CESSNOCK V GREYHOUND [2006] NSWSC 759

New South Wales Supreme Court

CITATION : CESSNOCK V GREYHOUND [2006] NSWSC 759

HEARING DATE(S) : 28-30 June; 7 July; 26 July 2006

JUDGMENT DATE : 1 August 2006

JUDGMENT OF : Hulme J at 1

DECISION : Stand over for a short period for the parties to formulate such orders

PARTIES : CESSNOCK & DISTRICT AGRICULTURE ASSOCIATION GREYHOUND RACING NEW SOUTH WALES

FILE NUMBER(S) : SC 2006/30069

COUNSEL : P: M Speakman SC; K Oliver D: S Gageler SC; K Williams

SOLICITORS : P: Smyth Turner Wall D: Blake Dawson Waldron

- 41 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

HULME J Tuesday, 1 August 2006

30069/06 CESSNOCK AND DISTRICT AGRICULTURE ASSOCIATION v GREYHOUND RACING NEW SOUTH WALES

JUDGMENT 1 HIS HONOUR: The Defendant, referred to in the Greyhound Racing New South Wales Act as GRNSW, is a body incorporated by Section 6 of that Act. Its functions include the registration of Greyhound Racing Clubs, the initiation development and implementation of policies considered conducive to the promotion and welfare of the Greyhound Racing Industry, the distribution of money received as a result of commercial arrangements required by the Totalizator Act 1997 and the allocation of dates on which greyhound races may be conducted. Local Rule 135E of the Greyhound and Harness Racing Regulatory Authority Greyhound Racing Rules, made under the Greyhound and Harness Racing Administration Act provides that "A club must not conduct a race meeting unless the meeting has been approved by GRNSW". 2 The Plaintiff is the owner of the showground at Cessnock where, for many years, it has conducted greyhound races. For at least the last several years the vast bulk of the Plaintiff's annual revenue has consisted of moneys distributed by the Defendant from those received as a result of commercial arrangements entered into pursuant to the Totalizator Act. 3 Following a number of decisions bearing on the topic, on 15 May last, the Defendant resolved to allocate race meetings during 2006-07 in a way which denied any to the Plaintiff. These reasons arise from challenges, on a variety of grounds, including denial of procedural fairness, denial of natural justice, and apprehended bias, that the Plaintiff has made to those decisions. 4 However, before turning to the issues that arise or the evidence bearing directly on them, it is desirable to provide some outline of the industry. Documents providing details in this regard are voluminous but the following is sufficient for present purposes. 5 Clubs holding greyhound races fall into 2 categories. One consists of what are called "TAB" clubs and for these TAB Limited provides both on course and off course wagering, the latter through all outlets, retail, phone and internet. Non-TAB clubs are not provided by TAB with off-course wagering totalizator services and the betting services available will usually consist of only local bookmaking services available at the track. TAB Clubs may also hold races at which TAB totalizator services are not available although, as has been said, GRNSW has the ultimate responsibility for deciding when races may be held. 6 Pursuant to contractual arrangements entered into by the Defendant, TAB Limited or an associated company (both of which may conveniently be referred to here as "TAB Limited") and organisations involved in horse racing of various types, the Defendant receives a percentage of the revenue derived by TAB Limited. The Defendant in turn distributes moneys so received in accordance with formulae upon which it decides. These financial arrangements often result in the Defendant receiving less money in consequence of a particular race meeting than that meeting costs it. 7 Under what is called the Consolidated Racing Distribution Agreement (the "RDA"), TAB Limited agreed to provide off and on-course wagering services for 593 races, including 104 metropolitan races, 238 provincial races and 251 country races. Later there was some variation to the last 2 figures although the total of them remained the same. In the financial year 2005-06 TAB Limited in fact provided its services at 726 races. Other provisions of that agreement provided for the submission to TAB Limited of a draft racing program no later than, in effect, 31 January, and a final program being agreed by the end of February, of each year. In fact, TAB granted some leniency in respect of this timetable during the events with which I am concerned. 8 Within the greyhound racing industry there are a number of other organisations. These appear to be at least in part groupings of clubs although the evidence did not indicate the extent to which the clubs formed the organisations or vice versa. For present purposes it does not matter. 9 One of these organisations is the Greyhound Breeders Owners and Trainers Association Limited (often referred to as "GBOTA"). This organisation operates a number of greyhound racing venues including one at Maitland. The Chairman of the GBOTA is a Mr Mangafas. 10 A second organisation is the National Coursing Association (often referred to as "NCA". The NCA also operates at Wentworth Park in Sydney, as does the GBOTA, at Tamworth, and at "The Gardens" which is located at Newcastle. It also operates at other places. The President of the NCA is a Mr R Zammit. He is also treasurer of The Gardens. 11 So far as is presently relevant, s8 of the Greyhound Racing Act provides:- (1) GRNSW consists of the following members: (a) one person nominated by The New South Wales Greyhound Breeders Owners and Trainers' Association Ltd, (b) one person nominated by the New South Wales National Coursing Association Limited, (c) two persons nominated by greyhound racing clubs (other than those referred to in paragraphs (a) and (b)), with one of those nominees being nominated as a representative of TAB clubs and the other being nominated as a representative of country racing. (d) one person nominated by participants in the greyhound racing industry (being owners, trainers, bookmakers or other persons involved with greyhound racing), (e) one person selected by the nominated members of GRNSW, who is to be the Chairperson … (6) The following persons are not eligible to be nominated under subsection (1)(d) as a member of GRNSW: (a) a person who is, or has been at any time in the year immediately preceding the time of nominations, a member of the committee of a greyhound racing club, (b) an employee of a greyhound racing club. (8) For the purposes of this section, a TAB club is a greyhound racing club on a majority of whose race meetings TAB Limited conducts an off-course totalizator (within the meaning of the Totalizator Act 1997). 12 At all relevant times Mr Mangafas was the person nominated by the GBOTA, Mr Zimmer the person nominated by the NCA and a Mr Jack Primmer, the person nominated by the TAB Clubs. Mr Primmer is also the President of the Dapto Greyhound Racing Club. At all relevant times the Chairman has been Professor Percy Allan. 13 Since 10 February 2006, the nominee of country racing has been Ms Debbie Prest, who is also the secretary of the Young and District Greyhound Racing Club and the President of the Greyhound Racing Association. Young is a non-TAB club. The nominee of non-club participants in the Greyhound Racing Industry has been Mr Peter Dutton, a breeder. There is no suggestion he has any interest in one of the Hunter region or South Coast clubs. Prior to 10 February 2006, the predecessors of these persons were Messrs Bruce Fletcher and John Tracey. 14 It is also relevant to the issues that arise to record that in the Hunter region there are only 3 greyhound racing venues, "The Gardens", one at Maitland and that run by the Plaintiff at Cessnock. "The Gardens" would seem to have been established only in 2005. Much of the finance for its construction would seem to have been borrowed. In connection with the establishment of The Gardens, in about July 2004 the Defendant entered into an agreement with the NCA whereunder the Defendant agreed to lend to the NCA up to $2.1M, at the rate of $300,000 per year to fund the servicing of a financing facility with the Commonwealth Bank should The Garden's own funds be insufficient. It was a term of the agreement that:- "The Lender must use its best endeavours, subject to its statutory duties and any other legal obligations including compliance with any injunction, order or judgment of any court (Lender's Legal Duties), to have allocated to the Borrower a total of 88 TAB race dates as follows: · by taking the 52 TAB rate dates from the Singleton Club and reallocating them to the Borrower; and · allocating an additional 36 TAB race dates to the Borrower. as soon as reasonably practicable in the circumstances. 15 In a media announcement also made in July 2004, the Chief Executive of the Defendant said that the Defendant expected the NCA to properly project manage the development so the NCA never had to fall back on the facility that had been provided by the Defendant to give comfort to the Bank. 16 In, or perhaps prior to, June 2005 the moneys received by the Defendant pursuant to the Totalizator Act (hereinafter referred to as "TAB moneys" or "moneys received from TAB") were in decline. The Defendant considered that it would need to reduce its costs. It took steps to effect such a reduction and otherwise to deal with the downturn in its income it expected to occur during the 2005-06 financial year. 17 In a meeting of its Board held on 4 January 2006 further steps were taken in respect of 2005-06. On that occasion it also approved the commencement of consultation with the TAB clubs in respect of the TAB race dates program for 2006/2007 based on three scenarios:- Maintaining the number of race meetings in a year at the same number, 726 as had been planned for 2005/06. Reducing the number to 593, this being the minimum number provided for in the RDA agreement to which I have referred. A number between 593 and 726 that was regarded as affordable. 18 In that last paragraph, I have referred to the Defendant's "Board". That is the expression commonly used in the documents although that body is co-extensive with the persons who, pursuant to s8 of the Greyhound Racing Act, are the Defendant's members. It will be convenient to continue the use of the term. 19 In a media release of 6 January 2006 the Defendant, after detailing policies it was implementing to save additional costs in the 2005/06 financial year, observed:- "These actions are step 1 only, resolving the funding shortfall in 2005/06. They do not address the looming funding crisis for 2006/07 and beyond. The incoming board of GRNSW will need to give urgent consideration to reducing the number of race meetings across the State together with other measures to protect the per race prize money levels currently paid." 20 It seems likely that the media release, or at least the substance of it was communicated to all clubs. They were all written to on 11 January. 21 On 17 January 2006 the Defendant sent to all of the TAB clubs a moderately detailed memorandum preparatory to a meeting which had been arranged for 24 January. In that memorandum it was said that the Defendant might well be looking for savings of the order of $3 - 3.5M in the year and the three options were canvassed. It was said, inter alia, that to maintain the number of meeting at the higher figure, reductions in administration allowances and prize money would need to be considered and figures were given for the cost to the Defendant of various types of race meetings. The memorandum concluded:- "As options 2 and 3 are both premised on a reduction in the total number of TAB meetings conducted, the issues that need to be considered are similar and include:- · What is the best approach to accommodating a reduced program given the current spread of TAB meetings. · What impact will a reduced TAB program have on club operations and the financial viability of individual clubs. · How would this approach affect participation." 22 A covering email sent at the same time concluded:- "Finally, I would once again reiterate the meeting next week is NOT intended to be the first and last opportunity for TAB clubs to contribute to the important decisions that will need to be made over the coming period. Instead it is intended to be the first opportunity for us to come together to discuss the issues that we face and discuss possible strategies for dealing with these issues. GRNSW would also welcome written comments from clubs on these issues should you consider this appropriate." 23 In the days following the memorandum of 17 January, a number of clubs made suggestions and these were the subject of a further memorandum dated 23 January 2006 provided by the Defendant to clubs, either prior to or at the meeting of 24 January. 24 No minutes of the meeting of 24 January were in evidence but an internal memorandum of the Defendant presented to its Board meeting of 31 January records that:- "Whilst opinion varied, the general view of the Clubs was:- · Maintain the current level of race dates in FY/07. · Clubs could not sustain further reductions in administrative funding in FY/07. · The funding shortfall would need to be met by various reductions in per race prize money. · No club was in a position to lose more than 1 to 3 meetings without adversely affecting their trading performance and ongoing viability. Richmond (one of the clubs) and the NCA argued that there needed to be a reduction in the number of meetings conducted and this could only be achieved by not allocating TAB race dates to all existing TAB clubs in FY/07." 25 On 25 January a further suggestion involving a reduction in the number of meetings by only 52 and effecting savings in other ways was advanced on behalf of the Nowra club and sent to the Defendant and the Plaintiff (and possibly other clubs). There seems to have been no further consultation by the Defendant with clubs between 24 January and the Board meeting of 20 February. 26 Following the meeting of 24 January, the management of the Defendant conducted a survey of dog owners and trainers. In the same memorandum it is recorded that "overall 70% of (these) Respondents indicated a preference for reducing the number of TAB meetings conducted instead of reducing the average prize money paid per race". 27 The memorandum also recorded:- "With specific regard to the TAB calendar, it is the view of management that the number of meetings conducted at TAB level should be reduced by 104. This is based on participant feedback that clearly indicated a preference for reducing racing opportunities over reducing the average per race prize money. Per race price money reductions will have a dramatic affect on the viability, sustainability and image of the NSW Greyhound Racing Industry. In short, we can no longer afford to conduct the number of meetings currently scheduled whilst operating under our current funding model." 28 The memorandum made it clear that this reduction in meetings would not achieve all of the savings thought to be necessary and other steps would also be needed, including possibly a reduction in the number of non-TAB meetings and their funding. The memorandum recommended that the Board:- "1. Receive the report. 2. Direct management to continue consultations with the TAB clubs on the basis that the TAB race dates calendar will be reduced by 104 meetings in FY/07." 29 The Minutes of the Board meeting of 31 January 2006 do not contain anything of significance beyond that the Board noted the report. There is nothing in the Minutes to indicate the Board then accepted the second of the recommendations just quoted. 30 The Minutes of the next Board meeting of 13 February 2006 do indicate a discussion by the Board of the positives and negatives of reducing the number of TAB meetings programmed in 2006/07 and record a decision to hold a special Board meeting on 20 February to decide whether to reduce the total number of meetings. Papers prepared for the meeting contained the same two recommendations as had been advanced for the meeting of 31 January. They also suggest the Board investigate the "feasibility of progressing several club mergers" as a means of reducing expenditure. Again the Board noted the report but did not accept the second recommendation at that time. 31 At the meeting on 20 February the Board resolved:- "1. Direct management to continue consultations with the TAB clubs on the basis that the TAB race dates calendar will be reduced by 104 meetings in FY/07. 2. Issue a media release indicating that the FY/07 TAB race dates calendar will be reduced by 104 meetings at a saving of $1.6M as the initial step in addressing the funding crisis and the need to achieve savings of $3.3M in FY/07." 32 Because the precise effect of these resolutions is an issue in the proceedings, it is appropriate to note that the Board Papers for the meeting of 20 February recommended "that the Board: 1. Note and Endorse the projected FY07 funding shortfall of $3.5M 2. Direct Management to continue consultations with the TAB Clubs on the basis that the TAB Race Dates Calendar will be reduced by 104 meetings in FY07." 33 On 21 February 2006 another memorandum was sent to TAB club secretaries preparatory to a meeting scheduled for 28 February. It is likely that notice of the meeting was provided in an email of 15 February 2006, although that document is not in evidence. The 21 February Memorandum recorded that the Board of the Defendant had resolved to reduce the TAB race dates calendar by 104 meetings in FY/07 and also included the following:- "The Board of GRNSW is now seeking input as to how the 104 meeting reduction should be implemented. Excluding metropolitan meetings, there are currently 12 TAB meetings conducted a week and 12 TAB Clubs. Broadly, options to achieve the 104 meeting reduction include:- · Reducing the race dates of all clubs by an equal number. This would equate to a reduction of between 8 and 9 race meetings per club from their current allocation. · The allocation of an equal number of race dates to all TAB Clubs. This would equate to the allocation of 43 TAB meetings per club. · The non-allocation of TAB meetings to selected venues. … Noting the above, the questions to which GRNSW would like your input include:- · What is the best approach to accommodating 104 less TAB meetings in FY07 given the current allocation of TAB race dates? · How will each option affect the level of participation in your area? · If it is determined not to allocate TAB meetings to selected venues, how should the selected venues be chosen? The Decision Making process In line with the outline provided at the first consultation meeting on January 24, the following table summarises the decision making process that GRNSW is following:- 21 Feb 06 GRNSW distributes a briefing paper to TAB Clubs on allocation options for FY07in light of the Board's direction given on 20 Feb 06 28 Feb 06 GRNSW meets with TAB Clubs to discuss the allocation of race dates in FY07 2 March 06 GRNSW Board determines the draft FY07 Race Dates Calendar 3-14 Mar 06 All TAB Clubs given an opportunity to make representations and make submissions to GRNSW on the draft FY07 Race Dates Calendar 14 Mar 06 GRNSW Board resolves the final FY07 Race Dates Calendar 15 Mar 06 GRNSW submits its final FY07 Race Dates Calendar to TAB & Racingcorp"