Christopher Fitzsimons v The Hon. Grant McBride Minister for Liquor Gaming and Racing for the State of New South Wales Commonwealth Bank of Australia v Christopher Fitzsimons Christopher Fitzsimons v TAB Limited.. - [2008] NSWSC 782

No judgment structure available for this case.

CITATION: Christopher Fitzsimons v The Hon. Grant McBride Minister for Liquor Gaming and Racing for the State of New South Wales Commonwealth Bank of Australia v Christopher Fitzsimons Christopher Fitzsimons v TAB Limited Commonwealth Bank of Australia v Christopher Fitzsimons [2008] NSWSC 782

HEARING DATE(S): 30/6/08, 1/7/08, 2/7/08, 3/7/08, 4/7/08, 9/7/08, 14/7/08, 17/07/08 and 22/07/08

JUDGMENT DATE :
4 August 2008

JUDGMENT OF: McDougall J at 1

DECISION: See paragraph [147] of the judgment.

CATCHWORDS: GAMING AND WAGERING - s81 Totalizator Act 1997 – whether Minister’s approval of credit betting facility valid – whether facility offered to customer within terms of approval – whether obligations of debtor secured or guaranteed – restitution – whether bets accepted in contravention of s81 void – whether guilty knowledge or intent necessary – causative mistake – quantification of restitution – defences – change of position – estoppel.

LEGISLATION CITED: Banking Act 1959
Casino Control Act 1992
Gaming Machines Act 2001
Interpretation Act 1987
Public Lotteries Act 1996
Totalizator Act 1997
Trade Practices Act 1974
Unlawful Gambling Act 1998

CATEGORY: Principal judgment

CASES CITED: Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119
Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 81 ALJR 1622
David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353
Dextra Bank and Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193
Fitzgerald v FJ Leonhardt Pty Limited (1997) 189 CLR 215
General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd (2007) 227 CLR 305
Nelson v Nelson (1995) 184 CLR 538
Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1988] QB 216
Sunbird Plaza Pty Ltd v Maloney (1987) 166 CLR 245
Verwayen v The Commonwealth (1990) 170 CLR 394
Yango Pastoral Company Pty Limited v First Chicago Australia Limited (1978) 139 CLR 410

TEXTS CITED: Macquarie Dictionary
Oxford English Dictionary
Stroud's Judicial Dictionary

PARTIES: Christopher Ronald Fitzsimons (Plaintiff) (50161/07)
The Hon Grant McBride Minister for Liquor Gaming and Racing for the State of New South Wales (Defendant)
TAB Limited (Second Defendant)
Commonwealth Bank of Australia (Plaintiff) (50164/07)
Christopher Ronald Fitzsimons (First Defendant)
Maria Angela Fitzsimons (Second Defendant)
Christopher Ronald Fitzsimons (Plaintiff) (50167/07)
TAB Limited (First Defendant)
Tabcorp Holdings Limited (Second Defendant)
Commonwealth Bank of Australia (Plaintiff) (50053/08)
Christopher Ronald Fitzsimons (First Defendant)
Maria Angela Fitzsimons (Second Defendant)

FILE NUMBER(S): SC 50161/07; 50164/07; 50167/07; 50053/08

COUNSEL: T Alexis SC / G Pulsford (Mr Fitzsimons)
Ms Grubisa (Mrs Fitzsimons and Mrs Roberts)
A A Henskens (CBA)
J Sheahan SC / P Brereton / B Kremer (TAB/Tabcorp)
R M Foreman (Westpac)
S Free (Minister and the State)

SOLICITORS: Lyons & Lyons Solicitors (Plaintiffs)
Henry Davis York (CBA)
Allens Arthur Robinson (TAB/Tabcorp)
Minster Ellison (Westpac)
I V Knight Crown Solicitors Office (Minister and the State)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

4 August 2008

50161/07 CHRISTOPHER RONALD FITZSIMONS v THE HON GRANT McBRIDE MINISTER FOR LIQUOR GAMING AND RACING FOR THE STATE OF NEW SOUTH WALES & 1 ORS
50164/07 COMMONWEALTH BANK OF AUSTRALIA v CHRISTOPHER RONALD FITZSIMONS & 2 Ors
50167/07 CHRISTOPHER RONALD FITZSIMONS v TAB LIMITED & 1 ORS
50053/08 COMMONWEALTH BANK OF AUSTRALIA v CHRISTOPHER RONALD FITZSIMONS & 2 ORS

JUDGMENT

1 HIS HONOUR: For a number of years, the activities of the second defendant (TAB) have included the operation of an off - course totalizator in New South Wales. The first cross-claimant (Mr Fitzsimons) was for at least some of those years up until mid 2006 an account customer of TAB or its predecessor, the Totalizator Agency Board of New South Wales. Mr Fitzsimons gambled very large amounts of money through TAB’s totalizator. For the financial year ended 30 June 2001, Mr Fitzsimons gambled about $3.5 million. In the following four financial years, the total of that gambling exceeded $11 million. To do so, he utilised an account with TAB. Not surprisingly, TAB regarded him as a “premium customer”.

2 In March 2003, TAB offered Mr Fitzsimons a credit facility (known as a “Premium Customer Staking Facility”), with a weekly credit limit, or line of credit, of $5,000.00 on his account. Mr Fitzsimons accepted that offer on 21 March 2003. Thereafter, and up until his account with TAB was suspended in June 2006, Mr Fitzsimons used the credit facility on a weekly basis.

3 Section 81 of the Totalizator Act 1997 prohibits the acceptance of totalizator bets on credit, except in narrowly defined circumstances. The principal question with which I am concerned is whether the credit facility offered by TAB to Mr Fitzsimons falls within the limited authorisation for credit betting given by s81. Mr Fitzsimons claims that it does not. Thus, he claims to be entitled to restitution in respect of all bets made by him utilising the facility.

The issues

4 The parties substantially agreed on the issues for decision. To the extent that they disagreed, their statement of the issues, which I set out below, indicates the extent of the disagreement. In my view, nothing turns on the disagreements. The issues, as stated by the parties, are as follows (I omit references to the evidence):

Issues between Mr Fitzsimons, the TAB parties and the State

Totalizator Act

TAB and State version:

or guaranteed

Mr Fitzsimons’ version:

(b) TAB and State version:

was the approval nevertheless valid

Mr Fitzsimons’ version:

were the obligations of the debtor nevertheless secured

Issues between Mr Fitzsimons and the TAB parties

(b) Alternatively, if the answer to 1(b) is yes, was the facility in accordance with the arrangements by virtue of the matters in point 3 of TAB’s letter of 5 August 2002?

TAB version:

is a bet accepted in contravention of the section void

Mr Fitzsimons’ version

(b) If so, is it necessary to establish that TAB had guilty knowledge or intent before the section can be found to have been contravened?

(c) Has Mr Fitzsimons established any relevant causative mistake on his part in:

(ii) in repaying moneys to TAB in discharge of the loans arising from the credit betting facility from time to time?

4. Is TAB able to rely upon a change of position defence and if so, to what extent?

5. Is TAB able to rely upon a defence of estoppel and if so, to what extent?

6. What form of restitution, if any, is Mr Fitzsimons entitled to including the giving of any counter-restitution?

Procedural history

5 There are four related sets of proceedings in this Court, in which the issues that I have just described were raised. Two of them were proceedings by the Commonwealth Bank of Australia (CBA) against Mr Fitzsimons and the other cross-claimants (his wife, Mrs Fitzsimons and their daughter, Mrs Roberts). CBA sought judgment for amounts owed on various loan accounts, and for possession of various properties mortgaged to it by way of security for those accounts. The issues between CBA, Mr Fitzsimons, Mrs Fitzsimons and Mrs Roberts have been resolved. However, in one of those proceedings (50164 of 2007), Mr Fitzsimons, Mrs Fitzsimons and Mrs Roberts filed a cross-claim by which they sought to agitate their arguments as to the invalidity of the credit facility extended to Mr Fitzsimons, and the consequences of any invalidity.

6 In addition, Mr Fitzsimons commenced proceedings against the Minister for Liquor, Gaming and Racing for the State of New South Wales, in which proceedings Mr Fitzsimons asserted that the approval given by the Minister to TAB’s Premium Customer Staking Facility was invalid. The Minister, through the State of New South Wales, is now a cross-defendant to the cross-claim to which I have referred in the preceding paragraph, and the issues between Mr Fitzsimons and the Minister were articulated, and are to be decided, by reference to that cross-claim and the agreed issues in respect of it.

7 Mr Fitzsimons also commenced proceedings against TAB and its parent Tabcorp Limited, in which he asserted the invalidity of the credit facility extended to him by TAB. Again, the issues between Mr Fitzsimons and TAB (and, to the very limited extent that it is relevant, Tabcorp) are to be litigated pursuant to the cross-claim and the agreed issues formulated in respect of it.

8 Mrs Fitzsimons and Mrs Roberts have ceased to be active parties. Orders were made by consent disposing of the cross-claim as between them, TAB and Tabcorp. The cross-claim between them and the State has not been resolved, but Mrs Fitzsimons and Mrs Roberts have taken no active part in the prosecution of that cross-claim.

9 On 5 June 2008 the Court ordered that all issues of liability be determined separately from and before all issues of quantum. These reasons are concerned with the issues of liability that the parties have propounded.

The totalizator

10 A totalizator is defined by s6 of the Totalizator Act as follows:

6 Meaning of “totalizator”

totalizator

(a) a system used to enable persons to invest money on events or contingencies with a view to successfully predicting specified outcomes of those events or contingencies and to enable the money left after the deduction of commission to be divided and distributed among those persons who successfully predict those outcomes, and

11 A totalizator operates by placing all bets of a particular type on a particular event (for example, a “win” bet on a particular race) into a specific pool. The odds on which a bet is made are not set at the time the bet is made. They are updated from time to time, as further bets are made and added to the pool. When the outcome of the event is decided, the pool is distributed. The operator of the totalizator takes a commission. That commission is distributed in various ways, to which it will be necessary to return. What remains in the pool is then distributed among the gamblers who correctly predicted the outcome of the event.

12 If a gambler makes a bet on a race with a bookmaker, the bookmaker is the counterparty of the bet. The bookmaker is entitled to keep the amount of any losing bet, and obliged to pay the agreed outcome on any winning bet. That is not the case with a bet made on the totalizator operated by TAB. TAB is not the counterparty of any bet made. It is not entitled to keep the amount of losing bets. Although it pays winning bets, it does so out of the pool, at odds that are calculated when the pool closes (which will happen at or shortly before the start of the particular event in respect of which the pool is held). In effect, all gamblers who bet on the totaliser in respect of a particular event bet against each other, and TAB operates the totalizator for them.

Distribution of commission

13 By s69(1) of the Totalizator Act, a licensee may deduct from each pool an amount not exceeding 25% of the total “invested” (to use the statutory euphemism) in that pool. However, by subs(2), the total deductions from all pools in any financial year should not exceed 16% of the total of those pools, unless the Minister has by order in writing directed some other percentage in place of 16%.

14 In practice, TAB deducts commissions ranging from 14.5% to 25% from particular pools. The total commissions deducted by TAB from all pools are paid out as follows:

(1) 19.11% is paid to the State of New South Wales;

(2) 21.9965% is paid to bodies representing the racing industry in New South Wales;

(3) 9.09% is paid to the Australian Tax Office by way of GST;

(4) The remainder of the commission is used to pay TAB’s operating expenses. After those expenses are paid, 25% of the residue is paid to bodies representing the racing industry;

15 Most of the payments out described in the preceding paragraph are made on a weekly basis; some are apparently made at other intervals. The payments are reconciled every six months.

The Premium Customer Staking Facility

The constraints imposed by Section 81

16 Section 81 appears in part 7 of the Totalizator Act. That part is concerned with “[o]ffences and other provisions relating to totalizators”. Section 81 reads as follows:

81 Credit betting prohibited

Maximum penalty: 20 penalty units.

17 In many cases, the “person” who accepts a bet on a totalizator will be the operator of the totalizator. In New South Wales, where the bet is accepted on TAB’s off - course totalizator (which, by s14 of the Totalizator Act, TAB is given an exclusive licence to conduct) that person will be TAB. However, TAB may act through an agent or a contractor. Those expressions are defined in section 5(1) of the Act as follows:

5 Definitions

agent

contractor

….

18 Thus, in particular cases, the person who accepts a bet on the off - course totalizator conducted by TAB may be TAB’s agent or contractor.

19 It was common ground that s81 was to be construed by reference, among other things, to the objects of the Act stated in s3. It is convenient to set out s3 at this point:

3 Objects of Act

(a) to make provision for the proper conduct of totalizator betting in the public interest and to minimise any harm associated with such betting.

TAB seeks approval for a credit betting facility

20 On 28 March 2002, TAB wrote to the then Minister for Gaming and Racing. The letter referred to pressures imposed on TAB’s wagering business because of increased competition in the gambling environment, both within New South Wales and elsewhere. It noted that “TAB remains uncompetitive in attracting high-value wagering customers who for various reasons do not bet in cash”. The letter stated:

“TAB does not wish to offer credit betting, however the company needs to be able to provide high–value players with a convenient way of funding betting transactions other than by way of cash…

TAB therefore seeks approval for an alternative staking facility for premium customers under s81(1)(c)… .”

21 The letter set out the “general elements” of the proposed facility. They included that:

(1) “A formal instrument securing the staking facility… be required by TAB eg. cheque, credit card or similar device.”

22 There were discussions between the Minister, employees of his department and representatives of TAB. Following those discussions, TAB wrote again to the Minister, on 10 May 2002, making a “formal application” for the establishment of a credit facility to be offered to selected “high-value” customers of TAB.

23

Relevantly, the proposed facility was described as follows:

… the general elements sought by TAB are as follows:

(i) TAB service to be quarantined to high value customers, defined as current “Special” (SPC) Account customers and others who may qualify at similar levels of weekly investment.

For your information, TAB has approximately 350 “SPC” Account customers from a total account base of approximately 180,000.

(ii) TAB betting facility offered to individual customers to be secured by the provision to TAB, by the customer, of a credit card, personal cheque, bank guarantee, negotiable instrument or any similarly acceptable financial instrument.

(iii) TAB will ensure that there is no financial risk to our Wagering business stakeholders; viz NSW Government (Wagering Taxes), NSW Racing Industry (Product Fees) and the investing public generally (totalizator pools etc); in respect of the operations of the scheme.

24 The Department wrote to the Crown Solicitor on 30 May 2002. The letter stated, among other things:

The TAB has proposed that a facility be offered to individual customers to be secured by provision to the TAB, by the customer, of a credit card authority, personal cheque, bank guarantee, negotiable instrument or any similarly acceptable instrument.

Could you please advise, if the above “securities/guarantees” could be arrangements approved by the Minister pursuant to s.81(1)(c) of the Act. If not, what types of arrangements could the Minister approve?

25 The Crown Solicitor’s advice was given on 19 July 2002. In paragraph 1.2, the advice repeated the description of the proposed facility given in the letter of 30 May 2002. It then canvassed a number of issues and concluded at paragraph 4.1 that all of the proposed arrangements “would appear to be securities or guarantees which could be the subject of arrangements approved by the Minister for the purposes of s81”.

26 Specifically, in relation to credit cards, the advice stated:

3.13 A credit-card authority is, in effect, an arrangement where the financial institution guarantees to provides [sic] funds up to the limit authorised by the institution, which are not the account holder’s own funds but are “on credit” from the financial institution. Assuming that the customer has not reached the limit of his/her credit as approved by the financial institution, the funds will be guaranteed by the financial institution. If the funds are drawn upon, for example, by the TAB to satisfy a debt, the cardholder becomes liable to the financial institution to repay the amount pursuant to the terms and conditions of the credit card contract between the holder and the financial institution.

27 The Minister’s approval to the proposed credit facility was given by letter dated 2 September 2002. That letter referred to the proposal dated 5 August 2002 and stated, among other things:

Totalizator Act

Mr Fitzsimons’ credit facility

28 TAB evolved a form of letter that it sent to selected “high – value customers”. Apparently, representatives of TAB had had discussions with those customers to ascertain whether they were interested in a credit facility. If they were, the letter was sent to them for completion and return.

29 In Mr Fitzsimons’ case, the letter (omitting formal and irrelevant parts) read as follows:

I refer to our recent discussions in relation to my commencing credit betting with TAB Limited.

I confirm that I will settle the net amount of any credit bets with Tab Limited on a weekly basis and that Tab Limited will also settle any amounts owing to me on a weekly basis.

I request that Tab Limited provide me with credit betting facilities up to a credit limit of $5,000.00.

I understand that the Minister’s approval for Tab Limited to conduct credit betting requires that security be provided by me to Tab Limited by one of the following 5 methods.

Credit card:

As security for payment, I provide my credit card details below:

Card Type:

Card Number:

Expiry Date:

Personal Cheque:

I will provide Tab Limited with a personal cheque for the amount of my credit limit, shown above, to be held by TAB Limited as security for payment. The cheque is provided on the basis that it will not be presented, by TAB Limited unless I am default. If it is presented, TAB Limited will immediately pay to be [sic] the balance remaining after deduction of the default amount.

Bank Guarantee:

As security for payment, I will provide Tab Limited with a bank guarantee for the amount of my credit limit shown above.

Promissory Note:

As security for payment, I unconditionally promise to pay the amount of my credit limit shown above demand to Tab Limited.

Letter of Credit:

As security for payment, I will provide Tab Limited with a letter of credit from a third party for the amount of my credit limit shown above.

30 Mr Fitzsimons placed a handwritten tick against the words “credit card”. He filled in the details of the card type, card number and expiry date. He signed the letter and returned it to TAB.

31 The credit card described by Mr Fitzsimons as “my credit card” was not in fact his. It was a card issued on an account between CBA and Mrs Roberts. For reasons that were explored in the evidence but not referred to in submissions, Mrs Roberts gave at least a limited authority to her father to operate on that account.

32 Mr Fitzsimons’ cross-claim asserted that even if a credit card could in general amount to security or a guarantee for the purposes of s81(1)(c), the particular card did not because it was not in his name. By the time of final submissions, Mr Alexis of Senior Counsel, who appeared with Mr Pulsford of counsel for Mr Fitzsimons, accepted that on any view of the letter of 21 March 2003, Mr Fitzsimons had represented that the card was his, and that it was not open to him to take any point based on the contrary, true, state of facts. In those circumstances, it is unnecessary to go into the controversy as to how, when and for what purposes Mrs Roberts permitted her father to use the credit card.

33 TAB required Mr Fitzsimons to provide an authority to enable debit balances on his credit facility to be settled by direct debit to a nominated bank account. That authority was provided, in a form satisfactory to TAB, on 11 April 2003 (a previous version, with alterations, had been provided on 9 April 2003). The account nominated was a joint account with CBA, to which Mr Fitzsimons and his wife and daughter were parties.

34 From time to time, TAB utilised the direct debit authority to access the joint account and recoup the debit balance on Mr Fitzsimons’ credit facility. There were at one stage disputes as to the validity of this process. Those disputes have fallen away.

35 Mr Fitzsimons placed his first bet using the credit facility on 11 April 2003. As I have said, he continued to utilise it until his account was suspended in June 2006.

36 Not all bets placed by Mr Fitzsimons utilised the available credit. From time to time, his betting account was in credit (for example, when winnings had been paid into it). Over the period that the credit facility was available to Mr Fitzsimons, the bets made by him can be divided into three categories:

(1) Bets made which were paid out of funds standing to the credit of the account: i.e., which did not involve any draw - down against the $5,000.00 line of credit available to Mr Fitzsimons under the facility.

(2) Bets made which were paid for partly out of funds standing to the credit of the account and, after those funds were exhausted, partly by drawing down against the line of credit.

37 Mr Gulpers, who is TAB’s general manager, customer service, gave the following unchallenged evidence (affidavit affirmed 3 July 2008)

5. I also only permitted Mr Fitzsimons to use the Premium Customer Staking Facility on the faith of his promise to repay to TAB any amounts from time to time owing by him from the use of the facility, and upon his conduct in ultimately honouring the payment of the amount of his debt from week to week.

6. Had Mr Fitzsimons not promised in his initial application to repay the amounts he owed, I would not have let him commence using the Premium Customer Staking Facility.

7. Had Mr Fitzsimons ever made clear to me that he did not intend to repay any amounts owing to TAB as a result of his use of the Premium Customer Staking Facility, or had I ever formed the belief that he did not intend to or could not repay the amounts owing by him, I would immediately have blocked his access to the Premium Customer Staking Facility and ensured that TAB did not accept any bets from his using that Facility.

First issue: validity of the Minister’s approval

The proper construction of s81(1)

38 Mr Alexis submitted that s81 was a consumer protection measure. He submitted that the legislature’s aim was to require that all bets be paid in cash (or the equivalent of cash) unless the gambler were a person of a financial standing sufficient to be able to provide security, or a guarantee, for the repayment of amounts paid out of a credit betting facility.

39 Mr Sheahan of Senior Counsel, who appeared with Mr Brereton of counsel and Mr Kremer of counsel for TAB and Tabcorp, submitted that the object of s81 was to protect the integrity of the totalizator system: specifically, the integrity of pools. Mr Free of counsel, who appeared for the State, took a similar approach. He submitted that the object of s81 was to protect the integrity of the totalizator and the TAB’s betting operations from the risk associated with default by a credit bettor. However, the submissions of Mr Sheahan and Mr Free diverged as to how the integrity of the operation of the totalizator was to be protected.

40 Mr Free submitted that there was a perceived need to ensure the integrity of the totalizator, so that all bets are properly accounted for and included in the totalizator pool. Thus, he submitted, the relevant “guarantee” in this case was the promise by TAB set out in numbered paragraph 3 of its letter of 5 August 2002 to “underwrite any financial risk to its Wagering business stake holders in respect of the operation of the scheme”.

41 I do not accept Mr Free’s submission as it was developed – I exclude, for the moment, the fundamental submission as to the legislative purpose enacted in s81. If the mechanism of s81(1) is followed, there is no risk to the integrity of any pool, and hence no “financial risk” to the “stakeholders” in that pool (at least, no risk deriving from any shortfall in payments into the pool). That is because the fundamental requirement of s81(1) is that every bet must be paid for “at or before the times [it] is made”. That is so whether the bet is paid for in cash (para (a)), by debit against an account is sufficiently in funds (para (b)) or by debit against an available credit betting facility of an approved kind (para (c)).

42 In each case, the payment for the bet is effected, and the pool for the event in respect of which the bet is made is credited, at the latest at the time when the bet is made. The identity of the actual payer may vary. For para (a), the payer will be the person who makes the bet. For para (b), the payer will be the person or entity in whose name the account is held. For para (c), the payer will be the credit provider.

43 Where payment for a bet is made on credit, as contemplated by para (c), the pool bears no credit risk. That credit risk is born by the credit provider. Nothing in s81, or for that matter in anything else in the Totalizator Act to which I was taken, suggests that a credit provider whose customer makes default has any right of recourse or indemnity out of the pool. In a practical sense, there could be no such right of recourse or indemnity, because the great bulk of the pool - the 84% that on average is distributed to successful gamblers – will be paid out within a short time after the completion of the event to which the pool relates, and most of the balance will be paid out within a week or so after.

44 At no time can there be any obligation of the gambler to the pool that is required to be, or is capable of being, secured or guaranteed. The only obligation of the gambler to the pool is to pay the bet; and that obligation is satisfied, at the latest, when the bet is made. Thus, I do not accept Mr Free’s submission that “the relevant policy concern is with protecting the totalizator… from default by credit bettors” (written outline, para 7).

45 As I have noted, Mr Sheahan also submitted that the legislative intention enacted in s81 was that the totalizator pools be available in full for distribution in accordance with the statutory scheme. However, Mr Sheahan submitted, that legislative scheme was satisfied by the requirement that payment for any bet was to be made at or before the time the bet is made. For the reasons that I have given, I accept that submission.

46 An acceptance of that submission does not however cast a great deal of light on the legislative policy underlying s81(1)(c). As I have noted, Mr Alexis submitted that the section, in particular para (c) was directed at consumer protection. I find that a little difficult to accept. If the legislature wished to protect people against the undoubted risk of destitution through betting on credit, it could simply have legislated to outlaw such betting. Such a stand would not be unique. See, for example, s74(1) of the Casino Control Act 1992 (noting also subs(3)), s43 of the Public Lotteries Act 1996 and s75 of the Gaming Machines Act 2001. Those provisions read, so far as relevant, as follows:

74 Credit prohibited

….

(3) It is a condition of a casino licence that an automatic teller machine or any like device is not to be installed within the boundaries of the casino.

43 Credit betting prohibited

cheque

Cheques and Payment Orders Act 1986

75 Prohibition on gaming machines that provide cash or credit otherwise than as a prize

A hotelier or registered club is guilty of an offence if an approved gaming machine available for use in the hotel or on the premises of the club is capable of being operated to provide cash or credit otherwise than as a prize.

47 I accept that other provisions of part 7 of the Totalizator Act are directed at consumer protection. Section 80 (imposing, in conjunction with the regulations and rules, restrictions on advertising) and ss82 to 84 (imposing prohibitions relating to minors’ betting) are examples. But it does not follow that s81 is to be construed as being another attempt to give effect to the laudable objective, set out in s3(a), of minimisation of harm associated with totalizator betting. In particular, it does not follow that the implication of any such purpose has a great deal to do with the real question, to which I now turn. That is what is meant by the words “secured or guaranteed” in their statutory context?

Para (a): “ secured or guaranteed”

48 At the outset, it is necessary to note, as Mr Free correctly submitted, that the real question for the purposes of the first issue is whether it was open to the Minister, pursuant to s81(1)(c), to approve the arrangements for a credit betting facility proposed by TAB in its letter of 5 August 2002. In other words, if the arrangements described in that letter are capable of amounting to arrangements in the nature of security or guarantee, the issue must be answered adversely to Mr Fitzsimons.

49 The concept of security has been the subject of exposition in a great number of cases. It is unnecessary to go to more than one: the decision of the High Court of Australia in General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd (2007) 227 CLR 305.

50 The Court pointed out at 312 [20] that the meaning of the word “secures” might vary according to the context in which it was used. Their Honours said that that word “is sometimes used in a broader sense of something that gives a right to look to some source of payment over and above the personal liability of the debtor. Thus, for example, a guarantee from a third party may be said to secure payment of a debt”.

51 At 312 [21], their Honours referred with apparent approval to a meaning given by Stroud’s Judicial Dictionary (sixth edition, 2000, at 2390) for the word security: “anything that makes the money more assured in its payment or more readily recoverable”.

52 Mr Alexis cited dictionary definitions of “security”, which referred among other things to property given or deposited as security for obligations undertaken (see, for example, the Macquarie Dictionary, third revised edition and the Oxford English Dictionary, second edition). I do not think that those dictionary definitions can be regarded as exhaustive of the meaning of the word “security” when used in a statutory context.

53 A guarantee is generally to be regarded as a promise by one person to undertake liability for the debt, default or miscarriage of another: see for example Mason CJ (with whom Deane, Dawson and Toohey JJ agreed) in Sunbird Plaza Pty Ltd v Maloney (1987) 166 CLR 245 at 254.

54 In the present case what is used is the composite expression “secured or guaranteed”. There may be an overlap between those concepts, as was pointed out in GMAC at 312 [20]. The two should be considered together, with each informing the meaning to be given to the other to the extent that it is capable of so doing.

55 Thus, whilst I am not sure that I understand the reasons underlying the somewhat differing formulation of the first part of the first issue, I think that it is appropriate to consider the question by reference to the language of the statute, and in particular by reference to the composite expression “secured or guaranteed”.

56 Section 81(1)(c) does not appear in a statutory context that suggests that the meaning of “secured” should be limited to “secured by mortgage or charge over property”. On the contrary, I think, the context in which it appears, and its use in close association with the word “guaranteed”, indicate that “secured” is to be given a wide meaning, of the kind indicated by Stroud. Thus, I think, for the purposes of s81(1)(c) the obligations of the debtor to the credit provider may be “secured” by an arrangement if that arrangement can be said to make the debt “more assured in its payment or more readily recoverable”.

Credit card as security

57 By the end of the case, it was I think accepted that a credit card might be “security” for the purposes of s81(1)(c). But in case I am wrong in thinking that there was agreement on this point, I will deal with it.

58 A credit card is issued pursuant to a contract between an “issuer” and a “cardholder”. Where a credit card is used to acquire goods or services from a “merchant”, the merchant agrees to forego payment from the cardholder and instead accepts payment (or the promise of payment) either from the issuer or, I think more usually, from a financial institution – an “acquirer” – that has agreed to acquire credit card transactions from that merchant. The issuer gives the cardholder a line of credit whereby the cardholder can use the card to make “payment” for goods or services in the way that I have described, and make repayments to the issuer at some later time. If the issuer and the acquirer are different, the issuer reimburses the acquirer for each transaction acquired by the acquirer for use of the card in question.

59 Thus, a person who incurs a debt on credit may agree with the credit provider to meet those obligations by charging them to a credit card account. Where this happens, the credit provider, like the merchant, will look to the acquirer (who may or may not be the issuer) for payment of the debt. If the debt is paid, the issuer will debit the cardholder’s account, and the cardholder will become liable to pay the issuer in accordance with the contract between them.

60 In the circumstances that I have postulated, the credit provider may look to the debtor for payment of the debt. But it may look also to the financial institution standing behind the debtor’s credit card. The credit provider may, if it wishes, simply process a transaction for the amount of the debt whereby the acquirer acquires the debt and pays the amount of the debt (presumably, less any applicable commission) to the credit provider. In those circumstances, the credit provider has two sources of recovery. One is the debtor. The other is, speaking colloquially, the credit card.

61 Thus, I think, in the sense given by Stroud, the provision of a credit card may make the debt “more assured in its payment or more readily recoverable”.

62 However, for this to be so, it is necessary that the credit provider be authorised to charge the amount of the debt to the credit card. Mr Alexis submitted that the arrangements approved by the Minister did not include any such authority, and thus that they could not fall within s81(1)(c).

63 I do not accept that submission. What was proposed was that the credit facility “will be secured by the provision to TAB, by the customer, of … [a] Credit Card”. It is not correct to focus on the words “Credit Card” in isolation. It is necessary to recollect that they are to be read in conjunction with the preceding words – including that the amounts owing under a credit betting facility “will be secured by” that credit card.

64 The Minister was concerned with the substance of the arrangements, not with their detail. In my view, he was entitled to assume that if a credit card were to be given to TAB as “security” it would be given in such a way as to enable TAB to have recourse to it in the event of default. I do not think that it was necessary that, for the arrangements to be capable of approval by the Minister, they should have specified the detail of the mechanism whereby that result would be achieved in a particular case.

Para (b): TAB’s undertaking to underwrite

65 Since what I have said means that issue 1(a) must be answered “yes”, it is unnecessary to deal in detail with issue 1(b). Were it necessary to do so, I would answer it “no”, for the reasons briefly outlined at [40] and [41] above.

Conclusion on first issue

66 Accordingly, I conclude that it was open to the Minister, pursuant to s81(1)(c) of the Totalizator Act, to approve the arrangements described in TAB’s letter of 5 August 2002. Issue 1 should be answered accordingly.

67 It follows that Mr Fitzsimons’ proceedings against the Minister (50161 of 2007), and the cross-claim against the Minister in proceedings 50164 of 2007, must be dismissed with costs.

Issue 2: was Mr Fitzsimons’ credit facility in fact secured or guaranteed?

68 Mr Alexis submitted that the credit betting facility offered to and accepted by Mr Fitzsimons was not one under which Mr Fitzsimons’ obligations were “secured or guaranteed in accordance with arrangements approved by the Minister”. This was so, Mr Alexis submitted, because there was nothing in the arrangements between Mr Fitzsimons and TAB relating to the facility that authorised TAB to debit the proffered credit card.

69 Mr Alexis raised other points as well. These included that:

(1) There was no certainty that the amount of credit available in respect of the credit card account would be sufficient to meet any liability of Mr Fitzsimons to TAB under the credit betting facility.

First point: secured or guaranteed in accordance with approved arrangements

70 I note that this question is to be considered and resolved on the basis that, as between Mr Fitzsimons and the TAB, Mr Fitzsimons cannot take advantage of the circumstance that the credit card in question was in Mrs Roberts’ name.

71 It is necessary to look at the whole of the letter of 21 March 2003. Mr Fitzsimons acknowledged, by the fourth (unnumbered) paragraph on the first page of that letter, that the Minister’s approval required him to give security to TAB by one of the five specified methods. In relation to the chosen method, credit card, Mr Fitzsimons gave what he said were his credit card details “[a]s security for payment”. At the conclusion of the letter, Mr Fitzsimons confirmed that this was his “preferred method of security”.

72 There is no doubt that the document could have been better worded. Mr Fitzsimons could have stated, for example, that TAB was authorised to charge any amount owing by him and unpaid to the nominated credit card account. But when one looks at the document as a whole, I think that this is the construction to be given to it in any event.

73 Clearly, the relevant commercial purpose that the parties sought to achieve was the giving of security by Mr Fitzsimons to TAB in consideration for TAB’s agreement to provide him with credit betting facilities. The credit card could only be security if TAB were authorised to debit the credit card, or more accurately the underlying account, with any amount owing from Mr Fitzsimons from time to time under the credit betting facility. In the absence of such implied authority, the credit card was no security at all.

74 In my view, the proper construction of the letter as a whole, flowing from the matters to which I have referred, is that it does authorise TAB to charge the nominated credit card account with amounts from time to time payable to TAB under the credit billing facility. Alternatively, and to give business efficacy to the contract for the provision of that facility, such a term should be implied.

75 Thus, I conclude, the first point should be resolved adversely to Mr Fitzsimons.

Second point: extent of credit available from time to time on card account

76 I do not accept this submission (summarised at [69(1)] above). Something that is offered as security for the payment of a debt does not lose its character of security because, when recourse is had to it, it proves to be insufficient.

Third point expiry date

77 Credit cards are issued pursuant to a contract between the issuer and the cardholder. It is common experience that cards have an expiry date. But the contract is not coterminous with the card. Cards are issued from time to time pursuant to the contract; and as long as cards are issued, the cardholder remains able to operate the account.

78 In this case, there is no evidence as to whether (or not) a replacement card was issued to take effect from March 2006. There is however evidence that debits and credits continued to be made to the account after February 2006. For example, a new charge was debited to the account on 13 March 2006. Interest was debited, and payments were credited, thereafter. Statements continued to be issued until at least October 2006: well after the credit betting facility was closed.

79 In the circumstances, there is no basis for concluding that any attempt by TAB to have recourse to the credit card facility after February 2006 would have failed.

80 It follows that:

(1) Mr Fitzsimons’ obligations to TAB were secured until the end of February 2006 (for the reasons that I have given); and

Conclusion on second issue

81 It follows that the second issue must be answered adversely to Mr Fitzsimons. It is unnecessary to consider the alternative way in which this issue was framed, given that question 1(b) of the issues did not arise and, had it arisen, would have been answered in the negative.

Third issue: consequences of any (hypothetical) illegality

82 The conclusion that I have reached make it unnecessary to consider this and the following issues. However, given that the resolution of these issues would require findings of fact, I shall deal with them in case I am wrong in what I have said so far.

The parties’ submissions

83 Mr Alexis submitted that each contract – i.e., each bet - made in contravention of s81(1)(c) of the Totalizator Act was void. Thus, he submitted, all monies paid pursuant to each such contract were paid under a mistake: namely, that TAB was entitled to demand, and Mr Fitzsimons was obliged to make, those payments. Mr Alexis submitted that this mistake was common to TAB and Mr Fitzsimons. The consequence of the mistake, Mr Alexis submitted, was that Mr Fitzsimons was entitled to restitution of all monies paid by reason of the mistake. Mr Alexis accepted that Mr Fitzsimons would be required to give credit, or as Mr Alexis put it make counter-restitution, for all winnings received.

84 Mr Sheahan submitted that s81(1)(c) did not render void any contract made in contravention of it. Thus, he submitted, there was no operative mistake – mutual or otherwise – by reason of which Mr Fitzsimons made his payments. Mr Sheahan went further. He submitted firstly that Mr Fitzsimons, who bore the onus on this issue, had not demonstrated that he was influenced by any mistake in making the payments in question; and, secondly, that the better inference on such evidence as was available (Mr Fitzsimons having chosen not to give evidence) was that Mr Fitzsimons would have made the payments even if he had been apprised of the possibility of illegality. In any event, Mr Sheahan submitted, restitution should not be ordered against TAB because it had changed its position, on the faith of the payments made to it by Mr Fitzsimons, by paying out in accordance with the statutory scheme each pool into which each bet of Mr Fitzsimons had been “invested”.

The pleaded case

85 Mr Fitzsimons’ “pleaded” case (to use a convenient but inaccurate term in relation to his amended commercial list statement) is less than clear. Paragraph 27 of the contentions in that document reads as follows:

Totalizator Act

86 Mr Sheahan submitted that this paragraph alleged only the acceptance of bets, not the making of any payment. The relevant payments, he submitted, were those made by Mr Fitzsimons weekly to replenish the credit facility. There was no allegation, nor evidence, that any such payment was made on the faith of any mistaken belief.

87 It is not necessary to resolve this point. Mr Sheahan was content to fight the case on the basis that, whether the payments were to be taken as those made by debiting the credit facility each time a bet was made and accepted, or those made weekly to replenish the credit facility, Mr Fitzsimons was asserting that they were made by reason of causative mistake.

Does section 81(1) avoid contravening contracts?

88 This aspect of the debate was conducted by reference to the decision of the High Court of Australia in Yango Pastoral Company Pty Limited v First Chicago Australia Limited (1978) 139 CLR 410 and subsequent cases. In Yango Pastoral, the respondent carried on banking business in Australia without possessing the necessary authority to do so. It thereby contravened s8 of the Banking Act 1959, and was subject to a penalty of $10,000.00 for each day during which that contravention continued. The question for decision was whether a mortgage given by the appellant to the respondent, or guarantees of the appellant’s liability to the respondent, were enforceable.

89 The facts in Yango Pastoral are clearly distinguishable from the facts of this case. In Yango Pastoral, the prohibition was against the carrying on of banking business. There was no express prohibition against the making of contracts in the course of carrying on that unauthorised business. In this case, the statutory prohibition is aimed directly at the making of the contract: a bet that is not made in one of the three authorised ways must not be accepted. It is of course the acceptance of the bet that results in the making of the contract.

90 Jacobs J at 430 stated the general principle as follows:

When a statute expressly prohibits the making of a particular contract, a contract made in breach of the prohibition will be illegal, void and unenforceable, unless the statute otherwise provides either expressly or by implication from its language.

91 Other members of the court – in particular, Gibbs ACJ and Mason J (with whom Aickin J agreed) spoke to similar effect. Gibbs ACJ said at 413:

It is often said that a contract expressly or impliedly prohibited by statute is void and unenforceable. That statement is true as a general rule, but for complete accuracy it needs qualification, because it is possible for a statute in terms to prohibit a contract and yet to provide, expressly or impliedly, that the contract will be valid and enforceable. However, cases are likely to be rare in which a statute prohibits a contract but nevertheless reveals an intention that it shall be valid and enforceable… .

92 Mason J said at 423:

The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognised that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule… [I]t is a matter of construing the statute and in construing the statute the court will have regard not only to its language, which may or may not touch upon the question, but also to the scope and purpose of the statute from which inferences may be drawn add to the legislative intention… .

93 Because Yango Pastoral was not a case of express prohibition, it was unnecessary for the Court to consider the circumstances in which the statute might provide, expressly or by implication, that a contract made in breach of the prohibition might not be void and unenforceable. The same general observation may be made as to subsequent cases.

94 Mr Sheahan noted that s81(1)(c) imposed a penalty for each contravention. He relied on the observations of Mason J in Yango Pastoral at 429, where his Honour stated that there was “much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished.” A little later on the same page, his Honour observed that where “Parliament has provided a penalty which is a measure of the deterrent which it intends to operate in respect of non-compliance… it is not for the court to hold that further consequences should flow”.

95 Gibbs ACJ spoke to similar effect. His Honour said at 413 that “[w]here a statute imposes a penalty upon the making or performance of a contract, it is a question of construction whether the statue intends to prohibit the contract in this sense, that is, to render it void and unenforceable, or whether it intends only that the penalty for which it provides shall be inflicted if the contract is made or performed.”

96 Although their Honours were speaking of a statutory provision, including the imposition of a statutory penalty, that did not directly prohibit the making of the contract in question, their observations may be capable of wider application.

97 The question, of the enforceability of a contract made in contravention of a statutory prohibition, has been considered on many occasions since Yango Pastoral was decided. See, by way of very incomplete example only, Nelson v Nelson (1995) 184 CLR 538 and Fitzgerald v FJ Leonhardt Pty Limited (1997) 189 CLR 215. Both Nelson and Fitzgerald were cases where there was no direct statutory prohibition affecting the contract in question.

98 The question arose recently in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 81 ALJR 1622. In that case, it was alleged that the first respondent, in its dealings with various state and territory purchasing authorities, engaged in anti-competitive conduct contrary to ss46 and 47 of the Trade Practices Act 1974. The principal issue was whether the first respondent was protected by derivative crown immunity. The majority (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) held that it was not. In dealing with that issue, their Honours noted at 1635 [44] that the relevant contravening conduct was unilateral, in the sense that it was only the first respondent that could contravene the provisions in questions. In those circumstances, their Honours said, “[t]he consequences of such illegality for the rights of the respective parties will not necessary be the same”.

99 Their Honours referred at 1635 [46] to the decision of Kerr LJ in Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1988] QB 216 at 273. His Lordship (with whom Parker and Balcombe LJJ agreed) there said that contravention of a unilateral prohibition on entry into a contract does not necessarily mean that the contract is void; it was necessary to consider the mischief at which the statue was directed, the language adopted by the legislature and its scope and purpose, the consequences on the innocent party of avoiding the contract, and other relevant considerations.

100 In the result, Kerr LJ would have decided that the contract of insurance in question was void and unenforceable: see his Lordship’s conclusion at 276. (I say “would have decided” because, his Lordship having concluded that

101 the plaintiffs were authorised by the relevant legislation to write the insurance contracts in question, his consideration of the consequences of contravention were obiter, as his Lordship stated at 267.) However, in reaching that conclusion, his Lordship took into account that the relevant (unilateral) prohibition, had it applied, was directed not only at making contracts of insurance but also at carrying them out (see his Lordship’s reasons at 274). Those latter words confirmed, in his Lordship’s view, that the legislature intended the contracts to be void and unenforceable; although it is clear that his Lordship would have come to the contrary view if those words had not been included.

102 Section 81 is not without its difficulties. The headings states baldly “Credit betting prohibited”. However, the section itself does not do that. Firstly, the actual prohibition is against the acceptance of a bet unless the bet is paid for in accordance with the requirements of subs(1). Secondly, and more substantially, any prohibition that may be spelt out of the section is not absolute. It is clear that a bet paid for in accordance with para (c) is not in any way prohibited. The heading to s81 does not form part of the Act (Interpretation Act 1987, s35(2); the exceptions in subss(3) and (4) do not apply). Nonetheless, it is “extrinsic material” for the purposes of s34 of the Interpretation Act and therefore something that may be taken into account, in the construction of s81, in the circumstances set out in s34(1) of the Interpretation Act. Thus, if there were some doubt that by s81(1) the legislature intended to prohibit credit betting that was not in accordance with para (c), it might be legitimate to have recourse to the heading to consider that issue.

103 As a matter of practicality, the prohibition on the acceptance of certain kinds of bets, described for convenience as “credit betting”, could be regarded as a prohibition on credit betting. That is so even though the prohibition is not directed at both (or all) parties to the bet, but only at one party: the party who accepts the bet. On any view of s81(1) the legislature intended to prohibit a certain kind of conduct.

104 Mr Sheahan submitted that I could not find that s81(1)(c) had been contravened, because there was no evidence that TAB possessed the necessary intent at the time each contract was made. I do not think that this submission answers the problem. In the alternative universe with which this part of my reasons is concerned, each bet in question was accepted although payment for it was not made in any of the three ways authorised by s81(1)(c). Thus, in that alternative universe, the acceptance of the bet was prohibited. It matters not that a prosecution for contravention of the section might fail because the necessary criminal intent could not be established. (I refrain from expressing a view firstly as to whether, contrary to Mr Sheahan’s submissions but as Mr Alexis submitted, s81(1) establishes an offence of strict liability; and secondly, even if it does not, whether the necessary intention could be established.) Objectively, in the alternative universe, TAB – in this case, the “person” at whom the prohibition in s81(1) is directed – accepted a bet that was not paid for in any of the authorised ways.

105 It would follow, if one were to apply the general rule confirmed in Yango Pastoral, that if the making of the bets in question were prohibited by s81(1), each contract made by the acceptance of each bet would be illegal, void and unenforceable unless the Totalizator Act provided otherwise, either expressly or by implication.

106 Mr Sheahan noted that there was no express provision in the Totalizator Act affecting the validity of contracts made in contravention of s81(1). He contrasted this position with s56 of the Unlawful Gambling Act 1998, which provides that any agreement relating to any form of gambling prohibited by that Act is stated to have no effect, and that no action may be brought to recover any money won or paid in connection with any such prohibited gambling.

107 Mr Sheahan submitted that the policy of the Totalizator Act was sufficiently satisfied by the penalty provided in s81(1). In addition, Mr Sheahan referred to other provisions of the Totalizator Act, including:

(1) Section 46, which empowers this Court on the application of the Minister to grant an injunction to restrain conduct in contravention of the Act;

(2) Section 47, which provides for disciplinary action (including cancellation or suspension of licence and the imposition of a monetary penalty) in the case of, among other things, contravention of the Act;

(3) Section 48, providing for the making of rectification orders as an alternative to disciplinary action under section 47; and

108 Mr Sheahan submitted that, the legislature having provided in a number of ways for steps that might be taken in the event of contravention of any provision of the Act, the Court should not impose further consequences.

109 When one looks at the scheme of the Act, and bears in mind the matter to which I have referred already – that the prohibition in s81(1) is unilateral – it seems to me that the legislature has provided a variety of remedies in the case of contravention, and that it is neither necessary nor desirable for the Court to go further, and do that which the legislature refrained from doing. In this context, I think, it is significant that in legislation passed at about the same time dealing with the topic of illegal gambling, the legislature did provide expressly for the irrecoverability of monies payable under an illegal contract.

110 Nothing in the Act suggests that the legislative policy underlying s81(1) requires that a contract made in contravention of it be treated as void: and this is so whether the policy be regarded the protection of consumers or the protection of the integrity of the pools. (It is also, and indeed a fortiori, so if the policy is, as Mr Sheahan submitted in the alternative, protection of the financial stability of the licensee.) The placing and acceptance of each bet constitutes the making of an individual contract. Each such contract has been fully executed. The funds flowing from the making and execution of that contract have been disbursed, in accordance with the scheme that I have already described. It is difficult to see why, having regard to those matters, the legislature would have intended that a person accepting a bet in contravention of s81(1) should be liable to the consequences of having the bet unwound (consequences which ordinarily would follow if the underlying contract were held to be void) as well as the penalty for which the section itself provides.

111 Further, the unilateral nature of the prohibition means that if the contracts in question were to be regarded as void and unenforceable, a gambler in Mr Fitzsimons’ position could not enforce a winning bet against TAB if TAB chose to take the point of illegality. One can of course see that it might be most unlikely that TAB, solicitous of its good name and reputation (to adapt the language of Kerr LJ in Phoenix Assurance at 276), would take that position. Nonetheless, it is legitimate to inquire whether the legislature intended to leave such an important matter to the commercial discretion of the operator of the totalizator. In my view, this consideration suggests strongly that the legislative intention underlying the prohibition contained in s81(1) is vindicated, in the case of breach, by the penalty provided; and that it is not necessary to go further and conclude that any debt made in contravention of the prohibition is void.

112 Thus, I would conclude if the question were to arise for consideration, a contract made in contravention of s81(1) of the Totalizator Act is not void.

No causative mistake

113 As I have noted, Mr Fitzsimons’ pleaded case is that the relevant bets were made under the mistaken belief that TAB was entitled to accept bets from him that were paid for by debiting the amount of the bet to his credit betting facility. On Mr Fitzsimons’ approach, those bets included bets in the second and third categories described at [36] above. Mr Fitzsimons’ pleaded case did not deal with the basis on which from time to time he caused or permitted payments to be made to replenish the credit betting facility.

114 As I have mentioned, Mr Fitzsimons gave no evidence. Thus, this aspect of his case must proceed on the basis of such inferences as are available from the evidence that was adduced for him. It is pertinent to inquire why, in these circumstances, the Court should be astute to draw inferences in Mr Fitzsimons’ favour on the question of causation mistake when he could have, but did not, give evidence. That question becomes more acute if, as Mr Sheahan contended, there is an alternative and indeed compelling inference available on the evidence.

115 In David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353, it was held that someone who paid money under a mistake was prima facie entitled to recover the monies so paid, whether the mistake was one of fact or one of law. The majority (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ) said at 369 that a mistake may signify either a positive belief as to the existence of something or ignorance as to whether or not that thing exists. Mr Alexis relied on that distinction, submitting that the causative mistake in this case was to be classified as one of ignorance of a relevant element: namely, the contravention of s81(1).

116 The Full Court of the Federal Court of Australia had held in David Securities that there was sufficient evidence to justify the inference that the appellants would not have made a payment unless they regarded themselves as legally obliged to make it. The majority in the High Court did not agree that the evidence justified the drawing of that inference. They pointed to the availability of an alternative inference:

Certainly the fact that the Bank required the payments to be made does not of itself warrant the drawing of such an inference, the more so since it is arguable that the appellants may have wished to ensure that there was a roll–over, whatever their belief as to the existence of an obligation to do so.

117 In this case, Mr Sheahan said, there was a strong – indeed, he submitted, irresistible – inference that Mr Fitzsimons would have made repayments regardless of any question of illegality, because he wished to ensure that he would continue to have access, on a weekly basis, to the $5,000.00 credit betting facility. Thus, Mr Sheahan submitted, the Court could not infer that the payments in question were made under or by reason of any operative mistake as to the legality of the underlying betting transactions.

118 Mr Alexis accepted – indeed, embraced with some enthusiasm – the proposition that Mr Fitzsimons made the repayments in question so as to ensure that the credit betting facility remained available to him. However, he submitted, that conduct was underpinned by an assumption as to the legality of the obligation to pay.

119 Mr Fitzsimons was, as he now accepts, an addicted, compulsive gambler. On his own evidence, the only reason that he stopped gambling was that he ran out of money. See his letter dated 16 April 2008 to Dr C Allcock, in which Mr Fitzsimons recognised his “propensity for compulsive addictive gambling”, and “that compulsive gambling is an addiction” that afflicted him, and said “I don’t bet anymore as I don’t have the money”.

120 In my view, the evidence justifies the inference that Mr Fitzsimons would have done whatever was necessary, and within his power to do, to ensure that he continued to have access to the credit betting facility. In the absence of evidence from him, I am not prepared to accept that he would have ceased to make repayments, and thus deprived himself of access to the facility, had he known or been told that there was a concern as to the legality of the underlying arrangements.

121 Thus, I do not accept that any of the payments in question were made by reason of some causative mistake as to the legality of the facility or the existence of a legal obligation to make them.

122 It follows that, even in the alternative universe, there could be no entitlement to restitution. The questions raised by the third issue should be answered accordingly.

Fourth and fifth issues: change of position, estoppel

123 TAB relied on the defence of change of position. The majority in David Securities said at 385 that, once it be accepted that payments made under a mistake should prima facie be recoverable, “a defence of change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust”. On the same page, their Honours said that “the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt”. (In each case, the emphasis is their Honours’.)

124 In this case, it is clear that TAB has paid away all but about 6% of the amount of all bets placed with it, including those placed by Mr Fitzsimons. Mr Sheahan put TAB’s case in three ways:

(1) Firstly, the change of position was “anticipatory”. TAB accepted the bets, and paid out the pools, in the expectation that Mr Fitzsimons would meet his obligations under the credit betting facility (in this context, I should make it clear that I accept Mr Gulpers’ evidence, to which I have referred at [37] above, to this effect).

(2) Secondly, and alternatively, the defence of change of position applied after the first repayment had been made, and weekly thereafter following subsequent repayments (a position again supported, as a matter of fact, by the evidence of Mr Gulpers to which I have just referred).

125 Mr Alexis did not deal in detail with any of these characterisations of the defence. His answer, to which I shall turn in a moment, does not involve some contrary characterisation. Thus, at this stage, I need do no more than say that each of them is made out as a matter of fact, and that the first of them – anticipatory change of position – is supported as a matter of law by the decision of the Privy Council in Dextra Bank and Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193. In that case their Lordships, speaking through Lord Bingham of Cornhill and Lord Goff of Chieveley, said at 204 [38] that expenditure incurred on the faith of a payment expected to be made can give rise to the defence of change of position where that payment is received (and received on the basis that it is a valid payment). What their Lordships said was obiter (they having concluded that the claim for restitution must fail for other reasons). I note however that in Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119, Pullin JA said at [23] that the defence of change of position was “not yet limited… only to cases where there has been an “incurring” of expenditure after the payment is received”; and Buss JA, with whom Steytler P agreed, said at [204], relying on the decision in Dextra Bank, “that the defence [of change of position] may apply to an anticipatory change of position in addition to a subsequent change of position”.

126 Mr Alexis submitted that, however the defences of change of position or estoppel were articulated, they were defeated by TAB’s undertaking, forming part of the approved arrangements, to “underwrite any risk to [the] Wagering business stakeholders in respect of the operation of the” credit betting facility. That promise included as specific elements that TAB would meet the payment of all bets, meet all tax obligations, and meet payment of all entitlements to the racing industry, regardless of the incidents of bad or unpaid debts.

127 In circumstances where, as I have already said, the language of s81(1) is such that there can be no threat to the integrity of a pool from the non-payment of any amount owing to TAB under a credit betting facility, TAB’s offer to underwrite is presumably to be read as a promise that it would not seek to claw back from the pool, or from “stakeholders”, any bad debt owing to it under a credit betting facility. That promise is to be read against the statutory background, which does not appear in any event to give TAB any such right of recoupment.

128 I have to say that I find it difficult to understand why a promise to do what in any event TAB was obliged to do – that is to say, carry the risk of bad debts – affects the defence of change of position. The submission appeared to be based on the underlying proposition that restitution would upset the balance of the pool (see for example, Mr Alexis’ submission at T105.5). But I do not think that this proposition formed a part of TAB’s case; and if it did, it must be erroneous. TAB does not have, and has never had, any entitlement to reopen pools that have been settled by distribution, and claw back money from those to whom distributions were made. The term of the approved arrangements on which Mr Alexis relies does no more than confirm this. The injustice that TAB says arises from the change of position is created by the fact that the change of position is irrecoverable, because there is no right of recoupment.

129 The more fundamental difficulty with the submission appears to me to be that the defence of change of position operates between the parties to a payment made by reason of some causative mistake of fact or law. As the majority in David Securities said at 385, there can be no unjust enrichment when, as between those parties, the recipient of the payment has changed its position, to its detriment, on the faith of the payment. In this case, TAB did so when it paid out the amounts of the various pools; and the fact that it paid out those amounts in circumstances where it could not claw back payments from the payees confirms, rather than denies, that as between it and Mr Fitzsimons there has been no unjust enrichment.

130 I note that Mr Alexis did not submit that TAB should make restitution to the extent of the 6% or so retained by it from the pools.

131 In the circumstances, I do not think that it is necessary to deal in any detail with the alternative defence of promissory estoppel. It is sufficient to say that the evidence makes good the elements of a promissory estoppel, if there is room for that doctrine to operate in the context of restitution as an alternative to change of position.

132 Thus, were it necessary to do so, I would conclude that TAB has made good the defence of change of position.

Sixth and seventh issues: basis on which any restitution should be ordered

133 Mr Alexis put the case in three ways:

(1) TAB should give restitution of all bets made that it should not have received; i.e., all bets where payment was made, in whole or in part, by drawing down against the line of credit provided under the credit betting facility. Mr Fitzsimons should provide counter -restitution for all receipts arising from those bets.

(2) Alternatively, TAB should provide restitution for all losing bets made, for which payment was made in whole or in part by drawing against the line of credit. Mr Fitzsimons should provide counter - restitution of the winnings derived from those bets.

134 The first alternative involves what might be called restitution in gross. The second involves some ambiguity in relation to the concept of winnings. The “dividend” that is paid to successful “investors” in a pool involves both the return of the stake and some “winning” margin. As I understand it, Mr Alexis suggested, in relation to the second alternative, that only the winning component should be accounted for by way of what he called counter - restitution.

135 Mr Sheahan submitted that if matters ever got to the point where restitution should be ordered then Mr Alexis’ first alternative – what I have called restitution in gross – was conceptually appropriate. He submitted, with some reluctance, that the third alternative was not supportable as a matter of principle. (I say “with some reluctance” because it appears that application of the third alternative might be more favourable to TAB than application of the first, or indeed the second, alternative.)

136 Mr Sheahan did submit that, in the case of bets for which payment were made in part out of funds standing to the credit account and in part by drawing down against the line of credit (i.e., bets falling into the second category referred to at [36] above), some allowance should be made in favour of TAB for the part of the bet that could have been made lawfully. He referred to the concept of the “minimum equity” (see, for example, Brennan J in Verwayen v The Commonwealth (1990) 170 CLR 394 at 429).

137 Mr Alexis did not deal with this complication. Since, on the views to which I have come it is four times remote, I do not think that it is either necessary or profitable to resolve it.

Postscript: the Ernst & Young material

138 It appears that, when TAB was considering offering credit betting facilities to its “premium customers”, it retained Ernst & Young to carry out some form of risk assessment. Ernst & Young prepared a draft report on or about 26 November 2002. The draft report was sent by email to TAB on that day. The final report was prepared on or about 29 November 2002, and sent by email to TAB on that day.

139 The case for Mr Fitzsimons was provisionally closed, with a reservation of the “right” to tender material relating to Ernst & Young, and the draft or any final report, when those documents became available. The hearing proceeded on this basis. At the conclusion of oral submissions, I directed Mr Fitzsimons to tender any material from Ernst & Young on which he sought to rely, on the basis that it would be admitted subject to relevance. I directed the parties to make written submissions in relation to that material.

140 It is unnecessary to discuss the Ernst & Young material in detail. It is clear that the author of the draft and final reports was concerned that the credit betting facility proposed to be offered by TAB was “essentially an unsecured offering… not underpinned by an effective or rigorous credit assessment”. That, or a similar, expression of opinion occurred more than once in the draft and final reports.

141 The further submissions for Mr Fitzsimons suggested that the draft and final reports were relevant to:

(1) Mr Fitzsimons’ version of issue 1(a);

(2) Issue 2: in particular, para (a);

(3) Both TAB’s and Mr Fitzsimons’ version of issue 3(a);

(4) Issue 3(b); and

142 I do not accept that the views expressed by Ernst & Young are relevant to the first and second issues, or to issue 3(a). The essential questions raised by those issues are, respectively, whether it was open to the Minister to approve the proposed credit betting facility; and whether the credit betting facility offered by TAB to Mr Fitzsimons was in accordance with what the Minister had approved. In essence, the resolution of those questions requires the application of the relevant provisions of the Act, properly construed, to the terms of Mr Fitzsimons’ credit betting facility, properly construed. Those are matters for the Court. The opinion of a principal or employee of Ernst & Young, regardless of that person’s qualifications (or lack of them) is irrelevant.

143 I accept that, had it been necessary to consider TAB’s “guilty knowledge or intent”, the Ernst & Young documents might have been relevant. However, in circumstances where that issue does not arise, where TAB had the contrary advice of the Crown Solicitor, and the Ernst & Young material was not put to the relevant witnesses of TAB in cross-examination, I do not propose to make any finding.

144 Again, the Ernst & Young material might be of some relevance to issue 4: for example, if it were to be suggested that any “change of position” had been undertaken with a full appreciation of the risk that Mr Fitzsimons’ credit betting facility were illegal. But having regard to the circumstances to which I have just referred in the preceding paragraph, I do not propose to make any finding or express any conclusion.

145 In the result, the Ernst & Young material goes nowhere.

Conclusion and orders

146 Mr Fitzsimons’ challenges to the credit betting facility fail. Thus, each of the proceedings by which he advances those challenges must be dismissed.

147 For convenience, I return to the issues and set out the answers that should be given.

Issues between Mr Fitzsimons, the TAB parties and the State

1. Was the Minister’s approval of the credit betting facility a valid approval within the meaning of section 81(1)(c) of the Totalizator Act 1997 (‘the Act’)?

(a) TAB and State version:

In particular, insofar as TAB’s letter of 5 August 2002 (XC1 p.18) referred to the facility being secured by provision to TAB by the customer of a credit card, did it provide for the obligations of the debtor to be secured or guaranteed within the meaning of the section?

Mr Fitzsimons’ version:

Answer: Yes (on either version).

If no to (a), was the approval nevertheless valid by reason of the matters in point 3 of TAB’s letter of 5 August 2002?

Mr Fitzsimons’ version:

were the obligations of the debtor nevertheless secured

Answer: Does not arise; but if it did would be answered yes (on either version).

2. If the Minister’s approval was valid, was the credit betting facility offered to Mr Fitzsimons and accepted by him, one whereby his obligations as the debtor were secured or guaranteed within the meaning of section 81(1)(c) of the Act?

(a) In particular, was the facility otherwise than in accordance with the approved arrangements if, as Mr Fitzsimons contends, it did not give TAB authority to debit the credit card to secure his obligations to TAB?

Answer: No.

(b) Alternatively, if the answer to 1(b) is yes, was the facility in accordance with the arrangements by virtue of the matters in point 3 of TAB’s letter of 5 August 2002?

Answer: Does not arise; but it did would be answered no.

3. Is Mr Fitzsimons entitled to restitution in relation to bets made and paid for by debiting the credit betting facility? Alternatively, is Mr Fitzsimons entitled to restitution in relation to moneys paid to TAB in discharge of the loans arising from the credit betting facility from time to time?

In particular, on the proper construction of s 81, is a bet accepted in contravention of the section void?

Mr Fitzsimons version

was the TAB prohibited from accepting Mr Fitzsimons’ bets paid for by debiting the credit betting facility

Answer: No (on either version).

(b) If so, is it necessary to establish that TAB had guilty knowledge or intent before the section can be found to have been contravened?

Answer: Does not arise; but if it did would be answered no.

(c) Has Mr Fitzsimons established any relevant causative mistake on his part in:

(i) placing the bets; or

(ii) in repaying moneys to TAB in discharge of the loans arising from the credit betting facility from time to time?

Answer: No.

4. Is TAB able to rely upon a change of position defence and if so, to what extent?

Answer: Yes. The parties did not address on the extent to which the defence might be available.

5. Is TAB able to rely upon a defence of estoppel and if so, to what extent?

Answer: As a matter of fact, yes. The parties did not address on the extent to which the defence might be available.

6. What form of restitution, if any, is Mr Fitzsimons entitled to including the giving of any counter-restitution?

Answer: If restitution were to be ordered, TAB should make restitution of all bets placed by Mr Fitzsimons paid for in whole or in part by utilising the line of credit under the credit betting facility, and Mr Fitzsimons should give counter-restitution of all dividends paid to him in respect of all such bets.

7. If Mr Fitzsimons is entitled to restitution, how is the amount of restitution to be quantified as a matter of principle, including in respect of bets placed when Mr Fitzsimons’ betting account was in credit before the bet was placed but in debit afterwards (the cross-over bets)?

Answer: Does not arise. I note that the parties did not address on the principles applicable in the case of “cross-over bets”.

148 To deal with the unresolved aspects of proceedings 50161, 50164 and 50167 of 2007, I make the following orders:

Proceedings 50161 of 2007

(1) Order that the proceedings be dismissed.

(3) Order that the cross-claim be dismissed.

(5) Order that the proceedings be dismissed.

(7) Order that any party seeking to vary or discharge orders two, four or six give written notice thereof to the other party or parties within 21 days of the date of publication of these reasons; any such notice to specify the order or orders sought and, in brief, the reasons why they are sought; a copy of any such notice to be provided to my Associate when it is given.

(8) Order that the exhibits remain with the papers for 28 days and that thereafter that they be held or disposed of in accordance with the rules.

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Citations

Christopher Fitzsimons v The Hon. Grant McBride Minister for Liquor Gaming and Racing for the State of New South Wales Commonwealth Bank of Australia v Christopher Fitzsimons Christopher Fitzsimons v TAB Limited.. [2008] NSWSC 782

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CITATION:	Christopher Fitzsimons v The Hon. Grant McBride Minister for Liquor Gaming and Racing for the State of New South Wales Commonwealth Bank of Australia v Christopher Fitzsimons Christopher Fitzsimons v TAB Limited Commonwealth Bank of Australia v Christopher Fitzsimons [2008] NSWSC 782
HEARING DATE(S):	30/6/08, 1/7/08, 2/7/08, 3/7/08, 4/7/08, 9/7/08, 14/7/08, 17/07/08 and 22/07/08
JUDGMENT DATE :	4 August 2008
JUDGMENT OF:	McDougall J at 1
DECISION:	See paragraph [147] of the judgment.
CATCHWORDS:	GAMING AND WAGERING - s81 Totalizator Act 1997 – whether Minister’s approval of credit betting facility valid – whether facility offered to customer within terms of approval – whether obligations of debtor secured or guaranteed – restitution – whether bets accepted in contravention of s81 void – whether guilty knowledge or intent necessary – causative mistake – quantification of restitution – defences – change of position – estoppel.
LEGISLATION CITED:	Banking Act 1959 Casino Control Act 1992 Gaming Machines Act 2001 Interpretation Act 1987 Public Lotteries Act 1996 Totalizator Act 1997 Trade Practices Act 1974 Unlawful Gambling Act 1998
CATEGORY:	Principal judgment
CASES CITED:	Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119 Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 81 ALJR 1622 David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353 Dextra Bank and Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193 Fitzgerald v FJ Leonhardt Pty Limited (1997) 189 CLR 215 General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd (2007) 227 CLR 305 Nelson v Nelson (1995) 184 CLR 538 Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd [1988] QB 216 Sunbird Plaza Pty Ltd v Maloney (1987) 166 CLR 245 Verwayen v The Commonwealth (1990) 170 CLR 394 Yango Pastoral Company Pty Limited v First Chicago Australia Limited (1978) 139 CLR 410
TEXTS CITED:	Macquarie Dictionary Oxford English Dictionary Stroud's Judicial Dictionary
PARTIES:	Christopher Ronald Fitzsimons (Plaintiff) (50161/07) The Hon Grant McBride Minister for Liquor Gaming and Racing for the State of New South Wales (Defendant) TAB Limited (Second Defendant) Commonwealth Bank of Australia (Plaintiff) (50164/07) Christopher Ronald Fitzsimons (First Defendant) Maria Angela Fitzsimons (Second Defendant) Christopher Ronald Fitzsimons (Plaintiff) (50167/07) TAB Limited (First Defendant) Tabcorp Holdings Limited (Second Defendant) Commonwealth Bank of Australia (Plaintiff) (50053/08) Christopher Ronald Fitzsimons (First Defendant) Maria Angela Fitzsimons (Second Defendant)
FILE NUMBER(S):	SC 50161/07; 50164/07; 50167/07; 50053/08
COUNSEL:	T Alexis SC / G Pulsford (Mr Fitzsimons) Ms Grubisa (Mrs Fitzsimons and Mrs Roberts) A A Henskens (CBA) J Sheahan SC / P Brereton / B Kremer (TAB/Tabcorp) R M Foreman (Westpac) S Free (Minister and the State)
SOLICITORS:	Lyons & Lyons Solicitors (Plaintiffs) Henry Davis York (CBA) Allens Arthur Robinson (TAB/Tabcorp) Minster Ellison (Westpac) I V Knight Crown Solicitors Office (Minister and the State)