FEDERAL COURT OF AUSTRALIA

Betfair Pty Limited v Racing New South Wales (No 6) [2009] FCA 1120

BETFAIR PTY LIMITED (ACN 110 084 985) v RACING NEW SOUTH WALES (ABN 86 281 604 417), HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373) and ATTORNEY-GENERAL (NEW SOUTH WALES)

NSD 1566 of 2008

PERRAM J

30 SEPTEMBER 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  The first respondent file and serve an affidavit, within seven days, deposing to the steps taken to discover the emails from or to Mr V’Landys in the period 1 July 2004 to 31 December 2007.

2.                  The second respondent file and serve an affidavit, within seven days, deposing to the steps taken to discover the emails from or to Mr Pool.

3.                  The first respondent give discovery of section 3.3 of the board papers for 19 March 2007.

4.                  The motion of 22 September 2009 is dismissed.

5.                  Costs to be costs in the cause.

Note:    Settlement and entry of orders is dealt with in O 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                     By a notice of motion filed on 22 September, the applicant seeks further discovery from the respondents.  The background to these proceedings is given in the five previous judgments I have delivered.  I will not set it out again. 

2                     As the argument was developed, disagreement existed on four disparate topics.  These were:

(a)        Whether there had been sufficient discovery of the emails of Mr V’Landys and Mr Pool;

(b)        Whether the respondents’ discovery of various specified matters was adequate;

(c)        Whether letters of instruction and other correspondence passing between the respondents and certain consultants retained by them were to be discovered; and,

(d)        The adequacy of discovery given by the respondents in respect of their decision to impose a 1.5 per cent turnover fee.

3                     It is convenient to deal with these in turn.

The emails of Mr V’Landys and Mr Pool

4                     Category 3 of the discovery categories provides as follows:

3.         All documents created on or after 1 July 2004 received by or created at the request of or by Peter V’Landys, CEO of Racing NSW, recording or referring to charging a fee to wagering operators for a race field publication approval (or a race field use approval) and/or setting the level of that fee.

5                     The definition of “race field publication approval” extends to times anterior to 1 July 2008.  The applicant’s solicitors have summarised the number of emails relating to Mr V’Landys, both those which were sent to and those which were sent from him, which have been discovered for the years 2004 to 2009.  That summary is in the following terms:

6                     The discontinuity in these figures is somewhat unusual.  Without some explanation for its existence, an inference could rationally be drawn that the discovery of these emails has in some way gone awry.  At this stage, however, I do not think that I can say that there are grounds for believing that the documents have not been discovered within the meaning of O 15 r 11 of the Federal Court Rules.  I do, however, propose to direct that the first respondent, within seven days, provide an affidavit explaining the processes and steps by which it has approached the discovery of Mr V’Landys’ emails.  Once that affidavit has been provided it will be possible to ascertain whether the process of discovery has gone awry or not.

7                     The evidence discloses that only three emails of Mr Pool, who is the Chief Executive Officer (“CEO”) of the second respondent, have been discovered.  For similar reasons I find that rather surprising.  I will direct, for the same reasons, that the second respondent provide an affidavit setting out the processes and steps by which it has approached the discovery or Mr Pool’s emails.

Specific discovery deficiencies

8                     Category 6 provides:

6.         All documents created between 1 July 2006 and 21 July 2008 (inclusive) recording, or referring to, any consideration of the costs of funding the New South Wales racing industry and the actual or potential sources of that funding.

9                     The applicant submits that this category “would capture any record, reference, or consideration of the funding arrangements between TAB Limited and Racing New South Wales.”  Consequently, it submits that it is apparent from the agendas to various board papers that there has been incomplete discovery.  For example, one part of the index to the board papers reads “finance - monthly reports” and must, so it is said, indicate the existence of a document, namely, the report falling within category 6. 

10                  I do not think that this argument should be accepted.  What category 6 calls for is documents which record, or which refer to, “any consideration” of the specified matter.  Those words connote an element of analysis, or the application of some thought.  A document which merely sets out information or raw data does not involve a consideration of that information or of that raw data.  In effect, the applicant’s construction of the word “consideration” renders it otiose, for it causes category 6 to operate precisely the same way as it would if it read: “…recording or referring to the costs of funding.”

11                  It follows that I reject the applicant’s construction of category 6.  A similar debate exists in relation to categories 1 and 2, which is to be resolved in the same way. 

12                  Once that conclusion is arrived at, I do not think that the references in the indexes to the board papers to documents containing information about the cost of funding demonstrates the existence of discoverable documents.  With one exception, therefore, I do not think that the claims made about category 6 in paragraph 38 of the applicant’s written submissions should be accepted.

13                  The one exception is the item consisting of “New South Wales and Victorian prize money comparisons”.  The comparison referred to must have involved, so it seems to me, an act of “consideration” within the meaning of category 6.  Accordingly, I would accept the applicant’s submission in relation to that item.

14                  Three other claims are made under this heading.  First, a claim is made that the item in the board papers entitled “Intellectual Property Rights in New South Wales Racing Information” is within category 11.  Category 11(i) provides as follows:

11.   All documents created between 1 July 2004 and 21 July 2008 (inclusive) recording or referring to:

(i)   the use of turnover as a measure of licence fees for the use of intellectual property.

15                  The item relied upon provides no basis for assuming that the discussion involved at the board level related to turnover.  It could quite readily have involved a discussion of whether copyright inhered in race field information.  That being so, the prerequisites to the operation of O 15 r 11 have not been engaged. 

16                  Secondly, it is said that the item “Draft letter attached to circular resolution dated Monday, 30 July 2007” is discoverable in category 1.  I do not apprehend the first respondent to deny that proposition.  Rather, its position is that the letter simply has not been located.  The applicant submits that no explanation has been provided as to the endeavours undertaken by the first respondent to locate those papers. 

17                  If it was shown that the inability to locate the document was an implausible position, or that there was some other circumstance to indicate that there was something amiss with the discovery process, I would be inclined to direct the preparation of an affidavit explaining that process.  However, I do not think that there is anything particularly remarkable about the fact that one document is unable to be located.  Accordingly, I see no need to direct such an affidavit.

18                  Thirdly, attention was drawn to the board papers item, “Race fields legislation - status report (pages 23 to 24).”  It was said that this showed the existence of documents that fell within categories 1, 2, 3 and 8.  I have already set out category 3. Categories 1, 2 and 8 are as follows:

1.       All documents created on or after 1 July 2004 considered by the Board of Racing NSW and all documents considered by any officer, employee or consultant of Racing NSW involved in the preparation of those documents for the Board recording or referring to charging a fee to wagering operators for a race field publication approval (or a race field use approval) and/or setting the level of that fee, including without limitation any consideration of:

(i)       the discretion available to a racing control body under reg 16 of the RA Regulations;

(ii)      the Note to reg 16 of the RA Regulations;

(iii)     the impact of the decision in Betfair v Western Australia;

(iv)     fees for publication of race fields set by GRNSW or RVL;

(v)      the calculation or setting of a fee on a gross revenue or gross profit basis;

(vi)     the annual turnover of bookmakers operating in New South Wales from 1 January 2007, including the number or identity of bookmakers with turnover equal to or below $5 million per annum and those with turnover above $5 million per annum

2.       All documents created on or after 1 July 2004 recording or referring to consideration given by Racing NSW to charging a fee to wagering operators for a race field publication approval (or a race field use approval) and/or setting the level of that fee, including without limitation ant consideration of:

(i)       the discretion available to a racing control body under reg 16 of the RA Regulations;

(ii)      the Note to reg 16 of the RA Regulations;

(iii)     the impact of the decision in Betfair v Western Australia;

(iv)     fees for publication of race fields set by GRNSW or RVL;

(v)      the calculation or setting of a fee on a gross revenue or gross profit basis;

(vi)     the annual turnover of bookmakers operating in New South Wales from 1 January 2007, including the number or identity of bookmakers with turnover equal to or below $5 million per annum and those with turnover above $5 million per annum

8.         All documents created on or after 1 July 2004 referring to any dispute between Racing NSW and Tabcorp or TAB Limited in relation to payment of fees by Tabcorp or TAB Limited to Racing NSW for a race field publication approval (or a race field use approval)

19                  I cannot see how this could relate to categories 3 or 8.  I do not see that it inevitably involves documents in categories 1 or 2 either.  Not every discussion of race field legislation need involve the matters which are set forth in categories 1 and 2.  For example, a document might refer to an update on the topic of where the drafting of the regulation had got to.  That observation matters because it negatives the contention that grounds can be shown for doubting the adequacy of discovery within the meaning of O 15, r 11. 

20                  A similar debate took place with respect to the second respondent.  In that case, the board papers in question were as follows:

21                  These were said to be discoverable within categories 12, 13 and 14, which were as follows:

12.   All documents created on or after 1 July 2004 considered by the Board of HRNSW and all documents considered by any officer, employee or consultant of HRNSW involved in the preparation of the documents for the Board recording or referring to charging a fee to wagering operators for a race field publication approval (or a race field use approval) and/or setting the level of that fee, including without limitation any consideration of:

(i)       the discretion available to a racing control body under reg 16 of the RA Regulations;

(ii)      the Note to reg 16 of the RA Regulations;

(iii)     the impact of the decision in Betfair v Western Australia;

(iv)     fees for publication of race fields set by GRNSW or RVL;

(v)      the calculation or setting of a fee on a gross revenue or gross profit basis;

(vi)     the annual turnover of bookmakers operating in New South Wales from 1 January 2007, including the number or identity of bookmakers with turnover equal to or below $5 million per annum and those with turnover above $5 million per annum

13.   All documents created on or after 1 July 2004 recording or referring to consideration given by HRNSW to charging a fee to wagering operators for a race field publication approval (or a race field use approval) and/or setting the level of that fee, including without limitation any consideration of:

(i)       the discretion available to a racing control body under reg 16 of the RA Regulations;

(ii)      the Note to reg 16 of the RA Regulations;

(iii)     the impact of the decision in Betfair v Western Australia;

(iv)     fees for publication of race fields set by GRNSW or RVL;

(v)      the calculation or setting of a fee on a gross revenue or gross profit basis;

(vi)     the annual turnover of bookmakers operating in New South Wales from 1 January 2007, including the number or identity of bookmakers with turnover equal to or below $5 million per annum and those with turnover above $5 million per annum

14.   All documents created on or after 1 July 2004 received by or created at the request of or by Max Pool, CEO of HRNSW, recording or referring to charging a fee to wagering operators for a race field publication approval (or a race field use approval) and/or setting the level of that fee.

22                  I do not think that the fact that the CEO’s report was discussed suggests the existence of documents in categories 12, 13 or 14.  The report may not have mentioned the matter at all. 

23                  For the same reasons I have given in respect of the first respondent, I do not think that the item “Race Fields Legislation - status report” reveals the existence of discoverable documents.  In any event, the second respondent’s position is that it cannot locate this document.  Again, I see no reason, without more, to require any further explanation of the reasons it is missing or the searches which have to date been made.

24                  As for the item “Race Field Information”, I do not see why it need involve documents which must fall into categories 12, 13 or 14.  The applicant’s submission assumes, in effect, that anything to do with race field information necessarily falls within categories 12, 13 and 14, but this is not what those categories say.

Letters of instruction and correspondence with consultants

25                  It appears that the first respondent engaged the Boston Consulting Group (“BCG”) to prepare a report for submission to an inquiry headed by Mr Alan Cameron AM into the structure of the New South Wales racing industry.  A copy of that report has been discovered.  The applicant seeks the discovery of BCG’s instructions and, also, all correspondence in relation to the preparation of the report passing between the first respondent and BCG, including any notes at meetings.  This is said to be within categories 1 and 2.

26                  I do not see that every piece of correspondence passing between BCG and the first respondent in relation to the report need fall within categories 1 and 2 at all.  Indeed, the idea that every item of correspondence and every meeting necessarily included a conversation or correspondence about such fees seems to me to be somewhat unlikely.  In any event, as I have already indicated, the categories call for documents which show a “consideration” of that or related subject matter, and I am far from persuaded that the correspondence in question would be of that character.

27                  The instructions to BCG may have touched upon the turnover fee.  However, they do not fall within category 1 because, so it seems to me, they were not prepared, so far as I can see, for the board or for consideration by the board.  It is possible that the instructions documents may fall within category 2, but it is not inevitable or necessarily even likely that they do do so; for example, the instructions may have been cast in a way which did not involve any consideration of the imposition of the fee within the meaning of either category.  I cannot, therefore, say that the discovery process has miscarried. 

28                  The same point may be made in relation to category 6.  It is not sufficient, for present purposes, to point to something which might be discoverable.  It needs to be shown that there are grounds for thinking a discoverable document exists.  I do not think that the present possibility I have just referred to constitutes sufficient grounds within the meaning of O 15 r  11.

29                  The applicant also seeks further discovery from the second respondent of briefing materials or correspondence relating to Equinox Consulting.  Equinox Consulting was retained by the second respondent to advise it in relation to changes to the race fields legislation.  Presentations in PowerPoint slides by Equinox Consulting have been discovered, together with a proposal.  The briefing materials and correspondence are said to go to categories 12, 13 and 17.  I have already set out categories 12 and 13.  Category 17 is as follows:

17.               All documents created between 1 July 2006 and 21 July 2008 (inclusive) recording or referring to any consideration of the costs of funding the New South Wales racing industry and the actual or potential sources of that funding.

30                  I do not understand why the briefing materials - which I take to be instructions - would fall within categories 12, 13 or 17 for the same reasons I have given in relation to BCG and the first respondent.

Discovery in relation to reasons to impose 1.5 per cent fee

31                  The first respondent appears to have decided, on 18 June 2008 and on 2 July 2008, to impose the 1.5 per cent turnover fee on all wagering operators.  At that time the board appears to have had a report before it of its CEO.  On 25 July 2008 the board endorsed that earlier decision and delegated to the CEO the function of granting race field approvals, together with a further power of sub-delegation.  At that time, there was a further report from him before the board.  On 5 August 2008 the applicant applied for an approval, which it received on 15 August 2008 under cover of a letter of the same date.  On the same day, TAB Limited also received an approval from the first respondent.

32                  All of these documents have been discovered, although some of them had been redacted for presently immaterial reasons. The applicant submits that the discovery is deficient because:  first, no document setting forth the reasons for imposing the 1.5 per cent fee have been discovered; secondly, no documents have been produced about the decision to issue the approval on 15 August 2008; and, thirdly, no documents have been discovered about the decision to issue TAB with an approval on the same day.

33                  There was, of course, no legal obligation on the first respondent to produce reasons for its decision.  The applicant’s complaint assumes that such reasons were produced.  It is just as likely, so far as I can see, that they were not.  It is true that paragraphs 101 and 107 of its defence have the first respondent positively asserting that the approvals were issued with a specified legitimate object.  It follows, so Ms Morgan submitted for the applicant, that it must have had at least those reasons.

34                  Another way of looking at it, however, I think, is that there is simply no documentary basis for those paragraphs.  I do not think, in that circumstance, that there is any particular reason why I should infer that documents revealing the first respondent’s reasons are being held back.  Rather, I would infer that such documents simply do not exist.  I would deal with the alleged undiscovered documents in the same way. Clearly, decisions were made to issue approvals to the applicant and the TAB on 15 August 2008. 

35                  The absence of discovered reasons leads only to the inference that no reasons were produced.  That proposition may ultimately not be one which is unfavourable to the applicant.

Conclusion

36                  In light of those remarks I order the first respondent to file and serve an affidavit, within seven days, deposing to the steps taken to discover the emails from or to Mr V’Landys in the period 1 July 2004 to 31 December 2007. I order the second respondent to file and serve an affidavit, within seven days, deposing to the steps taken to discover the emails from or to Mr Pool. The first respondent is to give discovery of section 3.3 of the board papers for 19 March 2007.

37                  I dismiss the motion of 22 September 2009.  Costs are to be costs in the cause.

Associate:

Dated:         30 September 2009