Regulation of gaming machines in NSW – a whole new ball game!

October 19, 2023

Clubs may be aware of a recent decision by the NSW Court of Appeal (COA) in three cases involving applications by hotels for transfer, lease and/or applications for increase in gaming machine thresholds: NSW Independent Liquor & Gaming Authority (ILGA) v Whitebull HTL Pty Ltd & Ors NSWCA 224.  

The case was an appeal by the Independent Liquor and Gaming Authority (ILGA) from the decision of the Supreme Court of NSW that held that ILGA's power to place conditions on liquor licences was limited and that it had no power to add conditions on gaming machine matters under the Liquor Act.  The case arose as three hotels owned by the same group sought approval for applications relating to leasing or transfer of gaming machine entitlements. ILGA approved two of the applications but put conditions on the applications that the hotels would be required to:

  1. Employ a dedicated staff member to monitor the gaming machines and gaming machine players from midnight whenever the machines are operating (to approximately 4:00am); and
  2. Maintain a gambling incident register and record therein all observable potential signs of problem gambling behaviour.

The Supreme Court held that ILGA had exceeded its power and that the conditions were invalid and of no effect.  ILGA appealed to the COA and was successful in having the Supreme Court's decision overturned. The COA held that ILGA's powers were not limited in the manner found by the Supreme Court.  ILGA's power to approve transfers or leases of gaming machine entitlements are discretionary powers without express qualification as to what can be taken into account.  The same is true of the power to increase gaming machine thresholds.

It is also very significant that the COA found that Section 53(1) of the Liquor Act grants ILGA a discretionary power to impose conditions on a liquor licence at any time. There is no express restriction on the possible subject matter of a condition.

What does this mean for Clubs?

The decision throws into doubt the whole stated purpose of the introduction of the amendments to the Gaming Machines Act in 2008.  When the legislation was introduced into State Parliament the Minister stated that the purpose of the amendment bill was to provide "greater certainty for industry and to introduce some simplification in the administrative processes" and providing "clarification and machinery changes to allow the Act to operate more effectively and efficiently".  

The result of the COA's decision is the opposite of that stated intention.  It will now be more difficult to advise with any certainty, what the outcome of an application to transfer gaming machine entitlements or to increase a gaming machine threshold will be with respect to any Club.  It raises the question as to whether a Club would ever make an application to lease or transfer gaming machines to the Club or seek to raise its gaming machine threshold when onerous conditions could be imposed on the whole of the Club's gaming machine operations.

Practical implications

In the Whitebull case one of the applications in the case of Griffith Hotel and Northbridge was seeking a threshold increase of one and the transfer of a single gaming machine entitlement from one entity to the other 200 metres up the road and in the same LSA.  The hotel refused to agree to a condition that a responsible gambling officer be present whenever gaming machines were operating and the application was refused.  If the hotel had agreed to the condition proposed by ILGA referred to above they argued that the condition "will substantially reduce the capital value of the Whitebull hotel".  The hotel group said the same thing in relation to each of the other two hotels.

Why then would a Club apply to increase its threshold to bring in five or 10 machines when ILGA would likely impose the conditions set out above and quite possibly other conditions which would apply to all of its gaming machine operations?

Conclusion

The decision of the COA has made it clear that the gaming machine threshold and entitlement system in NSW is subject to unconstrained and wholly discretionary powers by ILGA.  This was not the Government's stated intention of the new administrative scheme (which replaced the Licensing Court and Liquor Administration Board).  

Gaming plans of management have in recent times generally been required where ILGA's Guideline 16 applies (i.e. for venues which are able to trade late and depending on the banding of local statistical area).  A gaming plan of management could include the types of conditions imposed in the Whitebull case.  However, following that case it remains to be seen whether ILGA will impose conditions even when Guideline 16 does not apply and a gaming plan of management would not otherwise be required.

Considerable uncertainty now exists in the system. Clubs will need to very carefully consider whether it is worth making any gaming machine related applications in this new and uncharted territory.

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