Racing New South Wales v Sportsbet Pty Ltd

Number of paragraphs: 151

Counsel for the First and Second Appellants/First and Second Respondents: Mr BW Walker SC with Mr NJ Owens, Mr JS Emmett and Mr S Robertson

Solicitor for the First and Second Appellants/First and Second Respondents: Yeldham Price O'Brien Lusk

Counsel for the First Respondent/Appellant: Mr DMJ Bennett AC QC with Mr T North SC, Mr A Tokley and Mr PT Nugent

Solicitor for the First Respondent/Appellant: Fitzpatrick Legal

Counsel for the Second Respondent/First Respondent: Mr MG Sexton SC SG with Mr JK Kirk and Ms AM Mitchelmore

Solicitor for the Second Respondent/First Respondent: Crown Solicitor's Office (New South Wales)

Counsel for the Intervener: Mr M Hinton QC SG with Mr S McDonald

Solicitor for the Intervener: Crown Solicitor's Office (South Australia)

BETWEEN: RACING NEW SOUTH WALES (ABN 86 281 604 417) First Appellant HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373) Second Appellant

1. The appeal be allowed.
2. The judgment below be set aside.
3. The first respondent pay the appellants' and second respondents' costs of all proceedings below and on appeal.

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.

RACING NEW SOUTH WALES (ABN 86 281 604 417) Second Respondent HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373)

1. The appeal be dismissed.
2. The appellant pay the respondents' costs of all proceedings below and on appeal.

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.

RACING NEW SOUTH WALES (ABN 86 281 604 417) Second Respondent HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373)

1. The notice of motion seeking leave to appeal be dismissed.
2. The applicant pay the respondents' costs of the notice of motion.

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.

BETWEEN: RACING NEW SOUTH WALES (ABN 86 281 604 417)

HARNESS RACING NEW SOUTH WALES (ABN 16 962 976 373)

THE COURT: 1 Sportsbet is a wagering operator in the Northern Territory. It accepts bets over the telephone and the internet on the outcome of thoroughbred and harness races in New South Wales and other parts of the Commonwealth. Racing New South Wales (RNSW) and Harness Racing New South Wales (HRNSW), are the regulators of thoroughbred and harness racing in New South Wales. 2 In 2006, amendments to the Racing Administration Act 1998 (NSW) (the RA Act) and the Racing Administration Regulation 2005 (the Regulation)established a scheme pursuant to which RNSW and HRNSW (the NSW racing authorities) were authorised to grant approvals to wagering operators to use "race field information", ie the names of the runners and related information for thoroughbred and harness races conducted in New South Wales. Without an approval, wagering operators were prohibited from using race field information to engage in wagering operations. 3 The NSW racing authorities were also authorised to impose a fee as a condition of the necessary approval (the fee). The NSW racing authorities imposed a fee of 1.5% of the total of all bets placed with any wagering operator on New South Wales thoroughbred and harness races as a standard condition of all approvals. This condition operated subject to a fee-free threshold of $5 million for RNSW approvals and $2.5 million for HRNSW approvals. 4 Sportsbet applied to the NSW racing authorities for approvals, but did so under protest. RNSW granted Sportsbet an approval for the year 2008 - 2009 (the first approval), which it subsequently renewed for the year 2009 - 2010 (the second approval); HRNSW granted Sportsbet an approval for the two years, 2008 - 2010. 5 Sportsbet instituted proceedings challenging the validity of the scheme. Sportsbet contended that the scheme was incompatible with the freedom of interstate trade and commerce guaranteed by s 49 of the Northern Territory (Self-Government) Act 1978 (Cth) (the NT Act). Section 49 of the NT Act follows the provisions of s 92 of the Constitution by providing that "trade, commerce and intercourse between the Territory and the States, whether by means of internal carriage or ocean navigation, shall be absolutely free." 6 Although the fee is payable regardless of the principal place of business of the operator, the learned primary judge found that the NSW racing authorities, and wagering operators based in New South Wales such as TAB Limited (TAB), and New South Wales bookmakers, entered into "agreements, arrangements or understandings", the practical effect of which was to insulate the NSW wagering operators from the fee, thereby protecting NSW wagering operators from interstate competition. On that basis, his Honour held that the approvals granted by the NSW racing authorities were in conflict with s 49 of the NT Act, which prevails by virtue of s 109 of the Commonwealth Constitution and covering clause V of the Commonwealth of Australia Constitution Act 1900 (63 & 64 Vic)(Imp). 7 The primary judge declared the first approval granted by RNSW invalid, and ordered RNSW to repay Sportsbet money paid pursuant to that approval. His Honour also declared invalid the approval granted by HRNSW. 8 The primary judge declined to declare invalid the relevant provisions of the RA Act and Regulation on the basis that, in light of s 31 of the Interpretation Act 1987 (NSW), those provisions could not be interpreted so as to authorise the imposition of a fee which infringes s 49 of the NT Act. 9 The NSW racing authorities appeal from the decision of the primary judge striking down the approvals. They contend that the primary judge erred in making the findings as to the existence of "agreements, arrangements or understandings" upon which his conclusion of invalidity depended. Sportsbet does not seek to support those findings, but argues that the primary judge's decision in its favour can be maintained on the basis that the scheme established under the RA Act was protectionist in character. 10 In relation to the principal issue in the appeal by the NSW racing authorities, the essential steps in the reasoning of the primary judge seem to be that: (a) by reason of arrangements, agreements, or understandings between the NSW racing authorities, TAB and others, the fee condition had no real or effective operation against intrastate traders such as TAB and on-course bookmakers in New South Wales; (b) in consequence, the fee condition operated as a burden only upon interstate traders such as Sportsbet; and (c) that this burden was practically similar to a burden already borne by intrastate trade does not mean that its imposition is consistent with s 49 of the Act. Equalizing burdens are not permitted by s 92 of the Constitution or s 49 of the NT Act. 11 The NSW racing authorities argue that, if the fee condition does operate in relation to intrastate traders (such as TAB and on-course bookmakers in New South Wales), then the primary judge had no basis for concluding that the fee condition operated as a burden only upon interstate traders such as Sportsbet. The race field information scheme would not be properly characterised as an equalizing measure but as an equal measure which is not protectionist in character. 12 The State of New South Wales, which was a respondent to the proceedings below, supports the appeal of the NSW racing authorities. The Attorney-General of South Australia intervenes pursuant to s 78B of the Judiciary Act 1903 (Cth) in support of the NSW racing authorities. 13 Sportsbet appeals, seeking declarations that s 33 and s 33A of the RA Actand Part 3 of the Regulation are invalid. Sportsbet also seeks leave to appeal from an interlocutory decision of the primary judge delivered on 2 July 2010 whereby his Honour refused to vary the orders in the primary judgment or to permit Sportsbet to amend its pleadings. Sportsbet had sought, by notice of motion filed after the judgment had been delivered, but before the orders had been entered, to have those orders varied or to be permitted to amend its pleadings to enable it to recover fees paid to RNSW under the second approval and to have only the fee condition, rather than the approval, declared invalid. We should note that the procedure adopted by Sportsbet in purporting to appeal after the NSW racing authorities had appealed does not conform with Order 52 rule 22 of the Federal Court Rules. In fact, Sportsbet should have cross-appealed from the orders refusing the declarations which it claims in its separate appeal ought to have been made. Sportsbet also should have sought leave to cross-appeal in relation to the interlocutory decisions made by the primary judge subsequent to the publication of the principal reasons. However no party objected to the competency of the Sportsbet appeal or application for leave to appeal and we should proceed as if the appeal were a cross-appeal and the application was for leave to cross-appeal. 14 The issues which arise for resolution from the two appeals and the application for leave to appeal are complex and do not readily lend themselves to summary statement. In an endeavour to deal with the issues in an orderly fashion, we propose first to set out the background of the case in some greater detail and then to summarise the reasoning of the primary judge. We will then summarise the arguments agitated by the parties on the appeal by the NSW racing authoritiesand proceed to a consideration of those arguments. We will then set out the arguments that arise in relation to Sportsbet's appeal and associated notice of motion before proceeding to a consideration of those arguments.

The wagering market: services, operators and competition 15 Sportsbet is licensed under the Racing and Betting Act 1989 (NT) to operate seven days a week from a race-course office in the Northern Territory. Sportsbet offers "fixed price" betting on thoroughbred and harness races in New South Wales. Fixed price betting was described by the primary judge as: "when a bookmaker and a punter agree on the price or premium to be paid by the bookmaker in the event of a win by the punter at a time antecedent to the commencement of the event upon which the wager is placed". 16 Fixed price betting is to be contrasted with totalisator betting, which the primary judge described as "where the winning punters take their prizes from a pool of all bets placed but from which the totalisator operator's commission has first been deducted. It follows that, with totalisator betting, the actual price cannot be known until the outcome of the event is determined and with it the number of successful punters." 17 Sportsbet's fixed price services include a willingness to accept bets which are intended to compete with "totalisator betting". Those services are known as "tote-matching". The primary judge found that the effect of Sportsbet's "tote-matching" service "is to allow a punter to place a fixed bet price at the then prevailing totalisator price". 18 TAB is a wagering operator in New South Wales. It accepts bets through its various retail outlets and over the telephone and internet. TAB is a wholly owned subsidiary of a publicly listed company, Tabcorp Holdings Ltd; prior to 1998 it was operated by the State of New South Wales as the Totalisator Agency Board. Thereafter, it was privatised. 19 Under the arrangements for the privatisation, TAB was granted a licence to conduct an off-course totalisator on New South Wales racing events until 2097. That licence is to be sole and exclusive until 2013. Racing clubs are permitted to operate their own on-course totalisators upon race events, but they do so as the agent of TAB if TAB operates its totalisator in relation to that event: s 17(3) Totalizator Act 1997 (NSW). 20 Generally speaking, apart from the provisions of the RA Act, it is lawful in New South Wales to place a bet with an interstate bookmaker such as Sportsbet so long as the bookmaker is authorised to carry out that activity under the relevant interstate law: s 8(4),(6) Unlawful Gambling Act 1998. Bookmakers in New South Wales are permitted to take bets only whilst the bookmaker is physically situated at a racecourse: s 8 Unlawful Gambling Act 1998 (NSW), s 16 RA Act. A bookmaker may be authorised to accept bets over the telephone or internet only so long as the bookmaker is at a racecourse and only whilst it is lawful to gamble (generally during a race meeting): s 8 Unlawful Gambling Act 1998 (NSW), s 16 RA Act. 21 The primary judge described the circumstances of competition between Sportsbet, TAB and other totalisators and bookmakers in terms which reflect the common ground between the parties that all wagering operators participate in an Australian market for wagering services in which, on the demand side, no distinction is made between punters, in terms of their sophistication and financial resources, and on the supply side, no distinction is made between the kinds of betting in which the wagering operators engage. His Honour said at [21]-[24]: One begins with the proposition that there is a national market for wagering services. So much was admitted by RNSW and HRNSW in their defence. There is also a national market for internet and telephone wagering as was recognised by the High Court in Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 480 [114] per Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ… Within that market it is plain that Sportsbet is competing with the TAB and other interstate totalizators. This it does through fixed price betting and, more particularly, through the offer of its various totalisator price matching products which I infer, at the risk of being obvious, are specifically designed to compete with totalizators. I also accept that Sportsbet competes with New South Wales bookmakers. A report prepared by the Boston Consulting Group for RNSW concluded that the market share of the TAB and on-course bookmakers was being diminished by the activities of the interstate corporate bookmakers. Plainly Sportsbet competes with those on-course bookmakers who offer telephone or internet services. However, I also accept that it is likely to be competing directly with bookmakers at the track. There are those who, for one reason or another, would not want to go to the track to place a bet. There will be those also who, whilst being at the track, may choose nevertheless to place a bet online through a handheld device. I can by no means be persuaded that this competition is at the forefront of Sportsbet's competitive endeavours but nor can it be said that the effect is de minimis either. … … I have little difficulty concluding, contrary to the submissions of RNSW and HRNSW, that Sportsbet does compete with harness racing bookmakers. My reasons for this are thus: first, clearly insofar as the harness racing bookmakers are taking bets by internet or telephone they are in direct competition with Sportsbet. The HomeTAB product might be principally directed at totalizators but this does not mean that other operators are not affected as well. Secondly, for similar reasons to those I have already given in the case of thoroughbred bookmakers, I can readily see how a punter may choose to stay at home and bet with Sportsbet rather then [sic]make the arduous journey to Harold Park Paceway. Again, I do not imagine that such bookmakers are at the forefront of Sportsbet's competitive endeavours but it would be unrealistic to think that there was no competitive effect at all.

The Racing Distribution Agreement (RDA) 22 The grant of the exclusive licence to TAB was accompanied by a statutory obligation to enter into a satisfactory commercial arrangement with the New South Wales racing industry: s 21A Totalizator Act 1997 (NSW). TAB is obliged by s 43A of that Act to comply with the arrangement by reason of its licence conditions. The arrangement is known as the Racing Distribution Agreement. The original parties to the RDA were TAB, RNSW, HRNSW, Greyhound Racing New South Wales (GRNSW) and Racing Corp Pty Ltd (a body appointed by RNSW, HRNSW and GRNSW as their agent for the purposes of the RDA) or predecessors in title to those entities. Tabcorp Holdings Ltd became a party by way of the "Deed of Accession, Cooperation and Amendment" made on 22 December 2004. The RDA was in place by 11 December 1997. 23 Prior to the introduction of the amendments to the RA Act and Regulation, funding for the NSW racing authorities came primarily from payments by TAB pursuant to the RDA. Those payments are, and have always been, much greater in amount than the amount of the fee. The primary judge described the RDA generally (at [34] - [35]): First, the racing industry through its industry bodies must provide the spectacle of New South Wales racing by staging a significant number of race meetings. Secondly, the TAB must make its off-course totalizator available for each such race mounted. Thirdly, the racing industry is to provide the names of the runners, the riders (if relevant), the starting draw and other such related information to the TAB for each race held. Fourthly, the TAB, in return, promises to pay the racing industry a substantial fee. The precise details of this are as follows. As to spectacle, the racing authorities must prepare, at least five months in advance, the "New South Wales racing programme": cl 5.2. The racing programme must include, at least, the minimum programme which is set out in Schedule A. The minimum programme is 491 galloping race meetings, 342 harness racing meetings and 593 greyhound meetings. Not only must the programme be prepared, it must also, as one might naturally expect, be staged: cl 5.8(a); and, if it is not staged the industry must compensate the TAB for the revenue lost thereby: cl 5.9. As for the TAB, it must operate its off-course totalizator on all events in the programme: cl 5.8(b); and, if it does not, it must pay compensation: cl 5.9. The industry must provide race fields information to the TAB so that it may operate its totalizator on the events which the industry must stage: cl 6.1. As for fees, the TAB must pay the industry pursuant to cls 9, 9B and 11AA a fixed product fee of at least $12 million, 21.9965% of its net wagering turnover (a term of some complexity but including revenue streams of the TAB coming from sports, i.e. not races) and a wagering incentive fee. In the year 2006/07 these fees amounted to $221 million. 24 Importantly for present purposes, cll 6 and 8 of the RDA obliged the NSW racing authorities to supply race field information to TAB for its use. Thus, TAB has, since December 1997, been entitled to use race field information in return for the "substantial fee" provided by it to the NSW racing authorities under the RDA. Clauses 6 and 8 of the RDA are relevantly in the following terms: 6. DELIVERY OF NSW RACING INFORMATION 6.1 NSWR to supply NSW Racing Information NSWR must procure the supply to TAB of NSW Racing Information in respect of each of the Races included in each NSW Racing Programme at the times and in the manner specified in Schedule 4. 6.2 TAB Responsible for Other Racing Information TAB shall be solely responsible for and shall bear any and all costs of obtaining Racing Information in respect of any Races conducted or to be conducted outside New South Wales. TAB shall provide at no cost all necessary NSW Racing Information and interstate and overseas Racing Information and wagering information to NSWR, the Representative Bodies and Racing Clubs. 6.3 Exclusive Supply of NSW Racing Information (a) TAB agrees that unless NSWR otherwise specifically consents in writing, TAB will only obtain NSW Racing Information from NSWR; (b) NSWR may supply NSW Racing Information to any person on such terms and at such times as it determines; and (c) AB shall only use and disclose NSW Racing Information as set out in clause 6.2 and clause 8. … 8. OWNERSHIP AND LICENSING OF NSW RACING INFORMATION AND RACING PROGRAMME 8.1. Intellectual property rights TAB acknowledges and agrees that it: (a) does not own or hold any intellectual property or other rights in the NSW Racing Information or any NSW Racing Racing Programme or any forms of expression thereof (including drafts); and (b) will not take any action to seek to secure for itself any intellectual property or other rights in the NSW Racing Information or any NSW Racing Programme or any forms of expression thereof (including drafts); and (c) will not take any action to upset or interfere with the intellectual property or other rights of any person in the NSW Racing Information or any NSW Racing Programme or any forms of expression thereof (including drafts). 8.2 Permitted receipt and disclosure of NSW Racing Information TAB shall be entitled, subject to clauses 8.3 and 8.4, to (and to the extent required, NSWR will procure the grant to TAB of a non-exclusive, royalty-free licence ('Licence') to): (a) disclose, use, copy, publish and transmit to the public (using any form of technology) ('use') the NSW Racing Information and each NSW Racing Programme; and (b) sub-licence or otherwise permit others to use the NSW Racing Information and each NSW Racing Programme, on the following conditions: (c) that the use us is for the purposes of Wagering and any other wagering business in Australia acquired or commenced by TAB after the Satisfaction Date (provided that TAB will, in respect of a wagering business acquired [or commenced] continue to pay any fees or royalties being paid to NSWR by the previous owner of that wagering business and, in addition to the conditions set out in this clause 8.2, will be bound by the terms and conditions by which the previous owner was bound); (d) that no fee is charged or payment received or any other benefit or concession obtained by TAB or any sub-licensee in respect of the NSW Racing Information or its use; (e) that the use is consistent with TAB's and any sub-licensee's obligations under clause 21 (Confidentiality); (f) that the Licence and all sub-licences will terminate automatically upon termination of this Agreement; and (g) if TAB or a sub licensee from TAB breaches a condition specified in this clause 8.2, NSWR's remedy shall be limited to recovery of damages and the remedy referred to in clause 20.1 but NSWR cannot terminate the Licence. 25 The RDA contained the following recitals: Recital (I) NSWR will procure the staging of the NSW Racing Programme and the supply of the NSW Racing information to TAB; Recital F(v) "in consideration for the services and products from NSWR referred to in Recital F(i)-(iii) above … TAB will make payments to NSWR …" 26 Bookmakers who stand at racing events in New South Wales were obliged by their arrangements with racing clubs to pay a fee of 1% of their turnover for the privilege. These arrangements changed after the amendments to the RA Act.

The Amendments to the Racing Administration Act 27 In 2006, the RA Act was amended by the introduction of s 33 and s 33A. The effect of these new provisions is to prohibit the use of race field information without approval by the relevant racing control body. Such approval may be given, subject to conditions including the payment of fees. 28 The Minister's second reading speech indicates that the legislation was introduced with the purpose of catching interstate "free riders" who were perceived to carry on business as parasites on the NSW racing industry causing a leakage of revenue away from wagering operators in New South Wales and consequently away from the racing industry as well. 29 Section 33 of the of the RA Actprovides: 33 Use of NSW race field information restricted (1) A wagering operator or prescribed person must not use NSW race field information unless the wagering operator or person: (a) is authorised to do so by a race field information use approval and complies with the conditions (if any) to which the approval is subject, or (b) is authorised to do so by or under the regulations. Maximum penalty: (a) in the case of a corporation - 500 penalty units, or (b) in any other case: (i) for a first offence - 50 penalty units or imprisonment for 12 months (or both), and (ii) for a second or subsequent offence - 100 penalty units or imprisonment for 2 years (or both). (2) It is a defence to a prosecution for an offence against this section if a wagering operator proves that the use of NSW race field information: (a) did not occur in connection with the making or accepting of a bet (or the offer to make or accept a bet), and (b) did not occur in the course of the business of the wagering operator. (3) In this section, "prescribed person" means a person (or a person belonging to a class of persons) prescribed by the regulations. 30 Section 33A of the RA Actprovides: 33A Relevant racing control body may grant race field information use approvals (1) The relevant racing control body in relation to an intended race (or class of races) to be held at any race meeting on a licensed racecourse in New South Wales may grant approval to a person to use NSW race field information (a "race field information use approval") in respect of that race or class of races if the person has made an application for that approval under this Division. (2) A relevant racing control body may (but need not) impose any of the following kinds of conditions on a race field information use approval that it grants: (a) a condition that the holder of the approval pay a fee or a series of fees of an amount or amounts and in the manner specified in the approval (being a fee or fees imposed in accordance with any requirements prescribed by the regulations), (b) such other conditions as may be specified in the approval (being conditions of a kind that are prescribed as permissible conditions by the regulations). (3) Any fee that is payable under a race field information use approval is a debt due to the relevant racing control body that granted the approval and is recoverable as such in a court of competent jurisdiction. (4) A relevant racing control body that grants a race field information use approval may, by written notice to the holder of the approval, cancel or vary the terms of the approval on any grounds prescribed by the regulations. (5) If a relevant racing control body cancels or varies a race field information use approval, the body must provide the holder of the approval with written reasons indicating why the approval was cancelled or varied (as the case may be). 31 As a matter of practical reality, a bet cannot be placed on a horse race without the use of race field information. The expression "NSW race field information" is defined in s 27 as follows: "NSW race field information" means information that identifies, or is capable of identifying, the name or number of a horse or greyhound: (a) as a horse or greyhound that has been nominated for, or is otherwise taking part in, an intended race to be held at any race meeting on a licensed racecourse in New South Wales, or (b) as a horse or greyhound that has been scratched or withdrawn from an intended race to be held at any race meeting on a licensed racecourse in New South Wales. 32 The expression "use NSW race field information" is defined in s 32A in the following terms: For the purposes of this Division, a person "uses NSW race field information" only if the person, whether in Australia or elsewhere: (a) publishes any NSW race field information, or (b) communicates any NSW race field information to a person (regardless of whether the person already knew the information), or (c) acknowledges or confirms any NSW race field information communicated to the person (including acknowledging or confirming the information by accepting, or facilitating the making of, a bet), or (d) makes a written or electronic record (such as a betting ticket, statement of account or notice) that contains or refers to any NSW race field information (regardless of whether the record is communicated to any person), or (e) uses any NSW race field information in a manner prescribed by the regulations, or (f) causes any of the activities referred to in paragraphs (a) - ( e) to occur. 33 The expression "wagering turnover" was defined in cl 14 of the Regulation: 14 Interpretation (1) In this Part: … "wagering turnover", in relation to a race or class of races, means the total amount of wagers made on the backers side of wagering transactions made in connection with that race or class of races. 34 Clause 16 of the Regulation provides: 16 Fees for race field information use approvals: section 33A(2)(a) (1) A relevant racing control body may impose a condition on an approval (in addition to any other condition relating to fees) that the holder of the approval must pay a fee to cover the cost of assessing the application for the approval. (2) A relevant racing control body may impose a condition on an approval that the holder of the approval must pay the following fees: (a) in relation to a use in Australia of NSW race field information made in the course of the wagering operations of a licensed wagering operator - a fee that does not exceed 1.5% of the holder's wagering turnover that relates to the race (or class of races) covered by the approval plus any amount of GST payable in respect of the fee, (b) in relation to any other use of NSW race field information - a fee determined by the relevant racing control body. (3) In this clause, "GST" has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth. Note: In granting race field information use approvals, and imposing conditions on those approvals, relevant racing control bodies are subject to section 92 of the Commonwealth Constitution (Trade within the Commonwealth to be free etc). 35 The primary judge described the effect of the fee imposed under this legislative scheme as "in substance a franchise fee paid for the right to carry on a business, namely, that of a wagering operator".

The fee condition and the race field information use approvals 36 On 18 June 2008 the Board of RNSW determined that it would impose a fee of 1.5% on turnover in excess of $5 million per annum on all wagering operations regardless of location as a condition of the grant of an approval under s 33A. It endorsed that decision on 25 July 2008 by publishing its "Standard Conditions" to be incorporated into approvals under s 33A. As has been seen, cl 2.1 of the Standard Conditions required the payment of a monthly fee for a race field information use approval equivalent to 1.5% of wagering turnover over $5 million. 37 On 11 August 2008 Sportsbet applied, under protest, to RNSW for a race field information use approval. The Board of RNSW granted the first approval on 15 August 2008. The Standard Conditions were annexed. The first approval expired on 30 June 2009. Sportsbet applied under protest to RNSW for a renewal of its approval. RNSW granted the second approval for the period 1 July 2009 to 30 June 2010 on the same conditions. Sportsbet paid the fees for the period 1 September 2008 to 30 June 2010 to RNSW under protest. 38 On 23 September 2008 the Board of HRNSW resolved to adopt a 1.5% fee based on turnover subject to a $2.5 million fee-free threshold. None of the NSW harness racing bookmakers has a turnover in excess of $2.5 million: see the reasons of the primary judge at [95]. 39 Prior to the Board's resolution to fix the fee, on 26 August 2008 Sportsbet applied under protest to HRNSW for an approval. HRNSW granted the approval on 1 September 2008; it expired on 30 June 2010. The approval contained a condition which imposed a 1.5% fee.

The Deed of Release 40 TAB disputed RNSW's right to payment for the provision and use of race field information assured to TAB under the RDA. TAB's position was that under the RDA it was already entitled, as against the NSW racing authorities, to use race field information without further payment beyond that required of it by the RDA. Negotiations ensued. 41 On 25 November 2009 the Board of RNSW executed a Deed of Release with TAB and Tabcorp, Luxbet, Racing Corp, GRNSW and HRNSW pursuant to which RNSW agreed to pay TAB an amount of money being the equivalent of the fee paid by TAB to RNSW. The Deed of Release stated that "the Payment Amount is not a refund or return of any part of the Applicable NSW Race Fields Fees".

The primary judge's findings on the fee conditions and Deed of Release 42 The primary judge concluded that at the time the HRNSW made the decision to impose the fee conditions, it intended and understood that TAB and the NSW on-course bookmakers would be "economically insulated" from the burden of the fee through three "agreements, arrangements or understandings". Specifically the primary judge found (at [65]) that RNSW had: (a) reached an agreement, arrangement or understanding with the TAB that it would have refunded to it the full amount of the race fields fee it was obliged to pay under the terms of any approval granted to it; (b) reached an agreement, arrangement or understanding with New South Wales on-course bookmakers such that the overwhelming majority of them would be insulated entirely from the effect of the fee by a combination of the operation of: (i) the imposition of an apparently equal threshold of $5 million of turnover; and (ii) a rebate to them constituted by a reduction in fees paid by them to racing clubs which would be paid for by RNSW out of the proceeds of the 1.5% fee; (c) reached an agreement, arrangement or understanding with the racing clubs that they would reduce the levies imposed by them upon on-course bookmakers and, in return, RNSW would fund the ensuing reduction in their income out of the proceeds of the race fields fee. 43 The evidence which led the primary judge to conclude that there existed an agreement, arrangement or understanding between RNSW and TAB pursuant to which RNSW would refund the fee to TAB was set out at [66] to [69] of his reasons. It can be summarised as follows: (a) the report of RNSW's CEO to the Board of RNSW at its meeting of 18 June 2008, indicated that it expected that any fees imposed under the RA Act and Regulation "would be offset by compensation required to be paid to NSW TAB by the racing industry under cl 8 of the RDA …". (b) the fee condition on turnover was suggested by Tabcorp to the Board of HRNSW in November 2007 as a means "to ensure that all competitors pay a fair price for the racing products". (c) TAB and RNSW share a common commercial interest under the RDA in ensuring TAB's revenues are protected. (d) pursuant to the Deed of Release, TAB received from RNSW the same amount it paid pursuant to the fee. (e) RNSW intended the Deed of Release to be a "template" for the following year. 44 The primary judge did not accept that the Deed of Release was "precisely what it seems to be" (at [67]). His Honour concluded that the board papers of RNSW for the meeting of 18 June 2008 did not indicate that there was in fact a "complex commercial dispute" between RNSW and TAB. On the contrary, his Honour was of the view that the board papers evinced an understanding on the part of RNSW that it would not receive any money from TAB because of the effect of cl 8 of the RDA. 45 It is convenient to note here that the NSW racing authorities contend that it was no part of Sportsbet's case that the Deed of Release between TAB and the NSW racing authorities was anything other than a genuine settlement of a claim under the RDA which reflected an entitlement in TAB to use race field information which predated the scheme erected under the 2006 amendments to the RA Act. On this basis the NSW racing authorities contend that the primary judge erred in regarding the Deed of Release as part of an attempt to disguise the commercial reality that TAB was to be quarantined from the fee. 46 As has been noted, prior to the scheme on-course bookmakers in New South Wales paid a fee of 1% of their turnover to the racing clubs where they stand to ply their trade at race meetings. The primary judge inferred that the Board of RNSW understood that most NSW oncourse bookmakers would not meet the threshold amount of $5 million turnover under the Standard Conditions, and would therefore be excluded from the effect of the fee. In particular, the primary judge referred to the report of the CEO provided to the Board on 18 June 2008 which stated: [RNSW's] fee structure is predicated on the assumption that NSW thoroughbred racing clubs will rebate or eliminate their turnover fee to NSW bookmakers who pay the race field levy to Racing NSW. This will require agreement with the clubs. It is understood that the clubs have indicated that they would agree to such a reduction but that agreement has not yet been documented. 47 The primary judge found that, in the result, almost no NSW on-course bookmakers were in fact affected by the fee (at [76] - [78]): The consequence of the clubs' agreement to reduce their fees together with the $5 million threshold ultimately resulted in a state of affairs where no bookmaker was worse off as a result of the 1.5% race fields fee unless his or her turnover was more than $11.7 million, at least in the case of metropolitan bookmakers. Certainly, this is what RNSW told the racing press as is shown by one of its background briefing notes formulated for the Daily Telegraph. The actual agreement in the case of the metropolitan clubs was that their levies would be reduced from 1% of turnover to 0.33% on the first $5 million and zero thereafter. Again, that is known because of RNSW's background briefing paper to the Daily Telegraph which said just that. The precise agreement in the case of the provincial clubs is less clear. A report tabled by Mr V'landys to the board members at the 21 May 2007 meeting suggested that the provincial clubs levied a fee of 0.5% on on-course bookmakers. I am unable to determine the final fee reduction agreed to by the provincial clubs. However, whatever it was the bottom line effect was clear and, I infer, was the one contemplated by Mr V'landys, namely, the insulation of the on-course bookmakers from the fee. … The number of New South Wales bookmakers paying the fee, therefore, is negligible (in the vicinity of 1%) as is further the number of New South Wales bookmakers who are worse off under the new scheme. 48 The primary judge inferred that RNSW had reached an agreement with the racing clubs to compensate them for the reduction in their levies out of the race field fee. The absence of any reference to this arrangement in RNSW's documents after 21 May 2007 was said by his Honour to reflect a deliberate policy of not referring to the compensation arrangement. His Honour was in no doubt that the compensation arrangement remained in play for two reasons (at [81]): First, it is now obvious that RNSW, although no longer referring to the reduction in the clubs' levies in its internal correspondence, was orally informing the industry of the undertaking. There is little doubt about this because its statements to that effect are recorded in third party documents. Secondly, because it has in fact paid the clubs moneys from the proceeds of the fees in circumstances which make no sense unless such a compensatory arrangement is in place. 49 In relation to the position of NSW on-course bookmakers, the primary judge concluded at [90]-[91]: My conclusions therefore are: 1. RNSW intended that almost all of New South Wales' on-course bookmakers would not be economically affected by the fee and that this would be achieved through the $5 million threshold and by the simultaneous reduction by the clubs in their levies; 2. RNSW agreed or arranged with the clubs that it would compensate them for the loss of their revenues arising from that reduction out of the proceeds of the race fields fee; 3. RNSW has done so; and 4. RNSW intends to do so in the future. I have wondered whether the documentary records is not perhaps also consistent with some other less adverse conclusion, but the other theories are simply less plausible. For example, I cannot accept any of the following: (a) that the threshold was driven by desire to keep administration costs down. I reject this for six reasons. First, no evidence was advanced to support it and it was ultimately no more than assertion from the bar table. Secondly, the fee foregone on $5 million of turnover is $75,000 (1.5%) and I cannot accept that the administration costs involved in processing an application for an approval, by any stretch of even the most fertile imagination, can approach figures in that vicinity. Thirdly, it is evident that a much lower threshold of $250,000 was earlier contemplated which makes it difficult to accept that the fee could be about administration costs without some evidence explaining why a twentyfold increase occurred. Fourthly, the actual cost of collecting the fees was reported in RNSW's 2009 Annual Report, which was in evidence and was modest at $36,641. Fifthly, if the measure were truly about administration costs it would not operate as a threshold; rather, the fee would not become payable until the $5 million level was reached, but, once reached, the fee would be due on the whole amount. Sixthly, all operators are in any event required to lodge applications even if the amount of their turnover is below the threshold so that the suggested administration saving appears illusory. There may be answers to some of these matters. No evidence was called to provide those answers; (b) that the thresholds were selected to catch the large operators but to leave the smaller ones alone regardless of their location. It was said, for example, that the percentage of interstate bookmakers who were over the threshold was roughly the same as the percentage of New South Wales bookmakers over the threshold. That submission rested upon an argument that there were only 182 licensed bookmakers in New South Wales which I have rejected finding instead, based on RNSW's annual report, that there are 213. That conclusion damages the arithmetic upon which the argument is premised. Quite apart from that problem, however, the argument is detached from the documentary record which shows, rather, an anxiety to protect the position of New South Wales' bookmakers to the extent of even going so far as to put in place a compensatory arrangement. Further, there is no evidence - rather than submission - to support it. The numbers do not reveal a similar breakdown between interstate and out-of-State operators. But even if they did that fact would not prove that RNSW was seeking to achieve that end. Coincidence of outcome does not dictate coincidence of purpose; (c) the clubs were mistaken in thinking that RNSW had agreed that they should be reimbursed. One could not embark upon that view without someone giving evidence from RNSW to contradict what appears to have been the understanding of the clubs. 50 The primary judge reached similar conclusions in respect of HRNSW. His Honour inferred from the minutes of the Board (see at [96]-[98]): First, that the board was aware that no on-course bookmaker would pay the fee and that the TAB would be insulated from the fee too. Secondly, in that regard, HRNSW was doing what RNSW had down[sic], that is, essentially rendering on-course bookmakers immune from the effects of the fee. 51 Although the primary judge concluded that the subjective intention of individual actors has no direct role to play in the determination of this case, his Honour made findings that each of the NSW racing authorities and the State of New South Wales were parties to a common intention to engage in discriminatory protectionism. His Honour's conclusions in this regard are set out in the following passage at [44] - [46] of his reasons: Nevertheless, to the extent that it might be relevant, I conclude that each of the State of New South Wales, RNSW and HRNSW intended to engage in discriminatory protectionism. Insofar as RNSW and HRNSW are concerned, I draw this conclusion because: (a) their members either wished to prevent revenue leakage or to impose an equalising burden on free riders; (b) an intention to prevent leakage away from a local trader to out-of-State traders is an intention to engage in conduct barred by the High Court's decision in Fox v Robbins (1909) 8 CLR 115; and (c) an intention to level the playing field and to ensure that the interstate free riders pay their way is also a protectionist intention. I discuss this further below. In short, whilst there is support in the United States' authorities for the permissibility of State equalisation arrangements of the present kind, the decision of the High Court in Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 is emphatically against their validity in this country. In Australia, at least, a desire to level the playing field by imposing equal burdens on interstate free riders is an established species of protectionism. Had it been necessary to decide whether RNSW and HRNSW intended to prevent revenue leakage or to catch free riders I would have preferred the former conclusion. The consequence of the RDA was to connect the commercial fortunes of the TAB to those of the racing industry. Revenue which migrated from the TAB, in a real sense, migrated from RNSW and HRNSW. Such bottom line concerns are much more likely to have been in contemplation by those running the industry than highminded worries that other people were not paying their share. I prefer this inference because it is more consistent with the commercial realities of the situation…The only … concern which makes any sense is the one suggested by following the flow of revenue, that is, the maintenance of the TAB's revenues by protecting it from competition from interstate traders. I so conclude. I may more readily draw that inference where no witness was called for RNSW or HRNSW to give evidence about this matter. In the case of New South Wales, I conclude from the Minister's second reading speech on the introduction of the Racing Administration Amendment Act 2006 on 20 October 2006 that the State's expressed concern was to address the problem of free riders all of whom, it was known, were interstate traders. For the reasons already given I would conclude, if it were relevant, that this was a protectionist purpose. 52 The primary judge concluded that other inferences that might be drawn from the evidence were not plausible and that he could "more confidently" draw the inference that he did in circumstances where RNSW did not call any witness to provide any support for its asserted case (see at [92]). His Honour had earlier noted (at [68]): that the conclusion that Sportsbet contends for involves, implicitly, the proposition that RNSW has engaged in behaviour to generate the appearance of having a commercial dispute when, in truth, one does not really exist. That implicit inference is properly to be regarded as a grave conclusion to which the provisions of s 140(2)(c) of the Evidence Act 1995 apply. The significance of that is, of course, the need to take account of the gravity of the conclusion in drawing the relevant inferences. I do so. 53 It is convenient to note here that, on the appeal, Sportsbet disclaimed reliance on the contention attributed to it by the primary judge in the preceding paragraph. It did seek, however, to rely upon the primary judge's findings of fact in relation to the practical effects of the fee (at [101]-[104]): When RNSW decided on 18 June 2008 to impose the 1.5% fee subject to the $5 million threshold (and again when it endorsed the same decision on 25 July 2008) it intended and understood that: 1. The TAB would be economically insulated from the fee by RNSW refunding any fees paid by the TAB back to it. 2. Almost all New South Wales on-course bookmakers would be economically insulated from the fee by: (i) the imposition of a $5 million "fee-free" threshold; and (ii) procuring the agreement of the racing clubs to reduce their own levies with the accompanying understating that the resulting diminished revenues caused by such a reduction would be funded by RNSW out of moneys obtained by it from the fee. Once those understandings and intentions of RNSW are brought to account it is obvious that it would be blinkered and artificial to regard the imposition of the fee condition by RNSW in isolation. To the contrary, the imposition of the fee condition was part of a package of measures whose evident purpose was to ensure that the TAB and the New South Wales on-course bookmakers were substantially not affected by the fee. I do not think that the fee could have gone ahead without these ancillary arrangements and they are, in that circumstance, to be regarded as an inseverable block of measures, cut from the same fabric and travelling together. So viewed, it is plain that the practical operation of the fee condition must be taken to include the practical operation of the arrangements and understandings of which it formed but an integer. I reach the same conclusion in the case of HRNSW's fee condition. In its case, it understood and intended that neither the TAB nor New South Wales on-course bookmakers would be economically affected by the fee. As with RNSW that intention and those arrangements forms part of the decision to impose the fee and to consider its practical operation in isolation and without regard to those arrangements would be unrealistic. Together they form an inseverable whole. 54 The primary judge concluded at [120] that the arrangement which he had found to have been made was "inherently protectionist". In this regard, his Honour said at [116]-[119]: …Sportsbet alleged that in their legal or practical operation the fee conditions imposed a burden or disadvantage on trade and intercourse between the States and the Territories which was not imposed on intrastate commerce of the same kind. That allegation was in paragraph 90(b) of the pleadings. The disadvantage, which was set out at paragraph 85(b) of the pleadings (and especially the corresponding particulars) was, putting it shortly, that the TAB and the New South Wales on-course bookmakers would be relieved of the burden of the fee. I begin by observing that I have found the factual foundation for this case to be abundantly proved. The practical operation of the fee conditions imposed upon Sportsbet's approvals were, for the reasons I have already given, such as to protect almost all the New South Wales operators, and in particular, the one having a 95% share of the market - the TAB - from the economic burden of the fee. There is no doubt that where a State exposes interstate trade to an impost to which intrastate trade is not exposed that the measure will, generally speaking, infringe s 92. Thus in Fox v Robbins 8 CLR 115 a Western Australian measure imposing a licence fee of £2 on the sale of wine made from fruit grown in Western Australia but £50 on the sale of wine made from intrastate fruit was held to breach s 92 without any further inquiry. Fox v Robbins 8 CLR 115 itself was cited with apparent approval in Bath v Alston Holdings 165 CLR at 429 per Mason CJ, Brennan, Deane and Gaudron JJ. That is precisely what has occurred in this case. No doubt, unlike the fee in Fox v Robbins 8 CLR 115, the present fees are not so crassly explicit as to distinguish between interstate and intrastate traders. But it has long been established - it is common sense - that the guarantee in s 92 is concerned with substance and not form. Hence, a measure may infringe s 92 even if it otherwise appears apparently neutral should it transpire that in its practical operation, its effect constitutes a discriminatory protectionist measure: Bath v Alston Holdings 165 CLR at 426; Cole v Whitfield 165 CLRat 408; Castlemaine Tooheys (1990) 169 CLR 436at 466-467 per Mason CJ, Brennan, Deane, Dawson and Toohey JJ; Betfair 234 CLR at 481[118]. 55 The primary judge rejected the argument put by the NSW racing authorities that it had not been established as a fact that the scheme operates to discriminate against interstate trade. In this regard, his Honour said at [124]-[127]: It is, no doubt, to be accepted that a plaintiff in a practical operation case must prove the fact of discriminatory protectionism. In many cases, this may involve complex questions of fact: Sportodds 133 FCRat 77 [32]. The facts of the three cases relied upon by RNSW and HRNSW bear this out. In Castlemaine Tooheys 169 CLR 436 the impugned measure was the fixing of a 15 cent refundable deposit on non-refillable beer bottles. In Sportodds 133 FCR 63 the impugned measure was the obligation of a bookmaker to be present on a racecourse in New South Wales. In Barnes 65 NSWLR 331 the impugned provision was a New South Wales requirement that tow truck operators be licensed. In each of those cases some proof was required to make out the discriminatory burdens. In Castlemaine Tooheys 169 CLR 436 it was an agreed fact that the 15 cent deposit requirement for non-refillable bottles imposed a competitive disadvantage. In both Sportodds 133 FCR 63 and Barnes 65 NSWLR 331 the parties relying on s 92 failed to prove that they were affected - there was no evidence of the costs on the difficulties of complying with the requirement to operate from a New South Wales racecourse and one could not, without more, simply assume that it was a disadvantage: so too in Barnes 65 NSWLR 331 no attempt was made to show that the costs of complying with the New South Wales licensing regime imposed on the Queensland operator had any discernable disadvantage. In the same class can be placed my conclusions in Betfair Pty Ltd v Racing New South Wales [2010] FCA 603 where I have held that it is not sufficient merely for Betfair to allege that the fee affects it more than the TAB. It must also show that the discrimination is protectionist. This case is quite different. Here the identified practical effect is the fact that Sportsbet has to pay a substantial impost from which its intrastate competitors have been released. The discriminatory and protectionist nature of that is at once apparent and, in my opinion, not seriously contestable. Put another way, Sportsbet has proven that it bears a burden - the fee - which intrastate operators substantially do not. Discriminatory protectionism is established. For clarity, I do not think that the dictum in Sportodds 133 FCR at 77 [34] provides support for the proposition that unless a legislative instrument, standing alone, can be shown to have the practical effect of discriminatory protectionism a case cannot be made out. This would frustrate the purpose of s 92: see Cole v Whitfield 165 CLR at 391: The purpose of the section is clear enough: to create a free trade area throughout the Commonwealth and to deny Commonwealth and States alike a power to prevent or obstruct the free movement of people, goods and communication across State boundaries. (emphasis added). Thus, if the totality of the legislative or executive actions infringes s 92, the case law merely requires that the evidentiary requirement of discriminatory protectionism be discharged. In this case, such a requirement has unequivocally been discharged. 56 It should be noted that his Honour proceeded on the basis that "Sportsbet has to pay a substantial impost from which its intrastate competitors have been released". On the appeal, it is said by the NSW racing authorities that this view was not open to his Honour. 57 The primary judge went on to conclude, principally on the authority of the decision of the High Court in Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411, that the imposition of the fee as part of the race field information regime did not merely ensure that interstate and intrastate wagering operators made a uniform non-protectionist contribution to the support of racing in New South Wales, but was a measure apt to protect intrastate traders from interstate competition. His Honour said at [129]-[135]: At the heart of the respondents' case was the proposition that prior to the introduction of the fee a number of operators were making a contribution to the industry and that the fee, properly understood, did no more than ensure that those who were not making such a contribution but who were nevertheless making money from New South Wales' races - free riders if you will - should do so. It could not be protectionist to bring about a result which simply levelled the playing field and put everyone on the same footing. Such a proposition might well be arguable in the United States as an exception to the operation of the Dormant Commerce Clause. In Hinson v Lott 75 US (8 Wallace) 148 (1868) the Supreme Court upheld a law imposing a 50 cent per gallon tax on out-of-State liquor because there was already such a tax on in-State liquor. That decision supports the availability of regimes which place interstate and intrastate on the same footing. Such arrangements are sometimes referred to as equalization or compensation taxes. The principle that State equalisation taxes may in some circumstances be valid has been pursued in the United States authorities although it has been limited somewhat: see Armco Inc v Hardesty 467 US 638 at 642-643 (1984); Fulton Corp v Faulkner 516 US 325 at 331-333, 338-344 (1996); Maryland v Louisiana 451 US 725 at 759 (1981); Oregon Waste Systems Inc v Department of Environmental Quality of Oregon 511 US 93 at 102-105 (1994); Tyler Pipe Industries Inc v Washington State Department of Revenue 483 US 232 at 242-244 (1987). The doctrine is usefully described, together with its limitations, in: L H Tribe, American Constitutional Law (3rd ed, 2000) s6.19, pp 1127-1132. In the United States, much time has been spent analysing whether measures imposed at different levels of the supply chain can fall within the doctrine and much debate about economic equivalence has been engendered thereby: cf Professor Hellerstein's interesting article: "Complementary Taxes as a Defense to Unconstitutional State Tax Discrimination" (1986) 39 Tax Lawyer 405. In Australia, however, this approach has been eschewed and questions of economic equivalence do not arise. Bath v Alston Holdings 165 CLR 411 involved a Victorian tax imposed upon tobacco retailers on tobacco purchased interstate which had the effect of ensuring that all tobacco sold in Victoria ended up having the same amount of tax paid on it regardless of its origin; in short an equalisation tax. The Solicitor-General for Victoria referred to Hinson v Lott 75 US (8 Wallace) 148 in argument (165 CLR at 418). The Court, however, did not embrace such an approach. Mason CJ, Brennan, Deane and Gaudron JJ said (165 CLR at 427): The fact that taxes paid by a wholesaler in one State are higher than the taxes paid by a wholesaler in a second State may provide an inducement for the first State to protect local goods and local wholesalers by the imposition of an "equalizing" tax upon its retailers in respect of their purchases of products from that other State. The most that such notions of economic equalization can do, however, is to provide some local justification for the imposition of a protectionist tax in respect of interstate goods at the later retail stage of distribution. They do not alter the character of the tax as such or remove it from the ambit of s 92. Indeed, to hold that a law which protects local goods by imposing a discriminatory tax on interstate goods at the retail level is consistent with s 92 because the law equalizes in favour of the local goods an advantage which the interstate goods enjoy in their State of origin in the course of manufacture or distribution would be to disregard the critical constitutional purpose which the section is designed to serve. Further, their Honours emphatically rejected the notion that s 92 was infringed if the effect was merely that cost was passed on to consumers (further 165 CLR at 427): Nor is the protectionist character of the ad valorem tax on retailers calculated by reference to their interstate purchases removed by treating it as "equivalent" to the ad valorem tax imposed upon wholesalers in respect of their sales of local goods or by saying that both taxes are properly to be seen as being, "in substance", taxes on goods. For that reason the invocation of the notion that the fee was constitutional because it simply made everyone pay the same must fail. Where the playing field is levelled by taxing interstate traders to bring their expenses up to the level of those of intrastate traders, such a burden is protectionist. For similar reasons resort by the respondents to the argument that the fee ensured that every dollar of punter expenditure would result in collection of the fee is quite unsound (even if it had been proved) as the second passage just quoted from Bath v Alston Holdings 165 CLR at 427shows. New South Wales contended that it must be entitled to remove burdens which in-State operators were burdened by and that so much could not be a breach of s 92. This is, of course, entirely correct but it is also not what has happened. Whatever the TAB's pre-existing burdens were under New South Wales law or the RDA they still exist. What has happened, rather, is that a new burden has been created and imposed on all traders with the in-State traders then being relieved from the new burden. In terms of practical operation both the TAB and almost all New South Wales on-course bookmakers have been relieved in substance of the obligation to pay a fee which has been imposed upon interstate trade. Once that is appreciated it can be seen that the contention that the State's power to remove burdens imposed upon its own traders has somehow been called into question does not arise. No doubt, if the State wished it could remove all relevant burdens currently imposed on wagering operators in New South Wales. But the burden which has been removed is not the pre-existing burden (for example, the 19.11% betting tax on totalizator receipts imposed by ss 8 and 9 Betting Tax Act 2001 (NSW) or the approximately $200 million per year paid under the RDA) but instead the new burden of the 1.5% turnover fee. 58 It can be seen from the last sentence in this excerpt from the reasons of the primary judge that the essence of his Honour's decision was that intrastate traders such as TAB were, in truth, not earlier obliged to pay the fee. It is this reasoning which the NSW racing authorities argue cannot be sustained.

Validity of the Racing Administration Act and Regulation 59 The primary judge held that s 33 and s 33A of the RA Act and Part 3 of the Regulation are to be read down so as not to authorise the imposition of conditions on an approval which infringe s 49 of the Act. If necessary, the legislation could be construed in light of s 31 of the Interpretation Act 1987 (NSW). Section 31 of the Interpretation Act 1987 (NSW)provides: 31 Acts and instruments to be construed so as not to exceed the legislative power of Parliament (1) An Act or instrument shall be construed as operating to the full extent of, but so as not to exceed, the legislative power of Parliament. (2) If any provision of an Act or instrument, or the application of any such provision to any person, subject-matter or circumstance, would, but for this section, be construed as being in excess of the legislative power of Parliament: (a) it shall be a valid provision to the extent to which it is not in excess of that power, and (b) the remainder of the Act or instrument, and the application of the provision to other persons, subject-matters or circumstances, shall not be affected. (3) This section applies to an Act or instrument in addition to, and without limiting the effect of, any provision of the Act or instrument. 60 His Honour rejected Sportsbet's submission that s 31 of the Interpretation Act does not apply where invalidity is said to arise from s 109 of the Constitution or covering clause V. His Honour's views in that regard are set out at [59] of his reasons: I reject the submission made by RNSW and HRNSW that s 31 cannot apply where invalidity is said to arise from s 109 of the Constitution. I do so for two reasons. First, s 31 is a provision designed with practical matters in mind. Its purpose is to preserve, so far as possible, the workability of State statutes. Although the better view is probably that a State law which encounters s 109 is not beyond State legislative power I nevertheless would not interpret s 31 as not applying to such situations unless no other alternative was available. But I see no particular difficulties with construing the expression "exceed the legislative power of Parliament" as including situations thrown up where a state law encounters a federal law under the steely gaze of s 109. Secondly, I am fortified in that conclusion by the comments of Mahoney JA in Peters v Attorney-General (New South Wales) (1988) 16 NSWLR 24 at 30 where a similar analysis was embraced. 61 His Honour held that the RA Act and Regulation do not authorise the imposition of fee conditions which would infringe s 49 of the NT Act. Accordingly, the Act and Regulation were valid. 62 Sportsbet had sought declaratory orders that the fee condition was invalid. The primary judge declined to make those orders; instead his Honour declared each approval wholly invalid. His Honour's reasons for doing so are set out at [157] of his reasons: First, the constitutional infirmity springs from the practical operation of the fee condition and I have held that to be an inseverable part of a set of arrangements which includes the thresholds together with the rebates to the TAB and compensation arrangements with the clubs. If a measure is to be the subject of a declaration then it should involve, as RNSW and HRNSW point out, at least each element of the practical operation case. Secondly, there are significant problems with declaring only parts of the relevant instruments invalid. It would not, for example, be correct to leave operational the approvals with no condition as to fee attaching to them altogether. This raises the question of what the appropriate condition would be and that, so it seems to me, is not a judicial function. 63 Sportsbet was dissatisfied with this outcome, in that it carried with it the conclusion that Sportsbet had been trading illegally in New South Wales in carrying on business contrary to s 33 of the RA Act. It is this dissatisfaction which underlies one aspect of Sportsbet's appeal.

Quantum of fees paid 64 The primary judge gave judgment against RNSW in the amount of $2,061,000 together with interest pursuant to s 51A of the Federal Court Act to be calculated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The reasons of the primary judge for calculating the quantum of the judgment as he did need not be set out because the parties are agreed that his Honour's calculations involve an error of arithmetic which can and should be corrected. Because we have come to the conclusion that Sportsbet is not entitled to success in its claim at all, it is unnecessary to consider this aspect of the matter any further. 65 We turn now to set out a summary of the issues that arise on the appeal by the NSW racing authorities.

the appeal by the NSW RACING AUTHORITIES: the issues 66 The first issue raised by the NSW racing authorities on their appeal is whether the primary judge erred in finding, on the pleadings and on the evidence, the existence of the agreements, arrangements or understandings to which his Honoured referred at [65] of his reasons. The second issue is whether the primary judge erred in his analysis and application of the case law relating to s 92 of the Constitution, which, of course, informs one's understanding of the operation of s 49 of the Act.

The first issue: the agreements, arrangements or understandings 67 The NSW racing authorities contend that the primary judge erred in finding the existence of an agreement, arrangement or understanding between TAB and RNSW pursuant to which TAB would have refunded to it the full amount of the fee. They submit that the primary judge's conclusion on this point depended on his Honour's findings that the Deed of Release was not "what it seems to be" and that the parties to it had engaged in an attempt to generate the appearance of a commercial dispute where one did not in fact exist. The NSW racing authorities argue that it was not open to his Honour to make those findings. There are two aspects to this issue: the first is a complaint about the pleadings; the second is a question as to whether the finding was open on the evidence. 68 The NSW racing authorities contend that the agreement, arrangement or understanding was not pleaded or foreshadowed in argument. They argue that Sportsbet's case was that TAB was entitled to offset the fee under the RDA and this meant that TAB was "protected" against the fee condition. Sportsbet was not alleging a lack of bona fides in TAB and RNSW executing the Deed of Release. 69 Secondly, the NSW racing authorities contend that the evidence did not establish the existence of the agreement, arrangement or understanding between TAB and RNSW found by his Honour. The NSW racing authorities contend that the Deed of Release was a genuine settlement of a commercial dispute of a claim by TAB under the RDA, and that, because the evidence does not sustain the primary judge's conclusion that the Deed of Release was not "what it seems to be", his Honour's finding of an agreement, arrangement or understanding between RNSW and TAB must also fail. 70 As to arrangements between HRNSW and TAB, the NSW racing authorities submit that the extent of the express factual findings by the primary judge was an inference that the Board of HRNSW was aware that TAB would be insulated from the effect of the fee and a conclusion that HRNSW understood and intended that TAB would not be economically affected. They say these findings are insufficient to support a conclusion that the approval granted by HRNSW to Sportsbet contravened s 49 of the Act. 71 The NSW racing authorities contend that Sportsbet had not challenged the validity of arrangements pursuant to which fees payable by on-course bookmakers to racing clubs would be adjusted and moneys would be distributed to racing clubs. In any event, decisions made by racing clubs as to levies they charged to on-course bookmakers were said to be a matter of discretion for individual racing clubs; and decisions as to the distribution of funds to those clubs are said to be a matter of unfettered discretion for the NSW racing authorities. 72 The NSW racing authorities argue that there is no evidence from which the primary judge could have drawn reasonable conclusions as to the existing arrangements between racing clubs and on-course bookmakers and how those arrangements might be varied to suit the racing authorities. 73 Sportsbet concedes that the existence of the agreements, arrangements or understandings found by his Honour, and the conclusion that the Deed of Release was not "what it seems to be" were not alleged as part of its case. Sportsbet argues that those findings were not critical to the finding of invalidity because, at the time the legislation was passed and the scheme implemented, the NSW racing authorities understood that they would be required to refund or reimburse the fee paid by TAB as a consequence of the terms of the RDA. It is argued that it was well understood by all actors in "the milieu" in which the RA Act was amended and the fees imposed as a condition of approvals that the introduction of the fee would be accompanied by special consideration for TAB and on-course bookmakers in New South Wales. On that basis, Sportsbet says that criticisms of the primary judge's findings about the "agreement, arrangement or understanding" and that the Deed of Release was not "what it seems to be" are beside the point. 74 Sportsbet submits that the evidence supports his Honour's findings that the NSW on-course bookmakers and racing clubs understood that they would not be worse off by reason of the introduction of the race field information regime including the imposition of the fee condition.

The second issue: analysis and application of the law relating to s 49 of the Act (and s 92 of the Constitution). 75 The NSW racing authorities and the State of New South Wales contend that s 49 of the Act is not concerned with whether a particular measure leaves intrastate traders "no worse off" than they were before the introduction of the scheme. Rather, s 49 is concerned only with whether, in its legal or practical effect, the measure is discriminatory in a protectionist sense. The primary judge's approach, whereby it is permissible for the State to reduce intrastate burdens to their interstate equivalents but not to increase interstate burdens to their intrastate equivalents, is said to involve a preference for considerations of form over substance, and misunderstanding of Bath v Alston Holdings Pty Ltd (1987) 165 CLR 411. The NSW racing authorities rely upon the decision of the High Court in Boardman v Duddington (1959) 104 CLR 456 at 469. 76 Sportsbet submits that the primary judge correctly held that the fee condition was discriminatory in a protectionist sense. That is said to be because the fee is not to be paid by TAB or the NSW on-course bookmakers, but is to be paid only by interstate traders. Sportsbet contended at trial, and contends on appeal, that Boardman was impliedly overruled by the decision of the High Court in Cole v Whitfield. Further, Bath v Alston is said to be inconsistent with the approach in Boardman. And in any event, Sportsbet says that the situation in Boardman was quite different from the present case. 77 As to whether the fee-free thresholds referred to by the primary judge were discriminatory in a protectionist sense, the NSW racing authorities submit that his Honour failed to appreciate that any discrimination under the fee-free threshold is between high and low turnover wagering operators rather than between interstate and intrastate operators. In the case of RNSW's threshold, all intrastate and interstate wagering operators had the benefit of the threshold. Sportsbet does not compete with on-course bookmakers on harness racing events. 78 The Attorney-General for South Australia submits there is no practical discrimination against Sportsbet in comparison with TAB. South Australia contends that the primary judge failed to take into account pre-existing burdens of TAB under the RDA when considering the practical operation of the fee condition. TAB is subject, by reason of the RDA, to a greater burden for the purposes of contribution to the racing industry than the burden imposed on Sportsbet by reason of the 1.5% fee. 79 The Attorney-General for South Australia submits that Bath v Alston is distinguishable in that the "ad valorem" component of the retail licence fee in that case was a burden tending to equalize a competitive advantage which interstate goods enjoyed in their State of origin. Bath v Alston did not hold that it is impermissible to impose a burden directly on an intrastate competitor and separately to impose an equal burden on interstate competitors in the same market. The fee in the present case is not apt to "equalize" in favour of intrastate traders any competitive advantage which Sportsbet enjoys in the Northern Territory. 80 The Attorney-General for South Australia submits that there is nothing inherently protectionist about the fee-free thresholds because both intra and interstate competitors benefit from the threshold and there is no necessary connection between the turnover of a wagering operator and the location of their business. 81 Sportsbet submits that the circumstance that it receives the benefit of the fee-free threshold itself is irrelevant because its case is not that only intrastate operators obtained the benefit of the fee-free threshold but that the threshold was chosen so that intrastate operators would not have to pay the fee. One may pause here to say that this submission seems to elevate subjective intention in a way inconsistent with the primary judge's reasons. The primary judge observed at [41] of his reasons that intention has no direct part to play in the jurisprudence relating to s 92 of the Constitution. At [153] his Honour said: Discriminatory protectionism is to be discerned either on the face of the impugned measure or by a consideration of its practical operation. There is simply no room in that analysis for notions of intent. A measure which is not discriminatory in a protectionist sense does not become so because it was intended to be. So too, a measure which does infringe is not valid because the protectionist effect was not intended. 82 Sportsbet submits that his Honour's conclusion of constitutional invalidity was not premised on a finding as to purpose. It argues that intention does have an indirect role to play, but only as an indicator of the effect of a scheme in fact.

THE APPEAL BY THE NSW RACING AUTHORITIES: consideration 83 In our respectful opinion, the trial judge's findings as to agreements, arrangements and understandings cannot be sustained. Indeed, Sportsbet does not seek to sustain them. These findings were not open on the case as pleaded and then conducted. Sportsbet did not seek to make a case that the Deed of Release was not a genuine commercial transaction which took effect according to its tenor. More importantly, there was no allegation that the RDA (made in 1997) was not an effective charter of the rights of the parties to it - entitling TAB to use race field information for the purposes of its business. Indeed, it was part of Sportsbet's case that the rights enjoyed by TAB under the RDA made it inevitable that TAB would complain to the NSW racing authorities if it were obliged to pay again for the use of race field information. 84 Sportsbet submits that it is able to support the judgment in its favour on the footing that it was well understood by all actors in the "milieu" in which the fee came to be imposed that TAB and NSW on-course bookmakers would be given relief against the fee to be imposed under the RA Act and the Regulation. Sportsbet says that the imposition of the fee in this milieu inevitably meant that Sportsbet and other interstate traders would pay the fee, and TAB and NSW on-course bookmakers would not. On this basis, the imposition of the fee was a protectionist measure contrary to s 49 of the NT Act. 85 It may be said immediately that the view of the facts which Sportsbet urges is consistent with an understanding by all in "the milieu" that it would be unjust if, under the new regime, TAB and NSW on-course bookmakers were required to bear the burdens currently borne by them, as well as an extra burden in the shape of the fee to be imposed under the new scheme. And in relation to TAB, not only would that seem unjust in a general sense, it would be inconsistent with TAB's existing legal rights under the RDA. 86 It may be accepted, for the sake of argument, that all persons responsible for the implementation of the race field information regime expected that TAB and bookmakers located in New South Wales would not be required to continue to bear the burdens of their previous obligations to support racing in New South Wales, as well as the extra burden of the fee under the new scheme. It was only to be expected that TAB would insist on its rights under the RDA and that NSW on-course bookmakers would seek relief from their current obligations to the racing clubs who would benefit from the fees imposed under the new regime. In our respectful opinion, that these expectations were abroad is not surprising, much less sinister. The important point, however, is that the existence of such a universal expectation affords no basis for concluding that TAB and NSW on-course bookmakers were not truly required to bear the burden of the fee in common with interstate traders. 87 There is no basis for regarding the Deed of Release as a contrivance or a sham: it gives effect to rights in TAB which arose under the RDA because TAB was obliged to pay the fee. That TAB could be expected to insist on being compensated for the breach of the RDA, when it was obliged to pay the fee, does not mean that it was not expected to pay the fee or that it did not. 88 Nothing in the circumstances of "the milieu" in which the new regime was implemented is apt to attract the reasoning of the majority in Bath v Alston on which Sportsbet so heavily relied or to support the primary judge's conclusion that TAB and NSW on-course bookmakers would be relieved of their liability to also pay the fee in accordance with its terms. 89 The race field information scheme did not seek to erode any advantage which Sportsbet enjoyed by reason of its location in the Northern Territory and the business it had established in the "more favourable" regulatory and taxation environment there. Unlike the tobacco retailer in Bath v Alston, no competitive advantage enjoyed by Sportsbet in the Northern Territory was burdened by the fee. The fee was payable only because Sportsbet sought to use in its trade race field information in relation to races conducted in New South Wales. 90 TAB was subject to a real liability to pay the 1.5% fee imposed on it as a condition of its approval. It paid that fee. Had it not done so, it would have been in breach of this condition of its approval and it would have been at risk of the loss of its approval and prosecution for an offence. It was because it was, in truth, obliged to pay and did pay the licence fee to RNSW that RNSW was in breach of the RDA. Prima facie, the measure of the damages payable by RNSW by way of compensation for that breach was the amount of the fee, because that was the amount TAB was now obliged to pay in order to use the race field information to which it was already entitled under the RDA. Under the RDA, RNSW had bound itself to ensure that TAB had that benefit without any further payment. 91 Sportsbet argues that the right to use race field information conferred on TAB by the RDA is valueless. This is said to be because the common law does not recognise a right in a spectacle such as a horse race (Victoria Park and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479), and because anyone is at liberty at common law to obtain and use race field information as he or she pleases. Sportsbet argues that, in consequence, it cannot be said that the many millions of dollars paid by TAB under the RDA to the NSW racing authorities have truly been paid for the use of race field information. On this basis, Sportsbet contends that the amount paid by RNSW to TAB under the Deed of Release cannot be regarded as compensation payable for breach of the RDA. There are a number of problems with this argument. The first is that it sits uneasily with Sportsbet's argument that one element of the milieu into which the race field information scheme was introduced was the RDA which necessarily gave rise to an objective understanding that TAB could expect to be compensated for the breach of the RDA involved in the failure by the NSW racing authorities to provide race field information for its use free of any cost beyond the consideration paid under the RDA. If TAB's rights to the information under the RDA were meaningless, objectively speaking, then the foundation for this step in Sportsbet's argument disappears. 92 The second problem is that, whatever the situation may be at common law, the parties to the RDA made a bargain on which TAB was entitled to insist. That bargain was made in 1997, long before the fee was in contemplation. The measure of damages for breach of that bargain by reason of the failure to provide race field information for use free of further expense is, at least arguably, the further amount which TAB is obliged to pay for use of the information. 93 The third problem is that to emphasise, as Sportsbet does, that the consideration provided by the racing authorities to TAB under the RDA involves benefits in addition to the race field information for use in its wagering operations, is to differentiate the condition from the burdens borne by TAB under the RDA. The same point can be made, a fortiori, in relation to the position between the on-course bookmakers and the racing clubs. 94 The amount paid to TAB by RNSW by way of compromise under the Deed of Release was much less than the amount payable by TAB, by way of the fee under its approval under the RA Act. TAB did not obtain a discriminatory advantage, protectionist or otherwise over Sportsbet by virtue of the payment to TAB under the Deed of Release. The compromise in the Deed of Release was a form of vindication of the pre-existing entitlement of TAB, an entitlement which it enjoyed, not because it was an intrastate trader, but because it had been, since the execution of the RDA in 1997, obliged to make substantial contributions to horse racing in New South Wales in return for rights correlative to its contributions.

Bath v Alston 95 It is apparent from the reasons of the primary judge at [136] that his Honour considered that it is permissible to reduce in-State burdens to their out-of-State equivalents, but that it is not permissible to increase out-of-State burdens to the same level as in-State burdens. His Honour considered that he was bound to reach this conclusion by the decision of the High Court in Bath v Alston. In our respectful opinion, his Honour erred in that regard for a number of reasons. 96 His Honour's approach fails to recognise that under the race field information scheme, all wagering operators bear the same burden imposed via the standard fee condition. For the purpose of the comparison required by s 49 of the Act, regard must be had to the burdens imposed by that scheme. If all wagering operators are now subject to the same burdens, whatever their state of origin, the fact that the burdens had previously been borne only by intrastate trade is immaterial. Equally immaterial is the circumstance that adjustments to the previous burdens, such as reductions in standing fees to NSW on-course bookmakers, could be expected to occur, and did occur, to ensure that they did not bear the old burdens, as well as the new uniform burden. Bath v Alston did not decide otherwise. It is convenient now to consider that decision in some detail. 97 Under the Victorian Business Franchise (Tobacco) Act 1974, licensing fees were imposed in relation to the wholesale and retail sale of tobacco products. The fee for the retail licence included an amount equal to 25% of the value of tobacco sold by the licensee in an earlier period of trading. The retailer's licence fee did not take into account the value of tobacco that had been purchased by the retailer in Victoria from the holder of a wholesale licence. The challenge to the constitutionality of the scheme was brought by a Victorian retailer which purchased its tobacco products from a wholesaler in Queensland where there was no tobacco licence fee. The High Court held, by majority, that the 25% retail licence fee contravened s 92 of the Constitution in that it burdened the sale of a product imported from another state by denying the product the competitive advantage which it enjoyed in its state of origin. 98 The High Court held, by majority, (at 420), that the tax on retailers imposed "discrimination at the retail level" which was "of a protectionist kind". It was a discriminatory burden upon interstate trade because it was apt to "equalize" the advantage which tobacco purchased from wholesalers in Queensland enjoyed in Victoria and so to protect Victorian wholesalers. The vice of the Victorian scheme, so far as s 92 was concerned, was that it sought to "equalize" the "advantage which ... inter-State goods enjoy in their State of origin". Professor Zines in The High Court and the Constitution,5th Ed, The Federation Press (2008) at p 185 summarised the effect of this decision: "The imported product…carries with it any competitive advantage at the time of entry" into the importing State. 99 The majority of the High Court, Mason CJ, Brennan, Deane and Gaudron JJ, looked to the practical impact of the tax upon the trade in tobacco in Victoria in terms of the competitive advantage and disadvantage in the Victorian wholesale market for tobacco products. Their Honours said (at 424-427): The requirement of the Act that a Victorian retailer of tobacco products be licensed applies indifferently to retailers of both local and interstate products. Of itself, the requirement does not contravene s 92 of the Constitution. If the Act imposed the ad valorem licence fee by reference to the value of all tobacco products sold by a retailer in the relevant period, the imposition of the fee would not contravene s 92 since it would not differentiate between tobacco purchased in Victoria and tobacco purchased outside Victoria; a fortiori it would not discriminate in a protectionist sense against the purchase of tobacco outside Victoria. The exclusion of tobacco purchased in Victoria from a licensed wholesaler from the total sale value of tobacco used as the basis of the calculation of the ad valorem licence fee does, however, involve an element of differentiation and at least prima facie discrimination. Since the effect of the Act is to require all Victorian wholesalers selling tobacco products in Victoria to be licensed, the tobacco products purchased by the ordinary Victorian retailer from a local wholesaler will, for practical purposes, be all purchased from the holder of a wholesaler's licence under the Act. That being so, the exclusion of tobacco purchased in Victoria from the holder of a wholesaler's licence from the value of tobacco sold in the relevant preceding period has the effect that, for practical purposes, the licence fee paid by a Victorian retailer will ordinarily consist of the flat fee of $50 (for an indefinite licence: s 10(1)(c)) or $10 (for a monthly licence: s 10(1)(d)) together with an amount equal to 25 per cent of the value of any tobacco purchased from an interstate wholesaler. In other words, the retailer who sells only tobacco products purchased by him from a Victorian wholesaler will pay the appropriate flat fee for his licence, while a retailer who sells only tobacco products purchased from an interstate wholesaler will pay that flat fee plus 25 per cent of the value of tobacco sold in the preceding relevant period. It follows that, if they be viewed in isolation, the provisions of the Act imposing the obligation to pay a retail tobacconist's licence fee of $50 or $10 plus an amount calculated by reference to the value of tobacco sold which has not been purchased in Victoria from a licensed wholesaler, discriminate against interstate purchases of tobacco in favour of purchases in Victoria. If it be viewed in isolation, that discrimination is undeniably protectionist both in form and substance. In form, the provisions of s 10(1)(c) and (d) select the fact that tobacco was "purchased in Victoria" from a licensed wholesaler as the qualifying condition for exemption from inclusion in the products by reference to which liability to ad valorem tax is calculated. In substance, those provisions protect local wholesalers and the tobacco products they sell from the competition of an out of State wholesaler whose products might be cheaper in some other Australian market place for a variety of possible reasons, e.g, that the laws of the State in which he carries on his business as a wholesaler either do not require that he hold a licence at all or exact a licence fee comparatively lower than the fee exacted from a Victorian wholesaler. Even when the provisions of the Act imposing the liability to pay the retail tobacconist's licence fee are read in the context of the Act as a whole, they retain their discriminatory and protectionist character. Such a reading reveals the explanation for the exclusion from the basis of calculation of the retailer's licence fee of tobacco products purchased within Victoria from a licensed wholesaler. That explanation is that the licence fee which the Act requires Victorian wholesalers to pay to the Victorian Government will not have been paid to the Victorian Government by an out of State wholesaler who does not carry on business in Victoria and therefore does not require a licence in that State. The explanation tends, however, to underline, rather than remove, the protectionist character of the discrimination at the retail level effected by the provisions imposing the tax. If wholesalers of tobacco products in another State already pay taxes and bear other costs which are reflected in wholesale prices equal to or higher than those charged by Victorian wholesalers, the practical effects of the discrimination involved in the calculation of the retailer's licence fee would be likely to be that the out of State wholesalers would be excluded from selling into Victoria and that the products which they would otherwise sell in interstate trade would be effectively excluded from the Victorian market. On the other hand, if out of State wholesalers pay less taxes and other costs than their Victorian counterparts, and in particular if they pay no (or a lower) wholesale licence fee, the effect of the discriminatory tax upon retailers will be to protect the Victorian wholesalers and the Victorian products from the competition of the wholesalers operating in the State with the lower cost structure. Either way, the operation and effect of the provisions of the Act imposing the retail tobacconist's licence fee are discriminatory against interstate trade in a protectionist sense. For practical purposes, their operation is to impose on Victorian retailers who, during the relevant earlier period, purchased tobacco products both locally and in the markets of another State, an obligation to pay to Victorian consolidated revenue an ad valorem tax calculated by reference to the sale value of so much of those products as came from interstate. Ignoring the flat fee of $50 or $10, the effect of s 10(1)(c) and (d) is to discriminate against tobacco products sold by wholesalers in the markets of another State and to protect both Victorian wholesalers and the products which they sell from the competition of out of State wholesalers and their products. The wholesaler's licence fee, imposed on local wholesalers by reference to all their local sales, does not infringe s 92 in that it does not discriminate against goods coming from another State. The ad valorem content of the retailer's licence fee does infringe s 92 in that it discriminates against interstate trade and commerce in a protectionist sense by taxing a retailer only because of, and by reference to the value of, his actual or imputed purchases of products in any State other than Victoria. (Emphasis added). 100 Their Honours went on to explain at 428-430 why an "equalizing" impost falls foul of s 92: …The effect of an equivalent tax on transactions at another stage in the chain of distribution of the same goods or goods of the same kind is immaterial. That must be so unless s 92 permits the protection of an entire chain of distribution of goods within a State against competition from goods which might otherwise enter the chain from interstate. That proposition has only to be stated to be rejected. If that proposition were accepted, s 92 would present no impediment to the imposition of border duties at all events if they did not exceed the amount necessary to place on interstate goods a tax burden equivalent to the tax burden earlier placed on similar goods already in the local chain of distribution. As Barton J commented in Fox v Robbins [(1909) 8 C.L.R., at p.123] By burdens of this kind and that, whether under the name of licence fees or under any other name, the operation of interstate free trade could be so hampered and restricted as to reduce the Constitution in that regard to mere futility...There is no difference in substance or effect in its bearing on interstate commerce between a burden such as this and a duty collected at the borders or the ports of one State on the products of another. In either case that commerce is restricted which the Constitution says shall be free; and in either case the disability may be made so great as to render the product unsaleable, and therefore virtually to prohibit its introduction. A tax upon retailers in respect of their trading in goods may burden their trade in interstate goods consistently with the guarantee of s 92 only if it applies equally to the interstate and local goods which the retailers sell; it cannot lawfully discriminate between them so as to protect the local goods. Again to quote the words of Barton J in Fox v Robbins [(1909) 8 C.L.R., at p.124]: When the interstate transit is over and they have become part of the mass of property within the State, any goods may be taxed, no matter whence they have come. But they must be taxed alike with all other such goods in the State. The tax must be general, and laid equally on all goods of the kind to be taxed, whether their State of origin be the taxing State or another. It would have provided no answer in Fox v Robbins to have demonstrated that the price of local wine to the retailer reflected an equal or higher burden of some local tax which had been imposed on local manufacturers or wholesalers at an earlier time. Similarly, the fact that the price of local tobacco products to the retailers will reflect the burden of the licence fee imposed upon local wholesalers provides no answer to the attack upon the discriminatory ad valorem tax imposed upon retailers by reference to interstate purchases in the present case. Nor does the fact that s 92 invalidates the ad valorem content of the retailer's licence fee mean that the section has re-emerged as a source of preference for interstate trade and commerce over local trade and commerce. The source of any such preference, if it exists, lies in the fact that the imposition of the wholesaler's licence fee has placed local goods at a competitive disadvantage vis-a-vis goods which have passed through the wholesale stage of distribution in some other State. 101 The decision of the High Court in Bath v Alston can be seen to stand for the proposition that s 92 of the Constitution (and by a parity of reasoning s 49 of the Act) does not permit governments to impose on interstate trade higher taxes or burdens than are borne by intrastate operators in an attempt to neutralize a competitive advantage that interstate trade would otherwise enjoy but for the government measure. New South Wales may not seek to neutralize a competitive advantage enjoyed by Sportsbet as an interstate trader by discriminating against it. A discriminatory protectionist measure is one which is apt to disturb the state of relative competitive advantage between intrastate and interstate trade which would exist, but for the impugned law. The retail licence fee in Bath v Alston was invalid because its equalizing effect operated to burden interstate wholesale purchases of tobacco products which, but for the impugned law, would have enjoyed a competitive advantage over those sold wholesale in Victoria. Under the race field information regime, all traders, whatever their State of origin, are subject to the same fee in respect of their betting services. 102 The primary judge's reasoning also depends, in part, at least, upon the proposition that a law or executive measure imposing equal burdens on interstate traders can be consistent with s 92 (and s 49 of the Act) only if it commences in operation contemporaneously with the law or executive measure which first subjects intrastate trade to competitive disadvantage relative to interstate trade. This proposition should not be accepted. It is a proposition which is not supported by any decision of the High Court. Further, it elevates form over substance. Thirdly, it fetters legislative power to change an unsatisfactory state of affairs in which intrastate trade is unequally burdened. It has never been thought that s 92 of the Constitution operates to alter the position that the power to enact a law includes the power to repeal it: see Kartinyeri v The Commonwealth (1998) 195 CLR 337 at [14]-[17] and [57]. Fourthly, if Sportsbet's contention were accepted, it would mean that the private commercial arrangements made between TAB and the NSW racing authorities and the other parties to the RDA would fetter the legislative powers of the Parliament of New South Wales. 103 That view is supported by the decision of the High Court in Boardman.

Boardman v Duddington 104 In Boardman, the Roads (Contribution to Maintenance) Acts 1957 to 1958 (Qld) imposed on commercial goods vehicles which used public highways in Queensland a charge at a prescribed rate towards compensation for wear and tear caused to the highways by such use. It was argued that by reason of the operation of the State Transport Facilities Acts and Another Act Amendment Act of 1959 (Qld), the Roads (Contribution to Maintenance) Acts in substance, although not in form, imposed a special tax on members of a class primarily selected because they are engaged in interstate trade. That was said to be because the later Act provided that, where amounts in respect of a licensing fee payable under that Act and of a charge under the Roads (Contribution to Maintenance) Act, the Commissioner may reduce that amount of licensing fee by the amount of the charge. It was argued that the effect of the later Act was to relieve all licensees of the liability to pay tax to the extent to which they had paid the contribution to roads maintenance charge, so that the whole of the charge is thrown on to interstate trade because only vehicles engaged in interstate trade do not bear the licence fees under the State Transport Facilities Act. The High Court rejected this challenge. 105 Dixon CJ explained at 469-470: The amendment [ie, the rebate or relief] affected in no way the legal operation of The Roads (Contribution to Maintenance) Acts. The same people remained under the same obligations to pay the same sums of money in the same events. The money thus raised fell into the same fund and continued applicable exclusively to road maintenance. What it did was to treat the payment so made by a person who also incurred a liability to another exaction - a tax - as a ground of relief pro tanto from that exaction. Now this concession could not matter unless in some way it gave an advantage to the carriers obtaining it over inter-State carriers. It does not increase the liabilities of inter-State carriers; it does not reduce the liability of intra-State carriers to the contribution to road maintenance charge. What it does is to reduce pro tanto the latter's liability from which the inter-State carrier is free, to pay licence fees. Now if licence fees were something more than a tax, if they were the price of a valuable right…one could see that by the reduction of price something was being actually given to the licensee. Reduction of tax no doubt is itself a benefit but it could not operate to prefer the intra-State licensed carrier to the inter-State carrier because the latter never pays the fee and needs no licence. To produce such a preference it is necessary to find some positive benefit placing the intra-State carrier in a superior position to that occupied by the inter-State man. 106 Sportsbet argues that Boardman was overruled in Cole v Whitfield. The primary judge accepted that argument on the basis that Cole v Whitfield rejected the "criterion of operation" approach to s 92 of the Constitution. It is apparent from this passage that Dixon CJ did not determine the case by an application of the "criterion of operation" doctrine. Rather, his Honour's reasons for decision focussed upon the point that, as a matter of substance, the rebate to road users licensed under the State Transport Facilities Acts relieved intrastate users of Queensland roads from a burden (which would otherwise have obliged intrastate road users to bear a burden in excess of that borne by interstate trade) while, at the same time, imposing no new burden on interstate users. Boardman decided that such an arrangement does not infringe s 92 of the Constitution. Unless Boardman is to be regarded as having been overruled by Cole v Whitfield, it stands as a pointer to the resolution of the present case against Sportsbet. 107 We are unable to accept that Boardman was overruled by Cole v Whitfield. In Cole v Whitfield, a number of earlier decisions of the High Court were expressly disapproved; Boardman was not one of them. It was not mentioned adversely, either in argument, or in the reasons for judgment of the High Court. 108 In Cole v Whitfield at 406 the High Court referred, with evident approval, to the acknowledgment by the Supreme Court of the United States in Complete Auto Transit Inc v Brady (1977) 430 US 274 esp at 281, "that interstate trade may be made to pay its way". Indeed, in Cole v Whitfield, at 402-403 the High Court gave as the first of the major reasons which compel the rejection of the "criterion of operation" approach the point that "in some respects the protection which it offers to interstate trade is too wide. Instead of placing interstate trade on an equal footing with intrastate trade, that approach keeps interstate trade on a privileged or preferred footing, immune from burdens to which other trade is subject." The High Court went on to explain at 402-403 that s 92 does not require protectionism in reverse. Speaking of the "criterion of operation" approach, the High Court said: Finemores Transport Pty. Ltd v New South Wales [(1978) 139 CLR 338] is a striking example. There s 84G of the Stamp Duties Act 1920 (NSW) imposed an ad valorem duty on the certification of registration of a motor vehicle calculated upon the value of the vehicle. It was a duty imposed without distinction or discrimination on all those who registered motor vehicles, whether the vehicle was engaged or intended to be engaged in interstate trade or not. Yet the Court held that the duty could not be levied upon a certification of registration in respect of a vehicle used or intended to be used exclusively in the course of, or for the purpose of, interstate trade. The doctrine created protectionism in reverse. Both Mason J and Deane J have noted that s 92 had become in some circumstances a source of privileged and preferential treatment for that trade to the detriment of the local trade: Finemores Transport [(1978) 139 CLR at p 352]; Miller v TCN Channel Nine [(1986) 161 CLR at pp 618-619).

At this point it is convenient to mention the contrast between the result reached in Finemores Transport and that reached in the road tax cases, of which Hughes and Vale [No 2] [(1955) 93 CLR 127] may be taken as the leading example. The contrast shows that the doctrine failed when it was applied to fiscal charges. It applied to the fiscal charge in Finemores Transport but it evoked the recognition of an exception for road taxes to which s 92 did not apply when the charge was fixed as reasonable compensation for the use of the highway and a contribution to the wear and tear which the vehicle might be expected to make.

The second major reason for rejecting the doctrine as an acceptable interpretation of s 92 is that it fails to make any accommodation for the need for laws genuinely regulating intrastate and interstate trade. The history of the movement for abolition of colonial protection and for the achievement of intercolonial free trade does not indicate that it was intended to prohibit genuine non-protective regulation of intercolonial or interstate trade. The criterion of operation makes no concession to this aspect of the section's history. In the result there has been a continuing tension between the general application of the formula and the validity of laws which are purely regulatory in character. Judged by reference to the doctrine, the validity of a regulatory law hinged on whether it imposed a burden on an essential attribute or on a mere incident of trade or commerce. To say the least of it, this was not an appropriate criterion of validity of a regulatory law divorced, as it is, from considerations of the protectionist purpose or effect of the impugned law. It is not surprising that the Court found it necessary to develop a concept of a permissible "burden" which was associated with a somewhat ill-defined notion of what is legitimate regulation in an ordered society: see Hughes and Vale [No 2] [(1955) 93 CLR at pp 217-219); Samuels v Readers' Digest Association Pty Ltd [(1969) 120 CLR 1 at pp 19-20]; North Eastern Dairy [(1975) 134 CLR at pp 614-615, 621-622]; Permewan Wright Consolidated Pty Ltd v Trewhitt [(1979) 145 CLR 1 at p 26]. The problems which have arisen in this area culminating in Clark King [(1978) 140 CLR 120] and Uebergang [(1980) 145 CLR 266] are the inevitable consequence of any interpretation of s 92 which offers protection to interstate trade going beyond immunity from discriminatory burdens having a protectionist purpose or effect. 109 The decision in Boardman is consistent with this reasoning which points to the conclusion that the scheme conforms to s 49 of the Act in that it requires all traders to bear the same burden. That view of the operation of the scheme is not falsified by the fact that TAB and NSW on-course bookmakers may be entitled to relief from other burdens previously borne exclusively by them. Sportsbet argues that Boardman is a case in which form triumphed over substance. But the distinction at the very heart of Sportsbet's case and the decision of the primary judge itself promotes the triumph of form over substance. That distinction is that it is permissible under s 49 of the Act, or s 92 of the Constitution, to impose equal burdens on intrastate trade and interstate trade, and it is permissible to relieve intrastate trade of burdens which do not apply to interstate trade, but it is not permissible to do both at once. That is a distinction which no authority supports. 110 The complaints made by RNSW and HRNSW about the other findings made by the primary judge pale into insignificance, and, indeed, irrelevance, once it is accepted, as we think it must be, that any difference between TAB and NSW on-course bookmakers on the one hand, and Sportsbet on the other, under the race field information scheme is nothing more than a recognition of entitlements which are not conferred under the scheme and which Sportsbet does not enjoy for the non-discriminatory reason that it has not ever paid for them. These circumstances do not exhibit the features of a discriminatory law identified by Gaudron and McHugh JJ in Castlemaine Tooheys at 478 where their Honours said: A law is discriminatory if it operates by reference to a distinction which some overriding law decrees to be irrelevant or by reference to a distinction which is in fact irrelevant to the object to be attained; a law is discriminatory if, although it operates by reference to a relevant distinction, the different treatment thereby assigned is not appropriate and adapted to the difference or differences which support that distinction. A law is also discriminatory if, although there is a relevant difference, it proceeds as though there is no such difference, or, in other words, if it treats equally things that are unequal - unless, perhaps, there is no practical basis for differentiation. 111 The discussion thus far has proceeded on the assumption that the primary judge was correct in having regard to the arrangements made by the parties to the RDA and by racing clubs and on-course bookmakers to recognise, as a matter of common sense and fairness, if not of legal entitlement, the need not to doubly burden intrastate trade upon the introduction of the race field information scheme. There is, we think, something to be said for the view that, to the extent that these arrangements consisted of, or were consequential upon, contractual arrangements involving private parties, they were outside the purview of s 92 of the Constitution which is concerned to ensure that interstate trade is free of burdens imposed by legislative or executive measures imposed by government. The primary judge rejected that view. Having regard to the conclusions we have reached on the other issues, it is unnecessary for us to reach a concluded view upon this issue. 112 In summary in relation to the appeal by the NSW racing authorities, whether the imposition of the fee by RNSW and HRNSW as a condition of Sportsbet's approval is contrary to s 49 of the Act does not depend upon the subjective intentions or motives of those responsible for the adoption of the measure; the operation of s 49 depends upon the effect of the measure, not on whether those responsible for its adoption and implementation were correct in their understanding of the operation of s 92 of the Constitution. The crucial issue in this case concerns the objective effect of the imposition of the fee upon interstate trade relative to intrastate trade. TAB was, in truth, liable to pay the fee and did pay it. The same is true of NSW on-course bookmakers whose businesses were so large as to take them above the fee-free threshold. It was because TAB was truly liable to pay the fee for the right to use race field information that TAB was entitled to insist on compensation for the breach of its rights under the RDA. The impugned scheme did not confer the right to compensation, and s 49 of the Act does not operate to take it away.

THE APPEAL BY SPORTSBET: THE ISSUES 113 Sportsbet's appeal raises three issues for determination. The first is whether, in lieu of declaring the impugned approvals to be invalid, the primary judge should have declared invalid ss 33 and 33A of the RA Act and Part 3 of the Regulation. The second issue is whether the primary judge should have declared invalid only the fee condition rather than the whole approval. The third issue is whether the primary judge erred in granting relief on the basis that the second approval was not challenged by Sportsbet.

Invalidity of the RA Act and Regulation 114 The NSW racing authorities and the State of New South Wales submit that the primary judge was correct to declare invalid the approvals, rather than the legislation or the fee conditions. They also submit that the primary judge was correct to proceed on the basis that the second approval was unchallenged in circumstances where neither the application nor the statement of claim referred to the second approval and where the other parties did not agree to, or acquiesce, in the determination of the matter on a basis other than that disclosed by the pleadings. 115 Sportsbet submits that the relevant sections of the RA Act and Regulation operate with the fee condition and approval to infringe the constitutional guarantee at a practical level. This is said to be because the legislation is part of an integrated scheme which prohibits an activity in trade and commerce (that activity being the use of the race field information) subject to obtaining an approval. The scheme is said to burden interstate trade or commerce in its practical effect in a protectionist way by creating a prohibition upon the use of race field information coupled with the fee condition (which together constitute the burden) combined with the fee-free threshold and the general understanding that TAB and the racing clubs would not be worse off. The primary judge found that this was the intention of NSW in enacting the amendments to RA Act (at [44]). 116 The NSW racing authorities and the State of New South Wales support the primary judge's conclusion that the legislation is capable of authorising valid approvals and therefore of having an operation consistent with s 49 of the NT Act. To interpret the legislation in this manner, they submit, would not result in "liabilities or rights of a different tenor, measure or nature": R v Poole; ex parte Henry (No 2)(1939) 61 CLR 634 at 652 per Dixon J. 117 Sportsbet submits that s 31 of the Interpretation Act (NSW) is not an answer to its case because it does not allow a section to be read down when the legislature clearly intended to achieve an unconstitutional object. 118 The NSW racing authorities and the State of New South Wales submit that, even if the primary judge was wrong to apply s 31 of the Interpretation Act to read down the RA Act, the same result is compelled by s 109 of the Constitution. In this regard the NSW racing authorities and the State of New South Wales point to the approach taken by the High Court in AMS v AIF (1999) 199 CLR 160. In that case the High Court read down the provisions of a Western Australian law to the extent that it would have empowered the WA Family Court to make orders which would have impermissibly burdened freedom of trade between WA and the NT contrary to s 49 of the NT Act. 119 On this point, the Attorney-General for South Australia also submits that s 31 of the Interpretation Act does not apply in this case. If the RA Act and Regulation are invalid, it is not because they are beyond the legislative competence of the Parliament of New South Wales, but because of their inconsistency with a law of the Commonwealth, namely s 49 of the Act.

Invalidity of the fee condition 120 Sportsbet argues that the primary judge erred in holding that the whole of the approvals are invalid rather than merely the conditions requiring the payment of fees. This is said to be for the following reasons. First, it cannot be that the more complex the practical arrangements the less likely the court will be to make a declaration invalidating the requirement to pay. If it be assumed that RNSW would not have granted Sportsbet an approval without the condition as to the fee, it does not follow that the invalidity of the approval with the condition should result in the denial of an approval, rather it should result in the grant of an unconditional approval. Secondly, the impermissible burden is that which arose from the combined effect of the prohibition and the fee condition. A declaration of invalidity pertaining only to the fee condition lifts the burden without exposing Sportsbet to criminal penalty. 121 The NSW racing authorities submit that the prohibition on the use of race field information without an approval is not a discriminatory burden of a protectionist kind because the legislation affords no preferential treatment to local applicants and the Regulation expressly prohibit discrimination on the basis of the domicile of the applicant. 122 The NSW racing authorities submit that the impugned approvals would be of a radically different nature if only the fee conditions were declared invalid. The approvals would cease to achieve the statutory purpose of the legislation by ceasing to be directed to the object of "ensuring those who used the products of the New South Wales racing industry for profit made a contribution to that industry commensurate with their use of their product". Accordingly, so it is said, the primary judge was right to conclude that the fee conditions could not be severed from the remainder of the approvals without radically changing the nature of the approvals. It is not for the Court to substitute its own view regarding an appropriate fee.

The second approval 123 Sportsbet argues that its amended application and pleadings reveal that its primary complaint was that it was required to pay a monthly fee for the use of the race field information. It sought the repayment of those moneys in its application on the basis that the approvals and the fee condition were invalid (see paras [5], [6] and [7] of the amended application). The issue on the pleadings was whether Sportsbet was entitled to the return of all moneys it had paid. The answer to that issue is said not to turn upon whether an approval for a particular year was in existence, because payment was required to be made not only on the basis of the approval but also on the basis of the standard conditions. 124 In this regard, Sportsbet points to: 1. A schedule of payments made by Sportsbet to RNSW up to the date of judgment and a copy of the first and second approval tendered by Mr North SC at the close of Sportsbet's case ("the Payments Schedule"); 2. A statement by Mr North SC to the primary judge that if Sportsbet were successful it would seek to address the Court after judgment in respect of the additional fees paid between the date of the Payments Schedule and the date of judgment; 3. A statement by senior counsel for the NSW racing authorities which agreed with the figures in the Payments Schedule and that the figure would need to be updated to reflect the amounts that would accrue before the delivery of judgment; 4. Part X of Sportsbet's summary of legal contentions dated 2 February 2010 which were provided to the Court and parties prior to commencement of the trial and which refer to all moneys paid up to time of judgment; 5. Unchallenged evidence of Mr Tyshing, a director of Sportsbet as to the granting of the second approval and payments made under it; 6. The NSW racing authorities' amended defence dated 22 December 2009 which refers to "repayment of some or all of the fees paid to [the NSW racing authorities] to date"; 7. The circumstance that counsel for the NSW racing authorities did not seek to argue that Sportsbet would be entitled to recover only moneys paid pursuant to the first approval. On the contrary, RNSW's submissions proceeded on the basis that both approvals were being challenged by referring to the "approvals" and by referring to the amount paid by Sportsbet under both the first and second approvals. 125 The NSW racing authorities respond to the points made in the preceding paragraph: · As to 1 - 3: At its highest the Payment Schedule was an admission that amounts had been paid by Sportsbet to RNSW; it could not be construed as an agreement to conduct the case on the basis that the second approval was covered by the pleadings; · As to 4: Sportsbet's Summary of Legal Contentions supported the conclusion reached by the primary judge given that it states that Sportsbet seeks the relief set out in the amended application (ie in respect of the first approval); · As to 5: The NSW racing authorities say this does not support the conclusion and is irrelevant; · As to 6: The NSW racing authorities again argue that, given application does not refer to the second approval, this paragraph does not plead with respect to it; · As to 7: The NSW racing authorities support the observation of the primary judge that "in the context of the entire document it would be reading far too much into that statement too infer that the respondents had signalled their consent to conduct a case about the [second approval]." 126 The NSW racing authorities deny that the pleadings were capable of covering the second approval. They say that neither Sportsbet's second further amended application nor the third further amended statement of claim (both of which were most recently amended on 9 February 2010) referred to the second approval. In those circumstances they say that the primary judge was obliged to proceed on the basis that the second approval was unchallenged: see Banque Commerciale SA, en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 287. 127 The NSW racing authorities reject Sportsbet's suggestion that they deliberately chose some other basis for the determination of their respective rights and liabilities in circumstances where, as the primary judge said, they were "repeatedly emphatic about the fact that the case they were meeting was the pleaded one" (Sportsbet Pty Ltd v State of New South Wales (No 15) [2010] FCA 697 at [15]).

SPORTSBET'S notice of motion 128 In association with the third issue raised by Sportsbet on its appeal, by notice of motion dated 24 June 2010 Sportsbet sought to vary the orders made by the primary judge on 16 June 2010 to declare invalid the fee condition rather than the approval and to extend the effect of the orders to the second approval. In the alternative, Sportsbet sought leave to amend its pleadings to challenge the second approval. The primary judge dismissed Sportsbet's notice of motion on 2 July 2010. 129 Sportsbet now seeks leave to appeal from that decision. Leave to appeal against an interlocutory order will usually be granted only where the applicant is able to demonstrate that the order occasions substantial prejudice to the applicant and the decision is attended with sufficient doubt to warrant it being reconsidered by a Full Court: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. 130 Sportsbet argues that the primary judge erred in finding that it was only the first approval and the moneys paid under it which were the subject of challenge at trial. In particular, Sportsbet points to what it says are errors on the part of the primary judge in, first, finding that the "circumstances" changed after 9 February 2010 when Sportsbet was permitted to amend its claim to challenge "for the first time" the approvals rather than the validity of the legislation; and, secondly, treating the entitlement of the NSW racing authorities not to disclose the misapprehension of which they were aware as being a reason against allowing an amendment that otherwise would have been permitted. 131 The NSW racing authorities argue that the primary judge correctly exercised his discretion in circumstances where his Honour had squarely considered the issue of whether the second approval had been challenged and there was no misapprehension or other circumstances of a kind which would enliven the jurisdiction to recall or vary the orders given on 16 June 2010. 132 As to whether the primary judge should have granted leave to amend the pleadings, the NSW racing authorities argue that Sportsbet has not identified any substantial prejudice that it will suffer, particularly in circumstances where it may institute fresh proceedings to challenge the second approval. Further, they submit that the primary judge's decision is not attended by sufficient doubt to warrant a grant of leave.

Invalidity of the RA Act and Regulation 133 Sportsbet argues that the RA Act and Part 3 of the Regulation operate by conferring an absolute discretion to relieve against a prohibition. This is said, of itself, to infringe the freedom guaranteed by s 49 of the Act. In this regard, Sportsbet relies on Hughes and Vale Pty Ltd v New South Wales (1956) 93 CLR 1; Hughes and Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127; Boyd v Carah Coaches Pty Ltd (1979) 145 CLR 78 at 84; Ackroyd v McKechnie (1986) 161 CLR 60. 134 In Boyd v Carah Coaches Pty Ltd (1979) 145 CLR 78, at 84, Gibbs J said: Since the decisions in Hughes and Vale Pty Ltd v New South Wales and Hughes & Vale Pty Ltd v New South Wales[No 2] it has been settled law that a statutory provision which forbids a person to carry on an ordinary trade without a licence, and gives the licensing authority an uncontrolled discretion to refuse to grant a licence, cannot validly apply to interstate trade, by reason of s 92 of the Constitution. (footnotes omitted). 135 In Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556 at 605 Brennan J (as his Honour then was) explained that in Boyd and the other cases cited above, "the law has fallen because the discretion was insufficiently controlled to ensure that the prohibition would not impermissibly prohibit, burden or restrict interstate trade". That rationale has no application to a regime in which the prohibition and discretion to grant a relieving approval are components of a scheme designed to regulate the conduct of a trade such as the taking of bets on horse races. As Brennan J explained: A law of general application which imposes a prohibition, burden or restriction on an activity or transaction without reference to the essential qualities connoted by the phrase "trade, commerce, and intercourse among the States" is unlikely to be inconsistent with s 92. As Dixon CJ and Webb J said in Mansell v Beck [(1956) 95 CLR 550, at p 565]: A law which imposes restrictions or burdens upon some description of act matter or thing not of its own nature forming part of inter-State trade, commerce or intercourse and does so because of some characteristic which is independent of any element entering into that conception is very unlikely to be found to destroy impair or detract from the freedom secured by s 92. It may conceivably do so if upon examination of the facts and scrutiny of its intended operation it appears that in spite of the prima-facie absence of any but an accidental interference with inter-State trade, commerce and intercourse the law is but a circuitous means of burdening, restricting or impeding operations of a kind which s 92 protects. The restriction imposed by the law impugned in Mansell v Beck was a prohibition on the sale of tickets in an interstate lottery, so that the passage cited is as applicable to an absolute prohibition as it is to a more limited restriction or burden. 136 Brennan J confined the authorities relied upon by Sportsbet to cases where the burden on interstate trade was not an aspect of a regulatory regime applicable to all traders. His Honour said: In Boyd v Carah Coaches, a State law providing for the licensing of travel agents was held to be inconsistent with s 92 on the ground that the discretion to refuse a licence was too wide. To identify that as the ground of invalidity in that case subsumes two distinct lines of reasoning which appear in the judgments. Both lines led to the conclusion of invalidity in that case, but they require separate consideration in this case. The first line of reasoning was that the width of the discretion precluded the view that the law was regulatory - "nothing but a reasonable regulation of interstate trade". That was the line of reasoning of Gibbs J [(1979) 145 CLR at p 85]. The second line of reasoning was that the law was of a regulatory character but the width of the discretion enabled the licensing authority "to refuse a licence on arbitrary and unspecified grounds which are quite obnoxious to the concept of freedom of interstate trade embodied in s 92". That was the line of reasoning of Mason J [(1979) 145 CLR at pp 93,97]. The distinction between the two lines of reasoning is of importance in this case because if the width of the discretion conferred by s 5 of the Act denies a regulatory character to the rationing scheme created by ss 4, 5 and 6 of the Act, the prohibitions against the unauthorized use of a station for that purpose fall squarely within the principle stated by Gibbs J and must be held invalid. On the other hand, if the scheme is regulatory, the width of the discretion will invalidate the scheme only if the Minister is purportedly empowered to refuse a licence on grounds obnoxious to the freedom guaranteed by s 92. In my respectful opinion, the second line of reasoning is applicable in this case and the first is not. The principle stated by Gibbs J in the passage I have quoted, and which was recently reaffirmed in Ackroyd v McKechnie [(1986) 161 CLR 60, at p 68], applies when the person carrying on an ordinary trade has complied with any applicable regulatory law. He cannot then be prohibited from carrying on such a trade interstate, and the invalidity of a prohibition against doing so cannot be saved by the creation of an absolute discretionary power to relieve against it: the power gives no assurance that it will be exercised so as to leave the person carrying on the interstate trade free to do so: see per Mason J in Perre v Pollitt [(1976) 135 CLR at pp 153-154]. But that principle comes into play only when any applicable regulatory law has been complied with. In the joint judgment in Hughes and Vale[No 2] [(1955) 93 CLR at p 166] cited above, their Honours accepted the validity of a regulatory law "leaving to the discretion of the administrative agency the actual means of giving effect to the necessity of controlling the volume ... of traffic". Provided the discretion is so constrained that its exercise cannot be obnoxious to the freedom guaranteed by s 92, the width of the discretion furnishes no reason in principle why a law providing a licensing scheme should not be characterized as regulatory. In my respectful opinion, the principle as stated by Gibbs J is not an applicable criterion for determining whether a law prescribing a scheme for the licensing of a trade is regulatory. It is an applicable criterion for determining whether a law which requires a licence for the carrying on of an interstate trade is valid when the law is not regulatory. That appears from what Mason J said in Boyd v Carah Coaches [(1979) 145 CLR at p 92]: The fact that a statute in terms prohibits a person from entering without a licence into transactions which constitute the carrying on of interstate trade and commerce is not in itself enough to establish a contravention of s 92. If the prohibition is an element in a regulatory licensing scheme which leaves the trader free to carry on his interstate trade so long as he conforms to requirements prescribed so as to ensure a reasonable regulation of the trade for the protection of the public, there is no contravention of s 92: SOS (Mowbray) Pty Ltd v Mead [(1972) 124 CLR at p 544]; North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW [(1975) 134 CLR 559, at pp 600-601,607-608, 615-616,634]. The freedom to carry on interstate trade guaranteed by s 92 is the freedom enjoyed when any applicable regulatory law has been complied with. The passages in the cases to which his Honour refers dealt with the reasonable regulation of trade to protect the community "from many hazards such as health, nutrition, inimical and fraudulent practices in trade and the like": per Barwick CJ in SOS (Mowbray) [(1977) 124 CLR at p 544)]. 137 Brennan J went on to explain further the basis for characterising a law as "regulatory": The regulatory character of an impugned law is to be judged by reference chiefly to the interests of the community at large, though the operation of the law upon the activities and transactions into which an individual may enter is a relevant factor. The greater significance of community interests flows from the predominantly public character of s 92, as Mason J pointed out in Permewan Wright [(1975) 134 CLR at p 615]: It is because the section has this predominant public character that it is to be readily understood as presupposing a society in which conduct is regulated in the interests of the community, rather than a society in which conduct is merely regulated in the interests of those engaged in trade (the North Eastern Dairy Case [(1978) 134 CLR 559 at pp 600-601, 607-608, 615-616,634]. If regulation of an activity is necessary in the public interest and if a law providing for that regulation does not select or authorize a licensing authority to select as the criterion of its application any of the essential qualities connoted by the phrase "trade, commerce, and intercourse among the States", the law does not infringe the guarantee of freedom given by s 92. It is truly regulatory. 138 The race field information scheme established under the RA Act and Regulation regulates a trade well understood to require the protection of the community from the hazard of fraudulent practices, and financially irresponsible operators. 139 Under the race field information scheme, the relevant facility, namely the use of race field information to conduct a wagering operation, is obviously intended to be denied to those who are unable to demonstrate financial responsibility and integrity. This scheme is, to adapt the observation of Brennan J in Miller v TCN Channel Nine Pty Ltd at 609, …quite different from those transport cases where the impugned laws were held not to be regulatory and to be invalid because the discretion was so wide that the carrier was not entitled to the licence which he needed to carry on lawfully his ordinary interstate trade. In those cases the carrier was using facilities, namely the roads, which were available to the community generally and which could not be denied to any carrier. 140 The discretion of the racing authorities is not unfettered. In Miller v TCN Channel Nine Pty Ltd,Brennan J explained at 613 - 614: Of necessity, the area of the discretion must be large: the nature of the subject to be regulated requires that the discretion be wide. But it is not so wide that considerations foreign to the purpose for which the discretion is conferred can be taken into account. Nor can the discretion be exercised to discriminate against interstate trade, commerce and intercourse. That is because a discretion must be exercised by the repository of a power in accordance with any applicable law, including s 92, and, in the absence of a contrary indication, "wide general words conferring executive and administrative powers should be read as subject to s 92": per Dixon, McTiernan and Fullagar JJ in Wilcox Mofflin Ltd v New South Wales [(1952) 85 CLR 488, at p 522]. In Inglis v Moore[No 2] [(1979)46 FLR 470, at p 476] St. John J and I stated the relevant rule of construction: " ... where a discretion, though granted in general terms, can lawfully be exercised only if certain limits are observed, the grant of the discretionary power is construed as confining the exercise of the discretion within those limits. If the exercise of the discretion so qualified lies within the constitutional power and is judicially examinable, the provision conferring the discretion is valid." … Being bound to exercise the discretion reposed in him consistently with s 92, the Minister cannot lawfully refuse a licence on the ground that an applicant wishes to engage in interstate trade, commerce or intercourse. 141 It is to be noted that judicial review would be available to restrain any attempt to exercise the discretion to grant approvals in a way which would contravene s 92 of the Constitution or s 49 of the Act. In this regard, Brennan J said at 614: If judicial review were not available to ensure that the discretion is confined within constitutional limits, an exercise of the power outside those limits could not be restrained. In effect, the power would be wider than the Constitution could support: see Australian Communist Party v The Commonwealth [(1951) 83 CLR 1, at pp 185-187,258]. In the transport cases, the Court gave some weight to the procedural obstacles in the way of showing administrative infringement of s 92 because the grounds on which a wide licensing discretion might be exercised could not be discovered: see, eg, Hughes and Vale[No 2] [(1955) 93 CLR at pp 158, 187, 202, 243]. But the s 5 discretion is amenable to judicial review pursuant to s 75(v) of the Constitution or pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and any procedural obstacles to discovery of the ground on which a discretion has been exercised have been legislatively removed by that Act. The discretion is effectively confined so that an attempt to exercise the discretion inconsistently with s 92 is not only outside the constitutional power - it is equally outside statutory power and judicial review is available to restrain any attempt to exercise the discretion in a manner obnoxious to the freedom guaranteed by s 92. 142 The decision in Betfair v Western Australia, upon which Sportsbet also relies, does not support its argument. The legislation directly burdened interstate trade. Further, there was no prospect that the approval could be granted to relieve interstate betting exchanges from that burden. Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ said at [118] - [119]: Section 27D(1) This provision applies to the conduct of Betfair in publishing or otherwise making available a WA race field. This burdens interstate trade and commerce, both directly and indirectly. It does so directly because it denies to Betfair use of an element in Betfair's trading operations. It does so indirectly by denying to Betfair's registered players receipt and consideration of the information respecting the latest WA race fields by access to Betfair's website or by communication with its telephone operators. These effects of s 27D(1) operate to the competitive disadvantage of Betfair and to the advantage of RWWA and the other in-State wagering operators. The law in its application to Betfair answers the description of a discriminatory burden on interstate trade of a protectionist kind. The provision for authorisation may be put to one side so far as concerns Betfair. Given the stated legislative purpose of prohibition of betting through and the establishment and operation of betting exchanges, a matter to which the Minister is bound to have regard when considering an application under s 27D, the prospect of Betfair obtaining approval must be illusory. The evidence of the refusal of the application which Betfair made bears this out.

The extent of invalidity 143 The primary judge refused to vary the terms of the declaration so as to invalidate the fee condition rather than the approval. His Honour held that, in circumstances where the result had been expressly contemplated by Sportsbet, and the issue considered and decided, the appropriate forum was an appeal to the Full Court and not a re-opening application. 144 It will be apparent that, by reason of the views we have reached on the anterior issues, it is not necessary to decide this issue. For the sake of completeness, we indicate that we agree with the primary judge's view.

The second approval: was it in issue? 145 The point pressed most vigorously by Sportsbet under this rubric was that the exercise of the trial judge's discretion against Sportsbet miscarried because he erred in principle in a way which was not fairly attributable to the way in which Sportsbet had conducted its case. The error was said to be apparent in paragraphs [14]-[17] of his Honour's reasons ([2010] FCA 697). 146 The primary judge proceeded on the basis that once Sportsbet's statement of claim was amended on 9 February 2009 to make a specific challenge to the validity of the approvals rather than to the RA Act and Regulation, there emerged the possibility of different results in respect of the 2008 and 2009 approvals. His Honour went on to conclude at [14]-[17] : There was no ambiguity about the respondents' position which was always that they wished the case to be conducted on the pleading. Nor is there any real doubt, I think, that the respondents' advisors well understood that the 2009 approval was not being claimed and that Sportsbet's representatives were under a misapprehension that it was. The misapprehension must have been obvious from the fact that Sportsbet's representative sought and obtained from Racing New South Wales its agreement as to the amounts in question for the 2009/2010 year. Others might have corrected that misapprehension but I do not think that the respondents, as litigants, were bound to do so particularly when they were repeatedly emphatic about the fact that the case they were meeting was the pleaded one. As to matter (c), I do not think that the respondents' written submissions read as a whole - and taking into account their extensive nature - can really be read as an indication of their consent to the raising of the 2009 approval as an issue. I was taken to paragraph 201(a) of that document which suggested that, on a particular hypothesis, the following order might be appropriate: A declaration that the conditions of the approvals by the second respondent to the applicant to publish New South Wales thoroughbred race fields are invalid insofar as they purport to provide for an exempt turnover threshold. Strictly this paragraph must be referring to two distinct approvals and since there are only two - the 2008 and 2009 approvals - must be referring to the 2009 approvals. However, in the context of the entire document it would be reading far too much into that statement to infer that the respondents had signalled their consent to conduct a case about the 2009 approvals. More is this so in the context of their clear insistence that the case be conducted on the pleadings. Accordingly, I decline to permit Sportsbet to re-open its case and I dismiss its motion. The question of costs, including the costs of this motion must now be resolved. Those arguments should take place at the same time as the costs argument in Betfair. Any further division between these two cases is to be avoided. 147 Because we have concluded that the appeal by the NSW racing authorities should be allowed, it is not necessary, and it might be thought inappropriate, to determine Sportsbet's challenge to the primary judge's refusal to order repayment of the fees paid to RNSW pursuant to the second approval. For the sake of completeness, however, we should say that we respectfully consider that the primary judge did err in refusing Sportsbet's belated attempt to expand its claim. 148 While this case was fought ā l'outrance, with no quarter being asked or given by either side, on the strict basis that only those claims raised by the pleadings were at issue, the primary judge erred in proceeding on the footing that his discretion was controlled by the insistence of the NSW racing authorities on adherence to the pleadings. While they were entitled to argue that Sportsbet should be held to its pleaded case, that did not mean that the primary judge was obliged to exercise his discretion without having regard to the obvious fact that RNSW and HRNSW appreciated that Sportsbet was labouring under the impression - evidently mistaken - that the second approval was truly in issue. 149 In our respectful opinion, the primary judge's discretion miscarried. If it had fallen to this Court to exercise the discretion afresh, we would have allowed Sportsbet's application. However, since we have concluded that the judgment below should be set aside in its entirety, there is no occasion to make such an order.

CONCLUSION AND ORDERS 150 We allow the appeal by the NSW racing authorities, and set aside the judgment below. We dismiss Sportbet's appeal and notice of motion. 151 We order that Sportsbet pay the NSW racing authorities' and the State of New South Wales' costs of all proceedings below and on appeal. I certify that the preceding one hundred and fifty one (151) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Keane CJ, Lander and Buchanan JJ.