Tatts win $541m from Victoria in pokies dispute, Tabcorp claim dismissed

tabcorp-tatts-group-victoria-pokiesAustralian betting operator Tatts Group has won a $451m judgment against the state of Victoria for not renewing the video poker machine (pokies) duopoly Tatts had shared with Tabcorp Holdings. The Victorian government was also ordered to pay interest on the principal that could bring Tatts’ total payday to $541m. The day wasn’t a total debacle for the government, as the Victoria Supreme Court dismissed an even larger claim ($687m) by Tabcorp over the same pokies issue.

The two companies had inked deals in 1995 to share Victoria’s pokies spoils, each firm paying hundreds of millions of dollars upfront for the privilege. But when the contracts expired in 2012, Victoria decided to share the pokies wealth with clubs, prompting Tatts and Tabcorp to argue that their upfront fees should be refunded. The two sides quickly lawyered up, leading to Thursday’s decision.

Supreme Court Justice Kim Hargrave said Victoria’s rewriting of gambling legislation in 2009 wasn’t sufficient to override the terminal payment provision in Tatts’ contract. But Hargrave said the language in Tabcorp’s contract was “too strict to allow the alternative interpretation contended for by Tabcorp.” Both Tabcorp and Victoria have 14 days in which to decide whether to appeal the Court’s rulings.

The Victorian government is now looking at an unexpected bill that amounts to the total sum it plans to spend building and repairing schools this year. Treasurer Michael O’Brien called the court ruling “a very material blow to the state’s Budget.” O’Brien admitted that while the Budget had listed the pokies cases as potential liabilities, no cash had been set aside to cover the cost.

In a somewhat related story, Liverpool-based pools betting operator Sportech has finally received its £93m value added tax (VAT) refund from the UK government. The company had waged a long legal fight with Her Majesty’s Revenue and Customs (HMRC) over the ‘Spot the Ball’ game on Sportech’s Littlewoods subsidiary. Sportech had paid £40m VAT on the game over a 17-year period before deciding that the game wasn’t subject to VAT. Sportech filed a claim for a refund plus interest that HMRC declined to pay.

Sportech appealed and eventually won a favorable ruling last year with the First Tier Tribunal Tax Chamber. HMRC has appealed that ruling, so the £93m payout could be reclaimed when the Upper Tier Tax Tribunal makes its verdict known later this summer. HMRC actually owes Sportech a further £3m but is holding off until the final judgment is made.