SkyCity Adelaide Pty Ltd v Treasurer of South Australia & Anor

[2024] HCATrans 64

[2024] HCATrans 064

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A10 of 2024

B e t w e e n -

SKYCITY ADELAIDE PTY LTD

Appellant

and

TREASURER OF SOUTH AUSTRALIA

First Respondent

STATE OF SOUTH AUSTRALIA

Second Respondent

GAGELER CJ
GORDON J
EDELMAN J
GLEESON J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT HOBART ON THURSDAY, 12 SEPTEMBER 2024, AT 10.00 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR A.C. ROE for the appellant.  (instructed by Johnson Winter Slattery)

MR T.N. GOLDING, KC:   May it please the Court, I appear with MR M.E. BOISSEAU for the respondents.  (instructed by Crown Solicitor’s Office (SA))

GAGELER CJ:   Thank you, Mr Golding.  Mr Gleeson.

MR GLEESON:   Your Honours, the appeal ultimately concerns the meaning of the expression “gross gambling revenue” in the casino duty agreement between appellant and respondent.  We submit that in reaching the correct construction of that term, it is relevant and permissible to take into account the term “revenue”, which is part of the concept that is then being further explained in the definition.

Your Honours, in our outline between paragraph 2 and 9, I will be seeking to argue that the Shin Kobe Maru statement of principle does not erect an inflexible rule that one can never have regard to the thing being defined when understanding the definition that follows.  To that extent, our ultimate submission is that Shin Kobe Maru is merely an example of a particular case where the label was not informative in the construction exercise that followed; it is always permissible to consider whether the label is informative, particularly where there is ambiguity, but not just where there is ambiguity; and to the extent Shin Kobe Maru is treated as the orthodox position in this Court, the way it was described in Australian Securities and Investments Commission v King, it should be now recognised to be no more than a guide in appropriate cases, both as a matter of a statute and particularly when one is dealing with a commercial contract.

After I have dealt with that question of principle, we will then, between paragraphs 9 through to 13, advance our positive construction on the ultimate question.  Your Honours, I was proposing to deal with the cross‑appeal in reply, unless your Honours wish me to do it altogether in advance, which I can also do.

GAGELER CJ:   You can deal with it in reply, Mr Gleeson.

MR GLEESON:   Thank you, your Honour.  So, in terms of the statutory and contractual background, in volume 1 of the authorities, you have first of all, the Casino Act 1997 (SA), particularly section 17, which says:

There is to be an agreement (the casino duty agreement) between the licensee and the Treasurer –

which is to do three things:

(a)fixing the amount, or basis of calculation, of casino duty; and

(b)providing for the payment of casino duty; and –

Then, relevantly to the cross‑appeal, if it arises:

(c)dealing with interest and penalties to be paid for late payment or non‑payment –

We conceive of “interest” and “penalties” as different creatures at general law and as different creatures in section 17, and not simply to be rolled‑up together as the respondent argues on the cross‑appeal.

We draw attention to subsections (4) and (5) because they are two instances where the general law of contract and equity relating to agreements is varied.  It “operates as a deed”, irrespective of formalities.  It “does not attract stamp duty”.  The only other place where the Act modifies the general law of agreements and equity is earlier on in section 11(2), which permits transfers of the contract, irrespective of ordinary rules of privity or the like.  Then, under section 51, which is on page 44, there is a statutory obligation to:

pay casino duty (and interest and penalties –

if any:

in accordance with the casino duty agreement.

And in the absence of an agreement, a regulation can be made fixing those matters.  We would contend on the cross‑appeal that the scope of the statutory debt under section 51 mirrors the scope of the underlying obligation under the deed under section 17, particularly because of the language:

in accordance with the casino duty agreement.

Then there are penalties in section 52. In terms of the facts ‑ ‑ ‑

GORDON J:   Before you leave that, can I just ask whether you accept that sections 17 and 51 give effect to section 2A(d) in terms of objects?

MR GLEESON:   Yes, your Honour.

GORDON J:   Thank you.

MR GLEESON:   In terms of the facts which are in the special case, we have addressed them in our written submissions in chief at 5 to 27, and in reply at paragraph 6 we have sought to capture the essence of the situation.  In short, SkyCity operates a rewards program, customers can acquire points, generally through gambling and non‑gambling expenditure.  The points themselves expire after six months unless used, and they cannot themselves be redeemed for cash or transferred.

GLEESON J:   Who owns the points?

MR GLEESON:   The casino owns the points.

GLEESON J:   At all times?

MR GLEESON:   At all times, but pursuant to the arrangements in the program, is permitting the customer to do various things referable to the points.  So, they are the points.  Then we have what I might call the normal way of customers wagering, which is to put their own cash into the cashless gaming account which the customer can then access by putting the card into a machine, and when the card is put into the machine the customer may transfer their funds into credits – electronic gaming credits.

Pausing at that point in the structure, the customer has the card in the machine and has, say, $20 converted into credits.  The money is not yet the money of the casino, it is still the customer’s money.  It becomes the casino’s money at the next stage when it is wagered on a particular game.  Then, returning to the points, for them to realise value for the customer, the customer must make a choice to convert them into credits, because of the ‑ ‑ ‑ 

GLEESON J:   Your case does depend, though, on the casino owning the points at all times, does it not?

MR GLEESON:   I think it is important to the case, your Honour, but it also sits next to the notion we take from the London Clubs decision in the United Kingdom in the Supreme Court and the earlier United Kingdom cases, that we are looking at real‑world flows of money, and whatever is happening with points and credits and conversion is the means by which, ultimately, if money belonging to the customer has been brought into the possession of the casino in a revenue account sense, then that gets brought into the calculation.  Equally, if prizes go the other way, they are a deduction, but it is that real‑world emphasis which is important to our argument.

BEECH‑JONES J:   Mr Gleeson, can I just ask two things.  Firstly, it is still the case under the scheme as operative to this Act that non‑gambling expenditure on meals, drinks and so forth can create points that can be converted to credits that can be applied to gambling, is that correct?

MR GLEESON:   Yes.

BEECH‑JONES J:   The second thing is, do you accept on your argument that if the customer acquired points that way, converted them to credits, withdrew the money, and then gambled the money as cash, that would be “gambling revenue”?

MR GLEESON:   Yes.  And then one comes to the critical difference we apprehend, which is that – it is really my “turn left” and “turn right” that I am coming to next in the structure, your Honours.

BEECH‑JONES J:   Yes.

MR GLEESON:   So, I was at the point where you can convert points into credits, but only if you have passed through the “gate” – to use that term – meaning you have, on that gambling occasion, separately wagered from your own funds an amount equal or greater to the points that you wish to convert into credits.  Now, when you convert points to credits, in one sense, they look the same as the credits that you have purchased by cash, but there is one important qualification to that, which we have drawn attention to in our submissions.  It is at page 124 of the book, in the terms and conditions.  When it comes to wagering, the wager comes first out of the points and then comes out of credits paid for by cash.

GORDON J:   Could you just put that proposition again and identify what paragraph you are relying on, please, Mr Gleeson?

MR GLEESON:   It is page 124, paragraph 18, which is in the terms and conditions which are attached to the special case:

All Points are redeemed on a “first‑in‑first‑out” basis.  Where a Full Member accesses a cashless gaming facility under clause 33 and uses a combination of Points and cash payment for wagers the Points are redeemed first before any cash payment is applied.

So, you could have one situation where you wager $50 on an occasion and your account would otherwise be down to nil, but you have enough points to convert to $50 in credits, and then if, in that situation, you will be wagering solely with credits which have been sourced in the points coming from the casino.

GORDON J:   Why is that significant for your argument?  Why does it matter at all?

MR GLEESON:   It may not ultimately matter.  I am just dealing with – the Court of Appeal thought, particularly around paragraphs 37, 41 to 44 and 46 to 49, that you should treat the credits exactly the same for the purpose of the clause, whether they have been sourced in the customer’s funds or whether they have come from the casino with the points.  That is the idea that you ignore the question of origin completely, as we see in paragraph 47, and if you simply start the analysis at the point that the customer has points converted into credits, the Court of Appeal says what is then happening is identical to the case where the credits have come from the customer’s cash, so therefore there must be an amount received in both cases, et cetera.

Now, we of course say one must open the frame earlier, origin is critically important to working out whether an amount has been received by the casino, but I am pointing out that in a case where there needs to be a rule – a Clayton’s Case‑type rule – there is a rule, and for that purpose, one can identify and one does identify whether what has ultimately been wagered has come from the customer’s money or has come, as we would put it, ultimately from the casino’s own money.

EDELMAN J:   What is the point of clause 18?  Because if the unwagered points can be redeemed for cash in the same way as the cash credits can be redeemed for cash, why does one need to know whether it is the points that are being wagered or the cash that is being wagered?

MR GLEESON:   There may be more than one reason, but one reason is, if we are correct in this appeal, it will then allow you to properly calculate the duty.

BEECH‑JONES J:   Mr Gleeson, where it says the points ‑ ‑ ‑

MR GLEESON:   Sorry, can I just explain that answer?

BEECH‑JONES J:   Yes, sorry, please do.

MR GLEESON:   In many cases, it will not matter.  If the only credits you have are those sourced in points, and that is what is wagered and we are otherwise correct, then there is no gross gambling revenue.  But in a case where on a particular occasion the person had credits partly sourced in points and partly sourced in cash, and if we are right you need to work out how much is the gross gambling revenue, it is a rule of reconciliation that allows you to say, it is $50 that were received on that day out of, say, $100.

GORDON J:   But my difficulty about that is the first proposition would never arise because you cannot use points unless you have sufficient other cash provided equivalent or greater to the amount.  Is that not right?

MR GLEESON:   The way the gate works is paragraph 48(g) of the special case on page 30.  All that you have to do is to wager:

(put at risk), within the same trading day, a certain number of credits –

and then you:

can redeem Points up to the same nominal amount –

So, the first situation could occur – it may not often occur, but it could occur – which is you wager $50 of your own cash and then, if you have enough points, you can convert them and get the equivalent amount in credits.  Sorry, Justice Beech‑Jones.

BEECH‑JONES J:   That is all right, Mr Gleeson.  Paragraph 18 on page 124, that reference to “points” in the last two lines – both of those – that is a reference to points converted to credits, is it not?

MR GLEESON:   Yes.

BEECH‑JONES J:   Yes.  All right.

MR GLEESON:   So, the point I have reached in the facts is the customer has passed the gate and has converted some points into credits and, having converted them into credits – I will just for this purpose ignore any cash‑sourced credits the customer has on the same day, because that is dealt with by clause 18, but if we just focus on credits which were sourced in points – the first option for the customer is to turn left and withdraw the credits as cash.  That option is referred in paragraph 30(d) of the special case on page 26.

We pause on that first option and regard it as significant.  The respondent says it is of no significance in the construction exercise.  The reason it is significant is that at that point what happens is there is a flow of monetary benefit from the casino to the customer, and in revenue terms, the direction of that flow is outwards from the casino.  The casino is not receiving any amount.  The casino is doing the exact opposite, which is paying out an amount.  The person receiving the amount is the customer.

In that situation, we apprehend that the Full Court at paragraph 40 of the judgment, in the first two sentences, has accepted that there is no amount received by the casino which triggers gross gambling revenue.  We agree with that conclusion.  So, if the customer takes the cash, there is no gross gambling revenue, the direction of the flow is wholly from the casino to the customer.  If you were thinking of the casino drawing up a revenue account in that situation, what it has done is it has satisfied such contingent obligation as it had arising from the points, and the flow is all towards the customer.

Now, the alternative is the customer turns the other direction, which may be right, and uses the converted credits to make a wager.  In that situation, we again say the flow of benefit is from the casino to the customer.  What has happened is that the customer has been permitted to wager, not having to stake its own funds but using, effectively, the casino’s money.  For that reason, there is no revenue to the casino and there is no amount received by the casino.  What that allows us to submit is this.

BEECH-JONES J:   Has the casino not derived a benefit then?  Because it has discharged a liability for a transaction that it has a reasonable chance of winning on.

MR GLEESON:   I actually agree with most of what your Honours said, except for the last bit.  There is no doubt that in law, whether the casino pays out the cash or whether it accepts the credits for the wager, what has happened is that it has discharged the obligations which it has assumed under this arrangement.  It has discharged them by performance, it has done the thing it was meant to do, and it is no doubt a consequence of that – if you were looking at it in balance sheet terms – the liability arising from the points has been reduced by reason of discharge by performance. 

What we submit is one of the central areas in the Full Court, when looking at this concept of “amount received” or “revenue”, is this is about the revenue account, it is about the flow of benefit one way or the other.  It is not about what happens ultimately on the balance sheet.  One can think of it in these simple terms:  if I incur debts as a barrister, excessive or otherwise, and I pay those debts and I discharge them, what is happening on the revenue account is money has left from me and gone to my creditor; if I were drawing up a balance sheet, the consequence would be a liability has been reduced.

EDELMAN J:   It is not really a balance sheet or capital question though.  It is the question of a reduction in a chose in action.  At least, assuming the casino wins the gamble, it is a reduction in the value of a chose in action that existed, is it not? 

MR GLEESON:   Again, I would like to leave out the last bit assuming the casino wins – that was in both your Honour’s questions.  In a sense, that will be a separate matter which will come into either a revenue account or a capital account.  But if we can focus on – yes, if the casino performs its obligation, whether it pays out cash or whether it accepts the credits as the wager, what has happened in terms of the flow of benefit is it is a benefit out from the casino to the customer.  It is a consequence of that that the casino can then say the amount that I owed you on the chose in action – if you call it that – is now less.  That is the consequence of it. 

But the critical question is, is that consequential matter – namely, a reduction in the debt – to be treated as revenue for the casino or an amount received by the casino?  That is why I was giving my overly‑simple example of paying my debts.  When I pay my debts, I may reduce the amounts that I owe, looked at as the chose in action, but I would never bring into my revenue account the reduction in the chose in action.  What I would bring into my revenue account is the money that I have earned.

GORDON J:   But that is the point – there is two steps.  One has the reduction in the debt, but then there is a separate step:  whether the gambler has gambled or wagered the amount and that amount has come into the hands of the casino. 

MR GLEESON:   And on that second step, which is the critical one for the definition, our submission is nothing has come into the casino once one is permitted to take into account the origin of the points – the origin of the credits – in the casino making available the points for this purpose.  So, I agree, your Honour, one of our central criticisms of the Court of Appeal is that in paragraphs such as 37, which talk about the surrender of the right; 38, the surrender of the credits; 40, the surrender of the rights; 45, extinguishment of the debt; 52, surrender of the credit; and ultimately 56 – that is, that may be true – that is not the question being targeted by the definition.

EDELMAN J:   Your argument draws a distinction between the reduction of a liability and the increase in revenue or, effectively, also the increase in an asset that is received.

MR GLEESON:   The distinction is between, yes, first the reduction and liability, but the means by which that is done is through an outflow from the casino to the customer.  It is an outflow, whether they take cash or whether they wager the money.  So, if this definition is really about trying to capture the moneys coming into the casino on the revenue account, then the attention to the reduction and the liability is the wrong question.

EDELMAN J:   If that were right, would that not mean that every instance – a casino that operated by electronic means, so where cash has to be paid – put aside the whole point system, if one received credit in exchange for cash, then there could never be, on your argument, gross gambling revenue.

MR GLEESON:   No, no, no.  Sorry, your Honour, it is the exact opposite.  Let us take the ordinary situation your Honour is describing.  What happens in real‑world accounting terms, tax terms and this agreement – it is all actually identical.  I put my cash into my account and at that point I have not yet wagered my account.  At that point, the casino, on one side of the balance sheet, has my cash but, on the other side of the balance sheet, has the obligation to refund that cash to me.  So, that is there.

EDELMAN J:   As a liability to you.

MR GLEESON:   Yes.

EDELMAN J:   Yes.

MR GLEESON:   That is because my money has, through this mechanism, been put in a situation where it is available for use.  My money, through the electronic system, is the equivalent to, I bought the chips and I have them ready to put on the table; just before I put them on the table, I could go back and take cash again.  So, it is the exact functional equivalent to that.  In the physical system where I put my chip on the table – on the bet – and the call is made, at that point the casino now has my money.  Absolutely it is its money, I have staked that money with the casino.  That is the receipt of gross gambling revenue.  True it is, at that very point, the casino has, of course, then assumed a duty to me.  The duty is to conduct the game fairly and, if necessary, pay me back some money at the end. 

So, in the ordinary situation, gross gambling revenue, as per this definition, works absolutely perfectly because what you can see is a point at which the customer has transferred their money into the control of a casino.  What we then contrast that with is the present situation where, through the point system, the customer has never staked their own money with the casino.  They have been given the chance by the casino to behave as if they had staked their own money.  So, we would agree that in both cases you might see the reduction of the debt, assuming the transaction has been honoured on both sides.  The difference is, what is the origin of the money which has produced the outcome?

GORDON J:   Can I put it in different terms?  If you accept, as you do – I think you just put it – they are given a choice as if they had staked their money and one has a set of credits, subject to the Clayton’s rule which you took us to where the points must come out first, there is a choice.  At that point, regardless of the source or the origin, if the customer – that is, the gambler – does not choose to withdraw them, and they are entitled to, then the money is staked, is it not, regardless of source, and into the hands of the casino?

MR GLEESON:   What your Honour says is correct.  It is 100 per cent correct, but what we are saying is critical to an analysis of amount received is you can never put aside the origin.  What is happening at that point is the person is being permitted, in substance, to wager the casino’s money as if it had been put up by that person when the person has never done so.  So, that is why the origin is critical.

GAGELER CJ:   Mr Gleeson, using your terminology of, the customer turns left, takes the cash, comes back and puts it into the account, the origin is no different, is it, from the customer turning right?

MR GLEESON:   It is a fundamentally different transaction because, if the person takes the cash and ends the wagering transaction, if that happens, that is turning in that direction ‑ ‑ ‑ 

BEECH‑JONES J:   Sorry, “ends the wagering transaction”?  What do you mean?  There is no wagering transaction.

MR GLEESON:   They end the wagering occasion.

BEECH‑JONES J:   I see.

MR GLEESON:   They leave the casino, they cash out whatever they – they take it in cash.  They no longer have credits.  You have then left – to use that term – the ecoystem of the casino in which the points are owned by the casino, created by the casino, used as a mechanism – as a medium – to allow people free bets.  If the person is permitted to take it out, that is their money.  They are then under no relationship with the casino, they never need to go there again.  If they choose to go there again, that is a wholly distinct transaction.

Now, one of the propositions of revenue law that we embrace – and I will come to it – is one does not use economic equivalence to determine the incidence of taxation statutes, one looks at the taxable facts that are attracted.  So, we have made the concession about the situation below, and I have made it again today.  We submit it is a different, subsequent transaction which does not address any attention to this transaction.  Your Honours, can I deal with the Shin Kobe Maru point next and just ‑ ‑ ‑

GORDON J:   Sorry, are we going to come back to the agreement?

MR GLEESON:   I am, your Honour.  Do I have to do it now?

GORDON J:   No, no.  I do not wish to take you out of your order, but there are some clauses in there, in the concept of the definition of “gross gambling revenue” read with the “annual liability for casino duty”, which is “net gambling revenue”.  In particular, the reference to the fact that – this may be the way in which one looks at the composite phrase, but it is dealing with amounts which are “attributable to”, and I wonder whether or not that sort of language impacted at all upon the way in which you looked at the facts of this case.  You might take that on board when you get to the agreement.

MR GLEESON:   Yes, I will, your Honour, and I will come back to it.

GORDON J:   Thank you.

MR GLEESON:   Could I just give you one little idea that is relevant to that, and then I will come back to it.  “Gross gambling revenue”, which is on page 99, “for a period” is the term.  It is a composite term, and it has four notions in it:  gross, gambling, revenue, and it has to be done over a period.  In one sense, if you look at the definition that follows, what the parties have done is to carry some of those terms through into the more detailed definition without further elaboration.  So, “gross” finds its way in the definition as the very same term.

The parties have said, we do not propose to give any further specification to what is meant by the term “gross”.  That means gather in everything of the character that follows.  “Revenue”, if you actually look at it closely, appears to then match the terms “received by the Licensee”.  So, the parties have thought, we all know what “revenue” means but we will give it a further four words which, we submit, are consistent with the ordinary understanding of revenue in commerce, taxation and accounting, which are amounts received by the relevant person; amounts coming into the relevant person from an external source; amounts of money of money’s worth coming in.

You then see for a period, that is just carried into the definition.  Then you see the slight elaboration on what “gambling” adds to the definition.  That is the words:

for or in respect of consideration for gambling in the casino premises –

So, in one sense, that is why you must take revenue into account, because it has been identified as one of the four things you are trying to capture, and then you have had four extra words given, which really are consistent with the ordinary meaning of “revenue”, and that gets you fairly quickly to amounts in money or money’s worth received by the licensee.  I will otherwise come back to the agreement, your Honours.

GORDON J:   Just when you do come back – and I do not want to delay you at all – it is really the reference by clause 5 and the definitions of “net gambling revenue” which are the amounts that ascertain the actual casino duty that is payable.  That is all I am just asking about.

MR GLEESON:   Yes, your Honour is correct, that is the substantive obligation in clause 5.  That really is the starting point.  You must pay it in respect of net gambling revenue, and then there is a percentage of net gambling revenue, so you would go next to net gambling revenue on pages 100 and 101.  The relevant one here is paragraph (b):

net gambling revenue that is attributable to other gambling –

That is just dividing up gambling into two categories.  There is premium people under (a) and other people under (b), and it is:

gross gambling revenue for the relevant period that is attributable to the gambling –

So, yes, of course gambling is the subject of what we are trying to capture:

less the value of monetary prizes –

And that then takes you to gross gambling revenue where the focus has been on paragraph (a), but paragraph (b) is also very important, that bad debts recovered during the period, they are part of the gross gambling revenue.  Why?  Because they are something coming in to you, and then you subtract the monetary prizes which are going out.

If your Honours have the Shin Kobe Maru, which is volume 3 at tab 19, page 465 of the book, the argument which was put by Mr Jackson at page 408, point 5, cited Wacal Developments in this Court at page 507. That is the argument which was accepted at page 419 in the middle paragraph, and the reference at footnote (68) is to Wacal without a page number.  We submit that that was not a statement of principle to govern every case.  It was made in the context of the particular case where, as seen on page 476, the Admiralty Act said that it applied to:

all maritime claims, wherever arising.

Then maritime claims were broken down in a binary fashion to either proprietary maritime claims or general maritime claims – it cannot be both – and proprietary maritime claims were then given the seemingly exhaustive definition that is there set out.  Within that definition it included this, that a proprietary maritime claim is a claim relating to ownership of a ship or (b):

a claim between co‑owners . . . relating to the possession, ownership . . . of the ship –

The question that then arose, which is apparent on page 479 at point 5, was whether that reference to ‑ ‑ ‑

GORDON J:   What page of the report is that, please?

MR GLEESON:   I am sorry, page 418.   Whether the reference to a claim relating to ownership, which occurred twice, could be read down or should be read down so that it only governed cases where the plaintiff asserted its own title as well as the title of someone else.  Now, the Court rejected that argument.  The first step in the rejection at the foot of that page was that in its “natural and ordinary meaning”, the words used in the definition were broad enough to capture a claim that a third party was entitled to ownership.  It was then on page 419 there was an attempt to read down the ordinary and natural meaning by reason of the term “proprietary”, which was the starting point.  That is the argument that was summarily dismissed at page 419.

We submit that it stands for no more than that this, that in the particular context where the statute divided claims into two separate buckets – proprietary and general maritime – and attached different consequences to each, and each bucket was given a seemingly exhaustive definition which used words which had a clear and natural meaning and there was no ambiguity, there was no room to resort to the term being defined to narrow that meaning.  Wacal Developments itself is in volume 4 at tab 25.

EDELMAN J:   Is that really anything more than to say that it is circular to construe the words of the definition by reference to the term defined, where the words of the definition are intended to be independent of the word defined, but where the words of the definition are not intended to be independent or wholly independent of the words defined, then one needs to look at both?

MR GLEESON:   I think what we are putting is relatively close to that.  One has to always look at how the definition has been constructed to see the relationship between the label and the definition and look at the whole of the Act and what work it is doing to see whether the label colours the meaning or fills an ambiguity in the meaning.  It could do various things.

Shin Kobe Maru is one where the Court really was satisfied that, by reason of the exhaustiveness and the lack of ambiguity in the definition itself, there simply was no other work which the label was doing.  So, the true work “proprietary maritime claim” was doing in Shin Kobe Maru was to say, once you have collected every claim that meets the definition below, then, when you open the rest of the Act and find out what special remedies attach to proprietary maritime claims, they are the ones which are caught.  So, that was the purpose of it there.

In Wacal Developments v Realty Developments 140 CLR 503, tab 25, page 761, the critical term on page 506 of the CLR at point 6 was:

“‘instalment contract’ means an executory contract for the sale of land in terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange –

Justice Gibbs again started by looking at the ordinary and natural meaning of those words and said, you have chosen language where the word “instalment” is not used in the definition itself, you have used, rather than that, the broadest possible language:  any payment, or “payment (other than a deposit)”.  So, as a starting point of natural meaning, this is broader than “instalments”.  In that context, at 507, where there was an attempt to read “instalment” into the expression, his Honour said:

it is impermissible to construe a definition by reference to the term defined.  The expression is given by the statute a special meaning which must be applied whether or not it accords with the ordinary meaning.

Now, that is tolerably close to the way your Honour Justice Edelman put it, that, looking at this particular definition, the intention is that whatever you see in the body of the definition is to be the meaning and the only meaning, and there is to be no further reference back to the label itself.

EDELMAN J:   Does that coincide with Justice McHugh’s approach in Kelly, where he says that a true definition clause is one which you just take the words as defined and then reinsert them into the Act?

MR GLEESON:   It is tolerably close to that.  It is this particular definition – if it is doing that work, then it is as simple as that.  But many definitions, once they are properly understood, may be doing more than that.  We would emphasise that in Wacal, this was again a case where it was thought that there was simply no ambiguity in the words used in the definition.  That is Justice Stephen, page 513, point 3, and Justice Murphy, page 522 of the Commonwealth Law Report at point 8.  So, there was then simply no reason to read down any payment or payment by reference to the word in the label, which was “instalment”.

In volume 6, we have Justice Leeming’s judgment in Singh, tab 42.  We would commend the whole of his Honour’s analysis of the question.  At paragraph 110, his Honour refers to several further cases in this Court, including Cunneen.  The reason Cunneen is important is because, in that case, the Court was construing a long definition of “corrupt conduct”, and within that definition there were some particular words, “adversely effect”, which were open to two meanings:  either adverse effect on probity or adverse effect on efficacy.  Because there was a constructional choice, one of the Court’s reasons was, we can go back and recall what corrupt conduct is in general, and why it is that in public administration there is a need to stamp it out.  So, we would submit that Cunneen shows greater flexibility than the hardline version of Shin Kobe Maru.

Your Honours, could I just take you to one aspect of Cunneen, which is found back in volume 3 at tab 15.

GAGELER CJ:   Do you want us to keep Singh open?

MR GLEESON:   If you can, your Honour, because I am going to come back to it.  I am doing it because Justice Leeming has referred to paragraph 33 of Cunneen and says that it is an example of:

four justices of the High Court referred with apparent approval to the approach in Shin Kobe Maru.

We think that might overstate it.  In Cunneen 256 CLR 1, at page 9 of the CLR, the principal question is identified as whether “adversely affect” – how it should be understood in relation to a definition of “corrupt conduct”. Then, in paragraph 2, it was open to two different meanings. Paragraph 3:

The former meaning accords with the ordinary understanding of corruption in public administration and consequently with the . . . objects of the ICAC Act –

and it should be “preferred”.  That appears to be using the term that has been defined, “corrupt conduct”, even though it does not reemerge in the definition as helpful in understanding how to resolve a constructional choice.  Paragraph 6 has the particular section of the ICAC Act, which is section 8.  It is section 8(2) that was the critical one in question:

Corrupt conduct is also –

And then the words emerge.  What the Court concluded as part of its other reasons at paragraph 54, particularly near the end of that paragraph, is that:

as Basten JA observed, an extended meaning of “corrupt conduct” would be far removed from the ordinary conception of corruption in public administration.

That appears to be using the term being defined as part of the construction exercise.  The paragraph Justice Leeming referred to is paragraph 33.  We do not think it as strong as has been said.  The context of it is that at paragraph 32, the Court said:

there are potential difficulties with each of the approaches adopted in the Court of Appeal.

And paragraph 33:

the approach adopted by the majority, which counsel for the respondents urged this Court to adopt, is susceptible to circularity.  Counsel . . . characterised it as circularity of the kind identified in Shin Kobe Maru . . . It would be more accurate to say, however, that if there is any circularity in the majority’s reasoning, it is constituted of assuming the purpose of the Act and then reasoning . . . syllogistically –

in a particular fashion from that purpose.  So, what actually happened was the circularity in the majority’s reasoning, which this Court did not approve, was not the Shin Kobe type of circularity as had been argued.  Instead, it was a different form of impermissible circularity.  So, in the Court’s ultimate conclusion, it in fact was prepared to take into account the label ‑ ‑ ‑ 

GLEESON J:   Is that right?  If you look at paragraph 60, the majority seems to be saying that it was not adopting the Shin Kobe Maru approach and was relying on the objects of the Act.

MR GLEESON:   I might not have been clear on it.  What I was trying to say, the criticism of the majority was, you are offending Shin Kobe Maru.  The Court is saying in 33 that while the majority can be criticised, we do not think your error was a Shin Kobe Maru error; your error was a different sort of circularity which was assuming an object and then working backwards.  Once the Court says that is not the right way to do it, the Court – it is really paragraph 35 – says, this is the way in which the exercise should be done, and this is a Project Blue Sky exercise where everything is being taken into account and:

The best that can be done is to reason in terms of relative consistency – internal logical consistency and overall consistency in accordance with . . . Project Blue Sky – to determine which . . . is more harmonious –

GLEESON J:   But they are doing that by reference to the objects of the Act.

MR GLEESON:   They are doing it by reference to everything, including the objects of the Act.  The objects are critical.  I agree that the objects are important, and that appears in the first part of 54 that I took you to.  They say, in words of one syllable:

It would be at odds with the objects of the Act –

So, the objects are critical to the reasoning.  But they also say, at the end of 54:

And, last but by no means least . . . an extended meaning of “corrupt conduct” would be far removed from the ordinary conception of corruption in public administration.

BEECH‑JONES J:   Mr Gleeson, all Justice Leeming said was that the Court, at 33, had referred with apparent approval to Shin Kobe Maru.  That is probably right, is it not?  They did not apply it, they just said, look, that is a principle, but we are not applying it here.

MR GLEESON:   That is a principle; we are not applying it here.

BEECH‑JONES J:   But that is still – Justice Leeming is right, though, in that respect, is he not?

MR GLEESON:   In that respect.  Perhaps I was staring at the wrong target.

BEECH‑JONES J:   I understand.

MR GLEESON:   If he was read any higher than that, as saying ‑ ‑ ‑ 

BEECH‑JONES J:   That they applied it.

MR GLEESON:   ‑ ‑ ‑ they applied it – that is not what happened – and if he is read as saying this Court has said it is a cast‑iron principle that always applies to all definitions, not just to true definitions, then that is not what the case was saying either.  He then cites, at paragraph 33, ASIC v King, where three of your Honours ‑ ‑ ‑ 

GORDON J:   You mean paragraph 110 – you are back now on ‑ ‑ ‑ 

MR GLEESON:   I am back at 110, I am sorry.  He cites ASIC v King, where three of your Honours:

referred to “the orthodox view that one should not attempt to ‘construe the words of a definition by reference to the term defined’.”

We think that the reference to “orthodox view” is simply saying that is a view that has been expressed, but it is not this Court saying that is the cast‑iron view that must be followed with every definition in statute or a in commercial contract.

EDELMAN J:   It can be a cast‑iron view if one views it in the sense – the definition in the sense of what is sometimes described as a “true definition”, where the words that are in the definition, the words that are defined, are replaced in the instrument by the words of the definition.

MR GLEESON:   In that case, it is not offensive.

EDELMAN J:   Yes.

MR GLEESON:   And we would not read ASIC v King as going any further than that.

EDELMAN J:   Why does one need to worry about ambiguity, then?  Is it not ultimately then just a question of interpretation as to whether what was intended was a true definition in that sense or a definition in the looser sense, where all of the context around the defined words becomes important?

MR GLEESON:   You do not have to have ambiguity, but if you do have ambiguity, as there was in Cunneen, that might be the sort of case where you are then needing to look at everything, including the label itself.

GAGELER CJ:   In every case, if a provision says that X means Y, one is interpreting Y, and it may be that the context of X will shed some light on Y.

MR GLEESON:   That is our submission.  That is the approach Lord Hoffman took in Chartbrook.  It is the approach your Honour the Chief Justice and Justice Bell referred to in Mount Bruce, around paragraph 99, in a commercial contract, sometimes it will colour the meaning of what follows.  It is then necessary to look at the particular case to see what light it is shedding on it.

Justice Leeming, then, at paragraph 112, referred to this Court’s decision in Data Access where, without difficulty, the Court said the definition is of “computer program”.  You do not see those words emerge again in the detailed definition, but you must have some conception of what a computer does when it executes programs before you can give meaning to the words that are used.  So, that, Justice Edelman, we would say, is not an ambiguity case.  That is just a case where the very detailed – the highly artificial definition still needed some attention to the concept in order to elucidate its ultimate meaning.

So, if your Honours have our outline – as much as I would love to, I do not think it is appropriate to spend the whole day on these cases.  If the point you reach is ‑ ‑ ‑

GAGELER CJ:   Does Justice Leeming have a summary paragraph that you rely on?

MR GLEESON:   Yes.  So, the structure of his Honour is, having dealt with the cases in this Court in 110 to 114, he then, between 115 and following, deals with cases that have express difficulty with too strict a view of Shin Kobe Maru, including 118, 119 – a series of cases in the New South Wales Court of Appeal which did not adopt the same approach.  Paragraph 120 is Lord Hoffman in Chartbrook; 124 is the wealth of authority in the UK to the opposite effect; 126 are the authors to the opposite effect.  The ultimate summary is, really, paragraphs 128 to 130. 

GORDON J:   So, 127, he proffers, what he calls the various possible combinations and positions adopted and then identifies what his view is at 128 through to 130?

MR GLEESON:   Yes.

GORDON J:   And, arguably, the first sentence of 130, or first two sentences?

MR GLEESON:   Yes.  That is the approach we are urging.  In terms of the outline, I am at paragraph 7, where, in addition to Singh, there is an important Full Federal Court judgment in Federal Commissioner of Taxation v Auctus Resources, where Justice Thawley has surveyed the principles and propounded a fairly similar approach to Justice Leeming – we would commend that as well.  Then, we would make the propositions in the rest of paragraph 7 and paragraph 8 about the position in the United Kingdom and the leading textbooks.

So, then, what I wish to come to is paragraph 10, which is what is the ordinary meaning of revenue which may assist in the construction exercise.  We have given ‑ ‑ ‑

BEECH‑JONES J:   Even on that approach, Mr Gleeson, there may be a little – I think this is your paragraph 9.  The question may be, we can look at the defined terms, but the question is, why would we need to?

MR GLEESON:   Yes.

BEECH‑JONES J:   But you probably take that up in your analysis, I suppose.

MR GLEESON:   Yes.  Just before I address that question, paragraph 10 is to be clear on the ordinary meaning of “revenue”.  We go to three places.  Firstly, to Macquarie Dictionary, which is in volume 7 at tab 49, page 1506.  There are six meanings – meanings 4 to 6 are the closest to the context we are in – and meaning 5 is the meaning of most assistance, which is, revenue is:

an amount of money regularly coming in.

That is basically the words you see in the definition.  That is why I said to your Honour Justice Gordon’s question that what you can actually see is gross travels through as gross, revenue travels in as:

an amount of money regularly coming in.

Coming in over the period.  Then gambling comes in with the balance of the clause.

GORDON J:   It is “amount”, not “amount of money”.

MR GLEESON:   It is “amount”, yes.  So, we have a question of:  an amount of what?  And that is where we would submit revenue does colour and assist the words that come below it, which is we are looking at an amount of money, or money’s worth, coming in regularly over the period.  That is our first authority on revenue.  The second authority is in volume 5.

GAGELER CJ:   I am sorry, what is it about that definition that helps you?

MR GLEESON:   Two things:  that revenue is an amount of money – money or money’s worth – so, that is what we are looking at.  But it is something “coming in”, coming in to the business from an external source.  Then, regularity, that is covered by the concept we have that it is over a period anyway.  But the critical concept is amount of money, or money’s worth, coming in to your business from an external source.

In volume 5 at tab 38, in London, Midland & Scottish Railway Co, at page 1277 in the left‑hand column, at about point 3, Lord Tomlin said:

The word “revenue” is a word of somewhat indefinite import, but in its ordinary sense in relation to a business undertaking . . . connotes those incomings of the undertaking which are the products of or are incidental to the normal working of the undertaking.

Again, we have the focus on what are the things that are coming in from an external source through the normal working of the undertaking.  Then the third authority is Chemeq v Sheperd, which is also in volume 5 at tab 30.  The Full Court of the Supreme Court of Western Australia, at paragraph [152] on page 1040 of the book:

In the context of the agreements as a whole, the natural and ordinary meaning of the term revenue corresponds with the description of revenue contained in –

the accounting:

standard 118 as “income that arises in the course of ordinary activities of an entity including sales, fees, interest, dividends and royalties” . . . Revenue “from all sources” is intended to cover all the different types of revenue and the word “gross” goes no further than indicating an intention that the revenue of all different types is not to be net of associated expenses.

There are the key concepts we get from the ordinary meaning of revenue.  Can I then come to paragraph 11 of the outline and to the agreement.  I have referred to clause 5 and then the definition of “net gambling revenue” which takes us down to “gross gambling revenue”.  Looking at gross gambling revenue ‑ ‑ ‑

GLEESON J:   Before you go there, I did have a question about how the value of the monetary prizes liable to pay is calculated.  So, if there was a monetary prize as a result of a wager of points that had been converted to credit, would that be included in the value of monetary prizes there?

MR GLEESON:   Yes, your Honour. 

GLEESON J:   So, that means that those are attributable to the gambling.

MR GLEESON:   Yes, that is right.

GLEESON J:   And that is the same gambling that is the subject of the gross gambling revenue. 

MR GLEESON:   Yes, that is right, your Honour.

GLEESON J:   All right.

MR GLEESON:   Where that would sit with our argument is to say, if you use your points to convert to a credit and you then wager those credits, there is no gross amount received by the casino in respect of consideration for gambling because there is no amount of money or money’s worth that has come to you from the customer.  Instead, what has happened is you have been permitted to wager with what is the casino’s own money.

GAGELER CJ:   Is there a gambling contract when the notional chips are put on the table?  Is that a contract? 

MR GLEESON:   Sorry, is your Honour asking that in general or in this case? 

GAGELER CJ:   In this case.

MR GLEESON:   Your Honour, I think all we have in the special case are the terms and conditions – which I have showed you, clause 18.  So, the question, which I will just have checked, is whether that constitutes the contract between the customer and the casino.

GAGELER CJ:   It is just that the language of the definition uses the words “consideration for gambling”, and in the case of credits being used, what is the consideration?

MR GLEESON:   In the case of chips?  I think, to answer that, I do need to take your Honour to London Clubs, which is a little further in the outline, but an important case. 

GAGELER CJ:   Do it in your own course, Mr Gleeson. 

MR GLEESON:   What London Clubs tells us is that the accepted position in the United Kingdom, where a number of cases have come through the courts, is that you do not get overly distracted by the mechanism of the gambling, whether it is chips or whether it is something else.  What you are really asking is:  is the customer wagering money with the casino through whatever the particular mechanism is? 

So, if the customer, in a more old‑fashioned system, goes to the cashier and buys chips and puts the chips on the table, what the customer is wagering is the customer’s money.  The customer is not wagering the chip.  And, as your Honour Justice Gleeson asked me who owns the points, the question in respect of who owns the chips as physical tokens – they will be owned by the casino.  They are not owned by the customer.  So, the approach to take is:  is the customer wagering money via the mechanism that is being chosen?

Gross gambling revenue is trying to tally up all amounts received by the licensee during the period.  That is not the credits.  What it is totalling up is all money that has been received into the possession and control of the licensee through whichever mechanism might be used.  When this agreement was signed, electronic gambling had not yet come in – it came in 2014 – so, this agreement was in fact made against a more traditional system that your Honours are asking me about.  So, the gross amount received in the simple case is not the chips, it is the money that the chips represent. 

GAGELER CJ:   But it becomes consideration for gambling at the time that the chips are put on the table, does it?

MR GLEESON:   Yes, it does.  Because the definition is bringing four things together – gross, gambling, revenue and a period – it is telling us in respect to gambling what we are focusing on is that consideration exercise.  It is saying what has moved each way to enable the gambling debt to occur.  We know it is moving from the casino the customer which is taking the risk on the bet, and what is moving from the customer to the casino is then what is it of value that has moved from that customer to the casino so as to be able to be received?

GAGELER CJ:   Is it using consideration in a contractual sense?

MR GLEESON:   It probably is, your Honour.

GAGELER CJ:   So, when credits are used, do you say there is no consideration at all?

MR GLEESON:   No.  When credits are used, they are a mechanism by which the consideration can pass from the customer, which is the customer’s money being put into the possession of the casino, on that side of the transaction.  Your Honours, London Clubs is in volume 5 ‑ ‑ ‑

GORDON J:   Tab 37.

MR GLEESON:   Tab 37.  The statutory scheme is not identical, and the nature of the non‑negotiable chips is not identical, so it needs to be treated with a little care.  However, your Honour’s question raises this part of the analysis.  Just before the adjournment, at paragraph 20, the decision below from Dame Elizabeth Gloster in the Court of Appeal, which this Court upheld, was that the assessment:

involved a conventional arithmetical calculation of real‑world stakes received from players which, if necessary, could feature as revenue figures in a set of accounts and contribute to the casino’s gross profits . . . when a gambler used a Non‑Neg, he was not using his own money or putting his own money at risk.

Then the particular passage I wanted to refer to on your Honour’s question is paragraphs 33 to 35, which is following what Lord Goff had said in Lipkin Gorman:

“In common sense terms, those who gambled at the club were not gambling for chips:  they were gambling for money . . . ‘People do not game in order to win chips; they game in order to win money.  The chips are not money or money’s worth; they are mere counters or symbols used for the convenience of all concerned in the gaming.’

This is why I answered your Honours that the property in the chips or in the points remains owned by the casino.  At 35:

It follows that when a gambler plays with cash chips in a casino, he is not staking the chips but the money those cash chips represent which he has deposited with the casino.  When the gambler uses the chips to make a bet in a game, the money those chips represent is appropriated to the bet the gambler is making.  If the gambler loses the bet, the right to the money those chips represent passes to the casino.  If, on the other hand, the gambler wins the bet, then . . . the gambler will be entitled to a prize comprising the money he has bet and a further monetary prize –

I should pause there, your Honours, for the adjournment but that, we submit, is the correct way to view what is going on here.  Whether they are chips or non‑negs or whether they are credits, what we have to look at is the consideration is when the money of the customer is appropriated to the bet by whatever means that occurs.  Then one asks what amount is received from the customer by the casino when that consideration passes, and in the case of credits which are sourced in points, nothing has been received from the customer.  It is simply being allowed to gamble with the casino’s money.

BEECH-JONES J:   Could I just a quick mechanical question about Justice Gleeson’s question.  Does the way that work with monetary prizes and net gambling revenue is that when a credit is provided, that provides a reduction in net gambling revenue and, on the Court of Appeal’s construction, that is then effectively restored if that credit is used to gamble?  Take it on board.  I am not suggesting it has any great significance.  I am just trying to work out the movement of the way these work.

MR GLEESON:   Can I just consider that, your Honour?

BEECH-JONES J:   Yes.

GAGELER CJ:   The Court will take the morning adjournment.

AT 11.17 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.31 AM:

MR GLEESON:   I am sorry, your Honours.  Just getting the answers to those questions.  Your Honour the Chief Justice, there would be a gambling contract.  It is required by the statutory regime.  It is not in the material before the Court.  The document I have been taking you to are the terms and conditions which regulate the loyalty program but do not directly regulate what happens on the table.

Your Honour Justice Beech‑Jones, on the question of what happens with the prizes, this is how we see it fitting together.  In the ordinary case, where someone has put their own cash at risk, whether it be through chips or through this system, the amount is “received” by the casino within the definition, and the consideration passes at the point that the customer’s money has come into the possession of the casino such that the casino would be required to record it in its revenue account and in its balance sheet.

In the simple case, when the chips are put on the table and it is too late to withdraw them from the bet, at that point, the consideration has passed to the casino, and at that point, the casino has received an amount of money or money’s worth.  The consideration moving from the casino is the casino taking the risk on the bet, and that occurs when the game commences and the casino cannot pull out of the game.  At that point, the casino is taking a risk of having to pay out a sum of money.

If the bet is successful for the customer, there is then a monetary prize which the casino is liable to pay, and it will then have a crystallised liability which previously was a contingent liability.  The mechanism by which the prize will be paid, again, could vary – it could be chips, it could be credits – but at the point the game is complete, the casino has a liability to pay the prize.  That is properly deducted in the definition of “net gambling revenue” because at that point there will be a real‑world flow of money from the casino back to the customer.  So, if we then turn to the present case, the customer has been given the points ‑ ‑ ‑ 

BEECH‑JONES J:   Mr Gleeson, can I just stop you there.  These credits, these points which are not conditioned, as I understand it, on winning or losing, but this credit – is this credit a prize in the provision of credit, or it is not a prize at all, because you did not win?  Or is that not something for today?

MR GLEESON:   Well, the casino below lost on question 2, and has not appealed it to your Honours.  Question 2 was:  was the casino giving a monetary prize by reason of handing out these points in the first place, which have enabled the customer, for free, to bet on the game?  The court said, you are not giving a monetary prize.

BEECH‑JONES J:   I understand.

MR GLEESON:   So, at that point – which is part of the symmetry of the statute – the casino has been given no credit for making the points available, it has been given no credit for allowing the customer the free bet, but when the points are wagered through the converted credits, if we just pause at that moment, what has in fact happened is nothing of value in the real world has moved from that customer to the casino.  All that has happened is that that customer has been permitted to wager as if it had put its money on the table.

The reason that there is no amount received for or in respect of gambling by the casino at that point is simply that nothing of value has passed from the customer, from its resources, to the casino.  However, what the casino has done is take on the risk as it would in every other case.  So, the converted credits sourced in the points, when they are wagered – once we take Lord Goff’s approach of looking at has money been put at risk, the answer is no money of the customer has been put at risk; the customer has been allowed a free bet, but the casino has been required to take on the contingent liability of the bet.

Then, if the customer wins, as in the ordinary case, the casino has to pay out the money.  That is a real‑world flow of money – a monetary prize – and so, on your Honour Justice Gleeson’s question, there is no asymmetry in being allowed to deduct the value of the monetary prize in the case where everything started off in points, because in that situation, if we are looking at real‑world flows of money, there has only ever been one flow of money, which is from the casino to the customer under the prize.  Nothing has flowed from the customer to the casino.

GAGELER CJ:   So, you put it as a free bet – it is gambling for no consideration.

MR GLEESON:   Yes.  Being permitted to gamble as if you had provided consideration when, in truth, you have not.

GORDON J:   The problem with that – there are a couple of questions about the fact, and I think you have already answered this, but there is a decision made by the gambler to gamble it.  And so, to pick up the language which was used in London Clubs, if one is looking at the value of the stakes staked by the gambler, it includes an amount, regardless of source.

MR GLEESON:   We think not, your Honour.  Firstly, in London Clubs, one of the points of distinction I referred to was that the language there is “the value of the stake”, whereas our language is the amount received by the casino.  So, that is important.  But what ultimately happens in London Clubs – and I had not completed it – but by taking your Honours to paragraph 35 of volume 5, tab 37, page 1253, paragraph 35 we embrace as the way to view the consideration, when it passes, and how it passes.

Paragraph 37, although the statutory language is different, we submit is the same concept, which is, we must be assessing the amount received from the perspective of the casino.

GORDON J:   What paragraph was that?

MR GLEESON:   Paragraph 37 on page 1254.  And then paragraph 38 is the paragraph adopting Dame Elizabeth Gloster’s approach at paragraph 20, which is that – and although the statutory language is different:

in determining the value of the stakes staked it is the actual and real world value of the stakes in the hands of the banker which matters.  Section 11(10)(a) is concerned with stakes which are or represent money (as cash chips do) or which can be converted into money.  Similarly, in working out the value of the prizes provided by the banker, it is the actual or real world cost to the banker of providing the prizes that must be brought into account –

So, we are looking at the actual real‑world flows of money from a customer’s own resources into the casino or from the casino resources out to the customers, and we are not to be distracted by the precise mechanism by which all that occurs.  At the foot of that paragraph, there must be:

a focus on the economic substance of the stake and the real financial contribution that stake makes to the banker’s profits from gaming and in turn to the gross gaming yield . . . the Court of Appeal was correct to say that the calculation of stakes staked involves a conventional accounting of the real world value of the stakes which have been staked in any given accounting period.

So, while the language is different of the statute, we submit that is the focus:  real‑world flows of value.  And, in the case of the points, there has been no flow from the customer to the casino.  It is a bet for no consideration.  The only possible flow is the other way with the prizes.  Then, down to 41, that analysis is adopted.  Then, at 42, the court comes to the non‑negs – acknowledges:

that Non‑Negs do have a real world value to the gambler.  They confer . . . a right to make a bet in a game without placing any of his own money at risk, and with the bet comes the opportunity of winning.

That, we submit, is exactly what happens when a point is converted.  You are getting a right to make a bet in the game without having to provide real consideration, without putting your money at risk, and you are acquiring the opportunity of winning.  I immediately observe that, in paragraph 43, there is a factual difference from this case to our case, because it is said:

Non‑Negs are very different cash chips . . . Non‑Negs do not represent money to which the gambler is entitled and, unlike cash chips, they cannot be encashed or exchanged for goods or service.

So, there is one difference.  Under the non‑neg, you cannot – to use my colloquialism – turn left.  You cannot take cash.  All you can do is keep using it in the casino’s ecosystem.  But, when we look at 44, a series of reasons are provided:

when a gambler places a bet using a Non‑Neg, no money is appropriated to the bet.

Just pausing on that sentence, when I answered your Honour the Chief Justice that there is no consideration relevantly passing, that is the analysis.  Once you are looking at money – real‑world flows of money – when you bet using a non‑neg, no money is appropriated to the bet.  At that point, the casino cannot, in its revenue recount, say, I have received $100 from the customer – I have received nothing.

BEECH-JONES J:   There might be a debate about “received”, but the difference in 43 – that you can convert – means that the observation in 42 is invalidated in it because they are placing their own money at risk in the sense of their own money as represented by credit. 

MR GLEESON:   Except that, if we focus on the situation where they turn in that direction and they simply cash the money out, it seems clear from the paragraph we have taken you to that there is no suggestion that that is gross gambling revenue. 

GORDON J:   I do not understand that, at the moment, Mr Gleeson.  I am bit confused, because if you look at 41 – which is the point I was trying to make earlier – and one steps back from this and looks at the cashflow and says, what amount of money has the gambler put at risk?  Then, has he or she not put at risk the whole of the amount, which is standing to the account, regardless of source?

MR GLEESON:   No, your Honour.  As we would put it, the person, at that point, is in a position ripe to realise the gift that came from the casino.   The gift came through the points.  There has been a conversion.  It is now ripe to be realised.  If they take the cash, the casino is not receiving any amount.  There is no revenue flowing to the casino.

GORDON J:   The gambler has not put that amount at risk at that point.

MR GLEESON:   And the gambler has not put anything at risk.  If the gambler says, I will now use that as my wager, what is actually happening is that the gambler is being permitted to place that bet without having to put their money at risk.  The only money that is being put at risk is the casino’s money, and that is why I wanted to read the whole of 44 because, while the facts are not absolutely identical, the third sentence says:

When the casino allows a gambler to bet with a Non‑Neg, it is, in a sense, allowing the gambler to bet with the casino’s own money.  Put another way, from the point of view of the casino, a Non‑Neg amounts to a free bet.

That is a really critical sentence, your Honour, because it is saying the perspective we are looking at is the casino’s perspective – that is paragraph 37.  We submit that is the same in our case.  From the casino’s perspective, we are trying to look at amounts received by the casino for consideration, and from that perspective, it has allowed the person a free bet.

GLEESON J:   It is implicit in that that from the gambler’s perspective, at least in the case where the points are ultimately cashable, the gambler has put their money at risk.

MR GLEESON:   The gambler is getting the benefit of being gifted a free bet.

GLEESON J:   Yes, but the gambler could also cash in the points and use that money to go home and feed their child.

MR GLEESON:   Yes.  And if the gambler does that, within our definition there is no amount received by the casino for “in respect of gambling”.  Looking at it from that perspective, which we say is the wrong side, there is nothing being received for “in respect of gambling” – no gross gambling revenue.  And in that situation, where is the flow of money?  The flow of money is from the casino who has to pay out the cash.  That is why there is no revenue.

In the present situation, what the casino is doing is taking on the risk of the bet without receiving any money from the gambler and therefore there is no amount received.  While the case is not on all fours, if our clause requires attention from the perspective of the casino, as we say it does, if amount received is carrying forward the notion of revenue – amounts coming in – if the consideration is properly identified as saying nothing has increased the resources of the casino, all that has happened as a consequence of the entire transaction is the casino has been relieved of part of the liability that otherwise existed.  You really get to the ultimate question, is relief from liability to be treated as an amount received for “in respect of the consideration for gambling”?  And that, we submit, it is not.  I would also draw attention to paragraph 90 of Lord Sales to the same effect.

There are then two other authorities from the taxation context I need to deal with.  The first is Federal Commissioner of Taxation v Cooke, which is volume 5, tab 33.  This was the case where the taxpayers were given the benefit of free holidays, and the question was whether that was income under ordinary concept.  As seen in the head notes, the argument which was rejected was, because the free holiday saves you the expenditure you would otherwise have to make on a holiday, and in that sense, there was a benefit to you, that was enough to make it income.  In that context, on page 703 of the report, at lines 35 to 40, the court said:

The notion that the items of income are money or are to be reckoned as money accords with the ordinary concepts of income as “what comes into [the] pocket” –

It must either be money or something:

received . . . in . . . money’s worth –

And there are references to Tennant v Smith.  So, merely because there might be a benefit received does not necessarily equate to income.  Then, over the page, at 705, lines 15 to 25, the italicised passage:

It is immaterial that the respondents would have had to expend money themselves had they wished to provide the holidays for themselves.  If the receipt of an item saves a taxpayer from incurring expenditure, the saving is not income:  income is what comes in, it is not what is saved from going out.

So, again, from the perspective of the casino, to say that because you accepted the credits as the free bet rather than having to pay up the cash, that is some form of saving to you, that is not income because there is nothing that has actually come into your economic resources through that means. 

GORDON J:   What about the next line: 

A non‑pecuniary receipt can be income if it can be converted into money –

This raises the temporal question about what point you consider it, and at what point you identify the receipt. 

MR GLEESON:   I accept that is very important for the question, your Honour, and of course, in Cooke, a taxpayer is the person receiving the gift.  We are the exact opposite situation, because we are trying to ask:  is there an amount received by the casino through this process?  We submit one of the errors of the Court of Appeal is they are really looking at it from the wrong perspective.  If you were a professional gambler and you were given points, if you could convert them into money, this passage might well say that you are receiving income in this transaction.  That is the professional gambler – because you can cash them out. 

We are looking at it from the exact opposite side of the casino.  That is why, your Honours, in the Court of Appeal’s judgment at paragraph 56, we respectfully submit there is a significant confusion which, in fact, underpins the whole judgment of looking at it from the wrong side.  The court says in the second sentence: 

The conversion of Points to Credits creates something of value to SkyCity (a chose in action against it), which value is realised at the point of surrender of the Credits on the placing of a wager.  The debt that SkyCity is otherwise liable to pay in cash is extinguished.

The conversion of points to credits may be regarded as creating a chose in action against Sky City, but that is not a value to SkyCity, that is a liability.  So, this is the notion that seems to underpin the judgment, that somehow at the point of conversion you, the casino, have received value via the creation of a chose in action against you.

GLEESON J:   But it really comes back to the question of whether there is one transaction or two, does it not?

MR GLEESON:   It may, your Honour.  Because it is important for us to be able to look at the origin to see what has happened here, and to say if we are asking the Lord Goff question, has the customer put their money at risk in a way which has increased the resources of the casino, the answer is no.  Has the customer done something which the casino could bring to account in a properly drawn‑up revenue account, as Dame Gloster put it?  The answer is no.  You could never record in the revenue account, because I now have a chose in action against me, I have increased my resources.  So, it comes back to saying there is no consideration moving from the customer to the casino.

Your Honours, the last case, which is on this topic relied upon by the respondent, is Warner Music – which is volume 6, tab 45, page 1468.  So, in this case, the taxpayer was assessed sales tax in one year, and in a later year, by reason of a settlement and also a successful appeal, the taxpayer was freed of the liability to pay the sales tax.  The question was whether the release of the indebtedness constituted a gain, and if so, whether it was ordinary income.

Now, Justice Hill at page 205, letter D, rejected the commissioner’s principal contention, which is not relevant for today.  If I could just cross‑refer – the case he refers to, which is Commissioner of Taxation v Rowe, went to the High Court in Commissioner of Taxation v Rowe (1997) 187 CLR 266 and it confirmed Justice Hill’s approach. So, the part that is relevant is from the foot of that page onwards.

There was a lot of accounting evidence in that case, unlike the present, but the critical reasoning was at page 210, letters B to E.  His Honour identifies that the original sales tax assessment created a legal

liability, and when the taxpayer was freed from that liability by reason of the settlement and the successful appeal, that should be treated as the taxpayer making a gain.  His Honour then went on to say it was sufficiently connected with the business to be ordinary income.

Now, that case, your Honours, has no parallel to ours.  What is happening in that case is you are under a liability and then some event occurs which releases you or frees you from that liability.  That may be gain, that may be revenue, depending on the circumstances.  The critical difference here is the casino is not simply being released from a liability, it is performing its obligations and thereby acquiring a discharge, and in doing so the gain is moving to the customer, not to the casino.

Your Honours, I am conscious of the time.  I think that is sufficient for our appeal in chief.

GAGELER CJ:   Thank you, Mr Gleeson.  Mr Golding.

MR GOLDING:   Thank you.  Your Honours, my proposal for how to deal with this, if it is convenient to the Court, is that I will deal with the substantive appeal first – if your Honours take up my oral outline, you will see that is how it has been structured – and then come to the question of the cross‑appeal after that, if your Honours are content for me to deal with that order.

GAGELER CJ:   Yes.

MR GOLDING:   Thank you.  In dealing with the appeal, the first issue I wish to deal with is that of the decision in Shin Kobe Maru.  Now, there is, in fact, no disagreement between the parties with respect to the status of that decision and what the Court should make of that decision, in that whilst on its face it might be considered to be expressed in somewhat absolute terms at page 419 of the report, as we have been taken to, the reality is that subsequent courts have treated it as being an orthodox or principled statement, but not something which has to be slavishly followed in the circumstances.

There is no problem, certainly, from the perspective of the respondents, in that being the approach.  Your Honours will see – and I do not need to take you to it, because my learned friend already has – with respect to the approach that is taken in ICAC v Cunneen, and you will see the reference there in paragraph 2 of my oral outline.  But the question that then arises here is, if that is the case, how is it that the Court of Appeal below dealt with the matter, and is it consistent with that approach of it being a not‑inflexible but nevertheless salutary rule to be kept in mind.  If your Honours take up the judgment in the core appeal book ‑ ‑ ‑ 

GAGELER CJ:   If you can just give us the paragraph numbers of the judgment, would be best.

MR GOLDING:   Yes, the impugned aspect is at paragraph 35 of the judgment, and that is at page 172 of the core appeal book.  In particular, it is the last to sentences, which is to say:

To posit that that very word –

The word there being “revenue”:

imports a particular connotation, as a premise of the definitional exercise, risks circularity.  At the very least, any such connotation is subject to the ordinary constructional exercise.

Now, it is the submission of the respondent that whilst, of course, Shin Kobe is not referred to there at all and the parties did not take the court to it in the proceeding, that that nevertheless represents what has otherwise been described here this morning as being a not‑inflexible rule.  What is important is that the court here is not saying that there is necessarily circular reasoning here, but rather it is reminding itself or giving a warning with respect to the prospect that when one does approach definitions in that way, there is, of course, the risk of circularity. 

The difficulty with circularity as a concept – and if one looks at page 419 of Shin Kobe on its face, we are left to assume, presumably rightly, that circularity is ultimately a bad thing.  But, of course, normally in argument, one person’s circularity is in fact their opponent’s complementarity.  So, it can be viewed in different ways, depending on the perspective from which you are coming at it.

Can I, at that point, perhaps take up what fell from your Honours Justice Edelman about, well, are there a range of possible definitions and at one end do you have what you might call a very strict or true definition where it is specifically the words that are there and nothing more, and then there can perhaps be a spectrum and you can end up at another end where that is not the case and it might be more of a guide.  In this particular case, the respondent says that this fits at the more true definition end.

EDELMAN J:   Lord Hoffmann gives a very narrow scope for what I would call “true definition” cases.  The true definition would, would it not, be cases where the word is being used effectively as a deeming device or as a placeholder.

MR GOLDING:   Yes.

EDELMAN J:   So, in other words, the intention of Parliament is, where you see this word, read it as the following and just insert the following words.

MR GOLDING:   Yes.

EDELMAN J:   But that is not this case, though, is it?

MR GOLDING:   Well, no, and perhaps I have put it too high.  I do not mean to say that it is absolutely a true definition, I just want to give you a textual – if your Honours take up, still in the core appeal book, the actual definition ‑ ‑ ‑

GORDON J:   This is the definition of “gross gambling” ‑ ‑ ‑

MR GOLDING:   “Gross gambling revenue” at page 99 of the core appeal book.  What I was going to point out – and I do not cavil with what has fallen just there from your Honour Justice Edelman – is that:

“gross gambling revenue” for a period means –

So, one of the ways that you may well be determining about how far along the spectrum you are is what is the aspect of the deeming.  Now, of course, it is common for definitional provisions to say “includes”, for example, which would certainly be non‑exclusive.  But there is an element, at least, of exclusivity here by the use of the word “means” and that, in having regard to what I might call the strength of the Shin Kobe principle, one of course then has to look at what it is that is actually being asked to be done here.  It is not being asked to include.  It is not using a permissive such as shall or may, but rather, there is an aspect of stipulation by saying “means”.

Can I perhaps at this point then say the structure is as follows, in my submission, that what we say that the Court of Appeal’s reminder to itself, effectively, about the principle in Shin Kobe was appropriate; that the definition here is sufficiently closed – for want of a better word, to say that there is no need to go outside – but that, if we are wrong about that – and this comes back to what fell from your Honour Justice Beech‑Jones earlier, which is, why would you need to?  What is it that means that you need to go outside in this particular case?  That is the first point.

The second point is, if you do go outside, where are you going to?  For what purpose?  And what are you taking into account?  What we say is that there is a question about, if you do go outside, what is the weight to be given to that in circumstances where the definition is what I might call relatively strict.  But secondly, what we say is when my learned friends do go outside, with respect to the use of the word “revenue”, that what is presented is a view of the word “revenue” that is overwhelmingly from an income tax context.

EDELMAN J:   Why is what the Court of Appeal saying at the last two sentences of 35 not exactly the same as the interpretation that Mr Gleeson put upon paragraph 33 of Cunneen?  In other words, it is not really the Shin Kobe Maru‑type circularity, it is a circularity where you start with a premise and then impose that premise upon the definition.

MR GOLDING:   Yes, that is right.  “Premise” meaning, as in:  the beginning.  In other words, that is where you start, and because you start there, you close your mind and you see it through the lens of where you have started.  It may well just be my ineloquent expression, but I suspect that between Bar and Bench here and – the parties were actually in furious agreement.

Can I then proceed on the basis which is consistent with what the Court of Appeal did, which is to say that the ordinary constructional exercise, of course, does require a look at context and purpose.  I have now moved to paragraph 3 of the written outline.  What I propose to do is to take your Honours through what we say is the most important contextual and purposive material, which is that that surrounds the scheme – that is, the granting and administration of the licence of the casino, and the extraction of tax – and that that has to be weighed more heavily in terms of understanding what “amount received” may mean then referring to other kinds of extrinsic sources.

If we then look at paragraph 4, what I have set out there – and it is in descending order – is the hierarchy of how the licensing and arrangements for taxation in the casino work.  The top of that tree is the Gambling and Administration Act which, whilst dealt with in the judgment below, did not make into the appeal book.  I have copies here if your Honours ‑ ‑ ‑

GAGELER CJ:   Do you want to take us to provisions?

MR GOLDING:   They have been given to your Honours,  Sorry, is that what your Honour was saying?

GAGELER CJ:   I am asking whether you want us to look at provisions as you are speaking.

MR GOLDING:   Yes.

GAGELER CJ:   I think we have been given some extracts.

MR GOLDING:   Yes.  So, what your Honours will see, looking at my outline, is that I have referred to specific sections.  Firstly, just briefly by way of history – and perhaps this is why the Gambling Administration Act was missed – the casino in South Australia – and I say “the casino” because, importantly, we will get to that there is only one and there can only be one in South Australia, by reason of statute, and the decision to introduce it all of those years ago was a hard‑fought social and political battle.  The Gambling Administration Act has since come across the top of the Casino Act.

If we start by looking at the second page of the document that has been handed to your Honours, which is the Gambling Administration Act, or extracts of it, importantly it talks about gambling Acts, and the Casino Act is one, there, of a series of gambling Acts. Your Honours will see the other Acts that are included. What is important is, if you then go up to section 4, that this Act effectively sits over or can sit over the top of the other gambling Acts and prevail to the extent of inconsistency. It says there that if one of the other acts has a provision which provides for that, then that will be the case. We will get to it in a moment, but section 3A of the Casino Act is one of those Acts that has a provision that subjugates itself in that regard.

If we turn over to, then, what is section 15, section 15 talks about codes of practice.  There is a code of practice, it is not before the Court, but the only reason that I mention it for context and background is that if your Honours take up the core appeal book and look at the matters that were before the Court of Appeal below, one of those items, which is what my learned friend started with, are the terms and conditions of the reward program, which is tab 2.4.

GAGELER CJ:   What page?

MR GOLDING:   Page 119, your Honour.

GAGELER CJ:   Thank you.

MR GOLDING:   These are the terms and conditions of the reward program.  Now, this is something that is generated by the casino.  This, in amongst all of the documents in here that I will otherwise take your Honours to, such as the casino control standards, the CDA, the ALA, et cetera, this document is different in that it is in fact the only document that does not have a public appointment, shall we say, that it simply has to comply with the code of practice – and the parties agree that it does – but there is no process by which it is reviewed or approved or anything like that.  It is essentially a private arrangement between a gambler or prospective gambler and the casino.

BEECH‑JONES J:   Is the significance of that so that if the effect of this is that it turns out revenue, then the casino has to wear it?  I mean, is there anything beyond that?

MR GOLDING:   Yes, and that there has been a lot of emphasis – although perhaps more so below, and increasingly less in this Court – on the importance of points and credits, which are concepts not known to any of the public appointment documents.  They are concepts only in here, which is the private arrangement.  And so, yes, your Honour has put it very bluntly, that if the casino has arranged its affairs in such a way that it trips over the statute in a way that it did not intend to, for the purposes of tax purposes, then so be it.

GORDON J:   Is that just to say anything more than two things – I put this to Mr Gleeson – that when one looks at the intersection between gross gambling revenue and net gambling revenue, it uses the language of “attributable to” rather than some more direct language.

MR GOLDING:   Yes.

GORDON J:   In other words, one cannot structure the arrangements in a particular way to fall foul of or fall outside of whatever breadth may be given to that concept?

MR GOLDING:   Yes, and that that the words “attributable to”, whilst I do not have a dictionary definition immediately available, and I am grateful to your Honour for pointing out those words, that, effectively, in my submission, what that involves is being able to say, for some reason, this thing here can be married up with this thing here.  In a sense, there is a breadth, and what it does conceive of is effectively the kind of economic equivalence that is being put against us in terms of the income tax cases, as not being something that is viable here, but that, because we are talking about something being attributable to something else, there has to be a connection, but that connection does not necessarily have to be, say, causative.

GORDON J:   The second thing which follows from that is to say, what else is it attributable to but to gambling, or gaming?  Is that the way it is put?  In other words, if one does the negative – if one flips the argument – the only link that is made is between the placing of the bet, in the language of London Clubs, I have put the “money at risk”.  You might take it ‑ ‑ ‑ 

MR GOLDING:   I may need to just think through the – I had not thought of the flipside of it, and I may just need to think through that and come back to that after lunch.

GORDON J:   The only other second point is, you make – all I ask is, when you talk about the “private arrangements”, is that because the casino could structure its own arrangements in a way which would avoid it being revenue?  In other words, it could structure it in such a way that the credits could be somehow dealt with and not generate an amount which would be attributable?  Is that the point that is being made?

MR GOLDING:   Yes.  What I am about to say as a variation, effectively, on that point, but using the specific example here.  If these terms and conditions were not just specifically for the people that they are for, in that, for example, there is a reference to, I think, what are called “premium” gamblers, which are persons of significant means, et cetera, but rather, if the casino determined to have an expansive approach in terms of how it applied these terms and conditions to any gambler who came in, for example, then the amount of State revenue on that analysis would be diminishing very quickly.

EDELMAN J:   I mean, even if it was just applied to premium gamblers, if the way the scheme had worked was that certain premium gamblers were told, you get a free bet in the following circumstances, would that be dutiable?  Where would the revenue be there?

MR GOLDING:   That comes down to what is a “free bet”, and I – this is very important, so I will go out of my order here.  There has been a lot that has been put with respect to the wagering of credits as being a “free bet” or a “free spin”.  We say that is a mischaracterisation.  It is not a free spin.  A free spin is what has just fallen from your Honour Justice Edelman, because the casino in your Honour’s example is saying, you can have a bet, you can have a spin.  What it is not saying is, but whatever the value of that is, if you want to go to the cashier and cash it out, you can do that.

EDELMAN J:   It comes back, then, to the point Justice Gleeson made right at the outset:  are we talking about, effectively, two transactions or one?

MR GOLDING:   Yes.  So, to take that further – and I will get to London Clubs – but what is critical, the use of the term “non‑negs” there, where “negs” is short for “non‑negotiables”.  What we are dealing with here is negotiable, because you have the credit and you can turn left or you can turn right, as has been put, and in turning right, you are foregoing turning left, but turning left would be you negotiating for an exchange with cash.  It is really as simple as that, is the proposition that we are putting.

In that regard, whilst the result – London Clubs is a bit different, because the tax had been paid there, and the casino then said, hang on, I think we should get it back, and it was being resisted; here is the reverse – but where it does not apply is because they are dealing with non‑negotiable instruments that are truly just free spins but, as I will get to when I take your Honours to it, the analysis into why “non‑negs” are, in fact, not revenue for the casino and the same reasoning that is used there applies here, but here, it is negotiable.  That is why it counts for the purposes of an “amount received” as opposed to, necessarily, revenue – that being, of course, the word in the label.  Can I ‑ ‑ ‑ 

GAGELER CJ:   Are we still dealing with the Gambling Administration Act?

MR GOLDING:   There is one more.  The only reference to section 16 is to the code of practice that is referred to in the previous section.  It has a force in terms of a criminal penalty.  Then 61, which is the annual report, and what is there is that the commissioner – the commissioner, by the way, is the Commissioner of Liquor and Gaming, who is actually appointed under the Liquor and Gaming Act; being a separate piece of legislation not before the Court – must prepare an annual report.  Then, going over the page to subparagraph (3):

The Commissioner’s report must include the following information:

(a)the total net State wagering revenue . . .

(b)the total net gambling revenue of the holders of all gaming machine licences –

There is a crinkle in this, in that where it is a reference to “gaming machine licences” we are basically talking about what is colloquially known as pokies.  The casino itself, for other reasons, does not actually have to hold a licence specifically for gaming machines, it is treated differently to other hotels and pubs in that regard.

The reason I am taking your Honours here is to show two things.  One, that a level of care has to be taken before we run off to other contexts like income tax, et cetera, in terms of understanding the regime here, in that the commissioner has to report the total net State wagering revenue.  This is where an important difference comes in and, to some extent, is what has come from your Honour Justice Gleeson in the questions.  It is about perspective and which way you are facing, to some extent.  The word “revenue” here, and “State wagering revenue” as an overall phrase, is used but from the perspective of what it is that the State has earned as opposed to gross gambling revenue, which is what is dealt with in the CDA and is what the licensee has obtained.

Too much emphasis, in my submission, has been put on accounting standards and how the casino for certain corporations law purposes, or any other purpose, may well treat certain receipts, but that what we have to remember in the overall scheme here is that it is also about the perspective, from a taxing perspective, of the State and what its revenue is.  There is no reason, necessarily, in the absence of specific definitions, as to why the term “revenue” should be used or meant differently within the one overall scheme, which is what we are dealing with here.

BEECH-JONES J:   Sorry, how do we know what that word “revenue” means there?  They are not defined phrases, are they?

MR GOLDING:   That is right, but that is my point, and this is why I am saying care has to be taken about ascribing meanings and using the word “revenue” where it is otherwise defined further down in a statutory instrument – being the CDA – where the word is otherwise used here, not defined, and that there should be overall, a consistency.  So, what I am, I guess, cautioning against is being too quick to run off to what are said to be analogous‑type situations that in fact, in my submission, are not necessarily analogous in the circumstances.

If we could then turn to the Casino Act, which is in volume 1.  The whole Act is in there.  There has already been reference made to this.  There is the “Object” section in 2A, and what is important here is both (c) and (d), which is the reference to harm minimisation, but also 2A(d), and again the word “revenue”, undefined of course, is used there, and it is:

revenue arising from the operation of –

In some senses perhaps not that different from what I think fell from your Honour Justice Gordon about the use of “attributable to” in the sense that “arising from the operation of” perhaps implies something wider than direct causation.  Importantly then in section 3 – and this in part goes to your Honour the Chief Justice’s question about whether or not there is a contract when gambling occurs, when a bet is placed – the term “gambling” itself is defined, your Honours will see on page 13 of the book, and it means:

the playing of a game for monetary or other stakes and includes making or accepting a wager –

For separate reasons as has otherwise been referred to by my learned friend, it is a contract and the parties are at ad idem about that, but that is a further textual reference to support that conclusion.  Of course, the word “gambling” there is defined and then “gambling” and other composite phrases are defined, but of course “gross gambling revenue” is not.

Then we have section 3A, and that is the section I referred to before which, to an extent, in a hierarchy subjugates the Casino Act.  As to the reference to 5, I actually think that is a mistake.  Section 5 is just the grant of the licence.  Then we have 16 and 17.  Section 16 is the approved licensing agreement.  In this instance, the approved licensing agreement, otherwise described as the ALA, is found – and it has been varied several times – in the core appeal book starting at page 35.

It starts saying “Variation Agreement”, but as you flip through you get to the substance of the original content.  Now, what is important here is that there must be an approved licensing agreement that deals with the matters in (1)(a) to (d).  It is approved by the Minister.  The Minister is, presently anyway, the Minister for Gambling, who I note is not the Treasurer.  The Treasurer is provided for in section 17. 

So, there is an aspect of a division between licensing on the one hand and revenue on the other but, in my submission, the Act has to be read as a whole and you cannot understand one without the other, and that is really the ultimate point for where this is going, is that the tax aspect has to be understood in the context of being the only licensed casino under this regime in the State.

Then we go to “Casino duty agreement”, which is 17, and the variations to it are found starting at page 93 of the core appeal book.  We will come back to this, as well, on the question of the cross‑appeal, but importantly there has to be a casino licensing agreement, and if you look at 17(2) that it has:

to be entered into with a prospective licensee before the licence is granted or with a licensee before renewal of the licence.

In that sense, it is effectively a condition precedent to the grant of the license.  That will become important when we come back to, on the cross‑appeal, looking at this question of what does section 51(2) mean in the circumstances.

GAGELER CJ:   Mr Golding, can I just understand the significance of the approved licensing agreement.  Is there anything in that that we need to bear in mind? 

MR GOLDING:   There is not, specifically for the purposes of the disposition of this case.  Now that I have put that so boldly, I might just also check that over lunch in case I have missed something, but my understanding is, no, there is not for the purposes of the disposition of this case, except to say that when you read them that, in some instances, the CDA refers to the ALA for definitions.  The documents do not pass like ships in the night, they are interdependent in the sense that one will pick up the definition used in the other. 

GAGELER CJ:   What you are really showing us is that here we are engaged in the process of construction that it is within its own ecosystem, and we do not derive very much assistance from looking outside it.  Is that the whole point? 

MR GOLDING:   Yes, it may be that I am labouring it too much, but, yes, that is the ‑ ‑ ‑

GAGELER CJ:   But if there is something specific in the context that you want to take us to, please do. 

MR GOLDING:   I do not believe there is with respect to the ALA, but as I say I can – no, I am sorry, there is.  If your Honours pick up the ALA – no, that is in the CDA, I am sorry.

GORDON J:   I thought your point was, by reference to the statutory construction and in addition to the points you raised with the Chief Justice, just to point out there was specific attention given to the CDA as a separate revenue raising aspect as distinct from what might be called the licensing aspect.

MR GOLDING:   That is also true, and so the focus has to be on the CDA.  That is where this bites for revenue purposes.  At the same time, it cannot be completely understood without reference to the ALA, simply because it picks up, in many instances, some specific definitions from there.  The point that I had thought was in the ALA but is actually in the CDA is the definition of the term “bad debt”, which is on page 99.  

What is important there is that “bad debt” is given a particular meaning there that may or may not accord with what is general or Australian standards of accounting.  You will see that the term “bad debt”, in the penultimate line of the definition, refers to:

writes off as bad –

But this is an example in my submission, and we say the same applies to “gross gambling revenue”, where you do not need to go outside to see what might be – for accounting purposes or some other purpose or income tax purposes or whatever – a bad debt.  It is the confined ecosystem that the Chief Justice was talking about.  What I have then done at 4.4 with respect to the casino duty agreement is referred at 4.4 to various of the definitions that we say are the important ones for the purposes of understanding, to adopt the Chief Justice’s phrase, the “closed ecosystem”.

Can I then take you to the control standards.  There are many control standards but there are some that were before the court below and are included in here.  They had more relevance to question 2, which has not been the subject of appeal, but they are nevertheless before the Court and of relevance in the following way.  They start at page 136 of the core appeal book.

These control standards are promulgated under section 38 of the Casino Act, and what is important here if we look at what is considered – control standard IC03, which is at page 143 of the book. Your Honours will see on the facing page of 142 that that is, effectively, the promulgation of that standard under section 38. What this is about is, if you go down to “Purpose”:

To establish a framework and establish procedures for the
calculation and remittance of Casino Duty.

GORDON J:   Where are you reading from, please?

MR GOLDING:   Page 143.

GORDON J:   Thank you.  Under the purpose?

MR GOLDING:   “Purpose”.  There is a box ‑ ‑ ‑

GORDON J:   I understand, thank you.

MR GOLDING:   Yes.  Your Honours, the way this works is that these are drafted by the licence holder and are then submitted and are approved or not, as the case may be.  What we see here is, if you go over to page 144, the term:

Gross Gambling Revenue –

there appears to have a further – it is potentially problematic, although I do not think there is any inconsistency in that.  It refers out to the:

Casino Duty Agreement –

but then also repeats aspects of that definition.  If you then go over to the “Minimum Standards”, what you see at 2.2 is that:

(a)the calculation and recording of gross gambling revenue and net gambling revenue . . . and

(b)the payment of casino duty;

is in accordance with the methodology approved by the Treasurer.

Now, the methodology that is used, as I am instructed, is what is at 3.3, which is page 146.  And we have “Table Games” at (a) and we have “Gaming Machines” at (b).  What we see here – and this is what is important for the context – is that the parties effectively agreed, and then a public appointment was given to a specific methodology here with respect to how casino duty is to be, firstly, recorded, and then, secondly – sorry, the receipts are to be recorded and the casino duty to be calculated and paid.

If we take the, at (b), “Gaming Machines” as an example and we see the formula that is there of the plusses and the minuses, what we see is that what we are talking about here in terms of the credits would fall into that third box which is:

ACCOUNT BASED CASHLESS DROP –

that, for the following reason – “account based cashless drop” simply means from a card – something that you own as the gambler of value, which can be converted to money – that you choose to wager.  Where that came from, in my submission, is irrelevant for this purpose.  The point is, to pick up the language from London Clubs, it is negotiable.

The value that you have on the card, whether it is derived from credits, whether it is derived from the cash that you yourself put on there, does not matter for the purposes of this calculation.  And so, what this ultimately gets to is what we say is the proper construction, which is that this is about clicks of a turnstile or a simple ‑ ‑ ‑ 

BEECH‑JONES J:   You mean, total amount wagered?

MR GOLDING:   Sorry?  Total amount wagered, yes.

BEECH‑JONES J:   Can I just ask you, that standard, when was that promulgated?  Was it after the agreement?

MR GOLDING:   Yes – the date ‑ ‑ ‑ 

BEECH‑JONES J:   So, it is not so much an aid to construction as it is just saying, well, this is part of the – this is a way of looking at things.

MR GOLDING:   Yes.

BEECH‑JONES J:   But it is not an aid at all in to the construction of the agreement, though, is it?

MR GOLDING:   No, that is correct, but it is – the statute authorises the agreement, the agreement says certain things, the concepts in the agreement are then picked up and further extrapolated or elaborated upon in this document, which is effectively also agreed.

BEECH‑JONES J:   But does it reduce to the point of saying, look, if you are in an ecosystem not of tax or commerciality but of a grant of a monopoly and a State, then at least one perspective from the State is, we are just interested in how much you wagered on the machines, we do not care where it comes from?

MR GOLDING:   Yes.

BEECH‑JONES J:   Is that where we get to?

GLEESON J:   It is a little more, is it not?  It informs what the obligation is under clause 12 of the casino duty agreement.

MR GOLDING:   I am sorry, your Honour, I am having difficulty finding the relevant page.

GORDON J:   I think what you are looking for is possibly clause 2.2 of the standard, which says that:

The Adelaide Casino must ensure that in accordance with clause 12 of the Casino Duty Agreement that –

the calculations – I am putting this in neutral terms now:

is in accordance with the methodology approved by the Treasurer.

MR GOLDING:   Yes.

GORDON J:   I thought your argument was “the methodology” is what is at 3.3.

MR GOLDING:   That is correct, but I do not see that as necessarily being – and we may be at cross‑purposes – at odds with what fell from Justice Beech‑Jones, in that the issue is not so much necessarily about whether it is an aid to interpretation, but rather that this, as I said, is a further extrapolation, or details setting out, or confirmation of what is otherwise provided for in the agreement.  And so, to that extent, it cannot be inconsistent with the CDA when the whole purpose of it is to achieve something that is provided for in the CDA.  This is what I mean by a hierarchy.  We are now down in the granular detail, and I am pleased to say there is no further granular detail.

GAGELER CJ:   Mr Golding, your estimate for oral argument was two hours.  Is that still correct?

MR GOLDING:   It is, because I feel that now that I have set the scene, so to speak, that a lot of the rest follows.

GAGELER CJ:   Thank you.  The Court will adjourn until 2.15 pm.

AT 12.48 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

GAGELER CJ:   Mr Golding.

MR GOLDING:   Thank you, your Honours.  Before I commence, I just need to tell the Court that I had a brief discussion with my learned friend for the appellant as soon as the Court adjourned for lunch, in which he made reference to – and these are my words – what has been suggested is that I have taken him by surprise with respect to some of my argument and specifically, as a understand it, it is to do with the reference to the control standards that I have referred to in the book, and that they were only used for the purposes of question 2 below, which is not the subject of appeal.

I cannot remember my exact words, but I believe I said something to that effect to Justice Beech‑Jones when we were turning to that.  So, I definitely make clear to the Court that it was only referred to below for that purpose and was not referred to for the purposes of question 1, to the extent that I have caused any embarrassment to my friend.  It certainly was not ‑ ‑ ‑

GAGELER CJ:   If Mr Gleeson is caused any difficulty, he will tell us about that when it comes to his reply.

MR GOLDING:   Thank you.  Can I, before I move on, go to the question that was posed by your Honour Justice Gleeson, you may recall about the issue of “attributable to” that was being used in the CDA in the definition of “net gambling revenue, which your Honour sees at pages 100 and 101.

As I understand it, what your Honour was putting to me was, firstly, the question of “attributable” as dealt with in (a), which is – sorry, it would be both (a) and (b) – but the first time “attributable to” is used, which is with respect to the gambling, and the second time it is used, it is with respect to the monetary prizes.  What we say is that the meaning of “attributable” there is the same in both instances and it, effectively, covers the field, in the sense that the first use of “attributable” is to “gross gambling revenue”, which is everything that goes through the machine, but a certain subset of that will then be referrable to the monetary prizes because only some bets win.  So, in that sense, it is complete in that it is not – we are not saying it could be attributable to something else, somewhere else. 

GLEESON J:   I think it might have been Justice Gordon who asked you a question about “attributable to”, but I asked you a question about clause 12 of the casino duty agreement.

MR GOLDING:   The issue in clause 12 with respect to that being then a reference – or linked to the control standards that I otherwise referred to – and, yes, if one looks at 2.2 – this is at the control standard at page 145, that that clearly is a reference to what is otherwise being provided for in clause 12.  I apologise – sorry, I am doing a lot of apologising here – if I mixed up the questions that may have come from Justice Gordon ‑ ‑ ‑

GORDON J:   It is fine, Mr Golding, it is all right.

MR GOLDING:   ‑ ‑ ‑ and Justice Gleeson.

GLEESON J:   You were not the first, Mr Golding.

BEECH-JONES J:   Mr Golding, I have a question to ask you about monetary prizes and credits, but if it is better, later in your argument ‑ ‑ ‑

MR GOLDING:   I am happy to do it now, your Honour.

BEECH-JONES J:   I asked, I think, Mr Gleeson about this, and he referred to question 2.  As I understand, the reasoning of question 2 was that points were not to be deducted as monetary prizes.

MR GOLDING:   Yes.

BEECH-JONES J:   And the principal reasoning was that that was because at paragraph 83 at court book page 181, points did not meet the criteria:

Points are not money.  They are not gambling chips.

I could see that one might take the view that credits are.

MR GOLDING:   Yes.

BEECH-JONES J:   But there was an unresolved argument about whether a credit – whether it would be a prize, as I understand it.

MR GOLDING:   Yes, that is correct.

BEECH-JONES J:   Because you were running an argument that you had to win to get to become that ‑ ‑ ‑

MR GOLDING:   That’s correct.

BEECH-JONES J:   So my question is, has that been, as it were, resolved, or has that question just never arisen, or you will live to fight another day over any possibility of that?

MR GOLDING:   Well, I think it is the last of those because, of course, this was a case stated to the Court of Appeal without there having been a trial on the whole of ‑ ‑ ‑

BEECH-JONES J:   All questions of construction.

MR GOLDING:   That is right.

BEECH-JONES J:   Right.  So, the possibility that points converted to a credit could be deducted from net gambling revenue, but then restored if the credit is used to wager, is – or the question of whether it would be restored is what is here, but not the first question as to whether it would be deducted from net gambling revenue, if someone wanted to raise that.

MR GOLDING:   Yes, that is still a line of argument that is open but, of course, would be subject to, in the event as part of deciding this matter, what, if any, findings are made about the nature of credits.

BEECH-JONES J:   Indeed.   Okay.

GORDON J:   So, in a sense, this morning it was put that there are – by some of us – two transactions.  So, if you look at them as two transactions in the context of Justice Beech‑Jones’ question, we are dealing with question 2 on your analysis, not question 1.  Sorry, the second transaction, not the first transaction.

MR GOLDING:   Yes.

GORDON J:   What we might say about the second transaction may impact the view you would take on the first transaction.

MR GOLDING:   Yes.

GORDON J:   And Mr Gleeson says, no, there is one transaction, and one looks to the source in order to determine the effect of what happens in part 2.

MR GOLDING:   That is as I understand it, but as has fallen from your Honour from the first couple of statements, then we embrace that position.

GAGELER CJ:   So, where are we at in your outline?

MR GOLDING:   So, if I could now turn to the issue at 8 onwards on that page 2, which is the composite phrase of “for consideration for gambling”.  We are going back to the definition of “gross gambling revenue”, and it says that the:

amount received by the Licensee during the period for or in respect of consideration for gambling –

To some extent, it cannot really be divorced from the first question, and it actually takes up precisely what has fallen from Justice Gordon, namely, this issue of whether or not the customer turns left or turns right.  What we say is that if the customer turns right – which is, they go and they place a bet with the credit – that is the second separate and discrete transaction that is in issue here, and that that is the consideration that is being placed, which is the customer is deciding to take the item that he or she has and has control over which he or she could have cashed out, but instead to play it.  And that constitutes the consideration flowing and in that sense – and I made this point before – is that it is not what has been characterised as a free spin or a free bet, as I have in paragraph 11 there.  This is where the analysis in London Clubs is important, in my submission.  It is book 5.

GAGELER CJ:   As I understand it, you would accept the analysis in London Clubs, but you say here you have a money equivalent because of the ability to turn left instead of turning right.

MR GOLDING:   That is correct.

GAGELER CJ:   And you say this case falls within – I think it is paragraph 44, is it?

MR GOLDING:   Sorry, falls within – I did not catch the last ‑ ‑ ‑

GAGELER CJ:   Paragraph 44.  Am I right?  Paragraph 43.

GORDON J:   It is 41, 42 and 43.

MR GOLDING:   Yes.

GAGELER CJ:   This is a “neg” rather than a “non‑neg”.

MR GOLDING:   That is correct.  To be clear, where one gets the essential meaning of what is a “non‑neg” is actually on page 458 of the book underneath the heading “The facts”, at paragraph 8, on to the next page of paragraph 12 – that what is critical here is that they are described as, in paragraph 11:

Free bet vouchers –

and that over, at the top of page 459, the first complete sentence on that page:

In these proceedings non-negotiable chips and all free bet vouchers have been referred to collectively as “Non‑Negs” and I too will use that terminology.

We say, as has fallen from your Honour, that this is in fact a case about negs.  But of course it is the rationale that is used in London Clubs about precisely why non‑negs do not count as value or revenue, which is why we say in this particular instance what is in dispute here does – because something of value to the customer is being wagered because of an active choice that that customer chose to make with respect to something that was entirely within their control, and something that they could have just converted into fungible dollar bills and coins.  In this sense, if one looks at the bottom of page 465 and paragraph 43 there, where the distinction is being drawn:

Non‑Negs are very different from cash chips which represent money deposited by the gambler –

In effect, here in this case, we say the credits that are being wagered are, for present purposes, the same as cash chips, because an election has been made to treat them in that way, both by the casino in permitting it, but also by the customer in making their election about what to do with the credits.

GORDON J:   Do you rely upon the middle sentence of paragraph 41 that these are amounts:

of money the gambler put at risk.

MR GOLDING:   Sorry, I am just trying to find paragraph 41 ‑ ‑ ‑

GORDON J:   That is the middle sentence:

That was the amount of money the gambler put at risk.

It is like the election point.

MR GOLDING:   Yes.  A further point about this that also supports the case that we make about the origin or source not being relevant – again, looking at that paragraph 43 at the bottom of that same page – is that it talks about:

cash chips which represent money deposited by the gambler, or money which he has won all been given to encourage him to bet.

Now, it does not necessarily matter, I guess, whether it is to encourage him to bet or not, but the point is that it is something that he has been given, the rationale being that that aspect of it does not matter.  What matters is that it is of some value to him or her and he is putting that value at risk or at stake.

The next and last point to make on this is as follows, which is that if your Honours go to item 12 on my outline, and you will see there where I talk about the possibilities:  12.1, the customer loses; 12.2, the customer wins.  Then there is a reference that the casino deducts the value of the monetary prize from its casino duty liability.  That takes us back to the definitions that we were looking at in the core appeal book at page 99.

What is critical about this, having regard to the argument that is being put against us, is that in all of this, it is actually not until you get to this point that the word “money” – or a derivative of it, in the form of “monetary” – is actually mentioned.  That is the first point.  The second point is that it then goes on in the definition to define “monetary prize” – “monetary” is the important bit here – as including things that would not necessarily immediately sound in dollars and cents in the hand.  For example, the reference in (b) to the provision of chattels, the reference in (c) to bad debts.

The point that I am making is that what “monetary prize” is about – and this is really no different to the reference to amount received in gross gambling revenue – is that it is ultimately about value, but that can be represented by any number of things that need not necessarily be actual cash – it can be a chattel, it can be a bad debt – but to which a value – and is valuable to someone – can be ascribed to it.

BEECH-JONES J:   Mr Golding, since you have invited us there, does that mean that you accept if as part of the process of construction of what “gross gambling revenue” and “net gambling revenue” means, we might consider it necessary to look at how this system – credits – interact with “monetary prize”, that is open, as it were? 

MR GOLDING:   Your Honours may need to, and this is the difficulty – and I struggle with the artificiality here, because in looking at “net gambling revenue”, the composite phrase “monetary prize” is used.  That, in turn, is defined.  It is hard to draw a line.

BEECH-JONES J:   It is just that the answer may be a glorious draw because if it works like this, that points converted to credits are regarded as any prize for gambling in the form of a credit that may be redeemed – sorry, if credits are regarded as any prize for gambling in the form of a credit that may be redeemed for money within the definition of (a), that is credits, not points, because they can be redeemed for money.

MR GOLDING:   Yes.

BEECH‑JONES J:   Then they get deducted from net gambling revenue.  They get deducted when they are in the hands of the gambler, if that is the kind of reasoning.  But when they get reinvested as a wager, they become gross gambling.  So, the whole overall effect is an offset.  For every dollar that becomes a credit that becomes a monetary prize, if it gets re‑gambled it becomes gross gambling revenue.  I am saying that is a possible – I just want to know whether that is, as it were, in the ballpark. 

MR GOLDING:   Well, what we would say is the answer to that, if you read (a) all the way through is that it is referring to – it is all of those things that are before the hyphen which is on line 3 in all cases paid or awarded in accordance with system rules or procedures approved under the ALA, that that does not include, we would say, credits converted from points that are sitting in the hands of the gambler, because that is something that comes from the terms and conditions.

BEECH‑JONES J:   Which are not approved under the approved licensing agreement.

MR GOLDING:   And that goes back to my point at the start, which was about a public appointment and not a public appointment.

BEECH‑JONES J:   I see.  Yes, now I understand.

MR GOLDING:   Can I turn then to the question of the cross‑appeal.  Now, I need to say at the outset here that this cross‑appeal effectively stands alone, and the substantive appeal can be determined without reference to the cross‑appeal.  I note that that has been a consideration in the past with respect to whether leave is granted.  However, with respect to the question of whether or not there is a question of sufficient importance to warrant the attention of this Court, what we say is that Parliament provides for statutory contracts, whether that be in the sense of authorising them or whether that goes all the way to the other end of the spectrum and supply all of the terms, and it ends up being some kind of schedule to the Act, often with respect to things like revenue here, but also in mining and resource cases.

In those circumstances where this is a regularly‑adopted concept by parliaments in statutes, the question then arises to what weight ought be given to Parliament’s intention when Parliament has asked the parties, or allowed the parties, to agree – and sometimes requires them to agree – certain things in circumstances where what we are specifically talking about here is the question of the doctrine against penalties at common law and in equity.  It is something commonly used in contract law, but the intersection here is with the circumstances in which Parliament uses those terms.  In particular, it appears in taxing statutes – your Honours will see in the Tax Administration Act 1996 (SA), for example, that that is dealt with, and, in fact, as is the composite phrase – we are not just dealing with interest or penalties, but penalty interest is also dealt with there.

Now, as a quirk of history, the raising of casino duties is not actually caught by the Tax Administration Act which otherwise captures other South Australian taxing legislation.  What is important is to give some guidance with respect to what is required to modify the content of the underlying general law and, in this instance, specifically the doctrine about penalties where there has been a statutorily‑appointed or anointed contract.

Now, what we would say – and this now ventures into the argument – is three things, really.  The Court of Appeal in reaching its conclusion was wrong to characterise this as a matter of jurisdiction, that that was not really what the issue is here.  Secondly, whether or not the wording that has been used about needing very clear words to oust certain concepts from applying at general law, that applies to a category of concepts, and what we submit is that the doctrine against penalties is not one of those fundamental common law rights in the circumstances.

Finally is the question of, in any event, having regard to this particular arrangement – and again, it is a not‑uncommonly used device in statutes, certainly in South Australia – and that is the creation of a statutory debt as being a separate and distinct instrument with respect to – which is what actually, in these proceedings, if you go all the way back down to when the claims were filed and the pleadings were filed, the applicant, the plaintiff sought declarations, a cross‑claim was filed by the respondents which actually relied upon the statutory debt provision as the basis for bringing the action which ultimately has made its way ‑ ‑ ‑ 

BEECH‑JONES J:   You could have a statutory debt, but can only be in respect of a contract which validly – a contractual term which is valid in contractual terms.  In other words, just because it is a statutory debt does not make all the words in the contract binding as a statute.

MR GOLDING:   I do not dispute that, but the significance of the creation of a debt is – perhaps the best thing to do is to go to the specific wording in the Casino Act on that, at this point.  It is in section 51, which is at page 44 of volume 1.  Subsection (4):

Casino duty (and interest and penalties) may be recovered as a debt –

I am sorry, your Honour.  Where this is dealt with, what your Honour Justice Beech‑Jones has raised, is in paragraphs 104 and 105 of the judgment below, which you will find at page 185 of the core appeal book.  What the Court is saying there is that yes, there is a basis to provide enforcement.  The problem here is that, if you go to 104, there is, in effect, a mixing‑up there in relation to the question of what is said to be the clear language that is required for the purposes of ouster with respect to the statutory debt.

The point is that the statutory debt stands alone and is enforceable in terms of what may be recovered, but that is a separate question with respect to whether or not particular wording is required or is of sufficient clarity for the purposes of ousting.

GLEESON J:   Is what you are saying that the contract enables you to calculate the statutory debt?

MR GOLDING:   Yes, that – I am grateful to your Honour – but if what your Honours go to is, really this is the last point, at paragraph 19 of my written outline today, which is – it is the last sentence – that the contract allows for the quantum to be calculated, and that that is its purpose, but the enforcement and recovery of that is standalone with respect to it being a debt, and does not have to rely on contract law for that purpose.

That is not to say you could not – I mean, specifically, there is an earlier provision in section 17, one of the subsections there, that provides that it is a deed, in any event, and so there are certain advantages that come with that.  That is otherwise dealt with in the judgment here.

To go back, though, to the question of express words and the question of jurisdiction – and this is at paragraphs 15, 16 and 17 of my oral outline – what we say is that firstly, we are not talking here about judicial review, legal professional privilege, public interest immunity, those kinds of categories of what would generally be described as fundamental common law rights for which very clear words are required.

If you look at paragraph 18 of my outline – and there I put in single inverted commas a series of words: “clear”, “unmistakable”, “abrogation”, “abolition”  – I am sorry, I have not put the paragraph numbers in, but they are all words from the judgment below that 107 talks about abrogating the application of the common law and equity with respect to penalties and authorisation, and that those words and that kind of threshold is redolent of those other concepts that I mentioned before that are well‑accepted as being part of the intrinsic fabric of the common law and basic rights such as legal professional privilege, et cetera.

EDELMAN J:   It is not a binary question, though.  I mean, there is not just one category of really, really, really, important rights that are kind of entrenched without clear and unmistakable language and everything else.  There is a spectrum, is there not?

MR GOLDING:   I do not disagree with that.  I guess I am putting it as high as I possibly can, but I am not suggesting that there is a bright line in there.  What I am saying is that those other concepts that I have mentioned are concepts that usually attract that kind of language about abrogation, clarity, et cetera, and when one thinks about what each of them do, there is a reason for that, but that, perhaps, if I can put it this way, the rule against penalties is not as far along that spectrum or in the same league.

EDELMAN J:   It is a couple of thousand years old.

MR GOLDING:   Yes.  But ultimately it is also usually not framed as a right so much as – certainly in equity, anyway – discretionary relief, as opposed to things like, say, public interest immunity or legal professional privilege, where if certain conditions are satisfied, something must follow with respect to a protection.  There is a difference there

Perhaps, if I can look at it this way – which is in terms of the invocation of the question of jurisdiction – that what your Honours will see is that – and this relates to footnote 10, on page 185, in paragraph 104 – which refers to Shergold v Tanner. That, of course, is a case about ouster of jurisdiction in relation to the ADJR Act and whether something is reviewable or not.

In my submission, that very much is a question of jurisdiction in terms of access, as opposed to what we are talking about here in the case of the doctrine of penalties, which is discretionary relief which forms part of the subject matter of the law generally, as opposed to a particular – and certainly, when one looks at Shergold v Tanner – the erection by Parliament of a statute to do certain things to which the ADJR Act or, at common law, judicial review and the availability of prerogative relief would generally apply, and then the removal of that whole jurisdiction in the circumstances.

What we are doing here is nothing like that.  What Parliament is doing is something, firstly, much slimmer in terms of one aspect of the law of contract being modified, and secondly, one has to also remember it is not being modified generally for the population at large, it is being modified for the one licence‑holder of the monopoly arrangement with respect to the casino.  They are the kinds of considerations that would distinguish it.

GAGELER CJ:   Mr Golding, can I ask you a question?

MR GOLDING:   Yes.

GAGELER CJ:   Section 17(1)(c) says that the casino duty agreement can deal with penalties.

MR GOLDING:   Sorry, section 71 ‑ ‑ ‑ 

GAGELER CJ:   Section 17(1)(c).

MR GOLDING:   Yes.

GAGELER CJ:   It says that the agreement actually is to deal with penalties.  Now, what is the effect of the Court of Appeal’s construction on the meaning of section 17(1)(c), that the agreement can deal with penalties other than penalties within the common law doctrine?

MR GOLDING:   Presumably yes, but that would be, at its highest, there has to be some work for 17(1)(c) to do, even in light of the interpretation given to it by the Court of Appeal.

GORDON J:   Just to pick that up, and then when one sees that although it is not actually treated as a composite phrase, each of those concepts, “interest” and “penalties”, are then addressed separately.  So, if you go to clause 11 of the actual agreement, one sees “Interest Payable”.

MR GOLDING:   This is of the CDA, your Honour?

GORDON J:   Yes.

MR GOLDING:   I have page 106, clause ‑ ‑ ‑ 

GORDON J:   Clause 11, it deals with interest.

MR GOLDING:   Yes.

GORDON J:   Is your argument that clause 11(b) is the penalty aspect?

MR GOLDING:   The submission that we make is that in the legislation, the same phrase “interest and penalties” is repeated again and again, and that that is to be viewed, even though the common law deals with what is interest and what are penalties and that interest must be compensatory but penalties not be, we say that when reading the statute it needs to be just viewed as one head of power, effectively – interest and penalties – and that there is no gap as such between interest on the one hand and penalties on the other.

GORDON J: What do we make of section 52 of the Casino Act?  Is that a penalty provision, or penalty section?

MR GOLDING:   I mean, that is a criminal – it is penalty, as I read and understand “penalty” in section 51 and also in section 17 as about, for want of a better expression, a civil penalty, whereas 52 and the reason why it is separate is because it is specifically a criminal offence to do what is contained in there, which is, of course, something more than just a failure to pay.

GLEESON J:   You have to say that clause 11 deals with interest and penalties by agreeing on a payment of interest at 20 per cent per annum.

MR GOLDING:   Yes.

BEECH‑JONES J:   Sorry, you did not mean to say that 51 creates a civil penalty.  You meant a civil debt, did you not?  Not a civil penalty in a ‑ ‑ ‑ 

MR GOLDING:   Yes, in effect, and I hesitated as I went to say “civil penalty” because that is a loaded phrase and what that means.

BEECH‑JONES J:   Yes.  A civil debt.  Yes, I understand.

MR GOLDING:   So, a punishment for failing to pay.

BEECH‑JONES J:   In 51?

GLEESON J:   In 52.

BEECH‑JONES J: Section 52.

MR GOLDING: Section 52 is a criminal punishment for failing to pay, but 51 ‑ ‑ ‑

BEECH‑JONES J:   To the extent it is talking about penalties.

MR GOLDING: Sorry, going back to section 52, it is not just a punishment for failing to pay, failing to pay in certain circumstances where you have done something more like try to deliberately evade.

BEECH‑JONES J:   Yes.

MR GOLDING:   But 51 allows for the extraction of something that is more than just compensatory.

BEECH‑JONES J:   I understand, because of the word “penalties” in there.

MR GOLDING:   That is correct.  As has been set out in our written submissions with respect to how it is not uncommon for that to be the case in revenue and taxing statutes, and the importance of taxpayers being treated equally, in the sense that those with additional resources not just being able to, effectively, pay their way out of certain circumstances, is one of the examples that is usually given.

To go back to your Honour Justice Gleeson’s question about clause 11, that underscores and requires the reading that we give, which is that “interest and penalties” in section 51 and section 17 is to be read as one power because, of course, the word “penalty” is not actually used there, in clause 11.  In any event, for the purposes of agreeing that, we say that notwithstanding that that word is not there, that there is sufficient power provided for in section 51 and section 17 when read together, by use of the composite phrase repeatedly, “interest and penalties”.

EDELMAN J:   Can I just ask, what is wrong with the interpretation that would take the word “penalties” to refer to the criminal penalties described in section 52, and section 17(1)(c) would then regulate the manner in which those criminal penalties could be recovered as a debt – the terms and conditions and the way in which those penalties could be recovered?

MR GOLDING: Because, in my submission, there are two aspects to it. One is that there can be a penalty imposed under 17 and 51 when read together without needing to discharge the wrongdoing that is provided for in 52 – that 52, because it requires proof of an attempt to evade the payment as opposed to a genuine dispute about how it has been calculated, or the making of a false and misleading statement, that that is an additional threshold for which the maximum penalty specifically for that is $100,000 but, in my submission, that says nothing about a penalty – and I will not use the term civil penalty – but a penalty outside of a criminal context which may be extracted simply for late payment or non‑payment. They are dealing with different concepts – can I say, late payment or non‑payment, which is “innocent” in that there is no intention to deceive or evade as is required by section 52.

GAGELER CJ:   Mr Golding, where are we up to in your outline?

MR GOLDING:   I only have one more point to make, because I effectively jumped at the beginning, in response to a question from Justice Beech‑Jones, to debt.  The last point that I want to make is with respect to section – or the analysis in the Court of Appeal judgment about the effect of section 51(2), which provides that:

In the absence of an agreement between the licensee and the Treasurer –

That in fact the:

interest and penalties for late payment –

can be:

fixed under the regulations.

Now, that is effectively read down by the Court of Appeal to a narrow set of circumstances.  The difficulty is – and the Court of Appeal do not deal with this – that the existence of a CDA in section 17 is effectively a condition on the grant of a licence, when you have regard to section 17 and what is described there as:

The agreement is to be entered into with a prospective licensee –

This is at 17(2).  In our submission, the effect, then, of section 51(2) is actually quite narrow in that it is no more than a gap‑filler, because there are not going to be, because of section 17, many circumstances in which there is not in fact a CDA, and that is going to be circumstances where, for one reason, a party has terminated it unilaterally, say, or the time on it has

expired without it being renewed – in other words, a very narrow set of circumstances.  In those circumstances, Parliament – because it was concerned about the revenue – saw fit to provide that a regulation could be made so as to fix the interest and penalties.

Now, in my submission, that is a strong textual indicator that Parliament was quite prepared, and meant that with respect to interest and penalties generally in the CDA – which is going to be the majority of circumstances – that the parties were in fact completely free to agree it, given that there is a catch‑all at the end in 51(2) which provides that, simply by way of a regulation – which is effectively unilateral – that, in fact, a basis for recovery could be sought, and which basis, of course, would not attract the protection or jurisdiction – as it has been referred to by the Court of Appeal – with respect to the penalties doctrine.  So, that tends in favour of there being sufficient intention clearly demonstrated by Parliament here for the parties to be able to agree interests and penalties which may otherwise at common law offend that particular doctrine.

Perhaps if I could just give your Honours this reference – it might South Australia‑specific – we are not sure – but it is from your Honour Justice Edelman’s question about the prospect of section 52 and its relationship with 51 and 17. That is that the LegislationInterpretation Act 2021 (SA) in section 53 says – and it is specifically about the criminal law – this section says that:

A penalty set out at the end of a provision of an Act or a legislative instrument –

GAGELER CJ:   Mr Golding, we can probably take that on notice.

MR GOLDING:   Yes.

GAGELER CJ:   Thank you.

MR GOLDING:   Yes.  I have no further submissions, your Honours.

GAGELER CJ:   Thank you.  Mr Gleeson.

MR GLEESON:   Your Honours, can I deal with the cross‑appeal first, and then come back to the appeal?

GAGELER CJ:   Yes.

MR GLEESON:   We oppose the grant of special leave.  The issue sought to be raised involves the intersection between two particular statutory provisions, sections 17, 51 and one particular set of contractual words in clause 11.  While it has been asserted today, you have not been taken to any statutes which have the particular combination of sections 17 and 51.  Indeed, I will show you some of them shortly.  Because the distinction between penalties and interest is so fundamental to the law, what actually happens in statutes is that the legislature is attentive to that distinction, and where it wishes something to be a penalty, it makes clear it is using penalty.  Indeed, in the few cases where interest has ever been allowed as a penalty, the legislative practice is to say interest may be imposed by way of penalty.  So, that fundamental distinction is there, and you will not find any other statutes that use this model.

If your Honours grant leave, can I deal first with the alternative argument, which is paragraph 19 of the respondents’ outline.  This is the argument that says, somehow, you diminish the deed to a mere factum and you then say, even if when the deed is given effect to under the general law of the land, clause 11 cannot be given force to.  You ignore that when you come to the statutory debt under section 51, and you say the statutory debt does allow you to recover the money in clause 11.

If you think that through for just a moment, what that means is, if you sued on the deed, you would get one legal result; if you sued on the statutory debt, you would get a different legal result.  You would have an inconsistency between those two judgments – the law would simply not tolerate that.  The point of the statutory debt is to give you whatever extra recovery mechanisms there are attached to a statutory debt, over and above a deed, but not to alter the incidence of the substantive obligation.

In terms of what those extra recovery mechanisms might be, there are at least two.  The first is whether you get a longer limitation period.  In South Australia, under the Limitations Act, it is a 15‑year period for specialty debts, which would include statutory debts.  That is also the period for deeds, so you probably get 15 years whether you do it by deed or by statute – but that is one incident of it.

The second incident, obviously enough, is the Crown prerogative:  if the Crown is claiming under section 51 debt against an estate which is insufficient and the competing debt is not a statutory debt entitled to the Crown prerogative, the statutory debt will prevail for the reasons discussed in Williams (No 1) at paragraph 123 and Farley’s Case.  So, there is ample reason to understand why they have, first, the protection of a deed, then they have, on top of that, a statutory debt; but the incidence must be the same in both cases.

Your Honours, that leaves the alternative way it is put, and there has been a shift from the proposed notice of cross‑appeal to the outline.  In the proposed notice of cross‑appeal, the argument was based on the word “penalties” and that is the way it was put in the written submissions.  The argument was because section 17 says the agreement is to deal with penalties, that is a source of power which allows clauses which have the purpose of punishing.

Your Honours will have noticed from that part of the notice of cross‑appeal – that is, clause 2.1 – the ground was barren because it never asked for a finding that this particular clause 11 is a penalty within the language of the ground.  It is simply an argument about the statute without carrying it through to any conclusion that could matter in this case.

GAGELER CJ:   That was the way in which the question was framed before the South Australian court, was it not, as this question of abstract statutory construction.

MR GLEESON:   In respect to clause 11.  Clause 11 was built into the question.  So, it always had to say, what is the availability of the doctrine against penalties in respect to clause 11 – we submit that cannot be lost sight of.  The critical thing is, if your Honours look at the outline today at paragraph 15, the argument now is that it is a single authorisation to impose anything that meets the composite definition of “interest and penalties” and, therefore, implicitly, clause 11 can fall within that single authorisation.

Focusing on that as a matter of statutory construction, we submit, is not a tenable argument.  What section 17 is doing is picking up the two well-recognised creatures of “interest” on the one hand and “penalties” on the other, and saying your agreement may deal with either or both of those well-recognised creatures.  What it is not doing is saying you may simply add a further obligation to pay any amount on any basis in respect to late payment or non-payment.

Your Honours, there is a very practical reason why you would not construe it as a single authorisation – and I will give you the full references in a moment.  It has long been settled at common law, and it is now under the Income Tax Assessment Act (Cth), that moneys paid by way of penalty are not deductable for income tax purposes.  It is critical to know, in the context of taxation, whether what you are being asked to pay is interest – which is compensatory and is deductable – or whether it is penalty for a wrongdoing – in which event it will not be deductable.  That is a reason why it is very unlikely that a parliament would give a simple, single authorisation where all the boundaries between interest and penalties are blurred because of the extreme disadvantage that would cause to the person.

So, in the present case, when you look at clause 11, which simply says, on its face – it is page 106 – if there is a default, the Treasurer may require you:

in addition, to pay interest at 20% per annum . . . daily on a cumulative basis.

Compound interest daily at 20 per cent per annum.  What that clause is doing is taking up the first of the two opportunities provided by section 17 and saying, here is the parties’ agreement on the subject of interest; and by doing so that agreement is subject to the general law doctrine whereby interest is kept within compensatory bounds.

BEECH-JONES J:   Mr Gleeson, what would be a form of penalty that would be authorised by 17 and 51 in respect of late payment?

MR GLEESON:   There are various possibilities.  We may not need to settle on them, but one possibility would be the one Justice Edelman raised, which is that it would be regulating the penalty that is already in the statute.  That is one possibility.  That may not exhaust the field of possible penalties.

BEECH-JONES J:   If that is a criminal sanction, you would have thought that would be imposed by, or that would be within the province of the Court, imposing the fine, rather than an agreement.

MR GLEESON:   Yes.

BEECH-JONES J:   You would need pretty clear words for that.

MR GLEESON:   Yes, I am not suggesting that you would be agreeing, although the maximum if 100, we will be pay 50 in all circumstances.  I am not suggesting that.  But that was one possibility raised.  But what it would need to be is something which, first of all, squarely addressed itself to the subject of punishment, which would usually involve identifying the degree of culpability which attracted the punishment and then, having done that, it would have to clearly specify the nature of the punishment – not blurring questions of compensation with punishment, but identifying the punishment.

In tax statutes, that is usually done by saying it is an additional tax of 100 per cent, 75 per cent, 50 per cent – depending on degrees of culpability – but it will be an amount which will be expressly there to punish for identified culpability in respect of late payment or non‑payment.  The vice, when you compare that with clause 11, it is self‑evidently saying this is the interest – this is the reflection – through the compensatory lens of the non‑payment, and it simply has never addressed itself to the subject of punishment.  If it did, it would look very different.

GORDON J:   Is there any provision at all in the CDA that you say addresses penalties, punishment?

MR GLEESON:   Not in the agreement, only in the Act, your Honour – which makes perfect sense, because if one treats these as two distinct creatures with distinct purposes, the parties have the question, how do we address the compensatory interest of the State? Answer, clause 11. Do we wish to add any additional punishment beyond section 52 of the Act? Answer, no.

GAGELER CJ:   But on this argument, as I understand it, there could be an agreement to a punishment that would be unenforceable at common law, there just is no such agreement.  Is that right?

MR GLEESON:   I missed the last part of your Honour’s question.

GAGELER CJ:   Your point is that there is no such agreement.

MR GLEESON:   One point is there is no such agreement, and that is the reason why the ground should not be tolerated.

GAGELER CJ:   Yes.

MR GLEESON:   That is just a matter of looking at clause 11 – is it doing the work which a punishment clause would need to do?  Does it have the features:  identifying culpability, making clear it is punishment, and so on?  It does not.  Therefore, the primary way upon which this argument is put does not arise.

GLEESON J:   So, the agreement does not comply with section 17?

MR GLEESON:   No, the agreement takes up one of the two options in section 17.  When it says it is to deal with interest and penalties, it is not saying every agreement must have a penalty in it; it is to say those are two discrete subjects which it may deal with.  It may deal with neither of them.  This one deals with interest, it does not deal with punishment.  So, that is a complete answer to the question.

GAGELER CJ:   Is that the whole answer to the question?

MR GLEESON:   No.  Because what the Court of Appeal has said – which is at the higher level of the statute – is when you have simply authorised agreements on interest and penalties.  Indeed, we agree with the respondent, it is the same if you come down to the regulation.  The fallback regulation says if there is no agreement, you can have a regulation for interest and penalties.  The Court of Appeal has said, at that level of statutory construction, because of the deep respect of the law, to keep interest within a compensatory bound, the notion that by saying “interest and penalties”, we can completely subvert that and allow that doctrine to be undermined is not sufficiently clearly addressed in that statute.  That is an additional answer to the ground.  It is not a necessary answer, but it is the additional one.

What the Court is saying is if you truly want to use interest as a mechanism for punishment – which is a rare, but not unheard‑of thing for a parliament to do – you need far clearer language than just saying “interest and penalties”.  What you need is to say, you may punish through the use of the interest mechanism.  So, that is where legality does have some touchstone, because of the deep respect for this distinction between interest and penalty.  If you wish to use interest as penalty, thou shalt say so in explicit language.

GLEESON J:   Why do you keep on saying “if you wish to use” that?  There is a legislative direction at least three times obliging the imposition of penalties for late or non‑payment.

BEECH‑JONES J:   Am I to understand you to say you can have a system of penalties, but you cannot have a system of penalties determined by reference to interest – by using an interest rate?  You could use some other measure, but not interest rates?

MR GLEESON:   You either cannot use an interest rate or the alternative way of looking at it is, if you are to use interest as your method of punishment, because that is so contrary to the compensatory purpose of interest, and given the legality concerned, you will need to do that in words of one syllable.  You will need to be very clear in saying that is the form of punishment that can be agreed in the agreement. 

BEECH‑JONES J:   Sorry, in the statute you will need to be clear about that, or in the agreement?

MR GLEESON:   Well, both.  You would certainly have to be clear in the agreement, but at the higher level, the Court of Appeal is saying, we do not see words clear enough in the statute to authorise that form of perversion of the basic purpose of interest.  But your Honour Justice Gleeson, I did not quite answer your question, because there was another question.

We are saying, under 17(1)(c), it is to deal with interest and penalties in the sense that if there is to be interest and if there are to be penalties beyond section 52, those are matters which in the first instance will be found in the agreement. You do not have to have interest, you do not have to have penalties, you do not have to have both, but you may. Then, section ‑ ‑ ‑

GLEESON J:   Do you have to have payment of casino duty?

MR GLEESON:   You do, because you have to fix an amount for the basis calculation of the duty.  You could say that the duty is nil – unlikely – but you have to fix the amount in the basis of calculation.  It will presumably be a positive number.  You have to provide for payment.  You have to deal with – so, fix, provide and then deal with – in the sense of making such provision as is appropriate in respect of those two subject matters.

EDELMAN J:   There is no section 72 regulation that has been passed that deals with penalties for late payment or non‑payment of casino duty.

MR GLEESON:   That is correct, your Honour.

EDELMAN J:   But there would be power under section 72 to pass such a regulation?

MR GLEESON:   That raises the question of whether – I think your Honour was saying 51(2)?

EDELMAN J:   No, under section 72, the regulation‑making power.

MR GLEESON:   The general regulation power.

BEECH‑JONES J:   But you would say only in the absence of an agreement?

MR GLEESON:   There would first be an Anthony Hordern question, because 51(2) has dealt with the topic more specifically, and said:

In the absence of an agreement –

you:

must pay . . . on a basis fixed under the regulations.

So, the type of regulation that is contemplated is, as the respondent puts, a gap‑filling regulation, if you have not done it in the agreement.

GORDON J:   So, that is there to protect the revenue and in case you do not have an agreement.

MR GLEESON:   Yes, the agreement has not yet been reached or, more likely, has rolled over and expired and has not yet been renewed.  It is gap‑filling, we agree with that.  What it is to do, it gives them power to, in effect, substitute what should have been in section 17 but is not.  So, your Honours, that is the broad answer.  Can I then just fill in a couple of points of detail.

GAGELER CJ:   Is this still on the cross‑appeal?

MR GLEESON:   Yes, your Honour.  Your Honour, I wish now to flesh out the submission that the distinction between “penalties” and “interest” is not only well‑established at common law and equity in the cases you know, but it is reflected in the taxation legislation of both South Australia and the Commonwealth, and it illustrates that where the Parliament does intend to impose or authorise punishments, it says so in distinct and clear language.  If your Honours have volume 2 of the authorities, at page 136 ‑ ‑ ‑

GORDON J:   What is this document please, Mr Gleeson?

MR GLEESON:   This is the Taxation Administration Act 1996 (SA). The short point is that you see interest in respect to tax defaults dealt with in its own universe in sections 25 to 29. Then, as a discrete creature, you see penalty tax dealt with in sections 30 to 34. You see in section 30(2) that the culpability is identified. You see in subsection (3) that it is:

in addition to interest.

So, they are kept in their own fields.  Then in section 31, the amount is done as a percentage of the unpaid tax referrable to the degree of default.  That, we submit, is consistent with the notion that, because interest as compensation and penalty as punishment are so different, it is important to address them differently, and a parliament would not lightly simply roll them up in a single authorisation.  At the Commonwealth level ‑ ‑ ‑

GAGELER CJ:   I think you can take it that we are familiar with the provisions at the Commonwealth level.

MR GLEESON:   With those, yes, all right.

GLEESON J:   Do you accept that if the agreement does not provide for a penalty, then there could be a regulation made to fix a penalty?

MR GLEESON:   It is a difficult question, your Honour.  Probably the better answer is no, because the gap‑filling regulation power is not distributive, it is there when you do not have an agreement.  If the agreement has been made but does not cover penalties, it is not for the Executive to ‑ ‑ ‑

EDELMAN J:   But if there is no agreement, then you could have a regulation that provided for penalties, whether they be by way of penalty interest or pure penalties.

MR GLEESON:   If there is no agreement, you can have a regulation providing for penalties.

EDELMAN J:   And that may be what section 17(1)(c) is operating on in the reference to “penalties”, because there is a circumstance in which a non‑common law penalty then might be imposed, which is perhaps not even a criminal penalty under section 52.

MR GLEESON:   Well, it is all not this case, it is a case of no agreement ‑ ‑ ‑ 

EDELMAN J:   No, but one of the things that is put against you is that there is no work for the word “penalties” to do in 17(1)(c).

MR GLEESON:   Well, there is work to do.  It is that sort of penalty that, yes, you can agree upon it, but what you would expect is the explicit attention that I have made the submission on.

GLEESON J:   But, Mr Gleeson, do you accept that the legislative scheme contemplates that your client would be liable to pay penalties for late or non‑payment of casino duty, one way or another?  That is what the scheme is contemplating.

MR GLEESON:   The scheme contemplates that it may, but not that it must face penalties.

GLEESON J:   And how long does the agreement have to last?

MR GLEESON:   It is a complicated answer.  It is page 103, clause 4.  It may last until 2035, but it could come to an end at earlier dates, and it can also be varied from time to time, as it has been.

GORDON J: Mr Gleeson, is your proposition, in effect, three things, maybe four? One is, “interest” and “penalties” are different concepts, you cannot put them together in the one rubric. That is, they are dealing with separate subject matters. Second, that the agreement is able to, and at one level must, to the extent necessary – I have added those words – deal with interests and penalties. This agreement deals with interests, not penalties. The only other penalty that is available is that which is to be found in section 52.

MR GLEESON:   That is the primary answer to the whole of the cross‑appeal.  But I do not retreat from, as a subsidiary plank, what the Court of Appeal drew attention to, which is whether – what sort of language you would need if you wanted to authorise punishment through the device of interest, because that is such an unusual creature.  To say, then, as the Court of Appeal did, you do not see clear enough language in the statute authorising that.

GORDON J:   I speak only for myself, but the things you have taken us to in the Tax Administration Act (SA) and which we know arise in the Commonwealth sphere are talking about penalty tax, it is not talking about interest.

MR GLEESON:   Exactly.  That is why they are generally, because of the important difference between them, treated differently.  I do not need to give your Honours the other reference.  At a Commonwealth level it is page 123 of volume 2, which is the Commonwealth penalty tax, to be compared with section 8AAD, which is the general interest charge, which is interest.  So, they are all of that kind.  The high point of what the respondent put in writing but was not addressed today is their footnote 67.  In each of the examples they give ‑ ‑ ‑ 

GORDON J:   But your answer is that, in each of those instances they used by way of penalty, they identify that the thing that is being done is to impose an amount in the nature of a penalty, not in the nature of compensation.

MR GLEESON:   Yes.  Amongst its other salutary purposes of being exactly clear what you are doing, it will then have the consequence that because it is a penalty it will be wholly non‑deductible for Commonwealth income tax purposes, whereas the consequence of the present argument is that you agree upon something called “interest” at 20 per cent daily compound, it could be partly compensatory, it could be partly penal, you do not know, you are never told, and you do not know what the consequences are for deductibility of that amount.

Your Honours, can I just – I mentioned the common law and statutory position about non‑deductibility of penalties.  I will just give the reference to that.  At common law it is Madad v Commissioner of Taxation, which is volume 6, tab 40, citing Chief Justice Dixon in Snowden (1958) 99 CLR 431. Shortly after Madad, that position was brought into section 26‑5 of the Income Tax Assessment Act 1997 or its predecessor provision; it is volume 2 at page 113.  So, it is critically important for a range of reasons for parliaments to squarely distinguish between whether it is interest or penalty they are dealing with.  Your Honours, that is the cross‑appeal.

Can I then just return, in reply, on the appeal.  The first point is the submission that was made at paragraph 4 of the respondents’ outline to the suite of instruments.  Most of those, we would submit, are wholly irrelevant to the exercise – what is relevant are sections 17, 51 and the relevant clauses in the agreement.  In respect to the casino control standards, which is item 4.5 at pages 142 to 147 of the book, this is the wholly new argument.

It is not referred to in any of the written submissions; we have not responded to it in writing.  I can give your Honours at least one answer to it, but I would like the opportunity of 48 hours to see if we need to have any other answers to it.  The argument as was put started at page 143, and then referred to page 147, to a “methodology”, and it said, under the third item in the methodology, which is to add account based cashless drop, the casino has agreed that gross and net gambling revenue will be calculated on a basis that whatever drops – as in, passes from a credit – is revenue, without any further inquiry into origin.

That is not the effect of the agreement of the parties.  The critical clause in the agreement for this purpose is clause 12 on page 106, and that explains where the control standard comes into the contract.  The role of clause 12 is subsidiary to clause 5 – the substantive obligation and the substantive definitions.  What it is doing is recognising that the Treasurer can approve a system for calculating or recording those things which do constitute gross gambling revenue and net gambling revenue within the definitions and clause 5.  If the system on page 147 purports to capture things which fall outside the definition, then it is of no effect on the contractual obligation.

The other document you were referred to in the suite that I wish to respond to was that, when it came to the terms and conditions of the loyalty program, there was some suggestion that they were not approved; they were somehow a freestanding exercise of the casino and perhaps they could be used to manipulate the calculation and avoid the payment of what is otherwise gross gambling revenue.  That is wrong.

In the special case at page 10, paragraph 20, it is agreed that the rewards program was operating in accordance with the applicable gaming codes of practice under the relevant sections.  So, within the scheme, there is power to regulate the terms and conditions, and they are lawful within that scheme, and they add nothing further to the inquiry.

BEECH-JONES J:   Mr Gleeson, just to the extent that it is relevant, though, do you accept that the conversion of points into credits is not something that happens in accordance with the system’s rules and procedures approved under the approved licensing agreement?  Or is that a matter in contention?

MR GLEESON:   I would have to consider that.

BEECH-JONES J:   Yes.  All right.

MR GLEESON:   There are, in short, a range of mechanisms for the government to control anything and everything.  I can give your Honour part of the answer, which is page 58 of the book, clause 8.1.3, you must:

conduct an authorised game in accordance with the conditions on which it is authorised –

Your Honours, could I move to the second point, which is I think the real battleground – one transaction or two – and approach it in this manner.  Could we take first the simple case that your Honour Justice Edelman put my learned friend:  what if the casino gives free chips or free credits to a customer where there is no option to convert them into cash?  In that case, the transaction involves the grant of the chips at the first instance, and then at a later date it involves the acceptance of those chips as the wager, therefore as the only consideration that the casino is getting from the customer.

We would submit that it is appropriate to view that as a single transaction:  the grant of the chips and then the acceptance of them as the wager.  And within the language of the clause, there is no amount received for or in respect of consideration for gambling.  Why?  Because the customer is being allowed to gamble without providing consideration.  Nothing is coming in – pure London Clubs.  Nothing could be recorded in the revenue account of the casino.  The only flow of revenue is out, not in.

Now, all of that is true even though, by accepting the chips as a wager, the casino has relieved itself of the contingent liability under the chips, because the chips – the grant of them – would have to be recorded as a contingent liability.  By honouring the commitment, you have relieved yourself of that liability.  In that circumstance, the reduction in the debt does not constitute gross gambling revenue.

EDELMAN J:   It is not quite a debt unless the free bet is something that could also be cashed in for payment.

MR GLEESON:   I am assuming that by giving the chip, there is a representation – whether it is enforceable in contract or estoppel – saying, here is the thing you need, you can come and bet with me when you like.  That is creating a form of contingent liability.

EDELMAN J:   Or cash the chip in – or you do not need that?

MR GLEESON:   No, in my first example there is no possibility of cashing in.  I just want to try and ascertain what happens in that case.  In that case, the person is getting a free bet, a free spin.  What the chip represents is the grant of the gift to use the casino’s money to satisfy the condition of the wager.  We would submit it is important to ascertain whether in that case there is no gross gambling revenue.

If we are right that there is no gross gambling revenue, then the diagram presented on page 147 is inconsistent with the contract and is not binding on the casino, because the diagram is the purest example of the respondent’s argument:  only focus on whether the chip drops on the table, ignore where the chip came from.  But the answer you heard today I think was, no, they would accept that in the pure free spin case, there is no gross gambling receipt and that is the way the respondent had put it in paragraph 51 of its written submissions.

GLEESON J:   What is it about the gift of a use of the casino’s money that gives rise to a contingent liability?

MR GLEESON:   If the casino has made available the gift of the chip and the terms, whether contract or estoppel, are that that is something you do not have to pay me for, but you can, when you like, come and throw it on the table and I will treat that as if you had made a wager for full consideration.  When you look at the whole of that transaction, both the terms of the issue of the chip plus the playing of the chip, you look at the whole of that as a single transaction; you then say no amount has been received by the casino for or in respect of consideration for gambling.

BEECH-JONES J:   That would be creating a right, but not necessarily a debt, because what they just have is a right to make a bet but nothing else with it.

MR GLEESON:   They have a right to make a bet without having to deploy their resources to the bet as they would have to in the ordinary case.  That is that they have.  And we do not shy away from accounting terms being – they are not conclusive here, but they ‑ ‑ ‑

EDELMAN J:   They have a contingent asset and the casino has a contingent liability, it all depends on whether they win when they gamble.

MR GLEESON:   Yes, but from a casino’s perspective, if you have issued free chips to the value of $100,000, you would be expected in your accounts to record that as an expense, and you would be expected to record is as a contingent liability – whether you put full value on it, or a discount that some people do not turn up, that is a different matter.  But that has happened at that stage.  Our central point is one needs to understand whether there is gross gambling revenue in that simplest of cases.  We submit there is not.  Why there is not gross gambling revenue is for the reasons I have sought to explain.

We then add one fact to that.  The one fact is, in our case, the person in the first instance cannot cash it in – the points are not negotiable, the points are not cashable – that is true.  At the point they are converted, on our facts, the customer has two options rather than one.  And the question is, does the fact that they have the option at that point to take cash or to behave as in the earlier situation, does that somehow mean the casino now is receiving an amount in respect of consideration for gambling if the customer chooses to use the converted credits or the chips in that fashion?

We would say no, for these reasons in summary.  Firstly, the option to take cash does no more than give the customer an alternative way to realise the gift inherent in the original points.  Secondly, if the customer takes that option of cash, it is a flow of benefit from the casino to the customer, it is a discharge by performance of liability to the customer, there is nothing the casino could record in a revenue account, and in terms of real‑world cashflows, everything has gone from the casino to the customer and not vice‑versa.  So, that is if the customer takes the cash option.

Then, the next proposition is the presence of that option does not alter the approach that would be taken under the definition to our transaction, where the customer accepts the realisation of the gift in the form of the free wager.  That does mean we are submitting that it is appropriate to look at the whole transaction.  We submit that is consistent with a clause that focuses on amounts received by the casino that is fleshing out revenue, and it would be uncommercial to break it down and produce narrow and different results depending upon whether the customer turns left or right.

Could I put one submission about bad debts – they were raised this morning.  The definition is actually consistent with our argument, I would submit.  The definition is on page 99, and you can actually match that definition fairly closely to paragraph (a) of “gross gambling revenue”.  A “bad debt” is:

any amount by way of the consideration to what –

or perhaps which:

the Licensee is entitled for or in respect of gambling that is due as a debt but has not been received and which the Licensee writes off as bad, whether in whole or in part –

So, in a case where the casino gives a customer credit, allows the customer to gamble, and a debt is then due from the customer to the casino in respect to that credit, if the debt is not recovered during the relevant period, there is no gross amount received – there is no gross gambling revenue.

BEECH‑JONES J:   Is it not gross gambling revenue, but then it gets deducted from the net gambling revenue as a monetary prize when it turns sour?  So, you grant the credit, they gamble it, it becomes revenue.  When the debt turns sour, it becomes a monetary prize, it comes off net gambling revenue.

MR GLEESON:   I think it works in steps, your Honour.  I was just at the ‑ ‑ ‑ 

BEECH‑JONES J:   I am sorry, I jumped in.

MR GLEESON:   No, no.  I was just at the first step of, if you have been foolish enough to grant the gambler credit and, during the period when they have not yet paid their debt, you have not received the money ‑ ‑ ‑ 

BEECH‑JONES J:   But you may have recognised it as revenue, would you not?  Because they only have the debt because they have gone on the tables, probably.

GORDON J:   I had understood it that the gross gambling revenue was:

the gross amount received –

and then (b) was:

any bad debt to the extent recovered –

MR GLEESON:   And the submission I was trying to get to was that when the bad debts are recovered, they are then brought in as revenue.  That seems to be confirming that the focus is on amounts actually coming in and received by the casino.

BEECH‑JONES J:   I suppose what I am querying with you, the step presupposes it has earlier been recognised as a bad debt, which would get it treated as a monetary prize and come off net gambling revenue before you got there.

MR GLEESON:   That may be so, your Honour.  Now, I will just deal with any remaining matters.  Your Honours, in terms of where we got to on Shin Kobe Maru, my learned friend says we are in furious agreement on the principle but not in the application of it.  We would submit that within the construction of the present contract, where you see the word “revenue” flowing down into the four words that I have mentioned, revenue is of assistance in understanding we are looking at moneys coming in, money or money’s worth, real‑world flows, and the perspective of the casino.

The second‑last matter was your Honour Justice Gordon asked about “attributable to”.  Of course, we accept that you cannot structure your arrangements to turn something into non‑revenue that is revenue.  We agree with that, and if that is work being done by “attributable to”, we are perfectly comfortable with that.  Our case is that we do not have, on these facts, amounts received which would fall within any ordinary definition of revenue.

Finally, your Honour Justice Beech‑Jones’ question.  As I understand the record, the parties have not litigated that issue.  The consequence of their not litigating it to date and having a special case on a sub‑issue or on a series of sub‑issues in the case, then, with the matter being determined by the highest Court, I cannot predict all those outcomes today.  But we cannot, I do not think, put anything to you that has not been raised within the stated case today, but I should not be taken to be abandoning whatever rights may remain available, and my learned friend has taken the same approach, I think.

GAGELER CJ:   Mr Gleeson, do you wish to have the opportunity to add to what you have said about the control standards?

MR GLEESON:   I am sorry, your Honour?

GAGELER CJ:   Do you wish to have an opportunity to add, in writing, to what you have said today about the control standards?

MR GLEESON: Yes. By 10.00 am Monday, your Honour. I hope we will not have to add anything. So, I mentioned that the commissioner has power to approve all of the rules of the game, including exactly what happens, the critical steps. It is section 40A of the Casino Act, page 31 of volume 1.

May it please the Court.

GAGELER CJ:   Thank you, Mr Gleeson.  Mr Golding, do you have a reply?

MR GOLDING:   I do not have a reply, your Honour.

GAGELER CJ:   Thank you.  The Court will consider its decision in this matter and will adjourn until 10.00 am on Monday, 23 September.

AT 3.53 PM THE MATTER WAS ADJOURNED