P J Ryan's Hotels Pty Ltd v Townpub Pty Ltd
[2004] QDC 437
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- P J Ryan's Hotels Pty Ltd v Townpub Pty Ltd[2004] QDC 437
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P J Ryan's Hotels Pty Ltd v Townpub Pty Ltd[2004] QDC 437
P J Ryan's Hotels Pty Ltd v Townpub Pty Ltd[2004] QDC 437
DISTRICT COURT OF QUEENSLAND
CITATION: | P J Ryan’s Hotels Pty Ltd v Townpub Pty Ltd [2004] QDC 437 |
PARTIES: | P J RYAN’S HOTELS PTY LTD Appellant v TOWNPUB PTY LTD Respondent |
FILE NO/S: | BD3456/2004 |
DIVISION: |
|
PROCEEDING: | Appeal |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 5 November 2004 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 25 October 2004 |
JUDGE: | McGill DCJ |
ORDER: | Leave to appeal granted. Appeal dismissed with costs. |
CATCHWORDS: | GAMING AND WAGERING – Gaming Machines – operating authorities – whether “allocation dispute” between “parties” – operation of dispute resolution provisions INFERIOR TRIBUNALS – Commercial and Consumer Tribunal – jurisdiction – gaming machine operating authorities – whether “allocation dispute” between “parties” Gaming Machine Act 1991 ss 408; 420 Perpetual Trustees Australia Ltd v Bank of Western Australia Ltd [2004] QCA 345 – cited. Wonall Pty Ltd v Clarence Property Corporation Ltd (2003) 58 NSWLR 23 – considered. |
COUNSEL: | P L O'Shea SC and B G Cronin for the appellant P J Flanagan SC and J M Horton for the respondent |
SOLICITORS: | Phillips Fox solicitors for the appellant Suthers Taylor lawyers for the respondent |
- [1]The operation of gaming machines, commonly known as poker machines, in Queensland is regulated by the Gaming Machine Act 1991 (“the Act”). The use of such machines for gaming is made lawful on premises on which the holder of a gaming machine licence is licensed to conduct gaming: s 55(1)(b). A licensee can be either a category 1 licensee or a category 2 licensee; the former is generally applicable in the case of hotels, and the latter in the case of clubs.[1] At the relevant time Townpub Pty Ltd (“the respondent”) held a category 1 licence under the Act in respect of premises on which it operated a hotel business, the Rising Sun Hotel, in Townsville. Those premises were owned by P J Ryan’s Hotels Pty Ltd (“the appellant”) and the subject of a registered lease in favour of Mr and Mrs Casey. At the relevant time, the respondent owned 40 gaming machines which it operated at the hotel pursuant to that licence.
The 2003 amendments
- [2]Community concern that the proliferation of gaming machines had increased the level of harm caused by gambling led in May 2001 to the imposition by the government of a state-wide cap on the number of gaming machines in hotels.[2] When the cap was introduced the government announced that a scheme would be developed to allow for the reallocation of gaming machines that became available within the cap as a result of hotel closures or reductions in the number of machines in hotels. That scheme was implemented by amendments to the Act made in 2003. Essentially the scheme involved the creation of “operating authorities” which are required to be held by licensees in order to install and operate each gaming machine: s 80B. Initially existing licensees received one operating authority for each approved gaming machine (s 409); under the existing legislation a gaming machine licence specified the number of gaming machines that could be installed on the licensed premises: s 59(2).[3] There is a mechanism established by which licensees can trade in authorities, although only in a limited and somewhat artificial way; they can only be sold at an authorised sale, in effect a sale conducted by a government authority: ss 109B, 109C. Part of the sale proceeds is paid into the community investment fund, with the balance being paid to the licensee: s 109E. It is also possible for an operating authority to “become an operating authority of the state” under s 109F. It was not suggested that that section has any immediate relevance, and it is not necessary to attempt to ascertain just what it means; I suspect it is really a forfeiture provision.
- [3]One of the objects of the 2003 amendments was said in the explanatory notes to the Bill to be the inclusion of “transitional dispute resolution arrangements to ensure that landlords and licensees under the scheme are not worse off than at present.” This was also a matter referred to in the second reading speech.[4] The minister said he had “already publicly stated that no one will be worse off than they are currently.” He added that “conversely the scheme is not designed to be a get-rich-quick scheme.”
- [4]The 2003 Amending Act commenced on 1 July 2003: s 2. Immediately thereafter, 40 operating authorities for gaming machines were allocated to the respondent pursuant to s 409(2) of the Act. The provisions introduced by the 2003 amendment went on to require, although not as a condition precedent to the allocation of the operating authorities, that each category 1 licensee register in the approved form for the allocation of operating authorities: s 411(1). Registration occurred by the licensee giving the approved form properly completed to the chief executive: subsection (2). The chief executive was required to give each licensee written notice of this requirement, and such notice was given to the respondent. A form was sent out for the respondent to complete and return. Presumably this was in the approved form.[5]
- [5]The form contained a provision for the licensee to answer yes or no to a question: “Does a dispute exist between you and the freehold owner (lessor) in relation to the future disposal/sale of gaming machine authorities?” That question was not answered by the respondent. The form also had a provision for the “freehold owner (lessor)” to complete, which required the owner to make a declaration either that “I am not in dispute with the licensee regarding the future disposal/sale of the operating authorities” or that “I am in dispute with the licensee regarding the future disposal/sale of the operating authorities.” The former declaration included a note, “By indicating that you are not in dispute you are confirming that existing arrangements between you and the licensee adequately deal with the future disposal/sale of the operating authorities by the licensee, or that an agreement has been reached in this regard.”
- [6]There is obviously nothing in s 411, and I was not referred to anything elsewhere in the Act, which gave the chief executive authority to require the freehold owner, or lessor, to provide any information. In my opinion nothing for present purposes turns on the question of whether the respondent validly registered under s 411, or indeed whether the approved form, by purporting to require something of the owner which was not authorised under the statute, was valid as an approved form. I suspect it was not. In any case, it was not suggested that any estoppel arose or that there was otherwise any significance in the fact that the appellant signed a declaration that it was “in dispute with the licensee regarding the future disposal/sale of the operating authorities.”
Dispute resolution
- [7]The second reading speech of the Treasurer indicated that the reason for collecting this information was that it “will be essential to determine if parties will progress into the dispute resolution process created by the Bill.” This is a reference to the provisions of subdivision (3) of division 8 of part 4 of the Act, headed “Dealing with allocation disputes under Tribunal Act.” The Minister said that during the 28 days given to return the registration form licensees should attempt to reach agreement with hotel owners. He said he was aware some negotiations were already underway, and that licensees who failed to reach agreement would progress into the dispute resolution process created by the Bill. He then made the statement that I referred to earlier, and acknowledged that “a small number of people may not be able to achieve” resolution through normal commercial negotiations. “Consequently, for a transitional period the Bill creates a simple, speedy and relatively low cost process for resolving disputes thereby saving parties from having to pursue unresolved issues through the courts.”
- [8]This was to be achieved by having the matters resolved through the Commercial and Consumer Tribunal. By s 414 of the Act, “the tribunal’s jurisdiction for this Act is limited to hearing and deciding an allocation dispute between parties and matters relating or relevant to hearing and deciding the dispute.” By s 416 a party to an allocation dispute may within the specified time apply to the tribunal to hear and decide the dispute; the respondent did so apply, on 30 October 2003.[6] By s 417, the tribunal is required to attempt to resolve a dispute by mediation; presumably in the present case that was attempted and failed. Under s 419(1), therefore, the proceeding “must be heard and decided under the Tribunal Act.” I was told that the matter has been set down for hearing by the tribunal this month. Section 420(1) permits the tribunal to “make an order in relation to an allocation dispute about dealing with operating authorities of a party to the dispute, including, for example, an order (a) about the sharing, as between the parties, of any amounts payable to a party under s 109E; or (b) about compensating a party in another way for the sale or other disposal of an operating authority.” Section 109E is the provision under which, in the event of a sale of an operating authority at an authorised sale, the balance of the sale price after deduction of the amount payable to the community investment fund comes to be payable to the licensee. That did not occur in the present case.
Termination of lease
- [9]The significant feature in the present case, apart from the allocation of the operating authorities to the respondent, is that the lease terminated by effluxion of time on 26 June 2004.[7] When that occurred, the operating authorities which had been held by the respondent were transferred to the appellant by s 78(5) of the Act. A general liquor licence under the Liquor Act 1992 is held, in the case of leased premises, by the lessee rather than the lessor. That is because a general licence authorises the licensee to sell liquor in the course of a business conducted on the licensed premises by the licensee.[8] If a licensee under the Liquor Act is the lessee of the licensed premises, when the lease has been lawfully terminated (which would occur for example by its coming to an end) the owner may apply for a transfer of the licence, which the chief executive may transfer to a person who can be granted the licence: Liquor Act s 113.
- [10]A gaming machine licence however cannot be transferred to another person: s 77. If a liquor licence is cancelled, transferred or surrendered, any associated gaming machine licence is cancelled: s 96(1). But, so long as the requirements under the Act for the issue of a gaming licence can be met, a new gaming licence can be issued to the owner (or a new lessee). The category 1 licence relates to premises in respect of which relevantly there is a general liquor licence in force. Accordingly an application for a gaming machine licence can be made only by the proposed transferee of a liquor licence: s 56(1)(c). If the liquor licensing authority is prepared to transfer the liquor licence and the commission responsible for issuing gaming machine licenses is prepared to grant the gaming machine licence, arrangements are to be made for the transfer of the liquor licence and the issuing of the gaming machine licence to occur at the same time: s 78(3). When that occurs, subsection (5) provides that “all operating authorities, if any, for the licensed premises under the cancelled associated gaming machine licence are transferred by operation of this subsection to the holder of the new licence.”
Earlier proceedings
- [11]In proceedings in the Supreme Court,[9] the appellant obtained, as against Mr and Mrs Casey as first defendants and the respondent as second defendant, on 30 April 2004 a declaration that:
“1. The second defendant is obliged to transfer general liquor licence number 41110674 to the plaintiff or as the plaintiff may direct, upon the expiration or sooner determination of registered lease 702774158.
- The first defendants are obliged to cause the second defendant to transfer general liquor licence number 41110674 to the plaintiff, or as the plaintiff may direct, upon the expiration or sooner determination of registered lease 702774158.
- If upon the expiration or sooner determination of registered lease 702774158:
3.1 General liquor licence number 41110674 is say transferred to the plaintiff, or to such person as the plaintiff may direct (“the transferee”); and at the same time
3.2 The transferee applies for and obtains a gaming machine licence issued under the Gaming Machine Act 1991 for the Rising Sun Hotel; all operating authorities issued under the Gaming Machine Act 1991 for the Rising Sun Hotel will be transferred by operation of law to the holder of such new gaming machine licence for the Rising Sun Hotel.”
- [12]The reasons of Muir J for making those declarations indicate that the first two were made by consent. It had been submitted before his Honour that the fact that the respondent’s allocation dispute was pending before the tribunal in some way modified or restricted the operation of s 78(5). But his Honour was not persuaded that s 78 was to be read subject to division 8, and concluded that there was no impediment to the operation of s 78(5) according to its terms. In supplementary reasons[10] his Honour made it clear that he was not purporting to make declarations as to the scope of the tribunal’s power, or make an order binding on the tribunal in any way. But it may be that his Honour’s declaration, or the transfer by operation of law to which it referred, affected the question of the jurisdiction of the tribunal.
- [13]On 6 July 2004 the appellant’s solicitors sought the determination as a preliminary point that the tribunal did not have jurisdiction to determine the application on the basis that there was no allocation dispute before it.[11] That was a matter which had previously been raised in paragraph 19 of the defence filed on 17 June 2004. There was a hearing about that question on 20 August 2004, and on 30 August 2004 the tribunal concluded that, for reasons published, it had jurisdiction and dismissed the appellant’s application. The appellant now seeks leave to appeal to this court from that decision of the tribunal, pursuant to s 100 of the Commercial and Consumer Tribunal Act 2003. That section gives a limited right of appeal, but one of the available grounds is excess or want of jurisdiction, and that is the appellant’s allegation. The leave of this court is required for the appeal, but the respondent does not now oppose the grant of leave to appeal, and accordingly I will allow leave to appeal, and consider the merits of the appeal.
The appellant’s submissions
- [14]The appellant’s submissions turned on the definition of “allocation dispute” in s 408 of the Act, and the definition of “party” for the purpose of that definition, also in s 408. Relevantly those terms are defined as follows:
“Allocation dispute means a dispute arising from the allocation of an operating authority to a category 1 licensee under s 409 and affecting existing arrangements between parties.”
“Party, to an allocation dispute means –
- (a)the category 1 licensee to whom the operating authorities the subject of the dispute are allocated under s 409; or
- (b)the owner or lessor of the licensed premises of the category 1 licensee, or another person prescribed under a regulation, who –
- (i)under a lease, agreement or other arrangement, has, at the commencement, a financial interest in the conduct of the business of gaming of the category 1 licensee; and
- (ii)reasonably believes the interest may be adversely affected by the allocation of the operating authorities.”
- [15]It was conceded by Mr O'Shea SC who appeared for the appellant that there was a dispute arising from the allocation of operating authorities to the respondent under s 409, but he submitted that the further requirement, of “affecting existing arrangements between the parties,” was not satisfied. He conceded that the respondent satisfied paragraph (a) of the definition of party, but submitted that the appellant did not satisfy paragraph (b), because it did not satisfy subparagraph (ii). His submission was that the issue was whether the allocation had affected, that is produced a change in, the arrangements which were existing between the parties immediately prior to the allocation. His submission was that the definition required that the allocation affect existing arrangements, rather than the dispute do so; the dispute could not of itself affect arrangements, and the jurisdiction of the tribunal could not depend on the mere fact that somebody wanted to dispute something. Further the use of the word “affecting” tied in with the word “affected” in paragraph (b)(ii) of the definition of “party”. His submission was that if the existing arrangements made no provision for what was to happen as a consequence of the issue of operating authorities then the allocation had produced a change in the existing arrangements. On the other hand, if the existing arrangements did make provision for what was to happen, then no change had been produced by the allocation. If the existing arrangements did not cover the situation, there had been a change in the existing commercial balance; if the existing arrangements did cover the situation, there had been no change in the commercial balance.
- [16]This point had been rejected by the tribunal not in principle, but rather on the ground that the existing arrangements between the parties, specifically the lease, did not on their true construction apply to the situation where operating authorities had been created by the legislature as a new species of property. The tribunal concluded that the lease did not cover the situation, so that it was not correct to say in this case that the existing arrangements between the parties made provision for what was to happen with operating authorities. That conclusion was challenged by the appellant, and supported by counsel for the respondent, before me.
Reasons of the tribunal
- [17]Most of the reasons of the tribunal consist of no more than a reproduction of the submissions of each of the parties. The operative decision appears to commence at p. 17. The tribunal referred to the relevant provisions of the lease clause 21, and then said relevantly:
“23. The lease between the parties entered into in 1999 does not expressly refer to, deal with or mention operating authorities. Prima facie the allocation of a new species of property created in July 2003 does affect existing arrangements because the lease does not specifically do so.
- We agree with [the appellant] that the phrase ‘existing arrangements’ means the current state of affairs. Existing arrangements include, but are wider than, a contract because the allocation would not produce a change in the terms of the lease. We accept the submissions of [the respondent] that the allocation resulted in a new right coming into existence relating to property the subject of existing contractual relations between [the respondent] and [the appellant], yet that contract did not refer to these new rights. Because the lease does not provide expressly for the allocation of rights to this new asset and the parties respective rights in the period between allocation and expiry of the lease, existing arrangements are affected.
- The lease is silent as to the number of gaming machines which the applicant must hold during the course of the lease. The applicant is free under the lease to increase or decrease the number of gaming machines so long as the increase or decrease does not prejudicially affect the goodwill, trade or business of the gaming business (clause 21.2). The allocation of the authorities to the applicant however affected that arrangement. It placed a new asset in the hands of the applicant. The respondent, after allocation of the operation authorities, could not any longer decrease the number of gaming machines at the hotel, because there were valuable operating authorities associated with each gaming machine and disposal of any gaming machine would adversely affect the value of the gaming business.”
- [18]The appellant does not dispute that the phrase “existing arrangements” means the current state of affairs, or that the allocation would not produce a change in the terms of the lease. There is nothing in the Act which suggests that existing contracts were to be varied by the creation and allocation of this new species of property, and in those circumstances it does not appear to me to be realistic to test the question by reference to whether the allocation varied the terms of the lease. I also agree that the lease does not refer expressly to the operating authorities, or deal expressly with the rights of the parties to the lease in respect of the new asset. One would in the circumstances not expect it to do so, since the lease was entered into even before the cap was introduced in 2001, let alone the scheme for operating authorities which was presumably revealed only last year some time.
- [19]It was submitted on behalf of the respondent that consensual agreements cannot make provision for property whose existence was not contemplated by the parties at the time they reached agreement, and reference was made to the decision in Wonall Pty Ltd v Clarence Property Corporation Ltd (2003) 58 NSWLR 23. That was a decision which dealt with the creation under New South Wales legislation of something akin to an operating authority. The question in that case was whether a lease impliedly prevented the lessee from transferring what are in New South Wales referred to as poker machine entitlements prior to the end of the term. Reliance was placed in that case on a clause stating, “When the lease ends for any reason, the lessee must do everything necessary to transfer to the lessor or its nominee any transferable licences or permits that are required to carry on the hotel business.” The tenant contended that there was no obligation under this clause to transfer back any poker machine entitlements, and that in any event there was no obligation to maintain any poker machine entitlements until the lease came to an end.
- [20]At p. 46 Campbell J entertained some doubt about whether the poker machine entitlement counted as a “transferable licence or permit” for the purpose of clause 21 of the lease, but went on to note that there was no requirement under the lease for the tenant to operate the hotel with any particular number of poker machines, or indeed any poker machines at all: p. 47. At para [51] he said: “I would be prepared to accept that clause 21 requires the transfer back at the end of the lease of any poker machine entitlements which might at that time be allocated in respect of the hotelier’s licence – but neither the terms of s 21, nor any implication, goes so far as to prevent the lessee from transferring poker machine entitlements prior to the end of the term.”
- [21]In my opinion that is not an authority for the proposition that a consensual agreement cannot make provision for property whose existence was not contemplated by the parties at the time they reached agreement. Insofar as his Honour expressed a preference in relation to that issue, it was to the contrary. In my opinion the proposition is not correct. General terms in a lease may apply to new matters arising after the commencement of the lease, if they are in terms wide enough to cover those new matters. There will always be a question of construction involved, but in my opinion in principle there is no reason why a general term or general provision in a lease should not be wide enough to apply to a new species of property invented by the legislature after the commencement of the lease. The question is always one of construction of the lease. A term intended to be comprehensive could easily apply to such new property.
- [22]It is however not clear to me that the tribunal did not arrive at the same conclusion. As I have indicated para [25] of the reasons said that the allocation of the authorities affected the arrangements in clause 21.2. The last sentence of para [25] refers to the respondent’s ability to decrease the number of gaming machines at the hotel. But it is not apparent how the respondent ever had any ability, during the term of the lease, to decrease the number of gaming machines at the hotel. The relevant issue was whether, after the allocation of operating authorities, the respondent before me, that is the applicant in the tribunal, was prevented from decreasing the number of gaming machines at the hotel because to do so would be in breach of clause 21.2, in that such a decrease may prejudicially affect the goodwill, trade or business of the gaming business. Clause 21.2 operates as a restraint on the conduct of the respondent before me, not the respondent in the tribunal. I think that this was a mere slip on the part of the tribunal, and the last sentence was intended to refer to the applicant.
- [23]If the applicant had been able to reduce the number of gaming machines and hence operating authorities for the hotel prior to the expiration of the lease, that would have meant that the “valuable operating authorities” would not have been available to pass by operation of law under s 78(5) to the plaintiff (or whoever was the transferee of the liquor licence). The tribunal concluded that that did affect the arrangement between the parties, not because the general terms of the lease did not operate on the new operating authorities, but because the general terms of the lease did operate notwithstanding the creation of the operating authorities, but they operated in a different way.
Analysis
- [24]In my opinion the difficulty in this case arises because, although the legislature has provided for allocation disputes to be decided by the tribunal if they are not resolved by a commercial agreement between the parties or by mediation, and the tribunal has been given power to make an order in relation to an allocation dispute, there is nothing in the legislation which provides the tribunal with any guidance as to what approach it is to adopt in the resolution of such a dispute. There is no statement of what principles are to be applied, what objects are to be achieved, what exactly the tribunal was supposed to be doing in resolving an allocation dispute. Presumably the function of the tribunal was not simply to resolve the dispute by producing a decision, any decision. Presumably the legislature was not intending to see applied a dispute resolution technique where the outcome depends on the idiosyncratic notions, that is to say the whim, of the decider, and the only virtue of a decision is that it achieves resolution of what was previously a dispute. On the other hand, the tribunal’s function was I think just as obviously not simply to determine what is to happen if the existing arrangements operate according to their terms and the benefits or detriments flowing to the parties as a result of the creation of operating authorities lie where they fall. There was no need to set up a scheme for dispute resolution in order to achieve that outcome.
- [25]In fact if one looks at the second reading speech and the explanatory notes the objective that the legislature (or at least the government) had in mind was really quite clear. The problem is that the legislature did not express this objective in the legislation. The Minister in the second reading speech referred to the fact that he had previously stated publicly that no one would be worse off than they were currently, and that conversely the scheme was not designed to be a get-rich-scheme. That was reflected as well in the objectives of the legislation as set out in the explanatory notes. The relevant one was to provide “transitional dispute resolution arrangements to ensure that landlords and lessees under the scheme are not worse off than at present.” [emphasis added] That would be consistent with the political promise that parties were not to be worse off as a result of the implementation of this scheme. The intention was I expect to try to avoid the sort of consequences which are illustrated by Wonall (supra).
- [26]In the light of these matters, in my opinion the legislative purpose of this division of the Act was to provide a mechanism by which effect would be given to the Minister’s promise that parties would not be worse off as a result of the implementation of this scheme.[12] It is not concerned with changes to legal rights, but rather changes to the commercial implications of the operation of legal rights because of the allocation of operating authorities. Such an approach fits the definitions in issue in s 408. The allocation of operating authorities affects existing arrangements between parties if the commercial consequences of the existing arrangements have changed as a result of the allocation of the operating authorities. If there is a dispute as to how the parties are to respond to that change then that is a dispute which falls within the definition of “allocation dispute”.
- [27]That is also consistent with the definition of “party,” particularly paragraph (b)(ii), where the test depends in part on the question of whether a persons “interest may be adversely affected.” That makes sense if the issue is whether the commercial interest of the person may be adversely affected, that is, whether the person may be worse off than the person would otherwise have been because of the allocation of operating authorities. Such a person, who otherwise satisfies the requirements of the definition, is seen as a person within the protection of the legislative scheme.
- [28]This interpretation is also consistent with the two specific orders identified in s 420(1). The first is concerned with the situation where an amount becomes payable under s 109E. Such an amount can only become payable to the licensee, and is concerned with the situation where an operating authority has been (or will be) turned into a sum of money. Paragraph (b) is also concerned with the situation where there has been a sale or disposal of an operating authority, and the reference to “compensating a party” implies that it is concerned with a situation where the party has suffered a loss;[13] it does not readily apply to a situation where the matter in issue is the distribution between two parties of some windfall gain.
The competing economic arguments
- [29]The appellant’s submission was that the value of the hotel business was no different as a result of the allocation of the operating authorities, because the relevant value was the value of the business as a going concern, which depended upon the capitalisation of the income of the business. There is no reason why the allocation of operating authorities would have affected the income of the business, at least in the short term, and the capitalisation rate also would not have changed. It occurs to me that in principle the fact that there is a limit on operating authorities, so that as the population increases there will not be a proportionate increase in gaming machines, with the result that there will be more potential customers per gaming machine than was previously the case, means that the imposition of the legislative cap may have justified some adjustment of the capitalisation rate. But that is really a matter for expert economic evaluation, and in any case would arise from the cap on the number of gaming machines rather than specifically from the allocation of operating authorities. The appellant’s position, and it seems to me that there is a good deal to be said for it, is simply that it is no better off than it would have been anyway as a result of the operation of the ordinary terms of the lease. No doubt for that reason it is not asserting that it has any claim against the respondent for anything arising out of the allocation of operating authorities to the respondent.
- [30]The appellant’s case is that it has not received any windfall gain; it has a business which is worth no more than it would otherwise have been worth, and although it has some additional species of property, that could only be realised in a way which would produce a financial loss to the appellant; the operating authorities are worth more to the appellant than it would be able to achieve from the sale of them, so it will never sell them. On the appellant’s case the objective which the Minister promised in his second reading speech, that no one would be worse off as a result of the introduction of this scheme, has already been achieved in the present case, but if any order is made for payment to the respondent, the appellant would to that extent be worse off, and therefore it is not an order which ought to be made in order to give effect to the purpose for which this part was inserted into the Act.
- [31]The respondent’s position is that parliament has created new property which was of value, and that in the events that have happened the whole benefit of that valuable property has accrued to the appellant. The respondent asserted that it was entitled to some share in that valuable property, which is presumably being characterised as essentially a windfall gain, on the basis that, during the time when the business was operated by the respondent, it was built up, and in that way the respondent’s actions have contributed to the accrual of this benefit to the appellant. It may well be that in some circumstance the effect of the creation of this new property would be to increase the value overall of a business. It would provide an additional realisable asset to the business, which, although not affecting the value of the business as a going concern, would affect the value of the business on an asset realisation basis. In some circumstances, this would be of significance, if the holder of an operating authority could achieve more by the sale of the operating authority than the capital value of the income earned by the gaming machine operated pursuant to that authority.
- [32]Those who want to set up new premises with a general liquor licence and gaming machines, or who want to introduce gaming machines to premises with an existing liquor licence, or who just want to increase the number of gaming machines at licensed premises, will need to purchase operating authorities at the authorised sales. In theory if the operating authorities were readily transferable market forces would produce a redistribution of operating authorities so that they were located at those premises where they were capable of earning the most income for the licensees. In practice however that is not likely to happen to any great extent, because what is set up under the Act is very different from a situation where operating authorities are freely transferable.
- [33]To begin with, the licensee under the Act cannot simply decide to reduce the number of gaming machines, so as to produce surplus operating authorities. Any decrease in the approved number of gaming machines for licensed premises requires the approval of the chief executive under s 87 of the Act. The chief executive is required to take into account the matters referred to in s 89. There are various restrictions on applications seeking such approval. If the decrease is approved, then the operating authorities are sold at an authorised sale: s 87(5). Operating authorities can only be sold at an authorised sale, conducted by a selling entity: ss 109B, 109C. And most significantly, a substantial percentage of the selling price is not paid to the vendor, but into the community investment fund: s 109E. The percentage is fixed by the Gaming Machine Regulation 2002: s 10B. It is 33 percent, except in the case where a licensee is selling all of the operating authorities held, in which case it is 50 percent. It follows that the amount realised from the sale of operating authorities is necessarily going to be much less than the cost of purchasing replacement operating authorities, in order to avoid any loss or damage to a business as a result of that sale.
- [34]The licensee can also surrender a gaming machine licence at any time under s 95; if that occurs, all operating authorities for the licensed premises must be sold at an authorised sale: s 95(2A). It follows that, following the allocation of operating authorities to a licensee in respect of leased premises, it would be open to the lessee, so far as the Act is concerned,[14] either to sell some operating authorities with the approval of the chief executive, or simply to surrender the gaming machine licence, in which circumstances all of the operating authorities will have to be sold. Obviously there is potential for either of those courses adversely to affect the interest of the lessor, at least in circumstances where, on the expiration of a lease, the operating authorities would otherwise pass by operation of law to the lessor or another person (such as a replacement tenant) obtained by the lessor, under s 78(5) of the Act. If apart from the changes effected in 2003 at the expiration of the lease the lessor was entitled to obtain the benefit of the business on the licensed premises, including the business of operating gaming machines in the licensed premises, that business is going to be less valuable if prior to the termination of the lease the licensee has surrendered the gaming machine licence, or sold some of the operating authorities. If the licensee is entitled to keep its share of the sale proceeds of the operating authorities, this might be a profitable course for a licensee to take.
- [35]Consider the position of a licensee, just before the expiration of the lease, who has no interest in the continuing well-being of the business, because it is about to be handed back to the lessor. Any loss of profit for the licensee as a result of the loss of gaming machine profits before the lease comes to an end may well be insignificant compared with the amount that could be realised on the sale of operating authorities if the gaming machine licence was surrendered. If just before the expiration of the lease that license were surrendered and the operating authorities were then sold with the relevant share of the proceeds being kept by the lessee, that would produce a substantial windfall gain for the lessee, essentially at the expense of the lessor who would then receive back on the expiration of the lease a business where gaming machines could not be operated without first purchasing the necessary operating authorities, a process which will have become quite expensive. No doubt this was the sort of thing that the Minister had in mind preventing when referring in the second reading speech to the scheme not being designed to be a get-rich-quick scheme, and promising that no one would be worse off than they were currently. Indeed, the Act contains in s 424 a restriction on the cancellation of licences for a period after the commencement of the Act. If a proceeding has been started in the tribunal, the prohibition extends until the dispute is decided: subsection (2)(a). This is subject to the chief executive’s written approval, but is certainly consistent with my approach to the interpretation of this part.
Further analysis
- [36]On the approach that I would adopt, the crucial question in relation to the second part of the definition of “allocation disputes” is whether the allocation of operating authorities has affected existing arrangements between the parties in the economic sense. I think it clear that there is nothing in the Act which changes contractual rights between the parties,[15] or which produces any change as a matter of law in the position of the parties, so that it cannot mean affecting existing arrangements in the contractual sense. Rather it follows from the intention expressed for this provision in the explanatory notes for the Bill, that it is concerned with a situation where the financial balance between the parties pursuant to the pre-existing arrangements between them has been changed because these new operating authorities have been created and, specifically, allocated to the licensees. I do not think however that the legislature intended a narrow or technical construction of the expression “allocation of the operating authority to a category 1 licensee”, and indeed no such approach was contended for by the appellant. I think that a dispute arising in respect of some action taken by a party consequent upon the allocation of operating authority, such as the surrender of the gaming licence or the sale of the operating authority, would still be a dispute “arising from the allocation of an operating authority to a category 1 licensee under s 409.”
- [37]The real question is whether the allocation here did affect existing arrangements between the parties.[16] The tribunal concluded that it did, essentially because it changed the way in which clause 21.2 of the lease would operate, in that conduct which might otherwise not have been a breach of that clause on the part of the respondent now would be a breach of the clause.
- [38]Clause 21.1 of the lease restrained the people behind the respondent from applying to surrender its gaming machine licence without the written consent of the appellant, and clause 21.6 provided that at the expiration or determination of the lease the gaming machine licence would be surrendered with a view to allowing the lessor to obtain such a licence. Clause 21.2 provided: “The lessee shall not be and shall make every endeavour to ensure no other person is a party or privy to the doing of any act whereby the goodwill, trade or business of the use of the gaming machines on the premises may be prejudicially affected.” As I read paragraph [25] the tribunal accepted that after the scheme was introduced any reduction in the number of operating authorities would necessarily involve a breach of that clause. I agree. That situation would not be avoided simply by showing that the goodwill of the premises was not adversely affected by some small reduction in the number of gaming machines on the premises;[17] the business of the use of gaming machines on the premises would necessarily be prejudicially affected by any reduction in machines, not only because of the risk of reduced through-put, but because of the loss of the opportunity on the part of the lessor to realise the operating authority for its own benefit. That was not a loss which could have been suffered by the lessor prior to the introduction of the scheme.
- [39]The tribunal concluded in effect that the creation of the operating authorities had affected the existing arrangements because the way in which the existing arrangements, that is the lease, would operate as between the parties had changed, because of the economic implication of the existence of the operating authorities. Properly understood, it seems to me that the tribunal did not reject the test proposed by the appellant, or the appellant’s analysis of the effect of clause 21.2 of the lease after the creation of the operating authorities; but the tribunal rejected the proposition that this was no different from the way in which the lease would have operated in a practical sense had the operating authorities not been created by the legislature. In simple terms, the existing arrangements were affected because previously clause 21.2 had not prohibited the sale of operating authorities, whereas after they were created it did. The arrangements were affected, because the scope of operation and the effect of operation of clause 21.2 changed once it came to apply to the operating authorities. That is so, whether or not such a reduction would have been a breach of clause 21.2 anyway had the scheme not been introduced.[18]
- [40]The consequences of breach of that clause by the respondent certainly became dramatically different. If it had not been for the imposition of this scheme last year, the reduction by two in the number of gaming machines authorised under the gaming licence, assuming that was a breach of clause 21.2, would have produced an award of damages only in respect of any profit lost by the appellant as a consequence, and, if the appellant were able to obtain permission to increase the number by two again, the costs associated with obtaining that permission. That might not have been very much. On the other hand, a sale of two operating authorities would have also had the practical consequence in depriving the appellant of the opportunity of selling the operating authorities itself, which may well have been more, or even significantly more, than the damage suffered by the loss of two machines.
- [41]On the face of a fairly superficial consideration of the relevant facts it does seem to me that there is a good deal of force in the appellant’s position in this respect. But even if I were persuaded that it was necessarily correct, it would not follow that there was no “allocation dispute” for the purposes of s 408, so as to enliven the jurisdiction of the tribunal. Assuming that the respondent’s claim is bad, that is one which ought to fail, the respondent is still making that claim, and so long as the applicant disagrees with it then there is a dispute about it.[19] That is a dispute arising from the allocation of an operating authority to a category 1 licensee under s 409, as was conceded on behalf of the appellant. It is also in my opinion a dispute arising from the allocations affecting existing arrangements between the parties.
- [42]The appellant’s argument was that, in the events that have happened and as a consequence of the operation of clause 21.2 of the lease, there has been no effect on the existing arrangements between the parties as a result of the allocation of the operating authorities. It is not necessary for me to decide whether that is correct, because even if it is correct, it would not deprive the tribunal of jurisdiction. In my opinion it is sufficient, for the allocation to be said to have affected existing arrangements, for it to have produced a potential effect, that is, to have created a situation where if something is done as a consequence of the allocation, there would be an effect. The mere allocation is not going to change the situation; it is only if something happens as a consequence of the allocation that there could be any change in an economic sense in the arrangements between the parties. This follows from the fact that the dispute resolution provisions are clearly intended to operate promptly, in the absence of an agreement as to what is to occur in the future. In view of this, it should not be confined to dealing with the situation where some adverse consequence has already been suffered by a party; it should be sufficient that there is a potential for an adverse consequence because of the absence of agreement between the parties.
- [43]The tribunal in my opinion is not confined to making orders to rectify a loss which has already been suffered, and it would have the power to make orders, such as orders restraining a lessee from selling operating authorities or surrendering a gaming licence, in order to prevent a loss from being suffered by another party if such steps were taken, There is no reason to think that actions of that sort were outside the contemplation of the legislature, and every reason to think that they were intended to be covered by these provisions. That indicates that the allocation of the operating authorities is regarded as affecting existing arrangements for the purposes of the definition if it affects them potentially. That in my opinion was the case here, and therefore the dispute is an allocation dispute which the tribunal has jurisdiction to resolve. If the tribunal concludes that there has not been and will not be any loss suffered by the parties as a consequence of the allocation of the operating authorities, that would not deprive the tribunal of jurisdiction in the matter; it would simply mean that the application ought to fail. But that is not a matter which goes to jurisdiction, and therefore not something I should decide.
- [44]I do not think that any narrow or technical meaning of the words “affecting existing arrangements between parties” was intended. In particular, I do not think that it should be confined to a situation where the applicant in the tribunal can show that the existing arrangements have been affected in a way in which is adverse to the applicant. That would place additional restriction not made express in the legislation. I suspect that the real legislative purpose in the inclusion of this phrase was to make it clear that the scheme was intended to deal with situations where there were disputes between parties who had existing arrangements at the time when the operating authorities were allocated, although I accept that the use of the word “affecting” does mean that there would be no allocation dispute if in a particular case it were possible to show that the allocation had had no effect, in the relevant sense, on those existing arrangements. But I think there can be an effect on existing arrangements for the purposes of that definition even if a lease between the parties on its true construction prevents the lessee from dealing with the operating authorities after they are allocated in a way which is adverse to the interest of the lessor.
- [45]The existence of an effect on existing arrangements between the parties, in the economic sense to which I have referred, amounts to a jurisdictional fact.[20] If an applicant in the tribunal cannot show that the allocation has affected existing arrangements between the parties in the relevant sense, the application must fail for want of jurisdiction, rather than simply failing on the merits. That may have an effect in terms of the availability of an appeal under s 100 of the Commercial and Consumer Tribunal Act, but otherwise it would not seem to make any practical difference. In order to show an entitlement to some relief in my opinion the respondent has to show that the allocation has affected the existing arrangement between the parties in a way which was adverse to it, so that some order needs to be made to ensure that it will not be worse off as a result of the allocation. If it cannot show that, the application should fail anyway. But the significance for present purposes is that there is a dispute about this, and therefore there is an “allocation dispute” which is within the jurisdiction of the tribunal.
- [46]In my opinion the question of whether the lease dealt expressly with operating authorities was really a red herring. The significance of an agreement between the parties as to the effect which the allocation of operating authorities is to have on the existing arrangements between them is simply that there would then be no dispute which met the definition. But I think that an agreement could only achieve that result if it was one achieved specifically and expressly in response to the introduction of this scheme by the 2003 amending Act. Although I do not entirely agree with the reasons of the tribunal, I do agree with the result. In my opinion the first argument on the basis of which the appellant alleged that there was not before the tribunal an “allocation dispute” fails.
Is the appellant a “party”?
- [47]The second argument was that the dispute had to be one which arose between “parties”, and indeed parties the subject of existing arrangements. That required reference to the definition of “party” in the same section. Paragraph (a) of that definition governs the respondent, which is clearly therefore a party. But it was submitted by Mr O'Shea SC that the appellant was not a party because the appellant did not fall within paragraph (b). It was conceded that the appellant was the owner or lessor (indeed the owner and lessor) of the licensed premises, and that the appellant satisfied subparagraph (i), but it was submitted that the appellant did not satisfy subparagraph (ii). That was because the appellant did not believe that its interest in the conduct of the business of gaming on the premises may be adversely affected by the allocation of operating machines, because the appellant reasonably believed that it was adequately protected by the terms of the contract between the parties. It was therefore not a person who reasonably believed that its financial interest in the conduct of the business of gaming by the category 1 licensee may be adversely affected by the allocation of the operating authorities. The concept of “reasonably believes” involves both an objective and a subjective test, that is to say it would be necessary before the test could be satisfied to show that the party actually had that belief, which is a subjective matter, as well as to show that that belief was reasonable, which is an objective test.
- [48]That test works well enough when a party is alleging that the test is satisfied in respect of that party; it is not one which is suitable to be applied in circumstances where another party wants to allege that that person satisfies that test, notwithstanding that that person does not want to be in an allocation dispute. A claim of a reasonable belief is a reasonable qualification for a person seeking to make a claim in the tribunal against another party; it is not a reasonable test to apply in a situation where another party is making a claim against that person. I think it is clear that the legislature must have intended that paragraph (ii) would be applied as a test for a party making a claim before the tribunal, not applied as a test for a party resisting such a claim.
- [49]It did occur to me while considering this part of the definition that the reason for the expression in paragraph (b), and the presence of the second comma, might have been because the legislature contemplated that the disputes which were to be resolved under this division were always going to be claims by some other party against the category 1 licensee. Parliament was allocating the operating authorities to the licensees, so perhaps assumed that necessarily the licensees would not be worse off as a result of the implementation of the scheme. Therefore in order to prevent any party from being worse off it was only necessary to put in place some mechanism for other parties, owners or lessors or other persons prescribed by a regulation, who had a financial interest in the conduct of the business of gaming of the category 1 licensee and reasonably believed that that interest might be adversely affected. In other words, the reason why subparagraph (ii) was included as a requirement in paragraph (b) was that applicants in the tribunal would always fall within paragraph (b), because claims would always be made by someone else against the licensee.
- [50]However, such an approach is inconsistent with the fact that under s 416(1), a party, that is any party, to an allocation dispute may apply to the tribunal to hear and decide the dispute. That on its face is certainly wide enough to include the licensee. In addition the second reading speech and the explanatory notes do not suggest that what was contemplated was necessarily only claims against licensees. It may be possible for a tenant to show in a particular case that it is worse off than it would have been had the scheme not been introduced, perhaps as a result of the operation of s 78(5) following the termination of a lease. That in every case would depend on the particular circumstances of the parties, but I do not think the legislature intended a narrow or restrictive definition of “allocation dispute”.
- [51]The problem with the interpretation of paragraph (b) is that, read literally and with due regard to the punctuation that is present, the requirements of the subparagraphs apply to both “the owner or lessor” and “another person prescribed under a regulation”. That is essentially because of the comma after the word “regulation”, which suggests that the clause introduced by “who” applies to both sets of people previously identified. If, as the respondent contended, that clause was intended to operate as a limitation only on the latter set, “another person prescribed under a regulation”, one would expect either that the comma after “regulation” would be omitted, or that there would be an additional comma after the word “person”. I think that that is correct English usage.
- [52]On the other hand the explanatory notes to the Bill said of this definition relevantly (at p. 16): “The section also defines who may be a party to a dispute. The definition intends to confine the resolution of disputes to matters arising between a category 1 licensee, the landlord (if any) for the category 1 licensed premises and any person prescribed who has a financial interest in the conduct of machine gaming at the licensed premises which could be adversely affected by the initial allocation of authorities.” That suggests that the limitation of a financial interest which could be adversely affected was intended to apply only to the “person prescribed”, and that the licensee and the landlord would always qualify as parties. Certainly the explanatory note and the second reading speech indicate that the problems which were expected to arise, and which the dispute resolution arrangements were intended to resolve, were expected to arise essentially between landlords and tenant licensees. One would really only need some form of qualifying test if there is potential for other persons to be involved in the dispute; one would not expect parliament to require any additional qualifying test in the case of landlords, bearing in mind that no qualifying test was required for tenant licensees. It is perhaps a little surprising that paragraph (b) was not broken up into (b) dealing just with the owner or lessor of the licensed premises, and (c) dealing with another person prescribed under a regulation who satisfied the two specific requirements; certainly if that step had been taken the operation of this definition would have been unambiguous. But I do not think it necessarily follows that, because that approach was not adopted, the form of words that was adopted should be given a different interpretation.
- [53]Reading paragraph (b) as if the second comma did not appear is not as serious as adopting an interpretation which would fail to give meaning to a word or words.[21] This is because I think that the rules of punctuation are not so precise that one can say that the grammatically correct interpretation of what has been said is clearly one thing rather than the other.[22] In my opinion there is some ambiguity in paragraph (b) of the definition, and it is legitimate to look at the explanatory notes, and indeed to consider the purpose of these provisions and the reasonableness of operation of the competing constructions, in order to resolve that ambiguity. Once those matters are taken into account, in my opinion the interpretation of this word adopted by the tribunal was correct; the limitation in subparagraphs (i) and (ii) applies only to “another person prescribed under a regulation”, not the owner or lessor. The paragraph should be read as if the comma after “regulation” were omitted.[23] Accordingly it is clear that the appellant is within the definition of “party”, so that existing arrangements between the appellant and the respondent were existing arrangements between parties for the purpose of the definition of “allocation dispute”.
Conclusion
- [54]In these circumstances this appeal must fail. It is therefore unnecessary for me to consider the interesting questions raised by counsel for the appellant in relation to the true interpretation of s 100(8), dealing with costs. The appellant should pay the respondent’s costs of the appeal, but that will not include the costs of the appearance on 5 October 2004. On that occasion the only matter sought to be disputed was the question of whether leave should be granted, and ultimately the respondent did not oppose the grant of leave. It ought to have taken that attitude on 5 October, under which circumstances either those costs would not have been incurred, or the argument of the substantive appeal could have taken place on 5 October.
Footnotes
[1]The definition of category 2 licensed premises means licensed premises that are not category 1 licensed premises. Category 1 licensed premises are licensed premises for which a general liquor licence, an on-premises liquor licence or (with one exception) a special facility licence under the Liquor Act 1992 is in force: schedule to the Act.
[2]Explanatory notes to the Gaming Machine and Other Legislation Amendment Bill 2003, p. 2.
[3]See Reprint 6, which reflects the 2001 Amendment Act but not the 2003 Amendment Act.
[4]Queensland Hansard 13 May 2003 pp 1692 – 1696; a copy is exhibited to the affidavit of Sindel filed 4 October 2004.
[5]A copy is exhibited to the affidavit of Sindel.
[6]Affidavit of Sindel para 5.
[7]Affidavit of Sindel para 3.5; a copy of the lease is exhibited to the affidavit.
[8]See Liquor Act 1992 s 58A, 59. See also s 3A(1)(b).
[9]P J Ryan’s Hotels Pty Ltd v Casey [2004] QSC 105
[10]Presumably this is a reference to something additional said by his Honour when delivered his reserved judgment. The reasons are recorded in para 20 of the appellant’s submissions to the tribunal. They are not otherwise before me, but neither party disputed that they were accurately recorded.
[11]The tribunal clearly had jurisdiction to decide that question: Pezet v Pezet (1946) 47 SR(NSW) 45 at 51; Khatry v Price [1999] FCA 1289 at [15].
[12]This is an example of a purpose not stated expressly in the Act, to which regard can be had under the Acts Interpretation Act 1954 s 14A.
[13]See Nelungaloo Pty Ltd v The Commonwealth (1948) 75 CLR 495 at 571 per Dixon J.
[14]There were some transitional restrictions, which I shall refer to later.
[15]Perpetual Trustees Australia Ltd v Bank of Western Australia Ltd [2004] QCA 345.
[16]It was not submitted on behalf of the appellant that this did not occur because there were no existing arrangements between the parties, the lease being to Mr and Mrs Casey. The tribunal said, and presumably the appellant accepts, that the concept of “existing arrangements” is wider than a contractual relationship.
[17]A gaming machine cannot be used without its operating authority: s 80B.
[18]For this reason it is unnecessary for me to analyse the material in the affidavit of Kearns filed 21 October 2004.
[19]Re State Public Services Federation, ex parte Attorney-General of Western Australia (1993) 178 CLR 249 at 267.
[20]Craig v South Australia (1995) 184 CLR 163 at 177.
[21]Pingel v R & R Leach Pty Ltd [2003] 1 Qd R 533 at 534.
[22]The location of commas is an issue on which ideas of correct usage may differ. In sub-paragraph (i) for example I would omit the comma after “arrangement”, and I have an English test – Urquhart (1962), p. 155 – which requires one after “agreement”; see contra Fowler “Modern English Usage” (2nd Ed 1968) p. 588.
[23]Perhaps this is the missing comma omitted from the original version of s 72D(2)(a) of the Personal Injuries Proceedings Act 2002: see Lamb v State of Queensland (2003) 24 Qld Lawyer 320, at [8].