The first rule of holes is "when you're in a hole, stop digging."

Racing NSW Chairman Alan Brown was still flailing away with his shovel on Sky Channel yesterday in the aftermath of its devastating loss in the Federal Court case brought by Sportsbet.

"From what I've been told, the little bookmakers will struggle", Brown said when commenting on the probable consequence of them having to pay a 1.5% race fields levy.

If Racing NSW knew that a race fields levy set at that level was going to cripple small bookmakers, then it must have been certain that it was going to send the corporate bookmakers to the wall when the measure was put in place in 2008.

Which was exactly what it was intended to achieve.

But the ham fisted way it went about it was seen through by Justice Perram, who in his judgment last Wednesday described the scheme as "... a transparent attempt to evade the requirements of s92 in a way which, I regret to say, does not deserve the appellation sophisticated".

While there is a lot of bluster from Brown and his CEO Peter V'Landys about why the judgment is wrong, there was also completely delusional rhetoric about how it endorsed the gross turnover basis for charging a race field levy.

Paragraphs 238 to 252 of Perram's judgment lead inexorably to the conclusion that a gross profit based race field levy was the least discriminatory model.

It is hard to understand how Brown believes that Perram's understanding of the sham "commercial dispute" between TabCorp and Racing NSW which led to its race field levy being refunded could possibly be reversed on appeal.

This was the smoking gun in the Sportsbet case and most probably would also have been in the Betfair case if the information was available to the plaintiffs well ahead of the trial date as it should have been.

Racing NSW tried everything to avoid having documents discovered which would reveal that TabCorp effectively paid no race field levy at all.

What else would explain TabCorp's press release, issued within minutes of the original race field levy announcement on the 27th of June 1998?

In it, TabCorp said:

"Tabcorp also confirmed today that it is willing to work with the NSW racing industry to negotiate changes to the Racing Distribution Agreement to ensure the product fee regime is non-discriminatory."

I thought at the time that this meant that the RDA would be renegotiated so that TabCorp effectively paid no more when it had to pay the race field levy, which it expected to be 1.5-2% of turnover.

Little did I realise that TabCorp knew already that it would pay no race field levy.

Justice Perram was obviously convinced that the Racing NSW Board minutes from their 18th June 2008 meeting, showing no new revenue from TabCorp, confirmed that fact.

Brown, V'Landys and the rest of the Racing NSW Board must have known that this revelation would be fatal to their case. Why else would they have declined to testify? Why else did they try so hard to suppress the evidence?

Upon appeal no new evidence can be introduced, so any opportunity for Racing NSW to put extra information forward is extinguished. In my opinion, there is no conclusion that the Full Bench of the Federal Court can come to in respect of Justice Perram's verdict other than to uphold it.

In the meantime, we have a crippled Racing NSW carrying on as if the judgment is just a flesh wound.

V'Landys and Brown seem incapable of understanding the implications of the judgments in both the Betfair and Sportsbet cases. For V'Landys, this is the second time as CEO that Racing NSW has been savaged by a judge for unprofessional and inept behaviour. Justice Patricia Bergin was especially critical in the matter of Racing NSW vs AJC, STC & TVN where she observed:

"The plaintiff has placed much emphasis on its alleged motivation to act in the public interest
of protecting wagering revenue. It has been suggested by the Chief Executive that the plaintiff
was acting to ensure that the revenue distributed to the racing industry was maximised. I have
little doubt that there was an aim akin to that buried somewhere in all of this. What is
troubling is that in exercising its powers the plaintiff seemed to forget that it had to be fair to
interested parties whose rights may be affected by its conduct and decisions ..."

It would be most helpful if both Brown and V'Landys now stood down. They seem only concerned about limiting the damage to their own reputations, not realising that the single biggest danger to racing in New South Wales is their own incompetence.

Racing NSW is close to the end of a financial year in which it will announce another huge loss. Nothing has been done to arrest the drain on its resources of its loss making workers compensation business.

It has already been asked to confirm its financial viability to the NSW Workcover Authority which can hardly have been impressed with the state of its balance sheet before last Wednesday's judgment.

Added to those losses are millions of dollars of legal expenses related to the Betfair and Sportsbet cases. While temporarily, the Betfair case is a win for Racing NSW, Justice Perram has more or less invited Betfair to use the Sportsbet verdict to its advantage, which is an offer I'm sure they will take up.

Every corporate bookmaker will now be lining up in the payout queue to have their race fields fees refunded plus interest for both the 2008-09 and very shortly the 2009-10 years.

Every interstate TAB will be doing the same. Faced with a court judgment saying that the race field levy was imposed illegally they are duty bound to their shareholders to demand a refund.

The ANZ Bank, which currently provides a $36 million guarantee to Racing NSW to cover its Workcover liabilities, will undoubtedly be alarmed.

Its mortgage over all of Racing NSW's balance sheet currently includes a charge over the race field levies amounting to somewhere between $50 and $60 million, which are sitting in an ANZ account. The interstate wagering operators are hardly going to be happy as unsecured creditors to Racing NSW, propping up its balance sheet for the benefit of the ANZ Bank.

I would not be surprised to see Sportsbet and the rest demand that the funds be put in escrow and outside of the ANZ's control pending the outcome of Racing NSW's appeal.

In the meantime, while technically Racing NSW can reverse the impact of Perram's judgment going forward, it can only collect race field fees if it charges everyone equally including TabCorp. There is no way that anyone will pay anything unless the charade of TabCorp paying and then getting it back again is stopped.

How that can be done in a transparent and commercial manner presents a problem, but of more importance is that no wagering operator will pay another cent until the amounts paid already are returned.

A critical result of the court verdicts is that no one outside of TabCorp in the wagering sector trusts Racing NSW.

The body has shown itself to be so devious when it comes to protecting TabCorp and punishing everyone else that nothing short of a complete change at the top will allow a proper relationship to be established.

Contrast this lack of goodwill with the situation in Victoria where corporate bookmakers and Betfair  were dealt with across a table and with consultation. Tens of millions of dollars of race field fees have been paid to Racing Victoria with minimum fuss.

Racing Victoria is already so much further in front of Racing NSW on this issue and likely to surge further ahead during what looks to be a vintage Spring Carnival.

So perhaps the New South Wales government should pop V'Landys into the same hole that Brown has dug, cover them both with topsoil and plant the seeds of a new and more competent Racing NSW.