REASONS FOR GRANTING LEAVE AND ALLOWING THE APPEAL
19 It is true that the making of an order for discovery is discretionary. Further, and as apparent from Order 15 r 2(3) of the Federal Court Rules, discovery ordinarily should be limited to the documents on which the party relies and the documents that adversely affect or support that party's case or the case of another party. Moreover, Order 15 rr 3(1) and (2) indicate that, if anything, discovery by order should be restricted rather than expanded.
20 The discretion, nevertheless, is to be exercised judicially and not so as to cause substantial injustice to a respondent by depriving it of the capacity to obtain documents directly relevant to answering a claim made against it.
21 The principal difficulty for Betfair is that its submissions conflict with its pleading. Although Betfair said it did not need to and did not allege in its amended statement of claim that it could not profitably offer horse racing services in NSW, the inescapable fact is that it has so alleged. This is apparent from both the structure and the text of the amended statement of claim.
22 Paragraphs 67 and 71, which contain the allegations of the equivalent percentages of gross revenue of TAB Limited and Betfair represented by the standard turnover fee condition (that is, a fee equal to 1.5% of turnover), are in that part of the amended statement of claim entitled "Relationship between wagering turnover and gross revenue".
23 Paragraphs 96 and 97, containing the allegation that the total amounts of fees, taxes and levies required to be paid by Betfair mean that Betfair could not profitably offer wagering services on horse racing in NSW, are in that part of the amended statement of claim entitled "Betfair's payments to the racing industry". Paragraphs 96 and 97 are the culmination of the allegations in the preceding paras 91-95.
24 Paragraphs 96 and 97 also immediately precede that part of the amended statement of claim entitled "Breach of section 92 of the Constitution…". In that part of the amended statement of claim, Betfair alleges its interstate operations (para 98) and the practical effect of the impugned approvals and standard turnover fee condition as requiring Betfair to pay a fee in a sum that exceeds, in terms of the proportion of its gross revenue, the amount of the fee imposed on TAB Limited for the same approval (para 99). Paragraph 99 is particularised by cross-reference to, amongst other things, paras 76 and 71.
25 The amended statement of claim, however, does not stop with the allegations in paras 98 and 99. In the same section, entitled "Breach of section 92 of the Constitution…", the amended statement of claim continues. In paragraph 100 it alleges that by reason of the matters in paras 98 and 99 there is a burden the legal and practical effect of which is to protect TAB Limited from competition from Betfair. This burden is said to be not reasonably appropriate and adapted to any object consistent with s 92 of the Constitution. The amended statement of claim continues by particularising this latter claim in paras 103 and 109. These paragraphs include the reference to the approval and standard turnover condition being likely to hinder or prevent Betfair from offering its wagering in relation to thoroughbred and harness horse racing in NSW.
26 In other words, although it may well be the case that Betfair need not go so far as to prove that the burden about which it complains, as Racing NSW put it, "is likely…to harm Betfair's profits as to cause Betfair to cease offering its wagering services" in relation to thoroughbred and harness racing in NSW, the fact is Betfair has elected to go so far. The pleading clearly alleges that the approvals and standard turnover fee condition in dispute, by their practical effect, will be likely to cause Betfair to cease offering its horse racing services in NSW. This, moreover, forms part of the basis for Betfair's claim that the legislative provisions are not reasonably appropriate or adapted to a legitimate object or, putting it another way, that the impugned approvals and standard turnover fee condition operate "in a way or to an extent which warrants [their] characterisation …as protectionist" (Cole v Whitfield at 408).
27 Betfair's reasons for so pleading its case are not a matter for speculation. It is open to Betfair to make its case in this way and it has done so. Having done so, this part of Betfair's case cannot be dismissed as minor or irrelevant. As Betfair acknowledged, this claim (if sustained) would be sufficient for Betfair to succeed in the proceeding, albeit the claim is not necessary for that purpose. By this acknowledgment Betfair means that it could succeed on its more limited case that it is required to pay a fee which in terms of the proportion of its gross revenue exceeds that to be paid by TAB Limited (paras 99 and 100 of the amended statement of claim). But there is no principle that a party should be denied discovery of documents relevant only to a claim which is sufficient but not necessary for the other party to succeed.
28 Another difficulty is that paras 71, 96 and 97 of the amended statement of claim, irrespective of the part of the pleading in which they appear, are not admitted by Racing NSW. Hence, they must be proved. As Racing NSW submitted, Betfair will thus have to prove (at the least) the allocation of part of its Australia-wide expenses to its horse racing services in NSW. It can only do so, presumably, by reference to its financial documents. Betfair should not be able to rely on part of its financial documents for that purpose whilst depriving Racing NSW of any opportunity to test its claim by reference to Betfair's primary financial information. To the same effect, paras 103(ii)(a) and 109(ii)(a) are denied by Racing NSW and thus must be proved by Betfair. Those paragraphs particularise the breaches of s 92 of the Constitution. When asked for further particulars, it became apparent (if not apparent already) that Betfair relies on the assertions of fact in paras 96 and 97 of the amended statement of claim to make good these propositions said to found breach.
29 In these circumstances Betfair, by its own pleading, has chosen to place its financial position in issue. It follows that we must disagree with the primary judge's characterisation of this aspect of Betfair's claims as perhaps relevant to standing but otherwise irrelevant (at [6] and [8] of Betfair No 3). Racing NSW conceded the issue of standing. Given the way in which Betfair has pleaded its case, the disputed documents are directly relevant to a fact in issue and cannot be characterised as playing only a minor role in the allegations in the pleading as framed and in the constitutional issues engaged. As noted, Betfair could have pleaded its case on the more limited basis (either initially or by subsequent amendment) but has not done so.
30 For these reasons we accept the submissions of Racing NSW and the Attorney-General of NSW that the primary judge erred in the exercise of his Honour's discretion by misconstruing the amended statement of claim on which the exercise was based. This involves an error within the principles established by House v The King at 505. We are also satisfied that this error, if left uncorrected, would result in a substantial injustice to Racing NSW. The error, if left uncorrected, means that Racing NSW could not defend the impugned approvals and the standard turnover fee condition from allegations of fact that Betfair makes in its amended statement of claim other than by reference to the documents which Betfair elects to disclose in its own evidence. Contrary to Betfair's submissions, this would be manifestly unfair; the error thus requires appellate intervention despite the strength of the usual requirement for restraint in a case about practice and procedure.
31 Betfair's answers to such unfairness are unpersuasive.
32 First, the categories of documents agreed to be produced are far narrower than those sought. For example, category 8 relates to the calculation of turnover and would not disclose the allocation of expenses. Category 16 requires discovery of documents that, in terms, record the matter described. The disputed categories, in contrast, would provide Racing NSW with the primary financial documents from which it can mount an important part of its defence to Betfair's allegations.
33 Second, the fact that the categories may not be final is beside the point. The categories are final in the sense that Racing NSW seeks an order for discovery in the terms set out in annexure A as modified only to the extent necessary to address Betfair's complaint about oppression. In this regard, on 25 June 2009, Foster J ordered that the parties confer about any amendments to the categories of discovery and required Betfair to outline the evidence from the application below on which Betfair relied on the question of the burden of discovery. His Honour's purpose was to ensure the real issues in dispute became apparent. Betfair cannot use the effect of these orders, and Racing NSW's willingness to ameliorate any such burden, as a reason for denying discovery in principle.
34 Third, the same considerations undermine Betfair's claims that the categories as sought before the primary judge were too vague and ill-defined to warrant the making of an order for discovery. We do not agree with this contention. The categories relate to documents on which Betfair itself presumably will have to rely (at least in part) if it wishes to make good the allegations in paras 96, 97, 103(a)(ii) and 109(a)(ii) of its amended statement of claim as pleaded.
35 Fourth, we do not accept Betfair's claims that the disputed categories are onerous and unjustified. We have considered Mr Blanksby's affidavits. Those affidavits related to broader categories of discovery and thus must be inferred to include any hardship which the amended, and narrower categories, would involve. It is apparent from reading those affidavits that Mr Blanksby's primary concerns are the multitude of ad hoc reports, market specific reports and reports requested by regulators from time to time, as well as the internal emails to which such reports are attached. In explaining the problems with the discovery of these documents, Mr Blanksby (by way of contrast with these multitudinous documents) referred to the existence of monthly journals, monthly reports, monthly management reports, board reports and annual reports.
36 Pursuant to the orders of Foster J of 25 June 2009 and, we infer, having regard to the content of Mr Blanksby's affidavits, Racing NSW amended the definition of Nominated Financial Documents to refer to one copy only of each of the relevant monthly journals, monthly reports, monthly management reports, board reports and annual reports and a set of reports not more than 100 in number typically representative of the ad hoc reports, market specific reports and reports requested by regulators from time to time and which cover the period from 1 July 2008 to the date of discovery. Betfair filed nothing in response to indicate that this amendment failed to address the issues of concern Mr Blanksby raised.
37 In these circumstances, we are satisfied that an order reflecting the amendments Racing NSW proposed would not be oppressive of Betfair. Further, although Racing NSW's proposal involves an element of selection in respect of the typically representative ad hoc reports, market specific reports and reports requested by regulators from time to time, and may lead to a further request for discovery in the future prompted by the documents discovered pursuant to our proposed order, the working out of any further discovery issue will be a matter for the primary judge.
38 Finally, we do not accept Betfair's submission that the issue of discovery of the documents within the proposed amended categories should be remitted to the primary judge. We had the benefit of detailed submissions on the categories in dispute, including the proposed amendment by Racing NSW to further ameliorate any hardship to Betfair by reason of the number of documents required to be discovered. In these circumstances we are satisfied that we should exercise our discretion to order discovery of the disputed categories of documents as amended as part of this appeal.
39 For these reasons we are satisfied that leave to appeal should be granted and the appeal allowed.
40 Our orders made on 18 August 2009 included the costs of the appeal but not the costs before the primary judge. Racing NSW submitted that it should have the benefit of an order that Betfair pay 50% of the costs below, recognising that Racing NSW did not contest the correctness of the primary judge's refusal to make orders for discovery of documents in categories 2-5, 6, 7, 18, 19, 25 and 26. As matters presently stand, we consider that Racing NSW's submission reasonably and fairly reflects the differing success of the parties and, accordingly, also propose to order that Betfair pay 50% of Racing NSW's costs below. Betfair may make a brief submission in writing within 14 days if it wishes to dispute this proposed order, failing which an order will be made in chambers as proposed. If Betfair does make such a submission, Racing NSW may make a brief submission in reply within a further seven days.
41 It is also appropriate that we note that, before the publication of these reasons, the issue of discovery was again referred to a Full Court on 25 August 2009 (constituted by Jacobson, Jagot and Foster JJ) by reason of Betfair's application to the primary judge for an extension of the period of 14 days for the discovery to be completed in Order 4 and Racing NSW's submission to the primary judge that only the Full Court had power to vary its own order. The Full Court varied the orders made on 18 August 2009, granting the extension sought by Betfair.
I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Buchanan, Jagot and Foster.