| BILL OF EXCHANGE — Cheque — Unconditional order for payment — Member of gaming club signing undated cheque in exchange for gaming tokens— Club subsequently dating cheque and presenting it for payment — Cheque dishonoured — Club permitting member to continue gambling at club without paying previous debt — Member opposing club’s claim on ground of illegality — Whether sham transaction — Whether constituting provision of unlawful credit by club — Gaming Act 1968, s 16
Aspinall’s Club Ltd v Al-Zayat [2007] EWCA Civ 1001
CA (Sir Anthony Clarke MR, Sedley and Lloyd LJJ): 19 October 2007
A gambling debt which was recoverable at the time it was incurred could later become irrecoverable by the subsequent provision by the gaming club of unlawful credit to the member, which rendered the member’s liabilities on both the dishonoured cheque and the underlying loan illegal and unenforceable under s 16 of the Gaming Act 1968.
The Court of Appeal so held, allowing the appeal of the defendant, Fouad Al-Zayat against the striking out by David Steel J on 28 February 2007 of his defence to the claim of the claimant, Aspinall’s Club Ltd for £2m, and granting the defendant permission to defend the claim.
LLOYD LJ said that the defendant challenged an order for summary judgment in favour of the claimant on a cheque for £2m drawn by the defendant, which represented sums staked and lost by the defendant in the course of gambling at the claimant’s club on 10 March 2000. The defendant contended that either at the time the cheque was drawn and handed over to the claimant, or thereafter, or both, the claimant infringed the prohibitions in s 16 of the Gaming Act 1968 on the provision of credit for gaming, so that the sum which would otherwise be due on the cheque was not recoverable. His Lordship said that the central point in the case turned on s 16 of the 1968 Act, which had since been repealed. S 16(1) prohibited the provision of credit by a licence holder in two respects: first to enable any person to take part in gaming at the licence holder’s premises, and second in respect of any losses incurred by any person in such gaming; thus, both before and after the gaming. Moreover the prohibition was not just the giving of credit; it extended to releasing, or discharging on another’s behalf, the whole or any part of a debt. It was subject to limited exceptions. The facts raised the question whether, if the underlying loan and original cheques were validly made and accepted, but later the licence holder committed a separate breach of s 16, for example by redeeming the cheques in exchange for a substitute cheque in circumstances which did not comply with s 16(2A), or by giving credit for losses in breach of s 16(1)(b), did that affect the pre-existing liability on the original loan? The defendant’s first group of contentions arose from the circumstances in which the substitute cheque was signed and handed over to the claimant, the original script cheques being returned to him thereafter. The judge rejected those arguments but his Lordship concluded that it was not clear that that defence had no sufficient prospect of success. The defendant argued that the claimant allowed credit to the defendant in respect of his £2m gaming losses, by encouraging him to continue gaming at his club, hoping that the club would be paid eventually, and that it would also gain by the defendant’s losses on his continued gaming. The claimant’s own evidence suggested a deliberate policy decision not to seek to enforce liability on the cheque while the defendant continued to gamble at the club. His Lordship said that the defendant’s liability on the substitute cheque was a debt in respect of losses incurred by the defendant in the gaming in question. Therefore, if the claimant provided or allowed further credit, or released the debt or any part of it, that would fall within s 16(1)(b). The expressed conditions under which the defendant handed over the substitute cheque, if accepted, even implicitly, by the claimant, would have rendered the transaction in breach of s 16(1)(b) and would have invalidated not only the cheque itself but also, as from that time, the underlying loans. The defendant also had a well arguable defence under s 16(1)(b) based on the claimant’s own account of the dealings between them after March 2000, seeming to describe a process of giving the defendant credit in respect of a debt representing gaming losses. The claimant’s own evidence suggested that there was a breach of s 16(1)(b) after March 2000. The effect of s 16 was to render the defendant’s liabilities on both the £2m cheque and the underlying loans illegal and therefore unenforceable. The defendant’s defence had real prospects of success.
Sir Anthony Clarke MR and Sedley LJ delivered concurring judgments.
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