Tabcorp Holdings Limited v The State of Victoria

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

S CI 2012 4846

BETWEEN:

TABCORP HOLDINGS LIMITED ACN 063 780 709	Plaintiff
v
THE STATE OF VICTORIA	Defendant

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	3-6, 10-13, 17-20, 24 February 2014
DATE OF JUDGMENT:	26 June 2014
CASE MAY BE CITED AS:	Tabcorp Holdings Limited v The State of Victoria
MEDIUM NEUTRAL CITATION:	[2014] VSC 301

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STATUTORY INTERPRETATION – Gambling Regulation Act 2003 (Vic) s 4.3.12 – Whether Tabcorp entitled to terminal payment under s 4.3.12 upon State granting new licences to conduct wagering and gaming operations – Meaning of ‘new licences’ in s 4.3.12 – Whether s 4.3.12 impliedly repealed – Held: s 4.3.12 impliedly repealed – Tabcorp not entitled to terminal payment – Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 87 ALJR 588; Thiess v Collector of Customers & Ors (2014) 88 ALJR 514; Chubb Insurance Co of Australia Ltd v Moore (2013) 302 ALR 101; Goodwin v Phillips (1908) 7 CLR 1; Clissold v Perry (1904) 1 CLR 363.

CONTRACTUAL INTERPRETATION – Memorandum of Understanding executed by State and Victorian racing industry – Whether clause 10.3 of Memorandum of Understanding became contractually binding – Held: clause 10.3 not binding – Memorandum of Understanding fell within third category in Masters v Cameron (1954) 91 CLR 353.

GOOD FAITH – Whether express or implied term of good faith in Treasurer’s letter to racing industry and Tabcorp – Whether State breached term of good faith – Held: express good faith term existed – Content of good faith term limited by surrounding express terms in Treasurer’s letter – State did not breach good faith term.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff, Tabcorp Holdings Limited	Mr A Archibald QC with Mr J Sheahan QC, Mr R Strong, Mr P Liondas and Ms R Higgins	Herbert Smith Freehills
For the Defendant, the State of Victoria	Mr J Karkar QC with Ms W Harris QC, Mr R Craig and Mr K Loxley	Johnson Winter & Slattery

TABLE OF CONTENTS

Introduction......................................................................................................................................... 2

Background facts and legislative history....................................................................................... 4

(A)    Historical background......................................................................................................... 5
(B)    The 1994 privatisation......................................................................................................... 6
(C)    The Gaming and Betting Act................................................................................................. 8
(D)    The Gambling Regulation Act................................................................................................ 9
(E) 2008 amendments to the Act............................................................................................. 10
(F) 2009 amendments to the Act............................................................................................. 11
(G)    The grant of licences and entitlements under the new regimes................................. 12

Is Tabcorp entitled to the terminal payment specified in s 4.3.12 of the Act?...................... 13

(A) Should the specific or generic meaning apply?............................................................ 14

Text ................................................................................................................................... 16
Purpose or object................................................................................................................... 19
Tabcorp’s contentions............................................................................................................ 20

(B) Was s 4.3.12 impliedly repealed by s 4.3.4A?................................................................ 30

State’s contentions................................................................................................................. 33
Extrinsic materials................................................................................................................. 35
Tabcorp’s contentions............................................................................................................ 37

Were the new authorities materially different from Tabcorp’s existing licences?................... 42
Was it a requirement that all ‘new licences’ be granted to the same person?......................... 49
Could Tabcorp, or a related entity of Tabcorp, be the ‘new licensee’?.................................... 50

Did the State agree to indemnify Tabcorp?................................................................................ 51

(A) Did the MOU become binding?....................................................................................... 56
(B) Was clause 10.3 intended to be binding?....................................................................... 69

Mr Tilley’s evidence.............................................................................................................. 71

Did the State breach obligations of good faith and reasonable dealing?............................. 76

(A) Does the Treasurer’s letter contain a promise?............................................................. 76
(B) Did the State breach any good faith obligation?........................................................... 80

Conclusion and orders.................................................................................................................... 80

HIS HONOUR:

Introduction

Parliamentary sovereignty means that Parliament can choose to legislate to take away existing rights, whether those rights arise by existing legislation, contract or otherwise. But where Parliament chooses to take that course, it must do so by clear language. In this case, the State of Victoria contends that amendments to legislation have the clear and necessary effect of impliedly repealing, or rendering inoperative, a statutory provision which, in specified circumstances, granted the plaintiff a statutory right to a payment of $686,825,713.20 from the State. If the right remains enforceable, the amount payable is (with interest) about $800 million.

The genesis of the dispute arises from the privatisation by the State in 1994 of a statutory corporation, the Totalisator Agency Board of Victoria (the ‘TAB’). Until the privatisation took effect, the TAB operated the business of totalisator wagering on thoroughbred, harness and greyhound racing events and the business of operating gaming machines in over 100 venues in Victoria. These otherwise unlawful businesses were conducted pursuant to licences granted by the State under the Racing Act 1958 (Vic) and the Gaming Machine Control Act 1991 (Vic) (the ‘1991 Act’) respectively.

The privatisation of the TAB was effected by transferring its property to the plaintiff, Tabcorp Holdings Limited; by granting Tabcorp two 18-year licences, authorising it to conduct wagering and gaming in Victoria; by floating Tabcorp as a public company; and by requiring Tabcorp to pay the capital raised from the public offering to the State as consideration for the grant of the two licences and the value of the property transferred from the TAB.

The State sought to maximise the amount to be raised from the Tabcorp float. In this context, the Treasurer, at all relevant times Alan Stockdale, was advised that the amount which Tabcorp could expect to raise from the public offering would be substantially reduced if the profit forecasts in the Tabcorp prospectus were to include amortisation of the licences over their 18-year terms. This was unacceptable to the Treasurer, and so a solution was sought.

The Treasurer was advised that amortisation could be avoided if the State agreed to repay the licence consideration at the end of the licences. The Treasurer accepted this advice. As a result:

(1) The Gaming and Betting Act 1994 (Vic) (the ‘1994 Act’) was enacted. The 1994 Act provided: (a) for Tabcorp to be granted two licences, a wagering licence and a gaming licence,[1] in lieu of the TAB’s existing licences under the Racing Act and the 1991 Act; (b) for Tabcorp to pay the float proceeds to the State as consideration for the licences when granted;[2] and (c) following expiry of Tabcorp’s licences and ‘the grant of new licences’, that Tabcorp was entitled to be paid an amount representing the lesser of the consideration it paid for the licences (subject to adjustment) and the consideration paid for the new licences (‘the terminal payment provision’).[3]

(2) The profit forecasts in the Tabcorp prospectus did not amortise the consideration to be paid for the licences, on the express basis that the terminal payment provision made this unnecessary. There was unchallenged expert evidence that the forecast annual after tax profits in the prospectus ($63.4 million) would have been reduced to only $22.7 million if an amortisation charge was required.

(3) The float proceeds were thereby substantially increased. Tabcorp paid the net float proceeds of $597.2 million to the State as consideration for the grant of the licences. The licences were each for a period of 18 years, expiring on 15 August 2012.

[1]Section 12.

[2]Section 13.

[3]Section 21. This summary deliberately avoids some of the textual issues arising for determination on the proper construction of s 21 and its statutory successor provision, s 4.3.12 of the Gambling Regulation Act 2003 (Vic).

The various legislative instruments governing gambling in Victoria, including the Racing Act, the 1991 Act and the 1994 Act, were re-enacted and consolidated in the Gambling Regulation Act 2003 (Vic) (‘the Act’). The terminal payment provision became s 4.3.12 of the Act.

On expiry of its wagering licence on 15 August 2012, Tabcorp continued conducting a wagering business, under the authority of a new 12-year licence issued to it by the State called a ‘wagering and betting licence’. That licence was granted under a new legislative regime which came into effect immediately upon expiry of Tabcorp’s wagering licence.

On expiry of its gaming licence, however, Tabcorp ceased conducting a gaming machine business. No new gaming licence was granted to it or to any person. Instead, reflecting legislative amendments made in 2008 and 2009 which introduced a new statutory regime, ‘gaming machine entitlements’ were issued to persons who held a ‘venue operator’s licence’. Venue operators are the operators of hotels and clubs where gaming machines are played. No gaming machine entitlements were issued to Tabcorp.

Tabcorp’s first and principal claim is statutory. Tabcorp contends that, notwithstanding the introduction of the new legislative regimes, the State has in substance granted new licences to conduct wagering and gaming machine operations in Victoria and that, accordingly, it is entitled to be paid the amount due under the terminal payment provision.

The State denies this statutory claim at two levels. First, the State contends that no ‘new licences’ within the meaning of the terminal payment provision have been granted and, accordingly, the contingency triggering Tabcorp’s entitlement to payment has not occurred. Second, the State contends that the terminal payment provision was impliedly repealed, or ‘rendered inoperative’, by the 2008 and 2009 amendments. Should either of the State’s contentions be accepted, Tabcorp raises alternative contractual claims which are also denied.

Background facts and legislative history

Before turning to the specific issues for determination, it is necessary to set out the background facts and the legislative history in some detail. This will involve some repetition of the facts summarised in the introduction.

(A) Historical background

The approach of Victorian legislation is and was at all relevant times to impose a general prohibition upon gambling businesses and then provide for some exceptions or qualifications to that prohibition. Tabcorp’s licences permitted it to engage in wagering and gaming businesses.

The primary wagering business which is relevant to this proceeding is pari-mutuel betting, commonly known as totalisator betting or ‘tote’ betting. That form of betting was first authorised in Victoria by the Totalisator Act 1930, which allowed a racing club to obtain a permit to establish and conduct a totalisator at race meetings on the club’s racecourse – commonly called on-course totalisators. Racing clubs were required to deduct a commission from all amounts bet and the commissions were shared between the clubs and the government in varying proportions over the years.

The TAB was authorised to conduct off-course betting on totalisators conducted by the racing clubs. It received bets on events conducted by a particular club as agent for that club and paid the bets into that club’s totalisator. As with on-course totalisator betting, commissions on bets were deducted. The commissions were divided between the government, the relevant racing club, the TAB and other racing clubs which had paid the establishment expenses of the TAB under a scheme anticipated by the Racing Act 1958 (Vic).

Over time, the TAB’s functions and authorities were expanded to include cognate wagering activities in its own right, including its own off-course totalisator betting and some fixed odds betting.

Prior to the 1991 Act coming into operation, gambling activity in Victoria involving the use of gaming machines was unlawful. The 1991 Act legalised gaming machine operations in Victoria by providing for the grant of a ‘gaming operator’s licence’. A gaming operator’s licence authorised the holder to conduct gaming on gaming machines at approved venues in Victoria. Approved venues were essentially club and hotel premises, the operators of which held venue operator’s licences. The relevant gaming machines were primarily poker machines or ‘pokies’.

On 14 April 1992, the TAB and the Trustees of the Will and Estate of the late George Adams (the ‘Trustees’) were each granted a gaming operator’s licence for 20 years under s 33 of the 1991 Act. The Trustees conducted business under the name ‘Tattersalls’, often shortened to ‘Tatts’. In 1998, the estate administered by the Trustees was restructured and corporatised. One of the resulting corporate entities, Tatts Group Limited (‘Tatts’), became the holder of the gaming operator’s licence previously held by the Trustees. In a separate proceeding before the Court, Tatts claims similar relief to that claimed by Tabcorp in this proceeding. Judgment in the Tatts proceeding is also delivered today.[4] For convenience, I will refer to the Trustees as ‘Tatts’ unless it is necessary to refer to the Trustees specifically.
[4]Tatts Group Limited v The State of Victoria [2014] VSC 302.

Neither the TAB nor Tatts paid any fee to the State for the grant of the gaming operator’s licences.

In 1993, the Club Keno Act 1993 (Vic) came into force. Under that Act, the TAB and the Trustees were authorised to conduct a lottery-style game known as ‘keno’ or ‘club keno’.

(B) The 1994 privatisation

On 21 December 1993, the Premier of Victoria (Mr Kennett) issued a news release announcing the Government’s proposal to float the TAB on the stock exchange, with the ‘racing industry’ to hold a 25 per cent shareholding and the other 75 per cent to be held by the public. The announcement foreshadowed the release of a prospectus for the proposed public company by 30 June 1994. The Premier noted that the racing industry was yet to give a final response to the float proposal.

On or about 15 March 1994, the Treasurer, for and on behalf of the State, entered into a Memorandum of Understanding (‘MOU’) in relation to the float with the Victoria Racing Club, the Victoria Amateur Turf Club, the Moonee Valley Racing Club Inc, the Victorian Country Racing Council Inc, the Harness Racing Board (for and on behalf of the Harness Racing Clubs of Victoria) and the Greyhound Racing Control Board (for and on behalf of the Greyhound Racing Clubs of Victoria) (together, ‘the racing industry’).

The MOU provided, amongst other things, that the Government would seek the passage of necessary legislation through the Parliament to give effect to understandings that:

(1) a wagering licence and a gaming licence would be held by Tabcorp for a minimum term of 18 years;

(2) the renewal of the licences at the end of the initial term of 18 years would be for a further period of not less than 18 years; and

(3) the terms of the renewal of the licences at the end of the initial term of 18 years, and for each and every subsequent renewal, would require the holder of the licences to enter into agreements with the racing industry not less advantageous to the racing industry than the ‘joint venture agreement’ and other relevant agreements referred to in the MOU.

The joint venture agreement contemplated by the MOU was an agreement between Tabcorp and the racing industry regarding the establishment and operation of a joint venture, through which Tabcorp and the racing industry would conduct all gambling activity that the TAB was, at that time, authorised to conduct.

On or about 25 May 1994, as contemplated by the MOU, Tabcorp (and related companies) entered into the following agreements with companies representing the racing industry:

(1) the joint venture agreement;

(2) the ‘Product Supply Agreement’; and

(3) the ‘Racing Program Agreement’.

(C) The Gaming and Betting Act

To facilitate the float of the TAB, the Government introduced the Gaming and Betting Bill 1994 (Vic) into Parliament. The Second Reading Speech to that Bill confirmed that the legislation was designed to provide a regulatory framework for the privatisation of the TAB and to facilitate the successful public float of the TAB.[5] The Explanatory Memorandum to the Bill commenced by stating:

The Bill provides for the issue of a wagering licence and a gaming licence to TABCORP Holdings Limited (‘Tabco’) to authorise the licensee, and a wholly owned subsidiary of the licensee as operator, to conduct wagering, approved betting competitions, gaming operations and club keno.[6]

[5]Victoria, Parliamentary Debates, Legislative Assembly, 28 April 1994, 1313 (Alan Stockdale, Treasurer).

[6]Explanatory Memorandum, Gaming and Betting Bill 1994 (Vic) 1.

The 1994 Act passed through the Parliament on 25 May 1994 and all material provisions were in force by 15 August 1994.

Section 1 of the 1994 Act contained the following statement of its purpose:

1.        Purpose
The purpose of this Act is to make provision for the carrying on, under licence or permit, of—
(a)       a business of wagering;
(b)       a business of conducting approved betting competitions;
(c)       a business of conducting gaming;
(d)      a business of conducting club keno;
(e)       a business of on-course wagering.

On 28 June 1994, the Governor in Council of Victoria granted the wagering licence and the gaming licence to Tabcorp pursuant to ss 12(1)(a) and (b) of the 1994 Act. The licences commenced operation on the ‘appointed day’, being 15 August 1994. On 29 August 1994, Tabcorp paid to the Treasurer the ‘allotment amount’ (the proceeds of the float after some deductions – a net sum of $597.2 million) as consideration for the grant of the licences.

(D) The Gambling Regulation Act

The Act was enacted in December 2003. It commenced operation on 1 July 2004.

Section 1.1 of the Act provided that the main purpose of the Act was to re-enact and consolidate the law relating to various forms of gambling and to establish a Victorian Commission for Gambling Regulation (the ‘Commission’). It repealed eight existing Acts that prohibited or regulated various forms of gambling, including the 1991 Act, the Club Keno Act and the 1994 Act.

Chapter 4 of the Act materially re-enacted Tabcorp’s authorisations to conduct wagering activities and gaming machine operations under its existing wagering licence and gaming licence. The gaming licence and the wagering licence granted under s 12 of the 1994 Act were taken to be licences under Part 3 of Chapter 4 of the Act.[7]
[7]Section 12.2.1, sch 7 items 1.1, 4.2.

Section 4.3.12(1) of the Act materially re-enacted the terminal payment provision in s 21 of the 1994 Act:

4.3.12 Entitlement of former licensee on grant of new licences
(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.
(2)The person who was the holder of the former licences is entitled to the payment under subsection (1) whether or not the person was, or was entitled to be, an applicant for the new licences.
(3)…

Chapter 3 of the Act materially re-enacted Tatts’s entitlement to conduct gaming machine operations under its existing gaming operator’s licence.

Chapter 6 of the Act materially re-enacted the provisions of the Club Keno Act in respect of the conduct of keno games.

By a declaration made on 16 April 2008 under s 3.2.3 of the Act, the Minister directed that:

(1) the maximum number of gaming machines available for gaming in all approved venues in Victoria, other than the Melbourne Casino, was 27,500; and

(2) Tabcorp and Tatts could each operate 50 per cent of those gaming machines.

The declaration remained in force until the expiry of Tabcorp’s gaming licence and Tatts’s gaming operator’s licence on 15 August 2012.

(E) 2008 amendments to the Act

The Act was amended by the Gambling Regulation Amendment (Licensing) Act 2008 (Vic) (the ‘2008 amendments’), which commenced operation on 27 August 2008.

Section 8 of the 2008 amendments inserted Part 3A into Chapter 4 of the Act. The new Part 3A provides for:

(1) the grant of a ‘wagering and betting licence’;[8]
[8]Sections 4.3A.5–4.3A.8.

(2) payment by the holder of the wagering and betting licence of one or more amounts that the Minister may determine and require as the premium payment for the licence;[9]
[9]Section 4.3A.13.

(3) the activities authorised by the wagering and betting licence, namely:[10]
[10]Section 4.3A.1.

(a) wagering; and

(b) approved betting competitions; and

(4) a 12-year term for the wagering and betting licence.

The first wagering and betting licence was to come into operation upon the expiry of Tabcorp’s wagering licence and gaming licence, which had been issued on 28 June 1994.[11] Section 4.3A.2 provides that there can be no more than one wagering and betting licence in operation at any time.
[11]Section 4.3A.8.

Critically, s 6 of the 2008 amendments inserted s 4.3.4A in Part 3 of Chapter 4 of the Act. That section is in the following terms:

4.3.4A Application of Part
(1)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.
(2)Subsection (1) does not prevent the appointment of a temporary licensee under s 4.3.33 if the licences referred to in sub-section (1) are cancelled.

The 2008 amendments also inserted a new Chapter 6A into the Act, which provides for:

(1) the grant of a single licence known as a ‘keno licence’;

(2) payment by the holder of the keno licence of one or more amounts that the Minister may determine and require as the premium payment for the licence;

(3) the activities authorised by the keno licence, namely the conduct of keno games under Chapter 6A and any conditions to which the licence is subject; and

(4) a 10-year term for the keno licence.

(F) 2009 amendments to the Act

In June 2009, the Act was further amended by the Gambling Regulation Amendment (Licensing) Act 2009 (the ‘2009 amendments’), which in large part commenced operation on 24 June 2009.

The 2009 amendments inserted Part 4A into Chapter 3 of the Act. Part 4A provides for, among other things:

(1) the creation and allocation to the operators of approved venues (‘venue operators’) of gaming machine entitlements;

(2) the ability of the Minister to determine whether an amount or amounts must be paid for the entitlements;

(3) the activities authorised by the gaming machine entitlements, namely: the acquisition of approved gaming machines and restricted components, the conduct of gaming on an approved gaming machine in an approved venue, and the doing of all things necessarily incidental to the carrying on of the authorised activities; and

(4) a 10-year term for gaming machine entitlements.

(G) The grant of licences and entitlements under the new regimes

On or about 19 December 2011, the Minister for Gaming issued the wagering and betting licence to a wholly owned subsidiary of Tabcorp, Tabcorp Wagering (Vic) Pty Ltd, to operate from 16 August 2012 on the expiry of Tabcorp’s two licences. On or about 19 January 2012, Tabcorp Wagering paid $410 million to the State as consideration for the wagering and betting licence.

On or about 25 March 2011, the Minster for Gaming issued the keno licence to a wholly owned subsidiary of Tabcorp, Tabcorp Investments No 5 Pty Ltd. In April 2011, Tabcorp Investments paid $60 million to the State as consideration for the keno licence.

Tabcorp’s keno licence commenced on 15 April 2012, with the result that there was no period of overlap with the previous keno regime operated by Tabcorp and Tatts.

On 7 June 2010, the Minister for Gaming created 27,500 gaming machine entitlements, and determined that their effective date was 16 August 2012. On various dates in 2010, the Minister for Gaming allocated a total of 27,300 gaming machine entitlements to approved venue operators, to commence on expiry of the gaming licence held by Tabcorp and the gaming operator’s licence held by Tatts. Recipients of gaming machine entitlements were required to pay a total of approximately $981 million to the State.

Against this background, I proceed to consider the issues for determination.

Is Tabcorp entitled to the terminal payment specified in s 4.3.12 of the Act?

As stated above, the State denies Tabcorp’s statutory claim on two grounds. First, the State contends that no ‘new licences’ within the meaning of the terminal payment provision have been granted and, accordingly, the contingency triggering Tabcorp’s entitlement to payment has not occurred. Second, the State contends that the terminal payment provision was impliedly repealed, or ‘rendered inoperative’, by the 2008 and 2009 amendments. Both issues raise questions of statutory interpretation. Indeed, there is a central interpretation issue which can be simply stated.

The State contends that the phrase ‘[o]n the grant of new licences’ in s 4.3.12(1) has a specific limited meaning: it means on the grant of new licences under Part 3 of Chapter 4 of the Act. In other words, s 4.3.12(1) should be read as if it included the emphasised words in the following re-write of the section:

(1)On the grant of new licences under this Part, 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.

Tabcorp contends that the phrase ‘[o]n the grant of new licences’ in s 4.3.12 has a broader generic meaning: that the words should be understood in their natural and ordinary sense, as a reference to the grant of licences that did not previously exist and which authorise the conduct of wagering and gaming businesses that would otherwise be unlawful. Tabcorp contends that, when the matter is looked at as one of substance and not form, the grant of gaming machine entitlements to licensed venue operators amounts to the granting of new licences authorising gaming in Victoria; and that the wagering and betting licence granted to it falls within the meaning of a new licence authorising wagering.

So the central issue is whether the key words should be given a specific (or narrow) meaning, or a generic (or ordinary) meaning. I will refer to the rival positions as the ‘specific meaning’ contention and the ‘generic meaning’ contention.

It is first necessary to determine whether to accept the specific or generic meaning of the critical words on a proper interpretation of the language of the Act as it stood before the 2008 and 2009 amendments. It is then necessary, in the light of the answer to that central question, to interpret those amendments and consider their effect on the terminal payment provision.

(A) Should the specific or generic meaning apply?

As the High Court has repeatedly stated, the process of statutory construction involves beginning with the words of the statute and then considering those words in light of their context and the purpose of the provision to be interpreted. In Federal Commissioner of Taxation v Unit Trend Services Pty Ltd, French CJ, Crennan, Kiefel, Gageler and Keane JJ stated:

As French CJ, Hayne, Crennan, Bell and Gageler JJ said in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd: ‘This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text’. Context and purpose are also important. In Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross French CJ and Hayne J said:
The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky Inc v Australian Broadcasting Authority, ‘[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute’ ... That is, statutory construction requires deciding what is the legal meaning of the relevant provision ‘by reference to the language of the instrument viewed as a whole’, and ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’.[12]

[12](2013) 87 ALJR 588, 597 [47] (original emphasis; citations omitted).

Earlier, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue), Hayne, Heydon, Crennan and Kiefel JJ stated:

This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.[13]

[13](2009) 239 CLR 27, 46-7 [47]-[49] (citations omitted).

Most recently, in Thiess v Collector of Customs & Ors, French CJ, Hayne, Kiefel, Gageler and Keane JJ stated:

Statutory construction involves attribution of meaning to statutory text. As recently reiterated:
‘This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text'. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text.[14]

[14](2014) 88 ALJR 514, 518 [22], quoting Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 87 ALJR 98, 107 [39] (citations omitted).

Consistent with these general principles, s 35(a) of the Interpretation of Legislation Act 1984 (Vic) provides that ‘a construction that would promote the purpose or object underlying the Act … shall be preferred to a construction that would not promote that purpose or object’. Section 35(b) empowers the Court to consider ‘any matter, document or thing that is relevant’ to the interpretation of a provision. To similar effect is s 15AA of the Acts Interpretation Act 1901 (Cth).

In Thiess, the High Court described the search for statutory purpose as:

… a particular statutory reflection of a general systemic principle. For:
it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.[15]

[15]Ibid [25] (citations omitted).

In addition to these general principles of statutory interpretation, there are some specific principles which are relied upon in this case. They are considered below.

Text

As stated, the interpretative task must commence with consideration of the text of the terminal payment provision in the context of the Act as a whole. I start with the text of the Act as it stood before the 2008 and 2009 amendments.

The relevant part of the Act is Part 3 of Chapter 4. For convenience, I will refer to this as ‘Part 3’. Part 3 concerns the wagering licence and the gaming licence held by Tabcorp. It is divided into eight Divisions:

(1) Division 1 concerns the extent of the authorities granted by the licences.
(2)Division 2 concerns the grant of licences. Importantly, the two licences must be granted to, and held by, the same person.
(3)Division 3 contains the terminal payment provision.
(4)Division 4 concerns the appointment of wagering and gaming operators, who must be wholly owned subsidiaries of the defined ‘licensee’.
(5)Division 5 concerns regulation of the shareholding interests in the licensee.
(6)Division 6 concerns further licensing restrictions and requirements on the licensee and the operator.
(7)Division 7 concerns disciplinary action and cancellation of the licences.

This divisional structure demonstrates that Part 3 is a self-contained part dealing with Tabcorp’s licences, applications for further licences following cancellation or expiry of Tabcorp’s licences, and regulation of the licensee and the operators from time to time.

The following definitions and key aspects of Part 3 are relevant to determining the meaning of the critical words:

(1)‘wagering licence’ is defined as meaning ‘the wagering licence granted under Part 3 of Chapter 4’.[16]
(2)‘gaming licence’ is defined as meaning ‘the gaming licence granted under Part 3 of Chapter 4’.[17]
(3)‘licensee’ is defined as meaning ‘the holder of the wagering licence and the gaming licence’.[18]
(4)Under s 4.3.3 there can only be one wagering licence and one gaming licence in operation at any time.
(5)Under s 4.3.4, ‘the wagering licence and the gaming licence are not transferrable to any other person’.
(6)Division 2 of Part 3 provides that applicants can only apply for and be granted ‘a wagering licence and a gaming licence’ together – it is not possible to apply for, or be granted, only a wagering licence or only a gaming licence.[19]
(8)Section 4.3.12, the terminal payment provision, includes a number of expressions cognate to the term ’licence’: ‘new licences’, ‘licences last in force’, ‘former licences’, and ‘new licensee’. The use of the plural ‘new licences’ in conjunction with the singular ‘new licensee’ is consistent with the requirement in Division 2 that the defined wagering licence and gaming licence be granted and held by the same licensee. The terms ‘licences last in force’ and ‘former licences’ are obviously references to the defined licences.
(9)The formula for calculating ‘licence value’ in s 4.3.13 applies to holders of later licences, not only Tabcorp.[20] This shows that Part 3 was then intended to have continuing operation in relation to later wagering licences and gaming licences.

[16]Section 1.3.

[17]Ibid.

[18]Section 4.1.2.

[19] Section 4.1.1 reinforced that the wagering licence and the gaming licence could only be granted or held together by providing:

[20]Integer C(b) in the formula.

Notably, the 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.

I turn to consider the purpose or object of the terminal payment provision.

Purpose or object

Evidence as to the mischief to which s 4.3.12 was directed, when originally enacted as s 21 of the 1994 Act, is relevant and admissible in determining the purpose or object of the terminal payment provision. The evidence established that the mischief was the need to ensure that Tabcorp did not have to amortise the value of the licences in the profit forecasts contained in the float prospectus. Amortisation would have had a significant negative effect on the profit forecasts and made it less attractive to investors, thus reducing the float proceeds available to Tabcorp for payment to the State as consideration for the grant of the licences. This object was achieved by enacting the terminal payment provision, thus enabling the State to receive hundreds of millions of dollars more than it would have received if amortisation had been required. The achievement of this object was at the price of the promise contained in the terminal payment provision; albeit a promise which was always subject to the sovereign risk of repeal or alteration by Parliament. The formula for calculation of the terminal payment demonstrates an intention that the statutory promise, if fulfilled, would be revenue neutral for the State — because the terminal payment could never exceed the premium paid for the new licences.

Tabcorp’s contentions

Tabcorp’s contentions involve the following steps.

First, Tabcorp contends that s 4.3.12 does not contain the words ‘under this Part’, which the specific meaning contention effectively requires to be read into the section. The definition in the 1994 Act of ‘licence’ as meaning ‘the wagering licence or the gaming licence granted under Part 2’ was not determinative at that time, because the phrase used in the terminal payment provision was ‘on the grant of new licences’, and ‘new licences’ is capable of being read as an undefined composite phrase. It would have been an easy matter for Parliament to include the words ‘under this Part’, or specify ‘on the grant of a new wagering licence and a new gaming licence’, if that had been Parliament’s intention. Moreover, on re-enactment and consolidation in 2003, the Act jettisoned the definition of ‘licence’, with the result that its meaning in that Act depends throughout on its ordinary meaning in context. The ordinary meaning of ‘licence’ is no more than a permit to do something that would otherwise be unlawful.[21]
[21]Federal Commissioner of Taxation v United Aircraft Corporation (1943) 68 CLR 525, 533 (Latham CJ).

Second, Tabcorp acknowledges that, outside of s 4.3.12, Part 3 uses the term ‘licences’ to refer to licences under that Part. Tabcorp contends, however, that this is because the references either use the defined terms ‘wagering licence’ or ‘gaming licence’ expressly, or the context makes it plain that the general references to ‘licence’ or ‘licences’ are used in that confined sense. For example:

(1)References to ‘initial licences’ in the 1994 Act were to a defined term, which confined them to the specific meaning.
(2)The ‘later licences’ referred to in s 14 of the 1994 Act were, from their context, obviously confined to the specific meaning.
(3)The reference in s 4.3.33(3) of the Act to ‘another licence under this Part’ is expressly confined to the specific meaning.
(4)In Division 2 of Part 3, concerning the grant of licences, s 4.3.6(1) states that the Commission must not recommend that ‘a licence be granted’ unless satisfied of specified matters. It is clear from the preceding section (s 4.3.5) that it is speaking of a wagering licence and a gaming licence as defined. The same may be said of the references to ‘the grant of the licences’ in s 4.3.7, the references in s 4.3.8(2) to the Governor not granting ‘the licences’ unless satisfied of certain matters, and the references in ss 4.3.9 and 4.3.10 to ‘each licence’ and ‘the licences’.
(5)Similarly, in Division 7 of Part 3, concerning disciplinary action and cancellation, it is clear from ss 4.3.31 and 4.3.32(1) that the references in ss 4.3.32(2) and 4.3.33 to ‘the licences’ are references to the wagering licence and the gaming licence.
(6)There are occasions where an additional narrowing element, similar to that which the State contends should be read into s 4.3.12, is made express. For example:[22]
(a)       Section 3.3.13 refers to ‘premises approved under this Part’.
(b)      Section 3.8.1 refers to a licence holder ‘under this Chapter’.
(c)       Section 4.2.1(1) refers to ‘a licence or permit granted under this Chapter’.
(d) Section 4.3.27 refers to ‘forfeiture under this Division’.
(e)Section 4.3.33(3) provides for termination of a temporary licence ‘by the grant of another licence under this Part’.

[22]Emphasis added.

Tabcorp contends that these examples demonstrate that when Parliament intended to confine references to ‘licences’ or ‘a licence’ it did so by express language or necessary implication having regard to the context. Tabcorp contends that s 4.3.12 contains no such confining language. The section appears at the commencement of a separate Division in Part 3, and there is nothing about its context in the Act which dictates that the composite phrase ‘new licences’ should be confined in its meaning to licences ‘under Part 3’.

Third, Tabcorp contends that the definition of ‘licensee’, as the holder of both a wagering licence and a gaming licence, does not inform the meaning of the composite phrase ‘new licences’ in s 4.3.12, because:

(1) the reference to the ‘new licensee’ in that provision must take its meaning from ‘new licences’. In other words, the composite phrase ‘the new licensee’ is a reference to the holder of the ‘new licences’, and is thus not confined by the definition of ‘licensee’;

(2) the singular ‘new licensee’ does not confine the term ‘new licences’ to mean conjoined wagering and gaming licences under Part 3, because, under s 37 of the Interpretation of Legislation Act, the singular includes the plural and no contrary intention appears in the Act if the phrase ‘new licences’ is given a generic meaning;[23] and

(3) notwithstanding the confined definition of ‘licensee’, the term is used in Chapter 4 of the Act in other than the defined sense, albeit where the context dictates that it does not have the defined and specific meaning. For example, in s 4.2.9(1) and (3), s 4.2.10(2) and s 4.2.11, where the composite phrase ‘wagering and betting licensee’ and ‘the licensee’ are used interchangeably.

[23]Section 37 of the Interpretation of Legislation Act 1984 provides:

In an Act or subordinate instrument, unless the contrary intention appears—

(a)…

(c)words in the singular include the plural; and

(d)words in the plural include the singular.

Fourth, Tabcorp contends that the use of the word ‘on’ in s 4.3.12 — ‘on the grant of new licences’ — assumes that some form of new licences will be granted. That assumption is consistent with the purpose or object of the terminal payment provision. It is also consistent with the structure of the Act which, until amendment, provided for the grant of further licences under Part 3.

Fifth, Tabcorp contends that it would defeat the purpose of the provision to confine it to the specific meaning contended for by the State, thus enabling the payment obligation on which investors in Tabcorp relied to be avoided by the (perhaps unintended) side-wind of making changes to the source, but not the material substance, of the regime or regimes authorising wagering and gaming; for example, by placing those regimes in a different part of the Act, or even in another Act. Such a result would be inconsistent with providing for a ‘near certain occasion for the re-payment of the licence fee’, so that, consistent with the purpose or object of the provision, the licence fee did not need to be amortised in Tabcorp’s profit forecasts in the prospectus or in its later accounts. On this basis, Tabcorp contends that only the generic meaning would promote the purpose or object of the provision and, as the generic meaning is open on the words of the Act, it should be preferred — as s 35(a) of the Interpretation of Legislation Act requires.

I do not accept Tabcorp’s generic meaning contentions. In my opinion, Parliament intended the specific meaning to apply to the critical words. The statutory language is simply too strict to allow the generic meaning to be attributed to the critical words in accordance with Tabcorp’s submissions. When read as a whole, the structure and language of Chapter 4 of the Act, in particular Part 3, makes it plain that the phrase ‘new licences’ in s 4.3.12 refers to a subsequent gaming licence and a subsequent wagering licence as defined, each being a licence ‘granted under Part 3 of Chapter 4’ of the Act. My reasons follow.

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’.[24] 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.

[24]Emphasis added.

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.[25] None of these shorthand references are accompanied by an additional narrowing element such as ‘under this Part’ or ‘under this Chapter’.
[25]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’.

As to Tabcorp’s specific contentions:

(1)The first contention requires the Court to read ‘new licences’ and ‘new licensee’ without reference to the definitions in the Act or the requirement for both licences to be granted and held conjointly.
(2)The second contention, that all other references to a ‘licence’ or ‘licences’ in Part 3 depend on their context (or express terms) to attract the defined meanings, may be accepted. Nevertheless, it indicates that the parliamentary draftsperson has used the words consistently throughout the whole of the Part, including in s 4.3.12 itself (for example, ‘licences last in force’, ‘former licences’).
(3)As to the third contention, I accept that the phrase ‘new licensee’ depends for its meaning on the proper meaning of ‘new licences’. So, if the generic meaning were to be accepted, the definition of ‘licensee’ would not prevent the reference to a ‘new licensee’ being read in a generic sense also. But, given my rejection of the generic meaning, this contention cannot assist Tabcorp.
(4)The fourth contention is inconsistent with the plain requirement that the terminal payment is contingent on the grant of new licences. That was never a certain event, especially in the context of a fledgling gaming machine industry. Future government policy could have terminated the industry and re-imposed the total prohibition on gaming machines which prevailed in Victoria until 1991.
(5)As to the fifth contention, until the 2008 and 2009 amendments, new licences in accordance with the statutory definitions could be granted, thus enabling the operation of the terminal payment provision, consistent with the purpose of that provision. Accordingly, there was no need for a generic meaning to promote the purpose during the currency of the pre-amendment regime.

Tabcorp also seeks to support its generic meaning contention, in relation to the Act as it stood before the 2008 and 2009 amendments, by reference to the ‘always speaking’ principle of interpretation.

The text of a statute is ordinarily to be read as ‘always speaking’ or ‘speaking continuously in the present’.[26] In Chubb Insurance Co of Australia Ltd v Moore, Emmett and Ball JJA (Bathurst CJ, Beazley P and Macfarlan JA agreeing) summarised this principle:

Another way of putting that proposition is that a statute should generally be construed so as to apply to all things coming within the denotation of its terms, having regard to their connotation at the time of enactment. The connotation of a word or phrase is its essential attributes, which are to be determined as at the time of enactment. The denotation of a word or phrase is the class of things that, from time to time, may be seen to possess those essential attributes sufficiently to justify the application of the word or phrase to them.[27]

[26]Commissioner of Police v Eaton (2013) 87 ALJR 267, 286 [97] (Gageler J).

[27](2013) 302 ALR 101, 119-20 [82] (original emphasis).

Tabcorp contends that when enacted in 1994, and re-enacted in 2003, the terminal payment provision was intended to have continuing operation to ‘later licences’ (see s 14 of the 1994 Act) or to ‘another licence’ (see ss 4.3.5 and 4.3.33(3) of the Act) in circumstances where, unless Tabcorp’s licences were cancelled prior to expiry and new licences were granted before that time, the terminal payment provision was not intended to operate for at least 18 years. In these circumstances, giving the composite phrase ‘new licences’ the generic meaning makes it amenable to the application of the ‘always speaking’ principle — to allow the words to attach to new species of licences or other authorisations for the conduct of wagering and gaming businesses as and when they arise. Tabcorp contends that such a result is consistent with the purpose or object of the terminal payment provision, especially in circumstances where the benefit to the State from the increased float proceeds, and consequent increased licence consideration, had already been achieved.

These contentions seek to use the always speaking principle for an impermissible purpose – to support a generic connotation. In my opinion, the always speaking principle depends for its operation on the existence of a generic connotation in the relevant statutory provision as properly construed at the time of enactment. My reasons follow.

The argument in Chubb Insurance concerned whether a ‘claims made’ contract of insurance fell within the general description of ‘a contract of insurance by which the person is indemnified against liability to pay any damages or compensation … on the happening of the event giving rise to the claim for damages or compensation’ in s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Unlike here, there was no question that the description was of a generic kind, capable of application to any contract of insurance which had the effect stipulated. The argument in the case for exclusion of a claims made contract of insurance from the statutory description was based upon the fact that such policies were not in the contemplation of the Parliament when the section was enacted. So the facts of the Chubb Insurance case do not assist in resolving the issues in this case.

The only authority cited in Chubb Insurance concerning the ‘always speaking’ principle was the decision of Campbell J (as he then was) in Hore v Albury Radio Taxis Co-operative Society Ltd.[28] The facts of that case are also unhelpful to this case. In the course of interpreting the relevant legislative provision, Campbell J referred to the ‘always speaking’ principle in some detail, referring with approval to statutory interpretation texts and noting some of the decided cases in an appendix to his reasons. His Honour emphasised that the principle can only be applied where the provision at issue, on its proper construction, uses the words in question in a generic sense:

However, some caution must be applied in the exercise of this principle. There is still a question of construction which needs to be decided, about whether a particular expression ought to be construed, in the context of the particular legislation in which it occurs, as actually extending to some new state of affairs to which it might arguably extend.[29]

[28](2002) 56 NSWLR 210.

[29]Ibid 223 [43].

In Wilson v Commissioner of Stamp Duties,[30] the New South Wales Court of Appeal rejected an argument that an exemption from stamp duty on hiring arrangements relating to the use of ‘a motion picture film’ extended to include hiring arrangements for video cassettes. That argument was rejected on the basis that, properly construed, a ‘motion picture film’ had a particular or specific meaning and not a generic one capable of wider application to technological advances in film technology. This result was reached on a number of interpretative grounds, including a review of the legislative history and the statutory purpose behind the particular exemption.
[30](1988) 13 NSWLR 77.

The approach in Wilson was confirmed by Spigelman CJ in the New South Wales Court of Appeal in Deputy Commissioner of Taxation v Clark, where his Honour stated that the application of the always speaking principle required the Court to be ‘satisfied that the word or words was or were intended to be used in a generic sense in the relevant statute’.[31]
[31](2003) 57 NSWLR 113, 145 [141].

In oral submissions, Tabcorp relied on the English Court of Appeal decision in Victor Chandler International v Customs and Excise Commissioners and Anor.[32] In my opinion, that case is an example of the application of the always speaking principle in the context of generic language. It adds nothing to the Australian authorities discussed above.
[32][2002] 2 All ER 315.

For the reasons given above, I have rejected Tabcorp’s contention that the generic meaning applied to the phrase ‘new licences’ in s 4.3.12 before the 2008 and 2009 amendments, and instead accepted the State’s specific meaning contention. In order to meet this eventuality, Tabcorp contends that the specific meaning altered to a generic meaning when the 2008 and 2009 amendments introduced a new species of statutory authorisations to conduct the otherwise unlawful businesses of wagering, gaming and keno; thus allowing the always speaking principle to operate and embrace those new species of authorisations. I will refer to this contention as ‘the altered meaning contention’. It is relevant to the implied repeal issue, to which I now turn.

(B) Was s 4.3.12 impliedly repealed by s 4.3.4A?

There are a number of overlapping principles of statutory interpretation which are relevant to the implied repeal issue.

First, in the absence of express words, very strong grounds are required to found a conclusion that an earlier statutory provision is repealed by a later provision. In Goodwin v Phillips, Barton J adopted the following statement from Craies on Statute Law:

‘The Court must … be satisfied that the two enactments are so inconsistent or repugnant that they cannot stand together, before they can from the language of the later imply the repeal of an express prior enactment, i.e., the repeal must, if not express, flow from necessary implication.’ [33]

[33](1908) 7 CLR 1, 10.

Barton J went on to say:

If, therefore, there is fairly open on the words of the later Act, a construction by adopting which the earlier Act may be saved from repeal, that construction is to be adopted. … If the conditions are irreconcilable with the prior enactment, then to that extent the two cannot stand together.[34]

[34]Ibid 10-11.

Later High Court authority has confirmed this approach to questions of implied repeal. For example, in South-Eastern Drainage Board (SA) v Savings Bank of South Australia, Dixon J (as he then was) formulated a test for implied repeal by reference to whether it was ‘impossible to reconcile’ the later and earlier provisions.[35] More recently, in Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom, Gummow and Hayne JJ said that the doctrine requires ‘that actual contrariety be clearly apparent and that the later of the two provisions be not capable of sensible operation if the earlier provision still stands’.[36]
[35](1939) 62 CLR 603, 625.
[36](2006) 228 CLR 566, 585 [48]. See also, Saraswati v The Queen (1991) 172 CLR 1, 17 (Gaudron J); Dossett v TKJ Nominees Pty Ltd (2003) 218 CLR 1, 14 (Gummow, Hayne and Heydon JJ).

Second, consistent with the principles concerning implied repeal, the principle of legality is relevant. This principle was stated from an early time in the High Court by O’Connor J in Potter v Minahan in the following terms:

It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness …[37]

[37](1908) 7 CLR 277, 304 (emphasis added).

Third, although State parliaments have the power to deprive citizens of existing rights without making compensation, in contrast to the Commonwealth under the Commonwealth Constitution,[38] it remains a ‘principle of statutory construction that, unless it is unavoidable, an enactment should not be construed in a manner that would lead to the loss of a person’s valuable rights without payment of compensation’.[39] This principle was recently stated by McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Ltd, affirming the principle as expressed in Clissold v Perry:[40]

Clissold v Perry held that legislation is presumed not to interfere with existing vested proprietary interests without adequate compensation. Griffith CJ said:
In considering this matter it is necessary to bear in mind that it is a general rule to be followed in the construction of Statutes such as that with which we are now dealing, that they are not to be construed as interfering with vested interests unless that intention is manifest.

The principle applied in Clissold is but a particular exemplification of the wider principle that, in the absence of clear words, legislation is not construed as intending to interfere with economic rights and interests without compensation.[41]

[38]See s 51(xxxi).

[39]Springhall v Kirner [1988] VR 159, 165-6 (Crockett J).

[40](1904) 1 CLR 363, 373.

[41](2004) 221 CLR 30, 49 [43] (citations omitted).

In Clissold v Perry, Griffith CJ said that the principle applied to ‘vested interests’. In Potter v Minahan, O’Connor J expressed the principle as applying to ‘rights’. In this case, although contingent, Tabcorp’s right under the terminal payment provision was clearly a valuable right and, in my opinion, subject to this principle of statutory interpretation.

Fourth, there is a presumption that a later general enactment is not intended to interfere with an earlier special provision unless the later general enactment manifests that intention very clearly.[42]
[42]Commission of Police v Eaton (2013) 87 ALJR 267, 278 [46] referring to the statement of Lord Wilberforce in Associated Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538, 553-4. This principle is often expressed by the maxim ‘generalia specialibus non derogant’.

Fifth, all words in a statute must prima facie be given some meaning and effect. This principle may be more compelling if the word or phrase in question has been added by amendment,[43] but the principle applies to all legislation. In Project Blue Sky Inc v Australian Broadcasting Authority, McHugh, Gummow, Kirby and Hayne JJ approved an earlier statement 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’.[44]

[43]DS Pearce and RS Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7^th ed, 2001) 49-50 [2.26] and the cases there referred to.

[44](1998) 194 CLR 355, 382 [71].

Sixth, there is a general substantive presumption of statutory interpretation that the legislature does not intend to achieve a result that is manifestly unfair or unreasonable. In Commissioner for Railways (NSW) v Agalianos, Dixon CJ said that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’.[45] That statement has been expressly approved by the High Court on a number of occasions.[46]
[45](1955) 92 CLR 390, 397.
[46]For example, Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2015) 87 ALJR 588, 597 [47].

The presumption against manifestly unfair or unreasonable results is often applied in circumstances where the Court considers that the literal operation of the statute leads to absurd, extraordinary, capricious or irrational results, such that ‘the legislature could not have intended such an operation and that an alternative interpretation must be preferred’.[47] Of course, for this presumption to be applied the language must not be ‘intractable’ — there must be a reasonable alternative interpretation available on the words of the statute.[48]
[47]Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, 321.
[48]Ibid 320-1.

Seventh, s 14(2)(e) of the Interpretation of Legislation Act provides:

(2)        Where an Act or a provision of an Act—
(a)       is repealed or amended; or
(b)       expires, lapses or otherwise ceases to have effect—
the repeal, amendment, expiry, lapsing or ceasing to have effect of that Act or provision shall not, unless the contrary intention expressly appears—
(c)…
(d)…
(e)affect any right, privilege, obligation or liability acquired, accrued or incurred under that Act or provision; …

State’s contentions

The key amending provision relied upon by the State to support its implied repeal case is s 4.3.4A. Reliance is also placed on the whole of Parts 3A and 4A of Chapter 4, and on s 3.4.1A.

Section 4.3.4A was introduced into Part 3 by the 2008 amendments. It provides:

(1)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.
(2)Subsection (1) does not prevent the appointment of a temporary licensee under section 4.3.33 if the licences referred to in subsection (1) are cancelled.

Part 3A was introduced by the 2008 amendments. It established a separate and extended regime, authorising wagering and related activities by the holder of a ‘wagering and betting licence’.

Part 4A was introduced by the 2009 amendments. It provided for a wholly new regime, authorising licensed venue operators holding gaming machine entitlements to conduct gaming on one approved gaming machine per entitlement in an approved venue operated by the venue operator.

Section 3.4.1A of the Act provides:

The granting of a venue operator's licence under this Part on or after the commencement of section 12 of the Gambling Regulation Amendment (Licensing) Act 2009 to a person is not to be taken to be a granting of—
(a) a gaming operator's licence to that person under this Part; or
(b) a gaming licence to that person under Chapter 4.

In summary, the State’s position is that these amendments, in particular s 4.3.4A, had the obvious intention of making the grant of any further wagering licence or gaming licence under Part 3 impossible; so Parliament must have intended to deprive s 4.3.12 of any effect or possible operation. In other words, as submitted by the State’s counsel, the clear effect of these amendments was to ‘remove the trigger’ for the operation of s 4.3.12. The State contends that this result is of sufficient clarity to make the continued operation of s 4.3.12 so inconsistent or repugnant with these provisions that they cannot stand together. In effect, the State contends that Parliament well understood that the words ‘new licences’ in s 4.3.12 had the specific meaning when it set about passing the 2008 and 2009 amendments. The purpose of the amendments was both to establish the new and separate wagering and gaming regimes and to ensure that the payment entitlement under s 4.3.12 could never be triggered on the grant of authorities to conduct wagering and gaming activities under the new regimes.

In the context of the State’s submissions, I will next consider the available extrinsic materials for the 2008 and 2009 amendments, in order to ascertain whether they provide any assistance as to Parliament’s purpose or object concerning the continued operation of the terminal payment provision.

Extrinsic materials

The 2008 and 2009 amendments to the Act were preceded by an extensive review by the State of the regulatory landscape governing gambling in Victoria, in particular wagering, gaming and keno. On 10 April 2008, the Premier at the time (John Brumby) issued a media release, in which he announced a new structure for gaming in Victoria to operate after the expiry of the licences held by Tabcorp and Tatts (the ‘2008 media release’). The 2008 media release contains a detailed description of the proposed restructure of gaming regulation in Victoria after expiry of the licences held by Tatts and Tabcorp, and included a statement of the Government’s subjective understanding of the effect of the proposed amendments to the Act which would introduce the new regime:

The Government's decision represents an entirely new regulatory model for the operation of wagering, gaming and keno in Victoria after the expiration of the current licences in 2012, and the Government has formed the view that neither Tattersalls nor Tabcorp are entitled to compensation.[49]

[49]Emphasis added.

The State contends that this statement by the Premier could not be more explicit as to the Government’s purpose to ensure both: (1) that an entirely new regulatory model would come into operation at the expiry of the licences held by Tabcorp and Tatts in 2012; and (2) that the effect of the new regulatory model would be to deprive Tabcorp and Tatts of their respective entitlements to compensation under the terminal payment provisions.[50]
[50]As explained in the judgment delivered today in the Tatts proceeding, s 3.4.33 of the Act contained a terminal payment provision for Tatts, albeit one operating on a different contingency following expiry of Tatts’s gaming operator’s licence.

The State contends that the intention behind the 2008 and 2009 amendments was reinforced and reiterated by statements made in a budget paper for the 2008-2009 financial year dated 6 May 2008 (‘2008 budget paper’).[51] In dealing with the State’s contingent liabilities for the 2008-09 financial year, the Treasurer stated:
[51]Victoria, 2008-09 Budget Paper No 4 - Statement of Finances (6 May 2008), 237.

Gambling licences
In 1992, a gaming operator's licence was issued to the Trustees of the Will and Estate of the late George Adams, now trading as Tatts Group. In 1994, the state issued a wagering and gaming licence to TABCORP Holdings Limited (TABCORP). These licences expire in 2012 and the end of licence arrangements are specified in the Gambling Regulation Act 2003.
These end of licence arrangements include compensation provisions for the licensees predicated on the current licensing arrangements being rolled over for a further period beyond 2012.
On 10 April 2008, the government announced a new regulatory model for the post-2012 licences. The main changes include:
•separating the wagering and gaming licence to instead license wagering on a stand-alone basis; and
•transitioning from the current gaming operator duopoly to a system where venue operators are licensed to own and operate gaming machines in their own right.

After considering the end of licence arrangements in the Gambling Regulation Act 2003, the government has formed the 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 in the Gambling Regulation Act 2003 that deal specifically with the end of licence arrangements for Tatts Group and TAB CORP.[52]

[52]Emphases added.

The State relies upon those parts of the budget paper which are emphasised by italics in the above quote. Tabcorp relies upon the portion of the quote which is emphasised by underlining.

At the time of the 2008 budget paper, the 2008 amendments, which contained the proposed s 4.3.4A, were before Parliament and had been read a second time on 17 April 2008. But the 2009 amendments were still to be drafted. The Bill for the 2009 amendments was not presented to Parliament until 3 February 2009.

Apart from the 2008 media release and the 2008 budget paper, there is no extrinsic evidence, either in the documents concerning the reform process or in the explanatory memoranda and Parliamentary debates concerning the 2008 and 2009 amendments, which sheds light upon the Government’s object and purpose concerning the continuing operation of the terminal payment provisions for Tabcorp and Tatts. Those extrinsic materials relate to the desirability for, and the content of, the gambling reforms introduced by the amendments. They do not have any bearing on the operation of the terminal payment provisions according to their terms. None of the reforms necessitated those provisions being repealed or rendered inoperative.

The first difficulty with relying on the 2008 media release and the 2008 budget paper as the State proposes is that they record the Government’s subjective view about the effect of s 4.3.4A on Tabcorp’s payment entitlement under its terminal payment provision. Although s 35 of the Interpretation of Legislation Act does not limit the kinds of extrinsic materials which can be utilised to identify the purpose or object of legislation, it is rare that extrinsic statements of subjective understanding as to the meaning or effect of proposed legislation can assist in ascertaining the objective meaning of the statutory text.[53]
[53]For example, Harrison v Melhem (2008) 72 NSWLR 380, 384 [12]-[16] (Spigelman CJ), 398-401 [159]-[173] (Mason P).

The second difficulty is that, while expressing the view set out above, the materials make it plain that the Government did not intend to alter or amend the terminal payment provisions. While the proposed (and final) form of s 4.3.4A was before Parliament, and the general intention to introduce a ‘new structure’ involving a ‘venue operator system’ (as subsequently enacted by the 2009 amendments) was spelt out in the 2008 media release, the Government’s view expressed in these documents was, in my opinion, equivocal: on the one hand supporting a general understanding as to the meaning of s 4.3.4A; on the other hand, supporting an intention to leave the terminal payment provisions unamended. In fact, the terminal payment provisions were not amended. In these circumstances, even if the Government’s subjective view is given some weight, it is equivocal and unreliable on that ground.

Tabcorp’s contentions

Tabcorp relies upon a combination of matters in the context of the overlapping principles of statutory interpretation which require the clearest of language to effect an implied repeal or to deprive a person of existing rights – especially where no compensation is provided for.

First, Tabcorp contends that s 4.3.4A is directed only at terminating the existing licensing regime for wagering and gaming under Part 3 on the expiry of Tabcorp’s licences — thus ensuring that the new licensing regimes under separate parts of the Act would operate from that time. In the meantime, however, s 4.3.4A(1) expressly provided that Part 3 continued to apply ‘with respect to’ Tabcorp’s licences. Section 4.3.12 is a provision of Part 3 which applies ‘with respect to’ Tabcorp’s licences. As such, it continues to operate and must be given some meaning in accordance with the principles expressed in Project Blue Sky.[54]
[54](1998) 194 CLR 355, 382 [76].

In support of this contention, Tabcorp contends that there is no logical connection between changing the licensing arrangements for the future and an intention to abrogate a financial obligation that arose under the existing licensing regime. It relies in particular upon the fact that the extrinsic material relating to the review processes, which culminated in the State’s decision to implement the new regime following expiry of its licences, contains no suggestion that the reform process required or included abrogation of Tabcorp’s rights under the terminal payment provision. In that regard, Tabcorp places particular reliance upon the statement in the 2008 budget paper that the State did not intend to alter or amend the terminal payment provision – and in fact did not do so.

4.The TABCORP group will have the flexibility to conduct any kind of business whether under the new licences or otherwise and whether in or out of Victoria, where it is permitted by law or the terms of the Racing Industry joint venture.
5.Consistent with all of these objectives, the maximum commercial value for the licences should be recouped by the State of Victoria.

6.        Accordingly:
·     TABCORP has now been granted a wagering licence and a gaming licence which will come into effect on the successful conclusion of this float.
·     The licences will be for terms of 18 years and will be concurrent and not separable.
·     The Government does not currently intend to grant further gaming or wagering licences to persons who are not now authorised to conduct gaming or wagering during that 18 year period.
·     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).
·     The Gaming and Betting Act 1994 provides that the Governor in Council must not grant new licences to any third party when the initial licences expire unless there is satisfaction that steps have been taken, or reasonable opportunity given, to ensure that the Racing Industry joint venture has satisfactorily been wound up and the applicant for the new licences has entered into, or has made a binding offer to enter into, arrangements with the Racing Industry that in the opinion of the responsible Minister after consultation with the Victorian Casino and Gaming Authority, are no less favourable to the Industry than those last in force between them and the TABCORP Group.
7.It is intended that any new licences will be granted on conditions which include conditions substantially to the same effect as those to which the TABCORP licences are subject.

The Government recognises both the importance of the Victorian Racing Industry and the importance of the 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.
On behalf of the Government, I wish both the Victorian Racing Industry and TABCORP well and I am confident that the future for them will be one of healthy growth and much success.
Yours sincerely
Alan Stockdale
Treasurer[81]

[81]Emphasis added.

At the time the prospectus was issued, the parties to the joint venture agreement had not agreed that the condition precedent to the operation of the joint venture agreement had been satisfied. Mr Clifton of Clayton Utz prepared a Schedule of Outstanding Issues from the racing industry’s perspective on 30 June 1994. He described the non-binding instrument required by clause 2.1(a)(v) as the ‘State Agreement’, and continued:
The principal concern of the Industry is that the instrument provides some assurances that the conditions of the Wagering Licence and Gaming Licence will not be changed without the consent of the Racing Industry.
The prospectus for the float was issued on 1 July 1994 and offers for shares in Tabcorp closed on 12 August 1994.

During July 1994, the parties to the joint venture agreement considered whether to accept the Treasurer’s letter as satisfying the condition precedent in clause 2.1(a)(v). There is no evidence that those parties also considered whether or not the MOU had become binding and should be accepted as fulfilling that condition precedent. The Treasurer’s letter refers to the MOU as reflecting the principles stated in the letter, but this is immediately followed by a statement that those principles are not binding.

The racing industry received legal advice from Clayton Utz that it could ‘reasonably accept the Treasurer’s letter as satisfying the requirement for a State Agreement’. That advice was based on the following matters:

(1) the condition precedent did not require a legally binding instrument;

(2) the Treasurer’s letter addressed the racing industry’s principal concern regarding the joint venture, by the Treasurer’s statement of intention that new licences granted after expiration of Tabcorp’s licences would include conditions ‘substantially to the same effect’ as the existing licences; and

(3) Clayton Utz was not aware of any other principles or objectives of the racing industry that ‘could be reasonably expected to be included in the State Agreement’.

The racing industry accepted this advice. In that context, Arthur Robinson & Hedderwicks advised Mr Tilley that it would be prudent for the parties to the joint venture agreement to sign a written acknowledgment that the condition precedent in clause 2.1(a)(v) had been satisfied. Such an acknowledgment was signed by all relevant parties between 1 and 8 August 1994.

The float was successful and Tabcorp’s licences commenced operation on 15 August 1994.

Against this factual background, I turn to consider whether the third event specified in the preamble occurred.

Tabcorp relied heavily upon the Treasurer’s statement to Mr Tilley, as communicated to the racing industry, that he ‘stood by’ the MOU. Tabcorp contends that this statement, combined with the confirmation from Messrs Charlton, Yates and Bourke that the racing industry was not seeking that any further documents be executed, established that the third specified event occurred when the Treasurer’s letter was accepted to satisfy the condition precedent in clause 2.1(a)(v) and the joint venture agreement became binding.

I do not accept Tabcorp’s contentions. If my earlier conclusion is incorrect, and the parties had intended the understandings expressed in the MOU to become binding of their own force on the occurrence of the three events specified in the preamble, the third event did not occur. This is because the parties clearly contemplated that ‘the documentation’ would include the Government Agreement intended by clause 10.3 and no such agreement was executed.

(B) Was clause 10.3 intended to be binding?

If that conclusion is not correct, I find that the parties nevertheless intended that clause 10.3 would not be binding — for the following reasons.

First, because the State refused to sign the Government Agreement contemplated by clause 10.3. The Treasurer’s refusal arose out of the concerns expressed by Treasury officers, as recorded in Mr Renard’s memorandum to Mr Harry dated 16 May 1994. Mr Vertigan, Secretary of Treasury, was obviously concerned about provisions in the draft State Agreement ‘under which [the State] would pay damages if the terms of the licences given to TABCORP [were] varied’. That can only have been a reference to clauses such as 3.1 and 3.2 of the first draft of the State Agreement, or clauses to like effect, which reflected clause 10.3(a) of the MOU. Tabcorp contends in that regard that the evidence does not permit a finding that, by refusing to sign a State Agreement in the form of the draft provided, the Treasurer signified a rejection of clause 10.3 of the MOU. I do not accept that submission. I find that the Treasurer’s rejection of the State Agreement was, at least in substantial part, the result of advice that the State should not commit itself to pay damages to Tabcorp and the racing industry if there were legislative changes adversely affecting their interests.

In these circumstances, it would be commercial nonsense to hold the parties to a bargain in terms of clause 10.3(a) and (b). At the time the MOU was executed, the parties to it clearly intended that a Government Agreement in terms of clause 10.3 would form part of the documentation to be negotiated and agreed. Not only did the parties fail to agree on a Government Agreement, the State positively rejected a draft agreement containing obligations in terms of clause 10.3(a) and (b). That rejection is inconsistent with the State agreeing that the intention expressed in clause 10.3 was or would become binding. A general statement by the Treasurer that he ‘stood by’ the MOU cannot convert that intention into an agreement.

Second, I reject Tabcorp’s contention that clause 10.3(a) and (b) were capable of giving rise to a binding undertaking and indemnity.[82]
[82]Tabcorp acknowledges that the terms of the release in clause 10.3(c) were uncertain without recourse to extrinsic evidence as to what the release was to entail, but contends that it was obvious on the evidence of surrounding circumstances that it was a release from the claims by the racing industry to beneficial ownership of the TAB.

The short answer to Tabcorp’s contentions in this regard arises on the words of the MOU. Even if it be assumed that any understanding in the MOU which was not included in finally negotiated and agreed documentation became binding, clause 10.3 is no more than a statement of intention as to what, at that stage of negotiations, a Government Agreement was to include. The introductory words say just that: ‘It is intended that the Government Agreement include …’. This is in direct contrast to the mandatory or promissory language of the other understandings which are referred to in the MOU. The other clauses of the MOU were obviously intended to go into the joint venture agreement, racing program agreement or product supply agreement; and the understandings in them are expressed in mandatory or promissory language, namely that the parties ‘shall’ or ‘will’ do certain things, or that proposed agreements ‘shall’ or ‘will’ contain certain obligations. For example, clause 4.9 of the MOU records that Tabcorp ‘will unconditionally guarantee’ certain obligations of related parties pursuant to the joint venture agreement. If the intention of the MOU was to create binding rights and obligations in terms of clause 10.3, it would have used consistent language such as:

(1) ‘the State, TABCO and RACE CO shall enter into the Government Agreement’; and

(2) ‘the Government Agreement shall include …’.

The use of the language of intention in the introductory words is inconsistent with binding obligations. In my opinion, the likely reason for using language of intention in clause 10.3 is to be found, again, in the known background circumstance of sovereign risk. As recital 7 recognises, the parties intended that their arrangements and agreements would only be entrenched by contract to the extent that it was possible to protect the rights and obligations associated with them from adverse variation.

For the above reasons, it is unnecessary to consider whether Tabcorp is entitled to enforce any indemnity under clause 10(b) of the MOU or, if so, whether such an indemnity would be void or unenforceable as an impermissible restraint or fetter upon future legislative action.

Mr Tilley’s evidence

Before leaving the contractual claim based on the MOU, it is necessary to say why I rejected aspects of Mr Tilley’s evidence.

In his evidence, Mr Tilley said that he was of the opinion that the MOU became binding when Messrs Yates and Bourke agreed with him that ‘there were no outstanding documents or things that they required’,[83] or, in other words, agreed with him that ‘all of the documents that were in place were all of the documents that they reasonably required’.[84] While Tabcorp relies on Mr Tilley’s evidence as to the content of this conversation to support a contention that the third event specified in the preamble was satisfied, Tabcorp did not rely upon Mr Tilley’s evidence concerning his belief that this conversation resulted in the MOU becoming binding. There was much cross-examination of Mr Tilley directed at establishing that he did not genuinely hold such a belief at any relevant time. It is important to note, however, that Mr Tilley’s belief as to whether or not the MOU was or became binding was irrelevant and inadmissible to the determination of that issue. Tabcorp rightly acknowledged this in its submissions.
[83]Evidence in chief.
[84]Cross-examination.

I do not intend to catalogue all of the evidence given by Mr Tilley which was challenged in cross-examination. I must record, however, that I found Mr Tilley to be a most unsatisfactory witness concerning MOU issues. He was argumentative, evasive and gave inconsistent evidence on a number of topics; and some of his evidence was implausible.

Notwithstanding that his evidence concerning the MOU was in my opinion largely irrelevant, it is necessary to consider Mr Tilley’s evidence and credibility in some respects, as an appeal is likely and a contrary position may emerge on appeal in respect of some aspects of his evidence. As stated above, while I accept Mr Tilley’s evidence that the Treasurer told him words to the effect that he — the Treasurer — stood by the MOU, and that Mr Tilley informed racing industry representatives of this statement in the context of informing them that the Treasurer refused to execute a State Agreement, I reject his evidence to the effect that:

(1) he and the Treasurer had a ‘clear understanding’ that if the racing industry did not insist upon a State Agreement, and the float proceeded, ‘then the memorandum of understanding would become binding’, and it was in this context that the Treasurer asked Mr Tilley to meet with Mr Yates and Mr Bourke to ensure that the racing industry did not require that any further documents be executed; and

(2) his discussions with racing industry representatives were on the basis that the third event stipulated in the preamble would occur if they did not insist on a State Agreement, thus ‘taking the MOU from being binding to non-binding’.

Further, I reject Mr Tilley’s evidence that he told others of his belief that, if the racing industry did not require a State Agreement, the MOU would become binding. Specifically, I reject his evidence that:

(1) the Treasurer instructed him that the discussions he was having with the racing industry about the MOU becoming binding should not be disclosed to the due diligence committee for the float;

(2) notwithstanding the Treasurer’s instruction, he nevertheless informed Mr Renard and Mr Harry of Arthur Robinson & Hedderwicks that the State was treating the MOU as binding;

(3) Mr Renard, who was a member of the due diligence committee, agreed that these matters need not be disclosed to the due diligence committee or in the prospectus; and

(4) prior to publication of the prospectus, he told directors of Tabcorp (Messrs Robinson and Wilson) that the State intended that the MOU would become binding.

Mr Tilley’s evidence on these issues is implausible for the following reasons.

First, there is not one document to corroborate any discussion or belief by the relevant parties that the MOU was, or was intended to be, binding. This is remarkable given the importance of such an issue if it was discussed in the terms suggested by Mr Tilley with representatives of the racing industry, Arthur Robinson & Hedderwicks and Tabcorp.

Second, there is no evidence of the State or the racing industry acting on the basis that they believed the MOU had become binding. For example, if the State had believed that the MOU was binding, a release in terms of clause 10.3(c) would most likely have been sought from the racing industry.

Third, if the racing industry representatives had discussions with Mr Tilley to the effect that the MOU would be binding if they did not insist upon a State Agreement, that issue would likely have been discussed with the solicitor for the racing industry, Mr Clifton. Yet the contemporaneous documents reveal that Mr Clifton gave no consideration to the MOU when considering whether the racing industry should accept the Treasurer’s letter as satisfying the condition precedent in clause 2.1(a)(v) of the joint venture agreement, and in September 1994 Mr Clifton advised the racing industry that the MOU ‘does not have any on-going legal effect’.

Fourth, had Mr Tilley honestly believed that the MOU had, or would on satisfaction of the condition precedent in clause 2.1(a)(v) of the joint venture agreement, become binding, he would have told the due diligence committee directly. Common sense dictates that this is so. Indeed, if Mr Tilley is to be believed, the Treasurer instructed him before 2 June 1994 to meet with Messrs Yates and Bourke on the understanding that the MOU ‘going from being non-binding to binding … was the requirement for the due diligence committee to sign off on the forecasts to enable the prospectus to be issued.’

Fifth, it is wholly implausible that Mr Harry and Mr Renard would have acquiesced in concealing information about the potential bindingness of the MOU from the due diligence committee, especially in circumstances where Mr Renard had explained to the due diligence committee at its first meeting that ‘the consensus nature’ of the committee required that all members would have access to the same information. If clause 10.3 of the MOU was intended to become binding on successful completion of the float, it would have been necessary to disclose it as a material contract in the prospectus and this would have been obvious to Messrs Renard and Harry. The MOU was not referred to in the prospectus and Mr Renard signed a final due diligence report which included statements to the effect that the committee had considered all matters which were ‘material to the prospectus’ and was not aware of any relevant information which had not been disclosed in the prospectus.

Sixth, if Mr Tilley had an understanding with the Treasurer and the racing industry that the MOU was or would become binding, he would have told the investigating accountants for the float and Tabcorp’s auditors. In the context of sovereign risk, an indemnity in the terms provided for by clause 10.3(b) would have been a most material matter to take into account in considering whether the licence consideration should be amortised in the financial projections contained in the prospectus.

Seventh, if Mr Tilley had told Messrs Robinson and Wilson that the State intended the MOU to become binding, it is unlikely that they would have acquiesced in the prospectus being issued without reference to the MOU.

Eighth, Mr Tilley’s evidence concerning his belief that the MOU became binding and his discussions with others in that regard was not included in his witness statement. The evidence came out in cross-examination in a most unsatisfactory way and was replete with inconsistencies.

Taking the evidence and Mr Tilley’s demeanour and credibility as a whole, I find that Mr Tilley’s relevant and credible evidence on MOU issues amounts to no more than the following:

(1) the Treasurer refused to sign a Government Agreement containing provisions to the effect of clause 10.3(a) and (b) of the MOU, but said words to the effect that he would stand by the MOU;

(2) the Treasurer instructed Mr Tilley to speak with representatives of the racing industry and secure their agreement to proceed with the joint venture agreement and the float without a Government Agreement;

(3) Mr Tilley communicated the Treasurer’s position to Messrs Charlton, Yates and Bourke and asked them to proceed on that basis; and

(4) the racing industry representatives agreed that the racing industry would proceed on that basis.

For the reasons given above, evidence to that effect does not assist Tabcorp’s MOU case.

Did the State breach obligations of good faith and reasonable dealing?

Tabcorp alleges an alternative case based on an express or implied promise by the State to act reasonably and in good faith. Tabcorp contends that the State breached the term by failing either to preserve Tabcorp’s statutory right under s 4.3.12 of the Act or, alternatively, to provide an equivalent or corresponding entitlement to arise on the grant of the wagering and betting licence, the gaming machine entitlements and the keno licence.

The State denies that it was bound by an express or implied good faith obligation. If it was, the State denies that the good faith obligation could fetter the Executive of the State from proposing, or the Parliament of the State from enacting, legislation which had the effect of depriving Tabcorp of its statutory right to a terminal payment. The State contends that the content of the good faith term put forward by Tabcorp is both inconsistent with the express terms of the Treasurer’s letter and void as a fetter on future executive and legislative action.

(A)Does the Treasurer’s letter contain a promise?

I will first consider whether the good faith term was the subject of an express agreement between Tabcorp and the State. Tabcorp’s case in this regard is straightforward. It relies upon the final paragraph of the Treasurer’s letter:

The Government recognises both the importance of the Victorian Racing Industry and the importance of the 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.[85]

[85]Emphasis added.

Tabcorp contends that this language is in plain, unqualified and promissory terms. It contends further that the promise should be treated as contractually binding because, in exchange for the State’s promise, Tabcorp provided consideration by assisting it to recoup the maximum commercial value for the gaming licence and the wagering licence — specifically, by lodging the prospectus for registration and inviting the public to subscribe for shares in Tabcorp on the faith of the prospectus. Tabcorp contends that parallels can be drawn between the circumstances here and those considered in letter of comfort cases such as Banque Brussels Lambert SA v Australian National Industries Ltd[86] and pre-tender contract cases like Hughes Aircraft Systems International v Airservices Australia.[87]
[86][1989] 21 NSWLR 502.
[87](1997) 76 FCR 151.

The State contends that the statement in the Treasurer’s letter is not promissory, because it must be read in the light of the opening paragraphs of the letter, which state:

I am writing to you to confirm the principles on which the Government of Victoria is privatising the TAB….
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.

The State contends that these paragraphs of the Treasurer’s letter are inconsistent with the final paragraph constituting a contractually binding promise, especially a promise to the effect implicitly contended by Tabcorp in alleging that the State breached the good faith term by promoting legislation (the 2008 and 2009 amendments) which deprived Tabcorp of its right to a terminal payment under s 4.3.12. The State contends that the final paragraph of the letter is governed by the Treasurer’s unequivocal statement that ‘the statement of principles in this letter does not bind this Government or further governments’. If that is not so, the State contends that the statement was not intended to be contractually binding, and relies upon the acknowledgements executed by Tabcorp and VicRacing in August 1994, that the Treasurer’s letter satisfied the condition precedent in clause 2.1(a)(v) of the joint venture agreement, in support of that contention.

I do not accept the State’s contention that the final paragraph of the Treasurer’s letter is subject to the Treasurer’s statement in the opening paragraphs that the principles in the letter were not binding. Taking the Treasurer’s letter as a whole, the statement as to non-bindingness applies only to the statement of principles in the seven numbered paragraphs which are introduced by the words: ‘The principles are as follows: - ’. As a matter of structure and plain meaning, these are the principles which are subject to the statement of non-bindingness.

I accept, however, that the statement of non-bindingness impacts upon the scope and content of the good faith term in a way which deprives it of any meaningful content in the circumstances of this case. The fact that the seven numbered principles are non-binding, and are subject to the express statement that:

of course, … 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 …

must be given effect. Most relevantly, the sixth principle contains a description of Tabcorp’s entitlement to compensation in the event that it is not the new licensee. Accordingly, any express 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.

It is therefore unnecessary to reach a conclusion regarding the bindingness of the good faith commitment more broadly. I note, however, that I see difficulty in any analogy between the context here — a State-led privatisation of a statutory corporation — and the type of arms-length commercial transactions under consideration in letter of comfort cases, such as Banque Brussels, or the pre-tender contract cases like Hughes Aircraft, relied on by Tabcorp. 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.

I have not placed any weight in reaching my conclusion on the State’s contention that the acknowledgements executed by Tabcorp and VicRacing reflected an understanding that the Treasurer’s letter did not create any legal rights on the part of the State, Tabcorp or VicRacing, as the condition precedent in clause 2.1(a)(v) of the joint venture agreement required only an instrument which did not create such legal rights or obligations. In my opinion, that contention involves a syllogism: the condition precedent in clause 2.1(a)(v) of the joint venture agreement stipulated that the instrument to be executed was not to create legal obligations; Tabcorp and VicRacing accepted the Treasurer’s letter satisfied the condition precedent in clause 2.1(a)(v); therefore, the Treasurer’s letter did not create legal obligations.

I reject that reasoning. First, it involves a construction of the Treasurer’s letter by reference to subsequent conduct. Second, the fact that the parties to the joint venture agreement accepted a partly binding instrument as satisfying the condition precedent does not logically affect the meaning of that instrument – which in all other respects concerning the objectives of the State in connection with the joint venture agreement did not contain legal rights or obligations. Third, the parties well understood that there were other reasons why the Treasurer’s letter did not strictly satisfy the requirements of clause 2.1(a)(v) of the joint venture agreement.[88] To the extent that the condition precedent required an instrument which did not create legal rights or obligations, or the Treasurer’s letter did not otherwise comply with that condition, the evidence established that the parties waived or varied the clause.
[88]For example, the Treasurer’s letter was not an instrument executed by the State, Tabcorp and VicRacing, and did not set out the objectives of all parties.

(B) Did the State breach any good faith obligation?

Tabcorp pleads that the duty of good faith was breached by the actions of the State in preparing, introducing into Parliament, promoting, and procuring the enactment of, the 2008 and 2009 amendments, without making provision for the preservation of Tabcorp’s right to a terminal payment. Tabcorp contends that the want of good faith is clearly demonstrated by observing that the State reaped the benefit of the success of the float, substantially by virtue of the statutory promise of a terminal payment, and no public interest justification has been advanced by the State for its repeal.

In my opinion, Tabcorp’s breach allegation is inconsistent with the limited nature of the good faith term as discussed above. 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.

Having regard to this conclusion, it is unnecessary to consider the State’s contention that the way in which Tabcorp relies on the good faith obligation is void or unenforceable as a fetter on future executive and legislative action.

Conclusion and orders

For the reasons given above:

(1) Tabcorp’s statutory case fails, because the State’s specific meaning and implied repeal contentions have been accepted.

(2) Tabcorp’s contractual case based on clause 10.3 of the MOU fails, because that clause is not binding and, in any event, did not promise the claimed indemnity.

(3) Tabcorp’s contractual case based on good faith fails, because the content of the good faith obligation on which it relies is inconsistent with the Treasurer’s letter when read as a whole.

4.1.1 Purpose

The purpose of this Chapter is –

…

(b) 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.

[2014] VSC 301

26 June 2014