Victoria v Tatts Group Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0075

STATE OF VICTORIA

TATTS GROUP LIMITED (ACN 108 686 040)

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JUDGES:	NETTLE, OSBORN and WHELAN JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 October 2014
DATE OF JUDGMENT:	4 December 2014
MEDIUM NEUTRAL CITATION:	[2014] VSCA 311
JUDGMENT APPEALED FROM:	[2014] VSC 302 (Hargrave J)

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STATUTORY INTERPRETATION – Gambling Regulation Act 2003 (Vic) – Gaming operator’s licence – Regulatory regime changed – Ability to issue further gaming operator’s licence abolished – New species of authorisation called gaming machine entitlements created and issued – Appellant’s gaming operator’s licence expired – Whether appellant entitled to terminal payment under s 3.4.33 – Entitlement to terminal payment on grant of gaming operator’s licence to person other than former licensee or a related entity – Specific meaning of gaming operator’s licence adopted as representing connected and combined statement of the will of Parliament – Statutory purpose to make clear the appellant has not and never has had anything more than right to payment when and if a gaming operator’s licence as defined in s 1.3 (‘gaming operator’s licence issued under Part 4 of Chapter 3’) issues to someone other than the appellant – No entitlement to terminal payment – Conclusion of trial judge upheld – Appeal dismissed.

CONTRACT – Agreement as to grant of gaming operator’s licence – Compensation payable under cl 7 on expiry of licence without ‘a new gaming operator’s licence’ having issued – Regulatory regime changed – Ability to issue further gaming operator’s licence abolished – New species of authorisation called gaming machine entitlements created and issued – Whether ‘a new gaming operator’s licence’ issued for purposes of cl 7 – Intention of parties objectively discerned that ‘a new gaming operator’s licence’ would extend to a new licence or new licences substantially the same as existing licence – Essential core functional value of gaming operator’s licence and gaming machine entitlement to carry on gaming operations – Aggregate of rights conferred on licence and entitlement holders substantially and relevantly the same for the purposes of this enquiry –Appellant entitled to compensation – Conclusion of trial judge upheld – Appeal dismissed.

CONTRACT – Letter from Treasurer to appellant’s predecessor – Enumerated principles on which Government reaching agreement over grant of gaming operator’s licence – One principle dealt with terminal payment – Letter annexed to agreement – Express good faith term in performance of Agreement – Implied cooperation term to enable appellant’s predecessors to have benefit of agreement – Content of terms circumscribed by express statement that entitlement to terminal payment subject to contrary executive and legislative action – Alternative to claim under cl 7 of agreement – Failure to treat allocation of gaming machine entitlements as constituting the issuing of ‘new gaming operator’s licences’ within meaning of cl 7 of agreement cannot constitute breach – Failure to ensure issue of gaming machine entitlements did not have effect of depriving appellant of terminal payment cannot constitute breach – Conclusion of trial judge upheld – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr S McLeish SC, S-G with Ms W A Harris QC, Mr R G Craig and Mr K A Loxley	Johnson Winter & Slattery
For the Respondent	Mr N J Young QC with Mr P D Crutchfield QC and Mr N De Young	Clayton Utz

TABLE OF CONTENTS

Introduction

The principal questions

The facts and relevant legislation

The statutory claim

The decision below

Tatts’ contentions on the statutory claim

The specific meaning must be adopted

The contractual claim — The 1995 Agreement

The judge’s approach to the construction of the contract

The terms of the 1995 Agreement

Sufficient ambiguity to justify consideration of relevant legislative context and other circumstances surrounding formation of the 1995 Agreement
Is the phrase ‘a new gaming operator’s licence’ in cl 7 a reference to a licence granted under Part 3 of the 1991 Act?
Is the phrase ‘a new gaming operator’s licence’ in cl 7 a reference to a gaming operator’s licence as defined in the 2003 Act?

Did the State grant ‘a new gaming operator’s licence’ in 2010 pursuant to the 2009 amendments to the 2003 Act?

Rights in substance the same
Significance of duopoly
Significance of specific differences regarding manufacture, supply, monitoring, Keno

Was Tatts’ right to compensation in cl 7.1 spent upon enactment of the 1996 amendments to the 1991 Act?

Was cl 7.1 abrogated by the 2009 amendments to the 2003 Act?

The contractual claim — The Treasurer’s letter

Tatts’ ‘good faith’ claims

Co-operation and ‘good faith’ in the judgment below

Contentions and submissions

Was there a contractual term requiring the State to act ‘in good faith’?

Content of the obligations and alleged breach

Impermissible fetter on executive or legislative action

Conclusion

NETTLE JA

OSBORN JA
WHELAN JA:

Introduction

In 1991 gaming machines were legalised in Victoria for the first time. The State created a duopoly in the operation of gaming machines between the Totalizator Agency Board of Victoria (the ‘TAB’), then a statutory corporation, and the Trustees of the Will and Estate of the late George Adams (the ‘Trustees’). In 1994 the TAB was privatised. Private investors were offered the opportunity to subscribe for shares in the company Tabcorp Holdings Limited (‘Tabcorp’) and those shares were then listed on the Australian Stock Exchange (‘ASX’). The proceeds of the public offering were, after certain deductions, paid to the State. In 1998 the business conducted by the Trustees was also restructured and corporatised, the relevant resulting corporation being Tattersalls Limited, which after floatation on the ASX in 2005 changed its name to Tatts Group Limited (‘Tatts’).

The State raised substantial funds in the Tabcorp float. It maximised those returns by taking steps which resulted in the capital value of the gaming licence and the related wagering licence issued to Tabcorp not being amortised in the financial statements set out in the prospectus. The steps referred to included a statutory right to a payment upon the granting of new licences after the expiry of Tabcorp’s licences and a letter written by the Treasurer at the time setting out the government’s intentions.

Similar, although not identical, arrangements were then negotiated with the Trustees. Those arrangements were enacted in separate legislation and dealt with in a letter which the then Treasurer wrote to the Trustees. Unlike Tabcorp, the Trustees also entered into an agreement with the Minister for Gaming dated 17 November 1995 (the ‘1995 Agreement’) which contained a provision entitling the Trustees (and subsequently Tatts) to a payment after expiry of Tatts’ licences if another licence was issued to a person other than Tatts or a related entity of Tatts.

In 2008 the State government determined to restructure the gaming industry. Consequent upon legislative and administrative action to implement the restructure, both Tatts and Tabcorp lost the right to conduct gaming operations businesses. The right to conduct a gaming operation was granted to the holders of a new form of authority called ‘gaming machine entitlements’. Tatts and Tabcorp each claim that they are entitled to a payment as a result. The State denies the claims.

In this proceeding Tatts claims an entitlement to payment under the 1995 Agreement and under the statutory provision applicable to it. Before the judge, Tatts succeeded on its claim under the 1995 Agreement but failed on its statutory claim.[1] The State appeals that decision. Tatts contends the judge was correct in upholding its contractual claim, and by a notice of contention also seeks to uphold the outcome by contending that the judge ought to have upheld the statutory claim. Issues are also raised on the appeal concerning the effect of the letter the then Treasurer wrote to the Trustees. The outcome of those issues in the court below was in favour of the State.
[1]Tatts Group Ltd v State of Victoria [2014] VSC 302 (‘Reasons’).

In a separate proceeding heard together with this proceeding, Tabcorp claimed an entitlement to payment under the statutory provision applicable to it, and also made a claim relying on the letter it had received from the then Treasurer. The judge found in favour of the State in that proceeding for reasons which substantially reflected the reasons he gave on the broadly equivalent issues raised in the Tatts proceeding.[2] In a separate appeal Tabcorp has appealed that decision.
[2]Tabcorp Holdings Ltd v State of Victoria [2014] VSC 301.

The principal questions

The three principal questions which arise in this appeal are:

(1)Whether the allotment of ‘gaming machine entitlements’ to licensed venue operators under s 3.4A.5 of the Gambling Regulation Act 2003 (the ‘2003 Act’) constituted the grant of a ‘gaming operator’s licence to a person other than the former licensee’ within the meaning of s 3.4.33(1)(b) of the 2003 Act, and so entitled Tatts to the payment for which s 3.4.33(1) provides.
(2)Whether the judge was correct in concluding that ‘a new gaming operator’s licence’ within the meaning of cl 7.1 of the 1995 Agreement is not restricted to the statutorily defined meaning of that expression, being a gaming operator’s licence issued under Division 3 of Part 4 of Chapter 3 of the 2003 Act, but extends to other forms of authority to conduct gaming operations which would otherwise be unlawful.
(3)If the answer to question (2) is yes, whether the judge was correct in concluding that the creation and issue of gaming machine entitlements to venue operator licensees amounted to the issue of ‘a new gaming operator’s licence’ in that generic sense.

The facts and relevant legislation

Until the passage of the Gaming Machine Control Act 1991 (the ‘1991 Act’) in 1991, the possession and operation of gaming machines in Victoria was illegal. The 1991 Act provided for the creation of gaming operator’s licences and made it lawful for the holder of a gaming operator’s licence to conduct gaming operations[3] at approved venues by supplying approved gaming machines to licensed venue operators to be held in their possession in licensed venues.
[3]Scil, operate gaming machines.

For present purposes, the critical parts of the 1991 Act are: s 13, which laid down the authority conferred by a venue operator’s licence; s 14, which laid down the authority conferred by a gaming operator’s licence; and s 33, which provided for the issue of gaming operator’s licences only to the Trustees and to the TAB.

Section 13 of the 1991 Act was as follows:
13. Authority conferred by venue operator’s licence
Despite section 7,[4] a venue operator’s licence authorises the licensee, subject to this Act and any conditions to which the licence is subject—
(a)to obtain from a gaming operator,[5] gaming machines of a type approved by the Commission[6] under section 69; and
(b) to possess gaming equipment; and
(c)to do all things necessarily incidental to carrying on the activities authorised by this section.
[4]A general prohibition of manufacturing, selling, supplying obtaining or being in possession of a gaming machine.
[5]Defined in s 3(1) of the Act to mean: ‘the holder of a gaming operator’s licence under Part 3’.
[6]Defined in s 3(1) as the Victorian Gaming Commission.
Section 14 of the 1991 Act provided that:
14. Authority conferred by gaming operator’s licence
(1) Despite section 7, 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 Commission; 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.
(2)In this section “approved gaming machines” means gaming machines of a type approved by the Commission under section 69.
Section 33 of the 1991 Act provided that:
33. TAB and Tattersalls
The Commission may, subject to the requirements of this Act, grant a gaming operator’s licence to either or both of the following:
(a)The Totalizator Agency Board constituted under section 116A of the Racing Act 1958; and
(b) The trustees of the will and estate of the late George Adams.
Pursuant to the 1991 Act, each of the Trustees and the TAB was granted a ‘gaming operator’s licence’ issued under Division 3 of Part 3 for a term of 20 years.

In 1994, the Gaming and Betting Act 1994 (the ‘1994 Act’) was enacted to give effect to the corporatisation and floatation of the TAB. Part 2 of the 1994 Act created two new kinds of licences: a ‘wagering licence’ and a ‘gaming licence’, and it provided for the granting of a wagering licence and a gaming licence to Tabcorp to enable it to carry on under licence a business of wagering, approved betting competitions, gaming, club keno and on-course wagering.

Section 3(1) of the 1994 Act defined: ‘licence’ as ‘the wagering licence or the gaming licence granted under Part 2’; ‘gaming licence’ as ‘the gaming licence granted under Part 2’; and ‘wagering licence’ as ‘the wagering licence granted under Part 2’.

Section 7 of the 1994 Act provided that a gaming licence conferred the same authority on the licensee as was conferred on the holder of a gaming operator’s licence[7] under the 1991 Act and also authority to conduct and promote club keno games in Victoria in accordance with the Club Keno Act 1993 as a participant within the meaning of that Act. It provided:
[7]Scil, the Trustees.

7. Gaming licence
The gaming licence confers on—
(a) the licensee; and
(b)while an appointment under section 22 is in force, the wholly owned subsidiary of the licensee appointed as the operator—

the following authorities, subject to this Act and the regulations, the Gaming Machine Control Act 1991 and any conditions to which the licence is subject –
(c)the same authority as is conferred on the holder of a gaming operator’s licence under the Gaming Machine Control Act 1991; and
(d)the authority to conduct and promote club keno games in Victoria in accordance with the Club Keno Act 1993 as a participant within the meaning of that Act.

Section 10 of the 1994 Act provided for Tabcorp to apply to the Authority[8] for the grant of a wagering licence and a gaming licence, defined as ‘the initial licences’, and s 12 of the 1994 Act provided that each of those initial licences would be granted for a term of 18 years.
[8]‘Authority’ was defined as the Victorian Casino and Gaming Authority established under the 1994 Act.

Section 13 of the 1994 Act provided for Tabcorp to pay the State, as consideration for the grant of the licences, a sum called the ‘allotment amount’, which was in effect the net amount of the subscription moneys raised on the floatation of Tabcorp.

Section 14 of the 1994 Act provided for applications for and the grant of further licences to take effect after the expiration of the initial licences (meaning after the expiration of the gaming licence and the wagering licence issued to Tabcorp), relevantly as follows:

14. Application for licence after initial licences
(1)A company incorporated under the Corporations Law of Victoria may, within such period as the Authority determines before the expiry of the initial licences or later licences or, if the initial licences or later licences are cancelled, within such period after the cancellation as the Authority determines, apply to the Authority for the grant of –
(a) a wagering licence; and
(b) a gaming licence.

(2)A person who has been a licensee is not entitled to apply under sub-section (1) if a wagering licence or gaming licence held by the person has been cancelled.

Section 20 provided for the grant of the further licences upon payment of the prescribed premium.

Section 21 provided that upon the grant of the new licences the person who was the holder of the licence last in force would be entitled to be paid an amount equal to the ‘licence value’ of the former licence or the premium paid by the new licensee, whichever be less, in the following terms:

21. Entitlement of former licensee on grant of new licences
(1) On the grant of new licences (other than the initial licences), the person who was the holder of the licences last in force (in this section called the “former licences”) is entitled to be paid an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.
(2) The person who was the holder of the former licences is entitled to the payment under sub-section (1) whether or not the person was, or was entitled to be, an applicant for the new licences.
(3) Sub-section (1) does not apply if the holder of the former licences has been wound up.
(4) The payment under sub-section (1) must be made not later than 7 days after the commencement of the new licences and the Consolidated Fund is hereby to the necessary extent appropriated accordingly.
(5) In this section, “licence value” in relation to the former licences means the amount calculated in accordance with the formula ….

The section then went on to set out an elaborate formula for calculation of the amount of the ‘licence value’.

By the same Act, s 33 of the 1991 Act was amended by deleting reference to the TAB so that s 33 of the 1991 Act thereafter provided that :
The Authority may, subject to the requirements of this Act, grant a gaming operator’s licence to either or both of the following:
***
(b)The trustees of the will and estate of the late George Adams.
A new s 19A was also inserted to prevent the holder of a gaming operator’s licence also holding a venue operator’s licence, as follows:

19A. Gaming operator not be venue operator
Except as expressly provided by this Act in relation to tabaret premises at Menzies at Rialto, a gaming operator must not be granted, and must not hold, a venue operator’s licence under this Part.

Having raised a considerable amount of money from the float of Tabcorp, the State next set about obtaining a similar sum from the Trustees. The history of the exercise was later recorded in the second reading speech pertaining to the Gaming Acts (Amendment) Bill 1996, as follows:

The aims of part 2 of the bill are to ensure that the government receives an adequate return from the co-exclusive licence which has been provided to Tattersalls to operate electronic gaming machines outside the casino, and to put Tattersalls into a more equal competitive footing vis-a-vis the other gaming operator, Tabcorp.
In 1991 the previous government provided for only two licences to be issued in Victoria for the operation of gaming machines outside a casino. Those licences were allocated at no charge to the TAB – Tabcorp’s predecessor – and to Tattersalls …
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. The fee is payable by instalments over the life of the licence which expires in April 2012. The licence fee is to be equivalent to 30 per cent of the net profit from Tattersalls gaming division …
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 35 A 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.
Compensation will not be paid if the new licence is granted either to the former licensee or a related entity of the former licensee.[9]

[9]Victoria, Parliamentary Debates, Legislative Assembly, 4 June 1996, 565–6 (Jan Wade, Attorney-General).

On 17 November 1995, the Trustees and the Minister for Gaming entered into the 1995 Agreement, to which the recitals were as follows:

A.The Trustees hold a Gaming Operator’s Licence in the State of Victoria.
B.Clause 8 of the Gaming Operator’s Licence provides for a review of the amounts payable by the Trustees under Section 136 of the 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.
C.The Trustees have a responsibility under the Will of the late George Adams to conduct the activities authorised by that Will for the benefit of the nominated beneficiaries and otherwise as they solely determine. It is acknowledged that the Estate is a private enterprise and not any form whatsoever of Statutory Authority or listed Public Company.
D.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.
E. The parties have agreed to enter into an arrangement on the terms and conditions contained in this Agreement.

Clause 2 of the 1995 Agreement imposed a condition subsequent that the Trustees obtain from the Commissioner of Taxation a private binding ruling under Part IVAA of the Taxation Administration Act 1953 (Cth) on the taxation implications of the draft legislation provided for in the agreement which was acceptable to the Trustees.

Clause 3 of the 1995 Agreement imposed a new obligation on the Trustees to make a stream of payments to the State (of which the present discounted value was substantially equivalent to the amount paid by Tabcorp from the proceeds of its floatation).

By cl 6 of the 1995 Agreement the State agreed with the Trustees that:

6. Other Gaming Machine Operator
[F]or the term of the Gaming Operator’s Licence the Trustees’ conduct of the business will be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp Holdings Limited or its operator. At the time of entering into this Agreement the share of net machine income retained by the Trustees is 33^1/3 percent and other terms regulating the business are contained in the Ministerial Directions document dated 28 August 1995 (annexed as Schedule 1). Prior to entering into this Agreement the Trustees received from the Treasurer of Victoria, and considered, the letter annexed to this Agreement as Schedule 2.

The letter annexed as Schedule 2 (the ‘Treasurer’s letter’) was addressed to the Trustees, signed by the Treasurer of the State and read as follows:

LICENCE PAYMENT FOR ELECTRONIC GAMING MACHINES

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 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.

Clause 7 of the 1995 Agreement provided in part that:

7. Compensation
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.
7.3For the purposes of sub-clause 7.1 (but subject to sub-clause 7.4) “Licence Value” in relation to the former Gaming Operator’s Licence means the amount calculated in accordance with the following formula: …

A detailed formula, to which we shall return, was then set out.

Clause 8 of the 1995 Agreement provided in part that:

8. Draft Legislation
8.1The minister will cause to be drafted and will use his best endeavours to procure that the Parliament of Victoria enacts legislation which:
8.1.1 includes the Trustees’ obligation to pay the Minster in accordance with clause 3 of this Agreement;
8.1.2 includes 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;

…
8.1.6 includes 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;
8.1.7 includes any other provision deemed necessary or desirable to give effect to this Agreement.

Pursuant to cl 8 of the 1995 Agreement, s 9 of the Gaming Acts (Amendment) Act 1996 (the ‘1996 Act’) was enacted which inserted a new s 135A into the 1991 Act which provided for the payment by the Trustees to the Treasurer each year of a sum being the greater of 30 per cent of the Trustee’s net profit for that year and $35 million.

At the same time, ss 5 and 6 of the 1996 Act inserted new ss 33, 33A and 35A into the 1991 Act, providing for the issue of a new gaming operator’s licence on the expiration of the Trustees’ existing licence and for the payment of compensation to the Trustees if the new licence were not granted to the Trustees or a related entity:

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.

33A. Premium 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.

(2) The premium payment is a tax.
…
35A. Entitlement of former licensee on grant of new licence
(1) If—
(a) a gaming operator’s licence held by a person (“the former license”) 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 the 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…

In 2003, the 1991 Act, the 1994 Act, the Club Keno Act 1993 and a number of other Acts which provided for the several forms of gambling which are now lawful in Victoria were re-enacted and consolidated as the 2003 Act. Relevantly, for present purposes, the 2003 Act contained the following provisions:

(1) Section 1.3(1) which repealed the definition of ‘licence’ which had previously appeared in the 1994 Act and inserted new definitions for:

· ‘gaming licence’: ‘the gaming licence granted under Part 3 of Chapter 4’;
· ‘gaming operator’s licence’: ‘a licence granted under Division 3 of Part 4 of Chapter 3’; and
· ‘wagering licence’: ‘the wagering licence granted under Part 3 of Chapter 4’.

(2) Section 3.4.1 which restated the authority conferred by a venue operator’s licence substantially in the same terms as s 13 of the 1991 Act, as follows:

3.4.1 Authority conferred by venue operator’s licence
A venue operator’s licence authorises the licensee, subject to this Act and any conditions to which the licence is subject—
(a)to obtain approved gaming machines from a gaming operator; and

(b) to possess gaming equipment; and
(c)to manage and operate an approved venue; and
(d)to do all things necessarily incidental to carrying on the activities authorised by this section.

(3) Section 3.4.2 which restated the authority conferred by a gaming operator’s licence substantially in the same terms as s 14 of the 1991 Act, as follows:

3.4.2 Authority conferred by gaming operator’s licence
A gaming operator’s licence authorises the licensee and the operator subject to this Act and any conditions to which the licence is subject—
(a) to obtain from a person 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 Commission; 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.

(4) Section 3.4.9 which reproduced the prohibition on holding both a gaming operator’s licence and a venue operator’s licence at the one time, which was previously in s 19A of the 1991 Act, as follows:

3.4.9 Gaming operator must not be venue operator
A gaming operator must not be granted, and must not hold, a venue operator’s licence.

(5) Sections 3.4.29 to 3.4.33 which re-enacted in similar but not identical terms the provisions for issue of further gaming operator licences and for compensation, which had previously appeared in ss 33 to 35A of the 1991 Act, as follows:

3.4.29 Gaming operator’s licence
The Commission, on application by the Trustees or any other person, may grant a gaming operator’s licence to the Trustees or other person.
3.4.30 Premium payment
(1) Before a licence is granted under section 3.4.29, 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.

(2) The premium payment is a tax.
…
3.4.32 Duration of licence
A gaming operator’s licence is granted for the term specified by the Minister.
3.4.33 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 Commission 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 the expiry; and
(c)the Commission 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.

On 10 April 2008, the then Premier of the State publicly announced that:

The Government had decided to move to a new structure for the gambling industry beyond 2012, which removed the need for separate gaming machine operators – Tatts and Tabcorp – under which venues would own, operate and maintain gaming machines.
Under the new structure, venues would bid directly for gaming machine entitlements with a term of five years.
A single, stand-alone licence for wagering would be offered.
A new regulatory model for the operation of wagering, gaming and keno would operate following the expiration of Tatts’ and Tabcorp’s licences.

As the first step in implementing that announcement, the Parliament passed the Gambling Regulation Amendment (Licensing) Act 2008 (the ‘2008 Act’). Among other things, the 2008 Act inserted in the 2003 Act a new s 4.3.4A restricting the application of the wagering and gaming licences provisions to the wagering and gaming licences that had been issued to Tabcorp under the 1994 Act. Section 4.3.4A provides:

4.3.4A Application of Part

(1)This Part applies only with respect to the wagering licence and gaming licence that were issued on 15 August 1994 and does not authorise the grant of any further wagering licence or gaming licence.
(2)Subsection (1) does not prevent the appointment of a temporary licensee under section 4.3.33 if the licences referred to in subsection (1) are cancelled.

The 2008 Act also introduced a new Part 3A creating and governing a new kind of licence called a ‘wagering and betting licence’.

Then, in 2009, the Gambling Regulation Amendment (Licensing) Act 2009 and the Gaming Regulation Amendment Act 2009 (the ‘2009 Acts’) implemented the remainder of the Premier’s announcement:

(1)By restricting the application of the gaming operator licence provisions to the licence which had been issued to the Trustees in 1992, as follows:
3.4.3 Application of Part – gaming operator’s licences
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.

(2)By inserting a new Part 4A in Chapter 3 of the 2003 Act providing for a new species of authorisation called ‘gaming machine entitlements’, to be issued to venue operator licensees and adding additional rights to the rights conferred by venue operator’s licences, thus:
3.4.1 Requirements to hold gaming machine entitlements
(1) On and after the day declared by the Minister under subsection (2) (the gaming machine entitlement declared day), the conduct of gaming in an approved venue is lawful only if—
(a) the venue operator holds a gaming machine entitlement that authorises the conduct of that gaming; and
(b) the gaming is conducted in accordance with any conditions to which the gaming machine entitlement is subject.

…

3.4A.2 Authority conferred by gaming machine entitlements
(1) A gaming machine entitlement authorises the venue operator that holds the entitlement, subject to this Act, any related agreement referred to in section 3.4A.6 and any conditions to which the entitlement is subject—
(a) to acquire approved gaming machines and restricted components; and
(b)to conduct gaming on one approved gaming machine in an approved venue operated by the venue operator; and
(c)to do all things necessarily incidental to carrying on the activities authorised by the section.

(2) A gaming machine entitlement does not authorise the entitlement holder to engage in any business by way of—
(a) manufacture of gaming machines or restricted components; or
(b) supply of approved gaming machines or restricted components to any person; or
(c) service, repair or maintenance of gaming equipment or games.
…

3.4A.5 Minister may create and allocate gaming machine entitlements
(1) Subject to this section, the Minister may from time to time –
(a) create gaming machine entitlements;
(b) allocate gaming machine entitlements to venue operators, including gaming machine entitlements forfeited to the State under Division 6, 7 or 8.

…
(4)Subject to subsections (5) to (8), the Minister must impose on a gaming machine entitlement he or she allocates—
(a)a condition that specifies the region or municipal district in which gaming may be conducted under that entitlement (a geographic area condition); and
(b)a condition which specifies the type of approved venue in which gaming may be conducted under that entitlement ( a venue condition).

(3)By inserting a new s 3.4.1A in the 2003 Act to provide that the grant of a venue operator’s licence was not to be taken as the grant of a gaming operator’s licence:
3.4.1AVenue operator’s licence is not a gaming operator’s licence or gaming licence

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

(4)By adding to the rights conferred by a venue operator’s licence in s 3.4.1 under the 2003 Act the following:

(aa)to acquire and transfer gaming machine entitlements in accordance with Part 4A; and
(ab) while holding gaming machine entitlements, conduct gaming on approved gaming machines in an approved venue operated by the licensee;
(ac) while holding a gaming machine entitlement or following the forfeiture of a gaming machine entitlement under Division 6, 7 or 8 of Part 4A, to, with the approval of the Commission, sell or dispose of gaming equipment acquired for the purpose of use in an approved venue operated by the venue operator; and
(ad) while holding a gaming machine entitlement, to, through the services of a person holding a gaming industry employee’s licence, service, repair or maintain gaming equipment acquired for the purpose of use in an approved venue operated by the venue operator.

(5)By inserting in s 3.4.1 of the 2003 Act the following provisions:
(2) A venue operator’s licence does not authorise the licensee to engage in any business by way of—
(a)manufacture of gaming machines or restricted components; or
(b)supply of approved gaming machines or restricted components to any person; or
(c)service, repair or maintenance of gaming equipment or games.

(3)A venue operator’s licence only authorises the licensee to conduct gaming on 105 approved gaming machines in every approved venue operated by the licensee.

(6)By providing in s 3.4.32 of the 2003 Act that Tatts’ gaming operator’s licence would be extended to 15 August 2012. This meant the Tatts licence would expire at the same time as Tabcorp’s wagering and gaming licences.

On 7 June 2010, the Minister for Gaming created 27,500 gaming machine entitlements with an effective date of 16 August 2012 and thereafter allocated those entitlements to approved venue operators in return for premium payments totalling $981 million. Tatts was not eligible to apply for and was not granted any of the gaming machine entitlements.

Tatts’ gaming operator’s licence expired on 15 August 2012 and, at the next instant, on 16 August 2012 the gaming machine entitlements applicable to the authorised venues in which Tatts had until then conducted gaming operations took effect. Thereupon, the licensed venue operators began to conduct the gaming operations in their venues which Tatts had previously conducted in those venues.

The statutory claim
The decision below

Before the judge below, the State contended that ‘gaming operator’s licence’ in ss 3.4.33(1)(b) and (c) of the 2003 Act had the meaning defined in s 1.3 of that Act, being ‘a licence granted under Division 3 of Part 4 of Chapter 3’ (‘the specific meaning’) and so did not include the gaming machine entitlements. Tatts contended to the contrary that, although ‘gaming operator’s licence’ is defined in s 1.3 of the 2003 Act as meaning, unless the contrary intention appears, ‘a licence granted under Division 3 of Part 4 of Chapter 3’, a contrary intention does appear in s 3.4.33(1)(b), such that, in that context, the expression ought be taken as having a broader ‘generic meaning’ of any authority to conduct gaming operations which would otherwise be unlawful. It followed, Tatts contended, that the gaming machine entitlements were gaming licences within the meaning of those provisions.

The judge held in favour of the specific meaning. His Honour reasoned as follows:

As the High Court has repeatedly stated, the process of statutory construction involves beginning with the words of the statute and then considering those words in light of their context and the purpose of the provision to be interpreted.
...
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.[10]

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.[11]

Applying these principles to the issue at hand, Tatts’ 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.[12]
[10](2014) 88 ALJR 515, 518 [22], quoting Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 87 ALJR 9, 107 [39].
[11]Ibid 518 [23] (citations omitted).
[12]Reasons [200]–[205].

Tatts’ contentions on the statutory claim

Before this Court, Tatts contended that the judge erred in holding that the statutory language was ‘simply too strict’ to permit of the generic construction of ‘gaming operator’s licence’ in s 3.4.33 of the 2003 Act. In Tatts’ submission, the proper interpretation of ss 3.4.3 and 3.4.33 and the need to harmonise their respective fields of operation requires that, although the s 1.3 definition of ‘gaming operator’s licence’ applies to s 3.4.3, in s 3.4.33(1)(b) the words ‘gaming operator’s licence’ must be given their natural and ordinary generic meaning, namely, any licence or entitlement which in substance authorises the conduct of gaming operations at approved venues. In counsel’s submission, the following considerations pointed ineluctably in favour of that conclusion:

(1)As the 2003 Act was a consolidating Act, it should be presumed not to have changed the law, and in particular not to have altered the substantive operation of s 3.4.33(1) by the introduction of the new definition of ‘gaming operator’s licence’.[13]
(2)Section 3.4.33(1) is ex facie calculated to operate in the stipulated circumstance that Tatts’ gaming operator’s licence has expired and the authority to conduct gaming operations is thereafter granted to another licensee; thus allowing that other licensee to conduct gaming operations in Victoria at licensed venues. It is apparent that the section assumes there will be further licences authorising the conduct of gaming operations and, in substance, that is what has occurred.
(3)The definition of ‘gaming operator’s licence’ in s 1.3 is subject to context and so to indications of contrary intention. Since the effect of applying the s 1.3 definition of ‘gaming operator’s licence’ to s 3.4.33(1)(b) would be to bring about the consequence that s 3.4.33 would not work in the circumstances which have occurred, and thus would not work appropriately, the contrary intention is manifest and the s 1.3 definition does not apply.[14]
(4)That construction of s 3.4.33 is further required or supported by the principle that s 3.4.33(1)(b) is to be regarded as ‘always speaking’ or ‘speaking continuously in the present’[15] and so as embracing new forms of gaming operator’s licences, in the generic sense, as they might be enacted or amended from time to time.
(5)That construction of s 3.4.33(1)(b) is also supported by the presumption that a later general enactment, like ss 1.3 and 3.4.3, is not intended to interfere with an earlier special provision, like s 3.4.33(1)(b), unless the later general enactment perspicuously manifests that intention;[16] and ss 1.3 and 3.4.3 do not.
(6)To construe ‘gaming operator’s licence’ in s 3.4.3 as having its defined meaning while at the same time allowing that ‘gaming operator’s licence’ in s 3.4.33(1)(b) has its natural and ordinary generic meaning most closely accords with the different purposes and functions of each provision. Evidently, s 3.4.3 has as its objective the prevention of a grant of any further gaming operator’s licences under Division 3 of Part 4 of Chapter 3 following the inception of the new regime of gaming machine entitlements. The application of the s 1.3 definition in that context gives full force and effect to that purpose. In contrast, the evident purpose of s 3.4.33(1) is to compensate Tatts in the event that the rights to carry on gaming operations which it enjoyed under its gaming operator’s licence are conferred on others to Tatts’ exclusion; and, in order to give full force and effect to that purpose, only the natural and ordinary generic meaning of ‘gaming operator’s licence’ will suffice.
(7)Finally, to construe s 3.4.33(1)(b) in that manner does not pose a risk of interference with the new gaming machine entitlements regime. The licence referred to in s 3.4.33(1)(a) can only be Tatts’ licence and not a gaming machine entitlement. The formula for ‘licence value’ is based on integers that can only be applied to the term of the licence when issued to the Trustees. Integer ‘D’ of the formula relates to the aggregate sum of actual daily net cash balances from 1 January 1995 until the expiry of the former licence, which must be a reference to the Trustees' licence. Similarly, the denominator of $13.705 billion can only relate to the period covered by the Trustees’ licence.

[13]In re Davis (1947) 75 CLR 409, 429.

[14]Deputy Commissioner of Taxation v Mutton (1988) 12 NSWLR 104, 108.

[15]Commissioner of Police v Eaton (2013) 294 ALR 608, 631 [97] (Gageler J).

[16]Commissioner of Police v Eaton (2013) 294 ALR 608, [46] (Gageler J); cf Cobiac v Liddy (1969) 119 CLR 257, 268-9 (Windeyer J).

As the State submitted, however, the difficulty with those propositions is that, until the enactment of s 3.4.3 in 2009, the application to s 3.4.33(1)(b) of the s 1.3 definition of ‘gaming operator’s licence’ did produce a result which was consistent with the purpose or object of s 3.4.33, namely, to compensate Tatts when and if the right to carry on gaming operations which Tatts enjoyed under its gaming operator’s licence was conferred on another licensee to the exclusion of Tatts. The only way in which s 3.4.33 can now be read as providing for a payment to Tatts in the circumstances which have occurred is if the enactment of s 3.4.3 is treated as somehow having altered the application of the s 1.3 definition of ‘gaming operator’s licence’ to s 3.4.33(1)(b) in such a way that s 1.3 definition has ceased to apply. Section 3.4.3 would, in effect, have to be construed as expanding the scope of s 3.4.33.

In response, Tatts invoked the principles of statutory construction expressed in the plurality judgment in Project Blue Sky Inc v Australian Broadcasting Authority.[17] The relevant passage reads as follows:

A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other”. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.[18]

[17](1998) 194 CLR 355.

[18]Ibid 381-2 [70]–[71] (citations omitted).

Based on those precepts, Tatts submitted that s 3.4.33 should be seen as the ‘leading provision’ and the statutory definition of ‘gaming operator’s licence’ in s 1.3 as the ‘subordinate provision’ and that the latter should be taken to yield in its application to s 3.4.33(1)(b) in order to give best effect to the purpose and language of s 3.4.33 and the maintenance of the unity of the statutory scheme. It follows, it was said, that there is no impediment to adjusting the meaning of the two provisions inter se. Whereas before the 2009 amendments, the statutory definition of ‘gaming operator’s licence’ in s 1.3 might have applied to s 3.4.33(1)(b), now, in order to give effect to the purpose of s 3.4.33 of compensating Tatts for the loss of its rights to carry on gaming and their conferral on others, it is necessary that the statutory definition be taken to yield in its application to s 3.4.33(1)(b) to the generic meaning of ‘gaming operator’s licence’.

In Tatts’ submission, that construction was also supported by the:

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.[19]

According to Tatts, if ‘gaming operator’s licence’ in s 3.4.33(1)(b) has the statutory meaning defined in s 1.3, the effect of s 3.4.3 would be to render s 3.4.33 superfluous. The way to avoid that kind of superfluity, while at the same time giving coherent operation to all of the provisions of Part 4 of Chapter 3 of the 2003 Act (as amended in 2008 and 2009) is to construe ‘gaming operator’s licence’ in s 3.4.33(1)(b) as having its natural and ordinary meaning of a licence to carry on gaming operations howsoever created or denominated.

[19]Ibid 382 [71], citing R v Berchet (1688) 1 Show KB 106, 89 ER 480.

Counsel for Tatts faced the difficulty that s 3.4.3 provides in clear terms that Part 4 of Chapter 3 applies only to the gaming operator’s licence that was issued to the Trustees on 14 April 1992, and that Part 4 of Chapter 3 no longer authorises the grant of ‘any further gaming operator’s licence’.

In response to that difficulty, counsel for Tatts in effect adopted the submission put by counsel for Tabcorp in the Tabcorp appeal when responding to an essentially similar difficulty in that case. The submission was that s 3.4.3 has both a positive component (‘This Part applies only with respect to the gaming operator’s licence that was issued on 14 April 1992’) and a negative component (‘and does not authorise the grant of any further gaming operator’s licence’). Properly understood, it was submitted, s 3.4.3 expressly preserves Tatts’ right under s 3.4.33 in the positive component notwithstanding the preclusion of any further such right by virtue of the negative component. Both components of the section must be given operation. Tatts’ right is preserved (the positive component) but no further such entitlement can arise after Tatts has exercised its right (the negative component).

Counsel for Tatts also invoked the following textual considerations identified by counsel for Tabcorp in the Tabcorp appeal as support for that construction:

(1)If the intention had been to deprive Tatts of its right to payment under s 3.4.33, why would not Parliament simply have repealed that provision as Parliament could so easily have done? Instead of expressly repealing the right to payment for which s 3.4.33 provides, s 3.4.3 expressly provides that s 3.4.33 (as a provision of Part 4 of Chapter 3) shall continue to apply with respect to the licence issued to the Trustees on 14 April 1992.
(2)It is apparent that, elsewhere in the 2003 Act where the intention is to exclude rights to payments in the nature of compensation, the Act expressly so provides;[20] and where it is intended that one thing shall not be taken as another, the Act states that clearly.[21] Here, there is an absence of any express exclusion of the right to compensation for which s 3.4.33 provides and an absence of any provision to the effect that a gaming machine entitlement must not be taken to be a gaming operator’s licence.
(3)Given that the meaning of ‘gaming operator’s licence’ in s 3.4.33(1)(b) for which the State contends would have the effect of depriving Tatts of the right to payment which it previously enjoyed under s 3.4.33, and that Parliament has not made that intention inescapably clear, the principle of legality[22] requires the section to be construed if at all possible so as to avoid that result. The obvious and appropriate way for that to be done is by construing ‘gaming operator’s licence’ in s 3.4.33(1)(b) as having its natural and ordinary generic meaning.
(4)In order to treat s 3.4.3 as having rendered s 3.4.33 inoperative or redundant, as the State contended is the case, it is necessary to read in the words ‘under this Part’ in s 3.4.33 which simply are not there. Authority makes clear that it is a large thing to read words into a statute.[23]
[20]See, eg, s 3.4A.6B (No compensation payable by the State because of the operation of Division 2A — Venue operators and venue agreements).
[21]See, eg, s 3.4.1A (Venue operator’s licence not to be taken to be a gaming operator’s licence or a gaming licence) and s 3.4A.5B (Gaming machine entitlement not to be taken to be personal property).
[22]As to which see R & R Fazzolari Pty Ltd v Parramatta City Council (2009) 237 CLR 603, 619-20 [43]-[44] (French CJ).
[23]Thompson Goold & Co [1910] AC 409, 420; R v Young (1999) 46 NSWLR 681, 688-9 (Spigelman CJ); DC Pearce and RS Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7^th ed, 2011) [2.35].

The specific meaning must be adopted

In our view, the judge was right to conclude that ‘gaming operator’s licence’ in s 3.4.33(1)(b) means a gaming operator’s licence as defined in s 1.3. Although we are required to approach the construction of the 2003 Act as amended as one connected and combined statement of the will of Parliament with the aim of giving coherent operation to all of its provisions with best effect to their purpose and language, it seems to us inescapable that the expression ‘gaming operator’s licence’ has the same meaning in s 3.4.33(1)(b) as it does in ss 3.4.29, 3.4.31, 3.4.32 and 3.4.33(1)(a), and in s 3.4.3 itself, and that, in each case, that can only mean a gaming operator’s licence as defined in s 1.3.

We recognise that to construe ‘gaming operator’s licence’ in s 3.4.33(1)(b) in that fashion deprives s 3.4.33(1)(b) of relevant application because of the abrogation by s 3.4.3 of the State’s ability to issue new wagering and gaming licences under Division 3 of Part 4 of Chapter 3. We also accept that to construe the expression in that way deprives Tatts’ right to payment under s 3.4.33 of any present utility.

Like the judge, however, it appears to us that the precise definition of ‘gaming operator’s licence’ in s 1.3 when read in the context of the clear terms of the other sections to which we have referred leaves no room for an alternative broader interpretation of ‘gaming operator’s licence’ in that context. Contrary to Tatts’ submission, it is not a matter of reading in words which are not there. The words are there. The expression ‘gaming operator’s licence’ in that section must be read as a ‘gaming operator’s licence’ as defined in s 1.3 and thus as a gaming operator’s licence issued under Division 3 of Part 4 of Chapter 3.

For the same reasons, we reject Tatts’ contention that, in order to give best effect to the purpose and language of Part 4 of Chapter 3 following the introduction of s 3.4.3, it is necessary to adjust the meaning of ss 1.3 and 3.4.33 inter se. We do not think it appropriate to read s 1.3 as having ceased to apply to s 3.4.33(1)(b) by reason of the enactment of s 3.4.3. In our view, it is not possible to treat the statutory definition in s 1.3 as yielding in its application to s 3.4.33(1)(b) to the generic meaning of ‘gaming operator’s licence’.

The inaptitude of doing so can be demonstrated by supposing what the position would have been if, instead of the 2009 amendments, Parliament had passed amendments for the creation and issue of gaming machine entitlements while at the same time preserving the ability of the State to issue further gaming operator’s licences under Division 3 of Part 4 of Chapter 3. In those circumstances, it could not sensibly have been maintained that the meaning of gaming operator’s licence in s 3.4.33(1)(b) was somehow transformed from ‘gaming operator’s licence issued under Division 3 of Part 4 of Chapter 3’ to ‘gaming machine entitlements issued under Part 4A of Chapter 3’ (as ‘gaming machine entitlement’ is defined in s 1.3). Nor could that be so if, in order to facilitate the take-up of the new gaming machine entitlements, the State chose not to issue any more gaming operator’s licences. There would be nothing in an administrative action of that kind to cause the meaning of ‘gaming operator’s licence’ in s 3.4.33(1)(b) to change from the meaning it bore from at least the consolidating 2003 Act to something significantly different.

Logically, that would also be the case if Parliament then made further amendments akin to s 3.4.3 foreclosing the ability of the State to issue further gaming operator’s licences under Division 3 of Part 4 of Chapter 3. In point of principle, the fact of legislative amendment might be taken to signify a change of legislative intention in a way which executive action could not. But, in fact, there would be nothing about the content of that kind of amendment, any more than the content of the instanced executive action, which would signify a change in meaning of ‘gaming operator’s licence’ in s 3.4.33(1)(b) from the meaning it has borne from at least the consolidating 2003 Act.

Equally, in our view, it can make no difference that, instead of proceeding by way of the two instanced stages of, first, creating gaming machine entitlements (while preserving the State’s ability to issue further gaming operator’s licences) and then, later, abolishing the States’ ability to issue further gaming operator’s licences, the amendments necessary to enable the creation of gaming machine entitlements and the abolition of the State’s ability to issue further gaming operator’s licences were in fact all made at once. Ultimately, the two processes are identical in legal substance and effect. Either way, the expression ‘gaming operator’s licence’ in s 3.4.33(1)(b) retains the meaning it has had from at least the consolidating 2003 Act of a gaming operator’s licence issued under Division 3 of Part 4 of Chapter 3.

There is more force in Tatts’ submissions that, if it were intended to abolish Tatts’ right to payment under s 3.4.33, one would ordinarily expect the section to have been repealed and that, if the expression ‘gaming operator’s licence’ in s 3.4.33(1)(b) has the meaning defined in s 1.3, as we read it, it renders s 3.4.33 inoperative (since, because of s 3.4.3, there can be no further ‘gaming operator’s licences’ issued). It may also be that a legislative intention that Tatts not receive compensation for being denied a payment under s 3.4.33 could have been made clearer by means of a provision, like s 3.4.28F,[24] that no compensation is payable to Tatts by reason of the replacement of gaming operator’s licences with gaming machine entitlements. Certainly, it is right to ask why would s 3.4.3 expressly preserve s 3.4.33 and expressly provide that it applies with respect to Tatts’ licence if the object and purpose of s 3.4.3 is, as the State contends, that s 3.4.33 should in effect have no operation in respect of Tatts’ licence.
[24]No compensation payable in respect of this Division (Division 2A – Venue operators and venue agreements.

The answer to that, however, appears to us to be that the relevant provisions of the legislation evince a calculated legislative intent to prevent the change in regime being seen or treated as an alteration to the rights constitutive of Tatts’ gaming operator’s licence. We see that as the object of the express preservation of Part 4 of Chapter 3 ‘with respect to’ Tatts’ licence. The Act as amended also demonstrates a legislative determination to eschew any idea of Tatts once having had a right to payment which the change in regime has now denied it. We see that as the purpose of the express preservation of the operation of s 3.4.33 ‘with respect to’ Tatts’ licence. We also discern a legislative resolve to repel any notion that Tatts may have had a legitimate expectation of compensation. In our view, that is what informs the absence of an express compensational exclusion. Ultimately, what emerges to us from Part 4 of Chapter 3, as amended and construed as one connected and combined statement of the will of Parliament, is a statutory purpose to make clear that Tatts has not and never has had anything more under s 3.4.33 than a right to payment when and if a gaming operator’s licence as defined in s 1.3 issues to someone other than Tatts, and that, since none can now issue, Tatts now has nothing.

We do not overlook the risk of approaching the question of legislative purpose anthropomorphically. As Heydon J observed in Momcilovic v The Queen:

The search for “intention” is only a search for the intention revealed by the meaning of the language. It is not a search for something outside its meaning and anterior to it which may be used to control it. The same is true of another anthropomorphic reference to something which is also described as a mental state but in this field is not – “purpose”. And it is also true of the search for “policy”.[25]

[25](2011) 245 CLR 1, 175 [441]. See also Lacey v Attorney-General (Qld) (2011) 242 CLR 573, 591–2 [43] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).

We also recognise the force of the submission put by Tabcorp in the Tabcorp appeal, and embraced by Tatts here, that the rules of statutory construction require that statutory text be examined to see if it allows for an interpretative choice which avoids manifest unfairness, legislative redundancy and expropriation of vested rights. High authority makes clear that, in order for legislation to be interpreted as resulting in the expropriation of rights or other manifest unfairness, the legislation must be expressed in terms which unmistakably and unambiguously require that conclusion.[26] The result must be unavoidable. Hence, if at all possible consistently with established principles of statutory construction, interpretative choices must be made which avoid expropriation and other unfair outcomes.[27]
[26]Lee v New South Wales Crime Commission (2013) 302 ALR 363, 450-1 [309]-[310] (Gageler and Keane JJ).
[27]Attorney-General (SA) v Adelaide City Corporation (2013) 249 CLR 1, 30-1 [42] (French CJ).

In our view, however, the language of the statute is clear. Parliament has determined to preclude the occurrence of the circumstance under which an entitlement to payment in s 3.4.33(1) will arise. That interpretation is unavoidable, even if the commercial outcome is thought to be manifestly unfair.[28]
[28]Cf Western Australian Planning Commission v Temwood (2004) 221 CLR 30, 68–9, [96]–[98] (Gummow and Hayne JJ).

In any event, the only right which Tatts ever had under s 3.4.33 (or its legislative antecedents) was a right to payment when and if the State issued a further gaming operator’s licence under Division 3 of Part 4 of Chapter 3 (or its legislative antecedents) to someone other than Tatts. Axiomatically, that was only ever a contingent right, since the State was never under any obligation to issue a further gaming operator’s licence. Approached from that perspective, the fact that s 3.4.3 has now foreclosed the State’s ability to issue a further gaming operator’s licence does not relevantly alter the position. It means only that it is no longer possible to satisfy the contingency on which s 3.4.33 was conditioned. We do not overlook the expectations clearly created by the Treasurer’s letter. But neither that letter nor the legislation provided that the possibility of satisfying the contingency would never be interfered with. It was always open to Parliament to eliminate the possibility of issuing a further gaming operator’s licence, just as it was always open to the State to choose not to issue a further gaming operator’s licence while it remained possible for such a further licence to be issued.

Nor was there ever anything which prohibited Parliament from amending the 2003 Act to provide for the issue of other forms of gaming operator entitlements (to which s 3.4.33 does not apply) or to prevent the State from choosing to issue such new gaming operator entitlements, once created, instead of issuing a further gaming operator’s licence.

Doubtless, the Trustees expected that the State would abide by its stated intention at the time of the Treasurer’s letter and entry into the 1995 Agreement that any further licence would be granted on conditions which included conditions substantially the same as those to which the Trustees’ licence was subject and that, if the new licence were not issued to the Trustees, the Trustees would be entitled to receive capital compensation from the State as provided. The emasculation of the right to compensation which has now been accomplished by the enactment of s 3.4.3 may do little to enhance the State’s reputation for reliability and commercial morality in its dealings. But, as the State made unmistakably clear at the time of the Treasurer’s letter and the 1995 Agreement, its then stated intention would not bind that government or future governments and Parliament would have the power at any time to amend existing legislation or pass new legislation affecting Tatts’ operations and the terms on which those operations were conducted. As we construe Part 4 of Chapter 3 of the 2003 Act, as amended by the 2008 Act and the 2009 Acts, that is what Parliament has done.

The contractual claim — The 1995 Agreement

In consequence of the 1991 Act and the 1994 Act, the State created a regulatory environment in which only Crown Casino, the Trustees (later Tatts) and Tabcorp were authorised to conduct gaming businesses within Victoria. Tabcorp had been required to pay a very substantial upfront licence fee as consideration for its gaming licence and the State requested the Trustees to pay a like fee for its gaming operator’s licence, intending that the Trustees and Tabcorp would compete with each other on an equal basis and jointly yield significant funds by way of licence fees payable to the State.

The Trustees advised the State that they were not in a position to pay an upfront licence fee by way of a lump sum. Negotiations followed as to the basis on which a structured payment might be made of a fee equivalent to that paid by Tabcorp for its gaming licence, whilst otherwise ensuring that the Trustees were treated on no less favourable terms than Tabcorp.

The negotiations proceeded on the express basis that the Trustees would receive a terminal payment on expiry of their gaming operator’s licence, equivalent to that which had been the subject of provision for a conditional terminal payout to Tabcorp. These negotiations culminated in the 1995 Agreement, which was executed on 17 November 1995.

As indicated earlier, under cl 3 of the 1995 Agreement, the Trustees agreed to pay an annual licence fee to the State until the expiration of the 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 provided for a terminal payment to Tatts. We have previously set out its terms. We set out cls 7.1 and 7.2 again emphasising the phrases emphasised by the judge:

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.

The judge held that Tatts was entitled to $451,157,286 plus interest pursuant to this provision and the State now appeals that judgment.

In the first instance, the State contends that it is not liable to pay the sum claimed because the judge misconstrued the meaning of the phrase ‘a new gaming operator’s licence’ within cl 7.1 and 7.2.

In the course of his judgment, the judge concluded:

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.[29]

[29]Reasons [95].

His Honour reasoned that:

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’ defined ‘Gaming Operator’s Licence’.[30]

[30]Ibid.

The State takes issue with his Honour’s conclusions and further contends that no ‘new gaming operator’s licence’ issued to any person within the meaning of cl 7.2 upon the granting and allocation of the gaming machine entitlements to approved venue operators in 2010 pursuant to the provisions of the 2009 Act.

By its notice of appeal, the State asserts that the phrase ‘a new gaming operator’s licence’ had a specific meaning governed either by the 1991 Act as it was at the time of the 1995 Agreement; or, in consequence of the ambulatory effect of provisions of the 1995 Agreement, a specific meaning governed by subsequent legislation in force at the time that the potential obligation under the 1995 Agreement crystallised, namely, the 2003 Act.

The relevant grounds of appeal are:

1.The learned trial judge erred in finding that the phrase ‘a new gaming operator’s licence’ in clause 7 of the 1995 Agreement had a generic meaning, viz:
a.‘a licence that did not previously exist and which authorised the conduct of gaming operations that would otherwise be unlawful’…
b.any licence or other authority, or licences or authorities, of substantially the same kind as the Trustees’ existing gaming operator’s licence …

2.The learned trial judge erred in failing to construe the meaning of the word ‘Act’ in the 1995 Agreement as including the successor legislation to the Gaming Machine Control Act 1991 (Vic) being the Gambling Regulation Act 2003 (Vic)…
3.The learned trial judge ought to have held that the phrase ‘a new gaming operator’s licence’ in clause 7 of the 1995 Agreement was a reference to a licence granted under:
a.Part 3 of the Gaming Machine Control Act 1991 (Vic); and/or
b.Division 3 of Part 4 of Chapter 3 of the Gambling Regulation Act 2003 (Vic).

Those grounds of appeal reflect the starkly defined positions of the parties at trial, which the judge summarised as follows:

38The 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.
39Tatts 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’ contentions involve both textual and purposive considerations.[31]

[31]Reasons [38]-[39].

The judge concluded that the determinative issue with respect to the claim in contract was whether the composite phrase should be given a specific (or narrow) meaning or a generic (or broad) meaning.[32]
[32]Reasons [40].

As the State’s argument was developed on appeal, it was accepted that a right which was in substance the same as a gaming operator’s licence issued under the 1991 Act would be caught by the phrase ‘a new gaming operator’s licence’. Emphasis was placed upon the singular nature and statutory characteristics of the gaming operator’s licence in respect of which the new right must be in substance the same.

Correspondingly, as the argument for Tatts was developed on appeal, it was accepted that the natural meaning of the words in issue when read in context referred to a further authorisation of ‘core’ gaming operations of substantially the same kind as those authorised by the gaming operator’s licence held by Tatts, rather than any licence whatsoever authorising the conduct of gaming operations which would otherwise be unlawful.

So understood, the distinction between the specific and generic meanings contended for is on one view ultimately one of fact and degree.

Nevertheless, the central issue remains the question of whether (and if so, to what extent) ‘a new gaming operator’s licence’ was intended to have the characteristics of the licence held by Tatts at the date of the 1995 Agreement.

In the alternative to its primary contentions concerning the effect of cl 7, the State contended that cl 7 was superseded and therefore spent by the enactment of the 1996 amendments.

In the further alternative, it was submitted that the 2009 amendments had the effect of abrogating the contractual entitlement which would otherwise arise under cl 7.

We will deal with the central issue of construction before turning to consider these alternative contentions in turn.

The judge’s approach to the construction of the contract

As Tatts emphasised in its submissions, the State does not take issue with the judge’s approach to the construction of the 1995 Agreement by reference to the principles he adopted.

In summary, his Honour sought to ascertain the meaning which a reasonable businessperson would have attributed to the terms of the contract.

[59]See ss 6.1.2 (definition (a) of ‘participants’), 6.2.2(1) of the Act.

[60]Reasons [170]-[171] (citation in original).

The limited nature of the specific matters identified by the State as not authorised by the aggregation of gaming machine entitlements and venue operator’s licences inferentially demonstrates that the core entitlements to conduct gaming operations and incidental activities granted by the Gaming Operator’s Licence held by Tatts were in turn authorised by the authorities granted under the new regime.

There is, too, no dispute that in practice the new authorities authorised the same scale of use of the same type of gaming machine as that formerly authorised pursuant to the Gaming Operator’s Licence held by Tatts.

In the result, the judge was correct to conclude that

the issue of gaming machine entitlements to various licensed venue operators constituted the issue of new gaming operators’ licences within the meaning of clause 7 of the 1995 Agreement. The aggregated authorities granted under the new regime are substantially the same as those which were granted under Tatts’ gaming operator’s licence.[61]

[61]Reasons [172].

Two further matters were raised by the State in defence of the contract claim, neither of which advance its position. Each will be considered in turn.

Was Tatts’ right to compensation in cl 7.1 spent upon enactment of the 1996 amendments to the 1991 Act?

In the first of these matters, counsel for the State further contended that the judge was in error in holding that cl 7 of the 1995 Agreement continued to operate after the passage of the 1996 amendments pursuant to cl 8.

We see no error in that regard either. As his Honour said, the 1995 Agreement imposed continuing obligations over the term of the Gaming Operator’s Licence. Hence, the textual indications were that the agreement was intended to survive the enactment of the statutory provisions which it envisaged.

As the judge observed, sovereign risk was an important consideration in the lead-up to the execution of the 1995 Agreement. Thus, it would be commercially improbable to attribute an intention to the parties that their rights and obligations under the 1995 Agreement should be spent upon the passage of the legislation provided for by cl 8.

The notion that the 1995 Agreement could co-exist with the 1996 amendments also derives principled support from the decision of the New South Wales Court of Appeal in Bromley v Forestry Commission of New South Wales.[62] In that case, a Crown lease provided for a right of compensation for timber removed from a forest area calculated as a proportion of the royalties paid to the Crown for the removal of the timber, and at the time of the lease there was also provision under the Forestry Act 1916 (NSW), for payment to the lessee of a proportion of royalties paid to the Crown by those who removed timber from the forest area. Subsequently, that provision was repealed and a royalty sharing arrangement was introduced. But, the New South Wales Court of Appeal held that the legislative regime introduced by those amendments did not impliedly abrogate the contractual right to compensation under the Crown lease because they were capable of concurrent existence. So it is here.
[62](2001) 51 NSWLR 378, 393 [52]-[57] (‘Bromley’).

Possibly, the right to compensation provided for in cl 7 of the 1995 Agreement could not have co-existed with the right to compensation for which the Act provided until the 2009 amendments prohibited the issue of new gaming operator’s licences under Division 3 of Part 4 of Chapter 3. But, even if so, it does not follow that the right to payment under cl 7 of the 1995 Agreement was forever eliminated by the introduction of the 1996 amendments. To adopt and adapt the reasoning of Mason P in Bromley, the right to compensation conferred by cl 7 was a valuable contractual right and as such not subject to acquisition or destruction without compensation unless the legislation was ‘expressed in unequivocal terms incapable of any other meaning’.[63] There was nothing about the terms of the 1996 amendments which unequivocally detracted from the continuing operation of cl 7 in relation to the situation as it might become from time to time and as the legislation might be amended throughout the projected life of the Gaming Operator’s Licence. The clause was always capable of applying in circumstances where the statute did not provide for compensation, and thus the fact that the Act may have provided for a right of compensation for some of the time does not imply the repeal of the clause in relation to the rest of the time. In any event, the point is really put beyond doubt by the fact that, after the passage of the 1996 amendments, the State entered into two further agreements which amended and confirmed the existence of the 1995 Agreement as so amended.[64]
[63]Ibid 391 [44], citing Commonwealth v Hazeldell Ltd (1918) 25 CLR 552, 563 (Griffith CJ and Rich J).
[64]Reasons [106]-[119].

With respect, we agree with his Honour that, taken together, all of those considerations are compelling.

Was cl 7.1 abrogated by the 2009 amendments to the 2003 Act?

Finally, on this aspect of the matter, counsel for the State contended that the judge was in error in holding that cl 7.1 of the 1995 Agreement was not abrogated by the operation of the 2009 amendments which made it impossible for any further gaming operator licences to be issued under the 2003 Act.

We reject that submission for much the same reasons. It is premised on an assumption that ‘a new gaming operator’s licence’ within the meaning of cl 7 of the 1995 Agreement has the narrow specific meaning for which the State contended, of a new gaming operator’s licence issued under Division 3 of Part 4 of Chapter 3 of the 2003 Act. For the reasons already given, we reject that contention. As has been explained, parallel contractual and statutory rights may co-exist and changes to the statutory rights will not affect contractual rights unless exercise of the contractual rights would abrogate or stand in the way of the operation of the amended statute.[65] In this case, they would not.
[65]Reasons [148].

The contractual claim — The Treasurer’s letter

Tatts claimed in the alternative that it is entitled to the compensation it seeks pursuant to the Treasurer’s letter.

As indicated previously, the letter was annexed to the 1995 Agreement as Schedule 2. The only express reference to the letter in the 1995 Agreement was in cl 6 which provided, in substance, that the Minister agreed that the Trustees’ gaming business would be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp. Clause 6 concluded:

Prior to entering into this Agreement the Trustees received from the Treasurer of Victoria, and considered, the letter annexed to this Agreement as Schedule 2.

We have previously set out the letter in full. Relevantly, it contained the following components:

·The first paragraph advises that the Treasurer is writing to ‘confirm the principles’ on which the government was ‘reaching agreement with you’.
·The second paragraph contains a statement that ‘the statement of principles in this letter’ did not bind ‘this Government or future Governments’, and then states that ‘of course’ the Victorian Parliament had the power at any time to amend legislation or pass new legislation affecting the gaming machine operations.
·The letter then sets out six ‘principles’. One of those ‘principles’ (principle 3) is that the government did not ‘currently intend to grant further gaming licences’. Another of the principles (principle 5) sets out a description of the ‘process of awarding a new licence’ after the Trustees’ licence terminated. It referred to an expectation which was expressly said to be ‘not guaranteed’ that the new licence would be awarded to the highest qualifying bidder after a public tender. Principle 5 ends with:
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.

·The letter concluded with the following statement:
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.

Tatts’ ‘good faith’ claims

Tatts alleged that the 1995 Agreement included terms and conditions that:

(a) the State would act reasonably and in good faith in relation to the performance of the 1995 Agreement (the ‘good faith term’); and

(b) the State would do all such things as may be necessary on its part to enable the Trustees to have the benefit of the 1995 Agreement (the ‘co-operation term’).

The good faith term was said to be express and to be contained in the Treasurer’s letter. The co-operation term was alleged to have been implied. Tatts alleged that the State breached the good faith term and the implied term of co-operation in two respects.

The first breach was relevantly pleaded as follows:

The State has failed and refused to treat the allocation of gaming machine entitlements … as constituting the issuing of “new gaming operator’s licences” for the purposes, and within the meaning, of clause 7 of the 1995 Agreement.

It was also alleged in that respect that the State has ‘attempted to circumvent’ Tatts’ right to compensation under cl 7.1.

The second alleged breach was said to be constituted by the State having failed

to take all reasonable steps to ensure that the issue of gaming machine entitlements … did not have the effect of depriving Tatts of payment under clause 7 of the 1995 Agreement and/or s 3.4.33 of the Gambling Regulation Act.

Given our conclusion as to the operation of cl 7 of the 1995 Agreement, it is unnecessary to deal with these claims insofar as they are premised on the assumption that Tatts is not entitled to the payment for which cl 7 provides. We have concluded that it is. We nevertheless deal with these claims in deference to the submissions that were made and because Tatts also alleges breach by a failure to take reasonable steps to ensure that the issue of the gaming machine entitlements did not have the effect of depriving Tatts of a payment under s 3.4.3.

The State denies the existence of the good faith term and admits the implied term of co-operation. It denies any breach and also asserts that if either term has the effect contended for by Tatts the term is void and unenforceable as an impermissible fetter upon the executive or Parliament.

Co-operation and ‘good faith’ in the judgment below

In view of his conclusions on other issues, it was unnecessary for the judge to deal with the claims based on the alleged good faith term and the implied term of co-operation, but he did express his views briefly.[66]
[66]Reasons [174]–[188].

The judge found that the statement in the final paragraph of the Treasurer’s letter was not subject to the earlier statements to the effect that the principles set out in the letter was not binding.[67] He held that those ‘not binding’ statements applied only to the six numbered principles and not to the statement that followed them. The judge went on to hold, however, that the good faith term was deprived of ‘any meaningful content in the circumstances of this case’ because one of the six numbered principles which were expressly said not to be binding contained a description of the foreshadowed terminal payment provision in cl 7 of the 1995 Agreement.[68] His Honour held that, reading the letter as a whole, the express good faith term and the implied co-operation term were circumscribed in their operation by the express statement that Tatts’ entitlement to a terminal payment under cl 7 was subject to contrary executive or legislative action.
[67]Reasons [181].
[68]Reasons [182].

The judge also referred to submissions made by Tatts to the effect that the express good faith term and the implied co-operation term could be relied upon in order to ‘bolster’ its contentions as to the proper construction of the contract.[69] The judge observed that he did not find it necessary to rely on those submissions in accepting Tatts’ construction of the contract.
[69]Reasons [184].

Given the very limited content which the judge gave to the express good faith term and the implied co-operation term, his Honour concluded that there had been no breach of those terms.

In relation to what the judge called the ‘first aspect’ of the State’s alleged breach, being the failure to treat the issue of the gaming machine entitlements as constituting a new gaming operator’s licence, his Honour held that, if the specific meaning of the phrase ‘a new gaming operator’s licence’ in the 1995 Agreement had been adopted, it could not then have been a breach of the 1995 Agreement for the State to rely upon its terms, as so interpreted.[70]
[70]Reasons [185].

As to the second aspect of the State’s alleged breach, being refraining from altering or abrogating Tatts’ right to payment without a saving provision, the judge concluded that it was inconsistent with the limited nature of the good faith term and the implied co-operation term as he had found them to be.[71] The possible alteration or abrogation of such rights had been expressly envisaged in the letter itself.
[71]Reasons [187].

The judge did not find it necessary to consider the State’s contentions in relation to fetters on future executive or legislative action.[72]
[72]Reasons [188].

Contentions and submissions

In its notice of contention, Tatts asserted that the judge erred in rejecting the claims it made based on breach of the express good faith term and the implied term of co-operation. In Tatts’ written submission on the appeal, what the judge had described as the two aspects of Tatts’ alleged breaches were set out and it was submitted that the conclusions reached were erroneous. In oral submissions, particular emphasis was placed upon the relevance of the express good faith term to the issue of construction of cl 7 of the contract.

It was also submitted on behalf of Tatts that the judge made an error in saying that the Treasurer’s letter had expressly made it clear that the description of the entitlement to a terminal payment was subject to contrary executive or legislative action when, so it was submitted, that is not what the letter stated, because the letter does not refer to the principles as being subject to change as a result of executive action. Submissions were made in relation to the State’s contentions concerning fetter by reference to L’Huillier v Victoria[73] and to Port of Portland Pty Ltd v Victoria.[74]
[73][1996] 2 VR 465.
[74](2009) 27 VR 366 and (2010) 242 CLR 348.

For its part, the State submitted that the judge was wrong to conclude that any part of the Treasurer’s letter constituted a binding promise. In oral submissions counsel for the State emphasised that these issues would only fall for consideration if the Court concluded that Tatts was not entitled to the payment provided for in cl 7 and was not entitled to the payment provided for in s 3.4.33. In other words, it was submitted, Tatts’ case on these issues amounted to an assertion that the State was bound to make a payment even though the criteria for that payment, under the contract and the statute, were not met. It was also submitted that to require the State to make a payment in those circumstances based upon an obligation of ‘good faith’ was untenable. Although it was said that the judge below had been wrong to find the express good faith term, it was submitted that the judge had correctly concluded that such a term had no relevant content in the circumstances here. The State further contended that the terms alleged would constitute an impermissible fetter on government action and, in any event, that Tatts had proved no loss.

Was there a contractual term requiring the State to act ‘in good faith’?

The existence of the implied term of co-operation was not contested. The judge found there was also an express term which imposed upon the State an obligation to act ‘reasonably and in good faith’.

There are features of the 1995 Agreement and the Treasurer’s letter which militate against a conclusion that the letter contained contractual obligations. The 1995 Agreement annexes the Treasurer’s letter and expressly refers to it, but it does not refer to it in terms which suggest, in themselves, that it contained contractual promises. Apart from the ‘boilerplate’ definition of ‘agreement’ in cl 1.1 which defines the term as ‘this Agreement, including the Recitals, annexures and any subsequent amendment agreed by the parties’, the only reference to the Treasurer’s letter is the statement in cl 6 that the Trustees have ‘received’ it and have ‘considered’ it. As was submitted by counsel for the State, this language is more consistent with a non-binding letter of comfort than with a letter which contains additional contractual obligations. Further, whilst the statement that the letter is not binding is made by reference to what are described as the ‘principles’, the letter does begin by stating that the letter’s purpose is to confirm those principles. When the first two paragraphs of the letter are read together, they tend to fortify the argument that nothing in the letter was intended to be binding.

Notwithstanding these considerations, our conclusion is that the judge was correct in deciding that the last sentence of the letter was not subject to the express assertion that the ‘principles’ were not binding and that the last sentence did constitute a contractual obligation undertaken by the State. In this respect the following matters are significant:

(1)When the letter is read as a whole, it seems to us that the last sentence has to be understood as one written because everything that has gone before is not binding. It is because the six enumerated principles are not binding that the government then promises that it will ‘continue to deal with the Trustees reasonably and in good faith’.
(2)The letter is annexed to the 1995 Agreement, and notwithstanding the equivocal language of cl 6 and the ‘boilerplate’ cl 1.1, the letter itself is part of the agreement.
(3)The obligation imposed by the last sentence of the letter is, as counsel for Tatts submitted, no more than what is to be expected of the State in any event.[75]
[75]See Hughes Aircraft System International v Airservices Australia (1997) 76 FCR 151, 196–7.

Content of the obligations and alleged breach

In our view, the judge’s conclusion as to the content of the express good faith term and the implied co-operation term was also correct.

The letter is very clear in stating that the enumerated principles are not binding. The entitlement to a payment on termination of the Tatts’ licence is dealt with in one of the enumerated principles. The effect of the express good faith term and the implied co-operation term cannot be to impose upon the State, in effect, an obligation to procure the outcome dealt with in one of the specified principles when the letter expressly makes it clear that the State undertakes no such obligation.

It is neither necessary nor desirable to attempt to articulate comprehensively the ambit of the express good faith term or the implied co-operation term but they cannot operate in such a way as to result in breach because the State fails or refuses to treat the allocation of the gaming machine entitlements as constituting the issuing of ‘new gaming operator’s licences’ within the meaning of cl 7 of the 1995 Agreement if that construction of cl 7 is not the correct construction. Likewise, there cannot be contravention of those terms by a failure to ‘ensure’ that the issue of gaming machine entitlements did not have the effect of depriving Tatts of a payment under cl 7 of the 1995 Agreement or s 3.4.33 if Tatts was not entitled to that payment upon the proper construction of that term and that provision. So to hold would be to impose upon the State an obligation to produce a particular outcome in circumstances where the letter made it clear that it undertook no such obligation.

Such content as the express good faith term and the implied co-operation term had was confined to the process of government action. In its submissions, Tatts purported to address the issue in that way asserting that the Minister was obliged to prepare and seek to have passed legislation which would protect Tatts’ entitlement. It does not seem to us that that analysis accurately characterised what Tatts had pleaded but, in any event, it must be based upon the assumption that the non-binding statements in the letter applied only to legislative action, not executive action. We do not accept that construction. The letter does state that the executive is not and will not be bound. The relevant paragraph of the letter states that the letter does not bind ‘this Government or future Governments’ and then goes on to state that the Victorian Parliament can amend existing legislation or pass new legislation. The limitation which must be imposed upon the express good faith term and the implied co-operation term by virtue of the fact that the letter expressly states neither the executive nor the legislature is bound to produce the outcome described in principle 5 means that Tatts cannot succeed on the breaches which it alleges.

If it were alleged that there had been a failure of good faith by virtue of a refusal to consult or some such matter, the analysis might be different. What is asserted here, however, is that the letter imposed upon the State an obligation to ensure (or attempt to ensure) that a particular outcome occurred (Tatts retained its right to the payment) notwithstanding what were, in our view, clear statements to the effect that no such obligation was undertaken.

Impermissible fetter on executive or legislative action

The State contended that any obligation of good faith of the kind contended for would be void or unenforceable as a fetter upon legislative discretion. In the result, that question does not arise.

Conclusion

For these reasons the appeal will be dismissed.

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[2014] VSCA 311

4 December 2014