FEDERAL COURT OF AUSTRALIA Betfair Pty Ltd v Racing New South Wales (No 14) [2010] FCA 696 Citation: Betfair Pty Ltd v Racing New South Wales (No 14) [2010] FCA 696 Parties: BETFAIR PTY LTD v RACING NEW SOUTH WALES, HARNESS RACING NEW SOUTH WALES and ATTORNEY-GENERAL (NEW SOUTH WALES) File number(s): NSD 1566 of 2008 Judge: PERRAM J Date of judgment: 2 July 2010 Corrigendum: 16 July 2010 Catchwords: COURTS AND JUDGES – Bias – Apprehended bias – Application to amend pleadings after judgment but before the entry or orders – Amendment application sought to take the benefit of contrary orders made by the same Judge in another related case – Whether "a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment" – Threshold satisfied – Recusal Legislation: Constitution s 92 Cases cited: Aon Risk Services Australia Ltd v ANU (2009) 239 CLR 175 cited Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 cited Betfair Pty Ltd v Racing New South Wales [2010] FCA 603 cited Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 2) (2009) 174 FCR 175 applied Re JRL; Ex parte CJL (1986) 161 CLR 342 applied Livesey v NSW Bar Association(1983) 151 CLR 288 applied Marr v Australian Telecommunications Corp (1991) 34 FCR 82 cited Sportsbet Pty Ltd v New South Wales [2010] FCA 604 cited Date of hearing: 1 July 2010 Date of last submissions: 1 July 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 27 Counsel for the Applicant: MR A J Meagher SC with Mr C Lenehan Solicitor for the Applicant: Gilbert & Tobin Counsel for the Respondents: Mr J T Gleeson SC with Mr S A Kerr SC, Mr J Emmett and Mr S Robertson Solicitor for the Respondents: Yeldham Price O'Brien Lusk Counsel for the Intervener: Mr J Kirk with Ms A M Mitchelmore Solicitor for the Intervener: New South Wales Crown Solicitor's Office IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1566 of 2008 BETWEEN: BETFAIR PTY LTD Applicant AND: RACING NEW SOUTH WALES First Respondent HARNESS RACING NEW SOUTH WALES Second Respondent ATTORNEY-GENERAL (NEW SOUTH WALES) Intervener JUDGE: PERRAM J DATE of Corrigendum: 16 JULY 2010 PLACE: SYDNEY Corrigendum 1. The judgment originally published under the medium neutral citation of Betfair Pty Ltd v Racing New South Wales (No 13) [2010] FCA 696 should have instead borne the medium neutral citation of Betfair Pty Ltd v Racing New South Wales (No 14)[2010] FCA 696. I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 16 July 2010 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1566 of 2008 BETWEEN: BETFAIR PTY LTD Applicant AND: RACING NEW SOUTH WALES First Respondent HARNESS RACING NEW SOUTH WALES Second Respondent ATTORNEY-GENERAL (NEW SOUTH WALES) Intervener JUDGE: PERRAM J DATE OF ORDER: 2 JULY 2010 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The matter be stood over for further direction on the issue as to costs before Perram J on Friday 23 July 2010 at 9.30 am. 2. Betfair's notice of motion of 23 June 2010 be stood over sine die for hearing before another judge of the Federal Court of Australia. 3. The second and third respondents' notice of motion of 18 June 2010 be stood over sine die to the same judge hearing the applicant's notice of motion. 4. The time for Betfair to file an appeal from the decision in Betfair Pty Ltd v Racing New South Wales [2010] FCA 603 be extended to 23 July 2010. 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. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1566 of 2008 BETWEEN: BETFAIR PTY LTD Applicant AND: RACING NEW SOUTH WALES First Respondent HARNESS RACING NEW SOUTH WALES Second Respondent ATTORNEY-GENERAL (NEW SOUTH WALES) Intervener JUDGE: PERRAM J DATE: 2 JULY 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Judgment was delivered in this matter on 16 June 2010 at which time I ordered that the applicant's proceeding be dismissed but directed that that orders not be taken out without the leave of a Judge of this Court: Betfair Pty Ltd v Racing New South Wales [2010] FCA 603 (hereafter "Betfair"). On 23 June 2010 Betfair Pty Ltd ("Betfair") applied by motion for leave to reopen its case. The first and second respondents, Racing New South Wales ("RNSW") and Harness Racing New South Wales ("HRNSW") now seek my recusal from the hearing of that application. 2 The issue arises this way. At the same time as I delivered judgment in this matter, I also delivered judgment in Sportsbet Pty Ltd v New South Wales [2010] FCA 604 (hereafter "Sportsbet"). The litigation in both Betfair and Sportsbet concerned the constitutional validity of a fee imposed by RNSW and HRNSW on wagering operators known as the race fields fee. Broadly speaking, all wagering operators are required to pay RNSW and HRNSW 1.5% of the value of all of the bets placed with or through them, a concept conveniently, if not entirely accurately, referred to as back bet turnover. 3 Betfair and Sportsbet both contended that the fee contravened s 92 of the Constitution or statutory derivatives thereof. However, the bases upon which they did so were substantially different. Betfair's case was that it was a betting exchange; that it operated from Tasmania; that the fee represented about 60% of the commission derived from its exchange; that the fee only represented about 9% of the commission earnt by a New South Wales operator, TAB Limited ("the TAB"); that that difference constituted discrimination against it; the discrimination was protectionist; and, that there was no legitimate end to which the measure might be seen as being reasonably appropriated and adapted as serving. 4 I upheld all these allegations save the penultimate one. In its case I concluded that whilst Betfair alleged protectionism its allegations to that effect amounted, in substance, to no more than a repetition of its allegations of discrimination which was not enough to constitute protectionism. 5 The issues in Sportsbet were quite different. In addition to the challenge to the fee there was a challenge to the entire legislative structure which permitted the levying of the fee which I dismissed. At paragraph 85(b) of Sportsbet's third further amended statement of claim Sportsbet alleged that the effect of the legislation was to protect wagering operators in New South Wales from competition from wagering operators in the Northern Territory. One of the particulars to that allegation was particular (vii) which was in these terms: At all material times, Racing NSW has taken steps in consultation with TAB Limited to ensure that the payment of the race fields fee by TAB Limited was either compensated under the terms of the RDA, or the fees were returned to, or refunded to, or credited to, TAB Limited. (emphasis added) 6 That allegation – which was about the validity of the laws in question – was repeated in paragraph 90(b) of the third further amended statement of claim as an attack on the administrative measures imposing the fees. 7 I concluded that this case was made good and that the alleged steps were taken in consultation with the TAB. My precise conclusion was (Sportsbet [2010] FCA 604 at [65]): On its face that decision was apparently neutral. However, its practical impacts were understood by Mr V'landys and the board not to be neutral. In summary, for reasons shortly to be given, RNSW had by 18 June 2008: (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; 8 It was put against that conclusion that the sums had been paid pursuant to the deed settling a commercial dispute. I rejected that submission. 9 Another question in the case concerned certain turnover thresholds which operated so that the fee was not payable by persons with turnover below those thresholds. Sportsbet's allegation was: 91. Further or alternatively, Racing NSW set the exempt turnover amount of $5 million knowing and intending that the race field publication fee payable to it would be offset by racing clubs in New South Wales agreeing to waive or reduce fees that would otherwise be payable by licensed bookmakers whose wagering turnover exceeded $5 million to those clubs, so that, such bookmakers would not be negatively impacted upon [by] the race field publication fee. 91A. Further or alternatively, Harness Racing NSW set the exempt turnover amount of $2.5 million knowing and intending that licensed NSW Bookmakers that specialised in harness racing had a wagering turnover of less than $2.5 million. 10 I found these allegations of deliberate conduct to be made good. In the circumstances, I concluded that the approvals were invalid as they formed part of a fabric of measures which did, and were intended to, flout s 92. At paragraph 85(b) particular (viii) of its pleading Sportsbet alleged: Since November 2006, Racing NSW and Harness Racing NSW, in consultation with racing clubs, in particular, the Australian Jockey Club (AJC) and Sydney Turf Club (STC), have taken steps to ensure that licensed bookmakers in NSW were not negatively impacted upon by the race fields fee. 11 I concluded the evidence established this allegation. 12 Despite the fact that the pleadings expressly contended for a finding that the fees were repaid to TAB as a result of the consultations with it; that the thresholds were set deliberately to protect New South Wales bookmakers; and, that RNSW was seeking to compensate affected bookmakers via arrangements with the racing clubs for the impact of the fee, the respondents elected not to go into evidence. 13 Unassisted by any witness from RNSW and HRNSW I surveyed the documentary record and concluded that the allegations were sound. In the course of doing so I was critical, highly so, of RNSW, in particular, Mr V'landys. To give the flavour I said (Sportsbet [2010] FCA 604 at [150]): The first and third options, (a) and (c), plainly infringe s 92 and, in the case of (c) – which is the facts of this case – involve a transparent attempt to evade the requirements of s 92 in a way which, I regret to say, does not deserve the appellation sophisticated. Given the clear understanding that was held by the board of RNSW and Mr V'landys, that fee could only be applied neutrally and that this had to be so as a matter of substance, and not merely form. I must say that I am entirely puzzled as to how it was thought to be permissible, still less prudent as a statutory authority with the public responsibilities attendant thereon, to assume that the TAB or the New South Wales on-course bookmakers could be relieved from the economic burden of the fee. In any event, it is not presently necessary to determine why this reckless folly was chanced; it suffices only to conclude that it was. 14 Ultimately, I declared the relevant administrative instrument invalid and entered judgment for the money which had been paid under protest under it. 15 These two different, but plainly related decisions, were given simultaneously both on 16 June 2010. That simultaneity gave rise in Betfair [2010] FCA 603 to a concern which at [260] I recorded as follows: Those arguments were advanced in Sportsbet [2010] FCA 604 and, in that case, I have reached the conclusion that the same fee condition is invalid because of those reasons. To mind, a number of potential issues arise: (a) whether there is any contradiction between the order dismissing this proceeding and the declarations in Sportsbet [2010] FCA 604; (b) whether, regardless, the judicial power can properly be used to arrive at apparently contradictory decisions, that is, whether I can conclude that a measure that has been declared to infringe s 92 does not infringe s 92; (c) whether the declarations in Sportsbet [2010] FCA 604 have an effect beyond the parties thereto; that is, whether declarations of constitutional invalidity have a public aspect to them; (d) how the system of pleadings interacts with any such principle; (e) how procedural fairness interacts with any such principle. 16 My concern was to avoid, if it had happened, the spectacle of inconsistent judgments on the same issue of constitutional validity. 17 It was in that context that Betfair's reopening application falls to be considered. There are, in effect, two aspects to it. First, it seeks as a matter of constitutional principle to have me follow the decision in Sportsbet [2010] FCA 604 and to conclude that the fee is protectionist. Secondly, and overlapping, it seeks to amend its pleadings so that they pick up the factual findings in Sportsbet [2010] FCA 604 as to the arrangement with the TAB for the refund of the fee, the deliberate setting of the threshold so as to protect the on-course bookmakers and the compensation arrangements organised by the racing authorities with the New South Wales racing clubs. 18 RNSW and HRNSW's position is this: in order to assess whether to grant leave to reopen in that way I will inevitably be forced to consider whether my conclusions in Sportsbet [2010] FCA 604 are sound. There are, I think, a number of aspects to this: (a) The pleadings issue. I was taken to the notice of appeal in Sportsbet [2010] FCA 604 which has been filed. This discloses that a principle ground of attack upon my reasons will be the proposition that I concluded that there had been a conspiracy, that the deed of settlement under which it now appears that RNSW and HRNSW return the fee to the TAB is a sham and that no such case had been pleaded. The point was, as I understood it, that I would need to assess whether this argument had any merit and that, being the author of the remarks (although not, I should add, of the words "sham" or "conspiracy" which do not appear in the judgment), a reasonable observer might think I would be unable to bring a fair mind to bear. (b) The plainly wrong issue. RNSW and HRNSW argued that I would need to consider whether Sportsbet [2010] FCA 604 was plainly wrong cf. Marr v Australian Telecommunications Corp (1991) 34 FCR 82 at 85 per Hill J. I take that to be a separate argument to the one that I had stepped outside the pleadings; certainly, it was separately submitted. I take it to be an argument that, even assuming any factual findings are sound the legal reasoning is so deficient that any judge would see the error. The point again is that a reasonable observer might think me disabled from assessing the merits of that proposition when I am the author of my reasoning. (c) The Aon issue. It was submitted that to determine the application I would need to weigh up, as discretionary factors, the reasons for Betfair's delay in raising the point and the prejudice to RNSW and HRNSW if I were now to permit reopening. These were conceded to be procedural matters. It was said, however, in light of my adverse findings about RNSW in Sportsbet [2010] FCA 604 (and also in Betfair [2010] FCA 603) that a fair minded observer might think that I would not be able to bring a fair mind to bear. Consideration 19 There are three relevant principles. The first is in Livesey v NSW Bar Association (1983) 151 CLR 288 at 300 per Mason, Murphy, Brennan, Deane and Dawson JJ: … where it is not suggested that there is any overriding consideration of necessity, special circumstances or consent of the parties, a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment if a judge sits to hear a case at first instance after he has, in a previous case, expressed clear views either about a question of fact which constitutes a live and significant issue in the subsequent case or about the credit of a witness whose evidence is of significance on such a question of fact. 20 The second, also well established, is most recently set out by Greenwood J in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 2) (2009) 174 FCR 175 at 199 [71]: The application of the test requires two things. First, the identification of what it is that might lead a judge to decide the particular questions before him or her other than on the merits. Secondly, having identified the factor or circumstance that might influence a departure from meritorious decision-making, it is "no less important" (Ebner 205 CLR 337 at [8]) to articulate the "logical connection" between that factor and the fear that the judge might not apply proper judicial method (that is, merits based decision-making) in resolving the controversy on the facts and the law… Only when the relevant factor is identified and the logical connection articulated, can the reasonableness of the asserted apprehension of bias be assessed. (Emmett and Besanko JJ relevantly agreed) 21 The third is that judicial officers should not too readily accede to disqualification applications to avoid, in effect, a species of judge shopping: Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352 per Mason J. Accordingly, the conclusion of apprehended bias is not lightly to be drawn nor should it be too readily acceded to: Cadbury Schweppes 174 FCRat 211-212 [121] per Besanko J: In circumstances in which it is alleged that a judge should disqualify himself or herself on the ground of a reasonable apprehension of bias by reason of prejudgment, the case must be firmly established and judges should not accede too readily to suggestions of appearance of bias: Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352 (Re JRL) per Mason J. It has also been said that a conclusion of a reasonable apprehension of bias is not to be drawn lightly: Vakauta v Kelly (1989) 167 CLR 568 at 584-585 per Toohey J. 22 I do not regard the Aon (Aon Risk Services Australia Ltd v ANU (2009) 239 CLR 175) issues as generating an apprehension of bias. The fact that I have concluded that RNSW misbehaved by refunding the fee to the TAB, rebating the bookmakers and setting fee thresholds seems not logically to connect to the two procedural questions in Aon 239 CLR 175, namely, whether there is prejudice to the respondents and whether the explanation from Betfair as to its decision not to raise the issue earlier is sound. It is true that I accepted Mr Twaits as a witness of credit but I cannot say, at this stage, that his evidence will have anything to do with this issue. 23 It is different, however, with the two other arguments. If the question is whether I decided Sportsbet [2010] FCA 604 on a basis which was not pleaded I can well understand that a reasonable observer might think that I would be unable to bring an unbiased mind to bear on that issue. My own belief that such a case was plainly pleaded in paragraphs 85(b) particulars (vii) and (viii), 90(b), 91 and 91A of the third further amended statement of claim is beside the point. Also beside the point is my opinion that the present description of those conclusions in the notice of appeal as being a "sham" or a "conspiracy" is an example, I regret not isolated in this litigation, of hyperbole designed to inflame rather than enlighten. The devil's advocate however would say that those views might well be a product of the very bias apprehended. 24 So too, so far as the question of whether my legal reasoning is plainly wrong is concerned, a similar issue arises. It seems to me that a fair minded observer could well be sceptical of my ability to assess the quality of my own reasoning. This is not a case in which the principles to be applied are beyond argument. My reading of Bath v Alston Holdings Pty Ltd (1988) 165 CLR 411 is that it precludes equalisation arrangements but it seems to me a contrary position could be put. So too whilst I rejected as unsound the argument that Sportsbet was bound to prove that it had changed its position in response to the fee, that proposition is not incontestable. In those circumstances a fair minded observer might well regard me as being possibly unable to bring a fair mind to bear on these questions. 25 It follows that I should not hear Betfair's motion. 26 I have not overlooked the submission that there is a difference between the application to reopen and the question of what happens once that reopening occurs. These arguments would be forceful if the submissions were not made that on reopening I will need to assess the quality of my own reasoning in Sportsbet [2010] FCA 604. However, that submission is made and the consequence, so it seems to me, is recusal. 27 Counsel for the Attorney-General pointed to the need for expedition. That is a matter which is out of my hands. I granted these matters expedition at an early date. However, in light of my conclusions in Sportsbet [2010] FCA 604 at [87]-[90] the ongoing harm to the industry would appear to be of its own making rather than these proceedings. If the clubs have reduced their charges to bookmakers in anticipation of receiving the fee that is their doing. Clearly the issues in this litigation should be resolved promptly and, in any event, sooner rather than later but the claim by RNSW and HRNSW for "extreme" urgency harks, I fear, from the same place as the words "sham" and "conspiracy". When the reopening application has been dealt with I will deal with costs. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 5 July 2010