Automatic Totalisators Ltd v Federal Commissioner of Taxation [1920] HCA 25; (1920) 27 CLR 513 (27 April 1920)

HIGH COURT OF AUSTRALIA

Automatic Totalisators Limited and Another Plaintiffs; and The Federal Commissioner of Taxation Defendant.

H C of A

27 April 1920

Knox C.J., Isaacs, Gavan Duffy, Rich and Starke, JJ.

Langer Owen K.C., Lamb K.C. and Weigall, for the plaintiffs.

Weston, for the defendant.

The following judgments were read:—

April 27

Knox C.J.,

Gavan Duffy and Starke JJ. (read by Knox C.J.).

The question raised in this matter is whether money paid to a successful investor in the totalisator is a cash prize in a lottery within the meaning of sec. 14 (h) of the Income Tax Assessment Act 1915-1918.

The method of operation of the totalisator is described in the statement of claim as follows:—[His Honor here read pars. 7 to 10 of the statement of claim, and then continued:—] This statement is admitted by the defendant to be correct.

It is well settled that the word "lottery" imports a distribution by chance and nothing but chance, that is, by doing that which is equivalent to drawing lots (see Hall v. Cox[1]; Scott v. Director of Public Prosecutions[2]). In the present case it is, in our opinion, impossible to affirm that the distribution of money to successful investors on the totalisator is determined purely by chance. A person investing on the totalisator selects the horse on which he wishes to invest his money, and, presumably, in doing so forms a judgment to the best of his ability, having regard to his knowledge and experience, and to such information as he may acquire, as to the probability of that horse winning the race. In such a transaction the investor exercises his own volition with respect to the horse which he desires to back, and eliminates all chances except those inseparable from the event of the race and the amount of the dividend. The transaction undoubtedly amounts to a bet, and substantially only differs from a bet made with a bookmaker in that in the one case the fund out of which the winner is to be paid is made up by mutual contributions of investors and the rate of odds is determined by the amounts invested on the respective horses, while in the other case the winners are paid the amount of their winnings out of the money of the bookmaker and the bookmaker determines the rate of odds. We think it is clear that a bookmaker cannot be said to carry on a lottery, and equally clear that a similar transaction carried out by means of the totalisator is not within the description of a "lottery." The decision in Stoddart v. Sagar[3] is precisely in point, and we see no reason to doubt that that case was correctly decided.

For these reasons we are of opinion that the plaintiffs are entitled to the injunction claimed in par. 3 of the prayer of the statement of claim, this motion being by consent of the parties treated as a motion for decree on admissions in the pleadings.

Isaacs J.

I concur in the decision. The cases cited and referred to by Mr. Langer Owen were not questioned or distinguished by the defendant. I am not convinced by their reasoning. To a great extent I feel pressed by their conclusions. On the whole I feel bound to concur in the judgment of the Court.

Rich J.

I concur in the result; but from the way the case was argued for the defendant I reserve my opinion as to the applicability of the cases cited.

Defendant undertaking not to enforce the provisions of the notice set out in the statement of claim, no order except that the defendant pay the costs of the action, including the costs of the application to Starke J.

Solicitors for the plaintiffs, Macnamara & Smith.

Solicitor for the defendant, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] (1899) 1 Q.B., 198.

[2] (1914) 2 K.B., 868.

[3] (1895) 2 Q.B., 474; 18 Cox C.C., at p. 171.