FEDERAL COURT OF AUSTRALIA
The State of Victoria v Sportsbet Pty Ltd [2012] FCAFC 143
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 | |
EMMETT, KENNY AND MIDDLETON JJ | |
DATE OF ORDER: | |
WHERE MADE: |
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) Appellant |
AND: | SPORTSBET PTY LTD (ABN 87 088 326 612) First Respondent EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597) Second Respondent THE STATE OF VICTORIA Third Respondent THE 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
VICTORIA DISTRICT REGISTRY | |
GENERAL DIVISION | VID 1000 of 2011 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | THE STATE OF VICTORIA Appellant
|
AND: | SPORTSBET PTY LTD (ABN 87 088 326 612) First Respondent EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597) Second Respondent TABCORP HOLDINGS LIMITED (ABN 66 063 780 709) Third Respondent THE 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) Appellant
|
AND: | SPORTSBET PTY LTD (ABN 87 088 326 612) First Respondent EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597) Second Respondent THE STATE OF VICTORIA Third Respondent THE VICTORIAN COMMISSION FOR GAMBLING REGULATION Fourth Respondent |
JUDGES: | EMMETT, KENNY AND MIDDLETON JJ |
DATE: | 12 OCTOBER 2012 |
PLACE: | MELBOURNE |
REASONS FOR JUDGMENT
[1] | |
[12] | |
[16] | |
[30] | |
[49] | |
[61] | |
[69] | |
[83] | |
[110] |
1 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.
2 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.
3 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.
4 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.
5 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.
6 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.
7 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.
8 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.
9 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.
10 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.
11 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.
12 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.
13 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.
14 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.
15 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.
16 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.
17 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.
18 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.
19 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.
20 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.
21 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.
22 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.
23 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.
24 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.
25 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.
26 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.
27 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.
28 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.
29 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.
30 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.
31 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.
32 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.
33 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.
34 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.
35 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.
36 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.
37 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.
38 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.
39 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.
40 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.
41 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.
42 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.
43 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.
44 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.
45 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.
46 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.
47 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.
48 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.
49 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.
50 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.
51 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.
52 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.
53 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.
54 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.
55 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.
56 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.
57 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.
58 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.
59 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.
60 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
61 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.
62 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.
63 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.
64 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.
65 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.
66 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.
67 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.
68 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.
69 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.
70 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).
71 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.
72 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]).
73 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).
74 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).
75 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).
76 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).
77 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]).
78 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]).
79 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]).
80 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]).
81 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]).
82 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
83 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.
84 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.
85 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.
86 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.
87 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]).
88 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.
89 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.
90 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.
91 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.
92 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.
93 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.
94 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.
95 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.
96 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.
97 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.
98 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.
99 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.
100 The Impugned Provisions apply only if a bookmaker seeks to establish a physical presence in Victoria, as Sportsbet seeks to do by means of the Betbox. The question is whether, once a bookmaker has a physical presence in Victoria, the requirement that the bookmaker be present at a racecourse, rather than some other place, is more difficult to meet for Northern Territory bookmakers than it is for Victorian bookmakers. There is no reason to suppose that it is. There is, therefore, no discrimination of a protectionist kind that affects trade and commerce between the Northern Territory and Victoria.
101 Protectionism is the economic policy of restraining trade from foreign competitors in order to shield intrastate trade from the full rigours of that competition. The vice in such a policy is said to be that it discourages specialisation in areas of comparative advantage and fosters inefficiency. Protectionism ordinarily involves giving assistance to a specific inefficient domestic industry to the detriment of a specific more efficient foreign industry. That results in a loss to overall welfare. Motivation to engage in protectionism comes about from a perception that the protected industry will add to the wellbeing of the domestic jurisdiction.
102 However, the Impugned Provisions impose a blanket prohibition. A prohibition that outlaws all trade in a market, both domestic and foreign, is not protectionist. If the prohibition attaches to all, no intrastate trade and no intrastate traders are being protected. The predecessors of the Impugned Provision could not be characterised as protectionist, since they applied to the whole world. There was no exception until the TAB was created. Neither s 92 nor s 49 could possibly be attracted unless an exception to the blanket prohibition was created. However, the mere creation of an exception does not render the prohibition protectionist.
103 The blanket prohibition of offcourse wagering was qualified when the TAB was established and was continued when the operations of the TAB were privatised in 1994 by being transferred to Tabcorp. The privatisation did not simply involve granting a permit to a new private entity to engage in offcourse wagering. The scheme that operated to prevent the use of the Betbox in the Hotel was established in 1994 for a defined and finite term, on specified conditions. The scheme then established included the following elements:
Tabcorp acquired a wagering licence for a finite period, for which it paid a substantial consideration, replacing the TAB as sole provider of offcourse retail wagering services.
In taking on the wagering licence and entering into mandatory related commercial arrangements, Tabcorp became burdened by the obligation to make financial contributions to the Victorian racing industry at a substantially higher effective rate than any other person or entity and was also burdened by the need to operate a totalisator as a core element of its wagering service, involving significant expense not borne by non-totalisator wagering service providers.
104 The removal of one of the benefits afforded to Tabcorp, while retaining the corresponding burdens, would result in market distortion. Sportsbet would have the benefit of the payments made by Tabcorp to the racing industry without bearing the burden of making payments at the level that Tabcorp is obliged to make such payments. Sportsbet would take the benefit of Tabcorp’s financial contribution to the racing industry without bearing an equal burden. The retail exclusivity provisions that benefit Tabcorp do not deny market access to persons who are more efficient than Tabcorp. Rather, they prevent a market distortion that would be the consequence of permitting entities to have the benefit of Tabcorp’s ongoing payments to the racing industry without requiring such entities to make an equal payment.
105 Sportsbet contends that the Impugned Provisions necessarily target interstate trade because they prevent punters from using the Betbox for communicating from Victoria to the Northern Territory, in circumstances where Tabcorp enjoys the liberty of concluding transactions through the means of its EasyBet terminals, which perform the same function. Sportsbet asserts that the prohibition on using the Betbox as a means of carrying on its business in Victoria demonstrates that the burden falls directly on interstate trade. Sportsbet also points to Tabcorp as being not merely a trader but the single trader that is capable of engaging in the form of communication that is otherwise unlawful. Tabcorp is not subject to the prohibition contained in the Impugned Provisions and can communicate with its Victorian customers by means of EasyBet terminals.
106 However, in so far as the Impugned Provisions prohibit communicating, not only do they prohibit communication from a place in Victoria to the Northern Territory, they prohibit communication from any place in Victoria to any other place in Victoria. The relevant prohibition is not on communicating by means of the Betbox, but on possessing in Victoria an instrument of betting in the form of a Betbox, on opening, keeping or using in Victoria a betting house or place of betting, and on allowing a person to bet on licensed premises in Victoria.
107 Sportsbet’s contentions emphasise the real gravamen of its complaint. Its complaint is directed not so much at the Impugned Provisions as at the exemptions granted to Tabcorp by reason of its licence. Sportsbet’s true complaint is that an individual trader, namely Tabcorp, is given a preference that is not given to any other trader, whether interstate or intrastate. The real complaint of Sportsbet is that an exception to the long-standing prohibition imposed by the Impugned Provisions was created by the grant of a licence to Tabcorp to engage in offcourse wagering activities. That exception was created more than 50 years ago, in favour of the TAB, Tabcorp’s predecessor. Sportsbet says, in effect, that, simply because its manner of doing business involves an element that happens to take place in the Northern Territory, albeit that it could take place in Victoria, it should be exempted from complying with the Impugned Provisions so that it can compete with Tabcorp on a privileged basis. Sportsbet, in effect, seeks to be given a privilege that is not available to any intrastate bookmaker.
108 Thus, whether or not the activities of Sportsbet that are prohibited by the Impugned Provisions could fairly be characterised as trade or commerce between the Northern Territory and Victoria, the prohibitions of the Impugned Provisions do not constitute a discriminatory burden of a protectionist kind. Section 49 is not attracted by any of the Impugned Provisions. In the light of that conclusion, it is not necessary to consider whether any burdens imposed by the Impugned Provisions were appropriate and adapted to achieve legitimate ends.
109 Some months after these reasons were first formulated, the decision in Sportsbet v Harness Racing Victoria and Anor (No 6) [2012] FCA 896 was published, on 21 August 2012. The parties sought and were granted leave to make further brief written submissions in the light of that decision. It was recognised in that decision that the entitlements that Tabcorp enjoys are not because it is an intrastate trader but because of the obligations that it undertook to make substantive contributions to the Victorian racing industry in return for rights correlative to those contributions (at [126]). Tabcorp does not enjoy retail exclusivity because it is an intrastate trader, but rather because of its licence and the obligations imposed on it by the statutory scheme under which the licence is granted. No interstate trader is prohibited from engaging in any conduct by the Impugned Provisions simply by reason of the fact that it is an interstate trader. The reasoning in the decision, if anything, supports the position of Tabcorp and the State of Victoria.
110 The Impugned Provisions do not impose a discriminatory burden of a protectionist kind. They impose a restraint on all who wish to engage in certain kinds of wagering activity, other than Tabcorp. Their effect is to give to Tabcorp both totalisator exclusivity and retail exclusivity in certain kinds of wagering activity. However, the restraints do not have the effect of interfering with trade or commerce between the Northern Territory and Victoria in a way that constitutes a discriminatory burden of a protectionist kind. The Impugned Provisions do not offend against s 49 of the Self-Government Act. The primary judge erred in reaching her conclusion to the contrary.
111 Both appeals should be upheld. In lieu of the orders made by the primary judge, there should be orders that the proceeding be dismissed and that the applicants in the proceeding pay the costs of the respondents to the proceeding, except for costs that were the subject of orders for costs made by the primary judge from which there was no appeal. Sportsbet should pay the costs of the State of Victoria and Tabcorp of their respective appeals.
| I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. |
Associate:
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 Appellant |
AND: | SPORTSBET PTY LTD (ABN 87 088 326 612) First Respondent EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597) Second Respondent TABCORP HOLDINGS LIMITED (ABN 66 063 780 709) Third Respondent THE 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) Appellant |
AND: | SPORTSBET PTY LTD (ABN 87 088 326 612) First Respondent EUREKA HOTEL HOLDINGS PTY LTD (ACN 135 267 597) Second Respondent THE STATE OF VICTORIA Third Respondent THE VICTORIAN COMMISSION FOR GAMBLING REGULATION Fourth Respondent
|
JUDGES: | EMMETT, KENNY AND MIDDLETON JJ |
DATE: | 12 OCTOBER 2012 |
PLACE: | MELBOURNE |
REASONS FOR JUDGMENT
[112] | |
[121] | |
[129] | |
Section 2.5.2 of the GRA – Betting Houses or Places of Betting | [129] |
Section 2.6.1 of the GRA – Possession of Instrument of Betting | [134] |
[135] | |
Tabcorp’s exemption from the prohibitions in the impugned provisions | [137] |
[140] | |
Economic, social and cultural significance of the Victorian Racing Industry | [142] |
Brief history of Tabcorp’s exemption from the relevant prohibitions | [145] |
[164] | |
[167] | |
[169] | |
Tabcorp and the current funding of the Victorian Racing Industry | [172] |
Alternative models for funding the Victorian Racing Industry | [186] |
[189] | |
[195] | |
[199] | |
[204] | |
[208] | |
[216] | |
[225] | |
[243] | |
Discrimination against trade or commerce between the Territory and the State | [244] |
[244] | |
[259] | |
[262] | |
A statutory monopoly is not per se discrimination against out-of-state trade | [279] |
Protectionism – disadvantaging out-of-state trade or advantaging intrastate trade? | [287] |
Protectionism – Not reasonably necessary to achieve a legitimate purpose? | [303] |
[307] | |
[322] |
112 These are two appeals from a judgment of a single judge of the Court. For the reasons stated below, we would allow both appeals.
113 The appeals raise the question whether ss 2.5.2 and 2.6.1 of the Gambling Regulation Act 2003 (Vic) (GRA) and s 115 of the Liquor Control Reform Act 1998 (Vic) (LCRA) (together, the impugned provisions) are invalid to the extent that they purport to apply to the installation and use in Victoria by Sportsbet Pty Ltd (Sportsbet) and Eureka Hotel Holdings Pty Ltd (Eureka) of a computer device known as a “betbox”. Section 2.5.2 of the GRA prohibits a person from opening, keeping or using a betting house or place of betting. Section 2.6.1 of the GRA prohibits a person from possessing an instrument of betting not authorised under the GRA. Section 115 of the LCRA prohibits a licensee under the LCRA from allowing a person to bet on licensed premises. A betbox is a computer terminal that allows the user, by means of a touch screen, to select and place a bet with Sportsbet and to receive notification of its acceptance, by electronic communications to and from Sportsbet’s servers: see Sportsbet Pty Ltd v Victoria (2011) 282 ALR 423 (“Sportsbet v Victoria”) at 426 [2] and 434 [40]. The effect of the impugned provisions is to prohibit Sportsbet from installing a betbox device at premises in Victoria.
114 The appellants are, in appeal VID 1000, the State of Victoria (the State) and, in appeal VID 1002, Tabcorp Holdings Limited (Tabcorp). Sportsbet, the first respondent in both appeals, is a company licensed under the Racing and Betting Act 1983 (NT) (RBA (NT)) to operate as a sports bookmaker from premises in Darwin. Sportsbet’s servers are located at its licensed premises.
115 The litigation resulting in these appeals arose out of events between May and July 2010. In May 2010, Sportsbet installed a betbox at the Eureka Stockade Hotel (the Hotel) in East Ballarat in Victoria. Eureka, the second respondent in both appeals, is the licensee of the Hotel. In July 2010, officers of the Victorian Commission for Gambling Regulation (VCGR) seized the betbox under s 10.5.9(1)(c) of the GRA, which enabled them to seize equipment if they considered this necessary for the purpose of obtaining evidence of the commission of an offence. The relevant offences were breaches of the impugned provisions.
116 As a consequence, Sportsbet and Eureka instituted proceedings against the State and the VCGR. Tabcorp was subsequently granted leave to intervene and was later joined as a respondent.
117 Tabcorp is the holder of a sole wagering licence (the wagering licence), pursuant to which Tabcorp conducts totalisator (pari-mutuel) and fixed odds betting on horse, harness and greyhound races. Tabcorp accepts bets in various ways, including through “EasyBet” terminals. Provided that it complies with the wagering licence, Tabcorp is exempt from the impugned provisions. Tabcorp is said to enjoy “off-course retail exclusivity”. The exclusivity is said to be “off-course” because, subject to the Racing Act 1958 (Vic) (Racing Act), registered bookmakers “on-course” can also take bets, as discussed below.
118 The key question in these appeals arises by virtue of the operation of s 49 of the Northern Territory (Self-Government) Act 1978 (Cth) (the Self-Government Act) and s 109 of the Commonwealth Constitution (the Constitution).
119 Section 49 of the Self-Government Act provides that:
Trade, commerce and intercourse between the Territory and the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.
Section 109 of the Constitution provides that:
When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.
When read with s 109 of the Constitution, s 49 of the Self-Government Act (s 49) replicates the operation of s 92 of the Constitution (s 92) in relation to trade and commerce between the States and the Northern Territory (the Territory), save that s 109 renders a legislative provision inconsistent with s 49 inoperative, rather than invalid, “to the extent of the inconsistency”: compare Sportsbet Pty Ltd v New South Wales (2012) 286 ALR 404 (“Sportsbet v NSW”) at 408-410 [9]-[13]. In AMS v AIF (1999) 199 CLR 160 (“AMS v AIF”), the High Court held that s 49 is “to be given an ambulatory interpretation to follow the course of decisions construing s 92”: see AMS v AIF at 175-176 [36] per Gleeson CJ, McHugh and Gummow JJ, 211-212 [152]-[153] per Kirby J and 232-233 [221] per Hayne J.
120 The question for determination in both appeals is whether the impugned provisions are rendered inoperative by s 109 of the Constitution by reason of their inconsistency with s 49 of the Self-Government Act. The fact that the impugned provisions apply to Sportsbet’s use of a betbox at licensed premises in Victoria but do not apply to Tabcorp’s use of Easybet terminals at licensed premises is the basis of the claim that the impugned provisions offend s 49.
121 At first instance, Sportsbet and Eureka submitted that, on their proper construction, the impugned provisions did not apply to the installation and use of a betbox. The learned primary judge rejected this submission and held that the impugned provisions applied to the installation and operation of the betbox at the Hotel. This was because:
(a) the betbox was an “instrument of betting”, within the meaning of s 2.6.1 of the GRA, being “not merely the means by which the bet is communicated”, but “the means by which the bet is selected, placed and its acceptance is notified”: see Sportsbet v Victoria at 434 [40].
(b) the betbox and the Hotel in which it was located were both “places to which punters resorted for the purpose of betting with Sportsbet”: Sportsbet v Victoria at 439 [66]. Her Honour held that, “[b]y installing the ‘betbox’ in [the Hotel], Sportsbet had localised a place as the stand or pitch where the bets were executed”. Sportsbet v Victoria at 439 [64]. Accordingly, by installing and using a betbox at the Hotel, Sportsbet and Eureka, opened, kept or used a “betting house or place of “betting” within s 2.5.1(1)(a) of the GRA and, for similar reasons, also fell within s 2.5.1(1)(b) and (d) of the GRA: see Sportsbet v Victoria at 439 [63]-[68].
(c) under the LCRA, Eureka was the licensee of a licensed premises – the Hotel – where Sportsbet and Eureka installed the betbox that enabled the Hotel’s patrons to bet with Sportsbet in contravention of s 115(1) of the LCRA: see Sportsbet v Victoria at 440 [70]-[71].
122 On appeal, neither Sportsbet nor Eureka challenged the primary judge’s rulings on the construction issues. Nor did they challenge her Honour’s ruling that Tabcorp’s approval to conduct fixed odds betting was a valid approval under s 4.5.3 of the GRA: see Sportsbet v Victoria at 427 [7], 460-463 [161]-[172].
123 As well as arguing at trial that, as a matter of statutory construction, the use of the betbox at the Hotel did not contravene the impugned provisions, Sportsbet and Eureka contended that the effect of the impugned provisions was contrary to the requirement in s 49 of the Self-Government Act that trade and commerce between the Territory and the States be absolutely free and that, in consequence, the impugned provisions were invalid (presumably, in the sense of inoperative) by reason of s 109 of the Constitution.
124 The primary judge accepted this submission: see Sportsbet v Victoria at 427 [7]. Her Honour ruled that the impugned provisions were inconsistent with s 49 and invalid to the extent that they would preclude the operation of the betbox at the Hotel, because:
(a) Sportsbet was engaged in trade and commerce between the Northern Territory and the State (443-445[85]-[93]);
(b) the impugned provisions imposed burdens on trade and commerce between the Northern Territory and the State (446 [95], 448-449 [108], 449 [110]);
(c) these burdens were discriminatory because they did not apply to Tabcorp (447 [101], 449 [109], 449 [110]);
(d) these burdens were also protectionist because they conferred a competitive advantage on Tabcorp over its interstate competitors and imposed a competitive disadvantage on Sportsbet (451 [123], [125]);
(e) the impugned provisions could not be justified as no more than an appropriate and adapted means to a legitimate end – funding the Victorian racing industry and integrity – because:
(i) “the evidence did not disclose whether the funding of the racing industry was presently adequate, inadequate or in excess of what was “adequate” (455 [141], emphasis in original);
(ii) “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” (455 [141], 457 [149], 458 [150]);
(iii) “much of the evidence adduced by [the State and Tabcorp] was historical” [but] “the relevant date for construing the impugned provisions is the date when the “betbox” was removed by the VCGR, being the event which underpinned the constitutional challenge” (456 [144]);
(iv) the protection of revenue (including returns to the racing industry) was not a legitimate, non-protectionist purpose (456-457 [145]-[146]);
(v) the State and VCGR did not adduce “any evidence about integrity concerns [to] which the impugned provisions were said to be directed” (459 [158]);
(vi) the relevant witness for the State (Mr Kennedy) “gave evidence that although he considered that an integrity risk exposure existed, in his 30 years experience he could not recall any integrity failure with any corporate bookmaker in the Northern Territory or any other corporate bookmaker” (459 [158]);
(vii) integrity concerns “could be appropriately regulated without resorting to the blanket prohibition contained in the impugned provisions” (459-460 [159]); and
(viii) security concerns about the physical aspects of the betbox, including its weight, access to the internet) and “the differences in responsible gambling regimes as between Victoria and the Northern Territory … could be appropriately regulated without blanket prohibition” (460 [160]).
125 Regarding the funding of the racing industry, the primary judge concluded (at 458 [151]):
The respondents have failed to establish that the burden that the impugned provisions impose on interstate trade and commerce is appropriate and adapted to achieving the funding objective or even the broader objective of promoting a vibrant and successful racing industry, including by materially funding that industry through the totalisator, which generates a stable, commission-based and adequately high source of revenue that is not contingent on outcomes. The respondents did not establish that the impugned provisions are capable of being seen as likely to achieve those identified purpose(s) and, further, did not establish that there were no alternative means to achieve those identified purpose(s) which involve no, or a lesser, burden on interstate trade and commerce than the means adopted. Put another way, there was no evidentiary basis to make the necessary findings that the funding of the racing industry was imperilled by the striking down of the impugned provisions. That conclusion is not surprising. A person can use a mobile phone in a public bar to place a bet with Sportsbet but cannot use a “betbox”.
126 The primary judge also rejected the contention that identified security and integrity concerns justifying the prohibitions contained in the impugned provisions, for the reasons referred to in para [124] (e) (v) – (viii) above. In substance, her Honour held (at 427 [7]) that:
The impugned provisions are a burden because in their legal and practical operation they establish Tabcorp as a monopoly provider of off-course betting services in Victoria in what is a national market for the supply and acquisition of off-course betting services. It was not demonstrated that the impugned provisions were no more than an appropriate and adapted means to a legitimate end.
The primary judge made declarations consistent with this ruling and consequential orders, including an order for the VCGR to return the betbox to Eureka.
127 The State and Tabcorp have appealed against the whole of her Honour’s judgment upon grounds, which, if accepted, would establish that the impugned provisions were not inconsistent with s 49 of the Self-Government Act and applied to prohibit Sportsbet and Eureka from installing and using the betbox at the Hotel. Sportsbet and Eureka have sought to uphold her Honour’s declarations as to invalidity. In each appeal, the VCGR entered a submitting appearance, save as to costs.
128 Before we examine the arguments advanced by the parties, it is necessary to consider the legislative and factual context of the present case in more detail.
Section 2.5.2 of the GRA – Betting Houses or Places of Betting
129 Section 2.5.2(1) of the GRA relevantly provides:
A person must not—
(a) open, keep or use a betting house or place of betting; or
(b) being the owner or occupier of a house or place, knowingly and wilfully permit it to be opened, kept or used by any other person as a betting house or place of betting; or
(c) have the care or management of, or in any manner assist in conducting the business of, a betting house or place of betting.
130 The terms “betting house” and “place of betting” are defined in s 2.5.1(1) of the GRA as:
a house or place (as the case requires) that is opened, kept or used—
(a) for the purpose of betting with any persons (whether in person or by messenger, agent, post, telephone or otherwise); or
(b) for the purpose of taking instructions for the placement of bets on behalf of any person; or
(c) for the purpose of any money or valuable thing being received by or on behalf of a person—
(i) as or for the consideration for any undertaking to pay or give thereafter any money or valuable thing on any sporting event; or
(ii) as or for the consideration for securing the paying or giving by some other person of any money or valuable thing on any such event—
except for the purpose of paying or receiving money in settlement of bets lawfully made under the Racing Act 1958 or this Act by or on behalf of a registered bookmaker; or
(d) for the purposes of printing, duplicating or producing lists of persons, animals or things (however identified) for the purpose of such lists being used for or in connection with unlawful betting on a sporting event.
131 Relevantly, “place” is defined as any place, whether or not within a building, on land or water, defined as to area, or on private property, and a “registered bookmaker” as the holder of a current certificate of registration as a registered bookmaker under Pt 5A of Ch 4 of the GRA: see, respectively, ss 2.1.2(1) and 1.3(1).
132 The exception in s 2.5.1(1)(c) picks up s 4 of the Racing Act, which provides that a registered bookmaker may, in certain circumstances, take bets on horse, harness or greyhound races (or certain other events) without contravening the GRA. Section 4 provides that:
(1) Despite anything in the Gambling Regulation Act 2003 (except Divisions 5 and 6 of Part 5 of Chapter 4) or any other law, it is not a contravention of that Act or law, and a racecourse is not a common gaming house or place for the purposes of that Act, if a person bets by way of wagering—
(a) on any horse race, harness race or greyhound race; or
(b) on any approved betting event; or
(c) on a group of races approved by the Minister under section 2.5.16(1)(b) of the Gambling Regulation Act 2003 or on a race from such a group of races—
in accordance with this section.
(2) The racecourse must be licensed under this Part.
(3) The bet must be made—
(a) with a registered bookmaker; or
(b) with an approved substitute—
who is present on the racecourse at the time the bet is made.
(4) The bet must be made—
(a) during the holding of a race meeting at the racecourse by a person present on the racecourse; or
(b) at any time by a person not present on the racecourse using a method of communication approved by the Minister under section 4A.
(5) In this section, a reference to a racecourse licensed under this Part includes a reference to land otherwise authorised for the holding of race meetings under this Part or Part III.
133 That is, broadly speaking, a registered bookmaker will not contravene the GRA or the Racing Act by taking bets on certain events (as stated in s 4), including horse, harness or greyhound races, where the registered bookmaker accepts a bet when present on an authorised racecourse when the bet is made: (1) during a race meeting at the racecourse, from a person who is also on the racecourse; or (2) at any time, from a person who is not at the racecourse, by means of an approved method of communication. A racecourse, within the meaning of s 4 of the Racing Act, is a racecourse in Victoria: see Interpretation of Legislation Act 1984 (Vic), s 48(b).
Section 2.6.1 of the GRA – Possession of Instrument of Betting
134 Section 2.6.1(1) of the GRA provides that “[a] person must not possess an instrument of betting not authorised under this Act”. The term “instrument of betting” is defined in s 2.1.2(1) as including:
(a) a document;
(b) a card, list, money, paper, record, sheet, table, ticket or other written document;
(c) a mechanical, electrical, telephonic, electronic or other equipment or device or any access to such equipment or device;
(d) a board, chart or screen; or
(e) any form or means of recording, storing or transmitting information or data—
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 a gaming Act or any other Act).
The expression “gaming Act” is defined to mean the GRA or the Casino Control Act 1991 (Vic): see GRA s 1.3(1). “Possession” (as defined in s 2.6.1(2)) includes:
(a) actual physical possession; and
(b) custody or control; and
(c) having and exercising access, either solely or in common with others—
and an instrument of betting is in a person's possession if it is on land or in premises occupied, used or controlled by the person.
Section 115 of the LCRA – Betting on licensed premises
135 Section 115 of the LCRA provides that:
(1) A licensee or permittee must not bet or allow a person to bet on the licensed premises or any authorised premises.
Penalty: 20 penalty units.
(2) Subsection (1) does not apply to betting on licensed premises or on any authorised premises—
(a) if—
(i) the premises are on a licensed racecourse within the meaning of the Racing Act 1958; and
(ii) the betting is engaged in during the holding of a race meeting within the meaning of that Act on the licensed racecourse; or
(b) if—
(i) a betting facility of the holder of the wagering licence or the wagering operator under Chapter 4 of the Gambling Regulation Act 2003 is established in the premises; and
(ii) the betting takes place through that licence holder or wagering operator; or
… .
136 In summary, the impugned provisions preclude all bookmakers in Victoria except Tabcorp (as to which, see below) from engaging in off-course betting, including by means of a betbox or similar device. Tabcorp apart, providing a bookmaker is registered under the GRA, the bookmaker may take bets in Victoria but only in the circumstances stated in s 4 of the Racing Act. Sportsbet is not registered under the GRA and cannot take bets in Victoria. If it were registered, then Sportsbet would be in the same position in Victoria as other registered bookmakers. As it happens, Sportsbet has not sought registration under the GRA, although it could do so.
Tabcorp’s exemption from the prohibitions in the impugned provisions
137 The effect of s 4.2.1(2) of the GRA is that a place in which wagering or an approved betting competition is conducted by Tabcorp or its wholly owned subsidiary, Tabcorp Manager Pty Ltd (Tabcorp Manager), is not to be characterised as a common gaming house or place. This provision thus takes such a place outside the scope of certain offences concerned with common gaming houses or places: see GRA, Pt 5, Div 6. Further, the effect of s 4.2.1(2) and the extended definition of “common gaming house or place” in s 2.5.20(1)(a)(iii) is also to take Tabcorp outside the scope of s 2.5.2. Hence, Tabcorp enjoys a “retail presence” in Victoria that is not enjoyed by other bookmakers.
138 By virtue of s 4.3.1, the wagering licence authorises Tabcorp to conduct wagering and approved betting competitions, subject to the relevant legislation and licence conditions. Providing that Tabcorp’s use of Easybet terminals is in accordance with s 4.3.1, then Tabcorp is acting lawfully pursuant to s 4.2.1 and not in breach of s 2.6.1.
139 The effect of s 115(2) of the LCRA (see par [135] above) is to exempt Tabcorp from the prohibition in s 115(1) of the LCRA. Thus, by reason of s 115(2), betting at licensed premises in Victoria will not be unlawful by reason of s 115(1) if the betting is conducted with Tabcorp or Tabcorp Manager through a betting facility of Tabcorp or Tabcorp Manager at the premises.
140 In the following discussion, it is helpful to bear in mind the nature of an appeal in this Court. Such an appeal is by way of rehearing: see Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 at 533 [75] and Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 (“Branir”) at 434-435 [20]. With respect to an appeal of this kind, the Court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”: Dearman v Dearman (1908) 7 CLR 549 at 561, quoted with approval in Fox v Percy (2003) 214 CLR 118 (“Fox v Percy”) at 125 [23], where, in explaining the duty of an appellate court, Gleeson CJ, Gummow and Kirby JJ said (at 126-127 [25]):
Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge’s reasons. … In Warren v Coombes [(1979) 142 CLR 531 at 551], the majority of this Court reiterated the rule that:
“[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.”
As this Court there said, that approach was “not only sound in law, but beneficial in … operation”. (Citations mostly omitted)
141 On these appeals, the appellants did not contest the specific findings of fact that the primary judge made. Instead, they contested the inferences that should properly be drawn from them, the undisputed facts and certain other evidence adduced at trial. No party sought to argue that any assessment of credibility played any real part in her Honour’s evidentiary appraisals or conclusions on questions of fact or mixed fact and law. All parties invited the Court to consider as a whole the evidence adduced at trial – a task that, as appears below, proved to be unavoidable, having regard to the parties’ submissions upon which the Court must rule.
Economic, social and cultural significance of the Victorian Racing Industry
142 The primary judge described the Victorian racing industry as “successful and prestigious”, as the foremost in Australia, and among the best in the world: see Sportsbet v Victoria at 453 [134] and 457 [148]. In the words of a former Chair of VicRacing, Mr Lindsay Maxsted, the Victorian racing industry is “a leader within the thoroughbred racing industry in Australia, with premier racecourses and facilities attracting high quality trainers and racing participants from around Australia and internationally”. On account of its success and international prestige, the Victorian racing industry benefitted not only the State but also the Australian racing and wagering industries as a whole.
143 The evidence at trial showed, and the primary judge accepted, that racing contributed to the economy, culture and employment of the State: see Sportsbet v Victoria at 453 [134]. Indeed, racing has played a significant role in the social and cultural life of Victoria since European settlement: see 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); Hutchinson G (ed), They’re Racing! The Complete Story of Australian Racing (Penguin Books Australia Ltd, 1999). Race meetings have a social and cultural significance for both metropolitan and regional Victoria. In regional areas, they frequently contribute to the maintenance of local community identity. Race wagering is a popular recreation in the State and contributes to the economy through capital investment, employment and tourism.
144 Like other forms of gambling, however, participation in race wagering has a recognized potential for societal injury. Racing and race wagering are considered susceptible to corruption. As recently as August 2008, following a review sought by the Victorian Minister for Racing, Judge GD Lewis AM reported that “[i]t has been well known, for many years, that relationships exist between those involved in organised crime and the racing industry” and that “the racing industry is fertile ground for dishonesty and illegal manipulation, if it is not properly controlled”: see Lewis GD, A Report on Integrity Assurance in the Victorian Racing Industry, 1 August 2008, pp 18, 25.
Brief history of Tabcorp’s exemption from the relevant prohibitions
145 Tabcorp’s position under the State’s current legislation is the outcome of the history of wagering and gaming regulation in the State. Its position is, therefore, most readily understood by a brief reference to this history.
146 By the late 1950s, off-course wagering in Victoria, though unlawful, was widespread. In 1958, the Victorian Government appointed Justice FRB Martin as a Royal Commissioner to inquire whether off-course wagering should be legalised and, if so, by what method. Justice Martin’s report, published in 1959, recommended the establishment of an off-course totalisator for off-course wagering in Victoria. Justice Martin considered that a totalisator would be better able to protect the integrity of the racing industry than other proposed methods for regulating off-course wagering, and would generate revenue for the State and the racing clubs. For Justice Martin, the critical difference between totalisator and fixed odds betting was that, in contrast to fixed odds betting, the totalisator operator would take out its share from the pool of bets before ascertaining the payout at the end of the race and, in consequence, the operator would be indifferent to the result of the race. It was this factor that he considered likely to reduce the risk of interference with a race. Justice Martin’s report stated that an off-course totalisator system:
would be the one which would give most satisfaction to the community generally, because of the absence of any striving for private gain, of any motive to corrupt police, telephone employees or the connexions of horses, or to interfere with the horses themselves and also because there would be no evasion of tax.
(Report of the Royal Commissioner appointed to inquire into off-the-course betting, together with minutes of evidence, Melbourne, ordered by the Legislative Assembly to be printed 3 March 1959, p 53)
147 In response to Justice Martin’s report, the Victorian Parliament enacted the Racing (Totalizators Extension) Act 1960 (Vic). This Act created the Totalisator Agency Board (TAB) as a statutory body corporate to operate an off-course totalisator. As a result, up until 1994, off-course betting could only be lawfully conducted through the TAB. From its establishment until the 1990s, the net profits of the TAB were distributed to Victorian race clubs: see Sportsbet v Victoria at 454 [138]. As the primary judge found, “[t]he possibility of funding the Victorian racing industry through contributions from wagering was one of the reasons for establishing a government owned off-course totalisator agency board”: see Sportsbet v Victoria at 454 [137] (emphasis in original).
148 In 1994, the Victorian Government decided to float the TAB as a public company. In order to do so, the Government entered into negotiations with the racing industry as represented by its controlling bodies. The outcome was a Memorandum of Understanding between the State and representatives of the racing industry dated 15 March 1994 (MOU). A purpose of the MOU was, as the MOU stated, “to secure the financial strength and future of the Racing Industry”. By the MOU, the parties also stated that they would co-operate to establish a joint venture.
149 Tabcorp was incorporated later in 1994, as the entity to purchase the businesses conducted by the TAB and to acquire the wagering and gaming licences needed to conduct these businesses. In the same year, the Gaming and Betting Act 1994 (Vic) (GBA 1994) was enacted. In the Treasurer’s Second Reading Speech on 28 April 1994, the Treasurer stated (at 1314):
New arrangements have been entered into with the racing industry designed to secure the financial health of the industry and to provide for a large degree of self-determination in relation to racing and wagering. … The government will maintain regulation in respect of matters of public interest and probity. The industry will have a participating interest in the Victorian wagering and gaming operations of the privatised TAB through a proposed joint venture, providing a more secure level of income into the future than would be available under a continuation of the current arrangements.
150 The GBA 1994 provided for the grant to Tabcorp of a single licence to conduct wagering (i.e., pari-mutuel betting on horse, harness and greyhound races) and approved betting competitions, and a single licence to conduct gaming: see GBA 1994, ss 6, 7, 8, 11, 12, 13. Both licences were for a term of 18 years: see s 12(2). The Governor in Council was to grant the licences, subject to the recommendation of the Victorian Casino and Gaming Authority (VCGA): see s 12(1). Before making the recommendation in Tabcorp’s favour, the VCGA was required to be satisfied of various matters, including that Tabcorp and VicRacing Pty Limited (VicRacing) had concluded a joint venture agreement: see GBA 1994, s 11(2)(e). There were other provisions also directed to ensuring the integrity and probity of the wagering licensee and its operations: see, e.g., ss 11, 27 and 53.
151 The GBA 1994 provided that, notwithstanding any law to the contrary, “the conduct of wagering and approved betting competitions is lawful when conducted in accordance with a licence … granted under this Act”: see GBA 1994, s 68(1). There were numerous other provisions governing the conduct of the licensee’s business: see, e.g., ss 69, 70, 71, 72, 73, 76.
152 On 25 May 1994, Tabcorp entered into a Joint Venture Agreement (JVA) with VicRacing representing the Victorian racing industry. The JVA entitled VicRacing to a 25% interest in the profits generated by Tabcorp’s conduct of the gambling activities previously undertaken by the TAB. Additionally, Tabcorp entered into other agreements, a Product Supply Agreement and a Racing Program Agreement. These two agreements enabled the principal Victorian racing bodies to receive further fees from Tabcorp’s conduct of gambling activities previously undertaken by the TAB.
153 On 28 June 1994, Tabcorp was granted the wagering licence and the gaming licence pursuant to s 12 of the GBA 1994. Thereafter, Tabcorp acquired the business formerly conducted by the TAB. Tabcorp appointed Tabcorp Manager as the operator of the wagering licence pursuant to s 22(1) of the GBA 1994.
154 From 1994, pursuant to the GBA 1994, off-course betting was prohibited in Victoria unless conducted by, or through, Tabcorp. At the same time, Tabcorp was obliged to make substantial payments to the Victorian racing industry pursuant to the JVA and the other agreements that it had made with the Victorian racing industry. Tabcorp was, moreover, subject to various controls, limitations and restrictions: see, e.g., GBA 1994, ss 6(d), 12(2)(b), 64, 67, 70, 71, 72.
155 A decade later, the GBA 1994 was repealed, with effect from 1 July 2004, by s 12.1.1(b) of the GRA. The repeal of the GBA 1994 did not, however, mean the abandonment of the regime that had previously operated. The main purpose of the GRA (as stated in s 1.1(1)) was merely “to re-enact and consolidate the law relating to various forms of gambling and to establish a Victorian Commission for Gambling Regulation”.
156 As first enacted, the main objectives of the GRA, as stated in s 1.1(2), were:
(a) to foster responsible gambling in order to –
(i) minimise harm caused by problem gambling; and
(ii) accommodate those who gamble without harming themselves or others;
…
(b) to ensure that gaming on gaming machines is conducted honestly;
(c) to ensure that the management of gaming machines and gaming equipment is free from criminal influence and exploitation;
(d) to ensure that other forms of gambling permitted under this or any other Act are conducted honestly and that their management is free from criminal influence and exploitation;
(e) to ensure that –
(i) community and charitable gaming benefits the community or charitable organisation concerned;
(ii) practices that could undermine public confidence in community and charitable gaming are eliminated;
(iii) bingo centre operators do not act unfairly in providing commercial services to community or charitable organisations;
(f) to promote tourism, employment and economic development generally in the State. (Emphasis added)
Some of these objectives were relevant here, particularly to the appellants’ case on these appeals.
157 The relevant structure of the GRA was straightforward enough. Chapter 2 – entitled “General Prohibition on Gambling” – was intended “to impose a general prohibition on gambling and create certain offences”: see s 2.1.1. Elsewhere, the GRA (relevantly, in Ch 4) and the Casino Control Act 1991 (Vic) made certain specified exceptions to the general prohibition in Ch 2 and regulated the excepted gambling activities.
158 When enacted, Ch 4, entitled “Wagering and Betting”, stated in s 4.1.1 that its purpose was:
(a) to make provision for the carrying on of licensed wagering and betting, by –
(i) the issuing of a wagering licence;
(ii) the approval of betting competitions;
(iii) the issuing of permits to conduct on-course wagering;
(b) to provide for the issue of a gaming licence in conjunction with the issue of a wagering licence, allowing the licensee to conduct gaming in accordance with Chapter 3.
159 In particular, Ch 4:
(a) gave the Governor in Council, on recommendation from the VCGR and subject to Ministerial satisfaction, power to grant a wagering licence and a gaming licence (s 4.3.8(1) and (2));
(b) provided that the Governor in Council must not grant a wagering licence unless the Minister, after consultation with the VCGR, was satisfied that certain arrangements had been made between the licensee and VicRacing and Racing Products Victoria (s 4.3.8(2));
(c) provided that the conduct of wagering and approved betting competitions was lawful when conducted in accordance with the wagering licence and was not a public or private nuisance (s 4.2.1(1));
(d) provided that any place in which lawful wagering (see s 4.2.1(1)) or an approved betting competition was conducted was not a common gaming house or place (s 4.2.1.(2));
(e) provided for the appointment of a wholly-owned subsidiary of the licensee as operator of the wagering licence, subject to the approval of the VCGR (s 4.3.15);
(f) provided that the use of a totalisator as provided by Ch 4 was lawful, did not constitute a wagering or betting offence, was not a ground for any place to be taken to be a common gaming house or place, and is not a public nuisance (s 4.2.2);
(g) provided that the licensee and the wagering operator must only use equipment in connection with a totalisator or approved betting competition approved by the VCGR (s 4.2.3);
(h) provided that the licensee and the waging operator must not conduct a totalisator or an approved betting competition without betting rules, being rules that met prescribed requirements and which were not disallowed by the VCGR (ss 1.3(1), 4.2.4 to 4.2.6);
(i) provided that the wagering licence authorised the licensee and the waging operator to conduct wagering and approved betting competitions, subject to conditions, the GRA and regulations, and the Racing Act (s 4.3.1);
(j) authorised the operation at the same time of no more than one wagering licence and one gaming licence (s 4.3.3); and
(k) provided that the wagering licence and the gaming licence were each for a term of 18 years, or a longer term as determined by the Governor in Council (s 4.3.9).
160 In the GRA, “wagering” is defined as “pari-mutuel betting on a horse race, harness race or greyhound race” (s 1.3(1)). For a discussion of pari-mutuel (or totalisator) betting, see Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356 (“Betfair v RNSW”) at 361 [15]. Within Ch 4, “licensee” meant “the holder of the wagering licence and the gaming licence” and “operator” meant “the wagering operator or an operator appointed under section 4.3.15(1)(b)”: see s 4.1.2. “Approved betting competitions” were those approved by the Minister under s 4.5.3 in relation to horse, harness and greyhound racing, or the VCGR under s 4.5.6 of the GRA in relation to other events.
161 When the legislative history is considered, it becomes apparent that the scheme enacted under the GRA essentially carried on the scheme that had previously existed under the GBA 1994; and that the scheme under the GBA 1994 was built on, and developed from, the scheme introduced by the Racing (Totalizators Extension) Act 1960 (Vic). Furthermore, the GRA deemed Tabcorp to be the holder of the wagering licence under Pt 3 of Ch 4 of the GRA “for the balance of the term of the licence subject to any conditions to which the licence was subject immediately before that day”: see GRA, s 12.2.1, Sch 7, cl 4.2(1). Tabcorp Manager was deemed to be appointed as operator of the wagering licence under s 4.3.15(1) of the GRA: see GRA, s 4.3.15(1), Sch 7, cl 4.2(3). In this way, the wagering licence granted to Tabcorp under the GBA on 28 June 1994 was continued under the GRA.
162 Furthermore, the provisions of Ch 2 with which these appeals are concerned derived from legislation that preceded the GRA. Section 2.5.2 originated with s 4 of the Police Offences Statute Amendment Act 1872 (Vic). Section 2.6.1 was first enacted in 1986 as s 66B of the Lotteries Gaming and Betting Act 1966 (Vic). Section 115 of the LCRA derived from s 97 of the Licensing Act 1906 (Vic), first enacted on 28 December 1906.
163 The offence provisions in Ch 2 of the GRA and s 115(1) of the LCRA apply to all bookmakers who might otherwise want to provide an off-course retail betting service in Victoria, with the exception of the authorised activities of the wagering licensee and the wagering operator. The law of the State thus contemplates that there is only one company with the licence to engage in off-course wagering. The legislative scheme operates so that the sole wagering licence held by Tabcorp authorises only it and Tabcorp Manager to conduct off-course retail betting by means of totalisator wagering and approved betting competitions – the latter currently including fixed odds betting on races and other events: see Sportsbet v Victoria at 462 [170]-[171]. Consequently, only Tabcorp may currently establish an off-course “retail presence” in Victoria for betting: see Sportsbet v Victoria at 431 [22]. As already noted, the licence is for a defined and finite period. In accordance with its wagering licence, within Victoria, only Tabcorp and Tabcorp Manager conduct a totalisator (as defined in s 1.3(1)). This is sometimes called “totalisator exclusivity”. Also in accordance with its wagering licence, as already noted, Tabcorp provides various retail betting facilities, including Easybet terminals.
164 Tabcorp paid approximately $597.2 million for the wagering licence and concurrent gaming licence granted to it in 1994. At the time of the trial, Tabcorp was the largest wagering operator in Victoria, with customers throughout Australia and overseas.
165 Tabcorp remains subject to particular scrutiny under the GRA and, in some instances, regulation by the VCGR. For instance, the VCGR must approve Tabcorp’s instruments of betting and betting rules; and Tabcorp must submit to audits and related processes: see GRA, ss 4.2.3, 4.2.6, 4.3.10A and 4.8.2-4.8.6. Under the JVA, the racing industry, represented by VicRacing, scrutinises and has a voice in Tabcorp’s activities. Through participation in the Joint Venture Management Committee and the Joint Venture Operations Committee, the racing industry has access to significant information about Tabcorp’s Victorian wagering business and can affect the strategic and operational aspects of that business.
166 Punters place bets with Tabcorp in various ways – in person at a Tabcorp retail outlet, whether off-course or on-course; over the telephone; via an internet-enabled mobile phone or an iPhone application; via interactive pay television; via the internet; and via Easybet terminals. The primary judge found that Tabcorp’s retail wagering accounted for most of Tabcorp’s wagering business: see Sportsbet v Victoria at 455 [139]. At the time of trial, Tabcorp operated about 627 retail outlets in Victoria, 528 of which were licensed venues. Indeed, the primary judge found that Tabcorp had an established network of off-course retail outlets, some staffed and some self-service: Sportsbet v Victoria at 455 [139].
167 In cross-examination, Tabcorp’s Retail Distribution Manager, Mr Paul Carew, described Easybet terminals as “the future in terms of expanding our footprint in the venues”. The primary judge found that Easybet terminals were widely distributed through licensed venues in Victoria (Sportsbet v Victoria at 442 [82]); and, at the time of the trial, betting via Easybet terminals accounted for nearly 50% of all bets sold through Tabcorp outlets. Easybet terminals allowed customers to access software connected to Tabcorp’s retail network and, by this means, to view and select from Tabcorp’s betting products. Easybet terminals accepted payment for selected products in the form of cash, vouchers, betting tickets and pre-paid in-funds betting accounts. (Tabcorp is unable to extend credit: see GRA, s 4.7.6.)
168 Sportsbet relied on the fact that, whilst Tabcorp was permitted to install Easybet terminals in this way, by reason of the impugned provisions, Sportsbet was unable to install betboxes at licensed premises anywhere in Victoria. This was said to support Sportsbet’s claim that the impugned provisions were inconsistent with s 49 of the Self-Government Act.
169 Tabcorp’s wagering licence permitted it to conduct: (1) totalisator betting off-course and on-course in relation to horse, harness and greyhound racing; and (2) “approved betting competitions”, including fixed odds betting on horse, harness and greyhound races, and on various other sporting and non-sporting events. Tabcorp’s contribution to the racing industry, discussed further below, was largely derived from totalisator wagering. The evidence at the trial showed that, whilst Tabcorp’s engagement in fixed odds wagering had increased, especially since 2008, fixed odds wagering remained only about 20 per cent of its race wagering business.
170 As already indicated, only Tabcorp was able to conduct a totalisator. There was cogent evidence before the trial judge that totalisator wagering was less prone to corruption than other methods of wagering. As Justice Martin had observed in 1959, this was because, unlike a fixed odds operator, the totalisator’s return is a fixed proportion of turnover, regardless of the outcome of the event the subject of the wager. Tabcorp’s General Manager, Finance, Wagering Division, Mr Douglas Freeman, further explained that “[t]he amount that Tabcorp’s Victorian business may deduct as its take-out from the pool [was] limited by a statutory maximum (which flows from the operation of sections 4.2.5(2B) and 4.4.8 of the GRA)”.
171 There were also other advantages of totalisator betting. Totalisator betting provided a ready basis for all punters to place bets, irrespective of their betting knowledge. Inexperienced punters could inform their assessments by using the totalisator pool as a reflection of how others viewed the prospects of each entrant in the race. More experienced punters could be confident that large bets would be accepted. Totalisator betting was amenable to auditing. The success of a totalisator depended, however, on characteristics of structure and scale. A single, large totalisator increased the prospect of a good return because there was a substantial pool of money to distribute amongst the successful participants. Since the totalisator was more stable than other forms of wagering, its indicative odds were more accurate. If, however, the totalisator’s pool became too small, it became more unstable and more open to manipulation. This last-mentioned characteristic was important in the consideration of alternative models for funding the racing industry.
Tabcorp and the current funding of the Victorian Racing Industry
172 Mr Freeman’s unchallenged evidence was that:
A successful racing industry is created and sustained by providing good quality racing events (i.e. a good ‘spectacle’) through:
(a) securing the best race entrants (i.e. the best horses, dogs, jockeys and drivers, as appropriate);
(b) providing a large ‘field’ of entrants for each race;
(c) ensuring that the race track and facilities are kept in optimum condition; and
(d) providing high quality on-course entertainment.
Where a racing industry is able to secure a number of consistently good quality racing events, those racing events typically develop the prestige of that industry, which further encourages the participation and involvement of high calibre race entrants and racing industry personnel.
173 The evidence at trial was to the effect that the better the racing industry was funded, the better the spectacle it could afford to stage; and, in any case, to present a high-quality spectacle and a prestigious event, the industry had to be well funded. A number of witnesses gave evidence that the prestige and success of the Victorian racing industry depended on it providing a high quality spectacle; and that, without this spectacle, the industry would not draw top race performers or continue to encourage new breeders, trainers and other participants to enter the industry.
174 Substantial funds were needed, especially for high prize money. The Chief Executive of the Australian Racing Board (ARB), Mr Andrew Harding, and the State’s Executive Director of Gaming and Racing in the Department of Justice, Mr Ross Kennedy, both gave evidence that the revenue from wagering determined the prize money that race clubs offered at race meetings, as well as the number of racecourses and race meetings that the clubs could afford to support. The level of prize money affected not only the attraction of races to race entrants but also the prestige of the races. Further, prize money affected other critical aspects of the industry, including the number of horses bred, owned and raced, the number of people employed as trainers, jockeys and stable staff, the size of the race fields, and the scope of associated services such as horse transport and veterinary services.
175 Besides funding prize money, the Victorian racing industry also relied on wagering revenue to cover the costs of its regulatory and stewarding functions, track management and capital works, training and marketing.
176 Tabcorp’s relationship with the Victorian racing industry was unique. Mr Kennedy’s evidence at trial was that there was “a close symbiosis between the racing industry and race wagering”. Most of the Victorian racing industry’s revenue derived from distributions by Tabcorp to the industry’s controlling bodies under the JVA: see Sportsbet v Victoria at 453 [135]. Racing industry revenue derived from sources other than Tabcorp was significantly less than from Tabcorp: see Sportsbet v Victoria at 453 [135]. The level of distribution of funds from Tabcorp to the Victorian racing industry largely correlated to the level of wagering turnover. Thus, the total contribution from Tabcorp’s Victorian business in the financial year ending 30 June 2010 was approximately $338 million (equal to about 45.7% of Tabcorp’s Victorian business revenue).
177 The current funding model, which is dependent on the legislative regime of which the impugned provisions form part, has sustained the success of the Victorian racing industry. The primary judge found that the current industry funding model was and remained highly successful. Her Honour acknowledged that Tabcorp’s contributions were “an essential part” of keeping the Victorian racing industry “vibrant and successful” and that 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]. The evidence of numerous witnesses at trial clearly justified these findings. Indeed, Sportsbet’s former Chief Executive Officer, Mr Nicholas Tyshing, accepted in cross-examination that the Victorian racing industry could not sustain its current position without funding of the kind it presently received; and that payments by Tabcorp to the racing industry were essential for its continued success.
178 Tabcorp’s contribution to the racing industry was largely derived from totalisator wagering, which over time has proved, as Justice Martin predicted, a reliable means of generating funds for the industry. The evidence established, as the primary judge accepted, that totalisator wagering provided greater revenue certainty for the racing industry than revenue based on other forms of wagering: see Sportsbet v Victoria 455 [139]. Various key witnesses gave evidence that a successful totalisator was important for the continued success of the industry. For example, Mr Harding, from the ARB, concluded that “having a successful and stable Tote in each key racing jurisdiction is essential in order for the racing industry to continue to maintain its current level of funding and to continue to perform as it does”. This was borne out by the fact that funding through totalisator wagering was also the model “adopted in other Australian jurisdictions and internationally”: see Sportsbet v Victoria at 454 [136]. Thus, totalisator wagering was the means used for funding the most significant racing industries in the Asian region (including Hong Kong, Japan, Singapore, South Korea and New Zealand).
179 Further, a number of key witnesses gave evidence that Tabcorp’s retail exclusivity was significant in maintaining its funding level for the Victorian racing industry. Because Tabcorp’s retail exclusivity prevented Tabcorp losing business to retail competitors, the totalisator pool remained of sufficient size to operate at its optimal level and Tabcorp’s financial position continued to ensure that its contributions to the Victorian racing industry were sufficient to sustain a successful industry. As the primary judge noted, the financial viability of the totalisator and its integrity depend on the totalisator retaining a critical pool size for totalisator wagering. The evidence established that the sole wagering licence regime for the provision of off-course retail betting services in Victoria was conducive to the preservation of this critical pool size.
180 Further, given that an ability to manipulate the odds offered by a totalisator increased if the size of the totalisator pool fell below the critical size, the maintenance of the pool size was important for the integrity of totalisator wagering. Mr Kennedy and Mr Freeman both gave unchallenged evidence that: (1) a small totalisator pool was more susceptible to destabilisation through the placement of large wagers than a larger pool; and (2) a smaller totalisator pool was less attractive to high value punters who looked for a larger pool where the weight of investment ensured what Mr Kennedy called “stability of dividends”. Thus, Mr Kennedy said:
[A] smaller totalisator pool is … more susceptible to manipulation by bookmakers and punters alike. For example, a bookmaker seeking to reduce his or her liability to punters who have backed a particular horse at totalisator odds can do so by placing a substantial bet on the same horse on the totalisator as it is about to close. Where the totalisator pool is small, this will artificially reduce the dividend that the bookmaker is required to pay out if the punter wins. Conversely, a punter, who has placed a substantial wager on a horse, with a bookmaker at totalisator odds, can enhance the dividend on that horse by making a last minute place bet on other horses on the totalisator. Where the totalisator pool is small, this will artificially depress the totalisator odds on the other horses, while increasing the odds for the horse on which the punter placed the more substantial fixed-odds wager.
The possibility of totalisator manipulation cannot be discounted, as Tabcorp sought to do. Mr Kennedy’s evidence was that there had been an instance of pool manipulation within the three or four years preceding the trial.
181 Unsurprisingly, the precise effect of Tabcorp’s loss of retail exclusivity on the Victorian racing industry was difficult to quantify. Plainly enough, as the evidence showed, the effect of the loss of retail exclusivity would depend on a number of factors, including the number of corporate bookmakers and others entering the Victorian retail wagering market and their respective business operations. There was, however, evidence that, without retail exclusivity, Tabcorp’s financial position would be undermined and its contributions to the industry would decrease. If Tabcorp’s contributions decreased, then so too would the available prize money. A fall in the level of prize money would reduce the incentive for owners, breeders and others to participate in the industry.
182 There was also evidence that, without retail exclusivity, the totalisator would be compromised and totalisator wagering would cease to be a significant source of funding for the racing industry. In this regard, there were two relevant factors: first, the need to maintain the size of the totalisator’s pool, as explained above; and, second, the prevalence of “tote odds” – a product in which corporate bookmakers such as Sportsbet agreed to match or better the dividends paid by a totalisator in a particular pool. A number of witnesses, including Mr Harding, Mr Maxsted and Mr Freeman, gave evidence that “tote odds” betting would be likely to damage totalisator betting if Tabcorp did not have retail exclusivity. This was largely because corporate bookmakers had lower operational costs than Tabcorp, whose costs included maintaining totalisator betting. In Mr Maxsted’s words:
Corporate bookmakers offer a competing totalisator-matching product and can do so because of their lower costs model which in turn is driven in part by lower contributions to the [Victorian racing industry].
183 Mr Harding explained:
Retail betting attracts customers because of its convenience and therefore the exclusive ability to provide retail betting gives the Totes a point of difference that they can use. That point of difference is particularly important in the current environment, where corporate bookmakers mimic the Totes’ totalisator service through the provision of a tote odds service, thus eroding any point of difference that the Totes may otherwise have enjoyed based on their totalisator product offering. In these circumstances, a system in where the Tote retains sole authorisation to provide pari-mutuel wagering services but does not have retail exclusivity would have the potential to significantly reduce the funding of Australian racing.
184 Mr Freeman added that:
These products effectively replicate the attraction of a totalisator service by guaranteeing to match (or better) the totalisator’s dividends. Corporate bookmakers regularly offer tote odds products and can afford to do so because they do not have the same overheads associated with operating complex totalisator pools and because they can manage their risk by betting back into the totalisator pools if necessary. In view of Tabcorp’s funding and other obligations including to the Victorian racing industry, and its totalisator structure, it cannot offer equivalent dividends. In these circumstances, if corporate bookmakers offered tote odds products in a retail setting, this would effectively eliminate Tabcorp’s current point of difference and concurrently confer a significant competitive advantage on corporate bookmakers.
185 The evidence of Mr Harding, Mr Freeman and Mr Maxsted showed that the maintenance of a successful totalisator depended on the maintenance of retail exclusivity, not merely totalisator exclusivity. Given the evidence concerning the benefits of totalisator wagering, there was clear evidence that injury to the totalisator might well deprive the industry of some of the inherent and important benefits of totalisator wagering and also reduce the reliability of appropriate funding for a successful industry.
Alternative models for funding the Victorian Racing Industry
186 There was evidence that a different funding model in the United Kingdom has not proved as successful so far as the UK racing industry is concerned. Racing in the United Kingdom is funded by a levy scheme, pursuant to which the industry and wagering operators negotiate annually on the level of a levy for the following year or, absent agreement, a levy is determined by the Secretary for Culture. Most betting in the United Kingdom takes places with off-course corporate bookmakers, operating “high street” betting shops. Under this scheme, wagering funding to the racing industry has varied greatly over the past decade and is apparently in decline, with adverse effect on the industry, including available prize money.
187 The two economists – whose evidence was discussed by the primary judge in Sportsbet v Victoria at 450-451 [118]-[123] – were both unable to proffer a funding alternative for the racing industry that did not contain significant difficulties and inefficiencies. In his report, Mr Derek Ridyard, an economist whose opinion was relied on by the State and Tabcorp, identified and considered three other mechanisms that might be employed instead of the current model, including a uniform fee. Mr Ridyard concluded that each of these other mechanisms were deficient when compared with the current model. In summary, his opinion was that:
[R]etail exclusivity has the advantage of internalising and aligning the incentives of the racing industry and its chosen partner. By making a substantial commitment to a single exclusive retail partner, the State can allow the racing industry to maximise its bargaining power, providing incentives for the chosen retail partner to make financial contributions to the racing industry that it would not have an incentive to concede in the absence of exclusivity. …
The main potential disadvantage of retail exclusivity arises from the risk that this model could allow a single retailer to operate free from competitive pressures, e.g. at low levels of efficiency and/or at unduly high rates of profit. … As I have explained above, however, there is a clear incentive for the State and the racing industry to include contractual conditions on Tabcorp to guard against those dangers, and I note the existence of a number of contractual provisions that have been placed around Tabcorp’s licence that are designed to do so … .
188 There was evidence that, if the current funding arrangements were replaced by a uniform fee paid by all bookmakers, at present turnover levels, that fee needed to be set at a level that most bookmakers would be unable to pay because the fee would exceed a bookmaker’s typical profit margin. There was also evidence that a uniform revenue fee would be no less uncommercial. That is, if a uniform revenue fee were introduced, the evidence indicated that operators would need to pay around 41% of their revenue to achieve the level of funding attracted on the existing model in the 2009/2010 financial year. Further, this funding option would be less stable than the current one. Thus, the economists’ evidence indicated that there was no alternative equally efficient and viable funding model to that which already operated.
189 It is convenient at this point to turn to the business of Sportsbet, the consideration of which is important for resolving the appeals. Sportsbet is a corporate bookmaker with an annual turnover of about $2 billion. As already stated, Sportsbet is not registered as a bookmaker in Victoria under the GRA, but holds a licence under the RBA (NT) to conduct the business of sports bookmaking from its licensed premises in Darwin: see RBA (NT), s 70.
190 The primary judge found (at 441 [78]) that:
A person wishing to place a bet with Sportsbet must first register and acknowledge Sportsbet’s terms and conditions. A bet placed with Sportsbet, the Sportsbet’s computer server and Sportsbet’s bookmaking business, are all regulated by Northern Territory law. Sportsbet accepts bets by telephone and over the internet from registered members situated throughout Australia, including Victoria. The contingencies on which registered players bet include races conducted in each state and territory and sporting events conducted in each state and internationally.
191 Sportsbet operates a number of computer servers from its licensed premises. A registered Sportsbet customer may place bets by use of a computer connected via the internet to one of these servers. The primary judge found that “[c]ustomers may be located outside the Northern Territory and Sportsbet seeks to attract such customers located in states of the Commonwealth including Victoria”: see Sportsbet v Victoria at 442 [83]. As we have seen, Sportsbet also sought to accept wagers over the internet by means of a betbox installed in licensed premises in Victoria.
192 The primary judge made a number of important findings with respect to the conduct of Sportsbet’s business that were not challenged on the appeals: see Sportsbet v Victoria at 442-444 [84]-[87]. These findings were that:
(a) Sportsbet was registered as a company on 29 June 1999 under the Corporations Law 1989 (Cth), as applied to the Northern Territory by the Corporations (Northern Territory) Act 1990 (NT). Its registered office was that specified in the registration application: see ss 117 and 121. When the Corporations Act 2001 (Cth) (the Corporations Act) commenced, Sportsbet’s registration was taken to have effect under the corresponding provisions of the Corporations Act. Sportsbet’s registered office and principal place of business remained the same: s 1378(3) of the Corporations Act. Moreover, for the purposes of s 119A of the Corporations Act, Sportsbet was taken to be registered in the Northern Territory: s 1378(4) of the Corporations Act.
(b) Sportsbet had a registered licensed business which operated from licensed premises at the Fannie Bay Racecourse in Darwin under the RBA (NT).
(c) Sportsbet’s licence under the RBA (NT):
(1) permit[ted] Sportsbet to offer a much wider range of bets to punters than that permitted under Victorian law;
(2) permit[ted] Sportsbet to provide credit to punters (contrary to anywhere else in Australia);
(3) permit[ted] Sportsbet a more flexible approach to marketing (than other places in Australia);
(4) until recent changes to the Victorian legislation, provided Sportsbet with better access to capital resources because the [RBA (NT)] did not insist on directors and shareholders of the registered bookmaker themselves being bookmakers;
(5) required, as a condition of the licence, that Sportsbet take[] bets from the Fannie Bay Racecourse in Darwin.
(d) a significant part of Sportsbet’s computer system was located in Darwin and Sportsbet’s customers (both national and international) interacted with the Sportsbet business through the Darwin office.
(e) while Sportsbet had a registered office in Darwin, it had much larger offices in Melbourne.
(f) a substantial part of Sportsbet’s business was conducted in Melbourne “including its IT department, marketing, human relations, finance and administration, its bookmakers, the risk management department for real time client bet monitoring and the fraud department including anti-money laundering checking” (443 [84]).
(g) the management of Sportsbet’s business was conducted in Melbourne and there was a far greater concentration of senior and other staff in Melbourne.
(h) Sportsbet’s senior management spent most of their time in Melbourne and were resident in Melbourne.
(i) although Sportsbet’s Northern Territory licence explained the physical location of Sportsbet’s servers at the Fannie Bay Racecourse, the licence had no significance for the purposes of the impugned provisions because it did not confer any right, and did not purport to confer any right, on Sportsbet to engage in bookmaking in Victoria.
(j) by installing the “betbox” with logos and advertising, Sportsbet had a physical presence in Victoria and, in substance, the transactions occurred within Victoria.
193 Mr Edward Berry, a racing inspector employed by the Licensing, Regulation and Alcohol Strategy Division in the Territory’s Department of Justice, gave substantially unchallenged evidence about the regulation of licensed bookmakers in the Territory. Mr Berry’s evidence was that, in the Territory, a licensed sports bookmaker such as Sportsbet was required “to record and maintain all betting and financial information” and to supply the information to the Northern Territory Racing Commission (NTRC) for audit and compliance purposes. A sports bookmaker was also required to comply with accounting procedures; to maintain proper betting records; to ensure senior personnel, directors and major shareholders undergo police checks; to report unusual betting circumstance to AUSTRAC; and to comply with the Territory’s Mandatory Code for Responsible Gaming. Mr Berry made it clear, however, that the Territory pursued a policy of “minimum regulatory intervention”. This was consistent with s 17(2) of the RBA (NT).
194 Sportsbet was free to advertise in Victoria and to accept bets from its registered members in Victoria (other than through a betbox). Sportsbet was liable to pay a fee to Victorian race control bodies for the use of Victorian race field information. Whilst Sportsbet submitted on the appeals that this contribution was similar to that which applied to fixed odds wagers accepted by Victorian bookmakers and Tabcorp, the evidence to which Tabcorp referred did not bear this out and indicated, instead, that Tabcorp made a significantly higher rate of contribution derived from fixed odds betting than Sportsbet.
195 Sportsbet’s National Business Manager – Retail, Mr Paul Merrigan, gave evidence that Sportsbet wanted to install betboxes in licensed premises throughout Victoria. The primary judge found that the betbox operated from the Hotel was “intended to attract customers to Sportsbet and to attract patrons to the hotel”: see Sportsbet v Victoria at 439 [63]. Her Honour continued (at 439 [63]):
The idea was that by putting the “betbox” in the sports bar of the Eureka Stockade Hotel, punters would have a drink, watch television, eat a meal and bet on the “betbox”. … In fact, the licence for the “betbox” between [Sportsbet and Eureka] included an obligation to locate the “betbox” in a prominent and visible position adjacent to the main bar. Sportsbet paraphernalia was disseminated throughout the bar to attract customers.
Her Honour found that the betbox, including the computer terminal located within it, constituted “the physical presence of Sportsbet within the venue”: see Sportsbet v Victoria at 439 [64].
196 As noted at the outset of these reasons, the betbox is a device by which a customer selects and places a bet with Sportsbet and Sportsbet notifies the customer of its acceptance of the bet: Sportsbet v Victoria at 434 [40]. The primary judge described the operation of the betbox at the Hotel (at 445 [92]) as follows:
Here, a punter in Victoria approached a “betbox” situated in Victoria which was installed in Victoria and owned by Sportsbet. On approaching the “betbox”, the punter accessed information on a website maintained by Sportsbet and selected a race on which to place a bet. The punter then selected the size of the bet and sent that “request”. The request was received by Sportsbet on its server located in Darwin. That server then communicated Sportsbet’s acceptance of that bet with notification of acceptance of the bet being capable of being received on the “betbox” in Victoria.
197 In contrast to Tabcorp’s Easybet terminals, Sportsbet customers set up betting accounts via the betbox and Sportsbet could extend credit to them. The Sportsbet servers in Darwin used software developed by Sportsbet to process the bets communicated via the servers to it. Ordinarily, Sportsbet accepted a bet via this automated process. Thus, her Honour found that “Sportsbet’s customers … interact with the Sportsbet business through the Darwin office”: see Sportsbet v Victoria at 444 [87]. A decision requiring human decision-making was, however, generally made in Melbourne (for example, as to extending or terminating credit to a Sportsbet member or as to accepting a substantial bet outside a member’s normal profile).
198 Tabcorp contended that the licence granted to Sportsbet under the RBA (NT) did not authorise Sportsbet to operate off-course betboxes. This was because Sportsbet’s licence only authorised Sportsbet to conduct the business of a sports bookmaker at identified premises at the Fannie Bay Racecourse in Darwin. This latter proposition may be accepted. There is, however, no contravention of the Unlawful Betting Act (NT) whilst Sportsbet conducts its business in accordance with its licence: see ss 31 and 33. If Sportsbet were to open premises not on the Racecourse to the public “to attend in person for the purposes of placing a bet”, then Sportsbet would apparently breach special condition 24 of its licence. On these appeals, however, there is no occasion to determine whether special condition 24, or some other licence condition or statutory provision, would be engaged in the event that Sportsbet installed a betbox at a place in the Territory other than the Fannie Bay Racecourse. This is not what Sportsbet has done. It is immaterial that, as Mr Berry stated in cross-examination, Sportsbet had not applied for approval to use a betbox in the Territory. It may well be that, as Tabcorp submitted, Sportsbet would require specific authority from the NTRC to operate a betbox in the Northern Territory, but this is not what Sportsbet has sought to do. Whether approval, if sought, would be given is speculative. On these appeals, licence condition 8 is relevant in so far as it permitted Sportsbet to accept bets, over the internet or by any electronic means approved by the NTRC, from anywhere at its premises at the Fannie Bay Racecourse. Mr Berry deposed that Sportsbet had given the NTRC a prototype betbox for review and had informed the NTRC of its intention to operate a betbox from outside the Territory; and that the NTRC had confirmed that the betbox complied with Sportsbet’s licence. Having regard to Sportsbet’s licence and Mr Berry’s evidence, Sportsbet’s proposed use of betboxes in Victoria was not shown to be inconsistent with Sportsbet’s licence conditions or otherwise unlawful under the law of the Territory. Tabcorp’s argument with respect to these matters should be put to one side.
The market for wagering service providers
199 In relation to Sportsbet, the primary judge found (at 442 [82]) that:
Sportsbet competes with Tabcorp in a national wagering market. … [W]agering services on racing and sporting events are supplied throughout Australia by means of telephone and the internet to users of those services. That competition has been increasing for at least 10 years and is now “fierce”. … Tabcorp accepts bets over the internet and through “Easybet terminals” … Sportsbet also competes against bookmakers in Victoria who are able to stand at racecourses and accept bets by a person present on the racecourse, over the telephone and over the internet: ss 4 and 4A of the Racing Act. Tabcorp established “Luxbet”, a Northern Territory subsidiary in response to Sportsbet and other corporate bookmakers offering wagering products. This competition has resulted in lower priced wagering products for punters.
200 In recent years, interstate corporate bookmakers, mostly operating internet and telephone businesses, have become more prominent in Australian wagering. It has become commonplace for persons in Victoria to place bets, via internet or telephone, with interstate wagering providers. In this respect, the market has changed since 1994 when Tabcorp was incorporated and granted the sole wagering licence. Mr Harding stated in cross-examination that competition amongst wagering service providers was not significant in 1994, but that competition only became “more fierce” “towards the latter part of the 1990s”, although, as at 2001, corporate bookmakers had “only a niche segment of the Australian wagering market”. By July 2010, however, Tabcorp faced significant competition from a range of wagering operators throughout Australia.
201 The popularity of corporate bookmakers had seemingly some adverse effect on Tabcorp, particularly with respect to its totalisator wagering, as evidenced by a relative decline in funding to the racing industry in recent years. This decline had been stalled, however, by changes in Tabcorp’s business, including Tabcorp’s expansion of its fixed odds business. Indeed, as Sportsbet noted, there was evidence that there had been a growth in the wagering market over the past few years; a steady increase in Tabcorp’s wagering turnover in the five years from 2006; and a steady increase in prize money paid in the same period. Over the past decade, moreover, Tabcorp’s revenue had grown more or less steadily, as had the revenue received by Racing Victoria.
202 Sportsbet affirmed and Tabcorp denied that Tabcorp’s fixed odds business had altered, or would inevitably alter, the operation of the current industry funding model. As noted earlier, however, the proportion of Tabcorp’s revenue derived from its fixed odds business is comparatively small compared with its totalisator revenue. Further, if this or some other aspect of its business were seen to threaten the existing funding model, including totalisator wagering, Tabcorp’s approval in respect of that aspect of its business could be revoked under s 4.5.5 of the GRA.
203 Sportsbet sought to develop arguments based on: (1) the amount of Tabcorp’s licence fee allegedly attributable to gaming rather than wagering; and (2) the refund provisions of the GBA. Neither matter was raised before the primary judge. If it had been, further evidence might well have been led in response. We would therefore put these arguments to one side. In any event, there was some evidence that any contribution from Tabcorp’s gaming business to the racing industry was only a relatively minor component of Tabcorp’s overall contribution to the industry.
OVERVIEW OF RELEVANT PRINCIPLES
204 Before outlining the principles for construing s 92 and hence s 49 of the Self-Government Act, it is convenient to note a pertinent difference between the operation of s 92 and s 49.
205 As the joint judgment in Sportsbet v NSW observed, s 49 of the Self-Government Act is expressed as a command: see Sportsbet v NSW at 409 [10]. Citing Lamshed v Lake (1958) 99 CLR 132 at 147, the plurality there explained that “a federal law in the terms of s 49 is a ‘positive rule’ relating to the government of the territory and thus supported by s 122 of the Constitution”. Previously, in AMS v AIF, Gleeson CJ, McHugh and Gummow JJ said (at 176 [37]):
Lamshed v Lake … establishes that provisions such as s 49 of the Self-Government Act are laws of the Commonwealth which attract the operation of s 109 of the Constitution. As a species of what is often identified as “operational inconsistency”, this supremacy of Commonwealth law operates to exclude, in relation to the matters to which it applies, the operation of the laws of a State … .
Hayne J agreed: see AMS v AIF at 232-233 [220]-[221].
206 The relevance of this distinction is that, whilst s 92 renders the infringing legislation or executive measure invalid, s 49 of the Self-Government Act does not limit State legislative power. If the operation of a State law is inconsistent with s 49, then s 109 of the Constitution is attracted, with the result that the State law is inoperative to the extent of the inconsistency. An exercise of discretionary power under State legislation that is inconsistent with s 49 is not, of course, affected by s 109, although it would involve an error of law: see Sportsbet v NSW at 409 [12]; AMS v AIF at 176 [37]; Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556, at 596-597, 614-615; and Racing NSW v Sportsbet Pty Ltd (2010) 189 FCR 448 (“Racing NSW v Sportsbet”) at 490-491 [141].
207 As noted earlier, s 49 of the Self-Government Act is to be given an ambulatory interpretation that follows the construction of s 92. Accordingly, the principles relevant to the construction of s 92 are also relevant to s 49 of the Self-Government Act. These principles are outlined below.
208 In the decade immediately before Cole v Whitfield (1988) 165 CLR 360 (“Cole v Whitfield”), the High Court was unable to agree on an approach to the construction of s 92: see, for example, Clark King & Co Pty Ltd v Australian Wheat Board (1978) 140 CLR 120 and Uebergang v Australian Wheat Board (1980) 145 CLR 266. By the late 1970s, the criterion of operation doctrine, which had found expression in Hospital Provident Fund Pty Ltd v Victoria (1953) 87 CLR 1 (“Hospital Provident Fund”) and had been accepted for 25 years, was no longer accepted by a majority of the High Court.
209 There were three objections to the criterion of operation doctrine and, since they are relevant to the submissions in these appeals, it is useful to note them here. First, the doctrine was said to depend “on the formal and obscure distinction between the essential attributes of trade and commerce and those facts, events or things which are inessential, incidental, or, indeed, antecedent or preparatory to that trade and commerce”: Cole v Whitfield at 401. Second, the doctrine was thought to place “interstate trade on a privileged or preferred footing, immune from burdens to which other trade is subject”: Cole v Whitfield at 402. Third, the doctrine failed “to make any accommodation for the need for laws genuinely regulating intrastate and interstate trade”: Cole v Whitfield at 403. This led the Court in Cole v Whitfield at 403 to observe:
The history of the movement for abolition of colonial protection and for the achievement of intercolonial free trade does not indicate that it was intended to prohibit genuine non-protective regulation of intercolonial or interstate trade. … [T]here has been a continuing tension between the general application of the formula and the validity of laws which are purely regulatory in character.
210 The history of s 92 since Cole v Whitfield indicates that accommodating s 92 with the need for regulatory laws continues to provoke controversy. In a sense, these appeals reflect the tension to which the Court referred. Further, as these appeals indicate, even after Cole v Whitfield, there is perhaps a tendency in some s 92 analysis to veer towards a preference for interstate over other trade; and, as these appeals show, with respect to the identification of interstate trade, the attraction of arguments about essence remains.
211 By reference to an historical analysis, Cole v Whitfield substantially resolved the controversy over the construction of s 92, by holding that s 92 applied to laws that discriminate against interstate trade or commerce in a protectionist sense: see Cole v Whitfield at 391-395, 407. Thus, the Court said (at 393):
Section 92 precluded the imposition of protectionist burdens: not only interstate border customs duties but also burdens, whether fiscal or non-fiscal, which discriminated against interstate trade and commerce. That was the historical object of s 92 and the emphasis of the text of s 92 ensured that it was appropriate to attain it.
The Court held (at 394) that:
The history of s 92 points to the elimination of protection as the object of s 92 in its application to trade and commerce. The means by which that object is achieved is the prohibition of measures which burden interstate trade and commerce and which also have the effect of conferring protection on intrastate trade and commerce of the same kind. The general hallmark of measures which contravene s 92 in this way is their effect as discriminatory against interstate trade and commerce in that protectionist sense.
The focus in subsequent s 92 cases, as in these appeals, has been on whether the impugned measure is discriminatory in a protectionist sense, as to which the Court in Cole v Whitfield gave some guidance.
212 Whilst acknowledging that the concept of discrimination “commonly involves the notion of a departure from equality of treatment”, the Court held (at 399) that:
It does not follow that every departure from equality of treatment imposes a burden or would infringe a constitutional guarantee of the freedom of interstate trade and commerce from discriminatory burdens. Nor does it follow that to construe s 92 as guaranteeing the freedoms of interstate trade and commerce from discriminatory burdens would mean that interstate trade and commerce was rendered immune from any regulation which did not affect like intrastate trade. Such regulation might not constitute a burden at all. Even if it did, it might not be discriminatory in the sense to which we have referred.
213 Further, Cole v Whitfield recognized that the question whether or not an exercise of legislative power is invalid in so far as it impermissibly burdens interstate trade and commerce may depend on the practical operation of the law. Thus, the Court stated (at 399) that:
The concept of discrimination in its application to interstate trade and commerce necessarily embraces factual discrimination as well as legal operation. A law will discriminate against interstate trade or commerce if the law on its face subjects that trade or commerce to a disability or disadvantage or if the factual operation of the law produces such a result.
214 At issue in Cole v Whitfield was the validity of a Tasmanian law that made it an offence to sell undersized crayfish, whether or not taken in Tasmanian waters. Whilst the law burdened interstate trade in crayfish, the Court held that the burden was not discriminatory in a protectionist sense. The Court explained (at 408) that:
[W]here the law in effect, if not in form, discriminates in favour of intrastate trade, it will … offend against s 92 if the discrimination is of a protectionist character. A law which has as its real object the prescription of a standard for a product or a service or a norm of commercial conduct will not ordinarily be grounded in protectionism and will not be prohibited by s 92. But if a law, which may be otherwise justified by reference to an object which is not protectionist, discriminates against interstate trade or commerce in pursuit of that object in a way or to an extent which warrants characterization of the law as protectionist, a court will be justified in concluding that it nonetheless offends s 92.
The Tasmanian law was not discriminatory in a protectionist sense because it did not confer a competitive or market advantage over the trade in imported crayfish; and, even if the Tasmanian law advantaged local trade by improving the competitive quality of local supplies, on the agreed facts, the extension of the prohibition to crayfish caught outside the State was “a necessary means of enforcing the prohibition against the catching of undersized crayfish in Tasmanian waters”: Cole v Whitfield at 409.
215 The basic premise of Cole v Whitfield – that s 92 prohibits only discriminatory burdens of a protectionist kind – has not since been doubted, although subsequent decisions have explored its ramifications.
Bath, Castlemaine Tooheys and Barley Marketing Board
216 Prior to the Betfair cases (see below), after Cole v Whitfield, whether or not an exercise of legislative power was contrary to s 92 was examined in such subsequent cases as Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 (“Bath”), Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 (“Castlemaine Tooheys”) and Barley Marketing Board (NSW) v Norman (1990) 171 CLR 182 (“Barley Marketing Board”). In the present appeals, the parties relied on these authorities to support their respective positions. These cases illustrate that there was no departure from Cole v Whitfield at the time they were decided. Rather, the ramifications of the principles in Cole v Whitfield were explored by reference to the circumstances in each case. Each party drew comfort from what it saw as the ramifications that the Court supposedly accepted.
217 At issue in Bath was a Victorian law that required the payment of licence fees by tobacco wholesalers and retailers. The Victorian Act first imposed a licence fee on wholesalers in respect of tobacco sold to Victorian retailers and, then, a licence fee on Victorian retailers in respect of any tobacco not sold to them by licensed wholesalers. The result was that tobacco products purchased by a retailer from a local licensed wholesaler did not attract the extra fee that fell on a retailer who purchased from an interstate wholesaler. The majority concluded that the challenged provisions were relevantly discriminatory because they had the effect of protecting local wholesalers and their tobacco from competition from an out-of-State wholesaler “whose products might be cheaper in some other Australian markets for a variety of possible reasons, e.g., that the laws of the State in which he carries on his business as a wholesaler either do not require that he hold a licence at all or exact a licence fee comparatively lower than the fee exacted from a Victorian wholesaler”: Bath at 425. That is, the operation of the licence fee provisions was, in practice, discriminatory against the interstate trade in tobacco products in a protectionist sense. The majority did not hold, however, that the explanation for the imposition of the burden on interstate trade was irrelevant, as Sportsbet submitted. On the contrary, the majority considered that explanation and concluded that it underlined, rather than removed, the protectionist character of the provisions: see Bath at 426.
218 In Castlemaine Tooheys the High Court held that South Australian legislation, which required beer retailers to collect a refundable deposit from the purchasers of bottled beer, discriminated against out-of-state traders supplying beer in non-refillable bottles and protected in State suppliers of beer who mostly sold beer in refillable bottles. The legislation provided a higher refund rate for refillable bottles as opposed to non-refillable bottles. The majority summarised the position thus (at 464):
The practical effect of the [legislative arrangement] was to prevent [out-of- State suppliers] obtaining a market share in packaged beer in South Australia in excess of 1 per cent whilst their competitors used refillable beer bottles. …
It is common ground between the parties that the object and effect of the [legislation] was to make the sale of beer in non-refillable bottles commercially disadvantageous. …
[South Australia] claims that the [legislative arrangement] promoted litter control and conserved energy and resources.
219 The Court held that the South Australian legislation was discriminatory in a protectionist sense and, in so doing, developed the analysis required by s 92. First, the judgment of five members of the Court emphasized that the Australian approach was different from the American commerce clause analysis. Their Honours stated (at 471):
[W]e are concerned only with the proper characterization of the law as protectionist or not, in the sense described in Cole v Whitfield. Hence there is no place for a secondary test to invalidate laws which have been found to lack a protectionist purpose or effect. Rather, the two tests are combined as one inquiry into the characterization of the law as protectionist or otherwise.
220 Since the critical question in Castlemaine Tooheys was whether the discriminatory burden imposed on interstate trade by the South Australian legislation was of a protectionist kind, their Honours specifically dwelt on the characterization process. Relevantly for these appeals, their Honours said (at 471):
[T]he fact that a law regulates interstate and intrastate trade evenhandedly by imposing a prohibition or requirement which takes effect without regard to considerations of whether the trade affected is interstate or intrastate suggests that the law is not protectionist. Likewise, the fact that a law, whose effects include the burdening of the trade of a particular interstate trader, does not necessarily benefit local traders, as distinct from other interstate traders, suggests that the purposes of the law are not protectionist. On the other hand, where a law on its face is apt to secure a legitimate object but its effect is to impose a discriminatory burden upon interstate trade as against intrastate trade, the existence of a reasonable non-discriminatory alternative means of securing that legitimate object suggests that the purpose of the law is not to achieve that legitimate object but rather to effect a form of prohibited discrimination. There is also some room for a comparison, if not a balancing, of means and objects in the context of s 92. The fact that a law imposes a burden upon interstate trade and commerce that is not incidental or that is disproportionate to the attainment of the legitimate object of the law may show that the true purpose of the law is not to attain that object but to impose the impermissible burden.
221 In so far as the present appeals are concerned, it is important to note that the Court scrutinised both the rationale for, and operation of, the impugned legislative measures. If, so their Honours reasoned (at 473-474), the legislative measure was “appropriate and adapted to the protection of the environment in South Australia from the litter problem and to the conservation of the State’s finite energy resources and … its impact on interstate trade [was] incidental and not disproportionate to those objects”, then the burden would not be characterized as protectionist. In the result, their Honours held (at 477) that “neither the need to protect the environment from the litter problem nor the need to conserve energy resources offer[ed] an acceptable explanation or justification for the differential treatment given to the products of [out-of-state] brewing companies”. The challenged legislative measures were therefore discriminatory in a protectionist sense in relation to interstate trade.
222 Barley Marketing Board concerned the establishment, by New South Wales legislation, of a board for marketing barley. The appellants particularly relied on its authority, because it concerned the establishment of a monopoly in a market that did not offend s 92. Pursuant to the legislation, barley grown by New South Wales barley growers was vested in the board, which sold the barley and returned the benefit of the sale to the growers. The result of the marketing scheme was that Victorian buyers were unable to buy barley as cheaply as they had formerly done from individual growers. This was consistent with the object of the legislation since the board had been established to achieve a collective increase in market power to support higher prices “especially [to] interstate maltsers”, although the higher prices were charged to both intrastate and interstate buyers: see Barley Marketing Board at 202 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).
223 After discussing cases in which marketing schemes had previously been held to conflict with s 92, the Court said (at 201):
The decisions to which we have referred proceeded according to the so-called “individual rights” theory of s 92, namely, that the section guarantees the right of the individual to engage in interstate trade and commerce. That view of s 92 prevailed until it was displaced by Cole v Whitfield where it was pointed out that the “individual rights” theory has the effect of transforming s 92 into a source of discriminatory protectionism in reverse … Once that view was displaced by the interpretation adopted in Cole v Whitfield, it necessarily followed that the authority of earlier decisions of the Court, including the [Peanut Board v Rockhampton Harbour Board (1933) 48 CLR 266, North Eastern Dairy Co Ltd v Dairy Industry Authority (NSW) (1975) 134 CLR 559 and Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board (1985) 157 CLR 605], was open to question to the extent to which those decisions were decided by reference to an interpretation of the section that could no longer be supported.
224 The Court applied the principles as formulated in Cole v Whitfield to conclude that the legislation did not impose a discriminatory burden of a protectionist kind on interstate trade and commerce. The Court explained (at 203):
The maltsers in both States are denied direct access to the growers in New South Wales. The Act does not result in the exclusion of one group but not the other from any market; nor does the Act lead to any difference in price of product to malsters in the two States. Consequently the New South Wales malster is given no competitive advantage over his Victorian counterpart. So the operation of the Act does not result in “a departure from equality of treatment” of interstate and intrastate trade and commerce, that being the object of the constitutional injunction in s 92.
225 At the hearing of these appeals, the parties differed as to the significance they attached to Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 (“Betfair v WA”), which at the time of argument was the most recent decision of the High Court concerned with s 92. Betfair v WA illustrates that, whilst the construction of s 92 has not altered since Cole v Whitfield, s 92 may be invoked over time in very different circumstances.
226 Betfair operated a betting exchange pursuant to a licence under Tasmanian law, from premises in Tasmania for registered customers throughout Australia. Betfair’s customers communicated with it via telephone and the internet. Betfair challenged the validity of Western Australian legislation specifically targeted to prevent people in Western Australia from using its services: see Betfair v WA at 470-472 [68]-[77], 478 [106], 480 [114]. In this latter regard, Betfair v WA was not dissimilar to the measures considered in Castlemaine Tooheys. The Court held that the State’s legislation was invalid by reason of s 92, to the extent that it would prevent the use of Betfair’s betting exchange via telephone or internet: see Betfair v WA at 473 [83]-[84] (Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ) and 487-488 [141]-[146] (Heydon J).
227 Contrary to Sportsbet’s submissions, Betfair v WA did not involve any re-consideration of Cole v Whitfield and, as the joint judgment of Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel J noted, the source of s 92 jurisprudence remained Cole v Whitfield, as developed and applied in Bath, Castlemaine Tooheys and Barley Marketing Board: see Betfair v WA at 451 [10]. Relevantly for these appeals, their Honours’ decision ultimately depended on the application of the established principle that “a law the practical effect of which is to discriminate against interstate trade in a protectionist sense is not saved by the presence of other objectives … which are not protectionist in character”: see Betfair v WA at 464 [47].
228 Also relevantly for these appeals, Betfair v WA reaffirmed that s 92 is not concerned with the individual rights of entities that carry on interstate trade or commerce: Betfair v WA at 456 [26]. In their joint judgment, six of their Honours specifically accepted “s 92 was not designed to create ‘a laissez-faire economy in Australia’; rather, it had a more limited operation, to prevent the use of State boundaries as trade borders or barriers for the protection of intrastate players in a market from competition from interstate players in that market”: Betfair v WA at 460 [36].
229 Betfair v WA may perhaps be read as departing from Cole v Whitfield in relation to the appropriate and adapted test, referred to by the State as the negative criterion for determining whether or not a measure was a protectionist one. In their joint judgment at 476 [98]-[99], six members of the Court expressed dissatisfaction with a passage in Castlemaine Tooheys concerned with the appropriate and adapted criterion and subsequently used an alternative formulation of the negative criterion – that of reasonable necessity.
230 At the same time, the joint judgment indicated that there was to be no departure from the substance of the approach in Castlemaine Tooheys: see Betfair v WA at 476 [100]. Consistently with Castlemaine Tooheys and Cole v Whitfield, their Honours accepted (at 476-477 [101]-[102]) that the appropriate and adapted criterion necessarily involved:
… the existence of a “proportionality” between, on the one hand, the differential burden imposed on an out-of-State producer, when compared with the position of in-State producers, and, on the other hand, such competitively ‘neutral’ objective as it is claimed the law is designed to achieve.
Indeed, their Honours’ reference to the criterion of reasonable necessity first appeared in their elaboration of “proportionality” in the above passage. Thus, citing North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW (1975) 134 CLR 559, decided pre-Cole v Whitfield, their Honours said (at 477 [102]):
That “proportionality” must give significant weight to the considerations referred to earlier in these reasons when discussing Castlemaine Tooheys. These involve the constraint upon market forces operating within the national economy by legal barriers protecting the domestic producer or trader against the out-of-State producer or trader, with consequent prejudice to domestic customers of that out-of-State producer or trader. They suggest the application here, as elsewhere in constitutional, public and private law, of a criterion of ‘reasonable necessity’. (Emphasis added)
Their Honours went on to state that this “view of the matter should be accepted as the doctrine of the Court”: Betfair v WA at 477 [103].
231 The reference in the above passage to the criterion of reasonable necessity elsewhere in constitutional, public and private law signalled what was intended in this context by the reasonable necessity criterion: see the discussions in, for example, Thomas v Mowbray (2007) 233 CLR 307 (“Thomas v Mowbray”) at 331-333 [21]-[24] (Gleeson CJ); and Mulholland v Australian Electoral Commission (2004) 220 CLR 181 (“Mulholland v AEC”) at 199-200 [39] (Gleeson CJ), which was cited with approval in Hogan v Hinch (2011) 85 ALJR 398 (“Hogan v Hinch”) at 418 [72] (Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ). Read in this light, the criterion of reasonable necessity was, as their Honours indeed observed, consistent with Cole v Whitfield and Castlemaine Tooheys: see Betfair v WA at 477-478 [103]-[105]. Hence, in Betfair v WA, the criterion of reasonable necessity operated in much the same way as the appropriate and adapted criterion. Both criteria involved consideration of whether the burden imposed by the impugned measure was greater than that required for the reasonable attainment of the purpose that provided the “acceptable explanation or justification” for the measure. See Castlemaine Tooheys at 477 and Betfair v WA at 478-480 [106]-[113]. Both criteria involved the same kind of considerations. Neither formulation required a showing that the burden on interstate trade and commerce is absolutely necessary to achieve the legitimate purpose of the measure: see, with respect to reasonable necessity, Thomas v Mowbray at 331-333 [21]-[24] and Mulholland v AEC at 199 [39].
232 Further, in Betfair v WA the assessment in the joint judgment of the competing considerations relevant to the negative criterion established that there was to be no significant departure from the Cole v Whitfield approach. Noting that Western Australia sought to justify the challenged measures on the basis they dealt with a threat to the integrity of the racing industry, their Honours concluded (at 479-480 [110]-[112]):
[A]llowing for the presence to some degree of a threat of this nature, a method of countering it, which is an alternative to that offered by prohibition of betting exchanges, must be effective but non-discriminatory regulation. That was the legislative choice taken by Tasmania and it cannot be said that that taken by Western Australia is necessary for the protection of the integrity of the racing industry of that State. In other words, the prohibitory State law is not proportionate; it is not appropriate and adapted to the propounded legislative object.
Part 4A of the Tasmanian Act contains the detailed regulatory provisions which the Treasurer had outlined. It does not discriminate against interstate trade and commerce. Counsel for Tasmania points to evidence which indicates that the prescribed standards have been fully satisfied by Betfair. Seen from the other perspective, there was a lack of evidence of any increase in Australia of dishonest practices attributable to the operation of the betting exchange by Betfair. It will be recalled that Betfair’s exchange remains accessible under the laws of the other States.
In that setting, it cannot be found in this case that prohibition was necessary in the stated sense for the protection or preservation of the integrity of the racing industry.
(Emphasis added.)
233 This analysis is consistent with the approach in Cole v Whitfield and, indeed, Castlemaine Tooheys. The passage indicates that the reasonable necessity and appropriate and adapted criteria are substantially interchangeable and, on one view, it is of little practical significance which formulation is employed providing the correct process of assessment is made. Relevantly for these appeals, however expressed, the negative criterion would involve a notion of proportionality between the discriminatory burden on the one hand and the legitimate purpose of the impugned measure on the other.
234 After argument and whilst judgment was reserved, the High Court delivered judgment in Sportsbet v NSW and Betfair Pty Ltd v Racing New South Wales (2012) 286 ALR 221 (“Betfair v Racing NSW”). The Court invited the parties to file supplementary submissions to address the significance of these decisions for these appeals, which they duly did. As the High Court indicated, the reasons for judgment in Sportsbet v NSW and Betfair v Racing NSW are to be read together. The two cases show that the Court continues to adhere to the principles of construction formulated in Cole v Whitfield and explored in the subsequent cases to which refer has been made.
235 Betfair v Racing NSW concerned the validity of the imposition of a fee as part of a legislative regime pursuant to which wagering operators were unable to use New South Wales race field information without the approval of the relevant racing control body. Betfair argued that the fee – calculated as a percentage of wagering turnover on the relevant races – had a greater impact on it than wagering operators (such as the TAB Ltd) with different business models; and that, in consequence, the requirement to pay the fee was a discriminatory burden of a protectionist kind in breach of s 92.
236 Sportsbet v NSW concerned the same legislative regime as Betfair v Racing NSW, save that Sportsbet challenged the regime on a broader front and, as on these appeals, in reliance on s 49 of the Self-Government Act and s 109 of the Constitution. Sportsbet sought declarations of invalidity of the relevant legislative provisions and also of the conditions of approval requiring the payment of fees, on the ground that the impugned measures imposed a burden on trade and commerce between the Territory and New South Wales not imposed on intrastate trade and commerce of the same kind; and that the effect of these measures was to protect wagering operators in New South Wales from competition from wagering operators in the Territory.
237 In a plurality judgment in Betfair v Racing NSW at 231-232 [36]-[37], French CJ, Gummow, Hayne, Crennan and Bell JJ reaffirmed the principle acknowledged in the earlier cases that:
Not every measure which has an adverse effect between competitors will attract the operation of s 92. The “confined area” in which s 92 operates was emphasised in Cole v Whitfield. Betfair must establish that the fee conditions imposed upon it by [the racing control bodies] were unauthorised because their practical effect is to discriminate against interstate trade and thereby protect intrastate trade of the same kind. What is posited here is an essentially objective inquiry. It is the concept of protectionism which supplies the criterion by which discriminatory laws may be classified as rendering less than absolutely free trade and commerce among the states. …
It is important to note, as emphasised in Cole [at 407-8], that whether a facially neutral law in question is discriminatory in effect, and whether the discrimination is of a protectionist character, “are questions raising issues of fact and degree”.
The plurality judgment held that the fact that Betfair operated in a national market and that the challenged measure sought to regulate its activities in that market did not call for a departure from the settled approach to s 92: see Betfair v Racing NSW at 236 [57]; and 247-249 [100]-[109], 252-253 [123]-[127] (Kiefel J). One must, therefore accept that, as the appellants argued on these appeals, the existence of a national market for wagering services does not alter the fundamental principles relevant to the operation of s 92.
238 As the judgments in Betfair v Racing NSW make clear, the subject of s 92 is trade, not traders: see Betfair v Racing NSW at 233 [46] (French CJ, Gummow, Hayne, Crennan and Bell JJ), 237 [60], 239 [68]-[69] (Heydon J), 250 [114] (Kiefel J). The plurality judgment is plain that there is no place for an “individual rights” approach in contemporary s 92 jurisprudence: see Betfair v Racing NSW at 231 [36] and 232-233 [42]; also 239 [68]-[69] (Heydon J), 249-250 [110]-[112] (Kiefel J). Thus, the fact that, on Betfair’s argument, the burden imposed on it was greater than on others because of its business model did “not mandate an outcome” in its favour: see Betfair v Racing NSW at 233 [44]; and to similar effect, see Sportsbet v NSW at 411 [20]. Rather, for s 92 purposes, the relevant inquiry is whether there is discrimination against interstate trade, which may affect one or a number of traders. An individual trader can be no more than a surrogate or representative of the trade in which the trader participates and that is said to be the subject of the contested measure.
239 Applying the established principles with respect to the construction of s 92, Betfair failed to show that the impugned legislation was discriminatory against interstate trade in a protectionist sense. As the plurality noted, there was there no counterpart to that part of the case stated in Castlemaine Tooheys affirming that “[t]he object and effect of the [regime] had been to make the sale of beer in non-refillable bottles commercially disadvantageous”. Similarly, in Sportsbet v NSW the plurality held (at 415 [36]) that, as a matter of fact, Sportsbet failed to make out a case of relevant discrimination.
240 Betfair v Racing NSW and Sportsbet v NSW are plainly very different cases from Betfair v WA. Betfair v WA turned on the Court’s conclusion that, in the circumstances disclosed to it, the challenged provisions sought to create a barrier to entry into the Western Australian market, and the Court considered the position of the individual trader that wished to enter the market because that trader’s trade was barred by virtue of the barrier: see Betfair v Racing NSW at 224 [6] (French CJ, Gummow, Hayne, Crennan and Bell JJ) and 251 [121] (Kiefel J).
241 In contrast to Betfair v WA, in Betfair v Racing NSW, the plurality explained at 235-236 [55]-[56]:
The circumstance that the fee structure adopted by Betfair for its wagering operations differed from that adopted by other wagering operators did not constitute a relevant difference which, consistently with s 92, could not be disregarded by treating alike interstate and intrastate wagering transactions utilising NSW race field information. All that Betfair established was that by maintaining its current pricing structures, and given its low margin, the fees imposed by [the relevant racing control bodies] absorbed a higher proportion of its turnover on interstate transactions than that of the turnover of the TAB, the principal intrastate wagering operator.
Nor did Betfair demonstrate that the likely practical effect of the imposition of the fees will be loss to it of market share or profit or an impediment to increasing that share or profit. (Emphasis added)
242 As will appear in the following discussion, the current appeals are more akin to the circumstances considered in Betfair v Racing NSW and Sportsbet v NSW than in Betfair v WA.
QUESTIONS TO WHICH THE RELEVANT PRINCIPLES GIVE RISE
243 Having regard to the plurality judgment in Betfair v Racing NSW at 234-235 [52], these appeals give rise to the following broad questions:
1. whether the impugned provisions in their terms or practical operation discriminate against trade or commerce between the Territory and the State because:
(a) they draw a distinction in terms between intrastate trade and commerce and trade and commerce between the Territory and the State, otherwise than by reference to a relevant difference between them;
(b) they do not draw a distinction in terms between intrastate trade and commerce and trade and commerce between the Territory and the State, notwithstanding a relevant difference between them; or
(c) their practical operation shows that the objective intention of the legislature was to achieve the effect in (a) or (b);
2. if so, whether the impugned provisions burden trade and commerce between the Territory and the State to its competitive disadvantage or to the competitive advantage of intrastate trade and commerce; and
3. if so, whether that burden is nonetheless reasonably necessary or appropriate and adapted for the State to achieve a legitimate non-protectionist purpose?
Discrimination against trade or commerce between the Territory and the State
Trade or commerce between the Territory and the State?
244 The subject of s 49 of the Self-Government Act is, relevantly, trade between the Territory and the States, in this case, Victoria. When s 49 is invoked in a challenge such as this, whether or not trade is characterised as intrastate or between the Territory and the State is essentially a question of fact and degree, to be determined by reference to the substance of the transactions that constitute the trade said to be burdened by the impugned measures.
245 Section 49 of the Self-Government Act cannot be engaged in these appeals unless the impugned provisions burden trade between the Territory and the State. The appellants submitted that the impugned provisions did not relevantly affect trade between the Territory and the State. If this submission were accepted, then s 49 would have no application.
246 The appellants argued that Sportsbet’s installation of a betbox at the Hotel was functionally equivalent to establishing a retail outlet in the State. Thus, so the argument ran, when a punter placed a bet with a wagering service provider at a retail shop in the State and when a punter placed a bet with Sportsbet via a betbox, the punter was engaged in intrastate trade. On this argument, the basic transaction was the provision of a wagering service at the place where the betbox was installed.
247 As the authorities show, the subject of s 49 of the Self-Government Act is not traders, whose trade may consist of in-State transactions and transactions between the State and the Territory (and elsewhere). Hence, the cross-border elements of the trader’s business that belong to transactions outside the trade in question do not bear on whether that trade attracts the protection of s 49. Consideration of matters such as the location of the trader’s principal office and senior management, or the trader’s infrastructure and business model, distracts attention from the relevant inquiry, which first requires identification of the transactions constituting the relevant trade. This is borne out by the plurality judgment in Sportsbet v NSW at 410 [17] and Betfair v Racing NSW at 233-234 [46], particularly the reference (at 234 [49]) to O Gilpin Ltd v Commissioner for Taxation (NSW) (1940) 64 CLR 169. The plurality described that case in the following terms:
The taxpayer … was incorporated in Victoria, where its central management and control was located. But it carried on business as a draper at retail shops in four States including Victoria and New South Wales. This Court held that where a business ordinarily consists of selling goods (and, it might have been added, of supplying services), the contracts with consumers are of the essence of the business. The result was that, despite the location in Victoria of the central management and control, the taxpayer carried on trade in New South Wales where contracts were made and it derived income in that State.
On these appeals then, the question whether s 49 is attracted at all first depends on the identification of trade between the Territory and the State that is said to be burdened, and not on the cross-border character of Sportsbet’s organisation and business as a whole. This depends on the relationship between the impugned provisions and the trade said to be affected by them.
248 It can readily be accepted that the movement of goods across borders between the Territory and the States, and the commercial transactions of which the movement is the direct result, constitutes trade and commerce between the Territory and the States: compare Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board (1985) 157 CLR 605 (“Australian Coarse Grains Pool”) at 626-627. Plainly enough, as well as the movement of goods, trade and commerce between the Territory and the States can involve intangibles, including, as Mason J said in Australian Coarse Grains Pool (at 628), “the telegraph, the telephone, broadcasting, television, communications, the transmission of intelligence and those aspects of banking and the provision of services which involve movement across State boundaries” (emphasis added). See also Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 (“the Banking Case”) at 380-381, approved in The Commonwealth v Bank of New South Wales (1949) 79 CLR 497 at 632-633. Today, no doubt his Honour would add the trans-border transmission of services by internet, as in Betfair v WA.
249 Considered from the punter’s perspective, Sportsbet’s installation of a betbox at the Hotel was akin to Sportsbet’s establishing a retail outlet in Victoria. It was immaterial to the punter whether the bet was processed by one of Sportsbet’s servers in Darwin or elsewhere: compare Menashe Business Mercantile Ltd v William Hill Organisation Ltd [2003] 1 WLR 1462 at 1471 (CA). From Sportsbet’s perspective, the processing of the bet by its servers at its licensed premises in Darwin was important because it thereby acted under its licence under the RBA (NT) and in accordance with the law of the Territory that allowed it to undertake its bookmaker business in the first place.
250 The perspectives of the punter and the wagering operator are not, however, determinative, although they do serve to direct attention to what is important – the transactions involved in the relevant trade. Focusing on these transactions, it is apparent that there is a provision of wagering services across State and Territory borders. The punter, who has registered with Sportsbet, selects the race on which the punter wants to bet, nominates the amount and kind of bet and electronically sends a request to Sportsbet. Sportsbet receives the request, via its servers, at its licensed premises in Darwin, where the bet is processed and accepted. Sportsbet sends, electronically, a notification of acceptance to the betbox where it is read by the punter in Victoria. These transactions are repeated whenever a bet is sought to be placed with Sportsbet via a betbox in Victoria. They are the transactions that constitute the trade said to be burdened by the impugned provisions. Since the trade involves the provision of wagering services across State and Territory borders or, as the primary judge would have it, the movement of intangibles, the trade is relevantly between the State and the Territory.
251 The appellants relied on Hospital Provident Fund (see [208] above) in support of the contrary conclusion that the transactions constituting the trade were intrastate transactions. In that case, the Hospital Provident Fund Pty Ltd (HCF) challenged the validity of a Victorian statute that required the registration of hospital and medical benefits associations. HCF, a company incorporated in Victoria to provide health insurance, was held not to engage in interstate trade, notwithstanding that it had contracted with contributors to pay benefits and hospital fees anywhere in Australia if they incurred medical and hospital expenses and some contributors lived outside Victoria. The High Court held that the HCF was not engaged in interstate trade because “[n]either the contract nor its performance contemplates or of its nature involves the movement from one place to another of things tangible or intangible, and certainly not from a place in one State to a place in another”: see Hospital Provident Fund at 15 (Dixon CJ, with whom Kitto J agreed). That is, because the contract did not expressly provide for the movement of goods, services or other intangibles across State boundaries, there was no interstate trade. Further, as Dixon CJ remarked, “the contingencies against which the contract provides have nothing of the character of inter-State commerce or intercourse”: Hospital Provident Fund at 15; also 39 (Fullagar J), 45 (Taylor J). It was also irrelevant that HCF organised and administered its business across State boundaries.
252 As the appellants noted, the reasoning in Hospital Provident Fund was applied, with respect to the application of s 92, in HC Sleigh Ltd v South Australia (1977) 136 CLR 475 (“HC Sleigh”) in relation to a system of refinery exchange: HC Sleigh at 506. The exchange did not contemplate either the cross-border movement of petroleum products, “or for that matter the movement interstate of debits and credits”: see HC Sleigh at 506-507 (Mason J, with whom Barwick CJ and Stephen J agreed). (This aspect of the case was not apparently affected by Ha v New South Wales (1997) 189 CLR 465.) In Street v Queensland Bar Association (1989) 168 CLR 461 (“Street”) at 539-540, Dawson J expressly adapted Dixon CJ’s reasoning in Hospital Provident Fund to deny that a barrister could be characterised as engaged in interstate trade and commerce.
253 As earlier observed, Hospital Provident Fund marked the Court’s acceptance of the criterion of operation analysis, which was formally rejected in Cole v Whitfield. The appellants sought to circumvent this objection with the submission that the ruling on interstate trade and commerce, referred to above, formed part of the ratio of the case, but did not depend on the criterion of operation doctrine. That the ruling formed part of the ratio may be accepted; and, whilst the criterion of operation test may resonate in some of the language Dixon CJ used in characterising the trade that was subject to the challenged legislation, his Honour’s approach to characterisation was not substantially affected by that test. This approach involved considering the relation of the legislation in question to the trade said to be burdened by it. Since in Hospital Provident Fund the challenged legislation applied because of the nature of the business that the company carried on, the focus was on that business. Since the “essence of the business” from the company’s point of view was “the making of contracts involving … the receipt of money and … the payment of money on the occurrence of certain contingencies”, these contracts and contingencies were determinative of whether the business of the company was characterised as in interstate trade: see Hospital Provident Fund at 14-15.
254 A similar approach in HC Sleigh was also appropriate because of the nature of the measure under challenge. Dawson J’s adaption in Street of Dixon CJ’s language in Hospital Provident Fund should be understood as no more than an elucidation of his Honour’s view of the essentially local character of a barrister’s practice.
255 Furthermore, although it may not matter, when the reasons for judgment of Dixon CJ in Hospital Provident Fund are read as a whole, it is difficult to resist the conclusion that some, at least, of the language in the passages on which the appellants relied were written with the criterion of operation doctrine in mind and that this doctrine suffused his Honour’s reasoning. The doctrine continued to hold sway when HC Sleigh was decided.
256 The impugned provisions in these appeals are of a different character. They do not involve the consideration of Sportsbet’s business as a whole or of its wagering contracts in particular. Rather, the impugned provisions have a much narrower focus and the passages (in Hospital Provident Fund at 14-15) upon which the appellants rely do not assist them. The focus of the impugned provisions is on betting houses or places of betting (GRA, s 2.5.2; cf LCRA s 115) or instruments of betting (GRA, s 2.6.1). The relevant inquiry is, therefore, as to the relation between the operation of these provisions and trade between the Territory and the State. The simple fact that the provisions have a local, within-State operation is not enough to show that they do not burden this trade, although it does mean that the inquiry is relevantly different from Hospital Provident Fund, and that the reasoning in that case on which the appellants relied does not assist them.
257 In the present appeals, Sportsbet contends that there is a cross-border provision of wagering services made by: (1) the cross-border movement of wagering information between the punter in Victoria and Sportsbet in the Territory (involving the selection, placement and notification of acceptance of wagers) via the electronic transmissions between the betbox used by punters in Victoria and Sportsbet’s servers in Darwin; (2) the acceptance of the wagers in the Territory from punters in Victoria; and (3) the associated financial transactions in respect of the wagers received from these punters effected on an account maintained in the Territory. Betfair v WA, Australian Coarse Grains Pool and, earlier still, the Banking Case support the conclusion that these elements involve transactions in interstate trade and commerce and, thus, in this case, transactions in trade between the Territory and the State. See Australian Coarse Grains Pool at 628; the Banking Case at 289 (Rich and Williams JJ) and 380, 383 (Dixon CJ); and cf Betfair v WA at 481 [118].
258 These considerations lead to the rejection of the appellants’ submission that Hospital Provident Fund justifies a finding that the impugned provisions did not relevantly affect trade between the Territory and the State and in consequence interstate trade was not involved. The primary judge was correct to hold that the placement and acceptance of wagers via electronic transmissions (and the associated financial transactions) constituted trade between the State and the Territory: Sportsbet v Victoria at 445 [92].
259 Sportsbet claimed that ss 2.5.2 and 2.6.1 of the GRA and s 115 of LCRA burdened Sportsbet’s trade between the Territory and the State by prohibiting Sportsbet from using and installing a betbox in Victoria as an element of its trading operations between the State and the Territory. This much may be accepted.
260 Sportsbet also asserted that the impugned provisions burdened interstate communications. This was not a case that Sportsbet had previously pleaded or, indeed, apparently argued at first instance. In any event, as Tabcorp noted, the impugned provisions did not prohibit or restrict communication with Sportsbet’s servers in Darwin or elsewhere. Thus, the impugned provisions do not affect communications with Sportsbet’s servers via a computer or mobile phone. The impugned provisions did not attach to the use of a betbox merely because the betbox was the means by which a bet was communicated to Sportsbet. Rather, in the primary judge’s words, “[t]he sole, dedicated and public use of the “betbox” is to facilitate betting” and the betbox “is the means by which the bet is selected, placed and its acceptance is notified”: see Sportsbet v Victoria at 434 [40]. It would therefore be erroneous to characterise the burden that the impugned provisions impose in the way that Sportsbet proposed.
261 It is convenient here to note Tabcorp’s argument that there was no relevant burden because the impugned provisions only prohibited Sportsbet from doing that which it could not do under its Territory licence in any event. Hence, so Tabcorp said, the impugned provisions did not prevent Sportsbet from operating its business in the manner it was entitled to do. For the reasons already stated (at [198] above), this argument was misconceived. In any event, whether or not Sportsbet can use a betbox in the Territory does not answer the question whether the impugned provisions burden its trade between the Territory and the State by preventing its use of a betbox in Victoria.
Discrimination against Territory – State trade
262 The critical question at this stage is whether, in imposing this burden, the impugned provisions in their terms or practical operation discriminate against trade or commerce between the Territory and the State. As Gaudron and McHugh JJ explained in Castlemaine Tooheys at 478:
A law is discriminatory if it operates by reference to a distinction which some overriding law decrees to be irrelevant or by reference to a distinction which is in fact irrelevant to the object to be attained … A law is also discriminatory if, although there is a relevant difference, it proceeds as though there is no such difference, or, in other words, if it treats equally things that are unequal – unless, perhaps, there is no practical basis for differentiation.
263 None of the impugned provisions in terms discriminate against trading or commercial transactions in goods or services between the Territory and the State as compared with intrastate trading or commercial transactions in the same or substitutable goods or services.
264 Tabcorp aside, in their practical operation as well as in terms, the impugned provisions treat all bookmakers equally, irrespective of whether they engage in intrastate trade or trade between the State and the Territory or elsewhere. No-one can operate as a bookmaker in Victoria unless registered under the GRA and, if registered, may only engage in bookmaking while at a racecourse in Victoria licensed under the Racing Act. Sportsbet is in the same position as any unregistered bookmaker. Sportsbet sought to avoid this difficulty by asserting that all Victorian bookmakers other than Tabcorp were de minimis. This, as the State noted, was not borne out by the evidence at trial. There is, moreover, nothing to preclude a bookmaker wishing to engage in Territory – State trade from obtaining registration under the GRA. Even when registered, however, no bookmaker, whether engaged in intrastate trade or out-of-State trade can conduct off-course business by means of a betbox or similar device.
265 This led the appellants to submit that Sportsbet is, in effect, seeking an advantage for itself that is not enjoyed by any other trader (save perhaps for Tabcorp, whose position is discussed below) on the basis that it is engaged in out-of-State trade. The appellants argued that Sportsbet’s case, if accepted, would place out-of-State trade in a more advantaged position than intrastate trade, which would continue to be subject to the prohibitions in the impugned provisions. The appellants submitted that Sportsbet’s case, if accepted, would reintroduce individual rights jurisprudence for the protection afforded by s 92 and s 49 of the Self-Government Act. For the reasons elaborated hereafter, the appellants’ submissions should be accepted.
266 The primary judge identified discrimination against out-of-State trade on the assumption that it was easier for a Victorian bookmaker to conduct business from a Victorian racecourse than for an out-of-State bookmaker. Thus, her Honour held that the exception to s 2.5.2 for registered bookmakers favoured Victorian bookmakers “by requiring registered bookmakers to be present at a racecourse in Victoria”: see Sportsbet v Victoria at 446-497 [100] (emphasis in original). There was, however, no evidence that it was easier for a Victorian bookmaker to conduct business from a Victorian racecourse than a bookmaker like Sportsbet engaged in trade between Victoria and the Territory. In Sportsbet’s case too, the evidence was that its main administration was based in Melbourne. In these circumstances, the primary judge’s assumption would not appear sustainable.
267 In any event, the impugned provisions apply only if a bookmaker seeks to establish a physical presence in Victoria, as Sportsbet seeks to do by means of the installation of a betbox. The relevant question in this context is whether, if a bookmaker has a physical presence in Victoria, the requirement that the bookmaker be present at a racecourse and not elsewhere in Victoria is more difficult for an out-of-state bookmaker like Sportsbet than an intrastate bookmaker. There is no reason to suppose that this might be so. Further, if a requirement that all bookmakers (save Tabcorp, discussed below) conduct their business at a particular location in the State necessarily infringes s 92 of the Constitution and s 49 of the Self-Government Act, then the State can determine the place where intrastate bookmakers locate their business, but cannot do the same for bookmakers engaged in trade between Victoria and the Territory (or elsewhere) even though they are physically in Victoria. This would restore out-of-State trade and traders to the privileged position that they enjoyed when the individual rights theory of s 92 held sway.
268 As Cole v Whitfield and Betfair v Racing NSW illustrate, not every adverse effect on business amounts to discrimination. The fact that the impugned provisions preclude Sportsbet from conducting its business in Victoria by means of a betbox is insufficient in and of itself to attract s 49 of the Self-Government Act. Neither s 92 nor s 49 protects the right of the out-of-State trader to use any particular business model, such as conducting business through a betbox: see Betfair v Racing NSW at 232-233 [42] and 247 [103], 248 [105]; also Betfair v RNSW at 388 [103]. This was the substance of Sportsbet’s complaint: see, e.g., [269] below. The primary judge was mistaken in holding that the disadvantage imposed on Sportsbet did not “hinge upon Sportsbet’s particular circumstances or business model”: see Sportsbet v Victoria at 451 [125]. In this subsidiary argument, Sportsbet failed to establish that the impugned provisions operated to discriminate against trade between the Territory and the State.
269 Sportsbet’s principal argument was that the impugned provisions discriminated against trade between the Territory and the State in their practical operation because the impugned provisions did not apply to Tabcorp. Much of this argument assumed that trade between Victorian punters and Sportsbet by means of a betbox or similar device was properly treated as a proxy for Territory–State trade and commerce, and that trade between Victorian punters and Tabcorp was a proxy for intrastate trade. This assumption underpinned Sportsbet’s central complaint that Tabcorp was “permitted recourse to a particular and effective means of communication with its customers (Easybet terminals), whereas [Sportsbet was] prohibited from doing so (Betbox)”.
270 The proposition that Sportsbet is a proxy for trade between the Territory and the State, whilst Tabcorp is a proxy for intrastate trade does not withstand analysis. As Betfair v Racing NSW demonstrated at 232-233 [42], [44], an individual out-of-State trader such as Sportsbet cannot rely on the particular circumstances of its business activities – in this instance a desire to use a betbox as part of its business activities – to characterise a law as effecting practical discrimination against interstate trade or, as here, trade between the Territory and the State. As Betfair v Racing NSW demonstrates, this would involve a return to the individual rights theory of s 92: see Betfair v Racing NSW at 232-234 [42]-[50] and 248 [105]. Something more must be shown to constitute an infringement of the protected freedoms.
271 An individual trader is a convenient proxy for the relevant trade where, because of the nature of the challenged measures and the transactions to which they apply, the transactions of a trader affected by the measures are necessarily in interstate trade (or, in the case of s 49, in trade between the Territory and the States); or in intrastate trade and commerce. In such a case, the validity of a measure can, in consequence, be tested by reference to its operation on that trader. Bath, Castlemaine Tooheys and Betfair v WA are illustrative of this kind of analysis. Some care needs to be taken, however, in treating a trader as representative of interstate trade (or, here, trade between the Territory and the State) lest s 92 and, by extension, s 49, are turned into provisions for the protection of the individual rights of entities that carry on such trade or commerce, as Betfair v Racing NSW and Sportsbet v NSW confirm.
272 In the present case, Sportsbet fails to show that the circumstances of its own trading activities make it a proxy for trade between the Territory and the State. There are two reasons for this failure. First, the evidence did not support the conclusion that, by reason of its internal organisation or its business undertaking, Sportsbet was properly seen as a proxy for trade between the Territory and the State. The evidence established that, although registered in the Territory, licensed as a bookmaker under Territory legislation and carrying on some business in the Territory, Sportsbet also carried on business in Victoria, where its senior management was located. In the words of the plurality in Sportsbet v NSW, Sportsbet was a wagering operator that conducted its business from more than one “particular political and geographical subdivision in Australia”, both within those subdivisions and across their borders: see Sportsbet v NSW at 410 [17]. As a consequence, Sportsbet failed to show that its business was in substance merely a Territory business.
273 Second, whether or not Sportsbet’s undertaking is in substance a Territory business, the impugned provisions do not provide any basis for treating Sportsbet as a proxy for trade between the Territory and the State. So far as these appeals are concerned, Sportsbet happens to be a trader that engages in trade between the Territory and the State, but its status as such has no necessary connection with the impugned provisions and any competitive disadvantage to out-of-state trade.
274 The circumstances under consideration in these appeals are very different from those in Bath, Castlemaine Tooheys and Betfair v WA. In Bath, the challenged provisions infringed s 92 because of their operation on interstate trade in tobacco as such. In Castlemaine Tooheys and Betfair v WA the extrinsic circumstances showed an intention on the part of the legislature specifically to target an interstate trader. There was no evidence of any such circumstance in these appeals. On the contrary, in this case, there was no evidence or reason to suppose that the impugned provisions were aimed at Sportsbet’s trade between Victoria and the Territory. The mere fact that that trade was burdened was not enough to establish discrimination per se: see Castlemaine Tooheys at 475, citing Exxon Corporation v Governor of Maryland (1978) 437 US 117 at 126.
275 Sportsbet justifies various arguments as to discrimination by reference to the existence of a national wagering market. The existence of such a national market does not, however, alter the inquiry when an infringement of s 92 or, here, s 49 of the Self-Government Act, is alleged. Further, the existence of such a market does not mean that s 92 operates to confer individual rights on all participants in that market, or that a mere comparison of two participants in that market can establish infringement of these provisions. Sportsbet submitted that, if the impugned provisions were not held to contravene s 49, then “Tabcorp will continue to enjoy a major competitive advantage … denied to Sportsbet”. Even if accepted, this would not, for the reasons stated, demonstrate infringement of s 49.
276 Furthermore, Tabcorp is not correctly treated as a proxy for intrastate trade. First, like Sportsbet, Tabcorp’s business interests extend beyond Victoria. Tabcorp’s wholly-owned subsidiary, TAB Ltd, is the exclusive totalisator operator in New South Wales. Tabcorp is also ultimately responsible for the operation of Luxbet in the Territory. Second, and perhaps more importantly, Tabcorp’s position as the sole wagering licensee is different to the position of other in-State wagering service providers. Tabcorp is the only wagering service provider to be granted a licence for a defined period to engage in off-course and totalisator wagering. Under the Victorian regulatory scheme, the difference between Tabcorp as the sole wagering licence holder and every other wagering service provider, whether engaged in intrastate or interstate trade, or in trade between the Territory and the State, is the same in so far as none has the entitlements conferred on Tabcorp by the licence. Besides Tabcorp, the other participants in the in-State Victorian market are registered bookmakers who are subject to the impugned provisions in the same way as Sportsbet. Tabcorp cannot stand as a proxy for them or for the intrastate market.
277 In addition, comparing the business activities of Tabcorp and Sportsbet distracts attention from the fact that an individual trader (Sportsbet) is disadvantaged by a law of general application to all traders in the same position as it (i.e., all traders who do not hold the sole wagering licence) and does not take into account the fact that Tabcorp is, by virtue of the Victorian regulatory scheme, in a different position to all such traders by virtue of the sole wagering licence and its concomitant obligations under the scheme considered in its entirety. As Betfair v Racing NSW at 233 [45] acknowledged, the proper enquiry should be directed to whether the trader (Sportsbet) as a participant in the trade between the State and the Territory is subject to a differential burden by reason of the operation of the impugned provisions in the common circumstances of the trade. This enquiry fails, however, to show discrimination against such trade.
278 Sportsbet’s case focused on the differences between the conduct in which Tabcorp was permitted to engage and that which Sportsbet was prohibited from undertaking. For the most part, this focus was explicit, as for example in relation to the complaint that Tabcorp was permitted to engage “in remote terminal self-service betting” via Easybet, but Sportsbet was not because its use of a betbox was prohibited. On occasions, however, the focus was implicit, as for example in Sportsbet’s submission that “the evidence demonstrated that remote terminals were a vital increasing source of revenue for wagering operators”. Since no evidence was led in this regard other than with respect to Tabcorp, Sportsbet must be understood as focusing on Tabcorp’s position with respect to Easybet terminals. The differential treatment flowed from Tabcorp’s status as the licence holder. Assuming the status of licence-holder was a relevant difference, the differential treatment did not establish discrimination per se or against trade between the Territory and the State.
A statutory monopoly is not per se discrimination against out-of-state trade
279 The practical operation of the impugned provisions is to confer off-course retail exclusivity in Victoria on Tabcorp as the sole licensee. The primary judge held that the impugned provisions burdened trade and commerce between the Territory and the State “because in their legal and practical operation they establish Tabcorp as a monopoly provider of off-course betting services in Victoria in what is a national market for the supply and acquisition of off-course betting services”: see Sportsbet v Victoria at 427 [7]; also 447 [101], 448-449 [103], [105], [109]-[110] and 451 [123].
280 A statutory monopoly does not, as Barley Marketing Board shows, necessarily involve a contravention of s 92 or s 49 of the Self-Government Act. As explained earlier, the High Court ruled that the legislative scheme at issue in Barley Marketing Board was valid without there being any need to determine whether it was justified by reference to a non-protectionist purpose. Where a statutory monopoly exists of the kind considered there, the relevant discrimination is between the monopoly holder and all other traders, whether in or out of State. There is no discrimination against out-of-State trade and commerce because no trader, in State or out of State, is able relevantly to compete with the monopoly holder.
281 A licensing scheme such as the one in issue in these appeals that prohibits all traders but one licensed trader (Tabcorp) from offering a service within the State establishes a statutory monopoly for the term of the licence. In terms, such a licensing scheme discriminates only between the licence holder (Tabcorp) and those who do not have the licence, irrespective of whether their trade is intrastate or out of State. The scheme does not per se discriminate against out-of-State trade in the absence of adequate justification.
282 Even apart from Barley Marketing Board and Tabcorp’s status as a monopoly holder, the conferral of off-course retail exclusivity on Tabcorp does not involve differentiating between intrastate trade and trade between the Territory and the State. The intrastate or out-of-State nature of the trade is immaterial to the operation of the impugned provisions.
283 As the plurality observed in Sportsbet v RNSW at 411-412 [20]-[22], it is necessary to consider the practical operation of the impugned provisions as a whole. Thus, the impugned provisions and Tabcorp’s exemption from the offences that they create must be considered in the context of the entire regulatory scheme, which includes the obligations that Tabcorp bears under the scheme. To obtain the licence allowing it to carry on totalisator wagering and approved betting competitions and granting it the exclusive right to conduct off-course wagering, Tabcorp made a substantial payment and was required to enter into the JVA pursuant to which it assumed the obligations already mentioned, including the making of substantial payments to fund the racing industry, and the facilitation of in-depth scrutiny and a level of control over its activities by the racing industry. Tabcorp is, as already noted, subject to a special and distinct regulatory regime both under the JVA and under the State’s laws by reason of its status as the holder of the sole wagering licence: see [165] above.
284 The fact that Tabcorp and Sportsbet do not enjoy the same rights and privileges in Victoria with respect to their bookmaking businesses does not of itself mean that their differential treatment amounts to discrimination. Rather, this differential treatment recognises that Tabcorp and Sportsbet are relevantly different. Sportsbet fails to establish discrimination. Tabcorp’s retail exclusivity derives from the arrangements made in 1994, pursuant to which Tabcorp acquired, for a substantial price, the business of the TAB and the sole wagering licence. As part of these arrangements, the racing industry was given a 25% interest in the profits of its business. As indicated earlier, the arrangements and obligations to which Tabcorp is subject were assumed by Tabcorp in the negotiations that led to it acquiring the TAB’s business and the sole wagering licence, as evidenced in the MOU. In substance, Tabcorp’s favoured position in relation to Sportsbet and all other traders was the quid pro quo for payments it made and the obligations it assumed when it entered the JVA, acquired the TAB’s business and became the sole holder of the wagering licence: see GBA 1994, s 11(2)(e).
285 In these appeals, Sportsbet does not challenge the provisions pursuant to which Tabcorp was granted the sole wagering licence. Nor does it contend that the grant of the licence was in itself contrary to s 92 or s 49 of the Self-Government Act. Rather, Sportsbet’s complaint is that it cannot do that which Tabcorp may do pursuant to that licence. In substance, Sportsbet argues for preferential treatment because it is engaged in interstate trade and commerce. Neither s 92 nor s 49 of the Self-Government Act can support its position in this regard.
286 Since the impugned provisions do not in their terms or practical operation discriminate against trade or commerce between the Territory and the State, they cannot infringe s 49 of the Self-Government Act. For this reason, the appeals must be allowed.
Protectionism – disadvantaging out-of-state trade or advantaging intrastate trade?
287 If an impugned measure is discriminatory against out-of-state trade, the critical issue for the purposes of s 92, and s 49 of the Self-Government Act, becomes whether that discrimination is properly characterised as protectionist: see Cole v Whitfield at 394, 408 and Castlemaine Tooheys at 471, discussed at [211]-[215] and [218]-[220] above. As already noted, the primary judge concluded that there was discrimination of a protectionist kind because the impugned provisions “entrench Tabcorp’s position as the sole supplier in Victoria of betting facilities of a kind which Sportsbet seeks to supply in Victoria and the market in which both Tabcorp and Sportsbet operate is a national market”: see Sportsbet v Victoria at 451 [123], [125].
288 Since the impugned provisions are not, in our view, discriminatory against out-of-state trade and commerce, no question about protectionism arises. The impugned provisions cannot be characterised as discriminatory in a protectionist sense because they treat intrastate and out-of-State trade in the same way. For this reason too, they cannot be said to burden out-of-State trade to its competitive disadvantage or to the competitive advantage of intrastate trade.
289 In case the impugned provisions are discriminatory against trade between the Territory and the State, as the primary judge held, the following paragraphs seek to explain briefly why the impugned provisions are not properly characterised as protectionist even in that event.
290 As already noted, the circumstances in the current appeals are relevantly different from the circumstances in Castlemaine Tooheys and Betfair v WA. In those two cases, as noted above at [218]-[222] and [225]-[232], the legislative history and the practical operation of the challenged measures at the time of their enactment showed an objective intention on the part of the legislature to target a significant interstate trader: see Castlemaine Tooheys at 464, 475-477 and Betfair v WA at 470-472 [68]-[77], 478 [106], 480 [114], 481-482 [122]. In contrast to these cases, the statutory history of the impugned provisions gives no reason to suppose that, at the time of enactment, the legislature intended to disadvantage out-of-state trade or advantage intrastate trade. Further, as discussed hereafter, the character of the impugned provisions, judged by reference to the liabilities, rights and privileges they create, does not justify the imputation of such an intention: compare Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479 at 492 [16] and Kartinyeri v Commonwealth (1998) 195 CLR 337 at 352-353, 372. Nor does the practical operation of the impugned provisions demonstrate discrimination of a protectionist kind – whether considered in terms of their objective legislative intention at the time of enactment, or in terms of their effect at the time the VCGR seized the betbox at the Hotel (see below at [296] and following).
291 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.
292 As the plurality judgment stated in Bayside City Council v Telstra Corporation Ltd (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.
293 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).
294 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].
295 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.
296 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.
297 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.
298 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.
299 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.
300 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.
301 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.
302 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?
303 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.
304 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).
305 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.
306 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
307 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].
308 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].
309 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.
310 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].
311 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.
312 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.
313 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.
314 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].
315 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.
316 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.
317 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.
318 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.
319 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.
320 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.
321 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.
322 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.
323 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.
324 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.
325 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
