Tatts Group 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 4689

BETWEEN:

TATTS GROUP LIMITED ACN 108 686 040	Plaintiff
v
THE STATE OF VICTORIA	Defendant

---

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:	Tatts Group Limited v The State of Victoria
MEDIUM NEUTRAL CITATION:	[2014] VSC 302

---

CONTRACT – Licence agreement – Meaning of ‘a new gaming operator’s licence’ in terminal payment clause – Whether State obliged to make terminal payment to Tatts on grant of gaming machine entitlements under Part 4A of Chapter 3 – Whether obligation spent or abrogated by legislative amendments – Held: State obliged to make terminal payment to Tatts – Obligation neither spent nor abrogated as a result of legislative amendments – Electricity Generation Corporation v Woodside Energy Ltd & Ors (2014) 88 ALJR 447; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; Clissold v Perry (1904) 1 CLR 363; Perpetual Executors and Trustee Association of Australia Limited & Anor v Federal Commissioner of Taxation (‘Thomson’s Case’) (1948) 77 CLR 1; Bromley v Forestry Commission of New South Wales (2001) 51 NSWLR 378.

STATUTORY INTERPRETATION – Gambling Regulation Act 2003 (Vic) s 3.4.33 – Meaning of ‘gaming operator’s licence’ – Whether s 3.4.33 impliedly repealed – Whether s 3.4.33 engaged by grant of gaming machine entitlements under Part 4A of Chapter 3 – Held: Tatts not entitled to payment under s 3.4.33 – Section 3.4.33 impliedly repealed - Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 87 ALJR 588; Thiess v Collector of Customers & Ors (2014) 88 ALJR 514; Chubb Insurance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.

GOOD FAITH AND COOPERATION – Whether express or implied term of good faith incorporated into licence agreement – Whether terms of good faith and cooperation breached by State – Held: express term of good faith and implied term of cooperation not breached.

---

APPEARANCES:	Counsel	Solicitors
For Tatts Group Limited	Mr N Young QC with Mr P Crutchfield QC and Mr N De Young	Clayton Utz
For 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 prior to the 1995 Agreement................................... 2

Is Tatts entitled to a terminal payment under clause 7 of the 1995 Agreement?.................. 10

(A) Should the generic or specific meaning apply?......................................................... 12

The Agreement................................................................................................................... 12
Legislative context.............................................................................................................. 18
Other surrounding circumstances..................................................................................... 21
State’s contentions in support of the specific meaning....................................................... 27
Reasons for rejecting the State’s contentions...................................................................... 30

(B)      Was clause 7 spent as a result of the 1996 amendments?......................................... 33
(C)      Was clause 7 abrogated by the 2009 amendments?................................................... 39
(D)      Did the State grant new gaming operator’s licences?................................................ 49
(E)      Was clause 7 breached?.................................................................................................. 58

Did the State breach obligations of good faith or cooperation?.............................................. 58

(A) Did the 1995 Agreement include an express obligation of good faith?.................. 59
(B) Did the State breach its good faith and cooperation obligations?........................... 61

Is Tatts entitled to damages under clause 6?............................................................................... 62

Is Tatts entitled to a terminal payment under s 3.4.33 of the Act?........................................... 62

(A) Should the specific or generic meaning apply?......................................................... 64
(B) Was s 3.4.33 impliedly repealed by s 3.4.3?................................................................ 66

Implied repeal principles..................................................................................................... 66
State’s contentions on implied repeal.................................................................................. 69
Extrinsic materials.............................................................................................................. 70
Tatts’s contentions on implied repeal.................................................................................. 73

Conclusion and orders.................................................................................................................... 79

HIS HONOUR:

Introduction

The plaintiff, Tatts Group Limited, claims $451,157,286 plus interest from the defendant, the State of Victoria.

Tatts contends that the State agreed to pay that amount by a provision in a contract made in 1995 (the ‘1995 Agreement’) and is also entitled to that amount under a statutory provision to similar effect enacted in 1996.

The State denies the claim at both levels.

As to the contractual claim, the State contends that: (1) on a proper construction of the 1995 Agreement, the circumstances giving rise to a contractual right to payment have not occurred; (2) the 1995 Agreement was superseded by the 1996 legislation granting similar rights, with the result that its promise to pay was ‘spent’; and (3) if that be wrong, later legislation in 2009 was inconsistent with the promise to pay and thereby abrogated it.

As to the statutory claim, the State contends that: (1) on a proper interpretation of the statutory provision, the circumstances giving rise to the statutory right to payment have not occurred; and (2) the statutory provision granting the payment right has been impliedly repealed.

In the event that these defences succeed, Tatts raises alternative cases based on alleged breaches by the State of obligations of good faith and cooperation in contractual dealings.

Background facts and legislative history prior to the 1995 Agreement

On the Gaming Machine Control Act 1991 (Vic) coming into operation (the ‘1991 Act’), the conduct of gaming machine businesses in Victoria was authorised for the first time.

On 14 April 1992, the Trustees of the Will and Estate of the late George Adams (the ‘Trustees’) were 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 was the plaintiff, Tatts Group Limited (‘Tatts’). Tatts became the holder of the gaming operator’s licence previously held by the Trustees. For convenience, I will refer to the Trustees as ‘Tatts’ unless it is necessary to refer to the Trustees specifically.

On 14 April 1992, the Totalisator Agency Board of Victoria (the ‘TAB’), a statutory corporation of the State of Victoria, was also granted a gaming operator’s licence under the 1991 Act. The TAB already held a wagering licence under the Racing Act 1958 (Vic). The TAB was later privatised and its business and assets transferred to Tabcorp Holdings Limited. At that time, the TAB’s gaming operator’s licence ceased to have effect and was replaced by a ‘gaming licence’ to the same effect granted to it under the Gaming and Betting Act 1994 (Vic) (the ‘1994 Act’). In a separate proceeding before the Court, Tabcorp claims similar relief to that claimed by Tatts in this proceeding.[1]
[1]Judgment in the Tabcorp proceeding is also delivered today: Tabcorp Holdings Limited v The State of Victoria [2014] VSC 301.

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

Prior to the 1991 Act coming into operation, gambling activity in Victoria involving the use of gaming machines was unlawful. By their respective gaming operator’s licences, TAB and Tatts were authorised to conduct gaming on gaming machines at approved venues in Victoria. Approved venues were essentially club and hotel premises operated by the holders of venue operator’s licences. The relevant gaming machines were primarily poker machines or ‘pokies’.

In 1993, the Club Keno Act 1993 (Vic) came into force. Under that Act, the holder of a gaming operator’s licence under the 1991 Act was authorised to conduct a lottery-style game known as ‘keno’ or ‘club keno’.

The circumstances leading to the TAB privatisation and the Tabcorp float are described in the Court’s judgment in the Tabcorp proceeding. A brief summary follows.

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

The State sought to maximise the amount to be raised from the Tabcorp float, so as to reduce public debt. In this context, the Treasurer, at the relevant time 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 included amortisation of its 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 Tabcorp’s licences in 18 years’ time. The Treasurer accepted this advice. As a result:

(1) The 1994 Act was enacted. That Act provided: (a) for Tabcorp to be granted two licences, a wagering licence and a gaming licence,[2] 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;[3] and (c) that following expiry of Tabcorp’s licences and ‘the grant of new licences’, 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 Tabcorp terminal payment provision’).[4]

(2) The profit forecasts in the Tabcorp prospectus did not amortise the consideration paid for the licences.

(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 its wagering and gaming licences. The licences were issued for a period of 18 years, expiring on 15 August 2012.

[2]Section 12.

[3]Section 13.

[4]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).

Section 21 of the 1994 Act contained the Tabcorp terminal payment provision:

(1) Section 21(1) provided that:

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

(2) Section 21(2) continued:

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

(3) Section 21(5) prescribed the formula by which the ‘licence value’ for the purposes of s 21(1) was to be calculated, which was to fall within the range of 85 per cent to 115 per cent of the amount paid for the licences, depending on the average annual compound rate of growth in gambling revenue during the term of the licences. The amount paid by Tabcorp for the licences included consideration for both the wagering licence and the gaming licence.

By the 1991 Act and the 1994 Act, the State created a statutory duopoly for the conduct of gaming businesses in Victoria outside of Crown Casino, with the only two authorised operators being Tatts and Tabcorp. Given that Tabcorp had been required to pay a very substantial upfront licence fee as consideration for its gaming licence, the State requested Tatts to pay a like fee for its gaming operator’s licence, so as to ensure that Tatts and Tabcorp would compete with each other on an equal basis.

The Trustees advised the State that they were not in a position to pay the requested fee in a lump sum. Lengthy negotiations between the parties ensued in an endeavour to reach an agreement as to the basis upon which the Trustees would pay a licence fee equivalent to that paid by Tabcorp for its gaming licence, and to otherwise ensure that the Trustees would be treated on no less favourable terms than Tabcorp. The negotiations proceeded on the express basis that the Trustees would also receive a terminal payment on expiry of their licence in certain circumstances, calculated on a similar basis to the Tabcorp terminal payment provision. The negotiations culminated in the 1995 Agreement, which was finally executed on 17 November 1995.

Under clause 3 of the 1995 Agreement, the Trustees agreed to pay the State an annual licence fee until the expiration of their gaming operator’s licence. The amount of the fee was calculated by reference to the net profit of the Tatts gaming machine business in each year, subject to a minimum annual payment of $35 million (adjusted for inflation) if the specified percentage of net profit did not exceed that amount in any year.

Clause 7 of the 1995 Agreement (the ‘terminal payment provision’) provided for a terminal payment to Tatts in the following terms:

7.1If the Gaming Operator’s Licence expires without a new gaming operator’s licence having issued to the Trustees, the Trustees shall be entitled to be paid, by the State of Victoria, an amount of money as compensation for the investment in infrastructure lost. This amount will be equal to the Licence Value of the Gaming Operator’s Licence or the premium payment by the new licensee, whichever is the lesser.
7.2No amount will be payable pursuant to sub-clause 7.1 if a new gaming operator’s licence is not issued to any person, or is issued to the Trustees or a related entity of the Trustees.[5]

[5]Emphasis added.

By clause 8 of the 1995 Agreement, the Minister on behalf of the State agreed to cause draft legislation to be prepared and to use his best endeavours to procure that the Parliament of Victoria enacted legislation which included (amongst other things) the Trustees’ obligation to pay the licence fee in accordance with clause 3 of the Agreement and the State’s obligation to pay compensation in accordance with the terminal payment provision in clause 7.

Following execution of the 1995 Agreement, the State complied with its best endeavours obligation under clause 8 of the 1995 Agreement by procuring the Parliament of Victoria to enact legislation which reflected the principal terms of the Agreement (the ‘1996 amendments’).

Prior to the 1996 amendments, s 33 of the 1991 Act authorised the grant of only one gaming operator’s licence, being the licence already held by Tatts. The 1996 amendments introduced the ability for a further gaming operator’s licence to be granted. This was achieved by a substituted s 33 and a new s 33A, which together provided for persons other than the Trustees to apply for a gaming operator’s licence,[6] that such a licence could not commence before the expiry or earlier termination of the gaming operator’s licence held by the Trustees,[7] and that, before any such licence was granted, the applicant pay a premium payment as consideration for the grant of the licence.[8] The amendments therefore enabled the issue of a ‘new gaming operator’s licence’ within the meaning of the terminal payment provision in the 1995 Agreement, and provided the source of funding for the terminal payment.
[6]Section 33(1) of the amended 1991 Act.
[7]Ibid s 33(2).
[8]Ibid s 33A(1).

The 1996 amendments also introduced a statutory terminal payment provision. The statutory terminal payment provision was in similar, but not identical, terms to the contractual terminal payment provision contained in clause 7 of the 1995 Agreement. Section 35A provided:

35A. Entitlement of former licensee on grant of new licence
(1) If—
(a)a gaming operator's licence held by a person (‘the former licensee’) expires; and
(b)the Authority grants a gaming operator's licence to a person other than the former licensee, or a related entity of the former licensee being a licence that commences within 6 months after that expiry; and
(c)the Authority does not grant a gaming operator's licence before the expiration of that period to the former licensee or a related entity of the former licensee—

the former licensee is entitled to be paid an amount equal to the licence value of the licence held by the former licensee or the premium payment paid by the holder of the licence referred to in paragraph (b), whichever is the lesser.
(2)The payment under sub-section (1) must be made not later than 30 days after the commencement of the new licence and the Consolidated Fund is hereby to the necessary extent appropriated accordingly.

The 1996 amendments also introduced provisions obliging the Trustees to pay licence fees of like amounts as provided for in clause 3 of the 1995 Agreement,[9] and made other amendments consistent with the 1995 Agreement.
[9]Ibid ss 135A-C.

In December 2003, the Parliament of Victoria enacted the Gambling Regulation Act 2003 (Vic) (the ‘Act’). The Act commenced operation on 1 July 2004. Section 1.1 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. 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.

The Act retained the separate licensing regimes governing the conduct of the gaming machine businesses operated by Tatts and Tabcorp respectively. For present purposes, it is sufficient to note that s 1.3 of the Act defined a ‘gaming operator’s licence’ to mean ‘a licence granted under Division 3 of Part 4 of Chapter 3’ (‘Part 4’),[10] and that Division 3 concerned gaming operator’s licences. The provisions of the 1991 Act concerning gaming operator’s licences were substantially re-enacted without amendment. In particular, s 3.4.33 replicated the terminal payment provision in s 35A of the 1991 Act.
[10]I will use the shorthand ‘Part 4’ where appropriate in context, but not universally.

Following amendments to the Act in 2009 (the ‘2009 amendments’),[11] gaming machine operations in Victoria outside of Crown Casino were to be authorised under a different statutory regime, which was to come into effect following expiry of Tatts’s gaming operator’s licence and Tabcorp’s gaming licence. In summary, the 2009 amendments provided that no further gaming operator’s licence could be granted under Part 4 and instead provided for:
[11]Gambling Regulation Amendment (Licensing) Act 2009 (Vic).

(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 (ie a premium or premiums) 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 each gaming machine entitlement.

The 2009 amendments also introduced an amended s 3.4.32, under which the Minister extended the term of Tatts’s gaming operator’s licence until 15 August 2012 — so that it would expire on the same day as Tabcorp’s gaming licence.

On 7 June 2010, the Minister for Gaming created 27,500 gaming machine entitlements with an effective date of 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. Tatts did not apply for or receive any gaming machine entitlements. Recipients of the gaming machine entitlements were required to pay premiums totalling approximately $981 million to the State.

Is Tatts entitled to a terminal payment under clause 7 of the 1995 Agreement?

Before considering the interpretation issue which arises for determination, it is convenient to set out the governing principles of contractual interpretation. Most recently, in Electricity Generation Corporation v Woodside Energy Ltd & Ors, the High Court summarised the principles in the following terms:

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties ... intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[12]

[12](2014) 88 ALJR 447, 454-5 [35] (citations omitted) (French CJ, Hayne, Crennan and Kiefel JJ).

The citations given in the above quoted passage are lengthy. They include reference to many recent High Court decisions concerning both general principles of contractual interpretation and the admissibility of evidence to assist courts to interpret contracts.

There is one further general principle of contractual interpretation which is trite law. In Australian Broadcasting Commission v Australasian Performing Right Association Ltd, Gibbs J stated:

Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious with one another.[13]

[13](1973) 129 CLR 99, 109.

Consistent with the statement in Electricity Generation quoted above concerning the Court’s entitlement to give commercial contracts a businesslike interpretation, unless a contrary intention is indicated, Gibbs J stated:

[If] the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, ‘even though the construction adopted is not the obvious, or the most grammatically accurate’, to use the words from earlier authority … [14]

[14]Ibid (citation omitted).

Admissible evidence of surrounding circumstances which informs the genesis, purpose or object of both the contract as a whole and of particular contractual provisions is relevant and can be considered by the Court in interpreting a contract.[15]
[15]International Air Transport Association v Ansett Australia Holdings Ltd & Ors (2008) 234 CLR 151, 166 [22].

In Western Export Services v Jireh International Pty Ltd,[16] Gummow, Heydon and Bell JJ stated, in brief reasons for refusing special leave to appeal in a contractual interpretation case, that the ‘true rule’ as to the admission of evidence of surrounding circumstances was stated by Mason J (as he then was) in Codelfa Construction Pty Ltd v State Rail Authority of NSW,[17] to the effect that evidence of surrounding circumstances is admissible ‘if the language is ambiguous or susceptible of more than one meaning’. This issue has not been taken up by the High Court in more recent cases, including in the recent restatement of the principles of contractual interpretation in the Electricity Generation case set out above. It is, however, unnecessary to say anything further on the issue because, as appears below, I am satisfied that the contractual interpretation issue in this case arises from the use of language which is ambiguous or susceptible of more than one meaning. I turn to consider the issue for determination.

(A)Should the generic or specific meaning apply?

[16](2011) 86 ALJR 1.

[17](1982) 149 CLR 337, 352.

The State contends that the composite phrase ‘a new gaming operator’s licence’ in clause 7 of the 1995 Agreement has a specific limited meaning: it means a ‘gaming operator’s licence’ issued under the 1991 Act as amended or, following repeal and re-enactment of the 1991 Act by the Act, a gaming operator’s licence issued under Division 3 of Part 4 of Chapter 3 of that Act. The State does not accept that the word ‘new’ has any role to play in construing the composite phrase. The State’s contentions focus on textual considerations and pay little regard to the purpose or object of the terminal payment provision.

Tatts contends that the composite phrase ‘a new gaming operator’s licence’ has a broader generic meaning: that the words should be understood in their natural and ordinary sense, as a reference to the issue of a licence that did not previously exist and which authorises the conduct of gaming operations that would otherwise be unlawful. Tatts contends that, when the matter is looked at as one of substance and not form, the issue of gaming machine entitlements to licensed venue operators amounts to the issue of new gaming operator’s licences authorising gaming operations in Victoria, and that this triggers the terminal payment provision. Tatts’s contentions involve both textual and purposive considerations.

The determinative issue is whether the composite phrase should be given a specific (or narrow) meaning or a generic (or broad) meaning. I will refer to the rival positions as the ‘specific meaning’ contention and the ‘generic meaning’ contention.

As stated, the interpretative task must commence with consideration of the language of clause 7 in the context of the 1995 Agreement as a whole.

The Agreement

The 1995 Agreement is a formal agreement between the Minister for Gaming for and on behalf of the State of Victoria and the Trustees. It was plainly intended to have continuing legal force and effect until the expiry of Tatts’s gaming operator’s licence more than 17 years in the future.

Recitals A, B and C record that the Trustees held a gaming operator’s licence, that the licence was due for review not later than 1 November 1996, that the agreement constituted that review, and that the Trustees conducted a private enterprise on behalf of nominated beneficiaries.

Recital D is in the following terms:

This Agreement recognises that the business carried on by the Trustees is to be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp Holdings Limited or its operator, and is to otherwise have the benefit of the terms of this Agreement.

Clause 1.1 contains definitions, including:

‘Act’ means the Gaming Machine Control Act 1991 (Vic);
‘Agreement’ means this Agreement, including the Recitals, annexures and any subsequent amendment agreed by the parties;
…
‘Gaming Operator's Licence’ means the gaming operator's licence issued to the Trustees pursuant to the Act;[18]

[18]Emphasis added.

Clause 1.1 also provides that:

‘The singular includes the plural and vice versa …’

Clause 1.3 provides that:

Words and phrases appearing in this Agreement shall, unless the contrary intention appears, have the same meaning as in the Act.

Clause 3 contains the obligation by the Trustees to pay the State annual amounts of not less than $35 million during each year of the licence until 14 April 2012. The nature and purpose of these payments are not identified within clause 3, although clause 3.1.4 describes the payments as a ‘fee’.

Clause 4 imposes an obligation on the Minister to ‘endeavour to ensure, as far as he is reasonably able’, that Tatts’s existing ‘Gaming Operator’s Licence’ will not be varied without its consent.

Clause 5 provides for the Minister to ‘use his best endeavours’ to cause a transfer of the Trustees’ licence to a related entity, or for a ‘new licence on the same terms and conditions’ to be issued to a related entity, should the Trustees form the view that such a course ‘would be propitious’. The clause imposes an obligation on the Minister to use his best endeavours to introduce into Parliament any ‘amendment to the Act’ required to give effect to such a related party transfer or re-issue. As appears below, the Trustees’ licence under the 1991 Act as it then stood was unable to be transferred. For the avoidance of any doubt, clause 5.2 provided that transfer of the Trustees’ licence to a related entity, or the issue of a new licence to a related entity before the expiry of the Trustees’ current licence, would not be a ‘new gaming operator’s licence’ and would not trigger the terminal payment provision in clause 7.

Clause 6 reflects the equivalent treatment concept recorded in Recital D. The Minister expressly agreed ‘that for the term of the Gaming Operator’s Licence the Trustees’ conduct of [its] business will be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp’.

Clause 8.1 of the 1995 Agreement is in the following terms:

8.1The Minister will cause to be drafted and will use his best endeavours to procure that the Parliament of Victoria enacts legislation which:
8.1.1includes the Trustees' obligation to pay the Minister in accordance with clause 3 of this Agreement;
8.1.2includes the obligation of the State of Victoria to pay the Licence Value to the Trustees in accordance with the provisions of clause 7 of this Agreement;
8.1.3includes provision that section 36 of the [1991] Act will be repealed and replaced with a provision corresponding to section 12(4) of the Gaming and Betting Act 1994 (Vic);
8.1.4includes provision that section 38 of the Act will be repealed and replaced with a provision authorising the VCGA to take disciplinary action against a gaming operator or to apply to the Supreme Court for the cancellation of a gaming operator's licence on like grounds to those set out in sections 32 and 33 of the Gaming and Betting Act 1994;
8.1.5includes provision that the percentage of total daily net cash balances referred to in the proposed sub-section 136(3B) contained in section 160(3) of the Act will be amended to read ‘66 ²/₃ per centum’ in place of ‘75 per centum’;
8.1.6includes provision requiring the holder of any new gaming operator's licence issued following the expiry of the Gaming Operator's Licence to pay any licence fee by way of lump sum premium upon the grant of the new licence;
8.1.7includes any other provision deemed necessary or desirable to give effect to this Agreement.

Further, clause 6 and the definition of ‘Agreement’ in clause 1.1 incorporate two annexed documents into the 1995 Agreement: (1) the Ministerial Directions document dated 28 August 1995 annexed as Schedule 1; and (2) a letter from the Treasurer of Victoria to the Trustees annexed as Schedule 2 (the ‘Treasurer’s letter’), which clause 6 states was received and considered by the Trustees prior to them entering the Agreement.

The Ministerial Directions document was issued pursuant to s 12 of the 1991 Act. It recorded the maximum number of gaming machines permitted in the State outside of the Melbourne Casino, the proportion of gaming machines to be located outside the Melbourne Statistical Division, the maximum permissible number of gaming machines to be placed in restricted and unrestricted areas, the proportion of gaming machines outside the Melbourne Casino to be placed in premises licensed under the Liquor Control Act 1987 (Vic), and the proportion of gaming machines outside of Melbourne Casino that Tatts and Tabcorp were permitted to operate — 50 per cent in each case. Section 12 of the 1991 Act provided that these directions could be changed by the Minister at any time.

The Treasurer’s letter contains a statement of six principles on which the State reached agreement with the Trustees ‘over the payments relating to [the Trustees’] Gaming Operator’s Licence’. It is necessary to set out the Treasurer’s letter in full:

I am writing to confirm the principles on which the Government of Victoria is reaching agreement with you over the payments relating to your Gaming Operator's Licence.
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 your operations or the terms on which those operations are conducted.
The principles are as follows:-
1.You have been granted a Gaming Operator's Licence pursuant to the Gaming Machine Control Act 1991. This licence gives you a concurrent right (with TABCORP Holdings Limited and Crown Limited) to conduct gaming, for a fixed period.
2.The licence will expire on 14 April 2012.
3.The Government does not currently intend to grant further gaming licences to persons who are not now authorised to conduct gaming or wagering during the licence period.
4.Amounts which may be retained by you by way of commission on gaming will be maintained at 33.33% for the period of the licence.
5.The Trustees of the Estate of George Adams (whether you or your successors) may apply for a new licence after the initial licence terminates and on the same terms as other applicants. The process of awarding a new licence may involve a public tender. It is also expected but not guaranteed that the new licence would be awarded to the highest qualifying bidder. If the new licensee is not the Trustees, the Trustees will be entitled to receive from the State capital compensation as provided for in the agreement between the Minister for Gaming and the Trustees, shortly to be entered into.
6.It is intended that any new licence will be granted on conditions which include conditions substantially to the same effect as those to which the Trustees' licence is subject.

The Government recognises the importance of the gaming industry to the Victorian economy and, in recognition of that, it will continue to deal with the Trustees reasonably and in good faith.[19]

[19]Emphasis added.

The following aspects of the Treasurer’s letter are capable of supporting the generic meaning of the composite phrase ‘a new gaming operator’s licence’:

(1) In principle 1, the letter describes the Trustees’ licence as giving them ‘a concurrent right’ with Tabcorp and Crown Limited to conduct gaming for a fixed period, thereby identifying the essence of the Trustees’ licence as providing the authority to conduct gaming.

(2) In principle 3, the letter notes that the State did not, during the licence period, intend ‘to grant further gaming licences to persons who are not now authorised to conduct gaming’. This statement describes the licences or authorities held by the Trustees, Tabcorp and Crown Casino collectively as ‘gaming licences’, albeit that they had different names, different sources in legislation and different features.

(3) Principle 5 speaks in terms of the award of ‘a new licence’ or ‘the new licence’ to ‘the new licensee’, and principle 6 speaks of ‘any new licence’ being granted on conditions which include conditions ‘substantially to the same effect as those to which the Trustees’ licence is subject’ (emphasis added).

The ability to vary the Ministerial Directions from time to time under s 12 of the 1991 Act, combined with the non-binding nature of the six principles contained in the Treasurer’s letter, made it apparent that there was considerable uncertainty going forward over the remainder of the term of the Trustees’ licence. In other words, Parliamentary sovereignty or ‘sovereign risk’ was clearly understood by the parties and recognised by the incorporation of these documents into the 1995 Agreement.

That uncertainty was also evident in clauses 4 and 5 referred to above, containing best endeavours obligations only, and in clause 8, which imposed on the Minister an obligation to ‘cause to be drafted’ legislation, and to ‘use his best endeavours to procure that the Parliament of Victoria enact legislation’ which gave effect to the 1995 Agreement. Clause 8 did not prescribe whether the draft legislation was to be by amendment to the 1991 Act, by amendment to any particular Chapter, Part or Division of the 1991 Act, or by an entirely new Act dealing with one or more of the stated topics for legislation.

Further, clause 8.1.6 did not expressly provide for the intended legislation to authorise the issue of new gaming operator’s licences. This was, however, necessarily implicit, as there was at the time no legislation authorising the issue of anything which could be described as a gaming operator’s licence to any person other than Tatts (under the 1991 Act) or Tabcorp (under the 1994 Act).

I turn to consider the context in which the 1995 Agreement was executed. Before doing so, I note that the State contends there is no ambiguity justifying the Court considering evidence of surrounding circumstances, because the definitions of ‘Gaming Operator’s Licence’ and ‘Act’, combined with clause 1.3, dictated that that the specific meaning contention should be accepted. I disagree. The 1995 Agreement as a whole reveals the use of both the defined term ‘Gaming Operator’s Licence’ and use of the undefined composite phrase ‘a new gaming operator’s licence’. The capitalised defined term is always used in conjunction with the definite article (‘the Gaming Operator’s Licence’). It expressly relates to the gaming operator’s licence which had already been issued to the Trustees under the 1991 Act. The singular and uncapitalised term used in clause 7 (‘a new gaming operator’s licence’) referred to a licence that was obviously intended to operate after expiry of the defined licence held by Tatts. In my opinion, those matters make the uncapitalised term sufficiently ambiguous to justify looking outside of the text of the 1995 Agreement to consider relevant surrounding circumstances known to the parties, and the commercial purpose or objects to be secured by the 1995 Agreement as a whole and by the terminal payment provision in clause 7 in particular.

Moreover, ambiguity arises from the aspects of the Treasurer’s letter and the Ministerial Direction identified above.

I start with a consideration of the legislative context. The 1991 Act must be considered in any event, because it is referred to in the 1995 Agreement.

Legislative context

Section 7(1) of the 1991 Act provided that:

A person must not manufacture, sell, supply, obtain or be in possession of a gaming machine or a restricted component except in accordance with this Act.

Section 11(1) of the 1991 Act provided that:

Despite the provisions of any other Act or any law, the conduct of gaming is lawful when the gaming is conducted, and the gaming equipment is provided, in an approved venue in accordance with provisions of this Act.

Section 3(2) of the 1991 Act defined the ‘conduct of gaming’ as:

(a)the management, use, supervision and operation of gaming equipment; and
(b)the sale, redemption or use of gaming tokens; and
(c)the installation, alteration, adjustment, maintenance or repair of gaming equipment; and
(d)the use or distribution of proceeds from the conduct of gaming; and
(e)accounting, banking, storage and other acts in connection with or related or incidental to gaming and the conduct of gaming.

At the time of the 1995 Agreement, the 1991 Act authorised the grant of only one gaming operator’s licence, being the licence already issued to the Trustees.[20] That licence was not transferrable to any other person.[21] Although the term ‘gaming operator’s licence’ was not defined in s 3(1) of the 1991 Act, that sub-section did define ‘gaming operator’ to mean:

(a) the holder of a gaming operator’s licence under Part 3; and
(b)except in Division 3 of Part 3 and sections 136 and 136A, the holder of a gaming licence under the [1994 Act] and the operator or operators under the gaming licence [ie Tabcorp].

[20]Section 33.

[21]Section 37.

Further, s 14(1) of the 1991 Act specified the authority granted by a gaming operator’s licence, and thus defined what Tatts’s licence entailed:

14 Authority conferred by gaming operator’s licence
(1)Despite section 7 [which otherwise prohibited gaming machine operations], a gaming operator's licence authorises the licensee, subject to this Act and any conditions to which the licence is subject -
(a)to obtain from manufacturers and suppliers listed on the Roll approved gaming machines and restricted components; and
(b)to manufacture approved gaming machines and restricted components; and
(c)to supply approved gaming machines and restricted components to venue operators; and
(d)to conduct gaming at an approved venue; and
(e)to sell or dispose of gaming equipment with the approval of the Authority;. and
(f)to service, repair or maintain gaming equipment through the services of licensed technicians; and
(g)to do all things necessarily incidental to carrying on the activities authorised by this section.

Section 19 of the 1991 Act provided for a ‘venue operator’s licence’. Section 19(3) required any application for a venue operator’s licence to contain or be accompanied by:

(a)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; and
(b)any additional information that the Authority may request.

Under s 19A of the 1991 Act, which was introduced in 1994, a gaming operator was (subject to an irrelevant exception) prohibited from holding a ‘venue operator’s licence’.[22] As gaming machines could only be legally operated at an ‘approved venue’, this necessitated Tatts forming contractual arrangements with the holder of a ‘venue operator’s licence’ in respect of each approved venue at which Tatts conducted gaming operations. Without such arrangements, Tatts’s gaming operator’s licence was of no utility.
[22]Prior to s 19A being enacted, Tatts could have held both a gaming operator’s licence and a venue operator’s licence.

As mentioned, s 12 of the 1991 Act gave the Minister for Gaming power to make Ministerial Directions concerning, among other things, the maximum permissible number of gaming machines in the State, and the proportion of gaming machines that each gaming operator was permitted to operate. For the purposes of s 12 of the 1991 Act, Tabcorp was taken to be a ‘gaming operator’ within the meaning of that Act.[23] The Minister had the power to vary or revoke any such direction by further direction. The licences issued to the Trustees and Tabcorp did not specify the proportions or numbers of gaming machines allocated to each of them. That was done by Ministerial direction under s 12. There were various amendments to the directions over time, including to the direction referred to above. At all times, Tatts and Tabcorp were entitled to an equal share of the authorised maximum permissible number of gaming machines in Victoria outside of Crown Casino.
[23]Section 3(1), para (b) of the definition of ‘gaming operator’.

Under s 32 of the 1991 Act as it stood at the time of the 1995 Agreement, Crown Casino (the only authorised ‘casino operator’ at the time) was both ‘taken to be a licensed venue operator’ and authorised to obtain gaming machines, conduct gaming and service, repair or maintain gaming equipment through the services of licensed technicians ‘as if [it] were the holder of a gaming operator’s licence’. Crown Casino was not authorised to manufacture gaming machines, to supply them to venue operators, or to sell or dispose of gaming equipment, as Tatts was under s 14(1)(b), (c) and (e) of the 1991 Act.

Although the authorities granted to the casino operator under s 32 of the 1991 Act did not bear a label such as ‘gaming operator’s licence’ or ‘gaming licence’, it was clear that the substance of the authorisations under s 32 was to give the casino operator a statutory right to conduct gaming operations. In essence, this was the same kind of authority granted to the Trustees and Tabcorp. This is recognised in the Treasurer’s letter, when the three entities are described as having ‘a concurrent right to conduct gaming in Victoria’ within the limits of their respective licences.

I turn from the governing legislative regime at the time of the execution of the 1995 Agreement to other surrounding circumstances relied upon by Tatts.

Other surrounding circumstances

First, although the Trustees were authorised to undertake a number of ancillary activities in connection with their gaming machine business, they did not do so:

(1) The Trustees did not manufacture gaming machines and restricted components. Manufacturing was unnecessary because gaming machines and restricted components were obtained from others entitled to supply them.[24]

(2) The Trustees did not service, repair, maintain or install gaming machines. This work was always outsourced to licensed technicians.[25]

(3) The Trustees did not conduct any business of buying and selling gaming machines.

[24]Section 17 of the 1991 Act provided that a person whose name was ‘listed on the Roll’ was authorised to manufacture, sell or supply approved gaming machines and restricted components, and to enter into arrangements with gaming operators to service, repair or maintain gaming equipment through the services of licensed technicians.

[25]Section 16 of the 1991 Act provided for ‘a technician’s licence’, authorising the licensee to service, repair or maintain gaming equipment and to carry out prescribed duties.

Tatts contends that these matters must have been known to the State. I accept that contention. The evidence as a whole, coupled with the way in which the statutory authorisations worked under the 1991 Act and the 1994 Act, supports an inference that the State was aware of each of these matters concerning the Trustees’ gaming business as at the date of the 1995 Agreement. The evidence includes the fact that the State was the promoter of the Tabcorp float and, as the Tabcorp prospectus demonstrates, must have conducted a thorough assessment of the state of the gaming industry as it stood at that time. More importantly, the fact that Tatts did not perform any of the above activities demonstrates that they were unnecessary for it to conduct its core business of conducting gaming operations which was authorised by its licence.[26] They were ancillary activities that a gaming operator might potentially want to undertake.
[26]In this respect, the fact that Crown Casino was able to conduct gaming machine operations without the authority to manufacture, supply or sell gaming machines also supports the inference.

Second, although entitled to do so before the 1994 amendments introduced s 19A into the 1991 Act, the Trustees never held a venue operator’s licence but, instead, entered into contractual arrangements with venue operators in a form approved by the Commission pursuant to s 68 of the 1991 Act. After s 19A was introduced, the Trustees were required to conduct their gaming machine business in this way.

Third, the potential for future regulatory changes was recognised by the parties and formed a central basis of the negotiations leading up to the 1995 Agreement. Sovereign risk was a mutually known fact and was expressly referred to in the Tabcorp prospectus and the Treasurer’s letter. Further, as appears above, clauses 4, 5 and 8 of the 1995 Agreement evidence acceptance by both parties that the State could not commit itself to future executive or legislative action.

Fourth, Tatts relies upon post-contractual conduct by the State which it contends can be treated as admissions by the State as to the genesis, purpose and object of the 1995 Agreement — because the conduct relates to mutually known facts that preceded the contract. In this regard, Tatts relies upon the statement by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd about post-contract admissions concerning the genesis, purpose or object of an agreement:

It could happen that an event occurring after a contract was made was used as proof of a matter that is relevant to construction of the contract even on the objective theory of contract. If, for example, a contracting party admitted, after the contract had been made, the truth of some fact that was a relevant part of the context in which the contract had been made, I see no reason why that admission could not be used as part of the means of proof of that background fact.[27]

I accept that as a correct statement of the law.

[27](2009) 76 NSWLR 603, 682 [324].

Tatts relies upon two items of evidence in this category:

(1) In the second reading speech for the Gaming Act (Amendment) Bill on 4 June 1996, the Attorney-General for the State of Victoria relevantly said:

One consequence of the float of Tabcorp was that it and Tattersalls were placed in quite different competitive situations. Tabcorp had made a licence payment to the government, but Tattersalls had not. Consequently, in 1994 the government commenced negotiations with Tattersalls over the payment of a licence fee for its co-exclusive access to the gaming machine market.
As a result of these negotiations, the parties agreed that Tattersalls will pay a licence fee … On the basis of projections by the government's advisers, these arrangements are broadly equivalent to the licence fee paid by Tabcorp.
…
At the end of the licence period in April 2012 there will be an opportunity for a competitive application for a new licence. If the new licence is not granted to Tattersalls or a related entity of Tattersalls, as compensation for the lost investment in infrastructure Tattersalls will be entitled to the lesser of the premium payment for the new licence and the licence value, which is calculated according to a formula specified in proposed section 35A of the bill. This arrangement is broadly similar to the one which applies to Tabcorp. Proposed section 33A indicates that such premium payment is determined by the Treasurer. It is the government's intention that the amount actually paid by the successful applicant for the new licence will be the amount determined as such premium by the Treasurer.

(2) In a Cabinet paper dated 19 January 1996, presented by the Treasurer and the Minister for Gaming to Cabinet, the Ministers stated:

11.TABCORP's shareholders made their payment in the knowledge that on the grant of a new licence at the end of the initial licence period they would be entitled to receive back from the Government the lesser of the amount for which the licence for the succeeding period is sold or a ‘licence value’. This licence value is determined by a formula which essentially results in TABCORP receiving the amount initially paid for its licence plus or minus 15 per cent. It is not payable if TABCORP is wound up before the new licence is issued.
12.The Department of Treasury and Finance therefore set itself a target in the negotiations of achieving payment from Tattersalls of $520 million less Treasury’s estimate of the licence value which the Government will pay TABCORP when the licence expires. In net present value terms, at a 10% discount rate, the target was $422 million.
13.It was, however, agreed early in the negotiations at Tattersalls’ request that their licence fee would not take the form of an up front lump sum. Tattersalls argued that it would need to float its business to raise this amount of money and it was unwilling to do this. This meant that the objective became to achieve a set of payments over time which was as close as possible in present value terms to $422 million.
14.Negotiations with Tattersalls settled on a stream of annual payments and a ‘licence value’ payable under certain conditions to Tattersalls at the end of the licence period.
…
18.The formula for calculating Tattersalls’ licence value – which was included at Tattersalls’ request – is broadly similar to that applying to TABCORP. The main difference, also included at Tattersalls’ request, is that Tattersalls would not receive any compensation if the new licence is issued to it in 2012, whereas TABCORP would. Another difference is that while TABCORP’s licence value is essentially between plus or minus 15% of its original licence payment, the formula in Tattersalls’ case is more complicated (see Clause 6 of the Bill). Tattersalls sought both of these variations from TABCORP’s formula in order to protect the tax deductibility of its licence payments.

These statements constitute admissions as to the genesis of the 1995 Agreement and that the purpose or object of the agreement included:

(1) the State receiving fees from Tatts which were broadly equivalent to the consideration paid by Tabcorp for its gaming licence;

(2) the State paying Tatts a terminal payment which was broadly equivalent to the Tabcorp terminal payment, if a new licence was not issued to Tatts or a related entity; and

(3) ensuring that the State received a premium from a new licence in order to fund the terminal payment and place a limit on the amount of that payment.

Fifth, Tatts relies upon aspects of the negotiations between the parties to establish mutually known facts which evidence the genesis, purpose or object of the 1995 Agreement. Tatts expressly disavowed reliance on any aspect of the negotiations to establish subjective intent. Tatts relies upon the statement by Mason J in Codelfa concerning the limited use which can be made of prior negotiations:

Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent which they have this tendency they are admissible. But insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable.[28]

[28](1982) 149 CLR 337, 352 (emphasis added).

Tatts tendered much evidence for this limited purpose. It contends that the evidence is necessary to understand the objective background facts upon which it relies to establish the genesis, purpose or object of the 1995 Agreement. I do not intend to detail all of the evidence which was relied upon. Instead, the objective facts established by the evidence are summarised below:

(1) The genesis of the 1995 Agreement was the Tabcorp float, Tabcorp’s payment of significant up-front licence consideration, the maximisation of that consideration by the Tabcorp terminal payment provision in the 1994 Act and, in that context, the State’s request that Tatts pay a similar licence fee for its gaming operator’s licence to that paid by Tabcorp for its gaming licence.

(2) The purpose or object of the 1995 Agreement was to ensure equivalent treatment of Tatts and Tabcorp so that they could compete with each other on an even playing field in their respective gaming machine businesses.

(3) The amount of the licence fee to be progressively paid by Tatts, and the amount of the terminal payment to be made to it in certain circumstances, were to reflect the portion of the licence consideration paid by Tabcorp to the State that was referrable to its gaming machine business and not its wagering business. This explains the genesis of the $520 million figure as the starting point for the calculation of ‘licence value’ in the formula set out in clause 7.3 of the 1995 Agreement for calculating the amount of the terminal payment under clause 7.1.

I accept that the evidence of negotiations is admissible to the extent that it establishes the above facts.

Tatts also sought to rely on evidence that, during the course of the negotiations, there was never any discussion to the effect that Tatts would be disentitled from a payment if more than one gaming operator replaced it on expiry of its licence, or if there were changes to the form of statutory authorisation under which a new licensee or new licensees became entitled to conduct a gaming machine business in Victoria in return for payment of a premium to the State. This evidence was admitted subject to objection. In my opinion, this evidence cannot be relied upon. It does not establish or relate to the genesis, purpose or object of the terminal payment provision in the 1995 Agreement.

State’s contentions in support of the specific meaning

As referred to above, the State’s specific meaning case is based upon what it contends is the plain and ordinary meaning of the words ‘a new gaming operator’s licence’ in the context of the 1995 Agreement as a whole. The State’s contentions involve the following steps.

First, the State contends that the definition of ‘Gaming Operator’s Licence’ means that ‘a new gaming operator’s licence’ should also be understood as a reference to a gaming operator’s licence within the meaning of the 1991 Act as properly construed. The 1991 Act refers to only one kind of gaming operator’s licence, being a licence granted under s 33. Accordingly, as clause 1.3 provides that words and phrases have the same meaning as in the Act, the undefined term ‘a new gaming operator’s licence’ must mean a licence granted under Part 3 of the 1991 Act. The use of the adjective ‘new’ does not alter this specific meaning.

Second, the State contends that the definition of ‘Act’ in the 1995 Agreement, as meaning the 1991 Act, should be construed as including the 1991 Act as amended and successor legislation such as the Act. In this regard, the State relies by analogy on ss 16 and 17 of the Interpretation of Legislation Act 1984 (Vic), which concern the interpretation of legislation which refers to provisions in other legislation which has been amended or repealed and re-enacted. The State contends that it is necessary to read into the definition of ‘Act’ the words ‘as amended, repealed and replaced from time to time’ so as to give business efficacy to the 1995 Agreement when it refers to the defined ‘Gaming Operator’s Licence’.

Third, consistent with the second contention, the State relies on s 1.3 of the Act, which in 2003 introduced a definition of the term ‘gaming operator’s licence’ in specific terms:

‘gaming operator’s licence’ means a licence granted under Division 3 of Part 4 of Chapter 3 …

The State contends that this definition automatically confined the meaning of the phrase ‘a new gaming operator’s licence’ in clause 7 of the 1995 Agreement.

Fourth, the State contends that Tatts’s generic meaning case depends upon the phrase ‘a new gaming operator’s licence’ being read, in contradiction to clause 1.3 of the 1995 Agreement, as altering the meaning of the phrase ‘gaming operator’s licence’ from its plain meaning under the 1991 Act, both before and after the 1996 amendments. The State contends there is no objective reason for concluding that the parties intended to stray from the statutory meaning of the phrase.

Fifth, the State contends that evidence concerning communications between the Trustees and the Deputy Commissioner of Taxation, which were copied to the State and thus constituted mutually known facts, evince an intention on the part of the Trustees to ensure that any new gaming operator’s licence issued to them after expiry of their existing licence would qualify for capital gains tax rollover relief under s 160ZZPE of the Income Tax Assessment Act 1936 (Cth) (the ‘Tax Act’). At the relevant time, s 160ZZPE provided for rollover relief in circumstances where a fresh statutory licence was granted to a taxpayer by way of the renewal or extension of the original licence, and where the renewal or extension was (whether by law, custom or otherwise) wholly or principally attributable to the taxpayer’s ownership of the original licence.

I accept that the evidence showed that the Trustees had, prior to the execution of the 1995 Agreement, turned their minds to the question of whether rollover relief would be available. On 19 July 1995, the accountants acting for the Trustees wrote to the Deputy Commissioner of Taxation seeking a number of rulings, including confirmation that rollover relief under s 160ZZPE would be available if the licence was renewed in favour of Tatts on its expiry in 2012. On 31 August 1995, the Deputy Commissioner declined to provide the confirmation sought, but provided a non-binding statement of advice to the effect that rollover relief would be available.

The State contends that this correspondence demonstrates that it was a mutually known fact that it was in the Trustees’ interests for the composite phrase ‘a new gaming operator’s licence’ to be given a specific meaning, so as to ensure that only a licence that satisfied the criteria in s 160ZZPE (ie that could be considered a renewal or extension of the original licence) was granted to Tatts. I reject the State’s contention, principally because it requires the Court to speculate about the Trustees’ subjective intentions — for example, by considering the Trustees’ subjective views in 1995 about the likely best commercial outcome in 17 years’ time. Such a process would involve consideration of matters such as predictions about the merits of participating in a hypothetical tender process for a new gaming operator’s licence or, instead, opting to allow the new licence or licences to be issued to others so as to preserve the entitlement to a terminal payment. It may be that the availability of CGT rollover relief in the event that the Trustees’ licence expired and a new gaming operator’s licence was granted to them, thus disentitling them to a terminal payment, remained one of many factors considered by the Trustees in their private deliberations as to whether to agree to the final wording of the 1995 Agreement. But evidence or inference concerning the Trustees’ subjective intentions of that kind is inadmissible for the purpose of interpreting the 1995 Agreement.

In addition, I note that the State’s submissions presumed there would, in fact, be significant CGT consequences for the Trustees in the event that their existing licence expired, they were issued a new gaming operator’s licence and, as a result, did not receive a terminal payment. However, the State led no evidence, and addressed no submissions, as to the likely CGT consequences for Tatts in the event that it received a new licence that did not satisfy the criteria for accessing rollover relief under s 160ZZPE of the Tax Act. If it were necessary to make a finding in respect of this issue, it would be necessary to consider the effect of ss 160Z and 160ZD of the Tax Act. Tatts made submissions in that regard, to the effect that no capital gain would be deemed to have been made by Tatts in relation to the expiry of its existing licence. It is unnecessary to resolve that issue in these reasons.

I reject the State’s reliance on this evidence to support the specific meaning contention. I turn to consider the State’s other contentions as summarised above.

Reasons for rejecting the State’s contentions

In the context of the genesis, purpose and object of the 1995 Agreement, the generic meaning contention should be accepted. In my opinion, the reference in clause 7 to the issue of ‘a new gaming operator’s licence’ after expiry of the defined ‘Gaming Operator’s Licence’ would have been understood by a reasonable businessperson as the issue of any licence or other authority of substantially the same kind as the Trustees’ existing gaming operator’s licence. The issue of such a licence or authority, or licences or authorities, could have been authorised under the 1991 Act as amended, the 1991 Act as re-enacted and amended by the Act, or by any other legislation enacted by the Parliament of Victoria which operated upon expiry of Tatts’s defined ‘Gaming Operator’s Licence’. My reasons for rejecting the State’s contentions follow.

First, it may be accepted that the defined term ‘Gaming Operator’s Licence’ means the gaming operator’s licence held by the Trustees (later Tatts) pursuant to the 1991 Act as amended, re-enacted or replaced with other legislation granting the Trustees or Tatts a gaming operator’s licence. This is necessary for the operation of the 1995 Agreement insofar as it refers to the defined ‘Gaming Operator’s Licence’ held by the Trustees. However, in my opinion neither this definition nor clause 1.3, which provides that words and phrases used in the 1995 Agreement have the same meaning as in the 1991 Act unless the contrary intention appears, was engaged in respect of the composite phrase ‘a new gaming operator’s licence’, because that phrase had no meaning or possible operation in the 1991 Act at the time the 1995 Agreement was executed. Section 33 of the 1991 Act then authorised the grant of a gaming operator’s licence to the Trustees only; that licence had already been issued and was not transferrable; and thus there could be no ‘new licensee’ as contemplated by clause 7.1 until legislative amendments were made.

As stated above, it was not until the 1996 amendments introduced a substituted s 33 and a new s 33A into the 1991 Act that a new gaming operator’s licence could be granted under that Act. These new sections provided:

33 Gaming operator’s licence
(1)Subject to this Act, the Trustees or any other person may apply to the Authority for a gaming operator’s licence.
(2)A licence granted under this section must not commence before the expiry, or earlier termination, of the gaming operator’s licence held by the Trustees immediately before the commencement of section 5 of the Gaming Acts (Amendment) Act 1996.
33APremium payment
(1)Before a licence is granted under section 33, the applicant must pay to the Treasurer as consideration for the grant of the licence the amount determined by the Treasurer as the premium payment.

These sections were re-enacted in ss 3.4.29 and 3.4.30 of the Act.

Second, I do not accept the State’s submission that, when the Act introduced a definition of ‘gaming operator’s licence’ in 2003, this definition was automatically incorporated into the 1995 Agreement as defining the meaning of the previously undefined phrase ‘a new gaming operator’s licence’. Clause 1.3 appears in a contract, not in legislation, and so ss 16 and 17 of the Interpretation of Legislation Act have no application to the interpretation of the 1995 Agreement. Nor do I accept the State’s contention that this is necessary so as to give business efficacy to the agreement. In my opinion, a commercial or businesslike interpretation requires the opposite approach, for the reasons given below.

Third, clause 7 is intended to operate on one occasion only — the expiry of the gaming operator’s licence held by Tatts. That was 17 years in the future at the time the 1995 Agreement was executed. The parties expressly contemplated that the form of the new gaming operator’s licence to follow expiry of Tatts’s licence would be the subject of later legislation, commencing with the legislation required by clause 8 of the 1995 Agreement.

Fourth, the surrounding circumstances make it plain that both parties understood that there could be no guarantee that there would not be further legislative changes over the remaining term of Tatts’s licence. The Treasurer’s letter said so expressly: ‘of course, … the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation’. Further, the Treasurer’s letter made it clear that a new gaming operator’s licence might be different from the defined ‘Gaming Operator’s Licence’ held by the Trustees at the time of the 1995 Agreement: ‘it is intended that any new licence will be granted on conditions which include conditions substantially to the same effect as those to which the Trustees’ licence is subject.’

Fifth, there is no good commercial reason advanced by the State to justify the Court giving the specific meaning to the critical phrase. Accepting the specific meaning would not produce a commercial result. Rather, it would make commercial nonsense of the State’s promise to make the terminal payment in return for the Trustees’ agreement to pay the substantial fees stipulated in clause 3 of the 1995 Agreement and ‘as compensation for the investment in infrastructure lost’. Such a construction of the critical phrase would lead to an unjust result and should be rejected where a reasonable competing construction, which produces a commercial result consistent with the purpose or object of the 1995 Agreement, is available.[29]
[29]Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99, 109 (Gibbs J).

Sixth, there is no apparent commercial reason for reasonable businessmen in the position of the parties to have specified that the Trustees’ entitlement to the terminal payment depended on the statutory source of the new gaming operator’s licence which was to yield the premium payment to fund the terminal payment provided for in clause 7. If reasonable businessmen in the position of the parties were asked to consider whether a new gaming operator’s licence in accordance with clause 7 would be issued if the government of the day in 17 years’ time: (1) continued to authorise gaming machine operations in Victoria following expiry of the Trustees’ licence, and (2) in return for a premium or premiums, issued licences or other authorities which authorised new operators to conduct gaming businesses of substantially the same kind as Tatts’s gaming business, they would in my opinion have responded: ‘of course’.

For the above reasons, I have concluded that the generic meaning contention should be accepted. It is accordingly necessary to consider the application of clause 7 in the context of the generic meaning and the new statutory regime introduced by the 2009 amendments which were specifically designed to operate after expiry of the Tatts licence. Before doing so, however, it is necessary to consider other defences put forward by the State in order to meet such a finding:

(1) First, the State contends that the 1995 Agreement was superseded when, by the 1996 amendments, the Parliament of Victoria enacted legislation which included all of the provisions mentioned in clause 8.1 of the 1995 Agreement. As a result, the State contends that the 1995 Agreement was ‘spent’ when the respective obligations of the parties were enshrined in the 1991 Act by the 1996 amendments.

(2) Second, the State contends that the 2009 amendments were inconsistent with the continued operation of clause 7 and thereby abrogated its contractual obligation to make the terminal payment.

(3) Third, the State contends that, in any event, the substance of the authorisations granted under the gaming machine entitlements and related venue operator’s licences were materially different from the authorisations under Tatts’s gaming operator’s licence, with the effect that, even on the generic meaning of the composite phrase, the terminal payment provision has not been engaged.

I proceed to deal with these arguments in sequence.

(B)Was clause 7 spent as a result of the 1996 amendments?

The State contends that the 1995 Agreement was spent upon enactment of the 1996 amendments to the 1991 Act, for the following reasons:

(1) On a proper construction of the 1995 Agreement as a whole, it was intended to establish contractual entitlements and obligations ‘pending the enactment of the legislation contemplated by clause 8.1’. On this basis, the State contends that all of the provisions of the 1995 Agreement that were embodied in the 1991 Act by reason of the 1996 amendments were ‘spent and no longer enforceable independently of the legislation’.

(2) This objective intention should be attributed to the parties because clause 8 would otherwise have been ‘a clause without a purpose’, as there is no reason to attribute to the parties an intention that the Trustees should have concurrent rights and obligations under both contract and statute.

(3) This intention is also supported by counterfactual examples that can be postulated to demonstrate the consequences of Parliament failing to legislate in accordance with the precise terms of the 1995 Agreement. For example, Parliament could have enacted legislation requiring the Trustees to pay annual licence fees of $50 million, in lieu of $35 million under clause 3 of the 1995 Agreement, or could have decided that the terminal payment would be of a lesser amount or triggered by different events.[30]

(4) All of the specific matters mentioned in clause 8.1 of the 1995 Agreement were embodied in the 1996 amendments. The only importance of that, however, is that it ‘signifies the point at which the contractual provisions became spent’.[31]

[30]In this regard, clause 8 may have been void, as it required the State to use its best endeavours to pass legislation in a particular form – thus fettering future executive action. Cf Nettle JA’s dissent in Port of Portland Pty Ltd v Victoria (2009) 27 VR 366, 384 [86]. The High Court did not find it necessary to decide this issue: Port of Portland Pty Ltd v State of Victoria (2010) 242 CLR 348, 360 [14]. It is also not necessary to decide the issue in this case as it was not contested that clause 8.1 was fully complied with.

[31]Ibid [29].

I do not accept the State’s contentions in this regard.

First, the State’s contentions find no support in the language of the 1995 Agreement, which imposes continuing obligations over the term of the licence. For example:

(1) Clause 3 contains continuing obligations upon the Trustees to pay fees commencing in the 1996 financial year, and for each financial year thereafter until 30 June 2011, and for the part financial year ending 14 April 2012 when the Trustees’ licence was then due to expire.

(2) Clauses 4 and 5 impose continuing obligations on the Minister (for and on behalf of the State) to ‘endeavour to ensure, as far as he is reasonably able’ (clause 4) or to ‘use his best endeavours’ to act in a particular way (clause 5) over the term of the Trustees’ licence.

(3) Clause 6 contains an agreement by the Minister that the conduct by the Trustees of their gaming machine business will, for the whole term of their licence, be regulated ‘on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp’.

(4) Clause 11 provides for the possibility that the Trustees may ‘assign the benefit of this Agreement’ to a related entity to whom its Gaming Operator’s Licence is transferred with the consent of the Minister pursuant to clause 5. This indicates that the 1995 Agreement was to have continuing effect and could benefit a related entity of the Trustees many years after the proposed legislative changes contemplated by clause 8.

(5) Recital D provides that, in addition to equivalent treatment with Tabcorp in respect of its gaming machine business, ‘the business carried on by the Trustees … is to otherwise have the benefit of the terms of this Agreement.’ This also indicates continuing operation.

Second, recognition of sovereign risk was an important surrounding circumstance against which the 1995 Agreement was negotiated and executed. It was expressly recognised in the Treasurer’s letter, and clauses 4, 5 and 8 of the 1995 Agreement are also consistent with an understanding that the State could not restrict future executive or legislative action concerning regulation of the gaming machine business conducted by the Trustees. In these circumstances, it would be commercially unreasonable to attribute to the parties an intention that their rights and obligations under the 1995 Agreement would disappear once those rights and obligations were embodied in legislation as contemplated by clause 8. It was obviously in the interests of the Trustees to have concurrent contractual and statutory entitlements to receive the terminal payment, as repealing a statutory right may be thought more politically palatable than abrogating a right created by a commercial contract.

The existence of concurrent contractual and statutory entitlements is not without precedent. For example, in Bromley v Forestry Commission of New South Wales, the Court of Appeal in New South Wales recognised the existence of concurrent ‘compensation provisions’ under both contract and statute where there were material differences between the two provisions.[32] This case is analysed below.
[32](2001) 51 NSWLR 378, 393 [52]-[57] (Mason P).

Third, the State’s contentions are inconsistent with two later agreements entered into by the State which confirmed the continuing operation of the 1995 Agreement as a whole.

In 1999, following a tax ruling affecting the profitability of the Trustees’ gaming machine business, the Trustees approached the Treasurer and sought amendments to the manner in which its payments to the State were calculated. The Treasurer accepted the Trustees’ entreaties and, as a result, the 1991 Act was amended to alter the payment obligations of the Trustees, which had been in the same form as in clause 3 of the 1995 Agreement.

In addition to amending the 1991 Act, on 28 June 1999, the Minister for Gaming, for and on behalf of the State, and the Trustees signed an agreement amending the 1995 Agreement to reflect the change in the payment arrangements. The recitals to the 1999 Agreement stated:

A.On the 17th day of November 1995 the Trustees and the Honourable Haddon Storey, QC, MLC, former Minister for Gaming acting for and on behalf of the State of Victoria, entered into an agreement (‘1995 Agreement’) which inter alia, reviewed amounts to be paid by the Trustees to the Victorian Casino and Gaming Authority pursuant to s 136 of the Act.
B.By the Gaming Act Amendment Act 1996 (Act No 17/1996) the Parliament of Victoria legislated to reflect in statutory form the payment requirements contained in clause 3 of the 1995 Agreement.

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.[76]

[76](2014) 88 ALJR 514, 518 [22], quoting Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 87 ALJR 98, 107 [39].

Consistent with these general principles, s 35(a) of the Interpretation of Legislation Act 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.[77]

[77]Ibid 518 [23] (citations omitted).

Applying these principles to the issue at hand, Tatts’s contention that a generic meaning should be given to the term ‘gaming operator’s licence’ in 3.4.33(1)(b) and (c) must fail. The definition of ‘gaming operator’s licence’ in s 1.3 set out above is simply too strict to allow the Court to ignore the text of the Act and conclude that the identical defined phrase had different meanings within s 3.4.33.

The purpose or object of the statutory terminal payment provision, as discussed above in the context of the 1995 Agreement, did not require a different result prior to the 2009 amendments. Until that time, the application of the definition of ‘gaming operator’s licence’ to s 3.4.33(1)(b) and (c) was consistent with that purpose or object. The parties clash over the effect of those amendments on s 3.4.33: the State contends that s 3.4.33 was impliedly repealed as a result of the 2009 amendments. Tatts contends that the meaning of the term ‘gaming operator’s licence’ in s 3.4.33 changed from specific to generic, so as to enable the provision to have continuing operation. I turn to consider the effect of the 2009 Amendments.

(B) Was s 3.4.33 impliedly repealed by s 3.4.3?
Implied repeal principles

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.’[78]

[78](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.[79]

[79]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,[80] 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. 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’.[81]
[80](1939) 62 CLR 603, 625.
[81](2006) 228 CLR 566, 585 [48].

Second, consistent with the principles concerning implied repeal, and as set out above, the principle of legality as stated in Potter v Minahan is relevant.[82]
[82](1908) 7 CLR 277, 304.

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,[83] 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’.[84] As set out above, this principle was recently affirmed by McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Ltd,[85] affirming the principle as expressed in Clissold v Perry.[86]
[83]See s 51(xxxi).
[84]Springhall v Kirner [1988] VR 159, 165-6 (Crockett J).
[85](2004) 221 CLR 30.
[86](1904) 1 CLR 363, 373.

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.[87]
[87]Commission of Police v Eaton (2013) 87 ALJR 267, 278 [46] referring to Associated Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538, 553-4 (Wilberforce L). This principle is sometimes 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,[88] 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’.[89]

[88]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.

[89](1998) 194 CLR 355, 382 [71].

Sixth, there is a general substantive presumption 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’.[90] That statement has been expressly approved by the High Court on a number of occasions.[91]
[90](1955) 92 CLR 390, 397.
[91]For example, Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 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’.[92] 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.[93]
[92]Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297, 321.
[93]Ibid 320-1.

State’s contentions on implied repeal

The 2009 amendments inserted s 3.4.3, which provides:

This Part applies only with respect to the gaming operator's licence that was issued on 14 April 1992 and does not authorise the grant of any further gaming operator's licence.

The State contends that the combined effect of the definition of a ‘gaming operator’s licence’ in s 1.3, and the preclusion of the grant of a further gaming operator’s licence after expiry of Tatts’s licence introduced by s 3.4.3, provides a complete answer to Tatts’s statutory claim, as 3.4.3 rendered s 3.4.33 incapable of operation and was thus impliedly repealed.

Further to s 3.4.3, the State contends that its implied repeal argument is reinforced by other provisions of the Act including:

(1) s 3.4.1A, which expressly provides that the grant of a venue operator’s licence ‘is not to be taken to be a granting of a gaming operator’s licence … under this Part’; and

(2) s 3.4.4A, which expressly provides that the grant of a monitoring licence ‘is not to be taken to be the granting of a gaming operator’s licence … under this Part’.

The State’s contentions acknowledge that there is no similar provision expressly providing that the grant of a gaming machine entitlement is not to be taken to be the granting of a gaming operator’s licence under Part 4. The State contends, however, that this is explicable on the basis that gaming machine entitlements are not granted under Part 4 but, instead, under Part 4A and, in addition, are described as ‘entitlements’ and not ‘licences’. In effect, the State contends that, while it may be curious that the legislature did not expressly provide that the grant of a gaming machine entitlement is not to be taken to be the granting of a gaming operator’s licence, the combined effect of the definition and s 3.4.3 is so clear that the lack of such a deeming provision is immaterial.

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 3.4.33. The State contends that this result is of sufficient clarity to make the continued operation of s 3.4.33 so inconsistent or repugnant with these provisions that they cannot stand together. In effect, the State contends that Parliament well understood the earlier words in s 3.4.33 had the specific meaning when it set about passing the 2008 and 2009 amendments for the purpose of both establishing the new gaming regime and ensuring that the payment entitlement under s 3.4.33 could never be triggered on the grant of new authorities to conduct gaming activities under the new regime.

In the context of the State’s submissions, it is convenient to consider the available extrinsic materials for the 2008 and 2009 amendments 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 contained 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:

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.[94]

[94]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 Tatts and Tabcorp of their respective entitlements to compensation under the terminal payment provisions.[95]
[95]As explained in the judgment delivered today in the Tabcorp proceeding, s 4.3.12 of the Act contained a terminal payment provision for Tabcorp, albeit one operating on a different contingency following expiry of Tabcorp’s gaming licence and wagering licence in 2012.

The State contends that the Government’s intention for the 2008 and 2009 amendments was reinforced and reiterated by statements made in a Government budget paper for the 2008-2009 financial year dated 6 May 2008 (‘2008 budget paper’).[96] In dealing with the State’s contingent liabilities for the 2008-09 financial year, the Treasurer stated:
[96]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.[97]

[97]Emphases added.

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

There is no evidence that the 2009 amendments had been drafted at the time of the 2008 budget paper. 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 or 2009 amendments, that sheds light on the Government’s object and purpose concerning the continuing operation of the terminal payment provisions for Tatts and Tabcorp. These extrinsic materials relate to the desirability for, and the content of, the gambling reforms introduced by the amendments, none of which has 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 meaning of proposed legislation. 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.[98]
[98]For example, Harrison v Melham (2008) 72 NSWLR 380, 384 [12]-[16] (Spigelman CJ), 398-401 [159]-[173] (Mason P).

The second difficulty with the 2008 media release and the 2008 budget paper is that they record the Government’s view about the effect of proposed legislation on Tatts’s payment entitlement under its terminal payment provision — in circumstances where there is no evidence that the form of the 2009 amendments had been drafted, let alone settled — while making it plain in the 2008 budget paper that the Government did not intend to alter or amend the terminal payment provision. In these circumstances, even if the evidence of the Government’s subjective view is given some weight, it is equivocal and unreliable on that ground.

Tatts’s contentions on implied repeal

Tatts contends that s 3.4.3 is no more than ‘an application provision’; its function and purpose is simply to draw a temporal boundary between the old regime (under which only Tatts’s licence could exist) and the new regime. In other words, s 3.4.3 was intended to do no more than ensure that there was no overlap between the new regime and the old regime following expiry of Tatts’s licence, and it says nothing about the operation of s 3.4.33(1)(b) and (c). In my opinion, that contention is inconsistent with the Court’s acceptance that the specific meaning applied until the 2009 amendments were made. To cater for such a finding, Tatts contends that the phrase ‘a gaming operator’s licence’ altered in its meaning on the enactment of the 2009 amendments, from specific to generic, because the only way in which s 3.4.33 can work is if those words are given a generic meaning in s 3.4.33(1)(b) and (c). I will refer to this as ‘the altered meaning contention’.

Tatts’s submissions in support of its contentions on implied repeal involve the following steps.

First, Tatts contends that the extrinsic evidence is inconsistent with an intention to repeal the terminal payment provision. The express statement in the 2008 budget paper that the Government did not intend to alter or amend the terminal payment provisions of the legislation for Tatts or Tabcorp indicates that those provisions were intended to operate if they were engaged. This is especially so for Tatts, because there is no evidence that the form of the 2009 amendments was known. Put simply, if it was intended to repeal the terminal payment provisions, Tatts contends that it would have been ridiculous for the Government to declare in its formal budget paper that it did not intend to alter or amend those very provisions.

Second, Tatts contends that if the State had intended to repeal s 3.4.33 it could easily have done so expressly. Tatts contends that there is nothing in the State’s argument that, as some provisions in Part 4 were intended to have continuing operation until expiry of Tatts’s licence, it would have been a complicated ‘filleting’ exercise to repeal those sections which were not intended to have continuing operation on a piecemeal basis. All that was required was an express repeal of s 3.4.33.

Third, Tatts contends that, far from supporting an intention to repeal, ss 3.4.1A and 3.4.4A assist its contention that Parliament intended s 3.4.33 to have continuing operation. Tatts contends that those deeming provisions assume the continuing operation of the terminal payment provision because, were that not so, the deeming provisions would provide ‘a meaningless and irrelevant defensive mechanism’ against the possible triggering of the terminal payment right. On this basis, Tatts contends that the failure to include a similar deeming provision in respect of the grant of a gaming machine entitlement is consistent with a legislative intention that the grant of a gaming machine entitlement would represent the grant of a gaming operator’s licence for the purpose of s 3.4.33(1)(b) and (c).

Fourth, Tatts relies upon the presumption that a general enactment is not intended to interfere with an earlier specific provision unless that intention is clearly expressed. Here, s 3.4.33 granted Tatts a specific right in certain circumstances. That right was enacted in 1996 and consolidated and re-enacted in 2003. The 2009 amendments make no express reference to s 3.4.33 or its continuing operation. There is nothing in the language of s 3.4.3 which indicates that it was directed at curtailing or limiting or abrogating the rights in s 3.4.33.

Fifth, Tatts contends that there are other provisions of the Act where the legislature has expressly provided that amendments would not result in compensation being payable by the State to any person.[99] These provisions demonstrate that, where the legislature intended to provide that the operation of a certain provision would not give rise to an obligation on the part of the State to make a payment, it did so expressly. The contrast with s 3.4.3 is plain.
[99]See, for example, ss 2.5A.14, 3.2.5, 3.4.28F, 3.4.48B, 3.4.59LB, 3.4.59Q, 3.4A.11B, 3.4A.29, 3.4A.31, 3.5.33N, 3.7.6C, 3.8.12, 4.3A.10AB, 4.3A.34AB, 6A.3.10B, 6A.3.34B of the Act.

Sixth, in the absence of a clear intention to repeal, Tatts then contends that it must follow that the legislature intended that s 3.4.33 should have a continuing operation. If that be the case, Tatts contends that the Court should give s 3.4.33 a workable interpretation to enable it to continue to operate. As adopting the defined meaning of a ‘gaming operator’s licence’ would deprive the section of the possibility of operation, it should accordingly be given a generic or ordinary meaning.

Tatts contends that the changed circumstances brought about by the 2009 amendments, including the fact that the terminal payment provision was left unamended, provided a changed statutory context sufficient to constitute an intention that the definition of ‘gaming operator’s licence’ was not to apply to that phrase when used in paragraphs 3.4.33(1)(b) and (c) of the Act. In support of this submission, Tatts relies upon the principle that, even though not expressly stated in a statute, definitions in a statute are impliedly subject to the qualification ‘unless the contrary intention appears’.[100] As to that principle, McHugh J said in Kelly v R:

The function of a definition is not to enact substantive law. It is to provide aid in construing the statute. Nothing is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment. There is, of course, always a question whether the definition is expressly or impliedly excluded.[101]

[100]Transport Accident Commission v Treloar [1992] 1 VR 447, 449 (McGarvie and Gobbo JJ).

[101](2004) 218 CLR 216, 253.

As to the circumstances necessary to constitute a ‘contrary intention’ for this purpose, Tatts relies upon the decision of the New South Wales Court of Appeal in Deputy Commissioner of Taxation (NSW) v Mutton.[102] In that case, Mahoney JA canvassed the authorities concerning the identification of a ‘contrary intention’ and summarised the position in the following way:[103]
[102](1988) 12 NSWLR 104.
[103]Ibid 108 (citations omitted).

(1) ‘A definition section and its application must be considered in the context of the Act as a whole’.

(2) ‘A contrary intention may be inferred from a particular provision if, were the definition to be applied, the provisions of or the procedure established by the section would not appropriately work’.

(3) ‘It is … not necessary that what is laid down by the section in question be impossible of operation [if the statutory definition is applied]; it is sufficient if the result of the application of the definition to a section results in the operation of the section in a way which clearly the legislature did not intend’.

(4) ‘In the end, what the Court does when it decides whether there is a ‘contrary intention’ is to decide whether it was the intention of the legislature that the statutory … definition should apply to the particular section’.

Seventh, Tatts contends that the generic meaning opens the way for it to rely upon the ‘always speaking’ principle of statutory interpretation.

The text of a statute is ordinarily to be read as ‘always speaking’ or ‘speaking continuously in the present’.[104] 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..[105]

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

[105](2013) 302 ALR 101, 119-20 [82] (original emphasis).

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. 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..[106]

[106](2002) 56 NSWLR 210, 223 [43].

In Wilson v Commissioner of Stamp Duties,[107] 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, 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.
[107](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’.[108]
[108](2003) 57 NSWLR 113, 145 [141].

Tatts contends that, upon enactment of s 3.4.3, which made the grant of a ‘gaming operator’s licence’ in the defined sense impossible, the changed circumstances enlivened the always speaking principle so that, in order to make the terminal payment provision work, a generic meaning should be adopted. Tatts submits that would be consistent with the purpose of the provision – to provide compensation out of the premium paid for the grant of a gaming operator’s licence after expiry of the Tatts licence ‘as compensation for [Tatts’s] lost investment in infrastructure’.[109]
[109]Victoria, Parliamentary Debates, Legislative Assembly, 4 June 1996, 566 (Jan Wade).

Tatts’s submissions on implied repeal may be summarised as follows. The language of the 2009 amendments, in particular s 3.4.3, is not sufficiently clear to evince an intention by Parliament to deprive s 3.4.33 of continuing operation; and, if that be so, the Court should give s 3.4.33 a workable interpretation to enable it to continue to operate. The only way this can be done is by giving the phrase ‘gaming operator’s licence’ a generic meaning, so as to allow the always speaking principle to apply.

I do not accept Tatts’s submissions on implied repeal. They depend on its contention that the meaning of ‘gaming operator’s licence’, when used in s 3.4.33(b) and (c), changed from the defined meaning to a generic meaning upon enactment of the 2009 amendments; thus allowing the always speaking principle of interpretation to operate to include the grant of gaming machine entitlements to licensed venue operators within the generic meaning of gaming operator’s licence.

In my opinion, it is clear that the legislature initially intended that the specific definition of ‘gaming operator’s licence’ would apply throughout Part 4, including to s 3.4.33. Similarly, s 3.4.3 was in my opinion intended to apply to the whole of Part 4, including to s 3.4.33. After all, s 3.4.33 is a section expressly intended to operate on the grant of the very licence which the legislature expressly provided by s 3.4.3 could never occur. Accordingly, there was in my opinion never a contrary intention in the Act that the definition of ‘gaming operator’s licence’ would not apply to s 3.4.33. In these circumstances, the always speaking principle of interpretation cannot apply. The language of the statute is simply too strict.

If Tatts had not succeeded on its contractual claim, this result may be thought to be unfair, because Tatts paid annual licence fees over 17 years, totalling hundreds of millions of dollars, in the expectation that it would be entitled to a terminal payment if it was not granted a licence to continue its gaming machine business after expiry of its licence, and a licence or licences were granted to others. But such a result would reflect the harsh reality of sovereign risk.

(C)Did the State grant new gaming operator’s licences?

As the specific meaning of ‘gaming operator’s licence’ has been accepted, the grant of gaming machine entitlements to licensed venue operators did not constitute the grant of a ‘gaming operator’s licence’ under s 3.4.33(1)(b) of the Act. In the event that I am mistaken, and the generic meaning contention should have been accepted, then my reasoning in respect of Tatts’s contractual claim under the 1995 Agreement concerning the absence of material differences between the substance of the authorisations granted under the two regimes should be adopted.

Conclusion and orders

For the above reasons, I conclude that:

(1) Tatts’s contractual claim should succeed. Tatts is entitled to judgment for $451,157,286 plus interest.

(2) Tatts’s alternative claims based on the good faith and cooperation terms would have failed if its contractual claim had otherwise failed.

(3) Tatts’s statutory claim fails.

(4) Tatts’s claim based on clause 6 of the 1995 Agreement fails.

I will hear the parties as to interest and costs.

[2014] VSC 302

26 June 2014