Law report: 2 April 1998: Competition amounted to pool betting

Commissioners of Customs and Excise v News International Newspapers Ltd; Court of Appeal (Lord Justice Beldam, Lord Justice May and Sir Christopher Slade) 30 March 1998

ENTRANTS to the "Fantasy Fund Manager" competition run by the Sunday Times in 1994 were engaged in pool betting, and the newspaper was accordingly liable to excise duty on the pooled entry fees.

The Court of Appeal dismissed the appeal of News International Newspapers Ltd against a decision of Mr Justice Kay, upholding an assessment by the Commissioners of Customs and Excise to excise duty under the Betting and Gaming Duties Act 1981.

The appellants were the proprietors of the Sunday Times. In 1994 they organised and ran a competition for readers called the "Fantasy Fund Manager Competition". Entrants paid an entry fee of pounds 5 to select a portfolio of shares to invest in an imaginary fund of pounds 10m. The portfolios were valued each week and the portfolio which recorded the greatest gain was awarded a prize of pounds 1,000. The winning portfolio at the closing date was awarded the grand prize of pounds 100,000. In the event of a tie, all prizes would be equally divided between the winners.

The Commissioners of Customs and Excise contended that those taking part in the competition were engaged in pool betting within section 10(2)(b) of the Betting and Gaming Duties Act 1981, and accordingly assessed News International to excise duty at 37.5 per cent on the pooled entry fees.

Andrew Thornhill QC, Stephen Monkcom and Andrew Hitchmough (Farrer & Co) for News International; Rupert Anderson (Solicitor for HM Customs and Excise) for the Commissioners.

Lord Justice Beldam said that section 10(2)(b) of the 1981 Act provided that a bet would be deemed to be made by way of pool betting if it was made

on terms that the winnings of such of those persons as are winners shall be, or shall include, an amount (not determined by reference to stake money paid or agreed to be paid by those persons) which is divisible in any proportions among such of those persons who are winners.

News International's appeal against the assessment to the VAT and Duties Tribunal had been allowed, on the basis that the true nature of the payments made by the entrants to the competition was that of once- and-for-all entrance fees.

The Commissioners had appealed to the High Court, which had restored their assessment. The judge had held that the tribunal had concentrated on the commonly understood notion of what amounted to pool betting and had paid insufficient regard to the definition in section 10 of the Act. News International had appealed, contending that since the word "bet" was not defined in the 1981 Act it must be given its ordinary meaning, and that the competitors' transactions did not amount to betting in the ordinary sense of the word.

It had been argued for News International that when a competitor entered a competition he was not by entering merely forecasting a result. He was simply paying for the privilege of entering. The selection of a Fantasy Fund portfolio could be compared with producing the solution to a chess problem or a crossword puzzle.

In deciding whether those taking part in the "Fantasy Fund Managers Competition" were engaged in pool betting, the court had to consider not simply the meaning of "betting", but the meaning of "betting by way of pool betting" in the 1981 Act. The competitors were making a forecast of an uncertain future event, namely whether a portfolio selected by them would, on a given date, have the greatest value of all the portfolios selected, and if on any occasion there was more than one winner, the amount of the prize was to be divided equally among them. Those forecasts were, accordingly, bets deemed to be made by way of pool betting within the meaning of s 10(2)(b), and it followed that News International was liable to pay excise duty under the 1981 Act.