England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		28th February 2007

Mr Justice David Steel :

1. The Claimant is a well known gambling club. The Defendant is a wealthy man with a penchant for gambling who joined the club in October 1994. The scale of both his wealth and his gambling instincts are revealed by the fact that between October 1994 and April 2006, the Defendant visited the Claimant's club on over 600 occasions, purchasing gaming tokens to the value of over £91,000,000 and, in the process, losing over £23,000,000.
2. The Defendant's biggest loss at the club occurred on 10 March 2000 in the sum of £2,000,000 in one sitting. It is this loss which is at the centre of these proceedings.
3. The Claimant applies, pursuant to CPR 3.4 and/or CPR 24.2, for summary disposal of the proceedings on the basis that the defence filed by the Defendant discloses no reasonable grounds for defending the claim and/or that he has no realistic prospect of successfully defending the claim. It is not suggested that there is any other compelling reason why the case should be disposed of at a trial.

The background

4. There is little dispute as regards the facts. However I accept that it is appropriate for the purpose of the present application to assume that, where there is controversy, the Defendant's version of events is accurate. On that basis the surrounding circumstances were as follows: -

a) During the course of the playing session that day the Defendant drew four separate script or house cheques for £500,000 each. They were dated 10 March 2000. They were drawn on a joint account of the Defendant and his wife. The Defendant was duly given gaming tokens to the value of each cheque.

b) On a number of occasions during the playing session, the Defendant requested that the croupier be changed but was told that there was no other croupier available. However, at about 3.30 am, the Defendant discovered there were other croupiers available and became angry. A heated argument ensued with members of the management team of the club.

c) Thereafter, at the request of the Claimant, an undated substitute cheque was brought to the Defendant in the sum of £2,000,000. The Defendant was requested to sign it. The Defendant says that he had only signed the cheque on the understanding that it would not be dated and that it would not be presented until "the dispute which had arisen with regard to the croupiers had been resolved". An employee of the club who had proffered the cheque did not say anything in response or otherwise dissent from that proposition.

d) On 14 March the Claimant presented the substitute cheque which was now dated 10 March to its bank for payment. It was however dishonoured since the Defendant had sent a fax to his bank in Switzerland countermanding payment.

e) The Claimant did not issue proceedings till shortly before the six year limitation period expired. In the meantime, there were discussions from time to time with the Defendant about the outstanding indebtedness.

f) The Defendant continued to gamble substantial sums at the club after 10 March (almost £41,000,000) and in the process lost in excess of a further £10,000,000. During this period the club required that any further gaming tokens purchased by the Defendant were paid for in cash or by debit card or third party cheques.

5. The only correspondence between the parties of any materiality that was produced was a letter from the Claimant club to the Defendant dated 13 February 2002 which read as follows: -

"It is now one year since we discussed the matter of your indebtedness to the club of £2 million.

At this meeting you asked us to allow you one year, during which time you would continue to play here and make repayments from winnings. This has not happened and the debt remains unaltered. Apart from there having been no payments, there have been few visits with none at all in the past few months.

I am pressured by my board of directors, our shareholders and our auditors to pursue this debt and we are ever mindful of the Gaming Board who could construe a "credit giving" argument.

As you know Angelo and I hold you in the highest regard and we ask you to give us a repayment schedule so that we can put this matter behind us. "

The statutory background

6. The relevant parts of the Gaming Act 1968 are as follows:

16. Provision of Credit for Gaming

(1) Subject to subsections (2) to (2A) of this section, where gaming to which this Part of this Act applies takes place on premises in respect of which a licence under this Act is for the time being in force, neither the holder of the licence nor any person acting on his behalf or under any arrangement with him shall make any loan or otherwise provide or allow to any person any credit, or release, or discharge on another person's behalf, the whole or part of any debt,—

(a) for enabling any person to take part in the gaming, or

(b) in respect of any losses incurred by any person in the gaming.

(2) Neither the holder of the licence nor any person acting on his behalf or under any arrangement with him shall accept a cheque and give in exchange for it cash or tokens for enabling any person to take part in the gaming unless the following conditions are fulfilled, that is to say—

(a) the cheque is not a post-dated cheque, and

(b) it is exchanged for cash to an amount equal to the amount for which it is drawn, or is exchanged for tokens at the same rate as would apply if cash, to the amount for which the cheque is drawn, were given in exchange for them;

but, where those conditions are fulfilled, the giving of cash or tokens in

exchange for a cheque shall not be taken to contravene subsection (1) of this section.

(2A) Neither the holder of a licence under this Act nor any person acting on his behalf or under any arrangement with him shall permit to be redeemed any cheque (not being a cheque which has been dishonoured) accepted in exchange for cash or tokens for enabling any person to take part in gaming to which this Part of this Act applies unless the following conditions are fulfilled, that is to say—

(a) the cheque is redeemed by the person from whom it was accepted giving in exchange for it cash, or tokens, or a substitute cheque, [ or a debit card payment,] or any combination of these, to an amount equal to the amount of the redeemed cheque or (where two or more cheques are redeemed) the aggregate amount of the redeemed cheques;

(b) it is redeemed during the playing session in which it was accepted, or within thirty minutes after the end of the session;

(c) where a substitute cheque is given in whole or in part exchange for the redeemed cheque the substitute cheque is not a post-dated cheque;. . .

(d) where tokens are given in whole or in part exchange for the redeemed cheque, the value of each token is equal to the amount originally given in exchange for it or, if the token was won in the gaming, the value it represented when won; [ and

(e) where a debit card payment is given in whole or in part exchange for the redeemed cheque, the payment has been authorised by the holder of the card and by or on behalf of the issuer of the card;

but, where those conditions are fulfilled, the return of a redeemed cheque in exchange for cash, or tokens, or a substitute cheque, [ or a debit card payment,] or any combination of these, shall not be taken to contravene subsection (1) of this section.

(3) Where the holder of a licence under this Act, or a person acting on behalf of or under any arrangement with the holder of such a licence, accepts a cheque in exchange for cash or tokens to be used by a player in gaming to which this Part of this Act applies [ or a substitute cheque], he shall not more than two banking days later cause the cheque to be delivered to a bank for payment or collection.

(3A) Subsection (3) of this section shall not apply to a redeemed cheque.

23. Offences under Part II.

(1) Subject to the following provisions of this section, if any of the provisions of sections 12 to 20 of this Act, or of any regulations made under subsection (1), subsection (2) or subsection (4) of section 22 of this Act, are contravened in relation to any premises,—

(a) the holder of the licence, if they are premises in respect of which a licence under this Act is for the time being in force, or

(b) every officer of the club or institute, if they are premises in respect of which a club or a miners' welfare institute is for the time being registered under this Part of this Act,

shall be guilty of an offence.

The defence

7. In opposing the application, the Defendant relies primarily on the circumstances in which the substitute cheque was provided, dated and presented. In particular, three points are made: -

i) The Claimant was in breach of the agreement not to date or present the cheque.

ii) The cheque was post-dated within the meaning of section 16(2) of the Gaming Act 1968.

iii) The Defendant only provided the cheque on the understanding that it would not be dated or presented until the "dispute" had been resolved which amounted to the unlawful provision of credit.

Post-dated

8. For this purpose it is to be assumed that, at some stage before the substitute cheque was presented, the Claimant dated it 10 March. But this does not render it a post-dated cheque within the meaning of section 16(2) of the Act:

a) The cheque was not invalid by reason of the fact that it was not dated: Bills of Exchange Act 1882 section 3(4).

b) It was not invalid by reason of being ante-dated or post-dated: Bills of Exchange Act 1882 section 13(2).

c) If it was dated on or after 10 March it was either dated that day or ante-dated.

9. All this is entirely consistent with the purpose of the Gaming Act since an ante-dated cheque cannot by definition provide credit.

Agreement not to date or present

10. Even on the assumption that such an agreement was entered into, the cheque remained a valid and unconditional order to pay. Indeed, by definition, a cheque is a bill of exchange drawn on a bank and payable on demand: Bills of Exchange Act 1882 section 73. As already noted the absence of a date had no impact on the cheque's validity. Nor did the insertion of a date or the act of presentation even if it had been in breach of an agreement not to do so: see Roberts & Co v Marsh [1915] 1 KB 42.

Sham transaction

11. This leads to the main ground taken by the Defendant albeit not foreshadowed in the defence. Reliance is placed on R. v Knightsbridge Crown Court ex parte Marcrest Properties Ltd [1983] 1 W.L.R. 300 and in particular on the passage at page 308:

"The course of dealing between Marcrest and their customers over a long period and involving numerous cheques, demonstrated that it was the intention of the parties that there was to be no legal right to have a cheque honoured when it was presented. The only lawful cheque contemplated by section 16(2) & (3) of the Act 1968 is one in which there is a common expectation of payment on presentation within two days. What was provided was a "sham"; it was no better, if as good, as a post-dated cheque. As the Lord Justice rightly commented, its function was merely to record a loan of money or tokens to that value." per Ackner LJ

12. The Defendant sought to submit that, since he expressed the wish that the substitute cheque should not be dated or presented and such was not expressly rejected by the Claimant, it followed there was "no common expectation of payment on presentation within two days".
13. In my judgment this takes that part of the judgment in Marcrest quoted above entirely out of context. The issue there was the unlawful granting of credit which was accordingly said to justify the cancelling of the relevant club's licence. One form of the granting of credit that was performed by the club was by repeatedly accepting "so-called cheques" in circumstances when the drawer of the cheques had dishonoured previous cheques and the presentation of new cheques was a sham since the club perfectly well knew that the cheques would not be honoured.
14. The factual circumstances are accordingly quite different from the present case. The cheque was no more than the record of a loan. The proposition that the scheme was a "sham" is wholly out of accord with the approach set out in the decision of Diplock LJ in Snook v London & West Riding Investments [1967] 2 Q.B. 786 p 802

"But one thing, I think, is clear in legal principle, morality and the authorities…that for acts or documents to be "sham", with whatever legal consequences follow from this. all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a "shammer" affect the rights of a party whom he deceived."

Underlying loans

15. In any event, alongside any claim on the cheque, the Claimant is entitled to enforce the underlying loan agreements. Each script cheque constituted a conditional repayment of a loan of cash in the form of gambling tokens. Those cheques were redeemed and substituted by the substitute cheque. The dishonour of that cheque led to the revival of the loans: see Crockfords Club v Mehta [1992] 1 W.L.R. 355, Homes v Smith [2000] Lloyd's Reports (Banking) 139. It was not contended (nor could it be) that the cheque was taken in absolute satisfaction.

Swiss Law

16. The Defendant sought to argue in this context that the script cheques were "illegal" by virtue of Swiss law and, in the knowledge of that, the Claimant requested the substitute cheque. The short answer to this contention is as follows:

a) no such allegation was pleaded,

b) there was no evidence of Swiss law before the Court,

c) Swiss law is not the relevant law for assessing the validity of the cheque (see Bills of Exchange Act 1882 section 72); the relevant law is English law being the law of the place of issue,

d) in any event, even if the script cheques were invalid, this is of no consequence as regards the substitute cheque.

The agreement

17. The next stage was the suggestion that both the claim on the cheque and on the loans might fail because the Claimant had agreed that it would not date the cheque and/or present it and/or agreed not to sue on the loans. Alternatively it is submitted they made a representation to that effect which was relied upon by the Defendant.
18. As regards any such agreement : -

i) It is not suggested that the Claimant responded to the Defendant's propositions with anything other than silence. However, acceptance cannot (save in exceptional circumstances) be inferred from silence alone: The Leonidas D [1985] 1 W.L.R. 925. No exceptional circumstances are suggested nor is it contended that the inference could be drawn from anything other than the absence of a response.

ii) No consideration was given for the alleged agreement.

iii) The "agreement" was insufficiently certain to be binding. The alleged dispute as regards to the croupier was simply a complaint. There was no manner in which it could be "resolved". In reality the dispute was a refusal to pay which by definition could not be resolved prior to payment.

iv) An agreement on these terms would have been illegal and thus unenforceable. This of itself makes the existence of an agreement to that effect improbable.

v) In any event such an agreement could not be performed without presentation after two banking days and/or post dating, both in breach of section 16, and thus illegal by virtue of section 23 of the Gaming Act.

19. As regards the alleged representation, leaving aside the issues of illegality and reliance, the silence by way of response was entirely equivocal and cannot form the basis of any unambiguous representation.

Granting of credit

20. It was additionally submitted by the Defendant that the subsequent failure to seek to enforce the loans and to sue on the cheque until near the expiry of the limitation period itself involved the granting of credit contrary to the Gaming Act.
21. I reject this. The Claimant was at pains to grant no further credit. The continued gambling activities of the Defendant were entirely funded in cash or by debit cards or third party cheques. The mere forbearance to institute proceedings cannot constitute granting further credit. The debt had crystallised and was enforceable at any time during the limitation period.
22. The Defendant's further submission was that the letter of 13 February cited above contained or evidenced an agreement whereby he would be allowed to participate in further gambling on the basis that he would repay the debt out of his winnings. It is true that the Claimant in the schedule to the claim form refers to a "repayment agreement" in this respect but no relief is sought in respect of it. In any event the Defendant in his defence only relies upon it conditionally.
23. Perhaps this is not surprising since in his own statement the Defendant robustly undermines the argument in paragraph 30: -

"… I agree that I had a number of discussions regarding the £2 million. At one stage I had discussions with the club about the possibility of my paying half the amount claimed. I deny ever agreeing to pay the entire amount. I note from the letter exhibited at page 61 that Mr. Osborne was (and presumably still is) "ever mindful of the Gaming Board who could construe a "credit giving" argument" – that is hardly the conduct one would expect of a properly run casino."

24. The position is that the letter merely recorded that the Claimant, at the Defendant's request, allowed a year to pass on the basis that repayments would be made from winnings. No such payments were made and there was no basis upon which the Claimant could retain any winnings unless volunteered by the Defendant.

Conclusion

25. It follows that I accede to the Claimant's application and there must be judgment as asked.