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Last Updated: 8 June 2005
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
Case No: 152/04
REPORTABLE
In the matter between
André Gründlingh First Appellant
Ulrich Osmund Schüler
Second Appellant
Turfsport CC
Third Appellant
and
Phumelela Gaming and Leisure Limited Respondent
Before: Howie P, Farlam, Conradie, Lewis JJA et Comrie
AJA
Heard: 10 March 2005
Delivered: 1 June 2005
Summary: Bookmakers and totalizator – Gauteng Gambling Act 4 of 1995 – Bookmakers accepting ‘exotic’ bets – winnings dependent on tote’s published dividends for same bets – whether ‘fixed odds bets’ as defined – whether unlawful competition. Order in paragraph [44].
______________________________________________________
JUDGMENT
______________________________________________________
COMRIE AJA
[1] Litigation in this country about the totalizator
goes back to 1887: Day v Cloete 5 SC 139. See too Brady v SA Turf
Club 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 to the 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.
[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
Rex v Sportspools (Pty) 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 400; 151 LTR 153 (HL). The litigation continues. See eg
Queens Bookmakers Ltd v Commissioner of Customs and Excise 1975 SLT 207;
Tote Investors Ltd v Smoker [1968] 1 QBD 509; Christie NO v Mudalier
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
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 totalizator
in
Kwa-Zulu 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. In the Pretoria High Court, at the instance of the
respondent, Mynhardt
J granted with costs an interdict (in amended form)
restraining the appellants from:
‘1.1 Breaching Section 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 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 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.
[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:
‘‘Fixed odd bets’
[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:
‘‘totalisator’ 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, 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
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 off’ such bets. He takes
the betting risk.
There is no pool of bets to be divided among successful punters. The agreed odds
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 (eg 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 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 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 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 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 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 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 (eg the jackpot), the
calculation takes place after the last relevant race. The respondent publishes
these 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 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 precisely the same as the
dividend on the identical trifecta bet laid with the respondent’s tote.
There is 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.
[12] Para 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. Para 2 of the order was
premised on
the conclusion that by using the respondent’s published 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 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). In the
view which I take of the first leg of this appeal, the fixed
odds bet question,
it is unnecessary to resolve the contention. I shall content myself with the
prima facie dictum that Act 7
of 2004 relates to a concurrent legislative
competence and is largely permissive, and that the provinces can continue to
grant or
refuse bookmaking licences as before, provided certain minimum
standards are observed. Second, Mr Puckrin submitted that the apparent
endorsement by the national legislature of the type of betting now under review
was relevant to this court’s assessment of
the boni mores of the
community in relation to leg 2 of the appeal, viz the unlawful competition
issue. I will weigh this contention later. I turn
now to consider in turn the
two legs of the appeal.
Fixed Odds Bets
[14] It is
clear to me that the exotic bets under review are not tote bets. This is because
the appellants do not operate a ‘totalisator’
as defined. They
maintain no pools of bets to be divided among winning punters, nor do any actual
divisions of this kind take place.
As I have already recorded, the appellants
are on risk and must pay all winning bets from their own resources. On any given
race
or combination of races, they may show a profit or a loss. That is quite
different to a totalizator which runs no betting risk and
which shows no betting
loss or profit. It follows that the bets under review are not outlawed by the
concluding words of the definition
of fixed odds bets: ‘but excludes a
totalisator bet’. Indeed, the presence of these words of exclusion seems
to suggest,
at least prima facie, that tote bets, or some tote bets, are fixed
odds bets, hence the legislative wish to exclude them for one
or other reason of
policy.
[15] Turning to the rest of the definition of fixed odds bet, the
critical words are: ‘odds are agreed upon when such bet is
laid’. (My emphasis). Earlier in this judgment I gave as an obvious
example of a fixed odds bet, a bet for
a win at 5 to 1. I observed that the odds
(5 to 1) would be fixed at the moment when the bet is laid, and that the
payout in
the event of a win would be calculable at the same moment. But
immediately calculable winnings are not expressly required by the
definition. In
the course of argument Mr Puckrin offered a betting example drawn from the game
of cricket. I would prefer one drawn
from a different sport, golf. Suppose the
following wager: in return for a stake of R30, the bookmaker promises to pay the
punter
R10 for each birdie scored by a well known professional golfer in the
third round of a specified tournament. In such a wager the
odds in my view are
indubitably agreed or fixed (R10 per birdie) when the bet is laid. The potential
winnings (or loss) are not immediately
calculable, but they can be readily
calculated on a permutation basis. So I do not think that my hypothetical wager
would fall foul
of the definition.
[16] With the appellants’
exotic bets, the odds are not known, or in that sense fixed, when such bets are
laid. From that moment
until the race or combination of races is run, the odds
fluctuate according to the amounts of money which are wagered (on the tote)
and
the horses which are selected. Thus the appellants’ exotic bets do not fix
the odds; they provide formulae in terms of
which the odds will be determined or
ascertained later. Such a formula arguably, in my view, constitutes an
agreement upon the odds, at the moment when the bet is struck, even
though the actual odds are determined later (in terms of the formula).
I think
that is a permissible interpretation of the definition of a fixed odds bet,
which insists on agreed odds when the bet is
laid rather than known odds. I
conclude therefore that the definition is ambiguous.
[17] I mention in
passing that a difference between an immediately calculable payout in the event
of a win, and an ascertainable payout
in due course, is not unknown to foreign
legislators. In the Scottish case of Queens Bookmakers Ltd v Commissioner of
Customs and Excise, supra, the statutory definition of a fixed odds bet (for
tax purposes) expressly acknowledged the difference. Section 10(2) of the
Betting and Gaming Duties Act 1972 defined a fixed odds bet, as distinct from a
pool bet, as follows:
‘(2) A bet is a bet at fixed odds within the meaning of this section only if each of the persons making it knows or can know, at the time he makes it, the amount he will win, except in so far as that amount is to depend on the result of the event or events betted on, . . . or on the starting prices . . . for any such event . . . .
In this sub-section –
“starting prices” means, in relation to any event, the odds ruling at the scene of the event immediately before the start.’
That is not the definition employed by the Gauteng
legislature, but it does tend to show that an immediately calculable payout, in
the event of a win, is not necessarily a sine qua non of a fixed odds
bet.
[18] The foregoing ambiguity brings me to the history of the
legislation, to which courts may look for interpretative aid in this
event:
Nissan SA (Pty) Ltd v Commissioner for Inland Revenue 1998 (4) SA 860
(SCA). When this matter was decided a quo Act 4 of 1995 defined a fixed
odds bet in the terms quoted in para [5]. The definition had earlier been
amended by the deletion of
the following:
‘or any bet for which the
dividend is to be calculated or otherwise determined by reference to, or any
other basis which depends
upon, a totalisator bet of any kind.’
I
pause here to observe that these additional words would appear to have
prohibited the appellants’ exotic bets. The clear interpretative
inference
to be drawn from the deletion, it seems to me, is that the Gauteng
legislature’s intention has vacillated; and that
under the present
definition the appellants’ exotic bets are to be regarded as fixed odds
bets, although during the period
when the first amendment was in force they were
otherwise regarded.
[19] The court a quo held that the definition
of fixed odds bets was clear and that it meant that the odds had to be
determined (ie the potential payout
determined) when a bet is struck. For the
reasons given above I disagree. The court below declined to be deflected from
its view
by reference to the rules made in terms of s 85 of the Act. Rule
14 contemplates that a number of exotic bets constitute fixed
odds betting. It
also refers to a ‘starting price bet’, where the odds cannot be
known, or the potential winnings calculated,
until the race starts. However, I
too arrive at my interpretation without reliance on the rules. On the first leg
of the appeal,
therefore, I conclude that the court a quo erred and that
para 1 of the order should not have been granted.
Unlawful
Competition
[20] In view of the division of opinion in this Court it
is as well to begin this part of the judgment with a succinct analysis of
what
it is, in relation to exotic bets, the appellants are actually doing. At first
blush it may appear that they are simply borrowing
the respondent’s much
published dividend results which, once disseminated, may well pass into the
public domain. It was so
argued by Mr Puckrin. In reality, however, the
appellants in my opinion are doing more than borrowing the published dividends.
They borrow much of the respondent’s business system. The exotic bets
under review have to be struck in advance of the race(s)
being run. They are
struck with express reference to the respondent’s tote dividends which can
only be calculated and announced
after punters have placed their tote bets and
after the running of the race(s). In a telling admission the appellants conceded
that:
‘Dit is egter geriefliker om Saftote se dividende as riglyn
te gebruik. Die publiek dring oor die algemeen daarop aan om ooreenkomstig
Saftote se dividende uitbetaal te word.’
Inherent in the admission
is the trust placed by the betting public in the respondent’s tote. Some
other tote, less well known,
less reliable, might not invite the betting
public’s custom.
[21] The exotic bets in question thus depend not
just on the published tote dividends. They depend on the very existence and
operation
of the respondent’s totalizator, and its acknowledged
reliability. Without the respondent’s tote, its proper operation
and its
published dividends, the appellants’ exotic bets could not be laid. Nor
could winnings (dividends) on exotic bets be
paid by the appellants to
successful punters. In this way, as it seems to me, the appellants appropriate
unto themselves both the
respondent’s product and its performance. The
appellants achieve this outcome without any significant expense or effort on
their part. The respondent may or may not retain any property or
‘quasi-property’ in its published results; but its business
system
is of great value and the respondent surely has property therein.
[22] Mr
Cockrell, who argued the appellant’s case in reply, advanced a number of
pricing analogies which, he submitted, could
never be regarded as unlawful
competition in a free market economy. That may well be true in some instances.
But we have to concentrate
on the facts of this appeal and those facts show, in
my opinion, not a pricing issue but a clear case of appropriation by the
appellants
of the respondent’s business system with its concomitant
product, performance and repute. That the parties are in competition
with one
another admits, to my mind, of no doubt: the tote and bookmakers compete for the
business of the betting public. That the
respondent suffers loss, through
deflected betting and hence diminished turnover, also appears
likely.
[23] I would emphasise here that we are not concerned with a case
of ‘unprotected’ copying, that is unprotected by statutes
relating
to patents, copyright, designs and the like. This is a particularly sensitive
area in the United States as Callmann on Unfair Competition, Trademarks and
Monopolies (4 ed) records at 15-78 ff. That difficulty arose in our own
leading case, Schultz v Butt 1986 (3) SA 667 (A). See too the cases
collected in Haupt t/a Soft Copy v Brewers Marketing Intelligence (Pty) Ltd
and others 2005 (1) SA 398 (C). In Schultz v Butt, where the mould of
a boat hull was copied, this court required (and found) something more than mere
copying to render Schultz’s
parasitic conduct unlawful. It is interesting
to note that according to Callmann, loc cit, the ‘mould’ cases gave
no
end of difficulty in the light of the doctrine in United States law which
favours statutorily unprotected copying. The matter was
ultimately resolved, it
would seem, by federal legislation. (ibid: 15-87) In Schultz v Butt this
court was able to resolve that difficulty on the special facts of the case. Be
all that as it may, the present appeal is not
a case of copying, protected or
unprotected. Any copying that may occur is purely incidental. As I have sought
to show, the present
case is one of appropriation, not copying (or
pricing).
[24] I digress briefly in order to discuss the decision of this
court in Taylor & Horne (Pty) Ltd v Dentall (Pty) Ltd 1991 (1) SA 412
(A). An important issue in that case was whether competitor A, which under an
exclusive franchise had developed a
demand for an overseas product in the South
African market place, could object to competitor B capitalising on the
demand so
created. The answer was an unequivocal no. Seen in this light the
judgment of Van Heerden JA, an acknowledged expert in the field,
is with respect
not open to question. Businessmen sometimes believe that markets created or
materially enhanced by them, somehow
belong to them. This is a fallacy in a free
market economy. Subject to statutory protection, granted for legislative good
reason,
commercial demand is open to all competitors to supply. Supply and
demand is a basic tenet of any free economy, which explains why
competition is
regarded as healthy and not generally to be curbed. Non constat that the
manner of competition may not travel beyond what is regarded by courts as
fair (and even robust), and cross the border into the realm of
legal unfairness
and therefore unlawfulness. Dun and Bradsheet (Pty) Ltd v SA Merchants
Combined Credit Bureau (Cape) (Pty) Ltd 1968 (1) SA 209 (C) at 216. Passing
off, the original delict in this field, is the obvious example.
[25] In
the present case the appellants do not accept that the demand among punters for
exotic bets was created by the respondent.
Even had the respondent created the
demand, that would not preclude the appellants (on the authority of Taylor
& Horne, supra) from capitalising on that demand by offering and
accepting similar exotic bets, provided their licence so permits. That is
not
the real objection on my approach to the matter. On my approach the appellants
go further than capitalising on the demand: they
appropriate the
respondent’s business system, and its product and performance, for such
purpose. The facts are closer to the
Interflora case (Interflora African
Areas Ltd v Sandton Florist and others 1995 (4) SA 841 (T)) and the Aruba
case (Aruba Construction (Pty) Ltd and others v Aruba Holdings (Pty) Ltd and
others 2003 (2) SA 155 (C)), in both of which it was held by Kirk-Cohen J
and Van Heerden J respectively that there was an improper appropriation.
[26] It may be accepted that the respondent or its predecessor (the TAB) did
not invent the totalizator. The original pari-mutuel concept appears to
have originated in France in the 1860’s. Encyclopaedia Britannica (15 ed,
1980) Vol 8 s.v. Horse Racing,
gives 1872. (This date cannot be right: cf
Tollett’s case, supra, where a pari-mutuel machine was in
use on the Wolverhampton race course in 1870). The appellants in their
affidavits attribute the invention of the modern
tote to an Australian, Sir
George Julius, in the years 1913-1917. That is incorrect, as the early
litigation cited in the opening
paragraphs of this judgment demonstrates. It may
well be that Sir George Julius advanced the relevant technology in a
material
degree. The respondent does not claim invention, for what that might be
worth. It does not assert, nor can it be heard to assert,
some kind of monopoly
over the totalizator system in South Africa. It simply says to the appellants:
if your licence permits you
to accept exotic bets, so be it; but then please use
your own business system, at your own expense, and not ours. Reduced to these
essentials the parasitic nature of the appellants’ exotic bets is in my
view plainly evident. There is no fear that the parasite
will kill the host. But
competing on these uneven terms, there can be little doubt that in accordance
with the laws of nature and
business, the parasite will likely harm the host, as
parasites usually do.
[27] The genesis of much of the modern law of
unfair or unlawful competition is to be found in the inspired decision of the
United
States Supreme Court in International News Service v Associated
Press (1918) 248 US 215. The case concerned the filching of fresh, saleable
news by one news agency from another. The majority opinion
of Pitney J refers,
in biblically redolent terms, to a competitor reaping where it has not sown. It
has had a major influence on
our own law even since Dun and Bradstreet,
supra. In my view the appellants, by their appropriation, reap where they have
not sown. Van Heerden and Neethling Unlawful Competition at 243
distinguishes between direct and indirect appropriation. They refer to German
law. I would regard the appellants’ conduct
as direct appropriation, or
rather misappropriation. Two contrasting American decisions, dealing with the
use of another’s
results, deserve brief mention. They are: National
Football League v Governor of State of Delaware 435 F. Supp 1372; 195 USPQ
803 (use of league’s results for state lottery); and Board of Trade of
City of Chicago v Dow Jones & Co Inc 218 USPQ 636 (use of Dow Jones
stock market index averages for city’s proposed futures exchange).
Protection of the results
was denied in the first case, but upheld in the
second. In neither case were the parties competitors. In the present appeal,
however,
the parties are in direct competition with one another.
[28] The
question which remains is whether the appellant’s conduct is or is not to
be condemned as unlawful. The answer depends
on this court’s assessment of
the boni mores of the community. See Schultz v Butt; Taylor
& Horne’s case; and the Aruba case at 173H-174D; all supra.
Where a competitor has directly misappropriated his rival’s business
system, product, performance
and repute – at no significant expense to
himself – I consider that right-thinking members of the community should
and
would condemn it without much ado. All that can be offered in defence of the
practice is that it has apparently been legislatively
sanctioned in Gauteng for
many years (my brethren Farlam and Conradie’s researches indicate at least
since 1961), and more
recently in Natal, and that the national legislature ex
post facto appears to approve of the idea. I cannot regard these as weighty
considerations on their own, although I accept that legislative
sanction is a
factor relevant to the assessment. Lorimar Productions Inc v Sterling
Clothing Manufacturers (Pty) Ltd 1981 (3) SA 1129 (T) at 1154-5. No doubt
the legislatures have the best interests of the betting community, along with
the provincial
purse, at heart, but I have no reason to suppose that they have
given serious thought to the various matters, and their implications,
which I
have debated in this part of the judgment. Thus there is no hint that the
legislatures have applied their respective minds
to the possibility of
compensation to tote operators for the very real advantage which bookmakers
obtain at the expense of the tote.
[29] As for the betting public,
punters probably welcome the increased choice afforded by the appellants’
exotic bets, or at
least off course the convenience of being able to lay an
exotic bet (on tote terms) at a Tattersalls. How much thought punters have
given
to Saftote’s interests does not appear. At all events an indignant outcry
from the betting public is hardly to be expected
in the circumstances. Its
absence does not count for much in my view. Bookmakers will not complain since
legislative sanction, and
the distinct commercial advantages which I have
indicated, operate in their favour. That leads tote operators, in this instance
Saftote,
to protect their own interests.
[30] I accept that had the
appellants, and other bookmakers, built upon the respondent’s product and
performance, with significant
effort and expense on their own part, and without
timely challenge, then it might have been too late for the respondent, or other
tote operators, to object. In those circumstances the boni mores of the
community might suggest that the tote operators tarried too long. But those are
not our facts. On our facts the appellants
have contributed or added nothing of
value in relation to exotic bets linked to tote dividends. Such bets remain
essentially parasitical.
In my judgment they reap an unrighteous competitive
harvest; they are legally unfair, and hence unlawful. I would therefore confirm
para 1.2 of the order granted by Mynhardt J.
[31] As this is a minority
judgment on this leg of the appeal, it is unnecessary for me to consider an
appropriate cost order in relation
to a partially successful appeal. The
order of the court is set out at the end of the judgment of Farlam and Conradie
JJA.
___________
R G COMRIE
ACTING JUDGE OF
APPEAL
FARLAM and CONRADIE
JJA
[32] We have read the judgment of Comrie AJA. On the first leg we
agree that the definition of a 'fixed odds bet', and the manner
in which it came
to be cast in the form it has now assumed, invite the conclusion that despite
its apparently restricted scope, it
is intended to include ascertainable odds
bets. This has been the provincial law for a long time and the position ought in
our view
not to be disturbed without a clear indication of an intended change
from the lawgiver.
Investigation of the antecedents of the Gauteng Gambling
Act 4 of 1995 reveals that starting price bets (mentioned by our brother
Comrie)
are no novelty. As long ago as 1961 bookmakers were permitted by the then
betting regulations,[2] to take
'starting price bets', exotic bets where the odds were only determined after the
commencement of the race concerned and calculated
on the ruling odds on the
racecourse concerned at the time of such
commencement.[3]
[33] On the
second, unfair competition, leg we agree that the evidence demonstrates that
Saftote and its predecessors have developed
a business system of such
reliability and sophistication that it has earned the trust of the betting
public, a trust that is manifested
by a readiness to do business with Saftote.
The resulting income potential is part of its goodwill and as such a valuable
asset.
[34] We also incline to the view that the appellants in the course
of their business appropriate the results of the respondent’s
endeavour to
calculate pay-out dividends, something that is fundamental to the operation of
its totalizator business. The respondent
is to all intents and purposes in the
same position as that in which Dow Jones and Co Inc found itself. It had for
years published
the famous Dow Jones Average, an index of the United States
stock market that by the skill of its compilation had achieved high public
regard as a valuable investment tool. The Illinois Appellate Court
1st District[4] held that
the unauthorised use of the Dow Jones Index by the Board of Trade of the City of
Chicago brought the Board's conduct within
the boundaries of the doctrine of
misappropriation.
[35] We disagree, however, with Comrie AJA that such
appropriation was unlawful. On 29 Dec 1961 the Betting (Horse Racing)
Regulations
were promulgated by the Administrator of the
Transvaal.[5] Chapter IV regulated the
conduct of bookmakers on racecourses. These regulations contemplated the laying
of all kinds of bets, among
them an 'official course double bet'. That was
defined as 'a bet on whether or not a certain horse wins a certain race called
the
First Leg, as also whether or not a certain horse wins a certain other race,
called the Second Leg, at the same race meeting, but
shall only include a bet
whereof the bookmaker’s stake of the bookmaker or cubicle holder laying
such bet is based upon the
amount payable by a totalizator on the racecourse
concerned.’
[36] These regulations were replaced by others made
under the Horse Racing and Betting Ordinance 24 of
1978.[6] An 'official course double
bet' was slightly differently defined but it was still a bet 'where the
bookmaker's stake in such bet
is based upon the amount payable by the
totalizator on the race-course concerned.' It is worth noting that regulation
13 of the
regulations promulgated under the (repealed) Natal Racing and Betting
Ordinance 28 of 1957[7] envisaged
starting price bets as well as 'bets at tote odds'.
[37] The Gauteng
Gambling Act 4 of 1995 upon its promulgation contained no prohibition on the
practice by bookmakers of using totalizator
dividends to determine winnings.
That changed when Gauteng Act 1 of 1998 came into operation. Section 1(e)
inserted a definition
of ‘fixed odds bet’ reading as
follows:
‘ “fixed odds bet” 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 or any bet for
which the dividend is to be calculated or otherwise determined by reference to,
or any basis which depends upon, a
totalisator bet of any kind.’ (Our
emphasis)
The amendment did not remain in force for long. By s 1(a) of
Act 6 of 2001 the portion which we have emphasised was deleted so that
it would
appear that bookmakers were once again able to take a bet on which the winnings
were to be calculated by reference to totalizator
data.
[38] Any doubt
that the deletion of the emphasised words may have left unresolved was laid to
rest by the National Gambling Act 7
of 2004. It is, as Comrie AJA remarks,
overarching and largely permissive. What it permits is not without significance
for the unlawfulness
debate. One of the bets it permits a bookmaker to take is
an 'open bet'. Apart from being defined in section 1 to mean a bet (other
than a
totalizator bet) in which no fixed odds are agreed it also means
–
'(b) a bet in respect of which the payout is determined after the
outcome of the contingency on which such bet is struck became
known, with
reference to dividends generated by a totalisator.’
[39] The review
of the legislation in the Transvaal, more recently in Gauteng, and also
nationally shows that in regulating the racing
industry the provincial (and
latterly national) legislatures have not, apart from a short interval of
proscription enacted by the
Gauteng Provincial Legislature, considered it
offensive for bookmakers to make use of totalizator dividends in calculating the
pay-out
on exotic bets. Under the national Act presently in force it would be
lawful for a bookmaker to take a bet where the payout is based
on a totalizator
dividend. For many years before 1995 it was also expressly permitted in the
Transvaal.
[40] The test for the unlawfulness of a competitive action is
essentially public policy and the legal convictions of the community.
The latter
concept ordinarily includes not only right-thinking members of the community who
might be expected to hold a view on the
particular topic but also, as Van
Dijkhorst J said in Lorimar Productions Inc v Sterling Clothing Manufacturers
(Pty) Ltd 1981 (3) SA 1129 (T) at 1153A, those involved in the industry,
'The business ethics of that section of the community where the norm
is to be
applied’. Apart from these considerations there are elements like
‘an inherent sense of fairplay and honesty;
the importance of a free
market and strong competition in our economic system; the question whether the
parties concerned are competitors;
conventions with other countries, like the
Convention of Paris.' (1153B-C). While legislative provisions are obviously
expressions
of policy they may (and we think they do here) give expression to
the community’s legal convictions.
[41] The Convention of Paris for
the Protection of Industrial Property defines unfair competition as 'any act of
competition contrary
to honest practices in industrial or commercial matters.'
The theme of honest practices raised in Lorimar had been explored by
Corbett J in Dun & Bradstreet (Pty) Ltd v SA Merchants Combined
Credit Bureau (Cape) (Pty) Ltd 1968 (1) SA 209 (C) and taken up in
Schultz v Butt 1986 (3) SA 667 (A) where Nicholas AJA agreed with Corbett
J that ‘Fairness and honesty are themselves somewhat vague and
elastic
terms' (at 679A-B) but that they are nonetheless valuable concepts; and that
while they are 'relevant criteria in deciding
whether competition is unfair,
they are not the only criteria . . . questions of public policy may be
important in a particular
case . . .' (679E). He added that Van der Merwe en
Olivier Die Onregmatige Daad in die Suid-Afrikaanse Reg (5ed at 58 note
95)[8] ‘rightly emphasize’
that ‘ “die regsgevoel van die gemeenskap” opgevat moet
word as die regsgevoel
van die gemeenskap se regsbeleidmakers, soos Wetgewer en
Regter’ (679D-E).
[42] What we should decide, then, is whether the
appellants, who at the time of the institution of these proceedings used
totalizator
dividends for the purpose of calculating their own payouts, in the
eyes of their fellows and having regard to public policy, acted
fairly and
honestly. Public policy, as reflected in the provincial legislature's commands,
has (apart from one brief interruption)
for almost half a century not required
bookmakers to act otherwise. It is only to be expected that during the long time
that bookmakers
were permitted to use totalizator data, the racing community
would have come to accept that the use of such data by bookmakers was
not unfair
or dishonest. Indeed, while the practice was legislatively sanctioned, it could
not be.
[43] The application by the respondent for an order interdicting
the appellants from ‘using for commercial, business or trading
purposes
the results of the applicant’s totalizator pool’ would have been
assured of success if it had been launched
during the time that the use of
totalizator data by bookmakers was prohibited by the Gauteng legislature.
However, it was brought
after the definition of ‘fixed odds bet’ had
been amended to in effect restore the situation that had prevailed under
the
unamended Act when there was not, as there had been under earlier legislation,
express permission for the use of totalizator
data by a bookmaker or (save for
the short operation of the 1998 amendment in that regard) express prohibition on
their use. The
respondent’s case therefore had to be that, despite the
removal of the 1998 prohibition on the use of totalizator data, the
racing
community nevertheless continued to regard the use of such data as unfair and
dishonest. In the light of the fact that the
practice that bookmakers were now
free to resume had extended over decades, there does not appear to be any
warrant for the conclusion
that a brief period of prohibition would have caused
the legal convictions of the racing community on this issue to change so
dramatically.
We think that on the 'broad equitable approach' espoused by
Nicholas AJA in Schultz v Butt the better conclusion is that the
appellants' use of the totalizator data for their own commercial purposes is not
actionable.
[44] The appeal is accordingly allowed with costs that
include the costs of two counsel. For the orders of the court below there is
substituted an order reading: 'The application is dismissed with costs which are
to include the costs of two counsel.'
___________
I G FARLAM
JUDGE OF
APPEAL
_____________
J H CONRADIE
JUDGE OF
APPEAL
CONCUR:
HOWIE P
LEWIS JA
[1] The spelling in the statute is
anything but consistent. Except for quotations I shall spell totalizator with a
‘z’ (see
the Shorter Oxford English Dictionary), and I shall refer
to fixed odds in the plural. The accepted abbreviation of totalizator is
‘tote’, which I shall use from time to
time.
[2] Betting (Horse Racing)
Regulations promulgated under Administrator’s Notice 2944 in an Official
Gazette Extraordinary for the
province of Transvaal dated 29 December 1961: Reg
72(7) deals with starting price
bets.
[3] Chapter V s37 of the
Betting (Horse Racing) Regulations: definition of ‘starting price
bet’.
[4] Board of Trade
of the City of Chicago v Dow Jones & Company Inc. 218 USPQ
636
[5] See footnote
2.
[6] Horse Racing and Betting
Regulations published under Transvaal Administrator’s Notice 1916 dated 22
December 1978.
[7] Provincial
Notice no 244/1992 dated 17 September
1992.
[8] Note 99 in the
6th edition.
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