Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner

[2014] SASC 147

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

GOLDEDGE HOLDINGS PTY LTD v LIQUOR AND GAMBLING COMMISSIONER & ANOR

[2014] SASC 147

Judgment of The Honourable Chief Justice Kourakis

8 October 2014

GAMING AND LIQUOR - GAMBLING REGULATION AND OFFENCES - GAMING MACHINES

LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION

GAMING AND LIQUOR - ADMINISTRATION - LIQUOR LICENSING - TRANSFERS - SPECIAL TRANSFER TO LANDLORD OR NOMINEE

GAMING AND LIQUOR - ADMINISTRATION - LIQUOR LICENSING - TRANSFERS - GENERALLY

Goldedge Holdings Pty Ltd (Goldedge) was the lessee of the Colac Hotel from 1998-2011 when the lessor, Mallen’s Colac Hotel Pty Ltd (Mallens) terminated the lease due to Goldedge’s default. Upon entry into the lease, the parties contemplated that Goldedge would apply for a gaming machine licence. The lease included a provision that on termination the licences held by Goldedge would be transferred to Mallens.

On 14 May 2012 the Liquor and Gambling Commissioner (the Commissioner), on Mallens’ application, transferred the gaming machine licence held by Goldedge to Mallens and accepted Mallens’ offer to sell the entitlements attached to the licence.

Goldedge contends that it was not obliged to transfer all of the transferrable gaming machine entitlements with the licence but that it was entitled to sell the entitlements in accordance with the provisions of the Gaming Machines Act 1992 (SA) (the GMA) and to retain the proceeds of sale. Goldedge therefore challenges the validity of the Commissioner’s decision and seeks orders that Mallens make restitution to it for wrongfully retaining the proceeds of the sale of entitlement.

Held – dismissing the claim:

Goldedge was not entitled to strip the gaming machine licence of the entitlement before transferring it to Mallens, and it was not unconscionable of Mallens to enforce those terms (at [8]).

The detailed and comprehensive scheme for the regulation of gaming machine licences and entitlements enacted by the GMA does not allow an individual who is not the holder of a gaming machine licence to hold or trade gaming machine entitlements (at [50]).

The Commissioner was bound by law to accept and act on Mallens offer to sell because Mallens was the holder of the gaming machine entitlements (at [61]). Mallens did not act unconscionably in selling the entitlements and retaining the proceeds of sale (at [62]).

Gaming Machines Act 1992 (SA) s 4, s 14, s 15, s 16, s 27, s 27A, s 27B s 28 s 28B, s 32, s 38B; Gaming Machines (Miscellaneous) Amendment Act 2004 (SA); Liquor Licensing Act 1997 (SA) s 63, s 73, s 97, s 98, s 99; Lottery and Gaming Act 1936 (SA) s 51; Gaming Machine Regulations 2005 (SA) 5A, 5B, 5C, 5D, 5E, 5F, referred to.
Baker v Merckerel [1960] QB 657, discussed.

WORDS AND PHRASES CONSIDERED/DEFINED

"gaming machine licence", "entitlements"

GOLDEDGE HOLDINGS PTY LTD v LIQUOR AND GAMBLING COMMISSIONER & ANOR
[2014] SASC 147

Civil

1. KOURAKIS CJ:   The plaintiff, Goldedge Holdings Pty Ltd (Goldedge) was the lessee of the Colac Hotel from 1998 until 2011 when the lessor, Mallen’s Colac Hotel Pty Ltd (Mallens), terminated the lease on the grounds of Goldedge’s default.  On entering into the lease (the Colac Hotel lease), the parties contemplated that Goldedge would apply for a gaming machine licence pursuant to the Gaming Machines Act 1992 (SA) (the GMA). Goldedge eventually successfully obtained a gaming machine licence (the Goldedge gaming machine licence).

2. The GMA was amended by the Gaming Machines (Miscellaneous) Amendment Act 2004 (SA) (the Entitlement Amendments). The Entitlement Amendments came into operation on 1 February 2005. Gaming machine licences issued pursuant to the GMA, even before the Entitlement Amendments, included a condition limiting the number of gaming machines that the licensee could operate. The Entitlement Amendments established a scheme by which the right to operate a gaming machine could be traded between licensees, in effect allowing a licensee to purchase the right to operate additional machines from another licence.

3. The Colac Hotel lease included a provision commonly found in hotel leases, that on termination of the lease, the licences held by Goldedge would be transferred to Mallens.  Goldedge accepts that in accordance with that provision, it was obliged to transfer the Goldedge gaming machine licence to Mallens.  Notwithstanding that term, Goldedge contends that it was not bound to transfer all of the transferrable gaming machine entitlements with that licence.  Goldedge contends that it was entitled under the Colac Hotel lease to sell the entitlements in accordance with the provisions of the GMA and to retain the proceeds of that sale.

4. On 14 May 2012 the first defendant, the Liquor and Gambling Commissioner (the Commissioner), on Mallens’ application, transferred the Goldedge gaming machine licence to Mallens.  The Commissioner subsequently accepted, as valid and effective for the purpose of the trading scheme established by the Entitlement Amendments, Mallens’ offer to sell the entitlements attached to the Goldedge gaming machine licence.  Those entitlements were sold in the first trading round conducted pursuant to the provisions of the GMA in 2012 (the first trading round).  The Commissioner authorised the transfer of those entitlements pursuant to the procedures governing the trading round on 14 June 2012.  Goldedge does not claim the re-transfer of those entitlements to it and the purchaser is not a party to these proceedings.

5. Goldedge challenges the validity of the decisions of the Commissioner and, seeks orders that Mallens make restitution to it for wrongfully retaining the proceeds of the sale of the entitlement. 

6. Goldedge claims:

   1.A declaration that the Commissioner acted unlawfully in transferring the Goldedge gaming machine licence to Mallens and in effecting a sale of entitlements connected to that licence, and that the transfer and subsequent sale of entitlements were invalid. 

   2.The return of all or part of the proceeds of sale from Mallens.

7. The issues which arise on Goldedge’s claims are:

   (a)Whether the entitlements to operate a gaming machine pursuant to a gaming machine licence and to the GMA have an independent existence as a form of property under the provisions of the GMA.

   (b)Whether the Commissioner erred in approving the transfer to Mallens of the Goldedge gaming machine licence and in effecting the sale of the entitlements by Mallens in the May/June trading round. 

   (c)Whether the Commissioner failed to accord Goldedge an opportunity to make submissions as to the transfer of the Goldedge gaming machine licence and Mallens right to participate in the trading round.

   (d)Whether Mallens was bound to pay to Goldedge a part, or all, of the proceeds of the sale of the entitlement by way of restitution because it was otherwise inequitable for Mallens to retain those proceeds.

8. I dismiss Goldedge’s claim because pursuant to the terms of the Colac Hotel lease it was not entitled to strip the Goldedge gaming machine licence of the entitlement before transferring it to Mallens, and it was not unconscionable of Mallens to enforce those terms.  Moreover, the GMA does not allow a person who is not also a licensee to hold or trade entitlements to operate gaming machines.  My reasons follow.

   The Factual Context

9. Goldedge took a lease of the Colac Hotel premises on 23 December 1998.  The term of the lease was for a period of five years commencing on 24 December 1998 and expiring on 23 December 2003.  The Colac Hotel lease provided two rights of renewal of five years. 

10. On 24 December 1998 the Commissioner transferred a liquor licence to Goldedge pursuant to the Liquor Licensing Act 1997 (SA) (the LLA). From that time, the plaintiff commenced to operate the hotel business known as the Colac Hotel.

11. On 12 January 1999 the Commissioner granted a gaming machine licence to Goldedge pursuant to the GMA.

12. Pursuant to the Goldedge gaming machine licence, Goldedge was authorised to possess ten approved gaming machines at the premises and to conduct gaming on those machines.  In May 1999 Goldedge purchased ten gaming machines and associated equipment, installing them at the premises.  Goldedge then conducted gaming on those machines, paid for the maintenance and upkeep of them, and paid all fees and charges associated with them. 

13. The Colac Hotel lease was extended for a further period of five years commencing on 24 December 2003 and expiring on 23 December 2008.  Goldedge continued to operate the Colac Hotel in that time.  On 16 April 2007 Goldedge sold two gaming machine entitlements under the approved trading system.  The evidence does not show whether that sale proceeded from an arrangement between Goldedge and Mallens or by Goldedge’s unilateral conduct.

14. On the implementation of the scheme enacted by the Entitlement Amendments, Goldedge held entitlements to operate ten gaming machines. 

15. The Colac Hotel lease was again extended for a further five year term commencing on 24 December 2008.  On 22 August 2011 Mallens re-entered and took possession of the Colac Hotel.  The lease then came to an end.

16. By 22 August 2011, the gaming machine entitlements attached to the Goldedge gaming machine licence had been reduced to eight following the sale to which I earlier referred.

17. On 22 August 2011 Mallens’ solicitors wrote to the Commissioner informing the Commissioner that Goldedge was no longer in possession of the premises and that Mallens had entered into possession as landlord. Mallens’ solicitors applied to become the licensee under s 73 of the LLA and the gaming machine licensee under s 28B of the GMA. Mallens also applied for a suspension of the Goldedge gaming machine licence pursuant to s 32 of the GMA.[1]

    [1]    The Commissioner may, on the application of a licensee, suspend the licence held by the licensee for such period as the Commissioner thinks fit.

18. On 24 August 2011 the Commissioner, by his delegate, approved Mallens carrying on the business as the licensee under the GMA of the Goldedge gaming machine licence until 31 January 2012.  On the same day the Commissioner, by his delegate, approved a suspension of the licence.  On 29 August 2011 Goldedge, by letter, also sought a suspension of the licence.

19. On 27 September 2011 Mallens obtained a default judgment in the District Court in the sum of $120,406.43 on an action to recover unpaid rent, council rates, interest and cost of certain repairs as well as re-entry and termination costs under the terms of the Colac Hotel lease.

20. On 21 December 2011 Mallens wrote to the Commissioner seeking an extension of its approval to continue to carry on the business of the Colac Hotel as the landlord in possession under the LLA and GMA.  Mallens also sought suspensions of the liquor and gaming machining licences until it found a new tenant to take over the business.  Orders to that effect, for the period 1 February 2012 to 30 June 2012, were made by the Commissioner’s delegate on 23 December 2011.

21. On 30 March 2012 Mallens wrote to the Commissioner informing him that Goldedge had conceded that it was in breach of the Colac Hotel lease, that the lease had been lawfully terminated and that Mallens had re-entered the premises.  Mallens informed the Commissioner that it had obtained judgment to that effect in the District Court.  Mallens provided a copy of the Colac Hotel lease to the Commissioner and drew attention to those of its terms which required the licences to be transferred to it.  Mallens requested that the Colac Hotel liquor and gaming machine licences be transferred to it whilst the suspensions remained in place.  Mallens attached to the letter a formal application, in an approved form, for the transfer of the liquor and gaming machine licences. 

22. Pursuant to the provisions of the GMA the closing date for the first trading round for the sale of gaming machine entitlements in 2012 was fixed for 4 May 2012.  On 12 April 2012 Goldedge wrote to the Commissioner informing the Commissioner of its intention to dispose of eight entitlements in that trading round.  An offer to sell gaming machine entitlements associated with the Goldedge gaming machine licence was attached.

23. On 20 April 2012 Mallens, through its solicitors, also provided the Commissioner with an offer to sell the gaming machine entitlements with respect to the Goldedge gaming machine licence.

24. On 4 May 2012 Mallens, again through its solicitors, provided additional material to the Commissioner in support of their offer to sell. 

25. On 14 May 2012 a delegate of the Commissioner approved the transfer of both the liquor and gaming machine licences from Goldedge to Mallens.

26. Mallens sent a further letter in support of its position on the sale of the entitlements to the Commissioner on 21 May 2012.

27. On 30 May 2012 the Commissioner’s delegate wrote to the principal of Goldedge, Mr Plesa, informing him as follows:

    I refer to your application to participate in trading round 1/2012.

    I wish to advise that under the Gaming Machines Act 1992 you did not hold the gaming machine entitlements associated with the Colac Hotel as at the closing date for the submission of offers for trading round 1/2012 (4 May 2012). 

    You are therefore ineligible to participate in trading round 1/2012 and accordingly, I am unable to accept your application.

    Further, I note that the gaming machine licence (including the associated entitlements) for the Colac Hotel transferred on 14 May 2012 is now held by Mallen’s Colac Hotel Pty Ltd.

28. An email chain, received by consent, shows on its face that the letter of 30 May 2012 was sent to Mr Plesa by email of the same day.  In his evidence, Mr Plesa denied any recollection of receiving that letter.  However, the same email chain shows that Mr Plesa replied to the Commissioner’s email on 12 June 2012.  In his reply Mr Plesa asked the Commissioner’s delegate to provide him an email copy of the application he had earlier made to sell the gaming machine entitlements in the first trading round of 2012.  The final communication in the email chain is dated 13 June 2012, when the Commissioner’s office sent to Mr Plesa a copy of the application he had requested.  Mr Plesa agreed in evidence that he had requested a copy of that application in order to provide it to his solicitor.  Relying on that email chain, I find that Mr Plesa was sent the Commissioner’s letter of 30 May 2012 by email on that day.

29. On 14 June 2012 the Commissioner made an order effecting the sale of the eight gaming machine entitlements offered for sale by Mallens.  Mallens was advised that their application to sell the eight Colac Hotel gaming entitlements was successful.  The vendor price for each entitlement was $54,472.73, exclusive of GST.  The proceeds of the sale were paid to Mallens. 

    Licences and Entitlements Inextricably Linked

30. The parties agree that the applicable legislation is the GMA as it stood between 1 January 2012 and 11 July 2012.  It is to the provisions of the GMA extant in that period to which I refer below.

31. Section 14 of the GMA provides that a gaming machine licence authorises the licensee to possess approved gaming machines on premises designated in the licence and to conduct gaming on those machines. The authorisation is expressly made subject to the GMA and the conditions of the licence. The effect of the authorisation is best understood by reference to s 4(2) of the GMA which provides that “despite any other Act or law to the contrary, gaming and the possession, sale, supply or operation of a gaming machine, as authorised by this Act, or a licence under this Act are lawful”. Sections 4(2) and 14 of the GMA, in effect, exempt persons licensed under the GMA from the prohibition on gambling found in s 51 of the Lottery and Gaming Act 1936 (SA).

32. Section 16 of the GMA provides:

    (1)A gaming machine licence authorises the licensee to possess and operate in the licensed premises a number of gaming machines equivalent to the number of gaming machine entitlements held in respect of the licensed premises (or a lesser number).

    (2)The number of gaming machine entitlements held in respect of particular licensed premises cannot exceed the maximum number approved by the Commissioner for operation under the gaming machine licence for the premises.

    (3)The Commissioner cannot approve more than 40 gaming machines for operation under a gaming machine licence.

    (4)If 2 or more gaming machine licences are in force in relation to the same licensed premises, the aggregate number of gaming machines approved for operation under the licences cannot exceed 40.

    (5)The Commissioner may grant to the holder or former holder of a gaming machine licence a temporary authorisation to possess (but not to operate) gaming machines if the authorisation is necessary or desirable to enable the orderly disposal of gaming machines the holder or former holder is no longer authorised to operate.

33. It can immediately be seen that the authorisation conferred by s 14 GMA is restricted such that the number of gaming machines that the licensee may possess and operate is limited to the entitlements held in respect of the license.

34. The interest which inheres in a gaming machine entitlement is perhaps more accurately described as a privilege or immunity from s 51 of the Lottery and Gaming Act 1936 (SA) which would otherwise render operation of a gaming machine unlawful. That privilege or immunity takes on some of the qualities of a proprietary interest by reason of the statutory scheme enacted by the GMA for the trading of entitlements. Save for the exceptional circumstances for which s 16(5) GMA provides, s 16 inextricably links gaming machine entitlements to a gaming machine licence. That is, the entitlement to operate a gaming machine can only be exercised under a gaming machine licence.

35. Section 27A GMA provides that on the commencement of the Division,[2] the Commissioner is to assign to each licensee an entitlement. Section 27A(1) prescribes a formula by which the number of gaming machines for which the licensee was previously authorised are converted to a number of entitlements which are then assigned to each licensee. Section 27A(2) then provides:

    (2)A gaming machine entitlement may be held only by—

    (a)     a licensee holding a gaming machine licence who has an approval from the Commissioner to operate on the licensed premises a number of gaming machines equal to or exceeding the number of gaming machine entitlements held by the licensee; or

    (b)     Club One.

    [2]    1 February 2005

36. Section 27A(2) GMA therefore limits the persons who may hold a gaming machine entitlement to persons licensed under the GMA but, just as importantly, provides that a licensee cannot hold more entitlements than his or her gaming machine licence allows to be used on a particular licensed premises. Thereby s 27A(2) GMA further binds entitlements to licenses. That link is reinforced by s 27C GMA which provides that when an entitlement is transferred between licensed entities, the entitlement relates to the licensed premises.

37. Section 27B of the GMA relevantly provides:

    (1)A gaming machine entitlement is transferable as follows:

    (a)     if a gaming machine licence is transferred, the transferor may transfer together with the licence all gaming machine entitlements held by the transferor immediately before the transfer;

    ...

    (d)     if a person is authorised by or under Part 3 Division 4A to carry on the business of a licensee, the licensee’s gaming machine entitlements vest in the authorised person for the duration of the authorisation (and are not otherwise transferable during that period) but then revert to the person in whom they would (apart from this paragraph) have been vested;

    (e)     if a person holds a temporary licence under Part 3 division 4A, the former licensee’s gaming machine entitlements vest in the licensee for the duration of the temporary licence (and are not otherwise transferable during that period) but then–

    (i)if the temporary licence is converted into an ordinary licence–vest on the conversion in the holder of the licence; or

    (ii)if the temporary licence is not converted into an ordinary licence–revert to the person in whom they would (apart from this paragraph) have been vested;

    (f)     the holder of gaming machine entitlements may (subject to this section) sell 1 or more of the entitlements under the approved trading system.

1. I pause here to observe that Part 3 Division 3A provides for the devolution of a gaming machine licence on the landlord or mortgagee of the licensee if the licensee ceases to occupy the licensed premises or if the landlord or mortgagee stand to suffer a loss on the surrender or revocation of the licence. Section 27B of the GMA continues:

   (2)The approved trading system is a system established by the regulations.

   (3)The regulations establishing the approved trading system may include the following:

   (a)     provisions dealing with the eligibility of intending sellers and purchasers to participate in the system;

   (b)     conditions and restrictions on the sale of gaming machine entitlements (such as, for example, a condition providing that a gaming machine entitlement formerly held by the holder of a particular type of liquor licence may only be purchased by the holder of a liquor licence of a similar type);

   (c)     provisions for allocating gaming machine entitlements that are available for purchase under the approved trading system between intending purchasers;

   (d)     a provision requiring the purchaser of a gaming machine entitlement to acquire and operate a gaming machine under the entitlement within a specified period and providing that, if the purchaser fails to do so, the entitlement is to lapse;

   (e)     a provision requiring an intending seller of gaming machine entitlements to surrender a proportion of its entitlements to the Crown and prescribing how the Crown is to deal with entitlements so surrendered;

   (f)     a provision for the payment of a commission (not exceeding one-third of the purchase price) to the Crown on sale of a gaming machine entitlement under the approved trading system;

   (g)     a provision for the payment of fees by participants in the approved trading system;

   (h)     provisions dealing with any other aspect of the approved trading system.

   ...

   (5)If a gaming machine entitlement relates to premises that are (or were) held by the licensee under a lease, the right to sell the entitlement under the approved trading system is qualified as follows:

   (a)     if the lease is entered into after the commencement of this section, the lease may exclude or limit the right of sale;

   (b)     if the lease was entered into before the commencement of this section, the right may only be exercised if—

   (i)all parties to the lease agree; or

   (ii)the District Court, on application by the holder of the entitlement, determines that it is fair and equitable to authorise its sale and gives its authorisation accordingly.

   (6)If the District Court gives an authorisation under subsection (5)(b), it may exercise either or both of the following powers:

   (a)     it may impose conditions, such as a condition that the proceeds of the sale be shared between the parties on a fair and equitable basis;

   (b)     it may make a consequential alteration to the terms of the lease.

   (7)If the holder of a gaming machine entitlement makes an application for an authorisation under subsection (5)(b) and, before the proceedings are determined—

   (a)     the applicant is required under the terms of a lease to transfer the entitlement to someone else; or

   (b)     the entitlement vests in someone else on conversion of a temporary licence into an ordinary licence under Part 3 Division 4A,

   the District Court may order the sale of the entitlement under the approved trading system and the payment of the net proceeds of sale to the applicant or the division of the net proceeds of the sale between the applicant and another or others in proportions the District Court considers fair and equitable.

   (8)No liability to stamp duty arises in relation to a transfer of gaming machine entitlements under subsection (1)(b), (c) or (f) executed after the commencement of this subsection.

2. The use of the word “may” in s 27B(1)(a) of the GMA is difficult to explain. However, because it is otherwise clear that entitlements are inextricably linked to gaming machine licences, and that no person can hold an entitlement without also holding a licence, I am compelled to hold that the word “may” can only be read as “shall”.

3. It is necessary to consider s 27B(5) of the GMA more closely. Goldedge places much reliance on its terms. Section 27B(5)(a) of the GMA provides that if the lease is entered into after the commencement of the section, the lease may exclude or limit the right of sale. The purpose of that subparagraph is to allow a modification, by agreement, of the statutory right conferred by s 27B(1)(f) GMA of the holder of the gaming machine entitlements, in this case a lessee, to sell them, prior to the end of the lease and the transfer, in the ordinary course, of the gaming machine license to the lessor. If the statutory right to sell the entitlements could not be limited, by a term stipulated by the landlord in the lease or a collateral agreement, a lessee/licensee could substantially reduce the value of the licence, before it is transferred to the landlord, by selling entitlements during the term of the lease.

4. Leases of hotel premises may extend over a long period of time. Subparagraph (b) of s 27B(5) of the GMA deals with the situation in which a landlord may not have had an adequate opportunity to protect his or her position because the lease was entered into before the commencement of the section and the creation of gaming machine entitlements. On the expiry of the term of such a lease, there may be a dispute between the lessor and lessee over the gaming machine entitlements.

5. Section 27B(5)(b) of the GMA provides for recourse to the District Court to arbitrate disputes between landlords and tenants over gaming machine entitlements if the lease has not made provision for who is to take the benefit of the entitlement at the end of the term of the lease. In particular the subsection deals with the position when, after the expiry of the lease term, the licensee and holder of the associated gaming machine entitlements, seeks to sell or transfer those entitlements.

6. In short, the purpose of s 27B(5) of the GMA is to allow the parties to contract as to their respective interests in the newly created statutory entitlements or, in the absence of an opportunity to freely contract because the lease was entered into before the commencement of the section, to allow the District Court to arbitrate any dispute over their respective interests.

7. In light of that manifest purpose of 27B(5) of the GMA a difficult question arises as to whether subparagraph (a) extends to renewed leases in circumstances in which the original lease allows the lessee by its unilateral conduct to renew the lease on the same terms as the original lease.  In such a case, the landlord will not have had a real opportunity to negotiate any express provisions with respect to the interest in the statutory gaming machine entitlements.   On the other hand, and if the terms of the lease allow the lessee to sell the entitlements, the lessee could unilaterally renew the lease to the detriment of the landlord. 

8. The preponderance of common law authority regards a renewal as the entry into a new lease and not as an extension of a pre-existing one.  The exceptional case of Baker v Merckerel[3] can be explained by its particular facts.  In Baker the original lease provided for a fixed term of five years but by supplemental deed, made before the five year period had passed, the lessee and lessor agreed that the term may be extended to seven years at the option of the lessee.  The original lease included a term that the lessee was liable for the default of any assignee.  An assignee of the lease took advantage of the option to extend the lease and then defaulted during the extended term defaulted.  The question was whether the lessee remained liable for the default as a default occurring in the period of the original lease.  The Court held that the lessee remained liable.

   [3] [1960] QB 657.

9. On the orthodox common law approach, a lease first entered into before, but renewed by the unilateral act of the lessee after, the commencement of the Entitlement Amendments falls with s 27B(5)(a) and a lessee/licensee is free to sell the entitlements unless the landlord was fortunate enough to have anticipated the entitlement scheme.

10. In practice, leases of hotels commonly include conditions which require the lessee to return all licenses and permits to the lessor and to maintain the hotel business. Those provisions will generally confer on the landlord a right to the gaming machine entitlements. The position of lessors is then likely to be, as a general rule, sufficiently protected even if a lease renewed after 1 February 2005 is treated as a lease entered into after the commencement of the section even though the original lease was executed earlier. Nonetheless there is reason to limit s 27B(5)(a) of the GMA to leases negotiated after the commencement date given the mischief to which it is directed.

11. It is not necessary to finally decide that issue concerning the construction of s 27B of the GMA because, for the reasons I give in [52] below, the Colac Hotel lease excluded the licensee’s right of sale. Therefore, if the Colac Hotel lease was entered into after 1 February 2005 pursuant to its terms, Goldedge is not entitled to the gamine machine entitlements. Alternatively, whether the Colac Hotel lease was entered into before or after the commencement of the section, for the reasons I give in [52] below, on a proper construction of the GMA, the licensee at the relevant time for the purposes of the trading scheme was, in any event, Mallens and not Goldedge. Again, Goldedge’s claims must fail.

12. In considering Goldedge’s contentions as to the separation of entitlements from licenses, it is useful to consider certain provisions of the LLA because of the requirement imposed by s 15 of the GMA which provides that, save for an exception which is immaterial here, a gaming machine licensee must also hold a liquor licence. Section 97 of the LLA requires that the business conducted under a liquor licence must at all times be personally supervised and managed by an actual person who has been approved by the licensing authority. Section 98 of the LLA provides that a person must not assume a position of authority in a trust or corporate entity that holds a licence without the approval of the licensing authority. Section 99 of the LLA prohibits any form of profit sharing between a licensee and an unlicensed person, unless an agreement or arrangement to that effect is approved by the Commissioner.

13. The detailed and comprehensive scheme for the regulation of gaming machine licences and entitlements enacted by the GMA leaves no space for a person who is not the holder of a gaming machine licence to hold a gaming machine entitlement.

    The Colac Hotel lease denied Goldedge’s right to sell

14. Clause 2 of Item 7 of the Table to the Colac Hotel lease made special provisions for the regulation of the rights and interests of the parties relating to the licensing of the Colac Hotel.  Clause 2.5, 2.6, 2.11, 2.12 and 2.13 provided as follows:

    2.5You will ensure that the Gaming Licence is not endangered by non-compliance with the requirements of the Gaming Machines Act 1992 or any other statutory requirements.

    2.6You will use your best endeavours to maintain and extend the business conducted from the property and to preserve and maintain the character of that business.

    …

    2.11When this Lease ends for any reason, you must do everything necessary to transfer to us or our nominee, for no consideration and at no cost to us other than the payment of any statutory fee necessary in order to effect any such transfer of the Liquor Licence, Gaming Licence and all licences or permits that are required to carry on the business.

    2.12For the more effectual protection of us, our interest in the property and in the Liquor Licence and to facilitate and obtain the transfer, removal or surrender or any dealing with or affecting the Liquor Licence, you irrevocably appoint us and our substitute or substitutes to be named by us in writing on our behalf jointly and severally, the attorney and attorneys of you in your name to do anything which the licensee may lawfully do in respect of the Liquor Licence and, without limitation, to:-

    2.12.1.sell and dispose of all liquor which the licensee is authorised to sell and dispose of pursuant to the Liquor Licence;

    2.12.2.apply for and obtain and pay all fees and give valid receipts for the Liquor Licence or the transfer removal or surrender of the Liquor Licence;

    2.12.3.do such acts or things and execute such documents as may be necessary or convenient for facilitating and obtaining a transfer, removal or surrender of or any dealing with or affecting the Liquor Licence.

    2.13We agree that we will not act pursuant to this power of attorney unless you are in default under this Lease.

15. The obligation in 2.6 to “maintain” the business and to “preserve and maintain the character of that business” precluded Goldedge from selling all or any of the entitlements to operate gaming machines. The clause more naturally limits the sale of gaming machines whilst the Colac Hotel lease is extant and whilst Goldedge is operating the business but the obligation also subsists during the period of time in which Goldedge attends to its duty under clause 2.11. Clause 2.11 requires Goldedge to transfer “the Gaming Licence and all licences or permits that are required to carry on the business.” The gaming machine entitlements fall within the ordinary meaning of the term “permits”. The context and purpose of clause 2.11 also make it clear that the word was intended to include permits like gaming machine entitlements. Accordingly, I find that the Colac Hotel lease excluded Goldedge’s right to sell for the purpose of s 27B(5)(a) of the GMA.

    Transfer of Licence and Entitlements to Mallens

16. Section 28B(3) of the GMA and s 73 of the LLA Act authorised the orders made by the Commissioner referred to in [18]and [20] above. Section 28B(3) of the GMA relevantly provides:

    (3)If a licensee ceases to occupy the licensed premises to which the licence relates, a landlord, mortgagee or other person acting with the permission of the Commissioner may, for a period of 1 month or a longer period approved by the Commissioner, carry on business as the licensee under the licence.

17. Section 73(3) LLA is expressed in similar terms.

18. Even though there is no express statutory declaration of the transferability of liquor licences, a number of the provisions of the LLA are premised on a power to transfer liquor licences. Sections 63 of the LLA empowers the Commissioner to approve the transfer of a liquor licence.

19. Section 28(1) of the GMA provides:

    28—Certain gaming machine licences only are transferable

    (1)     Where a hotel licence or special circumstances licence is transferred, any gaming machine licence held by the transferor may, with the consent of the Commissioner, be transferred to the transferee of the hotel or special circumstances licence.

20. The powers conferred by s 28 of the GMA and s 63 of the LLA authorised the Commissioner’s decision referred to in [25] above to transfer the liquor and gaming machine licences from Goldedge to Mallens. Those transfers are not impugned by Goldedge. The effect is that Mallens also became holder of the entitlements because, as I have found, the gaming machine entitlements are inextricably linked to the underlying licence.

21. The trading system referred to by s 27B of the GMA is regulated by regulations 5A to 5J of the Gaming Machine Regulations 2005 (SA).  The Commissioner may establish a trading round pursuant to regulation 5B.   The Commissioner does so by inviting offers to purchase or sell gaming machine entitlements to be made and notified to him or her by a fixed closing date.  The offers must be submitted by that closing date.  The Commissioner then fixes a day for the determination of the offers that are to be regarded as accepted in that trading round.  Regulation 5C(1) provides:

    (1)Subject to this regulation, a person holding gaming machine entitlements may submit, for each entitlement the person wishes to sell in a trading round, an offer in a form approved by the Commissioner specifying the lowest price the person is willing to accept for the entitlement.

22. The offers to sell must be accompanied by evidence to satisfy the Commissioner of the vendor’s right to sell.  The Commissioner may require a person who makes an offer to purchase entitlements to provide an irrevocable letter of credit.  Regulation 5D also provides that a person is eligible to purchase gaming machine entitlements if the person is a licensee whose premises are approved for the operation of more gaming machines than the number of gaming machine entitlements held by that licensee.  Regulation 5E permits the Commissioner to refuse an application “at any time” before the trading day.  Regulation 5F outlines that the Commissioner will determine the offers to sell and the offers to purchase that, as of the trading day, are to be regarded as accepted and the purchaser price and the vendor price as follows.   Regulation 5F(1) confers on the Commissioner a power to determine “the offers to sell and the offers to purchase that, as of the trading day, are to be regarded as accepted” in accordance with a prescribed procedure.

23. The closing date for the submission of offers to sell gaming machine entitlements for the relevant trading round was 4 May 2012.  As of that date, Mallens had submitted an offer but was not yet the holder of the entitlements.  There is no textual reason to deny the trading scheme the practical advantage of allowing persons who expect to be the holders of tradeable entitlements on the trading day the right to submit offers.  Regulation 5E allows the Commissioner to disregard offers if the anticipated right does not materialise.  However, in this case Mallens became the holder of the entitlements when the gaming machine licence was transferred to it on 14 May 2012.  The determination of the Commissioner on 14 June 2012 was therefore valid.

    Conclusion

24. The Commissioner was bound to accept and act on Mallens’ offer to sell because by reason of the transfers Mallens was the holder of the entitlements.  That conclusion is one of law and no other lawful course was open to the Commissioner.  I have found in [27] above that Mr Plesa was notified of the Commissioner’s decision.  He took no steps to put a contrary position or to challenge the decision when made.  Assuming, without deciding that the Commissioner was bound to afford Goldedge procedural fairness the application for judicial review should be refused on discretionary grounds by reason of Mr Plesa’s inaction.  In any event, the relief would be futile because the Commissioner’s decision was the only lawful one open to him.

25. Finally, it is necessary to deal with Goldedge’s claim that Mallens has acted unconscionably in selling the entitlements and retaining the proceeds of sale.  Mallens was, for the reasons I have given, entitled in law to sell the entitlements.  It was the necessary legal consequence of the Colac Hotel lease into which Goldedge freely entered and the administrative decision made to transfer the gaming machine licence in accordance with its terms.  Goldedge does not claim that there was any misrepresentation or inequality of bargaining power or estoppels in, or arising out of, those negotiations.  If the Entitlement Amendments had not been made, the Goldedge gaming machine licence would have reverted to Mallens which would then have been in a position to attract a higher rental for the lease of the Colac Hotel premises as licensed premises.  The additional power to sell the entitlements gave Mallens another commercial, and more profitable, option but the Colac Hotel lease did not contemplate Goldedge ever sharing in the value of the business operated out of the Colac Hotel.  Mallens’ benefit is not at Goldedge’s detriment.

1. Even if Mallens had benefitted from the Entitlements Amendments at the expense of Goldedge, the additional commercial value of the entitlements is not a windfall of a kind which attracts equitable intervention.  Goldedge’s expenditure on the machines and licence fees were required by the Colac Hotel lease and were expended to maximise its profits while running the Colac Hotel business.  That expenditure is not a sufficient reason to deny Mallens its contractual rights.

2. I dismiss the action herein.