REASONS WHY DECISION IS OF INTEREST OR SIGNIFICANCE

PLANNING SCHEME - interpretation or consideration of VPP or local provision

Approval would result in a cluster of gaming venues, contrary to local policy discouraging the concentration of gaming venues in the central city.

Proposed ground floor layout of venue would not provide a satisfactory active street frontage.

LEGISLATION - interpretation or consideration of provision

What is the 'community of the municipal district in which the premises is located' in Melbourne's central city area.

PRACTICE OR PROCEDURE - consideration of individual instance or systemic issues

What weight to give the Commission's decision in the context of a de novo hearing on review.

Limitations on economic evidence about new and transferred expenditure, including application of 'Geotech' model, in central city location.

Difficulties in securing community contributions by way of condition on either gaming or planning approval.

Approval would result in cluster of gaming venues, added risk to problem gamblers and negative impact on social well-being.

In this decision, the Tribunal refused to approve a new 32-gaming machine venue on the ground floor of the Francis Hotel, a three-storey hotel in Lonsdale Street (near the Elizabeth Street corner) in Melbourne's central city area.

The Tribunal set aside the Commission's decision to approve the venue under the Gambling Regulation Act 2003 and affirmed the Melbourne City Council's decision to refuse a permit under the Planning and Environment Act 1987.

Aspects of this decision that may be of interest are:

• The Commission's decision was given no more than 'due weight' because of the very different submissions and evidence presented to the Tribunal. The Commission agreed new material was presented to the Tribunal.
• Considering the economic and social impact on the well-being of the community of the municipal district in which the premises are located is complex in the central city. The community, in this case, is the residents of the central city, plus those working in, studying or visiting the central city.
• Economic impact evidence about new and transferred expenditure is also difficult to assess in a central city location. The 'Geotech' model has design flaws and is not well adapted in such locations. The evidence presented was not persuasive about the extent of transferred expenditure. There appears to be no real sophistication to the assessment of transferred expenditure in the gaming industry and relevant data is an essential ingredient to such an assessment.
• Approval would result in a 'functional' cluster of venues. This would add risk to problem gamblers and have a negative impact on social well-being. It was also contrary to local planning policy and would not provide a satisfactory active street frontage in accordance with the relevant DDO provisions of the Melbourne Planning Scheme.
• The difficulties in this case in securing proposed community contributions by undertakings or conditions of either gaming or planning approval.

Application under section 77 of the Planning and Environment Act 1987; Melbourne Planning Scheme; Capital City Zone; Design and Development Overlay Schedule 1; Buildings and works and installation and use of gaming machines; Acceptability of location of premises; Active street frontage.

Application under section 3.3.14(2) of the Gambling Regulation Act 2003; Approval of premises as suitable for 32 electronic gaming machines; Net economic and social impact upon wellbeing of community; Definition of community - residents and city users; Accessibility and convenience of gambling; Risk of problem gambling.

Victorian Commission for Gambling & Liquor Regulation

Francis Hotel Pty Ltd v Melbourne CC (includes Summary) (Red Dot) [2012] VCAT 1896

1. The decision of the Responsible Authority is affirmed.
2. In permit application TP-2011-767 no permit is granted.

1. The decision of the Victorian Commission for Gambling & Liquor Regulation dated 25 January 2012 is set aside.
2. The application for approval of premises for 32 electronic gaming machines under section 3.3.7 of the Gambling Regulation Act 2003 is refused.

For Applicant/Second Respondent[1] (Francis Hotel Pty Ltd)

Ms S Porritt of counsel and Ms L Hicks of counsel instructed by Bazzani Scully Brand Lawyers

• Mr R Davis, group operations manager of Cook Beaumont;
• Mr L Barrett, gaming & liquor consultant of Leigh Barrett & Associates;
• Mr S Beaumont, director of Cook Beaumont;
• Mr R Quick, economist of Urbis Pty Ltd;
• Mr S McGurn, town planner of ERM Australia Pty Ltd; and
• Mr R Whitehouse, gambling analyst/consultant of PVS Australia Pty Ltd.

For Responsible Authority/Applicant (Melbourne City Council)

• Ms J Van Souwe, market researcher of Wallis Consulting Group;
• Mr R Milner, town planner of 10 Consulting Group;
• Ms A Chmielewski, social planner and researcher of Capire Consulting Group; and
• Mr C Gill, forensic accountant of Ferrier Hodgson.

For First Respondent (Victorian Commission for Gambling & Liquor Regulation)

Mr J Bayly, solicitor of Victorian Government Solicitor's Office

The Francis Hotel is located at 383-387 Lonsdale Street, on the southwest corner of Niagara Lane and Lonsdale Street in the central city of Melbourne.

Application no. P770/2012 - buildings and works to existing hotel and use and installation of 32 electronic gaming machines (EGMs)

Application no. B42/2012 - the approval of the premises as suitable for gaming (installation of 32 EGMs)

Application no. P770/2012 - section 77 Planning and Environment Act 1987

Application no. B42/2012 - section 3.3.14(2) Gambling Regulation Act 2003

Zone and Overlays (Melbourne Planning Scheme) (Application no. P770/2012)

Capital City Zone Schedule 1 - Outside the Retail Core (CCZ1)

Design and Development Overlay Schedule 1 - Active Street Frontages Capital City Zone (DDO1)

Reason(s) Permit Required under Melbourne Planning Scheme (Application no. P770/2012)

Clause 37.04-4 To construct a building or construct or carry out works in CCZ1

Clause 43.02-2 To construct a building or construct or carry out works in DDO1

Clause 63.05 To construct a building or construct or carry out works to an established existing use (hotel)

1. Francis Hotel Pty Ltd (Francis Hotel) is seeking planning and gaming permission for a gaming lounge with 32 electronic gaming machines (EGMs) on the ground floor of the three storey hotel building, fronting Lonsdale Street.
2. On 25 January 2012, the Victorian Commission for Gambling & Liquor Regulation (the VCGLR) granted approval for the installation of 32 EGMs. The City of Melbourne (the Council) opposed this application and now seeks a review of the VCGLR decision.
3. The Council advertised the planning application for the installation and use of 32 EGMs and received one objection. Despite an officer recommendation to approve the application, the Council determined to issue a Notice of Refusal. Francis Hotel seeks a review of the Council decision.
4. The planning and gaming applications raise separate, although overlapping considerations about the appropriateness of the proposed EGMs having regard to the separate legislative provisions that apply to each.
5. The two applications for review have been heard together and the evidence relied upon has relevance to varying degrees to each of the applications. As was stated in Rennie v Darebin CC,[2] the social and economic considerations of the planning and gaming applications do overlap, and Ms Porritt acknowledged this. Planning focuses upon the particular location whereas gaming licensing focuses upon the community of the municipal district. The extent of the 'location' and the 'community' to be considered needs to be determined on a case by case basis.

1. It is important to acknowledge at the start of our consideration of these applications that the City of Melbourne is recognised by the VCGLR as being unique in terms of gaming. This is because there is no cap[3] or regional limit on the number of EGMs permitted within the central city.[4] In decisions within the City of Melbourne the VCGLR has acknowledged this unique status and determined that some of the usual considerations such as the density of EGMs amongst the community are not appropriate.
2. Whilst we acknowledge this uniqueness, we agree with the Council's submission that planning and gaming approvals are still required for the installation and use of gaming machines in a premises within the central city (other than at Crown Casino). This means that the acceptability of creating a gaming room with EGMs must be determined having regard to the considerations that apply to any application for gaming premises approval or planning permit application for gaming. The relevance of these considerations in a central city context is a matter we will comment upon further as we explain the reasons for our decision.

1. Two discrete permissions are required for this proposal. The planning considerations focus upon whether location is appropriate and suitable for gaming and, secondly, the social and economic impacts of the location. The gaming considerations include whether the net economic and social impact of the machines would or would not be detrimental to the wellbeing of the community of the municipal district in which the premises is located. There is overlap between these considerations, so to best explain the reasons for our decisions, we have explained our findings of the economic and social impacts as part of our considerations under the Gambling Regulation Act 2003 rather than as part of our considerations of the planning application. Part of the reason for this approach is because of our specific findings about the unacceptability of the location of the gaming room under the planning considerations.

1. Pursuant to section 3.3.7 of the Gambling Regulation Act 2003, the VCGLR, and upon review the Tribunal, must not grant an application for the approval of premises as suitable for gaming unless (amongst others) the net economic and social impact of approval will not be detrimental to the wellbeing of the community of the municipal district in which the premises are located.
2. VCGLR granted the application because, despite finding any benefit to the City of Melbourne was likely to be modest, it was unconvinced the proposal would have a "deleterious effect on the social or economic character of the City of Melbourne or on any surrounding municipal district".[5]
3. The Council's application for review states the VCGLR ought to have found the negative aspects outweighed the benefits of the proposal. The Council seeks a review of this approval on the basis that the VCGLR erred in its consideration of:
   • The net economic and social impact on the community wellbeing; and
   • That a creation of a cluster of gaming venues would not have any impact on the prevalence of gambling related harm.

1. The Court of Appeal and previous Tribunal decisions have found that the decision of the Commission (VCGLR and its predecessor, VCGR) should be given weight as an expert decision.
2. In this case, the Council submits the evidence and submissions before us differ significantly from those before the VCGLR, hence undue weight should not be given to the Commission's decision. Francis Hotel's response to this is that the Commission's decision "must be given due weight, particularly where the case before the Tribunal does not materially differ from that which was presented to the Commission". Ms Porritt also submitted it would be a poor outcome if Councils were rewarded for running a better resourced case before the Tribunal than before the Commission.
3. This hearing is a de novo hearing, which means that we are making a decision based on the material, submissions and evidence presented to us. Like in many planning cases, it is not unusual for more and different material to be presented to the Tribunal as the proposal and the associated issues are often better understood and considered by all parties by that time. In such circumstances, different material may result in different considerations and possibly differing findings.
4. In this case, the Commission essentially agreed with the Council's submission, stating:

... the evidence put before the Tribunal by the first applicant [the Council] in the present review is substantially more voluminous than that put by the first applicant before the Commission. The case before the Tribunal is qualitatively different from the case considered by the Commission. The Commission therefore respectfully takes the view that the Tribunal would not be assisted by submissions supporting the correctness of the decision made by the Commission on the basis of the limited evidentiary material which was placed before it. ...[6]

1. Francis Hotel submits "a decision to overturn a determination of the Commission in the absence of a materially different case or circumstances or identified error should not be taken lightly". Francis Hotel then referred to the Whittlesea CC v George Adams Pty Ltd[7] Tribunal decision, pointing out it "devoted" 23 paragraphs to highlighting the differences between the case before it and the case before the Commission. As a matter of course, we do not consider it is necessary for the Tribunal to identify the differences in the cases presented as part of its consideration of a review application from the Commission. The reason that we say this is because, again, it is the role of the Tribunal to consider the merits of the proposal based on the material presented to it in a de novo hearing. We are not dealing with the same material or evidence presented to the Commission. We note that the proposal put to us during the course of the hearing changed from that considered by the Commission.[8] In this case, we have given the Commission's decision due weight having regard to the submissions, evidence and material presented by the parties.

1. As part of the gaming considerations it is necessary to consider whether the net economic and social impact of the machines is detrimental to the wellbeing of the community of the municipal district in which the premises is located.
2. Mr Bayly explained the starting point for this consideration in gaming applications is to consider the municipal district, but he acknowledged this district may not necessarily be the most relevant geographic area to consider in each case. Whilst the Gambling Regulation Act 2003 specifically refers to "the community of the municipal district", the Court of Appeal has determined that it is relevant to consider the social impact on the community (or some part or parts of it) in which the EGMs are proposed to be located[9].
3. The parties in this hearing agreed the Commission[10] has not defined the community in its decisions relating to the central city of the City of Melbourne. The Commission's decision on this proposal points out the Commission has previously accepted that the City of Melbourne is a unique municipal district within the Melbourne and in determining an application:

... it must take into account the fact that a large proportion of the patrons attending a venue within the central business district of Melbourne are likely to be persons who reside outside of the City of Melbourne.[11]

1. Mr Bayly referred us to a statement by the Commission in a recent central city decision that:

The Commission accepts the evidence of the Applicant that the City of Melbourne attracts people from a wide range of areas, and that a large proportion of patrons will come from outside the municipality. This results in a difficulty for the Commission in assessing the relevant community. However the Commission considers that the relevant community of the City of the [sic] Melbourne includes all of the residents, however a significant percentage of the City of Melbourne community is derived from visitors to the municipality for employment, entertainment, education and recreation purposes.[12]

1. The Council and Francis Hotel pointed out the choice of words in the above paragraph suggest the Commission did not actually define the community in that case, rather it accepted the Applicant's evidence.
2. In this case, it is our view it is necessary to understand who comprises the community in order to then consider whether the net social and economic impacts of the proposal are detrimental to the wellbeing of that community.
3. Mr Quick's evidence describes the City of Melbourne as having a resident population of around 92,800; hosting over one million international visitors per year; with around 771,000 people using the city each weekday and around 304,000 people using it each weeknight. Further, within roughly 750 metres of the Francis Hotel, Mr Quick says data[13] shows there are around 142,600 workers including approximately 104,900 in office employment.
4. During this hearing, the expert evidence presented by both the Council and Francis Hotel[14] referred to the residents of the city and 'the city users' being visitors to the central city,[15] students and workers within the central city. The expert witnesses considered economic and social impacts upon each of these groups and we are of the view this is appropriate. Each of these groups have a level of exposure to the central city that (as Ms Van Souwe explained) gives them a level of connection with the city and its activities. As such, it is our finding that the community to be considered in this case is both the residents and the city users.

1. In Macedon Ranges Shire Council v Romsey Hotel Pty Ltd[16] the Court of Appeal noted the matters to be considered in deciding whether the 'no net detriment' test is satisfied are not specified in the Act, but the statutory signposts (in that case) are provided by the test itself:
   • The likely economic impacts of approval;
   • The likely social impacts of approval; and
   • The net effect of those impacts on the well-being of the relevant community.
2. We find these signposts are relevant to this case as well, and we have used them to consider the 'no net detriment' test.

1. During the hearing, the identified economic impacts were:
   • The intended alterations and improvements to the Francis Hotel;
   • The new jobs to be created at the Francis Hotel;
   • The extent of new and transferred expenditure of EGMs; and
   • The community contributions.

1. Mr Davis, group operations manager of Cook Beaumont and Partners Group, gave evidence the introduction of EGMs will complete the redevelopment of Francis Hotel, including changes to the design and location of the public entries along Lonsdale Street; and providing a full range of facilities to patrons, including the introduction of an international sports bar with TAB wagering facilities. Mr Davis said the cost of the works will be approximately $350,000 but it will be undertaken by the Group's own building company so the likely value of the works to the Group will be an additional $100,000 approximately. Mr Beaumont gave evidence these works along with an expansion of the current dining offer will create a quality venue that is attractive to a broad range of patrons. Ms Porritt acknowledges these benefits are modest but submits the greater utilisation of the hotel during the day and its revitalisation are benefits of this proposal that are clearly dependent on gaming.
2. We agree with the findings in the Commission's decision that the renovations to the hotel would not represent a significant capital investment in the context of the City of Melbourne's economy. We agree with Ms Porritt the hotel's revitalisation and its greater utilisation are modest benefits derived from this proposal.

1. During the hearing, Mr Davis' evidence was unclear about the actual number of jobs to be created in the gaming room. His evidence appears to mix up full time positions with equivalent full time positions based on casual hours of work to be offered. Mr Beaumont advised there will be at least two (and possibly three) people in the gaming room at any one time, and it is this evidence that we prefer and have considered.
2. Francis Hotel's closing submission estimates there will be eight new full time jobs generated by this proposal, including a minimum of two in the gaming room. The Council says any benefit to be derived from employment generated by the proposal is to be confined to that attributable to the gaming component based on the Whittlesea CC v George Adams Pty Ltd decision. Francis Hotel disputes this on the basis that:
   • the Tribunal's disregard of non-gaming employment in the Whittlesea case appeared to accept the contention that hotel employment generation would occur even if the proposal did not; and
   • there was no licensee evidence in that case.

It is unclear to us from reading this decision as to whether the lack of licensee evidence had any part to play in this particular finding about non-gaming employment, as these findings in the decision appear to read as separate or distinct findings.

1. The Commission concluded the proposed renovations to the premises in this proposal would not generate significant additional employment in the city.[17] The Commission's decision does not specify how many new jobs there would be, or whether the employment considered was limited to the gaming room. Nevertheless, we have reached the same conclusion as the Commission that the proposal does not generate significant additional employment in the city, whether it be the overall new full time jobs or just the new gaming jobs. This is because in the context of the central city with (as Mr Quick said) 142,600 workers within 750 metres of the hotel, 2-8 new full time jobs is not significant.

1. Francis Hotel and the Council agree that the range of EGM expenditure at this premises is between $2,984,375 and $3,387,200, being the mid-point of the expert evidence report predictions by Mr Whitehouse and Mr Gill. Given this, these witnesses were called to present their evidence in relation to transferred expenditure only.
2. Mr Whitehouse's opinion is that 80% of the expenditure will be 'transferred', which Ms Porritt described as "money that would have been spent on EGMs in any case but not at this venue". Mr Gill's opinion is the transferred expenditure is more likely to be 60%.
3. Mr Whitehouse agreed with Mr Rantino during cross-examination that it is important to get a good indicator of transferred expenditure because it can have a significant impact on new expenditure. Mr Rantino used the mid-point of the agreed range of EGM expenditure in this case at $3.2 million to further illustrate this point. He explained 10% of this expenditure is $320,000, which means a transferred expenditure of 80% equates to $640,000 of new expenditure. Mr Whitehouse agreed with Mr Rantino that whether it is 60 or 80% is important to understand, as if it is 60% (as Mr Gill says) the new expenditure doubles to more than $1.2 million.
4. Remembering that the central city of the City of Melbourne is unique with no cap or regional limit, Ms Porritt submitted we should consider the new expenditure in the context of the total expenditure on EGMs in the City of Melbourne, being $70.3 million for the 2012 financial year. In this context, she calculated that the new expenditure generated by this proposal equates to an increase of between 0.85-0.96% of current expenditure in the City of Melbourne (excluding Crown Casino) on Mr Whitehouse's analysis; or an increase of between 1.67% and 1.93% on Mr Gill's analysis. Ms Porritt described this increase in expenditure as "extremely modest in comparison with what is already occurring in the City of Melbourne".
5. On the one hand this information is of some relevance and interest, and on the other hand it is unhelpful. An increase in the order of 0.85% to 1.93% may not appear to be much on paper, but in order for this to be helpful in considering the likely economic impacts of approval, one would need to understand what impact the existing level of expenditure is having now on the wellbeing of the community. "The tipping point in terms of detrimental net impact on community wellbeing" as Bell J said in Romsey Hotel[18] is another way of expressing this.
6. If the existing level of expenditure is not having detrimental impacts on the community wellbeing, a proposed increase in new expenditure may well be acceptable. On the other hand, if the existing level of expenditure is having detrimental impacts or may be close to creating detrimental impacts, such an increase may not be acceptable. For example, new expenditure of $1.2 million may mean other retail or entertainment expenditure is lost, and this may or may not be considered detrimental for the City of Melbourne. It could also mean bills, or rent, or daily travel monies (for example) could not be paid and this may be detrimental. Council suggested other tipping points such as the impact on the character of municipality, the daily uses of the City or impacts on the broader capital city role of the City.
7. We do not need to make a finding on this or consider whether further information is needed as we find, overall, the evidence presented in this case about transferred expenditure to be lacking in rigour.
8. Mr Whitehouse's evidence is based on analysis commensurate with what is described as 'the Geotech model'. Mr Whitehouse gave evidence before the Commission, which stated in its decision:
   1. Mr Whitehouse gave evidence of predictions he had made as to the likely revenue that would be generated by the installation of EGMs at the premises. Mr Whitehouse stated that such predictions were usually based on the use of a computer model known as 'Geotech', which aims to simulate choices made by consumers with respect to the use of EGMs within a defined area. Using data obtained from EGMs operating at venues within the area, the Geotech model attempts to predict the revenue which may be generated through the installation of EGMs at a new venue. In addition, the model attempts to predict the extent to which the installation of EGMs at a new venue will detract from revenue earned by EGMs at existing venues in the area.
   2. The accuracy of evidence based on the use of the Geotech model has been accepted by the Commission in numerous matters. However, Mr Whitehouse advised the Commission that owing to the location of the premises within the central business district of Melbourne and their proximity to Crown Casino, the Geotech model could not accurately predict the revenue that could be earned through the installation of EGMs at the premises. However, Mr Whitehouse gave evidence that while the Geotech model could not be applied directly to determine the likely revenue which could be derived through the installation of EGMs at the premises, the principles which underlie its application in other matters were able to be adapted to this task.
9. It is our understanding that PVS Australia Pty Ltd ('PVS'), of which Mr Whitehouse is a director, has proprietary rights over the Geotech model. Mr Whitehouse stated it started being used by Tattersalls under his management when he worked there as far back as 1999, and he had been using it "confidently" since about 2007-2008. Mr Whitehouse stated "he still reviews it and updates it annually". As Mr Gill did not have access to the Geotech model, his statement of evidence is effectively a peer review of Mr Whitehouse's analysis. Mr Gill's evidence focuses on the overall expenditure and level of transferred expenditure rather than the veracity of the initial output derived from the Geotech model principles relied upon by Mr Whitehouse.
10. We have some concern about the rigour of the Geotech model principles as its outputs are limited by the data that is input; and some of the data input is subjective in nature. Mr Whitehouse explained the principles look at a range of things including the venue type (e.g. hotel or club), the number of EGMs, the fitout/quality of venue, access by roads (drive time), spend potential of each CCD, and probability of attracting people from other venues. On the basis of the data input, the transferred expenditure is then predicted.
11. In this case, Mr Whitehouse and Mr Gill agree the Geotech model cannot be relied upon in the central city because the factors to be considered such as resident population and the number of machines are impacted upon the facts that there is a broader relevant community in the central city and there are many machines at Crown Casino. Mr Whitehouse also emphasised that the competitive nature of the central city venues is distinctive to suburban areas. This means the extent of transferred expenditure "has to be a subjective call" (as put by Mr Whitehouse).
12. Mr Whitehouse used the factors (or principles) in the Geotech model and one case study in Ringwood to assist him in forming his opinion as to the transferred expenditure. We will deal with each of these aspects separately.

1. In regard to the Geotech model principles or factors, we have already expressed some concern about the subjective nature of the data that is input, and this is demonstrated in this case with two examples relating to position and venue attractiveness. Mr Whitehouse stated at paragraph 34 of his witness statement that these factors "will decide the ultimate revenue potential of a venue", and it is our view the subjective nature of these factors demonstrates flaws in relying upon these principles.
2. First is the affected area within which transferred expenditure is considered. In response to the Council's cross-examination, Mr Whitehouse stated he relied upon the Geotech model to identify "the trade area", which meant the Balaclava Hotel was not included in the trade area but the Dick Whittington was even though they are the same distance away from the proposed venue. Mr Whitehouse said it is the ability to attract that determines the inclusion of the venue such as the number of EGMs, the facilities, and the road network/accessibility. The quality of the venue and its facilities, and its accessibility are subjective data determined by Mr Whitehouse.
3. Second is the "position" of the Francis Hotel and "limitations" in the layout of the gaming area. These are subjective factors determined by Mr Whitehouse that form part of the Geotech model principles underpinning Mr Whitehouse's analysis. Relying on his own observations, it is Mr Whitehouse's opinion that the Francis Hotel is not in a "prime location". He says it is out of the main precinct of the CBD and is not as close to the retail sector of the CBD and Melbourne Central train station as, for example, The Meeting Place gaming venue situated on the corner of Little Lonsdale and Elizabeth Streets. We are not persuaded by this evidence as our own observations revealed constant pedestrians using the Lonsdale Street footpath outside the Francis Hotel - an observation we made to the parties following a midday, mid-week inspection we undertook during the hearing. The Francis Hotel is also on a direct route between the entertainment precinct of Hardware Lane and the retail core of the central city, including Myer, David Jones and Melbourne Central. It is also well located in terms of public transport with buses, trams and train stations all in close proximity. Lonsdale Street (like Little Bourke Street and Little Lonsdale Street, being the two closest and east-west aligned streets) is an east-west street that provides the opportunity for pedestrians to access the retail core and the train and tram services on or adjacent to Elizabeth Street. In light of this and the number of workers within 750 metres of Francis Hotel, we are not persuaded the Francis Hotel is not in a "prime location". This means the net machine revenue could be higher than that predicted by Mr Whitehouse.
4. In regard to the layout of the gaming area, Mr Whitehouse states the proposal has "physical constraints" and describes the gaming room as narrow and not particularly spacious. This subjective opinion is Mr Whitehouse's view of the proposed venue in comparison to other venues in the area, and results in a subjective decision to reduce the net machine revenue by 10%. We are not persuaded there is any science to this aspect of the analysis, and it is again subjective. It is also one of several factors in the Geotech model principles that could change over time, including changes to facilities or the venue operator.

1. Mr Whitehouse made it clear that his analysis is his opinion as there are limited case studies available and, hence, limited data available about actual transferred expenditure. Mr Gill has used a range of case studies that he has developed to form his opinion about transferred expenditure. What is clear to us is that this analysis overall contains a number of subjective elements and is limited due to the lack of case studies to demonstrate what has actually occurred in terms of transferred expenditure. Mr Whitehouse explained he relied on a Ringwood case study because it was one of only three case studies available; and it was the most appropriate because it is urban and gave the most relevant guide points.
2. We are persuaded by Mr Gill's evidence that the Ringwood case study is not reliable because it had a nil growth rate which if included would have resulted in a transferred expenditure of 156% and, as Mr Gill said, that "doesn't make sense". We find Mr Gill's analysis of central city venues raises questions about the likelihood of 80% transferred expenditure. The Mail Exchange Hotel graph at paragraph 117 of his witness statement illustrates the opening of the Mail Exchange in the central city did not result in a transferred expenditure of 80% as there was no noticeable drop in EGM expenditure other than at the Golden Nugget, which is the furthest location away. Similarly, the graph at paragraph 121 of Mr Gill's expert report illustrates the Batman's Hill on Collins venue did not appear to be impacted materially by the opening of gaming at the Mail Exchange even though these two venues are located only a block apart. These illustrations suggest to us the transferred expenditure between central city venues could be quite low, and possibly lower than that predicted by either Mr Gill or Mr Whitehouse.
3. It is somewhat surprising to us that Mr Gill, on the last page of his evidence, estimates up to 60% transferred expenditure having pointed out some flaws in the available case studies; provided examples of actual levels of transferred expenditure of between 1 and 37%; and provided the central city examples mentioned in the previous paragraph . How the 60% estimate has been determined is unclear to us. It seems to us the range of 60% to 80% is often put to the Commission and the Tribunal in gaming cases, and in some instances without specifics as to how the estimate has been derived. We agree with the Tribunal's findings in Bendigo Stadium[19] that there appears to be no real sophistication or rigour to the assessment of transferred expenditure in the gaming industry.
4. Overall, it is surprising to us how little information is available about actual versus predicted transferred expenditure, particularly when transferred expenditure is a factor of some significance in many gaming decisions. Mr Whitehouse pointed out VCGLR information is restricted and not always available. In Bendigo Stadium, the Tribunal suggested the Commission itself might be able to take a more pro-active role given its access to relevant industry data.[20] What this case demonstrates to us is the need for expert witnesses to have access to data to understand actual transferred expenditure in order to best predict transferred expenditure. As such, we see relevant industry data is an essential ingredient to the assessment of transferred expenditure in the gaming industry.
5. What our findings means for this case is that we are not persuaded by Mr Whitehouse's evidence because of the subjective nature of key aspects of the analysis undertaken. We find the case studies provide limited assistance given flaws in the various case studies as identified by both experts. Mr Gill's 60% expenditure estimate is unclear given the case study transferred expenditure he relies on ranges from 1 to 37% and the potential low transfer of expenditure in the CBD examples contained in Mr Gill's witness statement. Accordingly, we are unable to conclude that the transferred expenditure is in the range of 60% to 80%. We are therefore unable to agree with the Commission's finding that the "vast majority of revenue derived through electronic gaming at the premises is likely to represent revenue transferred from other venues offering electronic gaming". The worst case scenario is that the new expenditure could be significantly higher than either of the estimates opined by the witnesses. This is relevant to our consideration (later in these reasons) of the likely social impacts of the proposal.

1. There is one final matter that arose during the hearing, being the independence of Mr Whitehouse. The Council cross-examined Mr Whitehouse about the involvement of his company PVS with the Francis Hotel and its directors. Mr Whitehouse responded to this by referring to the preparation of a gaming room layout plan. Ms Porritt explained in the Francis Hotel closing submission that "a gaming room layout plan was prepared by PVS and filed with the Commission together with the application and Mr Whitehouse declared his relationship with the Applicant within his evidence". It appears to us Mr Whitehouse's declaration and this information may not be the same.
2. Mr Whitehouse's evidence statement to the VCGLR in September 2011 contained a statement under the heading "Independence" that "conflict searches" with the partners and employees at PVS revealed no association with the parties that compromise his independence. We note Mr Davis' statement to the VCGLR in September 2011 included the PVS gaming room layout plan, hence it appears to us this plan was in existence already at the time Mr Whitehouse prepared his evidence statement for the VCGLR.
3. Mr Whitehouse's expert report for this hearing states PVS is contracted to manage gaming machine services after 16 August 2012 to other venues operated by some of the partners in this hotel, being Peter Cook and Stephen Beaumont, but not at this venue. This suggests to us that Mr Whitehouse's company is doing more than drawing a gaming room layout plan, a plan that was already drawn at the time the evidence was filed for the VCGLR hearing.
4. Whilst we acknowledge Mr Whitehouse's declaration reveals no direct conflict in relation to the management of gaming machines at this venue, it appears Mr Whitehouse's company has a commercial arrangement with two of the partners in this hotel to manage gaming machine services elsewhere. For reasons we have already explained, we are not persuaded by the evidence presented by Francis Hotel or the Council about the extent of transferred expenditure, hence we find the independence of Mr Whitehouse is not a factor that we need to consider further in determining the merits of this proposal.

1. Francis Hotel submits "the generous community contributions package of $50,000 in cash per annum (indexed to CPI) ought be seen as a significant benefit of this application to be spent to the benefit of the City of Melbourne". The Commission's decision found this commitment to be "laudable" but not determinative. It stated:

A commitment on the part of an applicant to making charitable donations in the event that premises are approved as suitable for gambling is not of itself sufficient to meet the requirements of s 3.3.7.

1. The Council submits the community contribution is irrelevant in the planning application, but of relevance (albeit little weight) in the gaming application. In Bright New Bay,[21] the Tribunal expressed concern about including a condition for community contributions on a planning permit given clause 52.28 focuses upon the appropriateness of the location of gaming machines rather than the impact of the machines themselves. In DSL Securities,[22] the Tribunal also found there would not be a sufficient nexus between a community contribution and the permission being granted under clause 52.28 to support such a condition. We agree with Mr Rantino that the effect of s 62(5) of the Planning and Environment Act 1987 is that a condition requiring a payment to a third party is of doubtful validity. Nevertheless, in DSL Securities the Tribunal found a section 173 agreement could be considered where there is a genuine agreement on the part of the permit applicant to enter into one that may otherwise lie outside the normal ambit of conditions in a planning permit. In this case, this is not an option because the gaming and planning applicant, Francis Hotel, is the tenant rather than the owner of the land. The owner of the land is required to be a party to a section 173 agreement, and the owner of the land is not a party to either of these proceedings, and it is unknown as to whether it would consent to being a party to an agreement.
2. In order for a community contribution to be seen as a "significant benefit" (as put by Francis Hotel) in terms of the gaming approval, we think it would be necessary for it to be a certainty. For the reasons outlined above, it is not a certainty as part of the planning application. There was discussion during the hearing as to whether the community contribution should form a condition of the gaming approval. The Commission advised it could be, but submitted it is not common practice to do so. The parties also expressed some uncertainty as to how and in what form it could be done under the Gambling Regulation Act 2003. The parties all referred to Bell J's observation in Romsey Hotel that it is not appropriate for inclusion in the gaming approval:

1. I do not think the commission has power, in any case, to impose a condition with respect to making community donations. Supporting community organisations through donations from gaming machine income is not part of the commission's (or the tribunal's) function. That is the function of the Community Benefit Fund. This subject is not closely connected with the premises or directly associated with them. Moreover, a condition of this kind may be difficult to define and enforce, place the commission in the position of being seen to mandate donations of a particular kind to particular groups and have unforeseen consequences.
2. The parties agreed this observation is a judicial comment (obiter dictum) and not binding. Since then, the parties were only able to advise us of one case where a condition was imposed in a gaming approval requiring annual reporting to the Commission on the community contributions paid.[23] Mr Rantino pointed out this condition is just requires "reporting" and does not impose a specific amount or specify to whom it should be paid.
3. In this proceeding, Francis Hotel strongly advocated for us to impose an undertaking pursuant to s 130 of the Victorian Civil and Administrative Tribunal Act 1998. On day 7 of the hearing, the parties referred to a recent Tribunal decision that had imposed an undertaking because a section 173 agreement was not possible because the applicant was the lessee.[24] In general terms, we are not persuaded an undertaking is an appropriate way to deal with community contributions in gaming applications. The Council identified some reasons as to why, with which we agree.
4. First, the practical ability to enforce an undertaking is questionable. If the applicant, as the person giving the undertaking, failed to pay the contributions, it appears that someone would need to refer an alleged contempt of the undertaking to the Tribunal. The nominated charity may not be aware of any failure. It is not clear whether the nominated charity would have standing to bring a proceeding, in the unlikely practical event that it wished to. The available remedies for a proven contempt do not appear to include making good the payment to the charity. Contempt proceedings appear ill-adapted for the purpose..
5. Second, an undertaking imposed as a result of a VCAT application raises a fairness issue from a public policy perspective. Gaming approvals that are not contested and do not come before the Tribunal would not be subject to any undertaking. Hence, this approach could lead to two streams of gaming approvals, one more onerous than the other. Furthermore, it places VCAT in a position similar to that foreseen by Bell J in regard to the commission - of being seen to mandate donations of a particular kind to particular groups. This is not the role of the Tribunal.
6. Third, the practice raises the prospect of payments to third parties being used to justify the grant of a permit, on a net community benefit basis, and this may have unforeseen and undesirable consequences.
7. In this case, we agree with the Commission's finding that the community contributions are laudable but not determinative.

1. Given our findings in regard to transferred expenditure, we are unable to agree with the finding of the Commission that any benefit to the City of Melbourne from this proposal is likely to be modest. It is possible that the new expenditure could be higher than that estimated by the two expert witnesses. Therefore, the likelihood is that the modest benefit found by the Commission would be lost and hence the likely economic impact would be negative.

1. The Commission had to consider submissions and evidence about the proximity of two community housing developments located between 800 metres and two kilometres from the Francis Hotel, but this was not a matter pursued by the Council during this hearing. Rather, the social impacts of concern to the Council are the proximity of the Francis Hotel to the surrounding residents and students; and the risk to problem gamblers. Before turning to these matters, we wish to deal with the submissions made about the adequacy of the evidence presented.

1. The Council is critical of Mr Quick's evidence because he is not a social planner and therefore has not dealt with the social implications in the same manner as a social planner would. Mr Quick acknowledged during the Council's cross-examination that he did not have social planning qualifications or experience. Francis Hotel did call Mr McGurn as a town planning expert, but Mr McGurn deliberately chose not to give any planning evidence about the social or economic impacts of the location. During the hearing, Ms Porritt suggested we should give weight to a memo provided by Ms Peterson to the Council as she is a town planner who provides economic and social planning advice and evidence on occasion to both the Commission and the Tribunal. This memo concluded the proposal should be supported subject to a number of conditions. However, on Day 7 of the hearing, Ms Porritt acknowledged this memo should be given less weight as Ms Peterson was not called by any of the parties as an expert witness in this case.
2. Despite the differing expertise of Ms Chmielewski and Mr Quick, there was some commonality in their expert reports regarding the relevant social and economic profile of this area of the CBD. What we have focussed on are the areas of difference in their evidence having regard to the social impacts of concern in this case.

1. Ms Chmielewski referred to the SEIFA index of the collector districts immediately surrounding the Francis Hotel to express concern that there are disadvantaged residents in close proximity. Mr Quick provided the same information but said this index should not be relied upon because all of the collector districts (except one which Ms Chmielewski agreed was not significant) are within the middle deciles of what is known as 'the bell curve'. Mr Quick explained SEIFA contains 20 areas of disadvantage to create the index and in turn the 'bell curve. It is a ranking tool and, using the bell curve, this means the middle scores (deciles) are close together[25] and not appropriate for use to distinguish or compare collector districts. Rather, SEIFA scores are an appropriate tool to distinguish between the lower deciles (the relative disadvantage of people in an area) and the upper deciles (the relative lack of disadvantage of people in an area).
2. The ranking of the areas in the immediate vicinity of Francis Hotel are in the 5th and 6th decile of SEIFA indices, the middle. We are not persuaded the relative disadvantage of the residential community surrounding the Francis Hotel is significant based on the socio-economic analyses of both witnesses (Ms Chmielewski and Mr Quick), including that:
   • Household structure in Melbourne has a high proportion of lone person households and couples without children;
   • The age profile indicates a high proportion of 20-34 year olds;
   • Household incomes are slightly below average due to small household sizes and few children, but a high proportion of households earn over $104,000 per annum; and
   • There is a higher proportion of white collar workers and a significantly lower proportion of blue collar workers than the Melbourne average.

1. Ms Chmielewski said there are around 74,000 students studying in the Melbourne CBD and approximately 1,200 student apartments within the CBD, "a large number of which are within proximity to the Francis Hotel". We acknowledge that there are student housing and education facilities/colleges in close proximity to the Francis Hotel. Mr Milner expressed the view that students are particularly vulnerable to gambling and relied upon two studies. However, those same studies conclude that EGM usage is the third least popular form of gaming for students and hence the proportion of students that use EGMs is small.
2. Mr Beaumont gave evidence that there is not an international student clientele at the Francis Hotel now. He said there are some university students who use the nightclub and younger people who use the second floor bar and restaurant facilities. Overall, Mr Beaumont described the clientele as 25-50 or 30-55 years of age and office workers.
3. In light of the findings of the studies undertaken and the clientele of the Francis Hotel, we are not persuaded there are any negative social impacts for students that arise from this proposal.

1. Mr Quick's evidence is there are around 142,600 workers with approximately 104,900 in office employment within 750 metres of the Francis Hotel. No evidence or documentation was submitted by any of the parties or their witnesses as to the socio-economic profile of the workers. Understandably this information may not be readily available. Nevertheless we think it is relevant to be aware that the socio-economic profile of workers, including predominantly white collar workers in this case, may not correlate with the socio-economic profile of the residents as identified through the SEIFA Index. In other words, it is not known whether the socio-economic profile of workers or the broader range of city users would be disadvantaged or not. This is of some relevance in considering social impacts in light of the well established theories that:
   • The higher the number of gaming machines in a local area, the higher the likelihood of problem gambling in the local community; and
   • The incidence of problem gambling is higher in areas characterised by socio-economic disadvantage.[26]

1. The Council commissioned Wallis Consulting Group to undertake a survey of the Melbourne community (both residents and 'city users') regarding their attitudes to EGMs in the City of Melbourne and their specific attitudes toward this proposal. Ms Van Souwe explained 600 randomly-generated people were surveyed by landline telephone, half residents and half (what she described as) 'city users', being people who used city services in the last two months. The survey revealed 25% of residents and 20% of city users knew of the Francis Hotel, which Ms Van Souwe described as "quite high" and meant between a quarter to one fifth of the respondents knew what they were talking about when asked questions specific to the Francis Hotel. Ms Porritt was critical of the order of the questions, but Ms Van Souwe explained the questions were rotated in terms of general wellbeing and wellbeing about this particular proposal to avoid bias in the results. We are persuaded by Ms Van Souwe's evidence that sufficient care was taken during the survey to avoid bias.
2. This community survey is new material that was not presented to the VCGLR. Ms Chmielewski summarised the results in the following terms:
   • The survey found those that visit or work in Melbourne, but do not reside in the City of Melbourne believe that issues regarding EGMs in the Melbourne CBD also influences their lives. It would appear, from the survey, that visitors and workers in the City of Melbourne consider themselves as part of the Melbourne community, and wish to be consulted on issues influencing the city.
   • The overwhelming majority of the Melbourne community believe that the Francis Hotel proposal will have a negative impact on the social character of Melbourne.
   • The majority of respondents suggested that the installation of gaming machines at the Hotel would have no impact on their personal well-being and happiness. Very few respondents indicated that the proposal would have a positive impact on such measures. A much larger minority of community members believe that the installation of gaming machines at the Francis Hotel will have a negative impact on their happiness and well being. These results suggest that the net impact on personal happiness and well-being amongst members of the Melbourne community would be negative, should the EGMs be installed as proposed.
   • The overwhelming majority of the Melbourne community opposes the installation of gaming machines at the Francis Hotel. 76% of respondents opposed the redevelopment of the Francis Hotel, assuming that the redevelopment is contingent upon the installation of EGMs at the venue.
   • The survey results suggest that the installation of EGMs at the Francis Hotel would contradict the desire of the Melbourne community. The installation of gaming machines, in light of strong community opposition, can be considered as a negative impact in itself. The survey results also highlight the negative impact that the proposal will have on the social character of the city, and on net levels of happiness and well-being amongst the Melbourne community.[27]
3. Ms Porritt submitted in the Francis Hotel's closing submission:

In order to demonstrate that community attitudes is a basis for finding an adverse social outcome arising from an approval, it is necessary to demonstrate more than just that 'the community do not like gaming machines' or that they do not want them.

1. In response to Ms Hicks cross-examination, Ms Van Souwe acknowledged the survey results were more or less in line with the 2003 longitudinal studies.[28] In other words, the 2003 studies found a general opposition to gaming machines, and this survey displays a similar sentiment, including specifically about this proposed venue.
2. We acknowledge the majority of the surveyed community feel the approval of this proposal would have a negative impact on the social character of the city. Mr Rantino submitted the negative impact views expressed by city users is "unusual and telling statistics" not normally expected by a user about the social character of a place (as opposed to a resident). It must be remembered that EGMs are a legitimate recreational and entertainment pastime, and this is the central city where there is no limit on the number of EGMs and there is a diverse community. We agree with the Council that the fact there is no limit does not mean the merits of individual proposals must not be considered. We also have some doubts about the reliability of the survey results. First, the 'city user' is defined as someone who visited the city as infrequently as once every two months. Second, as many as 40% of respondents significantly over-estimated the numbers of EGMs in the central city outside the Casino. Third, the survey method of landline telephone would tend to exclude more young people. For all these reasons we are not persuaded the results of this community survey are demonstrative of a negative impact upon the social wellbeing of the community, over and above the already well understood general opposition of communities to gaming machines.

Cluster of Gaming Premises and Risk to Problem Gamblers

1. We have considered the issues of a cluster of gaming premises and risk to problem gamblers, which are of concern to the Council.

1. The Commission's decision states Mr Quick agreed with questions put to him that approval of this proposal would result in the creation of a cluster of electronic gaming venues in the area immediately surrounding the Francis Hotel; but he did not agree it would have the effect of making it difficult for a person such as recovering problem gambler to avoid the temptation of electronic gaming. The conclusions in the Commission's decision express concern that approval of this proposal will result in the creation of a cluster of gaming venues in the area bounded by Lonsdale, LaTrobe, Elizabeth and Queen Streets. However, the Commission also stated it was unable to conclude that approval would have any impact on the prevalence of gambling-related harm in the City of Melbourne, whether among the city's residents or among the broader population of city users, due to the existing high density of electronic gaming venues in the central business district and the marginal impact of any one new venue being likely to be small or non-existent.
2. There was some debate during the hearing about the extent of area and the walking distance within which a cluster can form. Reference was made to planning practice notes about the cumulative impact of licensed premises, and various witnesses talked about sight lines and 400-800 metres being a comfortable walking distance. We are not persuaded practice notes about licensed premises are helpful in considering the implications of a new electronic gaming premises as the matters relevant (and associated impacts) to each type of land use differ. We are also not persuaded premises within sight of each other is a relevant criteria in the central city where there are many routes of pedestrian movement in and out of streets and lanes. Whilst 800 metres may be a comfortable walking distance (particularly in a 'greenfield' situation), we find the central city context is particularly conducive to walking due to the close proximity and integration of the retail core, public transport and other land uses such as offices, education and entertainment facilities.
3. We agree with the Commission that the approval of this premises will create a "cluster", being a situation where there is an electronic gaming venue on each east-west street between Lonsdale and LaTrobe Streets, between Elizabeth Street and Queen Street. This is a concern given the high proportion of office workers around this premises, many of whom may wish to access public transport or the retail core on a regular basis for reasons other than gaming. In this scenario, such persons would need to traverse a east-west street to reach these services/facilities.
4. Ms Van Souwe's survey results found:
   • 1 in 8 (or 13%) of residents and 1 in 7 (or 14%) of city users had played an EGM in the past year;
   • Residents were more likely to play in or around greater Melbourne and especially in the City itself, whereas city users were more likely to play outside of Melbourne with over 6 in 10 playing in venues around Victoria (57%), interstate or overseas (7%); and
   • Playing patterns for residents and city users were similar - around a third played just once in the past year, about a half played a few times, 1 in 8 played once a month and 1 in 12 played once a week.
5. We have already explained that we are not persuaded by the evidence about transferred expenditure, hence it is possible that the new expenditure could be greater than that accepted by the Commission. Based on the case studies of between 1% and 37% transferred expenditure presented by Mr Gill, the new expenditure could possibly be significantly greater than his estimate of 40%. Whilst we agree with the Commission that there are a high number of EGMs in the central city, the creation of a cluster of venues on east-west streets near Elizabeth Street and the potential for new expenditure contribute to an increased risk for problem gamblers, which is a likely negative impact of this proposal.

1. Mr Quick acknowledged there is a risk to problem gamblers, but said it is often the case in planning and gaming applications for EGMs that such a risk exists. Further, he said it must be remembered that it is a risk only; and the question is whether that risk is reasonable.
2. In considering the reasonableness of the risk, factors such as the exposure of the EGMs, the convenience of the EGMs and hence the location of the EGMs must be given due regard. This is where the planning considerations come to the fore and, in this case (for reasons we will explain shortly) the location of the EGMs is not acceptable.
3. Factors that influenced the Commission's conclusions to allow this approval despite its concern about a cluster included the proposed small number of EGMs and that electronic gaming would be a minor aspect of the overall entertainment offering. Whilst it was put to us that 32 EGMs (or 31 if we accept a modified layout tabled during the hearing) is a small number, we are not persuaded electronic gaming is a minor aspect of the overall entertainment offering at the Francis Hotel.
4. We note the Commission was persuaded by the evidence of Mr Davis that the venue would have a female friendly sports bar on the ground floor in addition to the gaming room. During our hearing, Mr Davis' evidence about the female friendliness of the ground floor was not persuasive. Mr Beaumont expressed the view (during his evidence) that the female friendly focus was "a little over-sold" and acknowledged it will be more of a sports bar. Hence, he said if we considered the ground floor looked like a gambling or wagering den, the TAB easy bet terminal in the sports bar could be removed and a social gambling situation created.
5. With the combination of the sports bar and gaming room on the ground floor of the hotel, we find the proposal does present as a gambling venue to persons entering from the street. In combination with the other two venues within 400 metres in LaTrobe and Little Lonsdale Streets, we share the Commission's concern about the formation of a cluster. This in turn contributes to the risk to problem gamblers, which we consider is not a reasonable outcome in this location and constitutes a negative impact upon the social wellbeing of the community in this case.

1. We find the approval and establishment of the proposed venue would create a cluster of EGM venues and would, in turn, contribute to an unreasonable risk of problem gambling. Consequently, we find that it is likely that the social impacts of approval would be negative.

1. It follows from the above consideration of the economic and social impacts of the proposal that we are not satisfied that the net economic and social impact would not be detrimental to the well-being of the community in which the premises is located.

1. The key issues we have considered in determining that the location of the EGMs is not acceptable are the cluster of venues; the achievement of an active street frontage; and the acceptability of the layout and use of the premises, particularly the ground floor, for gaming.

1. Mr Quick advised he stated in his evidence at the Commission's hearing that there is a cluster of machines and venues in the north-east quadrant of the city.[29] We have already explained that the Commission's decision found this proposal would create a cluster of electronic gaming venues, with three (including this proposal) within 400 metres of each other in the area created by LaTrobe, Elizabeth, Lonsdale and Queen Streets. This is a matter that needs to be considered as part of the planning merits of this proposal; and it is also relevant because a policy contained in the MSS in the planning scheme discourages the concentration of gaming venues within the central city.[30]
2. The advocates put questions to various expert witnesses during the hearing that a cluster could mean different things such as:
   • In the central city a cluster is what occurs within one city block;
   • In licensed premises matters a cluster would be a distance of 300 metres; or
   • A cluster could be a reasonable walking distance of somewhere between 400 and 800 metres.
3. Ms Porritt suggested a cluster might be formed if the gaming venues are within sight of one another. However, none of the parties or expert witnesses could identify any particular criteria to determine a cluster under the planning scheme or the Planning and Environment Act 1987 or for that matter the Gambling Regulation Act 2003 or through previous decisions of the VCGLR (and its predecessor the VCGR). We find the establishment of a cluster or concentration of gaming venues is a matter of fact to be determined based upon the individual circumstances of a particular proposal.
4. In this case, it is commonplace for people to walk through the central city or parts thereof. Some of the expert witnesses did place emphasis upon people using Melbourne Central train station and we agree this is a principal public transport destination. However, we are also of the view there are other 'drawcards' to the east of the Francis Hotel, namely other forms of public transport and the retail core, which is to the east beginning along Elizabeth Street, including entries to Melbourne Central and Myer in the next block north of Lonsdale Street[31]. This raises a question about the likely routes that pedestrians may take to reach the station, other public transport and the retail core.
5. Mr Quick identified that there are 142,600 workers within 750 metres of the Francis Hotel and many of these would use the east-west streets to get to Melbourne Central train station as well as the tram services along Swanston and Elizabeth Streets. At present there is an EGM venue (Celtic Club) on the corner of LaTrobe Street and Queen Street and there is an EGM venue (The Meeting Place) on the corner of Elizabeth and Little Lonsdale Streets. Both are consecutive east-west streets in a southward direction through the CBD that could be used to access the station and Melbourne Central. This proposal is placing a new EGM venue on the next southern east-west street (Lonsdale Street).
6. It is our opinion that, in this case, a cluster will be created as a result of this proposal as it will create a new venue on the next east-west street leading to the station and Melbourne Central (as a minimum of the available public transport options and the retail core). It is a 'functional' cluster in the sense that a pedestrian heading east towards Elizabeth Street from the area between LaTrobe Street and Lonsdale Street (and vice versa) will be unable to avoid passing close to an EGM venue.
7. The creation of a cluster is a concern to us given the strategy in the MSS discourages a concentration of gaming venues. Mr McGurn said the terms cluster and concentration are not the same, but in the context of gaming venues we are not persuaded of this. Both terms bring to mind the proximity of venues to one another, and that is the issue here. The creation of three venues (whether a cluster or concentration) is of concern to us because it is a factor that can contribute to the risk for problem gamblers in accessing parts of the city when travelling by foot from west to east. Mr Barrett gave evidence that the venue would not be attractive to problem gamblers because it is not on a main pedestrian route and it is in an office area where convenience gambling is unlikely. We are not persuaded by this. Mr McGurn describes Lonsdale Street as one of the principal streets in the city grid and the planning scheme nominates Lonsdale Street as an 'active street frontage'. The concern about a risk for problem gamblers is heightened by the fact that the gaming room is on the ground floor of the venue. In our opinion, this is an unacceptable outcome in terms of the suitability of the location of gaming venue in the Francis Hotel.

1. In our view, a fundamental constraint to the creation of a gaming room on the ground floor of the Francis Hotel is the specific Design and Development Overlay control that seeks an active street frontage along this section of Lonsdale Street.
2. The design objectives of DDO1 are:
   • To ensure ground floor frontages are pedestrian oriented and add interest and vitality to city streets.
   • To provide continuity of ground floor shops along streets and lanes within the retail core.
   • To ensure ground floor frontages contribute to city safety by providing lighting and activity.
3. DDO1 then contains requirements for Area 1 (Retail Core) and Area 2 (Major Pedestrian Areas). Francis Hotel is located just to the west of the retail core area along Elizabeth Street and hence there is some logic in our view to the fact that an active street frontage is sought along Lonsdale Street for pedestrians as they approach the retail core area. Francis Hotel is within Area 2 and the requirements are:

Buildings with ground-level street frontages to major pedestrian areas must present an attractive pedestrian oriented frontage to the satisfaction of the responsible authority, by providing:

• At least 5 metres or 80% of the street frontage (whichever is the greater) as an entry or display window to a shop and/or a food and drink premises, or
• At least 5 metres of 80% of the street frontage (whichever is the greater) as other uses, customer service areas and activities, which provide pedestrian interest and interaction.
• Built scale appropriate to the street and pedestrians.
• Clear glazing (security grilles must be transparent).

1. The proposed layout includes a gaming area along the west side of the ground floor of the building with a fixed window, part obscured (with an emergency door exit) as its frontage to Lonsdale Street. It was explained that there would be a central staired entryway in the centre of the Lonsdale Street frontage that would service all three levels of the hotel. Upon entering at this point, patrons can choose to access the sports bar or gaming area at ground floor, the first floor nightclub or the second floor bar, lounge and beer garden. A new disabled ramp entry to the east of the central entry will provide access to the sports bar.
2. In response to concerns we expressed during the hearing, Francis Hotel tabled a modified layout of the gaming area on Day 5 of the hearing. This modified layout depicts a "lounge" fronting Lonsdale Street to a depth of 2.5 metres with a gaming area containing 31 EGMs behind an obscure glass 2 metre high wall.
3. Mr McGurn acknowledges the proposed layout (including the modified layout for 31 EGMs) does not meet the quantitative requirement in DDO1 for structural reasons such as the existing pillars along the street frontage. However, it is his view that the Lonsdale Street frontage is active and improved from the existing situation. During our inspection of the premises at a lunchtime during the hearing, we observed that the west end of Francis Hotel had glass doors that were opened up to the street creating, in our view, a high degree of activation and integration with the pedestrian activity along Lonsdale Street. We appreciate that these doors are not opened up every day (due to weather conditions), but it is our view on the occasions that they are, the existing situation does contribute to the activation of Lonsdale Street in both an appropriate and acceptable manner. As such, we are not persuaded by Mr McGurn's evidence that what is proposed improves the current situation. Rather, in our view, it detracts from the current acceptable situation. We also considered his opinion placed too much weight on the replacement of the solid double-door entry to Lonsdale Street with glazed doors.
4. We observed on Day 7 of the hearing that the proposed lounge area in front of the gaming area (as depicted in the modified layout) is quite small. Ms Porritt agreed it is at best 12 square metres and conceded it would not accommodate two tables and chairs as depicted on the tabled modified plan. However, she submitted it is "still a reasonable size" and could fit at least 10 people based on the typical licensed premises calculation of 1sqm per person. We are not persuaded the proposed layout or the modified layout provide an acceptable active street frontage. To use the modified layout as the example, we are not satisfied the DDO1 design objectives are achieved:
   • A lounge may contribute to city safety by providing internal lighting that spills onto Lonsdale Street, but we are not persuaded that this lounge will provide activity that would also contribute to city safety;
   • A very small lounge, not capable of containing two tables and associated chairs will not add interest or vitality to Lonsdale Street;
   • A small lounge with limited seating that is accessed through the gaming area is unlikely to be well utilised and does not add interest or vitality to Lonsdale Street;
   • A lounge area accessed via a gaming area is not an ideal arrangement for patrons that would otherwise choose not to access a gaming area; and
   • A lounge that is only accessible internally and not via Lonsdale Street is not pedestrian oriented.
5. Mr McGurn accepted Lonsdale Street is one of the principal streets in the city grid albeit in his view not as "high" as Bourke or Collins Streets. Given the location of Francis Hotel between the entertainment and restaurant precinct of Hardware Lane and the retail core generally beginning along Elizabeth Street on a principal street with surrounding office workers and other city users, we are not persuaded this proposal achieves an active street frontage consistent with DDO1's design objectives.

1. Earlier we said we were not persuaded electronic gaming was a minor aspect of the overall entertainment offering at the Francis Hotel. It is our view that the entirety of the ground floor presents (to use words used during the hearing) as a gambling den or wagering den. This is because the gaming area is located on the west side of the ground floor and the sports bar is located on the east side.
2. During the hearing, Mr Davis' evidence about the female friendly sports bar was not persuasive because:
   • In response to the Council's cross-examination, Mr Davis said female friendly meant a lot more choice being offered on the hotel's food menu;
   • In response to our questions, Mr Davis said it is a 'female friendly theme' rather than the practicalities such as providing only one female toilet in the sports bar area;
   • Mr Barrett agreed an accurate description is that the ground floor presents as a gambling package (sports bar and gaming) albeit you will see lounge furniture in the sports bar; and
   • Mr Beaumont expressed the view during his evidence that the female friendly focus was "a little over-sold" and acknowledged it will be more of a sports bar.
3. Mr McGurn did not accept that the gaming room would be prominent to people passing by Francis Hotel on Lonsdale Street, but he did accept that it would be prominent to people coming into the venue. He said the TAB easy bet terminal (TAB EBT) may need to be relocated, but otherwise it looks like a typical hotel. We acknowledge this three storey hotel also offers a nightclub on the middle level and an integrated bar, lounge and outdoor beer garden on the top level. However, these facilities do not overcome our concerns about the layout and appearance of the proposed ground floor.
4. Mr Beaumont helpfully suggested that if we considered the ground floor looked like a gambling or wagering den, the TAB EBT in the sports bar could be removed and a social gambling situation created. We have considered whether there could be changes made to the ground floor to overcome our concerns, but in our view there is no 'quick fix'. With the combination of the sports bar and gaming room on the ground floor of the hotel, we find the proposal presents as a gambling venue from Lonsdale Street and to persons entering the new central entryway. Before choosing to access one of the upper level offerings at the hotel, patrons will be offered the convenience of the gambling related activities on the ground floor.
5. We have already explained our concerns about what this means in terms of contributing to a risk for problem gamblers given the ease of access and, hence, the convenience for passers-by. Whilst Mr Barrett identified what he considered to be other venues with higher levels of pedestrian traffic than this venue, we are also cognisant that Mr Barrett explained problem gamblers may access a venue on a route that they are more likely to take for other reasons and if people pass this venue, convenience or impulse gambling is more likely.
6. Overall, we find the proposed ground floor of Francis Hotel is not an acceptable location for EGMs.

1. It follows from our findings in relation to the two applications that we do not consider the proposal should be granted either an approval under the Gambling Regulation Act 2003 or a permit under the Melbourne Planning Scheme. Accordingly, we will set aside the Commission's decision and affirm the Council's decision.

[1] Earlier orders referred to Francis Hotel Pty Ltd as the Second Applicant in Application for Review B42/2012. During the hearing, the parties consented to this being changed to the Second Respondent.

[2] [2010] VCAT 1719.

[3] The Regional Electronic Gaming Machine Caps Review Panel Final Report by the Office of Gaming and Racing in November 2005 states on page xvi: "The City of Melbourne has unique characteristics that warrant a separate consideration of the regional cap issues. There is a significant concentration of gaming machines located within the central business district. In a sense, the City of Melbourne is the principal destination gaming area in Melbourne outside of Crown Casino. The Panel considers, therefore, that the central business district, Docklands and Southbank should not have the number of gaming machines capped."

[4] Some of the edges of the City of Melbourne have small capped areas, but that is not relevant to our consideration of the Francis Hotel as it is located within the central city.

[5] Extract from paragraph 46 of the VCGLR decision dated 25 January 2012.

[6] Extract from paragraph 4 of the VCGLR Submission on Day 1 of the hearing.

[7] [2011] VCAT 534.

[8] For example, during the hearing Mr Beaumont gave evidence that the 'female friendly' focus and the layout of the ground floor could change; and the Applicant provided amended layout plans showing a lounge area between the gaming room and Lonsdale Street resulting in a one machine reduction in EGMs (a total of 31 rather than 32 EGMs).

[9] This approach was adopted by Morris J in Macedon Ranges Shire Council v Romsey Hotel Pty Ltd [2008] VSCA 45; (2008) 19 VR 422, by Bell J in Romsey Hotel Pty Ltd v Victorian Commission for Gambling Regulation & Anor (Occupational and Business Regulation) [2009] VCAT 2275 at 274, and by the Court of Appeal in Macedon Ranges Shire Council v Romsey Hotel Pty Ltd [2008] VSCA 45 at 43.

[10] Including its predecessor - the VCGR.

[11] Extract from paragraph 22 of the VCGR decision on the Francis Hotel.

[12] The VCGLR decision dated 30 July 2012 for 54 EGMs at the Exchange Hotel 120 King Street Melbourne, at paragraph 47.

[13] Melbourne City Council's Census of Land Use and Employment (CLUE) for the Melbourne LGA conducted in 2006.

[14] The evidence of Mr Milner, Ms Chmielewski, Ms Van Souwe & Mr Quick.

[15] Not just the international visitors referred to by Mr Quick, but visitors from elsewhere in metropolitan Melbourne and Victoria and interstate, as well as overseas.

[16] [2008] VSCA 45 at [42]- [43].

[17] The VCGR decision dated 25 January 2012 paragraph 44.

[18] Romsey Hotel Pty Ltd v Victorian Commission for Gambling Regulation & Anor (Occupational and Business Regulation) [2009] VCAT 2275 at 274.

[19] Bendigo Stadium Ltd v Greater Bendigo CC [2012] VCAT 1698 at [31].

[20] Bendigo Stadium Ltd v Greater Bendigo CC [2012] VCAT 1698 at [33].

[21] Bright Newbay Pty Ltd v Bayside CC [2010] VCAT 1347 at [62[.

[22] DSL Securities v Cardinia SC [2011] VCAT 1842 at [101]- [104].

[23] The VCGLR approval of the Peppermill Hotel, Goulburn Valley Highway Kialla on 2 May 2012 includes a condition that Mt Dandenong Tourist Hotel Pty Ltd will provide to the Commission evidence of its financial community contributions annually from the date of installation of Electronic Gaming Machines in the approved venue. We were advised this approval is the subject of a VCAT Application for Review and we note the decision is pending.

[24] Bay & Bridge Hotel Pty Ltd v Port Phillip CC & Ors [2012] VCAT 1343 at [62]- [63].

[25] Mr Quick used the example that a middle score of 950 does not mean it is worse than a middle score of 1,000 given the scores are so close.

[26] These are the words contained on page 7 of Ms Chmielewski's evidence that is based on Branbeau Pty Ltd v Victorian Commission of Gambling Regulation [2005] VCAT 2606 and literature about problem gambling identified on pages 10-13 of her evidence.

[27] Statement of evidence of Ms Chmielewski dated 17 July 2012, page 53.

[28] 2003 Victorian Longitudinal Community Attitudes Survey, Centre for Gambling Research (2004). For example, a substantial majority of Victorians (85.1%) consider gambling is a serious social problem in Victoria.

[29] Refer to page 89 of the transcript of the VCGLR hearing.

[30] Clause 21.08-1 relates to the Central City and part of its retail, entertainment and arts land use implementation strategies on page 4 of 59 includes a dot point that states "Discourage the concentration of sexually explicit adult entertainment, amusement parlours and gaming venues within the Central City".

[31] Albeit we acknowledged during the hearing that Myer's Lonsdale Street entry is currently closed as part of its reconstruction and renovation works.