SKYCITY ADELAIDE PTY LTD v TREASURER OF SOUTH AUSTRALIA; STATE OF SOUTH AUSTRALIA [2024] SASCA 14

Appellant: SKYCITY ADELAIDE PTY LTD Counsel: MR R WHITINGTON KC WITH MR S MCDONALD SC - Solicitor: JOHNSON WINTER SLATTERY First & Second Respondent: TREASURER OF SOUTH AUSTRALIA; STATE OF SOUTH AUSTRALIA Counsel: MR T GOLDING KC WITH MR M BOISSEAU - Solicitor: CROWN SOLICITOR (SA) Hearing Date/s: 13/10/2023 File No/s: CIV-23-006787 A SUPREME COURT OF SOUTH AUSTRALIA (Court of Appeal: Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. SKYCITY ADELAIDE PTY LTD v TREASURER OF SOUTH AUSTRALIA & ANOR [2024] SASCA 14 Judgment of the Court of Appeal (The Honourable President Livesey, the Honourable Justice Lovell and the Honourable Justice Bleby) 22 February 2024 PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SEPARATE DECISION OR DETERMINATION OF QUESTIONS AND CONSOLIDATION OF PROCEEDINGS - SEPARATE DECISION OR DETERMINATION - APPEAL FROM DECISION OR DETERMINATION ON SEPARATE QUESTION TAXES AND DUTIES - MISCELLANEOUS TAXES - OTHER MISCELLANEOUS TAXES TAXES AND DUTIES - STAMP DUTIES - APPEAL, CASE STATED ETC Questions of law for referral to the Court of Appeal pursuant to r 214.6(1)(a) of the Uniform Civil Rules 2020 (SA). 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 s 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 s 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 (‘EGMs’) and Automated Table Games (‘ATGs’). Points can be -- 1 of 28 -- 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 the Applicant’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) 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. -- 2 of 28 -- Casino Act 1997 (SA) ss 2A, 3, 16(5), 17(1), 41B, 51; Gaming Machines Act 1992 (SA) s 3; Gambling Administration Act 2019 (SA) s 15; Taxation Administration Act 1996 (SA) ss 25, 26, 30, referred to. Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989; Australian Broadcasting Commission v Australian Performing Rights Association Ltd (1973) 129 CLR 99; De Vito v Commercial Union Assurance Co Ltd (2001) 78 SASR 439; Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241; Shergold v Tanner (2002) 209 CLR 126; Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67; Esanda Finance Corp v Plessnig (1989) 166 CLR 131, considered. -- 3 of 28 -- -- 4 of 28 -- SKYCITY ADELAIDE PTY LTD v TREASURER OF SOUTH AUSTRALIA & ANOR [2024] SASCA 14 Court of Appeal – Civil: Livesey P, Lovell and Bleby JJA 1 THE COURT: The appellant (‘SkyCity’) operates the SkyCity Casino pursuant to a licence granted under the Casino Act 1997 (SA) (‘Casino Act’). Section 16 of the Casino Act provides for an Approved Licensing Agreement (‘ALA’) between the licensee and the Minister. The ALA concerns the operation of the casino, the term of the licence, the conditions of the licence and the performance of the licensee’s responsibilities under the licence or the Casino Act. The ALA is varied from time to time, as is contemplated by s 16(5) of the Casino Act. The most recent variation was made on 20 October 2020. 2 Sub-section 17(1) of the Casino Act provides for a ‘casino duty agreement’ in the following terms: 17-Casino Duty Agreement (1) There is to be an agreement (the casino duty agreement) between the licensee and the Treasurer- (a) fixing the amount, or basis of calculation, of casino duty; and (b) providing for the payment of casino duty; and (c) dealing with interest and penalties to be paid for late payment or non-payment of casino duty. 3 Following a dispute arising between the parties as to the correct interpretation of the current casino duty agreement (‘CDA’) and the duty payable in accordance with it, the parties agreed that SkyCity would commence proceedings in the Supreme Court. SkyCity filed a Statement of Claim on 9 September 2022, seeking declarations as to the interpretation and effect of the CDA. The respondents have filed an Amended Defence and a Cross Claim that seeks payment of the duty that would be payable by SkyCity on the respondents’ interpretation of the CDA. 4 On 9 June 2023, with the consent of the parties, a master ordered that questions of law be reserved for determination by the Court of Appeal. The parties have agreed the terms of a Case Stated. This incorporates a lengthy statement of background facts, on the basis of which the master reserved the questions of law. Following the hearing of the Case Stated by this Court, the parties filed a Case Stated – Revision 1, which amended the questions of law reserved for consideration by clarifying the specific concepts the subject of the questions. The questions of law reserved are as follows: 1. Do “Converted Credits”, being electronic gaming credits arising from the conversion of loyalty points (howsoever accumulated) by the Applicant’s customers, when played by customers, constitute an “amount received by the Licensee during the -- 5 of 28 -- [2024] SASCA 14 The Court 2 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). Background facts Electronic gambling 5 Electronic forms of gambling at the casino occur by the use of electronic gaming machines (EGMs) and automated table games (ATGs). EGMs are ‘gaming machines’ as defined in s 3 of the Gaming Machines Act 1992 (SA) (‘Gaming Machines Act’) and s 3 of the Casino Act. They are known colloquially as poker machines or ‘pokies’. ATGs are electronic versions of table games such as Roulette and Baccarat. The Rewards Program 6 SkyCity operates a Rewards Program in accordance with the applicable gambling codes of practice issued pursuant to s 41B of the Casino Act and, from 3 December 2020, s 15 of the Gambling Administration Act 2019 (SA) (‘Gambling Administration Act’). Customers of SkyCity can join and participate in the Rewards Program. They are referred to as Rewards Program Members. There is no charge for joining the Rewards Program. A Rewards Program Member is given a membership card. This card is linked to an account-based cashless gaming system that is used in EGMs and ATGs. 7 Prior to 28 November 2018, Rewards Program Members could earn or be given ‘points’ of different characters through various means. For example, they could earn points from non-electronic forms of gambling and non-gambling expenditure. Points derived from these activities were called ‘Earned Non-downloadable Points’. They could only be used for food and beverage purchases and for promotional gambling chips used on table games. Rewards Program Members could also accrue other benefits from gambling expenditure capable of being used for non-gambling purposes (‘Complimentary Value’). 8 Relevant to the Case Stated, Rewards Program Members could also earn points from electronic forms of gambling expenditure. These points could be used to create Credits for use in electronic forms of gambling. Points so earned and able to be converted to Credits were referred to as ‘Earned Downloadable Points’. -- 6 of 28 -- [2024] SASCA 14 The Court 3 9 Rewards Program Members might also be given points in a range of circumstances. Some of these points could be used in electronic forms of gambling, in that they could be used to create Credits (‘Gifted Downloadable Points’). Others could not be so used (‘Gifted Non-downloadable Points’). 10 SkyCity changed the benefits of the Rewards Program substantially from 28 November 2018. From that date, all forms of expenditure at the casino accrued Earned Downloadable Points, that is, points that could be used to create Credits. Complimentary Value only continued to accrue to certain interstate and international customers. Gifted Downloadable Points continued to be provided to Rewards Program Members on a discretionary basis in certain ad hoc circumstances, such as on a particular member’s birthday or in connection with a trade promotion lottery. The Rewards Program discontinued all other forms of accrual of Non-downloadable Points. Credits and Points 11 Customers can credit money to their account. Money so credited is represented by a balance of Credits. Customers can use those Credits as a stake for gambling on EGMs and ATGs. They do this by inserting the card into the EGM or ATG and transferring Credits to the credit meter of the machine. 12 If a customer wins money on an EGM or ATG, the money won will register as increased Credits on the credit meter of the machine. Similarly, if the customer loses money, the Credit balance on the meter will show a commensurate decrease in Credits. When the customer withdraws the cashless gaming card from the machine, any remaining (including any increased) Credits will transfer back to the account balance on the customer’s card. 13 A customer can, at any time, take their cashless gaming card to a casino cashier and redeem the value of the Credits applied to their account for cash or another form of monetary payment. Credits do not expire. 14 As identified above, a customer can, in certain circumstances, convert Earned Downloadable Points (and, prior to 28 November 2018, Gifted Downloadable Points) into Credits. The rate at which a customer earns Points varies, depending on a number of factors, such as the ‘tier’ of the Rewards Program to which the customer belongs. Points are earned by reference to expenditure. A customer earns Points for gambling expenditure at the same rate whether the customer wins or loses. 15 Points expire at the end of a fixed period, being six months. They cannot be redeemed for cash. Neither can they be used as a wager on a gambling activity. When a customer wishes to convert Points to Credits, the customer must first wager Credits on the same trading day in an amount equal in value to the nominal value of the Points that the customer wishes to convert to Credits. The relevant agreed fact on the Case Stated is as follows: -- 7 of 28 -- [2024] SASCA 14 The Court 4 The system as approved included a requirement that the exchange of Points for gaming credits by Rewards Program members is subject to the customer passing through a ‘gate’. The ‘gate’ requires the customer to bet (put at risk), within the same trading day, a certain number of credits before the customer can redeem Points up to the same nominal amount. 16 The conversion rate is one Point for one cent of Credit. Once the customer has made bets to the amount they wish to convert, the value of the Credit balance that is displayed to the customer’s account on the credit meter of the machine will increase by one cent for each Point converted. 17 There is no difference in status between Credits that have been converted from Points and Credits that have been purchased by the payment of money. The description of Credits that have been converted from Points as ‘Converted Credits’ is a reference to their origin, not their present status. The following is an agreed fact on the Case Stated: Credits derived from Points will be indistinguishable from credits derived from cash transfers or wins, in that all credits may be used by customers for identical purposes, and there is no differentiation between gaming credits by reference to their source. A Rewards Program Member who takes their Card to a Casino cashier can redeem the value of gaming credits for cash or another form of monetary payment. 18 So, for example, a customer who converts a certain number of Points to Credits, having made bets to the nominal value of those Points that day, could redeem those newly converted Credits for cash. 19 Question 1 on the Case Stated is concerned with Credits arising from the conversion of Points. Specifically, it is concerned with Credits that have been converted from Earned Downloadable Points and Gifted Downloadable Points up until 28 November 2018 and then from that date, Credits converted from Earned Downloadable Points. Credits of this class may be wagered as a stake in gambling at an EGM or ATG. The question is whether, in that circumstance, they meet the description of 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’ in the definition in clause 1.1 of the operative terms of the CDA. 20 Question 2 on the Case Stated concerns a subset of Earned Downloadable Points (both prior to and after 28 November 2018), being those Earned Downloadable Points that are received for gambling using EGMs and ATGs. The question asks whether Earned Downloadable Points from these sources constitute ‘monetary prizes’ within the definition of ‘net gambling revenue’ in clause 1.1 of the operative terms of the CDA. Question 1: whether Converted Credits constitute an “amount received by the Licensee during the period for or in respect of consideration for gambling in the -- 8 of 28 -- [2024] SASCA 14 The Court 5 Casino premises” within the meaning of “gross gambling revenue” in the definition in clause 1.1 of the operative terms of the Current CDA 21 The parties were not in dispute about the applicable principles of contractual interpretation. Unsurprisingly, they emphasised different principles in support of their respective positions. The rights and liabilities of parties to a contract are to be determined objectively.1 This is done by reference to the text, context and purpose of the document. The context includes the entire text of the contract, as well as any contract, document or statutory provision referred to in the text of the document.2 22 Words in a contract are, prima facie, to be given their plain meaning. In a commercial contract, that is determined by reference to what a reasonable businessperson would understand the terms to mean. That requires consideration of the language used, the circumstances addressed by the contract and the commercial purpose or objects to be secured.3 Evidence of external circumstances cannot be drawn upon to contradict the plain meaning of the terms.4 However:5 … sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context and the market in which the parties are operating”.6 It may be necessary in determining the proper construction where there is a constructional choice. (Footnote in original) 23 SkyCity emphasised the principle that agreements are to be given a ‘commercial’ construction and that where an agreement is open to two constructions, a court should prefer the construction that will avoid consequences that are capricious, absurd, unreasonable, inconvenient and unjust.7 Accepting that, the sustainability of any claim of capriciousness or lack of commerciality arising on a posited interpretation requires an assessment of context and purpose. In this regard, the respondents observed that the context and purpose relevant to ascertaining the meaning of a contract will include the pertinent legislative background.8 They emphasised the following matters of context and purpose relevant to the interpretation of the CDA: 1 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350-351. 2 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]. 3 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]. 4 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352. 5 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [49]. 6 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 657 [35], citing Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350, in turn citing Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574. 7 Citing Australian Broadcasting Commission v Australian Performing Rights Association Ltd (1973) 129 CLR 99 at 109; De Vito v Commercial Union Assurance Co Ltd (2001) 78 SASR 439 at [34]. 8 Citing Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [50]. -- 9 of 28 -- [2024] SASCA 14 The Court 6 • the circumstance that the CDA was provided for by the Casino Act and was brought into effect to fix the amount of duty to be paid by SkyCity pursuant to the terms of that Act; and • the terms, including definitions, context and purpose of the Casino Act. The Casino Act 24 Section 2A of the Casino Act sets out the object of the Act: 2A – Object The object of this Act is to provide for the licensing, supervision and control of the Adelaide Casino and, in particular, to ensure- (a) that the Adelaide Casino is properly managed and operated; and (b) that those involved in the control, management and operation of the Adelaide Casino are suitable and fit and proper persons to exercise their respective functions and responsibilities; and (c) that gambling in the Adelaide Casino is conducted responsibly, fairly and honestly, with due regard to minimising the harm caused by gambling; and (ca) that minors are prohibited from gambling and that minors are not encouraged to gamble; and (d) that the interest of the State in the taxation of gambling revenue arising from the operation of the Adelaide Casino is properly protected. 25 Part 2 of the Act is concerned with the licensing of the casino. Division 8 of Part 2 is headed ‘Agreement with licensee’. Within the Division, s 16 provides for the ALA, as identified above. Sub-section 17(1) then provides for the CDA, as set out above. Sub-section 17(3) provides that the CDA may be varied by a later agreement between the parties. Sub-section 17(4) provides that the CDA or any agreement to vary the CDA operates as a deed. 26 Section 51 then imposes liability on SkyCity, as licensee, to pay casino duty in accordance with the CDA: 51 – Liability to casino duty (1) The licensee must pay casino duty (and interest and penalties for late payment or non-payment of casino duty) in accordance with the casino duty agreement. (2) In the absence of an agreement between the licensee and the Treasurer, the licensee must pay casino duty (and interest and penalties for late payment or non-payment of casino duty) on a basis fixed under the regulations. (3) The Treasurer must pay duty (and interest and penalties) received from the licensee into the Consolidated Account. (4) Casino duty (and interest and penalties) may be recovered as a debt due to the State. -- 10 of 28 -- [2024] SASCA 14 The Court 7 The obligation to pay casino duty pursuant to the CDA 27 Clause 5 of the CDA provides for the liability of SkyCity to pay casino duty: 5. ANNUAL LIABILITY FOR CASINO DUTY The Licensee must pay casino duty in respect of net gambling revenue for a financial year of an amount which is the greater of a nil amount and the sum of the following amounts: (a) 0.91% of net gambling revenue for the financial year that is attributable to Premium Table Gaming; (b) 3.41% of net gambling revenue for the financial year that is attributable to Non-premium Table Gaming; (c) 10.91% of net gambling revenue for the financial year that is attributable to Premium EGM Gaming; (d) the EGM Prescribed Rate, for that financial year, of net gambling revenue for the financial year that is attributable to Non-premium EGM Gaming; (e) 10.91% of net gambling revenue for the financial year that is attributable to Automated Table Games; (f) the Keno Prescribed Rate of net gambling revenue for the financial year that is attributable to Keno or any derivative of Keno; and (g) in respect of any other gambling which is not otherwise liable to duty being paid to the Treasurer, duty at the rate agreed between the Licensee and the Treasurer and failing agreement, as determined by the Treasurer at the time of introduction of that form of gambling. 28 The Case Stated is concerned with the proportions of net gambling revenue identified in sub-clauses (c), (d) and (e), above. ‘Net gambling revenue’ is defined separately in respect of revenue attributable to Premium Table Gaming and, relevantly, revenue attributable to other gambling. The relevant part of that definition is as follows: “net gambling revenue” in respect of gambling for a period means: … (b) for net gambling revenue that is attributable to other gambling – the gross gambling revenue for the relevant period that is attributable to the gambling, less the value of monetary prizes that the Licensee was liable to pay during that period that are attributable to the gambling (whether or not awarded in respect of gambling for that period); 29 ‘Gross gambling revenue’ is defined as follows: “gross gambling revenue” for a period means: (a) the gross amount received by the Licensee during the period for or in respect of consideration for gambling in the casino premises; and -- 11 of 28 -- [2024] SASCA 14 The Court 8 (b) any bad debt to the extent recovered by the Licensee during the period; 30 Question 1 focuses on the definition of ‘gross gambling revenue’, specifically whether Credits that have been converted from Points are, when staked as a bet on an EGM or ATG, included within the ‘amount received’ by SkyCity ‘during the period for or in respect of consideration for gambling in the casino premises’. 31 SkyCity’s submissions commenced with an examination of the phrase, ‘amount received’. It submitted that on a plain reading, the reference to the gross ‘amount received’ can only ‘sensibly’ be understood as a reference to revenue and, therefore, to an amount of money. ‘Amount’ suggests a quantitative measure; ‘received’ means to be given or to come into possession of something. The phrase, indeed, contributes to the definition of ‘gross gambling revenue’. SkyCity submitted that in circumstances where the word ‘revenue’ is not defined, its meaning is assumed. It thereby supplies the connotation of the phrase ‘amount received’. 32 From that textual starting point, SkyCity then focused its submissions on the nature of Points. As SkyCity described it, the coming into existence of Points gives rise to a conditional right to use Credits generated from Points. Points expire if not converted to Credits within six months. SkyCity retains control over Points and a customer cannot add to Points unilaterally. That is, Points cannot represent an amount that the customer brings in from outside SkyCity’s control. SkyCity receives no benefit from issuing Points to membership card holders as compared with non-membership card holders. No payment is required to join the loyalty card scheme. 33 Having regard to this genesis of Points, SkyCity then pointed to the phrase in the definition, ‘amounts received … for or in respect of consideration for gambling’. It submitted that on the one hand, where a customer purchased a Credit, which was then used for gambling, the amount received by the licensee can properly be regarded as consideration in respect of gambling. However, where a customer converts a Point to a Credit, the customer has obtained the Credit for no consideration. Using that Credit as a stake in a gambling transaction could not, in SkyCity’s submission, convert it into an amount received by way of consideration for that gambling. 34 The essence of SkyCity’s submission in this regard was that on the Credit being played as a gambling stake, SkyCity has received nothing. It gave the analogy of a customer holding a ferry ticket with which the ferry operator had provided them for no charge. For the customer to then use the ferry ticket to board the ferry does not involve the transfer of consideration. Similarly, SkyCity submitted that it retained control over the Points held by a customer. The number of Points held at any given time represented the extent of future gambling that SkyCity was prepared to allow the customer to engage in without SkyCity receiving any amount (of money) from the customer. -- 12 of 28 -- [2024] SASCA 14 The Court 9 35 SkyCity’s submission is heavily reliant on the somewhat stipulative assertion that the phrase ‘amount received’ must mean ‘amount of money received’. That is, of course, one possible reading. However, the word ‘money’ is not used. There is, as SkyCity emphasised, the circumstance that this phrase contributes to the definition of ‘gross gambling revenue’. It is true that ‘revenue’ is not defined. However, we do not think the word ‘revenue’ necessarily supplies the connotation for which SkyCity contends. What is being defined is a subset of everything that might be considered ‘revenue’. To posit that that very word imports a particular connotation, as a premise of the definitional exercise, risks circularity. At the very least, any such connotation is subject to the ordinary constructional exercise. 36 The immediate context of the phrase ‘amount received’ speaks against SkyCity’s construction. First, the phrase is used, as SkyCity emphasised, together with the qualifier ‘in respect of consideration for gambling’. The parties can be taken, in agreeing on these words, to have understood the nature of the cashless gaming system pursuant to which consideration is passed at the point of placing a stake in gambling on EGMs and ATGs. 37 One form of passing consideration is to place a stake by way of Credits attributed to the customer’s account and recorded on the cashless gaming card. That is to say, when a customer places a bet, actually engages in gambling, what passes is the right represented by Credits recorded to the account of the customer. Those Credits may have been purchased or may have been converted from Points. At the point that the surrender of the right represented by the Credits passes, that is, at the point of gambling, there is no distinction between Credits dependent on their genesis. 38 The express link, in the definition, between the ‘amount received’ and that this be ‘in respect of consideration for gambling’, together with the circumstance that gambling can be performed by the surrender of Credits, therefore provides a contextual indicator that the phrase ‘amount received’ is not limited to an amount of money. It may extend to an amount of Credits or, more accurately, an amount of monetary value represented by Credits. SkyCity’s textual starting point, that the phrase ‘amount received’ can only ‘sensibly’ be understood as referring to revenue and therefore limited to money, is not strong. 39 That is, however, only the starting point. SkyCity’s broader submission relied on the nature of Points. It emphasised that SkyCity did not relinquish control over Points. As to the conversion of Points to Credits, it is helpful to set out SkyCity’s precise submission: It is true that customers can, via an indirect process, convert Points to credits, and may cash out credits (including those that were derived from loyalty points). But a customer’s decision to convert credits to cash self-evidently does not involve the “receipt” by SkyCity of any “amount”, whether in consideration for gambling or otherwise; it involves SkyCity paying out an amount to a customer as cash that they did not previously have. -- 13 of 28 -- [2024] SASCA 14 The Court 10 40 This submission compares the position where a customer surrenders Credits for cash, rather than gambling with the Credits. That is not the situation regulated by the CDA. The submission relies heavily on SkyCity’s stipulative characterisation of the word ‘amount’ as necessarily referring to money. If a customer surrenders credits for cash, it is true that Sky City is not receiving an amount of money. However, it is receiving, as consideration for paying out that cash, the surrender of the rights represented by the Credits. 41 The fundamental difficulty with SkyCity’s submission, as the respondents observed, is that it tended to elide the distinction between Points and Credits. It is the case that SkyCity retains control over Points at all times. It may even be that Points are awarded to customers for no consideration, although that submission is not entirely persuasive. However, that does not matter. The distinction between Points and Credits is critical. 42 First, a customer can only convert Points to Credits if the customer stakes the relevant amount on the same trading day. It is difficult to see that that condition does not provide something of value to SkyCity in and of itself. Points cannot just be converted to Credits at a whim. 43 Secondly, and more importantly, once Points are converted to Credits, SkyCity does lose control of them. Credits can be converted directly to cash. Equally, they can be staked in gambling at any time. They do not expire. A positive Credit balance to a customer’s account represents a chose in action against SkyCity, of a monetary value in the amount represented by the Credit balance. Credits are fundamentally different from Points in this way. SkyCity’s elision of Points and Credits is represented by its submission as follows: The mere fact that a customer may have a nominal “right” to convert Points to cash via an indirect process (though ultimately completely controlled, and modifiable at the direction of SkyCity), which could then be “received” by SkyCity as consideration for gambling, does not mean that the use of Points for gambling itself involves the “receipt” of any “amount”. 44 The difficulty with this submission is that customers do not use Points for gambling. They use Credits. As identified above, unlike Points, a balance of Credits on a customer’s card constitutes a chose in action against SkyCity, the Credit balance representing the value of the indebtedness of SkyCity to the customer. This facility is recognised by the definition of ‘cashless gaming system’ in s 3 of the Casino Act: cashless gaming system means a system that enables the storage of monetary value for use in operating a gaming machine or automated table game equipment; 45 Section 42B then sets out a series of conditions for operating a cashless gaming system. The immediate observation to be drawn from this matter of statutory context is that Credits are the device created by the casino to meet the statutory necessity for the storage of monetary value in its cashless gaming system. -- 14 of 28 -- [2024] SASCA 14 The Court 11 We have already observed that there is no textual basis to confine the meaning of ‘amount’ to actual money. An ‘amount’, on its plain meaning, is a quantity of something capable of having monetary value. Credits are required to have monetary value, and they do. As the respondents expressed it: When a customer wagers a Converted Credit, they put at risk their right to recover from the Casino the money represented by the Credit, and the Casino accepts that wager. The debt is extinguished. The chose in action representing the extent of the Casino’s indebtedness to the customer is reduced pro tanto. The Casino “receives” the amount of the value of the debt thereby cleared from its books as a liability. This was not an amount that was “previously in the possession” of the Casino – it was in the possession of the customer. (Footnotes omitted) 46 What, then, of the origin of Converted Credits, as opposed to purchased credits? This was the critical issue on SkyCity’s submission, which emphasised that there was no economic benefit generated for the casino by the wagering of Converted Credits. 47 The short answer is that the origin is irrelevant. As observed above, we are not necessarily persuaded that the conversion of Points to Credits does not occur without a form of consideration passing from the customer to SkyCity. However, subject to further matters raised by SkyCity and considered below, that does not matter. As observed earlier, the relevant phrase of the definition connects the words ‘amount received’ to the qualifying phrase, ‘for or in respect of consideration for gambling’. The operative transaction for when an ‘amount’ is ‘received’ is at the point of gambling. How the customer came into possession of that ‘amount’ that the casino then receives ‘for or in respect of consideration for gambling’ would appear, on the terms of the definition, to be of little moment. 48 The ‘consideration’ in the contemplation of the CDA here is that which moves from the customer to the casino at the point of the wager. That is the plain effect of the phrase ‘for or in respect of consideration for gambling’. It is supported, as a matter of context, by the definition of ‘gambling’ in s 3 of the Casino Act: gambling means the playing of a game for monetary or other stakes and includes making or accepting a wager. 49 When a customer makes a wager with Converted Credits, that which passes from the customer to SkyCity is an ‘amount’ (being something of actual monetary value, over which SkyCity does not have control), ‘received by’ SkyCity ‘for or in respect of consideration for gambling’. 50 SkyCity pointed to a number of matters of broader context and purpose. First, it submitted that the ‘broad context’ is that the CDA is intended to establish the basis for the calculation and payment of casino duty. It submitted that its interpretation of ‘amount received’ is consistent with the need to establish a total number (through additions and deductions) in order to calculate the duty payable -- 15 of 28 -- [2024] SASCA 14 The Court 12 each month. That might be so, but it is a weak indicator, if anything. It does not detract from the above analysis. The need to establish a total number is equally met by the requirement that the ‘amount received’ must have a monetary value. 51 Second, SkyCity submitted that the definition of ‘gross gambling revenue’ feeds into the definition of ‘net gambling revenue’. Casino duty is calculated by reference to a percentage of net gambling revenue. Net gambling revenue constitutes, relevantly, the gross gambling revenue for the relevant period that is attributable to the gambling, less the value of monetary prizes that the licensee was liable to pay during that period that are attributable to the gambling. The definition of ‘monetary prize’ in the CDA includes bad debts. SkyCity submitted that this is a strong indication that the amounts in respect of which the CDA is concerned to impose duty are amounts which have a pecuniary value and which benefit SkyCity financially. It would go beyond that purpose to tax transactions where the customer does not actually have to pay anything to SkyCity. 52 We do not accept this argument. Even assuming that the debt represented by a Converted Credit to a customer’s account is created gratuitously, that is nonetheless an enforceable debt. It has a pecuniary value. When the customer surrenders that Credit by a wager, that action benefits SkyCity financially. 53 Third, SkyCity pointed to the circumstance that the basis for the calculation of net gambling revenue takes into account deductions only for ‘monetary prizes’. It submitted that this tended to ‘re-confirm’ that the focus is on the actual receipts of money. This does not follow. Having regard to the statutory context discussed above, the cashless gaming system is required to enable the storage of monetary value. In the case of EGMs and ATGs, monetary prizes are awarded in the form of Credits, that is, of the same device of monetary value as Credits that have been converted from Points. 54 As a consideration of purpose, SkyCity submitted that if the respondents’ construction were correct, duty would be payable by reference to an amount that included stakes which produced no actual income or revenue for SkyCity, that is, on amounts that did not constitute revenue. It submitted that this was ‘inconsistent with the focus of the CDA on net gambling revenue’. 55 This submission, again, tended to rely on SkyCity’s starting point as to the necessary meaning of ‘revenue’. It complemented SkyCity’s emphasis on the principle of construction that agreements are to be given a sensible and commercial construction where more than one construction is open. The effect of the submission is that it would not be commercial for SkyCity to have agreed to a regime by which it pays duty on amounts that it does not actually receive by way of revenue sourced externally from customers. 56 The charge of uncommerciality is superficial at best. In order to assess it, it would be necessary to understand the commerciality of permitting the conversion of Points to Credits in the first place. The conversion of Points to Credits creates -- 16 of 28 -- [2024] SASCA 14 The Court 13 something of value to SkyCity (a chose in action against it), which value is realised at the point of surrender of the Credits on the placing of a wager. The debt that SkyCity is otherwise liable to pay in cash is extinguished. Why then allow its creation in the first place? The basis for answering that question would likely lie in the requirement that the customer must wager the desired conversion amount on the same day’s play, together with the psychology of gambling that gives SkyCity a reason to permit the conversion of Credits to Points. This Court cannot say what the answer is. It can only go so far as to recognise that the charge of uncommerciality would require considerable exploration that has not been undertaken. 57 In any event, the CDA is entered into pursuant to the regime created by the Casino Act and the ALA. The objects of these regimes are not purely commercial; they extend to harm minimisation and revenue protection. Further, 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. 58 Finally, SkyCity contrasted the language in the definition of ‘gross gambling revenue’ with the language in s 72 of the Gaming Machines Act. That section defines ‘net gambling revenue’ as ‘the total amount of all bets made on the gaming machines on the licensed premises during the year less the total amount of all prizes won on the machines during the year’. That is the definition by reference to which a ‘gaming tax’ has been imposed on revenue from gaming machines operated by the holders of gaming machine licences. 59 SkyCity submitted that had that language been used in the CDA, it would clearly have captured the use of Converted Credits on EGMs and ATGs. The predecessor section to s 72, s 72A(6), deployed the same term and provided a ‘ready model’ for a definition of ‘net gambling revenue’ when SkyCity first entered into the CDA in 1999. SkyCity submitted that the ‘only reasonable explanation’ for the different wording was that the language in the CDA was deliberately chosen with the intention of producing a different and more limited basis for the calculation of duty. 60 The question is what the words of the CDA mean, objectively, construed in accordance with the established principles of interpretation discussed above. The circumstance that there existed a precedent form of wording in respect of ‘net gambling revenue’ in the Gaming Machines Act does not say much, if anything, about the objective intention of the parties in choosing the wording they did. In any event, even if some contextual inference could be drawn from the difference in wording, that could not overcome the readily apparent meaning of the definition arising from both its text and the other, far more pertinent, matters of context discussed above. -- 17 of 28 -- [2024] SASCA 14 The Court 14 61 We answer Question 1, ‘Yes’. Question 2: whether loyalty points received by customers for gambling using EGMs and ATGs constitute “monetary prizes” within the definition of “net gambling revenue” in clause 1.1 of CDA 62 Whether something constitutes a ‘monetary prize’ will affect, significantly, the calculation of ‘net gambling revenue’ as defined in the CDA. As identified above, SkyCity’s liability for casino duty is calculated at various percentages of the net gambling revenue attributable to different types of gaming. We have set out part of the definition of ‘net gambling revenue’ in the CDA, above. It is convenient now to set out the whole definition in cl 1.1: “net gambling revenue” in respect of gambling for a period means: (a) for net gambling revenue that is attributable to Premium Table Gaming – the gross gambling revenue for the relevant period that is attributable to Premium Table Gaming, less the aggregate of: (i) the value of monetary prizes that the Licensee was liable to pay during that period that are attributable to Premium Table Gaming (whether or not awarded in respect of gambling for that period); and (ii) the value of Approved Deductions for that period; or (b) for net gambling revenue that is attributable to other gambling – the gross gambling revenue for the relevant period that is attributable to the gambling, less the value of monetary prizes that the Licensee was liable to pay during that period that are attributable to the gambling (whether or not awarded in respect of gambling for that period); 63 As discussed above, only that part of the definition in sub-clause (b) is directly relevant. However, as a matter of context, it will be necessary to refer to the definition in sub-clause (a) applicable to Premium Table Gaming and the distinction drawn between ‘monetary prizes’ and ‘Approved Deductions’. The CDA contains a definition of ‘Approved Deductions’: “Approved Deductions” means as follows: (a) genuine, verifiable commissions or other inducements which are paid or allowed by the Licensee to Premium Customers, or to third parties in connection with Premium Customers, and which are of a type that the Treasurer has approved in writing for the time being for the purpose of this definition; and (b) genuine, verifiable commissions or cash payments calculated on the basis of gross gambling revenue attributable to Premium Customers who are not Australian residents and which are paid by the Licensee to such Premium Customers, or to third parties in connection with such Premium Customers, that the Liquor and Gambling Commissioner has approved in writing under an international customer attraction programme for the time being for the purposes of this definition; 64 ‘Monetary prize’ is defined in the CDA as follows: -- 18 of 28 -- [2024] SASCA 14 The Court 15 “monetary prize” means: (a) any prize (or part of a prize) provided by the Licensee for or in respect of gambling in the form of money, the provision of credit or of gambling chips that may be redeemed for money from the Licensee – in all cases paid or awarded in accordance with systems, rules or procedures approved under the Approved Licensing Agreement; (b) any prize (which may or may not be a jackpot prize) provided by the Licensee, that satisfied the following criteria: (i) the prize is provided in the form of chattels; (ii) prize is provided for, or in respect of, a game (which may or may not be played on a gaming machine); and (iii) the Treasurer has approved in writing that the chattels provided by the Licensee as a prize for, or in respect of, that particular game are a “monetary prize” for the purposes of this paragraph (b) and the Licensee has complied with any terms and conditions of that approval stipulated by the Treasurer, valued by reference to the actual purchase cost of the chattel plus other costs associated with the purchase, such as incidental taxes (other than GST), fees and charges, verified by such documentation as required by the Treasurer – in all cases awarded in accordance with systems, rules or procedures approved under the Approved Licensing Agreement; (c) bad debts; and (d) any amount by which monetary prizes exceeded gross gambling revenue in the period prior to the relevant period. 65 SkyCity’s contention, that Points derived from gambling using EGMs and ATGs (which it calls ‘Earned Points’) meet the definition of ‘monetary prize’, relies on such Points coming within the terms of paragraph (a) of the definition. In order to come within the definition, Earned Points must therefore be: • a prize; • provided by the licensee for or in respect of gambling; • in the form of money, the provision of credit or of gambling chips that may be redeemed for money from the licensee; and • paid or awarded in accordance with systems, rules or procedures approved under the Approved Licensing Agreement. 66 As to the last of these requirements, there does not appear to be any dispute that the system by which Earned Points are ‘awarded’ to customers is approved by the Liquor and Gambling Commissioner in accordance with the ALA. This approval is given through the mechanism of Control Standards approved by the Commissioner under s 38 of the Casino Act. -- 19 of 28 -- [2024] SASCA 14 The Court 16 67 As to whether Earned Points can be properly characterised as a ‘prize’, ‘prize’ is not defined in the CDA. SkyCity drew on the definition of ‘prize’ in the Oxford English Dictionary as a: … reward, trophy, or symbol of victory or superiority offered or awarded in a contest or competition. 68 SkyCity submitted that the accrual of Earned Points was readily characterised as a ‘reward … offered [and] awarded’ for engaging in electronic forms of gambling. In its submission, it mattered not that Earned Points were awarded on gambling regardless of whether the player won the bet. It drew an analogy with the adage ‘every player wins a prize’. It submitted that the use of the words, ‘in respect of gambling’ suggested that the term had a broader reach than just winnings on a bet and extended to other benefits. 69 SkyCity having played the definition from the Oxford English Dictionary, the respondents revealed in their hand the definition from the Macquarie Dictionary: 1. a reward of victory or superiority, as in a contest or competition; 2. that which is won in a lottery or the like. 70 The respondents submitted that the ordinary meaning of ‘prize’ is something valuable awarded as a result of winning. We accept that this is the ordinary connotation of the word ‘prize’, although a given context may extend the meaning to a more pedestrian form of reward. 71 The immediate legislative context provides no determinative assistance. The only reference to prizes in the Casino Act is in the definition of ‘gambling chips’ in s 3: gambling chips means chips or tokens used or capable of being used as gambling stakes or prizes; 72 This definition might be said to assume a definition of ‘prize’ that corresponds with an award for winning, but it could not be said necessarily to exclude something broader. 73 The Casino Act is required to be read together with the Gambling Administration Act as a single Act.9 Section 15 of the Gambling Administration Act empowers the Commissioner to prescribe advertising and responsible gambling codes of practice. Section 15(2)(b) provides that an advertising code of practice may, among other things: 9 Casino Act, s 3A. -- 20 of 28 -- [2024] SASCA 14 The Court 17 (b) make provision relating to the form, content and use of gambling related advertising, which may include requirements, limitations or prohibitions in relation to the following: … (iii) the value or nature of a prize to be won; (iv) advertising in relation to loyalty programs; 74 These provisions appear to contemplate a distinction between prizes, which are to be won, and loyalty programs. This is a distinction that the respondents pursued as a matter of construction of the CDA itself. Insofar as the distinction is drawn in the broader statutory context, that context, again, could not be said to be of determinative weight. 75 The respondents pointed to a number of matters of context in the CDA itself. First, they submitted that casino duty is a tax on the outcome of gambling transactions. In this regard, they observed that the duty is calculated on the basis of the amount received ‘for or in respect of consideration for gambling’ and subtracts from that the ‘value of monetary prizes that the Licensee was liable to pay … that are attributable to the gambling’. The words, ‘liable to pay’ connote, in the respondents’ submission, a liability to pay a monetary prize on the basis that the customer has won, rather than a contractually separate decision to reward the act of gambling with points that can then be converted to Credits on the undertaking of further gambling. 76 The respondents then emphasised the distinction, identified above, between monetary prizes and ‘Approved Deductions’ which are only available in respect of Premium Table Gaming. The respondents’ essential contention here was that where ‘Approved Deductions’ encompassed ‘other inducements’ paid or allowed, there was no scope for ‘monetary prize’ to include things that would be covered by the ordinary concept of an ‘inducement’. Earned Points, awarded as they are as part of a loyalty program, are in the respondents’ submission properly characterised as an inducement, rather than a prize for winning. That is, they fall squarely on one side of the dichotomy contemplated by the CDA. 77 In this regard, the respondents pointed to a different matter of context in the Gambling Administration Act. Section 15(3)(e) provides that a responsible gambling code of practice may: (e) make provision (including limitations and prohibitions) relating to the provision and operation of customer loyalty programs; … 78 Clause 14B.2 of the ALA then exempts SkyCity from complying, in relation to Premium Customers only, with any provision of the regulatory regime that imposes a prohibition or restriction on offering inducements to customers or prospective customers. -- 21 of 28 -- [2024] SASCA 14 The Court 18 79 In the submission of the respondents, the effect of these provisions is that in the context of the definition of ‘Approved Deductions’ with respect to Premium Table Gaming in the CDA, SkyCity is entitled to ignore any regulation or prohibition on conducting loyalty or rewards programs in relation to Premium Customers and can deduct the cost to it of conducting a loyalty or rewards program to Premium Customers from its gross gambling revenue. It cannot, however, deduct the cost of conducting a loyalty or rewards program in relation to non-premium customers. In this context, the fruits of a loyalty or rewards program fall within the concept of an inducement, which the CDA distinguishes from the concept of monetary prizes. This understanding of ‘inducement’ should, in the respondents’ submission, be given a meaning consistent with the interrelationship between the clauses of the CDA, the ALA and the legislation. 80 SkyCity submitted that this analysis created a false dichotomy, in that most prizes can be taken to operate as an inducement, not least the prospect of winning cash. Rather, for the concept of ‘inducements’ to have work to do within the definition of “Approved Deductions”, it only needed to be broader in some respect than the concept of prizes. The additional concept of ‘Approved Deductions’ created no need to confine the concept of prize. 81 SkyCity went so far as to submit that it was not open for the respondents to contend that loyalty points in fact operated as an ‘inducement’ in circumstances where that was not an agreed fact in the Case Stated or a fact the respondents had proved. That submission can be addressed shortly. Something can be offered as an ‘inducement’, whether or not it actually operates to induce. To deny that Earned Points, offered as part of a rewards program, meet the description of an ‘inducement’ in the absence of agreement or proof is not a convincing contention, to say the least. Logic suggests that an offer of something to a customer as part of a loyalty program is designed to induce customer loyalty. 82 More fundamentally, however, the effort devoted to this exercise in contextual marking risked overshadowing its importance. The contextual framework that the respondents looked to identify was, with respect, strained. There are indicators, within the broad regulatory scheme, of a difference between prizes and inducements offered by way of Earned Points as part of the Rewards Program. However, we would not place much weight on these contextual markers. We would place greater, but not determinative weight, on the observation that ordinary usage suggests that points conferred under a loyalty program do not constitute a ‘prize’ when considered in the context of gambling. The concept of ‘prize’ in the context of gambling ordinarily suggests a reward for winning. However, we do not rely on that observation to resolve Question 2. 83 For something to be a ‘monetary prize’ within paragraph (a) of the definition, it must also be provided ‘in the form of money, the provision of a credit or of gambling chips that may be redeemed for money from the Licensee’. The above analysis of the distinction between Points and Credits warrants the conclusion that Points meet none of these criteria. Points are not money. They are not gambling -- 22 of 28 -- [2024] SASCA 14 The Court 19 chips. Reading the definition distributively, as is clearly intended, the remaining question is whether Points can be described as ‘a credit … that may be redeemed for money’. 84 In this regard, SkyCity’s argument relies on its earlier elision of Points and Credits. For the reasons given above, we do not accept that elision. Points and Credits are different. Points may not be redeemed for money. They expire if not used. Credits do not expire and can be redeemed for money. For the reasons given above, the conversion of Points to Credits is a commercially significant act that does not follow as a matter of course. 85 This last observation also provides the foundation for rejecting SkyCity’s contention that to answer both Questions 1 and 2 adversely to SkyCity would result in an absurdity. SkyCity submitted that for the definition of ‘net gambling revenue’ to work ‘as it must obviously have been intended to’, amounts that are merely recycled within the casino must either be outside the concept of ‘amount received…’ or within the concept of ‘monetary prizes’, or both. It submitted that it would be bizarre if using up the ‘value’ of Points in an EGM or ATG gave rise to an ‘amount received…’ but the awarding of Points was not a ‘monetary prize’. It would mean that SkyCity was being taxed by reference to amounts of money it was paying itself. 86 This submission again supposes the sameness of Points and Credits. As already observed, if a customer has accrued a large number of Points, those Points will not necessarily all be able to go through the ‘gate’ to convert to Credits. That will depend on whether the customer then engages in sufficient gambling activity – the wagering of already existing Credits – to convert the Points before they expire. 87 The claim of absurdity also takes too narrow a focus. Casino duty is a tax on gambling, an activity that the legislation recognises has the capacity to be socially harmful. Its imposition serves a purpose that goes beyond simply ensuring that the State benefits proportionally from this form of economic activity. It is imposed as a condition of a licence to engage in an activity capable of causing harm. There is no absurdity in including within the reach of such a tax those incidents of gambling where the origin of the stake can be traced (through the requirement that it goes through a ‘gate’), to the casino itself. 88 To the contrary, if mere Points were able to be deducted as monetary prizes on their being awarded, the absurdity would arise by reason of the fact that the final fate of those Points is yet unknown. Should they expire, SkyCity will have obtained a deduction for something that cost it nothing. 89 In any event, for the reasons given above, Earned Points simply do not meet the terms of paragraph (a) of the definition of ‘monetary prize’. 90 We answer Question 2, ‘No’. -- 23 of 28 -- [2024] SASCA 14 The Court 20 Question 3: whether the common law or equitable principles concerning penalty clauses apply to clause 11 of the CDA 91 This question arises on the Case Stated on account of the Commissioner seeking payment of interest on the outstanding duty payable at 20 per cent, pursuant to the terms of cl 11 of the CDA. SkyCity’s contention on the pleadings is that cl 11 is unenforceable as a penalty at common law and in equity. The respondents contend that the Casino Act authorises the CDA to specify a penalty for late payment or non-payment of casino duty that would be unenforceable under the law of contract and in the absence of statutory authorisation. The Case Stated does not ask whether cl 11 is unenforceable as a penalty. 92 Clause 11 provides: 11. INTEREST PAYABLE IN RESPECT OF CASINO DUTY If the Licensee fails to pay casino duty in accordance with this agreement, the Treasurer may by written notice require the Licensee: (a) to make good the default; and (b) in addition, to pay interest at 20% per annum of the outstanding amount calculated form the due date of payment daily on a cumulative basis. 93 As noted above, s 17(1)(c) of the Casino Act provides that the CDA is to ‘[deal] with interest and penalties to be paid for late payment or non-payment of casino duty’. Section 17(4) provides that the CDA operates as a deed. 94 It is convenient to set out s 51 of the Casino Act again here: 51-Liability to casino duty (1) The licensee must pay casino duty (and interest and penalties for late payment or non-payment of casino duty) in accordance with the casino duty agreement. (2) In the absence of an agreement between the licensee and the Treasurer, the licensee must pay casino duty (and interest and penalties for late payment or non-payment of casino duty) on a basis fixed under the regulations. (3) The Treasurer must pay duty (and interest and penalties) received from the licensee into the Consolidated Account. (4) Casino duty (and interest and penalties) may be recovered as a debt due to the State. 95 SkyCity’s starting point is that the CDA is an agreement (with certain statutory effects) that is specified to operate as a deed. Its essential nature is consensual and contractual. By having the CDA operate as a deed, Parliament has identified that the general law of contract will apply to it, except where expressly modified by statute. Thus, for example, s 17(4) abrogates the need for good consideration. Similarly, the facility for transferring the licence in s 11, in respect -- 24 of 28 -- [2024] SASCA 14 The Court 21 of which s 11(2)(b) provides that the ALA and the CDA govern the conditions of the transferred licence, override the common law effect of privity of contract. 96 Section 17(1)(c) refers to both interest and penalties. SkyCity submitted that this amounted to recognition that they are different things, each of which may be ‘dealt with’ by the agreement. It accepted that each is to be read distributively with the phrase, ‘to be paid for late payment or non-payment of casino duty’. That is, the CDA may deal with interest for late payment or non-payment, as well as penalties for late payment or non-payment. 97 The specific legislative distinction between interest and penalties reflects a consistent distinction in South Australian tax legislation. SkyCity pointed to the separate regimes in the Taxation Administration Act 1996 (SA) (‘TAA’) for the imposition of interest and penalty tax, respectively. Division 1 of Part 5 of the TAA is concerned with interest. Section 25 renders a taxpayer liable, in the event of a tax default, to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid. Section 26 applies an interest rate in the sum of the market rate and eight per cent per annum. 98 Division 2 of Part 5 is concerned with penalty tax. Sub-section 30(1) imposes the liability to pay penalty tax in the event of a tax default. Sub-section 30(3) provides that penalty tax is in addition to interest. Section 31 sets the amount of penalty tax, which can vary depending on the circumstances. 99 Section 25(2), in Division 1, provides that interest is payable on unpaid penalty tax, but not on unpaid interest. 100 The essence of SkyCity’s submission in respect of these provisions was that the maintenance of the distinction between the concepts of interest and penalty in s 17(1)(c) of the Casino Act ‘echoes’ the structural division in the TAA. We accept that it does reflect that structure, but it is less clear what the significance of that echoing is. Section 17(1)(c) uses the same words but does not elucidate them, as does the TAA. That is because it leaves interest and penalties as matters for agreement (subject to s 51, which we consider below). 101 We accord greater weight to the appellant’s next argument, which was that the concept of ‘interest’ is well understood, and the general law principles limiting contractual terms imposing interest are well known. Parliament can be taken to have understood those principles. Where the statutory regime provides for an agreement that is to operate as a deed and is to deal with interest, that would ordinarily be understood as dealing with interest that is enforceable in a contractual setting. There does not appear to be anything in s 17(1)(c) by which Parliament has overlaid a different understanding of interest that could extend to interest that would ordinarily be unenforceable as a penalty. We do not think that the separate reference to penalties can perform that function. Penalties are, and are specified as, something separate from interest. -- 25 of 28 -- [2024] SASCA 14 The Court 22 102 Perhaps in recognition of this, the respondents focused on the need to read s 17(1)(c) together with s 51. They pointed first to the requirement in s 51(1) that the licensee must pay interest and penalties in accordance with the CDA. That is to say, this imposes a separate statutory obligation to pay that which has been agreed. This operated as a ‘reinforcement’, in the respondents’ submission, that whatever the parties agreed can be enforced. 103 Sub-section 51(1) imposes a statutory liability on the licensee to pay casino duty, as well as interest and penalties, in accordance with the CDA. Sub-section 51(4) provides that casino duty, interest and penalties may be recovered as a debt due to the State. These are statutory mechanisms of liability and enforcement of that which is agreed under the authority in s 17(1)(c). 104 There is some rhetorical force in the contention that where the CDA would in any event be enforceable as a deed to the extent that the general law would permit enforcement, s 51 operates to ensure the enforceability of that which has been agreed but would not be enforceable at common law or equity. However, this provides only a thin thread. There is nothing in s 51 that expressly alters the application of common law and equity with respect to the enforceability of contracts in the case of the CDA or, for that matter, ousts the jurisdiction of the Court to declare an interest provision to be unenforceable as a penalty. Any such ouster by implication would have to appear clearly and unmistakeably.10 105 Ultimately, it is difficult to see that s 51 does more than provide a statutory basis for enforcement of the CDA. 106 The other aspect of s 51 that the respondents relied on was the provision in s 51(2) that in the absence of an agreement between the licensee and the Treasurer, the licensee must pay casino duty (and interest and penalties) on a basis fixed under the regulation. Plainly enough, interest so fixed would not be subject to the common law with respect to penalties nor the equitable jurisdiction to relieve against penalties,11 as its source would not be agreement, but delegated legislation. The respondents submitted that Parliament could not be taken to have intended that where there is an agreement, common law and equity will operate against the inclusion of interest amounting to a penalty, where it has otherwise permitted such an imposition by regulation. 107 There is some force to this submission, certainly insofar as ss 51(1) and (2) use the same phrase ‘and interest and penalties for late payment or non-payment of casino duty’. However, the question is whether Parliament has clearly, expressly or by implication, abrogated the application of the common law and equity with respect to penalties in its authorisation of interest to be provided for in the CDA. At common law, penalties as a method of securing performance of an agreement 10 Shergold v Tanner (2002) 209 CLR 126 at [34]. 11 See generally, Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [121]-[125]. -- 26 of 28 -- [2024] SASCA 14 The Court 23 are unenforceable as contrary to the policy of the law.12 Equity will intervene against enforcement of a penal interest clause on the basis that such would be an unconscionable exercise of legal rights.13 108 The mere fact that the executive can, in the absence of agreement, impose by regulation an interest obligation that would be treated as a penalty does not have the contextual force in construing s 17(1)(c) as might first be thought. Having regard to the nature of the common law and equitable stances against penalty interest, it is an equally, if not more readily available inference, that Parliament has determined that if interest is to be imposed at a rate that the general law would set its face against, it is to be done by delegated legislation. That is to say, we do not think that the facility in s 51(2) provides the implication for which the respondents argue. 109 The legislative scheme provides for agreement on both interest and penalties. We are satisfied that 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. It is open to the parties to agree penalties. However, we are not satisfied that this facility so clearly permits the parties to agree on a rate of interest, a concept understood in the general law to be compensatory, that would operate as a penalty. 110 It is conceivably also open to the Treasurer to refuse to agree to any interest regime that complies with the demands of the general law with respect to penalties. Penal interest could then be imposed by regulation. The condition of an interest regime that the general law would hold contrary to public policy is, by s 51(2), that it must be imposed by delegated legislation. We do not think that s 51(2) provides any 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. 111 We answer Question 3, ‘Yes’. Conclusion 112 We answer the questions as follows: 1. Do “Converted Credits”, being electronic gaming credits arising from the conversion of loyalty points (howsoever accumulated) by the Applicant’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? Yes. 12 Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67 at [9]. 13 Esanda Finance Corp v Plessnig (1989) 166 CLR 131 at 148 (Brennan J). -- 27 of 28 -- [2024] SASCA 14 The Court 24 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? No. 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? Yes. -- 28 of 28 --