The Trillian Trust v The Secretary for Internal Affairs

JurisdictionNew Zealand
CourtHigh Court
JudgeSimon France J
Judgment Date14 November 2011
Docket NumberCIV 2010-485-2411
Date14 November 2011

UNDER the Judicature Amendment Act 1972 and Part 30 of the High Court Rules

IN THE MATTER OF an application for judicial review

The Trillian Trust
The Secretary for Internal Affairs

CIV 2010-485-2411


Application for judicial review — applicant held gambling class to operate pokie machines — net proceeds from gambling to be distributed to authorised community recipients as condition of licence — licence suspended on ground of unreasonable expenses incurred by applicant — decision to suspend based on audit report not provided to applicant — whether power of suspension could be used for punitive purposes under Gambling Act 2003 or was limited to ongoing non compliance — whether process leading to suspension was so flawed that decision should be quashed.


F M R Cooke QC and M S Smith for Applicant

K Stephen and H Sims for Respondent

JUDGMENT OF Simon France J


The Gambling Act 2003 regulates the conduct of gambling in New Zealand. Superintendence of the scheme lies with the Secretary of Internal Affairs. The Act also provides for appeals to a Gambling Commission established under the Act.


Trillian Trust is licensed under the Act to operate pokie machines of the type routinely found in clubs and pubs. Operators can have machines at numerous sites within a region, or nationally. Each site is subject to an approved venue agreement between the operator (in this case the Trust) and the venue. The venue looks after the machines on a day to day basis and is paid a venue fee. The income from the machines goes to the operator who is required to distribute the proceeds to authorised community recipients.


There are rules governing what expenditure an operator may incur prior to distribution of the net proceeds. The general rule is that all expenditure must be reasonable and necessary. Further, in some areas quite specific rules have been established. One of these is that, over a rolling 12 month period, an operator's venue costs must not exceed 16 per cent of the turnover from the operator's machines. With an operator such as the Trust, this assessment is made on an overall basis rather than on each particular venue. This specific rule is known as Limit D.


Following an audit, the Secretary determined that the Trust had committed five breaches of the Act in relation to its expenses. One breach related to the Limit D rule. The Trust accepts this is so. The other four were items of expenditure, or groups of expenditure, which the Secretary considered were unreasonable and/or unnecessary. These are disputed. The Secretary has imposed a five day suspension of the Trust's licence as a total penalty for all breaches. Trillian Trust seeks judicial review of that decision.

Preliminary issue

Section 61 of the Act provides that an operator has a right of appeal to the Gambling Commission against a decision to suspend. In hearing the appeal the Gambling Commission: 1

  • (a) may request further information;

  • (b) is not bound to follow any formal procedure;

  • (c) does not need to hold a hearing;

  • (d) must consider any information put before it;

  • (e) may confirm, vary, reverse or refer back the decision.


An appeal from the Secretary's decision has been filed, but not heard pending these proceedings. For reasons discussed at the hearing of these proceedings, I consider the particular decision needs to be made again. Having now reflected further on the matters raised at the hearing, I am of the view that the existence of an appeal to a body set up for that purpose, and the fact that this particular decision will be made again, means I should take a restrictive approach to the scope of the judgment.


In particular there were submissions made about the penalty imposed, and what factors should inform it. The Secretary in making the fresh decision will obviously follow such assistance as can be gleaned from existing Commission decisions. In my view any High Court review of penalties should be on review proceedings from a Commission decision. Accordingly, I have decided not to comment further on penalty.

Issues arising

The Trust submits that the power to suspend cannot be used for punitive purposes but is limited to situations where it is necessary to remedy existing and continuing non-compliance. It is common ground that the present suspension relates to breaches that are spent. If this is not a permissible use of the power to suspend, then no other basis exists in this case.


Second, the power to suspend arises when there has been a breach of the requirements of the Act, or the conditions of a licence. The Secretary has determined that the four contested expenses breached s 52(1)(d) of the Act. The Trust submits that, even if they are unnecessary and/or unreasonable expenses, on the proper interpretation of the section a breach of s 52(1)(d) has not been committed and so there is no power to suspend in relation to them.


Finally, the Trust submits that the procedure followed by the Secretary was flawed, and that as a result, the decision should be quashed. It further submits that the nature of the procedural flaws means the Court should exercise its discretion to bring matters to a halt by not referring the case back to the Secretary for further consideration.

Issue one — can past breaches be a basis for a suspension?

It is necessary to begin by setting out some of the statutory provisions which underlie the Trust's submission.


Section 58(1) provides:

  • (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) …

    • (d) …

  • (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.


Section 52 sets out the criteria that the Secretary must take into account when deciding whether to grant an operator's licence.


Next, s 59 of the Act sets out the procedures to be followed when suspending or cancelling. Of particular importance is sub (4):

  • (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.


The Trust's argument very much centres around s 59(4)(d) and (e). The proposition being advanced is that it is mandatory for the Secretary to identify what matters must be fixed. From this it is inferred that the suspension power is limited to situations where there is an on-going situation that needs fixing. The suspension power is, therefore, remedial in nature as it is predicated on there being a situation of on-going non compliance.


The argument is bolstered by reference to s 60 which deals with the consequences of suspension. Subsections (2) and (3) are of similar effect to s 59(4)(d) and provide:

  • (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.


The Trust's argument is supported by other strands. The Act provides a detailed scheme for the regulation of gambling. It is submitted that it would be surprising if the power to suspend in s 58 was intended to introduce a penalty regime in circumstances where the trigger for the penalty, and the factors that might inform its length, are left unstated.


Mr Cooke QC submits that the role of s 58 is understood when it is noted that the section deals with both suspension and cancellation. In his submission, the suspension power is to be seen as a tool able to be used in the process of considering cancellation, and not as a stand alone sanction. Licences cannot be for longer than 18 months, at which time renewal must be sought. It is submitted there is no point in exercising the cancellation power in s 58 if an operator at the time of cancellation meets the requirements for obtaining a licence. This illustrates that s 58 should be seen as focussed on situations of existing non-compliance where a failure to correct the matter during the suspension period might lead to cancellation. Section 58(2) is consistent with this. It requires the Secretary, when deciding whether to suspend or cancel, to have regard to the criteria that must be considered when deciding whether to issue (or renew) a licence.


In my view the applicant's submission and interpretation is a tenable one. However, for reasons which can be briefly stated, and which reflect the respondent's submissions, I do not accept it.


First, it does not give sufficient weight to the actual words of s 58 which say that the Secretary may suspend where a corporate society:

is failing, or has failed, to comply with ….


Mr Cooke submits this should be read as applying only to such past failures which suggest that the operator is not presently able to comply with the Act. Such a reading fits neatly enough with the Trust's submission, but there is otherwise no basis for it. One would need strong policy imperatives to read down the plain language in that way. They do not exist.


A power to suspend is consistent with the...

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