Limitations on government action
- The implementation of reforms dealing with problem gambling faces a difficulty.
- The Management Agreement imposes obligations upon the State to pay compensation to Crown Melbourne if certain action is taken. The action includes steps that may reduce gambling harms. These steps include introducing any form of mandatory pre-commitment or amending the manner in which Crown Melbourne’s loyalty program operates.
- The cap on the amount of compensation is $200 million (as adjusted) for each Parliamentary term.
- The relevant part of the Management Agreement is part 5A, which is headed ‘Regulatory Certainty’ and was introduced by the Tenth Variation Deed that was made on 3 September 2014.1 It is necessary to describe this part in some detail.
- One principal provision that was introduced by the Tenth Variation Deed is clause 24A.2. Pursuant to that clause, the State and the VCGLR agreed, among other things, that they will not, without the consent of Crown Melbourne:
- cancel or vary the casino licence on the public interest ground in section 20(1)(e) of the Casino Control Act2
- increase the then current rates of casino tax3
- impose any new tax except where such new tax applies generally throughout Victoria, applies to businesses in the Melbourne CBD or applies to businesses in the hospitality industry.4
- The State acknowledged that if clause 24A.2 was breached Crown Melbourne would suffer compensable loss, the amount of which would be determined according to ordinary principles of law applicable to a breach of contract.5
- In addition, it was provided that if the State or the regulator (or any other State body or State authority) takes any of the actions set out in Annexure 1 to the Management Agreement without the consent of Crown Melbourne, Crown Melbourne will be entitled to compensation.6 The actions, called ‘Trigger Events’, include:
- reducing any maximum bets on table games, semi-automated table games or FATGs or gaming machines
- removing, reducing in number or amending or restricting the then current manner in which gaming machines in unrestricted mode are permitted to operate
- introducing any form of mandatory pre-commitment other than the requirement for players of gaming machines operating in unrestricted mode to set time and net loss limits
- restricting or amending the then current manner in which Crown Melbourne’s loyalty scheme is permitted to operate.7
- There is a carve-out.8 No compensation is payable in respect of any action that:
- has an adverse impact on earnings before interest, taxes, depreciation and amortisation of less than $1 million per annum
- arises directly from disciplinary action taken against Crown Melbourne
- advertises or promotes the government’s responsible gambling, responsible service of alcohol or ‘Quit Smoking’ programs, provided such actions are not targeted solely at Crown Melbourne.9
- There is another carve-out. No compensation is payable as a result of any variation to the casino licence that would otherwise constitute a Trigger Event.10
- It is of significant concern that the State or the regulator might be inhibited from suspending or cancelling a casino licence on public interest grounds, or from taking action that would reduce the harm caused by gambling, if that action would oblige the State to pay damages to Crown Melbourne.
- First, if the public interest demands that Crown Melbourne’s casino licence should no longer remain in force because of misconduct on the part of Crown Melbourne, it would be wholly inappropriate for the State or the regulator to be inhibited from taking that action. There is no countervailing public interest that supports the restriction.
- Second, the position is equally problematic if the State or the regulator considers it necessary to implement a Trigger Event to limit gambling harm caused by the failure of Crown Melbourne to carry out its responsible gambling obligations (howsoever imposed). In that circumstance, an obligation to pay damages is both anomalous and contrary to good government.
- Third, it is also contrary to settled principle. It has long been established that a person should not be entitled to recover damages caused by their own wrongful conduct. The principle is so well settled that it has its own Latin maxim: ex turpi causa non oritur actio. A rough English translation is ‘from a dishonourable cause an action does not arise’.
- An example of the application of this principle is the Highwayman’s case.11 The plaintiff sued his partner for his share of the proceeds of the sale of a gold watch that they had stolen from ‘a gentleman’ walking on Hounslow Heath. The action was dismissed. The lawyers were held in contempt. The parties themselves were arrested and later hanged.
- There are two aspects of the Management Agreement that might offend this principle. First, clause 24A.2(a)(i) provides, in effect, that the State and the regulator must not, without Crown Melbourne’s consent, cancel or vary its casino licence relying on section 20(1)(e) of the Casino Control Act (the public interest ground for taking disciplinary action).
- The circumstances in which a casino licence might be cancelled or varied on the public interest ground might arise in two ways. One is when, quite apart from any misconduct by Crown Melbourne, the casino operations cause such harm that it is in the public interest for those operations to be brought to an end. The other is when action is required because of unacceptable conduct on the part of Crown Melbourne.
- In the latter circumstance the State or the regulator should be freed from the obligation to seek Crown Melbourne’s consent. The present requirement that they must do so cannot be justified.
- The same issue arises in relation to the State’s obligation to pay compensation under clauses 24A.3 and 24A.4 if a Trigger Event is implemented. Where a Trigger Event is required to deal with the consequences of Crown Melbourne’s misconduct, it is unreasonable for the State to pay any compensation.
Recommendation 15: Damages payable by the State
It is recommended that the following obligations under the Management Agreement be repealed:
- the obligation on the State or the regulator to obtain the written consent of Crown Melbourne before action is taken to cancel or vary Crown Melbourne’s casino licence pursuant to section 20(1)(e) of the Casino Control Act
- the obligation on the State to pay compensation pursuant to clauses 24A.3 or 24A.4 for action taken by the State or the regulator that is a Trigger Event,
if a reason for the cancellation or variation or action (as the case may be) is the conduct of Crown Melbourne.
1 For further discussion see Chapter 2.
2 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(a)(i).
3 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(a)(ii).
4 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(a)(iii).
5 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.2(b).
6 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cls 24A.3, 24A.4, Annexure 1.
7 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.4, Annexure 1 cl 1.1(b).
8 A carve-out is a contract provision by which the parties exclude (or carve out) certain claims or remedies.
9 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, Annexure 1 cl 2.3.
10 Exhibit RC0502 Consolidated Management Agreement, 20 September 1993, cl 24A.5.
11 Everet v Williams (1725) 104 ER 725. See ‘The Highwayman’s Case (Everet v. Williams)’ (1893) 9(3) Law Quarterly Review 197.
Reviewed 25 October 2021