Tabcorp Holdings Ltd v Entain Group Pty Ltd

1. [1]

   The plaintiffs, Tabcorp Holdings Ltd and TAB Ltd (together, “Tabcorp”), seek an order for preliminary discovery under Uniform Civil Procedure Rules 2005 (NSW), r 5.3(1), against the defendants, Entain Group Pty Ltd (“Entain”) and Australian Hotels Association (NSW) Holdings Pty Ltd and Australian Hotels Association NSW (together, “AHA”).

2. [2]

   There is no dispute about the relevant background. It is described in the submissions of Dr Higgins SC and Mr Lim, who appeared for Tabcorp. What follows, as to that background, is drawn with gratitude from those submissions.

3. [3]

   Tabcorp conducts a wagering business in New South Wales within a regulatory and licensing context that confers on them, in return for substantial payments to the State, exclusivity in pubs and hotels throughout New South Wales. The second plaintiff (“TAB”) is the only entity licensed in New South Wales to provide wagering off-course. Its exclusivity is underpinned by a broad legislative prohibition on the supply of unlicensed gambling and wagering products, including prohibitions on the establishment and operation of “gambling premises”. Tabcorp has contractual arrangements with pubs and hotels concerning the distribution of wagering products.

4. [4]

   Entain is an online bookmaker, not licensed in New South Wales. AHA are related industry bodies which represent some 1,800 pubs and hotels in New South Wales.

5. [5]

   On 6 October 2022 Entain and AHA announced the signing of a “Groundbreaking New Agreement” in which they were “joining forces to bring digital wagering competition to New South Wales for the first time”.

6. [6]

   The announcement continued:

7. [7]

   Tabcorp apprehends that the arrangement may constitute more than mere advertising and may operate in a manner that breaches what it sees as being its valuable retail exclusivity.

8. [8]

   Tabcorp is contemplating commencing proceedings against Entain and/or AHA and contends that whether or not it will do so will depend upon the precise nature of the arrangements the subject of Entain and AHA’s 6 October 2022 announcement.

9. [9]

   Tabcorp contends that despite having made reasonable inquiries, it has insufficient information about the arrangements to decide whether to commence proceedings.

10. [10]

    For that reason, it seeks preliminary discovery from Entain of the following categories of documents:

    1. (1)

       A copy of any documents constituting, recording or evidencing:

    2. (2)

       All documents constituting, recording or evidencing legal advice that Entain received with respect to the lawfulness of the Entain partnership or the arrangements with NSW venues contemplated by it.

    3. (3)

       All communications that any Entain representative has made or received about the detail of the Entain partnership or its lawfulness, including speaking notes, presentation slides, meeting notes, electronic communications, letters or otherwise, to or from any third party including but not limited to representatives of any of the following (where applicable):

    4. (4)

       All documents or other materials setting out the details as to how the “Ladbrokes Lounges”, “VIP Ladbrokes Activation Zones” or “Neds Club Lounges” or any other Entain location or area will or may be configured and operate in connection with the arrangements contemplated by the Entain partnership, including:

    5. (5)

       All documents recording details of the proposed financial arrangements, benefits or incentives (however described) for venues related to the Entain partnership.

    6. (6)

       All documents recording or evidencing:

    7. (7)

       All documents and information on which Entain relied as providing reasonable grounds for the following statements in the 6 October 2022 media release:

    8. (8)

       All documents that constitute or relate to:

11. [11]

    Tabcorp seeks preliminary discovery from AHA of substantially the same documents, save that the formulation of category (7) is directed to specific statements attributed to AHA.

Decision

1. [12]

   Entain and AHA should give preliminary discovery of the documents in categories (2), (4) and (7) above, save that in relation to category (4) the word “being” should be substituted for the word “including” at the end of the chapeau.

2. [13]

   Otherwise, Tabcorp’s application should be dismissed.

Tabcorp’s retail exclusivity and existing arrangement with venues

1. [14]

   Under the Unlawful Gambling Act 1998 (NSW) it is illegal to place a bet on horse, harness or greyhound races in New South Wales other than with a licensed bookmaker. [1]

2. [15]

   Online wagering businesses that conduct business outside New South Wales assert avoidance with this prohibition, arguing that a bet is placed, not in New South Wales where the punter is located, but in a place outside New South Wales where the bookmaker accepts the bet. Thus, punters can and do bet with online bookmakers not licensed in New South Wales using apps on their personal mobile devices.

3. [16]

   The Unlawful Gambling Act has a range of other prohibitions. It is unlawful for an owner, occupier or operator of premises knowingly to allow the premises to be used as “gambling premises”; [2] or for a person to organise or conduct or assist in organising or conducting any gambling premises. [3]

4. [17]

   “Gambling premises” includes premises “used for or in connection with” bookmaking not licensed in New South Wales. [4] “Premises” has a very wide meaning including a “part” of a building, “such as a room”. [5]

5. [18]

   A person must not make a “remote access betting facility” available, [6] and must not possess, or permit the use or operation of a “prohibited gaming device”. [7]

6. [19]

   Tabcorp is excepted from these prohibitions by licences under the Totalizator Act 1997 (NSW) for a 99-year period expiring in 2097.

7. [20]

   During the “exclusivity period”, [8] TAB is the sole holder of an Off-Course-Totalizator licence in New South Wales. That exclusivity period has been extended to June 2033 in exchange for a fee of $75 million, [9] of which $50 million was paid upfront.

8. [21]

   In their submissions Dr Higgins and Mr Lim described Tabcorp’s operations as follows:

The Entain partnership with AHA

1. [22]

   I have referred to Entain and AHA’s announcement made on 6 October 2022.

2. [23]

   The media release also stated:

3. [24]

   Dr Higgins and Mr Lim summarised the Entain partnership with AHA as follows:

4. [25]

   Again, there is no dispute about this.

5. [26]

   A fundamental distinction Entain and AHA are evidently seeking to draw between their proposal and Tabcorp’s current operations is that the Entain/AHA proposal is for digital wagering only, that is wagering using personal devices such as iPhones or iPads and placing bets with Entain entities outside New South Wales (such as Ladbrokes and Neds); whereas Tabcorp’s exclusive entitlements concern cash wagering.

The proposed causes of action

1. [27]

   Tabcorp contends that it may have two causes of action against Entain and AHA.

2. [28]

   The first is that Entain and AHA may have engaged in misleading or deceptive conduct for the purposes of s 18 of the Australian Consumer Law, [10] by representing to venues that the effect of the proposed arrangements is not to offend Tabcorp’s retail exclusivity and is legal.

3. [29]

   These representations are said to be potentially untrue by reason of the proposed arrangements being in contravention of the Unlawful Gambling Act.

4. [30]

   The second is that Entain and AHA may have engaged in the tort of conspiracy to injure by unlawful means.

5. [31]

   In that regard, there is no dispute that:

6. [32]

   The “unlawful” act here is said to be a contravention of the Unlawful Gambling Act.

7. [33]

   As Mr Herzfeld SC and Mr Jones, who appeared for Entain, submitted, both mooted causes of action essentially raise the same central question; whether the proposal, if implemented at a venue, would contravene the Unlawful Gambling Act.

Principles and issues

1. [34]

   Uniform Civil Procedure Rules r 5.3(1) provides:

2. [35]

   To order preliminary discovery against a prospective defendant, all five of the circumstances set out in UCPR r 5.3(1) must exist:

3. [36]

   Before me, there was no dispute about circumstances (ii) and (iv); that is, whether Tabcorp has made reasonable inquiries or whether Entain and AHA may have possession of relevant documents.

4. [37]

   There was also no significant dispute as to whether Tabcorp may be entitled to the claim for misleading or deceptive conduct to which I have referred, it being well established that it is not necessary that a party in Tabcorp’s position establish “even a prima facie case for relief”. [17] All that Tabcorp must establish is that it “appears to the Court” that it “may be entitled to make a claim for relief”. [18]

5. [38]

   There is a dispute as to whether Tabcorp may be entitled to make the claim for unlawful conspiracy, it being submitted by both Entain and AHA that it is a matter of speculation as to whether Tabcorp can establish the requisite intention on the part of either Entain or AHA.

6. [39]

   I also did not understand there to be any serious dispute that documents in Entain’s or AHA’s possession may be relevant to Tabcorp’s decision to commence proceedings or as to the likely success of any such proceedings for the purpose of circumstance (v) at [35] above.

7. [40]

   The parties’ submissions focused on circumstance (iii) at [35] above, namely, whether Tabcorp already has sufficient information to decide whether to bring proceedings against Entain and AHA.

8. [41]

   The question is whether Tabcorp has sufficient information to decide whether to commence proceedings; not whether Entain and AHA have documents which may assist to build up a case which Tabcorp could now decide to bring. [19]

9. [42]

   The question of whether Tabcorp has “sufficient” information to make a decision to commence proceedings is not confined to whether or not it has an apparently arguable case to commence proceedings but also permits some consideration of Tabcorp’s prospects of success, at least to the extent of exploring potentially available defences. [20]

10. [43]

    In Morton v Nylex Ltd, [21] White J (as his Honour then was) put the matter this way:

11. [44]

    As Dr Higgins accepted, the question is whether Tabcorp already has sufficient information to decide “whether to commence, not what to commence” such that if Tabcorp has sufficient information to commence proceedings for misleading or deceptive conduct, it does not matter whether it also has sufficient information to commence proceedings for unlawful conspiracy.

12. [45]

    Thus, in substance, the question comes down to whether Tabcorp now has sufficient information to commence proceedings against Entain and AHA alleging that their proposal will, if implemented at a venue, create “gambling premises” and thereby contravene the Unlawful Gambling Act.

What does Tabcorp know?

1. [46]

   Tabcorp knows a good deal about the proposed arrangements by reason of the public statements made by Entain and AHA.

2. [47]

   Both Entain and AHA have made statements directed to the question of whether the proposed arrangements are lawful.

3. [48]

   As I have set out above, in its announcement on 6 October 2022, Entain stated that the proposed arrangements would not do anything to “offend Tabcorp’s retail exclusivity” in New South Wales. In effect, this was a statement that the proposal would not involve Entain or the AHA members engaging in any activity contrary to the Unlawful Gambling Act.

4. [49]

   Tabcorp’s Chief Legal and Risk Officer, Mr John Fitzgerald, gave indirect evidence that, at an AHA meeting, an AHA representative, in response to a question as to whether “the Entain proposal was legal”, answered:

5. [50]

   Mr Fitzgerald gave that evidence on the basis of what Tabcorp’s Chief Operating Officer, Mr Paul Carew, had told Mr Fitzgerald that he (that is, Mr Carew) had been informed had been stated at the meeting. The evidence is thus indeed indirect. It is, however, consistent with a statement made by AHA in a formal letter to Tabcorp on 19 October 2022:

6. [51]

   That publicly available information has enabled Mr Fitzgerald to say, on information and belief from Mr Carew, that the proposed arrangements “appear to create the ‘look and feel’ of a wagering venue or gambling premises and that they are designed to encourage punters to come together at that venue for wagering purposes”.

7. [52]

   The features of the proposed arrangements that evidently led to Mr Carew’s opinion included:

8. [53]

   In that context, Mr Fitzgerald said:

9. [54]

   Dr Higgins and Mr Lim submitted:

What Tabcorp contends that it does not know

1. [55]

   Tabcorp’s submissions focused on the question of whether the proposed arrangements will result in the creation of “gambling premises” within New South Wales pubs and hotels, contrary to the Unlawful Gambling Act.

2. [56]

   Mr Fitzgerald deposed that the publicly available information is “unlikely to give a full picture” of what the proposed arrangement will involve. Mr Fitzgerald said that, before deciding whether to commence proceedings, Tabcorp required “a fuller understanding of what facilities, infrastructure or the like, Entain proposes to implement within venues”; including the “look and feel” of the arrangements and details of the devices and related apparatus Entain proposes to provide to support betting services.

3. [57]

   Mr Fitzgerald deposed matters “relevant to the lawfulness of the proposed arrangements” would include features set out at [52] above and also:

4. [58]

   In oral submissions, Dr Higgins said that what Tabcorp lacked was the “factual detail of [the] proposal, what the presence would look like, what functionality would be involved, how the WiFi would be branded” and the “rules of venues”.

5. [59]

   Dr Higgins pointed to the detail adduced by CrownBet Pty Ltd in its unsuccessful application for a declaration that its proposed “Digital Wagering Advertising Solution” would not contravene the Unlawful Gambling Act in CrownBet Pty Ltd v State of New South Wales. [23]

6. [60]

   As Mr Herzfeld pointed out, the question in that case, that is whether CrownBet should obtain declaratory relief that its proposal would not contravene the Unlawful Gambling Act, is different from the question here, which is whether Tabcorp now has sufficient information to decide whether to commence proceedings against Entain and AHA alleging, in substance, that the proposal will contravene the Unlawful Gambling Act.

7. [61]

   However, I see substance in Dr Higgins’ submission that, at the end of the day, the question of whether the proposed arrangements will result in the establishment of “gambling premises” in contravention of the Unlawful Gambling Act may well depend on matters of fine detail. Accordingly, the lack of knowledge of that fine detail may well be “something reasonably necessary to make a decision” [24] in order for Tabcorp to commence proceedings making the very serious allegation that Entain and AHA are engaging in an illegal activity.

8. [62]

   As Dr Higgins pointed out, a decision to commence proceedings making such a serious allegation is not only a commercial matter, but one involving careful and responsible professional judgment.

9. [63]

   As I have set out above, Entain has stated publicly that hotels and pubs participating in the proposed arrangements will not receive any commission from Entain for bets placed. [25]

10. [64]

    Entain has announced that a part of the proposed arrangements will be a “Commission Boost” of up to $10,000 per annum. The “Commission Boost” is described as an:

11. [65]

    Dr Higgins submitted that:

12. [66]

    Dr Higgins submitted that “even on the limited materials we possess” the statement concerning the “Commission Boost” show that it “appears” that Entain’s statement that it will not be paying any commission is not correct and that “it looks a lot like a commission, but candidly we don’t know”.

13. [67]

    Entain’s statement about the “Commission Boost” suggests that it is some kind of “top-up” to compensate hotels and pubs for any shortfall between the cost of maintaining “racing vision, hardware and consumables” and the amount of commission received by the pubs and hotels from Tabcorp or TAB.

14. [68]

    Whether or not any such arrangement would amount to the payment by Entain to the pubs and hotels of a commission is not a matter for me to determine on this application.

15. [69]

    However, the gist of the proposed arrangements appears to me to be clear enough from Entain’s public statements, despite the use of the word “offset” in Entain’s description of the arrangements. I do not see what further information Tabcorp would reasonably require at this stage to make a decision about whether to commence proceedings against Entain and AHA on the basis of this aspect of the proposed arrangements.

16. [70]

    Entain has announced that it will not “install or operate any physical Entain wagering facilities” nor “have staff operating Entain wagering terminals eg portable iPads or phones”. [26]

17. [71]

    Dr Higgins submitted that it was unclear what this statement meant and pointed to what she described as “market speak” such as the reference in Entain’s public announcements to “pathways to our offers, markets and other customer activations”.

18. [72]

    Again, this focuses on the fine detail of what Entain and AHA are proposing.

Likely financial impact on Tabcorp

1. [73]

   In written and oral submissions, Tabcorp emphasised the potential loss it might suffer were the Entain/AHA proposal to proceed.

2. [74]

   Thus, under the heading “Urgency”, Mr Fitzgerald deposed:

3. [75]

   Mr Fitzgerald also gave this evidence concerning Tabcorp’s turnover:

4. [76]

   Tabcorp’s public statements make clear that Tabcorp is aware of the potential impact on its business by digital wagering operators such as Entain. Thus, in its 2022 Annual Report, Tabcorp referred to the risk of “disruption or decline of licensed venues, agencies and retail network” by, amongst other things, “changes in consumer behaviour”, and described as a “key assumption on which management has based its recoverable amount estimates”:

5. [77]

   Thus, as Mr Herzfeld submitted:

6. [78]

   I see substance in that submission, although it does not necessarily follow that Tabcorp has already decided, by reason of the amount potentially at stake, to commence proceedings against Entain and AHA come what may.

7. [79]

   However, what this material does show is that it is not likely that any documents in Entain’s or AHA’s possession relevant to the likely financial success of the Entain proposal will make any significant difference to Tabcorp’s decision whether to commence proceedings.

Practice Note SC Eq 11

1. [80]

   A suggestion was made on behalf of Entain and AHA that a factor relevant to whether I should order preliminary discovery are the strictures laid down in Practice Note SC Eq 11 against disclosure before evidence in the absence of exceptional circumstances.

2. [81]

   In my opinion, those strictures have no role to play in relation to an application for preliminary discovery. As McDougall J said in Pioneer Energy Holdings v Seth, [27] UCPR r 5.3(1) and the Practice Note “look at entirely different situations” and have fields of operation that are “entirely separate”. [28] And in Dellara Pty Limited (subject to a deed of company arrangement) (receiver appointed) v Geoffrey Philip Reidy in his capacity as deed administrator of Dellara Pty Limited, [29] Brereton J said that the Practice Note “does not apply” to an application for preliminary discovery. [30]

The categories of documents sought

1. [82]

   I turn now to the eight categories of documents sought by Tabcorp by way of preliminary discovery.

2. [83]

   I am persuaded to allow preliminary discovery of documents in categories (2) and (4) (with one alteration to which I will return) and (7) but not in relation to categories (1), (3), (5), (6) or (8).

3. [84]

   Category (2) seeks documents recording legal advice Entain or AHA have received concerning the lawfulness of the proposed arrangements.

4. [85]

   As I have set out above, [31] Entain has contended publicly that the proposal will not offend Tabcorp’s retail exclusivity and thus, in effect, that it will not contravene the Unlawful Gambling Act and AHA has contended, publicly, and in correspondence with Tabcorp, that the proposed arrangements are “100% legal” and not in contravention of the Unlawful Gambling Act. [32]

5. [86]

   AHA is also reported to have stated that it has obtained legal advice about that question. [33]

6. [87]

   Whether or not Entain and AHA have received legal advice to the effect that the proposed arrangements do not contravene the Unlawful Gambling Act is a matter that would be relevant, perhaps decisively so, to the question of whether Entain and AHA had reasonable grounds to assert such a proposition.

7. [88]

   I am persuaded that Tabcorp cannot reasonably decide whether to commence proceedings alleging that Entain and AHA have engaged in misleading or deceptive conduct by reason of the statements to which I have referred at [85] and [86] above without discovery of the documents in category (2).

8. [89]

   Of course, documents containing legal advice would, on the face of it, be privileged and whether or not Tabcorp will be able to inspect the documents so discovered will depend on whether the public statements that Entain and AHA have made about these matters constitute a waiver of privilege in relation to any advice so sought. I express no view about that.

9. [90]

   Argument about such matters can follow discovery.

10. [91]

    Category (7) seeks documents upon which Entain and AHA relied, that is actually relied, as providing reasonable grounds for making the identified statements. For the same reasons as informed my conclusion concerning category (2), I am persuaded that Tabcorp could not reasonably be able to decide to commence proceedings alleging such misleading or deceptive conduct without disclosure of such documents.

11. [92]

    As to category (4), the documents sought go to what Dr Higgins described as the “granular detail” of the proposed arrangements, where such detail is, for the reason I have explained, relevant to the question of whether the proposed arrangements do constitute the establishment of “gambling premises” for the purposes of the Unlawful Gambling Act.

12. [93]

    I am persuaded that Tabcorp has established that it reasonably requires access to such documents in order to decide whether to commence proceedings.

13. [94]

    I propose to alter the proposed category in one respect, by deleting the word “including” at the end of the chapeau to the clause and substituting the word “being”.

14. [95]

    I am not persuaded that Tabcorp has established an entitlement to preliminary discovery of the other document categories sought.

15. [96]

    Categories (1) and (6) go to the same general topic as is the subject of category (4). Disclosure of documents in category (4) is, in my opinion, sufficient to enable Tabcorp to decide whether to commence proceedings based on the “granular detail” point.

16. [97]

    Category (3), in substance, goes to the issue covered by categories (2) and (7). My conclusion is that the disclosure of documents in categories (2) and (7) is sufficient to enable Tabcorp to decide whether to commence proceedings for misleading or deceptive conduct.

17. [98]

    Category (5), in substance, goes to the “Commission Boost” point that I have dealt with above, and about which I have concluded Tabcorp has sufficient information to make a decision whether or not to commence proceedings. [34]

18. [99]

    Category (8) goes to the likely financial impact of the Entain and AHA proposal on Tabcorp, being a further matter about which, for the reasons I have explained, [35] Tabcorp presently has sufficient information.

Conclusion

1. [100]

   The parties should bring in short minutes to give effect to these reasons.

2. [101]

   If there is to be a dispute about costs, the parties should confer and agree on a timetable for brief written submissions. I will decide that question on the papers.