McHugh v Australian Jockey Club Limited

Federal Court of Australia (Full Court)|2014-04-17|Before: White JJ

The appeal be dismissed.
The appellant's application to amend his notice of appeal be dismissed.
There be no order as to costs in relation to the appellant's application to amend his notice of appeal.
The third respondent be granted leave to amend its notice of contention to add proposed Ground 7 and that notice be filed within seven days hereof.
The appellant pay the respondents' costs of the appeal as taxed or agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 455 of 2013

PERRAM J: 1 This appeal concerns an alleged restraint of trade said to be constituted by a prohibition on the breeding of thoroughbred horses by artificial insemination. The Appellant is a breeder of thoroughbred horses. The modern thoroughbred horse is descended from three stallions - Godolphin Arabian, Darley Arabian and Byerley Turk. Since 1878 there has been published a work entitled 'The Australian Stud Book' whose proprietors decided from 1912 onwards to accept for inclusion within it only those new broodmares whose pedigrees could be traced to an accepted tap-root and of whose sire's pedigree their Stud Book Committee approved. I shall refer to the Australian Stud Book as 'the ASB'. On 31 December 1949 the then proprietors of the ASB issued a booklet entitled 'Outline of Stud Book Procedure governing Returns of Eligible Brood Mares to the Australian Stud Book' which contained this stipulation: Artificial Insemination A foal is not eligible for Australian Stud Book inclusion unless it is begotten by natural service, although it is permitted to reinforce at once the natural service by artificial insemination with semen from the stallion performing the natural service on the mare that has just been covered. [emphasis in original] 2 The 1949 booklet expressed itself to cancel an earlier booklet of 1947 and there was some indirect evidence in the form of a set of minutes of a meeting of the International Stud Book Committee held in 1980 that this rule against breeding by means of artificial insemination had first appeared in 1947, presumably in that earlier booklet. Although the rules, which I will call 'the ASB Rules', have been updated and reissued on a number of occasions since that time, the basic prohibition has persisted. At the time of the trial, the most recent instance of the prohibition was to be found in clauses (ix), (xi) and (xiii) of the updated ASB Rules issued in February 2011. Ownership of the ASB has passed through various hands including, most recently, the Australian Jockey Club Limited (which until not long ago conducted the horse races held at Randwick and Warwick Farm in Sydney), the Victorian Racing Club Limited (which conducts the horse races held at Flemington in Melbourne) and the Australian Turf Club Limited (which now conducts the horse races at Randwick, Warwick Farm and Rosehill). Each of these entities was a respondent to the present appeal and I will call them collectively 'the ASB Respondents'. 3 The Appellant wishes to breed thoroughbred horses by artificial insemination. He contended at trial that rules (ix), (xi) and (xiii) of the current ASB Rules are void as a restraint of trade and contrary to public policy. The trial judge rejected this argument and dismissed the proceedings from which the Appellant now appeals. In my opinion, for the reasons which follow, the appeal should be dismissed with costs.

Ground of Appeal No. 1 - was the ASB rule reasonable in 1947? 4 It was not in dispute before this Court or at trial that: (a) at common law all interferences with individual liberty of action in trading and all restraints of trade themselves, if there is nothing more, are contrary to public policy and therefore void: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 at 565 per Lord Macnaghten; (b) such a restraint will nevertheless be valid if: (i) it affords no more protection than is reasonably necessary to protect the interests of the party in whose favour it is imposed: Nordenfelt at 565; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 315-316 per Gibbs J; and (ii) it is reasonable having regard to the interests of the public: Nordenfelt at 565; Amoco at 315; (c) reasonableness in those contexts is to be judged at the date the restraint was first imposed: Adamson v New South Wales Rugby League Ltd (1991) 31 FCR 242 at 285-286 per Gummow J; Sheppard J agreeing at 245; (d) the onus of showing that the restraint is no more than reasonably necessary to protect the interests of the party having the benefit of the restraint is on that party: Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 at 319 per Lord Hodson; Herbert Morris Ltd v Saxelby [1916] 1 AC 688, 700, 707-708 per Lord Atkinson and Lord Parker. There are judgments of individual Justices of the High Court to similar effect: see Lindner v Murdock's Garage (1950) 83 CLR 628 at 646 per McTiernan J and 653 per Kitto J; Amoco at 317 per Gibbs J; (e) the onus of showing that a contract in restraint of trade is injurious to the public lies on the party making that allegation: Herbert Morris at 700, 707-708; Esso Petroleum at 319; (f) what is to be proved in both cases are facts, but the question of whether those facts make good the proposition that the restraint is reasonable is a question of law: Esso Petroleum at 319; Amoco at 317; (g) in assessing what is reasonable the Court may take into account future probabilities that could have been foreseen: Adamson at 285-286; and (h) in assessing what is reasonable, facts occurring after the restraint's inception may, but need not, throw light on circumstances existing at the relevant date: Amoco at 318. 5 The application of these principles at trial cast upon the ASB Respondents a legal burden to prove that in 1947 there were circumstances from which it could be inferred that the prohibition on entry of foals bred by means of artificial insemination in the ASB was reasonably necessary to protect a legitimate interest. As might be imagined in this kind of spirited litigation, a good deal of factual material was placed before the trial judge about this matter, principally of a documentary kind. His Honour was largely relieved of the need to conduct a thorough survey of its implications by a concession made on the Appellant's behalf in paragraph 63 of his written submissions in reply at trial which was in these terms: When the restraint on the use of AI [scil: artificial insemination], otherwise than by way of reinforcement, was introduced in 1949 (or earlier), the reason was the absence of any effective tests to detect possible fraud or mistaken identity in relation to the recording of new-born foals in the Stud Book. The prohibition on AI, which could not readily be detected, was therefore a reasonable response to the problem at hand and did not [sic] more than protect an interest of the proprietors of the Stud Book they were entitled to protect. 6 Despite this concession, however, the Appellant sought to characterise the prohibition on the inclusion in the ASB of foals bred by artificial insemination as perpetual in operation. He attacked its reasonableness, therefore, not on the basis that it did not address a legitimate concern which the ASB Respondents (or their predecessors) were entitled to protect but rather that the duration of the protection which had been put in place to protect that admittedly legitimate concern was not shown to be reasonable. The submission on the issue of duration followed on immediately from the submission set out above and was in these terms: However a restraint must be reasonable as to its scope, area and temporal dimensions. The restraint when first imposed 60 years ago did not meet the last of these requirements. It was not limited as to time and it was never suggested that it would cease to have effect once an effective test was available. It was always to be expected that tests such as blood-typing and DNA testing would evolve to a point where they would provide a reliable method of verifying pedigree. 7 Debate in this appeal turned critically upon who bore the onus of demonstrating this matter. Mr Hutley SC, who with Mr Lazarus of counsel appeared for the Appellant, submitted that the ASB Respondents were bound to prove as at 1947 'that future developments in technology could not have been foreseen' because it was they who bore the onus of proving the reasonableness of the restraint under the accepted doctrine outlined above at paragraph 4(d). The trial judge had dealt with this submission at paragraphs 1527-1528 and, finally, at 1533 of his Honour's reasons for judgment in these terms: [1527] However, the applicant also accepted, subject to one matter, that the common law alleged restraint was reasonable when it was imposed, that is, at those dates it was reasonable to prohibit conception by artificial insemination. The applicant submitted that when blood-typing became mandatory in Australia from 1 August 1986, the previous rationale of avoiding deliberate or accidental incorrect paternity had ceased to have any force. [1528] The "one matter" to which I have referred in the preceding paragraph is that the applicant submitted that the ban on the conception of thoroughbreds by AI should be read as if it was subject to an unexpressed condition or qualification to the effect that the ban should obtain only until there was a scientific method of checking for identity fraud and that that point had been reached by the mid-1980s. I reject that submission as having no foundation in the language of the relevant rules or in the evidence as to future probabilities which could have been foreseen by those affected at the time of the introduction of the ASB provision or at the time of introduction of ARR 15A. … [1533] In the present case there was no contemporaneous relevant evidence of future foreseeable probabilities in this respect. Later facts do not relevantly throw light on the circumstances then existing. I reject the applicant's submission that it was always to be expected that tests such as blood-typing and DNA testing would evolve to a point where they would provide a reliable method of verifying pedigree. 8 This, so the Appellant submitted, involved the legal error of reversing the onus of proof by requiring him to prove, rather than the ASB Respondents to disprove, that as at 1947 it could have been foreseen that matters such as blood typing and DNA testing would evolve to a point where they would provide a reliable means of verifying pedigree. 9 The Appellant's submission on this issue before this Court was subtly different to that which was made to the trial judge. Before his Honour what was said by the Appellant 'always to be expected' was the evolution of tests such as blood typing and DNA analysis. That submission was made in writing in the passage set out above and recorded at paragraph 1494 of the trial judge's reasons. It was this that, at trial, the ASB Respondents were said to be required to disprove. In this Court, on the other hand, it was said by the Appellant that the ASB Respondents were bound to disprove the foreseeability of future technological developments which might overcome the problem of parentage identification, a somewhat more general proposition not involving the identification of any particular technology. 10 It is useful at this juncture to consider the circumstances which were proved at trial in relation to these three matters, that is to say, blood typing, DNA testing and the more discursive 'future technological developments'.

(i) Blood Typing 11 There was no direct evidence of any kind about blood typing in 1947. Tendered before the trial judge were the minutes of the inaugural meeting of the International Stud Book Conference held on 7 October 1976 at Portman Square in London ('the 1976 ISBC Minutes'). This document was referred to in the course of this appeal by the Appellant to make good the proposition that blood typing had been a condition of entry in the United Kingdom General Stud Book in 1972. This it certainly shows. It shows too that a more limited blood typing programme was in effect by 1976 in France and was soon to be in effect across the Atlantic in the United States of America. It was also being used by that time in 'doubtful cases' in South America and in Queensland too with the possibility that it would be extended to the rest of Australia and New Zealand in the future. 12 At trial the Appellant submitted that blood typing became mandatory in Australia on 1 August 1986 (the horses' birthday), a proposition supported by the affidavit evidence of the Keeper of the Stud Book, a Mr Ford, at paragraph 206. He had been called to testify by the ASB Respondents. 13 The trial judge concluded that the evidence as to future probabilities which could be foreseen as at 1947 (that is, at the time of the introduction of the ASB provisions) did not permit a submission to be made that the prohibition should have been subject to a proviso limiting its effect until such time as the identity fraud problem was solved: see the quote from [1528] set out above. 14 This statement does not say what the evidence to which it refers is. However, it is tolerably clear from [1533] that his Honour had in mind an evidentiary vacuum: 'In the present case there was no contemporaneous relevant evidence of future foreseeable probabilities in this respect'. It is clear that 'contemporaneous' refers to the late 1940s. 15 Once that is understood, the structure of trial judge's reasoning on this issue can be seen to involve two steps: 1. a statement that there was no evidence in 1947 of a foreseeable probability that in the future a method of checking for identity fraud would be developed; and 2. a rejection of the Appellant's submission that it was always to be expected that tests such as blood typing or DNA would evolve to the point where they could solve the identification issue. 16 The difficulty, with respect, in proposition (1) is the distinction between the absence of evidence and evidence of absence. It is one thing to say that there was no evidence before the Court about future foreseeable probabilities in 1947 but quite another to say that as at 1947 there were no future foreseeable probabilities. The distinction becomes especially significant when questions of onus intrude. 17 Since the ASB Respondents bore the legal onus of proving facts from which an inference of reasonableness might be drawn it was they who needed to prove that as at 1947 there were no future foreseeable probabilities. That there might have been led no evidence of such probabilities would not discharge that onus because it would prove only that there was an absence of evidence when, by contrast, what needed to be proved was evidence that there were no such probabilities countenanced in 1947. These are not the same thing. Mr Hutley submitted that demonstration of such a negative proposition was a well-known forensic endeavour - witnesses could be called to say that they had conducted a thorough search of all the available materials that could be found and these disclosed nothing as at 1947 about future probabilities; witnesses from the period could be called to say that they knew nothing of such prospects at that time and so on. From such evidence a court might then be invited to infer that there were no probabilities contemplated in 1947. 18 I was not disposed to see the force of this argument during the hearing of the appeal but I have come to the view that it is correct. Paragraph 1533 of the trial judge's reasons treats the absence of evidence as the Appellant's problem whereas in fact it was the ASB Respondents' problem. I am not dissuaded from that view by the fact that this point first emerged at trial during the Appellant's submission in reply. There was no abandonment of this issue in his opening submission. It is true that nothing was said at that time on the issue but I do not think that mere silence at that stage of the trial could constitute what would be, in effect, a species of waiver or election. I do not accept that every point not expressly referred to in an opening address is abandoned for silence in such a circumstance is not an unequivocal step consistent only with the point being dropped: cf Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646. To conclude otherwise would be to require an applicant to open on every point which is certainly not the modern practice. 19 On the other hand, once the evidence had begun there was nothing which had occurred by that stage which relieved the ASB Respondents of the burden they bore. Nor is this a case where nothing was said in final submissions. It is true that the point was only raised in the submissions in reply and that an argument could have been raised that it should have been raised in the final written submissions in chief. Had that argument been raised, however, it would have needed to confront the fact that the written submission preceded an oral address. Further, even apart from that, the only result would have been that the ASB Respondents would have been given a further right of reply. No actual prejudice would have been suffered because the evidence was closed before any submissions were made. Accordingly, the point was not abandoned in opening and it was expressly addressed in closing. The ASB Respondents were not, therefore, relieved of the burden of proof. 20 For that reason I accept that [1533] of the trial judge's reasons does, with respect, involve a legal error. If the evidentiary record on future probabilities was empty, as the trial judge clearly assumed, the ASB Respondents had not discharged the onus of proving no such probabilities were contemplated. In effect, his Honour's reasoning reversed the onus of proof by putting at the Appellant's doorstep the forensic difficulties flowing from the suggested evidentiary vacuum. 21 That is not the end of the matter, however. Contrary to the trial judge's assumption, with respect, there was not an evidentiary vacuum about what was contemplated in 1947 about blood typing. In fact, the material available at trial permitted an inference to be drawn that nothing was contemplated in 1947 about it at all. The earliest trace of the use of blood typing was in 1972. That evidence plainly showed the technology was then in its infancy. If blood typing was only just beginning to be used in 1972 it is heroic to conclude that it was being contemplated in 1947 at all. Contrary to the submissions of Mr Hutley during argument, I do not accept that the fact that the Second World War had just occurred takes matters very far in this regard. Accordingly, the inference may readily be drawn that nothing was contemplated about blood typing for horses in 1947. 22 At that point, it then falls to consider the Appellant's submission that as at 1947 it was always to be expected that blood typing (and DNA testing) would develop to the point where the identification problem would be resolved. In effect, this is a submission that the inference just referred to should not be drawn. I do not accept the submission, however. The 1976 ISBC Minutes are sufficient material from which to draw the inference. Once it was proven that blood typing first appeared in around 1972 (as referred to in the 1976 ISBC Minutes) in terms which suggested it was a new technology, the only way the inference could be avoided was if the Appellant sought to counter it with some evidence of his own on the topic. This is not to reverse the legal burden of proof which always lay on the ASB Respondents. It is instead an example of the tactical burden of proof shifting during the course of a trial. The ASB Respondents had adduced enough evidence to discharge the onus they bore. The only question was whether the Appellant would seek to take the field against the inference. He did not. 23 In that circumstance, although I accept that the trial judge did make an error I am also satisfied that his Honour's ultimate conclusion was correct although for the slightly different reason that a solution to the identification issue involving blood typing was not contemplated in 1947.

(ii) DNA Tests 24 The use of DNA testing appears to have emerged in the 1980s. Even more than in the case of blood typing may it be inferred that nothing was contemplated in 1947 about the future possibility of DNA testing being used to resolve the identification problem. The trial judge's reasoning in respect of DNA testing is structurally the same as it was in the case of blood typing and, indeed, is treated in the same paragraph in an omnibus fashion. For the reasons given in relation to blood typing I would conclude that the trial judge did err but that this Court on an appeal by way of rehearing should affirm his Honour's conclusion. No resort is needed to the fact, possibly sufficiently notorious to fall within the legitimate scope of judicial notice, that Watson and Crick did not discern the helical nature of DNA until 1953.

(iii) Future Technological Developments 25 It is convenient to assume that it is open to the Appellant to pursue this somewhat more generalised version of the argument that he ran at trial. It should be noted that this form of the argument does not depend on any particular development as being foreseeable. The argument was to be seen, as Mr Hutley developed it on the appeal, as a corollary of what he referred to as the Age of Enlightenment. In 1947 the Second World War had just concluded and this had involved great technological leaps forward including, so he submitted, the development of nuclear weapons. In a scientific milieu which included such remarkable advances, the possibility that any given scientific problem might be resolved was itself inherently foreseeable. If science could bring forth the horrors of Hiroshima, Mr Hutley asked rhetorically, why could it not be foreseen that it would, in time, also conquer the problem of determining the paternity of the humble thoroughbred? 26 Mr Bannon SC, who with Dr Higgins of counsel appeared for the ASB Respondents, submitted that this chain of reasoning was entirely speculative and that the restraint of trade doctrine was not concerned with such frivolities. 27 Mr Bannon's submission is to be preferred. It is one thing to say that the forward march of science is foreseeable but quite another to say that the individual fruits of that stately progression have the same quality. It may well be that a prohibition on breeding thoroughbreds by artificial insemination should be limited in its duration when current tangible scientific developments suggest that a solution to the problem of paternity testing might soon be at hand. Such a state of affairs could be said to disclose a probable contingency, although a final determination of that issue would need to await an analysis of the particular development put forward (for example, blood typing, DNA testing and so on). But to say that the paternity problem in 1947 was foreseeably soluble for no more reason than that it was a scientific problem and hence likely, at some indeterminate point in the future, to yield to the forces of progress unleashed by the Renaissance raises nothing more than what Tindal CJ referred to in Rannie v Irvine (1844) 7 Man & G 969 at 976-977; 135 ER 393 at 396 as an improbable and extravagant contingency. As has frequently been explained, a covenant in restraint of trade need not be expressed to avoid such flights of fancy: see Nordenfelt at 574; Haynes v Doman [1899] 2 Ch 13 at 26-27; Adamson at 286. 28 The correctness of this conclusion is supported, I think, by a consideration of what the consequences of acceptance of the Appellant's submission would entail. It would mean that whenever a restraint of trade protected a legitimate interest for a specified period of time, it would need to be subject to the rider that the time limit was to be shortened if (unspecified) scientific developments made that shortening possible, even if no actual technological development was then on the horizon. Although Mr Hutley stoically resisted this proposition in his argument before this Court it would mean, for example, that an everyday non-compete clause of two years duration would be invalid because it was possible with the foreseeable forward march of scientific development &c that the problem of client poaching might at some stage be solved by a technical development to discern the motives of individual clients. I do not accept, despite Mr Hutley's submission, that this example is not concerned with technology. 29 It follows that the trial judge did err in his Honour's treatment of blood typing or DNA tests but the error was not material to the outcome of the trial. Even assuming that the generalised future technological developments argument can be put in this Court, I would not accept it for the reasons just given. Each of these arguments was encompassed in Ground 1 of the Appellant's notice of appeal. Ground 1 fails.

Ground of Appeal No.2 - the Australian Rules of Racing in 1980 30 In 1978 the Australian Racing Board adopted as an Australian Racing Rule ('ARR') a Rule 15A, which came into effect on 1 August 1980 and limited, relevantly for present purposes, the registration of horses with the Registrar of Racehorses to horses appearing in the ASB. Rule 14 of the ARR prevented horses in Australia from being entered or running in any thoroughbred race unless they were registered with the Registrar. At trial the Appellant launched an attack on Rule 15A (and other related rules) as part of what was called in his pleading 'the Combined Provisions'. The trial judge rejected the existence of the Combined Provisions on the facts. No appeal has been brought from that conclusion. 31 At trial the Appellant disclaimed any other case that Rule 15A (and the related rules) were invalid as a restraint of trade when made in 1980. Paragraph 6 of his written closing submission at trial was in these terms: It is also incorrect to say that the applicant's case does not involve an attack on AR.14 or AR.15A. The reference to EX 3R6 is to a response to a request for particulars which has not been put into evidence, and which makes it quite clear that the response relied on is limited to the applicant's case at common law. The Amended Application seeks relief in relation to the ARR under the Competition and Consumer Act ("CCA"), but not under the doctrine of restraint of trade. The restraint of trade case involves the ARR provisions insofar as they form part of the Combined Provisions and have effect in combination with the ASB Provisions. 32 It was thus made clear by the Appellant that the only restraint of trade case made about ARR 15A in 1980 was that made by him as part of his allegations concerning the 'Combined Provisions'. Since that case is expressly not pursued in this Court it follows that there is no case before us about the validity of ARR 15A. 33 As it was developed on the appeal, Ground 2 of the notice of appeal seeks to reventilate this abandoned contention. It begins: As to the restraint the subject of the ASB Provisions when combined with the ARR Provisions, and/or the Combined provisions his Honour erred…. 34 This ground, it may be accepted, is ambiguous in the sense that it might be read as suggesting that the ASB Rule of 1947 became invalid on the commencement of ARR 15A in 1980 or, instead, that ARR 15A itself was invalid in 1980 when it utilised entry in the ASB as a criterion for registration. The former proposition is quite untenable and I did not apprehend it to be advanced on the appeal. The latter proposition was advanced on the appeal but for the reasons just given reliance upon it was abandoned at trial other than through the device of the 'Combined Provisions'. Since the trial judge's rejection of that case has not been the subject of an appeal to this Court, Ground 2 raises nothing which this Court can legitimately consider. The Appellant submitted that this Court should nevertheless entertain the ground because the trial judge had done so. Paragraph 1525 of his Honour's reasons provides some support to that proposition. But a case expressly abandoned at trial is not revived because a trial judge nevertheless considers it. Accordingly, Ground 2 is not available to the Appellant.

The Notices of Contention 35 Both grounds of appeal having failed it follows that the appeal should be dismissed with costs. Each of the respondents also filed a notice of contention supporting the trial judge's orders on grounds not determined by his Honour. Since these no longer arise they can be disposed of without lengthy analysis.

(i) The ASB Respondents' Notice of Contention 36 At trial the ASB Respondents' submitted that the Appellant had no standing to pursue his case. The trial judge assumed in his favour that he did. By their first ground the ASB Respondents' sought to negative the correctness of that assumption. There is no substance in this contention. The trial judge accepted that the Appellant genuinely wished to engage in breeding by artificial insemination. Although his Honour also accepted that the Appellant was unlikely to achieve a substantial level of trade or to be profitable this simply does not deny his standing to bring the claim. In a similar vein, the suggestion that the suit before the trial judge was for similar reasons rendered hypothetical in a constitutional sense is without foundation. Ground 1 of the notice of contention fails. 37 The second ground of the notice of contention sought to deny that the restraint of trade doctrine could apply to the ARR. This was because they only took effect as a species of delegated legislation in each State. It is not necessary to address this ground in light of the Appellant's written concession that he was not attacking the validity of ARR 15A under the restraint of trade doctrine other than as part of the 'Combined Provisions' and his express abandonment in this Court of any appeal with respect to the 'Combined Provisions'. 38 Ground 3 sought to contend that when considering the validity of the ASB rule, it was impermissible to have regard to the introduction of ARR Rule 15A in 1980. In this Court it was not suggested by the Appellant that it was permissible and the trial judge did not reason in that way. No occasion arises to consider the issue which is not in dispute at any level. 39 Ground 4 was as follows: 4. The primary judge should have found that neither the ASB Provisions, in isolation or in conjunction with the ARR provisions, nor the Combined Provisions (if any such provisions exist) constitute a restraint of trade, given that: 4.1 horse breeders within Australia are at liberty to breed Thoroughbreds, by means of natural cover, for thoroughbred racing and/or sale without any contractual restriction on output; and 4.2 those provisions do not restrict or detract from the Appellant's liberty to conduct Thoroughbred racehorse breeding activities in Australia by means of artificial insemination; and 4.3 horse breeders within Australia are at liberty to breed other, non-Thoroughbred horses for the racing and/or sale and other purposes in the event that they determine that Thoroughbred breeding and/or racing is not sufficiently profitable, or for any other reason unsuited to their objectives. 40 I would reject Ground 4. The effect of the artificial insemination prohibition in the ASB Rules is to place a very significant limitation on the ability to trade: no horses bred by means of artificial insemination may be entered in thoroughbred races. To say that this does not restrain the Appellant in his trading activities is entirely unrealistic. Ground 4 should be rejected. 41 The Appellant sought to amend his notice of appeal to respond to the matters raised by Ground 4. Such an amendment is not necessary. The Appellant is entitled to respond to the contentions contained in Ground 4 in the manner in which he responded to them below. Such a matter does not need to be pursued by means of a notice of appeal. The application to amend should be dismissed. 42 Next, by Ground 5, the ASB Respondents submitted that the trial judge should have concluded that as at the late 1940's the artificial insemination prohibition was reasonable because: (a) it encouraged uniform standards for breeding and identification of thoroughbreds thereby preserving the integrity, organisation and attractiveness of thoroughbred breeding and racing as an activity and sport capable of generating profit, recreation, social advancement and attracting spectator interest; and (b) the rule was an aspect of the definition of the sport. 43 Whilst it may be the case that these matters were arguable by the 1980s (a matter about which I do not need to express a view) it is difficult to see that the ban on breeding by artificial insemination could have had either of these qualities at the moment of its inception in 1947. I would reject Ground 5. Ground 6 sought to ventilate similar points although in respect of ARR 15A. For reasons I have already given I do not need to deal with this point.

(ii) The Australian Racing Board's Notice of Contention 44 The Australian Racing Board ('the ARB') (who was the author of ARR 15A) raised similar issues to those raised by the ASB Respondents, specifically, the lack of the Appellant's standing, the hypothetical nature of the suit, the suggestion that the racing rules took effect as statutory instruments and the fact that the Appellant was not restricted in his trading by the rule. These should all be rejected for the same reasons. It also sought to justify the reasonableness of the ASB Rules and the ARR as at 1980 which is not a live issue in this Court. At the hearing Mr Walker SC, who appeared with Mr Ng of counsel for the ARB, sought to raise by way of amendment a proposed Ground 7 which, if permitted, would seek to contend that the ASB rule was imposed in 2011 when the Australian Turf Club Limited became a party to the ASB Rules upon it becoming one of the ASB's proprietors. This was then used to argue that circumstances which then existed in 2011 made the restraint reasonable. Shortly, I would reject this argument because the restraint was not freshly imposed each time a new party succeeded to ownership of the ASB. For the purposes of the restraint of trade doctrine, the restraint was first relevantly imposed in 1947.

(iii) The Fourth Respondent's Notice of Contention 45 Mr Emmett of counsel who appeared for the Fourth Respondent, Thoroughbred Breeders Australia Limited, raised two matters by way of notice of contention. First, he submitted that the Appellant was not relevantly restrained. This should be rejected for reasons already given. Secondly, he argued that the restraint was reasonable because: (a) it was part of the tradition and character of the sport; (b) allowing breeding by artificial insemination would damage the international standing of Australian racing; and (c) regard had to be had to the likely increase in the number of foals which could be bred from a single stallion. 46 None of this was, however, shown to have been contemplated in 1947. I would reject the argument.

Result 47 The appeal should be dismissed with costs. The Appellant's application to amend his notice of appeal should be dismissed. I would make no order as to costs in relation to that application. The ARB should have leave to amend its notice of contention to add the proposed Ground 7 and that notice should be filed within seven days hereof. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate: Dated: 17 April 2014 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 455 of 2013

JUDGES: PERRAM, GRIFFITHS & WHITE JJ DATE: 17 APRIL 2014 PLACE: SYDNEY

GRIFFITHS J: 48 I have had the distinct advantage of reviewing the judgment of Perram J in draft form. I agree with the orders proposed by his Honour and, with one qualification, with his Honour's reasons. 49 The qualification relates to the finding that [1533] of the primary judge's reasons for judgment discloses a legal error in relation to the onus of proof. In my respectful opinion, and for the following reasons, the primary judge made no such error. 50 In my view, [1533] of the primary judge's reasons, together with [1527] and [1528] which are related, need to be read in the context of how the case below was pleaded and conducted. For convenience, I will set out again those paragraphs of his Honour's reasons for judgment: [1527] However, the applicant also accepted, subject to one matter, that the common law alleged restraint was reasonable when it was imposed, that is, at those dates it was reasonable to prohibit conception by artificial insemination. The applicant submitted that when blood-typing became mandatory in Australia from 1 August 1986, the previous rationale of avoiding deliberate or accidental incorrect paternity had ceased to have any force. [1528] The "one matter" to which I have referred in the preceding paragraph is that the applicant submitted that the ban on the conception of thoroughbreds by AI should be read as if it was subject to an unexpressed condition or qualification to the effect that the ban should obtain only until there was a scientific method of checking for identity fraud and that that point had been reached by the mid-1980s. I reject that submission as having no foundation in the language of the relevant rules or in the evidence as to future probabilities which could have been foreseen by those affected at the time of the introduction of the ASB provision or at the time of introduction of ARR 15A. … [1533] In the present case there was no contemporaneous relevant evidence of future foreseeable probabilities in this respect. Later facts do not relevantly throw light on the circumstances then existing. I reject the applicant's submission that it was always to be expected that tests such as blood-typing and DNA testing would evolve to a point where they would provide a reliable method of verifying pedigree. 51 The reasonableness of the alleged restraint was raised by the ASB Respondents in [40] of their defence and by the ARB in [41C]-[41F] of its defence. It is significant to note that the Appellant below did not raise any issue as to the open-ended duration of the alleged restraint of trade in either the third further amended statement of claim or in any of his replies. 52 Moreover, no reference was made to that issue in either the Appellant's opening or closing addresses at trial. In his closing written outline below, the Appellant argued that, where the alleged restraint is "of greater antiquity" (as the ASB Provisions were said to be based on the Appellant's assertion that they were first imposed in the late 1940s), then: (a) "It is less clear that grounds which may have justified [the] restraint as reasonable when first imposed, but have ceased to have any relevance, should…continue to rule from the grave"; and (b) there is a basis for refusing to enforce the restraint "if circumstances afterwards arise in which it would be unreasonable or unfair" to enforce the restraint (see [225] of the Appellant's closing written outline below). 53 It was only in the Appellant's written submissions in reply that the indefinite duration of the alleged restraint was first squarely put in issue. Paragraph 63 of those reply submissions was as follows: When the restraint on the use of AI, otherwise than by way of reinforcement, was introduced in 1949 (or earlier), the reason was the absence of any effective tests to detect possible fraud or mistaken identity in relation to the recording of new-born foals in the Stud Book. The prohibition on AI, which could not readily be detected, was therefore a reasonable response to the problem at hand and did not more than protect an interest of the proprietors of the Stud Book they were entitled to protect. However a restraint must be reasonable as to its scope, area and temporal dimensions. The restraint when first imposed 60 years ago did not meet the last of these requirements. It was not limited as to time and it was never suggested that it would cease to have effect once an effective test was available. It was always to be expected that tests such as blood-typing and DNA testing would evolve to a point where they would provide a reliable method of verifying pedigree. A restraint which prohibited AI for this reason alone would have been reasonable had it been limited to such period as any reliable physical or scientific test was unavailable and unproven. No other reason appears to have been put forward for the restraint at the time. International comity would not have provided a justification in 1949. In the absence of any temporal limitation of the kind described, the restraint must be judged to have been void ab initio. (Emphasis added). 54 In his closing oral submissions at trial, the Appellant's Senior Counsel (Mr Tonking SC) elaborated on [63] of the Appellant's written reply submissions. Relevantly, he said: We say, well, it could have been made in reasonable terms at the outset by being limited in time so as to operate only for such time as there was not some more specific remedy for the problem that was encountered. Something better calculated, without prohibiting artificial insemination, better calculated to deal with issues of identity. And that limitation was never imposed. It was - the rule was introduced in terms which prohibited artificial insemination without limit as to time. (Transcript, 15 December 2011, p 42, l 42 - p 43, l 1-2). 55 In response to a question from the primary judge as to whether the original restraint was being read as if it said something like: "Here is the prohibition (for so long as it's necessary to prevent identity fraud)", Mr Tonking SC responded: Yes. Until such time as some technology is developed, or some more efficient means of detecting fraud without prohibiting in its entirety a method of conception (Transcript, 15 December 2011, p 43, l 8-10). 56 In his closing oral submissions before the primary judge, Senior Counsel for the ASB Respondents (Mr Bannon SC) paraphrased the Appellant's argument on this issue as involving the proposition that "in relation to the justification of the [restraint] when it first came in, you should now conclude that it was then unreasonable because it in effect didn't predict DNA testing or blood typing testing" (Transcript, 16 December 2011, p 90, l 8-10). Mr Bannon then submitted that the Appellant's argument effectively took into account subsequent events, namely blood typing and DNA testing, to argue that "effectively it should have been predicted and therefore the rules should not have just been no AI; it should have had some other formulation" (Transcript, 16 December 2011, p 90, l 21-24). He then added: What, until DNA testing comes in or until blood type testing comes in, neither matters which there's any evidence to suggest some - anyone could have reasonably contemplated it, or even some wording like, "until some viable testing method comes in". What does that mean? Is affidavits viable (sic) or whatever? One just asks the relatively simple proposition, is at the time its reasonable (sic), and at the time it was imposed, and that's not the only reason it was brought in… (Emphasis added). 57 Although the transcript reads a little awkwardly, it is relatively clear that at the core of Mr Bannon's response was the proposition that there was no evidence to support the Appellant's belated assertion that, at the time the restraint was imposed (i.e. 1947), it was expected that future technological developments relating to blood typing and DNA testing would evolve so as to provide a reliable method of verifying pedigree. 58 As the Third Respondent pointed out in its outline of written submissions in the appeal, this means that it was not until after the close of evidence that the respondents were made aware of there being any question in the litigation as to what may or may not have been reasonably foreseeable when the prohibition on the inclusion of horses produced by AI was first inserted into the ASB Rules. And as the Third Respondent further pointed out in its outline in the appeal, if an issue relating to the open-ended nature of the alleged restraint was to be litigated, it should have been raised by the Appellant below in either his pleadings or in opening or, at the very least, by adducing evidence which the respondents would have had to answer in order to demonstrate that it was not reasonably foreseeable in the late 1940s that technological developments might in the future provide a solution to the parentage identification problem and that, consequently, the indefinite nature of the prohibition of including AI horses in the ASB was reasonable. 59 In these circumstances, even though the respondents carried the legal onus of proving circumstances supporting the reasonableness of the alleged restraints, the Appellant's conduct of the trial in relation to the issue of the foreseeability of technological improvements gave rise to an evidentiary burden on his part to demonstrate that there was sufficient evidence to raise a question as to the existence or non-existence of a fact in issue. No such evidence was adduced by the Appellant. 60 When the primary judge expressly rejected the Appellant's submissions in [1528] and [1533], I do not consider that his Honour was reversing the legal onus of proof. Instead, as the ARB submitted in the appeal, his Honour was merely responding to the circumstances that the Appellant had: (a) conceded that a prohibition on the inclusion of AI horses was a reasonable response to the parental identification problem as at the late 1940s; and (b) not previously raised any issue concerning the foreseeability of technological developments that might have afforded a less drastic solution to that problem. 61 Given those circumstances, his Honour was doing no more than rejecting the Appellant's belated and unpleaded assertion that such developments were "always to be expected". 62 I consider that these matters provide the necessary context in which the relevant paragraphs in the primary judge's reasons are to be read. In my opinion, no legal error is disclosed in those paragraphs. His Honour's rejection of the Appellant's submissions simply reflects how the Appellant chose to plead and present his case below. 63 For completeness, I should also add that, while I respectfully disagree that the primary judge reversed the onus of proof, if his Honour did do so I agree with Perram J that there was evidence below to support a finding that the ASB Respondents had adduced enough evidence to discharge their onus of proof, with the consequence that any such error on the part of the primary judge was immaterial. 64 For these reasons, I agree with the orders proposed by Perram J. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.

Associate: Dated: 17 April 2014 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 455 of 2013

JUDGES: PERRAM, GRIFFITHS & WHITE JJ DATE: 17 APRIL 2014 PLACE: SYDNEY

WHITE J: 65 I agree with the orders proposed by Perram J and with his Honour's reasons. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice White.

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Cases Cited (5)