Sportsbet Pty Ltd v Harness Racing Victoria

REASONS FOR RULING 1 In this matter both the first respondent Harness Racing Victoria (HRV) and the second respondent the State of Victoria (Victoria) applied by motions of 3 and 2 August 2011 respectively for leave to amend their defences. I gave them limited leave to amend their defences, but not so as to expand the factual issue as to the detail of how and where Sportsbet Pty Ltd (Sportsbet) carries out its functions, or to make the factual allegation that its business is in substance conducted in Victoria. These are the reasons for my ruling. 2 This matter has already been the subject of previous interlocutory rulings, in which the background to it appears. I shall not repeat that background: see Sportsbet Pty Ltd v Harness Racing Victoria [2009] FCA 1471; Sportsbet Pty Ltd v Harness Racing Victoria (No 2) [2010] FCA 952; Sportsbet Pty Ltd v Harness Racing Victoria (No 3) [2010] FCA 1420 and Sportsbet Pty Ltd v Harness Racing Victoria (No 4) [2011] FCA 196. 3 In Sportsbet (No 2) I declined an application by Tabcorp Holdings Pty Ltd (Tabcorp) to be joined as a respondent to the proceeding, but gave it limited leave to intervene in the proceeding. In the course of doing so, I recited the background in a little detail. At that time, the proceeding relevantly concerned two central issues. First, a challenge to the validity of s 2.5.19B(1) of the Gambling Regulation Act 2003 (Vic) (the GR Act) on the basis that it imposes a discriminatory burden on interstate trade that has a protectionist effect that is not appropriate and not adapted to a legitimate objective, and thus contravenes s 92 of the Constitution because it is inconsistent with s 49 of the Northern Territory (Self Government) Act 1978 (Cth). Second, a challenge to the validity of a condition imposed, pursuant to ss 2.5.19B(1)(d) and 2.5.19D of the GR Act by HRV on the publication and use approval granted to Sportsbet requiring it to pay a fee of 1.5% of assessable turnover on Victorian harness racing. That challenge also is made on the basis that the condition imposes a discriminatory burden of a protectionist kind. 4 The detailed background to the application and the relevant legislation is set out in Sportsbet (No 1). 5 I note that issues similar to the issues in this proceeding have previously been ventilated in relation to the WA regulatory regime in Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 (Betfair) and the NSW regulatory regime in Sportsbet Pty Ltd v New South Wales (2010) 186 FCR 226; and on appeal in Racing New South Wales v Sportsbet Pty Ltd (2010) 189 FCR 449. I am informed that an application for special leave to appeal from that decision of the Full Court has been granted, and that the hearing of the appeal to the High Court of Australia is to commence on 2 September 2011. I am also informed that the contention proposed to be advanced, underlying the proposed amendments, had not been signified as an issue in those proceedings either at first instance or on appeal (although it may be ventilated before the High Court of Australia). It has been raised and argued in a separate proceeding in this Court in matter VID 808 of 2010: Sportsbet Pty Ltd and Eureka Hotel Holdings Pty Ltd v State of Victoria and Victorian Commission for Gambling Regulation (the Eureka action). 6 The proposed amendment to the defences is in practical terms the same in both instances, although by the different numbering in the defence of HRV on the one hand and Victoria on the other, the enumeration of the proposed amendments varies. I shall refer to the proposed amendments so far as they concern the defence of Victoria, as it was Victoria which made the primary submissions in support of the proposed amendment. The position of HRV is also slightly different because the relevant admission was made by HRV in response to a notice to admit rather than in the pleading itself. Nothing turns on that difference. 7 At present, Victoria by paragraph 4 of its defence admits that, from November 2003, Sportsbet has conducted the business of a sports bookmaker from Level 1, 79-81 Smith Street, Darwin, Northern Territory. Paragraph 5.1 of its defence admits that Sportsbet offers both telephone and online (or internet) betting from its Darwin premises to persons located throughout Australia. Paragraph 7.1 of its defence reads: [Victoria] admits that the taking of bets by Sportsbet in the Northern Territory from persons located within Australia but outside the Northern Territory who communicate with Sportsbet by internet, telephone or facsimile constitutes trade, commerce and/or intercourse between the Northern Territory and the other States and Territories in Australia. 8 The proposed amendments to paragraphs 4, 5 and 7 of its defence are intended to put in issue whether Sportsbet's business activities of both telephone and online (or internet) betting as a sports bookmaker to persons throughout Australia mean that Sportsbet is engaged in trade, commerce and/or intercourse between the Northern Territory and the other States and Territories in Australia. The precise amendments to give effect to that as proposed are: To delete from paragraph 4.1 of its defence the words "from Level 1, 79-81 Smith Street, Darwin, Northern Territory", and to make a consequential like deletion in its pleading in paragraphs 5.1 and 5.2 by removing the admission that Sportsbet's businesses involved the offering of telephone and online (or internet) betting "from its Darwin premises" to persons located throughout Australia, and to add paragraphs 4.1A and 4.1B to its defence in the following terms: 4.1A It says that Sportsbet's registered office is Suite 7, Brett Dixon House, Fannie Bay Racecourse, Dickward (sic, Dick Ward) Drive, Fannie Bay NT 0820; 4.1B It says that Sportsbet has an office in Victoria at 367 Collins St, Melbourne 3000, from which place its business is managed and operated, and at which place the substantial majority of its employees is based; To delete paragraph 7.1 of its defence as presently expressed and to substitute the following: 7.1 It admits that Sportsbet's registered office is located in the Northern Territory, that telephone bets with Sportsbet are received at a call centre located in the Northern Territory, and that internet bets with Sportsbet are routed through computer services located in the Northern Territory, but says that Sportsbet's business is managed and operated from premises located in Victoria, where the substantial majority of its employees is based; 7.1A It admits that Sportsbet services include the provision of bookmaking services to persons located throughout Australia, who communicate with Sportsbet by telephone or the internet; 7.1B It denies that the taking of bets by Sportsbet from persons who communicate with Sportsbet by internet or telephone from places located within Australia but outside the Northern Territory constitutes trade or commerce between the Northern Territory and the other States and Territories in Australia; 7.1C It says that the taking of bets by Sportsbet from persons who communicate with Sportsbet by internet or telephone from places located within Victoria constitutes trade or commerce only within Victoria; 9 The grounds for the proposed amendment emerge from the affidavit of Martin Pike, a principal solicitor for the Victorian Government Solicitor's Office who has the main conduct of this matter on behalf of Victoria. It is said that the reasons for the amendment arise because, until 9 March 2011, his understanding was that Sportsbet was "substantially a Northern Territory business, with an office of lesser significance in Melbourne". On 2 August 2011, he had a discussion with an officer of the Office of Gaming and Racing (the OGR) at a level he does not explain, who told him at that time that the OGR knew anecdotally that Sportsbet had an office in Melbourne but did not know any details about the size of that office or the activities conducted there. He then asserts that, in the course of the hearing of this matter, on its first tranche of hearing days from 9 March 2011, Mr Tyshing of Sportsbet gave evidence in cross-examination about the relative size and importance of aspects of Sportsbet's business run out of its Darwin and Melbourne offices. He says that led him to believe that Sportsbet's Victorian business operations were more extensive than its Northern Territory business operations. He also refers to the Eureka action in which he also has the principal carriage of the proceeding on behalf of the respondents. Sportsbet there challenged the validity of certain Victorian legislative provisions, different from those under challenge in this matter, but on grounds that include the allegation that those provisions impermissibly burden freedom of trade, commerce or intercourse between the Northern Territory and the States. Tabcorp was joined as a third respondent to that proceeding on 3 March 2011. Tabcorp in its defence filed on 7 March 2011 did not admit that Sportsbet's business constituted interstate trade, commerce or intercourse. On that basis, Victoria and the Victorian Commission for Gambling Regulation were also given leave to file an amended defence taking that point. On 11 April 2011, in the course of evidence in that case, Mr Pike attests in his affidavit that: The relative size and importance of the aspects of Sportsbet's business run out of Darwin and Melbourne respectively were pursued in cross-examination of Sportsbet's witnesses in the Eureka proceeding by senior counsel for Tabcorp. He then says that he then learned for the first time "in detail of the extent of Sportsbet's Victorian business operations, including the fact that the employees who performed the bookmaking role - by which I mean the role of deciding what odds to offer on what contingencies, and what bets to accept and reject - were all located in Melbourne". The admission now sought to be withdrawn was made consciously and not inadvertently. 10 On 29 June 2011, he sent the proposed further amended defence to the solicitors for Sportsbet asking for their consent to the opposed amendment. On 11 July 2011, Sportsbet indicated that it opposed the proposed amendment. Subsequently, the present notice of motion was issued on 2 August 2011. A similar affidavit of a solicitor for HRV was relied on by HRV. I have considered it. I do not need to refer to it in detail. 11 The proposed amendments have a dual character, although they are directed to the same issues. Certain of the proposed amendments assert that there has been no unlawful impairment of trade and intercourse between the Northern Territory and the States of Australia having regard, in effect, to the evidence as it now stands. That involves relatively minor amendments to the defences (and in the case of HRV a relatively minor withdrawal of a fact which has been admitted). That which is to be withdrawn is simply the legal conclusion that, on Sportsbet's operations as they are proven to be, it is not engaged in interstate trade or commerce. It is a proposition of law at least in part based upon some observations of Dixon J in Hospital Provident Fund Pty Ltd v Victoria (1953) 87 CLR 1 at 14. As to that matter, senior counsel for Sportsbet accepts that there is no particular prejudice to Sportsbet by allowing such amendments, other than being confronted with the argument of law. In those circumstances, I allowed those amendments. In doing so, I have applied the observations of Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ in Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at [31]. 12 The more significant proposed amendments involve potentially the significant extension of the evidence about the nature and scope of Sportsbet's operations and activities both in the Northern Territory and in Victoria. That is because, it is contended by Victoria and HRV that in fact Sportsbet is a Victorian trader so that any discrimination against Sportsbet is discrimination only against intrastate trade. 13 The principles upon which the discretion to allow amendment to a pleading are settled: see eg per Hill, Madgwick and Conti JJ in Jeans v Commonwealth Bank of Australia Ltd (2003) 204 ALR 327 at [17]-[20], and recently applied by Yates J in Optical 88 Ltd v Optical 88 Pty Ltd [2010] FCA 310 at [24]-[31]. 14 The overriding consideration is the interests of justice, but of course there may be a number of factors to be balanced when concluding where the interests of justice lie. That was explained in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon Services) per Gummow, Hayne, Crennan, Kiefel and Bell JJ at [98] and [111]-[113] including that the just resolution of proceedings must be assessed by taking into account any delay and cost to be incurred if an amendment is allowed. In Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101 at [38]-[43], the Full Court (Keane CJ, Gilmour and Logan JJ) said that those comments in Aon Services are also reflected in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). 15 I therefore did not allow that more extensive amendment to either defence. 16 I accept the assertion by senior counsel on behalf of Sportsbet that, if the amendment is allowed in full, Sportsbet would seek an adjournment of the hearing to a date to be fixed to enable it to further investigate the nature of the allegations, to assemble evidence in response to them, and that the proposed further evidence would be likely to include detailed evidence from Sportsbet, technical evidence from a computer expert as to the nature of computer operations by which the server/router in Darwin communicates with persons elsewhere in the Sportsbet structure, and an officer of the Northern Territory regulator whose evidence to date has been unchallenged. The consequence of that is that there would be likely to be a significant further period before the hearing can resume. That is a significant matter. 17 In my view, it was inappropriate to allow the proposed amendments, to the extent to which they re-open or extend the evidentiary inquiries having regard to the course of the proceedings to date, the terms of the proposed amendments, and the evidence relied upon in support of those amendments. 18 The first stage of the proceeding took place in the week commencing 9 March 2011. The present time set aside for the balance of the hearing is intended to complete it. The evidence on the motions indicates that each of HRV and Victoria in fact acquired the information from which they now seek to assert that, as a matter of fact, Sportsbet did not conduct its business from the Northern Territory at least by about mid-April 2011, after Mr Tyshing's evidence in the Eureka action. Had the present applications been made soon after that date, Sportsbet would have been in a position to have sought, to the extent appropriate, clarification of the allegations, assembled the responsive evidence, examined any further proposed evidence on behalf of Victoria and HRV, and so been in a position to address those matters at the resumed hearing. The timing of the motions now makes that impracticable, and so, without an adjournment, it would be unfair to Sportsbet to allow those amendments. 19 Indeed, I think HRV and Victoria had the means of knowing of that possible factual issue somewhat earlier. As I indicated in Sportsbet (No 2) at [44], I accepted that there is evidence that Tabcorp may wish to lead in the matter in the following passage: I accept that there is evidence that Tabcorp may wish to lead in relation to its financial contributions and to harness racing in Victoria and to its commercial arrangements, and more generally about the respective contributions to harness racing in Victoria of Tabcorp and other wagering service providers. Even accepting such evidence may be relevant, any such evidence is available to be called by the existing respondents. There is no suggestion that they will not have access to that evidence. They can decide what evidence they wish to call. There is no basis for thinking their decisions in that regard would be influenced by factors different from those presently motivating Tabcorp to make its joinder application. The mere fact that Tabcorp may be in a better position to assemble such evidence is not enough to make it necessary that it be joined as a party. The word "necessary" requires that it be more than just convenient; it must be essential to determine the questions which arise. Similarly, there is no reason to think that the existing respondents would not put as forcefully or as well as Tabcorp any legal submissions which should be put in opposition to Sportsbet's application. 20 I also noted variously in those reasons the role of Tabcorp as the largest wagering services operator in Victoria, the Joint Venture Agreement entered into between Tabcorp and three related Tabcorp entities, and Vic Racing Pty Ltd and, to a degree, the factual matters which Tabcorp wished to address. It seemed to me to be clear, particularly as HRV and Victoria supported Tabcorp's application, that although Tabcorp may have been in a better position to provide relevant information in relation to its "commercial arrangements and to the contested landscape of the industry generally", that information could readily be provided by Tabcorp to either HRV or the State of Victoria to ensure that such information was available to those entities. I have no reason to think, given Tabcorp's role in the racing industry in Victoria, that there has been any impediment to the flow of that information either to Victoria or to HRV from Tabcorp so far as it may relate to this proceeding. 21 The affidavits in support of the present application do not refer at all to what, if any, communications have taken place between Tabcorp and either HRV or Victoria so far as it may have informed the state of knowledge of either HRV or Victoria on the matters the subject of the proposed amendments. 22 In the circumstances, in my view, both Victoria and HRV could reasonably have been expected to have raised the factual issue as to whether Sportsbet operates from Victoria, or that the "substance" of its operations (to use the word in Victoria's Supplementary Submissions on the question of trade and commerce) is in Victoria at a considerably earlier time in the course of this proceeding. Neither of the deponents whose affidavits support the applications for leave to amend indicate when either of them might have first identified that factual issue now sought to be raised, as the affidavits are based upon information provided to solicitors only from particular persons, and they do not deal with the flow of any information from Tabcorp, which itself raised the particular factual issue in the Eureka action. Nor do they fully explain why the proposed amended defences were not formulated soon after the hearing of the Eureka action, so that Sportsbet could have known earlier whether it had to confront those allegations. 23 The proposed amendments, insofar as they seek to assert new facts, are in my view somewhat loose. Senior counsel for Victoria said in submissions that "as a matter of substance" the business of Sportsbet is operated from Victoria. It is unclear precisely how a more detailed investigation of what Sportsbet does in the Northern Territory and in Victoria will support a conclusion that in fact it does not carry on business in the Northern Territory, or if it does carry on functions in the Northern Territory as well as Victoria (as it apparently does) how, as a matter of law, a qualitative assessment of the respective significance of particular activities to form the factual conclusion that it conducts its business from Victoria rather than the Northern Territory. The proposed amendments in each case make the claim that Sportsbet "operated" in Victoria (to describe the factual conclusion which is sought). That is, it is sought to say that Sportsbet's business in reality is operated only from or in Victoria. In submissions it was said that the word "operated" referred to the steps central to the operations of Sportsbet's business, namely the setting of the odds and deciding ultimately whether to accept particular transactions. 24 The potential subtlety of the factual contention suggests to me that it requires repleading. It may be accepted from Cole v Whitfield (1988) 165 CLR 360 at 408 that s 92 is engaged only when there is, in reality and not simply as a matter of form, interstate trade and commerce. The observations of the High Court in Betfair at [14]-[15] recognising "the new economy" in which businesses operate without regard to geographic boundaries do not directly anticipate the proposed contention, nor demand that it be necessarily ventilated in this case. Those passages also do not mandate that the invocation of s 92 requires a finding that the entity itself is present in only one place or that such a determination is to be made on the basis of some qualitative finding about where the "substance" of the activities are carried out, it being acknowledged that business operations may be conducted from one or more places in combination. I was not taken to any authority which explains the point sought to be made. I do not regard the proposed findings sought to be so clearly expressed that a legal conclusion will readily flow from them such that the interests of justice fall in favour of allowing the proposed amendments in all the circumstances. 25 I have considered the various matters referred to in the submissions. For the reasons which are set out above, I did not consider that the interests of justice required the more extensive amendments be allowed. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Ruling herein of the Honourable Justice Mansfield.