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Victoria v Tatts Group Limited

Victoria v Tatts Group Limited

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HIGH COURT OF AUSTRALIA
FRENCH CJ,
KIEFEL, BELL, KEANE AND GORDON JJ
STATE OF VICTORIA APPELLANT
AND
TATTS GROUP LIMITED RESPONDENT
Victoria v Tatts Group Limited
[2016] HCA 5
2 March 2016
M83/2015
ORDER
1.Appeal allowed with costs.
2.Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made on 4 December 2014 and in their place order that:
(a)the appeal be allowed with costs;
(b)orders 1 and 2 of the orders of Hargrave J made on 27 June 2014 be set aside, and in their place order that the proceeding be dismissed with costs;
(c)the respondent pay the appellant $540,467,887.92 with interest, calculated from 27 June 2014.

On appeal from the Supreme Court of Victoria
Representation
W A Harris QC with R G Craig and K A Loxley for the appellant (instructed by Johnson Winter & Slattery)
N J Young QC with P D Crutchfield QC and N P De Young for the respondent (instructed by Clayton Utz Lawyers)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

Contract – Construction of terms – Where contract used statutory term "gaming operator's licence" – Where contract provided for payment to respondent if "new gaming operator's licence" issued to person other than respondent – Where statutory scheme amended so gaming operator's licence could no longer be issued – Meaning of "new gaming operator's licence" – Whether payment due.
Contract – Construction of terms – Context and purpose – Where commercial context regulated by statutory regime – Where letter from member of Executive annexed to contract – View of reasonable business people.
Contract – Construction of terms – Whether pre-existing contractual right operated independently of statutory right on same subject matter – Whether pre‑existing contractual right discharged or abrogated by subsequent legislative enactment.
Words and phrases – "gaming machine entitlement", "gaming operator's licence", "new gaming operator's licence".
Gaming Machine Control Act 1991 (Vic), Pt 3.
Gambling Regulation Act 2003 (Vic), Pts 4 and 4A of Ch 3.

FRENCH CJ, KIEFEL, BELL, KEANE AND GORDON JJ.
Introduction

The legalisation of gaming in Victoria in 1991 by the Gaming Machine Control Act 1991 (Vic) ("the 1991 Act"), the creation in 1992 of a duopoly in the gaming industry in Victoria by the issue of a gaming operator's licence to each of the Totalisator Agency Board of Victoria ("TAB") and the Trustees of the Will and Estate of the late George Adams ("Tatts"[1]) for a term of 20 years[2], the subsequent privatisation of TAB (resulting in the creation of Tabcorp Holdings Limited ("Tabcorp")) in 1994 and the enactment of the Gaming and Betting Act 1994 (Vic) ("the 1994 Act"), as well as the inclusion in the 1994 Act of a "terminal payment provision"[3] in favour of Tabcorp, are explained in the reasons published in the related appeal in Tabcorp Holdings Ltd v Victoria[4]. That factual and legislative…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] HCA 5
Decision Date: 2 March 2016

CaseChat Overview and Summary

The High Court of Australia heard an appeal concerning the construction of a contract between the State of Victoria and Tatts Group Limited. The dispute arose from a clause in the 1995 Agreement that stipulated a payment to Tatts if a "new gaming operator's licence" was issued to a party other than Tatts. However, subsequent legislative amendments to the statutory scheme meant that gaming operator's licences could no longer be issued in the manner contemplated by the original agreement.

The central legal issue before the court was the interpretation of the term "new gaming operator's licence" within the context of the 1995 Agreement, particularly in light of the amended statutory framework. The court was required to determine whether the contractual obligation to pay Tatts was triggered by the legislative changes, or if the absence of a mechanism to issue such a licence rendered the condition precedent impossible to fulfil, thereby excusing the State from payment. This involved considering whether the contractual right operated independently of the statutory right and whether the subsequent legislation discharged or abrogated the pre-existing contractual right.

The High Court reasoned that the 1995 Agreement, when read as a whole and in its commercial context, indicated that the parties intended the contractual provisions to operate even if the specific statutory mechanism for issuing a "gaming operator's licence" changed. The court found that the definition of "gaming operator's licence" in the relevant legislation was precise and did not permit an alternative, broader interpretation that would accommodate the changed circumstances. Consequently, the court concluded that the State's obligation to pay Tatts under the agreement was not discharged by the legislative amendments.

The appeal was allowed with costs. The orders of the Court of Appeal of the Supreme Court of Victoria were set aside, and in their place, the High Court ordered that Tatts Group Limited pay the State of Victoria $540,467,887.92, with interest calculated from 27 June 2014. The proceeding was dismissed with costs.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made on 4 December 2014 and in their place order that:

(a) the appeal be allowed with costs;

(b) orders 1 and 2 of the orders of Hargrave J made on 27 June 2014 be set aside, and in their place order that the proceeding be dismissed with costs;

Background

Background to the litigation

These reasons will set out the facts, including the relevant provisions of the 1995 Agreement, the legislative history and events subsequent to the 1995 Agreement. The reasons will then turn to the question of the proper construction of cl 7 of the 1995 Agreement.FactsNegotiations with Tatts following the privatisation of TAB Following the privatisation of TAB in 1994, Tabcorp held its conjoined wagering licence and gaming licence under the 1994 Act. Tatts still held its gaming operator's licence under the 1991 Act. The duopoly that had been created in 1992 was retained, but the terms on which Tatts and Tabcorp participated in that duopoly were different. Tabcorp had paid for its conjoined licences and had the benefit of a terminal payment provision. Tatts had not paid for its gaming operator's licence and did not have the benefit of a terminal payment provision. The State wanted to level the playing field between the duopolists (Tatts and Tabcorp) and to divide that playing field between them (with the limited exception of the Crown Casino). The State also wanted an adequate return from the "co-exclusive" licence which had been provided to Tatts and to put Tatts onto a more equal competitive footing with Tabcorp[5]. [5]See Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 4 June 1996 at 565-566 in relation to the history of the negotiations.1995 Agreement The State entered into negotiations with Tatts. Those negotiations culminated in the 1995 Agreement. The arrangements in that agreement were broadly similar to those which applied to Tabcorp in relation to gaming[6]. [6]Tabcorp Holdings Ltd v Victoria [2016] HCA 4 at [18]-[29]. The recitals to the 1995 Agreement provided: "A.[Tatts] hold[s] a Gaming Operator's Licence in the [State].B.Clause 8 of the Gaming Operator's Licence provides for a review of amounts payable by [Tatts] under Section 136 of [the 1991 Act] to the Victorian Casino and Gaming Authority, to be undertaken not later than 1 November 1996. This Agreement when it becomes unconditional constitutes that review.…D.This Agreement recognises that the business carried on by [Tatts] is to be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by [Tabcorp] or its operator, and is to otherwise have the benefit of the terms of this Agreement.E.The parties have agreed to enter into an arrangement on the terms and conditions contained in this Agreement." (emphasis added) The term "Gaming Operator's Licence" was defined in cl 1.1 of the 1995 Agreement to mean "the gaming operator's licence issued to [Tatts] pursuant to [the 1991 Act]". "[B]usiness" was defined in cl 1.1 of the 1995 Agreement to mean "[Tatts'] gaming machine business carried on in the [State], including the acquisition, supply, installation and operation of gaming machines". Clause 8 of the 1995 Agreement, entitled "Draft Legislation", relevantly provided: "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 [Tatts'] obligation to pay the Minister in accordance with clause 3 of this Agreement;8.1.2includes the obligation of the [State] to pay the Licence Value to [Tatts] in accordance with the provisions of clause 7 of this Agreement;…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." (emphasis added)

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

FRENCH CJ, KIEFEL, BELL, KEANE AND GORDON JJ

That contention cannot be accepted for the reasons stated by the primary judge[39] and by the Court of Appeal[40] – namely, that the precise definition of "gaming operator's licence" in s 1.3(1) as "a licence granted under Division 3 of Part 4 of Chapter 3" of the 2003 Act leaves no room for an alternative, broader interpretation of "gaming operator's licence".[39]Tatts Group Ltd v Victoria [2014] VSC 302 at [204], [250].[40]Victoria v Tatts Group Ltd [2014] VSCA 311 at [51]-[53].Conclusion and orders For those reasons, the appeal to this Court should be allowed with costs. The orders of the Court of Appeal made on 4 December 2014 should be set aside and, in their place, there should be orders that:(a) the appeal be allowed with costs;(b)orders 1 and 2 of the orders of the primary judge made on 27 June 2014 be set aside and, in their place, the proceeding be dismissed with costs; (c)Tatts Group Limited pay the State of Victoria $540,467,887.92 with interest, calculated from 27 June 2014.

Ratio Decidendi

Legal Principle Established

Established by: FRENCH CJ, KIEFEL, BELL, KEANE AND GORDON JJ

Full text does not contain this section.