Gaming and Wagering - Unlawful games and related offences - Possession of unlawful gaming machines - Forfeiture of machines - Inability to identify machines - Whether order may be made - Whether owner entitled to be heard. Racing and Gaming Act 1952 (Tas), s105(1). De La Rue v McNamara [1940] VicLawRp 24; [1940] VLR 128, doubted. (Aust Dig Gaming and Wagering [16]).

HOBART, 9 April 1997 (hearing), 23 April 1997 (decision)

1. By a complaint made by the applicant, the respondents were charged with a breach of the Racing and Gaming Act 1952, s105(5)(c)(iii) in that, between 21 February 1996 and 15 May 1996, they had in their possession unlawful instruments, namely two video game machines capable of being operated by a player with the intention that he had a chance to accumulate credits capable of being converted into goods. The respondents appeared before a magistrate constituting a court of petty sessions at Burnie on 22 November 1996 when each pleaded guilty to the charge. As to each respondent, the learned magistrate made an order dismissing the charge pursuant to the Probation of Offenders Act 1973 ("the Act"), s7(1).

2. The applicant seeks to have those orders reviewed on the following grounds:

"1 The learned magistrate erred in fact and/or in law in that the exercise of his discretion under Section 7(1) of the Probation of Offenders Act 1973 miscarried with respect to both respondents. 2 The learned magistrate erred in fact and/or in law in that the sentences imposed upon the respondents were manifestly inadequate in all the circumstances of the case."

3. The facts stated to the learned magistrate by the prosecutor may be summarised as follows. At all relevant times the respondents were the co-managers of licensed premises known as the Burnie Town House and the first respondent was the licensee thereof. Between 21 February and 15 May 1996, the respondents had in their possession at those premises two coin operated video game machines which were located in a bar. The machines were available for use both by staff and patrons. By playing a machine the player could accumulate credits. In exchange for each 80 credits the respondents provided the player with 12 stubbies of beer. Over the relevant period, the respondents provided some 850 stubbies of beer in this way.

4. The respondents maintained records of the names of players, the dates on which they played, the number of credits accumulated by each and the quantities of beer provided. The first respondent instructed certain of the hotel staff in the operation of the machines and in the keeping of records. At all times, the respondents were aware of the unlawfulness of their conduct. In 1995 both had attended a seminar conducted by the Gaming Commission at which specific warning was given in relation to the possession of unlawful gaming machines. The first respondent attended a further seminar of this nature on 8 January 1996.

5. The respondents' conduct came to light when a staff member played one of the machines and, apparently as the result of a malfunction in the machine, accumulated credits which entitled her to 62 cartons of beer. The respondents declined to provide her with those. As a result she made a complaint to the authorities, and on 31 May 1996 police officers visited the respondents' hotel. They interviewed the first respondent. He untruthfully told the officers that he was not aware that staff members had been providing goods in exchange for credits.

6. The learned magistrate was told that the first respondent had a prior conviction in 1987 in the New South Wales District Court when he was fined $5,000 for attempting to obtain a financial advantage by deception. In the course of his plea in mitigation, counsel who then appeared for the respondents told the learned magistrate that this offence concerned the first respondent's involvement in a scheme under which an insurance agent was to arrange superannuation in respect of fictitious persons, supposedly employees of the first respondent, in circumstances where the agent would then receive commission far in excess of the initial premium paid. The scheme involved the first respondent providing cheques for the initial premiums but the learned magistrate was not told of the precise arrangement between the agent and the first respondent pursuant to which the latter provided such cheques. He was told that the first respondent did not stand to make any financial gain from the scheme. The learned magistrate was told that the first respondent withdrew from participation in the scheme at a very early stage and voluntarily made full disclosure to the underwriter, although after he had provided it with at least one cheque.

7. Counsel who appeared for the respondents advanced an extensive plea in mitigation. The matters which he put to the learned magistrate in the course of that plea may be summarised as follows.

1 Each of the respondents had pleaded guilty to the charge, although initially they had entered pleas of not guilty. 2 The machines were not intrinsically unlawful but were unlawful by reason of the use to which they were put by the respondents. 3 The respondents were aged 53 years and 59 years respectively and, with the exception of the one conviction of the first respondent, were persons of exemplary character. 4 The respondents had extensive experience in the hotel industry, between them having managed some seventeen hotels without any form of conviction for licensing or similar offences. 5 The first respondent had an extensive history of involvement in community, service and industry organisations. 6 The first respondent had suffered from some ill health in the past. 7 The respondents worked long hours in the hotel business and employed some thirty-one staff. 8 The respondents regularly made donations in cash or in kind of a substantial nature to a variety of community organisations. 9 During the time that the respondents operated the machines, many other hotels in the Burnie area had operated similar machines for similar purposes. 10 The hotel industry was extremely competitive and the respondents considered that they needed to provide the machines as a service to hotel patrons so as not to give their competitors any competitive advantage. 11 The machines did not provide the respondents with any significant profits. 12 The conviction of the respondents was capable of affecting the outcome of the second respondent's pending application for a gaming licence under the Gaming Control Act 1993, s42.

8. The learned magistrate expressed the following reasons for dismissing the complaint under the Probation of Offenders Act:

"In this case the defendants plead guilty to one count of possession of an unlawful instrument under the Racing & Gaming Act for a period of just short of 3 months this year. Much play has been made by each side in the case of a decision of H W Mr Jones involving the Rosebery Ex-servicemen's Club in October of this year. I have taken time to read that decision and it is a case of relevant difference in my view because the penalties under consideration there involved penalties of up to $3,000 and $2,000 as well and appears to have involved also a submission for seizure of monies received through the machines involved there. I do not make any particular use of that case in this case but I noted that obvious distinction. Here it said that the defendants were specifically warned about the machines they used but also it has been said that some other outlets in the hospitality industry in the area use them also and it said that the defendants perceived it to be their competitive advantage to use them as though others did. It seems to me that those facts pro and con very much balance each other. In this case it is not being said that the defendants co-operated in any ready way in the investigation of the complaint, indeed by the prosecution to the contrary but on the other hand they are entitled to credit for their early pleas. I am bound to take into account not only the circumstances of the offence but the circumstances of each offender thus not withstanding that the offence admitted by each defendant is not trivial and is not extenuated by the circumstances of its commission. Taking into account the character of each defendant not overlooking the previous conviction of the male defendant on (sic) its explanation, their antecedents, age and in the male defendant's case also his health which it has been said has been affected by the bringing of the complaint I think the proper disposition of it is to dismiss it under the Probation of Offenders Act and I so order."

9. It appears that the learned magistrate was of the view that the fact that the respondents had been specifically warned about the unlawfulness of gaming machines was a matter of aggravation but that this was counter-balanced by the mitigating factor that they committed the offence because they thought that making the machines available to their customers would provide them with some competitive advantage. The learned magistrate erred in considering the latter factor as going in mitigation. To the contrary, it was a matter which aggravated the offence. The respondents, knowing of the unlawfulness of their conduct, nevertheless engaged in it because they perceived it to be to their economic advantage. Not only did they derive some direct profit from the machines but, by having them available for use, they made their premises more attractive in the expectation that that would result in an increase in their bar trade. It is difficult to see how the desire to gain a financial benefit can ever be a matter which goes in mitigation of an offence committed to that end. It may be that the erroneous characterisation of this matter as being mitigatory in nature led the learned magistrate into error.

10. I entirely agree with the view expressed by the learned magistrate that in the case of neither respondent could the offence be characterised as trivial or as having been committed under extenuating circumstances. It follows that neither par(b) nor par(c) of the Act, s7(1) applied. The learned magistrate relied on par(a). It cannot be doubted that significant relevant material, worthy of consideration for the purposes of par(a), was placed before the learned magistrate. However, the essential matter as to which the learned magistrate required to be persuaded before it was open to him to dismiss the complaint under s7(1) was that, after having had regard to those matters, it was inexpedient to inflict any punishment.

11. In speaking of a South Australian case in terms similar to s7(1), Windeyer J said in Cobiac v Liddy [1969] HCA 26; (1969) 119 CLR 257 at 275 - 276:

"The statutory conditions for its exercise were that he should be 'of opinion that, having regard to the character, antecedents, age, health, or mental condition of the person charged ... it is expedient to exercise' the power. That means, I think, that the magistrate must be of opinion that the exercise of the power is expedient because of the presence and effect of one or more of the stated conditions, namely character, antecedents, age, health or mental condition. One of these by itself, or several of them taken together, must provide a sufficient ground for a reasonable man to hold that it would be expedient to extend the leniency which the statute permits. The Act speaks of the court exercising the power it confers 'having regard to' the matters it states. I read that as meaning more than merely noticing that one or more of them exists. Its, or their, existence must, it seems to me, reasonably support the exercise of the discretion the statute gives. They are not mere pegs on which to hang leniency dictated by some extraneous and idiosyncratic consideration. But they are wide words. None of the matters they connote is necessarily to be regarded in isolation from the others, or apart from the whole of the circumstances of the offender and the offence."

12. Whilst the learned magistrate correctly identified the existence of matters relevant for the purposes of s7(1)(a), he gave no other reasons for his conclusion, which it must be inferred he reached, that it was inexpedient to inflict any punishment. It must be assumed that one of the matters which the learned magistrate took into account for this purpose was what he considered to be the mitigatory effect of the respondents having offended in order to obtain some competitive advantage within the hotel industry. It follows that his discretion miscarried and ground 1 is made out. Nevertheless, I will proceed to consider ground 2.

13. I should refer to one matter which was urged upon the learned magistrate although he made no reference to it when he came to sentence the respondents. The respondents submitted to the learned magistrate, and to me, that a conviction "would certainly have an effect" on the second respondent's application for a gaming licence. The learned magistrate was told that "in principle approval" had been granted for the installation of fifteen gaming machines at the respondents' hotel but that no final decision had been made as to whether the second respondent should be granted a licence in respect thereof until the outcome of the proceedings against the respondents was known.

14. Counsel for the respondents referred to McQuestin v Australian Securities Commission [1993] TASSC 118; (1993) 2 Tas R 30. That case concerned the prosecution of a company director for a breach of the Companies (Tasmania) Code, s229(2). The Code provided that a person convicted of an offence under s229(2) was disqualified for five years from being concerned or taking part in the management of a corporation. Underwood J held that that consequence was a relevant consideration in determining whether to proceed under the Act, s7(1). By analogy, the respondents submitted that the effect of the conviction of either respondent on the second respondent's application for a gaming licence should be taken into account in determining whether it was inexpedient to inflict any punishment.

15. This submission must fail. A conviction provides no bar to the grant of a gaming licence. On an application being made for a gaming licence, the Gaming Control Act 1993, s38 requires that the Tasmanian Gaming Commission consider whether the applicant and each associate of the applicant is of good repute, having regard to character, honesty and integrity. The first respondent would appear to be an associate of the second respondent by virtue of s4(2). I do not consider that a conviction for an offence, as distinct from the conduct constituting the offence, is a matter relevant for consideration by the Gaming Commission in considering whether an applicant or any associate of the applicant is of good repute. Their conduct which constituted the offence charged might well be relevant. On the other hand, it would be unreasonable to take a different view of that conduct depending on whether the charge was dismissed under the Act or whether it resulted in a conviction. This case is quite different from McQuestin v Australian Securities Commission (supra).

16. In my view, a disposition of the complaint under s7(1) was an entirely inadequate response to the conduct of the respondents. The respondents made a calculated decision to have unlawful gaming machines available on their premises, well knowing that they were unlawful and in order to gain an economic benefit. Their unlawful conduct continued over a substantial period of time and terminated only because of a complaint to the authorities. The prima facie requirement is that significant, deliberate and knowing breaches of the law for financial advantage attract some punishment. The matters relevant under s7(1)(a) do not displace that requirement in the case of either respondent. Accordingly, ground 2 is made out.

17. The parties were agreed that if I were to reach the conclusion that the learned magistrate's sentencing discretion miscarried I should re-sentence the respondents. In each case, the maximum penalty is a fine of 20 penalty units. For the reasons which I have already expressed, it is appropriate that fines be imposed. The first respondent's involvement with the machines was significantly greater than that of the second respondent. The second respondent should be given credit for the fact that she has never been convicted of any offence. It follows that I should differentiate between the respondents. I consider it appropriate to impose fines of $500 in the case of the first respondent and $250 in the case of the second respondent.

18. There remains the question of forfeiture. On conviction, the Racing and Gaming Act 1952, s105(10) requires the court to order that there be forfeited to the Crown the unlawful instrument in respect of the possession of which the conviction is imposed. This presents difficulties in the present case. As counsel told the learned magistrate, the machines in question were returned to their owner and it is not presently possible to identify them. Whilst a forfeiture order is mandatory, the order must be one which forfeits the relevant machines. An order which does not identify a particular machine is not authorised. It is incumbent upon a complainant to establish the identity of a relevant machine so that a forfeiture order in respect of it is capable of being made. Whilst there is no discretion as to the making of an order once it has been established that a particular machine is one in respect of which a conviction has been imposed, it is a matter of fact whether a particular machine answers to that description. Where the person convicted is not the owner of a machine which, it is alleged, is a machine in respect of which a conviction has been imposed, the owner would be entitled to be heard on the question whether the machine is liable to forfeiture. If De La Rue v McNamara [1940] VicLawRp 24; [1940] VLR 128 is authority to the contrary, I would decline to follow it.

19. As I have no material before me which enables me to identify the relevant machines and as the owners thereof have no notice of the possibility of a forfeiture order being made, I am presently unable to make such an order. It will be a matter for the applicant to bring the matter back before me, on notice to the owners, if and when he is in a position to put evidence before me with a view to satisfying me that particular identifiable machines are liable to forfeiture by reason of the convictions of the respondents. Once satisfied thereof, the making of a forfeiture order is mandatory.

1 That the appeal be allowed. 2 That the order of the learned magistrate dismissing complaint 55413/96 pursuant to the provisions of the Probation of Offenders Act 1973, s7(1) be quashed. 3 That in lieu of the order made by the learned magistrate, the first respondent is convicted and fined $500 and the second respondent is convicted and fined $250. 4 That consideration of the forfeiture of the machines the subject of the said complaint be adjourned sine die.