22 February 2024

The appellant (“SkyCity”) operates the SkyCity Casino in accordance with a licence granted under section 5(2) of the Casino Act 1997 (SA) (the “Casino Act”). The conditions of the licence are contemplated by section 16 of the Casino Act which provides for an Approved Licensing Agreement (“ALA”). On 27 October 1999, SkyCity and the Treasurer of South Australia (the “first respondent”) for and on behalf of the State of South Australia (the “second respondent”) entered into an ALA. The most recent variation to that agreement took place on 20 October 2020.

Section 51 of the Casino Act provides that a licensee must pay casino duty (and interest and penalties for late payment). The calculation of casino duty is governed by a separate Casino Duty Agreement (“CDA”) as contemplated by section 17 of the Casino Act.

SkyCity operates a rewards program within the casino. Customers who participate in the rewards program are able to accumulate ‘Points’ when using the cashless gaming system that is operative in Electronic Gaming Machines and Automated Table Games. Points can be converted into ‘Credits’. To enable a conversion, a customer must first wager Credits on the same trading day in an amount equal in value to the nominal value of the Points they wish to convert. Once the Points have passed through that ‘gate’, Credits can then be converted into cash or used for gambling (“Converted Credits”).

A dispute arose between SkyCity, the first respondent, and the second respondent as to what duties are payable by SkyCity with respect to Converted Credits under the operative terms of the CDA.

The parties agreed to commence proceedings in the Supreme Court. On 9 September 2022, SkyCity lodged a statement of claim seeking declarations as to the correct interpretation and effect of the CDA. The respondents filed a cross claim seeking payment of any duty payable by SkyCity should the respondents’ interpretation of the CDA be upheld.

Following the instigation of those proceedings, on 9 June 2023 a judge of this Court ordered that certain questions of law be reserved for determination by the Court of Appeal.

The parties agreed the terms of a Case Stated. The questions reserved were as follows:

1. Do “Converted Credits”, being electronic gaming credits arising from the conversion of loyalty points (howsoever accumulated) by SkyCity’s customers, when played by customers, constitute an “amount received by the Licensee during the period for or in respect of consideration for gambling in the Casino premises” within the meaning of “gross gambling revenue” within the definition in clause 1.1 of the operative terms of the Current CDA? (“Converted Credits Issue”);
2. Do loyalty points received by customers for gambling using electronic gaming machines and automated table games constitute “monetary prizes” within the definition of “net gambling revenue” in clause 1.1 of the operative terms of the Current CDA? (“Monetary Prizes Issue”); and
3. If the Converted Credits Issue and the Monetary Prizes Issue are decided in such a way that the Applicant is liable to the respondents for unpaid casino duty, then as a matter of law, do the common law or equitable principles concerning penalty clauses apply to clause 11 of the current CDA? (“Penalty Interest Issue”).

Held (by the Court of Appeal - The Honourable President Livesey, the Honourable Justice Lovell and the Honourable Justice Bleby) answering the questions of law reserved, 1. ‘Yes’; 2. ‘No’ and 3. ‘Yes’:

1. Points are fundamentally different from Credits. They can be converted directly to cash and can be staked in gambling at any time. They do not expire. A positive Credit balance represents a chose in action against SkyCity, of monetary value to the amount represented by the Credit balance. At the point of gambling, there is no distinction between Credits dependent on their genesis.
2. The duty regime under the Casino Act and the CDA is constructed on the basis of taxing the difference between the monetary value gained by the casino and the monetary value paid out at the point of gambling. It does not purport to be a tax on a different form of ‘revenue’ received at some earlier point, such as when Credits are purchased.
3. Points do not constitute a ‘monetary prize’ within the meaning of “net gambling revenue” in clause 1.1 of the CDA.
4. The legislative regime provides for agreement on both interest and penalties. This language, having regard to its ordinary usage in the law of contract, distinguishes objectively between interest as a compensatory device and penalties as a penal device.
5. Section 51 of the Casino Act contains no strong contextual indicator that the legislative regime has abolished the common law against, or the equitable jurisdiction to relieve against, interest provisions that go beyond the compensatory so as to operate as penalties.

CASINO DUTY – Casino Act 1997 – Gaming Machines Act 1992 – Gambling Administration Act 2019 – Taxation Administration Act 1996 - Casino Duty Agreement – Converted Credits – Monetary Prizes – Penalty Interest

SkyCity Adelaide Pty Ltd v Treasurer of South Australia & Anor [2024] SASCA 14

1 March 2024

When reasons were delivered in Skycity Adelaide Pty Ltd v Treasurer of South Australia & Anor [2024] SASCA 14 on 22 February 2024, answering three questions on a Case Stated, the Court intimated that the appellant should pay 75 per cent of the respondent’s costs of the hearing before the Court of Appeal. The respondent agreed and an order to that effect was made.

Senior counsel for the appellant sought further time to consider his position and, if so advised, to put a written submission on costs. The Court acceded to that request.

Further submissions were received and considered by the Court. The appellant contended:

1. That 75 per cent of costs of the Case Stated could be attributed to issues raised by the first two questions, on which the respondent succeeded, and 25 per cent to the third question, on which the appellant succeeded.
2. Therefore, the appellant should pay 75 per cent of the respondent’s costs of the Case Stated and it should recover 25 per cent of its costs of the Case Stated. A setting-off of costs orders should result in the appellant paying 50 per cent of the respondent’s costs of the Case Stated.

Held (the Court): the order for costs should not be disturbed:

1. Parties ought not assume that they will necessarily be given an opportunity to address costs in writing after the delivery of reasons for judgment. In most cases, including this, the broad parameters of any costs dispute are likely to be clear and the Court expects the parties to be in a position to put submissions at the time reasons are delivered.
2. The first two questions were difficult and required very considerable time in written and oral argument. They dwarfed the time spent on the third question. The important questions, and the weight of this case, concerned the first two questions rather than the third.
3. Acknowledging that there is now a greater preparedness to awards costs by reference to issues, success on an issue by an otherwise unsuccessful appellant does not necessarily translate into an order that the appellant recover costs on that issue.
4. The allowance of 25 per cent is broad but reflects the parties’ relative successes on the questions agitated having regard to all of the circumstances of the Case Stated including the time spent and the relative importance of the questions agitated.
5. The appellant must pay the costs associated with the further submissions on costs.

Casino Duty – Costs – Offers of Compromise

https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/sa/SASCA/2024/18.html