Tatts Group Limited ACN 108 686 040 v The State of Victoria [2014] VSC 302

STATUTORY INTERPRETATION - Gambling Regulation Act 2003 (Vic) s 3.4.33 - Meaning of 'gaming operator's licence' - Whether s 3.4.33 impliedly repealed - Whether s 3.4.33 engaged by grant of gaming machine entitlements under Part 4A of Chapter 3 - Held: Tatts not entitled to payment under s 3.4.33 - Section 3.4.33 impliedly repealed - Federal Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16; (2013) 87 ALJR 588; Thiess v Collector of Customers & Ors [2014] HCA 12; (2014) 88 ALJR 514; Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212; (2013) 302 ALR 101; Goodwin v Phillips [1908] HCA 55; (1908) 7 CLR 1.

GOOD FAITH AND COOPERATION - Whether express or implied term of good faith incorporated into licence agreement - Whether terms of good faith and cooperation breached by State - Held: express term of good faith and implied term of cooperation not breached.

1 The plaintiff, Tatts Group Limited, claims $451,157,286 plus interest from the defendant, the State of Victoria.

2 Tatts contends that the State agreed to pay that amount by a provision in a contract made in 1995 (the '1995 Agreement') and is also entitled to that amount under a statutory provision to similar effect enacted in 1996.

4 As to the contractual claim, the State contends that: (1) on a proper construction of the 1995 Agreement, the circumstances giving rise to a contractual right to payment have not occurred; (2) the 1995 Agreement was superseded by the 1996 legislation granting similar rights, with the result that its promise to pay was 'spent'; and (3) if that be wrong, later legislation in 2009 was inconsistent with the promise to pay and thereby abrogated it.

5 As to the statutory claim, the State contends that: (1) on a proper interpretation of the statutory provision, the circumstances giving rise to the statutory right to payment have not occurred; and (2) the statutory provision granting the payment right has been impliedly repealed.

6 In the event that these defences succeed, Tatts raises alternative cases based on alleged breaches by the State of obligations of good faith and cooperation in contractual dealings.

Background facts and legislative history prior to the 1995 Agreement

7 On the Gaming Machine Control Act 1991 (Vic) coming into operation (the '1991 Act'), the conduct of gaming machine businesses in Victoria was authorised for the first time.

8 On 14 April 1992, the Trustees of the Will and Estate of the late George Adams (the 'Trustees') were 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 was the plaintiff, Tatts Group Limited ('Tatts'). Tatts became the holder of the gaming operator's licence previously held by the Trustees. For convenience, I will refer to the Trustees as 'Tatts' unless it is necessary to refer to the Trustees specifically.

9 On 14 April 1992, the Totalisator Agency Board of Victoria (the 'TAB'), a statutory corporation of the State of Victoria, was also granted a gaming operator's licence under the 1991 Act. The TAB already held a wagering licence under the Racing Act 1958 (Vic). The TAB was later privatised and its business and assets transferred to Tabcorp Holdings Limited. At that time, the TAB's gaming operator's licence ceased to have effect and was replaced by a 'gaming licence' to the same effect granted to it under the Gaming and Betting Act 1994 (Vic) (the '1994 Act'). In a separate proceeding before the Court, Tabcorp claims similar relief to that claimed by Tatts in this proceeding.[1]

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

11 Prior to the 1991 Act coming into operation, gambling activity in Victoria involving the use of gaming machines was unlawful. By their respective gaming operator's licences, TAB and Tatts were authorised to conduct gaming on gaming machines at approved venues in Victoria. Approved venues were essentially club and hotel premises operated by the holders of venue operator's licences. The relevant gaming machines were primarily poker machines or 'pokies'.

12 In 1993, the Club Keno Act 1993 (Vic) came into force. Under that Act, the holder of a gaming operator's licence under the 1991 Act was authorised to conduct a lottery-style game known as 'keno' or 'club keno'.

13 The circumstances leading to the TAB privatisation and the Tabcorp float are described in the Court's judgment in the Tabcorp proceeding. A brief summary follows.

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

15 The State sought to maximise the amount to be raised from the Tabcorp float, so as to reduce public debt. In this context, the Treasurer, at the relevant time 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 included amortisation of its licences over their 18-year terms. This was unacceptable to the Treasurer, and so a solution was sought.

16 The Treasurer was advised that amortisation could be avoided if the State agreed to repay the licence consideration at the end of Tabcorp's licences in 18 years' time. The Treasurer accepted this advice. As a result:

(1) The 1994 Act was enacted. That Act provided: (a) for Tabcorp to be granted two licences, a wagering licence and a gaming licence,[2] 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;[3] and (c) that following expiry of Tabcorp's licences and 'the grant of new licences', 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 Tabcorp terminal payment provision').[4]

(2) The profit forecasts in the Tabcorp prospectus did not amortise the consideration paid for the licences.

(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 its wagering and gaming licences. The licences were issued for a period of 18 years, expiring on 15 August 2012.

17 Section 21 of the 1994 Act contained the Tabcorp terminal payment provision:

On the grant of new licences (other than the initial licences), the person who was the holder of the licences last in force (in this section called 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.

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

(3) Section 21(5) prescribed the formula by which the 'licence value' for the purposes of s 21(1) was to be calculated, which was to fall within the range of 85 per cent to 115 per cent of the amount paid for the licences, depending on the average annual compound rate of growth in gambling revenue during the term of the licences. The amount paid by Tabcorp for the licences included consideration for both the wagering licence and the gaming licence.

18 By the 1991 Act and the 1994 Act, the State created a statutory duopoly for the conduct of gaming businesses in Victoria outside of Crown Casino, with the only two authorised operators being Tatts and Tabcorp. Given that Tabcorp had been required to pay a very substantial upfront licence fee as consideration for its gaming licence, the State requested Tatts to pay a like fee for its gaming operator's licence, so as to ensure that Tatts and Tabcorp would compete with each other on an equal basis.

19 The Trustees advised the State that they were not in a position to pay the requested fee in a lump sum. Lengthy negotiations between the parties ensued in an endeavour to reach an agreement as to the basis upon which the Trustees would pay a licence fee equivalent to that paid by Tabcorp for its gaming licence, and to otherwise ensure that the Trustees would be treated on no less favourable terms than Tabcorp. The negotiations proceeded on the express basis that the Trustees would also receive a terminal payment on expiry of their licence in certain circumstances, calculated on a similar basis to the Tabcorp terminal payment provision. The negotiations culminated in the 1995 Agreement, which was finally executed on 17 November 1995.

20 Under clause 3 of the 1995 Agreement, the Trustees agreed to pay the State an annual licence fee until the expiration of their gaming operator's licence. The amount of the fee was calculated by reference to the net profit of the Tatts gaming machine business in each year, subject to a minimum annual payment of $35 million (adjusted for inflation) if the specified percentage of net profit did not exceed that amount in any year.

21 Clause 7 of the 1995 Agreement (the 'terminal payment provision') provided for a terminal payment to Tatts in the following terms:

7.1 If the Gaming Operator's Licence expires without a new gaming operator's licence having issued to the Trustees, the Trustees shall be entitled to be paid, by the State of Victoria, an amount of money as compensation for the investment in infrastructure lost. This amount will be equal to the Licence Value of the Gaming Operator's Licence or the premium payment by the new licensee, whichever is the lesser.

7.2 No amount will be payable pursuant to sub-clause 7.1 if a new gaming operator's licence is not issued to any person, or is issued to the Trustees or a related entity of the Trustees.[5]

22 By clause 8 of the 1995 Agreement, the Minister on behalf of the State agreed to cause draft legislation to be prepared and to use his best endeavours to procure that the Parliament of Victoria enacted legislation which included (amongst other things) the Trustees' obligation to pay the licence fee in accordance with clause 3 of the Agreement and the State's obligation to pay compensation in accordance with the terminal payment provision in clause 7.

23 Following execution of the 1995 Agreement, the State complied with its best endeavours obligation under clause 8 of the 1995 Agreement by procuring the Parliament of Victoria to enact legislation which reflected the principal terms of the Agreement (the '1996 amendments').

24 Prior to the 1996 amendments, s 33 of the 1991 Act authorised the grant of only one gaming operator's licence, being the licence already held by Tatts. The 1996 amendments introduced the ability for a further gaming operator's licence to be granted. This was achieved by a substituted s 33 and a new s 33A, which together provided for persons other than the Trustees to apply for a gaming operator's licence,[6] that such a licence could not commence before the expiry or earlier termination of the gaming operator's licence held by the Trustees,[7] and that, before any such licence was granted, the applicant pay a premium payment as consideration for the grant of the licence.[8] The amendments therefore enabled the issue of a 'new gaming operator's licence' within the meaning of the terminal payment provision in the 1995 Agreement, and provided the source of funding for the terminal payment.

25 The 1996 amendments also introduced a statutory terminal payment provision. The statutory terminal payment provision was in similar, but not identical, terms to the contractual terminal payment provision contained in clause 7 of the 1995 Agreement. Section 35A provided:

35A. Entitlement of former licensee on grant of new licence

(1) If -

(a) a gaming operator's licence held by a person ('the former licensee') expires; and

(b) the Authority grants a gaming operator's licence to a person other than the former licensee, or a related entity of the former licensee being a licence that commences within 6 months after that expiry; and

(c) the Authority does not grant a gaming operator's licence before the expiration of that period to the former licensee or a related entity of the former licensee -

the former licensee is entitled to be paid an amount equal to the licence value of the licence held by the former licensee or the premium payment paid by the holder of the licence referred to in paragraph (b), whichever is the lesser.

(2) The payment under sub-section (1) must be made not later than 30 days after the commencement of the new licence and the Consolidated Fund is hereby to the necessary extent appropriated accordingly.

26 The 1996 amendments also introduced provisions obliging the Trustees to pay licence fees of like amounts as provided for in clause 3 of the 1995 Agreement,[9] and made other amendments consistent with the 1995 Agreement.

27 In December 2003, the Parliament of Victoria enacted the Gambling Regulation Act 2003 (Vic) (the 'Act'). The Act commenced operation on 1 July 2004. Section 1.1 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. 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.

28 The Act retained the separate licensing regimes governing the conduct of the gaming machine businesses operated by Tatts and Tabcorp respectively. For present purposes, it is sufficient to note that s 1.3 of the Act defined a 'gaming operator's licence' to mean 'a licence granted under Division 3 of Part 4 of Chapter 3' ('Part 4'),[10] and that Division 3 concerned gaming operator's licences. The provisions of the 1991 Act concerning gaming operator's licences were substantially re-enacted without amendment. In particular, s 3.4.33 replicated the terminal payment provision in s 35A of the 1991 Act.

29 Following amendments to the Act in 2009 (the '2009 amendments'),[11] gaming machine operations in Victoria outside of Crown Casino were to be authorised under a different statutory regime, which was to come into effect following expiry of Tatts's gaming operator's licence and Tabcorp's gaming licence. In summary, the 2009 amendments provided that no further gaming operator's licence could be granted under Part 4 and instead provided for:

(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 (ie a premium or premiums) 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 each gaming machine entitlement.

30 The 2009 amendments also introduced an amended s 3.4.32, under which the Minister extended the term of Tatts's gaming operator's licence until 15 August 2012 - so that it would expire on the same day as Tabcorp's gaming licence.

31 On 7 June 2010, the Minister for Gaming created 27,500 gaming machine entitlements with an effective date of 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. Tatts did not apply for or receive any gaming machine entitlements. Recipients of the gaming machine entitlements were required to pay premiums totalling approximately $981 million to the State.

Is Tatts entitled to a terminal payment under clause 7 of the 1995 Agreement?

32 Before considering the interpretation issue which arises for determination, it is convenient to set out the governing principles of contractual interpretation. Most recently, in Electricity Generation Corporation v Woodside Energy Ltd & Ors, the High Court summarised the principles in the following terms:

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.[12]

33 The citations given in the above quoted passage are lengthy. They include reference to many recent High Court decisions concerning both general principles of contractual interpretation and the admissibility of evidence to assist courts to interpret contracts.

34 There is one further general principle of contractual interpretation which is trite law. In Australian Broadcasting Commission v Australasian Performing Right Association Ltd, Gibbs J stated:

Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious with one another.[13]

35 Consistent with the statement in Electricity Generation quoted above concerning the Court's entitlement to give commercial contracts a businesslike interpretation, unless a contrary intention is indicated, Gibbs J stated:

[If] the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the obvious, or the most grammatically accurate', to use the words from earlier authority ... [14]

36 Admissible evidence of surrounding circumstances which informs the genesis, purpose or object of both the contract as a whole and of particular contractual provisions is relevant and can be considered by the Court in interpreting a contract.[15]

37 In Western Export Services v Jireh International Pty Ltd,[16] Gummow, Heydon and Bell JJ stated, in brief reasons for refusing special leave to appeal in a contractual interpretation case, that the 'true rule' as to the admission of evidence of surrounding circumstances was stated by Mason J (as he then was) in Codelfa Construction Pty Ltd v State Rail Authority of NSW,[17] to the effect that evidence of surrounding circumstances is admissible 'if the language is ambiguous or susceptible of more than one meaning'. This issue has not been taken up by the High Court in more recent cases, including in the recent restatement of the principles of contractual interpretation in the Electricity Generation case set out above. It is, however, unnecessary to say anything further on the issue because, as appears below, I am satisfied that the contractual interpretation issue in this case arises from the use of language which is ambiguous or susceptible of more than one meaning. I turn to consider the issue for determination.

(A) Should the generic or specific meaning apply?

38 The State contends that the composite phrase 'a new gaming operator's licence' in clause 7 of the 1995 Agreement has a specific limited meaning: it means a 'gaming operator's licence' issued under the 1991 Act as amended or, following repeal and re-enactment of the 1991 Act by the Act, a gaming operator's licence issued under Division 3 of Part 4 of Chapter 3 of that Act. The State does not accept that the word 'new' has any role to play in construing the composite phrase. The State's contentions focus on textual considerations and pay little regard to the purpose or object of the terminal payment provision.

39 Tatts contends that the composite phrase 'a new gaming operator's licence' has a broader generic meaning: that the words should be understood in their natural and ordinary sense, as a reference to the issue of a licence that did not previously exist and which authorises the conduct of gaming operations that would otherwise be unlawful. Tatts contends that, when the matter is looked at as one of substance and not form, the issue of gaming machine entitlements to licensed venue operators amounts to the issue of new gaming operator's licences authorising gaming operations in Victoria, and that this triggers the terminal payment provision. Tatts's contentions involve both textual and purposive considerations.

40 The determinative issue is whether the composite phrase should be given a specific (or narrow) meaning or a generic (or broad) meaning. I will refer to the rival positions as the 'specific meaning' contention and the 'generic meaning' contention.

41 As stated, the interpretative task must commence with consideration of the language of clause 7 in the context of the 1995 Agreement as a whole.

42 The 1995 Agreement is a formal agreement between the Minister for Gaming for and on behalf of the State of Victoria and the Trustees. It was plainly intended to have continuing legal force and effect until the expiry of Tatts's gaming operator's licence more than 17 years in the future.

43 Recitals A, B and C record that the Trustees held a gaming operator's licence, that the licence was due for review not later than 1 November 1996, that the agreement constituted that review, and that the Trustees conducted a private enterprise on behalf of nominated beneficiaries.

This Agreement recognises that the business carried on by the Trustees is to be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp Holdings Limited or its operator, and is to otherwise have the benefit of the terms of this Agreement.

'Act' means the Gaming Machine Control Act 1991 (Vic);

'Agreement' means this Agreement, including the Recitals, annexures and any subsequent amendment agreed by the parties;

...

'Gaming Operator's Licence' means the gaming operator's licence issued to the Trustees pursuant to the Act;[18]

'The singular includes the plural and vice versa ...'

Words and phrases appearing in this Agreement shall, unless the contrary intention appears, have the same meaning as in the Act.

48 Clause 3 contains the obligation by the Trustees to pay the State annual amounts of not less than $35 million during each year of the licence until 14 April 2012. The nature and purpose of these payments are not identified within clause 3, although clause 3.1.4 describes the payments as a 'fee'.

49 Clause 4 imposes an obligation on the Minister to 'endeavour to ensure, as far as he is reasonably able', that Tatts's existing 'Gaming Operator's Licence' will not be varied without its consent.

50 Clause 5 provides for the Minister to 'use his best endeavours' to cause a transfer of the Trustees' licence to a related entity, or for a 'new licence on the same terms and conditions' to be issued to a related entity, should the Trustees form the view that such a course 'would be propitious'. The clause imposes an obligation on the Minister to use his best endeavours to introduce into Parliament any 'amendment to the Act' required to give effect to such a related party transfer or re-issue. As appears below, the Trustees' licence under the 1991 Act as it then stood was unable to be transferred. For the avoidance of any doubt, clause 5.2 provided that transfer of the Trustees' licence to a related entity, or the issue of a new licence to a related entity before the expiry of the Trustees' current licence, would not be a 'new gaming operator's licence' and would not trigger the terminal payment provision in clause 7.

51 Clause 6 reflects the equivalent treatment concept recorded in Recital D. The Minister expressly agreed 'that for the term of the Gaming Operator's Licence the Trustees' conduct of [its] business will be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp'.

52 Clause 8.1 of the 1995 Agreement is in the following terms:

8.1 The Minister will cause to be drafted and will use his best endeavours to procure that the Parliament of Victoria enacts legislation which:

8.1.1 includes the Trustees' obligation to pay the Minister in accordance with clause 3 of this Agreement;

8.1.2 includes the obligation of the State of Victoria to pay the Licence Value to the Trustees in accordance with the provisions of clause 7 of this Agreement;

8.1.3 includes provision that section 36 of the [1991] Act will be repealed and replaced with a provision corresponding to section 12(4) of the Gaming and Betting Act 1994 (Vic);

8.1.4 includes provision that section 38 of the Act will be repealed and replaced with a provision authorising the VCGA to take disciplinary action against a gaming operator or to apply to the Supreme Court for the cancellation of a gaming operator's licence on like grounds to those set out in sections 32 and 33 of the Gaming and Betting Act 1994;

8.1.5 includes provision that the percentage of total daily net cash balances referred to in the proposed sub-section 136(3B) contained in section 160(3) of the Act will be amended to read '66 2/3 per centum' in place of '75 per centum';

8.1.6 includes provision requiring the holder of any new gaming operator's licence issued following the expiry of the Gaming Operator's Licence to pay any licence fee by way of lump sum premium upon the grant of the new licence;

8.1.7 includes any other provision deemed necessary or desirable to give effect to this Agreement.

53 Further, clause 6 and the definition of 'Agreement' in clause 1.1 incorporate two annexed documents into the 1995 Agreement: (1) the Ministerial Directions document dated 28 August 1995 annexed as Schedule 1; and (2) a letter from the Treasurer of Victoria to the Trustees annexed as Schedule 2 (the 'Treasurer's letter'), which clause 6 states was received and considered by the Trustees prior to them entering the Agreement.

54 The Ministerial Directions document was issued pursuant to s 12 of the 1991 Act. It recorded the maximum number of gaming machines permitted in the State outside of the Melbourne Casino, the proportion of gaming machines to be located outside the Melbourne Statistical Division, the maximum permissible number of gaming machines to be placed in restricted and unrestricted areas, the proportion of gaming machines outside the Melbourne Casino to be placed in premises licensed under the Liquor Control Act 1987 (Vic), and the proportion of gaming machines outside of Melbourne Casino that Tatts and Tabcorp were permitted to operate - 50 per cent in each case. Section 12 of the 1991 Act provided that these directions could be changed by the Minister at any time.

55 The Treasurer's letter contains a statement of six principles on which the State reached agreement with the Trustees 'over the payments relating to [the Trustees'] Gaming Operator's Licence'. It is necessary to set out the Treasurer's letter in full:

I am writing to confirm the principles on which the Government of Victoria is reaching agreement with you over the payments relating to your Gaming Operator's Licence.

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 your operations or the terms on which those operations are conducted.

The principles are as follows:-

1. You have been granted a Gaming Operator's Licence pursuant to the Gaming Machine Control Act 1991. This licence gives you a concurrent right (with TABCORP Holdings Limited and Crown Limited) to conduct gaming, for a fixed period.
2. The licence will expire on 14 April 2012.
3. The Government does not currently intend to grant further gaming licences to persons who are not now authorised to conduct gaming or wagering during the licence period.
4. Amounts which may be retained by you by way of commission on gaming will be maintained at 33.33% for the period of the licence.
5. The Trustees of the Estate of George Adams (whether you or your successors) may apply for a new licence after the initial licence terminates and on the same terms as other applicants. The process of awarding a new licence may involve a public tender. It is also expected but not guaranteed that the new licence would be awarded to the highest qualifying bidder. If the new licensee is not the Trustees, the Trustees will be entitled to receive from the State capital compensation as provided for in the agreement between the Minister for Gaming and the Trustees, shortly to be entered into.
6. It is intended that any new licence will be granted on conditions which include conditions substantially to the same effect as those to which the Trustees' licence is subject.

The Government recognises the importance of the gaming industry to the Victorian economy and, in recognition of that, it will continue to deal with the Trustees reasonably and in good faith.[19]

56 The following aspects of the Treasurer's letter are capable of supporting the generic meaning of the composite phrase 'a new gaming operator's licence':

(1) In principle 1, the letter describes the Trustees' licence as giving them 'a concurrent right' with Tabcorp and Crown Limited to conduct gaming for a fixed period, thereby identifying the essence of the Trustees' licence as providing the authority to conduct gaming.

(2) In principle 3, the letter notes that the State did not, during the licence period, intend 'to grant further gaming licences to persons who are not now authorised to conduct gaming'. This statement describes the licences or authorities held by the Trustees, Tabcorp and Crown Casino collectively as 'gaming licences', albeit that they had different names, different sources in legislation and different features.

(3) Principle 5 speaks in terms of the award of 'a new licence' or 'the new licence' to 'the new licensee', and principle 6 speaks of 'any new licence' being granted on conditions which include conditions 'substantially to the same effect as those to which the Trustees' licence is subject' (emphasis added).

57 The ability to vary the Ministerial Directions from time to time under s 12 of the 1991 Act, combined with the non-binding nature of the six principles contained in the Treasurer's letter, made it apparent that there was considerable uncertainty going forward over the remainder of the term of the Trustees' licence. In other words, Parliamentary sovereignty or 'sovereign risk' was clearly understood by the parties and recognised by the incorporation of these documents into the 1995 Agreement.

58 That uncertainty was also evident in clauses 4 and 5 referred to above, containing best endeavours obligations only, and in clause 8, which imposed on the Minister an obligation to 'cause to be drafted' legislation, and to 'use his best endeavours to procure that the Parliament of Victoria enact legislation' which gave effect to the 1995 Agreement. Clause 8 did not prescribe whether the draft legislation was to be by amendment to the 1991 Act, by amendment to any particular Chapter, Part or Division of the 1991 Act, or by an entirely new Act dealing with one or more of the stated topics for legislation.

59 Further, clause 8.1.6 did not expressly provide for the intended legislation to authorise the issue of new gaming operator's licences. This was, however, necessarily implicit, as there was at the time no legislation authorising the issue of anything which could be described as a gaming operator's licence to any person other than Tatts (under the 1991 Act) or Tabcorp (under the 1994 Act).

60 I turn to consider the context in which the 1995 Agreement was executed. Before doing so, I note that the State contends there is no ambiguity justifying the Court considering evidence of surrounding circumstances, because the definitions of 'Gaming Operator's Licence' and 'Act', combined with clause 1.3, dictated that that the specific meaning contention should be accepted. I disagree. The 1995 Agreement as a whole reveals the use of both the defined term 'Gaming Operator's Licence' and use of the undefined composite phrase 'a new gaming operator's licence'. The capitalised defined term is always used in conjunction with the definite article ('the Gaming Operator's Licence'). It expressly relates to the gaming operator's licence which had already been issued to the Trustees under the 1991 Act. The singular and uncapitalised term used in clause 7 ('a new gaming operator's licence') referred to a licence that was obviously intended to operate after expiry of the defined licence held by Tatts. In my opinion, those matters make the uncapitalised term sufficiently ambiguous to justify looking outside of the text of the 1995 Agreement to consider relevant surrounding circumstances known to the parties, and the commercial purpose or objects to be secured by the 1995 Agreement as a whole and by the terminal payment provision in clause 7 in particular.

61 Moreover, ambiguity arises from the aspects of the Treasurer's letter and the Ministerial Direction identified above.

62 I start with a consideration of the legislative context. The 1991 Act must be considered in any event, because it is referred to in the 1995 Agreement.

A person must not manufacture, sell, supply, obtain or be in possession of a gaming machine or a restricted component except in accordance with this Act.

Despite the provisions of any other Act or any law, the conduct of gaming is lawful when the gaming is conducted, and the gaming equipment is provided, in an approved venue in accordance with provisions of this Act.

65 Section 3(2) of the 1991 Act defined the 'conduct of gaming' as:

(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 in connection with or related or incidental to gaming and the conduct of gaming.

66 At the time of the 1995 Agreement, the 1991 Act authorised the grant of only one gaming operator's licence, being the licence already issued to the Trustees.[20] That licence was not transferrable to any other person.[21] Although the term 'gaming operator's licence' was not defined in s 3(1) of the 1991 Act, that sub-section did define 'gaming operator' to mean:

(a) the holder of a gaming operator's licence under Part 3; and

(b) except in Division 3 of Part 3 and sections 136 and 136A, the holder of a gaming licence under the [1994 Act] and the operator or operators under the gaming licence [ie Tabcorp].

67 Further, s 14(1) of the 1991 Act specified the authority granted by a gaming operator's licence, and thus defined what Tatts's licence entailed:

14 Authority conferred by gaming operator's licence

(1) Despite section 7 [which otherwise prohibited gaming machine operations], a gaming operator's licence authorises the licensee, subject to this Act and any conditions to which the licence is subject -

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

(b) to manufacture approved gaming machines and restricted components; and

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

(d) to conduct gaming at an approved venue; and

(e) to sell or dispose of gaming equipment with the approval of the Authority;. and

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

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

68 Section 19 of the 1991 Act provided for a 'venue operator's licence'. Section 19(3) required any application for a venue operator's licence to contain or be accompanied by:

(a) the agreement in writing of a gaming operator to place gaming machines in the applicant's premises in the event of the licence being granted; and

(b) any additional information that the Authority may request.

69 Under s 19A of the 1991 Act, which was introduced in 1994, a gaming operator was (subject to an irrelevant exception) prohibited from holding a 'venue operator's licence'.[22] As gaming machines could only be legally operated at an 'approved venue', this necessitated Tatts forming contractual arrangements with the holder of a 'venue operator's licence' in respect of each approved venue at which Tatts conducted gaming operations. Without such arrangements, Tatts's gaming operator's licence was of no utility.

70 As mentioned, s 12 of the 1991 Act gave the Minister for Gaming power to make Ministerial Directions concerning, among other things, the maximum permissible number of gaming machines in the State, and the proportion of gaming machines that each gaming operator was permitted to operate. For the purposes of s 12 of the 1991 Act, Tabcorp was taken to be a 'gaming operator' within the meaning of that Act.[23] The Minister had the power to vary or revoke any such direction by further direction. The licences issued to the Trustees and Tabcorp did not specify the proportions or numbers of gaming machines allocated to each of them. That was done by Ministerial direction under s 12. There were various amendments to the directions over time, including to the direction referred to above. At all times, Tatts and Tabcorp were entitled to an equal share of the authorised maximum permissible number of gaming machines in Victoria outside of Crown Casino.

71 Under s 32 of the 1991 Act as it stood at the time of the 1995 Agreement, Crown Casino (the only authorised 'casino operator' at the time) was both 'taken to be a licensed venue operator' and authorised to obtain gaming machines, conduct gaming and service, repair or maintain gaming equipment through the services of licensed technicians 'as if [it] were the holder of a gaming operator's licence'. Crown Casino was not authorised to manufacture gaming machines, to supply them to venue operators, or to sell or dispose of gaming equipment, as Tatts was under s 14(1)(b), (c) and (e) of the 1991 Act.

72 Although the authorities granted to the casino operator under s 32 of the 1991 Act did not bear a label such as 'gaming operator's licence' or 'gaming licence', it was clear that the substance of the authorisations under s 32 was to give the casino operator a statutory right to conduct gaming operations. In essence, this was the same kind of authority granted to the Trustees and Tabcorp. This is recognised in the Treasurer's letter, when the three entities are described as having 'a concurrent right to conduct gaming in Victoria' within the limits of their respective licences.

73 I turn from the governing legislative regime at the time of the execution of the 1995 Agreement to other surrounding circumstances relied upon by Tatts.

74 First, although the Trustees were authorised to undertake a number of ancillary activities in connection with their gaming machine business, they did not do so:

(1) The Trustees did not manufacture gaming machines and restricted components. Manufacturing was unnecessary because gaming machines and restricted components were obtained from others entitled to supply them.[24]

(2) The Trustees did not service, repair, maintain or install gaming machines. This work was always outsourced to licensed technicians.[25]

(3) The Trustees did not conduct any business of buying and selling gaming machines.

75 Tatts contends that these matters must have been known to the State. I accept that contention. The evidence as a whole, coupled with the way in which the statutory authorisations worked under the 1991 Act and the 1994 Act, supports an inference that the State was aware of each of these matters concerning the Trustees' gaming business as at the date of the 1995 Agreement. The evidence includes the fact that the State was the promoter of the Tabcorp float and, as the Tabcorp prospectus demonstrates, must have conducted a thorough assessment of the state of the gaming industry as it stood at that time. More importantly, the fact that Tatts did not perform any of the above activities demonstrates that they were unnecessary for it to conduct its core business of conducting gaming operations which was authorised by its licence.[26] They were ancillary activities that a gaming operator might potentially want to undertake.

76 Second, although entitled to do so before the 1994 amendments introduced s 19A into the 1991 Act, the Trustees never held a venue operator's licence but, instead, entered into contractual arrangements with venue operators in a form approved by the Commission pursuant to s 68 of the 1991 Act. After s 19A was introduced, the Trustees were required to conduct their gaming machine business in this way.

77 Third, the potential for future regulatory changes was recognised by the parties and formed a central basis of the negotiations leading up to the 1995 Agreement. Sovereign risk was a mutually known fact and was expressly referred to in the Tabcorp prospectus and the Treasurer's letter. Further, as appears above, clauses 4, 5 and 8 of the 1995 Agreement evidence acceptance by both parties that the State could not commit itself to future executive or legislative action.

78 Fourth, Tatts relies upon post-contractual conduct by the State which it contends can be treated as admissions by the State as to the genesis, purpose and object of the 1995 Agreement - because the conduct relates to mutually known facts that preceded the contract. In this regard, Tatts relies upon the statement by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd about post-contract admissions concerning the genesis, purpose or object of an agreement:

It could happen that an event occurring after a contract was made was used as proof of a matter that is relevant to construction of the contract even on the objective theory of contract. If, for example, a contracting party admitted, after the contract had been made, the truth of some fact that was a relevant part of the context in which the contract had been made, I see no reason why that admission could not be used as part of the means of proof of that background fact.[27]

79 Tatts relies upon two items of evidence in this category:

(1) In the second reading speech for the Gaming Act (Amendment) Bill on 4 June 1996, the Attorney-General for the State of Victoria relevantly said:

One consequence of the float of Tabcorp was that it and Tattersalls were placed in quite different competitive situations. Tabcorp had made a licence payment to the government, but Tattersalls had not. Consequently, in 1994 the government commenced negotiations with Tattersalls over the payment of a licence fee for its co-exclusive access to the gaming machine market.

As a result of these negotiations, the parties agreed that Tattersalls will pay a licence fee ... On the basis of projections by the government's advisers, these arrangements are broadly equivalent to the licence fee paid by Tabcorp.

...

At the end of the licence period in April 2012 there will be an opportunity for a competitive application for a new licence. If the new licence is not granted to Tattersalls or a related entity of Tattersalls, as compensation for the lost investment in infrastructure Tattersalls will be entitled to the lesser of the premium payment for the new licence and the licence value, which is calculated according to a formula specified in proposed section 35A of the bill_._ This arrangement is broadly similar to the one which applies to Tabcorp. Proposed section 33A indicates that such premium payment is determined by the Treasurer. It is the government's intention that the amount actually paid by the successful applicant for the new licence will be the amount determined as such premium by the Treasurer_._

(2) In a Cabinet paper dated 19 January 1996, presented by the Treasurer and the Minister for Gaming to Cabinet, the Ministers stated:

1. TABCORP's shareholders made their payment in the knowledge that on the grant of a new licence at the end of the initial licence period they would be entitled to receive back from the Government the lesser of the amount for which the licence for the succeeding period is sold or a 'licence value'. This licence value is determined by a formula which essentially results in TABCORP receiving the amount initially paid for its licence plus or minus 15 per cent. It is not payable if TABCORP is wound up before the new licence is issued.
2. The Department of Treasury and Finance therefore set itself a target in the negotiations of achieving payment from Tattersalls of $520 million less Treasury's estimate of the licence value which the Government will pay TABCORP when the licence expires. In net present value terms, at a 10% discount rate, the target was $422 million.
3. It was, however, agreed early in the negotiations at Tattersalls' request that their licence fee would not take the form of an up front lump sum. Tattersalls argued that it would need to float its business to raise this amount of money and it was unwilling to do this. This meant that the objective became to achieve a set of payments over time which was as close as possible in present value terms to $422 million.
4. Negotiations with Tattersalls settled on a stream of annual payments and a 'licence value' payable under certain conditions to Tattersalls at the end of the licence period.

1. The formula for calculating Tattersalls' licence value - which was included at Tattersalls' request - is broadly similar to that applying to TABCORP. The main difference, also included at Tattersalls' request, is that Tattersalls would not receive any compensation if the new licence is issued to it in 2012, whereas TABCORP would. Another difference is that while TABCORP's licence value is essentially between plus or minus 15% of its original licence payment, the formula in Tattersalls' case is more complicated (see Clause 6 of the Bill). Tattersalls sought both of these variations from TABCORP's formula in order to protect the tax deductibility of its licence payments.

80 These statements constitute admissions as to the genesis of the 1995 Agreement and that the purpose or object of the agreement included:

(1) the State receiving fees from Tatts which were broadly equivalent to the consideration paid by Tabcorp for its gaming licence;

(2) the State paying Tatts a terminal payment which was broadly equivalent to the Tabcorp terminal payment, if a new licence was not issued to Tatts or a related entity; and

(3) ensuring that the State received a premium from a new licence in order to fund the terminal payment and place a limit on the amount of that payment.

81 Fifth, Tatts relies upon aspects of the negotiations between the parties to establish mutually known facts which evidence the genesis, purpose or object of the 1995 Agreement. Tatts expressly disavowed reliance on any aspect of the negotiations to establish subjective intent. Tatts relies upon the statement by Mason J in Codelfa concerning the limited use which can be made of prior negotiations:

Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent which they have this tendency they are admissible. But insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable.[28]

82 Tatts tendered much evidence for this limited purpose. It contends that the evidence is necessary to understand the objective background facts upon which it relies to establish the genesis, purpose or object of the 1995 Agreement. I do not intend to detail all of the evidence which was relied upon. Instead, the objective facts established by the evidence are summarised below:

(1) The genesis of the 1995 Agreement was the Tabcorp float, Tabcorp's payment of significant up-front licence consideration, the maximisation of that consideration by the Tabcorp terminal payment provision in the 1994 Act and, in that context, the State's request that Tatts pay a similar licence fee for its gaming operator's licence to that paid by Tabcorp for its gaming licence.

(2) The purpose or object of the 1995 Agreement was to ensure equivalent treatment of Tatts and Tabcorp so that they could compete with each other on an even playing field in their respective gaming machine businesses.

(3) The amount of the licence fee to be progressively paid by Tatts, and the amount of the terminal payment to be made to it in certain circumstances, were to reflect the portion of the licence consideration paid by Tabcorp to the State that was referrable to its gaming machine business and not its wagering business. This explains the genesis of the $520 million figure as the starting point for the calculation of 'licence value' in the formula set out in clause 7.3 of the 1995 Agreement for calculating the amount of the terminal payment under clause 7.1.

83 I accept that the evidence of negotiations is admissible to the extent that it establishes the above facts.

84 Tatts also sought to rely on evidence that, during the course of the negotiations, there was never any discussion to the effect that Tatts would be disentitled from a payment if more than one gaming operator replaced it on expiry of its licence, or if there were changes to the form of statutory authorisation under which a new licensee or new licensees became entitled to conduct a gaming machine business in Victoria in return for payment of a premium to the State. This evidence was admitted subject to objection. In my opinion, this evidence cannot be relied upon. It does not establish or relate to the genesis, purpose or object of the terminal payment provision in the 1995 Agreement.

State's contentions in support of the specific meaning

85 As referred to above, the State's specific meaning case is based upon what it contends is the plain and ordinary meaning of the words 'a new gaming operator's licence' in the context of the 1995 Agreement as a whole. The State's contentions involve the following steps.

86 First, the State contends that the definition of 'Gaming Operator's Licence' means that 'a new gaming operator's licence' should also be understood as a reference to a gaming operator's licence within the meaning of the 1991 Act as properly construed. The 1991 Act refers to only one kind of gaming operator's licence, being a licence granted under s 33. Accordingly, as clause 1.3 provides that words and phrases have the same meaning as in the Act, the undefined term 'a new gaming operator's licence' must mean a licence granted under Part 3 of the 1991 Act. The use of the adjective 'new' does not alter this specific meaning.

87 Second, the State contends that the definition of 'Act' in the 1995 Agreement, as meaning the 1991 Act, should be construed as including the 1991 Act as amended and successor legislation such as the Act. In this regard, the State relies by analogy on ss 16 and 17 of the Interpretation of Legislation Act 1984 (Vic), which concern the interpretation of legislation which refers to provisions in other legislation which has been amended or repealed and re-enacted. The State contends that it is necessary to read into the definition of 'Act' the words 'as amended, repealed and replaced from time to time' so as to give business efficacy to the 1995 Agreement when it refers to the defined 'Gaming Operator's Licence'.

88 Third, consistent with the second contention, the State relies on s 1.3 of the Act, which in 2003 introduced a definition of the term 'gaming operator's licence' in specific terms:

'gaming operator's licence' means a licence granted under Division 3 of Part 4 of Chapter 3 ...

The State contends that this definition automatically confined the meaning of the phrase 'a new gaming operator's licence' in clause 7 of the 1995 Agreement.

89 Fourth, the State contends that Tatts's generic meaning case depends upon the phrase 'a new gaming operator's licence' being read, in contradiction to clause 1.3 of the 1995 Agreement, as altering the meaning of the phrase 'gaming operator's licence' from its plain meaning under the 1991 Act, both before and after the 1996 amendments. The State contends there is no objective reason for concluding that the parties intended to stray from the statutory meaning of the phrase.

90 Fifth, the State contends that evidence concerning communications between the Trustees and the Deputy Commissioner of Taxation, which were copied to the State and thus constituted mutually known facts, evince an intention on the part of the Trustees to ensure that any new gaming operator's licence issued to them after expiry of their existing licence would qualify for capital gains tax rollover relief under s 160ZZPE of the Income Tax Assessment Act 1936 (Cth) (the 'Tax Act'). At the relevant time, s 160ZZPE provided for rollover relief in circumstances where a fresh statutory licence was granted to a taxpayer by way of the renewal or extension of the original licence, and where the renewal or extension was (whether by law, custom or otherwise) wholly or principally attributable to the taxpayer's ownership of the original licence.

91 I accept that the evidence showed that the Trustees had, prior to the execution of the 1995 Agreement, turned their minds to the question of whether rollover relief would be available. On 19 July 1995, the accountants acting for the Trustees wrote to the Deputy Commissioner of Taxation seeking a number of rulings, including confirmation that rollover relief under s 160ZZPE would be available if the licence was renewed in favour of Tatts on its expiry in 2012. On 31 August 1995, the Deputy Commissioner declined to provide the confirmation sought, but provided a non-binding statement of advice to the effect that rollover relief would be available.

92 The State contends that this correspondence demonstrates that it was a mutually known fact that it was in the Trustees' interests for the composite phrase 'a new gaming operator's licence' to be given a specific meaning, so as to ensure that only a licence that satisfied the criteria in s 160ZZPE (ie that could be considered a renewal or extension of the original licence) was granted to Tatts. I reject the State's contention, principally because it requires the Court to speculate about the Trustees' subjective intentions - for example, by considering the Trustees' subjective views in 1995 about the likely best commercial outcome in 17 years' time. Such a process would involve consideration of matters such as predictions about the merits of participating in a hypothetical tender process for a new gaming operator's licence or, instead, opting to allow the new licence or licences to be issued to others so as to preserve the entitlement to a terminal payment. It may be that the availability of CGT rollover relief in the event that the Trustees' licence expired and a new gaming operator's licence was granted to them, thus disentitling them to a terminal payment, remained one of many factors considered by the Trustees in their private deliberations as to whether to agree to the final wording of the 1995 Agreement. But evidence or inference concerning the Trustees' subjective intentions of that kind is inadmissible for the purpose of interpreting the 1995 Agreement.

93 In addition, I note that the State's submissions presumed there would, in fact, be significant CGT consequences for the Trustees in the event that their existing licence expired, they were issued a new gaming operator's licence and, as a result, did not receive a terminal payment. However, the State led no evidence, and addressed no submissions, as to the likely CGT consequences for Tatts in the event that it received a new licence that did not satisfy the criteria for accessing rollover relief under s 160ZZPE of the Tax Act. If it were necessary to make a finding in respect of this issue, it would be necessary to consider the effect of ss 160Z and 160ZD of the Tax Act. Tatts made submissions in that regard, to the effect that no capital gain would be deemed to have been made by Tatts in relation to the expiry of its existing licence. It is unnecessary to resolve that issue in these reasons.

94 I reject the State's reliance on this evidence to support the specific meaning contention. I turn to consider the State's other contentions as summarised above.

Reasons for rejecting the State's contentions

95 In the context of the genesis, purpose and object of the 1995 Agreement, the generic meaning contention should be accepted. In my opinion, the reference in clause 7 to the issue of 'a new gaming operator's licence' after expiry of the defined 'Gaming Operator's Licence' would have been understood by a reasonable businessperson as the issue of any licence or other authority of substantially the same kind as the Trustees' existing gaming operator's licence. The issue of such a licence or authority, or licences or authorities, could have been authorised under the 1991 Act as amended, the 1991 Act as re-enacted and amended by the Act, or by any other legislation enacted by the Parliament of Victoria which operated upon expiry of Tatts's defined 'Gaming Operator's Licence'. My reasons for rejecting the State's contentions follow.

96 First, it may be accepted that the defined term 'Gaming Operator's Licence' means the gaming operator's licence held by the Trustees (later Tatts) pursuant to the 1991 Act as amended, re-enacted or replaced with other legislation granting the Trustees or Tatts a gaming operator's licence. This is necessary for the operation of the 1995 Agreement insofar as it refers to the defined 'Gaming Operator's Licence' held by the Trustees. However, in my opinion neither this definition nor clause 1.3, which provides that words and phrases used in the 1995 Agreement have the same meaning as in the 1991 Act unless the contrary intention appears, was engaged in respect of the composite phrase 'a new gaming operator's licence', because that phrase had no meaning or possible operation in the 1991 Act at the time the 1995 Agreement was executed. Section 33 of the 1991 Act then authorised the grant of a gaming operator's licence to the Trustees only; that licence had already been issued and was not transferrable; and thus there could be no 'new licensee' as contemplated by clause 7.1 until legislative amendments were made.

97 As stated above, it was not until the 1996 amendments introduced a substituted s 33 and a new s 33A into the 1991 Act that a new gaming operator's licence could be granted under that Act. These new sections provided:

33 Gaming operator's licence

(1) Subject to this Act, the Trustees or any other person may apply to the Authority for a gaming operator's licence.

(2) A licence granted under this section must not commence before the expiry, or earlier termination, of the gaming operator's licence held by the Trustees immediately before the commencement of section 5 of the Gaming Acts (Amendment) Act 1996.

33A Premium payment

(1) Before a licence is granted under section 33, the applicant must pay to the Treasurer as consideration for the grant of the licence the amount determined by the Treasurer as the premium payment.

These sections were re-enacted in ss 3.4.29 and 3.4.30 of the Act.

98 Second, I do not accept the State's submission that, when the Act introduced a definition of 'gaming operator's licence' in 2003, this definition was automatically incorporated into the 1995 Agreement as defining the meaning of the previously undefined phrase 'a new gaming operator's licence'. Clause 1.3 appears in a contract, not in legislation, and so ss 16 and 17 of the Interpretation of Legislation Act have no application to the interpretation of the 1995 Agreement. Nor do I accept the State's contention that this is necessary so as to give business efficacy to the agreement. In my opinion, a commercial or businesslike interpretation requires the opposite approach, for the reasons given below.

99 Third, clause 7 is intended to operate on one occasion only - the expiry of the gaming operator's licence held by Tatts. That was 17 years in the future at the time the 1995 Agreement was executed. The parties expressly contemplated that the form of the new gaming operator's licence to follow expiry of Tatts's licence would be the subject of later legislation, commencing with the legislation required by clause 8 of the 1995 Agreement.

100 Fourth, the surrounding circumstances make it plain that both parties understood that there could be no guarantee that there would not be further legislative changes over the remaining term of Tatts's licence. The Treasurer's letter said so expressly: 'of course, ... the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation'. Further, the Treasurer's letter made it clear that a new gaming operator's licence might be different from the defined 'Gaming Operator's Licence' held by the Trustees at the time of the 1995 Agreement: 'it is intended that any new licence will be granted on conditions which include conditions substantially to the same effect as those to which the Trustees' licence is subject.'

101 Fifth, there is no good commercial reason advanced by the State to justify the Court giving the specific meaning to the critical phrase. Accepting the specific meaning would not produce a commercial result. Rather, it would make commercial nonsense of the State's promise to make the terminal payment in return for the Trustees' agreement to pay the substantial fees stipulated in clause 3 of the 1995 Agreement and 'as compensation for the investment in infrastructure lost'. Such a construction of the critical phrase would lead to an unjust result and should be rejected where a reasonable competing construction, which produces a commercial result consistent with the purpose or object of the 1995 Agreement, is available.[29]

102 Sixth, there is no apparent commercial reason for reasonable businessmen in the position of the parties to have specified that the Trustees' entitlement to the terminal payment depended on the statutory source of the new gaming operator's licence which was to yield the premium payment to fund the terminal payment provided for in clause 7. If reasonable businessmen in the position of the parties were asked to consider whether a new gaming operator's licence in accordance with clause 7 would be issued if the government of the day in 17 years' time: (1) continued to authorise gaming machine operations in Victoria following expiry of the Trustees' licence, and (2) in return for a premium or premiums, issued licences or other authorities which authorised new operators to conduct gaming businesses of substantially the same kind as Tatts's gaming business, they would in my opinion have responded: 'of course'.

103 For the above reasons, I have concluded that the generic meaning contention should be accepted. It is accordingly necessary to consider the application of clause 7 in the context of the generic meaning and the new statutory regime introduced by the 2009 amendments which were specifically designed to operate after expiry of the Tatts licence. Before doing so, however, it is necessary to consider other defences put forward by the State in order to meet such a finding:

(1) First, the State contends that the 1995 Agreement was superseded when, by the 1996 amendments, the Parliament of Victoria enacted legislation which included all of the provisions mentioned in clause 8.1 of the 1995 Agreement. As a result, the State contends that the 1995 Agreement was 'spent' when the respective obligations of the parties were enshrined in the 1991 Act by the 1996 amendments.

(2) Second, the State contends that the 2009 amendments were inconsistent with the continued operation of clause 7 and thereby abrogated its contractual obligation to make the terminal payment.

(3) Third, the State contends that, in any event, the substance of the authorisations granted under the gaming machine entitlements and related venue operator's licences were materially different from the authorisations under Tatts's gaming operator's licence, with the effect that, even on the generic meaning of the composite phrase, the terminal payment provision has not been engaged.

I proceed to deal with these arguments in sequence.

(B) Was clause 7 spent as a result of the 1996 amendments?

104 The State contends that the 1995 Agreement was spent upon enactment of the 1996 amendments to the 1991 Act, for the following reasons:

(1) On a proper construction of the 1995 Agreement as a whole, it was intended to establish contractual entitlements and obligations 'pending the enactment of the legislation contemplated by clause 8.1'. On this basis, the State contends that all of the provisions of the 1995 Agreement that were embodied in the 1991 Act by reason of the 1996 amendments were 'spent and no longer enforceable independently of the legislation'.

(2) This objective intention should be attributed to the parties because clause 8 would otherwise have been 'a clause without a purpose', as there is no reason to attribute to the parties an intention that the Trustees should have concurrent rights and obligations under both contract and statute.

(3) This intention is also supported by counterfactual examples that can be postulated to demonstrate the consequences of Parliament failing to legislate in accordance with the precise terms of the 1995 Agreement. For example, Parliament could have enacted legislation requiring the Trustees to pay annual licence fees of $50 million, in lieu of $35 million under clause 3 of the 1995 Agreement, or could have decided that the terminal payment would be of a lesser amount or triggered by different events.[30]

(4) All of the specific matters mentioned in clause 8.1 of the 1995 Agreement were embodied in the 1996 amendments. The only importance of that, however, is that it 'signifies the point at which the contractual provisions became spent'.[31]

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

106 First, the State's contentions find no support in the language of the 1995 Agreement, which imposes continuing obligations over the term of the licence. For example:

(1) Clause 3 contains continuing obligations upon the Trustees to pay fees commencing in the 1996 financial year, and for each financial year thereafter until 30 June 2011, and for the part financial year ending 14 April 2012 when the Trustees' licence was then due to expire.

(2) Clauses 4 and 5 impose continuing obligations on the Minister (for and on behalf of the State) to 'endeavour to ensure, as far as he is reasonably able' (clause 4) or to 'use his best endeavours' to act in a particular way (clause 5) over the term of the Trustees' licence.

(3) Clause 6 contains an agreement by the Minister that the conduct by the Trustees of their gaming machine business will, for the whole term of their licence, be regulated 'on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp'.

(4) Clause 11 provides for the possibility that the Trustees may 'assign the benefit of this Agreement' to a related entity to whom its Gaming Operator's Licence is transferred with the consent of the Minister pursuant to clause 5. This indicates that the 1995 Agreement was to have continuing effect and could benefit a related entity of the Trustees many years after the proposed legislative changes contemplated by clause 8.

(5) Recital D provides that, in addition to equivalent treatment with Tabcorp in respect of its gaming machine business, 'the business carried on by the Trustees ... is to otherwise have the benefit of the terms of this Agreement.' This also indicates continuing operation.

107 Second, recognition of sovereign risk was an important surrounding circumstance against which the 1995 Agreement was negotiated and executed. It was expressly recognised in the Treasurer's letter, and clauses 4, 5 and 8 of the 1995 Agreement are also consistent with an understanding that the State could not restrict future executive or legislative action concerning regulation of the gaming machine business conducted by the Trustees. In these circumstances, it would be commercially unreasonable to attribute to the parties an intention that their rights and obligations under the 1995 Agreement would disappear once those rights and obligations were embodied in legislation as contemplated by clause 8. It was obviously in the interests of the Trustees to have concurrent contractual and statutory entitlements to receive the terminal payment, as repealing a statutory right may be thought more politically palatable than abrogating a right created by a commercial contract.

108 The existence of concurrent contractual and statutory entitlements is not without precedent. For example, in Bromley v Forestry Commission of New South Wales, the Court of Appeal in New South Wales recognised the existence of concurrent 'compensation provisions' under both contract and statute where there were material differences between the two provisions.[32] This case is analysed below.

109 Third, the State's contentions are inconsistent with two later agreements entered into by the State which confirmed the continuing operation of the 1995 Agreement as a whole.

110 In 1999, following a tax ruling affecting the profitability of the Trustees' gaming machine business, the Trustees approached the Treasurer and sought amendments to the manner in which its payments to the State were calculated. The Treasurer accepted the Trustees' entreaties and, as a result, the 1991 Act was amended to alter the payment obligations of the Trustees, which had been in the same form as in clause 3 of the 1995 Agreement.

111 In addition to amending the 1991 Act, on 28 June 1999, the Minister for Gaming, for and on behalf of the State, and the Trustees signed an agreement amending the 1995 Agreement to reflect the change in the payment arrangements. The recitals to the 1999 Agreement stated:

1. On the 17th day of November 1995 the Trustees and the Honourable Haddon Storey, QC, MLC, former Minister for Gaming acting for and on behalf of the State of Victoria, entered into an agreement ('1995 Agreement') which inter alia, reviewed amounts to be paid by the Trustees to the Victorian Casino and Gaming Authority pursuant to s 136 of the Act.
2. By the Gaming Act Amendment Act 1996 (Act No 17/1996) the Parliament of Victoria legislated to reflect in statutory form the payment requirements contained in clause 3 of the 1995 Agreement.

1. The Government of Victoria and the Trustees have decided for mutual benefit to alter the payment requirements as reflected in the 1995 Agreement and in Act No 17/1996, and for this purpose inter alia, the Government of Victoria has introduced to the Parliament of Victoria and the Parliament of Victoria has passed the State Taxation Acts (Amendment) Act 1999 (Act No 47/1999, the '1999 Act').

1. The Government of Victoria and the Trustees have agreed to amend the 1995 Agreement in view of the new statutory payment obligations and the parties wish to reduce their further agreement to writing.

112 The 1999 Agreement amended the 1995 Agreement so that payments under clause 3 of the 1995 Agreement ceased with effect from 30 June 1999 and were replaced with the payments required under the amendments to the 1991 Act. All other rights and obligations under the 1995 Agreement were preserved by clause 4.1 of the 1999 Agreement, which provided:

The parties affirm their obligations to perform and the validity of the 1995 Agreement as amended by this Agreement.

113 The State contends that the parties' statement in clause 4.1 of the 1999 Agreement constituted a mistake as to the continuing operation of the 1995 Agreement following enactment of the 1996 amendments. It contends that the 1999 Agreement was no more than a 'mistake made by the contracting parties in 1999 as to the need for an amending agreement in respect of the changes to the licence fee arrangements'. On this basis, the State contends that the 1999 Agreement did no more than 'affirm those clauses of the 1995 Agreement which, at the time, had remaining work to do.' The State also contends that the 1999 Agreement is inadmissible evidence of the parties' subsequent conduct and is thus irrelevant to the proper interpretation of the 1995 Agreement. Reliance was placed upon the statement of Lord Reid in James Miller & Partners Ltd v Whitsworth Street Estate (Manchester) Ltd, that 'it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made.'[33] It is unnecessary to determine whether or not this submission should be accepted. This is because of a further agreement made between the State, the Trustees, Tatts and its operating subsidiaries in 2005 (the 'Transfer Agreement').

114 The Transfer Agreement and related Deed of Assignment novated all of the relevant provisions of the 1995 Agreement in favour of Tatts, so that Tatts became entitled to enforce all such provisions, as amended by the 1999 Agreement, on and from the date of the Transfer Agreement. The legal effect, therefore, is that the State repeated and re-made its contractual promise in clause 7 in favour of Tatts so that it could be directly enforced by Tatts as a contracting party. It was a 'new contract' and not merely subsequent conduct.[34]

115 The Transfer Agreement became necessary upon the public float of the estate administered by the Trustees. Clause 10 of the Transfer Agreement provides:

The rights and obligations of the Trustees arising pursuant to the 1995 Agreement as amended by the 1999 Agreement together with all rights and obligations of the Trustees arising pursuant to the 1999 Agreement are transferred to Tattersalls in accordance with clause 11 of the 1995 Agreement, as contemplated by the Amending Act.

4 ASSIGNMENT

4.1 With the approval of the Minister as evidenced by the Approval Letter and his execution of the Transfer Agreement, the Trustees hereby assign and transfer to Tattersalls on and from Completion:

(a) the Gaming Operator Licence together with all of its rights and obligations, and

(b) the rights and obligations under the 1995 Agreement as amended by the 1999 Agreement together with all rights and obligations of the Trustees arising pursuant to the 1999 Agreement.

117 The State's submissions did not address the proper characterisation of the Transfer Agreement as a novation. Rather, the State assumed that the Transfer Agreement was no more than another mistaken and unnecessary amendment to the 1995 Agreement. But it was clearly a novation, as the original and new contracting parties were all parties to the agreement.[35]

118 Fourth, the State's hypothetical examples of the consequences of a failure by it to achieve the objects of clause 8 do not have any relevance to the proper interpretation of the 1995 Agreement and, in particular, as to whether it provided only interim rights and obligations until the enactment of legislation pursuant to clause 8. The parties clearly intended that the legislation would substantially accord with the 1995 Agreement. If it did not do so, that may have raised other issues; such as whether a term should be implied, whether a material inconsistency between the provisions of the 1995 Agreement and the legislation was a frustrating event, or whether legislation which did not reflect the 1995 Agreement abrogated it in whole or part. None of these issues arise here, as it is common ground that the 1996 amendments substantially reflected the provisions of the 1995 Agreement.

119 I conclude that the 1995 Agreement, and the terminal payment provision in particular, was not rendered unenforceable (or spent) by reason of the embodiment of material aspects of it in the 1996 amendments.

(C) Was clause 7 abrogated by the 2009 amendments?

120 The State contends that this issue depends upon the Court's determination of the implied repeal question that arises in respect of Tatts's statutory case. The State's contentions on implied repeal are based on s 3.4.3 of the Act which was introduced by the 2009 amendments and provides:

This Part applies only with respect to the gaming operator's licence that was issued on 14 April 1992 and does not authorise the grant of any further gaming operator's licence.

121 As I have said, when clause 7 refers to 'a new gaming operator's licence' it does so in a generic sense. In contrast, the Act defines 'gaming operator's licence' in a specific sense and, for that reason, s 3.4.3 had the effect of impliedly repealing the statutory terminal payment provision in s 3.4.33.

122 Section 3.4.3 made it impossible for a new gaming operator's licence in the specific sense to be granted. The State contends that this section manifested an intention to abrogate both the statutory and contractual terminal payment provisions. In other words, if the Court accepts that s 3.4.33 of the Act was impliedly repealed by the 2009 amendments, it necessarily follows that the State also intended to abrogate any concurrent contractual right under clause 7 of the 1995 Agreement. I do not accept that this is so. In my opinion, accepting that the 2009 amendments had the effect of impliedly repealing s 3.4.33 does not mean that the concurrent contractual right under clause 7 of the 1995 Agreement was abrogated.

123 For the reasons given above, I have concluded that the contractual right under clause 7 of the 1995 Agreement continued in existence as a concurrent right after embodiment in the 1991 Act and its later re-enactment in the Act. The question for determination is, therefore, whether the 2009 amendments were expressed in sufficiently clear terms to deprive Tatts of its contractual entitlement under clause 7.

124 The relevant principle to be applied 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:[36]

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.[37]

125 In a similar vein is the principle of legality. 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 ...[38]

126 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, Tatts's right under the terminal payment provision was clearly a valuable right and, in my opinion, subject to this principle of statutory interpretation.

127 The need for manifest or irresistible clarity in statutory language before a statutory provision is to be construed as depriving a person of valuable rights is especially relevant where no compensation is provided for. For example, in The Commonwealth v Hazeldell Ltd, Griffiths CJ and Rich J stated that it is 'a settled rule of construction that such an intention cannot be imputed to the Legislature unless expressed in unequivocal terms incapable of any other meaning'.[39] In Springhall v Kirner, Crockett J stated that 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'.[40]

128 The State contends that, by the 2009 amendments, Parliament unequivocally manifested an intention to extinguish any right Tatts had to a terminal payment on the issue of a new gaming operator's licence - not just the statutory right under s 3.4.33 of the Act, but also the contractual right under clause 7 of the 1995 Agreement. The State relies heavily upon the judgment of Dixon J (as he then was) in Perpetual Executors and Trustee Association of Australia Limited & Anor v Federal Commissioner of Taxation ('Thomson's Case').[41] The State places particular reliance upon the statement by Dixon J in Thomson's Case that '[a] statute destroys all contracts which stand in the way of its operation.'[42]

129 The issue in Thomson's Case concerned whether a repayment of income tax to the executors of Christina Thomson's deceased estate formed part of her estate, and was thus subject to estate duty. The deceased had paid the income tax during her lifetime and, in the circumstances described below, made a claim for its repayment. Before that claim was dealt with by the Commissioner, however, the deceased died. The repayment of income tax was made to her executors. The outcome of the case depended upon the proper characterisation of the repayment. If it was a repayment pursuant to an existing right of the taxpayer at the time of her death, it formed part of her estate and was subject to estate duty. Otherwise, it was by default a voluntary (ex gratia) payment which formed no part of the deceased's estate and was not subject to estate duty.

130 In order to understand the circumstances in which the repayment was made, and thus to determine its proper characterisation, it is necessary to consider an earlier case. In Magrath v The Commonwealth,[43] the taxpayer (like the deceased in Thomson's Case) had purchased Commonwealth Government gold dollar bonds issued in the United States of America. The terms of the bonds promised repayment of principal and interest in New York without deduction for any taxes then or at any time thereafter imposed by the Commonwealth. After the bonds were issued, amendments were made to the Income Tax Assessment Act which, for the first time, imposed a tax on income received from all sources, whether in Australia or elsewhere, by every Australian resident. As a result of these amendments, Magrath paid income tax on interest received on the bonds (as did the deceased in Thomson's Case). Magrath sought to recover the income tax he paid, on the basis that the bonds comprised contracts containing a promise to pay principal and interest in New York without any deduction for tax. There were two issues in the case:

(1) whether, on the proper interpretation of bond contracts, the Commonwealth had promised that interest paid on the bonds would not be liable to income tax; and

(2) if so, whether Magrath was entitled to recover from the Commonwealth the amount of income tax he had paid in respect of interest - either by way of indemnity or damages.

131 On the first question, the majority of the High Court found in favour of Magrath - that the bond contracts on their proper interpretation promised Magrath that interest payable on the bonds would not form part of his assessable income for the purposes of income tax legislation.

132 On the second question, it was unnecessary for the High Court in Magrath to express an opinion because the Commonwealth informed the Court that, if the bond contracts were interpreted as promising that interest would not be included in Magrath's assessable income, the Commonwealth would honour that promise. Notwithstanding the Commonwealth's position, Rich, Williams and McTiernan JJ expressed obiter views that, in the words of Dixon J in Thomson's Case: 'emphasised the legal impossibility of the contract tying the hands of Parliament or relieving the plaintiff of a tax the legislature decided to impose, if it covered the interest.'[44]

133 The second question in Magrath was required to be answered in Thomson's Case. While Thomson was alive, she made an application to the Commissioner based on the decision in Magrath and the Commonwealth's position in that case, seeking an indication as to whether the Commissioner intended to repay her the income tax she had paid on the interest received under her bonds. This enquiry yielded no response. However, after her death, her executors received a cheque from the Treasurer for an amount described as a refund of the income tax paid on interest received on the bonds. The executors contended that the repayment of income tax did not form part of Thomson's estate because she had no accrued right to receive it at the time of her death.

134 Dixon J agreed with the executors. His Honour noted that the estate duty legislation provided that the estate of a deceased person shall include his or her 'personal property'. Dixon J stated that this was an expression 'of the widest character and covers every form of personal property recognised at law or in equity, every possible interest including all choses of action.'[45] But, his Honour reasoned, '[an] expectation, however well founded in fact, and however well warranted by political or business considerations, will not do, if it is devoid of legal title.'[46]

135 On this basis, Dixon J defined the question in the following terms:

The question upon which the dutiability of the sum depends appears to me to be whether it was a mere voluntary payment made by the Crown or on the contrary represented a right or claim of right existing in the deceased to a refund of tax or compensation for a violation of the contract contained the bonds.[47]

136 Dixon J resolved the question on the following basis. He accepted that the decision in Magrath meant that the bonds contained a provision which, on its proper interpretation, contained a promise by the Commonwealth that interest on the bonds would not be liable to income tax. However, a contract in that form could not defeat a later imposition of tax by legislative action:

I am not prepared to hold that this provision warrants a term or condition promising immunity from a present or future Act of Parliament applicable according to the true intention of the legislature. But even if it did, a subsequent Act of Parliament inconsistent with the immunity promised would operate as a paramount law destroying the obligation of the promise. Neither the passing of such an Act nor the doing of anything under it which it authorised, as for instance the levying of a tax, could amount to an actionable breach of contract.

... A statute destroys all contracts which stand in the way of its operation.

The imposition of a tax necessarily involves an intention that when levied it shall not become repayable. Any liability ex contractu to repay it in substance, whether as damages, indemnity or recoupment, must be dissolved by force of the statute.[48]

137 Dixon J went on to consider general principles of statutory interpretation which were potentially inconsistent with such a result. First, the maxim generalia specialibus non derogant, and whether it required the amendment introducing income tax on the income of all Australian residents, irrespective of the source of the income, to be read subject to an exception in favour of the specific immunity from tax contained in the bond contracts.[49] Second, the general principle that Parliament should not be taken to have intended to 'take away the rights previously granted to subjects without compensation and without specific statements to that effect.'[50] Dixon J determined that these general principles did not apply in Thomson's Case for three reasons:

(1) The exemption was not contained in a statute, but depended 'entirely on the contract'.[51]

(2) The language of the exemption in the bond contracts was not clear and unambiguous. The exemption was only reached as a matter of contractual interpretation 'involving some use of inference or implication'.[52]

(3) The subject of exempting interest on Government loans was one which had been the subject of legislative exemption in the past - 'it has always been treated as a matter for special enactment'.[53]

138 Accordingly, Dixon J concluded that the income tax paid by Thomson had been properly assessed and that, at the date of her death, she had no accrued right to repayment. The passing of amending legislation to impose income tax on the interest paid to her on the bonds 'could not have amounted to an actionable breach of contract'.[54]

139 The decision in Thomson's Case does not, in my opinion, have any application to the terminal payment provision in clause 7 of the 1995 Agreement. Once it is accepted, as I have determined above, that the contractual right to a terminal payment continued after the 1996 amendments, very clear words would be needed for a later statute to deprive Tatts of its contractual right. This is not a case where compliance with the terminal payment provision in the contract will 'stand in the way' of the operation of the 2009 amendments. Thomson's Case does not say, as the State's submissions assume, that a statute which abrogates a statutory right automatically abrogates any concurrent or parallel contractual right. The answer to that question depends upon a proper interpretation of the relevant contract and the later statute. In this case, for the reasons given above, I have held that the generic meaning applies to the terminal payment provision in the 1995 Agreement. This is to be contrasted with my conclusion below that the terminal payment provision in the Act is subject to the specific meaning, and thus the subject of implied repeal by the 2009 amendments.

140 None of this is to undermine the essential reasoning in Thomson's Case. As Latham CJ said in direct terms:

the position is that the 1936 Act destroyed an exemption which previously existed. ... Parliament may, by law with respect to a matter which is within its powers, make lawful that which would otherwise be unlawful and, in particular, may so legislate as to deprive an act of the character of a breach of contract. Thus, if the 1936 Act had the effect of rendering the bond interest subject to tax, it was the duty of the Commissioner of Taxation to assess and collect the tax. In so acting he was acting in obedience to the law. It was not possible for any Commonwealth authority to give effect to the promise that tax should not be imposed.[55]

141 In my opinion, Thomson's Case does not address the issue in this case, where there is no equivalent of a statutory provision requiring tax to be paid and an exemption being sought based on an agreement to the contrary. This case concerns whether a parallel right to a payment from the State, which differs in content from the statutory right, has necessarily been abrogated by repeal of a more limited statutory right. In my opinion, it has not. The 2009 amendments did not prohibit payment of compensation to Tatts. In fact, neither the 2009 amendments nor any admissible extrinsic materials concerning those amendments made any reference to the parallel terminal payment provision in the 1995 Agreement. At their highest, the 2009 amendments rendered the Act silent on the subject matter of compensation. That left the continuing contractual right to compensation under clause 7 of the 1995 Agreement to operate according to its terms.

142 The continuing existence of the contractual terminal payment provision is supported by the decision in Bromley v Forestry Commission of New South Wales.[56] In that case, the New South Wales Court of Appeal considered whether a contractual right to compensation under a Crown lease had been abrogated as a result of successive amendments to the applicable legislation.

143 The contractual right was contained in condition (n) of a Crown lease issued in 1919. The condition allowed for compensation to be paid to the lessee of one-third of any royalty paid to the Crown on timber removed from the lessee's land 'to cover any damage done to his interests in the holding by licensed timber operations'. At the time the lease was created, the applicable legislation provided for royalty sharing between the State and the lessee in respect of timber removed from the land. That legislative regime was altered in 1984 by legislation providing for a compensation regime. The regime applying from 1984 to 1989 provided for the lessee to receive 'the amount of compensation (if any) payable in respect of disturbance to the land occasioned by the taking of timber, products or forest materials on or from the land in pursuance of the licence'. In 1989, the statutory compensation regime was replaced by a re-introduced royalty sharing regime. This later regime provided for the State to pay the lessee one-third of the balance of royalties paid in respect of timber products or forest materials taken from the lessee's land after deduction of specified amounts.

144 Mason P (who delivered the principal judgment) held that the later statutory regime, which operated from 1989, was not a compensation regime, as it conferred rights which were 'different in character and vindicate[d] different interests of the landholder'.[57] The lessee's contractual right under the lease was properly described as 'a right of compensation for damage suffered by the lessee', while the statutory right was properly described as one providing for the lessee to have 'a share of the fruits' of the royalties payable in respect of timber felled on the lessee's land.[58]

145 Mason P based this decision on the principles discussed above concerning the need for clear language for a statute to implicitly deprive a person of a valuable right without compensation.[59] To these principles, Mason P added:[60]

To these may be added the reference to passages in Wik Peoples v Queensland[61] to which we were referred. Speaking of the extinguishment of subsisting rights by necessary statutory implication as distinct from express legislative provision, Gummow J said that:

The question is whether the respective incidents ... [of the existing right and the statutory right] are such that the existing right cannot be exercised without abrogating the statutory right. If it cannot, then by necessary implication, the statute extinguishes the right.

146 The situation concerning the compensation regime which operated between 1984 and 1989 was not so clear to Mason P.[62] Both the contractual right and the statutory right were properly described as compensatory rights arising from damage or disturbance to the lessee's land arising from timber operations. In these circumstances, the Forestry Commission contended that the 1984 regime effectively abrogated the continued operation of the contractual right to compensation and that such abrogation was permanent, with the result that the repeal of the 1984 regime by the 1989 amendments did not revive the operation of the contractual right to compensation.[63] Mason P rejected these submissions:

1. I would reject these submissions. The 1984 scheme covers a wide range of landholdings. It is silent as to provisions such as condition (n). The matters to be factored into the Commission's assessment of compensation for disturbance go beyond the scope of condition (n) in at least two related respects: first the beneficial effects of Commission activities are to be brought to account; secondly, the costs brought into account (extending to the Commission's expenditure on roads, bridges etc) cover works with which condition (n) is not necessarily concerned (eg works off site: see s30K(3)(b)).
2. Applying Gummow J's test in Wik Peoples,[64] the statutory and contractual rights were capable of concurrent exercise, albeit that a windfall might enure to the lessee. Parliament's failure to preclude possible unjust enrichment does not spell common law abrogation of the contractual right. None of this is to deny the capacity of the common law to prevent recovery of double compensation in the event of dual overlapping claims by a lessee[65] but this is not in issue in the present proceedings.
3. Accordingly, I would reject the respondent's contention that the 1984 legislation abrogated the contractual right.[66]

147 It was necessary for Mason P to consider whether the compensation rights differed in material respects because double compensation for the same kind of change or disturbance would have been an unlikely intention to attribute to Parliament. In the present case, however, no question of windfall, unjust enrichment or double-recovery of compensation arises.

148 In my opinion, the reasoning in Bromley recognises that parallel contractual and statutory rights may exist and, moreover, that changes to the statutory right do not affect the operation of the contractual right unless the changes have the effect that exercise of the contractual right will abrogate, or stand in the way of the operation of, the amended statute.

149 The question remains, however, as to whether the substance of the authorisations under the gaming machine entitlements and related venue operator's licences fall within the generic meaning of 'a new gaming operator's licence' when used in the terminal payment provision.

(D) Did the State grant new gaming operator's licences?

150 The State contends that, even if the Court accepts that the phrase 'a new gaming operator's licence' has a generic meaning and rejects its contentions that the terminal payment provision in the 1995 Agreement was spent or abrogated by reason of the 1996 or the 2009 amendments, the terminal payment provision has not been engaged. That State contends that the authorities granted by the new statutory regime, of gaming machine entitlements and venue operator's licences operating in tandem, do not bear sufficient similarity to the authorities granted to Tatts by its gaming operator's licence under the old statutory regime. In summary, the State contends that the authorities granted under the two regimes are wholly different and, therefore, the issue of gaming machine entitlements to holders of venue operator's licences is incapable of constituting the grant of new gaming operator's licences.

151 Before considering the detail of the State's contentions, I note that clause 1.1 of the 1995 Agreement provides that the singular includes the plural unless the contrary intention appears. Accordingly, clause 7 contemplated the issue of more than one new gaming operator's licence. In the events which transpired, on the expiry of its licence Tatts's gaming machines were acquired in situ by venue operators holding the corresponding number of gaming machine entitlements. I accept Tatts's submission that the evidence established that:

[T]he transition to the new gaming operators was seamless and barely discernible. At 11pm on 15 August 2012, one hour before the Tatts' licence expired, all of the gaming machines owned and operated by Tatts were disabled and as at midnight the gaming machines were sold to venue operators for use by them in accordance with their gaming machine entitlements in their existing location within approved venues. At approximately 8am on 16 August 2012, when the gaming venues re-opened, the same gaming machines in the same venues were re-enabled and the new gaming operators, who were already licensed and approved venue operators, commenced their gaming operations pursuant to the authorities conferred upon them by their gaming machine entitlements and venue operator licences.

152 This evidence was not admitted to assist the interpretation of the 1995 Agreement or the Act, but for the purpose of proving breach of the contractual and statutory terminal payment provisions.

153 The State's contentions in this regard focus entirely upon the form, and not the substance, of statutory authorisations to conduct gaming operations under the old and new statutory regimes. The State's arguments involve the following steps.

154 First, s 14 of the 1991 Act as it stood at the time of the 1995 Agreement provided that a gaming operator's licence authorised the licensee to do the things listed in s 14(1)(a) to (g) inclusive. Those things included the manufacture, supply, service, repair and maintenance of approved gaming machines. These same authorities were granted under 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.

155 The State contends that these express exclusions created a material difference between the authorities granted under the two regimes.

156 Second, the State contends that the monitoring provisions were different under the old regime and the new regime. Reliance was placed upon s 34 of the 1991 Act and s 3.4.31(3) of the Act. The State contends that the holder of a gaming operator's licence under the 1991 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.[67] 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.[68]

157 Third, the State contends that a material difference arises because Tatts, as the holder of a gaming operator's licence, was authorised to conduct or promote club keno games. The holder of gaming machine entitlements has no such right.

158 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 operator's licence was authorised to conduct gaming at an approved venue without the need for a separate venue operator's licence.

159 Fifth, the State contends that a material difference arises from the fact that it was a 'defining feature of the gaming operator model under the duopolist system' that gaming operators would supply the gaming machines to venue operators - and that this defining feature has ceased to exist.

160 In all the circumstances, the State contends that:

[t]he issue of wholly different entitlements under a wholly different regime is - definitionally and qualitatively - incapable of constituting a 'new gaming operator's licence' so as to trigger a payment to Tatts in accordance with clause 7.1 of the 1995 Agreement ... [and] ... [t]his is so even if one adopts a broad construction of the phrase 'new gaming operator's licence'.

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

162 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 revenue from gaming which provides 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.

163 This definition was repeated in s 3.1.4 of the Act.[69]

164 Second, there is a basic flaw in the State's contentions. The State fails to 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 Tatts's 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) authorities 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

165 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.

166 Manufacturing approved gaming machines was always the subject of an authorisation regime which was 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 operator's 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 operator's 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.

167 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 operator's licence, nor was monitoring by the gaming operator a condition of the licence. Section 34(1) of the 1991 Act provided only that the Commission could not grant a gaming operator's licence unless satisfied that the proposed licensee was a suitable person to be 'concerned in or associated with a business of ... monitoring gaming machines'. Section 34(2) required the Commission to consider whether the proposed licensee would have in place an adequate electronic monitoring system for detecting significant events associated with each gaming machine. Accordingly, the old regime enabled monitoring by third parties engaged by the licensee. If Tatts had contracted the monitoring function out to a third party, and the Commission approved Tatts's association with the contracted party, the Commission would have been authorised to grant a Tatts a gaming operator's licence. The same position applied under s 3.4.31 of the Act prior to the 2009 amendments.

168 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.

169 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.

170 Fourth, I do not accept that there is any material difference relating to club keno. At the time of the 1995 Agreement, the Club Keno Act gave the Trustees the right to conduct and promote club keno games. The Club Keno Act did not describe this right as arising by virtue of the Trustees then holding a gaming operator's licence. The authority to promote and conduct club keno did not arise under s 14 of the 1991 Act or under s 3.4.2 of the Act. Further, at the time of the 1995 Agreement, s 4 of the Club Keno Act specifically provided that club keno was not a game regulated by the 1991 Act.

171 Upon enactment of the Act, the regulation of club keno became subject to Chapter 6 of that Act. At that time, the authority to conduct and promote club keno games in Victoria was conferred upon persons including 'the holder of a gaming operator's licence for the term of that licence'.[70] While it is true that, from this time, the authority to conduct and promote club keno was linked to Tatts's status as 'the holder of a gaming operator's licence', that did not, in my opinion, bring that right within the ordinary meaning of the words 'gaming operator's licence'. If it did, it was an ancillary aspect of the licence, not part of its core authorisation.

172 It follows that the issue of gaming machine entitlements to various licensed venue operators constituted the issue of new gaming operators' licences within the meaning of clause 7 of the 1995 Agreement. The aggregated authorities granted under the new regime are substantially the same as those which were granted under Tatts's gaming operator's licence.

173 For the above reasons, the State has breached clause 7 of the 1995 Agreement and is liable to Tatts for the amount of the terminal payment and interest. The amount of the terminal payment has been agreed at $451,157,286. I will hear the parties as to the amount of interest to be added to that sum.

Did the State breach obligations of good faith or cooperation?

174 Tatts alleges an alternative contractual case based on an express or implied term of good faith and an implied term of cooperation, the latter of which the State concedes formed part of the 1995 Agreement. On the assumption that the Court accepted that the specific meaning applied to clause 7, or that clause 7 was not engaged because of material differences between the old and new statutory regimes, Tatts nevertheless contends that these terms were breached by the State, because:

(1) the gaming machine entitlements authorise licensed venue operators to conduct gaming operations in Victoria;

(2) the State has attempted to circumvent Tatts's right to compensation under clause 7 of the 1995 Agreement, or to deprive it of the benefit of that clause, by failing to treat the issue of gaming machine entitlements as constituting the issue of new gaming operator's licences within the meaning of clause 7; and

(3) further or alternatively, the State failed to take all reasonable steps to ensure that the issue of gaming machine entitlements did not have the effect of depriving Tatts of its right to a terminal payment. This aspect of the alleged breach was characterised as failing to preserve Tatts's right to the terminal payment when the 2009 amendments were enacted.

175 The State contends that the 1995 Agreement did not include an express or implied good faith obligation. Regardless, it denies any breach of the cooperation term or of any good faith term found to form part of the 1995 Agreement. The State contends that the content of the obligations put forward by Tatts would be both inconsistent with the express terms of the Treasurer's letter and void as a fetter on future executive and legislative action.

176 In light of the Court's conclusions above, it is strictly unnecessary for the Court to determine Tatts's case based on the good faith and cooperation terms. I will, however, briefly express my view on this aspect of Tatts's claims.

(A) Did the 1995 Agreement include an express obligation of good faith?

177 I will first consider whether the good faith term was an express term. Tatts's case in this regard is straightforward. It relies upon the final paragraph of the Treasurer's letter:

The Government recognises the importance of the gaming industry to the Victorian economy and, in recognition of that, it will continue to deal with the Trustees reasonably and in good faith.

178 Tatts contends that this language is in plain, unqualified and promissory terms.

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

I am writing to confirm the principles on which the Government of Victoria is reaching agreement with you over the payments relating to your Gaming Operator's Licence.

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 your operations or the terms on which those operations are conducted.

180 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 contended by Tatts in alleging that the State breached the good faith term by promoting the 2009 amendments, which deprived Tatts of its right to a terminal payment under clause 7.

181 I do not accept the State's contention that the statement in the final paragraph of the letter is subject to the Treasurer's statement 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 statements of principle in the six 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.

182 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 six 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 [Tatts's] operations or the terms on which those operations are conducted', must be given effect. Most relevantly, the fifth principle contains a non-binding promise in similar terms to the terminal payment provision in clause 7 of the 1995 Agreement. Accordingly, although I conclude that there was an express good faith term, it was circumscribed in its scope by the express statement that Tatts's entitlement to a terminal payment under clause 7 was subject to contrary executive or legislative action. The implied cooperation term was subject to the same limitation.

183 It is unnecessary to consider whether the 1995 Agreement included an implied obligation of good faith.

184 Tatts also relies upon the good faith and cooperation terms to bolster its generic meaning contention. It referred to American cases which have used good faith obligations to interpret agreements,[71] and authoritative statements that the cooperation term may be used as a rule of construction.[72] In final submissions, Tatts used the good faith and cooperation terms as an extension of ordinary principles of contractual interpretation directed towards underwriting 'the spirit of the contract and ... the integrity of the bargain'. I have found it unnecessary to rely upon the good faith and cooperation terms in accepting Tatts's generic meaning contention.

(B) Did the State breach its good faith and cooperation obligations?

185 The first aspect of the State's alleged breach, failing to treat the issue of gaming machine entitlements to licensed venue operators as constituting the issue of new gaming operator's licences, is not maintainable. If the specific meaning of the phrase 'a new gaming operator's licence' had been adopted by the Court, or the Court had found that the issue of gaming machine entitlements did not fall within the generic meaning of the issue of new gaming operator's licences, terms of good faith and cooperation could not assist Tatts. It could not be a breach of the 1995 Agreement to rely on its proper interpretation when applying it to subsequent events.

186 The second aspect of the State's alleged breach involves treating the content of the good faith and cooperation terms as including an obligation on the State to refrain from altering or abrogating Tatts's right to a terminal payment under clause 7 of the 1995 Agreement without providing a saving provision.

187 In my opinion, the second aspect of the State's alleged breach is inconsistent with the limited nature of the good faith and cooperation terms. As discussed above, those terms were subject to the express statement of non-bindingness, including the acknowledgment of Parliament's power to enact legislation affecting Tatts's terminal payment right, in the opening paragraphs of the Treasurer's letter. Tatts cannot, by a general term of good faith, obtain a result which is inconsistent with an express statement in the very instrument (the Treasurer's letter) that created the good faith obligation.

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

189 Tatts mounts a further alternative argument based on clause 6 of the 1995 Agreement. The opening words of clause 6 provide:

Without limiting any other provision in this Agreement, the Minister agrees that for the term of the Gaming Operator's Licence the Trustees' conduct of the business will be regulated on terms substantially as favourable as the terms regulating the gaming machine business operated by Tabcorp Holdings Limited or its operator.

190 In the event that all of its other arguments fail, but Tabcorp succeeds in obtaining a terminal payment in its proceeding, Tatts contends that clause 6 constitutes an agreement by the State that it will receive equal treatment and that, accordingly, the State is liable to make the terminal payment under clause 7.

191 It is unnecessary to decide this issue as Tatts's contractual claim has succeeded. Moreover, for the reasons given in the Court's judgment in the Tabcorp proceeding today,[73] Tabcorp has been unsuccessful in its claim for a terminal payment. Had Tabcorp been successful, and it was necessary to decide the point, I would reject this alternative argument. The availability of a terminal payment does not, in my opinion, fall within the regulation of the conduct of the gaming machine businesses operated by Tatts and Tabcorp during the term of their respective licences. The State's promise of substantially equivalent treatment was, on the plain meaning of clause 6, limited to regulation of that conduct.

Is Tatts entitled to a terminal payment under s 3.4.33 of the Act?

192 Tatts's statutory claim is based upon s 3.4.33(1) of the Act, which provides:

(1) If -

(a) a gaming operator's licence held by a person (the former licensee) expires; and

(b) the Commission grants a gaming operator's licence to a person other than the former licensee, or a related entity of the former licensee, being a licence that commences within 6 months after that expiry; and

(c) the Commission does not grant a gaming operator's licence before the expiration of that period to the former licensee or a related entity of the former licensee -

the former licensee is entitled to be paid an amount equal to the licence value of the licence held by the former licensee or the premium payment paid by the holder of the licence referred to in paragraph (b), whichever is the lesser.

193 The sub-section provides that Tatts is entitled to a terminal payment if three things occur: (1) expiry of its licence; (2) the grant of 'a gaming operator's licence' to a person unrelated to Tatts which commences within six months after expiry; and (3) 'a gaming operator's licence' is not granted to Tatts or a related entity. It is agreed that the first and third conditions have been satisfied. Tatts contends that the second condition has also been satisfied, because a generic meaning should be given to the phrase 'a gaming operator's licence'.

194 The State denies Tatts's statutory claim on two grounds. First, the State contends that no 'gaming operator's licence' within the meaning of the provision has been granted. Second, the State contends that the terminal payment provision was impliedly repealed, or 'rendered inoperative', by the amendments. Both issues raise questions of statutory interpretation.

195 The State contends that the phrase 'gaming operator's licence' in s 3.4.33(1) has a specific limited meaning: it means a licence granted under Division 4 of Part 4 of Chapter 3 of the Act. This contention relies on the definition of 'gaming operator's licence' in s 1.3 of the Act:

'gaming operator's licence' means a licence granted under Division 4 of Part 4 of Chapter 3

196 Tatts contends that the phrase 'gaming operator's licence' in s 3.4.33(1)(b) and (c) has a broader generic meaning: that the words should be understood in their natural and ordinary sense, as a reference to the grant of a licence which authorises the conduct of gaming operations that would otherwise be unlawful. Tatts 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 licences authorising gaming operations in Victoria.

197 So, in common with the contractual case, the central issue is whether the critical words should be given a specific (or narrow) meaning, or a generic (or broad) meaning. I will again refer to the rival positions as the 'specific meaning' contention and the 'generic meaning' contention.

198 If the specific meaning contention is accepted, it is common ground that no gaming operator's licence within that meaning ('under Division 4 of Part 4 of Chapter 3') has been granted. That means that the terminal payment provision will not have been triggered, and Tatts's case must fail on that ground unless, as Tatts contends, the 2009 amendments introduced changed circumstances which had the effect of changing the meaning of the critical words from specific to generic. If the generic meaning is accepted, Tatts's case will succeed unless, as the State contends, the grant of the gaming machine entitlements to various venue operators not including Tatts, did not constitute the grant of 'a gaming operator's licence' in a generic sense because of material differences with Tatts's licence.

199 It is first necessary to determine the central question on a proper interpretation of the language of the Act as it stood before the 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?

200 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:[74]

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'. (emphasis of French CJ and Hayne J)

201 Earlier, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory), 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.[75]

202 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.[76]

203 Consistent with these general principles, s 35(a) of the Interpretation of Legislation Act 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). 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.[77]

204 Applying these principles to the issue at hand, Tatts's contention that a generic meaning should be given to the term 'gaming operator's licence' in 3.4.33(1)(b) and (c) must fail. The definition of 'gaming operator's licence' in s 1.3 set out above is simply too strict to allow the Court to ignore the text of the Act and conclude that the identical defined phrase had different meanings within s 3.4.33.

205 The purpose or object of the statutory terminal payment provision, as discussed above in the context of the 1995 Agreement, did not require a different result prior to the 2009 amendments. Until that time, the application of the definition of 'gaming operator's licence' to s 3.4.33(1)(b) and (c) was consistent with that purpose or object. The parties clash over the effect of those amendments on s 3.4.33: the State contends that s 3.4.33 was impliedly repealed as a result of the 2009 amendments. Tatts contends that the meaning of the term 'gaming operator's licence' in s 3.4.33 changed from specific to generic, so as to enable the provision to have continuing operation. I turn to consider the effect of the 2009 Amendments.

(B) Was s 3.4.33 impliedly repealed by s 3.4.3?

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

207 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.'[78]

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.[79]

209 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,[80] 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. 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'.[81]

210 Second, consistent with the principles concerning implied repeal, and as set out above, the principle of legality as stated in Potter v Minahan is relevant.[82]

211 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,[83] 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'.[84] As set out above, this principle was recently affirmed by McHugh J in Western Australian Planning Commission v Temwood Holdings Pty Ltd,[85] affirming the principle as expressed in Clissold v Perry.[86]

212 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.[87]

213 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,[88] 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'.[89]

214 Sixth, there is a general substantive presumption 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'.[90] That statement has been expressly approved by the High Court on a number of occasions.[91]

215 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'.[92] 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.[93]

216 The 2009 amendments inserted s 3.4.3, which provides:

This Part applies only with respect to the gaming operator's licence that was issued on 14 April 1992 and does not authorise the grant of any further gaming operator's licence.

217 The State contends that the combined effect of the definition of a 'gaming operator's licence' in s 1.3, and the preclusion of the grant of a further gaming operator's licence after expiry of Tatts's licence introduced by s 3.4.3, provides a complete answer to Tatts's statutory claim, as 3.4.3 rendered s 3.4.33 incapable of operation and was thus impliedly repealed.

218 Further to s 3.4.3, the State contends that its implied repeal argument is reinforced by other provisions of the Act including:

(1) s 3.4.1A, which expressly provides that the grant of a venue operator's licence 'is not to be taken to be a granting of a gaming operator's licence ... under this Part'; and

(2) s 3.4.4A, which expressly provides that the grant of a monitoring licence 'is not to be taken to be the granting of a gaming operator's licence ... under this Part'.

219 The State's contentions acknowledge that there is no similar provision expressly providing that the grant of a gaming machine entitlement is not to be taken to be the granting of a gaming operator's licence under Part 4. The State contends, however, that this is explicable on the basis that gaming machine entitlements are not granted under Part 4 but, instead, under Part 4A and, in addition, are described as 'entitlements' and not 'licences'. In effect, the State contends that, while it may be curious that the legislature did not expressly provide that the grant of a gaming machine entitlement is not to be taken to be the granting of a gaming operator's licence, the combined effect of the definition and s 3.4.3 is so clear that the lack of such a deeming provision is immaterial.

220 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 3.4.33. The State contends that this result is of sufficient clarity to make the continued operation of s 3.4.33 so inconsistent or repugnant with these provisions that they cannot stand together. In effect, the State contends that Parliament well understood the earlier words in s 3.4.33 had the specific meaning when it set about passing the 2008 and 2009 amendments for the purpose of both establishing the new gaming regime and ensuring that the payment entitlement under s 3.4.33 could never be triggered on the grant of new authorities to conduct gaming activities under the new regime.

221 In the context of the State's submissions, it is convenient to consider the available extrinsic materials for the 2008 and 2009 amendments to ascertain whether they provide any assistance as to Parliament's purpose or object concerning the continued operation of the terminal payment provision.

222 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 contained 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:

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.[94]

223 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 Tatts and Tabcorp of their respective entitlements to compensation under the terminal payment provisions.[95]

224 The State contends that the Government's intention for the 2008 and 2009 amendments was reinforced and reiterated by statements made in a Government budget paper for the 2008-2009 financial year dated 6 May 2008 ('2008 budget paper').[96] 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.[97]

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

226 There is no evidence that the 2009 amendments had been drafted at the time of the 2008 budget paper. The Bill for the 2009 amendments was not presented to Parliament until 3 February 2009.

227 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 or 2009 amendments, that sheds light on the Government's object and purpose concerning the continuing operation of the terminal payment provisions for Tatts and Tabcorp. These extrinsic materials relate to the desirability for, and the content of, the gambling reforms introduced by the amendments, none of which has 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.

228 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 meaning of proposed legislation. 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.[98]

229 The second difficulty with the 2008 media release and the 2008 budget paper is that they record the Government's view about the effect of proposed legislation on Tatts's payment entitlement under its terminal payment provision - in circumstances where there is no evidence that the form of the 2009 amendments had been drafted, let alone settled - while making it plain in the 2008 budget paper that the Government did not intend to alter or amend the terminal payment provision. In these circumstances, even if the evidence of the Government's subjective view is given some weight, it is equivocal and unreliable on that ground.

230 Tatts contends that s 3.4.3 is no more than 'an application provision'; its function and purpose is simply to draw a temporal boundary between the old regime (under which only Tatts's licence could exist) and the new regime. In other words, s 3.4.3 was intended to do no more than ensure that there was no overlap between the new regime and the old regime following expiry of Tatts's licence, and it says nothing about the operation of s 3.4.33(1)(b) and (c). In my opinion, that contention is inconsistent with the Court's acceptance that the specific meaning applied until the 2009 amendments were made. To cater for such a finding, Tatts contends that the phrase 'a gaming operator's licence' altered in its meaning on the enactment of the 2009 amendments, from specific to generic, because the only way in which s 3.4.33 can work is if those words are given a generic meaning in s 3.4.33(1)(b) and (c). I will refer to this as 'the altered meaning contention'.

231 Tatts's submissions in support of its contentions on implied repeal involve the following steps.

232 First, Tatts contends that the extrinsic evidence is inconsistent with an intention to repeal the terminal payment provision. The express statement in the 2008 budget paper that the Government did not intend to alter or amend the terminal payment provisions of the legislation for Tatts or Tabcorp indicates that those provisions were intended to operate if they were engaged. This is especially so for Tatts, because there is no evidence that the form of the 2009 amendments was known. Put simply, if it was intended to repeal the terminal payment provisions, Tatts contends that it would have been ridiculous for the Government to declare in its formal budget paper that it did not intend to alter or amend those very provisions.

233 Second, Tatts contends that if the State had intended to repeal s 3.4.33 it could easily have done so expressly. Tatts contends that there is nothing in the State's argument that, as some provisions in Part 4 were intended to have continuing operation until expiry of Tatts's licence, it would have been a complicated 'filleting' exercise to repeal those sections which were not intended to have continuing operation on a piecemeal basis. All that was required was an express repeal of s 3.4.33.

234 Third, Tatts contends that, far from supporting an intention to repeal, ss 3.4.1A and 3.4.4A assist its contention that Parliament intended s 3.4.33 to have continuing operation. Tatts contends that those deeming provisions assume the continuing operation of the terminal payment provision because, were that not so, the deeming provisions would provide 'a meaningless and irrelevant defensive mechanism' against the possible triggering of the terminal payment right. On this basis, Tatts contends that the failure to include a similar deeming provision in respect of the grant of a gaming machine entitlement is consistent with a legislative intention that the grant of a gaming machine entitlement would represent the grant of a gaming operator's licence for the purpose of s 3.4.33(1)(b) and (c).

235 Fourth, Tatts relies upon the presumption that a general enactment is not intended to interfere with an earlier specific provision unless that intention is clearly expressed. Here, s 3.4.33 granted Tatts a specific right in certain circumstances. That right was enacted in 1996 and consolidated and re-enacted in 2003. The 2009 amendments make no express reference to s 3.4.33 or its continuing operation. There is nothing in the language of s 3.4.3 which indicates that it was directed at curtailing or limiting or abrogating the rights in s 3.4.33.

236 Fifth, Tatts contends that there are other provisions of the Act where the legislature has expressly provided that amendments would not result in compensation being payable by the State to any person.[99] These provisions demonstrate that, where the legislature intended to provide that the operation of a certain provision would not give rise to an obligation on the part of the State to make a payment, it did so expressly. The contrast with s 3.4.3 is plain.

237 Sixth, in the absence of a clear intention to repeal, Tatts then contends that it must follow that the legislature intended that s 3.4.33 should have a continuing operation. If that be the case, Tatts contends that the Court should give s 3.4.33 a workable interpretation to enable it to continue to operate. As adopting the defined meaning of a 'gaming operator's licence' would deprive the section of the possibility of operation, it should accordingly be given a generic or ordinary meaning.

238 Tatts contends that the changed circumstances brought about by the 2009 amendments, including the fact that the terminal payment provision was left unamended, provided a changed statutory context sufficient to constitute an intention that the definition of 'gaming operator's licence' was not to apply to that phrase when used in paragraphs 3.4.33(1)(b) and (c) of the Act. In support of this submission, Tatts relies upon the principle that, even though not expressly stated in a statute, definitions in a statute are impliedly subject to the qualification 'unless the contrary intention appears'.[100] As to that principle, McHugh J said in Kelly v R:

The function of a definition is not to enact substantive law. It is to provide aid in construing the statute. Nothing is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment. There is, of course, always a question whether the definition is expressly or impliedly excluded.[101]

239 As to the circumstances necessary to constitute a 'contrary intention' for this purpose, Tatts relies upon the decision of the New South Wales Court of Appeal in Deputy Commissioner of Taxation (NSW) v Mutton.[102] In that case, Mahoney JA canvassed the authorities concerning the identification of a 'contrary intention' and summarised the position in the following way:[103]

(1) 'A definition section and its application must be considered in the context of the Act as a whole'.

(2) 'A contrary intention may be inferred from a particular provision if, were the definition to be applied, the provisions of or the procedure established by the section would not appropriately work'.

(3) 'It is ... not necessary that what is laid down by the section in question be impossible of operation [if the statutory definition is applied]; it is sufficient if the result of the application of the definition to a section results in the operation of the section in a way which clearly the legislature did not intend'.

(4) 'In the end, what the Court does when it decides whether there is a 'contrary intention' is to decide whether it was the intention of the legislature that the statutory ... definition should apply to the particular section'.

240 Seventh, Tatts contends that the generic meaning opens the way for it to rely upon the 'always speaking' principle of statutory interpretation.

241 The text of a statute is ordinarily to be read as 'always speaking' or 'speaking continuously in the present'.[104] 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..[105]

242 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. 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..[106]

243 In Wilson v Commissioner of Stamp Duties,[107] 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, 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.

244 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'.[108]

245 Tatts contends that, upon enactment of s 3.4.3, which made the grant of a 'gaming operator's licence' in the defined sense impossible, the changed circumstances enlivened the always speaking principle so that, in order to make the terminal payment provision work, a generic meaning should be adopted. Tatts submits that would be consistent with the purpose of the provision - to provide compensation out of the premium paid for the grant of a gaming operator's licence after expiry of the Tatts licence 'as compensation for [Tatts's] lost investment in infrastructure'.[109]

246 Tatts's submissions on implied repeal may be summarised as follows. The language of the 2009 amendments, in particular s 3.4.3, is not sufficiently clear to evince an intention by Parliament to deprive s 3.4.33 of continuing operation; and, if that be so, the Court should give s 3.4.33 a workable interpretation to enable it to continue to operate. The only way this can be done is by giving the phrase 'gaming operator's licence' a generic meaning, so as to allow the always speaking principle to apply.

247 I do not accept Tatts's submissions on implied repeal. They depend on its contention that the meaning of 'gaming operator's licence', when used in s 3.4.33(b) and (c), changed from the defined meaning to a generic meaning upon enactment of the 2009 amendments; thus allowing the always speaking principle of interpretation to operate to include the grant of gaming machine entitlements to licensed venue operators within the generic meaning of gaming operator's licence.

248 In my opinion, it is clear that the legislature initially intended that the specific definition of 'gaming operator's licence' would apply throughout Part 4, including to s 3.4.33. Similarly, s 3.4.3 was in my opinion intended to apply to the whole of Part 4, including to s 3.4.33. After all, s 3.4.33 is a section expressly intended to operate on the grant of the very licence which the legislature expressly provided by s 3.4.3 could never occur. Accordingly, there was in my opinion never a contrary intention in the Act that the definition of 'gaming operator's licence' would not apply to s 3.4.33. In these circumstances, the always speaking principle of interpretation cannot apply. The language of the statute is simply too strict.

249 If Tatts had not succeeded on its contractual claim, this result may be thought to be unfair, because Tatts paid annual licence fees over 17 years, totalling hundreds of millions of dollars, in the expectation that it would be entitled to a terminal payment if it was not granted a licence to continue its gaming machine business after expiry of its licence, and a licence or licences were granted to others. But such a result would reflect the harsh reality of sovereign risk.

(C) Did the State grant new gaming operator's licences?

250 As the specific meaning of 'gaming operator's licence' has been accepted, the grant of gaming machine entitlements to licensed venue operators did not constitute the grant of a 'gaming operator's licence' under s 3.4.33(1)(b) of the Act. In the event that I am mistaken, and the generic meaning contention should have been accepted, then my reasoning in respect of Tatts's contractual claim under the 1995 Agreement concerning the absence of material differences between the substance of the authorisations granted under the two regimes should be adopted.

(1) Tatts's contractual claim should succeed. Tatts is entitled to judgment for $451,157,286 plus interest.

(2) Tatts's alternative claims based on the good faith and cooperation terms would have failed if its contractual claim had otherwise failed.

(4) Tatts's claim based on clause 6 of the 1995 Agreement fails.

252 I will hear the parties as to interest and costs.

[1] Judgment in the Tabcorp proceeding is also delivered today: Tabcorp Holdings Limited v The State of Victoria [2014] VSC 301.

[4] 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).

[6] Section 33(1) of the amended 1991 Act.

[10] I will use the shorthand 'Part 4' where appropriate in context, but not universally.

[11] Gambling Regulation Amendment (Licensing) Act 2009 (Vic).

[12] [2014] HCA 7; (2014) 88 ALJR 447, 454-5 [35] (citations omitted) (French CJ, Hayne, Crennan and Kiefel JJ).

[13] [1973] HCA 36; (1973) 129 CLR 99, 109.

[15] International Air Transport Association v Ansett Australia Holdings Ltd & Ors [2008] HCA 3; (2008) 234 CLR 151, 166 [22].

[16] [2011] HCA 45; (2011) 86 ALJR 1.

[17] [1982] HCA 24; (1982) 149 CLR 337, 352.

[22] Prior to s 19A being enacted, Tatts could have held both a gaming operator's licence and a venue operator's licence.

[23] Section 3(1), para (b) of the definition of 'gaming operator'.

[24] Section 17 of the 1991 Act provided that a person whose name was 'listed on the Roll' was authorised to manufacture, sell or supply approved gaming machines and restricted components, and to enter into arrangements with gaming operators to service, repair or maintain gaming equipment through the services of licensed technicians.

[25] Section 16 of the 1991 Act provided for 'a technician's licence', authorising the licensee to service, repair or maintain gaming equipment and to carry out prescribed duties.

[26] In this respect, the fact that Crown Casino was able to conduct gaming machine operations without the authority to manufacture, supply or sell gaming machines also supports the inference.

[27] [2009] NSWCA 407; (2009) 76 NSWLR 603, 682 [324].

[28] [1982] HCA 24; (1982) 149 CLR 337, 352 (emphasis added).

[29] Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).

[30] In this regard, clause 8 may have been void, as it required the State to use its best endeavours to pass legislation in a particular form - thus fettering future executive action. Cf Nettle JA's dissent in Port of Portland Pty Ltd v Victoria [2009] VSCA 282; (2009) 27 VR 366, 384 [86]. The High Court did not find it necessary to decide this issue: Port of Portland Pty Ltd v State of Victoria (2010) 242 CLR 348, 360 [14]. It is also not necessary to decide the issue in this case as it was not contested that clause 8.1 was fully complied with.

[32] [2001] NSWCA 34; (2001) 51 NSWLR 378, 393 [52]-[57] (Mason P).

[33] [1970] AC 583, 603; cited with approval in Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570, 582.

[34] James Miller & Partners Ltd v Whitsworth Street Estate (Manchester) Ltd [1970] AC 583, 603.

[35] JW Carter, Contract Law in Australia (LexisNexis Butterworths, 6th Edition, 2013) 360-1 [17-06].

[36] [1904] HCA 12; (1904) 1 CLR 363, 373.

[37] [2004] HCA 63; (2004) 221 CLR 30, 49 [43] (citations omitted).

[38] [1908] HCA 63; (1908) 7 CLR 277, 304 (emphasis added).

[39] [1918] HCA 75; (1918) 25 CLR 552, 563 (citations omitted).

[40] [1988] VicRp 21; [1988] VR 159, 165.

[41] [1948] HCA 24; (1948) 77 CLR 1.

[43] [1944] HCA 14; (1944) 69 CLR 156.

[44] [1948] HCA 24; (1948) 77 CLR 1, 25.

[56] [2001] NSWCA 34; (2001) 51 NSWLR 378.

[60] Ibid 392 [44] (citation in original).

[61] (1996) 187 CLR 1, 185 (Gummow J), 248-9 (Kirby J).

[62] Bromley v Forestry Commission of New South Wales [2001] NSWCA 34; (2001) 51 NSWLR 378, 393 [52].

[64] (1996) 187 CLR 1, 391 [44].

[65] Cf Franklins Self Serve Pty Ltd v Wyber [1999] NSWCA 390; (1999) 48 NSWLR 249, 254, 257-69.

[66] Bromley v Forestry Commission of New South Wales [2001] NSWCA 34; (2001) 51 NSWLR 378, 393 [56]-[58] (emphasis added; citations in original).

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

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

[70] See ss 6.1.2 (definition (a) of 'participants'), 6.2.2(1) of the Act.

[71] See, eg, Burger King Corporation v C R Weaver, 169F 3d 1310 (11th Cir, 1999).

[72] See, eg, Secured Income Real Estate (Aust) Ltd v St Martins Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607.

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

[74] [2013] HCA 16; (2013) 87 ALJR 588, 597 [47] (citations omitted).

[75] [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47] (citations omitted).

[76] [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].

[77] Ibid 518 [23] (citations omitted).

[78] [1908] HCA 55; (1908) 7 CLR 1, 10.

[80] [1939] HCA 40; (1939) 62 CLR 603, 625.

[81] [2006] HCA 50; (2006) 228 CLR 566, 585 [48].

[82] [1908] HCA 63; (1908) 7 CLR 277, 304.

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

[85] [2004] HCA 63; (2004) 221 CLR 30.

[86] [1904] HCA 12; (1904) 1 CLR 363, 373.

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

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

[89] [1998] HCA 28; (1998) 194 CLR 355, 382 [71].

[90] [1955] HCA 27; (1955) 92 CLR 390, 397.

[91] For example, Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) ALJR 588, 597 [47].

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

[95] As explained in the judgment delivered today in the Tabcorp proceeding, s 4.3.12 of the Act contained a terminal payment provision for Tabcorp, albeit one operating on a different contingency following expiry of Tabcorp's gaming licence and wagering licence in 2012.

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

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

[99] See, 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 of the Act.

[100] Transport Accident Commission v Treloar [1992] VicRp 31; [1992] 1 VR 447, 449 (McGarvie and Gobbo JJ).

[101] [2004] HCA 12; (2004) 218 CLR 216, 253.

[102] (1988) 12 NSWLR 104.

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

[105] [2013] NSWCA 212; (2013) 302 ALR 101, 119-20 [82] (original emphasis).

[106] [2002] NSWSC 1130; (2002) 56 NSWLR 210, 223 [43].

[107] (1988) 13 NSWLR 77.

[108] [2003] NSWCA 91; (2003) 57 NSWLR 113, 145 [141].

[109] Victoria, Parliamentary Debates, Legislative Assembly, 4 June 1996, 566 (Jan Wade).