FEDERAL COURT OF AUSTRALIA

Betfair Pty Limited v Racing New South Wales (No 10) [2009] FCA 1352

BETFAIR PTY LIMITED  v RACING NEW SOUTH WALES , HARNESS RACING NEW SOUTH WALES  and ATTORNEY-GENERAL (NEW SOUTH WALES)

NSD 1566 of 2008

PERRAM J

12 NOVEMBER 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  The parties are to provide agreed short minutes of order giving effect to these reasons by 4:15pm today.

2.                  No order as to costs.

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

REASONS FOR JUDGMENT

1                     On 27 October 2009 the respondents filed a notice of motion seeking further discovery from Betfair.  That motion was first returnable before the court on 28 October 2009, the following day.  It was eventually fixed for hearing on Friday 7 November 2009, however, the whole of that day was spent dealing with another unrelated application by Betfair.  In the event the present application proceeded on the papers with the final written submissions being filed on Wednesday 11 November 2009.  In their written submissions of Tuesday 10 November 2009 the respondents narrowed the categories they had sought in their original notice of motion.

2                     Betfair’s position on the application is that the documents sought are not relevant and that even if they were relevant discovery should be refused for various discretionary reasons.  It’s convenient to deal first with the relevance objections.  The documents sought by the respondents fall, broadly speaking, into four classes: 

(a)        the Tasmanian Product Fee relief class;

(b)       alterations to the structure, effective taxes, levies or fees imposed or to be imposed on Betfair by the Tasmanian Gaming Commission;

(c)        consideration by Betfair of options if the fees turn out to be valid;  and

(d)       the relative competition between Betfair and the TAB in Australia.

3                     It is convenient to deal with each of these in turn. 

(a)        The Tasmanian Product Fee Relief

4                     Paragraphs 91A, 96 and 97 of the further amended statement of claim are in the following terms:

91A.     On and from 1 July 2009 the commission referred to in paragraph 91(a) above is calculated as prescribed by reg 5A of the Gaming Control Regulations 2004 (Tas).

Particulars

            Tasmanian Act ss 150AC(4A), Gaming Control Regulations 2004 (Tas) reg 5A and Gaming Control Amendment Act 2009 (Tas) s 52.

96.               If the 2008 Racing NSW Approval and 2009 Racing NSW Approval (as applicable) and the RNSW Turnover Fee Condition were valid, the total amount of taxed, fees and levies required to be paid by Betfair in relation to offering wagering services on NSW thoroughbred racing:

(a)        for the period 1 September 2008 to 30 June 2009 would exceed approximately 94% of Betfair’s gross revenue from NSW thoroughbred racing for that period (such taxes including net payments of GST);

(b)                for the period 1 July 2009 to 31 August 2009 would exceed approximately 71% of Betfair’s gross revenue from NSW thoroughbred racing for that period (such taxes including net payments of GST).

would be such as to mean that Betfair could not profitably offer those services.

97.               If the HRNSW Approval and the HRNSW Turnover Fee Condition were valid, the total amount of taxes, fees and levies required to be paid by Betfair in relation to offering wagering services on NSW harness racing:

(a)        for the period 1 September 2008 to 30 June 2009 would exceed approximately 97% of Betfair’s gross revenue from NSW harness racing for that period (such taxes including GST), and would exceed approximately 104% of Betfair’s gross revenue from NSW harness racing for that period (such taxes including net payments of GST).

(b)        for the period 1 July 2009 to 31 August 2009 would exceed approximately 81% of Betfair’s gross revenue from NSW harness racing for that period (such taxes excluding GST), and would exceed approximately 88% of Betfair’s gross revenue from NSW harness racing for that period (such taxes including net payments of GST).

would be such as to mean that Betfair could not profitably offer those services.

5                      These paragraphs are not admitted.  Consistent with the Full Court’s decision in Racing New South Wales v Betfair Pty Ltd [2009] FCAFC 119 at 21-29, this makes documents going to these paragraphs discoverable, at least, at the level of principle.  The proposed categories are:

1.                  All documents created or received by Betfair in the period 1 August 2008 to date recording communications between Betfair and the Tasmanian Government referring to or recording the Tasmanian Product Fee Relief.

2.                  All documents created or received by Betfair in the period 1 August 2008 too date recording consideration by Betfair of any communications or representations by the Tasmanian Government in connection with the Tasmanian Product Fee Relief.

3.                  All documents recording or referring to meetings between Betfair and the Tasmanian Government in the period 1 August 2008 to date which discussed the Tasmanian Product Fee Relief.

6                     The respondents’ principle point in relation to these categories is that there may now be some suggestion that the level of the fees might be retrospectively altered by agreement which may then affect the allegations in paragraphs 96 and 97.  I do not, as yet, comprehend how this might be relevant to a case based on section 92, but the fact that the topic emerges on the pleading, as the Full Court’s decision in Racing New South Wales v Betfair makes clear, means that these documents are, at least at the level of principle, discoverable.

(b)       Alterations to the structure or effect of the taxes, levies or fees imposed or to be imposed on Betfair by the Tasmanian Gaming Commission

7                     The respondents point principally to paragraphs 100.1(a)(vi), 100.1(a)(vii), 100.1(b)(vi) and 100.1(b)(vii) of the Defence, which provide:

100.1    the first respondent denies the paragraph and says further that:

(a)  (vi)       the structure or effect of the taxes, levies and fees imposed by the Tasmanian Gaming Commission, and by other racing industry regulators, might alter in Betfair’s favour to respond to the NSW thoroughbred race fields fee and to other changes in the market;

      (vii)      the structure or effect of the taxes, levies and fees imposed by the Tasmanian Gaming Commission, and by other racing industry regulators, might alter in Betfair’s favour as a result of negotiations between Betfair and those racing industry regulators;

(b)  (vi)       the structure or effect of the taxes, levies and fees imposed by the Tasmanian Gaming Commission, and by other racing industry regulators, might alter in Betfair’s favour to respond to the NSW thoroughbred race fields fee and to other changes in the market;

      (vii)      the structure or effect of the taxes, levies and fees imposed by the Tasmanian Gaming Commission, and by other racing industry regulators, might alter in Betfair’s favour as a result of negotiations between Betfair and those racing industry regulators;

8                     Relying upon a joinder of issue the respondents say that materials going to the renegotiation of the fees are discoverable.  They seek, in consequence, the following categories: 

4.                  All documents created or received by Betfair in the period from 1 January 2009 to date recording communications between Betfair and the Tasmanian Government concerning or referring to Betfair’s licence alterations (or possible alterations) to the structure or effect of the taxes, levies or fees imposed or to be imposed on Betfair by the Tasmanian Gaming Commissions.

5.                  All documents recorded communications between Betfair and Betfair Group Limited in the period 1 January 2009 to date concerning or referring to Betfair’s licence alterations (or possible alterations) to the structure or effect of the taxes, levies or fees imposed or to be imposed on Betfair by the Tasmanian Gaming Commission.

9                     It follows from there being an issue about this that the material is, in principle, discoverable.

(c)        Consideration by Betfair of options if fees are valid 

10                  Paragraphs 96, 97 of the Further Amended Statement of Claim are set out above. Paragraph 100(b) provides:

100.           By reason of the matter referred to in paragraphs [98] and [99] above:

(b)                the legal and practical effect of the Racing NSW Approvals and the RNSW Turnover Fee Condition is to protect a wagering operator in New South Wales (being TAB Limited) from competition from a wagering operator in another State (being Betfair).

11                  The respondents seek correspondingly a category 11 of discovery, which provides:

11. All documents recording or referring to consideration by Betfair of the options available to the business in the event that it is unsuccessful in these proceedings.

12                  The allegations of practical effect contained in paragraph 100(b) are, of course, broad and it seems to me that the consequence is that the category which is sought is capable of being seen as going to that paragraph.  In that sense, it is discoverable. 

(d)        The relative competition between Betfair and TAB in Australia

13                  Category 12 provides:

12.       All documents regarding recording consideration by Betfair of or referring to the relative competition of Betfair and TAB in Australia its competitive position as against TAB Limited.

14                  Again, for similar reasons, this is relevant to the practical effect allegation.  I conclude, therefore, that all the documents sought by the respondents in the document attached to their written submissions of Monday 9 November 2009 are capable of being the subject of an order for further discovery.

Discretion 

15                  There is no question but that the power to order discovery is discretionary.  Betfair submits that it should be refused for four reasons: 

(a)        delay; 

(b)        the fact that many of the categories have previously been sought;

(c)        relevance;  and

(d)        oppression. 

16                  I will deal with each of these in turn. 

Delay

17                  Insofar as categories 1, 2, 3, 4 and 9 are concerned (that is categories, broadly speaking, relating to matters Tasmanian) the allegations making that relevant were, so it seems to me, only made after the Full Court’s earlier decision and towards the end of September.  Subsequently, Betfair changed its case now to allege an effect upon its profitability rather than an effect upon actual revenues.

18                  It follows that the current request for further discovery of the Tasmanian materials was raised first on 14 October 2009 when Yeldham Price O’Brien Lusk wrote a letter seeking further discovery.  I do not regard the approximate two week period inherent in that as amounting to a sufficient delay (assuming it is a delay) to refuse a discovery order.  However, category 11 was made relevant by paragraph 100(b) which has been in place, so it seems to me, more or less since the pleading’s inception.  I see no reason why the category could not have been sought at a much earlier date.  Category 12 is in a similar position, although it would appear that category 12 was erroneously treated by me in Betfair Pty Limited v Racing New South Wales (No 3) [2009] FCA 536 as being a category which was the subject of agreement between the parties when it was not.

19                  That error on my part was not raised with me at the time nor was it ventilated in the Full Court.  No application has been made to me to revisit my prior determination in Betfair (No 3).  It seems to me that that application could have been made, and leaving aside that procedural observation, in any event, the category could have been sought at a much earlier time.  I conclude, therefore, that categories 11 and 12 are affected by material delay and that categories 1, 2, 3, 4 and 9 are not. 

Previous seeking of similar categories

20                  I reject this argument in relation to categories 1, 2, 3, 4 and 9 which could not, and were not, substantially sought prior to the amendments at the end of September 2009.

21                  I do not think that category 11 was previously sought, although, as I have said, I think it could have been.  I accept that category 12 was, in substance, sought before but for reasons which I have already given that is not material and, as Betfair has correctly submitted, the matter has not been ventilated since that time. 

Relevance 

22                  The extent of the relevance of the material is something which bears upon the exercise of the discretion to order discovery.  By that I mean that having established that the material is sufficiently relevant to justify a discovery order the question of relevance then resurfaces as a discretionary consideration.  Discovery of extremely exiguous material having little relevance and causing considerable inconvenience to the orderly running of litigation could, so it seems to me, properly be refused.

23                  It is in that sense that I discuss the topic of relevance.  As presently advised, I do not understand how any of the material sought in any of the categories by the respondents is relevant to a claim based on section 92 of the Constitution.  However, as I have said, matters giving rise to those issues are presently pleaded and, not having heard how the parties are going to open their cases, I am reluctant to second-guess the relevance of these issues prior to the actual start of the case.  Accordingly, with some hesitation, I proceed on the basis that my inability to understand why this material bears upon discriminatory protectionism should not stand in the way of discovery orders which might otherwise be made.

24                  In adopting that approach I take into account not only the fact that I have not yet heard any explanation of how these paragraphs might work, but also the exigencies of the situation in which the parties find themselves.  This application has come on late.  There are many other applications in these proceedings presently before the Court.  Indeed, this morning there are three other judgments being delivered in this litigation.  There are practical limits to the extent to which all of these issues may be thoroughly ventilated. 

Oppression

25                  Betfair submits that the application takes place on the eve of the trial and it should not now have to endure the giving of further extensive discovery even as the trial itself is underway.  I am considerably sympathetic towards this concern.  I am also cognisant of the possibility that late discovery carries with it a not insignificant risk of aborting the trial.

26                  However, that risk, real as it may be, is one which is more properly dealt with if and when it arises.  Despite the unfortunate present impasse I do not think that that impasse is any party’s particular fault.  Both parties wished an expedited hearing.  Both parties wished to conduct the litigation with vigour, as was their right.  The present discovery imbroglio is the inevitable result of that style of litigation.  The decisions in Betfair Nos. 1, 2, 3, 4, 5, 6, 7, 8, and the decisions of the three Full Courts which have sat and heard the various interlocutory skirmishes, stand in testament to that proposition. 

27                  What I propose to do is to order discovery of categories 1, 2, 3, 4 and 9 as they become available under an obligation of best endeavours.  I will also direct the filing of an affidavit by Betfair as to when the discovery I have just ordered may be provided and completed.  Such an affidavit to be provided by 4.00 pm on 13 November 2009 at which point I will make a further direction fixing a hard date for the compliance with that task.  No doubt this has implications for the manner in which the respondents conduct the trial.  Those issues will be addressed as and when they arise.

28                  I decline to order further discovery of categories 11 and 12.  They could have been sought much earlier.  I will not increase the already substantial burden on Betfair when that burden could have been imposed at a very much earlier date and with much less inconvenience.  The parties are to provide agreed short minutes of orders giving effect to these reasons by 4.15pm today.  Failing agreement, competing orders are to be provided by that time.  There is to be no order as to costs.

Associate:

Dated:         12 November 2009