IFX Investment Company Ltd & Ors v Revenue And Customs

The principal issue on this appeal from the Upper Tribunal (Norris J) (“the UT”) is whether the First-tier Tribunal (“FTT”) were wrong to hold that the appellants’ “Spot the Ball” competitions (“STB”) was exempt under the gaming exemption in Group 4 of Schedule 9 to the Value Added Tax Act 1994 (“VATA”), and the statutory provisions which VATA replaced. To fall within the gaming exemption, STB must be a “game of chance” within the meaning of the Gaming Act 1968 (“GA 68”), and the dispute is over the word “game” and (as a result of HMRC’s respondent’s notice) the words “of chance”. The FTT had rejected the argument that there had to be what I will call an “inter-player interaction rule”, i.e. a rule that a competitor has both to make a move and also to respond to another competitor’s move or to a change of circumstance resulting from his move. It also held that STB was a game of chance. The UT found an error of law on the basis that inter-player interaction was classically required, and that its own assessment was that STB was not a “game.” It did not therefore need to consider whether STB was a game “of chance.” The appellants say that the UT was wrong to require a degree of inter-player participation: there is no hard and fast rule about that. Therefore there was no error of law entitling the UT to intervene.

For the detailed reasons given below, I agree that there is no hard and fast rule or presumption about inter-player participation in a “game” for GA 68 purposes and that the FTT made no error of law in holding that STB was a “game of chance”. The appeal must therefore in my judgment succeed.

The appellants are a group of operators of STB (or successors in title to or assignees of, operators of STB) and the period in issue is from 23 April 1979 to 31 December 2006. STB was played by the operator producing a picture of a football game but with the ball, together sometimes with other features which might potentially assist in locating the ball, such as the facial expressions or orientation of spectators, blanked out. The competitor had to place a cross where he or she thought the ball was and return the coupon to the operator. There was no single set of rules applying to STB. A typical coupon would invite a participant to “use your skill and judgment to decide from all the information contained in the picture, the spot where you think the centre of the ball is most likely to be and indicate the spot by making a cross….”

The form of STB with which this appeal is concerned is called “panel STB”. Although participants are instructed to guess the actual location of the missing ball, the rules generally made it clear that the winner would be decided not by reference to the actual position of the ball on the original photograph, but by reference to the opinion of the panel of experts as to which entry was most “skilful” or was closest to the panel’s opinion of the most logical position of the ball. STB was presented to the public as involving skill and judgement and also involving elements of chance. The FTT held that FTT was a game “of chance” for GA 68 purposes.

During most of the relevant period, the VAT exemption for gaming was contained successively in Group 4, Schedule 5, Finance Act 1972, Group 4, Schedule 6, Value Added Tax Act 1983 and Group 4, Schedule 9 Value Added Tax Act 1994, which provided exemption from VAT for:

From 1 November 2006, this was amended by the addition of the words “for a prize” at the end but nothing turns on this.

Until 31 October 2006 the successive provisions all defined “game of chance” for these purposes as having the same meaning as in the GA 68. The relevant provisions of GA 68 were in section 52:

(1)

….“game of chance” does not include any athletic game or sport, but, with that exception, and subject to subsection (6) of this section, includes a game of chance and skill combined and a pretended game of chance or of chance and skill combined;…

(6)

In determining for the purposes of this Act whether a game, which is played otherwise than against one or more other players, is a game of chance and skill combined, the possibility of superlative skill eliminating the element of chance shall be disregarded.

From 1 November 2006, the definition of “game of chance” was moved into the Notes to Group 4 of Schedule 9 to the Value Added Tax Act 1994. The new definition extended the exclusion of superlative skill to all games of chance, and not just those played against an operator or against a machine. Subject to that, the new provisions contained only immaterial differences to the definition in section 52(1), so I shall not set them out.

The FTT rejected HMRC’s argument that a “game” required interaction between the players. The essence of the FTT’s approach was that in the absence of any real guidance in the case law they had to approach “game” according to its ordinary meaning in the context of the GA 68. Dismissing case law which I will need to consider in detail below, the FTT held on these points:

79.

Our analysis of the cases is as follows. First, we read Regional Pool Promotions and Armstrong as establishing little more than that some degree of active participation is inherent in the concept of a “game” (a proposition that both parties in this appeal agree upon, and a feature which they both agree is present in STB). Beyond that, the only principles we extract from them are (a) that the question of whether an activity amounts to a “game” or not is primarily a question of fact and (b) that there is no rule of law that requires an assembly of players in order to constitute a “game”.

80.

Turning specifically to Adcock, we consider it to be unpersuasive in the present case. The bingo players were all clearly playing in their local game of bingo. The question was whether there was also a national game involving all of them. It seems to us that the general observations made in both the High Court and the House of Lords about the nature of a “game” must be understood in the context they were made, that is to say a discussion about bingo. In a game of bingo, a crucial part of the game is the interaction with the caller and the other players, so it is not hard to understand why the view was taken that the absence of that interaction, together with the lack of any requirement to do anything more than participate in the normal way in the local game, should mean that there was clearly no national game.

At paragraph 97 of their decision, the FTT adopted the dictum of Lord Hailsham in News of the World Ltd v Friend [1973] 1 WLR 248, 254D that “in these cases the court will look at the realities of the offer and the competition and will not allow itself to be deceived, whether innocently or otherwise, by delusive appearances or descriptions.” The FTT did not therefore confine their attention to the contractual documentation, and this is relevant to the respondent’s notice.

At paragraph 111 of their decision, the FTT relied on the fact that section 52(6), which enabled single-player activities against an operator or machine to be a game, was enacted only in 1968. HMRC contend that this led the FTT to disregard the cases that were decided before 1968. I will call this “the section 52(6) point.”

The principal reasoning of the FTT is to be found in the paragraphs of its Decision which follow:

112.

If we find the cases unhelpful, we must fall back on general principles of construction.

113.

Like many other words, the word “game” is a chameleon. It takes its colour from the context in which it is used. It has numerous “ordinary meanings”, as highlighted by the entry from the Shorter Oxford English Dictionary which was put before us. Ignoring for a moment meanings which relate to wild animals pursued with guns or rods, it can mean “amusement, fun, sport”, “amusement, diversion”, “a diversion in the nature of a contest, played according to rules, and decided by superior skill, strength or good fortune”.

114.

We do not consider that an activity must involve more than one person in some kind of interaction before it can be a “game”. It is normal, for example, to refer to a “game of patience”, which activity involves only the player and a pack of cards. We discount as unduly artificial Mr MacNab’s argument that this is because there is an element of “interaction” in such a game, namely an interaction between the player and the randomness of the cards.

115.

In seeking to explore the boundaries of the concept of a “game”, we also considered “puzzles” (involving the application of skill or logic to arrive at a single correct solution, such as in a crossword puzzle or Sudoku), “pastimes” (involving activities of many kinds whose main purpose is to spend time pleasurably) and “competitions” (in which a participant pits himself against another participant or participants with the purpose of achieving victory). It became readily apparent that such consideration did more to illustrate the vagueness of the concept of “game” than it did to clarify it.

116.

In Oasis Technologies (UK) Limited v HMRC [2010] UKFTT 292 (TC) at paragraph [65], the First-tier Tribunal said (when considering the meaning of the word “game” for the purposes of determining whether a particular activity was a “game of chance” for the purposes of section 6 of the Gaming Act 2005):

“There is no definition of “game” in section 6, and so we must construe this term according to its ordinary meaning. There is no single meaning that can be attached to this term. According to the Shorter Oxford English Dictionary, it can variously be regarded as meaning an amusement, fun or sport, or as meaning a diversion, whether or not one in the nature of a contest played according to rules and decided by superior skill, strength or good fortune. We consider that this demonstrates that “game” has a wide meaning, to be construed according to its context”.

We respectfully agree (subject to the inclusion of the missing comma after the word “contest”).

117.

In the light of all the above, and adopting the approach of the First-tier Tribunal in Oasis, when considered in the context of section 52(1) Gaming Act 1968 or of Note (3) to Group 4, Schedule 9 to the Value Added Tax Act 1994, we consider it perfectly apt to refer to the activity of STB as a “game”.

On the issue whether STB was a game of “chance”, the FTT held that, however skilful a competitor might be and even therefore if he had superlative skill, the most that skill and judgment could do was to estimate the ball’s approximate position and that accordingly the game was one of chance. The FTT noted that this Court had held in R v Kelly [2009] 1 WLR 701 that the element of chance did not have to be predominant. The FTT adopted another dictum of Lord Hailsham in News of the World Ltd v Friend at 256A that “the most that skill and judgment can do is to estimate its [i.e. the ball’s] approximate position.” This is also relevant to HMRC’s respondents’ notice.

In the circumstances the gaming exemption applied and the operators’ appeals were allowed.

The UT held that “playing a “game” involved some sort of engagement with other players, and that accordingly the FTT erred in law by holding that STB, where this element is absent, could involve playing a game.

The UT held that the FTT had not paid sufficient attention to the authorities and that a “game” had certain essential elements. In particular playing a game involved among other things the player interacting with a changed circumstance or responding to another player’s interaction though this was not a universal rule:

[22] ‘Playing’ a game involves (a) the player doing something which causes a change in existing circumstances and (b) the player thereafter interacting with the changed circumstance or responding to another player’s interaction with the changed circumstance. Classically where a game involves more than one player (whether the other player is an individual competitor or an ‘institutional’ participant, like a ‘bank’ or the ‘house’, or is a machine) it will involve move and counter-move: ready examples are chess and other board games, multiple-handed card games, noughts-and-crosses. Classically where the game is a solo one it involves move and response, or a succession of related moves. An example of the former is all forms of patience, where the act of turning over a card from the pack requires an assessment by the player of the displayed cards, possibly ‘playing’ the exposed card, possibly rearranging others in consequence of that ‘play’ and displaying new cards, and then turning over another card from the pack and repeating the process. Examples of the latter are harder to bring to mind, but perhaps solo darts or solo golf where the 'player' is playing himself to try and beat his own last highest score or to match par. Here the act which constitutes the 'play' is related to some prior act (such as the setting of a target) or some subsequent act (such as the aggregation of scores). Throwing a single dart at a board generally or a simply hitting a ball and then starting again or simply turning over a card to see what it is and then starting again would hardly constitute 'a game' though it might qualify as a pastime.

The UT went on to say how in ordinary language this is how a game of chance is “played.”

In the judgment of the UT, STB is “played” in “solitary isolation” and does not involve any interaction between competitors. The only contract is between the operator and the individual competitor. Additionally the act of placing a cross on the coupon was not “playing” (UT Decision, [37]).

On the section 52(6) point, the UT held that the FTT were wrong to rely on the fact that section 52(6) was not enacted until after Adcock v Wilson [1969] 2 AC 326, Armstrong v Director of Public Prosecutions [1965] AC 1262 and Regional Pools (“the three bingo cases”) had been decided. The word “game” had covered gaming machines because of section 17 of the Betting and Gaming Act 1960, which defined a gaming machine as

“a machine for playing a game of chance, being a game which requires no action by any player other than the actuation or manipulation of the machine”.

The UT held that the object of section 52(6) of the GA 68 was to bring within the scope of the terms 'game of chance and skill combined' games played against the bank or otherwise than against one or more players, as where gaming machines are used: see R v Kelly at [11](vi).

As explained in paragraph 1 above, the UT did not consider whether STB was a game “of chance”. The challenge to its decision has therefore focused on whether the FTT erred in their conclusion that STB is a game.

THE PARTIES’ SUBMISSIONS

There is little dispute about the fact that in general the question whether a competition is a “game” for the purposes of the GA 68 is a question of fact (see, for example, R v Kelly [2009] 1WLR 701). In those circumstances an appellate court should leave it to the fact-finder to find its meaning in a particular context and not seek to arrive at the meaning itself by refined analytical tools: see Seay v Eastwood [1976] 1 WLR 117 at 121 per Lord Wilberforce:

Legislation against, or controlling, gaming, wagering and betting is many centuries old in the United Kingdom. With only moderate success Parliament has endeavoured to keep up with the enormous variety of these activities which has arisen from the ingenuity of gamblers and of people who exploit them. It is impossible to frame accurate definitions which can cover every such variety; attempts to do so may indeed be counter-productive, since each added precision merely provides an incentive to devise a variant which eludes it. So the legislation contains a number of expressions which are not, or not precisely, defined: bet, wager, lottery, gaming, are examples of this. As to these, while sections appear in various Acts saying that a particular activity is, or is deemed to be, within the word, the general meaning is left to be decided by the courts as cases arise under the common law. The process, and I think it a very sound one, is then for magistrates, using their local knowledge, experience of the world and common sense, to give a sensible interpretation of the expressions used, subject to control of their decision by a court itself experienced in deciding this type of question. When, as should rarely occur, higher appellate courts are required to review these cases, they should, in my opinion, endorse decisions which they can see have been reached and confirmed in this way. Refined analytical tools are not suitable instruments in this context.

There is also no significant dispute that, as Jonathan Peacock QC, for the appellants, submits, the word “game” in the GA 68 is to be given a wide meaning: see Rosenbaum v Burgoyne [1965] AC 430, 439 where Lord Reid held that the word “game” in the context of gaming legislation, which is regulatory, is used “in an unusually wide sense.”

The difference between the parties is that HMRC contend that the case law shows that there is a requirement in law that a “game” involves inter-player interaction. It was common ground before the FTT that there was some degree of active participation, but the UT’s point is that it was not enough: after a competitor sent in his coupon there was nothing more for him to do. There was no game or playing of a game unless he interacted with another competitor’s move or a change of circumstance. Indeed it said that this is necessary to “play” a game.

Mr Peacock submits that it follows that HMRC must show either that the inter-player interaction rule is a rule of law which requires interaction between competitors or between a competitor and a machine, and therefore prevented the FTT from concluding that STB was a game, or that their conclusion was perverse. The latter is not alleged.

Moreover, on Mr Peacock’s submission, there is no case which supports the existence of the inter-player interaction rule. Mr Peacock went through the three bingo cases and since I shall have to consider them below I need only mention here some of the points Mr Peacock made. In Adcock v Wilson the Divisional Court referredto a common notion of a “game” as involving interaction with other competitors (see per Widgery J at [1967] 2 QB 683 at 702G). However, Widgery J merely regarded it as “extremely difficult” to envisage a “game” without such interaction and Winn LJ made it clear that such interaction was not a necessary element of a “game” (see 699F). Likewise in Armstrong v DPP, the House of Lords considered that interaction with other competitors was a factor of “considerable weight,” not that it was determinative in itself.

Mr Peacock further submits that notions of what is gaming may have changed with time and technological development. On his submission, section 52(6) of the GA 68 (paragraph 7 above) is significant because it makes it clear that a “game” can have a single player or be a multi-player activity, and that a game does not have to be played against another player.

Andrew Macnab, for HMRC, submits that playing a game must involve (see Regional Pool Promotions) or must ordinarily involve (see, on his submission, Armstrong and Adcock) some degree of communication and thus interaction between the competitors. On his submission, the essence of a “game”, at least in the narrower context required by gaming legislation (see Regional Pool Promotions at 256, per Winn J), is interaction between competitors (or other agents, such as “the bank” or a gaming machine) that is governed by a set of rules specifying the possible moves for each participant and a set of outcomes of each possible combination of moves. A mere one-way communication, or submission, of a “player’s move” does not suffice. Such a lack of interaction renders what could otherwise be a game a competition (Adcock). STB is not a one-person “game”, but a multi-person activity because entries are not judged independently on their own merits.

The three most important cases are the three bingo cases, Regional Pools, Adcock and Armstrong. In my judgment, none of them establishes that there cannot be a game unless there is inter-player interaction or that inter-player interaction must ordinarily exist. It all depends on the facts. I take the bingo cases in chronological order. Two of them, Adcock and Armstrong went to the House of Lords. Two of them, Regional Pools and Armstrong, concerned prosecutions for holding lotteries in which the defendants sought to rely on the exception for lotteries which were also games of chance.

The first case in time was DPP v Regional Pools. The defendants managed a club whose members were given four pairs of digits on admission for use in variants of bingo. The members did not have to do anything apart from pay their weekly subscription. Their numbers were automatically entered into each week’s lottery. The winners were announced by radio broadcast. Members could and did change their numbers. They did not have to meet at any point as part of the game. The justices held that the lotteries were games of chance, but the Divisional Court held in order for a game to be played there had to be some active participation by the members, which was not present in this case (see per Lord Parker LCJ at 252 and per Winn J at 257, with whom Fenton Atkinson J agreed). In addition, Lord Parker held (at 257) that a game could be played without the players being together in the same room provided that they could communicate with one another. Lord Parker clarified this particular holding in the next case. The Divisional Court did not hold whether there had to be some added factor of inter-player interaction.

Armstrong v DPP was another prosecution under the same prohibition. This time the defendants ran “postal bingo”. Armstrongturned on the lack of participation, not lack of association. A member joined a club and played postal bingo with the numbers he was issued on joining the club. He was not present when the numbers were drawn. He had to pay a sum of money for each card which he wished to play. The result was announced by radio broadcast or, in the case of winners, by post. The magistrates held that there was no playing of a game. The defendant appealed to the Divisional Court ([1967] 2 QB 683). Lord Parker LCJ held that there was no conclusive test of what is a game. He was however satisfied that there was no game in this case. Even if there was some active participation, that was not enough to make the activity a game for the purpose of the GA 68. Lord Parker LCJ clarified that he had not in Regional Pools held that the fact that the players did not meet was irrelevant. He held that that fact was relevant and could be conclusive in some cases. Marshall and Widgery JJ agreed.

The case then went to the House of Lords, where the only reasoned judgment was given by Lord Pearson, with whom the other members of the House agreed. Lord Pearson held that the payment of the sum required to enter a particular round of bingo, and listening to the results on the radio, could not constitute participation. So there was no participation to constitute the playing of a game by the members. The question was primarily one of fact and the magistrates had been entitled to reach the conclusion that they did, and moreover there had been no evidence to support the contrary conclusion.

Importantly, Lord Pearson added that the fact that members were not assembled together and the fact that the alleged players were not in communication with each other “may well have considerable weight in any case as evidence in favour of [the argument] that there was no playing of a game” (at 1294).

In the third bingo case, Adcock v Wilson, players of a local game of bingo were automatically treated by club rules as players in a national game. The magistrate found that the national game was not a “game”. In the Divisional Court (Winn LJ, Ashworth and Widgery JJ), Winn LJ held that the competitors in the local clubs were not participating in the national game but, with respect to the fact that there was no communication between the local groups competing in the national game, he did not:

attach so much importance to that, since I think that communication is relevant only where the game is of a kind which, in order that it may proceed regularly and in accordance with the rules, requires one player or one group of players to know what has happened, what success has been achieved, or what choice has been made by the opposed player or group of players.

The other members of the court gave short judgments agreeing with Winn LJ. Ashworth J considered the notions of the competitions being players in the national game “quite divorced from reality” (at 701). Widgery J referred to the ordinary meaning of a game as involving “the common pursuit by a number of competitors of a similar and known object” and held that it was “exceedingly difficult” to have a game unless there was communication between players who were in different locations.

Adcock also went to the House of Lords. The only reasoned judgment was that of Lord Morris, with whom the other members of the House agreed. The House concluded that there was on the facts only one game which was being played, namely the local game. There was nothing more that competitors could do since the national game went ahead automatically under the rules. That was “the reality of the matter” (at 336). Adcock is important because the House of Lords made it clear (at 335) that it was not necessary for all the competitors to be in one place and that the ability to communicate can be a factor but that it is not a necessary element.

Mr Macnab submits that the FTT were wrong to distinguish these cases on the grounds that they related to bingo. He submits that the situation in Adcock closely resembles that in the present case because it involved geographically separate participants in a putative “game” who were not in communication with each other and had no interaction with each other. The same applies on his submission to STB, where participants simply submit entries for central evaluation. They act in isolation and cannot be described properly as playing a game with each other. Participants are taking part in a competition but not playing a game.

In my judgment, the FTT did not, as HMRC contends, ignore the three bingo cases. In paragraphs 79 and 80 of their decision, they took the three bingo cases into account. At paragraph 111 of their decision, the FTT pointed out, correctly that none of them had considered section 52(6) GA 68.

I conclude from this study of the three bingo cases that the FTT were correct to hold that there is no inter-player interaction rule. Adcock and Armstrongclearly contemplate that there can be a game without the contestants being in communication with each other. The words “it is necessary to show interaction between the competitors” are conspicuously absent from the judgments in both cases.

The FTT took the view that, apart from the need for a degree of active participation (which was not in dispute), the cases only established two matters: what is a game is primarily a question of fact and that there was no need for competitors to be assembled together. There was no rule about inter-player interaction.

In my judgment, for the reasons given above, this self-direction was correct. There is no requirement that the competitors must respond to each other’s moves. I consider that the explanation that I have given above of the authorities shows no more than that the relationship between competitors is a relevant factor. Games after all are about winning something either from the operator or other people. Here the prize is payable by the operator from its own assets, and so the fact that the competitor cannot identify other competitors does not matter to him. The identity of the other competitors only matters to the operator, to whom the competitor entrusts the task of determining the winner.

Similarly this is not an alleged game which a competitor can play, without wishing to do so, by virtue of the rules of some organisation of which he is a member, as in Adcock. Nor does he do nothing more than pay the price of entry into the competition, as in Armstrong. He has to decide where the ball is and to place a cross on the coupon. The UT did not consider that this could amount to “playing a game” but this was because in effect the UT considered that there was an inter-player interaction rule (see UT Decision, [37] and [22]). The FTT’s decision was one drawn from the totality of their findings and there was in my judgment material in their very detailed analysis of the evidence and findings which entitled them to reach the conclusion they did.

In circumstances such as these where the correct analysis depends on the facts, there can be no “ordinary” rule, as HMRC contends, though of course past cases can help if those facts recur. But that is not so here.

The UT also relied on Earl of Ellesmere v Wallace. In this action the Jockey Club sued a race horse owner for the deposits due to it for entering his horse in two races. It did not sue for the sweepstakes representing the owner’s bets on his horse with other owners which were payable to it as trustee for the stakeholder. The court held that on the facts there was no gaming contract between the race horse owner and the Jockey Club.

The UT considered that this case “helps one work out what “the game” is, who are the players and what are the rules” (UT, decision, [29]). Mr Macnab submits that the same reasoning applies in this case because the only contract is between the competitor and the STB operator. Mr Peacock submits that Ellesmere does not assist because VAT does not depend on the existence of a contract but rather on economic reality and that all this case establishes is that the only written contract is with the operator.

I agree with that analysis of Ellesmere. The question whether there is a game depends on the nature of the arrangements between the actors, contractual or otherwise. No-one suggests that, if the FTT had found that the competitors were in a contractual relationship of some kind with each other that would have been determinative on the issue whether there was a “game”. Ellesmere does not deal with the meaning of a “game” so that, even apart from being a decision on its facts, it cannot assist the court in determining that issue.

The FTT relied on Oasis Trading, a decision of the FTT. But this case takes the meaning of “game” no further as (so far as relevant) it simply establishes that what is a game is a question of fact to be determined in the context of the case. It held that association was all that was necessary, but for that purpose the players need not meet together.

It follows that the FTT made no error of law on the question of what is a “game” unless it was in error of law on the section 52(6) point, to which I next turn.

The FTT held on this point:

111.

In addition, it must be remembered that there are quite specific provisions contained in section 52(6) of the Gaming Act 1968 (and latterly in note (3) to Group 4 of Schedule 9 to the Value Added Tax Act 1994) which were absent in all of the cases referred to at [63] to [77] above. Those provisions expressly contemplate the possibility of a game being played “otherwise than against one or more other players” or “whether or not there are one or more other participants”. In that context, we consider it is quite simply unsustainable to argue that an activity cannot be a game within the meaning of section 52 of the Gaming Act 1968 (or Note (3) to Group 4 of Schedule 9 to the Value Added Tax Act 1994) unless it includes the features of identifying, interacting with and/or monitoring the progress of other participants.

As explained in paragraph 19 above, the UT held that the FTT were wrong to rely on the fact that section 52(6) was not enacted until after the three bingo cases because the word “game” had covered gaming machines by virtue of section 17 of the Betting and Gaming Act 1960.

Mr Peacock submits that the UT were wrong to hold that the FTT were in error on this point. The FTT were literally correct because section 52(6) was not introduced into legislation until the passing of GA 68. Moreover, that sub-section is wider than the definition of games played against a bank or machine to which the UT referred since the third party need not be a machine. Furthermore, the definition of “gaming machine” did not apply for the purpose of the whole of the 1960 Act. Section 52(6), on the other hand, applied for all the purposes of GA 68.

In any event, the VAT legislation referred to section 52 of the 1968 Act. The point the FTT made was that a game was not restricted to a single-player game.

In any event, submits Mr Peacock, HMRC must show that interaction is required in a multi-player game. There is no justification in GA 68 for differentiating between single-player and multi-player games. On that basis, the issue on section 52(6) is beside the point.

Mr Macnab submits that the appellants are wrong to say that the UT was wrong on section 52(6). He seeks to uphold the reasoning of the UT.

Mr Macnab goes on to argue that, even if he is wrong on the section 52(6) point, the fact remains that there was, as he put it, a non sequitur in the FTT’s reasoning because they reached their result on the basis of an analogy with the single player game which is of a different character. In a multi-player game there must be interaction. He submits that there is no interaction in the present case. In other forms of single player game there is a croupier or a panel or a machine or a lever as in a fruit machine.

In my judgment, there was no error in paragraph 111 of the decision of the FTT for the reasons which Mr Peacock gives. There is no distinction in GA 68 between single-player and multi-player games and therefore the FTT were entitled to rely on what they saw as a characteristic of a single-player game which also threw light on the meaning of game in the context of a multi-player game such as STB.

PARTIES’ SUBMISSIONS

HMRC has filed a respondent’s notice arguing that, even if this court holds that STB is a “game”, the decision of the UT should be upheld on the basis that it is not a game of “chance”.

In support of the respondents’ notice, Mr Macnab submits that the question whether STB is a game of chance has to be assessed by reference to the rules and the materials passing between the operator and the competitor. These invited the competitor to use his skill. It was therefore not open to the FTT to go behind those statements and look to see how the winner was actually found.

Moreover, on Mr Macnab’s submission, the element of chance in STB derived from the fact of other competitors and not from any inherent characteristic of the game itself. If there were a single entry, the single entrant would be bound to win.

Mr Macnab further submits that the FTT were wrong to rely on the dictum of Lord Hailsham in News of the World Ltd v Friend about the element of chance (see paragraph 13 above). Lord Hailsham was dealing with a question of law arising from the prosecution of an operator of STB under different legislation.

Mr Peacock contends that the FTT recognised that the “reality” of panel STB was in accordance with the conclusions of the House of Lords in News of the World (see FTT, Decision [124]). The FTT was entitled to conclude that the random element found by the House of Lords in that case, which was in fact made in relation to an earlier iteration of STB, remained present in panel STB. The FTT did not consider itself bound by the ratio of News of the World but simply indicated that it had arrived at the same conclusion. The UT was thus wrong, to dismiss the FTT’s reference to the case (UT Decision, [39] to [40]).

Mr Macnab also contends that in STB superlative skill can eliminate chance and so the game was not a game of chance before 1 November 2006 because it was not played against a bank or machine.

Mr Peacock submits that section 52(6) is not limited to games played against a “bank” or by way of “gaming machine”, nor does it state that superlative skill is ignored only in cases of games played other than against other players. There is some support for this in the explanatory note to the statutory instrument which brought about the change in the definition of “game of chance” with effect from 1 November 2006.

In any event, submits Mr Peacock, HMRC’s argument at this juncture proceeds on the basis that STB is a single-player game. On Mr Peacock’s submission, it is unrealistic to say there was no interaction and that STB was only a single-player game. He accepted that entrants pitted their wits against others. That is enough. It is the same as a national lottery game. Parliament had to amend section 52(3) to make it clear that it was treated as a lottery and not as a game.

I accept Mr Peacock’s submission that the FTT were entitled to go beyond the contractual documentation. The position might have been different if the question had been one of applying the provisions of a VAT directive (see Secret Hotels2 Ltd v HMRC [2014] STC 937 at [29] to [35] per Lord Neuberger P). However in the instant case the FTT had to apply English domestic legislation. They were entitled to apply the dictum of Lord Hailsham in News of the World, set out in paragraph 13 above, which was of general application and not based on the specific legislation before the House.

In my judgment, it is not open to HMRC to take any point on the effect of superlative skill at this stage because there was no finding by the FTT that superlative skill could defeat any element of chance in STB. Indeed Mr Macnab does not dispute that there was no evidence on which it could have made that finding. I need not therefore consider Mr Peacock’s further submissions.

For these reasons I would dismiss the respondent’s notice.

In the circumstances it is unnecessary for me to analyse the cases from New Zealand and Australia on which Mr Peacock relies. Moreover, as Mr Macnab submits, they concern different legislation. Mr Peacock also relies on an observation about the character of STB of Carnwath J in Town and Country Factors v HMRC [1998] STC 225 at 236b, but in the circumstances it is not necessary for me to consider this.

For the reasons given above, in my judgment this appeal should be allowed and the respondent’s notice should be dismissed. The FTT made a finding that STB was a game of chance which could not be disturbed on appeal. There is no inter-player interaction rule or requirement for inter-player interaction in the ordinary case and the FTT’s reliance on section 52(6) did not amount to an error of law in the context of their decision read as a whole. The FTT found that STB was a game of chance and made no error of law in making that finding. I would therefore allow this appeal and dismiss the respondent’s notice.

I agree with both judgments.

I agree that the appeal should be allowed and the respondent’s notice should be dismissed for the reasons given in Arden LJ’s clear and detailed judgment. I do not wish to add anything on the subject of the respondent’s notice but as we are differing from the decision of the Upper Tribunal (“UT”) in relation to the subject of the appeal, I wish to summarise briefly my own reasons for allowing the appeal.

The Upper Tribunal was only able to reverse the decision of the First-tier Tribunal (“FTT”) if the decision of the FTT was affected by an error of law: see section 11(1) of the Tribunals, Courts and Enforcement Act 2007. It seems that the UT considered that the FTT had made the following errors:

Arden LJ has analysed the relevant authorities which were cited to the FTT and to the UT. My own assessment of the authorities is that they do provide some, but only fairly limited, assistance. Indeed, the authorities themselves acknowledge that the assistance offered, in any individual case, to a fact finding court or tribunal, by the non-exhaustive statutory definitions and/or by the discussion in the authorities is limited: see Armstrong v DPP [1965] AC 1262 at 1284 A-B, per Lord Pearson, and Seay v Eastwood [1976] 1 WLR 1117 at 1121 B-E, per Lord Wilberforce. I consider that the view taken by the FTT as to the degree of assistance provided by the authorities was correct.

Section 52(6) of the Gaming Act 1968 is set out by Arden LJ in paragraph 7 of her judgment. Before the 1968 Act, there was no provision equivalent to section 52(6). Both the Betting and Gaming Act 1960 and the Betting, Gaming and Lotteries Act 1963 contained a definition of “player”. That definition was in section 28(1) of the 1960 Act and in section 55(1) of the 1963 Act. (The definition of “player in section 55(1) of the 1963 Act was adopted for the purposes of the 1968 Act but it was expressly made subject to subsections (1) to (7) of section 52 of the 1968 Act.) In the various Acts, “player” was defined, in relation to a game of chance, to “include”:

“any person taking part in the game against whom other persons taking part in the game stake, play or bet” (my emphasis).

I note that the FTT specifically quoted this definition of “player” in paragraph 74 of their decision.

The 1960 Act was the relevant Act in DPP v Regional Pool Promotions Ltd [1964] 2 QB 244 and Armstrong v DPP [1965] AC 1262 and the 1963 Act was the relevant Act in Adcock v Wilson [1967] 2 QB 683 and [1969] 2 AC 326. The words “against whom” in the definition of “player” in the 1960 and the 1963 Acts, might in the past have been relied upon as arguably supporting a construction which required interaction between players. But, as Arden LJ has shown, the authorities on the 1960 and the 1963 Acts did not hold that there was any such legal requirement. That may have been because the definition of “player” was inclusive and not exhaustive but, whatever the reason, those authorities did not go so far as to require there to be interaction between players in order for there to be a “game” or “playing a game”. Nonetheless the presence or absence of interaction between players was recognised as a potentially relevant factor, where it was for the fact finding court or tribunal to decide whether that factor should be given any weight, and, if so, how much weight. It may be that the reference to “against whom” in the definition of “player” led Lord Morris in Adcock v Wilson [1969] 2 AC 326, at 335 D-E, to point out, as a relevant matter, that the players in that case were not playing a game of bingo “with each other”.

That being the position before the 1968 Act, the enactment of section 52(6) served to make the position even more clear that, in order for there to be a “game” or “playing a game”, there was no legal requirement that there had to be interaction between players. Although, as explained in R v Kelly [2009] 1 WLR 701 at [11] (vi), section 52(6) was directed at the operation of games played against the bank or where gaming machines were used, I do not see why section 52(6) cannot be relied upon as making it more clear that interaction between players was not a legal requirement of a “game” or “playing a game”. That is what, in essence, the FTT said about the relevance of section 52(6) and I think that they were right to say so.

It follows that in so far as the UT held that there was a legal requirement in this context that there had to be interaction between players or interaction by a player with changed circumstances, the UT was itself wrong in law. Alternatively, in so far as the UT held that interaction between players or interaction by a player with changed circumstances was a matter to be given weight, the FTT did not commit any error of law in that respect. The weight to be given to that factor was a matter for them and it was not right for the UT to substitute its own view for that of the FTT.

Accordingly, I consider that the decision of the FTT was not affected by an error of law and the UT itself committed an error of law in holding otherwise. The result must therefore be that the appeal against the decision of the UT is allowed and the decision of the FTT is restored.