Betfair Pty Limited v Racing New South Wales

Federal Court of Australia|2009-09-09|Before: Perram J

REASONS FOR JUDGMENT 1 In these proceedings the applicant ("Betfair") alleges that the respondents, Racing New South Wales ("RNSW") and Harness Racing New South Wales ("HRNSW") respectively, have imposed a fee on its operations which interferes with freedom of interstate trade contrary to s 92 of the Constitution. Both parties have given, or are in the process of giving, discovery. That process has involved a degree of burden for both parties. As an aspect of the discovery process I made orders on 25 February 2009 regulating the making of claims for confidentiality. The important elements of that regime were: (a) the provision of the document in respect of which a claim for confidentiality was to be made to the lawyers, including the in-house counsel, for the other side; (b) the provision by both sets of lawyers of a standing undertaking to maintain the confidence in the materials so provided; (c) the provision at the time the document in question was produced of brief reasons for the claim; (d) machinery for objecting to the claim. 2 There are three applications before the Court. 3 First, the respondents contend that Betfair has made excessively extensive claims for confidentiality without providing the brief reasons called for by my orders of 25 February 2009, thereby frustrating the objection procedure. Further, the respondents say that Betfair has claimed confidentiality over documents which are not the proper subject of such a claim. The combined effect of these matters has been, so the respondents submit, to hinder them in their proper preparation of their cases. Consequently, they seek to have the entire confidentiality regime rescinded. 4 Secondly, Betfair seeks to augment the confidentiality regime in respect of a class of documents said to be of elevated confidentiality by preventing access to those documents by the respondents' in-house counsel. 5 Thirdly, Betfair applied orally at the hearing for a determination of its claims for confidentiality in respect of a number of specified documents.

Revocation of present regime 6 My previous order required the provision of brief reasons for any claim for confidentiality in any document at the time the document was produced. Betfair served a verified list of documents in which a claim for confidentiality was made in respect of the documents set out in annexure B to that list. Annexure B contained a large number of documents, each of which was described in a rather summary way, e.g., "letter to NSW re underwriting". The letter enclosing the list indicated that a disc containing the documents in electronic format would be provided early in the following week. The same letter said: A number of the documents in the List are highly commercially sensitive to our client. Documents identified in the List as 'confidential' may only be accessed by persons who have signed the relevant confidentiality undertaking. 7 There was no obligation to provide brief reasons for the claim at the time of the service of the list; that obligation arose only on the production of the documents. There is no evidence that any brief reasons were provided by Betfair at the time the documents were produced on delivery of the disc. However, since no point was taken about this I proceed on the basis that the statement contained in the letter serving the list is to stand as the brief reasons called for by the order. The same process was played out again with the subsequent serving of a supplementary list of documents, with substantially the same statement being proffered. 8 Shortly after the delivery of the supplementary list, the respondents' solicitor wrote to Betfair's solicitors complaining that brief reasons had not been delivered, a proposition immediately denied by Betfair's solicitors who went on to say: In any event, we note that the majority of our client's claims for confidentiality relate to recent commercial decision making of our client and our client's strategies and results may be affected if such matters were disclosed to your clients. 9 I do not think that Betfair has complied with the order requiring provision of brief reasons for the claim for confidentiality. The object of the order made on 25 February 2009 was to provide sufficient information to permit the receiving party to decide whether to challenge the claim for confidentiality or not. It is true, of course, that the respondents not only have the verified list but, also, the actual documents said to be confidential. I do not doubt that many of the documents in question are probably confidential in the sense that they are private documents of Betfair which are of some commercial sensitivity. However, it is well-established that confidentiality on its own is insufficient to attract a confidentiality order. Instead, if a party wishes to achieve greater protection than that afforded by the implied undertaking, it is for that party to establish that the character of each document is such that it should attract that additional protection: Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 ("Mobil") at 38 per Hayne JA (with whom Winneke P and Phillips JA agreed). That proposition is not obscure or difficult but has been applied on a large number of occasions. Gordon J collected many of those decisions in Cadbury Pty Ltd v Amcor Limited (No. 2) [2009] FCA 663 at [7] to which I would add, only to underscore how basic and well-expounded the principle is, the decision of Jacobson J in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2007] FCA 467 at [13]-[14] and my own decision in Media Ocean Ltd v Optus Mobile Pty Ltd (No. 1) [2009] FCA 421 at [2]. 10 The response by Betfair's solicitors set out above suggests the existence of an assumption in those solicitors that commercial confidentiality by itself was a sufficient basis for the making of a claim for confidentiality. I conclude that that assumption does, in fact, exist because it is supported by other material. The solicitor for Betfair, Ms John, was cross-examined and gave the following evidence: MR KERR: Thank you, your Honour. You see at the middle of the page, the sentence which commences with the word commencing with a capital G, going down to redacted in the second line. Do you say that's confidential? --- Yes. Why? --- My client says it's confidential. Why? --- That's a matter of instructions from my client, but --- No. What's - as far as you're concerned, what's confidential about that sentence or at least that part sentence? --- It reveals my client's current financial performance and the trend. … MR KERR: I'll move on. I think I've made - could I ask you to turn to page 18 and perhaps to, again, avoid wasting time, if you can take it from me that this document is on page 144 of Mr Price's other document? --- Yes. Have you seen this document before? --- Yes, I have. When did you last look at it? --- today. Had you looked at it before today? --- Yes. And had you, before today, obtained instructions as to why it's confidential? --- Yes. Do you maintain that it's confidential? --- Yes. Why? --- It refers to our client's business and gross margin. What's confidential about that, as between your client and Racing New South Wales? --- This is not publicly available information. 11 It is neither a sufficient nor proper basis for applying for an order whose effect is to set aside normal notions of open justice that a client instructs that material is confidential. As Mobil at 38 shows, that the making of the claim involves more and requires, on the part of those making the claim, the independent exercise of judgment. 12 I do not think, however, that this means that the confidentiality regime which is in place should be dismantled in its entirety. That course would be appropriate only if the regime was itself shown to be materially deficient. Whilst there are deficiencies in the regime - I return to these below - the predominant problem is not the regime but Betfair's apparent approach to it. To remedy that I will amend the regime by requiring the provision within three days hereof of the brief statement of reasons in respect of each document for which confidentiality has been claimed, and in respect of future claims for simultaneous delivery of the reasons. I am conscious of the shortness of time involved in that timetable. However, I consider, as will become apparent, Betfair to be principally responsible for the current difficulties. Further, as will become apparent, the bases of the claims should now be straightforward. 13 The regime established by my original order is deficient because it leaves it up to the party resisting confidentiality to approach the Court, when the burden should be the other way around. Accordingly, I will amend the regime so that, in the event that a party indicates that a claim for confidentiality is not accepted, then the regime will cease to apply fourteen days thereafter. This will place the onus on the claiming party to seek a confidentiality order in respect of the disputed document. Any objection to confidentiality is to be served within 7 days of receipt of the claim.

Augmentation of the present regime 14 Betfair placed in evidence for the purposes of its application a class of documents which it said should not be permitted to be shown to the respondents' in-house counsel (which the present regime would permit). It sought, in the first instance, to put in place an augmented regime by which such claims might be determined. Broadly, the structure was the same as that of the general confidentiality regime discussed above, with the significant difference that in-house counsel were not included amongst those to whom initial access might be granted. And, of course, an important feature of the proposed regime is that it does not determine whether a confidentiality order should be made but merely puts in place a mechanism for regulating in an orderly fashion the making of such claims. 15 To determine whether such a regime should be imposed is, therefore, not the same as determining that a particular document is such that a confidentiality order should be made. Generally speaking, it is likely to be appropriate to impose such an administrative regime when there is a realistic possibility that documents might exist which could be regulated by it. 16 I am satisfied that such a class of documents may well exist. There was received in evidence as Exhibit 3 materials which consisted of a bound volume of documents, which were said by Betfair to include documents which should not be accessible to the respondents' internal lawyers. For the purposes of the application those documents were admitted subject to an order that they not be disclosed other than to the parties' external advisors. I have inspected the documents. They clearly contain material which is commercially sensitive. Betfair argues that the respondents either are, or should be treated as, its trade rivals. If that were so, it might well be appropriate to impose a confidentiality regime. It is possible that the role of in-house counsel of the respondents might be such that his or her excision from the class of persons entitled to examine the documents could be warranted. There is, therefore, a realistic possibility of such confidentiality orders being made and, in principle, it is appropriate to provide for an administrative regime for regulating the making of such claims. 17 I conclude that such a regime should be ordered. It will have the same features as the primary regime (as modified).

Interference with the respondents' preparation 18 The respondents submit that the confidentiality regime is hindering their preparation of the case. In an ordinary situation I would be satisfied that the two regimes above would provide for the orderly disposition of the confidentiality claims. It may be said against that that they will engender a delay of at least 21 days - probably more - in determining contested confidentiality claims. The respondents say that they will be hampered in their preparation of the case because they cannot, whilst the regimes are in place, receive instructions from their clients. 19 I accept that this is a real concern. The trial is fixed for hearing on 16 November 2009 and both parties are currently attempting to complete discovery and their evidence with a view to that trial date. Necessarily this is imposing considerable hardship on both parties. I also accept, in principle, that an inability to show confidential documents to the respondents' officers may impact deleteriously on their preparation for the case. 20 I was not taken to any particular documents which the respondents' advisers claim is currently causing a problem. However, I do not regard that necessarily as a deficiency. The applications which were made on notice by both parties did not relate to particular documents and I do not think that the respondents can be criticised for taking the position that they have. So far as I can see, the first indication by Betfair of a proper basis for its proposed confidentiality orders was when it delivered Ms John's affidavit on 1 September 2009, that is, the day before argument before me took place on 2 September 2009. 21 In those circumstances, it is appropriate to provide an additional procedure permitting the respondents to apply forthwith to me in the case of any particular document for which they seek some loosening of the confidentiality regime. I do not intend that this should be subject to extensive use; rather, I intend that it will be utilised in cases of demonstrable and urgent need. 22 In putting in place this procedure I have considered the respondents' prima facie right to have their officials assist in the analysis of all of the discovered documents. The regime referred to in the preceding paragraph contemplates application in respect of particular documents. It does not permit an application to be made for general inspection in respect of all of the documents. This means that the ability, in the short term, of the respondents to engage in that kind of general analysis will, indeed, be impaired. I have concluded that it is appropriate nevertheless to impose that regime for five reasons. First, I have no particular indication before me of what the analysis of the discovered documents is intended to achieve and, hence, no metric by which to gauge the significance of the impairment. Secondly, access to the documents is not denied to the respondents' experts. Thirdly, the impairment in question is temporary since the primary regime will run its course in a few weeks. Fourthly, whilst I can readily discern how analysis of the discovered documents will be relevant to the expert evidence, for tendering at trial and for cross-examination, the connexion between that analysis and the immediate preparation of the respondents' lay evidence is less obvious. In that regard, there was no evidence before me that the preparation of lay (or expert) evidence was being retarded by the absence of this analysis. Finally, whilst some temporary interference with the ability to provide advice to the respondents' board may be encountered I do not think that that is sufficiently time critical to adopt a different course.

Betfair's oral application in respect of particular documents 23 Betfair's claim for confidentiality in these documents was put on six bases: (a) the risk that the respondents might accidentally or deliberately disclose its confidential information to its rival Tabcorp Ltd or its subsidiary TAB Ltd (collectively, "the TAB"); (b) the risk that the respondents might for the purposes of the litigation, seek to enlist the assistance of officials from the TAB and, in the course of that process, disclose the information to them; (c) the fact that some of the information was provided to Betfair by third parties on a confidential basis; (d) the hostility of the respondents to Betfair; (e) the fact that the respondents held positions on an advisory committee whose functions included strategic advice to the TAB on gaming and wagering; and (f) the fact that the respondents derived income from the TAB. 24 Matters (a) to (d) do no warrant the imposition of a confidentiality regime. 25 As to (a), the risk of deliberate or accidental disclosure of confidential information to the TAB is, as Mobil shows, ordinarily adequately addressed by the implied undertaking. 26 As to (b), the respondents proffer, and I accept, an undertaking not to seek to reveal information to the TAB for the purposes of the present litigation without first giving Betfair seven days' notice of its intention so to do; that is, in the circumstances, sufficient protection. 27 As to (c), I do not think that the fact that the material was provided on a confidential basis by third parties to Betfair requires, at this stage, any further protection beyond that which is supplied by the implied undertaking. There may come a time, if the material is ultimately sought to be tendered or used publicly, that some form of additional protection may need to be put in place. However, that time has not yet arrived. 28 As to (d), I accept that there is a degree of antagonism between the parties. However, I do not think that merely because the respondents seek robustly to put their position in the press demonstrates that the implied undertaking is not sufficient. 29 Matters (e) and (f) are, I think, to be put in a different category. I accept - contrary to the respondents' submission - that the presence of the representatives of the respondents on a committee established for purposes which include, inter alia, providing strategic advice on gaming and wagering to the TAB gives rise to a problem. Both the TAB and the respondents are parties to a contractual arrangement known as the Racing Distribution Agreement which provides for, amongst other things, the distribution of funds from the TAB to the respondents. Clause 16 of the agreement provides for the establishment of a business and strategy committee whose purpose is to consider and to make recommendations to the TAB in relation to "proposed strategies for TAB … which impact on wagering and gaming" and also in relation to "the business plans of TAB … for the conduct and promotion and development of wagering and gaming". The committee comprises eight individuals, four of whom are appointed by RacingCorp. RacingCorp is the company that represents the two respondents (and also the body regulating the racing of dogs) in their dealings with the TAB. 30 The problem is not that the respondents may accidentally or deliberately reveal confidential information to the TAB during the committee's meeting, or even by reason of those meetings. Rather, it is the impossibility of the respondents' representatives putting from their minds Betfair's confidential information when it comes to providing the strategic advice to the TAB which cl 16 calls for; that is, it is similar to the problem which arises in an ordinary trade rival case: cf. Mobil at 38. 31 The analogy with the position of a trade rival is enhanced because the economic interests of the respondents and the TAB are aligned, at least to the extent that the respondents derive income from the TAB which, in turn, derives income from taking money from people who bet on horses. Thus, the strategy input on gaming and wagering is likely to be influenced by a desire, borne of economic circumstance, to maximise the profitability and success of the horse racing industry and betting thereon. 32 The analogy is, however, not perfect. Betfair and the TAB compete in a number of betting markets which do not involve horses. It is not self-evident that Betfair's confidential information about, for example, golf or tennis would be relevant to the functions being performed by the committee. Unless it can be shown that that information is relevant to the committee's functions, the problem described in Mobil does not arise. If that be so, it would not be appropriate to impose anything beyond the implied undertaking. 33 The material before me does not presently satisfy me that Betfair's confidential information about sports other than horse racing and harness racing is relevant to the committee's deliberations. Thus, at least as presently advised, I see no basis for granting it the protection sought. I do not exclude the possibility that such evidence or explanation may be available. 34 On the other hand I can readily see why Betfair's confidential information concerned with gaming and wagering on horse racing and harness racing (both in New South Wales and interstate) would be relevant to the committee's role, and hence appropriately the subject of protection. 35 The question of financial material is more difficult. I would accept that very recent financial information, which is not publicly available, might be relevant to the committee's strategy functions. However, the evidence before me does not disclose how rapidly that relevance fades. My initial impression is that the outer limit may be about six months. If that be so, during the course of the proceedings information will continuously be released from the confidentiality regime upon reaching that age. However, there is not currently in the material before me sufficient evidence to permit an accurate answer to that question. I also incline to the view that Betfair's marketing information, at least in relation to horses and harness racing, is entitled to be kept back since it may impact upon the committee's strategic functions. 36 Most of Betfair's claims in its evidence proceeded upon the assumption that what was being protected against was deliberate or accidental disclosure. Insufficient attention has been devoted to analysing the issue by reference to the functions of the strategy committee. 37 In those circumstances, I decline to deal with Betfair's oral application that I determine the status of a number of particular documents. I should add that that application was made only during the hearing and was opposed by the respondents on the basis that the information before the Court was not sufficient for that purpose, a submission which I accept. Nevertheless I have made the comments above in order to give some guidance to the parties.

Augmentation 38 I turn then to the question of the augmented confidentiality regime which would exclude the respondents' in-house counsel from inspecting documents said to be of heightened confidentiality. The basis for this application appeared, from the evidence of Ms John, to be that the respondents' in-house counsel were likely to be involved in activities associated with the relationship that the respondents have with the TAB pursuant to the provisions of the Racing Distribution Agreement. It was also put that they were otherwise likely to be involved in advising on commercial and strategic decision making by the respondents. That evidence from Ms John was on information and belief from Mr Blanksby, himself the manager of legal and regulatory affairs at Betfair. Mr Blanksby was of the opinion that the functions of in-house counsel extended to this sort of role. 39 The respondents submitted that that much was known to Betfair many months ago, a proposition which appears to be borne out by the evidence. Circumstances may, however, change and I do not regard the prior position of Betfair as fatal to its current application. In order to justify excluding in-house counsel it will need to be shown that they were or might be involved in management decisions connected to the strategic input to the TAB through the committee identified above. As the evidence presently stands it would be open to me to conclude from the evidence of Mr Blanksby (through Ms John) that in-house counsel were, or might be, involved in processes which might lead, through the committee, to strategy input into the TAB. Because Betfair's evidence was not precisely directed to that point, there is, however, some ambiguity about that evidence. The respondents' evidence does not deny some management decisions by their in-house counsel. However, in light of the manner in which the issue has come up I would be hesitant, at this stage, to read too much into the absence of such a denial. 40 If on the making of a claim for confidentiality of this kind the evidentiary record remained in the same form then, subject to one matter, I would be inclined to provide the augmented confidentiality sought. That one matter is the possibility of the in-house counsel giving an undertaking not to be involved in management decisions which are connected directly (or indirectly) to the committee's function of providing strategy advice to the TAB. If such an undertaking were forthcoming it would appear to me to provide an alternative solution. Put another way, if the in-house counsel are truly involved in the strategy advising function of the committee then, during the pendency of the proceedings (and perhaps for some time thereafter) it is either appropriate that they cease being involved in that way or that they be denied access to the documents. Again, I stress that the issue of confidentiality is to be seen through the prism of the role of the committee.

Costs 41 Finally, I turn to the question of costs. It is appropriate that the costs of Betfair's motion should be costs in the cause. 42 Although I have dismissed the respondents' motion I accept that it was made necessary by the position the Betfair took in relation to the confidentiality regime. The brief reasons it proffered were entirely inadequate and either indicated a want of understanding about the principles in play or a disregard for those principles. That conduct has been productive of considerable inconvenience to all parties. I have now upheld, at least in principle, a range of confidential materials which is much narrower in ambit then the original claim made by Betfair. Those circumstances provide a proper basis for departing from the ordinary rule that costs follow that event. Betfair is, therefore, to pay the respondents' costs of the respondents' motion. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Counsel for the Applicant: R G McHugh SC and P W Flynn

Counsel for the Respondents: S A Kerr and J Emmett

Solicitor for the Respondents: Yeldham Price O'Brien Lusk

Solicitor for the Intervener: NSW Attorney-General

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Judgment (11 paragraphs)

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