R William Hill Organisation Ltd and Another v The Horserace Betting Levy Board & Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moses,Lord Justice Davis,Lord Justice Maurice Kay |
| Judgment Date | 03 May 2013 |
| Neutral Citation | [2013] EWCA Civ 487 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C1/2012/1999 |
| Date | 03 May 2013 |
[2013] EWCA Civ 487
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ADMINISTRATIVE COURT
QUEEN'S BENCH DIVISION
Lord Justice Stanley Burnton
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Maurice Kay
Lord Justice Moses
and
Lord Justice Davis
Case No: C1/2012/1999
Ms Dinah Rose QC and Ms Jessica Boyd (instructed by Olswang Llp) for the Appellants
Lord Pannick QC, Mr Michael FordhamQC andMr Fraser Campbell (instructed by Herbert Smith Freehills Llp) for the Respondents
Mr David Anderson QC and Mr Oliver Jones (instructed by Gibson, DunnandCrutcher Llp) for TSE (Gibraltar) LP (Betfair) — Interested Party
Hearing dates: 11 th-12 th March 2013
Approved Judgment
The issue in this appeal is whether business customers of betting exchanges may be required to pay a horse race betting levy. If they are bookmakers within the meaning of the Betting, Gaming and Lotteries Act 1963 (the 1963 Act) then the Horserace Betting Levy Board, the respondent, is entitled to impose a levy on them. Customers of a betting exchange will fall within the statutory definition of a bookmaker if they carry on the business of "receiving or negotiating bets".
Stanley Burnton LJ dismissed the application of William Hill Organisation Limited to quash the decision of the Board that business customers of betting exchanges are not liable to levy ( 2012 EWHC 2039 (Admin)). The appeal turns on the correct construction of s.55 of the 1963 Act; in short, does a customer which, as part of its business, bets on a betting exchange, receive or negotiate bets?
The Statutory Scheme
The Board is a statutory body established by the Betting Levy Act 1961. Pursuant to s.24 of the 1963 Act, the Board was required to assess and collect duty to be applied for purposes conducive, amongst other things, to the improvement of horse racing. Monetary contributions to be applied for such purposes were to come from "bookmakers and the Totalisator Board" (s.24 (1)). By s.27(2)(a) of the 1963 Act the levy scheme was required to include provision:
"(a) For securing that the levy shall be payable only by a bookmaker who carries on on his own account a business which includes the effecting of betting transactions on horse races, and only in respect of so much of the business of the bookmaker as relates to such betting transactions."
Section 55 contains the dictionary:
"'betting transaction' includes the collection or payment of winnings on a bet and any transaction in which one or more of the parties is acting as a bookmaker'.
'bookmaker' means any person other than the Totalisator Board who –
(a) whether on his own account or as servant or agent to any other person, carries on, whether occasionally or regularly, the business of receiving or negotiating bets or conducting pool betting operations; or
(b) by way of business in any manner holds himself out, or permits himself to be held out, as a person who receives or negotiates bets or conducts such operations…
and the expression 'bookmaking' shall be construed accordingly."
The 1963 Act consolidated previous legislation both as to licensing of bookmakers under the Betting and Gaming Act 1960 and as to the provision of a levy under the Betting Levy Act 1961. The 1963 Act has largely been repealed with effect from 1 September 2007 by the Gambling Act 2005 but ss. 24–27, governing the levy, and s.55, remain in force (paragraph 2 of the Gambling Act (Horserace Betting Levy) Order 2007 ( SI 2007/2159))
At the time the levy was introduced in 1961, replacing a voluntary scheme, there were no internet betting exchanges. The technology, at that time, was not capable of maintaining an online market place. Accordingly, the bookmaker within the meaning of s.55 was a traditional bookmaker who sought to build a "balanced book". The traditional bookmaker sought to take enough money on each outcome in a race, or sporting event, in proportion to the odds offered so as to ensure that whatever the outcome of the race, or other event, it would make a profit.
The customer makes a bet at fixed odds offered by the bookmaker on a selected horse or selected outcome. If, for example, the horse wins, the bookmaker pays the customer out of its own funds. Traditionally, a bookmaker would not offer the customer the opportunity to make a "lay bet", that is, a bet that a particular horse would not win the race, although from time to time traditional bookmakers have offered that opportunity and William Hill's case does not depend on the distinction between betting for a certain outcome, "backing", or betting against a certain outcome, "laying". When betting was as uncomplicated as that, there could be little difficulty in distinguishing between the bookmaker and its customer, that is, between the bookmaker who carried on the business of receiving or negotiating bets within the meaning of s.55 and its customer, who was not in the business of receiving or negotiating bets. This case turns on whether the statutory definition of bookmaking can be interpreted so as to include betting on a betting exchange, and therefore requires some understanding of how a betting exchange works.
Betting Exchanges
No issue was taken with the judge's description of how a betting exchange works. He reproduced William Hill's description and Betfair's own prospectus (paragraphs 14 and 15). The essential features of the betting exchange are that whereas the traditional bookmaker seeks to generate profit by setting odds so that the amount they pay to winners is less than the stake they reclaim from losers, the betting exchange generates revenue by charging commission on the winnings of successful customers. It takes no risk in relation to individual bets made.
Customers place bets either as layers or backers. The exchange uses software to match opposing bets. The exchange operator only matches a bet request on a given betting "market" if it is has received one or more opposing bet requests from one or more other customers which allow the first bet to be matched. By that means it ensures that the book is always perfectly balanced.
Customers who enter into bets through an exchange specify, within the parameters set by the exchange, and on the exchange's standard terms and conditions, the amount which they wish to bet either as backer or layer and the odds on which they wish to place their bet. If the exchange finds a matching customer or customers, (a large bet may be matched with one or more smaller bets), then a bet or more than one bet is effected. If the bet cannot be matched, the request is cancelled. Once the bet or sporting event is over and the bet has been matched, the exchange deducts money from the account of the losing customer and credits it to the account of the winning customer, less commission and other charges.
Betfair accepts that it is a bookmaker, within the meaning of s.55 and seeks to emphasise that it acts like a traditional bookmaker. Like a traditional bookmaker it:
(a) decides which betting markets will be offered and when customers will be able to bet on them;
(b) determines rules and terms and conditions which apply to the use of the exchange and to bets made on the exchange and how customer disputes will be resolved;
(c) determines which odds are permitted and the minimum stake which customers must provide to make a valid bet request;
(d) determines whether a customer has sufficient funds available in their account for the bet request to be accepted for processing;
(e) determines whether to permit bets;
(f) holds the stake pending the outcome of the events;
(g) determines whether to void bets due to system errors or for other reasons, and
(h) retains the stake from those who lose and pays it out to the winners.
The Statutory Meaning of Bookmaker
Section 55 is concerned to identify those liable to pay the levy pursuant to section 27(1). They are bookmakers. It is important not to overlook the impact of the word bookmaker, or, as Bennion (Statutory Interpretation 4 th Ed (2002)) would have put it, 'the potency' of the use of that description (see Lord Scott's discussion in Oxfordshire CC v Oxford City Council [2006] 2 AC 674, [2006] UKHL 25). The definition in s.55 seeks to distinguish bookmakers from their customers. It does so by referring to bookmakers as those who receive or negotiate a bet.
It is as well to start with the paradigm of a bookmaker, the paradigm with which the 1963 Act was plainly concerned, long before betting exchanges were envisaged. At that time there was a clear division between bookmaker and punter, between those receiving a bet and those placing a bet.
The bookmaker, beyond question, receives a bet. The bookmaker issues to the would-be punter an invitation to treat. The punter makes a request to bet and the bookmaker decides whether to accept that request or not. In that sense the punter makes an offer and the bookmaker decides whether to accept it or not. The bookmaker receives the bet request, receives the stake and facilitates the placing of bets.
The punter places a bet or makes a bet. If he uses the services of the traditional bookmaker, as the 1963 Act envisaged, he receives nothing other than confirmation that his bet has been accepted. He does not receive or negotiate a bet. As Sir Stanley Burnton said, "nobody would say, 'I am going to the betting shop to receive a bet'".
Accordingly, s.55 distinguishes between...
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