The ACT TAB lost the commercial and legal trifecta in the past 48 hours.
Its very favourable link with the Victorian superpool was severed. It has an interim court injunction against it preventing it from severing links with the Vanuatu-based Vitab Ltd. And it faces an action for damages from Vitab in any event.
This is despite repeated assurances over the past two months from the present Minister for Sport, David Lamont, that he was confident a pooling arrangement would continue and repeated boasts from his predecessor, Wayne Berry, that the Vitab deal was good for the ACT.
The injunction, granted in the Federal Court in Melbourne on Sunday night, was continued by Justice Alan Neaves in Canberra yesterday pending further argument today.
Counsel for Vitab, Will Houghton, said that if the ACT TAB were unlawfully to sever the link with Vitab, Vitab’s business would be extinguished. The Vanuatu Government had insisted that Vitab have a link with an Australian TAB to keep its betting licence.
Vitab’s business turnover had grown in the first six months to $600,000. Its first year’s turnover would be $26 million and in future up to $100 million. The contract was for five years with an option to renew for another five years.
Earlier in the day, Vitab principal Daniel Kolomanski was reported by the ABC as saying that if the link were severed Vitab would sue for $50 million. He would not speak to the media after yesterday’s hearing.
ACTTAB entered the contract with Vitab in October last year under which ACTTAB agreed to accept and process bets taken in Vanuatu by Vitab for a commission.
In January, the Victorian TAB gave the required six months’ notice that it would sever the pooling link with ACTTAB.
The importance of pooling is that the larger the pool, the larger the bet that can be taken without distorting the dividends paid because dividends are struck at 85 per cent of the pool. Large punters do not like small pools.
ACTTAB evidence yesterday was that the desertion of large punters would cut turnover by $14.2 million and revenue by $2 million.
Both Victoria and NSW have insisted that ACTTAB refuse to accept overseas bets if it is to link into their pools.
When the injunction was granted, the in-principle agreement with Victoria collapsed and the chief executive of VicTAB, Clive Hooke, announced yesterday that pooling would end. ACTTAB confirmed this had happened.
In court, Mr Houghton argued that on the balance on convenience ACTTAB should be made to continue its links with Vitab, even if that meant it lost its link to the superpool.
He gave several reasons. Vitab would lose more than ACTTAB. The contract gave Vitab the option of continuing or discontinuing with the contract without a superpool link and Vitab had chosen to continue. The contract did not give ACTTAB the option of severing the contract if the pooling fell through. Indeed, under the contract ACTTAB “”warranted” that it would provide a pool, (which is legalese for saying it is open to an action for damages if it fails to do so, but the contract continues).
Mr Houghton said the contract had not been “”frustrated” (legalese for excusing the parties from their contractual obligation because of some external event) because it was still possible for the contract to continue without the pool.
The contract should continue because damages alone were a less appropriate remedy given that Vitab was new in business with profits were growing very rapidly and therefore hard to assess.
Mr Houghton condemned the Victorian and NSW TABs for insisting onVitab’s exclusion.
“”One could not imagine a clearer case of inducing a breach of contract,” he said.
He condemned also the ACT for giving what it “”laughingly”” called “”advance notice” to Vitab on Saturday night at 7.30pm that it would sever Vitab’s link at midnight on Sunday.
Doug Williamson, QC, for ACTTAB will present his argument today.
In another TAB development, public offers in the privatisation float for Victoria’s TAB close on Friday, with the float due on the Australian Stock Exchange on August 15. The Victorian Government hopes to raise up to $810 million from the float.
Yesterday’s hearing gave us the first public knowledge of some details of the VITAB and VicTAB contracts. To date the Government has refused to make the contracts public on the ground of commercial-in-confidence _ a polite way of saying cover up your bungles.
We learned that Victoria was charging the ACT an astonishingly low one-eighth of one per cent turnover for the pooling arrangement. It was clearly a governmental “”in-the-best-public-interest” arrangement. Why anyone allowed it to be put into jeopardy is extraordinary.
We learned that the essential elements of the deal for Vitab were incorporated bindingly into the contractual arrangement, yet the essential elements for ACTTAB were left in the air. Moreover, ACTTAB knew of the importance of its essential elements before the contract was signed but still did not include them.
Vitab started with a binding confidentiality agreement. If the pooling arrangement failed it could pull out of the contract, but ACTTAB could not. And Vitab got the best of both worlds: if the pooling arrangement failed it could sue for damages (ital) and (end ital) continue the contract.
An essential element for ACTTAB was that Victoria would not sever the link on Vitab’s entry on the scene. We learned yesterday that TAB officials canvassed that very matter with the Victorian TAB before the Vitab contract was signed. Yet, was any binding contractual guarantee sought from Victoria? No. Did the ACTTAB give itself an out in the Vitab contract if Victoria did pull the pin? No.
We learnt also that the Victorian TAB did not feel that it had bound itself with an assurance verbally and in a letter that the pool would continue even if Vitab joined in. And that later on when it got cold feet, it could ignore that assurance and insist on the letter of the contract.
Another essential element for ACT was that Vitab would not poach Australian punters from ACTTAB or any other Australian TAB it might pool with. Was that put in an enforceable way into the contract? No.
It is just as well court hearings with evidence on oath is done in public, or we would never find out how these the commercial-in-confidence contracts are such a “”good deal for the ACT”, to quote Mr Berry.