High Court dismisses claim for statutory termination payment by Tabcorp


Tabcorp Holdings Ltd v State of Victoria [2016] HCA 4

The High Court has confirmed that Tabcorp was not entitled to a statutory termination payment in the amount of $686.8 million following the State’s decision not to renew Tabcorp’s gaming licence.

In 1992, following a decision by the State of Victoria to legalise gaming machines, Totaliser Agency Board of Victoria or ‘TAB’ (the predecessor to Tabcorp) was granted a gaming operator’s licence for 20 years. At the same time another gaming operator’s licence was granted to Tatts, thus enshrining a long-standing duopoly in the gaming machine sector in Victoria. In 1994, following the privatisation of Tabcorp, and pursuant to the Gaming and Betting Act 1994 (Vic), the State granted Tabcorp a conjoined licence – a wagering licence and a gaming licence – for an 18-year term. As a result of the privatisation, Tabcorp paid the State $597.2 million as proceeds of the float in return for the licences. The 1994 Act defined these licences as ‘initial licences’ and provided for a ‘terminal payment provision’ whereby the grant of ‘new licences’ to another provider would result in Tabcorp receiving an amount equal to the licence value of the former licensee or a premium payment paid by a new licensee, whatever was the lesser. In effect, the provision allowed for a pay-out to Tabcorp if the State decided, after the licence period ended, not to grant a new licence to Tabcorp.

In 2003, the State repealed the previous acts and consolidated gambling regulation under the Gambling Regulation Act 2003 (Vic) (‘GRA’). The GRA continued the duopoly of Tatts and Tabcorp along with the terminal payment provision. It also made provision for Tabcorp to continue to operate both a wagering licence and a gaming licence. However, due to the new Act encompassing other forms of gambling, the term ‘licence’ was no longer defined.

In 2008 the State decided it would introduce a new structure for the gambling industry and would therefore not renew Tabcorp and Tatts’ gaming licences. Following this decision, a number of amendments were made to the GRA which allowed for the creation of 27,500 gaming machine entitlements (‘GEM’) which effectively replaced the gaming licence that was held by Tabcorp.

Following the expiry of Tabcorp’s licences, the State made no payment to Tabcorp under the terminal payment provision, and on 24 August 2012, Tabcorp issued proceedings against the State seeking payment of $686.8 million plus interest.

Relevantly, the terminal payment provision on the date at which the licences ceased was found in Pt 3 of Ch 4 of the GRA. That Part concerned the granting of wagering licences and gaming licences. It also contained s 4.3.12, which provided for the terminal payment on the granting of new licences. It stated:

  • On the grant of new licences, the person who was the holder of the licences last in force (the former licences) is entitled to be paid an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.
  • The person who was the holder of the former licences is entitled to the payment under subsection (1) whether or not the person was, or was entitled to be, an applicant for the new licences.

In short, Tabcorp argued that the term ‘licence’ was to be given a broad and general meaning. In effect, that the terminal payment provision was enlivened where a licence was granted that authorised the same activities as the licence granted under the GRA, regardless of whether the grant was made pursuant to Pt 3 of Ch 4 of the GRA. The trial judge dismissed this argument, and the decision was affirmed by the Court of Appeal.

The High Court decision

In a unanimous decision of the High Court (French CJ, Kiefel, Bell, Keane and Gordon JJ) dismissed Tabcorp’s appeal. The High Court heard a related appeal in Victoria v Tatts Group Limited [2016] HCA 5. That appeal focused predominantly on the interpretation of an agreement made in 1995 between Tatts and the State of Victoria following the privatisation of Tatts.

Their Honours held that on the face of the statute, it was clear that ‘new licences’ meant the granting of a wagering and gaming licence under Pt 3 of Ch 4 of the GRA. This was for a number of reasons.

First, the subject matter of Pt 3 Ch 4 of the GRA supported the limited definition of ‘new licence’. The terminal payment provision appeared in Pt 3 of Ch 4 which was headed ‘Wagering Licence and Gaming Licence’. Moreover, the other provisions in Pt 3 dealt predominately with wagering and gaming licences such as the rights conferred by those licences, how to apply for a licence and the termination of those licences following the decision in 2010.

Secondly, while the term licence was not defined, the term licensee was defined as the holder of a wagering licence and a gaming licence. In that context, the Court held that reading the provision consistently meant that the term ‘new licence’ must mean a new licence granting a wagering licence and a gaming licence under Pt 3 Ch 4. Their Honours also relied on the previous acts, in particular the 1994 Act that defined licence as meaning ‘the wagering licence or the gaming licence’ granted under Part 2 of that Act.

Thirdly, there was nothing to suggest the term ‘licences’ in s 4.3.12 should be distinguished from its use throughout Pt 3 Ch 4, especially where ‘licences’ and ‘the wagering licence and gaming licence’ were used interchangeably. This was because, in the opinion of the Court, Pt 3 and Ch 4 was concerned with the sole subject matter of a wagering licence and a gaming licence.

Fourthly, the Court held that to interpret the term ‘new licence’ so broadly was inconsistent with the granting of the GME’s. Their Honours noted that an applicant for a wagering licence and gaming licence was obliged to offer a premium payment at time of the application and it would be only granted if the premium was paid. However, no premium payment was required for the granting of the GME’s, and there were no provisions in the Act to have payment made by the GME’s used to calculate the terminal payment provisions under s 4.3.12.

Fifthly, their Honours rejected Tabcorp’s preferred construction of ‘new licence’ on the basis that it would lead to the impermissible conclusion that not only did Parliament adopt a new meaning for ‘licence’ in s 4.2.12 for the first time in Pt 3 Ch 4, but also that the term ‘licence’ could have two difference meanings within the same section.

Finally, the Court rejected the proposition that the new legislative framework introduced to end the duopoly would deprive s 4.3.12 of any operative effect if the term licence was limited to a wagering licence and a betting licence granted under Pt 3 Ch 4. Section 4.2.4A of the GRA provided that Pt 3 only applied to wagering licences and gaming licences issued in 1994 and prevented any further grant of those licences. The Court held that the provision was inserted for a number of reasons including a staged sunset of the old gaming regime as well as limiting the operation of certain sections in Pt 3 Ch 4 in the event temporary licences were granted. It did not, according to their Honours, deprive s 4.2.12 of any practical content and the principle of redundancy was therefore not engaged.

The Court also rejected Tabcorp’s alternative argument that the actions of the State had impinged upon the principle of legality. Their Honours held that the right given under the terminal payments provision was contingent as opposed to vested and moreover it was contingent on the issuing of new licences which Tabcorp knew the government may not issue. Therefore, the terminal payment entitlement was not taken away by the actions of the State government, the entitlement to that right was simply not exercised.




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