City of Whittlesea v Victorian Commission for Gambling and Liquor Regulation

City of Whittlesea v Victorian Commission for Gambling and Liquor Regulation - [2013] VCAT 26 - VCAT 2013 case summary — Zoe

[7]

The applicant submits that, notwithstanding the assertions of Mr Quick, there is no evidence to say that the residents in the north of the municipality spend less on EGMs than those in the south and that the level of expenditure per machine is not the same thing as expenditure per adult. He asserts that one cannot simply divide the amount spent on gaming machines in a statistical local area by the number of adults and thus create an end product of expenditure per adult. Such calculation, he submits, ignores that adults can, and often do, expend money on EGMs that are outside the SLA.
The applicant further submits that there is no demonstrated need or desire for additional EGMs at the behest of members of the club or residents of the township or surrounding area. Rather, it submits, the club is motivated (at least to some extent) by a desire to fend off competition and that cannot be seen as a social or economic benefit. This view, it is said, is borne out by the club's own gaming counts which do not evince an overwhelming need for more machines. Also it is submitted that although there are periods during the week when more than 70% of the machines are in use, those occasions are limited.
Mr Peter Spratt is the senior research officer at the City of Whittlesea and has occupied that position since 2007. He holds impressive credentials in the field of sociology and was responsible for preparation of the Council's Social and Economic Impact Assessment provided to the VCGLR and for the subsequent addendum to that statement prepared in October 2012. These documents were before the Tribunal and Mr Spratt spoke to his report. In his evidence he told the Tribunal that Whittlesea was a rural town, it was not a strong community, it had a low level of high sector jobs, a low level of education and was therefore vulnerable to the effects of economic downtown.
Attached to Mr Spratt's statement were a number of letters and expressions of opposition to the proposed increase. It is clear from those letters (and from the signed petition) that there is a level of passionate opposition to gambling per se and to this application in particular. If I understand Mr Spratt's evidence correctly, the community survey (as distinct from the council-initiated telephone survey), was not taken into account but in any event, it might have carried more weight had it not been headed by pejorative statements such as:

[18]

Of course this late-in-the-day generosity might seem opportunistic in the circumstances, but it represents a significant outlay in favour of other community and sporting organizations in a town where community activity is what brings residents together and contributes to a healthy and vibrant town. The relevant resolution was carried unanimously at a meeting on 29 October 2012. I note as a matter of interest that Mr Aldous refers to the percentage of 'surplus' whereas the resolution refers to a percentage of 'profits'.
Mr Aldous spoke of the expansion plans that had been drawn up in 2008, at the time of the major renovations carried out at that time. Those renovations were financed by a loan which still stands at $800,000.00. It is now apparent that those renovations are inadequate to meet current and future needs and the club planning committee is considering other options for the further development of club facilities. This may involve the acquisition of land although a set of plans was drawn up in November 2011 and is among the options still being considered.
Mr Bernard Walker is the general manager of the club and has held the position since November 2010. He prepared cash flow projections for the years 2013 to 2022 and budgeted income and expenditure for the years ended June 2013 to June 2016. They were available to the Tribunal and Mr Walker estimated they were a reasonable forecast of the club's financial performance for the next 9 years. He spoke of the ebb and flow of net gaming revenue attributing decreases to increased competition and resulting loss of market share. It was his view that the club would be able to limit the negative impact on its gaming revenue with the introduction of the extra 10 machines and thus would help stem the loss of market share.
He gave evidence of the proposed improvements that would flow from increased revenue and told the Tribunal that the club planning committee was considering the acquisition of adjacent land, relocation to another site in the township or development of a second storey to the existing building. He confirmed what Mr Aldous said, i.e. that the club had a conservative attitude to borrowing and expenditure but was bound to embrace the improvements to provide for future generations of Whittlesea without encumbering them with excessive debt.
Both Mr Aldous and Mr Walker were excellent witnesses and their evidence is accepted.
Mr Walker informed the Tribunal that the club had joined the Mercury RSG Initiative including Mercury Responsible Gambling Code of Conduct and the ClubsVIC Self Exclusion Program; that all staff employed in the gaming area complete mandatory RSG training as do board members. All told, he presented as a competent and assured manager and on the day of my unannounced visit, the premises and grounds had an air of quiet competence and communal friendliness.
Mr David Baldi is the general manager of Mercury Group Victoria Inc. Ms Jacqueline Hutchison is its compliance officer. Mercury is a not-for-profit member-based organisation established under the auspice of ClubsVIC to assist venues navigate the transition to the new venue-based system. There are 46 clubs in the association. It is an independent group that offers a wide range of management services to clubs and gaming hotels. It prepares budgets, reports and plans for a variety of purposes. In his Competitor and Market Analysis Mr Baldi set out his computations that show the club's decline in net gaming revenue during the 2010-11 year compared with the prior year occurring, as it did, at a time when the local government area experienced an increase in net gaming revenue. His conclusions were set out as follows:

[49]

It is certainly true that $102m is the total EGM expenditure for the City of Whittlesea in the relevant period, that there are 621 EGMs in the City of Whittlesea's nine EGM venues, that the club's share of that annual expenditure is approximately 2.8% of the total but none of that leads to the conclusion that an increase of 10 further machines will give rise to the awful consequences contemplated above. The welfare and church groups speak from their actual involvement in the community and there is no doubt that their views are genuinely held, but to make the leap that an extra 10 machines in a municipal area already ravaged by bushfires will inevitably give rise to the consequences enumerated above is possibly a leap too far. That is not to say that the issue of problem gambling is hypothetical - it is real, albeit as Judge Macnamara said, its consequences are impalpable and not amenable to economic analysis.
The Tribunal accepts the largely uncontested evidence of Mr Quick that the EGM density in the Whittlesea local government area will remain below the average EGM density in Victoria in the event the application is granted. It also accepts his opinion that the EGM density and expenditure in the Whittlesea North statistical local area where the club is situated will continue to be lower than density and expenditure in the Whittlesea local government area and Melbourne (see paras 43 and 44).
The applicant has submitted that the club's intentions concerning redevelopment and increased community support and benefit are set in indefinite timeframes and speculative and thus of no benefit. Certainly there is a lack of definition about just what additional funds will be available for community distribution. Terms such as surplus and profit are used interchangeably. The evidence before the Tribunal was that if the club made a voluntary reduction in its loan facility, that amount would not be taken into account in assessing the available distribution pool but, if the bank called for a payment of principal on its interest only loan, that would be deducted from the pool. Notwithstanding this lack of precision, the Tribunal accepts that the club's resolution to increase its community assistance package is genuine and accepts that there is no reason to doubt that this will result in an overall increase in funding for many of the municipality's volunteer organisations. The Tribunal also notes the club's long term ambition to increase the pay-out to 30% when all its debts are repaid.
The applicant also contends that the uncertainty surrounding the completion of the eventual improvements (which it says might not eventuate until 2016-7) means that the 10 extra machines will be in operation for four years before any community benefit occurs and that these potential benefits are strongly outweighed by the likely increase in problem gambling flowing from the extra machines. Council submits that the proposal thus offers little benefit to the community of Whittlesea. That submission is not accepted and, in any event, it is contradicted by Messrs Aldous and Walker by virtue of the recent resolution to distribute further funds and the contemplated tendering process. The Tribunal does not accept that there needs to be some immediacy about the improvements to enable them to be taken into account. It is satisfied in this instance that the plans are genuinely contemplated.
It is true, as Mr Rantino contended, that there is considerable uncertainty about the extent and timing of the club's commitment to extensions, renovations or relocation but the Tribunal accepts the evidence of Messrs Aldous and Walker that the club takes a conservative approach to borrowing and expenditure and intends to await the outcome of this application before proceeding to an actual commitment. Mr Walker told the Tribunal that the club continues to maintain the extensive community asset which it operates on behalf of the community and provide for the community's future needs. He told the Tribunal that, if the application were to be successful, the club would confidently embrace the improvements, be that a move or an upgrade, to provide for the future without encumbering the club with excessive debt. That strikes the Tribunal as a prudent and proper approach.
Each of Messrs Aldous and Walker spoke about the in kind assistance the club presently offers to various organisations throughout the municipality and the Tribunal accepts that whatever modifications and improvements may occur, the club will continue this service and be in a position to render even more assistance of that nature.
The council seeks to join the advent of the bushfires with an increase in problem gambling due to hardship submitting that 'there is a high risk that a significant portion of the additional expenditure will come from problem gamblers'. Again, this is speculative; the Tribunal has given credence to the self-exclusion policy in place in the club which, to some extent at least, alleviates risk.
The Tribunal does not accept the proposition that the absence of a demonstrated need for additional machines is fatal or that there is something negative about the club's desire to fend off competition by seeking further machines. Need is not an express statutory criteria and competitive influences are a factor of modern business activity. Indeed, it was Mr Walker's evidence that the club has lost some market share which, in his view. was due to the superior product selection in local hotel venues. It was his opinion that the club should be able to limit the negative impact of those influences with the additional machines. The Tribunal accepts the evidence that granting the application will widen the choices available to the gaming public and will assist in meeting some of the club's competitive pressures.
It is accepted that the club is well run, that its attitude to its responsible gambling obligations is excellent and it provides a pleasant, comfortable and orderly venue for its patrons. From my brief visit, it is not surprising that community groups use the meeting and function space provided to them by the club as part of its in kind contribution to the community. It offers a valuable resource and the possibility of eventual improved accommodation will no doubt be gratefully received by those community groups whose use of the facilities is generously subsidised by the club.
The Tribunal accepts that an increase in the number of machines will go some way to increasing revenue thus enhancing the club's ability better to service its commitments.
And that brings me to the balancing of the positives and negatives in order to be satisfied whether or not the net economic and social impact of approval will or will not be detrimental to the well-being of the community of the municipal district in which the club is located. I am not persuaded that there is any evidence to indicate that granting this application would be detrimental to other venue operators in the municipality.
The major negative impact of any increase in the number of machines is clearly that posed by the threat of compulsive or problem gambling and its impact on the economic and social fabric of the municipality. Against that must be balanced the eventual improvement of the premises, the club's improved ability to service debt for the ultimate benefit of members as a result of increased revenue, the creation of some extra jobs, the continued and possibly extended in kind provision of venue and other assistance and the commitment to increased financial contribution to local community groups.
Having regard to my findings and the observations made throughout these reasons' I am satisfied that the net economic and social impact of approving an extra 10 machines at the club will not be detrimental to the wellbeing of the community of the municipal district of Whittlesea. There are a number of benefits to the community which must of course be balanced against the occurrence of problem gambling but I am satisfied the positives far outweigh the negatives.
The decision of the Commission made on 30 May 2012 is affirmed.

At a glance

Court

Decision date

Source

Judgment (49 paragraphs)

Parties

Cases Cited (4)

City of Whittlesea v Victorian Commission for Gambling and Liquor Regulation (Occupational and Business Regulation) [2013] VCAT 26 (11 January 2013)