12 Oct 2010
NSW Race fields - the Sportsbet and Betfair first instance "decisions"
by Tony Rein, Andrew Clarke
The appeals in both the Sportsbet and Betfair matters have been heard, but the result is still pending.
The ongoing NSW race fields disputes (Sportsbet Pty Ltd v New South Wales  FCA 604 and Betfair Pty Ltd v Racing New South Wales  FCA 603) were concluded on 16 June 2010 (subject to appeals) with Justice Perram finding:
1. in the Sportsbet case, due to the protectionist nature of the race fields fees in discriminating against interstate wagering operators, the condition of approvals by Racing NSW and Harness Racing NSW to publish race fields information subject to the payment of the 1.5 percent turnover fee was invalid. The court found however that the unlawful conduct occurred at the racing body level and not at the level of the legislation thus it is permissible to impose a race fields fee if imposed indiscriminately on all racing operators; and
2. in the Betfair case, Betfair apparently failed to lead proper evidence of the protectionist nature of what the court found to be a clearly discriminatory fee - a necessary element in establishing a section 92 claim.
Race fields legislation and its constitutional validity
Although the Betfair and Sportsbet cases were run on different grounds, both constitutionally challenged aspects of the Racing Administration Act 1998 (NSW) and Racing Administration Regulations 2005 (NSW) (Race Fields Legislation) which had effect from July 2008.
Under the July 2008 amendments to the Race Fields Legislation, racing bodies were to collect a fee (not exceeding 1.5 percent of the net assessable wagering turnover of each of NSW's licensed wagering operators (including Betfair and Sportsbet)), allowing wagering operators to publish race fields information.
Both the Sportsbet and Betfair cases questioned the constitutional validity of the Race Fields Legislation because of the discriminatory and protectionist nature of the 1.5 percent fee and the burden the practical operation of the fee imposed on interstate operators.
Sportsbet (which is licensed as a bookmaker in the Northern Territory) challenged the validity of the payment of the 1.5% fee on grounds that it was contrary to section 49 of the Northern Territory (Self-Government) Act 1978 (Cth). This is an identical prohibition to that of section 92 of the Constitution, which states that trade and commerce between the territories and states shall be free. It also argued the fee was contrary to section 109 of the Constitution (which gives section 49 of the Northern Territory (Self-Government) Act paramount effect over inconsistent state law).
It sought declarations that:
Evidence Sportsbet put forward in this respect included:
that while race fields fees had been paid by TAB Limited (the sole off-course totalizator operator in NSW), these fees had, in substance, been refunded to TAB because of an ongoing arrangement with TAB,; and
Racing NSW and Harness Racing NSW each had put in place a threshold ($5 million and $2.5 million respectively) to exempt NSW bookmakers. The effect of this threshold was to exempt practically all NSW bookmakers from paying the fee.
Based on the evidence, Justice Perram found that the fee, in its practical operation (as a result of the repayments to TAB and the bookmaker thresholds), discriminated against interstate trade in a protectionist way and was thus in breach of section 49 of the Northern Territory (Self-Government) Act. As such, Sportsbet was entitled to a refund of moneys paid.
The nature of the judgment was concerned with the practical operation of the fee with the court concluding that it is permissible to impose a fee on interstate and intrastate operators under the Race Fields Legislation, so long as that fee is imposed, in substance and practical effect, indiscriminately on all wagering operators, regardless of their state or territory of residence. As the court found that the unlawful conduct occurred at the racing body level and not at the level of the legislation, the claim against the State of New South Wales was dismissed.
Betfair (which is licensed in Tasmania to operate a betting exchange) also sought a declaration that the approvals by Racing NSW and Harness Racing NSW to publish race fields information subject to the payment of the 1.5% turnover fee was invalid as it was contrary to section 92 of the Constitution.
In the case, and in contrast to the Sportsbet case, Betfair argued that the imposition of the fee on the Betfair business model (ie. a betting exchange) created a much larger burden than it did on the TAB Limited business model (ie. a totalizator structure) and this imposed on interstate trade and commerce a burden or disadvantage which was not imposed upon intrastate trade and commerce.
While the court found that race fields fees imposed by Racing NSW and Harness Racing NSW discriminated in favour of TAB, Betfair failed to demonstrate that that burden or disadvantage imposed by the fee was protectionist in nature.
Justice Perram stated that authorities indicate that protectionism is established by an "examination of the competitive consequences of the impugned measure". With the respondents emphasising their right to confine Betfair to its pleaded case, Justice Perram went so far as to state matters that were not alleged in the Betfair pleadings included that Betfair did not allege that the discriminatory effect of the fee:
reduced a competitive advantage which Betfair enjoys over TAB (ie. lower Tasmanian gambling taxes) or ameliorated the effect of a competitive disadvantage which burdens TAB; or
is the result of an equalising fee or tax.
Justice Perram concluded that Betfair's original pleadings did not elucidate the kind of protectionism as prohibited by section 92 of the Constitution.
With appeals in both cases, clarity on NSW race fields payments remains less than certain. With the continuing uncertainty around race fields fees and their calculation, Clayton Utz will continue to closely monitor developments.
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