8 Dec

Australian pokies giant Tatts Group wins half billion suit against Victorian Gov

Two years ago, the pokies giants Tatts Group and Tabcorp were enjoying a long-term duopoly over the Victorian poker machine market. That status was swept away in 2012 when the Labor Brumby government took charge and overturned an antiquated law dating back to the 1990’s, allowing clubs and pubs to run their own gambling devices outside Melbourne’s Crown Casino. Both entities launched a multi-million dollar suit against the government, and while the courts denied Tabcorp’s near $700 million compensation claim, its rival, Tatts Group has been awarded $540 million.

When the duopoly was abolished, Tatts Group and Tabcorp opened litigation against the Victorian government for $451 million and $686 million (plus interest) respectively. In July of this year, the Victorian Supreme Court dismissed Tabcorp’s case, but upheld Tatts Group’s claim against the government. Flummoxed, Tabcorp immediately launched an appeal, as did the Victorian government after being ordered to pay $540 million to Tatts Group.

The two cases were candidly similar, yet Tabcorp’s claims were dismissed. The poker machine giant said it had every right to the near $700 million in compensation due to advance payments on its operating license. Tabcorp claimed that the pre-payment should have been returned the moment the reforms went into effect in August of 2012.

Furthermore, Tabcorp asserted that the government’s obligation to repay the licensing fee was based upon the original privatization of TAB, followed by the company’s transition to a publicly traded entity on the Australian Stock Exchange. According to the pokies group, that obligation was acknowledged for 14 years straight within the state’s annual budget reports, dating from 1994 to 2008.

The Victorian government won the original case, as well as the appeal by Tabcorp, based on its claims that the obligation in question was repealed in 2008, and all contractual obligations had expired.

The Tatts Group, on the other hand, was able to walk away with a $540 million reward. The Victorian Court of Appeals not only sided in Tatts’ favor, but did so by unanimously rejecting the government’s appeal.

Both poker machine companies had been awarded 18-year exclusivity licenses, due to expire in 2012. Within its compensation claim, the Tatts Group revealed a clause in its contract with the Victorian government that stated the pokies company was entitled to compensation for the amount spent setting up the infrastructure to host poker machines across the state.

The government claimed compensation was only to be paid if “licenses” were granted to other poker machine operators from 2012, and that no other licenses were granted. However, the government did issue what it called “entitlements”. The Supreme Court, as well as Court of Appeals, agreed that the “entitlements” were, in effect, licenses, ruling that the government had breached its contract. The original verdict on June 26, 2014 ordered Victoria to pay $451,157,286 in compensation. However, the Court of Appeals amplified the payment to $540,467,887 last week after calculating interest and court fees.

Unlike its successful rival, Tabcorp’s contract with the government was slightly different. According to online documentation of the events, the Victorian Supreme Court declared that the verbiage of their agreement plainly referred only to “specific licenses of that time”, thus the pokies company is not entitled to compensation.