The High Court has allowed an appeal against a decision of the Victorian Court of Appeal relating to state contracts on gaming operator’s licences in Victoria. After gaming machines were legalised in Victoria in 1991, the State created a duopoly between TAB (then a statutory corporation) and the trustees of an estate which would later become Tatts Group Ltd by issuing them with gaming licences. After TAB was privatised (becoming Tabcorp) and listed on the ASX, Victoria granted it a statutory right to a payment if new licences were granted after the expiry of its licence. Similar arrangements were made with the trustees, though the new licences payment was effected through a clause in a 1995 contractual agreement with the Minister for Gaming. In 2008, Victoria restructured the gaming industry and both Tabcorp and Tatts lost the right to conduct gaming operations, which were now open to smaller venue-based licence holders by creating 27,500 new ‘gaming machine entitlements’. Both companies claim they are entitled to a payment because of the issue of these new licences. (Tabcorp has a separate appeal before the High Court based on its statutory right.) The Court of Appeal dismissed Victoria’s appeal against the primary judge’s decision, holding that the intention of the parties to a 1995 Agreement was that the phrase ‘new gaming operator’s licence’ would include new licences substantially the same as that held by Tatts, which, in this context, meant functional equivalence: the right to conduct gaming operations (see [131]ff). While the new licensing regime differed in its form in a number of ways, in substance and commercial effect the rights were the same (see at [165]ff), and Tatts was entitled to compensation.

The Court (French CJ, Kiefel, Bell, Keane and Gordon JJ) unanimously held that the phrase ‘new gaming operator’s licence’ in cl 7 of the Agreement referred to a gaming operator’s licence granted under pt 3 of the 1991 Act, and did not have a generic meaning which covered any statutory authority that conferred on the holder substantially the same rights as those held by Tatts at the time of its licence’s expiration, and because no such new licence was ever issued, Tatts was not entitled to a payment under the Agreement. In construing cl 7 of the Agreement, the Court rejected the Court of Appeal’s view that it meant both a new licence issued under the 1991 Act as well as any substantially similar licence: rather, the text, context and purpose of cl 7 meant that it was limited only to a licence granted under the 1991 Act (at [49]ff): the addition of the word ‘new’ to the phrase ‘gaming operator’s licence’ (which the Court of Appeal accepted meant the phrase used in the 1991 Act which had a clear meaning) did not change the presumption that that phrase should be used consistently, and still meant licences under the 1991 Act (see [53]–[59]). The Court of Appeal also erred in failing to consider the context and purpose of the Agreement, namely, that the Agreement was predicated on the existence of a duopoly and that any new licensee grant would lead to compensation for Tatts from the State, would be dependent on a continuation of the duopoly, and also that the Government may change its policy on the continuation of the duopoly (see [61]–[72]). Consequently, ‘new gaming operator’s licence’ referred only to a licence granted under pt 3 of the 1991 Act, and because no such licence was ever issued, Tatts is not entitled to the payment under cl 7.