Tabcorp Manager Pty Ltd v Vancelow Pty Ltd
[1997] FCA 761
•11 AUGUST 1997
FEDERAL COURT OF AUSTRALIA
CONTRACTS - trial of separate issue - agreement between gaming operator and venue operator for installation of gaming machines in hotel - whether period of agreement five years or such lesser period as liquor licence subsisted
Gaming Machine Control Act 1991 (Vic) s 1, s 18(2), s 7, s 3(1), s 11, s 19(1), s 19(3), s 25(1), s 25(2), s 25(5), s 26, s 27, s 30, s 68
Federal Court Rules O 29 r 2(a)
Johnson v Moreton [1980] AC 37
TABCORP MANAGER PTY LTD -v- VANCELOW PTY LTD & ORS
NO. VG 237 of 1997
HEEREY J
MELBOURNE
11 AUGUST 1997:
IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG 237 of 1997 ) GENERAL DIVISION )
BETWEEN: TABCORP MANAGER PTY LTD
ApplicantAND: VANCELOW PTY LTD and OTHERS
RespondentJUDGE: HEEREY J PLACE: MELBOURNE DATE: 11 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
Answer the questions to be tried pursuant to the Order made 2 July 1997 as follows:
(i) Yes
(ii) No
Question of costs adjourned for argument on a date to be fixed.
Affidavits to be relied on for the purposes of any argument as to costs to be filed and served within 14 days.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG 237 of 1997 ) GENERAL DIVISION )
BETWEEN: TABCORP MANAGER PTY LTD
ApplicantAND: VANCELOW PTY LTD and OTHERS
Respondent
JUDGE: HEEREY J PLACE: MELBOURNE DATE: 11 AUGUST 1997
REASONS FOR JUDGMENT
On 15 April 1992 the first respondent Vancelow Pty Ltd (Vancelow) entered into an agreement (the agreement) with the predecessor of the applicant (the TAB) for the installation and operation of twenty gaming machines at the Prince of Wales Hotel, 109 Church Street, Richmond. Clause 4 of the agreement provided that the agreement should
... take effect upon signing and shall continue in operation for a period of five (5) years from the date of granting of a Venue Operator’s Licence to (Vancelow) or such other term as may be specified in the Licence.
A venue operator’s licence was granted to Vancelow on 12 December 1994. On 27 June 1996 Vancelow entered into an agreement for the sale of the hotel to the second respondent (Zagame). Pursuant to this agreement the liquor licence held by Vancelow was transferred to Zagame on 30 August 1996. By virtue of s 28(2)(a) of the Gaming Machine Control Act 1991 (Vic) (the Act) Vancelow’s venue operator’s licence was immediately cancelled.
The TAB has brought an action, initially in the Supreme Court of Victoria but cross-vested to this Court, alleging that Vancelow has repudiated the agreement.
Pursuant to an order under O 29 r 2(a) made on 2 July 1997 I am to try as a separate question the following:
Was the period of the agreement:
(i)Five years (as averred in par 7 of the statement of claim); or
(ii)Five years, subject to the provisions of the Gaming Machine Control Act (“the Act”), in particular s 26 and 28(2)(a) of the Act, the effect of which was five years or such lesser period during which the liquor licence of the hotel subsisted (as averred in pars 5 and 8 of the defence of the first respondent).
(There was a second question but it does not presently arise.)
The Legislation
Relevantly to the present case the purpose of the Act, as stated in s 1, is
... to establish a system for the regulation, supervision and control of gaming machines and gaming equipment with the aims of -
(a) ...
(b) ...(c)regulating the use of gaming machines in casinos and other approved venues where liquor is sold; and
(d)regulating the activities of persons in the gaming machine industry; and
(e) ...
Part 3 of the Act sets up a licensing regime providing for the issue of, inter alia, a venue operator’s licence (Pt 3 Div 2), and a gaming operator’s licence (Pt 3 Div 3). For present purposes the only licensed gaming operators are the TAB and the Tattersalls organisation. (The Crown Casino operates under separate legislation.) Licences are granted by the Victorian Casino and Gaming Authority (the Authority) established under the Gaming and Betting Act 1994 (Vic).
It is a criminal offence for a person to be in possession of a gaming machine except in accordance with the Act: s 7. The conduct of gaming is lawful when the gaming is conducted in an approved venue by a venue operator in accordance with provisions of the Act: s 11. In s 3(1) it is provided that “approved venue” means premises on which a venue operator is licensed to conduct gaming and “venue operator” means a person holding a venue operator’s licence under Pt 3.
Under s 19(1) a person may apply to the Authority to be granted a venue operator’s licence for premises in respect of which one of a number of specified liquor licences are in force. These licences include a general licence under s 47 of the Liquor Control Act 1987 (Vic). Vancelow held such a licence in respect of the Prince of Wales Hotel. By s 19(3) an application for a venue operator’s licence must contain or be accompanied by the agreement in writing of a gaming operator to place gaming machines in the applicant’s premises in the event of the licence being granted. The Authority must determine an application by granting or refusing it: s 25(1). The licence may be granted subject to any conditions that the Authority thinks fit and must specify the number of gaming machines permitted and the gaming machine areas approved for the venue: s 25(2). Section 25(5) provides:
(5) If an application is granted, the licence is granted for a term of 5 years or any other term specified in the licence, subject to the conditions and for the venue specified in the licence.
Section 26 provides that a venue operator’s licence is not transferable to any other person or venue. Under s 27 the conditions of the venue operator’s licence, including the number of gaming machines permitted in the venue, may be amended in accordance with the section. Section 28 (2) provides:
(2) If a licence under the Liquor Control Act 1987 in respect of an approved venue -
(a)is cancelled, transferred, removed, surrendered or released, the venue operator’s licence is immediately cancelled; or
(b)is suspended for a period of time, the venue operator’s licence is immediately suspended for the same period.
Section 30 is headed “Cancellation, Suspension or Variation of Venue Operator’s Licence”. Action may be taken by the Authority where there are “grounds for disciplinary action”, defined in s 30(1) to include a number of circumstances including improperly obtaining the licence, repeated breaches in the approved venue of rules made by the Authority, and contravention of the Act that in the Authority’s view is “so serious as to warrant disciplinary action”. The Authority is to give the venue operator notice in writing to show cause why disciplinary action should not be taken: s 30(2). The venue operator may then make submissions: s 30(3). Section 30(4) provides:
(4) The Authority may then take disciplinary action against the venue operator as the Authority sees fit and does so by giving written notice to the venue operator -
(a)of the cancellation or suspension of the venue operator’s licence or the variation of the terms of the licence; or
(b)in the form of a letter of censure.
Section 68 provides for contracts to be approved by the Authority. A “relevant contract” (defined as a contract between a venue operator and a gaming operator) must be in accordance with a form approved by the Authority. Section 68(3) provides:
(3) The Authority must not approve a relevant contract if in the opinion of the Authority the contract -
(a)is harsh and unconscionable; or
(b)is not in the public interest; or
(c) jeopardises the integrity and conduct of gaming; or
(d)is in breach of this Act.
The Agreement
The agreement recites that the TAB is licensed pursuant to Div 3 of the Act as a gaming operator and that the licensee (Vancelow)
... is the operator of the venue set out in Schedule A (“the Venue”) and holds a licence pursuant to the Liquor Control Act 1987 or the Racing Act 1958 and is intending to make application to the Victorian Gaming Commission (“the Commission”) to become a licensed venue operator under the Act;
It is further recited:
CIn order to satisfy the requirements of the Act and in order to make provision for the conduct of gaming within the venue the licensee has requested and TAB has agreed to provide the TAB Gaming System upon the terms and conditions hereinafter set out.
Clause 1 provides:
In consideration of the supply and operation by TAB of TAB Gaming Equipment the Licensee hereby agrees to installation and undertakes site management of the TAB Gaming Equipment in the Venue.
Clause 2.1 provides that “subject at all times to the provisions of the Act” the TAB is to carry out certain obligations. Amongst other things, the TAB is to provide, install and test gaming equipment and service, repair and maintain it, assist the licensee in complying with its responsibilities under the Act and deliver games and products to optimise the use of the gaming equipment. Clause 3.1 provides that the licensee shall:
3.1.1Append this Agreement to any application made to the Commission for its consideration and the granting of a Venue Operator’s licence in accordance with the Act;
3.1.2Upon being granted a Venue Operator’s licence use its best reasonable endeavours to enable the TAB Gaming Equipment to be established in the Venue promptly and comply with the requirements of the relevant planning authorities, including all necessary building requirements.
There follow seven other sub-clauses including obligations to comply with requirements of the Liquor Licensing Commission, provide access to TAB personnel, use best and reasonable endeavours to keep the gaming machines clean and free from damage and interference etc.
The critical clause for present purposes is cl 4 which provides as follows:
4.Effective date and term.
This Agreement shall take effect upon signing and shall continue in operation for a period of five (5) years from the date of granting of a Venue Operator’s Licence to the Licensee or such other term as may be specified in the Licence.
Under cl 5 the licensee is to provide power communications, data cabling and other services. Under cl 6 the licensee undertakes to meet and consult with the TAB to ensure the commencement of gaming within the venue in an efficient and effective manner at the first reasonable opportunity following the granting of a venue operator’s licence. Upon the granting to the licensee of a venue operator’s licence the TAB is to supply, install, test and maintain the gaming equipment in the venue. Clause 6.4 provides for delays caused by various circumstances such as the failure of the licensee to obtain a venue operator’s licence as a result of any act, error or omission on the part of the licensee in the process of making application for its licence or the premises, insufficient security, or the TAB being prevented by any cause beyond its control from providing and installing the equipment. The TAB may extend its intended program for delivery, provided that if such extension exceeds a period of three months either party may, by notice in writing to the other, terminate the agreement
Clause 11 provides for a number of warranties by the licensee including that it is capable of entering into the agreement (cl 11.1.1) and shall do all things necessary to gain all such approvals and licences as may be required for any personnel employed or contracted or in the future to be employed or contracted by it in relation to any aspect of gaming upon the venue (cl 11.1.3). Under cl 12.1 the licensee covenants with the TAB amongst other things to use its best endeavours to actively promote gaming upon the venue to the mutual benefit of the licensee and the TAB. Clause 21.1 provides:
21.1The TAB may in its sole discretion terminate this Agreement -
21.1.1immediately upon the suspension for a period in excess of six (6) months, cancellation or other substantial amendment to the Licensee’s licence or conditions attaching thereto;
21.1.2where an order is made or a resolution is passed for the liquidation or winding up of the Licensee (other than for the purposes of reconstruction or amalgamation of the Licensee); or
21.1.3upon the Licensee or the Licensee’s personnel doing any act of a fraudulent or dishonest nature toward the TAB or with respect to the TAB Gaming Equipment; or
21.1.4upon the Licensee committing a breach of a term of this Agreement; or
21.1.5immediately upon the Liquor Licence for the Venue lapsing, being cancelled or otherwise revoked or suspended for a period in excess of six (6) months; or
21.1.6in the event of the destruction of the Venue by fire or other natural cause whereby gaming is prevented; or
21.1.7if following the making of a determination by the TAB pursuant to Clause 20 hereof the Licensee fails to act in accordance with the terms of such determination within the time specified by the TAB or such further period as mutually agreed between the parties.
Clause 22 provides for termination by the licensee with provisions which in some respects mirror cl 21.1, for example:
22.1The Licensee may in its sole discretion terminate this Agreement:-
22.1.1immediately upon the suspension for a period in excess of six (6) months or cancellation of the TAB’s gaming operator’s licence.
The licence is in the following terms:
GAMING MACHINE CONTROL ACT 1991 (VIC)
VENUE OPERATOR’S LICENCE
Licence no: V94/10078
The Victorian Casino and Gaming Authority; pursuant to Division 2 of Part 3 of the Gaming Machine Control Act 1991, hereby grants a venue operator’s licence to
Vancelow Pty Ltd
(A.C.N. 006 679 045)
in respect of
PRINCE OF WALES HOTEL
of
109 Church Street Richmond
the venue hereby approved for gaming
This licence authorises gaming at the venue in the Gaming Machine Area(s) specified on the plan(s) annexed to this licence. This licence authorises gaming on not more than Twenty (20) machines in the Restricted Area specified on the annexed plan(s).
The term of this licence is Five years from the date of issue shown below.
This licence is subject to compliance with the Act, regulations and rules and to the conditions set out in the Schedule.
J RICHARDS
Chairperson of the
Victorian Casino and Gaming AuthorityDATED: 12 December 1994
Conclusion
Counsel for both Vancelow and Zagame stressed the importance of the Act and the licence.
There was, as counsel for Vancelow put it, a hierarchy in descending order of Act, licence and agreement. Counsel for Zagame pointed to the sequence in point of time. First there was the Act, then the agreement, then this licence. I do not disagree with either of those propositions in general terms. Obviously enough the statute, and the licence granted under it, prevail over the terms of any agreement between parties. Equally, while the issue I have to determine is one of construction and not of illegality, one would prefer a reading which would treat the parties as having intended a lawful rather than an unlawful result. Nevertheless, I do not think these considerations lead to the construction for which the two respondents contend.
In my opinion, the expression “such other term” in cl 4 of the agreement means a period of time. I think that is clear from the context in which the expression follows a reference to the period of five years. “Term” here is not used in the general sense of a contractual provision or stipulation. If such had been the intention, the plural “terms” would have been more appropriate.
Turning then to the licence, the term specified is five years. There is no “other term ... specified” for the purposes of cl 4 of the agreement or s 25(5) of the Act. It is to be noted that s 25(5) itself, like the licence, distinguishes between “term” (a period of time) and “conditions”.
The concluding sentence in the licence (“this licence is subject to compliance with the Act, regulations and rules and to the conditions set out in the Schedule”) is in my opinion addressed to the licensee Vancelow. It is stating, unsurprisingly, that Vancelow, having been granted a licence to do what would otherwise be unlawful, must comply with the Act and that the licence remains conditional on such compliance. The argument of the respondents was that this sentence had to be read as though there appeared after the word “licence” the words “(including the term thereof)”. Therefore, counsel argued, the licence had to comply with, inter alia, s 26 and 28(2)(a) with the consequence that the licence came to an end on the transfer of the liquor licence.
There are a number of problems with this construction, not the least of which is that it requires the addition of words to a formal statutory instrument. Moreover, the words “subject to compliance with the Act” are contained in the licence. The licence is not speaking to itself. There would be no point in the licence saying that it must comply with the Act; the licence has already issued. Compliance with the Act, is a criterion which the licence must satisfy - otherwise it would have no statutory force. But this is a criterion exterior and anterior to the licence itself. There was no suggestion that Vancelow’s licence did not comply with the Act, in the sense of being in accordance with the requirements of the Act.
Counsel for the TAB pointed out that cl 21.1.1 expressly provides for the case of cancellation. Cancellation may come about, inter alia, by the operation of s 28(2)(a) as a consequence of transfer of the liquor licence for the venue. Therefore, he argued, it is clearly contemplated that when there is cancellation of the venue operator’s licence the agreement remains on foot, subject to termination at the sole discretion of the TAB. I find this argument compelling. To counter it, counsel for the respondents were driven to argue that “cancellation” in cl 21.1.1 only applies to cancellation under s 30 as a consequence of “disciplinary action” by the Authority and not to cancellation as a consequence of the operation of s 28(2)(a). I do not see any logical basis for this distinction. It amounts to a substantial gloss on the plain word “cancellation”. Moreover the agreement is in common form, expressly approved by the Authority under s 68. If the Authority had intended that cancellation under s 28(2)(a) should carry a different consequence from cancellation under s 30, it is surprising that this was left to be divined by the reader.
Counsel for Vancelow argued that on the TAB’s construction cl 4 would operate as a fetter on the right of the holder of a licence under the Liquor Control Act to assign such a licence. This was said to be contrary to the public interest. Reliance was placed on the decision of the House of Lords in Johnson v Moreton [1980] AC 37 and particularly the speeches of Lord Salmon at 49 and Lord Hailsham at 58. However, I do not see the construction for which the TAB contends as involving any unlawful contracting out of the Liquor Control Act. As counsel for the TAB pointed out, there is nothing unusual about a vendor of property which is subject to third party rights having to negotiate an arrangement which satisfies the third party before a contract of sale with a purchaser can be concluded. I gather from what counsel told me in the course of argument that if Zagame wished to continue with TAB machines, it would be a simple matter to arrange a fresh agreement and a fresh licence. The present litigation arises from the fact that Zagame wants to use Tattersalls machines.
The construction I prefer accords with the purpose of the Act, which includes the objective of giving both venue operators and gaming operators some stability and security of tenure in relation to gaming operations at a particular venue. Both parties will thus be better able to plan and develop their respective businesses. If an agreement for the use of machines could be brought to an end any time there was a transfer of the liquor licence - perhaps collusively - this objective would be compromised.
Nor does the TAB’s construction in my view involve any illegality. Once the licence is cancelled by the operation of the s 28(2)(a), machines cannot be lawfully operated at the venue. There is nothing to suggest that they have been in fact so operated in the present case. There may be a consequential liability in damages to the TAB for loss of profits, but no law has been broken. .
I answer the questions
1.(i)Yes.
No.
As requested by counsel, the question of costs will be adjourned for argument to a date to be fixed. Affidavits to be relied on for the purposes of any argument as to costs are to be filed and served within fourteen days.
I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey
Associate:
Dated: 11 August 1997
Counsel for the Applicant: Mr W T Houghton QC and Mr
J D ElliotSolicitor for the Applicant: Mahonys Counsel for the first
Respondent:Mrs S Crennan QC and Mr J J
GleesonSolicitor for the first
Respondent:Maurice Blackburn Counsel for the second
Respondent:Mr J E Middleton QC and
Mr S M AndersonSolicitor for the second
Respondent:Bazzari Lawyers Date of hearing: 28 July 1997 Date of Judgment: 11 August 1997
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