Pokies and the Pandemic


Acts of Parliament may confer broad discretionary powers on public officials.
What could possibly go wrong?


This blog post extends a conversation I began with Hon Tracey Martin, the Minister of Internal Affairs, on Twitter:

Surprisingly, and perhaps because we are all on Level 4 lock-down for the COVID-19 pandemic, the Minister responded and we entered into a conversation. Somewhere down the thread I offered to explain these issues to her on my blog.

This a long read, but it's a kind of detective story with a few twists and turns in the tale. If you're on lock-down you have time for this, so.let's get into it.

By the way: hyperlinks mostly take you to PDF documents, obtained under the Official Information Act and stored on Google Drive.

Context

Section 71(1)(g) of the Gambling Act says that:
(when) a corporate society has not conducted class 4 gambling at the venue for a period of more than 4 weeks (then) the class 4 venue licence must be surrendered, under section 79(1)(a), unless the Secretary agrees that the venue may remain inactive for a further specified period.
And section 79(1)(a) says that:
A corporate society… must surrender a class 4 venue licence to the Secretary in the circumstances described in section 71(1)(g)
So, according to the law, after more than four weeks of Level 4 lock-down, during which all Class 4 (pokie) venues in New Zealand have been closed, every Class 4 Venue Operator (or "pokie trust") must have surrendered the Class 4 Venue licences for all of their venues, OR the Secretary of Internal Affairs must have formally agreed to extend the non-surrender period for those licences, for a specified period.

This ability to extend the non-surrender period is discretionary power conferred on the Secretary (CEO) of the Department of Internal Affairs. The exercise of such discretionary powers is an important legal issue, to which we shall return.

As it happens, the Dept of Internal Affairs created its own guidelines for exercising this power. It is my understanding that the policy actually has no legal standing (for reasons we will come back to). But anyhow, we might legitimately expect departmental officials to follow them.

Some parts of the guidelines are reproduced here, to save you reading the whole thing.

DIA Non-Surrender policy guidelines (14 Nov 2012)
OIA 2018190587, Doc 01

Length of Extension
You should grant an extension for the shortest period possible to complete the (rebuilding) work. This should not be longer than a few months.... The total extension period should not usually go beyond the term of the operator’s licence but there will be some situations where this is necessary.
Approval Letter
You should warn the society when approving an extension that we would need to be convinced that there were unforeseen and exceptional circumstances before a second extension would be considered. A second extension will not be considered if the application is received after the first application expires.
Second Extension
We should generally not grant a second extension. The application must be referred to the Team Leader, Licensing. There must be special circumstances that are significant and beyond the control of the applicant to justify a second extension.
Subsequent Extension
If a society does apply for a third extension that application should be referred to the National Manager, Licensing and Operational Policy. There would have to be extraordinary circumstances that occurred during the rebuilding to justify this further extension. We should aim to keep the extension period within the term of the operator’s licence where this is possible.
Follow up
You should diary for follow-up on the date the extension expires... If the machines are not operating, and no subsequent application has been received, then you should pick up and follow the process (but with modified letter(s)) outlined under “Corporate Societies that fail to advise no class 4 gambling for more than 4 weeks”- pick it up at the stage of writing a letter to require the society to surrender the venue immediately.
OK, so that seems clear enough. What could possibly go wrong?

Ted's Bar in Halswell, Christchurch, that's what. I have been assisting some people who have an interest in the matter, by formulating a series of Official Information Act requests and analysing the results. With their permission, I will share our findings as a timeline.

After that, I will explain the legal and policy issues, for the minister's attention.

Teds Bar: timeline of events

16 Apr 2013: Pub Charity is granted a Class 4 Venue licence for Ted's Bar
OIA 2018190587, Doc 04

9 Sep 2013: Ted's Bar is destroyed by fire
The date is confirmed by contemporary media reports online.

1 Oct 2013: Pub Charity requests FIRST extension due to fire
OIA 2018190587, Doc 05
The request does not specify a “gambling resume date” but asks for an extension of 6 – 12 months. The only reason for requesting an extension is “Venue burnt down.”

11 Dec 2013: DIA grants FIRST extension until 8 March 2014 (6 months)
OIA 2018190587, Doc 11

5 Mar 2014: Pub Charity requests SECOND extension due to fire
OIA 2018190587, Doc 06
The document contains no statement or evidence of “special circumstances that are significant and beyond the control of the applicant” to justify a second extension, as required by DIA guidelines. The only reason giving for requesting an extension is “Venue burnt down. 23/9/2013.” (which was not the actual date: 9/9/2013).

14 May 2014: DIA grants SECOND extension until 7 March 2015 (another 12 months)
OIA 2018190587, Doc 12
Although this is now the second extension, the letter rather oddly implies it is the first – saying:
It is unlikely that the Department would grant a further extension. The Department would have to be convinced that there were unforeseen and exceptional circumstances before any second extension would be considered. Any application for further extension must be lodged 5 working days before the expiry date of this extension.
Now please make a mental note of something: the letter implies that applications and extensions should overlap. Why else should an application be lodged 5 working days before the expiry date of the previous extension?

Up to this point on the timeline, the sequence of requests and extensions is more or less consistent with DIA's guidelines. Now things start to get interesting.

18 Feb 2015: Pub Charity requests THIRD extension due to fire
OIA 2018190587, Doc 07
No extension was granted pursuant to this request. OIA 18190296, Doc 41 (dated 13/02/2017) says the request was " withdrawn" because an application for a Waikiwi relocation (17/05/2016) had superseded it.  There is no OIA document from Pub Charity to DIA requesting that the extension request be withdrawn.

Hiatus

I won't go into the whole business of the Waikiwi relocations. That's another story in its own right, and must be the subject of a further blog post.

Pub Charity was required by the Gambling Act to surrender its Class 4 venue licence after the second extension expired, but doesn't.  Pub Charity is in breach of the law, but the Department of Internal Affairs takes no action.

A substantial amount of documentation was produced under OIA18190296 regarding this proposed relocation. The issue is irrelevant – the relocation proposal was implausible, which DIA internal emails confirm (Josh Mitchell on 30th May 2015 and Jasmine Rangiwhetu on 25 August 2015). Senior Gambling Inspector Brent Addison delays a decision by ignoring Mitchell’s advice and a direct instruction from Ms Rangiwhetu.

15 Dec 2016: DIA letter to Pub Charity refusing Waikiwi relocation request
OIA 18190296, Doc 38
The period during which the Waikiwi relocation request purportedly "superseded" the non-surrender period now ends. The last time Pub Charity had a valid extension to its non-surrender period on 7 March 2015, about 22 months ago.

13 Feb 2017: DIA internal email: Pub Charity has no current extension
OIA 18190296, Doc 41  confirms this understanding is correct (WR stands for "Work Request": Class 4 licencing decisions are all given a Work Request number).
WR 1605080738 was received on 18/02/2015 and was for the venue to remain active until 07/10/2015; this application was subsequently withdrawn as an application to relocate the venue via Waikiwi (WR168180907)… was received on 17/05/2016 superseding it and; Pub Charity has not applied for any further extensions and the venue has no current extension.

22 Feb 2017: DIA email to Pub Charity - Ted's does not have a current licence
OIA 18190296, Doc 42
The Department actually asks Pub Charity if it wants to make a further application to relocated Ted's Bar (emphasis added):
Dear Martin (Martin Cheer, CEO of Pub Charity),
As you are aware, Ted’s Bar… does not have a current venue licence. The last extension for the venue to remain inactive has expired and the subsequent application to relocate the venue via a Waikiwi amendment… has been declined….
We will now finalise the refused (Waikiwi) application and cease the venue licence. Please contact me within 10 working days if you wish to make any further application.

14 Aug 2017: Pub Charity makes FOURTH request for extension due to fire
OIA 2018190587, Doc 09
The application says gambling ceased at the venue on 29/9/2013 (actually 20 days after it burned down). The reason given for requesting an extension is: 
Venue was destroyed due to a fire on 23/9/2013 (sic). Construction of new premises is due to commence in September 2017 and be completed by May/June 2018. Attached is a letter from the developer and also plans of the new development.

21 Sep 2017: DIA grants THIRD extension, up to 1 July 2018
OIA 2018190587, Doc 13
You will recall that the previous (SECOND) extension of a non-surrender period ceased on 7 March 2014. Pub Charity has not had a formal extension of non-surrender period for 3 years, 6 months, and 14 days. The period during which the Waikiwi relocation request "superceded" the extension period ceased on 15 December 2016, 9 months and 5 days previously.

Although this is now the third extension, this letter also includes a statement that “It is unlikely that the Department would grant a second extension.”, and asks that any further request be lodged within five days of the expiry of this extension.

06 Jul 2018: Pub Charity makes FIFTH request for extension
(missing document)

08 Aug 2018: DIA grants FOURTH extension to 28 Feb 2019
OIA 2018190587, Doc 14
The request was made 5 days after the previous extension expired. This extension is contrary to DIA guidelines which, under the heading “Approval letter”, says a second (and presumably subsequent) extension will not be considered if the application is received after the first (or, presumably a subsequent) application expires. Obviously the guidelines are not being followed at all, by this time.

21 Feb 2019: Pub Charity makes SIXTH request for extension
OIA 2018190587, Doc 10

25 Feb 2019: Letter from Charlotte Stanley in response to several questions about these extensions
OIA 18190456, Doc 00
Ms Stanley states that each of the four work requests granted overlapping (rather than sequential) non-surrender extension periods:
  • WR 1573511525 from 09/09/2013 to 08/03/2014 (or FIRST extension)
  • WR 158395835 from 09/09/2013 to 07/03/2015 (or SECOND extension)
  • WR 171604582 from 29/09/2013 to 01/07/2018 (or THIRD extension)
  • WR 173775069 from 29/09/2013 to 28/02/2019 (or FOURTH extension)
Ms Stanley says:
For each work request outlined above, the first date refers to the commencement date of the inactive period granted by the Secretary for Internal Affairs and the second date refers to the expiry of that period.

Let's take a moment to think about that.

I interpret Ms Stanley's statement as saying that: when a Class 4 Operator neglects to surrender a Class 4 Venue Licence (which Gambling Act says it "must" do within 4 weeks), then the Department of Internal Affairs can at any time, and perhaps years later, grant a new non-surrender extension, and backdate it to the date when gambling ceased at that venue. And that, by doing this, the Department can legally validate an operator's decision not to surrender a licence.

But there is nothing in the Gambling Act to suggest that extension of a non-surrender period under section 71(1)(g) can be granted retrospectively to validate an operator's failure to surrender a licence.  Or nothing I can find, and believe me, I've looked.

Also none of the non-surrender extension letters from DIA to Pub Charity includes a date from which the grant of a non-surrender period began. All of them are dated (with the dates noted above), implying that the extension is granted from the date of the letter. None of them say that the non-surrender period was backdated to the date of the fire. Just saying.

Fettered Discretion and Administrative Decisions

Some other interesting things happened during the years since Ted's Bar burned down, which we will get to in due course.  

What interests me most, and what should interest the Minister at this time, is the extent of the discretionary power conferred on the Secretary of Internal Affairs by section 71(1)(g) of the Gambling Act 2003.

It is a principle of administrative law that no Act of parliament should confer an "unfettered discretion" on any government official.  The English Law Lord Sir Tom Bingham sets out several principles in his 2001 book The Rule of Law to define what we should understand the term "rule of law" to mean. In Chapter 6, titled The Exercise of Power he proposes the principle that:
Ministers and public officials at all levels must exercise the powers conferred upon them in good faith, fairly, for the purpose for which the powers were conferred, without exceeding the limits of such powers and not unreasonably.

That sentiment is echoed and reinforced by the Supreme Court of New Zealand in UNISON NETWORKS LTD V COMMERCE COMMISSION SC 12/2007 10 September 2007 in paragraphs [53] to [55]. Para 53 begins by saying:
A statutory power is subject to limits even if it is conferred in unqualified terms. Parliament must have intended that a broadly framed discretion should always be exercised to promote the policy and objects of the Act. These are ascertained from reading the Act as a whole. The exercise of the power will be invalid if the decision-maker “so uses his discretion as to thwart or run counter to the policy and objects of the Act”.

Now that's the actual law in New Zealand: it is the legal test that would be applied, were these administrative decisions to be challenged in a judicial review at the High Court.

As I said earlier: one of the purposes of the Gambling Act is to "(h) facilitate community involvement in decisions about the provision of gambling".

The principal way the Act does that is to require every local authority to adopt a policy on Class 4 gambling (Class 4 means any pokie venue that is not a Casino), and to periodically review that policy.

Many local authorities in New Zealand have adopted "sinking lid" policies, which means that they will not grant consent for any new Class 4 Venues, and when any Class 4 venue permanently closes the Council will not grant consent for a new venue to replace it.

Christchurch City Council has a sinking lid policy, adopted in August 2009, which it has maintained without amendment since then.

If the Secretary of Internal Affairs had not granted Pub Charity Ltd any extensions to its licence non-surrender period for Ted's Bar then, six months after Pub Charity had surrendered its licence, Christchurch's sinking lid would have sunk by one venue (according to section 98(b) of the Act). But it did not. Which, in my assessment of the evidence, explains the reason these extensions were granted.

It is my firm opinion, based on the evidence we have collected under the OIA, that the Department of Internal Affairs has intentionally collaborated with Pub Charity Ltd to prevent Christchurch's sinking lid policy from having its intended effect. 

I believe that is very likely to be an unlawful use of the Secretary's discretionary powers under section 71(1)(g) of the Act. And I don't believe the Minister of Internal Affairs can pass this off as merely a sequence of "operational decisions" she has no responsibility for.

A wee footnote

Near the beginning I said that DIA's internal guidelines on these matters would have no legal standing.  If a case for judicial review were undertaken of these decisions, the High Court would look first to the Supreme Court's ruling in Unison Networks and then to the broader principles of, and precedents in, administrative law. The guidelines would be more-or-less disregarded by the court. And that, as I recall, that was the position of Professor Philip A Joseph in his book Constitutional & Administrative Law in New Zealand. I expect would have cited some case law on that point (as he does on every other).

Earthquakes vs Pandemic

But surely (I hear you say) Ted's Bar is a unique case; a one-off, a failure of decision-making involving only a handful of officials who took their eye off the ball?

No, it's not. In one of the emails we got under the OIA, a departmental official said Ted's Bar was a "Christchurch affected venue, but not by earthquakes" (or something like that, I haven't been able to relocate the exact quote for this post).

Anyway, the statement piqued my interest, so I made a request to Christchurch City Council under the Local Government Official Information and Meetings Act.

I was provided with a response that included two letters from the Department of Internal Affairs to the council, explaining that the non-surrender extensions had been granted to several Christchurch pokie venues after the 2010 and 2011 earthquakes. You can read those letters here: (9 December 2016) and here: (10 May 2017).

Clearly, similar non-surrender extensions were granted to Class 4 Venue operators after the Christchurch Earthquakes, and a few of those extensions continued to be granted for years afterward. The Department appears to have unilaterally decided the earthquakes were sufficient reason to make decisions favouring the pokie industry, effectively overriding Christchurch's "sinking lid" Class 4 Venue policy.

It is my firmly held opinion (see how I'm avoiding a defamation claim there), that all of the decisions made under 71(1)(g) of the Gambling Act in relation to Christchurch venues after the 2010 and 2011 earthquakes, including Ted's Bar, were unlawful. 

Furthermore, it is my firmly held opinion that, if the Secretary were to make similar decisions in response to the current pandemic, those decisions would also be unlawful.

Which is why I wrote this blog: if the Minister didn't know, now she knows.

Counterfactual

OK (I hear you say, because you are a highly intelligent reader who thinks like a policy analyst), what should the Department have done instead?

As I noted above, the Gambling Act says a Class 4 Venue Operator "must" surrender a Class 4 Venue licence no later than four weeks after gambling ceases at a venue. But that surrendering a licence does not make a sinking lid sink.

First, section 98(b) of the Gambling Act means there's a period of six months during which an operator could apply for a new Class 4 Venue Licence for the same venue, or for a new venue at the same address (that last bit is important - I will explain it in a later blog about "Waikiwi" decisions). Note that an operator doesn't even have to obtain the licence within six months - they only need to apply for it, to keep a venue alive and prevent the sinking lid from sinking.

Second, if the venues were permanently closed, and the sinking lid sank as the council intended, section 102 of the Act allows a council to review its Class 4 Venue Policy policy and replace it with a different one. Some councils have set a "cap" on either the number of machines or the number of venues in their district. They can set a cap at any level they think appropriate, including higher than the current number. One or two councils have even had open-ended policies, with no cap, meaning consent would be granted for as many pokie venues as the industry can support.

And those counterfactuals are clearly within "...the policy and objects of the Act... ascertained from reading the Act as a whole", as the Supreme Court said. Because adopting and amending Class 4 Venue policies is just about the only way in which the Act fulfils its stated purpose in section 3(h): (to) facilitate community involvement in decisions about the provision of gambling.

The other way (in case you're interested, and I just know you are), is that people can object to the renewal of a Casino licence, 25 years after it was first granted and then once every 15 years thereafter.  The community has no involvement in decisions about the provision of gambling for Classes 1 to 3 or for Lotto outlets, which are the other types of gambling covered by the Act.

So what happened with Ted's Bar?

Well, that's still not fully and finally resolved.

Ted's Bar was the trading name of Gibraltar Hospitality Ltd, a limited liability company with one director and shareholder: Mr Christopher Patrick Casserley.

Companies office records show that Gibraltar Hospitality was placed in liquidation on 12 February 2015.  The company apparently had some dispute with its insurance company, after Ted's Bar burned down, which explains why it was not rebuilt within a year or two. We know nothing about the nature of that dispute.

A final liquidators report was lodged on 17 August 2015 and the company should have been subsequently struck off the register, but it wasn't (which is odd).  

But then, on 27 March 2018, the High Court made an order revoking the final liquidators report, after the liquidator applied to have the company reinstated (or rather kept) on the register, giving the reason that:
It was subsequently discovered that the company had a gaming licence for the outlet where it traded from that had a value and was an asset that could be realised in the liquidation. 

That was only peculiar, because there is no such thing as a "gaming licence".  There used to be, under the Gaming and Lotteries Act 1977, but gaming licences were replaced by Class 4 Venue licences by the Gambling Act 2003, according to section 32 of the latter.

Anyway, the Class 4 Venue Licence for Ted's Bar was held by Pub Charity Ltd, not by Gibraltar Hospitality. And Class 4 venue licences are not transferable, according to section 80 of the Gambling Act.

In order to hold a Class 4 Venue Licence for Ted's Bar, Pub Charity Ltd had to have a Venue Agreement with Gibraltar Hospitality Ltd.  Under section 69(3) of the Gambling Act, these agreements expire, and must be renewed not less than every three years.

On 19 July 2019 we received a letter from Charlotte Stanley, Deputy Director Operations - Regulatory System Gambling, assuring us that the Department had renewed Pub Charity's Class 4 Venue licence for Ted's Bar every year since it burned down (even though the site was a vacant lot for six years or more of that time), and saying the Department did not know that Gibraltar Hospitality Ltd had been placed in liquidation.

We kept digging, and on 2 October 2019 received a letter from Lisa Docherty, Director Regulatory System Gambling, saying that:
Pub Charity made a new venue agreement with Gibraltar Holdings Ltd before 16 April 2016 (on 2 April 2016) and another new venue agreement with Ted's Bar and Grill Ltd before 16 April 2019 (on 10 April 2019). The Secretary approved the 2016 venue agreement. Approval in relation to the 2019 agreement is still pending.

We later met with Lisa Docherty, who seemed like a good sort and a very competent official.  She had not been in her role all that long, and seemed very (very) surprised when we told her that Pub Charity Ltd could not possibly have made a valid Venue Agreement with Gibraltar Holdings Ltd on 16 April 2016, because the company was in liquidation at the time and should have been struck off the companies register by then.

Another odd thing about the quote above was that another new venue agreement had been made by Pub Charity with Ted's Bar and Grill Ltd, not with Gibraltar Hospitality.

Companies Office records show that Christopher Patrick Casserley registered Ted's Bar and Grill Ltd (an entirely new company), on 6 September 2018. He then sold it to Tony Gerard Crosbie on or about 18 September 2019.

But what exactly did Crosbie buy?

  • He could not have bought the "gaming licence" for Ted's Bar, because there is no such thing, since 2003. 
  • He could not have bought the Class 4 Venue licence, because they are not legally transferable. 
  • He could not have bought the Venue Agreement, because he was not party to the agreement and anyway it had expired in 2016. 

These mysteries remain unsolved.

The last time we submitted an OIA enquiry about the matter of those venue agreements, our request was rejected under section 6(c) of the Official Information Act, which says the release of that information would be likely:
to prejudice the maintenance of the law, including the prevention, investigation, and detection of offences, and the right to a fair trial

The letter also said that the Department had refused to issue another extension to the licence non-surrender period.

And that ends the story of Ted's Bar, for now.
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