TVWORKS LIMITED V DEPARTMENT OF INTERNAL AFFAIRS COA CA286/2011

TVWORKS LIMITED V DEPARTMENT OF INTERNAL AFFAIRS COA CA286/2011 [26 April 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA286/2011[2012] NZCA 160BETWEEN TVWORKS LIMITEDAppellantAND DEPARTMENT OF INTERNAL AFFAIRSRespondentHearing: 6 March 2012Court: Glazebrook, Arnold and Harrison JJCounsel: J Billington QC and J Edwards for AppellantC L Mander and J E Mildenhall for RespondentJudgment: 26 April 2012 at 10 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.REASONS OF THE COURT(Given by Harrison J)Introduction[1] The Department of Internal Affairs (the DIA) charged TVWorks Ltd with breaching the Gambling Act 2003 by publishing an advertisement which promoted a gambling operator outside New Zealand. The charges depended upon proof that atype of poker tournament conducted by the operator was gambling, which is materially defined as:1... paying or staking consideration, directly or indirectly, on the outcome of something seeking to win money when the outcome depends wholly or partly on chance;...[2] The District Court dismissed the charges.2 However, that decision was reversed by the High Court on appeal on a point of law.3 TVWorks now appeals to this Court.Background[3] The relevant facts are not in dispute. TVWorks operates TV3 and C4 television channels. On four occasions between August and December 2007 those channels broadcast advertisements for the Asia Pacific Poker Tour (APPT). The DIA then laid the subject charges.4 Conviction carries a maximum fine of $10,000.[4] TVWorks pleaded not guilty to the charges. Judge David Harvey delivered a comprehensive decision following a three day defended hearing in the District Court at Auckland. Both parties accept, as did Ronald Young J in the High Court, theJudge's summary of the APPT as follows:[20] APPT stands for the Asia Pacific Poker Tour. There are two ways of participating on this tour. One is to pay a sum of money to compete. The other is to qualify by demonstrating that one has the necessary skill by using the Pokerstars.net software and using PokerStars frequent player points. This allows a player to participate in the tournament without the payment of the entrance fee....[22] One qualifies for play at an APPT tournament by paying the requisite entry fee or by acquiring qualification through the utilisation of thePokerstars.net software. It goes without saying that one must indicate one's1 Gambling Act 2003, s 4.2 Department of Internal Affairs v TVWorks Ltd DC Auckland CR 08004505568-620,23 June 2010.3 Department of Internal Affairs v TVWorks Ltd HC Auckland CRI-2010-404-256,17 November 2010.4 Gambling Act, s 16.interest in participating in the tour, using Pokerstars.net software. Qualification does not automatically happen. Upon payment of the fee, or upon qualifying via Pokerstars.net, one is assigned a number of chips. The number of chips bear no relationship to the entry fee. All players start with the same number of chips. Players then engage in a number of rounds involving a number of games of poker. Those who win the most number of games by acquiring the greatest number of chips from other players become the winners and a prize pool is shared between the top 10 players. When asked if there were any money bets on the side, Mr Rasheed indicated that there were not. The tournament is in the nature of a competition where prizes are awarded to winners, although those prizes bear no relationship to the number of chips that a potential winner might have other than to determine his ranking for the purposes of a prize.[5] The essence of Judge Harvey's conclusion is as follows:[117] I do not consider that the way in which the APPT is structured amounts to gambling. It does not involve the payment of consideration based upon the outcome of the game. It involves the splitting of a sum of money derived from payment of entry fees between the winning players. Although poker is usually associated with some form of gambling, because players in the Tournament do not make side bets on the outcome of each hand that element of wagering upon the outcome, or paying consideration or a stake, is not present.[6] The DIA appealed on a case stated. Judge Harvey identified the question for the High Court's decision as being whether he correctly interpreted the statutory definition of gambling so as to exclude the APPT from it.[7] Ronald Young J allowed the Department's appeal on this basis:[25] The Judge in the District Court considered an important point was that the payment of the entrance fee bore no relationship to the value of chips allocated to the entrant. It is difficult to understand the relevance of that point. To get the allocated number of chips the player has to play a particular entrance fee. And so the number of chips the player has (and all players start with the same number) relates directly to the cash paid. The chips themselves are not allocated a specific value although all are of the same value. Nor in this game is it possible to buy more chips than the entrance fee allows. This is presumably a way of ensuring that all players start the tournament on an even footing.[26] The use of the chips and how they are reflected in the entrance fee does not seem to me to be the pivotal question. The purpose of the tournament is to find the best and luckiest players. This is done by starting all the players off on the same footing with the same number of chips. The best players, and given that poker is partly a game of chance the luckiestplayers, will win other players' chips. At the end of the tournament theplayers' chips are totalled. If a player is in the top ten he/she is eligible for aprize. The more chips the greater the prize.[27] Here the entrance fee in part makes up the prize pool which is shared by the top ten players. The number of chips won during the tournament reflects the players placing and thereby his/her prize money. The entrance fee is therefore the payment of money which is indirectly staked on the outcome of the poker game trying to win money in a game depending partially on chance, the definition of gambling in s 4.[28] Although some contestants qualify to play by skill rather than the payment of an entry fee those who do pay are gambling. Thus what is advertised is still gambling even if not all contestants are gambling.[8] Ronald Young J remitted the proceeding back to the District Court for further consideration in view of his answer to the identified question. He made clear his opinion that TVWorks unintentionally breached a statutory provision which was "far from clear".5 He left it open to the District Court to determine whether a penalty should be imposed.[9] TVWorks appeals on the grounds that Ronald Young J's decision was wrongin law.Decision[10] In support of TVWorks' appeal, Mr Billington QC identifies four component elements of the definition of gambling found in s 4 of the Gambling Act,6 namely: (a) paying or staking consideration; (b) directly or indirectly; (c) on the outcome of something and seeking to win; and (d) where the outcome depends wholly or partly on chance. When the statutory definition is broken down in this way, he says that the DIA failed to prove two elements of the charges. One is that payment was made of a sum of money staked on the outcome of the competition; the other is that the outcome depends on chance. We shall deal with each separately.Staking money on outcome[11] First, Mr Billington says the evidence is consistent with Judge Harvey'sfinding that the entry fee is a sum paid for a licence to enter and compete in the tournament. He says the entry fee is not a payment staked on the outcome. That5 At [30].6 See at [1] above.would only be the case if bets were taken and money staked, normally by third parties, on the eventual winner. He likens the payment to a licensing fee entitling a participant to sit at the table. He draws a comparison with a golfer who pays to enter a tournament and play on the course.[12] The starting point for consideration of Mr Billington's submission is Judge Harvey's finding that the prize pool was derived from entry fees paid by the players. He had earlier accepted uncontested evidence from TVWorks that the entry fees are paid principally as contributions to the prize pool with about 10 per cent assigned tothe organiser's profit. We shall proceed accordingly.[13] We are satisfied that payment of the entry fee has a much wider purpose than merely allowing participation. Its principal purpose is to provide a prize pool fordistribution among the top ten players. The organiser's share is a small part. Theentry fees are what are staked or put at risk by the players to be won or lost on the result of the game. The prize pool itself is the stake which is available to a participant to win back what he or she has paid or staked together with part or all of what others have staked.[14] This conclusion is supported by Mr Mander's identification of a criticalintermediate step between a player entering the tournament and playing a game. It is the assignment or allocation to a player of a number of chips. Each participant receives the same number of chips, which are then wagered in games against otherplayers. This betting or wagering, based on the outcome of a participant's hand, isintrinsic to the game: the chips become the tools by which the game is played because they give a participant an opportunity to accumulate a larger number of chips and eventually to recover the entry fee and more money. In this alternative or indirect way, a participant stakes or pays consideration in the form of chips assigned from the entry fee in order to win money.[15] In this respect we should note, if only to reject, Mr Billington's analogy witha sporting event which found some favour with Judge Harvey. Mr Billington notes that the owners of a horse pay a fee for the horse to enter a race and compete for stake money. The general public separately bet or stake money on the outcome atthe Totalisator Agency Board. The same distinction applies, he says, in sports tournaments such as professional golf or rugby. Again, in those situations, the Totalisator Agency Board offers a sporting betting facility distinct from the financial involvement of the competitors who compete for prize money. In these examples the horse owner or golf player is not a gambler, unlike the member of the general public staking money on the result: the statutory definition of gambling expressly extends to betting on a sporting event.[16] Analogies are apt to mislead. In Mr Billington's examples there is noevidence that the prize pool available to the winner and place getters is constituted by the entry fee. But, more critically, the intermediate step of allocation to participants of chips or something similar,7 derived from payment of the entry fee, is absent. We are satisfied that the definition of gambling is not restricted to payments staked by a third party or outsiders on the outcome of a game played by others. That may be the most obvious example of gambling. But there is no warrant for reading the plain words of s 4 of the Gambling Act to impose that limitation where the facts are consistent with a finding that the participants themselves are gambling within the terms of the definition.[17] With respect, Judge Harvey's conclusion that the structure of the APPTtournament does not involve the payment of consideration based on the outcome of the game because it is simply the splitting of a sum of money derived from entry fees is unsustainable. That conclusion omits critical elements of the games constituting the tournament. We agree with Ronald Young J that the entrance fee, which allows a participant to acquire chips for use in order to participate and wager, is a payment of money which is directly or indirectly staked on the outcome of the poker game. Thus the first of the two disputed elements of the definition of gambling is proved.Outcome depends on chance[18] Second, Mr Billington submits that the outcome of the APPT tournament does not depend wholly or partly on chance. He refers to those participants who qualify through skilful use of the relevant software and frequent player points or who7 See at [14] above.are skilled poker players. He says also that a literal approach to the meaning of chance would capture events such as yachting tournaments where, as Judge Harvey found, environmental factors such as the sea state, wind and tides operate to affect the result.[19] Mr Billington's submission effectively seeks to reinstate a line of argumentwhich has been consistently rejected by New Zealand Courts since the Gaming and Lotteries Act was enacted in 1977. The original Gaming Act 1908 was directed atprohibiting "a game of chance". The then Supreme Court consistently construed that phrase narrowly, as exemplified, as Salmond J's decision in Weathered v Fitzgibbon.8In summary, the statutory definition was limited to games of pure chance – games of mixed chance and skill were excluded. Pure chance was treated as meaning a game where there was no element of skill whatsoever. By contrast, most games of cards were treated as being of mixed chance and skill. That was because a substantially operative element of skill existed.9[20] However, s 2 of the Gaming and Lotteries Act introduced a new and widerdefinition of a game of chance. Materially, it was defined as a game "the outcome of which depends wholly or partly on chance".10 That element of the definition is essentially incorporated into s 4 of the Gambling Act. As Roper J noted in Police v Gardiner the Act effected a fundamental change in the definition of a game of chance.11 In contrast to s 10 of the Gaming Act, games of mixed chance and skill were caught by the expanded definition.[21] In Gardiner, where the game at issue was a variation of poker, Roper J was satisfied that it constituted a game of chance. Of particular relevance were the players inability to influence the cards that will be turned up, the order of the cardsand a player's inability to know the value of the personal cards held by other players.Some players will of course be more skilful than others and more adept at calculating the odds on their hand improving. But Roper J was satisfied that element did not remove the game from one which depended wholly or partly on chance. It is8 See Weathered v Fitzgibbon [1925] 1 NZLR 331 (SC).9 At 337.10 Gaming and Lotteries Act 1977, s 2.11 Police v Gardiner HC Christchurch M440/83, 7 November 1983 at 4.notable also that s 2 of the Gaming and Lotteries Act excluded a sporting event from the definition of a game of chance.[22] The question on this appeal is whether "... the outcome [of the APPT]depends wholly or partly on chance" (our emphasis). Something depends when it iscontingent upon or controlled or determined by something else. So it is appropriate to inquire if the controlling or determining factor in the APPT tournament be characterised, wholly or partly, as chance – that is something random, undesigned or over which the player has no control?12[23] In our judgment the outcome of the APPT tournament depends in part at least on chance. The element of chance is inherent in a player betting on the value of his or her hand where he or she has no control over that hand or the hand dealt to any players. The participant must make the best of his or her hand. At this stage skill might become an operative component. But the underlying chance – the luck of the dealt hand – also has an operative part to play in the result. In this sense the outcome depends at least partly on chance.[24] Mr Billington submits that on this approach, as Judge Harvey found, an absurdity would arise. Again relying on the analogy with conventional sporting events, Mr Billington says that participants who paid entry fees would be caught by the statutory definition of gambling given the effect of extrinsic factors.[25] There is a short answer to that submission. It is true that while, depending on the physical conditions, there may be an element of chance in the outcome of the yachting race or a golf tournament, it cannot be said that the outcome normally depends wholly or partly on chance. Skill is the predominant, normally decisive, feature. Chance may on certain occasions have an effect on the outcome. But chance is not an intrinsic or inherent feature of a traditional sporting event like a yachting race or golf tournament. It follows that we do not detect any element of absurdity in applying the statutory definition to these facts.12 See Police v Plank HC Palmerston North AP333/90, 14 February 1991.[26] Mr Billington relied on some United States authorities, as he had in the lower Courts. However, we do not need to consider the relevant decisions because they concerned a meaning of gambling different from that provided by the Gambling Act and under a different statutory framework.[27] This second disputed element of the definition of gambling is also proved.Result[28] TVWorks' appeal is dismissed.[29] TVWorks must pay the DIA costs for a standard appeal on a band A basis together with usual and reasonable disbursements.[30] We wish to express our appreciation to all counsel for the quality of argument on this appeal.Solicitors:Russell McVeagh, Wellington for AppellantCrown Law Office, Wellington for Respondent