Tabcorp Holdings Limited v The State of Victoria [2014] VSC 301

CONTRACTUAL INTERPRETATION - Memorandum of Understanding executed by State and Victorian racing industry - Whether clause 10.3 of Memorandum of Understanding became contractually binding - Held: clause 10.3 not binding - Memorandum of Understanding fell within third category in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353.

GOOD FAITH - Whether express or implied term of good faith in Treasurer's letter to racing industry and Tabcorp - Whether State breached term of good faith - Held: express good faith term existed - Content of good faith term limited by surrounding express terms in Treasurer's letter - State did not breach good faith term.

1 Parliamentary sovereignty means that Parliament can choose to legislate to take away existing rights, whether those rights arise by existing legislation, contract or otherwise. But where Parliament chooses to take that course, it must do so by clear language. In this case, the State of Victoria contends that amendments to legislation have the clear and necessary effect of impliedly repealing, or rendering inoperative, a statutory provision which, in specified circumstances, granted the plaintiff a statutory right to a payment of $686,825,713.20 from the State. If the right remains enforceable, the amount payable is (with interest) about $800 million.

2 The genesis of the dispute arises from the privatisation by the State in 1994 of a statutory corporation, the Totalisator Agency Board of Victoria (the 'TAB'). Until the privatisation took effect, the TAB operated the business of totalisator wagering on thoroughbred, harness and greyhound racing events and the business of operating gaming machines in over 100 venues in Victoria. These otherwise unlawful businesses were conducted pursuant to licences granted by the State under the Racing Act 1958 (Vic) and the Gaming Machine Control Act 1991 (Vic) (the '1991 Act') respectively.

3 The privatisation of the TAB was effected by transferring its property to the plaintiff, Tabcorp Holdings Limited; by granting Tabcorp two 18-year licences, authorising it to conduct wagering and gaming in Victoria; by floating Tabcorp as a public company; and by requiring Tabcorp to pay the capital raised from the public offering to the State as consideration for the grant of the two licences and the value of the property transferred from the TAB.

4 The State sought to maximise the amount to be raised from the Tabcorp float. In this context, the Treasurer, at all relevant times Alan Stockdale, was advised that the amount which Tabcorp could expect to raise from the public offering would be substantially reduced if the profit forecasts in the Tabcorp prospectus were to include amortisation of the licences over their 18-year terms. This was unacceptable to the Treasurer, and so a solution was sought.

5 The Treasurer was advised that amortisation could be avoided if the State agreed to repay the licence consideration at the end of the licences. The Treasurer accepted this advice. As a result:

(1) The Gaming and Betting Act 1994 (Vic) (the '1994 Act') was enacted. The 1994 Act provided: (a) for Tabcorp to be granted two licences, a wagering licence and a gaming licence,[1] in lieu of the TAB's existing licences under the Racing Act and the 1991 Act; (b) for Tabcorp to pay the float proceeds to the State as consideration for the licences when granted;[2] and (c) following expiry of Tabcorp's licences and 'the grant of new licences', that Tabcorp was entitled to be paid an amount representing the lesser of the consideration it paid for the licences (subject to adjustment) and the consideration paid for the new licences ('the terminal payment provision').[3]

(2) The profit forecasts in the Tabcorp prospectus did not amortise the consideration to be paid for the licences, on the express basis that the terminal payment provision made this unnecessary. There was unchallenged expert evidence that the forecast annual after tax profits in the prospectus ($63.4 million) would have been reduced to only $22.7 million if an amortisation charge was required.

(3) The float proceeds were thereby substantially increased. Tabcorp paid the net float proceeds of $597.2 million to the State as consideration for the grant of the licences. The licences were each for a period of 18 years, expiring on 15 August 2012.

6 The various legislative instruments governing gambling in Victoria, including the Racing Act, the 1991 Act and the 1994 Act, were re-enacted and consolidated in the Gambling Regulation Act 2003 (Vic) ('the Act'). The terminal payment provision became s 4.3.12 of the Act.

7 On expiry of its wagering licence on 15 August 2012, Tabcorp continued conducting a wagering business, under the authority of a new 12-year licence issued to it by the State called a 'wagering and betting licence'. That licence was granted under a new legislative regime which came into effect immediately upon expiry of Tabcorp's wagering licence.

8 On expiry of its gaming licence, however, Tabcorp ceased conducting a gaming machine business. No new gaming licence was granted to it or to any person. Instead, reflecting legislative amendments made in 2008 and 2009 which introduced a new statutory regime, 'gaming machine entitlements' were issued to persons who held a 'venue operator's licence'. Venue operators are the operators of hotels and clubs where gaming machines are played. No gaming machine entitlements were issued to Tabcorp.

9 Tabcorp's first and principal claim is statutory. Tabcorp contends that, notwithstanding the introduction of the new legislative regimes, the State has in substance granted new licences to conduct wagering and gaming machine operations in Victoria and that, accordingly, it is entitled to be paid the amount due under the terminal payment provision.

10 The State denies this statutory claim at two levels. First, the State contends that no 'new licences' within the meaning of the terminal payment provision have been granted and, accordingly, the contingency triggering Tabcorp's entitlement to payment has not occurred. Second, the State contends that the terminal payment provision was impliedly repealed, or 'rendered inoperative', by the 2008 and 2009 amendments. Should either of the State's contentions be accepted, Tabcorp raises alternative contractual claims which are also denied.

11 Before turning to the specific issues for determination, it is necessary to set out the background facts and the legislative history in some detail. This will involve some repetition of the facts summarised in the introduction.

12 The approach of Victorian legislation is and was at all relevant times to impose a general prohibition upon gambling businesses and then provide for some exceptions or qualifications to that prohibition. Tabcorp's licences permitted it to engage in wagering and gaming businesses.

13 The primary wagering business which is relevant to this proceeding is pari-mutuel betting, commonly known as totalisator betting or 'tote' betting. That form of betting was first authorised in Victoria by the Totalisator Act 1930, which allowed a racing club to obtain a permit to establish and conduct a totalisator at race meetings on the club's racecourse - commonly called on-course totalisators. Racing clubs were required to deduct a commission from all amounts bet and the commissions were shared between the clubs and the government in varying proportions over the years.

14 The TAB was authorised to conduct off-course betting on totalisators conducted by the racing clubs. It received bets on events conducted by a particular club as agent for that club and paid the bets into that club's totalisator. As with on-course totalisator betting, commissions on bets were deducted. The commissions were divided between the government, the relevant racing club, the TAB and other racing clubs which had paid the establishment expenses of the TAB under a scheme anticipated by the Racing Act 1958 (Vic).

15 Over time, the TAB's functions and authorities were expanded to include cognate wagering activities in its own right, including its own off-course totalisator betting and some fixed odds betting.

16 Prior to the 1991 Act coming into operation, gambling activity in Victoria involving the use of gaming machines was unlawful. The 1991 Act legalised gaming machine operations in Victoria by providing for the grant of a 'gaming operator's licence'. A gaming operator's licence authorised the holder to conduct gaming on gaming machines at approved venues in Victoria. Approved venues were essentially club and hotel premises, the operators of which held venue operator's licences. The relevant gaming machines were primarily poker machines or 'pokies'.

17 On 14 April 1992, the TAB and the Trustees of the Will and Estate of the late George Adams (the 'Trustees') were each granted a gaming operator's licence for 20 years under s 33 of the 1991 Act. The Trustees conducted business under the name 'Tattersalls', often shortened to 'Tatts'. In 1998, the estate administered by the Trustees was restructured and corporatised. One of the resulting corporate entities, Tatts Group Limited ('Tatts'), became the holder of the gaming operator's licence previously held by the Trustees. In a separate proceeding before the Court, Tatts claims similar relief to that claimed by Tabcorp in this proceeding. Judgment in the Tatts proceeding is also delivered today.[4] For convenience, I will refer to the Trustees as 'Tatts' unless it is necessary to refer to the Trustees specifically.

18 Neither the TAB nor Tatts paid any fee to the State for the grant of the gaming operator's licences.

19 In 1993, the Club Keno Act 1993 (Vic) came into force. Under that Act, the TAB and the Trustees were authorised to conduct a lottery-style game known as 'keno' or 'club keno'.

20 On 21 December 1993, the Premier of Victoria (Mr Kennett) issued a news release announcing the Government's proposal to float the TAB on the stock exchange, with the 'racing industry' to hold a 25 per cent shareholding and the other 75 per cent to be held by the public. The announcement foreshadowed the release of a prospectus for the proposed public company by 30 June 1994. The Premier noted that the racing industry was yet to give a final response to the float proposal.

21 On or about 15 March 1994, the Treasurer, for and on behalf of the State, entered into a Memorandum of Understanding ('MOU') in relation to the float with the Victoria Racing Club, the Victoria Amateur Turf Club, the Moonee Valley Racing Club Inc, the Victorian Country Racing Council Inc, the Harness Racing Board (for and on behalf of the Harness Racing Clubs of Victoria) and the Greyhound Racing Control Board (for and on behalf of the Greyhound Racing Clubs of Victoria) (together, 'the racing industry').

22 The MOU provided, amongst other things, that the Government would seek the passage of necessary legislation through the Parliament to give effect to understandings that:

(1) a wagering licence and a gaming licence would be held by Tabcorp for a minimum term of 18 years;

(2) the renewal of the licences at the end of the initial term of 18 years would be for a further period of not less than 18 years; and

(3) the terms of the renewal of the licences at the end of the initial term of 18 years, and for each and every subsequent renewal, would require the holder of the licences to enter into agreements with the racing industry not less advantageous to the racing industry than the 'joint venture agreement' and other relevant agreements referred to in the MOU.

23 The joint venture agreement contemplated by the MOU was an agreement between Tabcorp and the racing industry regarding the establishment and operation of a joint venture, through which Tabcorp and the racing industry would conduct all gambling activity that the TAB was, at that time, authorised to conduct.

24 On or about 25 May 1994, as contemplated by the MOU, Tabcorp (and related companies) entered into the following agreements with companies representing the racing industry:

(C) The Gaming and Betting Act

25 To facilitate the float of the TAB, the Government introduced the Gaming and Betting Bill 1994 (Vic) into Parliament. The Second Reading Speech to that Bill confirmed that the legislation was designed to provide a regulatory framework for the privatisation of the TAB and to facilitate the successful public float of the TAB.[5] The Explanatory Memorandum to the Bill commenced by stating:

The Bill provides for the issue of a wagering licence and a gaming licence to TABCORP Holdings Limited ('Tabco') to authorise the licensee, and a wholly owned subsidiary of the licensee as operator, to conduct wagering, approved betting competitions, gaming operations and club keno.[6]

26 The 1994 Act passed through the Parliament on 25 May 1994 and all material provisions were in force by 15 August 1994.

27 Section 1 of the 1994 Act contained the following statement of its purpose:

1. Purpose

The purpose of this Act is to make provision for the carrying on, under licence or permit, of -

(a) a business of wagering;

(b) a business of conducting approved betting competitions;

(c) a business of conducting gaming;

(d) a business of conducting club keno;

(e) a business of on-course wagering.

28 On 28 June 1994, the Governor in Council of Victoria granted the wagering licence and the gaming licence to Tabcorp pursuant to ss 12(1)(a) and (b) of the 1994 Act. The licences commenced operation on the 'appointed day', being 15 August 1994. On 29 August 1994, Tabcorp paid to the Treasurer the 'allotment amount' (the proceeds of the float after some deductions - a net sum of $597.2 million) as consideration for the grant of the licences.

29 The Act was enacted in December 2003. It commenced operation on 1 July 2004.

30 Section 1.1 of the Act provided that the main purpose of the Act was to re-enact and consolidate the law relating to various forms of gambling and to establish a Victorian Commission for Gambling Regulation (the 'Commission'). It repealed eight existing Acts that prohibited or regulated various forms of gambling, including the 1991 Act, the Club Keno Act and the 1994 Act.

31 Chapter 4 of the Act materially re-enacted Tabcorp's authorisations to conduct wagering activities and gaming machine operations under its existing wagering licence and gaming licence. The gaming licence and the wagering licence granted under s 12 of the 1994 Act were taken to be licences under Part 3 of Chapter 4 of the Act.[7]

32 Section 4.3.12(1) of the Act materially re-enacted the terminal payment provision in s 21 of the 1994 Act:

4.3.12 Entitlement of former licensee on grant of new licences

(1) On the grant of new licences, the person who was the holder of the licences last in force (the former licences) is entitled to be paid an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.

(2) The person who was the holder of the former licences is entitled to the payment under subsection (1) whether or not the person was, or was entitled to be, an applicant for the new licences.

(3) ...

33 Chapter 3 of the Act materially re-enacted Tatts's entitlement to conduct gaming machine operations under its existing gaming operator's licence.

34 Chapter 6 of the Act materially re-enacted the provisions of the Club Keno Act in respect of the conduct of keno games.

35 By a declaration made on 16 April 2008 under s 3.2.3 of the Act, the Minister directed that:

(1) the maximum number of gaming machines available for gaming in all approved venues in Victoria, other than the Melbourne Casino, was 27,500; and

(2) Tabcorp and Tatts could each operate 50 per cent of those gaming machines.

The declaration remained in force until the expiry of Tabcorp's gaming licence and Tatts's gaming operator's licence on 15 August 2012.

36 The Act was amended by the Gambling Regulation Amendment (Licensing) Act 2008 (Vic) (the '2008 amendments'), which commenced operation on 27 August 2008.

37 Section 8 of the 2008 amendments inserted Part 3A into Chapter 4 of the Act. The new Part 3A provides for:

(1) the grant of a 'wagering and betting licence';[8]

(2) payment by the holder of the wagering and betting licence of one or more amounts that the Minister may determine and require as the premium payment for the licence;[9]

(3) the activities authorised by the wagering and betting licence, namely:[10]

(4) a 12-year term for the wagering and betting licence.

38 The first wagering and betting licence was to come into operation upon the expiry of Tabcorp's wagering licence and gaming licence, which had been issued on 28 June 1994.[11] Section 4.3A.2 provides that there can be no more than one wagering and betting licence in operation at any time.

39 Critically, s 6 of the 2008 amendments inserted s 4.3.4A in Part 3 of Chapter 4 of the Act. That section is in the following terms:

4.3.4A Application of Part

(1) This Part applies only with respect to the wagering licence and gaming licence that were issued on 15 August 1994 and does not authorise the grant of any further wagering licence or gaming licence.

(2) Subsection (1) does not prevent the appointment of a temporary licensee under s 4.3.33 if the licences referred to in sub-section (1) are cancelled.

40 The 2008 amendments also inserted a new Chapter 6A into the Act, which provides for:

(1) the grant of a single licence known as a 'keno licence';

(2) payment by the holder of the keno licence of one or more amounts that the Minister may determine and require as the premium payment for the licence;

(3) the activities authorised by the keno licence, namely the conduct of keno games under Chapter 6A and any conditions to which the licence is subject; and

41 In June 2009, the Act was further amended by the Gambling Regulation Amendment (Licensing) Act 2009 (the '2009 amendments'), which in large part commenced operation on 24 June 2009.

42 The 2009 amendments inserted Part 4A into Chapter 3 of the Act. Part 4A provides for, among other things:

(1) the creation and allocation to the operators of approved venues ('venue operators') of gaming machine entitlements;

(2) the ability of the Minister to determine whether an amount or amounts must be paid for the entitlements;

(3) the activities authorised by the gaming machine entitlements, namely: the acquisition of approved gaming machines and restricted components, the conduct of gaming on an approved gaming machine in an approved venue, and the doing of all things necessarily incidental to the carrying on of the authorised activities; and

(4) a 10-year term for gaming machine entitlements.

(G) The grant of licences and entitlements under the new regimes

43 On or about 19 December 2011, the Minister for Gaming issued the wagering and betting licence to a wholly owned subsidiary of Tabcorp, Tabcorp Wagering (Vic) Pty Ltd, to operate from 16 August 2012 on the expiry of Tabcorp's two licences. On or about 19 January 2012, Tabcorp Wagering paid $410 million to the State as consideration for the wagering and betting licence.

44 On or about 25 March 2011, the Minster for Gaming issued the keno licence to a wholly owned subsidiary of Tabcorp, Tabcorp Investments No 5 Pty Ltd. In April 2011, Tabcorp Investments paid $60 million to the State as consideration for the keno licence.

45 Tabcorp's keno licence commenced on 15 April 2012, with the result that there was no period of overlap with the previous keno regime operated by Tabcorp and Tatts.

46 On 7 June 2010, the Minister for Gaming created 27,500 gaming machine entitlements, and determined that their effective date was 16 August 2012. On various dates in 2010, the Minister for Gaming allocated a total of 27,300 gaming machine entitlements to approved venue operators, to commence on expiry of the gaming licence held by Tabcorp and the gaming operator's licence held by Tatts. Recipients of gaming machine entitlements were required to pay a total of approximately $981 million to the State.

47 Against this background, I proceed to consider the issues for determination.

Is Tabcorp entitled to the terminal payment specified in s 4.3.12 of the Act?

48 As stated above, the State denies Tabcorp's statutory claim on two grounds. First, the State contends that no 'new licences' within the meaning of the terminal payment provision have been granted and, accordingly, the contingency triggering Tabcorp's entitlement to payment has not occurred. Second, the State contends that the terminal payment provision was impliedly repealed, or 'rendered inoperative', by the 2008 and 2009 amendments. Both issues raise questions of statutory interpretation. Indeed, there is a central interpretation issue which can be simply stated.

49 The State contends that the phrase '[o]n the grant of new licences' in s 4.3.12(1) has a specific limited meaning: it means on the grant of new licences under Part 3 of Chapter 4 of the Act. In other words, s 4.3.12(1) should be read as if it included the emphasised words in the following re-write of the section:

(1) On the grant of new licences under this Part, the person who was the holder of the licences last in force (the 'former licences') is entitled to be paid an amount equal to the licence value of the former licences or the premium payment paid by the new licensee, whichever is the lesser.

50 Tabcorp contends that the phrase '[o]n the grant of new licences' in s 4.3.12 has a broader generic meaning: that the words should be understood in their natural and ordinary sense, as a reference to the grant of licences that did not previously exist and which authorise the conduct of wagering and gaming businesses that would otherwise be unlawful. Tabcorp contends that, when the matter is looked at as one of substance and not form, the grant of gaming machine entitlements to licensed venue operators amounts to the granting of new licences authorising gaming in Victoria; and that the wagering and betting licence granted to it falls within the meaning of a new licence authorising wagering.

51 So the central issue is whether the key words should be given a specific (or narrow) meaning, or a generic (or ordinary) meaning. I will refer to the rival positions as the 'specific meaning' contention and the 'generic meaning' contention.

52 It is first necessary to determine whether to accept the specific or generic meaning of the critical words on a proper interpretation of the language of the Act as it stood before the 2008 and 2009 amendments. It is then necessary, in the light of the answer to that central question, to interpret those amendments and consider their effect on the terminal payment provision.

(A) Should the specific or generic meaning apply?

53 As the High Court has repeatedly stated, the process of statutory construction involves beginning with the words of the statute and then considering those words in light of their context and the purpose of the provision to be interpreted. In Federal Commissioner of Taxation v Unit Trend Services Pty Ltd, French CJ, Crennan, Kiefel, Gageler and Keane JJ stated:

As French CJ, Hayne, Crennan, Bell and Gageler JJ said in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd: 'This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text'. Context and purpose are also important. In Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross French CJ and Hayne J said:

The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky Inc v Australian Broadcasting Authority, '[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute' ... That is, statutory construction requires deciding what is the legal meaning of the relevant provision 'by reference to the language of the instrument viewed as a whole', and 'the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed'.[12]

54 Earlier, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue), Hayne, Heydon, Crennan and Kiefel JJ stated:

This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.[13]

55 Most recently, in Thiess v Collector of Customs & Ors, French CJ, Hayne, Kiefel, Gageler and Keane JJ stated:

Statutory construction involves attribution of meaning to statutory text. As recently reiterated:

'This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text'. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text.[14]

56 Consistent with these general principles, s 35(a) of the Interpretation of Legislation Act 1984 (Vic) provides that 'a construction that would promote the purpose or object underlying the Act ... shall be preferred to a construction that would not promote that purpose or object'. Section 35(b) empowers the Court to consider 'any matter, document or thing that is relevant' to the interpretation of a provision. To similar effect is s 15AA of the Acts Interpretation Act 1901 (Cth).

57 In Thiess, the High Court described the search for statutory purpose as:

... a particular statutory reflection of a general systemic principle. For:

it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.[15]

58 In addition to these general principles of statutory interpretation, there are some specific principles which are relied upon in this case. They are considered below.

59 As stated, the interpretative task must commence with consideration of the text of the terminal payment provision in the context of the Act as a whole. I start with the text of the Act as it stood before the 2008 and 2009 amendments.

60 The relevant part of the Act is Part 3 of Chapter 4. For convenience, I will refer to this as 'Part 3'. Part 3 concerns the wagering licence and the gaming licence held by Tabcorp. It is divided into eight Divisions:

(1) Division 1 concerns the extent of the authorities granted by the licences.

(2) Division 2 concerns the grant of licences. Importantly, the two licences must be granted to, and held by, the same person.

(3) Division 3 contains the terminal payment provision.

(4) Division 4 concerns the appointment of wagering and gaming operators, who must be wholly owned subsidiaries of the defined 'licensee'.

(5) Division 5 concerns regulation of the shareholding interests in the licensee.

(6) Division 6 concerns further licensing restrictions and requirements on the licensee and the operator.

(7) Division 7 concerns disciplinary action and cancellation of the licences.

61 This divisional structure demonstrates that Part 3 is a self-contained part dealing with Tabcorp's licences, applications for further licences following cancellation or expiry of Tabcorp's licences, and regulation of the licensee and the operators from time to time.

62 The following definitions and key aspects of Part 3 are relevant to determining the meaning of the critical words:

(1) 'wagering licence' is defined as meaning 'the wagering licence granted under Part 3 of Chapter 4'.[16]

(2) 'gaming licence' is defined as meaning 'the gaming licence granted under Part 3 of Chapter 4'.[17]

(3) 'licensee' is defined as meaning 'the holder of the wagering licence and the gaming licence'.[18]

(4) Under s 4.3.3 there can only be one wagering licence and one gaming licence in operation at any time.

(5) Under s 4.3.4, 'the wagering licence and the gaming licence are not transferrable to any other person'.

(6) Division 2 of Part 3 provides that applicants can only apply for and be granted 'a wagering licence and a gaming licence' together - it is not possible to apply for, or be granted, only a wagering licence or only a gaming licence.[19]

(8) Section 4.3.12, the terminal payment provision, includes a number of expressions cognate to the term 'licence': 'new licences', 'licences last in force', 'former licences', and 'new licensee'. The use of the plural 'new licences' in conjunction with the singular 'new licensee' is consistent with the requirement in Division 2 that the defined wagering licence and gaming licence be granted and held by the same licensee. The terms 'licences last in force' and 'former licences' are obviously references to the defined licences.

(9) The formula for calculating 'licence value' in s 4.3.13 applies to holders of later licences, not only Tabcorp.[20] This shows that Part 3 was then intended to have continuing operation in relation to later wagering licences and gaming licences.

63 Notably, the Act essentially replicated and replaced the provisions of the 1994 Act, but with two relevant changes:

(1) 'Licence' had been defined under the 1994 Act as 'the wagering licence or the gaming licence granted under Part 2' of that Act. The definition of 'licence' was not re-enacted in the Act, but the definitions of 'gaming licence', 'wagering licence', and 'licensee' were retained and updated. The deletion of the definition of 'licence' is explicable on the basis that the Act consolidated the statutory regimes concerning many different forms of licences relating to gambling, beyond the wagering and gaming licences. The Act includes regulation of gaming operator's licences, bingo centre employee's licences, bingo centre operator's licences, casino licences, club licences, pub licences, racing club licences, interactive gaming licences, public lottery licences, special employee's licences, technician's licences and venue operator's licences.

(2) A reference to 'initial licences' in section 21 of the 1994 Act was removed from the successor provision, s 4.3.12, presumably as it was no longer necessary given those licences had already been issued. The definition in the 1994 Act of 'initial licences' was also not included in the Act, notwithstanding that the phrase had a continuing use in integer C of the formula in s 4.3.13 for calculating the licence value in s 4.3.12.

64 The generic meaning contention requires that the words 'new licences' and 'new licensee' be understood:

(1) in s 21 of the 1994 Act, as not incorporating the definitions of 'licence' and 'licensee'; and

(2) in s 4.3.12 of the Act, as not incorporating the defined terms 'wagering licence', 'gaming licence' and 'licensee'. The State contends that this interpretation makes no sense, as it requires the definitions to be ignored in some, but not all, parts of the same section. The State contends that such an interpretation is inconsistent with every other use of the word 'licence' and cognate expressions throughout Part 2 of the 1994 Act and Chapter 4 of the Act. Moreover, the State submits that where the plural term 'licences' is used it always means the conjoined wagering licence and gaming licence. Examples include references to 'licence' and 'licences' in ss 4.3.3 to 4.3.9, in particular ss 4.3.6(1) and 4.3.8(2), and in ss 4.3.32 and 4.3.33.

65 Tabcorp contends that ambiguity arises because the composite phrase 'new licences' is a concept which was specifically provided for in both Part 2 of the 1994 Act and in Part 3 of the Act prior to the 2008 and 2009 amendments; but not afterwards when it was replaced by the new licensing regime. In these circumstances, Tabcorp contends that the purpose or object of the terminal payment provision is critical - because a regime change was always possible and the legislature should be taken to have intended that licences to conduct wagering and gaming under a new regime would be 'new licences' for the purposes of that provision, notwithstanding that they did not fall within the definitions and may not be granted conjointly but to separate licensees.

66 I turn to consider the purpose or object of the terminal payment provision.

67 Evidence as to the mischief to which s 4.3.12 was directed, when originally enacted as s 21 of the 1994 Act, is relevant and admissible in determining the purpose or object of the terminal payment provision. The evidence established that the mischief was the need to ensure that Tabcorp did not have to amortise the value of the licences in the profit forecasts contained in the float prospectus. Amortisation would have had a significant negative effect on the profit forecasts and made it less attractive to investors, thus reducing the float proceeds available to Tabcorp for payment to the State as consideration for the grant of the licences. This object was achieved by enacting the terminal payment provision, thus enabling the State to receive hundreds of millions of dollars more than it would have received if amortisation had been required. The achievement of this object was at the price of the promise contained in the terminal payment provision; albeit a promise which was always subject to the sovereign risk of repeal or alteration by Parliament. The formula for calculation of the terminal payment demonstrates an intention that the statutory promise, if fulfilled, would be revenue neutral for the State - because the terminal payment could never exceed the premium paid for the new licences.

68 Tabcorp's contentions involve the following steps.

69 First, Tabcorp contends that s 4.3.12 does not contain the words 'under this Part', which the specific meaning contention effectively requires to be read into the section. The definition in the 1994 Act of 'licence' as meaning 'the wagering licence or the gaming licence granted under Part 2' was not determinative at that time, because the phrase used in the terminal payment provision was 'on the grant of new licences', and 'new licences' is capable of being read as an undefined composite phrase. It would have been an easy matter for Parliament to include the words 'under this Part', or specify 'on the grant of a new wagering licence and a new gaming licence', if that had been Parliament's intention. Moreover, on re-enactment and consolidation in 2003, the Act jettisoned the definition of 'licence', with the result that its meaning in that Act depends throughout on its ordinary meaning in context. The ordinary meaning of 'licence' is no more than a permit to do something that would otherwise be unlawful.[21]

70 Second, Tabcorp acknowledges that, outside of s 4.3.12, Part 3 uses the term 'licences' to refer to licences under that Part. Tabcorp contends, however, that this is because the references either use the defined terms 'wagering licence' or 'gaming licence' expressly, or the context makes it plain that the general references to 'licence' or 'licences' are used in that confined sense. For example:

(1) References to 'initial licences' in the 1994 Act were to a defined term, which confined them to the specific meaning.

(2) The 'later licences' referred to in s 14 of the 1994 Act were, from their context, obviously confined to the specific meaning.

(3) The reference in s 4.3.33(3) of the Act to 'another licence under this Part' is expressly confined to the specific meaning.

(4) In Division 2 of Part 3, concerning the grant of licences, s 4.3.6(1) states that the Commission must not recommend that 'a licence be granted' unless satisfied of specified matters. It is clear from the preceding section (s 4.3.5) that it is speaking of a wagering licence and a gaming licence as defined. The same may be said of the references to 'the grant of the licences' in s 4.3.7, the references in s 4.3.8(2) to the Governor not granting 'the licences' unless satisfied of certain matters, and the references in ss 4.3.9 and 4.3.10 to 'each licence' and 'the licences'.

(5) Similarly, in Division 7 of Part 3, concerning disciplinary action and cancellation, it is clear from ss 4.3.31 and 4.3.32(1) that the references in ss 4.3.32(2) and 4.3.33 to 'the licences' are references to the wagering licence and the gaming licence.

(6) There are occasions where an additional narrowing element, similar to that which the State contends should be read into s 4.3.12, is made express. For example:[22]

(a) Section 3.3.13 refers to 'premises approved under this Part'.

(b) Section 3.8.1 refers to a licence holder 'under this Chapter'.

(c) Section 4.2.1(1) refers to 'a licence or permit granted under this Chapter'.

(d) Section 4.3.27 refers to 'forfeiture under this Division'.

(e) Section 4.3.33(3) provides for termination of a temporary licence 'by the grant of another licence under this Part'.

71 Tabcorp contends that these examples demonstrate that when Parliament intended to confine references to 'licences' or 'a licence' it did so by express language or necessary implication having regard to the context. Tabcorp contends that s 4.3.12 contains no such confining language. The section appears at the commencement of a separate Division in Part 3, and there is nothing about its context in the Act which dictates that the composite phrase 'new licences' should be confined in its meaning to licences 'under Part 3'.

72 Third, Tabcorp contends that the definition of 'licensee', as the holder of both a wagering licence and a gaming licence, does not inform the meaning of the composite phrase 'new licences' in s 4.3.12, because:

(1) the reference to the 'new licensee' in that provision must take its meaning from 'new licences'. In other words, the composite phrase 'the new licensee' is a reference to the holder of the 'new licences', and is thus not confined by the definition of 'licensee';

(2) the singular 'new licensee' does not confine the term 'new licences' to mean conjoined wagering and gaming licences under Part 3, because, under s 37 of the Interpretation of Legislation Act, the singular includes the plural and no contrary intention appears in the Act if the phrase 'new licences' is given a generic meaning;[23] and

(3) notwithstanding the confined definition of 'licensee', the term is used in Chapter 4 of the Act in other than the defined sense, albeit where the context dictates that it does not have the defined and specific meaning. For example, in s 4.2.9(1) and (3), s 4.2.10(2) and s 4.2.11, where the composite phrase 'wagering and betting licensee' and 'the licensee' are used interchangeably.

73 Fourth, Tabcorp contends that the use of the word 'on' in s 4.3.12 - 'on the grant of new licences' - assumes that some form of new licences will be granted. That assumption is consistent with the purpose or object of the terminal payment provision. It is also consistent with the structure of the Act which, until amendment, provided for the grant of further licences under Part 3.

74 Fifth, Tabcorp contends that it would defeat the purpose of the provision to confine it to the specific meaning contended for by the State, thus enabling the payment obligation on which investors in Tabcorp relied to be avoided by the (perhaps unintended) side-wind of making changes to the source, but not the material substance, of the regime or regimes authorising wagering and gaming; for example, by placing those regimes in a different part of the Act, or even in another Act. Such a result would be inconsistent with providing for a 'near certain occasion for the re-payment of the licence fee', so that, consistent with the purpose or object of the provision, the licence fee did not need to be amortised in Tabcorp's profit forecasts in the prospectus or in its later accounts. On this basis, Tabcorp contends that only the generic meaning would promote the purpose or object of the provision and, as the generic meaning is open on the words of the Act, it should be preferred - as s 35(a) of the Interpretation of Legislation Act requires.

75 I do not accept Tabcorp's generic meaning contentions. In my opinion, Parliament intended the specific meaning to apply to the critical words. The statutory language is simply too strict to allow the generic meaning to be attributed to the critical words in accordance with Tabcorp's submissions. When read as a whole, the structure and language of Chapter 4 of the Act, in particular Part 3, makes it plain that the phrase 'new licences' in s 4.3.12 refers to a subsequent gaming licence and a subsequent wagering licence as defined, each being a licence 'granted under Part 3 of Chapter 4' of the Act. My reasons follow.

76 First, Part 3 establishes a discrete regime concerned solely with a wagering licence and a gaming licence as defined. It is headed 'Wagering Licence and Gaming Licence'. Sections 4.3.1 and 4.3.2 describe the authority granted by the respective licences, and s 4.3.3 provides that only one wagering licence and one gaming licence may operate at the same time.

77 Second, the unambiguous intent of Part 3 is that the wagering licence and the gaming licence must be granted to and held by the same person. Section 4.1.1(b) provides that a purpose of Chapter 4 is to provide for 'the issue of a gaming licence in conjunction with the issue of a wagering licence, allowing the licensee to conduct gaming in accordance with Chapter 3'.[24] Section 4.1.2 defines 'licensee' as 'the holder of the wagering licence and the gaming licence'. This intention is also implicit from a variety of provisions in Part 3. For example:

(1) Section 4.3.4 provides that 'the wagering licence and the gaming licence are not transferrable to any other person';

(2) Section 4.3.5(1) provides that applications may be made for the grant of both a wagering licence and a gaming licence;

(3) Section 4.3.7(1) provides that 'the Commission must determine whether or not to grant the licences';

(4) Section 4.3.8(1) provides that the Governor in Council may grant a wagering licence and a gaming licence; and

(5) Section 4.3.32 provides that 'the wagering licence and the gaming licence' can only be cancelled together.

78 Third, Division 2 of Part 3 addresses the grant of the wagering licence and the gaming licence, and those licences are referred to in shorthand as 'the licences' in numerous provisions in the Division and elsewhere within Part 3.[25] None of these shorthand references are accompanied by an additional narrowing element such as 'under this Part' or 'under this Chapter'.

79 Fourth, the phrase 'new licences' also appears in s 4.3.9, which provides:

4.3.9 Duration of licences and licence conditions

(1) Each licence is for a term of 18 years, or a longer term determined by the Governor in Council and set out in the licence, and is subject to the conditions set out in the licence and any conditions imposed by this Act.

(2) If, because of section 4.3.8(2), the Governor in Council is unlikely to grant the licences before the expiration of the term of 18 years of the licences held by the current licensee, the Governor in Council may, by Order published in the Government Gazette, approve the extension of the term of the current licences until the commencement of the new licences or for any shorter period specified in the Order.

80 It is clear that the phrase 'new licences' in s 4.3.9 means a subsequent wagering licence and a subsequent gaming licence, in contradistinction to the 'current licences' which are referred to. This is comparable to s 4.3.12, where 'new licences' is used in contradistinction to the term 'former licences'. In each case, the word 'new' carries only a temporal significance, doing no more than identifying the licences that are to be issued later in time. In my opinion, the word 'new' has no other bearing on the meaning of the term 'licences'.

81 In light of these textual considerations, it would in my opinion be inconsistent with the coherent meaning and operation of Part 3 as a whole to construe 'new licences' in s 4.3.12 as referring to anything other than a wagering licence and a gaming licence as defined. This result is reinforced by the use of the singular reference to the person who is to hold the 'new licences' - being a 'new licensee'. The reference to a singular holder of the new licences is consistent with the structure of Part 3 as a whole, which requires that the defined wagering licence and gaming licence be held by the defined 'licensee'.

(1) The first contention requires the Court to read 'new licences' and 'new licensee' without reference to the definitions in the Act or the requirement for both licences to be granted and held conjointly.

(2) The second contention, that all other references to a 'licence' or 'licences' in Part 3 depend on their context (or express terms) to attract the defined meanings, may be accepted. Nevertheless, it indicates that the parliamentary draftsperson has used the words consistently throughout the whole of the Part, including in s 4.3.12 itself (for example, 'licences last in force', 'former licences').

(3) As to the third contention, I accept that the phrase 'new licensee' depends for its meaning on the proper meaning of 'new licences'. So, if the generic meaning were to be accepted, the definition of 'licensee' would not prevent the reference to a 'new licensee' being read in a generic sense also. But, given my rejection of the generic meaning, this contention cannot assist Tabcorp.

(4) The fourth contention is inconsistent with the plain requirement that the terminal payment is contingent on the grant of new licences. That was never a certain event, especially in the context of a fledgling gaming machine industry. Future government policy could have terminated the industry and re-imposed the total prohibition on gaming machines which prevailed in Victoria until 1991.

(5) As to the fifth contention, until the 2008 and 2009 amendments, new licences in accordance with the statutory definitions could be granted, thus enabling the operation of the terminal payment provision, consistent with the purpose of that provision. Accordingly, there was no need for a generic meaning to promote the purpose during the currency of the pre-amendment regime.

83 Tabcorp also seeks to support its generic meaning contention, in relation to the Act as it stood before the 2008 and 2009 amendments, by reference to the 'always speaking' principle of interpretation.

84 The text of a statute is ordinarily to be read as 'always speaking' or 'speaking continuously in the present'.[26] In Chubb Insurance Co of Australia Ltd v Moore, Emmett and Ball JJA (Bathurst CJ, Beazley P and Macfarlan JA agreeing) summarised this principle:

Another way of putting that proposition is that a statute should generally be construed so as to apply to all things coming within the denotation of its terms, having regard to their connotation at the time of enactment. The connotation of a word or phrase is its essential attributes, which are to be determined as at the time of enactment. The denotation of a word or phrase is the class of things that, from time to time, may be seen to possess those essential attributes sufficiently to justify the application of the word or phrase to them.[27]

85 Tabcorp contends that when enacted in 1994, and re-enacted in 2003, the terminal payment provision was intended to have continuing operation to 'later licences' (see s 14 of the 1994 Act) or to 'another licence' (see ss 4.3.5 and 4.3.33(3) of the Act) in circumstances where, unless Tabcorp's licences were cancelled prior to expiry and new licences were granted before that time, the terminal payment provision was not intended to operate for at least 18 years. In these circumstances, giving the composite phrase 'new licences' the generic meaning makes it amenable to the application of the 'always speaking' principle - to allow the words to attach to new species of licences or other authorisations for the conduct of wagering and gaming businesses as and when they arise. Tabcorp contends that such a result is consistent with the purpose or object of the terminal payment provision, especially in circumstances where the benefit to the State from the increased float proceeds, and consequent increased licence consideration, had already been achieved.

86 These contentions seek to use the always speaking principle for an impermissible purpose - to support a generic connotation. In my opinion, the always speaking principle depends for its operation on the existence of a generic connotation in the relevant statutory provision as properly construed at the time of enactment. My reasons follow.

87 The argument in Chubb Insurance concerned whether a 'claims made' contract of insurance fell within the general description of 'a contract of insurance by which the person is indemnified against liability to pay any damages or compensation ... on the happening of the event giving rise to the claim for damages or compensation' in s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Unlike here, there was no question that the description was of a generic kind, capable of application to any contract of insurance which had the effect stipulated. The argument in the case for exclusion of a claims made contract of insurance from the statutory description was based upon the fact that such policies were not in the contemplation of the Parliament when the section was enacted. So the facts of the Chubb Insurance case do not assist in resolving the issues in this case.

88 The only authority cited in Chubb Insurance concerning the 'always speaking' principle was the decision of Campbell J (as he then was) in Hore v Albury Radio Taxis Co-operative Society Ltd.[28] The facts of that case are also unhelpful to this case. In the course of interpreting the relevant legislative provision, Campbell J referred to the 'always speaking' principle in some detail, referring with approval to statutory interpretation texts and noting some of the decided cases in an appendix to his reasons. His Honour emphasised that the principle can only be applied where the provision at issue, on its proper construction, uses the words in question in a generic sense:

However, some caution must be applied in the exercise of this principle. There is still a question of construction which needs to be decided, about whether a particular expression ought to be construed, in the context of the particular legislation in which it occurs, as actually extending to some new state of affairs to which it might arguably extend.[29]

89 In Wilson v Commissioner of Stamp Duties,[30] the New South Wales Court of Appeal rejected an argument that an exemption from stamp duty on hiring arrangements relating to the use of 'a motion picture film' extended to include hiring arrangements for video cassettes. That argument was rejected on the basis that, properly construed, a 'motion picture film' had a particular or specific meaning and not a generic one capable of wider application to technological advances in film technology. This result was reached on a number of interpretative grounds, including a review of the legislative history and the statutory purpose behind the particular exemption.

90 The approach in Wilson was confirmed by Spigelman CJ in the New South Wales Court of Appeal in Deputy Commissioner of Taxation v Clark, where his Honour stated that the application of the always speaking principle required the Court to be 'satisfied that the word or words was or were intended to be used in a generic sense in the relevant statute'.[31]

91 In oral submissions, Tabcorp relied on the English Court of Appeal decision in Victor Chandler International v Customs and Excise Commissioners and Anor.[32] In my opinion, that case is an example of the application of the always speaking principle in the context of generic language. It adds nothing to the Australian authorities discussed above.

92 For the reasons given above, I have rejected Tabcorp's contention that the generic meaning applied to the phrase 'new licences' in s 4.3.12 before the 2008 and 2009 amendments, and instead accepted the State's specific meaning contention. In order to meet this eventuality, Tabcorp contends that the specific meaning altered to a generic meaning when the 2008 and 2009 amendments introduced a new species of statutory authorisations to conduct the otherwise unlawful businesses of wagering, gaming and keno; thus allowing the always speaking principle to operate and embrace those new species of authorisations. I will refer to this contention as 'the altered meaning contention'. It is relevant to the implied repeal issue, to which I now turn.

(B) Was s 4.3.12 impliedly repealed by s 4.3.4A?

93 There are a number of overlapping principles of statutory interpretation which are relevant to the implied repeal issue.

94 First, in the absence of express words, very strong grounds are required to found a conclusion that an earlier statutory provision is repealed by a later provision. In Goodwin v Phillips, Barton J adopted the following statement from Craies on Statute Law:

'The Court must ... be satisfied that the two enactments are so inconsistent or repugnant that they cannot stand together, before they can from the language of the later imply the repeal of an express prior enactment, i.e., the repeal must, if not express, flow from necessary implication.' [33]

If, therefore, there is fairly open on the words of the later Act, a construction by adopting which the earlier Act may be saved from repeal, that construction is to be adopted. ... If the conditions are irreconcilable with the prior enactment, then to that extent the two cannot stand together.[34]

96 Later High Court authority has confirmed this approach to questions of implied repeal. For example, in South-Eastern Drainage Board (SA) v Savings Bank of South Australia, Dixon J (as he then was) formulated a test for implied repeal by reference to whether it was 'impossible to reconcile' the later and earlier provisions.[35] More recently, in Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom, Gummow and Hayne JJ said that the doctrine requires 'that actual contrariety be clearly apparent and that the later of the two provisions be not capable of sensible operation if the earlier provision still stands'.[36]

97 Second, consistent with the principles concerning implied repeal, the principle of legality is relevant. This principle was stated from an early time in the High Court by O'Connor J in Potter v Minahan in the following terms:

It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness ...[37]

98 Third, although State parliaments have the power to deprive citizens of existing rights without making compensation, in contrast to the Commonwealth under the Commonwealth Constitution,[38] it remains a 'principle of statutory construction that, unless it is unavoidable, an enactment should not be construed in a manner that would lead to the loss of a person's valuable rights without payment of compensation'.[39] This principle was recently stated by McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Ltd, affirming the principle as expressed in Clissold v Perry:[40]

Clissold v Perry held that legislation is presumed not to interfere with existing vested proprietary interests without adequate compensation. Griffith CJ said:

In considering this matter it is necessary to bear in mind that it is a general rule to be followed in the construction of Statutes such as that with which we are now dealing, that they are not to be construed as interfering with vested interests unless that intention is manifest.

The principle applied in Clissold is but a particular exemplification of the wider principle that, in the absence of clear words, legislation is not construed as intending to interfere with economic rights and interests without compensation.[41]

99 In Clissold v Perry, Griffith CJ said that the principle applied to 'vested interests'. In Potter v Minahan, O'Connor J expressed the principle as applying to 'rights'. In this case, although contingent, Tabcorp's right under the terminal payment provision was clearly a valuable right and, in my opinion, subject to this principle of statutory interpretation.

100 Fourth, there is a presumption that a later general enactment is not intended to interfere with an earlier special provision unless the later general enactment manifests that intention very clearly.[42]

101 Fifth, all words in a statute must prima facie be given some meaning and effect. This principle may be more compelling if the word or phrase in question has been added by amendment,[43] but the principle applies to all legislation. In Project Blue Sky Inc v Australian Broadcasting Authority, McHugh, Gummow, Kirby and Hayne JJ approved an earlier statement that:

it was 'a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent'.[44]

102 Sixth, there is a general substantive presumption of statutory interpretation that the legislature does not intend to achieve a result that is manifestly unfair or unreasonable. In Commissioner for Railways (NSW) v Agalianos, Dixon CJ said that 'the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed'.[45] That statement has been expressly approved by the High Court on a number of occasions.[46]

103 The presumption against manifestly unfair or unreasonable results is often applied in circumstances where the Court considers that the literal operation of the statute leads to absurd, extraordinary, capricious or irrational results, such that 'the legislature could not have intended such an operation and that an alternative interpretation must be preferred'.[47] Of course, for this presumption to be applied the language must not be 'intractable' - there must be a reasonable alternative interpretation available on the words of the statute.[48]

104 Seventh, s 14(2)(e) of the Interpretation of Legislation Act provides:

(2) Where an Act or a provision of an Act -

(a) is repealed or amended; or

(b) expires, lapses or otherwise ceases to have effect -

the repeal, amendment, expiry, lapsing or ceasing to have effect of that Act or provision shall not, unless the contrary intention expressly appears -

(c) ...

(d) ...

(e) affect any right, privilege, obligation or liability acquired, accrued or incurred under that Act or provision; ...

105 The key amending provision relied upon by the State to support its implied repeal case is s 4.3.4A. Reliance is also placed on the whole of Parts 3A and 4A of Chapter 4, and on s 3.4.1A.

106 Section 4.3.4A was introduced into Part 3 by the 2008 amendments. It provides:

(1) This Part applies only with respect to the wagering licence and gaming licence that were issued on 15 August 1994 and does not authorise the grant of any further wagering licence or gaming licence.

(2) Subsection (1) does not prevent the appointment of a temporary licensee under section 4.3.33 if the licences referred to in subsection (1) are cancelled.

107 Part 3A was introduced by the 2008 amendments. It established a separate and extended regime, authorising wagering and related activities by the holder of a 'wagering and betting licence'.

108 Part 4A was introduced by the 2009 amendments. It provided for a wholly new regime, authorising licensed venue operators holding gaming machine entitlements to conduct gaming on one approved gaming machine per entitlement in an approved venue operated by the venue operator.

The granting of a venue operator's licence under this Part on or after the commencement of section 12 of the Gambling Regulation Amendment (Licensing) Act 2009 to a person is not to be taken to be a granting of -

(a) a gaming operator's licence to that person under this Part; or

(b) a gaming licence to that person under Chapter 4.

110 In summary, the State's position is that these amendments, in particular s 4.3.4A, had the obvious intention of making the grant of any further wagering licence or gaming licence under Part 3 impossible; so Parliament must have intended to deprive s 4.3.12 of any effect or possible operation. In other words, as submitted by the State's counsel, the clear effect of these amendments was to 'remove the trigger' for the operation of s 4.3.12. The State contends that this result is of sufficient clarity to make the continued operation of s 4.3.12 so inconsistent or repugnant with these provisions that they cannot stand together. In effect, the State contends that Parliament well understood that the words 'new licences' in s 4.3.12 had the specific meaning when it set about passing the 2008 and 2009 amendments. The purpose of the amendments was both to establish the new and separate wagering and gaming regimes and to ensure that the payment entitlement under s 4.3.12 could never be triggered on the grant of authorities to conduct wagering and gaming activities under the new regimes.

111 In the context of the State's submissions, I will next consider the available extrinsic materials for the 2008 and 2009 amendments, in order to ascertain whether they provide any assistance as to Parliament's purpose or object concerning the continued operation of the terminal payment provision.

112 The 2008 and 2009 amendments to the Act were preceded by an extensive review by the State of the regulatory landscape governing gambling in Victoria, in particular wagering, gaming and keno. On 10 April 2008, the Premier at the time (John Brumby) issued a media release, in which he announced a new structure for gaming in Victoria to operate after the expiry of the licences held by Tabcorp and Tatts (the '2008 media release'). The 2008 media release contains a detailed description of the proposed restructure of gaming regulation in Victoria after expiry of the licences held by Tatts and Tabcorp, and included a statement of the Government's subjective understanding of the effect of the proposed amendments to the Act which would introduce the new regime:

The Government's decision represents an entirely new regulatory model for the operation of wagering, gaming and keno in Victoria after the expiration of the current licences in 2012, and the Government has formed the view that neither Tattersalls nor Tabcorp are entitled to compensation.[49]

113 The State contends that this statement by the Premier could not be more explicit as to the Government's purpose to ensure both: (1) that an entirely new regulatory model would come into operation at the expiry of the licences held by Tabcorp and Tatts in 2012; and (2) that the effect of the new regulatory model would be to deprive Tabcorp and Tatts of their respective entitlements to compensation under the terminal payment provisions.[50]

114 The State contends that the intention behind the 2008 and 2009 amendments was reinforced and reiterated by statements made in a budget paper for the 2008-2009 financial year dated 6 May 2008 ('2008 budget paper').[51] In dealing with the State's contingent liabilities for the 2008-09 financial year, the Treasurer stated:

Gambling licences

In 1992, a gaming operator's licence was issued to the Trustees of the Will and Estate of the late George Adams, now trading as Tatts Group. In 1994, the state issued a wagering and gaming licence to TABCORP Holdings Limited (TABCORP). These licences expire in 2012 and the end of licence arrangements are specified in the Gambling Regulation Act 2003.

These end of licence arrangements include compensation provisions for the licensees predicated on the current licensing arrangements being rolled over for a further period beyond 2012.

On 10 April 2008, the government announced a new regulatory model for the post-2012 licences. The main changes include:

• separating the wagering and gaming licence to instead license wagering on a stand-alone basis; and
• transitioning from the current gaming operator duopoly to a system where venue operators are licensed to own and operate gaming machines in their own right.

After considering the end of licence arrangements in the Gambling Regulation Act 2003, the government has formed the view that neither Tatts Group nor TABCORP will be entitled to compensation after the expiration of their current licences.

The government does not intend to alter or amend the provisions in the Gambling Regulation Act 2003 that deal specifically with the end of licence arrangements for Tatts Group and TAB CORP.[52]

115 The State relies upon those parts of the budget paper which are emphasised by italics in the above quote. Tabcorp relies upon the portion of the quote which is emphasised by underlining.

116 At the time of the 2008 budget paper, the 2008 amendments, which contained the proposed s 4.3.4A, were before Parliament and had been read a second time on 17 April 2008. But the 2009 amendments were still to be drafted. The Bill for the 2009 amendments was not presented to Parliament until 3 February 2009.

117 Apart from the 2008 media release and the 2008 budget paper, there is no extrinsic evidence, either in the documents concerning the reform process or in the explanatory memoranda and Parliamentary debates concerning the 2008 and 2009 amendments, which sheds light upon the Government's object and purpose concerning the continuing operation of the terminal payment provisions for Tabcorp and Tatts. Those extrinsic materials relate to the desirability for, and the content of, the gambling reforms introduced by the amendments. They do not have any bearing on the operation of the terminal payment provisions according to their terms. None of the reforms necessitated those provisions being repealed or rendered inoperative.

118 The first difficulty with relying on the 2008 media release and the 2008 budget paper as the State proposes is that they record the Government's subjective view about the effect of s 4.3.4A on Tabcorp's payment entitlement under its terminal payment provision. Although s 35 of the Interpretation of Legislation Act does not limit the kinds of extrinsic materials which can be utilised to identify the purpose or object of legislation, it is rare that extrinsic statements of subjective understanding as to the meaning or effect of proposed legislation can assist in ascertaining the objective meaning of the statutory text.[53]

119 The second difficulty is that, while expressing the view set out above, the materials make it plain that the Government did not intend to alter or amend the terminal payment provisions. While the proposed (and final) form of s 4.3.4A was before Parliament, and the general intention to introduce a 'new structure' involving a 'venue operator system' (as subsequently enacted by the 2009 amendments) was spelt out in the 2008 media release, the Government's view expressed in these documents was, in my opinion, equivocal: on the one hand supporting a general understanding as to the meaning of s 4.3.4A; on the other hand, supporting an intention to leave the terminal payment provisions unamended. In fact, the terminal payment provisions were not amended. In these circumstances, even if the Government's subjective view is given some weight, it is equivocal and unreliable on that ground.

120 Tabcorp relies upon a combination of matters in the context of the overlapping principles of statutory interpretation which require the clearest of language to effect an implied repeal or to deprive a person of existing rights - especially where no compensation is provided for.

121 First, Tabcorp contends that s 4.3.4A is directed only at terminating the existing licensing regime for wagering and gaming under Part 3 on the expiry of Tabcorp's licences - thus ensuring that the new licensing regimes under separate parts of the Act would operate from that time. In the meantime, however, s 4.3.4A(1) expressly provided that Part 3 continued to apply 'with respect to' Tabcorp's licences. Section 4.3.12 is a provision of Part 3 which applies 'with respect to' Tabcorp's licences. As such, it continues to operate and must be given some meaning in accordance with the principles expressed in Project Blue Sky.[54]

122 In support of this contention, Tabcorp contends that there is no logical connection between changing the licensing arrangements for the future and an intention to abrogate a financial obligation that arose under the existing licensing regime. It relies in particular upon the fact that the extrinsic material relating to the review processes, which culminated in the State's decision to implement the new regime following expiry of its licences, contains no suggestion that the reform process required or included abrogation of Tabcorp's rights under the terminal payment provision. In that regard, Tabcorp places particular reliance upon the statement in the 2008 budget paper that the State did not intend to alter or amend the terminal payment provision - and in fact did not do so.

123 Tabcorp contends in this respect that s 4.3.4A provides for 'two separate universes' - one concerning Tabcorp's existing licences and the other concerning the grant of licences under the new regimes established under other parts of the Act. I accept that this is so. But the question remains as to whether s 4.3.4A had another purpose also - to render s 4.3.12 incapable of operation. For the reasons given below, in my opinion it plainly did.

124 Second, Tabcorp contends that, if the State had intended to repeal the terminal payment provision, it could easily have done so directly - by simply repealing Division 3 of Part 3. That division is separate and self-contained, addressing only one subject matter - the terminal payment provision. The fact that some provisions in other divisions of Part 3 continued to have some work to do, while other provisions did not, is thus not to the point. The ease with which Parliament could have directly repealed Division 3 is self-evident. Indeed, there is an example of it doing just that when the Act omitted Division 2 of the 1994 Act, which provided only for the grant of the initial licences to Tabcorp in 1994, on the ground that that division no longer had any work to do. Moreover, there are examples of other provisions introduced by the 2008 and 2009 amendments which expressly provided that the effect of certain provisions introduced by those amendments would not give rise to an obligation on the part of the State to pay compensation.[55] Nothing to this effect was introduced in respect of s 4.3.12.

125 Third, Tabcorp contends that its entitlement under s 4.3.12 was a valuable right - thus attracting the principle of legality and the principle that, unless it is unavoidable, legislation should not be construed in a manner that would lead to the loss of a person's valuable rights without payment of compensation. As with principles of implied repeal, these principles require the clearest of statutory language in order to deprive a person of rights. Accordingly, if there is an interpretation which would preserve the rights, or avoid implied repeal, it should be preferred - especially where it conforms with the underlying purpose or object of the Act.

126 Fourth, Tabcorp relies upon the principle that a general enactment is not intended to interfere with an earlier special provision unless it manifests that intention very clearly. Tabcorp refers to this principle to support its above contention that the clear purpose of s 4.3.4A is to divide the old regime from the new regime, and that it is not necessary to attribute another intention to Parliament - namely, to deprive s 4.3.12 of the possibility of any operation and therefore to impliedly repeal it.

127 Fifth, Tabcorp contends that s 14(2)(e) of the Interpretation of Legislation Act is engaged, on the basis that its rights under the terminal payment provision were not contingent but, properly understood, constituted an accrued right to a terminal payment. It is convenient to deal with this contention now, because it is separate from the other four principal contentions. I reject the contention. Section 14(2)(e) of the Interpretation of Legislation Act protects rights which exist at the time of the repeal. Contingent rights, which depend upon future events which may or may not occur, are not protected.[56] In this case, Tabcorp's rights under s 4.3.12 were contingent at the time of the 2009 amendments. In any event, as discussed below, a contrary intention to repeal the right expressly appears from the language of s 4.3.4A.

128 As to the first to fourth of Tabcorp's contentions, they may be summarised as follows. The language of the 2008 and 2009 amendments, in particular s 4.3.4A, is not sufficiently clear to evince an intention by Parliament to deprive s 4.3.12 of continuing operation; and, if that be so, the Court should give s 4.3.12 a workable interpretation to enable it to continue to operate. The only way that this can be done is by giving the phrase 'new licences' a generic meaning, so as to allow the always speaking principle to apply.

129 I do not accept Tabcorp's contentions. In my opinion, it is clear that the legislature initially intended that the specific definitions would apply throughout Part 3, including to s 4.3.12. Similarly, s 4.3.4A was intended to apply to the whole of Part 3, including to s 4.3.12. After all, s 4.3.12 is a section expressly intended to operate on the grant of the very licences which the legislature expressly provided by s 4.3.4A could never occur. Accordingly, it is plain that Parliament intended that s 4.3.12 would not continue to have any operation.

130 In these circumstances, Tabcorp's altered meaning contention cannot succeed. The legislative intention that s 4.3.12 should be rendered inoperative is inconsistent with an intention that the specific meaning of the words 'new licences' in s 4.3.12 would alter on the enactment of the 2008 and 2009 amendments. In these circumstances, there is no room for the application of the always speaking principle of interpretation.

131 Before leaving this issue, it is necessary to address Tabcorp's contention that the State's implied repeal argument would lead to a result which is manifestly unfair and unreasonable. Tabcorp contends that, having received in 1994 hundreds of millions of dollars more than it would have received in the absence of the terminal payment provision, the above result enables the State to retain those additional proceeds without repaying them in accordance with the terminal payment provision, in circumstances where it has not had the political courage to legislate for that result expressly.[57] In these circumstances, Tabcorp contends that the Court should prefer a reasonable interpretation if one is available, by treating s 4.3.4A as limited to ensuring that the old and new statutory regimes could not overlap and by accepting its generic meaning contention. I accept that the result is manifestly unfair and unreasonable, because no reason has been put forward by the State as to why Parliament chose to deprive Tabcorp of its terminal payment. However, for the reasons I have given, I do not accept that another reasonable interpretation is available. This is an unfortunate case of the harsh reality of sovereign risk.

(C) Did the State grant 'new licences' within the meaning of s 4.3.12?

132 My conclusion that the specific meaning contention should be accepted means that it is unnecessary to consider this question. However, I will consider whether, had I accepted Tabcorp's generic meaning contention and found that s 4.3.12 had not been impliedly repealed, 'new licences' in a generic sense were granted.

133 Tabcorp contends that, the new regime introduced by the 2008 and 2009 amendments provided for the grant of statutory authorities to conduct wagering, gaming and keno that substantially replicated the authorities granted under the earlier regime. Specifically, Tabcorp contends that the grant of:

(1) the wagering and betting licence granted under Part 3A of Chapter 4 of the Act;

(2) the gaming machine entitlements issued under Part 4A of Chapter 3 of the Act; and

(3) the keno licence granted under Chapter 6A of the Act,

constituted the grant of 'new licences' under s 4.3.12.

134 Tabcorp contends that this result accords with the purpose of the terminal payment provision discussed above. The State disputes Tabcorp's contentions. The State's principal contentions on this hypothesis may be summarised as follows:

(1) the new authorities were materially different from Tabcorp's wagering licence and gaming licence;

(2) the new authorities were not granted to a 'new licensee' but, instead, to multiple licensees; and

(3) 'new licensee' in s 4.3.12 means a party other than the incumbent licensee (ie other than Tabcorp or a related entity).

Were the new authorities materially different from Tabcorp's existing licences?

136 To decide this question, it is necessary to compare the authorities to conduct wagering, gaming and keno granted under the two regimes.

Section 6 the 1994 Act (which was substantially reproduced in s 4.3.1 of the Act) provided that Tabcorp's wagering licence authorised it to conduct wagering activities and approved betting competitions.

137 Section 4.3A.1 of the Act provides that the wagering and betting licence under the new regime authorises the licensee to conduct the same activities and two additional activities - approved simulated racing events and a betting exchange.

138 In my opinion, if the generic meaning contention is accepted, the grant of the wagering and betting licence clearly constituted the grant of a new wagering licence for the purposes of s 4.3.12 of the Act. An expansion in the range of activities authorised under the new regime does not fundamentally alter the character of the licence.

139 Section 7 of the 1994 Act provided that Tabcorp's gaming licence authorised: (1) the same activities as a gaming operator's licence issued under the 1991 Act; and (2) the conduct and promotion of club keno games in Victoria in accordance with the Club Keno Act 1993. Section 4.3.2 of the Act maintained the same arrangement, authorising the same activities by reference to Chapters 3 and 6 of the Act in respect of gaming and keno respectively.

140 The State contends that there are material differences between the authorities granted by the old statutory regime governing Tabcorp's gaming licence and the authorities granted under the new regime governing gaming machine entitlements, venue operator's licences and keno; with the result that there has been no grant of new gaming licences within the generic meaning of that term.

141 The State's contentions in this regard focus entirely upon the form, and not the substance, of the statutory authorisations. They involve the following steps.

142 First, s 14 of the 1991 Act provided that a gaming operator's licence, and thereby Tabcorp's gaming licence, authorised the licensee to do the things listed in s 14(1)(a) to (g) inclusive, which included the manufacture, supply, service, repair and maintenance of approved gaming machines. Section 14 is substantively reproduced in s 3.4.2 of the Act. The State contends that these activities are expressly excluded from the authority granted to the holder of a gaming machine entitlement under the new regime introduced by the 2009 amendments. The State relies upon s 3.4A.2(2) of the Act, which provides:

(2) A gaming machine entitlement does not authorise the entitlement holder to engage in any business by way of -

(a) manufacture of gaming equipment or monitoring equipment; or

(b) supply of approved gaming equipment or monitoring equipment to any person; or

(c) service, repair or maintenance of gaming equipment, monitoring equipment, games or jackpots.

143 The State submits that these exclusions created a fundamental difference between the authority conferred upon Tabcorp by its gaming licence and the authority conferred upon the holder of a gaming machine entitlement.

144 Second, the State contends that the monitoring provisions were different under the old regime and the new regime. Reliance was placed upon s 11(2)(f) of the 1994 Act and s 4.3.6(2)(g) of the Act. The State contends that the holder of a gaming licence under the 1994 Act and the Act was at all times required to conduct monitoring of its gaming machine operations. In contrast, under the new regime, the requirement, or at least authority, for a gaming operator to monitor its own gaming machine operations was removed and replaced with a regime providing for the issue of a 'monitoring licence' to an independent 'monitoring licensee' under Division 4 of Part 4 of Chapter 3 of the Act.[58] The difference between the two monitoring regimes is apparent from s 3.4.52 (which authorises only 'preparatory action' concerning monitoring prior to the expiration of Tatts's or Tabcorp's licences) and from ss 3.5.17A and 3.5.17B under the new regime, which provide:

3.5.17A Gaming machines must be connected to approved electronic monitoring system

A gaming operator must not allow a game to be played on a gaming machine of the gaming operator unless the gaming machine is connected to the gaming operator's approved electronic monitoring system.

3.5.17B Gaming machines must be connected to approved electronic monitoring system

A venue operator who is an entitlement holder must not allow a game to be played on a gaming machine of the venue operator unless the gaming machine is connected to the monitoring licensee's approved electronic monitoring system.[59]

145 Third, the State relies upon the change in the authorisation of the conduct and promotion of keno. Whereas Tabcorp's gaming licence authorised it to conduct and promote club keno games, that authorisation is now the subject of a separate licence under Part 6A of the Act. The holder of a gaming machine entitlement has no such authorisation.

146 Fourth, the State contends that the scope of the authority to conduct gaming machine operations under the new regime is more limited, because s 3.4A.1(1) of the Act provides that the conduct of gaming in an approved venue is only lawful if the venue operator holds a gaming machine entitlement, and then only in accordance with any conditions to which that entitlement is subject. The State contrasts this with the old regime, under which the holder of a gaming licence was authorised to conduct gaming at an approved venue without the need to also hold a separate venue operator's licence.

147 Fifth, the State contends that a material difference arises from the overall change to the structure of the gaming industry, away from 'the downstream supply of gaming machines' under the 'duopolist model' to a venue operator system.

148 In all the circumstances, the State contends that:

These differences make the content and effect of the gaming licence held by Tabcorp materially different in substance to the GME (both alone and when combined with a venue operator's licence).

149 I do not accept the State's contentions in this regard.

150 First, there is no difference between the extent of the authorities granted under each regime for the 'conduct of gaming' as defined in the legislation. It is the conduct of gaming which provides the revenue that comprises the principal value of the authorities granted under each regime. The authorities to manufacture approved gaming machines, to conduct monitoring of the gaming operator's own conduct of its gaming machine business, and to conduct or promote club keno games have never been within the defined concept of the 'conduct of gaming' in the legislation. Section 3(2) of the 1991 Act provided:

(2) A reference in this Act to 'conduct of gaming' is a reference to -

(a) the management, use, supervision and operation of gaming equipment; and

(b) the sale, redemption or use of gaming tokens; and

(c) the installation, alteration, adjustment, maintenance or repair of gaming equipment; and

(d) the use or distribution of proceeds from the conduct of gaming; and

(e) accounting, banking, storage and other acts connection with or related or incidental to gaming and the conduct of gaming.

151 This definition was repeated in s 3.1.4 of the Act.[60]

152 Second, there is a basic flaw in the State's contentions in this regard. In spite of the bracketed words at the end of the State's submission set out above, the State does not aggregate the authorities granted under a venue operator's licence and the related gaming machine entitlements held by that venue operator. When that aggregation exercise is undertaken, the only relevant authority which is included in s 14 of the 1991 Act and s 3.4.2 of the Act (in respect of a gaming operator's licence) that is not also granted under either a gaming machine entitlement or a venue operator's licence, is the authority to manufacture approved gaming machines. This is illustrated by the table below.

Section 14 authorities under Gaming Machine Control Act 1991 (substantively reproduced in s 3.4.2 of the Gambling Regulation Act 2003)

Section 3.4A.2(1) under the Gambling Regulation Act 2003

Section 3.4.1 authorities under the Gambling Regulation Act 2003

(a) to obtain from manufacturers and suppliers listed on the Roll approved gaming machines and restricted components

(b) to manufacture approved gaming machines and restricted components

(c) to supply approved gaming machines and restricted components to venue operators

(b) to conduct gaming on one approved gaming machine in an approved venue operated by the venue operator

(e) to sell or dispose of gaming equipment with the approval of the Commission

(ac) while holding a gaming machine entitlement or under an authorisation under section 3.2.2(2B), sell or dispose of a gaming machine or gaming equipment acquired for the purpose of use in an approved venue operated by the licensee

(f) to service, repair or maintain gaming equipment through the services of licensed technicians

(ad) while holding a gaming machine entitlement, to, through the services of a person holding a gaming industry employee's licence, service, repair or maintain gaming equipment acquired for the purpose of use in an approved venue operated by the licensee

(g) to do all things necessarily incidental to carrying on the activities authorised by the section

(c) to do all things necessarily incidental to carrying on the activities authorised by the section

153 In my opinion, the authority to supply approved gaming machines to venue operators has ceased to have any relevance under the new regime, because a person can lawfully conduct gaming only if they hold both a venue operator's licence and a gaming machine entitlement in respect of a gaming machine obtained from an approved manufacturer and supplier listed on the Roll.

154 Manufacturing approved gaming machines was always the subject of an authorisation regime separate to the authorities granted under a gaming operator's licence - see s 17 of the 1991 Act and the continuation of that regime in s 3.4.60 of the Act. Persons who did not hold a gaming licence could be authorised to manufacture approved gaming machines. This illustrates further that manufacturing was an ancillary aspect of the authorities granted by a gaming licence - it was authorised but not necessary and others could do it. The exclusion of manufacturing from the defined concept of the 'conduct of gaming' is telling in this regard.

155 Third, I do not accept that there is any material difference between the monitoring provisions under the two regimes. Under the old regime, monitoring was not authorised by a gaming licence, nor was monitoring by the gaming operator a condition of the licence. Section 11(2)(f) of the 1994 Act provided that the Victorian Casino and Gaming Authority was required to be satisfied that Tabcorp would 'have in place an adequate electronic monitoring system for detecting significant events associated with each gaming machine within the meaning of the [1991 Act]' before recommending the gaming licence and wagering licence be granted. Under s 4.3.6 of the Act, it continued to be a requirement in respect of applications for later licences that the Commission consider whether the applicant would have in place an adequate electronic monitoring system.

156 Under the new regime, a venue operator's licence authorises the venue operator to possess monitoring equipment operated by the monitoring licensee. Section 3.5.17B prohibits a venue operator who holds gaming machine entitlements from allowing machines at the licensed venue to be played unless they are connected to the monitoring licensee's approved electronic system.

157 Accordingly, the only difference is that, under the new regime, the possibility of a gaming operator conducting its own monitoring operations, or engaging for this purpose a third party chosen by it, is excluded and replaced by the requirement for a contractual relationship with the monitoring licensee.

158 Fourth, I do not accept that a material difference arises by virtue of the reorganisation of the authorisation to conduct and promote club keno under a separate licence. The authority to conduct and promote club keno never formed a part of the definition of the 'conduct of gaming'. While it is true that an authority to that effect was linked to Tabcorp's status as 'the holder of a gaming licence under the [1994 Act]', that authority was, in my view, an addendum to the gaming licence. Moreover, the continued authorisation of the conduct and promotion of club keno under the Act, albeit under a separate licence, means that there is, in any event, no substantive difference between the authorisations granted in respect of club keno under the two regimes. The fact that earlier restrictions on the operation of club keno have been relaxed under the new regime is also, in my view, immaterial.[61]

159 It follows that the issue of gaming machine entitlements to various licensed venue operators and the grant of the keno licence to Tabcorp constituted the issue of new gaming licences within the generic meaning of s 4.3.12. The aggregation of authorities granted under the new regime shows that substantially the same kind of activities as those authorised by Tabcorp's gaming licence continue to be authorised under the new regime.

Was it a requirement that all 'new licences' be granted to the same person?

160 On the hypothesis that the Court accepts the generic meaning contention, the State next contends that, for s 4.3.12 to be engaged, the 'new licences' must have been granted to the same licensee. The State's contention relies on the definition of licensee in s 4.1.2 of the Act:

licensee means the holder of the wagering licence and the gaming licence.[62]

161 The State relies also upon a variety of other textual matters arising in Part 3 of Chapter 4 that illustrate the conjoined nature of the gaming licence and the wagering licence. I have outlined these textual issues above in relation to the meaning of 'new licences', where they were a persuasive factor in deciding that the specific meaning contention should be accepted. However, had I accepted the generic meaning contention, I would have accepted Tabcorp's contention that it would not be necessary for the new licences to be the issued the same licensee. A generic reading of 'new licensee' would be the logical corollary of the adoption of the generic meaning of 'new licences'. Indeed, to hold otherwise would defeat the operation of s 4.3.12. In those circumstances, I would have read the reference to 'new licensee' as including the plural, in accordance with s 37(c) of the Interpretation of Legislation Act, as submitted by Tabcorp.

Could Tabcorp, or a related entity of Tabcorp, be the 'new licensee'?

162 The State's final contention on this issue, that neither Tabcorp nor a related entity of Tabcorp could be the 'new licensee', is unsustainable on a plain reading of s 4.3.12 in the context of the Act as a whole, in particular s 4.3.12(2). I do not accept the contention that the word 'new' carries any significance in terms of stipulating the identity of the subsequent licensee; it simply establishes a link with the phrase 'new licences'. This view is supported by the text of s 3.4.33 of the Act (Tatts's terminal payment provision), which expressly provides that the grant of a gaming operator's licence to Tatts or a related entity will disqualify it from receiving a terminal payment. There is no equivalent disqualification under s 4.3.12.

163 In coming to that finding, I have considered and rejected the State's submission that its construction of 'new licensee' in s 4.3.12 is supported by the Treasurer's letter dated 29 June 1994 referred to below, in which the Treasurer stated that '[i]f the new licensee is not Tabcorp, Tabcorp will be entitled to receive ... an agreed capital compensation amount'. First, the submission uses extrinsic evidence of a subjective view about the meaning of a statutory provision, which is rarely if ever useful.[63] Second, statements in other extrinsic materials directly contradict the above statement in the Treasurer's letter. For example, the Tabcorp Prospectus issued on 1 July 1994, endorsed by the State, included the following statements:

(a) 'TABCORP is entitled, whether or not it is the successful tenderer, to receive an amount equal to the lesser of the sum paid by the new licences and a benchmark sum';

(b) 'The licences are for terms of eighteen years. TABCORP is entitled on expiry to the initial licences, whether or not it is issued new licences, to receive an amount of up to 115% of the amount paid by TABCORP for the initial licences';

(c) 'The wagering and gaming licences are for terms of eighteen years. TABCORP is entitled on expiry (other than by cancellation) of the initial licences to participate in a tender for new licences. TABCORP is entitled, whether or not it is the successful tenderer, to receive an amount equal to the lesser of the sum paid for the new licences and a benchmark sum'.

164 Consequently, to the extent that extrinsic materials of this kind are admissible in determining the meaning of s 4.3.12, they support Tabcorp's contention on this point.

165 As stated in the introduction, in the event that its statutory claim failed, Tabcorp alleges alternative contractual claims. The first alternative claim is based upon the MOU. In summary, Tabcorp contends that the MOU became binding as a contract, that by clause 10.3 of the MOU the State agreed to indemnify it in respect of any loss resulting from actions taken by the State which had the effect of detracting from its rights under s 4.3.12, and that, although it is not a party to the MOU, Tabcorp is nevertheless entitled to enforce it as a contract made for its benefit. Before dealing with these issues, it is necessary to set out the applicable law, the admissible surrounding circumstances in which the MOU was signed, and the MOU's key provisions.

166 Whether or not the parties intended to create binding legal relations must be determined objectively,[64] as must the meaning of the words used in a contract.[65] As to contractual interpretation, it is necessary to consider the language used by the parties in the MOU in the context of the surrounding circumstances known to them and the commercial purpose or objects to be secured by that agreement.[66]

167 I turn to consider the surrounding circumstances.

168 Following the Premier's announcement of the proposed float of the TAB, on 21 December 1993, the State appointed Centaurus Corporate Finance Pty Ltd as its project manager and principal financial advisor for the float. The appointment was made in January 1994 after discussions between the Premier of the day, Mr Kennett, and Michael Tilley, the principal of Centaurus. The Premier instructed Mr Tilley that the State wished to finalise the float of the TAB within six months and that the 'counter-negotiating party was the Victorian racing industry'. At the time, the racing industry consisted of more than 300 clubs which conducted horse-racing, harness-racing and greyhound-racing events in Victoria. The Premier also instructed Mr Tilley that 'the Government's key objective was to maximise the proceeds of the float for the Government'. Following Centaurus's appointment, Mr Tilley represented the State in all of the negotiations with the racing industry concerning the structure and details of the float.

169 The State appointed Arthur Robinson & Hedderwicks as its solicitors for the float. Mr Tilley dealt regularly with three partners of Arthur Robinson & Hedderwicks, including Ian Renard and John Harry.

171 The racing industry appointed Macquarie Corporate Finance as its financial advisor in respect of the float. Mr Tilley dealt mainly with Peter Yates of Macquarie. Mr Tilley dealt also with representatives from the Victoria Racing Club on behalf of the racing industry, in particular Ric Charlton and David Bourke. He dealt also with Greg Clifton from Clayton Utz, solicitors for the racing industry in the float negotiations.

172 Mr Tilley was present at all negotiations with the racing industry representatives. He met with representatives of almost all of the 300 racing clubs comprising the racing industry.

173 It was necessary to include the racing industry in negotiations concerning the terms of the float because that industry derived substantial income from the TAB's wagering business and claimed that it beneficially owned the TAB. There was a possibility that, in the absence of agreement, there could be litigation concerning this issue. The Government was concerned to avoid litigation because of its potential to stand in the way of the float. So, a compromise with the racing industry was necessary.

174 In his witness statement, Mr Tilley said that 'sovereign risk' was recognised by the parties to the negotiations as an important issue to the maximisation of the float proceeds:

I recall that the issue of sovereign risk was in the public arena in early 1994 due to a recent but unrelated dispute between the Grollo companies and the Government. I considered that dealing with sovereign risk issues, and providing investors with confidence that the business would not be undermined by future Government action, were important issues in relation to the Float.

175 The sovereign risk issue was particularly relevant to the terminal payment provision. As the terminal payment provision was to be embodied in legislation, it was always subject to the risk of legislative change or repeal.

176 As I have said, a key aspect of managing the float was to avoid litigation with the racing industry. This necessitated negotiating a means by which the racing industry could share in the proposed Tabcorp business after the float. The chosen mechanism was a joint venture between Tabcorp and the racing industry. The joint venture would conduct wagering and gaming activities on behalf of Tabcorp as to 75 per cent and the racing industry as to the other 25 per cent. From the terms of clause 10.3 of the MOU, quoted and discussed below, I infer that the racing industry representatives also considered sovereign risk to be relevant to the amortisation issue and thus the value of its share in the joint venture to be established with Tabcorp.

177 Agreement on the terms of the joint venture arrangements was crucial to the float proceeding. The negotiations for the joint venture agreement were difficult and protracted. From an early stage in the negotiations, it was a condition precedent to the operation of the proposed joint venture that the State execute a 'State Agreement'. The 24 February 1994 draft of the joint venture agreement provided that the obligations of the parties were subject to the due and complete execution and delivery of 'a State Agreement' by Tabcorp and the State.

178 By March 1994, it was becoming apparent that the negotiations concerning the joint venture arrangements were unlikely to be completed in accordance with the State's timetable. In these circumstances, Mr Tilley was instructed by the State to negotiate a pre-cursor document containing sufficient detail to enable the other work required for the float to proceed - for example, obtaining legislative and departmental sign-off, and preparing the prospectus. The resulting document was the MOU dated 15 March 1994.

179 The parties to the MOU are the State on the one hand and six bodies representing the racing industry on the other - the Victoria Racing Club, the Victoria Amateur Turf Club, the Moonee Valley Racing Club Inc, the Victorian Country Racing Council Inc, the Harness Racing Board and the Greyhound Racing Control Board.

180 The preamble to the MOU is in the following terms:

This memorandum summarises the understanding between the Government of the State of Victoria and the Racing Industry of Victoria in relation to the restructuring of the TAB and the conduct by TABCO and its subsidiaries of wagering, gaming and other specified operations in Victoria. Negotiations between the Government and the Racing Industry with respect to these matters are continuing, with many of the details remaining to be finalised. The understanding of the Government and the Racing Industry as set out herein is not binding unless and until the proposed float of TABCO has been achieved and is successful, the requisite legislation has been passed giving effect to the proposed·arrangements and documentation in a form acceptable to all parties has been negotiated and agreed.[67]

181 Clause 10.3 of the MOU is in the following terms:

10.3 Government ... Agreement

It is intended that the Government Agreement include:

(a) an undertaking that the State will not take action or allow action to be taken by any State body that would have the effect of detracting from or adding to TABCO's then existing rights and obligations under the Racing Act 1958 (Victoria), the Gaming Machine Control Act 1991 (Victoria), the Club Keno Act 1993 (Victoria) or the proposed legislation.

(b) an indemnity in favour of TABCO and RACE CO in respect of any loss, damage, costs or expenses suffered or incurred by either of them as a direct or indirect result of:

(i) the Wagering Licence or the Gaming Licence being cancelled or suspended other than as permitted by relevant legislation or the terms and condition of the Wagering Licence and the Gaming Licence begin changed otherwise than in accordance with relevant legislation;

(ii) a change in relevant legislation;

(iii) actions taken in breach of the obligations contained in paragraph (a); and

(c) a complete release by the Racing Industry of the State and TABCO and all subsidiaries of TABCO and a covenant not to take action.[68]

182 The 'Government Agreement' was defined in clause 1 of the MOU as meaning the agreement between the State, 'TABCO' (Tabcorp) and a company owned and controlled by the racing industry that was intended to be the joint venturer representing the interests of the industry, nominally called 'RACE CO' in the MOU and later incorporated as VicRacing Pty Ltd.

183 As appears below, the State subsequently refused to enter into a proposed 'State Agreement' including an undertaking to the effect of clause 10.3(a) and, I infer, refused, or would have refused if asked, to execute an agreement including an indemnity of the kind described in clause 10.3(b). There is no evidence of a release of the kind described in clause 10.3(c) being sought by the State or given by the racing industry.

184 I turn to consider the specific issues for determination concerning Tabcorp's claim under the MOU.

185 The first issue concerns the proper interpretation of the preamble to the MOU. Tabcorp contends that the text of the preamble to the MOU is clear and specific. The understandings recorded in the MOU were intended to become binding when the three specified events had all occurred:

(3) the negotiation and agreement of documentation in an acceptable form.

186 Tabcorp contends that there is no other plausible reading of the words 'not binding unless and until'. Accordingly, upon the three events occurring, the understandings set out in the MOU, or at least those which did not become entrenched in the requisite legislation or agreed documentation, became binding. Tabcorp contends that this interpretation is supported by recital 7 to the MOU, which provides:

1. The Parties intend that the arrangements and agreements between them will to the extent appropriate be entrenched in Government legislation and by contract to ensure so far as is possible that the rights and obligations associated therewith shall not be varied at any time except by mutual agreement and consent of the Parties.[69]

187 Tabcorp contends that recital 7 demonstrates an intention on the part of the parties to the MOU that there may be understandings which, for whatever reason, are not appropriate to be entrenched in legislation or by contract. Accordingly, the parties must have intended that those understandings would, upon the MOU becoming binding, become binding in the terms contained in, and by force of, the MOU.

188 I do not accept this interpretation of the preamble and recitals to the MOU. In my opinion, the MOU falls within the third class of case mentioned in Masters v Cameron.[70] In that case, Dixon CJ, McTiernan and Kitto JJ summarised three categories into which documents executed during the course of continuing negotiations may fall:

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.[71]

189 Tabcorp rightly acknowledged in submissions that the first draft of the MOU, which included the following words, was in the third Masters v Cameron category:

This memorandum summarises the understanding between the Government of the State of Victoria (the 'Government') and the Racing Industry of Victoria (the 'Racing Industry') ... Negotiations between the Government and the Racing Industry with respect to these matters are continuing, with many of the details remaining to be finalised. Accordingly, the understanding of the Government and the Racing Industry as set out herein is not binding until formal documentation is executed.[72]

190 Tabcorp contends that the final wording of the preamble was materially different, and took the MOU outside the third Masters v Cameron category. I do not accept that submission. If the first two specified events are put to one side, the preamble relevantly reads: 'The understanding of the Government and the racing industry as set out herein is not binding unless and until ... documentation in a form acceptable to all parties has been negotiated and agreed.' The changes from the first draft do not alter its obvious intent. The composite phrase 'not binding unless and until' (emphasis added), in lieu of 'not binding until', cannot assist Tabcorp. Indeed, the emphasised words are the very words used to describe the third category of case in Masters v Cameron.

191 In my opinion, the words in the preamble to the MOU are consistent with it being an agreement in the third Masters v Cameron category. This is not a case in the first or second Masters v Cameron categories, where the parties have 'reached finality' or 'completely agreed' the terms of their bargain. To the contrary, the preamble states expressly that negotiations are continuing and that the 'documentation' to record the terms of their final bargain is still to be 'negotiated and agreed'. Objectively viewed, the MOU was never intended to be binding according to its terms. When the 'requisite legislation' was passed, the appropriate 'documentation' was negotiated and agreed, and the float was successfully completed, the rights and obligations of the parties would then become binding in accordance with the terms of the legislation and documentation.

192 I do not accept that recital 7 alters this result. In my opinion, the circumstances in which the MOU was executed, which included recognition of sovereign risk, explain the references in recital 7 to the intended 'arrangements and agreements' being entrenched in legislation and contract 'to the extent appropriate', and 'to ensure so far as is possible that the rights and obligations ... shall not be varied at any time ...' (emphasis added). Recital 7 confirms that the understandings in the MOU were yet to be finally agreed.

193 Moreover, this interpretation, or characterisation, of the MOU accords with commercial common sense. In circumstances where negotiations were still continuing, and the proposed float was still months away, there was no good commercial reason for the State to commit to a final position in respect of rights and obligations which involved hundreds of millions of dollars.

194 I conclude that, upon the occurrence of the three events stipulated in the preamble, the rights and obligations under the resulting legislation and finalised documentation became binding. To the extent that the legislation and documentation did not include any of the understandings in the MOU, those understandings had no legal force or effect.

195 The rejection of Tabcorp's first contention means that it is strictly unnecessary to consider Tabcorp's other contentions as to whether the MOU became binding. I will, however, express my view on those contentions, as they were fully argued, involved factual issues and the parties have made it plain that, whatever the result in this proceeding at first instance, an appeal is inevitable.

196 Assuming, contrary to the above conclusion, that it overcame the first hurdle of establishing that the MOU was not in the third Masters v Cameron category, Tabcorp contends that the evidence established that the three events specified in the preamble to the MOU were satisfied. There is no issue that the first and second events occurred - the enactment of the requisite legislation and the success of the proposed float. Tabcorp contends that the third event, the negotiation and agreement of documentation in an acceptable form, occurred when the parties to the MOU agreed that no further documents, in particular a Government Agreement, were required. The State disputes that contention, on the basis that it expressly refused to enter into the Government Agreement contemplated by clause 10.3 of the MOU, and so the third stipulated event did not occur. It is necessary to set out some facts in order to resolve the rival contentions.

197 On or prior to 13 May 1994, Arthur Robinson & Hedderwicks sent a copy of a draft 'State Agreement' to the Department of Treasury. As appears below, that draft included, at least, an agreement by the State that it would not take or authorise action in terms similar to the undertaking contained in clause 10.3(a) of the MOU; namely, that the State would not act or allow action to be taken which would have the effect of detracting from Tabcorp's existing rights under legislation applying to its wagering and gaming licences.

198 The provision of this draft State Agreement to the Department of Treasury caused alarm. Complaint was made to Mr Tilley by Mr Vertigan, the Secretary of Treasury. As a result, Mr Tilley telephoned Mr Renard at Arthur Robinson & Hedderwicks. In turn, Mr Renard sent a memorandum to his partner Mr Harry dated 16 May 1994, the relevant aspects of which are set out below:

On 13 May, Mike Tilley rang me about a number of issues. The main purpose of his call was to discuss the 'State Agreement'. He asked me if I knew about it: I admitted I had no knowledge of it. He said he was ringing to alert me to the possibility that I may receive a telephone call from the Secretary of Treasury, Mike Vertigan. He would be asking me why AR&H was recommending that the State enter into an agreement under which it would pay damages if the terms of the licences given to TABCORP are varied.

Mike Tilley said that this concept was incorporated in a State Agreement which we had prepared on his instructions. He said that, before he had seen it, SGA had given a copy in confidence to Rowena Armstrong, who in turn had been apparently alarmed by it and given a copy to the Premier's Department. He said that Ken Baxter had obtained a legal Opinion ... which criticised it as inappropriate and possibly unconstitutional, and Ken was criticising AR&H for having prepared it. Mike claimed Ken was suggesting that we were looking after the interests of TAB and the racing industry rather than those of the Government.[73]

199 Mr Tilley agreed in cross-examination that Mr Renard's file note is an accurate reflection of the conversation as far as he recalls it.

200 By mid-May 1994, the Treasurer advised Mr Tilley that he was 'uncomfortable' about signing a State Agreement including a term to the effect of clause 10.3(a) of the MOU. But the Treasurer did not instruct Mr Tilley at this time that the State would definitely not proceed with a State Agreement containing such an undertaking.

201 The first draft of the State Agreement which is in evidence is dated 19 May 1994. The draft was described in a letter from Arthur Robinson & Hedderwicks to Centaurus that day as 'our first draft'. It included clause 3.1, which contains obligations in similar terms to clause 10.3(a) of the MOU. Although it contains no indemnity for breach of those obligations, in terms similar to clause 10.3(b) of the MOU, a breach of the obligations under clause 3.1 would make the State liable to Tabcorp for damages and thus have the same commercial result as the indemnity referred to in clause 10.3(b) of the MOU. Further, the first draft included as clause 3.2 a promise by the State not to adversely change the terms of the joint venture agreement and related product supply and racing program agreements.

202 On 20 May 1994, Mr Tilley sent a copy of the draft State Agreement to Mr Charlton on behalf of the racing industry. In his covering letter, Mr Tilley stated to Mr Charlton:

This draft has been reviewed by the Treasurer and is in a form which is in principle acceptable to the Treasurer. The Treasurer has informed me that he cannot commit to sign this document or a document the same as this until such time as he has been advised by each of the relevant departments affected that there is nothing in this document which would cause him to breach his legal obligations as an Officer of the Crown. Accordingly, the Treasurer has asked me to inform you that he is not bound and that I am not capable of binding him to sign this document.[74]

203 Mr Tilley gave evidence in cross-examination that, soon after he sent this letter to Mr Charlton, the Treasurer instructed him that he could not sign a State Agreement in the form of the draft, as clauses 3.1 and 3.2 were unacceptable to the State and that this position was 'not negotiable'. Later in cross-examination, Mr Tilley agreed that the Treasurer instructed him that the State would not enter into a State Agreement that included provisions reflecting clause 10.3 of the MOU, but contradicted his earlier evidence that the Treasurer mentioned clauses 3.1 or 3.2 of the State Agreement. Nothing turns on this, as it is clear that, by shortly after 20 May 1994, the Treasurer had refused to sign a State Agreement which contained terms reflecting clause 10.3(a) of the MOU.

204 At this time, however, the Treasurer told Mr Tilley that he would 'stand by' the MOU, or words to that effect.

205 Mr Tilley said that he met Mr Charlton following the Treasurer's refusal to sign the State Agreement, that at this time Mr Charlton was representing the racing industry as a whole, and that he told Mr Charlton that the State was not prepared to sign a State Agreement but 'stood by' the MOU. Mr Tilley asked Mr Charlton to consider whether the racing industry would proceed with the joint venture agreement, the related documents and the float without a State Agreement. This evidence finds support in the minutes of a meeting of racing industry chairmen on 25 May 1994, which record that the racing industry's solicitor, Mr Clifton, advised the meeting 'that the Treasurer was refusing to enter into the proposed State Agreement and at this stage was sticking to the provisions of the MOU.'[75] Mr Tilley said that he did not convey this information to Mr Clifton, but that he had told Mr Yates this on numerous occasions during that week.

206 Mr Tilley's evidence about his conversation with Mr Charlton is set out below:

I don't know if I recall the specific words but I recall that I made it clear in discussion with Mr Charlton, and it was a fairly informal discussion, that the Treasurer was not prepared to proceed with the State agreement, that the Treasurer's position was not negotiable, that the racing industry really needed to form a view as to whether or not this would be acceptable to them, that the material protections that the racing industry were seeking through the State agreement would essentially be available to them through the MOU if both parties accepted that all of the conditions or the agreements that were required had been satisfied and therefore if they accepted that the State agreement ... was not necessary, then they would achieve most of the important protections they were seeking and Mr Charlton, while making it clear that he had no authority to bind the racing industry, left me to believe that he would recommend that they should proceed in that direction. We also discussed the prospective downside for the racing industry of them not being prepared to agree to that which was essentially that negotiations would go back some way and that some of the benefits that they had been able to get agreement from the government on to that point may be lost in a renegotiation of the agreements.[76]

207 Mr Tilley said that Mr Charlton later spoke with him and 'confirmed to me that the racing industry would accept the position that I had proposed'; namely, that the racing industry would proceed without insisting on a State Agreement.

208 While I accept Mr Tilley's evidence that he informed Mr Charlton that the Treasurer had refused to proceed with the State Agreement, that this position was not negotiable, and that the racing industry needed to consider whether to accept that position or re-open the negotiations (with the prospective downside that may entail), I reject the emphasised portion of the above-quoted evidence. My reasons for rejecting that portion of his evidence appear below.

209 As a result of the Treasurer refusing to sign the State Agreement, the condition precedent in the draft joint venture agreement concerning the State Agreement was altered. The 20 May 1994 draft of clause 2.1(a)(v) provided that the joint venture agreement was conditional upon the execution of a State Agreement in the form of the draft to be scheduled to the final joint venture agreement. The 23 May 1994 draft of clause 2.1(a)(v) provided that the joint venture agreement was conditional upon:

(v) the execution by the State, TABCORP and VicRacing of an instrument setting out the objectives of the State, TABCORP and VicRacing in connection with the establishment of the joint venture referred to in Clause 2.1 (b) (which instrument shall not create legal rights or obligations on the part of any of the State, TABCORP or VicRacing).[77]

210 The joint venture agreement was executed with this form of condition precedent on 25 May 1994. The racing industry was represented in the joint venture agreement by VicRacing Pty Ltd.

211 The 1994 Act was passed by the Victorian Parliament on the day before, 24 May 1994.

212 Mr Tilley gave evidence in his witness statement that, before 2 June 1994, the Treasurer instructed him to meet with Messrs Yates and Bourke 'in order for the parties to agree that everything that needed to be done and agreed had been done and agreed in order to allow the legislation to be assented to and the Prospectus to proceed.' In cross-examination, Mr Tilley gave an expanded version of the Treasurer's instructions:

... the Treasurer actually instructed me to go to [the] racing industry to get assurance from them that there were no matters outstanding, no documents which they wished to have completed that weren't in existence or acceptable to them at this stage which was the precursor for the memorandum of understanding going from being non-binding to binding which was the requirement for the due diligence committee to sign off on the forecasts to enable the prospectus to be issued.[78]

...

He instructed me to arrange for a meeting with Mr Yates and Mr Bourke to ensure that all the documents that the racing industry required were completed to their satisfaction and to have a similar discussion with other - with members of the executive in the clear understanding that once those things had been done, if ... the float proceeded, then the memorandum of understanding would become binding.[79]

213 Again, while I accept that Mr Tilley was instructed by the Treasurer to speak to Messrs Yates and Bourke in the terms stated in his witness statement, as repeated in cross-examination, I reject the emphasised portions of the above-quoted evidence. My reasons for rejecting those portions of his evidence appear below.

214 In his witness statement, Mr Tilley said that he could not 'specifically remember' the content of his discussion with Messrs Yates and Bourke at this time but generally recalled 'that those present did agree that everything that needed to be done and agreed had been done and agreed'. In his evidence in chief, however, Mr Tilley purported to recall this discussion in much more detail. For example:

I don't recall every part of it but certainly I recall explaining that essentially this was the last step in the process in terms of the things that needed to be done - the last sort of step that required our involvement in the process and that was to ensure that they were satisfied with all of the documents, with all of the arrangements and would do the things they needed to do to enable the float to proceed, the joint venture to come into existence and that there were no outstanding documents or things that they required and I explained that that was part of the process of taking the MOU from being non-binding to binding, which was in their interest.

Can you recall what you said about the MOU and bindingness? --- I explained to them that from the perspective of the float, the MOU being binding was important around the issue of amortisation but I also discussed with them why turning the MOU into a binding document was important, for all the parties.[80]

215 Again, while I accept Mr Tilley's evidence in his witness statement about his discussion with Messrs Yates and Bourke, as repeated in substance in his evidence-in-chief, I reject the emphasised portion of his above-quoted evidence. My reasons for that rejection appear below.

216 As the date for finalising the prospectus neared, Mr Tilley met with the intended independent directors of Tabcorp, particularly Tony Hodgson, Michael Robinson and Ross Wilson. In his witness statement, he said that, during these meetings:

they made clear their view to me that there needed to be a public assurance about the Government's intentions in documentary form that could be referred to in the Prospectus and publicly discussed, and that they considered this to be of critical importance to them.

217 The independent directors' concerns were likely to have been the result of genuine concern about sovereign risk. At about the same time, Clayton Utz were pressing Mr Tilley for a draft of the instrument that was intended to satisfy the condition precedent in clause 2.1(a)(v) of the joint venture agreement. A letter from the Treasurer was prepared and executed on 29 June 1994 in this context (the 'Treasurer's letter').

218 The Treasurer's letter was addressed to the Chairmen of Tabcorp and VicRacing Pty Ltd. It is in the following terms:

Dear Sirs

PRIVATISATION OF THE TOTALIZATOR AGENCY BOARD

I am writing to you to confirm the principles on which the Government of Victoria is privatising the TAB. It is important that applicants for shares in TABCORP Holdings Limited understand why the Government has decided to proceed with the privatisation. These principles are reflected in the Memorandum of Understanding signed between the Government and the Racing Industry on 15 March 1994, the Gaming and Betting Act 1994 and my Parliamentary speeches in relation to the Act.

I must however make it clear that the statement of principles in this letter does not bind this Government or future Governments and, of course, that the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation affecting the operations of the TABCORP group of companies, the Victorian Racing Industry or the terms on which those operations are conducted.

They are as follows:

1. TABCORP Holdings Limited has the sole licence for 18 years under the Gaming and Betting Act 1994 to conduct off-course wagering on horse, harness and greyhound racing and a concurrent right (with Tattersalls and Crown Casino) to conduct gaming, for a fixed period.
2. It is important that the Victorian Racing Industry should, after the TAB's privatisation, continue to grow and develop and derive appropriate financial support from TABCORP's wagering and gaming activities. Consequently, an unincorporated joint venture will be established between a subsidiary of TABCORP and VicRacing Pty Ltd, representing the Racing Industry. The joint venture will include the conduct and development of wagering, gaming, approved betting competitions and Club Keno games. A TABCORP subsidiary will act as the joint venture manager. The joint venture will be owned as to 75% by TABCORP's subsidiary and 25% by the Racing Industry. The joint venture will be established in order to generate for the Racing Industry a more secure level of income than would have been available under a continuation of the current arrangements, which is in the long term interests of the development of racing and racecourses in Victoria. The Racing Industry will also be deregulated in the interests of efficiency subject to the Government's social policies and to the maintenance of the highest standards of probity. Similarly, and subject to the same overriding policies, the TABCORP group will be subject to a less intrusive regulatory environment than that which currently applies to the TAB.
3. In order to maintain and improve the competitiveness of the Victorian Gambling Industry, amounts payable to the Government in relation to wagering operations under the new TABCORP licences will be reduced from an average across bet types of approximately 42% of net wagering revenue under the Racing Act to approximately 28.2% of net wagering revenue for the period of the licences. Amounts which may be retained by TABCORP by way of commission on gaming will be maintained at 33.33% for the period of the licences.
4. The TABCORP group will have the flexibility to conduct any kind of business whether under the new licences or otherwise and whether in or out of Victoria, where it is permitted by law or the terms of the Racing Industry joint venture.
5. Consistent with all of these objectives, the maximum commercial value for the licences should be recouped by the State of Victoria.

• TABCORP has now been granted a wagering licence and a gaming licence which will come into effect on the successful conclusion of this float.
• The licences will be for terms of 18 years and will be concurrent and not separable.
• The Government does not currently intend to grant further gaming or wagering licences to persons who are not now authorised to conduct gaming or wagering during that 18 year period.
• TABCORP may apply for new licences after the initial licences terminate and on the same terms as other applicants. It is expected that the process of award of new licences will involve a public tender. It is also expected but not guaranteed that the new licences would be awarded to the highest qualifying bidder. If the new licensee is not TABCORP, TABCORP will be entitled to receive from bid proceeds received by the State an agreed capital compensation amount of approximately the net amount TABCORP will pay the Government for the initial licences calculated in accordance with the Gaming and Betting Act 1994 (subject to the bid proceeds being sufficient).
• The Gaming and Betting Act 1994 provides that the Governor in Council must not grant new licences to any third party when the initial licences expire unless there is satisfaction that steps have been taken, or reasonable opportunity given, to ensure that the Racing Industry joint venture has satisfactorily been wound up and the applicant for the new licences has entered into, or has made a binding offer to enter into, arrangements with the Racing Industry that in the opinion of the responsible Minister after consultation with the Victorian Casino and Gaming Authority, are no less favourable to the Industry than those last in force between them and the TABCORP Group.

1. It is intended that any new licences will be granted on conditions which include conditions substantially to the same effect as those to which the TABCORP licences are subject.

The Government recognises both the importance of the Victorian Racing Industry and the importance of the gaming and betting industries to the Victorian economy and in recognition of that it will continue to deal with the Victorian Racing Industry and the TABCORP group of companies reasonably and in good faith.

On behalf of the Government, I wish both the Victorian Racing Industry and TABCORP well and I am confident that the future for them will be one of healthy growth and much success.

Yours sincerely

Alan Stockdale

Treasurer[81]

219 At the time the prospectus was issued, the parties to the joint venture agreement had not agreed that the condition precedent to the operation of the joint venture agreement had been satisfied. Mr Clifton of Clayton Utz prepared a Schedule of Outstanding Issues from the racing industry's perspective on 30 June 1994. He described the non-binding instrument required by clause 2.1(a)(v) as the 'State Agreement', and continued:

The principal concern of the Industry is that the instrument provides some assurances that the conditions of the Wagering Licence and Gaming Licence will not be changed without the consent of the Racing Industry.

220 The prospectus for the float was issued on 1 July 1994 and offers for shares in Tabcorp closed on 12 August 1994.

221 During July 1994, the parties to the joint venture agreement considered whether to accept the Treasurer's letter as satisfying the condition precedent in clause 2.1(a)(v). There is no evidence that those parties also considered whether or not the MOU had become binding and should be accepted as fulfilling that condition precedent. The Treasurer's letter refers to the MOU as reflecting the principles stated in the letter, but this is immediately followed by a statement that those principles are not binding.

222 The racing industry received legal advice from Clayton Utz that it could 'reasonably accept the Treasurer's letter as satisfying the requirement for a State Agreement'. That advice was based on the following matters:

(1) the condition precedent did not require a legally binding instrument;

(2) the Treasurer's letter addressed the racing industry's principal concern regarding the joint venture, by the Treasurer's statement of intention that new licences granted after expiration of Tabcorp's licences would include conditions 'substantially to the same effect' as the existing licences; and

(3) Clayton Utz was not aware of any other principles or objectives of the racing industry that 'could be reasonably expected to be included in the State Agreement'.

223 The racing industry accepted this advice. In that context, Arthur Robinson & Hedderwicks advised Mr Tilley that it would be prudent for the parties to the joint venture agreement to sign a written acknowledgment that the condition precedent in clause 2.1(a)(v) had been satisfied. Such an acknowledgment was signed by all relevant parties between 1 and 8 August 1994.

224 The float was successful and Tabcorp's licences commenced operation on 15 August 1994.

225 Against this factual background, I turn to consider whether the third event specified in the preamble occurred.

226 Tabcorp relied heavily upon the Treasurer's statement to Mr Tilley, as communicated to the racing industry, that he 'stood by' the MOU. Tabcorp contends that this statement, combined with the confirmation from Messrs Charlton, Yates and Bourke that the racing industry was not seeking that any further documents be executed, established that the third specified event occurred when the Treasurer's letter was accepted to satisfy the condition precedent in clause 2.1(a)(v) and the joint venture agreement became binding.

227 I do not accept Tabcorp's contentions. If my earlier conclusion is incorrect, and the parties had intended the understandings expressed in the MOU to become binding of their own force on the occurrence of the three events specified in the preamble, the third event did not occur. This is because the parties clearly contemplated that 'the documentation' would include the Government Agreement intended by clause 10.3 and no such agreement was executed.

228 If that conclusion is not correct, I find that the parties nevertheless intended that clause 10.3 would not be binding - for the following reasons.

229 First, because the State refused to sign the Government Agreement contemplated by clause 10.3. The Treasurer's refusal arose out of the concerns expressed by Treasury officers, as recorded in Mr Renard's memorandum to Mr Harry dated 16 May 1994. Mr Vertigan, Secretary of Treasury, was obviously concerned about provisions in the draft State Agreement 'under which [the State] would pay damages if the terms of the licences given to TABCORP [were] varied'. That can only have been a reference to clauses such as 3.1 and 3.2 of the first draft of the State Agreement, or clauses to like effect, which reflected clause 10.3(a) of the MOU. Tabcorp contends in that regard that the evidence does not permit a finding that, by refusing to sign a State Agreement in the form of the draft provided, the Treasurer signified a rejection of clause 10.3 of the MOU. I do not accept that submission. I find that the Treasurer's rejection of the State Agreement was, at least in substantial part, the result of advice that the State should not commit itself to pay damages to Tabcorp and the racing industry if there were legislative changes adversely affecting their interests.

230 In these circumstances, it would be commercial nonsense to hold the parties to a bargain in terms of clause 10.3(a) and (b). At the time the MOU was executed, the parties to it clearly intended that a Government Agreement in terms of clause 10.3 would form part of the documentation to be negotiated and agreed. Not only did the parties fail to agree on a Government Agreement, the State positively rejected a draft agreement containing obligations in terms of clause 10.3(a) and (b). That rejection is inconsistent with the State agreeing that the intention expressed in clause 10.3 was or would become binding. A general statement by the Treasurer that he 'stood by' the MOU cannot convert that intention into an agreement.

231 Second, I reject Tabcorp's contention that clause 10.3(a) and (b) were capable of giving rise to a binding undertaking and indemnity.[82]

232 The short answer to Tabcorp's contentions in this regard arises on the words of the MOU. Even if it be assumed that any understanding in the MOU which was not included in finally negotiated and agreed documentation became binding, clause 10.3 is no more than a statement of intention as to what, at that stage of negotiations, a Government Agreement was to include. The introductory words say just that: 'It is intended that the Government Agreement include ...'. This is in direct contrast to the mandatory or promissory language of the other understandings which are referred to in the MOU. The other clauses of the MOU were obviously intended to go into the joint venture agreement, racing program agreement or product supply agreement; and the understandings in them are expressed in mandatory or promissory language, namely that the parties 'shall' or 'will' do certain things, or that proposed agreements 'shall' or 'will' contain certain obligations. For example, clause 4.9 of the MOU records that Tabcorp 'will unconditionally guarantee' certain obligations of related parties pursuant to the joint venture agreement. If the intention of the MOU was to create binding rights and obligations in terms of clause 10.3, it would have used consistent language such as:

(1) 'the State, TABCO and RACE CO shall enter into the Government Agreement'; and

233 The use of the language of intention in the introductory words is inconsistent with binding obligations. In my opinion, the likely reason for using language of intention in clause 10.3 is to be found, again, in the known background circumstance of sovereign risk. As recital 7 recognises, the parties intended that their arrangements and agreements would only be entrenched by contract to the extent that it was possible to protect the rights and obligations associated with them from adverse variation.

234 For the above reasons, it is unnecessary to consider whether Tabcorp is entitled to enforce any indemnity under clause 10(b) of the MOU or, if so, whether such an indemnity would be void or unenforceable as an impermissible restraint or fetter upon future legislative action.

235 Before leaving the contractual claim based on the MOU, it is necessary to say why I rejected aspects of Mr Tilley's evidence.

236 In his evidence, Mr Tilley said that he was of the opinion that the MOU became binding when Messrs Yates and Bourke agreed with him that 'there were no outstanding documents or things that they required',[83] or, in other words, agreed with him that 'all of the documents that were in place were all of the documents that they reasonably required'.[84] While Tabcorp relies on Mr Tilley's evidence as to the content of this conversation to support a contention that the third event specified in the preamble was satisfied, Tabcorp did not rely upon Mr Tilley's evidence concerning his belief that this conversation resulted in the MOU becoming binding. There was much cross-examination of Mr Tilley directed at establishing that he did not genuinely hold such a belief at any relevant time. It is important to note, however, that Mr Tilley's belief as to whether or not the MOU was or became binding was irrelevant and inadmissible to the determination of that issue. Tabcorp rightly acknowledged this in its submissions.

237 I do not intend to catalogue all of the evidence given by Mr Tilley which was challenged in cross-examination. I must record, however, that I found Mr Tilley to be a most unsatisfactory witness concerning MOU issues. He was argumentative, evasive and gave inconsistent evidence on a number of topics; and some of his evidence was implausible.

238 Notwithstanding that his evidence concerning the MOU was in my opinion largely irrelevant, it is necessary to consider Mr Tilley's evidence and credibility in some respects, as an appeal is likely and a contrary position may emerge on appeal in respect of some aspects of his evidence. As stated above, while I accept Mr Tilley's evidence that the Treasurer told him words to the effect that he - the Treasurer - stood by the MOU, and that Mr Tilley informed racing industry representatives of this statement in the context of informing them that the Treasurer refused to execute a State Agreement, I reject his evidence to the effect that:

(1) he and the Treasurer had a 'clear understanding' that if the racing industry did not insist upon a State Agreement, and the float proceeded, 'then the memorandum of understanding would become binding', and it was in this context that the Treasurer asked Mr Tilley to meet with Mr Yates and Mr Bourke to ensure that the racing industry did not require that any further documents be executed; and

(2) his discussions with racing industry representatives were on the basis that the third event stipulated in the preamble would occur if they did not insist on a State Agreement, thus 'taking the MOU from being binding to non-binding'.

239 Further, I reject Mr Tilley's evidence that he told others of his belief that, if the racing industry did not require a State Agreement, the MOU would become binding. Specifically, I reject his evidence that:

(1) the Treasurer instructed him that the discussions he was having with the racing industry about the MOU becoming binding should not be disclosed to the due diligence committee for the float;

(2) notwithstanding the Treasurer's instruction, he nevertheless informed Mr Renard and Mr Harry of Arthur Robinson & Hedderwicks that the State was treating the MOU as binding;

(3) Mr Renard, who was a member of the due diligence committee, agreed that these matters need not be disclosed to the due diligence committee or in the prospectus; and

(4) prior to publication of the prospectus, he told directors of Tabcorp (Messrs Robinson and Wilson) that the State intended that the MOU would become binding.

240 Mr Tilley's evidence on these issues is implausible for the following reasons.

241 First, there is not one document to corroborate any discussion or belief by the relevant parties that the MOU was, or was intended to be, binding. This is remarkable given the importance of such an issue if it was discussed in the terms suggested by Mr Tilley with representatives of the racing industry, Arthur Robinson & Hedderwicks and Tabcorp.

242 Second, there is no evidence of the State or the racing industry acting on the basis that they believed the MOU had become binding. For example, if the State had believed that the MOU was binding, a release in terms of clause 10.3(c) would most likely have been sought from the racing industry.

243 Third, if the racing industry representatives had discussions with Mr Tilley to the effect that the MOU would be binding if they did not insist upon a State Agreement, that issue would likely have been discussed with the solicitor for the racing industry, Mr Clifton. Yet the contemporaneous documents reveal that Mr Clifton gave no consideration to the MOU when considering whether the racing industry should accept the Treasurer's letter as satisfying the condition precedent in clause 2.1(a)(v) of the joint venture agreement, and in September 1994 Mr Clifton advised the racing industry that the MOU 'does not have any on-going legal effect'.

244 Fourth, had Mr Tilley honestly believed that the MOU had, or would on satisfaction of the condition precedent in clause 2.1(a)(v) of the joint venture agreement, become binding, he would have told the due diligence committee directly. Common sense dictates that this is so. Indeed, if Mr Tilley is to be believed, the Treasurer instructed him before 2 June 1994 to meet with Messrs Yates and Bourke on the understanding that the MOU 'going from being non-binding to binding ... was the requirement for the due diligence committee to sign off on the forecasts to enable the prospectus to be issued.'

245 Fifth, it is wholly implausible that Mr Harry and Mr Renard would have acquiesced in concealing information about the potential bindingness of the MOU from the due diligence committee, especially in circumstances where Mr Renard had explained to the due diligence committee at its first meeting that 'the consensus nature' of the committee required that all members would have access to the same information. If clause 10.3 of the MOU was intended to become binding on successful completion of the float, it would have been necessary to disclose it as a material contract in the prospectus and this would have been obvious to Messrs Renard and Harry. The MOU was not referred to in the prospectus and Mr Renard signed a final due diligence report which included statements to the effect that the committee had considered all matters which were 'material to the prospectus' and was not aware of any relevant information which had not been disclosed in the prospectus.

246 Sixth, if Mr Tilley had an understanding with the Treasurer and the racing industry that the MOU was or would become binding, he would have told the investigating accountants for the float and Tabcorp's auditors. In the context of sovereign risk, an indemnity in the terms provided for by clause 10.3(b) would have been a most material matter to take into account in considering whether the licence consideration should be amortised in the financial projections contained in the prospectus.

247 Seventh, if Mr Tilley had told Messrs Robinson and Wilson that the State intended the MOU to become binding, it is unlikely that they would have acquiesced in the prospectus being issued without reference to the MOU.

248 Eighth, Mr Tilley's evidence concerning his belief that the MOU became binding and his discussions with others in that regard was not included in his witness statement. The evidence came out in cross-examination in a most unsatisfactory way and was replete with inconsistencies.

249 Taking the evidence and Mr Tilley's demeanour and credibility as a whole, I find that Mr Tilley's relevant and credible evidence on MOU issues amounts to no more than the following:

(1) the Treasurer refused to sign a Government Agreement containing provisions to the effect of clause 10.3(a) and (b) of the MOU, but said words to the effect that he would stand by the MOU;

(2) the Treasurer instructed Mr Tilley to speak with representatives of the racing industry and secure their agreement to proceed with the joint venture agreement and the float without a Government Agreement;

(3) Mr Tilley communicated the Treasurer's position to Messrs Charlton, Yates and Bourke and asked them to proceed on that basis; and

(4) the racing industry representatives agreed that the racing industry would proceed on that basis.

250 For the reasons given above, evidence to that effect does not assist Tabcorp's MOU case.

Did the State breach obligations of good faith and reasonable dealing?

251 Tabcorp alleges an alternative case based on an express or implied promise by the State to act reasonably and in good faith. Tabcorp contends that the State breached the term by failing either to preserve Tabcorp's statutory right under s 4.3.12 of the Act or, alternatively, to provide an equivalent or corresponding entitlement to arise on the grant of the wagering and betting licence, the gaming machine entitlements and the keno licence.

252 The State denies that it was bound by an express or implied good faith obligation. If it was, the State denies that the good faith obligation could fetter the Executive of the State from proposing, or the Parliament of the State from enacting, legislation which had the effect of depriving Tabcorp of its statutory right to a terminal payment. The State contends that the content of the good faith term put forward by Tabcorp is both inconsistent with the express terms of the Treasurer's letter and void as a fetter on future executive and legislative action.

(A) Does the Treasurer's letter contain a promise?

253 I will first consider whether the good faith term was the subject of an express agreement between Tabcorp and the State. Tabcorp's case in this regard is straightforward. It relies upon the final paragraph of the Treasurer's letter:

The Government recognises both the importance of the Victorian Racing Industry and the importance of the gaming and betting industries to the Victorian economy and in recognition of that it will continue to deal with the Victorian Racing Industry and the TABCORP group of companies reasonably and in good faith.[85]

254 Tabcorp contends that this language is in plain, unqualified and promissory terms. It contends further that the promise should be treated as contractually binding because, in exchange for the State's promise, Tabcorp provided consideration by assisting it to recoup the maximum commercial value for the gaming licence and the wagering licence - specifically, by lodging the prospectus for registration and inviting the public to subscribe for shares in Tabcorp on the faith of the prospectus. Tabcorp contends that parallels can be drawn between the circumstances here and those considered in letter of comfort cases such as Banque Brussels Lambert SA v Australian National Industries Ltd[86] and pre-tender contract cases like Hughes Aircraft Systems International v Airservices Australia.[87]

255 The State contends that the statement in the Treasurer's letter is not promissory, because it must be read in the light of the opening paragraphs of the letter, which state:

I am writing to you to confirm the principles on which the Government of Victoria is privatising the TAB....

I must however make it clear that the statement of principles in this letter does not bind this Government or future Governments and, of course, that the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation affecting the operations of the TABCORP group of companies, the Victorian Racing Industry or the terms on which those operations are conducted.

256 The State contends that these paragraphs of the Treasurer's letter are inconsistent with the final paragraph constituting a contractually binding promise, especially a promise to the effect implicitly contended by Tabcorp in alleging that the State breached the good faith term by promoting legislation (the 2008 and 2009 amendments) which deprived Tabcorp of its right to a terminal payment under s 4.3.12. The State contends that the final paragraph of the letter is governed by the Treasurer's unequivocal statement that 'the statement of principles in this letter does not bind this Government or further governments'. If that is not so, the State contends that the statement was not intended to be contractually binding, and relies upon the acknowledgements executed by Tabcorp and VicRacing in August 1994, that the Treasurer's letter satisfied the condition precedent in clause 2.1(a)(v) of the joint venture agreement, in support of that contention.

257 I do not accept the State's contention that the final paragraph of the Treasurer's letter is subject to the Treasurer's statement in the opening paragraphs that the principles in the letter were not binding. Taking the Treasurer's letter as a whole, the statement as to non-bindingness applies only to the statement of principles in the seven numbered paragraphs which are introduced by the words: 'The principles are as follows: - '. As a matter of structure and plain meaning, these are the principles which are subject to the statement of non-bindingness.

258 I accept, however, that the statement of non-bindingness impacts upon the scope and content of the good faith term in a way which deprives it of any meaningful content in the circumstances of this case. The fact that the seven numbered principles are non-binding, and are subject to the express statement that:

of course, ... the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation affecting the operations of the TABCORP group of companies, the Victorian racing industry or the terms on which those operations are conducted ...

must be given effect. Most relevantly, the sixth principle contains a description of Tabcorp's entitlement to compensation in the event that it is not the new licensee. Accordingly, any express good faith term was circumscribed in its scope by the express statement that Tabcorp's entitlement to a terminal payment under s 4.3.12 was subject to contrary executive or legislative action.

259 It is therefore unnecessary to reach a conclusion regarding the bindingness of the good faith commitment more broadly. I note, however, that I see difficulty in any analogy between the context here - a State-led privatisation of a statutory corporation - and the type of arms-length commercial transactions under consideration in letter of comfort cases, such as Banque Brussels, or the pre-tender contract cases like Hughes Aircraft, relied on by Tabcorp. It was the State that determined to privatise the TAB and the terms on which that privatisation would take place, facts which undermine the contention that the good faith commitment in the Treasurer's letter formed part of a bargain in exchange for Tabcorp's assistance in progressing towards the float.

260 I have not placed any weight in reaching my conclusion on the State's contention that the acknowledgements executed by Tabcorp and VicRacing reflected an understanding that the Treasurer's letter did not create any legal rights on the part of the State, Tabcorp or VicRacing, as the condition precedent in clause 2.1(a)(v) of the joint venture agreement required only an instrument which did not create such legal rights or obligations. In my opinion, that contention involves a syllogism: the condition precedent in clause 2.1(a)(v) of the joint venture agreement stipulated that the instrument to be executed was not to create legal obligations; Tabcorp and VicRacing accepted the Treasurer's letter satisfied the condition precedent in clause 2.1(a)(v); therefore, the Treasurer's letter did not create legal obligations.

261 I reject that reasoning. First, it involves a construction of the Treasurer's letter by reference to subsequent conduct. Second, the fact that the parties to the joint venture agreement accepted a partly binding instrument as satisfying the condition precedent does not logically affect the meaning of that instrument - which in all other respects concerning the objectives of the State in connection with the joint venture agreement did not contain legal rights or obligations. Third, the parties well understood that there were other reasons why the Treasurer's letter did not strictly satisfy the requirements of clause 2.1(a)(v) of the joint venture agreement.[88] To the extent that the condition precedent required an instrument which did not create legal rights or obligations, or the Treasurer's letter did not otherwise comply with that condition, the evidence established that the parties waived or varied the clause.

(B) Did the State breach any good faith obligation?

262 Tabcorp pleads that the duty of good faith was breached by the actions of the State in preparing, introducing into Parliament, promoting, and procuring the enactment of, the 2008 and 2009 amendments, without making provision for the preservation of Tabcorp's right to a terminal payment. Tabcorp contends that the want of good faith is clearly demonstrated by observing that the State reaped the benefit of the success of the float, substantially by virtue of the statutory promise of a terminal payment, and no public interest justification has been advanced by the State for its repeal.

263 In my opinion, Tabcorp's breach allegation is inconsistent with the limited nature of the good faith term as discussed above. The enumerated principles in the Treasurer's letter were subject to the express statement of non-bindingness in the opening paragraphs of the letter, including the acknowledgment of the power of the Victorian Parliament to enact legislation affecting Tabcorp's terminal payment right. Tabcorp cannot obtain a result by a term of good faith which is inconsistent with an express statement in the very instrument (the Treasurer's letter) which created the good faith obligation.

264 Having regard to this conclusion, it is unnecessary to consider the State's contention that the way in which Tabcorp relies on the good faith obligation is void or unenforceable as a fetter on future executive and legislative action.

(1) Tabcorp's statutory case fails, because the State's specific meaning and implied repeal contentions have been accepted.

(2) Tabcorp's contractual case based on clause 10.3 of the MOU fails, because that clause is not binding and, in any event, did not promise the claimed indemnity.

(3) Tabcorp's contractual case based on good faith fails, because the content of the good faith obligation on which it relies is inconsistent with the Treasurer's letter when read as a whole.

[3] Section 21. This summary deliberately avoids some of the textual issues arising for determination on the proper construction of s 21 and its statutory successor provision, s 4.3.12 of the Gambling Regulation Act 2003 (Vic).

[4] Tatts Group Limited v The State of Victoria [2014] VSC 302.

[5] Victoria, Parliamentary Debates, Legislative Assembly, 28 April 1994, 1313 (Alan Stockdale, Treasurer).

[6] Explanatory Memorandum, Gaming and Betting Bill 1994 (Vic) 1.

[7] Section 12.2.1, sch 7 items 1.1, 4.2.

[12] [2013] HCA 16; (2013) 87 ALJR 588, 597 [47] (original emphasis; citations omitted).

[13] [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47]-[49] (citations omitted).

[14] [2014] HCA 12; (2014) 88 ALJR 514, 518 [22], quoting Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 87 ALJR 98, 107 [39] (citations omitted).

[19] Section 4.1.1 reinforced that the wagering licence and the gaming licence could only be granted or held together by providing:

(b) to provide for the issue of a gaming licence in conjunction with the issue of a wagering licence, allowing the licensee to conduct gaming in accordance with Chapter 3.

[21] Federal Commissioner of Taxation v United Aircraft Corporation [1943] HCA 50; (1943) 68 CLR 525, 533 (Latham CJ).

[23] Section 37 of the Interpretation of Legislation Act 1984 provides:

In an Act or subordinate instrument, unless the contrary intention appears -

[25] For example, see ss 4.3.7, 4.3.8, 4.3.9, 4.3.12, 4.3.32 and 4.3.33.

[26] Commissioner of Police v Eaton [2013] HCA 2; (2013) 87 ALJR 267, 286 [97] (Gageler J).

[27] [2013] NSWCA 212; (2013) 302 ALR 101, 119-20 [82] (original emphasis).

[28] [2002] NSWSC 1130; (2002) 56 NSWLR 210.

[30] (1988) 13 NSWLR 77.

[31] [2003] NSWCA 91; (2003) 57 NSWLR 113, 145 [141].

[32] [2002] 2 All ER 315.

[33] [1908] HCA 55; (1908) 7 CLR 1, 10.

[35] [1939] HCA 40; (1939) 62 CLR 603, 625.

[36] [2006] HCA 50; (2006) 228 CLR 566, 585 [48]. See also, Saraswati v The Queen [1991] HCA 21; (1991) 172 CLR 1, 17 (Gaudron J); Dossett v TKJ Nominees Pty Ltd [2003] HCA 69; (2003) 218 CLR 1, 14 (Gummow, Hayne and Heydon JJ).

[37] [1908] HCA 63; (1908) 7 CLR 277, 304 (emphasis added).

[39] Springhall v Kirner [1988] VicRp 21; [1988] VR 159, 165-6 (Crockett J).

[40] [1904] HCA 12; (1904) 1 CLR 363, 373.

[41] [2004] HCA 63; (2004) 221 CLR 30, 49 [43] (citations omitted).

[42] Commission of Police v Eaton [2013] HCA 2; (2013) 87 ALJR 267, 278 [46] referring to the statement of Lord Wilberforce in Associated Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538, 553-4. This principle is often expressed by the maxim 'generalia specialibus non derogant'.

[43] DS Pearce and RS Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 7th ed, 2001) 49-50 [2.26] and the cases there referred to.

[44] [1998] HCA 28; (1998) 194 CLR 355, 382 [71].

[45] [1955] HCA 27; (1955) 92 CLR 390, 397.

[46] For example, Federal Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16; (2015) 87 ALJR 588, 597 [47].

[47] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297, 321.

[50] As explained in the judgment delivered today in the Tatts proceeding, s 3.4.33 of the Act contained a terminal payment provision for Tatts, albeit one operating on a different contingency following expiry of Tatts's gaming operator's licence.

[51] Victoria, 2008-09 Budget Paper No 4 - Statement of Finances (6 May 2008), 237.

[53] For example, Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380, 384 [12]-[16] (Spigelman CJ), 398-401 [159]-[173] (Mason P).

[54] [1998] HCA 28; (1998) 194 CLR 355, 382 [76].

[55] For example, ss 2.5A.14, 3.2.5, 3.4.28F, 3.4.48B, 3.4.59LB, 3.4.59Q, 3.4A.11B, 3.4A.29, 3.4A.31, 3.5.33N, 3.7.6C, 3.8.12, 4.3A.10AB, 4.3A.34AB, 6A.3.10B, 6A.3.34B**.**

[56] Adelaide Brighton Cement Ltd v Victorian Rail Track [2007] VSCA 10, [52]-[53].

[57] For example, _R v Secretary of State for the Home Department; ex parte Sim_s [1999] UKHL 33; [2000] 2 AC 115, 131 - 'Parliament must squarely confront what it is doing and accept the political cost'.

[58] Section 3.2A.2 of the Act prohibits a venue operator or a related party from holding a monitoring licence at any time.

[60] The only addition related to the operation of 'jackpots'.

[61] The State submitted that the abolition of the requirement under s 6.2.5 of the Act that keno could only be offered at premises where gaming machines were also present represented a significant departure from the old regime.

[63] Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380, 384 [12] (Spigelman CJ), 401 [172] (Mason P).

[64] Ermogenous v Greek Orthodox Community (2002) 209 CLR 95, 105-6 [25].

[65] Toll (FGCT) Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 175-6 [36]-[40].

[66] For example, Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447, 454-5 [35].

[70] [1954] HCA 72; (1954) 91 CLR 353.

[82] Tabcorp acknowledges that the terms of the release in clause 10.3(c) were uncertain without recourse to extrinsic evidence as to what the release was to entail, but contends that it was obvious on the evidence of surrounding circumstances that it was a release from the claims by the racing industry to beneficial ownership of the TAB.

[86] [1989] 21 NSWLR 502.

[87] [1997] FCA 558; (1997) 76 FCR 151.

[88] For example, the Treasurer's letter was not an instrument executed by the State, Tabcorp and VicRacing, and did not set out the objectives of all parties.