Pub Charity v The Gambling Commission [2012] NZHC 3530 (19 December 2012)

Last Updated: 7 January 2013

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-808 [2012] NZHC 3530

BETWEEN PUB CHARITY Applicant

AND THE GAMBLING COMMISSION First Respondent

AND THE SECRETARY OF INTERNAL AFFAIRS

Second Respondent

Hearing: 5-6 November 2012

Court: MacKenzie J Collins J

Counsel: FMR Cooke QC and M S Smith for Applicant

C P Browne for First Respondent

K G Stephen and A B Sintenie for Second Respondent

Judgment: 19 December 2012

In accordance with r 11.5 I direct that the delivery time of this judgment is 11.30am on the 19th day of December 2012.

_{RESERVED JUDGMENT OF THE COURT}

Table of contents

Introduction [1] Background [3] The suspension and the appeal [7] The grounds of review [12] The grounds for suspension in this case [14] Can the power of suspension be used purely to punish? [20] Result [46]

PUB CHARITY V THE GAMBLING COMMISSION HC WN CIV-2012-485-808 [19 December 2012]

Introduction

[1] The applicant (Pub Charity) operates gaming machines at venues throughout New Zealand, under an operator’s licence issued by the second respondent (the Secretary) under the Gambling Act 2003 (the Act). In June 2011 the Secretary suspended Pub Charity’s operator’s licence for one day, which it fixed as 25 July

2011. Pub Charity appealed to the first respondent (the Commission) against that suspension. In a decision notified on 16 March 2012, the Commission upheld the one day suspension. The Secretary then specified 16 April 2012 as the suspension date.

[2] In this application for judicial review, Pub Charity challenges the decisions of the Commission and the Secretary.[1]

Background

[3] Pub Charity is a charitable trust established by what was then the Hotel Association of New Zealand in 1987, when the use of gaming machines in venues other than casinos was first permitted under licence in New Zealand. It operates machines in many venues, mostly pubs and taverns, throughout New Zealand. As at

2008 it was operating 1,787 gaming machines in 178 venues.

[4] The operation of gaming machines is regulated under the Act. It falls in the category referred to as class 4 gambling. Class 4 gambling may be conducted only by a corporate society that holds both a class 4 operator’s licence for the gambling and a class 4 venue licence for every place where the gambling is conducted. The arrangements between the operator and each of the venue owners is governed by a venue agreement, the terms of which are regulated under the Act. The purpose of the gambling must be to raise money for charitable and community purposes.

[5] To ensure that the maximum amount is available for charitable and beneficial

_{purposes, the holders of class 4 operator’s licences are required to maximise the net}

proceeds from the gambling and minimise the operating costs of the gambling. For this purpose, controls are imposed on the expenses which may be paid to venue owners for the costs incurred in having the machines on their premises and managing their day to day operation. The Secretary has, by a Gazette notice under s 116 of the Act,[2] fixed the maximum costs which may be paid by a class 4 operator. Four limits are imposed. Two of those controls (limits A and B) are set on a per gaming machine basis. These limit the maximum hourly and weekly operating costs which may be paid for each machine. The third control (limit C) is set on a per venue basis and

sets a maximum weekly limit on venue operating costs. The fourth control (limit D) is an overall control based on the operator’s total turnover. The total costs incurred by an operator must not exceed a fixed percentage of gaming machine profits (GMP) from all machines at all venues. GMP is defined, in s104 of the Act, as turnover less prizes paid.

[6] In the year ended 31 July 2009, Pub Charity’s expenses exceeded limit D.

The limit set was 16 per cent of GMP (excluding GST). Pub Charity spent

16.46 per cent. That was, in dollar terms, an overspend of $286,275. Although they were the subject of evidence, it is not necessary for us to discuss the reasons why limit D was exceeded, or the steps taken by Pub Charity to remedy the situation.

The suspension and the appeal

[7] The relevant provisions as to suspension of a class 4 operator’s licence are in ss 58, 59, 60 and 61 of the Act. Sections 52 and 106 are also relevant. For ease of reference in a convenient form, we set these out in an appendix.

[8] By letter dated 20 April 2011, the Secretary gave notice of a proposal to suspend Pub Charity’s class 4 operator’s licence under ss 58(1)(b) and 59 of the Act, for breach of limit D, and invited submissions under s 59 of the Act. The reasons given by the Secretary for initiating the proposal to suspend the licence were set out

_{as follows:}

Proposal to suspend your licence

Under sections 58(1)(b) and 59 of the Gambling Act 2003 (the Act), the Secretary for Internal Affairs (the Secretary) proposes to suspend your class 4 operator’s licence

There are two overarching considerations which should be taken into account when determining any regulatory penalty. The first is an aspect of deterrence, while the second is that the penalty should be appropriate for the particular offender and the regulatory issue. The principles of deterrence require that any penalty should aim to eliminate any financial gain or benefit from non-compliance.

In this case the Society has overspent $286,275 of net proceeds. It is therefore essential that the Society be penalised so as to “recover” the amount overspent. The most appropriate way to do this is to take the Society’s average daily GMP and suspend the society for as many days as it takes for the GMP to equal the amount overspent. The society’s latest reported GMP was for the year 1 October 2009 to 30 September 2010. The GMP was $65,456,000 which is a daily average of $168,372. This means that it would take a suspension of 2 days for the Society’s daily averages GMP to match the amount of net proceeds overspent ($286,275). We therefore propose that the suspension should be for 2 days.

The Secretary will consider withdrawing part of the suspension if evidence can be provided that shows that the overpayment has been recovered in part or whole from the venues.

The reason why we propose to suspend your licence is listed below.

Breach of Limit D of the Limits and Exclusions on Class 4 Venue Costs Notice dated 17 July 2008 (the Gazette Notice) for the 12 month period ending 31 July 2009.

[9] Pub Charity made submissions by letter dated 28 April 2011. By letter dated

21 June 2011, the Secretary imposed a suspension of Pub Charity’s class 4 operator’s licence for a period of one day, Monday, 18 July 2011. Following a letter from Pub Charity taking issue with a factual statement in that letter, the Secretary replaced the letter of 21 June by a letter dated 27 June 2011. That imposed a suspension of the licence for a period of one day, Monday, 25 July 2011. In the letter imposing the suspension, the Secretary commented on the way in which the length of suspension was to be calculated. He said:

4.7 How then should the length of suspension be calculated?

As mentioned in the Proposal to Suspend, there are two overarching considerations that should be taken into account when determining any regulatory penalty. The first is an aspect of deterrence; while the second is that the penalty should be appropriate for the particular offender and the regulatory issue. The principles of deterrence

require that any penalty should aim to change the behaviour of the offender and others in a similar position, and should aim to eliminate any financial gain or benefit from non-compliance. Regulators have an interest in proper sanctions against illegal activity in order to prevent entities operating outside the law from gaining a competitive advantage. The deterrent aspect of any penalty imposed on Pub Charity is intended to not only deter Pub Charity from further non-compliance but also to deter the class 4 sector as a whole.

4.8 The Proposal to Suspend set out criteria for determining the length of a suspension. The starting point in determining the length of a suspension involving non compliant expenditure is the amount of expenditure to be “recovered”. In this case the Society has overspent $286,275 of net proceeds. It is therefore essential that the Society be penalised so as to “recover” the amount overspent. The most appropriate way to do this is to take the Society’s averaged daily GMP and suspend the society for as many days as it takes for the GMP to equal the amount overspent. The society’s latest reported GMP was for the year 1 October 2009 to 30 September

2010. The GMP was $65,456,000 which is a daily average of

$168,372. This means that it would take a suspension of 2 days for the Society’s daily average GMP to match the amount of net proceeds overspent ($286,275). Taking account of all other factors the Secretary proposed that the suspension should be for 2 days. Not mentioned in their formal submissions but in an earlier e-mail of

20 April 2011 the CEO of Pub Charity advised that daily GMP for year to date 2010 / 2011 is $209,317. He further stated that daily averaged GMP for March 2011 was $227,776. On any of these figures the start point for a suspension is therefore between 1 and 2 days.

4.9 The society was advised in the Proposal to Suspend that the Secretary would consider withdrawing part of the suspension if evidence could be provided that showed that the overpayment has been recovered in part or whole from the venues. No such evidence was provided in the formal submissions. However amounts

‘recovered’ were mentioned in a letter from the society’s CEO in March this year. Those figures are set out in the Proposal to Suspend. For the purposes of this decision I will treat the figures in that letter as submissions from the society, given that it was sent by way of explanation for the Limit D overspend.

The letter went on to question whether the amount discussed could be considered as a recovery of the over-expenditure. It then said:

4.12 Taking account of all the circumstances I have decided that in the round the suspension should be for one day, with one day having been withdrawn for the recovery efforts of the society.

The letter also said:

7. Withdrawal of part of the suspension

As I said in the Proposal to Suspend, the Secretary would consider

withdrawing part of the suspension if evidence could be provided that shows that the overpayment has been recovered in part or whole from the venues. As stated earlier I have taken your efforts in reducing your venue costs into account and 1 day of the proposed suspension has been withdrawn leaving

1 day to serve.

[10] Pub Charity exercised its right under s 61 to appeal to the Commission against that decision. It filed affidavit evidence and both parties made written submissions. The Commission reached a decision on the appeal on

17 February 2012 and delivered a written decision giving its reasons on

16 March 2012. The appeal was dismissed.

[11] Pub Charity advised on 19 March 2012 that it intended to seek judicial review. On 4 April, the Secretary wrote to Pub Charity noting that no further steps had been taken by it. The Secretary nominated the date of suspension as Monday 16

April 2012. Following discussions between counsel, that nomination of suspension date was withdrawn subject to commencement of proceedings. These proceedings were filed on 26 April.

The grounds of review

[12] The grounds of review in the statement of claim assert that the decision of the Commission on the appeal, and the decision of the Secretary to impose a new suspension date, involve a misapplication of the Act, errors of law and procedural impropriety. The particulars of that pleading may be summarised as:

(a) the power to suspend an operator’s licence cannot be used purely to punish the operator for past non-compliance with requirements under the Act;

(b) alternatively, if it can be so used, the Commission has erred in:

(i) substituting its decision for that of the Secretary on a de novo basis;

(ii) failing to consider the matters in s 52 and failing to separately address whether to impose a suspension;

(iii) failing to impose a suspension consistently with s 59;

(iv) failing to consider or advise Pub Charity of steps to reduce the suspension period under s 59(4)(d);

(c) the Commission acted improperly in:

(i) failing to give Pub Charity an opportunity to comment on its different analysis from that of the Secretary on penalty;

(ii) treating Pub Charity’s case as similar to another case decided by the Commission without providing an opportunity to comment on that case;

(iii) making comments outside its jurisdiction and without giving an opportunity to comment;

(d) the Commission failed to take into account relevant considerations; (e) the Secretary had no power to advise a new day of suspension.

[13] The essence of the principal ground of challenge is that the suspension powers are not properly used to impose a penalty for failure to meet the requirements imposed under the Act. In judicial review terms, counsel for Pub Charity submits that this may be characterised as an error of law as to the scope of the suspension powers, the exercise of this suspension power for an improper purpose, or as the misapplication or misinterpretation of the statutory power. Counsel submits that it can also be characterised as taking into account irrelevant considerations.

The grounds for suspension in this case

[14] The reason given in the letter of 20 April for the suspension was a breach of limit D of the Gazette notice. The statutory provision relied on for suspension was s 58(1)(b). In the suspension letter dated 27 June the suspension was again said to be in accordance with s 58(1)(b). The reason for suspension was expanded to state that it was for exceeding limit D “which is a breach of ss 52(1)(d) and 106 of the Act”.

[15] Section 52(1)(d), set out above, provides that the Secretary must refuse to grant a class 4 operator’s licence unless the Secretary is satisfied that the applicant will maximise the net proceeds from the class 4 gambling and minimise the operating costs of that gambling. Section 106 provides:

(1) A corporate society must apply or distribute the net proceeds from class 4 gambling only to or for an authorised purpose specified in the corporate society's licence.

(2) A corporate society that fails to comply with subsection (1) commits an offence and is liable on summary conviction to a fine not exceeding $10,000.

(3) A Court that convicts a corporate society of an offence under this section may—

(a) make whatever orders are necessary to recover an amount of proceeds wrongly applied or distributed or to safeguard an amount not applied or distributed; and

(b) order the application or distribution of an amount of proceeds not yet distributed.

(4) The effect of a conviction under this section is that—

(a) the class 4 operator's licence and all class 4 venue licences held by the corporate society are cancelled; and

(b) the corporate society does not have a right to appeal the cancellation.

[16] In The Trillian Trust v The Secretary for Internal Affairs this Court held that a breach of limit D did not constitute a breach of s 52.[3] We agree with that conclusion,

and the reasons given by Simon France J for it. Section 52 does not impose an obligation on the holder of a licence under s 52.

[17] Simon France J also considered whether expenditure incurred in breach of limit D might be a breach of s 106 of the Act. He doubted whether that provision was intended to apply to circumstances such as the present. The Secretary’s argument before him was:

(a) net proceeds are defined as turnover plus interest on investments plus proceeds of any chattel sales, less actual necessary and reasonable costs;

(b) costs which exceed limit D cannot be necessary and reasonable costs;

(c) therefore, to the extent of that excess, the net proceeds must have been applied for an unauthorised purpose.

[18] We agree with Simon France J’s view that this provision is not intended to apply in this situation. A breach of limit D does not, per se, constitute an application of funds for other than an authorised purpose. Limit D operates as an overall cap on expenditure. It does not limit expenditure for any particular purpose. In this case, there has been no breach of any of the specific expenditure limits in limits A, B and C. Section 106 is a penalty provision. In alleging a breach of it, the Secretary must identify a specific application or distribution of funds other than for an authorised purpose. In this case, all of the expenditure was for expenses which fell within the description of permitted expenditure in the Gazette notice, and was within the specific limits for that expenditure. It is not possible to link the overspend arising from the application of limit D to any particular item of expenditure. We do not consider that a breach of s 106 has been established.

[19] The judgment in the Trillian case was delivered between the date of Pub Charity’s suspension and the date of decision on the appeal to the Commission. The Commission sought additional submissions based upon that judgment. The Commission found that the Secretary’s jurisdictional analysis, by which he equated

non-compliance with limit D with a breach of ss 52(1)(d) and 106 was flawed. However it held that that conclusion did not ultimately determine the appeal. The Commission considered the appeal on a de novo basis and that it was open to the Commission to impose a suspension for any ground or grounds which may be available. The Commission followed its earlier decision in Blue Waters Community Trust and held that compliance with limit D of the Gazette notice is a requirement of the Act pursuant to s 58(1)(b), with the result that a breach of limit D is a ground for

suspension under s 58(1)(b).[4]

Can the power of suspension be used purely to punish?

[20] The proposition that a power of suspension under a licensing regime may not be applied for a punitive purpose was advanced in the context of liquor licensing in Christchurch District Licensing Agency Inspector v Karara Holdings Ltd).[5] The Court of Appeal said:[6]

Counsel for each of the respondents advanced argument in support of the High Court judge’s conclusion that the power of suspension under s132 had been wrongly applied for a punitive purpose. Mr Munro appeared for holders of off-licences in respect of the three taverns, and also for the Hospitality Association of New Zealand which had been given leave to intervene in the appeal. He argued that it was not the role of the Licensing Authority to operate as a first instance disciplinary body for licensees and managers. He also suggested that the manner in which the appellants had proceeded, under s132 rather than by prosecution in the District Court, had the potential for allowing systemic avoidance of that Court’s role in determination of criminal offending. He cited this Court’s decision on availability of exemplary damages in tort claims, where the conduct alleged was criminal offending, in Daniels v Thompson [1998] 3 NZLR 22, for the proposition that “the infliction of punishment for criminal offending lies as it should, primarily with the criminal law” (at p53).

The last proposition, however, assumes that the s132 process is criminal in nature. That is not the case. The purpose of the power of suspension and cancellation under the Act, as it indicated, is to enforce proper standards of conduct by licensees of their licensed premises in the public interest. The powers may be applied as a consequence of conduct that is in breach of the law, as s132(3)(a) specifically allows, but that does not mean that the powers are criminal in nature. This can be demonstrated by reference to the analogous licensing systems regulating many occupations in New Zealand. It is long established, for example, that powers of suspension or removal of the

right to practice under the disciplinary provisions currently appearing in the

Medical Practitioners Act 1995 Part VIII and the Law Practitioners Act 1982

Part VII are not criminal in nature but rather exist to ensure that the appropriate standards of conduct in those professions are maintained: In re a Medical Practitioner [1959] NZLR 784, 800 per Gresson P; 814 per North and Cleary JJ; see also Dental Council of New Zealand v Bell [1992] 1

NZLR 438, 445 and Dentice v Valuers Registration Board [1992] 1 NZLR

720, 724. In Dentice a range of occupations so regulated is listed.

Once it is appreciated that licensing enforcement, involving suspension on account of failure to meet standards of conduct, is not a criminal process a major element of the High Court Judge’s reasoning is undermined. There is then no sound basis for reading down the scope of Part VI powers to ensure that full scope is given to the summary criminal process of the District Court. Whether or not the licensing enforcement procedure was used by the Licensing Authority for disciplinary purposes, as Mr Munro also argued, is beside the point. The purpose of Part VI in general and s132 in particular in the scheme of the Act is to maintain the integrity and effectiveness of the licensing system through management compliance with standards. Provided the use of the power is within the scope of that purpose it is authorised by the Act. Whether the effect, from a licensee’s perception, is disciplinary or even punitive is then irrelevant as long as it is merely an incidental effect to the genuine use of the power for the authorised purpose. The offence provisions of Part VIII are of course an important part of the statutory framework. They are separate from licensing enforcement and are administered by a court in its criminal jurisdiction rather than a statutory tribunal. The two sets of provisions in the respective parts of the Act operate in tandem and it is open to enforcement agencies such as the police and licensing inspectorate to choose between them or even, where they consider the situation warrants, to invoke both: Super Star Bar (NZ) Ltd v Kaveney: HC100/96, Auckland, 17 December 1996.

(Emphasis added)

[21] That reasoning was applied to the provisions of the Act with which we are concerned in The Trillian Trust v The Secretary for Internal Affairs.[7]

[22] The application of that passage from Karara, with particular regard to the words which we have emphasised, requires us to examine the purpose of the suspension provisions having regard to the scheme of the Act and to decide whether the imposition of a short period of cancellation, with the objective of imposing a financial penalty on the holder of the operator’s licence, is within the scope of that purpose.

[23] It is clear from the extracts which we have set out at [9] from both the letter advising the proposal to suspend and the decision letter that the purpose of the

Secretary in imposing the suspension was to impose a penalty on Pub Charity. The penalty was to deter by aiming to eliminate any financial benefit from non-compliance. The penalty had to be appropriate for the particular offender and regulatory issue and this was to be done by suspending for a period in which the GMP would equal the “overspend”.

[24] Pub Charity’s argument is that the proper scope of the suspension power is remedial or corrective in nature and does not exist in order to establish a penalties regime. The submission is that the purpose of the suspension power in the scheme of the Act is to maintain the integrity and effectiveness of the licensing system by enabling the Secretary to suspend a licence while there is non-compliance with an ongoing requirement. The purpose is not to permit the exercise of the power of suspension, at a time when the requirements of the Act are being complied with, for the purpose of imposing a penalty as a deterrent for the operator or other operators.

[25] The question, to pose it in accordance with the statement of principle in Karara which we have emphasised, is whether the imposition of a penalty for a previous breach, which has either been remedied or is of a one-off nature not affecting ongoing compliance with the terms of the licence and the requirements of the Act, is a valid use of the suspension power to promote the effectiveness of the licensing system through the enforcement of compliance with standards.

[26] In support of the submission that it is not, Mr Cooke QC refers to ss 58(1)(a) and (b), 58(2), 59(4)(d) and (e), and 60(2) and (3). He places particular reliance on s 59(4)(d). He submits that the obligation of the Secretary to notify matters which may lead to a withdrawal of suspension indicates a statutory intention that the suspension power is exercisable only where there is an ongoing breach capable of remedy.

[27] A similar argument was made and rejected in Trillian. Simon France J said:[8]

The other main plank in the applicant’s argument is the statutory requirement on the Secretary to identify what steps an operator can take to reduce or end the suspension. This is the strongest aspect of the argument. I agree,

however, with the Gambling Commission that the Secretary can meet this obligation by stating that there are no matters of current correction required, nor any matters that would lead to a reduction.

It is consistent with the compliance rationale of the suspension power that the Secretary identify areas of correction, where they exist. There is no obligation on the Secretary to attach a reduction in penalty to those areas, but often it will be good administration to do so. It does no damage to the words of the Act to read these obligations as arising only when remedial steps are needed.

[28] In that passage, Simon France J referred to a previous decision of the

Commission, where it had said:[9]

58. In fact, the Commission is satisfied that section 59(4)(d) applies only insofar as such matters of the type described in the subsection exist. This is the only sensible interpretation of the section. The subsection cannot require the Secretary to notify matters when no such matters exist; nor does it provide a basis for concluding that such matters must always exist. In essence, it is argued that section 59(4)(d) should be so construed as to make suspension entirely remedial, to provide an incentive to remedy, and as having no other purpose. The Commission rejected such an argument in respect of the similarly worded section 146(2)(c) in decision GC07/06 at paragraphs 54 to 56:

If suspension cannot be used as a sanction for past breaches then it follows that the only consequence available for prior breaches is to cancel the licence or to do nothing. The Commission is of the view that it is unlikely that Parliament intended such breaches to be dealt with only by the most serious sanction action available (cancellation) or by taking no action at all.

As a practical matter, it takes several months for a suspension application to be heard. This time period provides a casino licence holder ample opportunity to rectify any ongoing breaches, thus precluding a suspension if it can only be imposed for present and continuing breaches. It is unlikely that Parliament intended suspension applications to be so easily thwarted.

For the above reasons, the Commission is of the view that suspension is available as a sanction for prior breaches of the Act or licence conditions.

[29] It is clear from that and other decisions that the Commission’s view is that the imposition of suspension as a penalty for past breaches of the licence requirements is

in accordance with the statutory scheme. As that view is clearly put in issue in this case, we think that it is necessary to subject the point to a closer analysis than was necessary by Simon France J in Trillian.

[30] We do not find persuasive on this question the Commission’s opinion that it is unlikely that Parliament intended that past and not ongoing breaches should be dealt with only by cancellation or by taking no action at all. There are, broadly speaking, two ways in which Parliament may impose sanctions designed to ensure compliance with a licensing regime. One is by the imposition of controls within the licensing regime itself. The other is by the imposition of penal sanctions. Those two methods are not mutually exclusive, as Karara demonstrates. A particular breach may be liable to be enforced either by the application of the penalty provisions in the legislation, or by measures taken under the licensing regime. As Karara also demonstrates, Parliament is not to be presumed to have intended to exclude a particular breach from the application of the licensing provisions of the Act, just because it has provided that the breach is an offence under the penal provisions of the Act.

[31] The present case is the converse of that considered in Karara. There, the particular breach (the sale of liquor to persons under age) was an offence. In this case, the only assertion that Pub Charity’s breach of limit D constituted an offence under the penalties provisions in the Act was the submission, rejected in Trillian, and which we have rejected at [18], that it was a breach of s 106. We do not consider that Parliament is to be presumed to have intended that a particular breach of the licence should be able to be penalised under the suspension provisions, where it has not prescribed some other penalty for that breach.

[32] We consider that the question of whether the particular breach is an offence under the penalties provision, and whether it is a breach liable to lead to suspension under the suspension provisions, are separate questions. The answer to the latter question must be determined by applying the suspension provisions in accordance with the scheme and purpose of the Act. The fact that the particular breach is not an offence does not weigh in favour of the proposition that a penal sanction under the

suspension provisions is intended. To the contrary, Parliament should not be presumed to have intended to impose a penalty without clear words.

[33] A second reason advanced by the Commission in the decision cited, and by counsel for the Secretary in this case, for the proposition that suspension may apply in the case where there is no ongoing breach capable of remedy is the wording of s 58(1)(b), that the operator “is failing or has failed, to comply with any relevant requirement ...”. Mr Stephens argues that, if Parliament was contemplating only a forward looking enquiry when considering whether the suspension power could be exercised, it might have been expected to use words such as “and in future is likely to fail” or “will fail”.

[34] We do not find that argument persuasive. Sections 58(1) and 59(4) apply at different stages of the suspension process. The former prescribes a number of circumstances about which the Secretary must be satisfied before the suspension process can be initiated. The Secretary can be satisfied only of matters which have happened, or are continuing to happen, not matters which may happen in the future. It would be quite impractical to have the initiation of the suspension process dependent upon the Secretary being satisfied of a future failure.

[35] However, when the s 59(4) stage is reached, the decision to suspend the licence has been made. The difficulties of proof of satisfaction which may arise under s 58(1) are no longer relevant. The matters required to be notified in s 59(4)(d) and (e) are, quite expressly, forward looking. That is appropriate to a suspension power which is intended to address ongoing deficiencies in the conduct of a licence. If those paragraphs must be complied with in every case, they preclude the application of the suspension power where the ground for suspension relied upon does not involve an ongoing matter not capable of rectification. Do they apply in every case?

[36] The strongest argument for the proposition that they do not is that which appealed to Simon France J, namely that they require the Secretary to identify areas of correction only where they exist. On that analysis, subs (4) is to be interpreted on the basis that the requirements in (a), (b) and (c) are mandatory, while requirements

(d) and (e) are optional, in the sense that, if the Secretary considers that there are no matters which will cause the Secretary to consider withdrawing the suspension before the end of the suspension period, none need be identified.

[37] In this case, the Secretary did not proceed on the basis that there were no matters to be addressed, so that the requirement in (d) did not apply. The Secretary identified in the letter of 20 April 2011 as set out at [8], the grounds on which the Secretary would consider withdrawing part of this suspension. Section 59(4) was not engaged at that point. In the letter of 27 June 2011 notifying the suspension, under s 59(4), the Secretary referred to that issue in the final passage set out at [9]. The way in which the point was dealt with did not meet the requirements of s 59(4)(d), because it advised what the Secretary had done, not what he might do, about the matters he identified.

[38] The natural meaning of subs (4), read in isolation, is that the requirement on the Secretary to notify is mandatory in respect of all of the paragraphs. If that is so, they do apply in every case. That meaning, read in isolation, may however be outweighed when the provision is read in the light of the scheme of the Act as a whole.

[39] One of the features of the wider licensing scheme of the Act, relevant in determining Parliament’s intention, as to a power to suspend for a defined period as a penalty for breach, is the relationship between the licensed operator and the venue owner. Under the Act, the operation of gaming machines at a venue requires there to be an operator’s licence, a venue licence, and a venue agreement. All three are subject to the control of the Secretary, in different ways. The operator must hold an operator’s licence, which is governed by ss 50 to 64. The operator must also hold a venue licence for each venue in which gaming machines are placed. Venue licences are governed by ss 65 to 80. The operator must enter into a venue agreement, approved by the Secretary, with each venue owner. That is required by ss 65(3) and

69.

[40] The suspension in this case was of the operator’s licence. There has been no

suspension of any of the venue licences held by Pub Charity. There are provisions

for the suspension of a class 4 venue licence in ss 74, 75 and 76. No steps have been taken under those provisions in this case. The breach in this case, a breach of limit D, is not a breach which can be attributed to any venue licence held by Pub Charity. It was not made clear to us, in the course of argument, what contractual right Pub Charity would have, under its venue agreements, to require the venue owners to shut down the machines for the day of suspension. If it does have such ability, then the effect of the suspension, imposed on Pub Charity, is to impose a penalty also on every venue owner. Suspension of a licence may affect persons other than the licence holder. For example patrons, and possibly staff, of a licensed liquor outlet may be affected by a suspension such as that in Karara. But in this case, venue owners are not in an equivalent position to members of the public and others who may be affected or inconvenienced by the closure of gaming machines. They are persons who have both a contractual and a statutory right to participate in the gaming machine operation, by virtue of the venue agreement. Those rights will be interfered with, to such an extent as to impose a penalty on them, without fault on their part.

[41] We consider that the inter-connected licensing structure, and the effect of a suspension on parties forming part of the structure of the licensed gaming who are not themselves at fault, is a relevant and important consideration in determining the scope of the suspension provisions. That consideration weighs against the proposition that the imposition of short suspensions of an operator’s licence for the purpose of imposing a deterrent penalty for past breaches forms part of the scheme of the Act to maintain the integrity and effectiveness of the licensing system. In this respect, the licensing system is significantly different from the liquor licensing system under consideration in Karara.

[42] When the plain words of s 59(4) are read in the light of the scheme of the Act as we have described it, and taking into account that Parliament should not be presumed to have intended to impose a penalty without clear language, we do not consider that the power of suspension permits a short suspension for the purpose of imposing a penalty for a past, non-continuing, breach of the licence.

[43] Those considerations lead us to the view that the imposition of a short period of suspension to impose a penalty for a single past breach of the conditions of an

operator’s licence, for the purpose of deterring that operator or others from similar

breaches, is not within the scope of the suspension power in s 58.

[44] The decision to suspend in this case was, as we have found at [23], for the purpose of imposing a penalty on Pub Charity. For the reasons we have given, that was not a proper purpose, and the suspension was not validly imposed.

[45] That finding is sufficient to dispose of this application. In the circumstances, we do not consider it necessary to address the other grounds raised in the application, summarised at [12](b) to (e).

Result

[46] In the light of the foregoing, the appropriate outcome is an order under s 4(2) of the Judicature Amendment Act 1972 setting aside the decision of the Secretary contained in its letter of 27 June 2011 to suspend the applicant’s licence. There must, consequently, be an order setting aside the Commission’s decision on the applicant’s appeal notified on 16 March 2012.

[47] Costs are reserved. It appears that the question of the categorisation of the proceedings, raised in counsel’s memoranda dated 11 and 13 July 2012, has not been determined. Counsel may submit memoranda if they are unable to agree on this or any other issues on costs.

“A D MacKenzie J”

“D Collins J”

Solicitors: Paul Cheng & Co, Wellington, for Applicant

Counsel: FMR Cooke QC

Wilson Harle, Auckland, for First Defendant

Crown Law, Wellington, for Second Respondent

APPENDIX

58 Suspension or cancellation of class 4 operator's licence

(1) The Secretary may suspend for up to 6 months, or cancel, a class 4 operator's licence if the Secretary is satisfied that—

(a) any of the grounds in section 52 are no longer met; or

(b) the corporate society is failing, or has failed, to comply with any relevant requirement of this Act, licence conditions, game rules, and minimum standards; or

(c) the class 4 venue agreement is no longer consistent with ensuring compliance with this Act or the licence; or

(d) the corporate society supplied information that is materially false or misleading in its application for—

(i) a class 4 operator's licence; or

(ii) a renewal or an amendment of a class 4 operator's licence; or

(iii) a class 4 venue licence; or

(iv) a renewal or an amendment of a class 4 venue licence.

(2) In deciding whether to suspend or cancel a class 4 operator's licence, the Secretary must take into account the matters in section 52.

59. Procedure for suspending, cancelling, or refusing to amend or renew class 4 operator's licence
    

(1) If the Secretary proposes to suspend, cancel, or refuse to amend or renew a class 4 operator's licence, the Secretary must notify the corporate society of—

(a) the proposal to suspend, cancel, or refuse to amend or renew the licence; and

(b) the reason for the proposed suspension, cancellation, or refusal; and

(c) the corporate society's rights, and the procedure to be followed—

(i) before the suspension or cancellation takes effect; or

(ii) as a result of the refusal to amend or renew the licence.

(2) The corporate society may make written submissions to the Secretary concerning the proposed suspension, cancellation, or refusal to amend or renew within—

PUB CHARITY V THE GAMBLING COMMISSION HC WN CIV-2012-485-808 [19 December 2012]

(a) 20 working days after the date of the notice under subsection

(1); or

(b) any longer period that the Secretary allows if an application for an extension is made within the time period specified in paragraph (a).

(3) The Secretary must consider any submissions made by the corporate society.

(4) If the Secretary decides to suspend a licence, the Secretary must notify the corporate society of—

(a) the date that the suspension takes effect; and (b) the suspension period (up to 6 months); and (c) the reason for the suspension; and

(d) the matters to be dealt with in order for the Secretary to consider withdrawing the suspension before the end of the suspension period; and

(e) the consequences of not dealing with the matters identified. (5) If the Secretary decides to cancel or refuse to amend or renew a

licence, the Secretary must notify the corporate society of,—

(a) for a cancellation, the date on which the cancellation takes effect and the reason for the cancellation; or

(b) for a refusal to amend or renew, the reason for the refusal.

(6) If subsection (4) or subsection (5) applies, the Secretary must also notify the corporate society of—

(a) the right to appeal the decision; and

(b) the process to be followed for an appeal under section 61.

60. Consequences of suspension, cancellation, or refusal to amend or renew class 4 operator's licence
    

(1) The suspension or cancellation of, or refusal to amend or renew, a class 4 operator's licence does not affect—

(a) the obligation of the corporate society to apply or distribute the net proceeds from the class 4 gambling in accordance with this Act and the licence; and

(b) any condition added to the licence by the Secretary relating to records that must be maintained and reporting requirements.

(2) The Secretary may decide to withdraw a suspension before the end of the suspension period if the reasons for the suspension are resolved to the satisfaction of the Secretary.

(3) The Secretary may decide to cancel a suspended licence at the end of the suspension period if the reasons for the suspension are not resolved to the satisfaction of the Secretary.

(4) Section 59(5) and (6) apply to the cancellation of a suspended licence.

(5) Subject to section 62, a licence that is suspended or cancelled or refused to be renewed or amended remains in force or unchanged (as the case may be) until the period for making an appeal expires.

(6) A corporate society is not entitled to a refund of fees, taxes, or levies paid in relation to class 4 gambling if the Secretary suspends, cancels, or refuses to amend or renew its class 4 operator's licence.

52 Grounds for granting class 4 operator's licence

(1) The Secretary must refuse to grant a class 4 operator's licence unless the Secretary is satisfied that,—

(a) the gambling to which the application relates is class 4 gambling; and

(b) the applicant's purpose in conducting class 4 gambling is to raise money for authorised purposes; and

(c) the applicant's proposed gambling operation is financially viable; and

(d) the applicant will maximise the net proceeds from the class 4 gambling and minimise the operating costs of that gambling; and

(e) the net proceeds from the class 4 gambling will be applied to or distributed for authorised purposes; and

(f) the applicant is able to comply with applicable regulatory requirements; and

(g) the applicant will minimise the risks of problem gambling;

and

(h) any investigations carried out by the Secretary do not cause the Secretary not to be satisfied about the suitability of the applicant or any key person, in terms of subsection (4); and

(i) there are no factors that are likely to detract from achieving the purpose of this Act; and

(j) a key person is not a key person in relation to a class 4 venue licence held, or applied for, by the applicant (except in the

case of a club that intends to operate gambling equipment on its own non-commercial premises, the New Zealand Racing Board, or a racing club).

(2) In assessing financial viability under subsection (1)(c), the Secretary must consider, among other things, the ability of the applicant to reward winners and pay levies, taxes, and other costs, as well as apply or distribute the net proceeds from the class 4 gambling to or for authorised purposes.

(3) The Secretary may refuse to grant a class 4 operator's licence if an applicant fails to provide the information requested by the Secretary in accordance with section 51.

(4) In determining whether an applicant is suitable for a class 4 operator's licence, the Secretary may investigate and take into account the following things:

(a) whether the applicant or a key person has, within the last 10 years,—

(i) been convicted of a relevant offence:

(ii) held, or been a key person in relation to a class 3 or class 4 operator's licence, a class 4 venue licence, a casino licence, or a licensed promoter's licence under this Act or any licence under previous gaming Acts that has been cancelled, suspended, or for which an application for renewal has been refused:

(iii) been placed in receivership, gone into liquidation, or been adjudged bankrupt; and

(b) the financial position of the applicant and the credit history of the applicant and each key person; and

(c) the profile of past compliance by the applicant and each key person with—

(i) this Act, minimum standards, game rules, Gazette

notices, and licence conditions; and

(ii) the Racing Act 2003 or the Racing Act 1971 (and any rules of racing made under either of those Acts); and

(iii) previous gaming Acts, and regulations made under previous gaming Acts; and

(iv) a licence or a site approval issued under a previous gaming Act.

(5) The Secretary may take into account matters of a similar nature to those listed in subsection (4) that occurred outside New Zealand.

(6) If the Secretary decides to refuse to grant a class 4 operator's licence, the Secretary must notify the applicant of—

(a) the reason for the decision; and

(b) the right to appeal the decision; and

(c) the process to be followed for an appeal under section 61.

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[1] The functions of the Secretary were carried out by officials in the Department of Internal Affairs, under delegation. For convenience, we refer to the Secretary.

[2] “Notice of Limits and Exclusions on Class 4 Venue Costs” (17 July 2008) 114 New Zealand

Gazette 3027.

[3] The Trillian Trust v The Secretary for Internal Affairs HC Wellington CIV-2010-485-2411,

14 November 2011at [42].
[4] _{An appeal by The Blue Waters Community Trust GC01/12, 1 February 2012.}
[5] Christchurch District Licensing Agency Inspector v Karara Holdings Ltd [2003] NZCA 96; [2003] NZAR 752 (CA).
[6] At [39]-[41].

[7] The Trillian Trust v The Secretary for Internal Affairs, above n 3.

[8] At [26]-[27].

[9] An appeal by The Trusts Charitable Foundation GC11/10, 5 May 2010.