VICTOR CHANDLER (INTERNATIONAL) LTD v. ZHOU CHU JIAN HE
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HCA 2475/2006
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 2475 OF 2006
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BETWEEN
| VICTOR CHANDLER (INTERNATIONAL) LIMITED | Plaintiff | |
| and | ||
| ZHOU CHU JIAN HE (周建和) | Defendant |
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Before: Deputy High Court Judge Carlson in Chambers
Date of Hearing: 27 November 2008
Date of Judgment (Handed Down): 3 December 2008
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J U D G M E N T
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Introduction
1. The Plaintiff, a Gibraltar-based internet gambling company is trying to recover a HK$28 million gambling debt owed to it by the Defendant. He is a Mainland Chinese, resident in Beijing and also has Peruvian nationality. In purported settlement of his outstanding account with the Plaintiff, he presented it with seven post-dated cheques totalling $28 million, drawn on his account with a Hong Kong branch of DBS Kwong On Bank, which he then proceeded to countermand. The Plaintiff brings the action on the cheques alternatively, for damages in the same amount.
2. The Plaintiff has obtained judgment in default of appearance by the Defendant under O.13 RHC dated 31 December 2007 which the Defendant is now seeking to have set aside under O.13 r.9 on the ground that the judgment is irregular or, in the event that the court holds that it has been regularly obtained, on the basis that he has a meritorious defence of the type that has a “real prospect of success” as would on the relevant authorities in these circumstances be required of him.
History and Background
3. The case has something of a history to it. This is in fact the third action that the Plaintiff has brought in this court and the second judgment in default of appearance that it has obtained. The first action was started on 18 February 2005 [HCA 300/2005] which was for $14 million being the value of the first three of the seven post-dated cheques. The Plaintiff had been served at his residential address in Hong Kong after which he failed to return any acknowledgment of service and judgment in default was entered against him. When he was able to show that he was not in Hong Kong on the date of service, the Master set aside the judgment as having been irregularly obtained. The Master then ordered him to file his acknowledgment of service and thereafter his defence. Having filed his acknowledgment, he then took out a summons challenging the court’s jurisdiction on the basis that he had not been validly served. That submission was upheld by me with the result that the Plaintiff was required to issue another writ and apply under Order 11 RHC for leave to serve a copy of the writ on the Defendant at his usual residence at Beijing.
4. Subsequently, the four remaining cheques were presented following their due dates and were not honoured. The Plaintiff then issued another writ [HCA 1195/2006] in which it sued on all seven cheques in the amount of $28 million. That writ was not served on the Defendant and the action was discontinued on 13 October 2006. The writ in this action was issued on 10 November 2006. There was a repeated attempt to serve this on the Defendant at his Hong Kong address which was returned to the Plaintiff’s solicitors by the Defendant’s solicitors who indicated that they were representing the “occupants of (those) premises” and that the Defendant did not reside there and should be served at his address in Beijing. An application therefore was made under Order 11 to Master de Souza to serve a copy of the writ out of the jurisdiction which he granted. A further application had to be made to Master Hui, on this occasion for an order for substituted service at his address in Beijing and also in Hong Kong. Consequent upon that, the Defendant’s solicitors acknowledged service of the writ and took out a summons under O.12 r.8(1)(a), (c) and (g) RHC. By that summons, heard by Suffiad J, the Defendant sought to have both Master’s orders set aside on the ground that, as required under Order 11, there was no serious issue to be tried between him and the Plaintiff and therefore, leave to issue the writ out of the jurisdiction should not have been given. He raised two matters, which I will need to consider myself, namely that the seven cheques now sued on are unenforceable in Hong Kong because the consideration (the underlying gaming transaction) is illegal and further that the Plaintiff is only in possession of five of the seven cheques which it is suing on. By a judgment dated 24 October 2007, Suffiad J dismissed the summons.
5. That dismissal was appealed to the Court of Appeal by a Notice of Appeal dated 19 November 2007. For the purpose of this application, the chronology is important particularly in relation to the relevant Rules of the High Court. Under O.12 r.8(1) whereby a defendant who wishes to challenge the jurisdiction of the court is required to give notice of his intention to defend and should, within the time limited for service of a defence, apply to the court for one or other of the orders referred to in paragraphs (a) to (g) of rule 8(1), which is what the Defendant had done in making his application to Suffiad J. Following the judge’s dismissal of that application O.12 r.8(6) took effect. It says this:
“A defendant who makes an application under paragraph (1) shall not be treated as having submitted to the jurisdiction of the court by reason of his having given notice of intention to defend the action; and if the Court makes no order on the application or dismisses it, the notice shall cease to have effect, but the defendant may, subject to rule 6(1), lodge a further acknowledgement of service and in that case paragraph (7) shall apply as if the defendant had not made any such application. (emphasis added)”
Accordingly, the Defendant was confronted with a requirement to file a fresh acknowledgment of service but, in circumstances where he had decided to appeal against the judgment of Suffiad J. It is clear under sub-rule 8(1) that the effect of this second acknowledgment of service would have had the effect of a submission to the jurisdiction of the court which was inconsistent with the Defendant’s objective in applying to set the writ aside as he had done to Suffiad J and then in entering an appeal against the judge’s ruling. It is this aspect which lies at the heart of the dispute on the question of whether the judgment obtained by the Plaintiff is a regular one or not and, is a matter which I will need to give further consideration to in a moment.
6. Before I do so I return to the chronology in order to explain how this application has come about. The notice of appeal having been issued on 19 November and the Defendant not having filed and served an acknowledgment of service and, more importantly not having applied for an extension of time for filing one or for a stay of the action, the Plaintiff entered judgment in default on 31 December 2007. I should observe that the parties’ solicitors had corresponded on the question of a stay of the proceedings pending the outcome of the Defendant’s appeal. I can summarise this briefly. On 8 November 2007, Mr Lo, the Defendant’s solicitor informed the Plaintiff’s solicitor Miss Li, that his client intended to appeal and asked the Plaintiff to agree to a stay. Miss Li replied on 16 November refusing to agree a stay and said that she had instructions to enter judgment in default if no acknowledgment of service was filed. On 19 November, Mr Lo wrote back enclosing the Notice of Appeal and repeating his request for a stay failing which an appropriate application would be made to the court for such an order. Miss Li replied on 23 November to say that given the history of the litigation, her client would only agree to a stay if the Defendant paid the whole of the claim into court and an additional $300,000 as security for costs. That was rejected by Mr Lo on 26 November who went on to say that he would apply for a stay. Miss Li wrote again to say that her client would only agree to a stay on the terms of her letter of 23 November. In the event, no acknowledgment of service was forthcoming nor was an application for a stay made. On 14 December 2007, the Plaintiff applied for a default judgment which was entered on 31 December.
7. From that chronology, I now turn to consider whether this can be said to have been a regularly obtained judgment. If it was then the Defendant has the exacting task of showing that his defence is one with a real prospect of success and that for this reason the judgment should go and the matter should be allowed to proceed to trial. If I rule the judgment to be irregular and one that should never have been applied for then it must be set aside without more and the matter will proceed to trial.
Is the Judgment Irregular
8. The regime for challenging the court’s jurisdiction under O.12 r.8 is a precise one. The intention is to avoid traps for the unwary by setting out precise steps that need to be followed and providing a clear indication of the effect of those steps. There is no doubt that a defendant in this position who wishes to challenge the court’s jurisdiction on any of the grounds provided for in paragraphs (a) to (g) of O.12 r.8(1) is required to file an acknowledgment of service before he can do so. I have already set out O.12 r.8(6) at paragraph 5 above which provides what is to happen after the judge who has heard a defendant’s challenge to the court’s jurisdiction and has either dismissed or made no order on it. The sub-rule makes clear that the first acknowledgment of service, which was entered for the limited purpose of challenging the court’s jurisdiction and which, did not have the effect of a submission to the court’s jurisdiction, ceases to have effect. In such circumstances, a defendant has three choices. He can appeal, which is the case here. Alternatively, he can file a fresh acknowledgment of service so that he can contest the action on its merits. Such an acknowledgment will undoubtedly amount to a submission to the court’s jurisdiction. Lastly, he can do nothing, if that is what he wishes to do, in which circumstances he becomes amenable to have judgment in default of appearance entered against him under O.13 r.9 RHC.
9. In this case, the Defendant had decided to appeal the judge’s order. I can complete the chronology of this aspect by saying that his appeal was heard by the Court of Appeal [Le Pichon JA and Hartmann J (as he then was)] on 22 May 2008 and dismissed on 13 June 2008, some five and six months respectively after the Plaintiff had obtained judgment in default, based upon which the Plaintiff obtained a charging order nisi on 26 February 2008 against the Defendant’s property in Hong Kong which the Plaintiff’s solicitors served on the Defendant’s solicitors on 24 June 2008.
10. Mr Paul Lam, on behalf of the Defendant, has addressed an interesting submission to me suggesting that on a proper interpretation of the rules, in these circumstances, that is to say on an appeal from an O.12 r.8 challenge, the Defendant is not required to apply for a stay nor for an extension of time, until after the disposal of his appeal, to file his acknowledgement of service as O.12 r.8(6) requires of him. Mr Lam submits that I should imply the following words in bold type into O.12 r.6(8). I set out the material parts of the rule again with the implied words that Mr Lam contends for:
“A defendant who makes an application under paragraph (1) shall not be treated as having submitted to the jurisdiction of the court by reason of his having given notice of intension to defend the action; and if the court makes no order on the application or dismisses it, the notice shall cease to have effectunless the Defendant has lodged an appeal against such an order; in such event the notice shall cease to have effect if the Court of Appeal dismisses the appeal …”
11. Mr Lam is driven to contend for such implied words because an appeal to the Court of Appeal will not have the effect of staying the proceedings. In the usual case, a stay will have to be applied for. Mr Lam submits that in these circumstances a stay would be an inapposite concept because there is no order or judgment to stay upon which execution will be levied by the successful party in the court below nor any other adverse order against the intending appellant will take effect without the imposition of a stay. In such circumstances, says Mr Lam, where his client could not file an acknowledgment of service without submitting himself to the court’s jurisdiction and where a stay is inapposite, I ought to imply into the rule, the words that I have referred to in the previous paragraph.
12. I regret that I am unable to agree with Mr Lam’s analysis. It strikes me that the correct analysis in this situation was given by Tuckey LJ in the English Court of Appeal in the unreported decision of Sithole v Thor Chemical Holdings Ltd, 3/2/1999. The relevant part of his judgment has been referred to by Mr Lam. It is in these terms:
“… The notes in the White Book to which I have referred relate, as I think the White Book makes clear, only to the time before the Order 12, rule 8 summons has been decided by the judge at first instance. It is clear from Order 12 rule 8(6) that once the summons has been dismissed a different regime comes into being. A defendant’s original notice of intention to defend ceased to have effect so if he does nothing he is at risk of judgment in default. If he chooses to file a further acknowledgement he must do so within 14 days unless the court directs otherwise following which he must serve a defence within 28 days. Again, if he does nothing he is at risk of judgment in default. In neither case is his position saved if he appeals since an appeal does not act as a stay. To protect himself he must either apply for a stay or to extend time for filing an acknowledgment of service pending the appeal. In my judgment, neither of these steps could possibly be construed as a submission to the jurisdiction.
There is good reason why the defendant should have to apply for a stay, or to extend time since if the court has to decide it will be in a position to impose terms as to the making of the application for leave to appeal (which is required in every case) and its prosecution. Otherwise there is scope for the defendants to delay. Once the application for leave to appeal has been made one would expect respondents to consent to a stay or the court to order one.”
Whilst Mr Lam is absolutely correct in saying that this case in no way binds me and that these remarks by Tuckey LJ were obiter because he was dealing with a different point, in that case concerning a stay based on forumnon conveniens and, the English rule differs because interlocutory orders such as these require leave to appeal whereas no leave is required in Hong Kong, the fact of the matter is that, if I may respectfully say so, Tuckey LJ’s analysis is the correct one in the case of any appellant in the Defendant’s position in circumstances such as these where O.12 r.8(6) applies. There is simply no need for Mr Lam to have tried to imply words into the sub-rule as he has here. Firstly, there is no need where he can and should have applied for an extension of time for filing the acknowledgment of service or for a stay and secondly, I cannot find any legitimate reason for such an implication of words as Mr Lam contends for when the rule is perfectly clear and the rules themselves make express provision for an extension of time or for a stay pending the disposal of an appeal.
13. In these circumstances, the Plaintiff was perfectly entitled to have entered judgment in default. It is to be regretted that the Defendant’s solicitors, who had asked for a stay by consent did not, once their request had been rebuffed save as to onerous terms, go on and do what they said they would do, which was to ask for a stay or an extension of time. Having failed to obtain the required order, they now face a regularly obtained judgment and are required to overcome the not insubstantial hurdle of having to show that their client has a defence with real prospects of success in order to have the judgment to set aside.
The Application to Set Aside This Regularly Obtained Judgment
14. As the note at 13/9/14 HCP 2009 recites:
“It is not sufficient to show a merely ‘arguable’ defence that would justify leave under Order 14. The Defendant must show that he has ‘a real prospect of success’. To do so, he must satisfy the court that his case and the evidence that he adduces in support of it is potentially credible and carries some degree of conviction. Thus the court must form a provisional view of the probable outcome of the action [Evans v Bartlam [1937] AC 463HL, as explained in the Saudi Eagle [1986] 2 Lloyd’s Rep.221, CA …]. However, where the ultimate outcome would depend on whose evidence is believed and no provisional view of the probable outcome of the action can be formed without a trial, the appropriate test to determine whether the Defendant has a real prospect of success is whether the defence ‘could well be established’ at trial (Allen v Taylor [1992] 1 PIQR 255 at 259 …).”
15. Mr Lam submits that there are two aspects, each of which would carry him past the winning post. Firstly, it is submitted that the Plaintiff does not have possession of all of the seven cheques now sued on. It is in fact admitted by the Plaintiff’s solicitor that two of the cheques have been mislaid. It is a requirement that a Plaintiff suing on a dishonoured cheque should be in possession of the cheque when the writ is issued. Nevertheless, section 70, Bills of Exchange Ordinance provides that:
“In any action or proceeding upon a bill, the court or a judge may order that the loss of the instrument should not be set up, provided an indemnity be given, to the satisfaction of the court or judge, against the claim of any other person upon the instrument in question.”
But even so, submits Mr Carolan on behalf of the Plaintiff, this is not a section 70 case. These cheques were countermanded by the Defendant. Section 70 is there to cover the situation where the cheques may have since come into the possession of another party who may attempt to encash them. In this case, this is not possible. These cheques were returned to the Plaintiff marked as countermanded and they are therefore incapable of being negotiated, in which circumstances, there is no prospect of any third party being prejudiced with the result that no indemnity needs to be provided. The cheques themselves had been photocopied and these copies are in the evidence before me. It strikes me therefore that there is little prospect of this point getting very far. This defence, affecting only two of the seven cheques would have very little or indeed any prospect of success. On this aspect therefore I would not be disposed to set aside the judgment.
16. The more substantial aspect of the defence concerns what has been referred to in the course of the argument as the “illegality” point upon which the parties have each put in expert legal opinion from Queen’s Counsel at the Gibraltar Bar. The issue comes about in the following way. The cheques having been proffered in payment of a gambling debt transacted, it is said by the Plaintiff in Gibraltar, the Defendant reserving his position to say that it was transacted in the PRC, the Defendant submits that in either of these two jurisdictions these transactions were, for different reasons, illegal and that accordingly the consideration for the cheques being illegal, payment under them is therefore unenforceable.
17. I take the position in Gibraltar first and in doing so, I proceed on the basis that I am satisfied by the legal opinion obtained from the PRC on the Defendant’s behalf that “foreign/overseas betting operators are prohibited from seeking customers for gambling in the PRC. Such acts are illegal based on the laws of the PRC. There is no legal ground for collecting gambling debts in the PRC, and no gambling debts will be legally enforced inside the PRC ” [B/371-373].
18. The opinion of Mr Vasquez QC, for the Defendant, is that notwithstanding the fact that the Plaintiff had been licensed to conduct this type of on-line betting business in Gibraltar, the English Gaming Act 1845 applied to these transactions between the Plaintiff and the Defendant. Under section 18 of that Act all gaming contracts are void and no court proceedings can be brought for the recovery of debts under such contracts [See section 3 of Mr Vasquez first opinion, pages B199-200]. Given the applicability of this Act, Mr Vasquez says that it is not open to the Plaintiff to sue the defendant for these debts under the laws of Gibraltar. If that is right and if this court were to decide that the governing law of the contract is that of Gibraltar then, in applying Gibraltar law, the court would be required to uphold the Defendant’s plea of illegality and the action based on that underlying gaming transaction would fail.
19. Mr Neish QC, retained by the Plaintiff, has provided a diametrically opposed opinion. He says that the Gaming Act 1845 had never been applied to Gibraltar. Mr Neish recognises that if it had applied to Gibraltar, section 18 of the Act is plain in its terms and effect that gambling transactions would not be enforceable in Gibraltar. In coming to his conclusion that this Act did not have application in Gibraltar, Mr Neish has provided impressively detailed analysis and discussion from paragraph’s 7 to 18 of his first opinion dated 26 July 2007 [B264-268].
20. Mr Neish suggests that the 1845 Act had not been applied “either wholly or partly” by the English Law Application Act 1962 and that the 1845 Act did not apply to Gibraltar by virtue of any other law. He says that the English Law Application Act did not contain any provisions similar to the provisions of section 18 of the 1845 Act and was silent on the lawfulness or otherwise of gaming in Gibraltar. He concludes that at this time therefore the legality and enforceability of wagers was governed by English common law and the rules of equity which were applied to Gibraltar by section 2(1) of the English Law Application Act [see para. 8 of his first opinion at page B/264]. He then moves on to consider the position of gaming/wagering at common law which is that wagers were valid and could be enforced by the winner save as to wagers that were illegal including wagers on unlawful games or where one party would commit a legal wrong or do an immoral act. Mr Neish then makes good that position by references from Chitty, 29th edition, para. 40-014 and from Halsburys Laws of England, Vol. 4(1) para. 8. Having regard to the applicability of the common law rules on gaming in Gibraltar, Mr Neish concludes that:
“Wagering in Gibraltar is prima facie lawful and debts thereby incurred are enforceable.”
unless it can be shown that the wager is of the type falling within one of the exceptions, for example based on an illegal act or an immoral one.
21. He then turns to Mr Vasquez analysis of why the Gaming Act 1845 is said to have applied in Gibraltar. Mr Vasquez had said that the Gaming Act was given currency by virtue of an Order in Council of 2 February 1884. That Order in Council was extremely wide-ranging. It was to this effect.
“Except in respect of matters which are now or hereafter may be provided for by any Order in Council or local Ordinance for the time being in force in Gibraltar, or by any Act of Parliament expressly, or by necessary inference, extending to Gibraltar, or by any proclamation or other instrument issued under the authority of such Order in Council, local Ordinance, or Act of Parliament, the law of English, as it existed on the 31st day of December, 1883, shall be hereafter in force in Gibraltar so far as it may be applicable to the circumstances thereof.”
Mr Neish suggests that the Order in Council did not apply at any time material to this dispute. Because of the importance of this part of his opinion, I propose to set out his reasoning in full. It is to be found at paras.15 to 18 at B/266-268:
“15. I would advise that the Order in Council did not apply in Gibraltar at any material time because:-
(i) the Act was enacted in 1962 and, applying the ordinary rules of statutory construction, resulted in the disapplication of the Order in Council. Section 3 of the Act provides as follows:-
‘3. (1) Subject to the provisions of this section and of any other Act, the law of England as set out in the following Acts shall be in force in Gibraltar –
(a) the Acts listed in the Schedule, to the extent shown in the fourth column of each Part;
(b) any other Act of the Parliament of Westminster applied to Gibratlar by -
(i) any Order of Her Majesty in Council; or
(ii) any express provision in the Act, or by necessary implication; or
(iii) any Act
(2) The Parliament may, by resolution, add to Part I of the Schedule any Act of the Parliament at Westminster passed before the 31st day of December 1883 or vary the extent of the application of any Act listed in that Part.
(3) The Acts referred to in subsection (1) and (2) shall be read and construed with such formal alterations or modifications as to names, localities, courts, officers, persons or otherwise as may be necessary to make them applicable to the circumstances of Gibraltar.’
The Gaming Act 1845 is not listed in the Schedule.
(ii) the Order in Council expressly states that it shall not apply to matters which are provided for by a local ordinance. Accordingly, it is disapplied according to its own provisions following the enactment of the Act. It would be a nonsense to contend that notwithstanding the provisions of the Act which specifies and limits which English legislation applies in Gibraltar that the general application of English legislation provided by the Order in Council would survive;
(iii) the Ordinance specifically legislated on gaming and accordingly, for the same reasons as stated in (ii) above any English legislation on gaming thereby ceased to apply (save as may have been applied by the Act); and
(iv) the restricted manner in which English legislation is applied to Gibraltar by the Act contrasts with the general way in which the Common Law and Rules of Equity of England and Wales are applied by Section 2 of the Act, the provisions of which are set out at paragraph 7 hereof.
16. The Ordinance was repeated and replaced by the Gambling Act 2005, which came into effect on 26th October, 2006.
17. I would bring to your notice the provisions of section 50 thereof which provides as follows:-
’50. (1) Section 18 of the Gaming Act 1845 (which renders wagering contracts unenforceable) shall not form part of the law of Gibraltar.
(2) The following enactments of the Parliament of the United Kingdom shall no longer form part off the law of Gibraltar –
(a) section 1 of the Gaming Act 1710 (which renders void securities given for money won by gaming or for the repayment of money lent for gaming); and
(b) section 1 of the Gaming Act 1835 (which provides that securities rendered void by the Gaming Act 1710 shall be deemed to be given for illegal consideration).
(3) A Gaming Act authorisation will cease to have effect upon the issue of a new licence issued by the Minister (or licensing Authority if not the Minister) under this Act, whether or not the holder of the authorisation has applied for such a licence.
(4) A lottery permit ground under Part II of the Gaming Act and current on the relevant appointed day shall have effect as an authorisation under section 20.
(5) the Minister may by regulations make such further or other provisions as he considers appropriate to provide for the transition from the system of licensing and regulations provided for in the Gaming Act to the provisions of this Act.
(6) the Minister may by regulations make such provisions as he considers appropriate to provide for the transition from the Gaming Tax Act and regulations made thereunder to regulations made under section 41.’
18. I construe section 50(1) as declaratory that gambling is lawful in Gibraltar and acknowledgement by the legislature that the Gaming Act 1845 did not apply to Gibraltar. This construction is supported by the wording of sub-section (2) which disapplied section 1 of the Gaming Act 1710 and section 1 of the Gaming Act 1835. In contrast with the words ‘shall not form part of the law of Gibraltar’ used in 50(1), 50(2) uses the words ‘shall no longer form part of the law of Gibraltar’.”
22. Mr Vasquez does not accept this interpretation. In his further opinion of 11 September 2007 [B/280-282] he suggests that Mr Neish has oversimplified the situation. The substance of his response is at paras.3.1 to 3.8 [B/281-282]. The essence of his opinion is at 3.5 and 3.6 which is in these terms:
“3.5 It will be appreciated that Part 1 of the Schedule to the Application of English Law Act sets out English enactments that apply on a non-inclusive basis. It does not preclude the application of Acts not listed. As already stated, Section 3(1)(b)(i) explicitly provides that other Acts might apply if they have been applied by Order in Council. The 1845 Gaming Act was clearly a pre-1883 Act and was accordingly one of the Acts which automatically took effect in Gibraltar following the Order in council of 1884. Accordingly, in the absence of any enactment repealing the application of the 1845 Act to Gibraltar, its non-inclusion in the Schedule on which Mr Neish bases his view is irrelevant.
3.6 It was not until the coming into effect of the 2005 Gambling Act (which shows no retrospective intent) in October 2006 that the situation changed. Section 50 of that Act specifically provided, for the first time, that section 18 of the English Gaming Act of 1845 ‘shall not’ (future) form part of the law of Gibraltar. It goes without saying that there can be no reliance on Section 50 before the Gambling Act 2005 came into effect.”
23. Accordingly, Mr Vasquez concludes that the 1884 Order in Council applied to Gibraltar and with it the Act of 1845 which made gambling debts unenforceable.
24. It seems to me that ultimately the matter falls to be decided on an interpretation of section 50, Gaming Act 2005 referred to by Mr Neish under which gaming in Gibraltar is now regulated. It strikes me, if I may say so, that Mr Neish’s analysis of section 50(1) and section 50(2)(a) and (b) is to be preferred to that of Mr Vasquez. The language used in section 50(1) as compared to section 50(2) is determinative of this. Section 50(1) says that section 18 Gaming Act 1845 “shall not form part of the law of Gibraltar”, whereas, section 50(2)(a) says that section 1, Gaming Act 1710 and sub-section 2(b) that section 1, Gaming Act 1835 [both of which had been preserved by the 1962 Act] “shall no longer form part of the law of Gibraltar”. This difference in wording between the two sub-sections can only be explicable by reference to the fact that the 1845 Act was never part of the law of Gibraltar whereas the 1710 and 1835 Acts were [both Queen’s Counsel accept that this was so in respect of these two Acts] and were now being disapplied or repealed by the Gaming Act 2005. The expression used in section 50(1) “shall not form part” is, in the circumstances, only there for the avoidance of doubt in respect of English legislation which had not been referred to in the Schedule to the 1962 Act which listed the English Acts of Parliament that applied to Gibraltar.
25. The question that now arises is whether it would be right for me to decide an issue such as this on paper only or whether the matter is sufficiently arguable both ways to require a trial at which both experts would have to be cross-examined on their opinions. It should be remembered that the burden is very much on the Defendant, who has allowed a perfectly good regularly obtained default judgment to be entered against him, to show that his defence is one with “real prospects of success”. This issue, on whether section 18 Gaming Act 1845 applied to Gibraltar when these bets were taken from the Defendant by the Plaintiff and are therefore, unenforceable by virtue of this section, is the main plank of the defence. I am of the view that where the experts have put down on paper everything that they would have wished to this is an issue that I can decide on paper and where I am disposed to hold that Mr Neish’s opinion is to be preferred, it must then follow that the Defendant’s case is one that has not been shown to have “a real prospect of success” nor that the evidence adduced in support of it “carries some degree of conviction”. In these circumstances, the judgment will not be set aside unless the Defendant can bring to bear any other matters which require me to decide otherwise.
26. In this regard, Mr Lam has raised the question of the terms of the Plaintiff’s gaming licence in the way that those terms might affect the legality of the transaction to which the seven cheques are referable. Mr Vasquez has said that it is common for the Gibraltar Government to issue gaming licences which include terms prohibiting the gaming operator, the licensee, from taking bets from citizens of countries whose domestic law prohibits gambling. Mr Vasquez has provided examples of these terms as they appear in the company prospectuses of other gambling operators of which he is familiar. This is dealt with in his opinion of 27 August 2008 at B/385-387. As appears from the PRC legal opinion, betting of this sort is prohibited in the PRC. The point that arises therefore is if the evidence were to show that the Plaintiff’s relevant licence contained such terms, then these transactions would have been in breach of the licence and it could therefore be argued that the betting transactions would be unenforceable for that reason.
27. The Defendant has required the Plaintiff to provide its current licence. This the Defendant has refused to do because it says that this is a confidential matter and that it is irrelevant because it was not the licence under which it was operating when it entered into these particular transactions with the Defendant. It has produced its licence for the period of the transactions to which the action relates. The evidence filed on its behalf is that its licence during this period did not contain any restrictions of the type which now commonly appear in gaming licences issued by the Gibraltar Government. The Defendant says if that is so, the Plaintiff has nothing to fear and should therefore produce the terms to that licence in order to confirm the evidence of Mr Charlton, who is one of its executives who has given the sworn evidence.
28. Mr Vasquez, perhaps going a little further than his remit of providing an expert opinion on the various aspects of gaming law in Gibraltar, has in effect, submitted in the final paragraph of his opinion of 27 August 2008 that the Plaintiff should be obliged to disclosed the relevant licence and its terms and indeed all of gaming licences that it has held in Gibraltar together with their terms so that the Defendant can be satisfied that what Mr Charlton has said is in fact correct. Mr Vasquez concludes, more qua advocate rather than expert, that:
“It would not be appropriate to allow the Defendant to retain the benefit of a default judgment against the Defendant whilst there are still questions unanswered relating to the possible illegality and unenforceability of the gaming transactions underlying the present claims.”
29. It seems to me that these questions do not remain “unanswered”. Mr Charlton has gone on oath to say that the Plaintiff’s licence and its accompanying terms for this relevant period contained no such provisions. Where I have the matter asserted on oath on the Plaintiff’s behalf in respect of what is a confidential matter such as the terms of the Plaintiff’s gaming licences, it is not in my view necessary to insist on their production. The licence itself has been produced. There is no doubt that the Plaintiff was conducting a lawful licensed business and that is sufficient. What Mr Lam is in effect saying is that this regularly obtained default judgment should go or I presume, at the very least, the application to set it aside should be adjourned until the Plaintiff produces the terms and conditions of its licences. If it decides to do so then these terms can be examined. If the terms of the relevant licence contain prohibitions of the type referred to by Mr Verquez then the judgment should be set aside. And, if the Plaintiff refuses to produce the terms of the licence then the court ought to assume that such prohibitions existed at the time, otherwise why not produce the documents, and so for that reason the judgment should also be set aside.
30. As I have said I am satisfied on the current state of the evidence that these transactions did not breach the terms of the Plaintiff’s licence at the time. One can, in my view, place considerable weight on Mr Charlton’s affidavit. If it were to be discovered that he had lied on oath on such an important matter, I have very little doubt that the status of the Plaintiff’s license would be at very real risk. No respectable regulatory authority, such as that of Gibraltar, would tolerate what would amount to bare-faced lies being told on an occasion such as this.
31. For all of these reasons therefore this ground must also fail.
32. Finally, I turn to the position in Hong Kong. The authorities show that where the underlying transactions are lawful under the laws of the jurisdiction where these transactions were entered into, then the Plaintiff will be able to sue on the cheques by which purported payment was being made on the transactions. Where I am satisfied that these transactions were lawfully entered into under the laws of Gibraltar which governed them, payment under the Hong Kong cheques can be insisted upon by the Plaintiff. No proper challenge can be made to this position.
33. Finally, a suggestion has been made that PRC law should govern these bets which would make the bets unenforceable. The fact is that the parties agreed to transact on the basis of Gibraltar law and it matters not where the Defendant was when he placed those bets. If he happened to be in the PRC then he may well have broken PRC law but that is a matter between him and the PRC authorities, it will not affect the recoverability of any debt based on those transactions under Gibraltar law which governs the position.
34. These being my findings, this judgment must stand. There is no basis upon which it ought to be set aside. The summons will therefore be dismissed with costs to the Plaintiff. The order for costs will be, in the usual way, an order nisi.
| (Ian Carlson) | |
| Deputy High Court Judge |
Paul Carolan, instructed by Messrs Baker & McKenzie, for the Plaintiff
Paul Lam, instructed by Messrs David Lo & Partners, for the Defendant