Appendix H

Appendix H

Suitability and public interest

Previous legal advice or consideration of the term ‘suitability’

1. When the regulator conducted its First triennial review of the Casino Operator and Licence in 1997 (First Review), it sought advice from Ms Susan Crennan, QC (as her Honour then was) on the proper construction of terms used in section 9 of the Casino Control Act. As these terms and their definitions have not been amended since, the advice may be considered relevant.
2. Ms Crennan, QC provided the following advice:

   [Suitable person]

   There are no mandatory considerations set out in section 25 but a ‘suitable person to be concerned in or associated with the management and operation of a casino’ (s. 9) and ‘a suitable person to continue to hold the casino licence’ (s. 25) must give rise to very similar if not identical considerations.

   Suitability

   … ‘ Suitable person to continue to hold the casino licence’ in section 25, in my opinion, should similarly be construed to mean a person who is both ‘fit and proper’ and ‘operationally capable’ …

   Accordingly any matter relevant to a person being:

   1. fit and proper; and
   2. operationally capable;

   may be taken into account in determining whether a person is a ‘suitable person to continue to hold the casino licence’ under the provisions of section 25. … There is no other test as such, as to whether persons meet the standards however guidance from the cases would suggest that on a proper analysis the basic test is whether the [regulator] achieves the requisite satisfaction that there is nothing which reflects adversely on the operator’s fitness to operate a casino (citations omitted).

   …

   Good repute

   Advice has already been provided by me on 26 May 1993 as to construction to be given to ‘good repute’ in section 9(2) of the [Casino Control] Act. On that occasion I opined that ‘good repute’ in section 9(2) should be construed widely, not narrowly, and would include ‘reputation in fact and reputation in merit’ the distinction between those being further explained in that advice.

   …

   Character

   The word has as one of it[s] ordinary meanings ‘the mental or moral constitution of a person’ (Oxford English Dictionary [citation omitted]). To say a person has ‘character’ or ‘good character’ implies ‘good repute’ so there is some degree of overlap. Equally ‘bad character’ can imply ‘bad repute’.

   Honesty

   Because ‘honest’ and ‘dishonest’ are descriptions of conduct frequently used in the law and in the case of ‘dishonest’ particularly in the criminal law, ‘honesty’ is a word possibly narrower and clearer that the words ‘character’ and ‘integrity’. ‘Honesty’, in the prevailing modern sense of the word, means ‘uprightness of disposition and conduct; integrity; truthfulness; straightforwardness; the quality opposed to lying, cheating or stealing’ (Oxford English Dictionary [citation omitted]).

   …

   Integrity

   Integrity means ‘freedom from moral corruption’. It is a synonym for honesty. It carries with it the connotation of truthfulness and fair dealing (Oxford English Dictionary [citation omitted]).

   …

   [Reputation]

   Innuendo and rumour are matters which go to ‘reputation in fact’ as described in my earlier advice. To ensure that real (or actual) issues are not clouded by innuendo and rumour it is appropriate to investigate innuendo and rumour to see whether such have a basis in fact. In the absence of a proper factual basis, innuendo and rumour cannot in fairness be given any significant weight at all.¹

3. Mr David Habersberger, QC (as his Honour then was) separately advised the regulator on the extent of the investigation required by section 25 of the Casino Control Act. With respect to the suitability review, he advised:

   It is clear that the first limb of s. 25(1) requires an investigation of the suitability of the casino operator, which includes its associates. This is a similar test to that laid down in s. 9(1) of the [Casino Control] Act, as amplified by the particular matters listed in s. 9(2), and would have been applied by the [regulator] before it granted Crown Casino Ltd (‘Crown’) its casino licence in November 1993. The first limb of [s. 25(1)] is also virtually the same test as that specified in s. 20(1)(d) as a ground for disciplinary action. In essence, one could say that s. 25(1)(a) is a further attempt at ‘ensuring that the management … of casinos remains free from criminal influence or exploitation’ (see 1(a) of the [Casino Control] Act).

   Therefore, in my opinion, the [regulator] need to go no further than s. 9(2)(a) to (g) for guidance as to what matters it would have to consider in forming the opinion required under s. 25(1)(a)—whether the casino operator and its associates were still persons of good repute, having regard to character, honesty and integrity, whether they were still persons of sound and stable financial background, whether the casino operator still had a satisfactory ownership, trust or corporate structure, whether it still had adequate financial resources and sufficiently experienced staff, whether its business ability was such that it was maintaining a successful casino, whether there were any business associations with any persons or bodies who were not of good repute or who had undesirable or unsatisfactory financial resources and whether all relevant officers were still suitable persons to act in their particular capacities.²

4. In the Fifth Review of the Casino Operator and Licence, the VCGLR referred to advice that had been previously received as to the meaning of ‘suitable person’, which stated:

   The expression ‘suitable person’ is not defined in the Casino Control Act. The VCGLR and its predecessors have obtained advice from Senior Counsel that, in light of the objectives of the Casino Control Act, the task of determining suitability for a section 25 casino review is akin to determining suitability for approval of an application for a casino licence.³

5. The Bergin Report also considered the term ‘suitability’, noting:

   Previous reports to the [ILGA] have explored the expression ‘good repute having regard to character, honesty and integrity’. Comparisons have been made with tests of fitness and propriety to hold certain licences, and requirements to be of ‘good fame and character’.

   Reference has also been made to judicial observations in relation to the concepts of ‘character’ as it ‘provides an indication of likely future conduct’ and of ‘reputation’ as it ‘provides an indication of public perception as to the likely future conduct’ of a person. It has also been observed that findings as to character and reputation ‘may be sufficient’ to ground a conclusion that a person is not ‘fit and proper to undertake activities’. The analysis of the concept of character can become somewhat circular with reference to a person’s ‘nature and good character’. However, it is clear that a person of good character would possess ‘high standards of conduct’ and act in accordance with those standards under pressure.

   Some observations by Regulators in other jurisdictions when considering a casino operator’s ‘integrity, honesty, good character and reputation’ are of assistance.

   In 1981 the New Jersey Casino Control Commission made the following observation in relation to the assessment of ‘character’ in the context of individuals:

   We find this a most difficult task for several reasons. First, ‘character’ is an elusive concept which defies precise definition. Next, we can know the character of another only indirectly, but most clearly through his words and deeds. Finally, the character of a person is neither uniform nor immutable.

   Nevertheless, we conceive character to be the sum total of an individual’s attributes, the thread of intention, good or bad, that weaves its way through the experience of a lifetime.

   In 2018 the Massachusetts Gaming Commission observed that when assessing the suitability of a corporate casino operator, it must be remembered that ‘the corporate entity itself is made up of individuals and has no independent character or morality standing alone’. The Commission referred to the remarks in Merrimack College v KPMG LLP … that:

   Where the plaintiff is an organization that can only act through its employees, its moral responsibility is measured by the conduct of those who lead the organisation. Thus, where the plaintiff is a corporation … we look to the conduct of senior management—that is, the officers primarily responsible for managing the corporation, the directors, and the controlling shareholders, if any.

   It is accepted that a company’s suitability may ebb and flow with changes to the composition of the company’s Board and Management, and others who influence its affairs, over time. If a company’s character and integrity has been compromised by the actions of its existing controllers, then it may be possible for a company to ‘remove a stain from the corporate image by removing the persons responsible for the misdeeds.’ However, this would only be possible if the company could ‘isolate the wrong done and the wrongdoers from the remaining corporate personnel’. It would be necessary to ensure that ‘the corporation has purged itself of the offending individuals and they are no longer in a position to dominate, manage or meaningfully influence the business operations of the corporation.’

   A person is of ‘good repute’ if they have a reputation or are known to be a good person. A person may have flaws and may make mistakes but still have a reputation or be known as a good person. They may be of ‘good repute’ because they are honest; because they have integrity; and because their character is not adversely affected by the particular mistakes they have made.

   In the context of this Inquiry good repute or reputation is to be judged by reference to matters including character, honesty and integrity. Although there was some debate about whether the assessment of good repute includes consideration of matters other than character, honesty and integrity, it is necessary in assessing character to take an ‘holistic view’ of both the Licensee and Crown including the assessment of the integrity of corporate governance and risk management structures and the adherence to adopted policies and procedures.⁴

Public interest

6. In conducting its First Review, the VCGA also sought advice from Mr Habersberger, QC on the extent of the investigation required by section 25 of the Casino Control Act. Mr Habersberger, QC advised:

   Understanding what is required by the second limb of s.25(1) is rather more difficult [than understanding the first limb of s.25(1)]. A number of points can be made concerning its construction. First, the phrases ‘public interest’ or ‘interest of the public’ are defined for the purposes of the [Casino Control] Act in s.3(1) thereof as meaning:

   [the] public interest or interest of the public having regard to the creation and maintenance of public confidence and trust in the credibility, integrity and stability of casino operations.

   In my opinion, this definition of the phrase ‘public interest’ is quite restricted compared to what it might have been thought to encompass without the enforced statutory guidance. It is limited to certain aspects of ‘casino operations’ rather than a broader approach to the question of the ‘public interest’.

   Secondly, there can be no doubt that the subject matter of s.25(1)(b), whatever that may be, is not the same as that in s.25(1)(a) of the [Casino Control] Act.

   Thirdly, the distinction between casino operator and casino operations is to be found in the [Casino Control] Act itself. Part 3 of the [Casino Control] Act is concerned with the ‘Supervision and Control of Casino Operators’, whereas Part 5 deals with ‘Casino Operations’.

   Next, the question for the [regulator] under the second limb of s.25(1) is whether ‘the casino licence’ should continue in force, that is the licence of a particular casino operator, in this case, Crown. It is not a direction to the [regulator] to embark on the task of deciding whether or not there should be any, or any particular number of, casinos in Victoria. Moreover, the question is whether the licence ‘should continue in force’, that is, whether or not there should be a licence.⁵

7. Ms Crennan, QC also commented on the public interest requirement in section 25(1) of the Casino Control Act in her advice to the VCGA in the First Review. She advised:

   Community standards whether consensual or legal are relevant as guidelines or specific standards of good repute, character, honesty or integrity. It is Australian standards i.e. [those] recognised by the Australian community which are relevant. ‘Public interest’ which is relevant to section 25(2) is defined in section 3 and includes as a legitimate object of public interest ‘public confidence and trust in the credibility, integrity and stability of casino operations’ must refer to the confidence of the public in Victoria. Arguably the standards imposed under the Victorian and New South Wales legislation may be higher in some respects than standards imposed under other Australian legislation bearing in mind the derivation from the New Jersey model of legislation. See for example Darling Casino v. New South Wales Casino Control Authority and Ors., an unreported decision of the High Court dated 4 April 1997 at pp.26–32. Be that as it may and I have not made any detailed comparisons for the purposes of this advice, it seems to me the public confidence referred to in section 3 must be a reference to local confidence which in turn will be grounded in local community standards. Standards may well be different in different countries and cultures but I do not deal with that further having regard to what I have said about the relevant community standards.⁶

8. In the Fifth Review, the VCGLR noted that senior counsel’s advice on the definition of the phrase ‘public interest’ is:

   … quite restricted compared to what it might have been thought to encompass without the enforced statutory guidance. It is limited to certain aspects of ‘casino operations’ rather than a broader approach to the question of the ‘public interest’.⁷

Endnotes

_{1 VCGA, Second Triennial Review of the Casino Operator and Licence (Report, June 2000) 49–53.}

_{2 VCGA, Second Triennial Review of the Casino Operator and Licence (Report, June 2000) 54–5.}

_{3 Exhibit RC0013 VCGLR Fifth Review of the Casino Operator and Licence, June 2013, 43.}

_{4 Exhibit RC0970 Bergin Report Volume 2, 1 February 2021, 337–8 [11]–[18] (citations omitted).}

_{5 VCGA, First Triennial Review of the Casino Operator and Licence (Report, June 1997) 5.}

_{6 VCGA, Second Triennial Review of the Casino Operator and Licence (Report, June 2000) 52–3.}

_{7 Exhibit RC0013 VCGLR Fifth Review of the Casino Operator and Licence, June 2013, 141.}