The Federal Court last week gave a judgement on Racing NSW's application to strike out the most important parts of Betfair's statement of claim in its case alleging discrimination against it in the setting of a turnover based race fields fee.

Judge Perram ordered the removal of just two words in Betfair's claim, deleting the words "purported to". Racing NSW's submission that it should be awarded costs on the basis of this tiny success was rejected and it will now have to pay all costs associated with its strike out application.

Importantly the major parts of the claim remain intact.

Counsel for Racing NSW wanted removed any reference to statements made by Racing NSW over the past few years in support of TabCorp and against Betfair, arguing that because they pre-dated the legislation enabling race fields, they were not relevant.

Perram was unimpressed and forecast in his strike out findings that the conduct and state of mind of Racing NSW leading up to the race fields legislation becoming law was very relevant to the issues that Betfair was concerned about.

Betfair's objection is not to the law itself, which does not actually set the level and method of calculation of the race fields levy. Instead the law requires the various NSW racing bodies to establish the levy amount.

While Greyhound Racing NSW came up with a 10% of gross profit levy, both Racing NSW and Harness Racing NSW decided on 1.5% of turnover.

It is this administrative decision for a turnover based levy which Betfair is arguing is unconstitutional, because it discriminates against it and in favour of TAB NSW, a subsidiary of TabCorp.

So Racing NSW is now in the invidious position of explaining to the Court's satisfaction why a decision it made is so blatantly unfavourable to Betfair in terms of claiming 60% of its gross revenue when TAB has to pay only 9%.

It will have to come up some plausible explanation as to why all its negative statements against Betfair and positive statements about protecting industry revenue (TabCorp) are not reflected in the fee regime decided upon.

Racing NSW will need to show the Court that it consulted widely with all potentially affected parties before making its levy decision.Under the Act allowing its creation, Racing NSW is obligated to consider the whole NSW community in its decision making, not just the racing industry.

This has to include the impact of its decisions on punters, who are surely being asked to pay the majority of funds used by the industry. If they are being forced to lose more money by making it unprofitable for TAB competitors to operate in New South Wales, Racing NSW must take that into account.

The strategy put in place by Racing NSW to fight this case seems to be rapidly unravelling. The fact that the previous Board fought a similarly expensive and unsuccessful battle to crush TVN in support of TabCorp has many similarities to the current case.

One wonders how long the new Board will be prepared to stick with this case before it becomes more embarrassing than it has already?

P.S. Costs were also awarded today against Racing NSW in another similar strike out application against Sportsbet in a case in which it is also the respondent.