Court of Appeal
Published October 31, 2007
Aspinall’s Club Ltd v Al-Zayat
Before Sir Anthony Clarke, Master of the Rolls, Lord Justice Sedley and Lord Justice Lloyd
Judgment October 19, 2007

A gambling debt which was recoverable when it was incurred, could later become irrecoverable if the gaming club had extended credit to a member contrary to law; that unlawful provision of credit rendered the member’s liabilities on both a dishonoured cheque and the underlying loan illegal and unenforceable.

The Court of Appeal so held, (i) allowing the appeal of the defendant, Fouad Al-Zayat, against Mr Justice David Steel who, on February 28, 2007, had struck out his defence to the claim of the claimant, Aspinall’s Club Ltd, for £2 million, and (ii) granting permission to defend the claim.

Mr David Lord for Mr Al-Zayat; Mr Patrick Goodall for Aspinall’s.

LORD JUSTICE LLOYD said that the defendant challenged the judge’s order giving summary judgment for the claimant on a cheque for £2 million drawn by the defendant. That cheque represented sums lost by the defendant in the course of gambling at the club operated by the claimant on March 10, 2000.

The defendant maintained that either when the cheque was drawn and handed over to the claimant, or thereafter, or both, the claimant infringed the prohibitions in section 16 of the Gaming Act 1968 on the provision of credit for gaming, and that therefore the sum otherwise due on the cheque was not recoverable.

The defendant had been a member of the club since 1994 and had gambled frequently as he continued to do until April 2006. During those 12 years he lost more tham £23 million. His loss on the night of March 10, 2000 was the largest that he suffered in a single session.

During that session the defendant drew four successive script cheques of £500,000 each in exchange for gaming tokens. He lost all the £2 million of gaming tokens. He disputed his liability to pay that sum.

He signed a preprinted but undated cheque on his account for £2 million but he contended that he only signed it on the understanding that it would not be presented unless the dispute was resolved.

Those facts were the basis of the defendant’s first line of defence, which was that the claimant provided credit to him in a way which was inconsistent with section 16 of the 1968 Act when it accepted the substitute cheque from him and returned the four script cheques to him.

Later the defendant countermanded the cheque. On March 14, the club caused the cheque to be presented bearing the date March 10. It was not paid because of the defendant’s orders not to pay.

The present claim was brought only three days before the end of the six-year limitation period for a claim on the cheque. During much of that time the claimant permitted the defendant to continue gambling at its club, though always requiring payment in cash or on a third party’s account. During that period he lost more than £10 million.

The defendant took the point that the agreement to allow him to continue gambling with no steps being taken to recover the £2 million amounted to a breach of section 16 of the 1968 Act. In addition, he contended that the underlying loan agreements were null and void under the Gaming Act 1892.

His Lordship said that section 16 had since been repealed. Section 16(1) prohibited the provision of credit by a licence holder in two respects: first, for enabling 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.

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 section 16, for example, by redeeming the cheques in exchange for a substitute cheque in circumstances which did not comply with section 16(2A), or by giving credit for losses in breach of section 16(1)(b), did that affect the preexisting liability on the original loan?

The defendant’s first contentions arose from the circumstances in which the substitute cheque was signed and handed to the claimant. The judge had rejected those arguments, but in his Lordship’s view, the position was not clear. It could not be said that that defence had no prospect of success.

The club’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.

The Master of the Rolls and Lord Justice Sedley delivered concurring judgments.

Solicitors: Quastels Avery Midgen; Beachcroft LLP.

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