Court of Appeal endorses Department’s policy on how much pubs should be paid to host gaming machines

7/12/2004

The Court of Appeal today released a decision supporting the Department of Internal Affair’s approach to how much pubs should be paid to host gaming machines.

The Director of the Department’s Gaming and Censorship Regulation Group, Keith Manch, said that the decision is important for the whole community: “In effect, it means a larger share of gambling profits should go to the community.”

In the year to 30 June 2004 gambling operators made profits of $1.03 billion on gaming machines in pubs and clubs. Gambling profits from gaming machines have increased significantly every year since machines were allowed in New Zealand.

“How much of that money should be paid to pubs has often been a contentious issue, and this decision strongly supports the principles on which we based new rules,” Mr Manch said.

The new rules took effect from December 1 and, even if gambling profits do not increase this year, will allow pubs to be paid up to a total $128 million a year to cover their costs for hosting gaming machines. The amount allowed includes a margin for regional variations in costs and for management fees for pubs.

Pubs do not own the machines. They are owned by gambling operators known as gaming machine societies. Societies would keep up to an additional $136 million a year to cover their own costs.

That is a total of $264 million a year to cover actual, reasonable and necessary expenses, plus a margin for pubs, to operate 17,600 gaming machines at 1,365 pubs (numbers licensed as at 30 September 2004).

The machines are licensed as a form of community fundraising only, with profits to be distributed as grants. Societies and pubs are entitled to recover their costs. Pubs can make some profit for their owners while societies are charitable organisations.

The case began under the previous law, the Gaming and Lotteries Act, when the Department refused to allow one of the gaming machine societies, Pub Charity, to pay some of its pubs $234,000 each, a year.

“In effect, Pub Charity was claiming that it would cost a pub $234,000 a year to operate 18 gaming machines on its behalf. Consultants and accountants for the Department came to the conclusion that it costs much less”, Mr Manch said.

Pub Charity took its case to the High Court. In May this year Justice Miller dismissed all of Pub Charity’s arguments and awarded costs to the Department.

Pub Charity appealed Justice Miller’s decision and the Court of Appeal has today also dismissed all of the society’s arguments, and awarded costs to the Department.

After Pub Charity started its High Court action Parliament passed new law, the Gambling Act. In September this year the Department gazetted rules for how much pubs should be paid under the new law. These rules are known as the venue expenses policy.

The approach Justice Miller accepted as the correct way to assess the actual, reasonable and necessary costs of operating gaming machines is an important part of the new rules.

The rules were made after extensive consultation with the gambling sector and the community. This included considering Justice Miller’s decision and work by independent accountants who used information from the sector to analyse the actual costs of operating machines.

A set of guidelines on the policy has been distributed to all societies that pay pubs to host gaming machines and the Department has given presentations on the policy for societies.

A copy of Justice Miller’s decision is on the Department’s website here: High Court Decision (25/5/2004) 176k

A copy of the Court of Appeal decision is available here: Court of Appeal Decision (7/12/2004) 225k

This media release is a summary of the Department’s position. Reading it is not a substitute for reading the Courts’ decisions or for obtaining independent, professional legal or financial advice.


Media contacts

Keith Manch
Director Gaming and Censorship Regulation Phone 04 495 9449, Cellular 027 445 6420

Vince Cholewa
Communications Advisor Phone 04 495 9350, Cellular 027 272 4270