Judicial Review of Levy Board's Treatment of Betting Exchange Users Fails

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Judgment was handed down this morning in the judicial review claim brought by William Hill (and originally by the BHA until it withdrew at the beginning of the hearing, see here). Olswang acted for the Claimants in the proceedings.

The case had its origins in a consultation launched by the Levy Board in the summer of 2010 on whether betting exchange users are subject to the Horserace Betting Levy.  The contention of the BHA was that those users who carry on a business are "bookmakers" within the terms of the Betting, Gaming and Lotteries Act 1963 which defines a bookmaker as someone who "…carries on, whether occasionally or regularly, the business of receiving or negotiating bets …" and therefore are subject to the Levy. 

Although the consultation closed at the end of 2010, nothing further was heard from the Levy Board until March 2011 when it published the opinions it had obtained from Lord Pannick QC and Michael Fordham QC.  These opinions acknowledged that exchange users could be in business and could be "receiving or negotiating bets" but then focused on section 27 of the 1963 Act which states that the Levy is payable "only by a bookmaker who carries on on his own account a business with includes the effecting of betting transactions on horseraces …".  Their opinion was that "effecting" meant "making the arrangements for" a betting transaction and that it is the exchange which makes those arrangements and not the parties who enter into the bet.  Accordingly, their view was that only the exchange is subject to levy and not the users who transact via the exchange and that this would also apply to traditional bookmakers' exchange transactions.  (All of the documents relevant to the consultation can be found here).

The Levy Board invited responses to these opinions and a number of contrary opinions were submitted on behalf of the BHA and bookmakers saying that "effecting" must include those who enter into a bet via an exchange and the purpose of section 27 was to make it clear that the Levy was only payable on horseracing bets.  Betfair submitted a QC's opinion which supported the analysis of Lord Pannick and Mr Fordham. 

The BHA then argued, as it had done since before the original consultation commenced, that this was purely a question of statutory interpretation which should be settled by the courts.  Further opinions were obtained from Lord Pannick and Mr. Fordham and these issues were then discussed at Levy Board meetings in April and June of last year.  At its board meeting on 8 June, it was resolved (i) by a majority decision, that the Board should not seek a declaration from the courts as to the correct interpretation of the provisions of the 1963 Act; and (ii) after exercise of the Chairman's casting vote, that, as a matter of law, exchange users are not subject to the Levy.  It was the latter decision that was the subject of the judicial review claim brought by the BHA and William Hill in September. 

At the hearing, William Hill's counsel argued that exchange users "receive" bets and that where exchange users were in business they would be "bookmakers" and therefore subject to the Levy.  Lord Pannick for the Levy Board no longer argued that "effecting betting transactions" should be interpreted as meaning "arranging or facilitating bets" but instead argued that arranging or facilitating was how "receiving" should be construed.  He also argued that the policy underlying the 1963 Act and its predecessor legislation and also of the Gambling Act 2005 was not to regulate traditional punters or backers and that the same policy should apply to exchange users who should be equated with traditional punters.  Betfair's counsel effectively adopted Lord Pannick's submissions on behalf of the Levy Board.  In response to Lord Pannick's policy argument, William Hill's counsel pointed to the explanatory notes to the Gambling Act 2005 and, in particular, to the notes on section 296 of that Act (which provides an exemption for private gambling) which state that "these provisions apply equally to those using the services of a betting intermediary, i.e. an internet betting exchange.  The intermediary will require an operating licence … but the users of the exchange will benefit from the exemption in these sections, provided their use is in a non-business capacity."

In his judgment, Lord Justice Stanley Burnton effectively rejected all of the arguments made by William Hill, the Levy Board and Betfair.  Whilst he quoted extensively from DCMS discussion papers in relation to the 2005 Act, he agreed with the contention put by William Hill that "there is no reason to conclude that the scope of regulated activities under the 2005 Act should be construed as being the same as "receiving or negotiating bets" under the 1963 Act".

He did not agree with Lord Pannick and Mr. Fordham's opinions regarding the meaning of "the effecting of betting transactions on horseraces" and said that it is clear that the function of these words "is to restrict the horseracing levy to betting on horseracing".  The judge also concluded that "I do not think that it is possible to interpret the receiving of bets as meaning providing facilities for betting". 

Having rejected all of the different arguments put to him, the judge then set out his own analysis as follows:-

"The question posed by the statute is not whether, in the course of a business, a person receives bets.  The question is whether he carries on the business of receiving bets.  Someone who operates a betting shop, or who has a stand at a race meeting, receives bets there.  His business is that of receiving bets.  The person who operates through a betting exchange may in the course of doing so find himself receiving a bet.  But he does not carry on the business of receiving bets.  He is not a bookmaker.  It follows that he is not liable to pay the levy."

So according to the judgment, exchanges users are - contrary to the original views of the Levy Board's lawyers - effecting betting transactions on horse races.  They may also - once again contrary to the original views of the Levy Board's lawyers - be receiving bets.  In addition, they may be carrying on a business.  However, according to the Judge, they are not carrying on the business of receiving bets.

What the difference is between a person who is carrying on a business which includes the receiving of bets and a person who is carrying on a business of receiving bets is not clear.  That was not a distinction that either the Levy Board, Betfair or any other party had ever sought to make during the consultation.  Nor was the point argued at all in the proceedings.  It was a subtlety introduced by the judge only in his final judgment.

This leaves the law in a very uncertain position.  Not only is this distinction confusing, it also leaves unclear the position of the activities of traditional bookmakers on exchanges.  On one view, these activities would now appear (again) to be subject to levy since traditional bookmakers are certainly carrying on a business of receiving bets.  But this is contrary to the position adopted by the Levy Board and the challenge to that position has failed.

The only means of clarifying these uncertainties is if the case is appealed to the Court of Appeal.