The Gambling Commission's Brunner Rugby League Club decision opens the way for other clubs to appeal against the DIA licence condition or authorised-purposes percentage. 

A number of clubs are now looking to restore their gaming operations in light of the new policy. The major difficulty for many of them is the requirement to obtain territorial-authority consent to re-establish the gaming operation when the local gambling-venue policy prevents new gambling venues being established.

At the time of writing (late July 2011), there had been only one successful class-4 Gambling Commission decision in 2011. Made by the Brunner Rugby League Club, this appeal related to financial viability and whether it was appropriate for the Department of Internal Affairs to impose a standard, universal licence condition requiring all clubs to return a minimum of 37.12% to authorised purposes.

Societies that mainly apply funds (typically clubs) are exempt from regulation 10 of the Gambling (Class 4 Net Proceeds) Regulations 2004 that requires societies that mainly distribute funds (traditional gaming societies) to return a minimum of 37.12% to authorised purposes.

However, despite the exemption, the DIA has duplicated the regulation by imposing a licence condition on all clubs, requiring them to return a minimum of 37.12%. This has resulted in successful, recent challenges. (The clubs concerned have consented to this discussion of case details).

The first to challenge the 37.12% licence condition was the Te Aroha Club (I was involved in representing the Te Aroha Club, with support from Clubs New Zealand, in its appeal to the Gambling Commission). The appeal was filed with the commission in December 2009. The DIA then requested time to consider its policy, and the appeal was adjourned for several months.

On September 1, 2010 the DIA issued new guidelines for clubs. That:

• Clubs that return between 30% and 37.12% should have their licence renewed, but encouraged to return at least 37.12%;
• Clubs returning between 25% and 30% should be considered marginal operations;
• Clubs returning less than 25% would be considered poor operations.

In December 2010 the DIA withdrew its previous decision to refuse to renew the Te Aroha Club's licence. This brought the appeal process to an end.

But the DIA subsequently advised that it proposed to refuse to renew the Te Aroha Club's 2010 licence. In February 2011 we made comprehensive submissions disputing the DIA's claim that the club was not financially viable, and again challenged the validity of the 37.12% licence condition.

After considering these submissions, the DIA issued licences for 2009, 2010 and 2011. The 2009 licence had a condition requiring a 25% return; the 2010 licence had a condition requiring a 30% return; and the 2011 licence had a condition requiring a 35% return. The 2011 licence condition was consistent with the financial forecast the Te Aroha Club had submitted.

On May 6, 2011, an appeal lodged by the Brunner Rugby League Club (which I also acted for) was determined by the Gambling Commission. The arguments were similar to those made in the Te Aroha Club case, and the appeal was successful.

The commission held that a 37.12% licence condition that is similar to regulations 10 and 11 (for which clubs are exempt) is not automatically unlawful. It found that the club was able to meet the 37.12% licence condition and, therefore, did not need to consider whether the condition was reasonable. However, the commission noted that in future cases, it would be appropriate to consider the reasonableness of a 37.12% licence condition.

The commission stated that if clubs and societies that mainly apply funds wished to challenge such a licence condition, they should to do so as an appeal against the condition once it had been imposed, and not as an appeal against subsequent cancellation action for failing to meet the condition.

If such clubs and societies wanted to have a lower percentage or no percentage, they should appeal against the licence condition within 15 working days of the date of the DIAs letter enclosing the renewed licence.

Following the Brunner Rugby League Club decision, any club that has recently had its licence renewed and is concerned about its ability to meet a 37.12% licence condition, should immediately appeal and seek to have the licence condition removed, or the percentage reduced.

A number of clubs that historically had returns of around 30% are now looking to restore their gaming operations in light of the new policy. The major difficulty for many of them is the requirement to obtain territorial-authority consent to re¬establish the gaming operation when the local gambling-venue policy prevents new gambling venues being established.

This was the case recently for the Dargaville Club, which surrendered its licence for two machines in 2007 because it could not meet the 37.12% licence condition. The club now believes that by buying inexpensive, second-hand equipment, it can restore its gaming operation and easily achieve a return of more than 30%.

However, before an application for a gaming licence can be lodged with the DIA, the club has to obtain consent from the Kaipara District Council. But the council has a sinking-lid policy that no new consents will be granted.

In May we represented the Dargaville Club at the Kaipara District Council gambling-venue policy hearing and made submissions seeking an exemption to the policy. As a result the council amended its policy to allow the Dargaville Club to restore its two gaming machines. This is a landmark decision as it sets a valuable precedent for clubs that wish to restore their gaming operation.

The Brunner Rugby League Club decision is discussed in further detail in chapter 18.11 of the New Zealand Gambling Law Guide's on-line version, www. gamblinglaw.co.nz). The website also includes a summary of the Lion Foundation cost decision (chapter 26.25) and details of the DIA's latest stance on how venue enhancement costs should be managed (chapter 2.08).

(SOURCE: Jarrod True - Gaming NZ Vol 9 Issue 2 2011)

Jarrod True, a partner in law firm Harkness Henry, specialises in advising trusts and clubs that operate gaming machines. He can be contacted by: phone - 0800 427563 (0800 HARKNESS) or 027 4527763; email - This e-mail address is being protected from spambots. You need JavaScript enabled to view it .n.z.