FEDERAL COURT OF AUSTRALIA

Sportingbet Australia Pty Ltd v State of New South Wales [2010] FCA 1022

THE COURT ORDERS THAT:

1.                  The proceeding be adjourned for directions at 9:30 am on 2 December 2010.

2.                  In the event that judgment is delivered in proceedings NSD 730 of 2010, NSD 826 of 2010 and NSD 828 of 2010 before 2 December 2010, the parties are to approach the Associate to Yates J within 48 hours thereafter to appoint an earlier directions hearing.

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

REASONS FOR JUDGMENT

1                                             By notice of motion dated 12 August 2010, the second respondent, Racing New South Wales, and the third respondent, Harness Racing New South Wales, seek a stay or an adjournment of this proceeding, for reasons to which I will shortly refer. The first respondent, the State of New South Wales, supports the granting of relief in that regard.  The motion is opposed by the applicant, Sportingbet Australia Pty Ltd (Sportingbet). 

2                                             Before considering the merits of the motion, it is necessary to refer to some background matters.

background

3                                             By application filed on 13 July 2010 Sportingbet seeks declarations that:

(a)                sections 33 and 33A of the Racing Administration Act 1998 (NSW);

(b)               Part 3 of the Racing Administration Regulation 2005 (NSW);

(c)                certain conditions of approval imposed by Racing New South Wales upon Sportingbet to publish New South Wales thoroughbred race fields (namely, the payment by Sportingbet of a fee based on a percentage of turnover); and

(d)               certain conditions of approval imposed by Harness Racing New South Wales upon Sportingbet to publish New South Wales harness race fields (namely, the payment by Sportingbet of a fee based on a percentage of turnover),

are invalid or, in the case of the legislative provisions, invalid in their operation with respect to Sportingbet, by virtue of s 49 of the Northern Territory (Self-Government) Act 1978 (Cth) and s 109 of the Constitution and/or Covering Clause 5 of the Commonwealth of Australia Constitution Act 1900 (Imperial).

4                                             Sportingbet also seeks declarations that:

(a)                the fee imposed by Racing New South Wales and Harness Racing New South Wales as a condition, in each case, of the respective approvals under s 33A of the Racing Administration Act is not a “fee or a series of fees of an amount or amounts” within the meaning of s 33A(2)(a) of the Racing Administration Act; and

(b)               various approvals given by Racing New South Wales and Harness Racing New South Wales are invalid.

5                                             Sportingbet seeks restitutionary orders that Racing New South Wales and Harness Racing New South Wales repay the fees that it has paid to each of them pursuant to those approvals together with interest.

6                                             The essence of Sportingbet’s claims, as pleaded in its statement of claim, can be summarised as follows:

(a)                Sportingbet conducts a sports bookmaking operation pursuant to a licence granted under the Racing and Betting Act (NT).  It conducts this operation by means of telephone and computer facilities.  Under the licence, Sportingbet’s customers can place wagers with Sportingbet on events occurring in Australia and throughout the world, including thoroughbred racing and harness racing in New South Wales.

(b)               Sportingbet is not a licensed bookmaker in New South Wales; nor is it licensed to conduct a totalisator on a racecourse in New South Wales.

(c)                Prior to 3 December 2008 ss 33 and 33A of the Racing Administration Act prohibited a person publishing a New South Wales race field in New South Wales or elsewhere unless the person was authorised to do so by a race field publication approval and complied with the conditions attached thereto, or was otherwise authorised to do so under regulations made under that Act.  Relevantly in this connection, “race field information” is information that identifies or is capable of identifying the names or numbers of horses.

(d)               From and after 3 December 2008, ss 33 and 33A of the Racing Administration Act prohibited a wagering operator from using New South Wales race field information unless the wagering operator was authorised to do so by a race field information use approval and complied with the conditions attached thereto, or was otherwise authorised to do so by regulations made under the Racing Administration Act. 

(e)                The Racing Administration Regulation authorises Racing New South Wales and Harness Racing New South Wales to impose certain conditions on a race field publication approval or on a race field information use approval, namely the payment of a fee calculated by reference to a certain percentage of turnover.

(f)                 Each of Racing New South Wales and Harness Racing New South Wales imposed a fee on Sportingbet as a condition of approvals granted by it.

(g)                In each case the fee that was imposed was not a “fee or a series of fees of an amount or amounts” within the meaning of s 33A(2)(a) of the Racing Administration Act in that such a fee is required to be a fixed amount that is a quantified sum, and not an amount determined by way of the application of a formula which may involve discretionary considerations.

(h)                Further, and in any event, Sportingbet says that ss 33 and 33A of the Racing Administration Act, the relevant regulations providing for the imposition of conditions and the fee (namely, regs 16 and 17 of the Racing Administration Regulation), certain standard conditions imposed by Racing New South Wales and certain standard conditions imposed by Harness Racing New South Wales with respect to payment of the respective fees and various approvals granted by Racing New South Wales and Harness Racing New South Wales are invalid.

(i)                  In each case Sportingbet says that the alleged invalidity arises because, for reasons articulated in the statement of claim:

(i)                  Sections 33 and 33A of the Racing Administration Act in their legal operation purport to prohibit Sportingbet and other wagering operations from publishing and, after 3 December 2008 from using, New South Wales race field information without an approval that has been conditioned on paying a fee.

(ii)                Those provisions impose a burden or disadvantage on trade, commerce and intercourse between the Northern Territory and New South Wales which they do not impose on intrastate trade, commerce and intercourse of the same kind, and the legal and/or practical effect of those sections is to protect wagering operators in New South Wales from competition from wagering operators in the Northern Territory.

(iii)               The burden or disadvantage imposed by ss 33 and/or 33A and regs 16 and 17 of the Racing Administration Regulation on trade, commerce and intercourse between the Northern Territory and New South Wales is not reasonably appropriate and adapted to, and is not reasonably necessary for, any legislative object which is consistent with s 49 of the Northern Territory (Self-Government) Act because, inter alia, the object of the relevant New South Wales provisions is to protect the turnover and income of wagering operators in New South Wales from being diminished through competition from wagering operators in the Northern Territory, including Sportingbet.

(iv)              Accordingly, ss 33 and 33A and regs 16 and 17 are inconsistent with s 49 of the Northern Territory (Self-Government) Act and are thereby invalid pursuant to s 109 of the Constitution.

(v)                Further, the burden or disadvantage that each of the turnover conditions imposes on trade, commerce and intercourse between the Northern Territory and New South Wales is not reasonably appropriate and adapted to, and is not reasonably necessary for, any legislative object which is consistent with s 49 of the Northern Territory (Self-Government) Act because, once again, the object of those conditions is to protect the turnover and income of wagering operators in New South Wales from being diminished through competition from wagering operators  in the Northern Territory, including Sportingbet.

(j)                 Additionally, Sportingbet says that it is required to “publish” or “use” race field information in the course of its interstate business. The prohibition on the publication or use of race field information imposed by s 33 of the Racing Administration Act on Sportingbet is contrary to the freedom of intercourse protected by s 49 of the Northern Territory (Self-Government) Act. 

7                                             In its statement of claim, Sportingbet seeks to rely on the fact that, on 16 June 2010, this Court declared invalid the 2008 approvals granted to Sportsbet Pty Ltd (Sportsbet) by Racing New South Wales and Harness Racing New South Wales on the ground that certain conduct of Racing New South Wales and Harness Racing New South Wales was contrary to s 49 of the Northern Territory (Self-Government) Act:  Sportsbet Pty Ltd v New South Wales [2010] FCA 604.

8                                             In Sportsbet Perram J declared that certain approvals granted by Racing New South Wales and Harness Racing New South Wales respecting Sportsbet were invalid because the imposition of fees, of the specific type in dispute in this proceeding, as a condition of approval in each case, was an act of discriminatory protectionism of the kind to which s 49 of the Northern Territory (Self-Government) Act was directed to prohibiting: at [145].

9                                             However, his Honour did not declare ss 33, 33A or Part 3 of the Racing Administration Regulation to be invalid because, in light of the operation of s 31 of the Interpretation Act 1987 (NSW), those provisions did not authorise the imposition of fee conditions that would infringe s 49 of the Northern Territory (Self-Government) Act: at  [156].

10                                          Sportsbet has filed a notice of appeal from his Honour’s judgment.  It has also filed a notice of motion seeking leave to appeal from certain interlocutory rulings made by his Honour.  Racing New South Wales and Harness Racing New South Wales have also filed a notice of appeal. These appeals and the motion for leave to appeal have been granted expedition and are listed for hearing in the week commencing 27 September 2010.  One of the grounds on which Racing New South Wales and Harness Racing New South Wales sought and obtained expedition was the prospect that multiple separate proceedings may be commenced by other wagering operators, such as Sportingbet.

11                                          In its statement of claim Sportingbet also refers to an appeal in other proceedings heard by Perram J:  Betfair Pty Ltd v Racing New South Wales [2010] FCA 603.  Betfair also concerned the Constitutional validity of the fee imposed by Racing New South Wales and Harness Racing New South Wales on wagering operators.  However, Betfair Pty Ltd (Betfair) was unsuccessful in that proceeding.  It is significant to note that Betfair’s case was different to the case that had been brought by Sportsbet.  Betfair’s case was that it was a betting exchange; that it operated from Tasmania; that the fee represented about 60% of the commission derived from its exchange; that the fee only represented about 9%  of the commission earned by a New South Wales operator, TAB Limited; that the difference constituted discrimination against it; the discrimination was protectionist; and, that there was no legitimate end to which the measure might be seen as being reasonably appropriated and adapted as serving:  see his Honour’s summary in Betfair Pty Ltd v Racing New South Wales (No 14) [2010] FCA 696 at [3]. 

12                                          His Honour found that whilst Betfair had alleged protectionism, its allegations to that effect amounted, in substance, to no more than a repetition of its allegations of discrimination which was not enough to constitute protectionism.  Otherwise, his Honour upheld the other allegations that I have recorded. 

13                                          Betfair has filed a notice of appeal from his Honour’s judgment in that proceeding.   The appeal is to be heard at the same time as the Sportsbet appeals.

14                                            In the present case, Sportingbet pleads that if Betfair is successful in its appeal then Sportingbet would be entitled, as a matter of law, to the benefit of any declaration subsequently obtained by Betfair and made in that proceeding.

the parties’ submissions

15                                          In argument today the respondents advanced the granting of an adjournment of the principal proceeding until 2 December 2010 as the principal relief sought on the motion.  The granting of the stay was advanced as alternative relief.  The stay that is sought is a limited one conditioned, in terms, on the delivery of judgment in the pending Sportsbet appeals.

16                                          The substantial reason advanced for seeking this relief on the motion is that this proceeding is inextricably linked to the pending appeal proceedings, for the following reasons.  First, in both this proceeding and in the Sportsbet appeals orders are sought declaring ss 33 and 33A of the Racing Administration Act and Part 3 of the Racing Administration Regulation to be invalid.  Secondly, in its statement of claim in this proceeding, Sportingbet seeks to obtain the benefit of any declaration that might be made should the appeal in Betfair be successful.   Thirdly, many of the allegations made in the pleadings in Sportsbet mirror the allegations made in the present proceeding.

17                                          As a consequence, Racing New South Wales and Harness Racing New South Wales submit that the issues arising in this proceeding could be substantially resolved by the judgments to be given in the pending appeals.  They submit that, in the circumstances, it would be an inefficient use of the resources of the Court and those of the parties to commence the process of identifying and refining the issues in dispute in this proceeding in the ordinary manner in circumstances where the determination of the bulk of those issues may be rendered irrelevant by a decision of the Full Court within a short period.

18                                          Racing New South Wales and Harness Racing New South Wales further submit that the imposition of a stay or the granting of an adjournment, as sought, would not result in substantial prejudice being suffered by Sportingbet, beyond the inevitable delay that would be thereby caused.  In this connection they point to the fact that Sportingbet wrote to Racing New South Wales on 11 August 2008, more than two years ago, making claims of Constitutional invalidity similar to those made in this proceeding.  They submit that despite this, and despite the fact that Sportingbet must have been aware of the Sportsbet and Betfair proceedings for some time, no steps were taken by Sportingbet to either formally join in either of those proceedings or, until recently, to commence its own proceeding.

19                                          They suggest, by argument, that there may be some arrangement or understanding between Sportingbet and other wagering operators in connection with the allegations made in this proceeding.  They speculate that the arrangement or understanding might have resulted, for example, in the Sportsbet action being “some kind of ‘shadow class action’” conducted by Sportsbet for the benefit of an undisclosed class of which Sportingbet is a member.  They then project that, if that were the case, it may be open to them to pursue an argument that the present proceeding for final relief is an abuse of process “to the extent that an Anshun estoppel or some other doctrine would have prevented such action if Sportingbet was formally a party to the Sportsbet proceedings”.  They submit that a similar submission may be available in the event that funding or other arrangements or communications demonstrated that this proceeding was being pursued (in part or whole) for the benefit of a third party such as Sportsbet. 

20                                          They also suggest by argument advanced through an affidavit (to which objection was not taken) that the commencement by Sportingbet now of its proceeding is suggestive of a legal and commercial strategy being pursued in common with Sportsbet and other wagering operators.  It is not clear what that legal or commercial strategy is said to be, other than it is claimed to be one to create a favourable environment for Sportingbet (and possibly other wagering operators associated with it) to obtain a favourable settlement of its dispute with Racing New South Wales and Harness Racing New South Wales with the respect to payment of the contested fees. 

21                                          I should say at once that, in my view, this aspect of the submissions made by Racing New South Wales and Harness Racing New South Wales raises matters that are irrelevant to whether the relief sought in their motion is granted.  Sportingbet seeks the repayment of substantial sums of money paid by it under protest.  Ultimately, the only means available to Sportingbet to recover the challenged fees is the institution of court proceedings in which enforceable orders and other relief can be granted. The evidence does not suggest that there is any offer by Racing New South Wales and Harness Racing New South Wales to repay the challenged fees either unconditionally or pending the resolution of the appeals.  Far from it:  Racing New South Wales and Harness Racing New South Wales submit that the delay occasioned by the granting of the relief they seek on the motion would be remedied by an order for interest should Sportingbet be successful in this proceeding in obtaining an order for repayment of the sums to which it claims to be entitled.  In that connection they point to the fact that there is no suggestion of any solvency or similar risk concerning them.  They also point to the fact that there is evidence that the fees collected from Sportingbet have been retained and will not be distributed by either Racing New South Wales or Harness Racing New South Wales until the issues in these and related proceedings are resolved.

22                                            However, the point of present relevance in respect of this aspect of the second and third respondents’ submissions is that they bring no claim to dismiss or stay the principal proceeding on the basis that it is an abuse of process.   It is not suggested by them that the causes of action pleaded in the statement of claim supporting Sportingbet’s restitutionary claim are frivolous or vexatious or other than genuine claims in that regard.  Indeed, the genuineness of the claims is reflected in the submission that this proceeding is inextricably linked to the pending appeal proceedings.  It seems to me that Sportingbet’s forensic strategy or any desire it might have to settle the proceeding in circumstances favourable to it, or the speculative possibility that there may be some kind of arrangement or understanding between Sportingbet and others, including Sportsbet, leading to the possibility that there may be some basis for seeking a stay of the principal proceeding as an abuse of process, is beside the point, once it appreciated that there is no challenge to the principal proceeding as an abuse of process.

23                                          It is for this reason that, in the course of the hearing today, I set aside a subpoena addressed to Sportsbet seeking production of the following documents: 

Schedule

The documents and things you must produce are as follows:

1          a copy of all documents created or received during the Period recording or referring to any understanding, arrangement or agreement between Sportsbet and Sportingbet for or concerning the funding of legal costs to be or incurred in connection with:

1.1        the Sportsbet Proceedings;

1.2       the obtaining of advice for the benefit of Sportsbet and/or Sportingbet concerning the NSW Race Fields; or

1.3        these proceedings.

2          a copy of all documents created or received during the Period recording or referring to any understanding, arrangement or agreement between Sportsbet and Sportingbet for the funding of any advertising or other public promotion in connection with NSW Race Fields.

3          a copy of all documents recording communications between Sportingbet and Sportsbet referring to:

3.1        the Sportsbet Proceedings;

3.2       any proceedings contemplated by Sportingbet concerning NSW Race Fields; or

3.3        these proceedings.

24                                          The “Period” referred to was specified in the schedule to the subpoena as 1 July 2008 to date.

25                                          I set aside a notice to produce addressed to Sportingbet in substantially the same terms.

26                                          In my view, neither the subpoena nor the notice to produce was issued for a proper purpose in that none of the categories of documents sought had an apparent relevance to the issues raised by the present motion for an adjournment of the principal proceeding or for a limited conditional stay:  see Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 at 102-103; Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 927; Seven Network Ltd v News Ltd (No 5) (2005) 216 ALR 147 at [10]; Tamawood Ltd v Habitare Developments Pty Ltd [2009] FCA 364 at [13]; Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 4) (2010) 269 ALR 76 at [37]–[40].

27                                          That is not to say that the timing of commencement of the proceeding is irrelevant.  Delay in commencement, if not satisfactorily explained, is a factor that will inform the discretion whether to grant the adjournment or the stay that is sought.  It is clear on the evidence that a period of two years has elapsed since Sportingbet made its first payment under protest and raised the question of Constitutional invalidity. 

28                                          Finally, Racing New South Wales and Harness Racing New South Wales submit that it would be oppressive to submit them to a timetable for interlocutory steps in this proceeding at the same time as they are required to attend to the preparation and hearing of the pending appeals.  This submission was not developed beyond the stating of it.

29                                          As I have noted, the State of New South Wales supported the motion for an adjournment or for a limited stay and advanced additional submissions directed to “the legal perspective”, the likely outcomes of the Sportsbet appeals and how they might affect the conduct of this proceeding, and the complexity likely to attend the interlocutory steps in this proceeding having regard to the history provided by the conduct of the Sportsbet proceeding.  Significant among these submissions was a submission addressing the likely precedential nature of Constitutional facts that might be found by the Full Court in determining the Sportsbet appeals, that would be binding for the purposes of this proceeding:  Breen v Sneddon (1961) 106 CLR 406 at 412. 

30                                           For its part, Sportingbet points to significant differences between the pleading of its case and the case in Sportsbet.  It points to the fact that it seeks to attack the validity of the 2009/10 and 2010/11 approvals, not just the 2008/09 approval.  It points to the fact that it seeks to impugn  s 33 of the Racing Administration Act on the basis that it is contrary to the freedom of intercourse protected by s 49 of the Northern Territory (Self-Government) Act.  These matters were not dealt with by Perram J in Sportsbet. 

31                                          As to the question of the validity of the approvals, Sportingbet submits that, in this proceeding, it will be necessary to examine the facts and circumstances surrounding the 2009/2010 and 2010/2011 approvals in contrast to the 2008/2009 approval that was considered by Perram J.  Even then, it will be necessary, in this proceeding, to examine the facts and circumstances surrounding the 2008/2009 approval given that findings of fact in Sportsbet will not be binding on the parties to this proceeding:  see also in that regard, s 91(1) of the Evidence Act 1995 (Cth) which provides that evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.

32                                          Sportingbet submits that it will suffer prejudice because the pending appeals may not (and, I would suggest on the material before me, probably will not) ultimately resolve its claims, especially in respect of the validity of the 2009/2010 and 2010/2011 approvals and the validity of the imposition of the challenged fees on the basis that such imposition contravenes the freedom of intercourse as to the use of information between the Northern Territory and the States.  In the meantime, it has demanded repayment by both Racing New South Wales and Harness Racing New South Wales of the challenged fees.  As the respondents’ submissions and the evidence makes clear, there has been no repayment.  It submits that it should not be criticised for not commencing proceedings until recently.  It submits that, by doing so, it has exemplified efficient case management by waiting until the decisions in Sportsbet and Betfair had been given and thus the outcome of those proceedings known.

33                                          Sportingbet submits that compliance with directions made now for the purpose of completing the pleadings and the giving of discovery would not be burdensome and would be likely to see the present proceeding ready for hearing by the end of this year.  I should say that the respondents argued that this submission by Sportingbet was a reflection of hopeful expectation not borne out by the history of the Sportsbet proceeding itself.

consideration

34                                          It is a tantalising thought that the prospective judgments in the pending appeals may determine fully or even partially the controversy between the parties to this proceeding.  However, it is quite uncertain that that will be the case.  Much will depend on what is actually decided in the appeals and how that affects the resolve of the parties to this proceeding to litigate their dispute.  The material before me indicates that that resolve is strong on both sides of the record.

35                                          It is entirely possible that the relevant legislative provisions will be declared to be invalid; but they might not be.  Even if they are declared to be invalid, I am informed that Sportingbet’s restitutionary claim will still be contested, although the basis for doing so would be significantly more limited than foreshadowed by the present statement of claim.  It is possible that the judgment in Sportsbet will be affirmed, in which event, barring capitulation by the respondents, it will be necessary for Sportingbet to litigate its claims.  That course will no doubt involve the proof of certain facts, matters and circumstances.  I have no clear picture of the scope of the evidentiary material required for that task or how that consideration might impact on directions to be made.  It is possible that Racing New South Wales and Harness Racing New South Wales will succeed in their appeals.  If they do, it does not follow that their dispute with Sportingbet will be thereby quelled and the present proceeding thus rendered nugatory. 

36                                          On one view of the matter, the uncertainty reflected in these considerations would weigh against the granting of the relief sought on the motion; the parties should simply proceed with the preparation of the case for hearing. 

37                                          However, the respondents rely on that very uncertainty as the reason why efficient case management would be promoted and achieved by awaiting the outcome of the Full Court judgments in the pending appeals. 

38                                          It is clear on reading the notices of appeal in the Sportsbet appeals that there are a number of significant issues to be engaged by the Full Court which, depending on how they are resolved, are likely to have a profound effect on how the present proceeding will be conducted.  This may well be reflected in how the case is ultimately pleaded as well as in the evidentiary fabric of the trial.  If so, judgment in the Sportsbet appeals will inform how best the proceeding can be made ready for trial.  I accept that there is a real likelihood that the making of directions now may lead to unnecessary or ultimately unproductive work and the incurring of costs that could be avoided when a clearer picture of the legal landscape emerges.  Also, by adopting such a course, the possibility for disputes to foment in the course of complying with directions may be lessened. 

39                                          I am conscious of the fact that Sportingbet’s restitutionary claim stems from the payment in 2008 and following years of disputed fees in a very significant sum and that an adjournment or stay as sought will delay its proceeding by up to five months.  However, the timing of the commencement of the proceeding has always been a matter within its control.  To the extent that the timing of the commencement of the proceeding was dependent on knowing the outcome in the Sportsbet proceeding, as seemed to have been suggested in oral argument this morning, then Sportingbet will only be better informed of its position once the Sportsbet appeals have been determined.  In the meantime it will have the protection of its claim for interest, referable to the period of delay at least, should it ultimately succeed in its claim for restitutionary relief.

40                                          Although I have some hesitation about the matter, it seems to me that the better course is to accede to the application that the principal proceeding be adjourned to 2 December 2010 at 9.30 am for directions, on condition that if judgment in the Sportsbet appeals is delivered before that time the parties are to approach my Associate within 48 hours thereafter to appoint an earlier directions hearing.  My tentative view is that the costs of an incidental to the motion should be the respondents’ costs in the proceeding.  However, I will hear the parties on the appropriate order for costs. 

Associate:

Dated:         16 September 2010