Prize Provision Services Ltd v Revenue & Customs (2005)
The court could not apply a formulaic test to decide whether a scheme was a lottery or a series of lotteries, or whether it amounted to fixed odds betting. Common sense should be applied to ask if, overall, a given scheme more closely resembled the classic description of betting or of a lottery.
The appellant company (P) challenged the decision of the respondent Revenue and Customs that P's "Great Weather Lottery" (GWL) was a single game of fixed odds betting and liable to general betting duty under the Betting and Gaming Duties Act 1981 s.1. The purpose of the GWL was to raise money for those charities which subscribed to it. Entrants had the chance of winning set amounts of money by declaring what the temperature would be at certain cities on certain days, and all monies were paid into a single fund with notional individual accounts. The difference between receipts and prizes was a notional profit or loss, rolled over each month. No attempt was made to match the prizes won to the individual charities. P submitted that it managed a series of society's lotteries. The Revenue and Customs submitted that (1) although there was no formal reason why each charity's scheme should not be seen as a "society's lottery" under the Lotteries and Amusements Act 1976 s.5, on the evidence of its monthly accounting summary the GWL did not consist of several such lotteries within the meaning of the 1976 Act, but amounted to a single prize fund for a single game for which the individual charities merely provided participants in return for reward, and that they were either P's agents for that purpose or in a similar position, and accordingly that, overall, the GWL amounted to fixed odds betting; (2) even if there were separate lotteries, they did not comply with s.11(1)(a) of the 1976 Act and there was a conflict of interest between P and the participants.
(1) There was nothing in the GWL, or in the individual society's lotteries, if that was the correct view, disqualifying them from being categorised as lotteries, and they could not properly be regarded as a form of betting. The court could not simply apply a formulaic test. A lottery could remain such while bearing some of the marks of betting, and the latter might have some of the characteristics of a lottery. Common sense should be applied to ask whether, overall, a given scheme more closely resembled the classic description of betting, Carlill v Carbolic Smoke Ball Company (1892) 2 QB 484 applied, or of a lottery, Reader's Digest Association Ltd v Williams (1976) 3 All ER 737 applied. The GWL scheme did have the characteristics of a lottery, a term which was not to be narrowly interpreted, and whose general meaning should be left to the courts to decide in the light of the general underlying idea, Re Senator Hanseatische Gesellschaft mbh (1996) BCLC 597 applied. On the evidence in the instant case, a calculation of the surplus of prize allocation over prizes actually won by an individual charity's participants could be made, although it would be difficult and laborious. It was clear that in the long term there was no real difference between returns for one charity and another, and that separation within the fund was not considered necessary. If the GWL was a series of society's lotteries, then each was a lottery. The only significant difference between a series and a single scheme lay in the way the cost of the prizes was borne. As the GWL entrants won in exactly the same way, it could not readily be argued that their payments were the price of the chance to win if they were paid to a society's lottery, but were betting stakes if paid to P. (2) The promoter's limited involvement was an immaterial factor. The 1976 Act required him to run the lottery lawfully, but did not demand he do it personally, so his duty could be delegated as long as he remained responsible. Although P did have a potential pecuniary interest in the outcome of the lottery, he neither gained nor lost overall. His pecuniary isolation from the outcome could be achieved by limiting the prizes to the available fund, but that was not an essential characteristic of a lottery. It was not necessary that participants in a lottery were in competition with each other, nor need the value of a prize be affected by the number of winners. Neither did it matter that the amount of the prizes was fixed.
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18 Aug 2005
VAT & Duties Tribunal
Colin Bishopp (Chairman), Rosalind Rudd, Ray Battersby