Kilsyth and Mountain District Basketball Association Inc. v Victorian Commission for Gambling Regulation(Occupational and Business Regulation) [2007] VCAT 2

Kilsyth and Mountain District Basketball Association Inc. v Victorian Commission for Gambling Regulation(Occupational and Business Regulation) [2007] VCAT 2 - VCAT 2007 case summary — Zoe

[12]

5 Sadly, there remain some misconceptions about the nature of the tribunal's powers and responsibilities under gaming legislation. This is so notwithstanding the detailed reasons set out in Branbeau Pty Ltd v Victorian Commission of Gambling Regulation.[1] In the reasons for that decision the tribunal set out an overview of Victoria's gaming machine industry, which provides an important backdrop in the making of decisions about gaming machines. Also in that case the tribunal set out the relevant legislation, the nature of a review before the tribunal, and the relevant test that must be applied in determining applications for gaming machines (or gaming venues) under the Act. Some of these general principles were elaborated in the subsequent tribunal decision of Ocean Grove Bowling Club Inc v Victorian Commission for Gambling Regulation.[2] Significantly no party in the present preceding sought to contest any of the principles of law outlined in those decisions.

6 It is important that I explain that review on the merits does not necessarily involve overriding the primary decision (that is, the decision made by the Commission). Still less does it involve overriding a decision made by a council, as no decision under the Act has been vested in a local council. Often the body charged with conducting a review on the merits is presented with additional or different evidence than the body which made a primary decision. As a matter of logic and reality this means that if the reviewing body takes a different view than the primary decision maker this does not mean that the primary decision was wrong. Indeed, this is a case where the information before the tribunal was modified from that which was considered by the Commission.

7 It is also important to stress that statutory decision making takes place in a context. Not only are particular provisions laid down by the Parliament which must be taken into account, but also decisions must be made in the context that the Parliament has made the installation and use of gaming machines in Victoria a lawful activity. Thus it is not lawful for the tribunal to reject gaming applications on the basis that it believes gaming to be immoral or socially harmful in all circumstances. Rather the tribunal is required to make its decisions in the context that gaming is lawful in Victoria.

[13]

8 The applicant is a basketball association that has been in operation for 30 years. The association is one of the largest in Victoria and, it would appear, one of the most successful. The applicant is a non-profit organisation, predominantly run by volunteers. There are over 1,000 basketball teams playing weekly in competitions organised by the association. The spatial span of the association embraces the north-western part of the Shire of Yarra Ranges, the City of Maroondah and the northern part of the City of Knox. The headquarters of the association are located in Kilsyth, within the Shire of Yarra Ranges and just east of the boundary with the City of Maroondah.

9 The association makes a major contribution to the recreational activities of children and adults (of both sexes) within its area of spatial influence. The role of the association is not only important in providing recreational opportunities, but also in improving and maintaining the physical and social health of the community.

10 One reason for the success of the association is that in 1998 it opened a club, known as Club Kilsyth, which has subsequently generated some $4 million in revenue for use by the association. Club Kilsyth is located within the City of Maroondah, adjacent to the municipal boundary with the Shire of Yarra Ranges. The club was established in 1998 with gaming facilities, containing 100 gaming machines, as well as other facilities. In the period to November 2005 the venue generated significant profits, typically in the order of $500,000 per year. Unfortunately the club was burnt down in November 2005 and has only recently been rebuilt. An inspection of the recently rebuilt club shows a rounded facility which contains a 200 seat member lounge, a 250 seat bistro, a gaming room and two function rooms. It is apparent that Club Kilsyth has been, and is likely to continue to be, very popular in the local community.

11 The revenue received by the association from Club Kilsyth has mainly been applied to promote basketball activities. For example the association applied $1.7 million to the redevelopment of the existing Kilsyth basketball stadium, which has resulted in an outstanding indoor sporting venue, catering for table tennis and badminton as well as basketball. Other projects have been the funding of coaching and umpiring initiatives, the fitting of coolers to basketball stadiums and other similar works. Club Kilsyth has also routinely made substantial donations to various community groups and charities.

12 Essentially the applicant wishes to replicate the success of Club Kilsyth, albeit at a slightly smaller scale, in a new venture at Club Ringwood. The new club is proposed to be located at the site of the former Smorgy's Restaurant on the north-east corner of Oban Road and Maroondah Highway, Ringwood. The existing building will be renovated, and expanded, so as to provide a 130 seat members' lounge and bar, a gaming room with 75 machines, a 200 seat dining area/bistro and smaller areas for functions and meetings. The estimated cost of the works and refurbishment is $2.5 million. Based upon the experience at Club Kilsyth, I find it likely that the quality of the physical environment to be provided will be first class.

13 The freehold of Club Ringwood is owned by a company associated with the Appleby family; and is proposed to be leased to the applicant association. This arrangement is similar to the arrangement currently in place in respect of Club Kilsyth.

14 As I have mentioned, all of the gaming machines to be installed within Club Ringwood are to be sourced from existing Tabcorp club premises within the City of Maroondah.

[32]

29 Section 51 of the Victorian Civil and Administrative Tribunal Act 1998 provides that in exercising its review jurisdiction in respect of a decision the tribunal has all the functions of the decision maker. Thus, in exercising its review jurisdiction, the tribunal "stands in the shoes" of the primary decision maker.[3] A "function" is defined to include "jurisdiction, power, duty and authority".[4] And the tribunal's powers, including the power in section 51, should be construed liberally.[5] Section 51 further provides that in determining a proceeding for review of a decision the tribunal may, by order, affirm, vary, or set aside the decision under review; and in the last case it may either make another decision in substitution for the decision under review or it may remit the matter for reconsideration by the decision maker. Section 51(3) then provides, subject to exceptions which are not presently relevant, that a decision made by the tribunal in substitution for the decision of a decision maker is deemed to be a decision of that decision maker.

30 It is significant that the definition of "transitional application" in clause 52.28-5 of the planning scheme refers to an application made before 18 October 2006 to the Commission, and does not refer to the determination of the application by the Commission. In other words, the transitional provisions are not concerned with the identity of the determiner, but with the determination itself.

31 In my opinion, in the context of the transitional provision in clause 52.28-5, the "determination" of a gaming venue application embraces the entire process of determination and means the final determination of the application. As I will explain, this conclusion is not only preferable as a matter of jurisprudence, but also best gives effect to the obvious underlying policy of the provision.

32 If the tribunal orders that a primary decision is set aside it may do so with or without a specification of when that order will come into effect. If no date is specified then, in my opinion, the primary decision is set aside from the date the primary decision was made. In this circumstance, at least for substantive purposes, the primary decision is to be taken as having not been made.[6] This follows from the notion of "setting aside". It must also be so because, unless any order is made to the contrary, any decision made by the tribunal, in lieu of the primary decision, has or is deemed to have had effect from the time at which the decision under review has or had effect.[7] Hence if the tribunal was to simply set aside the decision of the Commission (without specifying a date) the application will not be one which has been determined before 18 October 2006.

33 In interpreting legislation and subordinate instruments, the tribunal is entitled to have regard to the context and to any underlying policy revealed by that context. The transitional arrangements set out in clause 52.28-5 are designed to protect applicants who may have spent many thousands, even hundreds of thousands, of dollars preparing an application. It would be an odd and unfair outcome if the transitional arrangements protected those who had an application in the pipeline before the Commission but did not provide similar protection to an applicant whose application was further down the pipeline and was before the tribunal.

34 Thus I do not accept the submission by the council that the application the subject of this proceeding is not a "transitional application" within the meaning of clause 52.28-5 of the relevant planning scheme.

35 I should indicate that if I was of the view that the present proceeding was not a transitional application, I would hold that is open for the tribunal to consider the application for the approval of the premises as suitable for gaming and to grant approval, in accordance with section 3.3.9(3)(b) of the Act, subject to a condition that the approval does not take effect until the applicant satisfies the Commission that the applicant has obtained a permit permitting the premises to be used for gaming on gaming machines. Further, I would have granted approval subject to such a condition.

[33]

36 I accept the evidence given by Mr Ridley that the gaming expenditure that is likely to be generated by the 75 machines proposed for Club Ringwood is in the order of $5,475,000 per annum or $200 per machine per day. I also accept the evidence of Mr Ridley that more than two thirds of this revenue will be transferred from existing venues within the City of Maroondah. As some of the expenditure at Club Ringwood is likely to be transferred from gaming venues outside the City of Maroondah, I find that it is likely that no more than 20% of the spending at Club Ringwood will be "new" gaming expenditure; and that at least 80% of the gaming expenditure at Club Ringwood would be transferred from a gaming venue elsewhere. Of course, as the proposal involves a relocation of all the machines from the Croydon Golf Club and the Bird and Bottle Sporting Club the transfer from these venues will be greatest. Nevertheless there will still be transfers from other venues - particularly other venues within the City of Maroondah - such that the total additional gaming expenditure is unlikely to be greater than about $1.2 million per annum.

37 In making my findings about the extent of transferred expenditure I rely upon the evidence of Mr Ridley and other evidence that has been given in gaming cases before the tribunal over the last year.[8] Mr Ridley gave evidence about the impact of the newly established Roxburgh Park Hotel (with 80 machines) on surrounding venues. He estimated that in the first twelve months of operation of the Roxburgh Park Hotel 61% of its revenue had been transferred from other venues within the City of Hume and the Epping area within the City of Whittlesea. It is likely that there would have been a small amount of transferred expenditure from venues outside of the City of Hume and Epping, such that the total amount of transferred expenditure at Roxburgh Park is likely to have been in the order of about 66%. The Roxburgh Park Hotel is physically quite separate from many of the gaming venues with which it competes. By contrast, the proposed Club Ringwood is in an area with substantially more competition. A new venue, located in an area which already has substantial gaming opportunities, is more likely to derive its revenue from transferred expenditure than from "new" gaming expenditure. This is especially so in the present case as the machines to be provided at Club Ringwood are to be transferred from existing venues within the municipal district.

[35]

40 The provision of a new gaming venue in Ringwood will provide a modest improvement to the accessibility of gambling opportunities for those living in the City of Maroondah. As I explained in Branbeau, this could be regarded as both good and bad. However to the extent that it provides a better opportunity for recreational gamblers to exercise their own free choice to gamble, I would regard this as a benefit: an objective of the Act is to accommodate those who gamble without harming themselves or others. The reason why the benefit is modest is that there is already ample opportunity for Maroondah residents to use gaming machines. The flip side to the benefit being modest is that the likely impact on problem gambling is also modest. The explanation for this is that a substantial proportion of the gaming expenditure at the new venue will simply be transferred from existing gaming venues; and, to that extent, cannot as a matter of logic exacerbate problem gambling.

41 There are some in the community who would adopt a libertarian position and argue that people should be free to gamble when and how they wish. There are others who adopt a paternalistic or moralistic position and argue that gambling should be banned or severely restricted. It is not the tribunal's task to adopt a position in this regard. The tribunal must accept the position adopted by the Parliament and encapsulated in section 1.1(2)(a) of the Act: namely to foster responsible gambling in order to minimise harm caused by problem gambling and to accommodate those who gamble without harming themselves or others. The rights of those who gamble without harming themselves or others can too easily be overlooked in making an assessment of the social and economic impact of a new gaming venue. Insofar as this class of person is concerned, it is an undoubted benefit to them to have good access to gaming opportunities. It is also a benefit to this class of persons for there to be competition between gaming venues, with the consequence that service standards are improved. Further, the existence of a range of opportunities to engage in gambling provides additional choice: which is an undoubted benefit to the recreational gambler.

[36]

42 There is no doubt that the surpluses generated by Club Kilsyth have been put to worthwhile community purposes. As I have noted, basketball is not only a valuable recreation, but it is also one that promotes good health. Basketball facilities are particularly valuable for children. Further, adult games are played by both men and women. In this sense basketball provides an important community focus, which builds and cements relationships between people. Importantly the expenditure of gaming surpluses on community basketball activities is spending that occurs in the areas from which the gaming revenue is derived.

43 The applicant has reached an agreement with the Croydon Golf Club that, for the next ten years, $100,000 per annum of the surplus will be allocated to support the activities of the Croydon Golf Club. This agreement is the consequence of the Croydon Golf Club supporting the transfer of the machines currently located at the Croydon Golf Club and at the Bird and Bottle Sporting Club (which the Croydon Golf Club controls). Following concerns raised by the Commission, the Croydon Golf Club has agreed that half the amount allocated to it each year will be spent in supporting golfing activities, or golfing participation, by residents of the City of Maroondah.

44 The balance of the surplus is expected to be spent by the association in support of its core activities and in the making of community donations. Based upon the record of Club Kilsyth, I would expect that substantial community donations would be made to bodies such as Country Fire Authority brigades, charities, sporting organisations and community groups.

45 I have no doubt that the surpluses generated by the proposed club will be used for valuable community purposes which will confer a substantial benefit on residents of the City of Maroondah.

46 As a substantial proportion of the gaming expenditure at Club Ringwood is to be transferred from existing venues - particularly existing venues within the City of Maroondah, including the Maroondah Sports Club - the benefits conferred by the allocation of the surplus to community purposes will be offset by a reduced capacity of other clubs to make similar contributions or donations. Indeed, there may be some modest decline in the gaming revenue generated at Club Kilsyth as a result of the operation of Club Ringwood, although, having regard to the distance between the two clubs, I doubt that the extent of this will be as significant as the Commission thought it may be. But it is true that clubs such as the Maroondah Sports Club will be less able to make community contributions, as Club Ringwood will impact the gaming revenue that such clubs derive. In this respect, I note that much of the surplus generated by the Maroondah Sports Club is used to support the semi-professional Australian Rules football team "East Ringwood". Although this invites the comparison of the worth of using a gaming surplus to support a semi-professional football club - compared to a basketball association with widespread community participation - I hesitate to make the comparison. Rather I think the appropriate approach is to recognise that the net impact of approving the proposed venue will be to increase the overall capacity of clubs in the City of Maroondah to invest gaming surpluses in their own communities. To the extent that expenditure at Club Ringwood is transferred from hotels or is new gaming expenditure this benefit is not offset by a reduced capacity to contribute in other venues. Thus it is a substantial benefit of the proposal.

[40]

Hence, as a matter of discretion, if not a matter of law, I would not place weight on the fact that existing gaming venues, including the Maroondah Sports Club, will suffer a detriment as a result of increased competition unless it could also be shown that there will be a resultant overall adverse effect on the community. Such a resultant overall adverse effect may occur if an existing facility is forced to close, or cut back its services, as a result of a new facility; in circumstances where that loss will not be made good by the new facility. A resultant overall adverse effect upon the community might also arise if there is a reduction in the total gaming surpluses that are used for community purposes; or, possibly, where the distribution of gaming surpluses among the community is altered in a way which diminishes the benefit enjoyed by the community.

49 I accept that the proposed venue will have a substantial impact upon the revenue of the Maroondah Sports Club. It is unnecessary to make a precise finding as to the extent of this impact. If I was forced to make such a finding I would choose a number somewhere between that put forward by Mr Ridley and that proffered by Mr Cottle. This is because I do not accept the methodology used by either witness which, I think, in each case lacks rigour. But it is unnecessary for me to make a specific finding on this subject because it was clear from the evidence of Mr Cosmi, the general manager of the Maroondah Sports Club, that the club would continue to operate, notwithstanding the financial impact it was likely to suffer, and would continue to provide services to its members. Further, even if the Maroondah Sports Club was to close, I would be satisfied that the loss of that facility would be made good by the proposed new venue. It needs to be appreciated that the impact of the new venue on the Maroondah Sports Club will depend upon the quality of the service offered by the respective clubs. Depending upon the quality of service customers will then vote with their feet. If an overwhelming number of customers prefer Club Ringwood, with the consequence that the Maroondah Sports Club closes, how could it be said that Club Ringwood has not "made good" the loss of the Maroondah Sports Club. Surely such a conclusion would fly in the face of consumer preferences.

50 As for the effect of the new venue on the distribution of gaming surpluses, I have found that if Club Ringwood is approved the total amount that will be available for distribution from gaming clubs within the City of Maroondah will grow. I have also declined to make a judgment as to whether distributions to a semi-professional football team are to be preferred, or not to be preferred, to distributions to an association that promotes a mass participation sport, particularly by children. But it is clear enough that the net effect on the community of a different distribution of gaming surpluses will not be negative: on the contrary the change will be positive.

[47]

57 Statistics produced by the Commission show that as at 30 June 2006 there were 770 gaming machines in 11 venues within the Maroondah municipality. It is of some significance that 400 of these machines were installed in club venues and 370 were installed in hotel venues. (The significance lies in the fact that, on average, hotel machines tend to generate revenue at twice the rate as machines installed in clubs.) This represents 9.7 machines per 1,000 adults in the municipal district, a ratio which is above the Victorian average of 6.92 machines per 1,000 adults. The existing ratio is also only slightly below the figure of ten machines per 1,000 adults, which seems to have been influential in the recent decisions by the Government and the Commission in relation to regional caps. The total net expenditure on gaming machines that occurred within the Maroondah municipal district for the year 2005-06 was $59.7 million. This represents net gaming machine expenditure per adult of $753 (compared with the Melbourne metropolitan average of $679), but this is a figure which, for reasons I will give, must be treated cautiously.

58 As the proposal involves the relocation of existing machines within the City of Maroondah, the approval of the venue with 75 gaming machines will not change the ratio of machines per 1,000 adults in the municipality. However the council regards the existing ratio as too high and advocates a reduction in the ratio to at least the metropolitan average. The total expenditure that occurs within the municipality on gaming will rise as the result of the approval of the proposed venue; as will the average gaming expenditure per adult. Having regard to my earlier findings I would expect the average expenditure per adult that occurs within the municipality to increase by about 2% if Club Ringwood is approved.

59 In my opinion, it is unrealistic for all municipalities to expect that the number of gaming machines in their municipality per 1,000 adults will be average or below average. It is almost inevitable that the average number of gaming machines per 1,000 adults in some municipalities will be greater than the metropolitan average; and in other municipalities less than the metropolitan average. I would have thought that from a social viewpoint municipalities having a robust population, and who are not comparatively disadvantaged, might be better placed to absorb a higher concentration of gaming machines than disadvantaged areas. Hence I am not persuaded that the council's policy that the number of gaming machines per 1,000 adults should be reduced "to at least the metropolitan average" should be applied.

60 Another relevant factor is that there are more club machines in Maroondah than hotel machines. This factor will tend to reduce overall expenditure per gaming machine. Indeed, a comparison of two ratios illustrates this. Maroondah has 9.7 gaming machines per 1,000 adults compared with a Melbourne metropolitan average of 6.9 machines (a difference of 41%); whereas the gaming machine expenditure per adult in Maroondah is $753 compared with a Melbourne metropolitan average of $679 (a difference of 11%).

61 Another important factor is the distribution of gaming machines within the Maroondah municipal district. It is noteworthy that there are three substantial venues which are located close to the boundaries of the Maroondah municipality: the Manhattan Hotel at the corner of Canterbury Road and Heatherdale Road (103 machines), the Coach and Horses Club at 33 Whitehorse Road, Ringwood (100 machines) and Club Kilsyth at the corner of Canterbury Road and Colchester Road (100 machines). Each of these venues is likely to serve a market that includes a substantial portion of residents from the adjacent municipality. We know that Club Kilsyth has half its members from outside the City of Maroondah: and, by reason of its geographical location and transport routes, it is likely that an even greater proportion of its custom derives from beyond the Maroondah municipality. Further, the location of the Manhattan Hotel is likely to mean that a substantial portion of its custom derives from the City of Whitehorse and, possibly, to a lesser extent from the City of Knox. Although it is true that some residents of Maroondah will be using gaming venues in the municipalities of Whitehorse, Yarra Ranges and Knox, I doubt that this would outweigh the expenditure of non-Maroondah residents in Maroondah.

62 The flaw in treating net gaming expenditure in a municipality per adult in that municipality as a reliable indicia of problem gambling is that the problem arises because of expenditure by residents, not by expenditure in a particular physical area. The City of Melbourne clearly has the highest expenditure on gaming machines per adult, but that tells us more about its role as an urban centre than about problem gambling. To a lesser extent Ringwood, which is a major activity centre, performs a similar role.

63 The following table sets out the position in relation to gaming machine density and gaming expenditure in the City of Maroondah and the municipalities which surround it. This region might be described, for convenience, as the outer eastern region.

At a glance

Court

Decision date

Before

Source

Judgment (51 paragraphs)

Kilsyth and Mountain District Basketball Association Inc. v Victorian Commission for Gambling Regulation(Occupational and Business Regulation) [2007] VCAT 2 (11 January 2007)

Parties