State of Victoria v Tabcorp Holdings Ltd

[2014] VSCA 312

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0078

TABCORP HOLDINGS LIMITED (ACN 063 780 709)

v

STATE OF VICTORIA

---

JUDGES:	NETTLE, OSBORN and WHELAN JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 October 2014
DATE OF JUDGMENT:	4 December 2014
MEDIUM NEUTRAL CITATION:	[2014] VSCA 312
JUDGMENT APPEALED FROM:	[2014] VSC 301 (Hargrave J)

---

STATUTORY INTERPRETATION – Gambling Regulation Act 2003 (Vic) – Gaming and wagering licences – Regulatory regime changed in 2008 and 2009 – Creation of gaming machine entitlements – Tabcorp gaming and wagering licences expired – Whether Tabcorp entitled to terminal payment under s 4.3.12 – Whether allotment of gaming machine entitlements amounted to ‘grant of new licences’ within meaning of s 4.3.12 – Specific meaning adopted as representing connected and combined statement of the will of Parliament – Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 309 ALR 209 applied – Statutory purpose to preclude occurrence of circumstance which could entitle Tabcorp to terminal payment whilst preserving existence of statutory entitlement – No entitlement to terminal payment – Appeal dismissed.

CONTRACT – Letter from Treasurer to Tabcorp and racing industry – Enumerated principles on which Government was to privatise Totalizator Agency Board of Victoria –Principles not to ‘bind this Government or future Governments’ – One principle dealt with terminal payment – Statement that Government would deal with Tabcorp and racing industry ‘reasonably and in good faith’ – Statement contractually binding – Content of statement circumscribed by express statement in letter that entitlement to terminal payment subject to contrary executive and legislative action – Failure to include or cause to be included statutory provisions preserving Tabcorp’s entitlement under s 4.3.12 of Gambling Regulation Act 2003 (Vic) cannot constitute breach – Appeal dismissed.

---

APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr J C Sheahan QC with Mr R D Strong, Ms R C A Higgins and Mr P G Liondas	Herbert Smith Freehills
For the Respondent	Mr S McLeish SC, S-G with Ms W A Harris QC, Mr R G Craig and Mr K A Loxley	Johnson Winter & Slattery

TABLE OF CONTENTS

The statutory claim

The facts and relevant legislation

The principal issue on appeal

The judgment below

Tabcorp’s contentions on appeal

The specific meaning must be adopted

The State’s notice of contention

The contractual claim

The Treasurer’s letter – ‘reasonably and in good faith’

The trial judge’s treatment of the good faith and reasonable dealing agreement

Submissions on appeal

Existence of the good faith and reasonable dealing agreement

What was the relevant content of the good faith and reasonable dealing statement?

Intention to create legal relations and consideration

Impermissible fetter on executive or legislative action

Expectation

Conclusion

NETTLE JA
OSBORN JA
WHELAN JA:

1. This appeal was heard in conjunction with an appeal by the State of Victoria (the ‘State’) against a decision of the judge below in favour of Tatts Group Ltd (‘Tatts’) (the ‘Tatts appeal’).[1]  It raises similar issues.  In particular, it poses the question of whether the allotment of gaming machine entitlements to licensed venue operators under the Gambling Regulation Act 2003 (the ‘2003 Act’) constituted the ‘grant of new licences’ within the meaning of s 4.3.12 of that Act. This appeal is different, however, inasmuch as here that question is one purely of statutory construction as opposed to one also of contract, although the appeal involves as well a contractual claim made by Tabcorp Holdings Limited (‘Tabcorp’) founded upon an alleged promise to deal with it reasonably and in good faith.

   [1]The reasons of this Court are set out in:  Victoria v Tatts Group Ltd [2014] VSCA 311.

The statutory claim

The facts and relevant legislation

1. In 1994 the Totalizator Agency Board of Victoria (the ‘TAB’), then a statutory corporation, was privatised and the business it conducted was taken over by Tabcorp.  The State took from Tabcorp by way of a licence fee the net proceeds of capital subscribed for shares in the company.  In return, the State granted Tabcorp a ‘gaming licence’, which conferred on Tabcorp the same authority to conduct gaming operations as was conferred on Tatts as the holder of a gaming operator’s licence under the Gaming Machine Control Act 1991 (the ‘1991 Act’), and a ‘wagering licence’.  The licences were granted on 28 June 1994 and commenced operation on 15 August 1994.  They were granted pursuant to the Gaming and Betting Act 1994 (the ’1994 Act’).[2]  

   [2]The 1994 Act refers to Tabcorp by the abbreviation ‘Tabco’.

1. Section 3 of the 1994 Act defined ‘licence’ as ‘the wagering licence or the gaming licence granted under Part 2’.  It then defined ‘gaming licence’ as ‘the gaming licence granted under Part 2’ of the Act and defined ‘wagering licence’ in cognate terms.

1. Section 10, which appeared in Division 2 of Part 2 of the 1994 Act, provided for Tabcorp to apply for a gaming licence and a wagering licence.  Section 12, which also appeared in Division 2 of Part 2, provided for the grant of the wagering licence and the gaming licence to Tabcorp for a term of 18 years.  Section 7, which appeared in the same Division, provided for the rights conferred by the gaming licence, as follows:

7.  Gaming licence

The gaming licence confers on—

(a)       the licensee; and

(b) while an appointment under section 22 is in force, the wholly owned subsidiary of the licensee appointed as the operator—

the following authorities, subject to this Act and the regulations, the Gaming Machine Control Act 1991 and any conditions to which the licence is subject –

(c)the same authority as is conferred on the holder of a gaming operator’s licence under the Gaming Machine Control Act 1991;  and

(d)the authority to conduct and promote club keno games in Victoria in accordance with the Club Keno Act 1993 as a participant within the meaning of that Act.

The rights conferred by the wagering licence were separately provided for in s 6.

1. Section 13 provided for the payment of a licence fee on the grant of the licences in the amount of the ‘allotment amount’ (which was defined to mean amounts paid, deemed to be paid or due and payable for the allotment of shares in Tabcorp on the appointed day less amounts paid by Tabcorp to the TAB for the transfer of certain property and an amount determined by the Treasurer).

1. Section 14 provided for applications to be made for the grant of licences after the expiry or cancellation of Tabcorp’s wagering and gaming licences (defined as ‘the initial licences’) and s 20 provided for their grant upon payment of a premium for the new licences. 

1. Section 21 provided in effect for the former licensee to be refunded all or part of the initial licence fee if the new licences were issued either to the initial licensee or to another licensee.  That section was as follows:

21.      Entitlement of former licensee on grant of new licences

(1)On the grant of new licences (other than the initial licences), the person who was the holder of the licences last in force (in this section called the “former licences”) is entitled to be paid an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.

(2)The person who was the holder of the former licences is entitled to the payment under sub-section (1) whether or not the person was, or was entitled to be, an applicant for the new licences.

(3)Sub-section (1) does not apply if the holder of the former licences has been wound up.

(4)The payment under sub-section (1) must be made not later than 7 days after the commencement of the new licences and the Consolidated Fund is hereby to the necessary extent appropriated accordingly.

(5)In this section, “licence value” in relation to the former licences means the amount calculated in accordance with the formula … [there followed an elaborate formula].

1. Each of those provisions of the 1994 Act was subsequently repealed and re-enacted in the 2003 Act.  Section 1.3 of the 2003 Act defined ‘gaming licence’ as ‘the gaming licence granted under Part 3 of Chapter 4’ and defined ‘wagering licence’ in cognate terms.  Section 4.1.2 defined ‘licensee’ in Chapter 4 as ‘the holder of the wagering licence and the gaming licence’. 

1. In Chapter 4 of the 2003 Act s 4.3.2 provided for the rights conferred by the gaming licence in substantially identical terms to the former s 7 of the 1994 Act. 

1. Sections 4.3.12 to 4.3.14 of the 2003 Act provided for the entitlement of former licensees on the grant of new licences in substantially identical terms to the former s 21 of the 1994 Act. In particular, s 4.3.12(1) provided:

(1)On the grant of new licences, the person who was the holder of the licences last in force (the “former licences”) is entitled to be paid an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.

1. In 2008, the 2003 Act was amended to make it impossible to issue any further licences under Part 3 of Chapter 4.  Section 4.3.4A was inserted into the Act, sub-s (1) of which read:

This Part applies only with respect to the wagering licence and gaming licence that were issued on 15 August 1994 and does not authorise the grant of any further wagering licence or gaming licence.

Section 4.3.12 was not altered.

1. The 2008 amendments also created a new form of licence called a ‘wagering and betting licence’ under Part 3A of Chapter 4 of the 2003 Act.

1. In 2009, the 2003 Act was further amended to provide for the creation of ‘gaming machine entitlements’ and their issue to holders of approved venue operator’s licences under Part 4A of Chapter 3 of the Act.

1. On 7 June 2010, the Minister for Gaming created 27,500 gaming machine entitlements with an effective date of 16 August 2012 (the date of expiration of Tabcorp’s gaming licence) and thereafter allocated those entitlements to holders of approved venue operator’s licences, with the result that the gaming operations which Tabcorp had until then carried on under its gaming licence were thenceforth carried on by approved venue operators under their gaming machine entitlements.  Tabcorp obtained the new wagering and betting licence upon payment of a substantial premium.  

The principal issue on appeal

1. Tabcorp claims to be entitled to the payment provided for in s 4.3.12 of the 2003 Act upon the ‘grant of new licences’. Whether the allotment of the gaming machine entitlements amounted to the ‘grant of new licences’ within the meaning of s 4.3.12 turns largely on whether the expression ‘[o]n the grant of new licences’ in s 4.3.12(1) means new licences issued under Part 3 of Chapter 4 of the Act, as the State contends (‘the specific meaning’), or has a broader generic meaning of a licence or other entitlement which authorised gaming in Victoria, as Tabcorp contends (‘the generic meaning’).

The judgment below

1. The judge summarised the issue thus:

Notably, the Act [a reference to the 2003 Act] essentially replicated and replaced the provisions of the 1994 Act, but with two relevant changes:

(1)  ‘Licence’ had been defined under the 1994 Act as ‘the wagering licence or the gaming licence granted under Part 2’ of that Act.  The definition of ‘licence’ was not re-enacted in the Act, but the definitions of ‘gaming licence’, ‘wagering licence’, and ‘licensee’ were retained and updated.  The deletion of the definition of ‘licence’ is explicable on the basis that the Act consolidated the statutory regimes concerning many different forms of licences relating to gambling, beyond the wagering and gaming licences.  The Act includes regulation of gaming operator’s licences, bingo centre employee’s licences, bingo centre operator’s licences, casino licences, club licences, pub licences, racing club licences, interactive gaming licences, public lottery licences, special employee’s licences, technician’s licences and venue operator’s licences.

(2)  A reference to ‘initial licences’ in section 21 of the 1994 Act was removed from the successor provision, s 4.3.12, presumably as it was no longer necessary given those licences had already been issued. The definition in the 1994 Act of ‘initial licences’ was also not included in the Act, notwithstanding that the phrase had a continuing use in integer C of the formula in s 4.3.13 for calculating the licence value in s 4.3.12.

The generic meaning contention requires that the words ‘new licences’ and ‘new licensee’ be understood:

(1)  in s 21 of the 1994 Act, as not incorporating the definitions of ‘licence’ and ‘licensee’; and

(2)  in s 4.3.12 of the Act, as not incorporating the defined terms ‘wagering licence’, ‘gaming licence’ and ‘licensee’. The State contends that this interpretation makes no sense, as it requires the definitions to be ignored in some, but not all, parts of the same section. The State contends that such an interpretation is inconsistent with every other use of the word ‘licence’ and cognate expressions throughout Part 2 of the 1994 Act and Chapter 4 of the Act. Moreover, the State submits that where the plural term ‘licences’ is used it always means the conjoined wagering licence and gaming licence. Examples include references to ‘licence’ and ‘licences’ in ss 4.3.3 to 4.3.9, in particular ss 4.3.6(1) and 4.3.8(2), and in ss 4.3.32 and 4.3.33.

Tabcorp contends that ambiguity arises because the composite phrase ‘new licences’ is a concept which was specifically provided for in both Part 2 of the 1994 Act and in Part 3 of the Act prior to the 2008 and 2009 amendments; but not afterwards when it was replaced by the new licensing regime.  In these circumstances, Tabcorp contends that the purpose or object of the terminal payment provision is critical — because a regime change was always possible and the legislature should be taken to have intended that licences to conduct wagering and gaming under a new regime would be ‘new licences’ for the purposes of that provision, notwithstanding that they did not fall within the definitions and may not be granted conjointly but to separate licensees.[3]

[3]Tabcorp Holdings Ltd v Victoria [2014] VSC 301 [63]–[65] (‘Reasons’).

1. The judge held in favour of the State’s contention. He concluded that ‘new licences’ in s 4.3.12 has the specific meaning for which the State contends and, therefore, that the issue of gaming machine entitlements, although authorising the carrying on of gaming operations, did not amount to the grant of new licences within the meaning of the section. His Honour reasoned as follows:

First, Part 3 establishes a discrete regime concerned solely with a wagering licence and a gaming licence as defined.  It is headed ‘Wagering Licence and Gaming Licence’.  Sections 4.3.1 and 4.3.2 describe the authority granted by the respective licences, and s 4.3.3 provides that only one wagering licence and one gaming licence may operate at the same time.

Second, the unambiguous intent of Part 3 is that the wagering licence and the gaming licence must be granted to and held by the same person.  Section 4.1.1(b) provides that a purpose of Chapter 4 is to provide for ‘the issue of a gaming licence in conjunction with the issue of a wagering licence, allowing the licensee to conduct gaming in accordance with Chapter 3’.  Section 4.1.2 defines ‘licensee’ as ‘the holder of the wagering licence and the gaming licence’.  This intention is also implicit from a variety of provisions in Part 3.  For example:

(1)  Section 4.3.4 provides that ‘the wagering licence and the gaming licence are not transferrable to any other person’;

(2)  Section 4.3.5(1) provides that applications may be made for the grant of both a wagering licence and a gaming licence;

(3)  Section 4.3.7(1) provides that ‘the Commission must determine whether or not to grant the licences’;

(4)  Section 4.3.8(1) provides that the Governor in Council may grant a wagering licence and a gaming licence; and

(5)  Section 4.3.32 provides that ‘the wagering licence and the gaming licence’ can only be cancelled together.

Third, Division 2 of Part 3 addresses the grant of the wagering licence and the gaming licence, and those licences are referred to in shorthand as ‘the licences’ in numerous provisions in the Division and elsewhere within Part 3.[4]  None of these shorthand references are accompanied by an additional narrowing element such as ‘under this Part’ or ‘under this Chapter’.

[4]For example, see ss 4.3.7, 4.3.8, 4.3.9, 4.3.12, 4.3.32 and 4.3.33.

Fourth, the phrase ‘new licences’ also appears in s 4.3.9, which provides:

4.3.9 Duration of licences and licence conditions

(1)  Each licence is for a term of 18 years, or a longer term determined by the Governor in Council and set out in the licence, and is subject to the conditions set out in the licence and any conditions imposed by this Act.

(2)  If, because of section 4.3.8(2), the Governor in Council is unlikely to grant the licences before the expiration of the term of 18 years of the licences held by the current licensee, the Governor in Council may, by Order published in the Government Gazette, approve the extension of the term of the current licences until the commencement of the new licences or for any shorter period specified in the Order.

It is clear that the phrase ‘new licences’ in s 4.3.9 means a subsequent wagering licence and a subsequent gaming licence, in contradistinction to the ‘current licences’ which are referred to. This is comparable to s 4.3.12, where ‘new licences’ is used in contradistinction to the term ‘former licences’. In each case, the word ‘new’ carries only a temporal significance, doing no more than identifying the licences that are to be issued later in time. In my opinion, the word ‘new’ has no other bearing on the meaning of the term ‘licences’.

In light of these textual considerations, it would in my opinion be inconsistent with the coherent meaning and operation of Part 3 as a whole to construe ‘new licences’ in s 4.3.12 as referring to anything other than a wagering licence and a gaming licence as defined. This result is reinforced by the use of the singular reference to the person who is to hold the ‘new licences’ — being a ‘new licensee’. The reference to a singular holder of the new licences is consistent with the structure of Part 3 as a whole, which requires that the defined wagering licence and gaming licence be held by the defined ‘licensee’.[5]

[5]Reasons [76]–[81] (emphasis in original).

Tabcorp’s contentions on appeal

1. Before this Court, Tabcorp argued that the judge’s reasoning miscarried as a result of his Honour endeavouring to construe s 4.3.12 by reference to its form and context in earlier iterations of the gaming machine legislation. In Tabcorp’s submission, the correct approach is to start with the provision as it is now, recognising that the 2003 Act and the amendments made in 2008 and 2009 must be read as one connected and combined statement of the will of Parliament, and that in order to give proper effect to the connected and combined whole it is no objection to the adoption of the generic meaning that s 4.3.12 is now to be given a meaning different to the meaning which it may have had before the amendments.[6]  

   [6]Among the authorities cited are: Commissioner of Stamps (SA) v Telegraph Investment Co Pty Ltd (1995) 184 CLR 453, 463 (Brennan CJ, Dawson and Toohey JJ); Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 309 ALR 209, 214 [25] (Crennan, Bell, Gageler and Keane JJ); DC Pearce and RS Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7^th ed, 2011) [3.33]–[3.34].

1. Tabcorp relied in particular on the principles of statutory construction stated in the plurality judgment in Project Blue Sky Inc v Australian Broadcasting Authority, as follows:

A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals.  Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions.  Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other”.  Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.

Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision.  In The Commonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was “a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent”.[7]

[7](1998) 194 CLR 355, 381–2 [70]–[71] (citations omitted).

1. Thus, Tabcorp submitted, even if ‘new licences’ in s 4.3.12 may once have had the narrow specific meaning contended for by the State, the judge was wrong to treat that as confining its meaning in the context in which it now appears in s 4.3.12. The only way to give coherent operation to all of the provisions of Part 3 of Chapter 4 of the 2003 Act, and therefore best effect to the purpose and language of those provisions following amendment, is to construe ‘new licences’ as having its natural and ordinary meaning, being new licences to carry on gaming operations howsoever created or denominated.[8]   

   [8]Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 309 ALR 209, 222–3 [61]–[63].

1. Counsel for Tabcorp acknowledged that s 4.3.4A provides in clear terms that: Part 3 of Chapter 4 applies only ‘with respect to’ the wagering licence and the gaming licence which were issued to Tabcorp on 15 August 1994; and that Part 3 of Chapter 4 no longer authorises the grant of ‘any further wagering licence or gaming licence’. But, counsel submitted, it does not follow that ‘new licences’ in s 4.3.12 are limited to new licences issued under Part 3 of Chapter 4. That would render s 4.3.12 redundant. If ‘new licences’ in s 4.3.12 is given the generic meaning, s 4.3.12 can rationally be construed as applying ‘with respect to’ the wagering and gaming licence issued to Tabcorp on 15 August 1994 and so as providing, ‘with respect to’ that licence, a right to payment under the section when and if new licences (in the natural and ordinary generic sense referred to) are issued.

1. Counsel for Tabcorp also invoked the following textual considerations as, in their submission, supporting that conclusion:

(1)There is nothing in the 2003 Act as amended which expressly provides or, as counsel would have it, necessarily implies that ‘new licence’ means a new gaming licence issued under Part 3 of Chapter 4 of the Act.  To the contrary, the definition of ‘licence’ at s 3(1) of the 1994 Act (which previously limited the meaning of licence to a ‘licence issued under Part 2 of the 1994 Act’)[9] was deleted at the time of the enactment of the 2003 Act.  Although that was well before any thought of creating gaming machine entitlements or prohibiting the issue of further wagering and gambling licences under ‘Part 2’ it should be taken to have changed the meaning of ‘new licence’ to something broader than before. 

(2)The judge held that the repeal of the definition resulted from nothing more than that the 2003 Act dealt with 12 different types of licence, thus making a single definition of ‘licence’ impracticable.  But, counsel submitted, if that were the only explanation, it was to be expected that the 2008 or 2009 amending Acts would include a definition of ‘new licence’ in Part 3 of Chapter 4 expressly limiting the meaning of ‘new licence’ to a new gaming licence issued under that Part.

(3)If the intention had been to deprive Tabcorp of its right to payment under s 4.3.12 upon the issue of ‘new licences’, why would not Parliament have simply repealed that provision as it could so easily have done? So far from expressly repealing s 4.3.12, s 4.3.4A expressly provides that s 4.3.12 shall continue to apply with respect to the licence issued to Tabcorp on 15 August 1994. In this respect it was submitted that s 4.3.4A has both a positive component (‘this Part applies only with respect to the wagering licence and gaming licence that were issued on 15 August 1994’) and a negative component (‘and does not authorise the grant of any further wagering licence or gaming licence’). Properly understood, it was submitted, s 4.3.4A expressly preserves Tabcorp’s right under s 4.3.12 in the positive component notwithstanding the preclusion of any further such right by virtue of the negative component. Both components of the section must be given operation. Tabcorp’s right is preserved (the positive component) but no further such entitlement can arise after Tabcorp has exercised its right (the negative component).

(4)In order to treat the introduction of s 4.3.4A as having impliedly repealed s 4.3.12, or as having rendered it redundant (as the State contended) it is necessary to read in the words ‘under this Part’. Authority is clear that it is a large thing to read words into a statute.[10]

(5)It is apparent that elsewhere in the 2003 Act where the intention is to exclude rights to payments in the nature of compensation the Act expressly so provides;[11]  and where it is the intention that one thing should not be taken as another, the Act states that clearly.[12] Here, there is an absence of any express exclusion of the right to compensation for which s 4.3.12 provides and an absence of any provision to the effect that a gaming machine entitlement must not be taken to be a gaming licence.

(6)Given that the meaning of ‘new licences’ for which the State contends would have the effect of depriving Tabcorp of the right to payment which it previously enjoyed under s 4.3.12, and since Parliament has not made that intention inescapably clear, the principle of legality[13] requires the section to be construed if at all possible so as to avoid that result.  The obvious and appropriate way for that to be done is by construing ‘new licences’ as having its natural and ordinary generic meaning.  

[9]Scil, a wagering and gaming licence.

[10]Thompson v Goold & Co [1910] AC 409, 420; R v Young (1999) 46 NSWLR 681, 688–9 (Spigelman CJ); DC Pearce and RS Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7^th ed, 2011) [2.35].

[11]Section 3.4.28F is an example (no compensation payable by the State because of the operation of Division 2A – venue operators and venue agreements).

[12]Section 3.4.1A is an example (venue operator’s licence is not a gaming operator’s licence or gaming licence).

[13]R & R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603, 619–20 (French CJ); cf Western Australian Planning Commission v Temwood Holdings Pty Ltd (2004) 221 CLR 30.

The specific meaning must be adopted

1. In our view, the judge was right in concluding that the specific meaning must be adopted. Granted that we are bound to approach the construction of the 2003 Act as amended as one connected and combined statement of the will of Parliament with the aim of giving coherent operation to all of its provisions with best effect to their purpose and language, we find ourselves driven to the conclusion that ‘new licences’ in s 4.3.12 must mean a new wagering licence and a new gaming licence granted under s 4.3.8 and, in the context of s 4.3.8, a new wagering licence and a new gaming licence must mean a new wagering licence and a new gaming licence as defined in s 1.3. The steps in our reasoning are as follows:

(1)Section 1.3 expressly provides that ‘gaming licence’ means the gaming licence granted under Part 3 of Chapter 4.  ‘Wagering licence’ is defined in cognate terms.

(2)Section 4.3.4A provides that Part 3 of Chapter 4 applies only with respect to the wagering and gaming licences that were issued to Tabcorp on 15 August 1994 and does not authorise the grant of any further wagering licence or gaming licence. 

(3)Section 4.3.5 provides, in terms, that a Victorian company may apply for the grant of wagering and gaming licences, and s 4.3.8 provides that the Governor in Council may grant them. 

(4)Read in conjunction with s 4.3.4A, the only way of reconciling ss 4.3.4A and 4.3.8 is to read s 4.3.8 as providing in effect that, although before the commencement of s 4.3.4A the Governor in Council could have granted the new wagering licence and gaming licence, they may no longer be granted.

(5)Section 4.3.9(1) provides, in terms, that each licence (meaning each licence granted under s 4.3.8) is for a term of 18 years or for such longer term as is determined by the Governor in Council and set out in the licence.  Section 4.3.9(2) provides, in terms, that the licence held by a current licensee may be extended in certain circumstances until the commencement of the ‘new licences’ (meaning the ‘new licences’ granted under s 4.3.8).  

(6)Read in conjunction with s 4.3.4A the only way of reconciling s 4.3.4A and s 4.3.9 is to read s 4.3.9(2) as providing in effect that, although before the commencement of s 4.3.4A the Governor in Council could have extended the terms of existing wagering and gaming licences until the commencement of the ‘new licences’ granted under s 4.3.8, they may no longer be so extended because there can no longer be ‘new licences’ granted under s 4.3.8.

(7)Section 4.3.12 provides in terms that, on the grant of ‘new licences, the person who was the holder of the licences last in force (the former licensee)’ is entitled to be paid an amount calculated in accordance with the formula set out later in the section.

(8)Read in conjunction with s 4.3.4A, the only way of reconciling s 4.3.4A and s 4.3.12 is to read s 4.3.12 as providing in effect that, if new licences could still be and were granted under s 4.3.8, the person holding the former licences would be entitled to be paid the amount calculated in accordance with the formula.

1. We are of course conscious that to construe ‘new licences’ in s 4.3.12 in that fashion deprives the section of operative effect after the commencement of s 4.3.4A, because the abrogation of the State’s ability to issue new wagering and gaming licences under Part 3 of Chapter 4 means that there can be no new licences. We also acknowledge that to construe the expression in that fashion denudes Tabcorp’s right to payment under s 4.3.12 of practical utility. Nonetheless, we agree with the judge that the precise definition of ‘gaming licence’ in s 1.3 when read in the context of the clear terms of the other sections to which we have referred leaves no room for an alternative broader interpretation of ‘new licences’ in that context.

1. Contrary to Tabcorp’s submission, it is not a matter of reading in words which are not there. As we read Chapter 4 of the 2003 Act as amended, the words ‘under this Part’ are necessarily implicit in s 4.3.12 for the reasons already stated, and the expression ‘new licences’ must be read or read down accordingly.[14] To give it the broader generic meaning for which Tabcorp contends would require a significant departure from the plain and ordinary meaning of the words of s 4.3.12 in the context in which it now appears and thus in effect run counter to what we perceive to be the statutory purpose of precluding the occurrence of the circumstance which would give rise to Tabcorp’s entitlement to the specified payment.

   [14]R v Young (1999) 46 NSWLR 681, 688 [16] (Spigelman CJ); Taylor v Owners – Strata Plan No 11564 (2014) 306 ALR 547, 556–8 [35]–[40] (French CJ, Crennan and Bell JJ), 563–5 [65]–[66] (Gageler and Keane JJ, in dissent).

1. Likewise, we reject Tabcorp’s argument that, in order to give best effect to the purpose and language of Part 3 of Chapter 4 (following the introduction of s 4.3.4A), the Court should attribute a meaning to s 4.3.12 which is different to the meaning it had before the enactment of s 4.3.4A. As explained in our reasons in the Tatts appeal, the inaptitude of doing that may be understood by envisaging what the position would have been if, instead of the 2008 and 2009 amendments, Parliament had passed amendments for the creation and issue of gaming machine entitlements but, at the same time, preserved the ability of the State to issue new wagering and gaming licences under Part 3 of Chapter 4. In those circumstances, it could not sensibly have been contended that the meaning of ‘new licences’ in s 4.3.12 was somehow transformed from ‘wagering licence and gaming licence issued under Part 3 of Chapter 4’ to ‘gaming machine entitlements issued under Part 4A of Chapter 3’. Nor could it be so if, in order to facilitate the take-up of the new gaming machine entitlements in those circumstances, the State chose not to issue any new wagering and gaming licences. There would be nothing in an administrative action of that kind which would cause the meaning of ‘new licences’ in s 4.3.12 to change from the meaning it had borne from the inception of the legislation in 1994 to something significantly different.

1. Logically, that would also be the case if Parliament then made further amendments, akin to s 4.3.4A, foreclosing the ability of the State to issue further wagering and gaming licences under Part 3 of Chapter 4.  In point of principle, the fact of legislative amendment might be taken to signify a change of legislative intention in ways which executive action could not.  But there would be nothing about the content of the postulated amendment any more than the content of the instanced executive action which would in fact signify a change in meaning of ‘new licences’ from the meaning it has borne from inception of the legislation in 1994.

1. Equally, in our view, it can make no difference that, instead of proceeding by way of the two instanced stages of first creating gaming machine entitlements (while preserving the State’s ability to issue new wagering and gaming licences) and then, later, abolishing the States’ ability to issue new wagering and gaming licences, the amendments necessary to enable the creation of gaming machine entitlements and the abolition of the State’s ability to issue new wagering and gaming machine entitlements were in fact made in the reverse order. Ultimately, the two processes are identical in legal substance and effect. Either way, the expression ‘new licences’ in s 4.3.12 retains the meaning it has had from the inception of the legislation in 1994 of new wagering and gaming licences issued under Part 3 of Chapter 4 (or its legislative antecedents).

1. There is more force in Tabcorp’s submission that, if it were intended to abolish Tabcorp’s right to payment under s 4.3.12, one might expect the section to have been repealed. We accept that it would have been possible to make clearer the intention that Tabcorp not receive a payment under s 4.3.12 upon the issue of gaming machine entitlements by incorporation in the 2008 or 2009 Act of a provision, like s 3.4.28F, that no compensation is payable to Tabcorp by reason of the replacement of gaming licences with gaming machine entitlements. We also accept that, at first sight, it presents as anomalous that s 4.3.4A should preserve s 4.3.12 by expressly providing that it continues to apply with respect to Tabcorp’s licence and yet at the same time deprive s 4.3.12 of useful operation by providing that no new wagering and gaming licences may issue.

1. Nevertheless what emerges to us from Part 3 of Chapter 4, as amended, construed as one connected and combined statement of the will of Parliament,[15] is a statutory purpose to preclude the occurrence of the circumstance which could entitle Tabcorp to the specified payment whilst preserving the continued existence of the statutory entitlement. Parliament determined not to alter the right to payment in s 4.3.12, and indeed expressly preserved it. But at the same time Parliament determined to deprive that right of any practical content by providing that the pre-condition to the payment could not occur. It seems to us that this reveals a legislative determination to eschew the perception that Tabcorp had a right to a payment which has been taken away.

   [15]Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 309 ALR 209, 214 [25] (Crennan, Bell, Gageler and Keane JJ).

1. We bear steadily in mind that the search for ‘intention’ is a search for the intention revealed by the meaning of the language and not for something outside or anterior to it which may be used to control it.[16]  We also recognise the force of Tabcorp’s submission that the rules of statutory construction require that statutory text be examined to see if it allows for an interpretative choice which avoids manifest unfairness, legislative redundancy and expropriation of vested rights.  There is no doubt that, in order for legislation to be interpreted as resulting in the expropriation of rights or other manifest unfairness, the legislation must be expressed in terms which unmistakably and unambiguously require that conclusion.[17]  Hence, if at all possible and consistently with established principles of statutory construction, interpretative choices must be made which avoid expropriation and other unfair outcomes.[18]   

   [16]Momcilovic v The Queen (2011) 245 CLR 1, 175 [441] (Heydon J); see also Lacey v Attorney-General (Qld) (2011) 242 CLR 573, 592 [44] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).

   [17]Lee v New South Wales Crime Commission (2013) 251 CLR 196, 308–9 [309]–[310] (Gageler and Keane JJ).

   [18]Attorney-General (SA) v Corporation of the City of Adelaide (2013) 249 CLR 1, 30–1 [42] (French CJ).

1. On the one hand, as we explain below, the State is correct that construing ‘new licences’ in s 4.3.12 in accordance with its specific meaning does not deprive Tabcorp of any right to payment to which it was previously entitled. As with Tatts under s 3.4.33 of the 2003 Act, the only right which Tabcorp ever had under s 4.3.12 (or its legislative antecedents) was a contingent right. In Tabcorp’s case, it was a right to payment when and if the State issued a new wagering and gaming licence under Part 3 of Chapter 4 (or its legislative antecedents). That was only ever a contingent right because the State was never under any obligation to issue new wagering and gaming licences under that Part.

1. On the other hand, as will be seen, Tabcorp and its investors have been deprived of an expectation the State deliberately created so as to maximise the amount raised when Tabcorp's shares were offered to the public for subscription. 

1. But the 1994 Act (and later the 2003 Act) never provided that the possibility of satisfying that expectation would be forever preserved. It was always open to Parliament to eliminate the possibility of issuing new wagering and gaming licences, just as it was always open to the State to choose not to issue new wagering and gaming licences while it remained possible for such new licences to be issued. Nor was there ever anything in the 2003 Act or elsewhere which prohibited Parliament from amending the Act to provide for the issue of other forms of gaming entitlement (to which s 4.3.12 does not apply) or to prevent the State from choosing to issue such new gaming entitlements, once created, instead of issuing wagering and gaming licences.

1. The emasculation of s 4.3.12 which has now been accomplished by the enactment of s 4.3.4A may do little to enhance the State’s reputation for reliability and commercial morality in its dealings with private investors. One of the more remarkable submissions put on behalf of the State in the course of argument was that the statutory purpose of s 4.3.12 was achieved and discharged as soon as the subscription moneys had been raised. But for all of that, the legislation is too clear to permit the construction for which Tabcorp contends.

1. Tabcorp never sought, still less achieved, a binding contractual agreement with the State on the termination arrangements.  It put its trust in the State.  That trust was misplaced.

The State’s notice of contention

1. The State contended that, if ‘new licences’ in s 4.3.12 had the broad generic meaning for which Tabcorp contended, the issue of gaming machine entitlements would still not have been the issue of ‘new licences’ within the meaning of the section. Since we are not persuaded that ‘new licences’ has a generic meaning, that issue does not arise. For completeness, however, we add that, if the expression did have the kind of generic meaning for which Tabcorp contended, we think that the issue of the gaming machine entitlements would fall within it. Our reasons are the same as for concluding in the Tatts appeal that the issue of gaming machine entitlements falls within the generic meaning of new gaming operator’s licence in the contract in issue there.[19]

   [19]Reasons [11]–[23].

The contractual claim

The Treasurer’s letter – ‘reasonably and in good faith’

1. In its amended statement of claim Tabcorp pleaded that the State of Victoria and Tabcorp had entered into an agreement, which Tabcorp called ‘the good faith and reasonable dealing agreement’.  This agreement was said to be partly in writing and partly to be inferred.  Insofar as it was in writing, it was constituted or evidenced by a letter from the then Treasurer of Victoria to the Chairman of Tabcorp and to the Chairman of VicRacing Pty Ltd (‘VicRacing’) dated 29 June 1994 (the ‘Treasurer’s letter’).  Insofar as it was inferred, the inference was said to arise from Tabcorp’s conduct in lodging the prospectus whereby members of the public were given the opportunity to subscribe for shares in Tabcorp,  and from the conduct of the State in consenting to the issue of that prospectus.  A copy of the Treasurer’s letter is annexed to this judgment. 

1. The Treasurer’s letter is addressed to the Chairman of Tabcorp and the Chairman of VicRacing and headed ‘PRIVATISATION OF THE TOTALIZATOR AGENCY BOARD’. 

1. The first paragraph of the Treasurer’s letter states that its purpose is to ‘confirm the principles on which the Government of Victoria is privatising the TAB.’  It says that it is important that applicants for shares in Tabcorp understand why the Government has proceeded with privatisation and says that the principles are reflected in a memorandum of understanding signed between the government and the racing industry on 15 March 1994, in the 1994 Act, and in the Treasurer’s parliamentary speeches.

1. The second paragraph reads as follows:

I must however make it clear that the statement of principles in this letter does not bind this Government or future Governments and, of course, that the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation affecting the operations of the TABCORP group of companies, the Victorian Racing Industry or the terms on which those operations are conducted.

1. The Treasurer’s letter then states, ‘They are as follows,’  and seven enumerated principles are set out.  Principle 6 includes the following passage:

TABCORP may apply for new licences after the initial licences terminate and on the same terms as other applicants.  It is expected that the process of award of new licences will involve a public tender.  It is also expected but not guaranteed that the new licences would be awarded to the highest qualifying bidder.  If the new licensee is not TABCORP, TABCORP will be entitled to receive from bid proceeds received by the State an agreed capital compensation amount of approximately the net amount TABCORP will pay the Government for the initial licences calculated in accordance with the Gaming and Betting Act 1994 (subject to the bid proceeds being sufficient).

1. Before a final statement in which the Treasurer wishes both the Victorian racing industry and Tabcorp well, the following sentence appears:

The Government recognises both the importance of the Victorian Racing Industry and the importance of gaming and betting industries to the Victorian economy and in recognition of that it will continue to deal with the Victorian Racing Industry and the TABCORP Group of Companies reasonably and in good faith.

1. The reference in the Treasurer’s letter to a memorandum of understanding signed on 15 March 1994 was a reference to a document summarising the understanding between the State and the racing industry concerning the restructuring of the TAB, then a statutory corporation, and the floatation of a company which came to be Tabcorp.  Amongst other things, it envisaged the establishment of an unincorporated joint venture between the racing industry and Tabcorp.  Before the judge, a claim was made on behalf of Tabcorp pursuant to this memorandum of understanding.  The claim was unsuccessful and it was not persisted in on the appeal.

1. Tabcorp, VicRacing and related companies of Tabcorp entered into an unincorporated joint venture agreement dated 25 May 1994.  Clause 2.1(a) of that agreement set out a number of conditions to the operation of relevant parts of that agreement.  One of those conditions was the following:

v.the execution by the State, TABCORP and VicRacing of an instrument setting out the objectives of the State, TABCORP and VicRacing in connection with the establishment of the joint venture referred to in clause 2.1(b) (which instrument shall not create legal rights or obligations on the part of any of the State, TABCORP or VicRacing).

1. As matters transpired, the State refused to execute an instrument as described in the joint venture agreement.  On 1 August 1994, Tabcorp and its related entities executed a document acknowledging and agreeing that the conditions in cl 2.1 of the joint venture agreement had been satisfied and in particular that the Treasurer’s letter satisfied the condition in cl 2.1(a)(v).  VicRacing executed the document on 8 August 1994.

1. At the time the joint venture agreement was entered into, Tabcorp was still controlled by the State and its directors were the State’s nominees.  On 27 June 1994, those directors resigned and new directors independent of the State were appointed.  The new directors were referred to during the trial and during the appeal as ‘the independent directors’.

1. At an early point in the privatisation process, the State’s advisors identified a problem in maximising the return to the State from the float of the TAB.  It was that the licences would be the major asset of Tabcorp and, if they were amortised over their 18 year term, that would significantly reduce the profit forecasts and make investment less attractive to potential investors.  The solution devised was to provide for repayment of the initial licence fee upon expiration of the initial licence, eventually in terms of the formula provided for in s 21 of the 1994 Act.  The view  taken was that that entitlement would mean that the intangible asset represented by the licences would not have to be amortised in the projections.

1. As the date for finalisation of the prospectus neared, the State’s principal advisor, Mr Michael Tilley, met with the independent directors.  They made it clear to him that there needed to be a public assurance about the Government’s intentions in documentary form that could be referred to in the prospectus and publicly discussed, and that they considered this to be of critical importance to them. The independent directors harboured genuine concern as to what the State might do about repaying the licence fee and, more generally, as to the issue of sovereign risk.

1. It seems to us  implicit in  Mr Tilley’s evidence and the judge’s reasons that the Treasurer’s letter was the public assurance which the judge found the independent directors needed and considered to be of critical importance.[20]   The minutes of a meeting of the TAB Due Diligence Committee held at 8.30 am on 30 June 1994, which was attended by the independent directors, contains the following relevant entry:

There was a discussion in relation to the letter dated 29 June 1994 from the Treasurer to the Chairman, TABCORP Holdings Limited and the Chairman VicRacing Pty Ltd.  It was agreed that this letter would be described in the Additional Information section of the Prospectus and would be one of the documents made available for inspection at the registered office of TABCORP Holdings Limited.

[20]Reasons [216]–[218].

1. At 11.25 am that day, the same independent directors who had been in attendance at the Due Diligence Committee meeting that morning considered a draft prospectus, and resolved that when it had been signed it should be lodged with the Australian Securities Commission (the ‘ASC’)[21] by Tabcorp’s solicitors.  The Treasurer’s letter was not referred to in the minutes of that meeting.

   [21]As it then was.

1. On 1 July 1994 a prospectus dated 30 June 1994 offering members of the public the opportunity to subscribe for shares in Tabcorp was lodged with the ASC.  It was signed by the independent directors.

1. The prospectus was prepared by the State and its advisors.  The pro forma balance sheet included the wagering and gaming licences as assets in the sum of $732.1 million.  The pro forma forecast profit returns in the prospectus did not include provision for amortisation of the wagering and gaming licences.    The reason why the licence fees were not amortised was Tabcorp’s rights upon expiry of its initial licences.  Page 29 of the prospectus included the following statement:

The wagering and gaming licences are for terms of eighteen years.  TABCORP is entitled on expiry (other than by cancellation) of the initial licences to participate in a tender for the new licences.  TABCORP is entitled, whether or not it is the successful tenderer, to receive an amount equal to the lesser of the sum paid for the new licences and a benchmark sum.  The benchmark sum will not be greater than 115% or less than 85% of the amount paid by TABCORP for the initial licences (see ‘Additional information – Wagering and gaming licences’.)

1. In a note to the pro forma balance sheet the following appeared:

Under the Gaming and Betting Act, on 28 June 1994 TABCORP was granted by the State a gaming licence and a wagering licence, both for a period of 18 years commencing on the Appointed Day for $732.1 million, which is to be paid from the monies raised under this Offer.

Under the Gaming and Betting Act, at the completion of the 18 years (or earlier in the event of cancellation), the licences will be retendered for another period of at least 18 years.  On the grant of the new licences, TABCORP is entitled to be paid an amount equal to the amount bid by the new licensee or a benchmark amount, whichever is the lesser.  The benchmark amount is in the range of 85% to 115% of the amount paid by TABCORP of the $732.1 million.  TABCORP is entitled to be an applicant for the new licences, except where its licences were cancelled.

The licences have not been amortised, as the payment to be received by TABCORP under the above tender mechanism at the end of 18 years is currently expected to be in excess of the $732.1 million.

1. Certain provisions of the Treasurer’s letter were set out in the section of the prospectus dealing with material contracts but the portions of the letter dealing with what was to occur on termination of the licences and the statement concerning the Government continuing to deal ‘reasonably and in good faith’ were not referred to.

1. As matters transpired, the amount recovered by the State after the float was $597 million. 

1. The Government’s Budget Paper No 2 in relation to the financial year 2002-2003 contained the following in relation to Tabcorp’s licences:

In 1994, the State sold TABCORP Holdings Ltd (TABCORP) a wagering and gambling licence for $597 million.  The Gaming and Betting Act 1994 requires the State to provide in 2012 a refund to TABCORP of an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.  While this creates an obligation on the State to refund the licence value to TABCORP, it will be offset by the premium payment from the issue of any new licences.

1. In April 2008, the Government announced an alteration in the regulatory regime governing wagering and gaming.  In particular, the Government decided to replace the duopoly in gaming with a system whereby venue operators were licensed to own and operate gaming machines in their own right.  This decision was referred to in Budget Paper No 4 for the financial year 2008-2009, after which the following appeared:

After considering the end of licence arrangements in the Gambling Regulation Act 2003, the government has formed a view that neither Tatts Group nor TABCORP will be entitled to compensation after the expiration of their current licences.

The government does not intend to alter or amend the provisions of the Gambling Regulation Act 2003 that deal specifically with the end of licence arrangements for Tatts Group and TABCORP.

1. The amendments made in 2008 and 2009 to which we have referred earlier implemented this decision.

1. Tabcorp claims that, in the circumstances outlined, the good faith and reasonable dealing agreement came into existence and that the State breached that agreement in the following three respects, which were particularised under paragraph 83 of the amended statement of claim:

(a)The State failed to include or cause to be included provisions in the bill for the Wagering Amendment Act [a reference to the 2008 amendments] which would have preserved Tabcorp’s entitlements under s 4.3.12 of the Gambling Regulation Act, or alternatively provisions which would have provided for corresponding or equivalent entitlements to arise on the grant of the Wagering and Betting Licence.

(b)The State failed to include or cause to be included in the bill for the Gaming Amendment Act [a reference to the 2009 amendments] provisions having the effect of preserving Tabcorp’s entitlements under s 4.3.12 of the Gambling Regulation Act or alternatively providing for corresponding or equivalent entitlements to arise on the grant of the GMEs [a reference to the gaming machine entitlements] in respect of the gaming machines operated by Tabcorp and, or alternatively, the Operators.

(c)The State failed to include or cause to be included in the bill for the Wagering Amendment Act or the Gaming Amendment Act provisions having the effect of preserving Tabcorp’s entitlements under s 4.3.12 of the Gambling Regulation Act, or alternatively provisions which would have provided for corresponding or equivalent entitlements to arise on the grant of the Keno licence.

1. Tabcorp pleaded that the good faith and reasonable dealing agreement contained terms whereby Tabcorp would assist the State to recoup the maximum commercial value for the licences by lodging the prospectus and inviting the public to subscribe for shares and that in consideration thereof the State agreed to deal with Tabcorp reasonably and in good faith.  Put the other way, Tabcorp’s case was that, in consideration of the promise to deal with Tabcorp reasonably and in good faith, it lodged the prospectus and invited the public to subscribe. 

1. The State denied the existence of the good faith and reasonable dealing agreement and denied the paragraph of the amended statement of claim alleging the terms concerning consideration referred to.  The State alleged that, in any event, the decision to institute the new regulatory regime was made after an extensive period of investigation and consultation with stakeholders including Tabcorp.  The State submitted that, if there were a good faith and reasonable dealing agreement, it had not been breached and, in any event, any such agreement would be void and unenforceable as an impermissible fetter on executive and legislative action. 

The judge’s treatment of the good faith and reasonable dealing agreement

1. Before the judge, Tabcorp particularly relied on the passage of the Treasurer’s letter previously quoted where he had said that the Government would continue to deal with the racing industry and Tabcorp reasonably and in good faith.  The State, on the other hand, particularly relied upon the passage at the beginning of the letter where the Treasurer had said that the statement of principles in the letter did not bind the Government. 

1. The  judge found that, taking the Treasurer’s letter as a whole, the statement as to what was ‘non-binding’ applied only to the statement of principles in the seven numbered paragraphs and not to the passage relied on by Tabcorp.[22]  The  judge, however, did not reach a conclusion that a contractual promise had been made.[23]  Rather, his Honour considered the content of what had been said in the context of the letter as a whole.  The  judge held that the non-binding principles deprived what the judge called ‘the good faith term’ of ‘any meaningful content in the circumstances of this case’.[24] That was because the seven numbered principles were subject to an express statement to the effect that they were not binding. One of those seven principles (principle 6) dealt with the position on termination. The judge concluded that the good faith term ‘was circumscribed in its scope by the express statement that Tabcorp’s entitlement to a terminal payment under s 4.3.12 was subject to contrary executive or legislative action.’[25]

   [22]Reasons [257].

   [23]Reasons [259].

   [24]Reasons [258].

   [25]Reasons [258].

1. The judge referred to the consideration which had been pleaded by Tabcorp and denied by the State,[26] but, after dealing with the matters referred to above, said that it was unnecessary to reach a conclusion ‘regarding the bindingness of the good faith commitment more broadly’.[27]  The judge noted that there was difficulty in applying cases concerning commercial transactions to a State-led privatisation of a statutory corporation.  He observed:

It was the State that determined to privatise the TAB and the terms on which that privatisation would take place, facts which undermine the contention that the good faith commitment in the Treasurer’s letter formed part of a bargain in exchange for Tabcorp’s assistance in progressing towards the float.[28]

[26]Reasons [254].

[27]Reasons [259].

[28]Reasons [259].

1. The  judge then dealt with the State’s reliance on the condition precedent in cl 2.1(a)(v) of the joint venture agreement.  The State’s argument was that, just as that foreshadowed instrument was agreed not to be binding, so the letter which was accepted as satisfying the condition providing for the instrument must also have been intended not to be binding.  The  judge found that that clause did not assist the State’s position.[29]

   [29]Reasons [260]–[261].

1. The  judge held that there was no breach of any duty of good faith.  He concluded that Tabcorp’s alleged breaches were ‘inconsistent with the limited nature of the good faith term’ as he had found it to be.[30]  He said:

The enumerated principles in the Treasurer’s letter were subject to the express statement of non-bindingness in the opening paragraphs of the letter, including the acknowledgment of the power of the Victorian Parliament to enact legislation affecting Tabcorp’s terminal payment right.  Tabcorp cannot obtain a result by a term of good faith which is inconsistent with an express statement in the very instrument (the Treasurer’s letter) which created the good faith obligation. [31] 

[30]Reasons [263].

[31]Reasons [263]

1. In the result, the judge did not find it necessary to deal with the State’s arguments concerning fetter on future executive and legislative action.[32]

   [32]Reasons [264].

1. By its notice of appeal, Tabcorp contends that the judge erred in the conclusions he reached as to the scope and content of the good faith term, and that he erred in particular in finding that the non-binding statements referred to both legislative and executive action; the submission being that, properly construed in that context, the letter referred only to legislative action. The notice of appeal states that the judge ought to have held that the term was breached ‘by the actions of the Crown and its ministers in preparing, introducing into Parliament, promoting and procuring the enactment of legislation which abrogated Tabcorp’s right to a terminal payment under s 4.3.12 ‘.

1. By a notice of contention, the State contends that the  judge was wrong to find that the Treasurer’s letter contained a ‘contractually binding obligation’ to act reasonably and in good faith[33] and contends that the outcome should also be upheld on the basis that any such term would be void and unenforceable as an impermissible fetter on future executive and legislative power. 

   [33]As we read his Honour’s reasons he did not conclude that the promise was contractually binding.

Submissions on appeal

1. Tabcorp submitted that the judge was ‘plainly correct’ to find that a promise to act reasonably and in good faith had been made and that the judge had found ‘at least implicitly’ that it was contractually binding.  It was submitted that the Treasurer’s letter had been of critical importance to the independent directors and that in the context it was clear that Tabcorp would have been unwilling to proceed with the float in the absence of the assurance that was given.  Reliance was placed upon the decision of this Court in Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (rec and mgr appt).[34]

   [34](2009) 25 VR 411 (‘Atco’).

1. Tabcorp further submitted that the judge made ‘a simple error’ in that he misconstrued the Treasurer’s letter.  According to Tabcorp, the possibility of future action was confined to legislation and the judge had been wrong to say that there was an express statement that the principles concerning Tabcorp’s entitlement to a terminal payment were subject to contrary executive or legislative action. 

1. In relation to breach, Tabcorp submitted that the breach was constituted by the fact that the ‘Crown and its servants devised legislation that had the effect [of] depriving Tabcorp of its right to a termination payment without making provision for the preservation, in some way, of Tabcorp’s right.’  In that respect, particular reliance was placed upon the circumstances of the float and the importance, in commercial terms, of the termination payment.  It was submitted that the State had pointed to no circumstance or policy consideration which explained the destruction of the right to the termination payment without compensation.  In oral submissions Tabcorp emphasised that it was not contending that the passage of the legislation was itself a breach of the good faith and reasonable dealing agreement.  Rather, it  was said that the judge had confused ‘a promise about an outcome with a promise about the quality of conduct’.  It was submitted that Tabcorp accepted that it had no warranty that it would receive the terminal payment but it was contended that Tabcorp was at least entitled to have its interests taken into account and to be dealt with fairly.  It was further submitted that the State did not contend that Tabcorp had been treated reasonably or fairly or in good faith.  When pressed, however, on how this argument could be put, given that the breach appeared to be allegedly constituted by the presence and absence of provisions in legislation, it was submitted that the breach was the action of the executive in framing and promoting the legislation without taking Tabcorp’s interest into account. 

1. It is necessary to pause at this point and to clarify what Tabcorp’s case was in relation to breach of the good faith and reasonable dealing agreement.  We have already set out what was pleaded in paragraph 83 of the amended statement of claim.  The breach was alleged to be the failure to include or cause to be included legislative provisions which preserved Tabcorp’s entitlement or which gave Tabcorp a corresponding or equivalent entitlement.  The notice of appeal accurately reflected that position in contending that the agreement had been breached by the executive in preparing, promoting and procuring the amendments which allegedly abrogated Tabcorp’s rights.  At times, however, during the course of oral submissions, counsel for Tabcorp appeared to submit that the breach was constituted by the process undertaken by the Government in reaching the decision in 2008 to change the regulatory regime.  That concern arose when it was submitted that the trial judge had confused a promise about an outcome with a promise about the quality of conduct and a little later when counsel for Tabcorp referred to the ‘process of review and reform’.  At another point counsel for Tabcorp submitted:

What we contend for is that in coming to a decision about how the discretion will be exercised we will be treated fairly and in good faith.

1. Counsel for the State objected to the matter being put in that way on the basis that a case directed at the process of reform had been expressly and specifically disavowed prior to the trial.  In that respect, counsel for the State relied upon a hearing concerning amendments to the statement of claim held before the trial judge prior to the trial on 9 December 2013.  In the course of an exchange regarding proposed amendments counsel for the State indicated an intention to call evidence about the process of reform and about the matters that were considered in the course of that process.  At that point the State was submitting that the proposed amendments would require that evidence to be reconsidered.  In response, counsel for Tabcorp emphasised that the only case that Tabcorp was advancing on breach was one whereby breach was constituted by the three matters particularised under paragraph  83 of the amended statement of claim.  Counsel for the State was concerned to ensure that that position was clear.  She eventually summarised the situation as being that Tabcorp’s case was that ‘that obligation was breached only by failing to introduce an additional provision into the legislation that positively acted to preserve the compensation entitlements’. Our reading of the transcript is that counsel for Tabcorp accepted that summary, whilst repeating that the case was particularised in paragraph 83, and that the judge confirmed that that was his understanding of the position as well. 

1. Clearly, Tabcorp cannot be now permitted to advance a case any broader than that particularised under paragraph 83.  It maintains, however, that it is not doing so or attempting to do so.  It is necessary to clarify, therefore, that  the  judge did not decide, and we have not considered, the question of whether the State had acted reasonably and in good faith in the process of reform which had been undertaken to reach the decision made in 2008.  The matter must be determined on the basis of the case which Tabcorp pleaded and conducted. 

1. We turn then to the submissions on appeal made on behalf of the State.

1. On behalf of the State it was submitted that the judge had been wrong to find that there was any contractual promise in the Treasurer’s letter.  The principal submission was that the express statements concerning ‘non-bindingness’ governed the letter in its entirety.  It was also submitted that even if the  judge had been correct in characterising the relevant statement as being separate from the rest of the letter, the statement was a statement without contractual force.  It was a statement of the kind sometimes referred to as a ‘letter of comfort’ and was unsupported by consideration.  The State relied upon the judge’s observation to the effect that it was the State that determined to privatise the TAB and determined the terms of that privatisation and that this was inconsistent with Tabcorp’s assertion that it had provided consideration by assisting the State in that endeavour.  Reliance was placed again on cl 2.1(a)(v) of the joint venture agreement.  It was submitted that the Treasurer’s letter was, on analysis, the non-binding instrument referred to in that sub-clause. 

1. The State submitted that the judge had been correct to find that the statement of non-bindingness rendered any good faith term devoid of meaningful content.

1. As to breach, the State submitted that the breaches pleaded concern the inclusion or failure to include provisions in legislation.  The Treasurer’s letter had expressly foreshadowed that possibility and, it was submitted, Tabcorp’s attempt to enforce the good faith promise was, in effect, seeking to require the State to do the very thing that the State had clearly stated it was not undertaking, namely, to ensure future legislation would not affect the position.  In any event, any such obligation would, the State submitted, be an impermissible fetter on Government action.

1. The State contended that the judge had not made an error in characterising the non-binding statement as applying to both executive and legislative action and referred to the express statement to the effect that the letter did not bind ‘this Government or future Governments’.

1. In oral submissions, counsel for the State emphasised that the good faith issue only arises if Tabcorp fails in its claim under s 4.3.12. In those circumstances it was said Tabcorp sought to rely on the good faith term to give it a right to a payment which it did not have under the statute. Counsel for the State submitted that whilst Tabcorp asserted that the Treasurer’s letter had been critical to the independent directors, those directors had not given evidence in the proceeding and there was no basis in the evidence for that assertion, the only relevant evidence coming from Mr Tilley, who had been the corporate advisor to the State.

1. In reply, Tabcorp relied upon Mr Tilley’s evidence where he described the sequence of events to which we have earlier referred.

Existence of the good faith and reasonable dealing agreement

1. Our conclusion is that the judge was correct in deciding that the relevant passage in the letter concerning good faith and reasonable dealing was not subject to the express assertion that the ‘principles’ were not binding.  We agree with the  judge that the letter by its very terms relates what it says about ‘non-bindingness’ to the seven enumerated principles.  It seems to us that the following further matters are also significant:

(1)When the letter is read as a whole, the relevant passage concerning good faith and reasonable dealing has to be understood as a statement made because what has gone before is not binding.  It is because the seven enumerated principles are not binding that the Government then says that it will deal with Tabcorp ‘reasonably and in good faith’.

(2)The statement in the relevant passage in the letter is, as counsel for Tabcorp submitted, no more than what is to be expected of the State in any event.[35]

[35]See Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, 195–7.

1. As has been noted, the judge did not conclude that the statement made was a contractually binding promise.  He did not decide that issue, implicitly or otherwise.  Insofar as he expressed a view  about it, it seems to us that he was disposed to accept the State’s submission that there was relevantly no consideration;  although that is not entirely clear.  The judge did not need to reach a conclusion on this issue because of the way he analysed the content of the statement that was made.  We will return to this issue after addressing the judge’s analysis of the content of the statement.

The relevant content of the good faith and reasonable dealing statement

1. In our view, the judge’s conclusion was also correct as to the content of the good faith and reasonable dealing statement. 

1. The letter is clear in stating that the enumerated principles are not binding. The entitlement to a payment on termination of Tabcorp’s licences is dealt with in one of the enumerated principles. The effect of the good faith and reasonable dealing statement (assuming for the moment that it is contractually binding) cannot be to impose upon the State, in effect, an obligation to procure the outcome dealt with in one of the specified principles when the letter expressly makes it clear that the State undertakes no such obligation. As was submitted by counsel for the State, a failure to include or cause to be included statutory provisions preserving Tabcorp’s entitlement under s 4.3.12 cannot be a breach of a promise to act reasonably and in good faith in itself and without more in circumstances where it was expressly stated that neither the present Government nor future Governments were bound, and that the Victorian Parliament had the power at any time to amend existing legislation or pass new legislation affecting the relevant matter. To find a breach constituted by the matters alleged by Tabcorp would be to impose upon the State an obligation to produce an outcome in circumstances where the letter made it clear that it undertook no such obligation.

1. Similarly, as to the  ‘simple error’ which it was asserted the  judge made in his construction of the non-binding statement as applying to both executive and legislative action, we agree with the judge.  The passage dealing with the non-binding effect of the principles in the letter expressly refers to the fact that it does not bind ‘this Government or future Governments’.  The judge was correct when he concluded that the content of the good faith and reasonable dealing statement was circumscribed by the express statement that the entitlement to a terminal payment was subject to contrary executive and legislative action.

1. Tabcorp did not plead or conduct a case whereby it contended that there had been an absence of good faith or reasonable dealing in the process of reform leading to the Government’s 2008 decision to change the regulatory regime of gaming and wagering.  The matters which it pleaded and relied upon concerned what was included or, more exactly, not included in the implementing legislation.  Tabcorp’s case is that the Treasurer’s letter imposed upon the State an obligation to include particular provisions having a particular effect in the legislation.  The Treasurer’s letter is clear that no such obligation was undertaken.

Intention to create legal relations and consideration

1. As already observed, the  judge did not reach a conclusion that the statement concerning good faith and reasonable dealing was a contractual promise.  Other than  to refer to the State’s submission concerning the issue of consideration, he did not address the issues raised in Atco.[36]  Given his other conclusions, it was unnecessary for him to do so.

   [36](2009) 25 VR 411.

1. For the same reasons, it is also unnecessary for us to address this issue but we will do so briefly.

1. Assuming, however, that the issues of intention to create legal relations and consideration are to be treated as discrete issues,[37] our conclusion is that there was an intention to create legal relations for the two further reasons we have given earlier in relation to our construction of the letter, namely, that the good faith and reasonable dealing statement was made because the Government was not otherwise bound by the letter, and that the obligation undertaken is no more than what is to be expected of the State in any event.  We do not accept the proposition that seems to have attracted the judge that the privatisation was entirely a matter for the State.  The State had to obtain the agreement of the racing industry but, more importantly, by the time the prospectus was issued it did not control the board of directors of Tabcorp.  The decision to lodge the prospectus was one made by that board, not by the State.  The prospectus invited the public to contract with Tabcorp not with the State.  Assuming for present purposes that consideration is a necessary element of a contract separate and discrete from the need to establish an intention to create legal relations, and adopting this Court’s analysis in Atco, in our view, on the material before the judge, the conclusion ought to be drawn that the State did, in effect, request Tabcorp to proceed with the float upon the terms contained in the Treasurer’s letter (some of which were not binding and some of which were binding) and that Tabcorp was moved by that request to proceed with the float.[38]

   [37]Ibid 428 [60].

   [38]Ibid 429 [62].

Impermissible fetter on executive or legislative action

1. It is unnecessary and may be undesirable to decide the issues raised by the State concerning fetter on executive or legislative action;  but, on our construction of the obligation undertaken, it could not be a fetter on executive or legislative action as it was an obligation to do no more than what is expected of the State in any event.

Expectation

1. In the Tatts appeal and earlier in this judgment we have referred to the expectation created by the State by its stated intentions and have suggested that the emasculation of the statutory right to compensation in relation to Tatts and Tabcorp might do little to enhance the State’s reputation for reliability and commercial morality in its dealings.  In Tabcorp’s case, the State not only created expectations but profited from the reliance placed upon those expectations by members of the investing public. The Treasurer’s letter and the prospectus created the expectation that compensation would be paid upon the expiry of the licences after 18 years.  The forecast returns and the forecast balance sheet were prepared upon the basis of that expectation.  Members of the public invested in reliance upon the expectation which the State created and actively encouraged.  The State has not met that expectation.  Be that as it may, however, the claims made by Tabcorp in this proceeding must be dismissed.

Conclusion

1. The appeal must be dismissed.

- - -