Gründlingh and Others v Phumelela Gaming and Leisure Ltd

• Jurisdiction: South Africa
• Judge: Howie P, Farlam JA, Conradie JA, Lewis JA and Comrie AJA
• Judgment Date: 01 June 2005
• Citation: 2005 (6) SA 502 (SCA)
• Docket Number: 152/2004
• Hearing Date: 10 March 2005
• Counsel: C E Puckrin SC (with him A Cockrell) for the appellants. P Ginsburg SC (with him J M Heher) for the respondent.
• Court: Supreme Court of Appeal

Comrie AJA:

[1] Litigation in this country about the totalizator goes back to 1887: Day v Cloete (1887) 5 SC 139. See too Brady v South African Turf Club (1907) 23 SC 385. It reached this Court in 1914 in the leading case of R v Williams 1914 AD 460. There this Court adopted the principle that a power conferred on the E Cape Provincial Council to regulate horse racing and betting did not empower the Council to prohibit betting in a partial but most substantial manner. The Council was consequently not empowered to prohibit bookmaking on horse racing or to confine betting to the totalizator. F

[2] The same is true of England, starting with Tollett and Another v Thomas 6 QBD 518, decided in 1871. Many of the decided cases are collected in the comprehensive judgment of Ogilvie Thompson AJ in R v Sportspools (Pty) Ltd and Others 1949 (2) SA 202 (C). These include the decision of the House of Lords in Attorney-General v Luncheon and Sports Club Ltd [1929] AC G 400 (HL) (151 LTR 153). The litigation continues. See, for example, Queens Bookmakers Ltd v Commissioner of Customs and Excise 1975 SLT 207; Tote Investors Ltd v Smoker [1968] 1 QB 509; Christie NO v Mudaliar 1962 (2) SA 40 (N).

[3] Now bookmaking and the totalizator once again feature in an appeal to this Court. The first and second appellants are licensed H bookmakers who carry on business from premises, called a Tattersalls, inter alia, in Silverton, Pretoria, Gauteng. The respondent is a public company which owns and carries on the business of operating a computerised totalizator and also running thoroughbred horserace meetings. It operates nationally under the brand name Saftote. Gold Circle (Pty) Ltd is licensed to operate a I totalizator in KwaZulu-Natal and the Western Cape. Its totalizator betting pools are commingled with those of the respondent under the name Saftote, for which service Gold Circle pays the respondent a fee. Saftote has some 2 600 betting terminals, on and off course, throughout the country. The turnover is about R150 million per month. J

Comrie AJA

In the Pretoria High Court, at the instance of the respondent, Myn- hardt J granted with costs an interdict (in amended form) A restraining the appellants from:

'1.1

Breaching s 55 of the Gauteng Gambling Act 4 of 1995 by offering or receiving bets which are not ''fixed odds'' bets.

1.2

Prohibiting the respondents from offering bets to the public or taking bets from the public in terms whereof or on the basis B whereof bets are offered to be paid or are paid out on the basis of result and/or dividends derived or obtained from the applicant's totalisator pool.'

[4] The first and second appellants appeal to this Court with limited leave granted by the Court a quo. An interdict was C also granted (para 2 of the order) against the third appellant (Turfsport CC) which is owned by the first and second appellants. That part of the order is not the subject of appeal and nothing further need be said about it. For convenience I shall refer in this judgment to the first and second appellants as the appellants. D

[5] As licensed bookmakers in terms of the Gauteng Gambling Act 4 of 1995 the appellants are authorised to accept 'fixed odds bets' on sporting events (s 55), in this case horse races. To carry on unlicensed bookmaking is an offence (ss 54, 87). The definition of such bets (s 1), as it stood when this matter was decided a quo, read: E

'''Fixed odds bet'' [1] means a bet taken by a licensed bookmaker on one or more events or contingencies where odds are agreed upon when such bet is laid, but excludes a totalisator bet; . . . .'

A totalizator bet was not defined, but a 'totalisator' was: F

'''(T)otalisator'' means a system of betting on a sporting event in which the aggregate amount staked on such event or combination of events, after deduction from such aggregate amount of any amounts which may lawfully be deducted therefrom, whether under this Act or by agreement, is divided amongst those persons who have made winning bets on that event or combination of events in proportion to the amounts staked by such persons in respect of such winning bets, G and includes any scheme, form or system of betting, whether mechanically operated or not, which is operated on similar principles.'

[6] An obvious example of a fixed odds bet with a bookmaker would be 5 to 1 for a win on the celebrated race horse 'Appeal Court'. The odds (5 to 1) would be fixed at the moment when the bet is laid, and the payout in the event of 'Appeal Court' winning would be calculable H at the same moment. We know from the evidence that the odds given by bookmakers may shorten or lengthen as the race approaches and that different bookmakers may offer different odds. In the event of 'Appeal Court' winning, the bookmaker must pay all the winning bets on that horse from his own resources - save to the extent that he may have 'laid I

Comrie AJA

off' such bets. He takes the betting risk. There is no pool of bets to be divided among successful punters. The agreed odds A rule.

[7] As the definition indicates, the totalizator operates on principles different from those described in the preceding paragraph. All the bets (tote bets) on a particular race (for example all the bets for a win in race No 1) are pooled. From the resulting (gross) pool or total, tax and administration expenses (which include the profit of the B tote operator) are deducted. The net pool is divided equally between all the successful punters in proportion to their respective stakes. There is no betting risk to the totalizator or its operator. Subject to lawful deductions, the tote pays out in winnings (or dividends) what it has received in bets. As it was succinctly put in the papers (in lay C terms) punters on the tote bet against each other (whether that is the correct legal position is unnecessary to decide - cf Tote Investors Ltd v Smoker (supra)), whereas a punter placing a bet with a bookmaker bets against that bookmaker. It is also clear that the odds on a tote bet are not fixed when the bet is laid because no odds are agreed. On the contrary, everything depends on how much money is wagered on the race, via the tote, and on how many D winning tickets there are. The dividend can only be calculated after the race has been run.

[8] The essence of a tote bet - ie a bet on the totalizator - is the pool system, namely that each pool is divided among the successful punters. That essence is reflected in the definition of a totalizator set out above. It also accords with E the descriptions and analyses of the totalizator to be found in several of the decided cases cited in the opening paragraphs of this judgment and in the judgments referred to therein.

[9] The totalizator has long since moved from straightforward bets for a win or a place. So-called 'exotic' bets are offered. One F such is the 'trifecta' in which the punter selects three horses to finish first, second and third in the correct order. In a 'trio' bet, the punter selects the first three horses to finish in any order. There are other permutations such as the dupla, the exacta, the jackpot, the pick 6, the place accumulator, the quartet and the swinger. The dividends on such tote bets are likely to be higher than for a simple G place or win. These exotic bets also operate on the pool system which I have described.

[10] Once the race has been run, the totalizator calculates the dividends and these are announced. In respect of a bet which spans more than one race (for example the jackpot), the calculation takes place after the last relevant race. The respondent publishes these H results widely: on the course, in the press, on some radio channels, and on a dedicated television channel. The development and operation of its totalizator, and the publication of its results, have involved the respondent in considerable effort, expertise and expense. The system is now so sophisticated that it even forecasts some dividends I before the race.

[11] It came to the notice of the respondent that the appellants were offering and accepting 'exotic' bets, the stake formula being the tote dividends or results to be published by the respondent. Thus the dividend per rand on a trifecta bet laid with the appellants would be J

Comrie AJA

precisely the same as the dividend on the identical trifecta bet laid with the respondent's tote. There is A this difference, however: with the appellants there is no pool of bets to be divided among winning punters. The appellants are on risk and must pay all winning bets from their own resources. Resolving to put a stop to the practice of bookmakers accepting such exotic bets, the respondent brought the present application in the Court a quo. B

[12] Paragraph 1 of the order granted by Mynhardt J was premised on his conclusion that the exotic bets laid by the appellants were not fixed odds bets and that the appellants were accordingly not authorised by their licence to accept them. Paragraph 2 of the order was premised on the conclusion that by using the respondent's published C dividends or results as ingredients of such bets, the appellants were guilty of unlawful competition. Both conclusions are challenged on appeal.

[13] While this appeal was pending the National Gambling Act 7 of 2004 came into force. Its provisions were urged upon us by counsel for the appellants, Mr Puckrin, in two ways. First, he D submitted that certain definitions and other provisions relating to the permissible activities of licensed bookmakers override any contrary stipulation in the Gauteng law. He referred us to the definitions of 'bookmaker', 'fixed odds bet', and 'open bet'. He also referred us, inter alia, to ss 4, 8, 30, 37 et seq, 44 and the Schedule (transitional provisions), more particularly s 2(2). E In the view which I take...