Reinhold v New South Wales Lotteries Corporation - [2008] NSWSC 5

No judgment structure available for this case.

CITATION: Reinhold v New South Wales Lotteries Corporation [2008] NSWSC 5

HEARING DATE(S): 10/12/07, 11/12/07, 12/12/07, 13/12/07
Written submissions: 14/12/07, 17/12/07

JUDGMENT DATE :
30 January 2008

JURISDICTION: Equity Division

JUDGMENT OF: Barrett J

DECISION: Plaintiff entitled to damages of $2,000,000 as against first defendant and second and third defendants. Further submission to be made on cross-claims, interest and costs.

CATCHWORDS: GAMING AND WAGERING - lottery authorised by statute - effect of statutory provisions and rules governing Oz Lotto - where ticket cancelled without consent of holder - whether holder nevertheless entitled to prize - EQUITY - equitable remedies - claim for rectification of computer records of Lotteries Corporation - whether context of pre-ordained rules giving supremacy to computer records admits of rectification - CONTRACTS - claim by ticket holder for breach of contract by Lotteries Corporation and ticket selling agent - where ticket cancelled without holder's consent - TORTS - negligence - whether duty of care owed by Lotteries Corporation and ticket selling agent to ticket holder in relation to processing of order and cancelling of ticket - whether duty of care breached - CONTRACTS - exemption clauses - approaches to construction - whether applicable to claims in contract and tort - DAMAGES - for breach of contract and negligence in cancelling ticket attracting large prize

LEGISLATION CITED: Civil Liability Act 2002, Division 2 Part 1A, ss 5D(1), 5F, 34(1A), 34(2), 35, 36
Contracts Review Act 1980
Corporations Act 2001 (Cth), s 140(1)
Fair Trading Act 1987, s 42
Law Reform (Miscellaneous Provisions) Act 1946, s 5
Lotteries and Art Unions Act 1901
New South Wales Lotteries Corporatisation Act 1996
Public Lotteries Act 1996, ss 6(1), 22(1), 22(2), 23, 25
Public Lotteries Act 2000 (Vic), s 7/5)
State Owned Corporations Act 1989
Unlawful Gambling Act 1998

CATEGORY: Principal judgment

CASES CITED: Abdelrehim v Tattersall’s Ltd [2007] VCAT 756
Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) FCR 26
Bratton v Seymour Service Co Ltd v Oxborough [1992] BCLC 693
Brown v Petranker (1991) 22 NSWLR 717
Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Coolibah Pastoral Co v Commonwealth (1967) 11 FLR 173
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500
Egyptian Salt and Soda Co Ltd v Port Said Salt Association Ltd [1931] AC 677
Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691
Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473
Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145
Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539
Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336
National Australia Bank Ltd v Nemur Varity Ltd [2002] VSCA 18; (2002) 4 VR 252
National Roads and Motorists Association Ltd v Parkin [2002] NSWCA 153; (2004) 60 NSWLR 224
OBG Ltd v Allan [200] UKHL 21; [2007] 2 WLR 920
Orica Investments Pty Ltd v McCartney [2007] NSWSC 645
Overseas Tankships (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound No 1) [1961] AC 388
Overseas Tankships (UK) Ltd v The Miller Steamship Co Pty (The Wagon Mound No 2) [1967] 1 A 617 at 643
Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180
Pukullus v Cameron [1982] HCA 63; (1982) 150 CLR 447
Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd [2006] NSWCA 356
State Lotteries Office v Burgin (unreported, NSWCA, 19 May 1993)
Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334; (2006) Aust Contract R 90-245
Sydney Corporation v West [1965] HCA 68; (1965) 114 CLR 481
Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642
Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515
Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463

PARTIES: Werner Reinhold - Plaintiff
New South Wales Lotteries Corporation - First Defendant
Graeme John Baker - Second Defendant
Julie Anne Baker - Third Defendant

FILE NUMBER(S): SC 3532/06

COUNSEL: Mr J B Simpkins SC/Mr T M Thawley - Plaintiff
Mr J T Gleeson SC/Ms T L Wong - First Defendant
Mr J C Kelly SC/Mr R A Cavanagh - Second and Third Defendants

SOLICITORS: Piper Alderman - Plaintiff
Eakin McCaffery Cox - First Defendant
Boyd House & Partners - Second and Third Defendants

- 78 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

WEDNESDAY, 30 JANUARY 2008

3532/06 WERNER REINHOLD v NEW SOUTH WALES LOTTERIES CORPORATION & 2 0RS

JUDGMENT

Background

1 The question at issue in these proceedings is whether Mr Reinhold is entitled to a substantial lottery prize or, in default, damages.

2 The relevant events happened in September 2005. At that time, Mr Reinhold had been for ten years or more a regular buyer of tickets in Oz Lotto draws conducted by New South Wales Lotteries Corporation (which I shall call “Lotteries”). Mr Reinhold was a registered player who held a player card carrying a distinctive player registration number (or “PRN”).

3 On 19 September 2005, the Division 1 prize in the next scheduled Oz Lotto draw (Oz Lotto Draw 605) was to be $2,000,000. Mr Reinhold went on that day to his local newsagency to buy a ticket for that draw.

4 The proprietors of the newsagency were Mr Baker and Mrs Baker (“the Newsagents”). They were authorised to sell Oz Lotto tickets by means of terminals in the store connected to Lotteries’ computer system. There were two such terminals at the Newsagents’ shop.

5 In response to Mr Reinhold’s spoken request, a shop assistant employed by the Newsagents (Ms Nicole Skinner) activated a computer terminal to print out a ticket of the required description. The ticket that emerged was incomplete. Although it contained game panels showing the game numbers covered by the ticket, there was no ticket serial number (or “TSN”), no bar code reflecting a TSN, no record of the purchaser’s PRN and no number indicating the agency and terminal through which the ticket had been issued. These were standard content for such a ticket.

6 On noticing that the ticket did not contain all the expected details, Ms Skinner made a telephone call to Lotteries’ help line. She did so for the purpose of seeking guidance on what to do about the incompletely printed ticket. While Ms Skinner was waiting on the telephone after being placed on hold, another shop assistant, Ms Stevie Macdonald, who was working beside her and was aware of the situation, printed a ticket for Mr Reinhold on the second terminal within the Newsagents’ premises. After paying over $14.80 to Ms Macdonald, Mr Reinhold was given this second ticket. It was complete and regular on its face. He left the shop and went home, taking the second ticket with him. The incompletely printed ticket remained at the Newsagents’ premises.

7 In the discussion that follows, I shall use descriptions that were used in the course of the hearing. The incompletely printed ticket retained at the Newsagents’ premises is referred to as “Ticket A”. The completely printed ticket with which Mr Reinhold left the premises is referred to as “Ticket B”. The terminal operated by Ms Skinner to produce Ticket A is referred to as “Terminal 3”, while that operated by Ms Macdonald to produce Ticket B is referred to as “Terminal 2”. The terminals were identified within the Newsagents’ premises and on Lotteries’ computer system by these numbers.

8 Oz Lotto Draw 605 occurred on 20 September 2005, the day after Mr Reinhold’s purchase. The six numbers drawn (6, 19, 21, 22, 25 and 31) corresponded with the game numbers in one of the game panels on Ticket B. No other ticket in the draw carried those six numbers. Thinking that his ticket was a winning ticket, Mr Reinhold went back to the Newsagents’ shop on 22 September 2005. When staff there scanned Ticket B at one of the terminals, the computer did not record any prize as applicable to that ticket.

9 Upon investigation, it became clear that Ticket B had been recorded by Lotteries as cancelled before the draw. The circumstances of the cancellation (or purported cancellation) are controversial but certain of the facts are not. When Ms Skinner spoke by telephone to the member of Lotteries’ help line staff (Mr Adam Cardwell) on 19 September seeking guidance on what to do about the incompletely printed Ticket A, she was told that it should be cancelled. Cancellation of a ticket can be effected through an agency’s terminal but, in order to make a cancellation, it is necessary to input the ticket’s TSN. Because the incompletely printed Ticket A had no TSN on it, Ms Skinner sought further guidance. She was given over the telephone by Mr Cardwell an identifying number which she wrote on the back of the defective Ticket A. He told her to use that number to effect the cancellation. Using that identifying number as the TSN and following a procedure described to her by Mr Cardwell, Ms Skinner entered a cancellation into the computer system.

10 The circumstance that brings the parties to court is that the number given to Ms Skinner by Mr Cardwell and entered by her in order to effect ticket cancellation was the TSN of Ticket B (the ticket issued by Ms Macdonald and taken home by Mr Reinhold), not the TSN of Ticket A (the incompletely printed ticket obtained earlier by Ms Skinner and kept at the Newsagents’ shop). The stance taken by Lotteries is that Ticket B, which Mr Reinhold thought was a winning ticket, had been cancelled before the draw and therefore did not represent an entry in the draw.

11 Documents in evidence which are accepted as copies of extracts from the electronic records of Lotteries show the following sequence of events on 19 September 2005:

1. 10.15.10am: The player card carrying Mr Reinhold’s PRN is swiped on Terminal 3 at the Newsagents’ premises.

2. 10.15.15am: A series of game numbers is entered in respect of that player card at Terminal 3 and payment of $14.80 is recorded. This is the series of game numbers that was at that point printed on to Ticket A at the Newsagents’ premises.

3. 10.17.35am: The player card carrying Mr Reinhold’s PRN is swiped on Terminal 2 at the Newsagents’ premises.

4. 10.17.47am: A series of game numbers is entered in respect of that player card at Terminal 2 and payment of $14.80 is recorded. This is the series of game numbers that was at that point printed on to Ticket B.

5. 10.21.50am: The series of game numbers related to Ticket B is cancelled on Terminal 3 and a credit or refund of $14.80 is recorded.

12 It may thus be inferred (and I find) that, on 19 September 2005, it was the operation of Terminal 2 that caused Ticket B to be issued (and game numbers to be recorded) and the operation of Terminal 3 that caused Ticket B to be recorded as cancelled (and the record of the game numbers to be deleted). Ticket A was never recorded as cancelled. As a result of the matter recorded at 10.21.50am, the game numbers printed on Ticket B did not participate in Oz Lotto Draw 605. The game numbers on Ticket A did so participate but did not attract any prize.

13 I should point out at this early stage that a regularly printed Oz Lotto ticket carries details enabling ready identification of the agency at which it was produced and the number of the terminal within the agency through which it was printed. Thus, Ticket B was, on its face, readily identifiable as having been produced at Terminal 2 at the Newsagents’ shop. The agency and terminal identification was one of the items missing from the incompletely printed Ticket A. Inspection of Ticket A therefore did not give any information about the agency and terminal at which it was produced.

14 I should also point out that, immediately after Oz Lotto Draw 605, Lotteries proceeded on the footing that, as there had been no Division 1 winning entry in that draw, the sum of $2,000,000 that would have been paid to any Division 1 winner or winners was carried forward to Oz Lotto Draw 606. The Division 1 prize for that subsequent draw (which took place a week later) was $4,000,000. There were Division 1 winners in Oz Lotto Draw 606 and the sum of $4,000,000 was paid accordingly.

These proceedings

15 Mr Reinhold has brought proceedings against both Lotteries (as first defendant) and the Newsagents (as second and third defendants). The principal claim advanced by Mr Reinhold is a claim in the nature of specific performance. He pleads a contract the parties to which were himself, Lotteries and the Newsagents. The main issue arising in this part of the case is whether the event or collection of events I have described in a somewhat shorthand way as the “purported cancellation” of Ticket B was effective in such a way that Mr Reinhold was not properly regarded as a participant in Oz Lotto Draw 605 in respect of the game numbers on that ticket.

16 If the purported cancellation of Ticket B was not effective, the result of Mr Reinhold’s principal claim will be that he is entitled, as against Lotteries, to have Lotteries pay him $2,000,000. There will then be questions, which arise upon cross-claims, as to where the burden of the payment should fall – that is, upon Lotteries or upon the Newsagents.

17 If the purported cancellation of Ticket B was effective, the result will be that Mr Reinhold is not entitled to payment of the prize of $2,000,000 by Lotteries – subject, however, to the possibility that the contract may be rectified to cause it to be in a form to make Mr Reinhold so entitled. If there is no rectification, claims in damages maintained by Mr Reinhold will arise for consideration and, if he is successful on any of those, questions about the shouldering of the financial burden as between Lotteries and the Newsagents will have to be addressed.

18 Mr Reinhold was represented upon the hearing before me by Mr J B Simpkins SC and Mr T M Thawley of counsel. Mr J T Gleeson SC and Ms T L Wong of counsel appeared for Lotteries. The Newsagents were represented by Mr J C Kelly SC and Mr R A Cavanagh of counsel.

The regulatory and contractual framework

19 Lotteries is a corporation constituted by the New South Wales Lotteries Corporatisation Act 1996. It is a “statutory SOC” as defined by the State Owned Corporations Act 1989.

20 Prohibitions upon certain forms of gambling are imposed by the Unlawful Gambling Act 1998 and the Lotteries and Art Unions Act 1901. By virtue of

s 6(1) of the Public Lotteries Act 1996, however, a “public lottery” conducted by the holder of licence under that Act is not unlawful and is freed from the prohibitions imposed by the other two Acts. Oz Lotto is a “public lottery” as defined by the Public Lotteries Act.

21 Lotteries holds a licence under the Act in respect of Oz Lotto. The conditions of the licence include the following Condition 2(a):

“Games of Oz Lotto and Promotional Oz Lotto shall be conducted in accordance with the Act, the Regulations, the Rules, these Conditions as amended from time to time and any corresponding laws.”

22 The reference here to “the Rules” is a reference to “the rules in force under the Act in relation to Games of Oz Lotto and Promotional Oz Lotto”.

23 Condition 2(b)(vii) of the licence requires Lotteries, as the licensee, to

“take such steps as are necessary to ensure the observance of the Rules so far as concerns the admission of Entries and the payment of prizes;”

24 Condition 4(b) is as follows:

“Games of Oz Lotto shall be conducted by the Licensee in accordance with the Rules.”

25 Section 22(1) of the Public Lotteries Act requires a licensee to make rules (which are not inconsistent with the Act, the regulations under the Act or the conditions of the licensee’s licence) “for or with respect to the conduct by the licensee of the public lottery”. Section 22(2) refers to a particular matter with which any such rules may deal. Section 23 is concerned with the “effect” of such rules:

“(1) Rules made under this Part must be submitted to the Minister for approval and have no effect unless they are approved in writing by the Minister.

(2) If the rules are so approved, the licensee must cause the rules to be published in the Gazette.

26 Section 25 provides:

“If a rule becomes inconsistent with this Act, the regulations or the conditions of a licence (because of amendment of this Act or the regulations or alteration of the conditions of the licence), the rule ceases to have effect to the extent of the inconsistency.”

27 It is common ground that rules known as the “Oz Lotto Rules” were, in September 2005, in effect pursuant to s 23 in respect of Oz Lotto. Their coverage is stated in rule 2(a):

“These Rules are to be read subject to the Act and shall apply, where the context permits, to every Game of OZ Lotto and Game of Promotional OZ Lotto.”

28 By force of s 23 of the Act, the Rules have “effect”. Given its source, that “effect” is supplied by the Act itself but its nature is not specified. Unlike its counterpart in Victoria, the New South Wales Act does not cause the rules to form part of each player’s contract: see Abdelrehim v Tattersall’s Ltd [2007] VCAT 756 and the reference, at [25], to s 7(5) of the Public Lotteries Act 2000 (Vic). But I am satisfied that, despite the absence any such explicit reference, the contract arising upon purchase of an Oz Lotto ticket incorporates the provisions of the Oz Lotto Rules. There was no submission to the contrary. Indeed, each party relies on aspects of those rules and, as will be seen presently, the rules themselves are expressed to be binding on a player who enters a game, the relevant agent and Lotteries.

29 Provisions of the rules and the Oz Lotto licence envisage the appointment of agents by Lotteries. The main function of agents is to sell tickets to customers and to receive subscription moneys accordingly. The Newsagents in this case are agents of Lotteries in respect of a number of games operated by Lotteries, including Oz Lotto. The agency was created by a deed dated 16 May 1996 expressed to operate from 12 May 1996. It is relevant, at this point, to quote only one provision of this agency agreement. Clause 4.3.1 is as follows:

“The Agent must observe the Rules and Regulations applicable to the games conducted by NSW Lotteries and comply with all instructions given by NSW Lotteries from time to time for the Agency. The Agent agrees that any failure to observe the Rules and Regulations constitutes a breach of the terms of this Agreement as if they were reproduced in this Agreement and were covenants made with NSW Lotteries.”

30 The combined effect of the Public Lotteries Act, Lotteries’ licence, the Oz Lotto Rules and the Newsagents’ agency agreement is that, upon purchase of a ticket by Mr Reinhold at the Newsagents’ premises on 19 September 2005, there arose a contract to which Mr Reinhold, Lotteries and the Newsagents were parties, being a contract under which the rights and obligations of the parties were those specified by the Oz Lotto Rules in relation to participation by a subscriber in a game of Oz Lotto.

31 The contractual relationship was, however, of a special kind. Its nature was the subject of the following observation by Clarke JA (with whom Handley JA and Waddell AJA agreed) in Brown v Petranker (1991) 22 NSWLR 717, another case involving rules governing Lotto games conducted by Lotteries (or, more accurately, its statutory predecessor). His Honour said at 722:

“The Court is not dealing with a contract freely negotiated between two parties. On the contrary, while it can be accepted for present purposes that upon the facts alleged by the respondent the appellants came under duty which may be described as

32 Clarke JA later said (at 722-723):

The Oz Lotto Rules

33 It is necessary at this point to set out some key provisions of the Oz Lotto Rules, noting that, in the extracts that follow and in the context of this case, references to the “Licensee” are references to Lotteries and references to “the Agent” are references to the Newsagents.

34 The rules express themselves to have effect as follows (rule 16(a)):

“By entering a Game of OZ Lotto or a game of Promotional OZ Lotto a Player or Syndicate Player acknowledges that he or she has entered into an agreement with the Licensee and the Agent and agrees to be bound by the provisions of these Rules which subsist for the benefit of the Licensee, Directors, the Chief Executive Officer, the Agent and all Employees thereof.”

35 Allocation of and entitlement to prizes under the Oz Lotto Rules is by reference to “Entries”, in that a particular prize is expressed to be payable “in respect of” a particular “Entry”. This is the effect of rules 12(a) and 12(b):

“(a) Prizes for each Game of OZ Lotto shall be paid by the Licensee from the Prize Pool in the percentage specified in this Rule and shall be classified as Division 1, Division 2, Division 3, Division 4 and Division 5 Prizes.

(b) Any such Prize shall, where only one (1) Entry or Syndicate Entry is eligible for that Prize, be payable in respect of that Entry or Syndicate Entry, or shall, where two (2) or more Entries and/or Syndicate Entries are eligible for that Prize, be shared equally between those Entries and/or Syndicate Entries.”

36 The expression “Entry” is defined as follows by rule 1(a):

“’Entry’ means the Numbers in a Game of OZ Lotto which have been recorded in the central processing computer equipment, which have been selected by way of an Entry Form or Automatic Entry, which (subject to Rule 6(e)) have been imprinted on the same numbered line on a Ticket, and in respect of which a Fee has been paid.”

37 The existence of a “Ticket” and the payment of a “Fee” are thus matters essential to the existence of an “Entry”. The expression “Ticket” is defined by rule 1(a) thus:

38 The process that brings a “Ticket” and an “Entry” into existence is that referred to in rule 6(c):

“A completed Entry Form or any other approved form of Entry (including Automatic Entry) completed or made in accordance with these Rules shall be accepted by an Agent and processed on a Computer Linked Terminal and evidenced by the issue of the Ticket to the Player or Syndicate Player.”

39 It is also relevant to quote at this point rule 11(i):

“An Entry Form or Automatic Entry instructions must be received by the Licensee or an Agent in sufficient time to be processed before the Drawing relating to that Entry or Syndicate Entry. For the purposes of this paragraph an Entry or Syndicate Entry will be taken to be received when details thereof have been recorded on the central processing computer equipment held by the Licensee and the Ticket has issued from a Computer Linked Terminal.”

40 Once the processes giving rise to an “Entry” and a “Ticket” have been completed, the relevant person is a “Player” within the following definition in rule 1(a):

41 Cancellation of a “Ticket” is dealt with in rule 6(f):

“Subject to Rule 19(f), a Player may return a Ticket and on request have the same cancelled provided it is returned on the day of purchase to the place of purchase and prior to the Drawing of the Game of OZ Lotto entered. A Ticket so cancelled shall be void.”

42 The rules reflect an apparently separate concept of “withdrawal” of a “Ticket”. Rule 11(j) provides:

“Other than as provided for in Rules 6(f), 19(e) and 19(f) no Ticket may be withdrawn or altered after issue to a Player or Syndicate Player without the consent of the Licensee.”

43 There is also a provision concerned with inconsistency between the content of a “Ticket” and the content of Lotteries’ computer records. Rule 6(e) provides:

“In the event that the details recorded on the Player’s or Syndicate Player’s Ticket are not consistent with the details held by the Licensee by way of Computer Records then the latter shall apply to the exclusion of the former and shall determine what Prize, if any, the Player or Syndicate Player shall be entitled to and the Player or Syndicate Player shall be bound by any such determination.”

44 The definition of “Computer Records” in rule 1(a) is:

“’Computer Records’ means the sum of information which is provided to the Licensee by way of the Licensee’s central processing computer equipment in respect of a Player or Syndicate Player and in respect of details of:

(1) a Player’s Entry in a Game of OZ Lotto;

(2) a Syndicate Entry and a Syndicate Player’s Syndicate Entry Share in a Game of OZ Lotto; and

(3) where appropriate a Player’s entry in a Game of Promotional OZ Lotto.”

45 The rules contain provisions excluding liability of Lotteries and agents in certain circumstances. It will be necessary to consider these, as well certain other rules not so far mentioned, as particular issues are addressed.

Did Mr Reinhold have an “Entry” for the six winning numbers?

46 As I have said, allocation of and entitlement to prizes under the Oz Lotto Rules is by reference to “Entries” (although, as will be seen in the discussion of rule 14(l), the ability to produce a “Ticket” and to quote its TSN is a prerequisite to actually obtaining a prize). To succeed in his principal claim (that is, the claim to be paid the prize of $200,000,000), Mr Reinhold must show that he had an “Entry” consisting of the game numbers in one of the game panels appearing on the face of Ticket B, being the six numbers drawn in Oz Lotto Draw 605.

47 An “Entry” is a set of game numbers that satisfies the several criteria in the rule 1(a) definition of “Entry”, that is

(a) the numbers “have been recorded in the central processing computer system”;

(b) the numbers “have been selected by way of an Entry Form or Automatic Entry”;

(c) the numbers “(subject to Rule 6(e)) have been imprinted on the same numbered line on a Ticket”; and

(d) a “Fee” has been paid in respect of the numbers.

48 There is no issue about criterion (b) and criterion (d), so far as the game numbers on Ticket B are concerned. It is not in dispute that, since Ticket B was an “Autopick” ticket, the numbers on it were selected by “Automatic Entry”, as defined by rule 1(a). Nor is it disputed that a “Fee” was paid by Mr Reinhold in respect of the numbers on Ticket B. He paid $14.80 to Ms Macdonald when she handed him Ticket B.

49 Lotteries accepts that, immediately after the issue of Ticket B and the recording in Lotteries’ computer system of the particulars recorded at 10.17.47am (see paragraph [11] above), Mr Reinhold had an “Entry” consisting of or relating to the game numbers on Ticket B. Lotteries contends, however, that Mr Reinhold no longer had such an “Entry” at the time of the draw and that, for that reason, he was not entitled to a prize.

50 This raises questions about the time at which “Entries” come into existence and their duration. Having regard to rules 12(a) and 12(b), it is clear that the “Entries” to be taken into account for the purpose of determining and allocating prizes for a particular draw are those subsisting at the time of the draw. The rules appear to reflect no explicit concept of cancellation or withdrawal of an “Entry”, as distinct from a “Ticket” – although there is a concept of cancellation of “Numbers in a Game of OZ Lotto”. This is dealt with by rule 6(g) which, broadly speaking, is concerned with a case where a terminal at an agency has caused game numbers to be entered in the central computer but payment for the relevant entry or ticket has not been forthcoming. It is recognised that, in such a case, the agent may “cancel the Numbers before the Drawing”.

51 Despite the absence from the rules of any explicit concept of cancellation of an “Entry”, it seems to me that cancellation or withdrawal of a “Ticket” (rules 6(f) and 11(j)) carries with it the consequence that the “Entry” with which the “Ticket” is connected will also be cancelled or withdrawn. A “Ticket” is, after all, “the official confirmation that a Player has submitted an Entry” and a completed entry form is, after acceptance and processing, “evidenced by the issue of” a “Ticket” (rule 6(c)), so that cancellation or withdrawal of a “Ticket” necessarily entails cancellation or withdrawal of the “official confirmation” of the submission of the relevant “Entry” and of the document by which acceptance and processing of the relevant entry form are “evidenced”.

52 As I have said, Lotteries contends that Mr Reinhold had no “Entry”, in respect of the game numbers on Ticket B, when the relevant draw occurred. This is because criterion (a) and criterion (c) were, at that point, not satisfied.

53 As to criterion (a), the game numbers on Ticket B were recorded in the central processing computer equipment at 10.17.47am on 19 September 2005. In that way, criterion (a) was at that point satisfied. At 10.21.50am, however, another entry was made which referred to the same numbers and, in its last line, included the word “CANCEL” in block letters. The recording of the numbers in the central processing computer equipment after 10.21.50am was therefore a twofold recording the net effect was to record the numbers as cancelled. Implicit in the concept of recording with which criterion (a) is concerned is, it seems to me, the notion that the recording will be one which treats the numbers as operative and extant. A twofold recording having the net effect I have mentioned does not satisfy that concept. From the point at which the “CANCEL” notation was entered in respect of the game numbers on Ticket B, those numbers were, in the relevant sense, no longer “recorded in the central processing computer system”.

54 As to criterion (c), the position at the time of the draw was that Mr Reinhold continued in possession of the piece of paper referred to as Ticket B. The game numbers printed on that piece of paper at the time of its creation continued to be printed on it at the time of the draw. To that extent, those game numbers satisfied criterion (c) at the time of the draw – subject, however, to the force of the qualifying words “subject to Rule 6(e)”. Rule 6(e) is concerned with inconsistency between the “details” on a person’s ticket and the “details” in Lotteries’ computer records. In the case of such inconsistency, the details in the computer records prevail and are determinative of prize entitlement. Game numbers must be regarded as such “details”.

55 The qualification expressed by the words “subject to Rule 6(e)” indicates that printing of the relevant game numbers in the specified way on a “Ticket” is not, of itself, necessarily sufficient to supply the element of “Entry” with which criterion (c) is concerned. That element will exist only if there is printing of that kind on a “Ticket” and, in addition, rule 6(e) has not operated to deal with a situation of the kind with which that rule is concerned. The continued existence of the printing does not satisfy criterion (c) once rule 6(e) has operated in a case of relevant inconsistency.

56 An inconsistency of the kind dealt with by rule 6(e) arose at 10.21.50am on 19 September 2005. Before that point, the “details” as to game numbers recorded on Ticket B corresponded with the “details” as to operative game numbers recorded in Lotteries’ computer system which constituted the “Entry” reflected by Ticket B. But that correspondence ceased at 10.21.50am. If, after that point, Ticket B was still properly regarded as a “Ticket”, as defined by the rules, the situation was one in which, although the relevant game numbers continued to be physically visible on the “Ticket”, the “subject to” qualification operated to preclude their still being regarded as printed on a “Ticket” at the time of the draw, so that criterion (c) was no longer satisfied when the draw occurred.

57 Having regard to the provisions of the rules as a whole, the result is that, at the time of Oz Lotto Draw 605 on 20 September 2005, the game numbers in fact printed on the piece of paper I have called “Ticket B” no longer constituted an “Entry” for that draw. This is because those game numbers were no longer recorded in Lotteries’ central processing computer system and because rule 6(e) had accordingly intervened to preclude their continuing to be regarded as printed on a “Ticket”.

58 For reasons of policy which are not difficult to understand, the rules afford paramount force to the content of Lotteries’ computer records. No “Entry” can exist in respect of game numbers which, at the time of the draw, are not recognised as operative game numbers in those computer records. And this is so whatever might appear on the face of a document that is, or has been, a ”Ticket” showing of the game numbers constituting the “Entry”. Where, as in a case such as the present, game numbers have been entered in the computer system and other criteria have been satisfied so as to create an “Entry” consisting of those game numbers, a subsequent entry in the computer system causing the numbers to be no longer operative game numbers means that there is thereafter no such “Entry”. The cause of or reason for the removal or reversal is irrelevant to the question whether the “Entry” subsists, even though it might have other consequences under the contract between Lotteries and the person who had the “Entry”.

59 Because of the paramount force given to the content of Lotteries’ computer records and the consequent absence of any “Entry” for the game numbers appearing on Ticket B at the time of Oz Lotto Draw 605, Mr Reinhold cannot succeed in his primary claim to recover, as a matter of contract, the prize of $2,000,000 that would have been payable had there been a single “Entry” for Oz Lotto Draw 605 consisting of those game numbers.

The rectification claim

60 It is the contention of Mr Reinhold and the Newsagents that, if the outcome on Mr Reinhold’s principal claim is as I have just stated, the computer records of Lotteries should be rectified in exercise of equity’s jurisdiction to rectify instruments. It was apparently accepted that Lotteries’ computer records are, for these purposes, an instrument and that the jurisdiction to rectify is available accordingly. I therefore do not pause to consider that matter.

61 The essence of the claim, as articulated by Mr Kelly SC on behalf of the Newsagents in submissions adopted by Mr Simpkins, is that the entry at 10.15.15am on 19 September 2005 relating to Terminal 3 (that is, item 2 at paragraph [11] above) should, as to the whole of its substantive content, including the game numbers, be deleted and there should be inserted in its place all of the substantive content of the entry at 10.21.50am (that is, item 5 at paragraph [11] above). In that way, the player identification details and game numbers referable to Ticket B should be recorded in place of the player identification and ticket identification details and game numbers referable to Ticket A and those substituted particulars would stand uncancelled as the content of the computer record referable to Ticket A.

62 The approach to be taken to a rectification claim of this kind is the subject of comment in several of the judgments in Pukullus v Cameron [1982] HCA 63; (1982) 150 CLR 447. Wilson J said (at CLR 452):

Crane v Hegeman-Harris Co Inc

Slee v Warke

Joscelyne v Nissen

Maralinga Pty Ltd v Major Enterprises Pty Ltd

Joscelyne

Maralinga

63 Brennan J said (at CLR 456):

Slee

Maralinga

64 To these observations may be added that of Mason J in Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336 at CLR 350:

"What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral, except in cases of a special class to which I shall later refer.

Shipley Urban District Council v. Bradford Corporation

Slee v. Warke

65 Where there are several parties, rectification will be ordered only if it is clearly shown that all of them shared an intention not accurately recorded or implemented by the relevant instrument.

66 The simple proposition upon which Mr Reinhold and the Newsagents rely in pursuing the rectification claim is that it was, on the morning of 19 September 2005, the common intention of Mr Reinhold, Lotteries and the Newsagents that Ticket A and the computer entries it reflected should be cancelled and that Ticket B and the computer entries it reflected should remain extant and operative.

67 Lotteries seeks to resist the rectification claim on several grounds. First, Lotteries says that the common intention of the three parties was merely that Mr Reinhold should have one set of game numbers participating in Oz Lotto Draw 605 and that it was, on 19 September 2005, a matter of complete indifference to all of them which particular numbers should participate. The parties’ common intention was, according to Lotteries, met and satisfied by Mr Reinhold’s participation in respect of the game numbers on Ticket A.

68 Lotteries further says that it was the common intention of the parties that any entitlement of Mr Reinhold to a prize would be determined by the game numbers shown by Lotteries computer records to be allocated to him and that those numbers and their effect for prize purposes would prevail over the content of any ticket held by Mr Reinhold.

69 I do not think that these submissions can be accepted. If one leaves to one side the intention of Lotteries and concentrates on the intentions of Mr Reinhold and the Newsagents, it is to my mind clear that they attached significance to the game numbers on Ticket B to the exclusion of those on Ticket A. The whole purpose of the acts of the Newsagents’ employees and Mr Reinhold while he was at the shop was to put him in a position where he had a set of game numbers evidenced by a complete and regular ticket. Mr Reinhold, it may be accepted, did not turn his mind to the content of the computer records and questions of discrepancy between those records and the ticket he took home with him. Had it been the game numbers on Ticket A, rather than those on Ticket B, that attracted the $2,000,000 prize, Mr Reinhold, holding Ticket B in his hand, would have been astonished by the suggestion that he had won that prize.

70 Mr Reinhold, in any event, could not have obtained a prize in respect of the game numbers on Ticket A. Various provisions within rule 14 say what must be done to obtain or claim a prize. Under rule 14(l), a claim for a prize under any of the earlier provisions of rule 14 must be accompanied by certain “particulars”, including “the Ticket Serial Number” (rule 14(l)(ii)) and “the Ticket” (rule 14(l)(v)). Because he was never given Ticket A (which was retained by the Newsagents) and because he had no way of knowing the TSN of Ticket A (which did not print), Mr Reinhold could never have satisfied those conditions. For the same reason, he did not satisfy the criteria in paragraph (2) of the definition of “Player” (see paragraph [40] above) in respect of the game numbers on Ticket A. At no stage, therefore, did Mr Reinhold become a participant in the relevant game of Oz Lotto in relation to the Ticket A game numbers. It is therefore wrong to suggest that the chance he wished to purchase accrued to him because the game numbers on Ticket A continued to be recorded in Lotteries’ computer records at the time of the draw.

71 While selection of the particular game numbers in the first instance was a matter of indifference to all parties, the intention of Mr Reinhold, at least, could only have been that his participation in the draw would be solely by reference to the game numbers appearing on Ticket B, being the ticket he was given and with which he left the shop. The intention of the Newsagents, in my view, must have been the same.

72 Lotteries, on the other hand, was not a participant in the events at the newsagency on the morning of 19 September 2005. Lotteries’ intention about which ticket was to be cancelled and which was to stand was formed and shaped, in the first instance, by what Mr Cardwell was told on the telephone by Ms Skinner and, in addition, by the procedures Mr Cardwell undertook in response to Ms Skinner’s request for guidance. Lotteries did not have any independent desire or intention of its own in that respect.

73 Lotteries raises another matter. It contends that the contract between itself, the Newsagents and Mr Reinhold was, of its nature, not such as to allow rectification of the kind Mr Reinhold and the Newsagents seek.

74 I have already outlined the statutory context in which the Oz Lotto Rules are made and operate. A person who buys an Oz Lotto ticket elects to become subject to a pre-ordained contractual regime the terms of which are fixed by and pursuant to a statute. The statute cannot be changed excepted by Parliament. The rules themselves cannot be changed by Lotteries except as approved by the Minister. Combined action of Lotteries, an agent such as the Newsagents and a subscriber or player such as Mr Reinhold cannot alter the terms of a contract to which they have become parties by the processes culminating in an “Entry” as defined by the rules. As Clarke JA pointed out in Brown v Petranker (above), the parties are not free to negotiate their contract. They must contract on the pre-ordained terms or not at all and, as Clarke JA also observed, the “presumed intention of the parties” plays no part in the process of construing the contract.

75 It was submitted by Mr Gleeson SC on behalf of Lotteries that the contract is accordingly similar to the constitution of a company which, by s 140(1) of the Corporations Act 2001 (Cth), has affect as a contract between the company and each members, between the company and each director and the secretary and between a member and each other member. A company’s constitution will not be rectified according to equitable principles of rectification. The reason is that which precludes implication of terms from extrinsic circumstances, as explained by Steyn LJ in Bratton v Seymour Service Co Ltd v Oxborough [1992] BCLC 693 at 698:

76 Both rectification and implication depend on findings about intentions. Each is concerned with “a deficiency in the expression of the consensual agreement”: Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 per Mason J at CLR 346. In relation to intentions underlying a company’s constitution, Ipp JA, in National Roads and Motorists Association Ltd v Parkin [2002] NSWCA 153; (2004) 60 NSWLR 224 at [81], quoted the following passage from the speech of Lord Macmillan in Egyptian Salt and Soda Co Ltd v Port Said Salt Association Ltd [1931] AC 677 at 682:

77 These observations are, of course, concerned with the intentions of “the framers” of a company’s constitution. But they apply also to the intentions of persons later becoming bound. As Steyn LJ pointed out, the intrusion of the intentions of the company and one subsequent subscriber for or transferee of shares might mean that implications arose inconsistent with those arising from the intentions of the company and another subscriber or transferee, so that conflicting implications competed for supremacy. In the case of a company constitution, as in the case now before me, it must be presumed that the parties intended simply to subject themselves to the pre-ordained regime, so that their rights and obligations would be as dictated by that regime, without elaboration or qualification peculiar to the particular case. Certainly Lotteries cannot have intended that inconsistent intention involved in a course of dealing at a suburban newsagency should be accommodated.

78 I accept the submission made on behalf of Lotteries that, since hundreds of thousands of people participate in Oz Lotto draws, it cannot be accepted that the statutory contract is to apply differently to different participants according to such intentions inconsistent with the pre-ordained regime as may be manifested from time to time by individuals at newsagencies and other outlets throughout New South Wales. The contractual regime is fixed in advance. A participant cannot participate except in accordance with the pre-ordained terms, whatever may be the actual intention of that participant, the agent through which he or she becomes a participant or Lotteries itself. Among the statutory terms is the term which makes the contents of Lotteries’ computer records determinative, regardless of subjective intentions inconsistent with that content.

79 In this respect, the circumstances of this case bear a distinct similarity to those before the Supreme Court of the Northern Territory in Coolibah Pastoral Co v Commonwealth (1967) 11 FLR 173. The claim there was a claim for rectification of a pastoral lease granted under Crown lands legislation. The statutory process entailed issue by the Administrator of a notice containing the proposed lease terms. An applicant could then accept or reject the proposal contained in the notice. In case of acceptance, the Minister was bound to grant a lease on the terms in the notice. Blackburn J held that the procedure left no room for the inclusion of terms which were agreed or intended by the parties but not expressed in the notice. There, as here, the terms to apply as between the parties were fixed in advance by a process of external prescription admitting of no common intention beyond that reflected by the terms so fixed.

80 The contract, of its nature, and by its terms, is one that cannot be affected by the parties’ intentions. Those intentions play no part in discovering the meaning of the contract. Nor can they cause any term to be implied or lead to the rectification of an instrument created in accordance with the contractual provisions.

81 I mention, in addition, another matter raised by Lotteries, namely, that the $2,000,000 that would have been paid as prize money had Ticket B and its related Entry not been cancelled had, by the time Mr Reinhold submitted his prize claim, come to be included in the prize for the next draw: see paragraph [14] above. That draw proceeded accordingly and the augmented prize of $4,000,000 was paid. I accept the submission by Lotteries that the prejudice and loss to Lotteries that would follow from subsequent rectification in Mr Reinhold’s favour as now sought would militate against the exercise of equity’s discretion in favour of decreeing rectification.

82 The rectification claim does not succeed.

The breach of contract claims, the claims in negligence and the cross-claims

83 The next question is whether a breach of contract occurred when Ticket B was cancelled. It is, as I have said, accepted that, immediately after the issue of Ticket B and the recording on Lotteries’ computer system of the particulars recorded at 10.17.47am on 19 September 2005, Mr Reinhold had an “Entry” consisting of or relating to the game numbers on Ticket B. I have found that he no longer had that “Entry” at the time of the draw. The “Entry” ceased to exist when the “CANCEL” notation was recorded against the relevant particulars in Lotteries’ computer system at 10.21.50am. Furthermore, I have noted that the rules reflect no concept of cancellation or withdrawal of an “Entry” but work on the basis that cancellation or withdrawal of a “Ticket” (both recognised concepts) will result in cancellation or withdrawal of the “Entry” the submission of which is the subject of “the official confirmation” constituted by the related “Ticket”.

84 It must follow that, if the game numbers that make up an “Entry” are treated as cancelled in Lotteries’ central computer records as a result of cancellation or withdrawal of a “Ticket” in conformity with the rules, the elimination of the “Entry” will be consistent with and authorised by the rules. But if there is, within the rules, no warrant for the cancellation or withdrawal of the “Ticket” and the consequent recording of the relevant game numbers as cancelled, the elimination of the “Entry” will be inconsistent with and unauthorised by the rules and will constitute a breach of contract.

85 Mr Reinhold pleads such a breach of contract. He alleges that it was a term of the contract to which he, Lotteries and the Newsagents were parties that his “Ticket” or “Entry” would not be cancelled by Lotteries or the Newsagents without instructions to that effect from him; that Lotteries and the Newsagents (or Lotteries or the Newsagents) – the latter acting either alone or as agents of Lotteries – purportedly cancelled Ticket B and the “Entry” reflected by it, and did so without his instructions; and, if that cancellation was effective, there was a breach by both Lotteries and the Newsagents of the pleaded term of the contract.

86 Mr Reinhold also advances claims in tort. In relation to Lotteries, Mr Reinhold pleads a duty to take reasonable care in and about cancelling Tickets and Entries and providing information for the purpose of enabling Tickets and Entries to be cancelled.

87 Mr Reinhold pleads a duty of care in negligence on the part of the Newsagents by which the Newsagents were required to take reasonable care in and about issuing Ticket B to Mr Reinhold and recording the Entry and cancelling any ticket issued; also to take reasonable care not to cancel Ticket B or the related Entry where the Newsagents had not been requested by Mr Reinhold to do so.

88 In addressing the breach of contract claims and the claims in negligence, it is necessary at the outset to focus on the actions of Lotteries on the one hand and the Newsagents on the other. The circumstance that caused Mr Reinhold’s participation in Oz Lotto Draw 605 in respect of the game numbers on Ticket B to be discontinued was the removal of the “Entry” reflected by Ticket B from Lotteries’ computer records. The immediate cause of that removal was the keying in of a TSN on a terminal at the Newsagents’ premises and the activation of a cancellation accordingly. Those acts were acts of the Newsagents, through their employee, Ms Skinner. But Ms Skinner would not have performed the acts resulting in removal of the Ticket B “Entry” from Lotteries’ computer records unless Lotteries had given her over the telephone the number that she used as the TSN when activating the cancellation through the terminal at the Newsagents’ premises.

89 If the Newsagents committed a breach of contract or were negligent because of the acts of Ms Skinner that were the immediate cause of the removal of the “Entry” reflected by Ticket B, there will be an issue as to the responsibility of Lotteries to protect the Newsagents against the consequences of the wrong done by them. That issue is raised by the Newsagents’ cross-claim by which they plead implied terms of their agency agreement with Lotteries that Lotteries would provide proper instructions to the Newsagents as to cancellation of tickets and would adhere to its own procedures to ensure that tickets were not improperly cancelled. The Newsagents also plead a duty of care on the part of Lotteries towards the Newsagents in respect of these matters.

90 Lotteries, in turn, maintains a cross-claim against the Newsagents. It relies on provisions of the agency agreement, including provisions requiring the Newsagents to comply with instructions given to them by Lotteries. This is relevant to instructions regarding cancellations which, as the evidence shows, were contained in “Network News” publications given by Lotteries to the Newsagents. There is also a term by which the newsagents must indemnify Lotteries against claims arising from failure or default of the Newsagents under the agency agreement. Lotteries further says that the Newsagents owed it a duty of care to exercise all reasonable skill, diligence and care in discharging their duties under the agency agreement and that it was an implied term of the agreement itself that they would do so. Lotteries therefore claims indemnity by the Newsagents.

Concurrent duties of care owed to Mr Reinhold

91 I am satisfied that each of Lotteries and the Newsagents owed Mr Reinhold a duty of care in negligence. That the relevant events occurred in a contractual context and that Mr Reinhold acquired rights in contract as against Lotteries and the Newsagents does not preclude the existence of a concurrent duty of care. Each duty of care is found whether one adopts a foreseeability approach or a proximity approach, particularly because Mr Reinhold was “vulnerable” in the sense that he was not in a position to protect himself from the want of reasonable care on the part of Lotteries or the Newsagents or both in and about the matter of ticket issue and ticket cancellation: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180. Of necessity, Mr Reinhold relied on the accuracy and integrity of the steps taken by Lotteries and the Newsagents: Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609; Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515. Speaking of the position of a solicitor in relation to the solicitor’s client and after referring to the decision of the High Court in Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539, Kirby P said, in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 652:

“The attempt to limit a solicitor's duty strictly to the scope of his retainer is inconsistent with the holding of the High Court in Hawkins . It attempts to confine the duty of care to a contractual format. But as the majority established in that case, that duty lies also in tort. The consequences of tort liability may not be the same as of contractual liability. Although the contract of retainer will be an important indicium of the nature of the relationship

which gives rise to the common law duty of care (as the minority held in Hawkins ) it will not chart exclusively the perimeters of that duty. Deane J pointed out (at 579) that, depending upon the circumstances of the particular case, the duty may require the taking of positive steps “ beyond the specifically agreed professional task or function ”, where these are necessary “to avoid a
real and foreseeable risk of economic loss being sustained by the client”.

92 In the case of Lotteries, the context in which dealings take place indicate that the contractual duties emerging from the rules are supplemented by a duty of care in negligence to administer the rules in a careful and prudent way, including by adhering to such policies and procedures as Lotteries itself has seen fit to adopt for the purpose of ensuring the due and proper implementation of the rules. Such a duty will, depending on circumstances, be owed to the relevant player or subscriber, or to the relevant agent or to both those persons. Lotteries operates in an environment where its actions and its adherence to both the rules and the policies and procedures that underwrite and supplement the rules are potentially the source of detriment to agents and to subscribers.

93 In the case of the Newsagents, the concurrent duty of care will include a duty to persons buying lottery tickets to exercise reasonable care and skill in executing and fulfilling orders placed by those persons: see Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd [2006] NSWCA 356 at [183].

94 From the perspective of both Lotteries and the Newsagents, the risk that steps taken to identify a ticket to be cancelled might result in wrong identification to the prejudice of the holder of a ticket that was not to be cancelled was a foreseeable risk and was not insignificant. The risk was also such that a reasonable person in the position of Lotteries or the Newsagents, in order to preclude or reduce the risk, would have taken the precautions envisaged by such standard procedures applicable to each as were directed to elimination of the risk. There was a probability that harm would occur if those precautions were not taken. Taking of the precautions would not have involved any burden in either case. I mention all these matters with Division 2 of Part 1A of the Civil Liability Act 2002 in mind.

95 I am also satisfied, in relation to the cross-claim by the Newsagents against Lotteries and the cross-claim by Lotteries against the Newsagents, that the relationship of those parties was such that duties of care in negligence co-existed with duties sourced in express or implied terms of their agency agreement. Each was entitled to expect a particular standard of care and skill from the other in relation to actions that were potentially a source of liability to both.

96 The breach of contract claims and the claims in negligence require consideration of the precise circumstances in which Ticket B was cancelled and Ticket A remained uncancelled. I turn, therefore, to the evidence in more detail.

Mr Cardwell’s evidence

97 Mr Cardwell, a call centre operator employed by Lotteries, gave evidence that he received a telephone call from a person at the Newsagents’ business on 19 September 2005. When swearing his affidavit and at the time of his cross-examination, Mr Cardwell had no actual recollection of the incident.

98 Mr Cardwell explained that procedures manuals were available to staff members such as himself. He only consulted the manuals when unusual cases arose. A case such as the present was commonplace and not such as to cause him to consult a manual.

99 On average, Mr Cardwell received about ten calls per hour and between 60 and 100 calls a day. He was able, however, to refer to the document he created at the time, being a “Ticket Cancellation” document recording a telephone call at 10.19am in respect of a transaction at 10.17am, with the “Fault for Cancellation” described a “Partially printed ticket (No TSN)”. The entry for “Verification details for Cancellation” reads, “Agent received a partially printed ticket. TSN of 3184-26868737-1357 was cancelled”.

100 This TSN was not given to Mr Cardwell by Ms Skinner. She knew that, to obtain cancellation of a ticket through a terminal at the shop, she had to input a TSN. The partially printed Ticket A had no TSN on it. That was one of the reasons she needed to speak to Lotteries. Ms Skinner needed to obtain the TSN of Ticket A from Lotteries in order to effect cancellation.

101 Mr Cardwell gave evidence of his usual practice in cases where he was asked over the telephone to assist with cancellation of tickets. The practice he described consisted of the following steps:

1. Ask caller for name of agency.

2. Type name of agency into computer.

3. Search the system for terminals within the agency that are “active”, that is, currently in use.

4. Ask the caller for details of the problem, including whether the ticket was partially printed or not printed at all.

5. Ask the caller whether the customer is still in the agency.

6. If the customer is not still in the agency, inform the caller that a TSN cannot be given and that Lotteries cannot assist.

7. If the customer is still in the agency, ask for other information, such as the type of Lotto game involved, how long ago the game had been purchased, the customer’s PRN and whether the ticket had been resold.

8. Scroll through the most recent transactions recorded for the active terminals to identify the ticket matching the information given by the caller.

9. Ask the caller to read out the numbers of two of the game panels appearing on the partially printed ticket (usually the first and fourth games) in order to compare those with the game numbers in the ticket appearing from the system to be the ticket in question.

102 Mr Cardwell said in relation to step 9:

“At all times we required the agents to read us the game number panels appearing on partially printed tickets. It was my practice never to read the game numbers to an agency representative.”

103 The next steps typically taken, as described in Mr Cardwell’s affidavit, were as follows:

“[O]nce I had identified the correct entry using the game numbers provided to me by the agent, I would print the following documents from the system:

(i) the record of the ticket to be cancelled by the agency (see for example page 2 of annexure ‘A’);

(ii) if the player was registered, the record of the player’s registration number, obtained from the ‘Customer Details’ field of the record of the ticket to be cancelled (see page 3 of Annexure ‘A’);

(iii) the game panels of the ticket to be cancelled (see page 4 of annexure ‘A’); and

(iv) the listing of the most recent transactions sold on the terminal, including the listing of the ticket to be cancelled (see page 5 of annexure ‘A’).”

104 These documents were then attached to a “Ticket Cancellation” document prepared by Mr Cardwell and, once that document had been signed by Mr Cardwell and checked and signed by his supervisor (in this case, Ms Cooper), Mr Cardwell would give to the caller by telephone the number to be entered as a TSN to obtain cancellation of the ticket.

105 One matter not included in Mr Cardwell’s description of his usual practice in his affidavit is any inquiry of the caller directed to identifying the terminal within the agency on which the relevant ticket was printed. In response to a question whether, as Ms Skinner deposed, he had asked her for the terminal number, Mr Cardwell said:

“I can’t recall specifically, but we would need to determine the terminal number.”

106 In the course of re-examination about the production of the extracts from electronic records attached to his “Ticket Cancellation” document, Mr Cardwell said:

“In the New South Wales Lotteries, what is called the process computer system, you type the agent number, the agent identifier, by putting in that and the relevant terminal number. That would then bring up that last transaction screen. So that in the normal procedure you rely on the agent to advise you as to what the particular problem was that they are experiencing or which terminal they are working on. Usually we would look at prior transactions that they had done.”

107 The next question and answer were:

108 The document Mr Cardwell produced shows that the transaction he identified as the transaction to be cancelled was one that had been processed through Terminal 2 at the Newsagents’ premises.

109 I pass now to another aspect of Mr Cardwell’s general practice as outlined in his affidavit. The steps to ascertain details in order to identify the relevant ticket were, he said, preceded by a particular inquiry. I quote from his affidavit:

“I would ask the caller whether the customer was still in the agency. If the caller responded that the customer had left the agency, I would inform the caller that I was unable to issue any ticket serial number (‘TSN’) or otherwise assist them with cancelling the ticket.”

110 An extract from a procedures manual annexed to Mr Cardwell’s affidavit states the questions that must be asked of agency callers seeking a TSN to cancel a ticket. In the case of “ticket/s partially printed”, one such question is, “Is the Customer still in the agency?” The manual then says:

“If the customer is still in the agency, advise the Agent to resell the ticket/s and confirm this before providing the TSN.”

111 Mr Cardwell could not recall whether he had covered these matters with Ms Skinner. However, his “Ticket Cancellation” document records the following:

Ms Cooper’s evidence

112 Ms Cooper is a shift supervisor employed by Lotteries. It was she who countersigned the “Ticket Cancellation” document prepared by Mr Cardwell. She has some current recollection of this particular case.

113 Ms Cooper gave evidence of steps taken in a case such as the present. She listed in her affidavit “key aspects of the procedure for assisting agencies to cancel tickets, as stated in the CSR Procedure Manual”. Having described a case in which the TSN might be available from the ticket itself, despite partial printing (a “poor print” case), Ms Cooper deposed:

“If the newsagency was not able to take advantage of the “poor print” function, operators were required to check whether the customer was still in the newsagency. This was a critical part of the procedure, as operators were required to refuse to provide a TSN unless the newsagency confirmed that the customer who purchased the ticket remained in the shop.

Assuming the customer was still in the shop, operators were required to ask a series of questions, to enable them to identify the ticket from the information in the NSW Lotteries’ computer system (the ‘system’). This information included the time of purchase, the type of game purchased and the registration number of the player (if registered).

Operators were also required to ask if the ticket had been resold.”

114 Ms Cooper also described her practice when requested by a call centre operator to authorise the cancellation of a ticket:

“When the operator presented the system print-outs and/or ticket cancellation form to me for approval, I would have a short discussion with the operator to confirm the following matters

(c) that the operator verified the number in the game panels in the case of a partially printed ticket;

(d) whether or not the ticket had been resold.”

115 It appears from Ms Cooper’s evidence that she did not independently consult the computer records and confined herself to questioning Mr Cardwell about steps he had taken.

116 One thing that Ms Cooper did make clear is that the computer system was such that a person in Mr Cardwell’s position could not call up on to a single screen all recent transactions at an agency having several terminals. A list of recent transactions for one terminal was available separately from a list of recent transactions for the other terminal. These could be accessed sequentially, but not simultaneously.

117 Ms Cooper said that she had assumed that Mr Cardwell had taken all necessary steps to satisfy himself that the defective ticket had been printed on Terminal 2.

The evidence of the Newsagency employees

118 I turn now to the parts of Ms Skinner’s evidence relevant to her identification to Mr Cardwell over the telephone of the ticket to be cancelled.

119 On 22 September 2005, after it was discovered that the ticket produced by Mr Reinhold did not qualify for the prize, Mr Baker had both Ms Skinner and Ms Macdonald prepare written statements of their recollections of the events involving Mr Reinhold on 19 September 2005. I quote from Ms Skinner’s statement:

“[I] rang the lotteries office and explained to the man what had happened, he asked what terminal this happened on and I told him it was on terminal number 3. One of the other girls then printed him another autopick on our number 2 terminal and the customer left. I did not realise that the customer had left the store. I explained to the man on the phone exactly this and he gave me a serial number to cancel the ticket with, I took his word for it considering I didn’t have a number to check with him, and he didn’t ask me to verify the cancellation in any other way, other than did I have the customers rego card. But I explained to him the customer had already left and I wrote the serial number down on the back of the ticket I was to cancel and I proceeded to cancel the ticket.”

120 When Ms Skinner was interviewed by Mr Koro, an investigator with Lotteries, on 26 September 2005, she told him that she had told the person to whom she spoke on the help line that she had sold the ticket on Terminal 3 and “the other girl has printed a replacement ticket on terminal 02”. Mr Koro’s account of what Ms Skinner said continues:

121 In her affidavit of 1 March 2007, Ms Skinner deposed that, after she had explained the problem to the man on Lotteries help line, he said, “Okay, hang on I’ll look it up from my end. What’s the terminal number?” Ms Skinner’s affidavit continues:

“20. I confirmed with Ms Macdonald that I was working on terminal 3 and then said to the man on the line:

‘It’s terminal 3.’

The man had not asked me what terminal number I was on. The man then went off the phone for a few minutes. He then came back and said:

‘Are you sure your printed out on terminal 3.’

I said: ‘Yes. The other girl is on terminal 2 and she has printed out a valid ticket.’

He said: ‘Is the customer still there?’

I said: ‘No, he’s gone.’

He said: ‘So the bad ticket was on terminal 3.

I said: ‘Yes.’

He said: ‘So you need to cancel the ticket.’

I said: ‘But I don’t have the TSN to cancel it.’

He then said: ‘Okay – write this number down.’

I then turned the ticket over and wrote the number down on the back of the ticket.

…

22. I then said words to the effect of:

‘How do I cancel it because I’ve never cancelled it without putting it through the machine?’

He said: ‘Press cancel and enter the numbers I’ve given you.’

I said: ‘So that’s it.’

He said: ‘Yes, that’s it.’

He was then still on the phone and I did what he said.

23. I pressed the cancel icon and a line with a number paid came up under. I entered the number into the terminal.

24. Thereafter a further document was printed with ‘cancellation’ on it. I stapled it to the invalid ticket and put it in the cancelled box.

25. I then said to the man:

‘Okay, it worked.’”

122 Ms Skinner’s statement of 22 September 2005 does not refer to her having confirmed the terminal identification with Ms Macdonald. Ms Skinner was, however, taken to the matter in cross-examination and gave an answer as follows:

“A. Well, as - when the printer malfunctioned, I said to Stevie ‘What should I do?’ She said ‘Just ring the lottery office.’ And I then rang the lottery office. After I waited on hold for however long I was on there, I went through what happened to the man on the phone and I confirmed with her - I said ‘Stevie, this is terminal 3, correct?’, and she said ‘Yes, this is 3. This is 2’, and then I went on the phone back to the guy and said exactly that.

123 The cross-examination continued:

“Q. May we take it that the reason you say you were speaking with Stevie was that you were unsure what terminal you were on?
A. No.

Q. Why did you even speak with her at all about it if you knew you were on terminal 3?
A. Because I wanted to confirm, so I didn't make a mistake.

Q. So, it was a matter of importance to you, was it, to confirm with Stevie that you were on terminal 3?
A. Yes.

Q. A matter of fundamental importance?
A. Yes.

124 Ms Skinner was then taken to a glaring inconsistency in her affidavit. As stated above (paragraph [121]), she deposed that the man on the help line asked her, ‘What’s the terminal number’. She said that in paragraph 19 of the affidavit. Then, in paragraph 20, she said that said to the man, ‘It’s terminal 3’’; and she also said, “The man had not asked me what terminal number I was on”. Ms Skinner accepted in cross-examination that this simply did not make sense.

125 Ms Skinner was later taken to another aspect of her affidavit, namely, the absence from it of reference to a matter referred to in her statement of 22 September 2005. In the statement, she said that the man on the help line did not ask her to verify the cancellation except by giving the customer’s PRN from his card – which, she told him, she could not do as the customer had left the shop. While she said in the affidavit that she told the man that the customer had left the shop, she did not refer to the request for the customer’s PRN. Ms Skinner had no explanation for this.

126 Ms Macdonald’s affidavit records, in paragraph 7, her recollection of her conversation with Ms Skinner on 19 September 2005:

“Nicole said to me words to the effect of:

‘This ticket is only half printed.’

She showed me the ticket and said to me words to the effect of:

‘What should I do?’

I said to her words to the effect of:

‘Call the Lotteries Hotline and cancel it.”

127 Ms Macdonald here said nothing about Ms Skinner’s having confirmed the terminal numbers with Ms Macdonald. Nor was there any such reference in the written statement made by Ms Macdonald at Mr Baker’s request on 22 September 2005. Ms Macdonald referred there only to Terminal 2 as the terminal on which she printed the second ticket. In cross-examination, however, Ms Macdonald said that the version of her conversation with Ms Skinner on 19 September 2005 contained in her affidavit was not a complete version. I quote from her cross-examination:

213 I am not persuaded that these observations are of assistance here. Kirby P proceeded on the footing that a party “which had complete control over the terms which it propounded” should be treated as occupying the position of a proferens for the purpose of an approach similar to the contra proferentem rule. That may be so. The case his Honour mentioned of “a printed form which is tendered by a party which has complete control over its terms” would be such a case. But that is not the case now before me. Lotteries does not have “complete control” over the terms by which Oz Lotto games are governed. The terms are fixed by the statutory processes already discussed. While Lotteries plays a part in those processes, it is not free to dictate or insist upon particular terms. Lotteries, agents and players are alike subject to terms which are fixed, as to participation in any game. Each is subject to the same external prescription.

214 The approach that must be preferred is that referred to in Brown v Petranker (above). It is unlikely that the contra proferentem rule or any analogy applies. Clarke JA said as much in that case at 726. The primary task is to construe the provisions in the context in which they apply. And any “presumed intention of the parties” is irrelevant, except as it emerges from those provisions.

215 That task of construction must, in my opinion, be approached with two particular points in mind: first, that neither party had any opportunity to negotiate, with the result that the terms do no represent consciously adopted stipulations; and, second, that, unless the words clearly indicate otherwise, the protection extends only to things done by Lotteries within the scope of its contractual function.

216 Rule 16(d)(i) is concerned with negligence and other stated shortcomings “in the carrying out or performance of any duty, function or discretion conferred or contemplated by the Rules in or about the conduct of any Game of OZ Lotto …”. Rule 16(d)(ii), while preserving the generality of rule 16(d)(i), then refers to negligence and the other stated shortcomings “in relation to” specified matters, including “the processing and issue of a Ticket following acceptance of any Entry Form or Automatic Entry Instructions” (rule 16(d)(ii)(2)) and “the inclusion of an Entry or Syndicate Entry in any particular game of OZ Lotto or entry in a Game of Promotional OZ Lotto received by way of Entry Form or Automated Entry” (rule 16(d)(ii)(4)).

217 The primary submission made on behalf of Mr Reinhold is that the cancellation of Ticket B did not entail the performance of any duty, function or discretion conferred or contemplated by the rules. To the extent that there was any duty, function or discretion as to the cancellation of a ticket, it was a duty, function or discretion related solely to a ticket which had been returned for cancellation and the cancellation of which was consented to by the person to whom the ticket had been issued. The rules, in rule 6(f), create a duty, function or discretion in such a case. Otherwise, there is no duty, function or discretion with respect to the cancellation of a ticket.

218 Under the alternative approach for which Lotteries contends, the rules are to be regarded as having provided for and contemplated a general function of cancelling tickets and the need for return of the ticket and the giving of consent by the ticket holder did not circumscribe or limit the scope of the function. Return of the ticket and the giving of consent by the holder were no more than procedural requirements non-observance of which might constitute default of the very kind with which rule 16(d)(i) is concerned.

219 In relation to the particular aspects of rule 16(d)(ii), Mr Reinhold contends that cancellation of a ticket is not and does not form part of “the processing and issue of a “Ticket” (rule 16(d)(ii)(2)) or “the inclusion of an Entry … in any particular Game of OZ Lotto” (rule 16(d)(ii)(4)).

220 The submission made on behalf of Lotteries as to the first of these matters is that, in the circumstances, the cancellation of Ticket A and of the Entry reflected by it was part of the processing and issue of Ticket B, having regard to the fact that only one set of Automated Entry instructions was given by Mr Reinhold who wished to obtain only one Entry.

221 In relation to the second matter, Lotteries says that the ordinary and natural meaning of the words “the inclusion of an Entry” cover whether a particular Entry was or was not recorded as a valid Entry for the draw in question.

222 My conclusion in relation to rule 16(d)(ii)(2) is that the construction for which Mr Reinhold contends must be preferred. The words in rule 16(d)(ii)(2) – “the processing and issue of a Ticket following acceptance of an Entry Form or Automatic Entry instructions” – are to be contrasted with those of rule 16(h) – “the acceptance and processing of any Entry Form or Automatic Entry culminating in the issue of a Ticket”: see paragraph [192] above. The “processing and issue of a Ticket” is, by the different words used, distinguished from “the acceptance and processing of any Entry Form or Automatic Entry”. In the present case, steps were taken towards the processing and issue of two tickets. The steps were completed in one case but not in the other. I say this because of my conclusion, already expressed, that there was “issue” of Ticket B but not of Ticket A: see paragraphs [192] and [193] above. The cancellation of Ticket B occurred after it had been processed and issued – indeed, after Mr Reinhold had left the shop with it. The cancellation was not part of the “processing and issue” of Ticket B. Nor was the cancellation of Ticket B part of the “processing and issue” of Ticket A. This is because, as I have already said, Ticket A was never issued and, to the extent that it may have been “processed”, by being partially printed, the cancellation of Ticket B was not part of that processing.

223 My conclusion in relation to rule 16(d)(ii)(4) is also that the construction for which Mr Reinhold contends must be preferred. The words to be emphasised in that provision are “in relation to the inclusion of an Entry”. The words are not “in relation to an Entry”. If the provision is to apply, one must therefore identify both an “Entry” and some negligence, omission, delay or default “in relation to” its “inclusion” in a particular Oz Lotto game. Instances in which the provision would apply, as identified by Mr Simpkins, are conduct which meant that the Entry was not included in the game or was included with incorrect details. I accept the submission that the words do not naturally bear a meaning that extends to conduct which meant that an Entry was regularly and properly included but later excluded without authority. The conduct would then relate to the subsequent exclusion, not the completed and earlier inclusion.

224 But the point of particular importance is that rules 16(d)(ii)(2) and 16(d)(ii)(4) are, by the terms of the rules themselves, recognised as concerned with special aspects of the subject matter dealt with by rule 16(d)(i). The correct approach to rule 16(d)(i), in my view, is that, consistently with the High Court authority to which I have referred, protection is to be had only in relation to activities engaged in within the permitted scope of the rules. The cancellation of Ticket B without Mr Reinhold’s request and without the ticket having been returned for cancellation, and the issue of Ticket B’s TSN to enable it to be cancelled without those prerequisites having been satisfied, were not activities within the scope of any duty, function or discretion conferred or contemplated by the rules. The only duty, function and discretion with respect to ticket cancellation arising from the rules were those in relation to tickets returned for cancellation at the holder’s request. The duty, function and discretion did not extend to a case where Lotteries unilaterally cancelled a ticket because it feared that any prize the ticket attracted might be devoted to illegal purposes; or a case where an employee of an agent cancelled a particular person’s ticket out of spite or vindictiveness. A cancellation effected in either of these hypothetical cases would not represent the performance or exercise of any duty, function or discretion of Lotteries or of the relevant agent, even though it was an act which each was, as a matter of fact, capable of performing. So too with any other cancellation effected without the return of the ticket and without the holder’s request. Such a cancellation is something that it was possible to effect but the effecting of it was not within the scope of any duty, function or discretion to be exercised or performed in accordance with the applicable contractual framework.

225 Rule 16(f) may be dealt with shortly. It is true that some “malfunction” of a “Computer Linked Terminal” set in train the series of events which ultimately led to these proceedings. The malfunction was that which caused Ticket A to be defective because not fully printed. But the liability that Mr Reinhold seeks to lay at the feet of Lotteries and the Newsagents is not liability “for or in respect of” the malfunction that resulted partial printing. It is liability for or in respect of conduct of Lotteries and the Newsagents consequential upon the malfunction. Broad though the words “in respect of” are, they do not, in this context, cause to be within the exclusion liability which comes from separate and subsequent conduct engaged in with a view to changing the content of Lotteries’ computer records.

226 The conclusion relation to the exclusion provisions in the rules is that none of them, upon a proper construction, operates upon or in relation to the liabilities for breach of contract and for negligence that have been established by Mr Reinhold in these proceedings.

Liability of Lotteries and the Newsagents

227 Mr Reinhold has succeeded in establishing that

(a) Lotteries and the Newsagents were each guilty of a breach of contract, as against Mr Reinhold, by obtaining the cancellation of Ticket B through the acts of Ms Skinner at Terminal 3;

(b) Lotteries breached a duty of care in negligence owed by it to Mr Reinhold when it failed to take reasonable care to identify the ticket to be cancelled;

(c) the Newsagents breached a duty of care in negligence owed by them to Mr Reinhold when they failed to take reasonable care in giving to Lotteries information for the identification of the ticket to be cancelled; and

(d) the exclusion provisions in the Oz Lotto Rules do not preclude liability of the Newsagents and Lotteries to Mr Reinhold for these breaches; nor do they preclude recovery of damages by Mr Reinhold accordingly.

228 It remains to consider questions of causation, remoteness of damage and quantum (and to deal briefly with some subsidiary claims advanced by Mr Reinhold). Thereafter, the position as between Lotteries and the Newsagents upon their cross-claims will require attention.

229 Mr Reinhold would not have been deprived of Ticket B and the Entry it reflected but for the cancellation which, as I have found, entailed a breach of contract, as against him by each of Lotteries and the Newsagents. And that cancellation would not have occurred but for the breaches of the duties in negligence owed to Mr Reinhold by both Lotteries and the Newsagents, being the duties related to the exercise of care and skill in the identification of tickets to be cancelled. The breaches of contract and of the duties of care were directly causative of Mr Reinhold’s deprivation. In the terms used in s 5D(1) of the Civil Liability Act, those breaches were a necessary condition of the harm constituted by the deprivation and it is appropriate for the scope of the liability of Lotteries and the Newsagents to extend to that harm, they being, to the entire exclusion of Mr Reinhold, the persons with control of the process of ticket cancellation and with knowledge of the workings of that process. This last factor means that the risk to which Mr Reinhold was exposed was not an “obvious risk” as defined by s 5F of the Civil Liability Act.

230 Where a breach of contract occurs, the plaintiff can only recover for such damage as arose “according to the ordinary course of things” or could reasonably be supposed to have been in the reasonable contemplation of the contracting parties: Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145. The parties’ reasonable contemplation must be taken to extend to a serious possibility or real danger liable to result. The principles relevant to the alternative basis (or “second limb”) were analysed by Beazley JA in Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334; (2006) Aust Contract R 90-245 at [32] to [46].

231 In the case of negligence, damages are available for loss or injury of a kind that was foreseeable as a possible result of the breach of duty: Overseas Tankships (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound No 1) [1961] AC 388. As the Privy Council observed at a later stage (Overseas Tankships (UK) Ltd v The Miller Steamship Co Pty (The Wagon Mound No 2) [1967] 1 A 617 at 643), the question is whether there was “a real risk, one which would occur to the mind of a reasonable man in the defendant’s position and which he would not brush aside as far-fetched.”

232 The distinction between the questions to be addressed in contract and in tort was discussed by Batt JA in National Australia Bank Ltd v Nemur Varity Ltd [2002] VSCA 18; (2002) 4 VR 252 at [43] to [44]:

“With regard to the test for remoteness, the Privy Council in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) laid it down — and it has been accepted in Australia ever since — that the essential factor in determining liability for the consequences of a tortious act of negligence is whether the damage is of such a kind or genus as the reasonable person should have foreseen and not whether the damage was the direct or natural consequence of the tortious act. The Privy Council elaborated this test as regards the degree of foreseeability required in the subsequent case of Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty , holding that it was sufficient if there was “a real risk”, that is, “one which would occur to the mind of a reasonable man in the position of the [defendant]”. Foreseeability is not required of the precise manner in which the particular injury came about or of its extent: see generally Fleming, The Law of Torts . …

Hadley v Baxendale

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd

C Czarnikow Ltd v Koufos

Alexander v Cambridge Credit Corporation Ltd

Hadley v Baxendale

Koufos

The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

40

of the kind

Koufos

Alexander v Cambridge Credit Corporation

The Law of Contract

Chitty on Contracts

233 When these principles are applied in the present case, the conclusion must be that a reasonable person would have foreseen that the wongly cancelled ticket (or, more precisely, the “Entry” it reflected) would attract a prize in Oz Lotto Draw 605 and that the parties would reasonably be supposed to have had it in contemplation that the ticket (or “Entry”) would attract a prize. Furthermore, the circumstance foreseen or in contemplation would have been the winning of a prize of some amount between a small or trifling sum and the available maximum of $2,000,000. Although the possibility that, if there was a prize at all, it would be a prize of some small amount would have been recognised as much greater than the possibility of the prize of $2,000,000, the contemplation of the reasonable man and the parties would clearly have extended to that latter possibility. Loss of – or inability to obtain – a prize was a loss of a kind bearing such a relationship to the reach as to be compensable both in contract and in tort.

234 I turn to the question of quantum of damages. The central question here is: what loss did Mr Reinhold suffer? On one view, he suffered the loss of a chance to win such prize, if any, as an “Entry” of the relevant kind might reasonably have been expected to attract in the particular Oz Lotto draw. On that basis, the amount of the loss would be small. The nature of the game is such that the chance that any Entry will attract a prize greater than a token or trifling amount is remote.

235 The alternative approach, which I consider to be the correct approach, is that Mr Reinhold’s loss is to be measured not by reference to a single hypothetical Entry in Oz Lotto Draw 605 but by reference to the particular Entry that was wrongfully taken away from him. Had he not been deprived of the Entry reflected by Ticket B, he would have received a prize of $2,000,000. In those circumstances, deprivation of the Entry caused him not to receive the $2,000,000 that he would otherwise have received.

236 The damages for both breach of contract and negligence are therefore the sum of $2,000,000 necessary to put Mr Reinhold into the position he would have occupied had the deprivation not occurred.

Mr Reinhold’s other claims

237 I have not, to this point, mentioned subsidiary claims of Mr Reinhold. These are, first, claims against both Lotteries and the Newsagents based on s 42 of the Fair Trading Act 1987 and a claim that Lotteries and the Newsagents “converted the contractual rights arising from [Mr Reinhold’s] possession of the Entry and/or Ticket B and/or the contractual rights under the Contract”, that is, the contract to which Mr Reinhold, Lotteries and the Newsagents were parties.

238 This second claim may be dealt with shortly. It is a tort claim of the kind dealt with in the following passage in the judgment of Lindgren J (with whom Lockhart J and Tamberlin J agreed) in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) FCR 26 at 43:

“In my opinion, the authorities establish conclusively that the gravamen of the tort is intention. Although the requirement of knowledge of the contract is sometimes discussed as if it were a separate ingredient of the tort, it is in fact an aspect of intention. The requirement that the alleged tortfeasor have ‘sufficient knowledge of the contract’ is a requirement that he have sufficient knowledge to ground an intention to interfere with contractual rights.”

239 This passage was approved by the Court of Appeal in Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 and by White J in Orica Investments Pty Ltd v McCartney [2007] NSWSC 645. White J observed that, in OBG Ltd v Allan [200] UKHL 21; [2007] 2 WLR 920 at [40]–[41], Lord Hoffmann approved the statement to the same effect by Lord Denning MR in Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 at 700-701. Neither Lotteries nor the Newsagents had any specific intention of depriving Mr Reinhold of the Entry reflected by Ticket B. That is sufficient to dispose of this claim.

240 As to the claims based on s 42 of the Fair Trading Act, I have found that each of Lotteries and the Newsagents failed to take reasonable care in and about the identification of the ticket to be cancelled. If that caused any particular statement or representation of either to be misleading or deceptive, no further or additional vindication would accrue to Mr Reinhold. There is therefore no need for the matter to be pursued.

241 Mr Reinhold made a claim under the Contacts Review Act 1980 but the claim was relevant only in the eventuality that the exclusion clauses in the rules operated to preclude or defeat his claims in contact and negligence against Lotteries and the Newsagents – a result that has not emerged. I therefore need say no more about that aspect.

Responsibility as between Lotteries and the Newsagents

242 Remaining for consideration is the question of the respective financial responsibilities of Lotteries and the Newsagents, noting, of course, that liability of each in both contact and in tort has been established but that Mr Reinhold’s entitlement is to recover $2,000,000 only once.

243 It may be that, because both are liable (and because Mr Reinhold’s claim is a claim for economic loss), the situation is properly regarded as one in which there is, in terms of the Civil Liability Act, a “single apportionable claim” as defined by s 34(1A) and Lotteries and the Newsagents are “concurrent wrongdoers” as defined by s 34(2). If that is so, the task of the court under s 35 will be to apportion the liability between them on the basis of its assessment of what is “just” having regard to their respective “responsibility for the damage or loss”: see Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463. In addition, s 36 may affect the outcome of the cross-claims of Lotteries and the Newsagents against one another. Another possibility referred to briefly in submissions and raised on the pleadings is that rights of contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 will require attention.

244 Because these are matters that were not fully developed in submissions and are likely to affect (or be affected by) the contractual stipulations binding as between Lotteries and the Newsagents (including that set out at paragraph [29] above), it is appropriate that all parties be given an opportunity to address the cross-claims further in light of the conclusions to which I have now come.

Result to this point

245 Mr Reinhold has failed in his claim to enforce the contract to which he, Lotteries and the Newsagents were parties by means of an order that Lotteries pay him the prize of $2,000,000 that would have been payable in respect of the Entry reflected by Ticket B had Ticket B not been cancelled. Mr Reinhold has also failed in the claim (pressed also by the Newsagents) to have the electronic records of Lotteries rectified in a way that would lead to such an order. But Mr Reinhold has succeeded in establishing liability of Lotteries and the Newsagents for both breach of contract and negligence such as to entitle him to judgment for damages in the sum of $2,000,000.

246 At a time to be fixed, I shall hear argument on the question of how the cross-claims by Lotteries and the Newsagents against each other should be disposed of in light of the last element of the overall result just stated. I shall also hear argument on the question whether (and, if so, upon what basis) interest should be awarded on the judgment sum of $2,000,000; as well as argument on the question of costs.

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Citations

Reinhold v New South Wales Lotteries Corporation [2008] NSWSC 5

Most Recent Citation

Kuzmanovski v New South Wales Lotteries Corporation [2010] FCA 876

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CITATION:	Reinhold v New South Wales Lotteries Corporation [2008] NSWSC 5
HEARING DATE(S):	10/12/07, 11/12/07, 12/12/07, 13/12/07 Written submissions: 14/12/07, 17/12/07
JUDGMENT DATE :	30 January 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Plaintiff entitled to damages of $2,000,000 as against first defendant and second and third defendants. Further submission to be made on cross-claims, interest and costs.
CATCHWORDS:	GAMING AND WAGERING - lottery authorised by statute - effect of statutory provisions and rules governing Oz Lotto - where ticket cancelled without consent of holder - whether holder nevertheless entitled to prize - EQUITY - equitable remedies - claim for rectification of computer records of Lotteries Corporation - whether context of pre-ordained rules giving supremacy to computer records admits of rectification - CONTRACTS - claim by ticket holder for breach of contract by Lotteries Corporation and ticket selling agent - where ticket cancelled without holder's consent - TORTS - negligence - whether duty of care owed by Lotteries Corporation and ticket selling agent to ticket holder in relation to processing of order and cancelling of ticket - whether duty of care breached - CONTRACTS - exemption clauses - approaches to construction - whether applicable to claims in contract and tort - DAMAGES - for breach of contract and negligence in cancelling ticket attracting large prize
LEGISLATION CITED:	Civil Liability Act 2002, Division 2 Part 1A, ss 5D(1), 5F, 34(1A), 34(2), 35, 36 Contracts Review Act 1980 Corporations Act 2001 (Cth), s 140(1) Fair Trading Act 1987, s 42 Law Reform (Miscellaneous Provisions) Act 1946, s 5 Lotteries and Art Unions Act 1901 New South Wales Lotteries Corporatisation Act 1996 Public Lotteries Act 1996, ss 6(1), 22(1), 22(2), 23, 25 Public Lotteries Act 2000 (Vic), s 7/5) State Owned Corporations Act 1989 Unlawful Gambling Act 1998
CATEGORY:	Principal judgment
CASES CITED:	Abdelrehim v Tattersall’s Ltd [2007] VCAT 756 Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) FCR 26 Bratton v Seymour Service Co Ltd v Oxborough [1992] BCLC 693 Brown v Petranker (1991) 22 NSWLR 717 Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609 Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 Coolibah Pastoral Co v Commonwealth (1967) 11 FLR 173 Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 Egyptian Salt and Soda Co Ltd v Port Said Salt Association Ltd [1931] AC 677 Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336 National Australia Bank Ltd v Nemur Varity Ltd [2002] VSCA 18; (2002) 4 VR 252 National Roads and Motorists Association Ltd v Parkin [2002] NSWCA 153; (2004) 60 NSWLR 224 OBG Ltd v Allan [200] UKHL 21; [2007] 2 WLR 920 Orica Investments Pty Ltd v McCartney [2007] NSWSC 645 Overseas Tankships (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound No 1) [1961] AC 388 Overseas Tankships (UK) Ltd v The Miller Steamship Co Pty (The Wagon Mound No 2) [1967] 1 A 617 at 643 Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 Pukullus v Cameron [1982] HCA 63; (1982) 150 CLR 447 Rickard Constructions Pty Ltd v Richard Hails Moretti Pty Ltd [2006] NSWCA 356 State Lotteries Office v Burgin (unreported, NSWCA, 19 May 1993) Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334; (2006) Aust Contract R 90-245 Sydney Corporation v West [1965] HCA 68; (1965) 114 CLR 481 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515 Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463
PARTIES:	Werner Reinhold - Plaintiff New South Wales Lotteries Corporation - First Defendant Graeme John Baker - Second Defendant Julie Anne Baker - Third Defendant
FILE NUMBER(S):	SC 3532/06
COUNSEL:	Mr J B Simpkins SC/Mr T M Thawley - Plaintiff Mr J T Gleeson SC/Ms T L Wong - First Defendant Mr J C Kelly SC/Mr R A Cavanagh - Second and Third Defendants
SOLICITORS:	Piper Alderman - Plaintiff Eakin McCaffery Cox - First Defendant Boyd House & Partners - Second and Third Defendants