose as the Touchstone” (2005) 33 FL Rev 445
Sonter D, “Intention or Effect? Commonwealth and State Legislation after Cole v Whitfield” (1995) 69 ALJ 332Date of hearing: 20 – 22 February 2012 Date of last submissions: 7 September 2012 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 325 VID 1000 of 2011: Counsel for Appellant: Mr S McLeish SC, Solicitor-General for the State of Victoria with Dr S Donaghue SC and Mr P Herzfeld Solicitor for the Appellant: Victorian Government Solicitor Counsel for the First and Second Respondents: Mr N Young QC with Mr T North SC and Mr R Niall SC Solicitor for the First and Second Respondents: Fitzpatrick Legal Counsel for the Third Respondent: Mr P Brereton SC with Dr R Higgins Solicitor for the Third Respondent: Herbert Smith Freehills The Fourth Respondent submitted to any order the Court might make, save as to costs. VID 1002 of 2011: Counsel for the Appellant: Mr P Brereton SC with Dr R Higgins Solicitor for the Appellant: Herbert Smith Freehills Counsel for the First and Second Respondents: Mr N Young QC with Mr T North SC and Mr R Niall SC Solicitor for the First and Second Respondents: Fitzpatrick Legal Counsel for the Third Respondent: Mr S McLeish SC, Solicitor-General for the State of Victoria with Dr S Donaghue SC and Mr P Herzfeld Solicitor for the Third Respondent: Victorian Government Solicitor The Fourth Respondent submitted to any order the Court might make, save as to costs. FEDERAL COURT OF AUSTRALIA
The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
CORRIGENDUM
1.In paragraph 180 of the Reasons for Judgment, in the fourth sentence, the word “Tabcorp” should read “Sportsbet” so that the sentence reads: “The possibility of totalisator manipulation cannot be discounted, as Sportsbet sought to do.”
I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justices Kenny and Middleton. Associate:
Dated: 23 October 2012
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1000 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE STATE OF VICTORIA
AppellantAND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First RespondentEUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second RespondentTABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Third RespondentTHE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGE:
EMMETT, KENNY AND MIDDLETON JJ
DATE OF ORDER:
12 OCTOBER 2012
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
2.Within seven days, the appellant in appeal VID 1000 of 2011 file short minutes giving effect to the reasons for judgment herein.
3.If the parties in appeal VID 1000 of 2011 are unable to agree within seven days on the appropriate costs orders for the proceeding before the primary judge and for the appeal, within a further seven days, the appellant in appeal VID 1000 of 2011 file and serve its written submissions as to the appropriate costs orders and, within seven days thereafter, the respondents in appeal VID 1000 of 2011 file their written submissions. In either case the submissions should not exceed three pages.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1002 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
AppellantAND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First RespondentEUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second RespondentTHE STATE OF VICTORIA
Third RespondentTHE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGE:
EMMETT, KENNY AND MIDDLETON JJ
DATE OF ORDER:
12 OCTOBER 2012
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1. Within seven days, the appellant in appeal VID 1002 of 2011 file short minutes giving effect to the reasons for judgment herein.
2.If the parties in appeal VID 1002 of 2011 are unable to agree within seven days on the appropriate costs orders for the proceeding before the primary judge and for the appeal, within a further seven days, the appellant in appeal VID 1002 of 2011 file and serve its written submissions as to the appropriate costs orders and, within seven days thereafter, the respondents in appeal VID 1002 of 2011 file their written submissions. In either case the submissions should not exceed three pages.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 1000 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: THE STATE OF VICTORIA
AppellantAND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First RespondentEUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second RespondentTABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
Third RespondentTHE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
GENERAL DIVISION
VID 1002 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: TABCORP HOLDINGS LIMITED (ABN 66 063 780 709)
AppellantAND: SPORTSBET PTY LTD (ABN 87 088 326 612)
First RespondentEUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597)
Second RespondentTHE STATE OF VICTORIA
Third RespondentTHE VICTORIAN COMMISSION FOR GAMBLING REGULATION
Fourth Respondent
JUDGES:
EMMETT, KENNY AND MIDDLETON JJ
DATE:
12 OCTOBER 2012
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
EMMETT J
INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [1] THE IMPUGNED PROVISIONS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [12] TABCORP........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [16] SPORTSBET........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [30] The betbox........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [49] THE DECISION OF THE PRIMARY JUDGE........ ........ ........ ........ ........ ........ ........ .... [61] RELEVANT LEGAL PRINCIPLES........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [69] APPLICATION OF SECTION 49 OF THE SELF-GOVERNMENT ACT........ ........ [83] CONCLUSION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [110] INTRODUCTION
These appeals, and the proceeding from which they are brought, demonstrate the absurdity that, in the worldwide economy of the 21st century, the legal system of the great nation of Australia is still complicated by wrangling between polities that grew out of the former British colonies that combined to form the Commonwealth of Australia in 1901. This proceeding is concerned specifically with the regulation of wagers and bets placed with a Northern Territory registered bookmaker by punters physically located in the State of Victoria. It is a blight on our nationhood and a travesty of sensible administration and good government that there are eight different regulatory regimes concerning lawful gambling in Australia, with an overlay of federal intervention, both actual and threatened.
The draughtsmen of the Constitution saw the need for the new nation to be absolutely free from inter-colonial rivalries, at least in relation to trade, commerce and intercourse. Thus, s 92 of the Constitution relevantly provides that trade, commerce and intercourse among the States is to be absolutely free. When self-government was conferred on the Northern Territory, that principle was extended. Section 49 of the Northern Territory (Self-Government) Act 1978 (Cth) (the Self-Government Act), which is an act of the Commonwealth parliament, relevantly provides that trade, commerce and intercourse between the Northern Territory and the States is also to be absolutely free. The jurisprudence that has arisen in connection with s 92 is applicable to the construction and operation of s 49 of the Self-Government Act (see AMS v AIF (1999) 199 CLR 160 at 175-176 [35]-[36]). To the extent that a law of Victoria is inconsistent with s 49 of the Self-Government Act, that law would, by the operation of s 109 of the Constitution, be invalid.
Section 92 of the Constitution refers to trade, commerce and intercourse by means of internal carriage or ocean navigation. That was probably intended to cover the field of the means by which trade, commerce and intercourse among the States might take place. The concept of trade, commerce or intercourse by means of digital electronic communication, such as is involved in the present dispute, was not conceived of by those responsible for the drafting of the Constitution.
The particular dispute in question in these appeals is principally between two corporate bookmakers, namely, Sportsbet Pty Limited (Sportsbet) and Tabcorp Holdings Limited (Tabcorp). Each of those companies has its central management and control in Victoria, although Sportsbet is a Northern Territory company. Both companies operate in a gambling market that is Australia-wide and is, in some respects, worldwide. Each engages in gambling activities in Victoria.
Sportsbet is Australia’s largest corporate bookmaker. Sportsbet uses computer equipment that is located in the Northern Territory that communicates, by means of the internet, with a device known as a Betbox, which is located in Victoria. The devices are accessible to, and are used for the purpose of wagering with Sportsbet by, persons located distant from the Northern Territory, in Victoria.
In May 2010, a Betbox owned by Sportsbet was installed by Sportsbet in the Eureka Stockade Hotel in East Ballarat, Victoria (the Hotel), which is owned by Eureka Hotel Holdings Pty Limited (Eureka). Eureka is the licensee of the Hotel under the Liquor Control Reform Act 1998 (Vic) (the Liquor Act) and the Hotel constitutes licensed premises under the Liquor Act. Sportsbet entered into contracts with Eureka for the installation of a Betbox at the Hotel. It then installed and used the Betbox in the Hotel and accepted wagers over the internet by means of that Betbox from persons physically located in the Hotel in Victoria.
The present dispute is concerned more specifically with the seizure in July 2010 of the Betbox located in the Hotel by officers of the Victorian Commission for Gambling Regulation (the Gambling Commission). The officers were acting under s 10.5.9(1)(c) of the Gambling Regulation Act 2003 (Vic) (the Gambling Act), which authorises the seizure of any machinery, equipment or records for the purpose of obtaining evidence of the commission of an offence.
The State of Victoria and the Gambling Commission contend that the installation and the operation of the Betbox in the Hotel gave rise to offences under several laws of Victoria (the Impugned Provisions) as follows:
·Section 2.5.2 of the Gambling Act, which prohibits a person from opening, keeping or using a betting house or place of betting;
·Section 2.6.1 of the Gambling Act, which prohibits a person from possessing an instrument of betting not authorised by the Gambling Act; and
·Section 115 of the Liquor Act, which generally prohibits the holder of a licence under the Liquor Act from allowing a person to bet on licensed premises.
Sportsbet and Eureka contend that the Impugned Provisions are invalid in so far as they affect the installation and use by Sportsbet and Eureka of the Betbox. Accordingly, following the seizure of the Betbox, Sportsbet and Eureka commenced a proceeding in the Court against the State of Victoria (the State) and the Gambling Commission, seeking an order for the return of the Betbox to Sportsbet or, alternatively, to Eureka. As well as the return of the Betbox, Sportsbet and Eureka claimed declarations that each of the Impugned Provisions is invalid to the extent that it would apply to installation and use of a Betbox in Victoria. Subsequently, Tabcorp was joined as a respondent to the proceeding.
On 9 September 2011, for reasons published on 22 August 2011, a judge of the Court ordered that the Betbox be returned to Eureka at the Hotel. The primary judge also declared that each of the Impugned Provisions is invalid to the extent that it applies to the installation and use in Victoria by Sportsbet and Eureka of the computer device known as a Betbox.
By notice of appeal filed on 13 September 2011, the State appealed from those orders. Sportsbet, Eureka, Tabcorp and the Gambling Commission are respondents to the State’s appeal. By notice of appeal filed on the same day, Tabcorp also appealed from those orders. Sportsbet, Eureka, the State and the Gambling Commission are respondents to Tabcorp’s appeal. In each appeal, the appellant seeks an order that the appeal be upheld, that the orders made by the primary judge be set aside and that the proceeding brought by Sportsbet and Eureka be dismissed.
THE IMPUGNED PROVISIONS
Section 2.5.2(1) of the Gambling Act relevantly provides that a person must not:
·open, keep or use a betting house or place of betting; or
·being the owner or occupier of a house or place, knowingly and wilfully permit the house or place to be opened, kept or used by any other person as a betting house or place of betting.
Under s 2.5.1(1), a betting house or place of betting is a house or place that is open, kept or used, relevantly, for the purpose of betting with any persons, whether in person or by messenger, agent, post, telephone or otherwise or for the purpose of taking instructions for the placement of bets on behalf of any person. A betting house or a place of betting is declared by s 2.5.1(2) to be a public nuisance and contrary to law.
However, under s 4 of the Racing Act 1958 (Vic) (the Racing Act), it is not a contravention of the Gambling Act for a registered bookmaker to take bets on certain events, including thoroughbred, harness and greyhound races, while present at a racecourse licensed under the Racing Act either:
·during the holding of a race meeting, from a punter present on the racecourse; or
·at any time, from a punter off the racecourse by means of a method of communication approved by the Minister.
A registered bookmaker is a person who is the holder of a current certificate of registration as a registered bookmaker under the Gambling Act. Sportsbet is not a registered bookmaker and has never sought registration under the Gambling Act.
Section 2.6.1(1) of the Gambling Act relevantly provides that a person must not possess an instrument of betting not authorised under the Gambling Act. Under s 2.6.1(2), possession includes actual physical possession, as well as custody or control, and an instrument of betting is taken to be in a person’s possession if it is on land or in premises occupied, used or controlled by the person. Under s 2.1.2(1), instrument of betting relevantly includes a mechanical, electrical, telephonic, electronic or other equipment or device or any access to such equipment or device used, apparently used or likely to be used in carrying on or in connection with betting on a sporting event, being betting that is not authorised by any Act. It is common ground that the Betbox is an instrument of betting within the meaning of that provision. It is also common ground that the Betbox seized from Eureka was likely to be used in carrying on, or in connection with, betting on sporting events. The Betbox is not authorised under the Gambling Act.
Section 115(1) of the Liquor Act relevantly provides that a licensee of licensed premises must not bet or allow a person to bet on the licensed premises. However, under s 115(2), that prohibition does not apply to betting on licensed premises if, relevantly:
·the premises are on a licensed racecourse and the betting is engaged in during the holding of a race meeting on the licensed racecourse; or
·a betting facility of the holder of the wagering licence or of the wagering operator is established in the premises and the betting takes place through that licence holder or wagering operator.
At the present time, Tabcorp is the holder of the wagering licence, as referred to in s 115(2), and Tabcorp Manager Pty Limited (Tabcorp Manager), a wholly owned subsidiary of Tabcorp, is the wagering operator, as referred to in s 115(2). The term betting facility, as referred to in s 115(2), is not defined.
TABCORP
Until the late 1950s, offcourse wagering was prohibited in Victoria. Oncourse wagering was permitted with registered bookmakers and with a totalisator operated by a racing club.
Generally, wagering with registered bookmakers was fixed odds wagering. A fixed odds bookmaker is one who makes up a book on all the contestants in a given race, adjusting the odds and the volume of money taken on any particular contestant, so that, if the adjustments made by the bookmaker are correct, at the end of the race, no matter which contestant wins, the book would show a profit for the bookmaker. While oncourse bookmakers competed with each other by offering differing fixed odds for each contestant in a race, such that the odds would vary during the lead up to the start of the race as the bookmaker made the book, a punter was guaranteed the odds at which the wager was made, irrespective of variations in the odds being offered after the wager was made.
Wagering with a totalisator, on the other hand, was on the pari-mutuel basis. That is to say, the balance of the total pool of wagers made with the totalisator, after deducting a fixed proportion of the wagers for the totalisator operator, was divided among the successful wagerers. Thus, the odds that would be paid on a successful wager with a totalisator would not be known until after the start of the race, when betting closed and the total pool was ascertained.
While offcourse wagering was prohibited, it was widespread. Generally, offcourse wagering was with unregistered, unlicensed bookmakers and was, for the most part, limited to starting price wagers. The odds for each contestant at the close of betting on a race, which were published after the event, were the odds at which starting price wagers were determined. Thus, as with a totalisator, the odds that would be paid on a successful wager would not be known until after the start of the race, when betting closed.
A significant difference between the totalisator operator and the bookmakers, whether fixed odds or starting price, is that the totalisator operator cannot lose. An oncourse licensed bookmaker, offering fixed odds, was generally required to accept any wager, up to predetermined limits. A competent bookmaker, by adjusting the odds for each runner in a race, assuming a minimum number of wagers, could make a book so as to ensure a profit on most races. A starting price bookmaker could not adjust the odds, but had some control, in so far as the bookmaker could refuse to accept a bet. However, a profit is never guaranteed for either a fixed odds or starting price bookmaker.
In 1959, a report to the Victorian government recommended the legalising in Victoria of offcourse betting, by means of the establishment of an offcourse totalisator. Following that recommendation, an offcourse totalisator was established under the Racing (Totalizators Extension) Act 1960 (Vic) (the 1960 Act). The offcourse totalisator was operated by the Totalizator Agency Board (the TAB), a statutory body corporate created by the 1960 Act. Until 1994, offcourse wagering could be conducted in Victoria legally with the TAB, but not otherwise.
In 1994, the Victorian government decided to privatise the operations of the TAB. To that end, Tabcorp was incorporated as the entity that would acquire the operations of the TAB. The Gaming and Betting Act 1994 (Vic) (the 1994 Act) provided for the grant of a single licence to conduct pari-mutuel betting on thoroughbred, harness and greyhound racing and on approved betting competitions. The single licence, together with a concurrent gaming licence, was granted to Tabcorp on 28 June 1994 for a period ending in August 2012. At the same time, Tabcorp acquired the operations of the TAB, including its assets and staff. The consideration paid by Tabcorp for the operations of the TAB and for the grant of the licence was approximately $600 million. Tabcorp raised those funds by the issue of shares to the public. In effect, from 1994, Tabcorp stepped into the shoes of the TAB, and the operations of the TAB were thereby effectively privatised.
At the same time, Tabcorp entered into joint venture arrangements with VicRacing Pty Limited (VicRacing), a representative body of the Victorian racing industry. The arrangements gave effect to a memorandum of understanding made between the Victorian government and representatives of the racing industry. Tabcorp was obliged to make substantial payments to fund VicRacing and was subjected to various other restrictions, limitations and obligations, including obligations that allow VicRacing to have strategic and operational oversight of, and input into, the operations of Tabcorp.
The 1994 Act was repealed by the Gambling Act, with effect from 1 July 2004. One of the main purposes of the Gambling Act was stated to be to re-enact and consolidate the law relating to various forms of gambling. Its main objectives were said to include:
·to foster responsible gambling in order to minimise harm caused by problem gambling and accommodate those who gamble without harming themselves or others;
·to ensure that other forms of gambling permitted under Victorian Acts of parliament are conducted honestly and that their management is free from criminal influence and exploitation; and
·to promote tourism, employment and economic development generally in Victoria.
Another purpose of the Gambling Act was stated to be to impose a general prohibition on gambling and to create certain offences, including those created by ss 2.5.2 and 2.6.1. Section 2.5.2 is derived directly from the Police Offences Statute Amendment Act 1872 (Vic), which amended the Betting Act 1853 (Vic). Section 2.6.1 was first enacted in 1986 as s 66B of the Lotteries Gaming and Betting Act 1966 (Vic). Thus, the Gambling Act carries on the scheme previously existing under the 1994 Act, which, in turn, broadly reflected the scheme introduced by the 1960 Act.
Section 4.2.1 of the Gambling Act provides that the conduct of wagering or approved betting competitions is lawful when conducted in accordance with a licence or permit granted under Chapter 4. Such wagering and approved betting competitions are not a public or private nuisance and a place in which such wagering or approved betting competitions is conducted is not a common gaming house or place. Wagering is defined as pari-mutuel betting on a horse race, harness race or greyhound race. An approved betting competition on a horse, harness or greyhound race is one approved by the Minister under s 4.5.3 of the Gambling Act or by the Gambling Commission under s 4.5.6. Under s 4.5.3, the Minister may approve a betting competition on an event or contingency, or a class of event or contingency, of or relating to a horse race, harness race or greyhound race.
Under s 4.3.3 of the Gambling Act, there can be only one wagering licence at any given time. Under s 4.3.1, the wagering licence authorises the licensee and the wagering operator to conduct both wagering and approved betting competitions. Tabcorp is the licensee, since it is deemed to be the holder of the wagering licence. The licence that had been granted to Tabcorp on 28 June 1994 under the 1994 Act was continued under the Gambling Act. Tabcorp Manager is deemed to be appointed as the wagering operator under s 4.3.1 of the Gambling Act.
The effect of those provisions is that a place in which wagering or an approved betting competition is conducted by Tabcorp or Tabcorp Manager, in accordance with the licence granted to Tabcorp, is taken outside the scope of the various offences concerning common gaming houses or places, including the offences in s 2.5.2. The consequence is that only Tabcorp may establish in Victoria a retail presence for betting. That is described as offcourse retail exclusivity.
Sections 2.5.14 and 4.7.2 of the Gambling Act prohibit conduct of various kinds in relation to use of a scheme of pari-mutuel betting, whether conducted by means of an instrument or contrivance known as a totalisator or otherwise. However, under s 4.2.2 of the Gambling Act, the use of a totalisator as provided by Chapter 4 is lawful, and a person who uses or conducts a totalisator as provided by Chapter 4 is not guilty of an offence at common law or under any Act by reason of so using or conducting a totalisator. Further, wagering or betting by means of a totalisator does not constitute an offence at common law or under any Act, is not a ground for any house or place being taken to be a common gaming house or place and is not a public nuisance. Chapter 4 of the Gambling Act contemplates the use of a totalisator by Tabcorp and Tabcorp Manager, as the holder of the licence and the wagering operator, respectively. The consequence is that, within Victoria, only Tabcorp or Tabcorp Manager may operate a totalisator. That is described as totalisator exclusivity.
SPORTSBET
Sportsbet was registered on 29 June 1999 and is taken, under the Corporations Act 2001 (Cth), to be registered in the Northern Territory. Sportsbet is recorded as having a registered office and principal place of business in the Northern Territory.
Sportsbet holds a licence under the Racing and Betting Act 1983 (NT) (the Territory Betting Act) to conduct the business of a sports bookmaker in the Northern Territory. That licence, which was granted on 2 July 2010, requires that Sportsbet take bets from its premises situated at the Fannie Bay Racecourse, near Darwin in the Northern Territory. Sportsbet is permitted a more flexible approach under its licence to the marketing of its services than it would be permitted in other places in Australia. Specifically, Sportsbet is permitted to offer a much wider range of bets to punters than is permitted under the law of Victoria. Further, under the law of the Northern Territory, Sportsbet is permitted to provide credit to punters. That is contrary to the position anywhere else in Australia.
The information reporting system relating to the operation of Northern Territory sports bookmakers includes a full independent audit log of all wagering and financial transactions. The purpose of the audit log is to provide the Northern Territory Racing Commission (the NT Commission) with the data necessary to resolve any dispute between a sports bookmaker and a customer and to provide the NT Commission with information necessary to enable it to monitor all financial and betting transactions. Sports bookmakers in the Northern Territory, as part of the conditions of their licences, are required to record and maintain betting and financial information and supply that information to the NT Commission. Voice recordings are made of all communications with customers over the telephone and the recordings must be made available on request from the NT Commission.
Each sports bookmaker in the Northern Territory must comply with a mandatory code for responsible gambling and is required to establish account opening procedures and steps designed to ensure accounts cannot be opened by under-age customers. Each sports bookmaker must ensure that all senior personnel, directors and major shareholders have undergone police checks and have not been found guilty of any offence in the previous 10 years. Each sports bookmaker must have systems in place to record bets properly and to monitor unusual betting patterns and must report unusual betting patterns and circumstances to the NT Commission.
Standard condition 8 of Sportsbet’s licence under the Territory Betting Act provides that Sportsbet may accept bets at its designated premises on approved sporting events, by use of the telephone, internet, facsimile or any other electronic means approved by the NT Commission. Standard condition 11 provides that Sportsbet must record details of bets made by telephone, facsimile and internet. Special condition 24 provides that Sportsbet must ensure that any of its premises that are not situated on a racecourse are not open to the public to attend in person for the purposes of placing a bet.
Sportsbet has not applied for approval for the use of a Betbox in the Northern Territory. Accordingly, the NT Commission has not approved the use of a Betbox by Sportsbet. Indeed, Sportsbet is prohibited under its current licence from installing a Betbox in the Northern Territory.
Under s 31 of the Unlawful Betting Act (NT), a person, other than a lawful bookmaker, who acts as, or holds himself or herself out to be, a bookmaker is guilty of an offence. Under s 33 of that Act, a person commits an offence if the person carries on the business of bookmaking other than as a lawful bookmaker or in accordance with any other law in force in the Northern Territory. A lawful bookmaker is a person licensed or registered as a bookmaker under the Territory Betting Act. Bookmaking is defined as the business of receiving or negotiating bets or wagers. So long as Sportsbet conducts its business at its premises within the Fannie Bay Racecourse, it does not offend s 31 or s 33.
While Sportsbet has a registered office and premises in the Northern Territory, it has much larger premises in Melbourne. It occupies three floors in a building at 367 Collins Street, Melbourne, where some 150 to 200 employees operate. Sportsbet’s business is managed from those Melbourne premises.
The total operating expenses of Sportsbet are around $100 million a year. Approximately a quarter of those expenses are attributable to the operations in the Northern Territory. To the extent that Sportsbet employs persons in the Northern Territory, police checks are conducted in Darwin. Probative verifications for those in Melbourne are prepared in Melbourne.
There are up to 50 staff in Sportsbet’s Northern Territory premises, most of whom are telephone operators. There are also about five IT staff and two or three administrative staff. The work in the Northern Territory is seasonal and, on occasions, there are fewer than 40 people in those premises. Mr Nicholas Tyshing, who has been the chief financial officer of Sportsbet since July 2006 and the chief operating officer of Sportsbet since July 2009, spends no more than three to four days a month in the Northern Territory. His superior, Mr Tripp, spends a similar amount of time in the Northern Territory. Both of them spend most of their time managing Sportsbet’s business in Melbourne.
Sportsbet’s marketing department, production department, IT department and human relations department, all of which are staffed by highly qualified people who earn substantial salaries, are located in the Melbourne premises. Financing support and administrative support for Sportsbet’s business are also conducted from its Melbourne premises, and the people working in those areas are highly qualified. Sportsbet has a dedicated risk management department and a dedicated fraud department, which are the two most important functions in the business of betting. Both departments operate in the Melbourne premises. Checking with respect to money laundering is conducted by personnel in Melbourne. No personnel in the Northern Territory check for money laundering.
At its Northern Territory premises, Sportsbet accepts bets by telephone and over the internet from registered customers situated throughout Australia, including Victoria. The contingencies on which registered players bet include thoroughbred, harness and greyhound racing conducted in each State and Territory and sporting events conducted in each State and Territory and internationally. A person wishing to place a bet with Sportsbet must first register and acknowledge Sportsbet’s terms and conditions.
The process of becoming a customer of Sportsbet is automated to a large extent. A prospective customer completes details online, either on the internet or on a Betbox, and transmits the details. If the details are verified by the system in the Northern Territory, the customer will automatically be accepted as a customer of Sportsbet and the system will generate a welcome pack letter and pamphlets about the Sportsbet business, together with a pre-branded card similar to a credit card. The customer can swipe that card on a Betbox in order to log on to the Sportsbet system.
Customers of Sportsbet may establish a credit balance with Sportsbet. Customers use credit cards to replenish their credit balances. Checks on credit cards are carried out in Melbourne. Decisions to accept customers of Sportsbet are made in Melbourne. While system interfaces with customers flow through Sportsbet’s Northern Territory premises, any notification is triggered in Melbourne and notification of acceptance of a customer emanates from Melbourne.
Sportsbet reserves the right to decline a deposit from a customer if it determines that the funds are not genuinely for the purposes of betting. Such determinations are made in Melbourne. Sportsbet also reserves the right to close a customer’s account. Such decisions are made in Melbourne. A decision to suspend a customer’s account is also made in Melbourne. Sportsbet has a discretion to permit a customer to establish a credit facility. The credit facility is approved or not approved by a third party credit reporting agency in Melbourne. The customer is contacted by Sportsbet by email or mail when the credit facility is approved or not approved. That contact comes from Melbourne. Sportsbet may choose to approve or decline an application for a credit facility. That decision to approve or decline is made in Melbourne. Sportsbet may terminate a credit facility. The decision to terminate a credit facility is made in Melbourne.
Approximately 40 highly qualified bookmakers are the risk managers of Sportsbet’s business. They work in a room on one of the floors in the Melbourne premises, where there are numerous screens. A task of the bookmakers is to monitor Sportsbet’s books and manage the risk of Sportsbet’s business. They do so by watching, on the screens in front of them, the bets that are being placed. Sportsbet’s computer system is configured so that, when a bet is placed, it can be observed in Melbourne. While bets are received in the Northern Territory, they can be seen on the screens in Melbourne a millisecond or so after they are received in the Northern Territory. The purpose in having such a system in place is to enable the bookmakers in Melbourne to monitor Sportsbet’s book. Monitoring the book is one of the most fundamental functions of a bookmaker.
The fixed odds offered by Sportsbet on a particular event or contingency are determined by Sportsbet’s bookmakers in Melbourne. The odds are placed on the servers in Melbourne and transmitted to the Northern Territory. The odds are then capable of being accessed anywhere in the world through Sportsbet’s website. As bets are taken on a particular event, such as a thoroughbred, harness or greyhound race, the shape of the book and the nature of the bets are monitored in Melbourne for the purpose, if necessary, of adjusting the odds. When the odds are adjusted, they are adjusted in Melbourne. The bookmakers in Melbourne not only monitor the odds for fixed odds betting but they also monitor the odds on the totalisator. Depending on the shape of the book, the bookmakers may choose to lay off part of Sportsbet’s risk. The laying off of risk is an important area in the business of betting. The decision to do that is made in Melbourne.
Sportsbet holds money in a trust account on behalf of its customers. It does not maintain separate accounts for each customer. Customers are grouped by type, such as post-paid customers and pre-paid customers, and there is one trust account referrable to each type of customer. Thus, there is one account for pre-paid customers, in which all pre-paid customers’ funds are mixed. The bank account is an account with National Australia Bank in the Northern Territory.
When a customer wins a bet, the account of that customer is credited with the amount of the win. The customer must have an account with Sportsbet. If the customer requests money to be transferred out of the account, the transfer to the customer is effected in Melbourne.
The betbox
The primary judge found, quite correctly, that the sole, dedicated and public use of the Betbox is to facilitate betting. It is not merely the means by which the wager is communicated, but is also the means by which the wager is selected, placed and its acceptance is notified. There are distinct and significant differences between the function of the Betbox when a punter places a wager with Sportsbet using the Betbox, on the one hand, and the function of a telephone or personal computer when a punter places a wager with Sportsbet using the telephone or personal computer, on the other.
The Betbox is a computer terminal that allows a punter, by means of a touch screen, to communicate with Sportsbet’s computer servers located at Fannie Bay Racecourse in the Northern Territory, for the purpose of placing bets. On approaching a Betbox situated in Victoria, a punter accesses information on the website maintained by Sportsbet and selects a race on which to place a bet. The punter then selects the wager that the customer wishes to make and sends that as a request, which is received by Sportsbet on its server located at Fannie Bay Racecourse.
A bet placed by means of the Betbox in Victoria is received in the Northern Territory and is accepted or rejected by means of the automated computer system in the Northern Territory. There are certain predetermined bet limits and acceptance levels for which the Sportsbet computer system is programmed. If a bet received is within those predetermined limits and levels, the system will automatically accept the bet without any human intervention. If a bet or series of bets exceeds a certain tolerance threshold, the bet will be automatically denied. The server automatically communicates Sportsbet’s acceptance or rejection of the wager, in a manner that is capable of being shown on the Betbox in Victoria.
Sportsbet’s computer system uses proprietary software developed by Sportsbet to process bets, including receiving bets, processing payouts, maintaining ledgers and other processes. Access to the system in the Northern Territory, in order to place a bet, is achieved by means of the internet. Sportsbet operates two channels through which data is exchanged, one a web browser and the other a web services client.
In order to access the system, either through a web browser or through a web services client, it is necessary for a customer to authenticate access by means of a unique ID and password. From the perspective of Sportsbet’s system, there is no difference between a member gaining access through a web browser or gaining access through a web services client. There is no difference between the two in function, in that both allow the customer access to Sportsbet’s computer system. However, the computer processes that lie behind the two processes are different.
A web browser, such as Internet Explorer or Firefox, allows the user to access the Sportsbet website by means of a personal computer connected to the internet. That, in turn, allows an authenticated person access to the system for the purpose of placing bets and accessing that person’s account. In the case of web browser access, the servers in the Northern Territory operate both front end and back end operations. The system sends out HTML files that are received and interpreted by the web browser. The web browser receives the messages and displays them as a web page. The customer then navigates the web page in order to review the customer’s account or to place a wager. All of the data, including the graphics, emanate from the computer servers in the Northern Territory. When a wager is placed, it is processed in the Northern Territory and the computer system either accepts or rejects the wager. When it is accepted, a bet number is transmitted over the internet and can be read on the screen at the customer’s terminal. Although there are several processes involved, the transaction is very fast. The customer can subsequently track the bet over the internet using the bet number allocated to the bet.
A web services client enables the user to access Sportsbet’s computer system by means of a Betbox. Once the customer enters the customer’s unique identifier and password, the customer is able to access the customer’s account and place a wager. The Betbox does not record or save any data in the Betbox itself. It is solely a communication device to allow the customer to access the computer system maintained by Sportsbet in the Northern Territory.
The key technical difference between web browser access and web services client access, from an information-processing standpoint, is that the web services client, stored on the Betbox, processes the graphics. The Betbox receives XML code from the computer server and uses software to present graphical images. A web services client is used for Betbox access rather than a web browser because the web services client interacts better with the touch screen technology used in the Betbox.
Thus, a Betbox operates in a similar way to a web browser on a personal computer, although it uses different software. The Betbox performs the same computing function as a personal computer, or mobile telephone with internet capabilities. The Betbox is designed to use an ADSL telephone connection to the internet. However, it could also be set up to use a 3G modem connection, such as is commonly used on mobile telephones and personal computers. The Betbox provides convenience for the customer and is designed to operate at high speeds, but does not differ from a personal computer or mobile phone in a functional sense.
The Sportsbet website advertises all available selections that operate on the Sportsbet system. A customer can log on to Sportsbet’s website either by use of the internet with a unique identifier and password or by use of a telephone or facsimile machine. The customer then nominates a bet by selecting the preferred event, the bet type and the bet amount. The customer can transmit that information to Sportsbet at its premises in the Northern Territory from a location anywhere in the world, either orally over the telephone or electronically by way of the internet. If the bet is received orally over the telephone or by facsimile, the bet is manually entered into the Sportsbet computer system located in the Northern Territory by an operator in the Northern territory premises. When a bet is accepted orally over the telephone, the operator informs the customer that the bet has been accepted. If Sportsbet accepts a bet, it places a bet confirmation number on Sportsbet’s website and the customer can check to see whether the bet has been accepted. The Impugned Provisions do not impose any restrictions on a person in Victoria betting by telephone or facsimile or by means of a personal computer in the way just described.
Tabcorp employs a device known as an EasyBet Terminal. EasyBet Terminals are widely distributed throughout licensed premises in Victoria. The function of an EasyBet Terminal is similar to the function of a Betbox, which is described in more detail below. The use of an EasyBet Terminal by Tabcorp or Tabcorp Manager is lawful if it is conducted in accordance with s 4.3.1 of the Gambling Act, because it is betting of a kind authorised by s 4.2.1.
There is an iPhone application called TAB iPhone. Once loaded onto an iPhone, that application allows the user to access Tabcorp’s website for the purpose of placing bets. Like a Betbox, an iPhone uses a touch screen interface. The function performed by the application is identical to the function performed by the Betbox.
THE DECISION OF THE PRIMARY JUDGE
The primary judge found that there is a national wagering market and that wagering services on racing and sporting events are supplied to users of those services throughout Australia by means of telephone and the internet. Her Honour found that competition in that market has been increasing for at least 10 years and that the competition is now fierce. Sportsbet competes in that market with Tabcorp, which accepts bets through its EasyBet Terminals, as well as over the internet. Tabcorp has also established a Northern Territory subsidiary to compete with Sportsbet and other corporate bookmakers offering wagering products. Sportsbet also competes with licensed bookmakers in Victoria operating at racecourses, who accept bets by punters present on the racecourse, over the telephone and by means of the internet.
The Betbox that was installed in and operated from the Hotel was intended to attract customers for Sportsbet and to attract patrons to the Hotel. Patrons who came to the Hotel would be able to have a drink, watch television, eat a meal and place bets by means of the Betbox. The licence for the use of the Betbox granted by Sportsbet to Eureka included a requirement that the Betbox be located in a prominent and visible position adjacent to the main bar. Sportsbet paraphernalia was disseminated throughout the bar in order to attract customers.
The primary judge found that the Betbox is an instrument of betting and that its sole, dedicated and public use is to facilitate betting. It is not merely the means by which a bet is communicated but is also the means or mechanism by which the bet is selected by the punter, placed with Sportsbet and its acceptance is notified by Sportsbet. When a bet is placed on a Betbox in Victoria, the Betbox is the indispensable or essential means for so placing the bet. By installing the Betbox in the Hotel, Sportsbet localised the Hotel as the stand or pitch where bets are executed. Further, the Betbox, including the computer terminal located within it, constitutes a physical presence of Sportsbet within the Hotel.
The primary judge held, correctly, that s 2.6.1, by its express terms, is directed at physical possession, custody or control of, or access to, an instrument of betting in Victoria. It is not concerned with a wagering contract, or the proper law or governing law of a wagering contract, but with the physical instrument and its possession or deemed possession in Victoria. The prohibition in s 2.6.1 has nothing to do with Sportsbet’s computer system in the Northern territory. Rather, it is directed at prohibiting the physical presence in Victoria of an instrument that is used in carrying on, or in connection with, betting on a sporting event and possession by a person of that instrument. The prohibition operates, in the present case, on possession of the Betbox, which is the means or mechanism by which a wager is selected, placed and its acceptance is notified, at the Hotel. Possession of the Betbox enables any one of those objectives to be achieved.
In those circumstances, the primary judge found that the installation and use of the Betbox in the Hotel contravened the Impugned Provisions. However, her Honour found that a contract made between a punter and Sportsbet by means of a Betbox, by its nature, involves the movement, from a place in Victoria to a place in the Northern Territory, of things tangible or intangible. Her Honour concluded therefore, that the business of Sportsbet, in accepting wagers placed through its Betbox situated in Victoria, constitutes trade and commerce between the Northern Territory and Victoria and that the Impugned Provisions impose on that trade and commerce a discriminatory burden that is protectionist in nature.
The primary judge considered that, once it was accepted that the Impugned Provisions constitute a relevant burden, the State had the onus of establishing that the burden was appropriate and adapted to a legitimate end. Her Honour considered that, in determining whether a particular provision is appropriate and adapted to a legitimate end, the burden imposed must be no more than is reasonably necessary, in that there must be an acceptable explanation or justification for the identified discriminatory treatment of trade and commerce between the Northern Territory and Victoria. That is to say, it is not necessary to show that the burden is absolutely necessary to achieve the relevant end.
Two overlapping ends had been identified by the State as being legitimate. They were as follows:
·funding the operation of the racing industry in Victoria by means of taxes and charges imposed in respect of the sole offcourse wagering and betting business authorised to be conducted in Victoria; and
·the regulation, control and restriction of offcourse betting, including totalisator wagering and other betting, in Victoria.
The primary judge found that the Impugned Provisions were not appropriate or adapted to any legitimate end. Accordingly, her Honour concluded that the Impugned Provisions offended s 49 of the Self-Government Act.
The State and Tabcorp contend that the primary judge erred in her conclusions concerning the application of s 49 of the Self-Government Act. Thus, three broad questions were raised in the appeals as follows:
·whether the placing and acceptance of wagers by means of the Betbox, including associated financial transactions and the commercial arrangements for the installation of the Betbox in the Hotel, constitute trade and commerce between the Northern Territory and Victoria;
·whether the prohibitions contained in the Impugned Provisions impose on that trade and commerce a discriminatory burden that is protectionist in nature; and
·whether any such burden is appropriate and adapted to a legitimate non-protectionist end.
Before dealing with those questions, it is necessary to say something about the relevant legal principles.
RELEVANT LEGAL PRINCIPLES
The establishment of a monopoly by statute does not, of itself, engage s 92 of the Constitution or s 49 of the Self-Government Act. Where a statutory monopoly exists, no person is permitted to compete with the monopolist. In such a case, the statute discriminates between the monopolist, on the one hand, and all others, on the other hand. It does not discriminate against trade or commerce between a Territory and a State (see Barley Marketing Board (NSW) v Norman (1990) 171 CLR 182). A licensing scheme does not prima facie discriminate against trade and commerce between States or between a State and Territory. Rather, it discriminates between the holders of a licence and all others. Unless it can be shown that the practical operation of such a scheme is such that it can be inferred that the true purpose of the establishment of the scheme was to discriminate against trade and commerce between State and Territory or between States, neither s 92 nor s 49 will be attracted.
Section 49 is not concerned with the individual rights of entities that engage in trade or commerce that extends over State or Territory boundaries. It does not extend to a burden on trade or commerce in which an entity engages or seeks to engage simply because that entity happens to operate from, or have a place of business, outside the borders of the State or Territory that imposes the burden. It does not extend to a burden imposed by the law of a State or Territory simply because the burden affects competition between participants in a national market, even if those participants happen to be located on different sides of a State or Territory boundary (Betfair Pty Limited v Western Australia (2008) 234 CLR 418 at [26] (Betfair v WA) and Castlemaine Tooheys Limited v South Australia (1990) 169 CLR 436 at 471 and 474 (Castlemaine Tooheys).
The new economy, both Australia-wide and worldwide, facilitates the ability of those who are physically located outside the geographical area of a particular jurisdiction to compete with those physically located wholly within the geographical area of that jurisdiction. That, in turn, has facilitated the development of national markets in circumstances where, previously, only local markets might have existed. Thus, the factual context within which s 49 operates has changed. Nevertheless, while the factual context has changed, the legal questions posed by s 49 remain the same.
The purpose of s 92 of the Constitution was the achievement of freedom of trade and commerce among the States that succeeded the former colonies. The purpose of s 49 of the Self-Government Act is the achievement of freedom of trade and commerce between the Northern Territory and the States. However, it is necessary to identify the kinds of burdens, restrictions, controls and standards from which freedom is guaranteed by the provisions. Both s 92 and s 49 require only that trade and commerce be immune from discriminatory burdens of a protectionist kind. That is to say, the object of both s 92 and s 49 is the elimination of protectionism. Both provisions are designed to prevent the use of State and Territory boundaries as trade borders or barriers for the protection of participants in a market, who are within a State or Territory, from competition from participants in that same market, who are not in that State or Territory. The means by which that object is achieved is a prohibition of measures that burden trade and commerce between State and Territory and that have the effect of conferring protection on intrastate trade and commerce of the same kind (Cole v Whitfield (1988) 165 CLR 360 at 392-394 (Cole v Whitfield), Betfair v WA at [36]).
In considering the application of s 49 to a particular law, one must first consider the nature of that law. If, on its face, it applies to all trade and commerce, both between State and Territory and intrastate, it is less likely to be protectionist than if discrimination appears on its face. However, even if the law does not, on its face, discriminate in favour of intra-State trade, it will nevertheless offend s 49 if, in its effect, it discriminates in favour of intra-State trade and the discrimination is of a protectionist character. On the other hand, a law will not ordinarily be characterised as protectionist if its real object is the prescription of a standard for a product or service or a norm of commercial conduct for all participants in a market (Cole v Whitfield at 408).
Even though a particular measure may unquestionably constitute a burden on trade and commerce between State and Territory, of a particular kind, it will not necessarily bear the character of being discriminatory against that trade and commerce if the burden applies equally to intrastate trade and commerce and to trade and commerce between State and territory. If the burden created by the law does not give intrastate trade and commerce a competitive or market advantage over trade and commerce between State and Territory, there will be no offending against s 49 (Cole v Whitfield at 409).
A law will be discriminatory if it operates by reference to a distinction that some overriding law decrees to be irrelevant or by reference to a distinction that is, in fact, irrelevant to the object to be attained. Even if a law operates by reference to a relevant distinction, it will be discriminatory if the different treatment thereby assigned is not appropriate and adapted to the difference or differences that support that distinction. A law will also be discriminatory if, although there is a relevant difference, it proceeds as though there is no such difference. That is to say, a law will be discriminatory if it treats equally things that are unequal unless there is no practical basis for differentiation (Castlemaine Tooheys at 478).
Section 49 will not invalidate a burden on trade and commerce between State and Territory that disadvantages that trade in competition with intrastate trade, if the imposition of the burden is reasonably necessary or appropriate for the protection of the people of the State from a real danger or threat to its wellbeing. The question whether a particular legislative enactment is a necessary, or even a desirable, solution to a particular problem is, in large measure, a political question, best left for resolution by the political process. It would be intolerable for the judiciary to sit in judgment on a legislative decision, since to do so would give a new and unacceptable dimension to the relationship between the judiciary and the legislature. The judiciary would be placed in an invidious position if it were only such regulation of interstate trade as is, in fact, necessary for the protection of the community that was consistent with the freedom ordained by s 92 (Castlemaine Tooheys at 472-473).
Even if a measure is legitimately directed to a perceived threat to the integrity of an industry in a State, the method of countering it must be non-discriminatory regulation. If the choice taken is not necessary for the protection of the integrity of that industry in the State, in that prohibitions contained in the measure are not appropriate and adapted to guarding against the threat to the integrity of that industry in a non-discriminatory manner, the provision will offend s 92 (Betfair v WA at [109]-[110]). Further, revenue protection cannot justify a law that discriminates against interstate trade, since such a justification, if allowable, would support the reintroduction of customs duties at State and Territory borders (Betfair v WA at [108]).
A measure may burden trade and commerce between State and Territory, both directly and indirectly. It will do so directly if it denies to a trader outside the State the use of an element in that trader’s operations. It will do so indirectly if it denies to the customers of the out-of-State trader receipt and consideration of information required by those customers that would otherwise be available to them by accessing the trader’s website or by communication with its telephone operators. If such effects operate to the competitive disadvantage of the trader outside the State and to the advantage of in-State traders, the measure may impose a discriminatory burden of a protectionist kind on trade between State and Territory (Betfair v WA at [118]).
A measure that prohibits a person in a State from engaging in a particular form of transaction by means of a cross-border electronic communication and renders an out-of-State trader liable for aiding or abetting an offence by a person in the State, may be a discriminatory burden on interstate trade of a protectionist kind, even if all of the acts of the out of State trader occur outside the State and that particular form of transaction is also denied to in-State operators and their customers. However, such a measure will only be a discriminatory burden on interstate trade of a protectionist kind if it operates to protect established trading operations in the State from the competition that the out-of-State trader would otherwise present. If the discrimination in a measure is between different but competing forms of transaction and the effect of the measure is to prohibit an out-of-State trader from providing a service to persons in the State, leaving in-State operators able to supply customers with their services without the competition to their revenue that the out-of-State trader would present, the measure will impose a discriminatory burden of a protectionist kind (Betfair v WA at [120]-[122]).
Before there will be a contravention of s 49, it is necessary to point to a relevant differential treatment that is likely to discriminate in a protectionist sense between interstate and intrastate wagering transactions that employ technology such as the Betbox (Betfair Pty Limited v Racing New South Wales (2012) 286 ALR 221 at [31] (Betfair v Racing New South Wales). Not every measure that has an adverse effect between competitors will attract the operation of s 49. A measure will not contravene s 49 unless its practical effect is to discriminate against interstate trade and thereby protect intrastate trade of the same kind (Betfair v WA at [11] and Betfair v Racing New South Wales at [36]). The concept of protectionism supplies the criterion by which discriminatory laws may be classified as rendering less than absolutely free trade and commerce among the States and between the Northern Territory and the States. The requirement of protectionism is essential to the attraction of s 92 or of s 49 (Betfair v Racing New South Wales at [36]).
Emphasis upon the circumstances of particular traders, and upon features that may be accidental to those circumstances and to interstate transactions in which those traders may engage, carries the risk of erroneously characterising an impugned law by its effect on particular traders and not by its effect upon interstate trade (Betfair v Racing New South Wales at [46]). The subject of s 49 is trade between the Northern Territory and the States, not traders, whose transactions may or may not consist wholly of inter-State transactions or intra-State transactions (Betfair v Racing New South Wales at [50]).
The fact that a trader has its principal place of operation in a State where its business receives protection by the law of that State does not necessarily lead to the conclusion that that trader is engaged only in intrastate trade. Where the central management and control of a trader is located in one state but it carries on, in other States, the business of selling goods, the essence of which consists of the contracts with buyers, the trader should not be classified as being engaged in intrastate trade (Betfair v Racing New South Wales at [48]-[49]).
APPLICATION OF SECTION 49 OF THE SELF-GOVERNMENT ACT
The declarations made by the primary judge, which were the declarations sought by Sportsbet and Eureka, were that the Impugned Provisions are invalid to the extent that they apply to the installation and use in Victoria by Sportsbet and Eureka of the computer device known as a Betbox. The basis for the invalidity is that they offend against s 49 of the Self-Government Act, in that they impose an impermissible burden on trade and commerce between the Northern Territory and Victoria.
Those declarations are specifically concerned with activities of Sportsbet and Eureka. In concluding that, by accepting wagers by means of the Betbox, Sportsbet is engaged in interstate trade and commerce, the primary judge regarded several facts and matters as being critical.
Firstly, Sportsbet is registered in the Northern Territory and has a registered office and principal place of business in the Northern Territory. However, the following facts make it clear that the real central control and management of Sportsbet’s business is in Victoria:
·While Sportsbet has a registered office in Darwin, it has much larger offices in Melbourne.
·A substantial part of Sportsbet’s business is conducted in Melbourne, including its IT, marketing, human relations, finance and administration departments, its bookmakers, the risk management department, real-time client bet monitoring and the fraud department, including anti-money laundering checking.
·The management of Sportsbet’s business is conducted in Melbourne and there is a far greater concentration of senior and other staff in Melbourne.
·Sportsbet’s senior managers spend most of their time in Melbourne and are resident in Melbourne.
·Sportsbet’s Northern Territory licence does not confer any right, and does not purport to confer any right, on Sportsbet to engage in bookmaking activities in Victoria.
·By installing the Betbox in the Hotel and its display of logos and advertising, Sportsbet had a physical presence in Victoria and, in substance, betting and wagering transactions occurred within Victoria.
Secondly, her Honour had regard to the fact that Sportsbet has a registered licence business that operates from specific premises in the Northern Territory under the Territory Betting Act. Its licence permits Sportsbet a more flexible approach to marketing than other places in Australia. It permits Sportsbet to offer a much wider range of bets to punters than is permitted under Victorian law. It permits Sportsbet to provide credit to punters. Sportsbet cannot do that anywhere else in Australia. One of the conditions of Sportsbet’s licence is that Sportsbet take bets from the Fannie Bay racecourse in Darwin.
In that regard, it is relevant that there is a developed market throughout Australia for the provision by bookmakers and totalisators, by means of telephone and the Internet, of wagering services on racing and sporting events. Indeed, such a market may be international. Such events may take place in one State or Territory, the punter may be in another State or Territory and the bookmaker or totalisator may be in a third State or Territory. The inhibition to competition presented by geographic separation between rival suppliers and between supplier and customer in such a market is reduced by the existence of the Internet and the ease of its use, together with other means of electronic communication, such as wireless telephones (Betfair v WA at [114]).
However, even if the facts and matters relied on by the primary judge might lead to the conclusion that Sportsbet is engaged in trade and commerce in a market that extends to the Northern Territory and other parts of Australia and the world, including Victoria, that is not to the point. The question is whether the installation and use of the Betbox and the transactions that are undertaken by means of the Betbox constitute trade between the Northern Territory and Victoria. It is not sufficient to conclude that Sportsbet is engaged in interstate trade and commerce between Victoria and the Northern Territory. It is necessary to consider whether the Impugned Provisions impose a relevant burden on that trade and commerce.
The relevant transactions that Sportsbet says constitute the trade and commerce between Victoria and the Northern Territory that is burdened by the Impugned Provisions occur when a punter places a wager with Sportsbet using the Betbox in the Hotel in Victoria. In those circumstances, the punter is present in the Hotel; so is Sportsbet, by reason of the location of the Betbox in the Hotel. Thus, the relevant transactions occur between Sportsbet, through the Betbox, and the punter, within the Hotel in Victoria. The question is whether those transactions are properly to be characterised as trade and commerce between Victoria and the Northern Territory. That question is not answered by considering the business of Sportsbet or the business of Eureka in broad terms. It is necessary to examine the precise conduct involved.
The Betbox, located in Victoria, is the means whereby a customer of Sportsbet places a wager with Sportsbet in Victoria. The fact that the wager is subsequently accepted or rejected in Darwin does not detract from the fact that the Hotel is a place of betting within the meaning of s 2.5.2(1)(a). The Betbox, and the place where it is located within the Hotel, are both places to which punters resort for the purposes of wagering with Sportsbet. The function and purpose of the Betbox at the Hotel is to enable Sportsbet to accept instructions from punters in Victoria for the placing of bets with Sportsbet. By installing the Betbox in the Hotel, Sportsbet has localised a stand or pitch where wagers were to be executed (see Bond v Foran (1934) 52 CLR 364 at 370). That stand or pitch is in Victoria.
In so far as Sportsbet engages in trade and commerce in a market that extends beyond the borders of the Northern Territory, it does so by means of the internet and other technology, such as personal computers and mobile telephones. Competition in that regard is fierce. However, s 49 does not afford Sportsbet an immunity to conduct business as it pleases in Victoria simply because there are some aspects of its activities that might fairly be characterised as trade and commerce that go beyond the boundaries of the Northern Territory and might fairly be described as trade and commerce between the Northern Territory and Victoria. The Impugned Provisions do not prevent Sportsbet from doing what it does in the Northern Territory in accordance with its licence. Nor do they prevent Sportsbet from engaging in its business beyond the border of the Northern Territory by means of the internet and other technology, such as personal computers and mobile telephones.
Finally, the primary judge had regard to the fact that the significant part of Sportsbet’s computer system is located in Darwin and that Sportsbet’s customers, including customers in Victoria, interact with Sportsbet through its computers located in the Northern Territory. However, the facts summarised above demonstrate that the computer system and employees in the Northern Territory operate under the control and management of the senior management of Sportsbet located in Victoria. The Impugned Provisions prohibit activities that are distinctly Victorian. The use of the Betbox is essentially Victorian. Any trade and commerce that is affected by the Impugned Provisions, including the installation and use of the Betbox in the Hotel, occurs within Victoria.
Accordingly, there are cogent reasons for concluding that the primary judge erred in concluding that the installation and the use of the Betbox in the Hotel, as described above, constitutes trade or commerce between the Northern Territory and Victoria. Having regard to the location in Victoria of the management of Sportsbet, the Betbox, the Hotel and a punter who uses the Betbox in the Hotel for the purpose of making a wager or bet with Sportsbet, there are good grounds for concluding that it is trade and commerce wholly within Victoria. The connection with Sportsbet’s computer system in the Northern Territory is no more than incidental to the particular transactions in question. It would follow that the Impugned Provisions impose no burden or restraint on trade and commerce between Victoria and the Northern Territory.
However, even if the particular conduct in question constitutes trade and commerce between the Northern Territory and Victoria, the critical question is whether the Impugned Provisions constitute a burden of the relevant kind on that trade and commerce, namely, a discriminatory burden of a protectionist kind. The Impugned Provisions do not have a discriminatory effect in relation to Sportsbet qua interstate trader, because there is no competition between Sportsbet and Tabcorp on equal terms. Sportsbet would have a huge advantage over Tabcorp if it were allowed to operate the Betbox without having to bear all of the obligations undertaken by Tabcorp. The obligations undertaken by Tabcorp are the quia pro quo for all of the rights granted by its licence.
Discrimination involves the unequal treatment of equals or the equal treatment of unequals (Bayside City Council v Telstra Corporation Limited (2004) 216 CLR 595 at 629-630). However, Sportsbet is treated in precisely the same way as every other person in the world, other than Tabcorp. While Tabcorp and Sportsbet may be competitors, they are not equals. The grant of the wagering licence to Tabcorp was conferred only on the basis that Tabcorp would accept substantial burdens, principally directed to the advancement of the Victorian racing industry. Those burdens do not fall upon Sportsbet or upon anybody else. Tabcorp is sui generis.
It is not possible to conclude, simply from the differential treatment afforded to Tabcorp, by reason of its exemption from the Impugned Provisions, that the Impugned Provisions discriminate in favour of intrastate trade. Tabcorp is in a position relevantly different from all other bookmakers, both Victorian and Northern Territory. It is the holder of a licence for which it paid approximately $600 million, being a licence that grants to it the privilege of totalisator exclusivity and offcourse retail exclusivity. As a condition of the grant of that licence and of the privileges that it entails, Tabcorp was required to, and did, enter into arrangements that were satisfactory to the racing industry, being arrangements that substantially fund the racing industry. Tabcorp is subject to special and distinct regulatory requirements by reason of its status as the holder of that licence. The differences between the legislative treatment of Tabcorp, on the one hand, and the legislative treatment of all other entities, on the other, are a reflection of the value of the privileges for which Tabcorp paid substantial consideration.
In their terms, the Impugned Provisions treat all bookmakers other than Tabcorp equally, whether they are based in the Northern Territory or Victoria and whether they engage in trade and commerce between the Northern Territory and Victoria or intrastate trade and commerce. Unless registered under the Gambling Act, no person can operate as a bookmaker in Victoria. If registered under the Gambling Act, a person may engage in such business while at a licensed race course in Victoria. There is nothing to preclude bookmakers who wish to engage in trade and commerce between the Northern Territory and Victoria, or who have connections with the Northern Territory, from becoming registered under the Gambling Act. However, even if so registered, no bookmaker other than Tabcorp, whether wholly Victorian or otherwise, can conduct offcourse business by means of a service such as the Betbox. On the other hand, there is no prohibition on Sportsbet receiving bets from persons located in Victoria by means of telephone or personal computer and the internet.
If Sportsbet or any other Northern Territory based bookmaker sought to be registered in Victoria, it would be in exactly the same position as all other bookmakers registered in Victoria, other than Tabcorp. The fact that the Impugned Provisions preclude Sportsbet from conducting business in Victoria by means of the Betbox is not of itself sufficient to engage s 49 of the Self-Government Act. Sportsbet must demonstrate discrimination of a protectionist kind, not just an adverse effect on a particular aspect of its business. Section 49 does not protect the particular business model that a trader seeks to employ.
If the requirement of the Impugned Provisions that all bookmakers conducting business in Victoria must do so only at particular locations offended s 49, the consequence would be that the State could regulate where and how Victorian bookmakers can conduct their business in Victoria but could not regulate where and how non-Victorian bookmakers can conduct their business in Victoria. Section 92 of the Constitution, in its emanation in s 49 of the Self-Government Act, does not afford Sportsbet an immunity to conduct business as it pleases in a State simply because it has a licence in the Northern Territory and it processes, on its computer system in the Northern Territory, wagering transactions that emanate from Victoria.
As already noted, the impugned provisions have their origins in late 19th and early 20th century Victorian laws, when gambling was permitted only on race courses. There is no suggestion that, as blanket prohibitions, they disclosed a protectionist purpose. Rather, Sportsbet would have the court impute a protectionist character to them because their prohibitions apply to all bookmakers conducting business in Victoria save for Tabcorp.
As the plurality judgment stated in Bayside City Council v Telstra CorporationLtd (2004) 216 CLR 595 at 629-630, “where a certain kind of differential treatment is put forward as the basis of a claim of discrimination, it may require an examination of the relevance, appropriateness, or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified”. Whether or not, as a practical matter, the differential treatment inherent in exempting Tabcorp from the impugned provisions is of a protectionist nature depends on a consideration of matters of this kind.
The relevant statutory history does not support any imputation of protectionism. As already noted, Tabcorp’s favoured position has its origins in the establishment of the TAB by the Racing (Totalizators Extension) Act 1960 (Vic), enacted as a consequence of Justice Martin’s report in 1959: see [147] above. History discloses that the statutory monopoly enjoyed by the TAB was introduced to allow off-course totalisator wagering with a single wagering operator in a regulated environment. More immediately, however, Tabcorp’s favoured position derives from the arrangements made in 1994, pursuant to which Tabcorp acquired the business of the TAB. These arrangements were designed to secure funding for the racing industry and also to provide for the well-being of the industry: see [148]-[154] above. These arrangements included the enactment of the GBA 1994 and the grant to Tabcorp of the sole wagering licence for an eighteen-year term, as a result of which Tabcorp enjoys retail and totalisator exclusivity. The arrangements also included the JVA and other agreements pursuant to which Tabcorp undertook significant obligations to the racing industry, including a funding obligation to contribute at a higher effective rate than any other wagering operator and to operate a totalisator. When enacted in 2003, the GRA represented no material departure in the legislative scheme or purpose from the GBA 1994. As noted above (at [155]), the main purpose of the GRA was that of re-enactment and consolidation of the existing regulatory regime: see GRA, s 1.1(1).
As we have seen, the grant of the sole wagering licence under the GBA 1994 operated to exempt Tabcorp from the prohibitions in the impugned provisions and conferred a monopoly on Tabcorp with respect to off-course retail wagering. The GRA operated to preserve Tabcorp’s exemption and its monopoly rights. As explained earlier (at [282]-[284]), the existence of a monopoly of the kind enjoyed by Tabcorp does not demonstrate discrimination of a protectionist kind: it does not operate in terms or practical effect competitively to disadvantage out-of-state trade or advantage intrastate trade: compare Castlemaine Tooheys at 467, 468; Barley Marketing Board at 203; and Betfair v WA at 481 [118].
At the time of the enactment of the GRA, the regulatory scheme of which Tabcorp’s monopoly formed part had been in operation for almost a decade. In 1994, besides making the substantial payment and assuming the obligations to which reference has been made, Tabcorp was also made subject to a distinct regulatory regime: see [165] and [283] above. The GRA continued this regulatory regime and preserved Tabcorp’s rights as the sole wagering licensee whilst, at the same time, Tabcorp’s obligations under the 1994 arrangements continued. Competition from out-of-state bookmakers was insignificant in the early 1990s and, by 2003 when the GRA was enacted, it was still no more that “a niche segment” in the Australian wagering market: see [200] above. In this context, there is little reason to suppose that when the GBA 1994 and the GRA were enacted, they created or preserved a monopoly that operated to advantage intrastate trade or disadvantage out-of-state trade in a protectionist sense.
The appellants argued that the fact that, at the time of enactment, the practical operation of the impugned provisions was not to advantage intrastate trade or disadvantage out-of-state trade was conclusive of the absence of protectionism. They submitted that: (1) the practical effect of a law on out-of-state trade was relevant only to identify the character of a law; (2) the process of characterisation was an inquiry into the objective intention of the legislature in enacting the impugned provisions; and (3) the relevant time for an inquiry as to the practical effect was at the time of enactment of these provisions. The appellants argued that the practical operation of the impugned provisions on facts that were not in Parliament’s contemplation at the time of enactment was not relevant to the question of validity. The appellants argued that the primary judge wrongly rejected this submission and that her Honour failed to consider the correct question – whether the practical operation of the impugned provisions founded an inference that the true purpose of the provisions was to achieve a protectionist object.
Against these propositions, Sportsbet argued that, in s 92 jurisprudence, where validity depended on the practical operation of a law, the practical effect of an impugned measure was to be considered as at the time of the alleged invalidity – in this case, on 16 July 2010, when the VCGR seized the betbox and thereby interfered with Sportsbet’s trade. In written submissions, Sportsbet said:
It is clear that since July 2004 the wagering market has changed considerably with the development of internet wagering, the growth of corporate bookmakers and the introduction of race fields.
Section 92 must be applied in a way that accommodates these changes. The core questions posed by s 92, namely whether a discriminatory burden of a protectionist kind is imposed and, if so, whether the burden is saved by a non-protectionist purpose are to be answered as a practical matter at the time the burden bites.
The issue of time raised by the parties’ submissions is an important one that has attracted scholarly attention: see, for example, Sonter D, “Intention or Effect? Commonwealth and State Legislation after Cole v Whitfield” (1995) 69 ALJ 332 at 337-341; Simpson A, “Grounding the High Court’s Modern Section 92 Jurisprudence: the Case for Improper Purpose as the Touchstone” (2005) 33 FL Rev 445 at 465-484; and Bell AS, “Section 92, Factual Discrimination and the High Court” (1991) 20 FL Rev 240 at 245-248. As explained below, it is, however, unnecessary to determine the issue here, because the changes relied on by Sportsbet do not affect the resolution of these appeals.
Whilst the evidence showed that, by 2010, Tabcorp faced competition from a range of wagering operators, including out-of-state corporate bookmakers like Sportsbet, there was no reason to suppose that Tabcorp’s favoured position was on this account converted from a permissible to an impermissible monopoly. The change could not retrospectively alter the objective intention of the legislature in enacting the GRA, or the GBA 1994. This was, and remained, a non-protectionist purpose. Equally importantly, the different treatment accorded Tabcorp as compared with other traders, including out-of-state traders such as Sportsbet, continued to be explicable by reference to a relevant difference between Tabcorp and other traders. That is, Tabcorp’s favoured position continued to be explicable by reference to the arrangements made in 1994, pursuant to which Tabcorp acquired the sole wagering licence and assumed the significant obligations to which reference has been made.
Sportsbet argued that it was competitively disadvantaged in comparison with Tabcorp by reason of the fact that the impugned provisions prevented it from using a betbox in Victoria although Tabcorp could use Easybet terminals. Sportsbet contended that “[t]he competitive disadvantage that flows to [out-of-state] traders was clearly proved by the commercial exploitation of the Easybet terminals by Tabcorp”. There are a number of difficulties with this submission, some of which have already been noted.
Sportsbet’s argument with respect to changed circumstances tended to assume, at another level still, an individual rights theory of s 92. The fact that the impugned provisions prevented Sportsbet from competing with Tabcorp in one way (by using a betbox) does not demonstrate protectionism. To establish discrimination of a protectionist kind, Sportsbet had to show, in effect, that, by exempting Tabcorp from their operation, the impugned provisions subjected Sportsbet, as a proxy for trade between the State and Territory, to a competitive disadvantage sufficient to warrant a finding that the provisions were protectionist: see Cole v Whitfield at 399, 409 and Bath at 426. Sportsbet did not satisfy this requirement. Having regard to the whole of the legislative scheme, there was no evidence that, as a matter of fact, the impugned provisions created such a competitive disadvantage for Sportsbet as an out-of-state trader that warranted the provisions being characterized as protectionist. There was, for example, no evidence that Sportsbet’s market share or profits were reduced as a consequence of the impugned provisions: compare Betfair v Racing NSW at 235-236 [55]-[56], 237 [62]-[63], 249 [110], 254 [133]. Nor was there evidence that, Tabcorp aside, the impugned provisions operated to the competitive advantage of in-State wagering operators as a whole. As Betfair v Racing NSW and Sportsbet v NSW clearly showed, the fact that the impugned provisions affected competition between participants in a national market, even on different sides of State and Territory borders, was insufficient to establish protectionism: see also Castlemaine Tooheys at 472 and 474.
In supplementary submissions dated 18 April 2012, Sportsbet made what it termed a “formal submission” that s 92 should be construed to “prohibit any … restriction of trade, commerce and intercourse among the States which is detrimental to competition in a market, which operates without reference to State boundaries”. This submission must fail, having regard to the authorities discussed earlier. Furthermore, as the appellants noted, this was not the case Sportsbet ran at trial and has no basis in the pleadings. The submission was not the subject of a notice of contention. Had the submission formed part of Sportsbet’s case at trial, it seems likely that the appellants would have led further evidence.
Protectionism – Not reasonably necessary to achieve a legitimate purpose?
Even if the impugned provisions discriminated against out-of-state trade to its competitive disadvantage or the advantage of intrastate trade, the provisions cannot be characterised as protectionist if they were enacted in pursuit of a legitimate objective and were appropriate and adapted, or reasonably necessary, to achieve that objective: see Cole v Whitfield at 408-410 and Betfair v WA at 477 [102]-[103], discussed at [231]-[233] above.
The appellants contended that the impugned provisions were reasonably necessary for:
(a)funding the Victorian racing industry by means of the payment obligations imposed on Tabcorp as the holder of the sole wagering licence conferring off-course retail and totalisator exclusivity (Victoria’s contention);
(b)for the regulation, control and restriction of off-course betting in Victoria (Victoria’s contention);
(c)for the promotion of a vibrant and successful racing program and associated spectacle, including by materially funding the racing industry (Tabcorp’s contention);
(d)for the promotion of an attractive and socially beneficial form of wagering through the provision and protection of an ubiquitous totalisator (Tabcorp’s contention); and
(e)for the preservation of integrity and probity within the Victorian racing and wagering industries (Tabcorp’s contention).
Plainly enough, these objectives overlap and are inter-related: compare Racing NSW v Sportsbet at 490 [138]. Further, when considered in light of the circumstances mentioned earlier, objectives (a) and (c) may be regarded as different formulations of essentially the same idea. Both involve the proposition that the impugned provisions are reasonably necessary for the promotion of a successful racing industry, including for the purpose of funding the industry. Likewise, objective (b) and objective (e) can be understood as different ways of expressing essentially the same objective. Objective (d) may be considered as part of both sets of objectives.
The primary judge rejected the contention with regard to funding because the appellants failed to demonstrate that the impugned provisions were “the only means or a necessary means” to achieve that end (emphasis in original): see Sportsbet v Victoria at 455 [141], 455-456 [143], 456 [145], 457 [149], 458 [150]-[151]. In her Honour’s words (at 455 [141]), “the evidence did not establish what was the necessary level of funding, and whether that level of funding could only be secured by maintenance of the impugned provisions”. Similarly, her Honour held that the appellants had not shown that the impugned provisions were reasonably necessary for the regulation, control and restriction of off-course betting in Victoria because it was not shown that “the objectives sought to be achieved could not be achieved without the impugned provisions”: see Sportsbet v Victoria at 459 [154].
Reasonably necessary for the promotion of a successful racing industry, including for the purpose of funding the industry
The legislative history shows that, objectively speaking, these objects were amongst the chief purposes of the legislative regime, of which the impugned provisions formed part: compare APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 394 [178] (Gummow J) and 462 [423]-[424] (Hayne J). Under the legislative scheme, Tabcorp’s exclusion as the sole wagering licensee from the prohibitions in the impugned provisions conferred off-course retail and totalisator exclusivity. The legislative history and the liabilities, rights and privileges that the impugned provisions create show that Tabcorp was granted retail exclusivity upon the basis that Tabcorp would provide a totalisator wagering service and from that service provide much of the funds for the Victorian racing industry: see [145]-[171] above; also Sportsbet Victoria at 453-454 [135].
It was, of course, open to the State to be of the view that the Victorian racing industry contributed to the social, cultural and economic well-being of Victoria and to decide upon a funding model for the industry: see [142]-[144] above. This model (see [172]-[185]) has worked well. As noted, the primary judge stated that the funding model used in Victoria “has been and remains highly successful” and is also used in other Australian jurisdictions and internationally: see Sportsbet v Victoria at 454 [136].
Sportsbet argued that the appellants’ case on funding was fatally flawed in two respects. First, the appellants made no attempt to quantify the level of funding that was necessary to fund the racing industry and, secondly, racing industry returns were not in decline, notwithstanding the increased competition from the growth of corporate bookmakers. It was, however, unnecessary for the appellants to meet these propositions. The question was whether the appellants established that the legislative scheme was reasonably necessary for a legitimate objective – such as the promotion of a successful racing industry, including for the purpose of funding the industry. Having regard to the following considerations, the appellants made out their case.
Sportsbet challenged the width of the prohibitions in the impugned provisions but, plainly enough, a prohibition of this kind was a concomitant of the monopoly that was part of the State’s legislative scheme. Further, funding via this monopoly model is integral to the success of the Victorian racing industry. In the words of the primary judge, Tabcorp’s contributions are “an essential part” of keeping the Victorian racing industry “vibrant and successful” and the industry’s position “could not be maintained without substantial funding of the kind it presently receives”, which necessarily included contributions from the gambling industry: see Sportsbet v Victoria 454 [136], 457 [148]-[149].
As the earlier discussion discloses, most of the Victorian racing industry’s revenue derives from distributions by Tabcorp to the industry’s controlling bodies under the JVA; revenue from other sources is significantly less: see Sportsbet v Victoria at 453 [135]. Distributions from Tabcorp are largely derived from totalisator wagering. Totalisator wagering has proved a reliable means of generating funds for the racing industry and has provided greater funding certainty for the industry than other forms of wagering. For this and the other reasons already mentioned, a successful totalisator is reasonably seen to be important for the continued success of the industry. Tabcorp’s retail exclusivity is vital for maintaining a successful totalisator and Tabcorp’s funding level for the Victorian racing industry.
It should be borne in mind that there was no evidence that any increase in wagering overall would offset the loss in funding from Tabcorp in the event that Tabcorp lost its retail exclusivity. There was also no evidence that there was an alternative viable funding model that would confer the same or more benefits than the current model.
In these circumstances, there was no need to establish a precise level of funding, as Sportsbet argued. The evidence was that the size and success of the racing industry varied with the level of funding it received. It was enough to show, as the appellants did, that without substantial funding of the kind the industry currently receives from Tabcorp, the Victorian racing industry could not sustain its current position; that the current funding model has sustained the success of the Victorian racing industry; that if Tabcorp were to lose its retail exclusivity, the level of funding for the Victorian racing industry would be lower and less secure; and that this would entail a less successful racing program and associated spectacle. In the circumstances, the impugned provisions can properly be regarded as reasonably necessary or appropriate and adapted for the promotion of a successful racing industry, including for the purpose of funding the industry.
At this point, it is necessary to consider two matters raised by the primary judge. The first was that her Honour held that, at this stage of the analysis required by Cole v Whitfield and Betfair v WA, funding was not a legitimate objective. Her Honour held, mistakenly, that this followed from the observations in the plurality judgment in Betfair v WA at 479 [108]: see Sportsbet v Victoria at 456-457 [145]-[146].
In Betfair v WA at 478 [106], the plurality judgment drew attention to a statement made by the relevant State Minister in the State Legislative Assembly to the effect that Western Australia opposed betting exchanges because the exchanges made no contribution to the racing industry in Australia and “allow[ed] punters to bet on any of the racing codes and lose”. The plurality went on to say (at 478-479 [107]-[108]):
First, as to the absence of contribution to the racing industry in Australia, so far as that may be relevant. The evidence shows that by agreement with the Victorian regulator, Betfair undertook to return an amount equivalent to 1 per cent of the value of bets taken by it on races in Victoria; this is the same level of return as that required from bookmakers in that State. Betfair has been meeting that obligation. There is no reason to doubt the assertion by Betfair that it remains ready to undertake obligations of this kind in Western Australia and to ensure that the organisers of races in that State obtain a reward from Betfair as well as from other wagering operators in that State.
In its submissions Western Australia also contended that any practical effect of the impugned legislation in protecting the turnover of in-State operators from diminution as a result of competition from Betfair, with consequent prejudice to the returns to the racing industry and in-State revenue provided by it, could not be protectionist in nature. But a proposition which asserts that an object of revenue protection of this kind may justify a law which discriminates against trade is contrary to authority [Bath at 426-427; Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63 at 80]. And it is contrary to principle, for such a justification, if allowable, would support the re-introduction of customs duties at State borders.
In the first of these paragraphs, the plurality acknowledged the permissibility of requiring contributions in order to fund a State’s racing industry. The plurality clearly contemplated that a requirement to make such contributions is permissible at least if it is imposed at the same level on local and interstate operators: see also Betfair v WA 488 [146] (Heydon J). Read with this in mind, it is apparent that the second paragraph is concerned with a further and different object – the protection of the revenue of the State (qua State) provided by the returns to the State’s racing industry. The reference to “revenue” in this paragraph is to State revenue from taxation and other imposts, which would be prejudiced if the returns to the racing industry were prejudiced.
In the second paragraph, on which the primary judge relied, the plurality stated in effect that, for the purpose of s 92 and s 49 of the Self-Government Act, the protection of State revenue was not a legitimate objective. The report of argument in Betfair v WA at 433 and the plurality’s reference to Bath at 426-427 and Sportsodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63 (“Sportsodds”) at 80 confirms that this was in fact their Honours’ intended meaning.
In particular, in Sportsodds at 80 [43], a Full Court of this Court specifically said:
The appellant submitted before us that the only objective now remaining is raising taxation revenue for the Treasury. This would not be a legitimate objective for the purpose of justifying a discriminatory burden: see Bath v Alston Holding Pty Ltd. (Emphasis added.)
Elsewhere in Sportsodds, the Full Court specifically referred to the possibility that the protection of the racing industry by appropriate funding measures could be a legitimate objective: see Sportsodds at 79-80 [41]. There is no reason to suppose that the plurality in Betfair v WA overlooked the distinction discussed in Sportsodds between protecting a State’s racing industry through appropriate funding arrangements and protecting the State’s revenue.
Considered in this way, Betfair v WA did not require the primary judge to conclude that legislative measures designed to promote a successful racing industry by maintaining funding for the industry were directed to an illegitimate objective. As the Full Court observed in Sportsodds at 79 [41], Cole v Whitfield held that the protection of Tasmanian crayfish stocks was a legitimate objective in circumstances where the exploitation of stocks was non-discriminatory. Given this, there is no reason to suppose that the promotion of a State’s racing industry is not also a legitimate objective provided it is non-discriminatory. Further, there no reason in principle why such an objective should cease to be legitimate simply because the measures in question are directed amongst other things to funding the industry, as opposed to maintaining the quality of crayfish stock, as in Cole v Whitfield.
The second difficulty with the primary judge’s analysis was that her Honour stated that, to meet their burden at this stage of the inquiry, the appellants were obliged to establish the “necessary” or “adequate” level of funding for the Victorian racing industry in a given form, or that this level of funding could only be secured by the impugned provisions: see Sportsbet v Victoria at 455 [141], 457-458 [149]-[150]. As already indicated, in our view, the appellants were not required to establish this. The inquiry is one of reasonable necessity, or whether the impugned provisions are appropriate and adapted to a legitimate objective – here, the promotion of racing, including for the purpose of funding the industry. In this context, necessary does not mean “essential” or “indispensable”: see [229]-[233] above, citing Mulholland v AEC at 199 [39] and Hogan v Hinch at 418 [72]. There was ample evidence that the impugned provisions were reasonably necessary, or appropriate and adapted, for the promotion of a successful racing industry, including for the purpose of funding the industry and, indeed, that they had achieved this objective.
Having regard to this conclusion, there is no need to consider further whether the impugned provisions were reasonably necessary or appropriate and adapted to the other objectives on which the appellants relied.
DISPOSITION
For the reasons stated, the appeals must be allowed. The impugned provisions do not infringe s 49 of the Self-Government Act and there is no inconsistency to which s 109 of the Constitution applies. The impugned provisions do not in their terms or practical operation discriminate against trade or commerce between the Territory and the State. If it were necessary to examine the matter further, the impugned provisions would not properly be characterised having a protectionist operation.
Before the judgment in these appeals was delivered, Mansfield J delivered judgment in Sportsbet Pty Ltd v Harness Racing Victoria (No 6) [2012] FCA 896; and with the leave of the Court, Sportsbet and Tabcorp filed short submissions addressing the decision. The State did not wish to add to Tabcorp’s submissions. Having considered the matter, there is nothing that would lead us to depart from what we have stated above.
Having regard to the fact that the appeals concern only part of the judgment of the primary judge, we would direct that, within seven days, the appellant in each appeal file short minutes giving effect to these reasons for judgment.
We would also direct that, if the parties in each appeal are unable to agree within seven days on the appropriate costs orders for the proceeding before the primary judge and for the appeal, within a further seven days, the appellant in each appeal file and serve its written submissions as to the appropriate costs orders and, within seven days thereafter, the respondents file their written submissions. In either case the submissions should not exceed three pages.
I certify that the preceding two hundred and fourteen (214) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny and Middleton. Associate:
Dated: 12 October 2012
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