MELCO CROWN GAMING (MACAU) LTD v. HUANG HAICHAO

CACV 153/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 153 OF 2013

(ON APPEAL FROM HCA NO 2193 OF 2012)

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REASONS FOR JUDGMENT
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Hon Cheung JA:

1.  I agree with the Reasons for Judgment of Barma JA.

Hon Kwan JA:

2.  I agree with the Reasons for Judgment of Barma JA.

Hon Barma JA:

3.  This was the defendant’s appeal against the judgment of Deputy High Court Judge Seagroatt dated 25 June 2013, by which he granted summary judgment to the plaintiff, Melco Crown Gaming (Macau) Limited, against the defendant, Huang Haichao.  At the conclusion of the appeal, we dismissed the appeal and made an order for costs in favour of the plaintiff.  We stated that we would hand down our reasons for doing so at a later date.  These are my reasons for dismissing the appeal.

4.  The facts of this case can be briefly stated:

(1) The plaintiff is a sub-concessionaire of gaming business in Macau.  Chap Sam Gaming Promotion Company Limited (“Chap Sam”) is a licensed gaming promoter.

(2) On about 29 June 2011, the plaintiff and Chap Sam entered into two agreements.  The first was a gaming promotion agreement, and the second was an agreement authorising Chap Sam to grant credit facilities (“the Credit Authorisation Agreement”).  Thereafter, in August 2011, Chap Sam applied to the plaintiff for credit facilities for itself.  Pursuant to that application, the plaintiff agreed to grant to Chap Sam credit facilities of up to HK$15,000,000.

(3) On 17 August 2011, the defendant signed a Liability Statement by which he guaranteed the repayment of money to be advanced by the plaintiff to Chap Sam.  He also provided to the plaintiff an undated blank cheque (“the Cheque”) to enable the plaintiff to obtain payment in respect of sums that might become due under the guarantee.

(4) On 19 October 2012, Chap Sam borrowed HK$15,000,000 from the plaintiff by signing out three markers for that total amount.  The loan was to be repaid on 18 November 2012.  The casino chips obtained under these markers were provided by Chap Sam to a gambler on credit. However, the gambler did not repay Chap Sam, which was in turn unable to repay the plaintiff.  After giving credit for a credit balance of HK$2,275,300 on Chap Sam’s account with the plaintiff, a balance of HK$12,724,700 remained due from Chap Sam to the plaintiff.

(5) On 19 November 2012, the plaintiff completed the Cheque provided by the defendant and presented it for payment. However, the Cheque was dishonoured and returned to the plaintiff marked “refer to drawer”.  This led to the present proceedings, in which the plaintiff claims the amount of the dishonoured Cheque against the defendant, together with interest.  The plaintiff applied for summary judgment.

5.  In the court below, the judge entered summary judgment for the plaintiff, rejecting the various defences advanced by Mr Kwan on behalf of the defendant.  Before us, Mr Kwan put forward broadly the same defences as were raised before the judge.  In my view, none of these suggested defences have merit.

6.  Mr Kwan accepted that the Cheque was governed by Hong Kong law, and that consideration had been provided for the guarantee and the Cheque by the plaintiff’s agreement to advance credit to Chap Sam, and the subsequent giving of credit by the plaintiff to Chap Sam. However, he submitted that notwithstanding this, the agreement of August 2011 by which the plaintiff agreed to lend money to Chap Sam, and the guarantee given by the defendant pursuant to the Liability Statement of 17 August 2011 were legally unenforceable under Macau law, and that the Cheque was thereby rendered similarly unenforceable against the defendant, because it was conditional on the enforceability of the underlying debt from Chap Sam to the plaintiff (see paragraph 1 of the defendant’s Notice of Appeal).

7.  Mr Kwan went on to suggest that there were two provisions of Macau law which rendered the transactions and the Cheque unenforceable.  The arguments in respect of these provisions were as follows:

(1) The credit application form which formed the basis of the loan agreement between the plaintiff and Chap Sam, and the Liability Statement under which the defendant guaranteed Chap Sam’s debt to the plaintiff, were void as they had not been submitted to the Gaming Inspection and Coordination Bureau of Macau (“the DICJ”), this being said to be the effect of under Articles 8.2 and 8.7 of Macau Ordinance No. 5 of 2004.

(2) The agreement mentioned above were documents involving a debt of Macau Dollars 1,000,000 or more, and as such required to be submitted to the DICJ for approval pursuant to Regulation 24.3 of Macau’s Administration Regulation 6/2002.  As the documents were not so submitted or approved, the transactions and Cheque were void for this reason also.

(see paragraph 2 of the defendant’s Notice of Appeal).

8.  Alternatively, Mr Kwan submitted that the plaintiff should have first claimed against Chap Sam and could only sue the defendant after it had done so and failed to recover the full amount due from Chap Sam, pursuant to the doctrine of Benefit of Prior Excussio (or Exhaustion) under section 634 of the Macau Civil Code (see paragraph 3 of the defendant’s Notice of Appeal).

9.  For the plaintiff, Mr Hunsworth submitted that even if the underlying liability under the guarantee were unenforceable (which it was not), the Cheque remained enforceable because it was supported by consideration and the underlying transaction was not tainted with illegality.  In my view (and as the judge accepted), this is correct: see Sharif v Azad [1967] 1 QB 605, per Diplock LJ at p.618, where he said:

“A cheque issued in performance of an agreement which is merely unenforceable is not ‘affected by illegality’, although the drawer may have an alternative defence to an action by an immediate party by showing that the immediate party did not give value, that is consideration, therefor.”

10.  Here, there is no evidence that either of the agreements of August 2011 on which the plaintiff relies were illegal.  At best, from the defendant’s point of view, they might be ineffective or unenforceable, as provided for in Article 8.7 of Macau Ordinance No. 5 of 2004.  Although Mr Kwan suggested that a better translation of Article 8.7 would be to the effect that the contracts not approved by the Macau Government are “void” rather than “ineffective”, this does not assist the defendant, as it does not follow that such contracts are illegal as a matter of Macau law.  In any event, the translation has been certified, and I see no basis for departing from the certified translation as Mr Kwan would have us do.

11.  Given that the relevant provisions of Macau law provide only that contracts which are non-compliant are ineffective rather than illegal, even assuming that the arrangements between the plaintiff and Chap Sam and the defendant infringed those provisions (an assumption which I shall address briefly below) does not assist the defendant and provides him with no defence to a claim on the Cheque, for which consideration was admittedly provided.

12.  No doubt with this in mind, Mr Kwan submitted that the Cheque was provided on a conditional basis – the condition being that the underlying obligation was enforceable.  However, there is no evidence from the defendant to show that the Cheque was (or might be) so conditional, so that this argument lacks any evidential foundation and cannot succeed.

13.  In any event, the defendant’s suggestion that Article 8 of Macau Ordinance No. 5 of 2004 renders the August 2011 agreements void or unenforceable does not seem to me to be arguable.  Article 8 was the subject of careful consideration and analysis by Chu J (as she then was) in Wynn Resorts (Macau) S.A. v Mong Henry (unreported, HCA 192/2009, 12 February 2010).  Having considered expert evidence for the defendant in that case from Mr Cravo (who is also the defendant’s expert in the present proceedings), Chu J concluded that the provisions of Article 8 did not apply to contracts relating to credit relationships between a concessionaire/sub-concessionaire and a gambler, a gaming promoter and a gambler or a concessionaire/sub-concessionaire and a gaming promoter.

14.  I respectfully agree with the analysis of Chu J, for the reasons which she has fully explained in her judgment.  In particular, as indicated by Article 8.1, Article 8 applies only to a contract between a casino and a gaming promoter (under Article 3.2) and a management company or gaming promoter and a casino (under Article 5.3) by which the gaming promoter/management company was given the ability to enter into credit business with gamblers.  In the present case, these appear to be the contracts entered into in June 2011 (on which the plaintiff does not rely for present purposes), and not the contracts of August 2011 which underlie the plaintiff’s claim.

15.  Thus, the premise on which Mr Kwan relies (i.e. that the August 2011 agreements infringed the provisions of Article 8 of Macau Ordinance No. 5 of 2004) is invalid, and for this reason also, the defence based on that Ordinance cannot succeed.

16.  Turning to the alternative argument based on the alleged infringement of Article 24.3 of Administration Regulation 6/2002, this argument similarly fails in the light of Sharif v Azad, coupled with the absence of any evidence that the effect of a failure to comply with Article 24.3 makes it illegal to enter into the contracts with which it is concerned.  Moreover, there is in fact no evidence from the defendant’s expert as to the effect of the Regulation (although having been mentioned in the defence, it was addressed by the plaintiff’s experts who rejected the argument).  That being so, this argument cannot get off the ground.

17.  As for the plaintiff’s point based on section 634 of the Macau Civil Code, this is again a matter on which there is in fact no evidence from the defendant’s expert (although it was also dealt with and rejected by the plaintiff’s experts).  Thus, this argument cannot be maintained either, and it is not particularly surprising that the judge did not specifically deal with it.

18.  Thus, each of the proposed defences raised in the defendant’s notice of appeal are, for the reasons given above, unmeritorious and have no reasonable prospects of success.

19.  For completeness, I should add that Mr Kwan also raised a number of further points, none of which were mentioned in the defendant’s notice of appeal.  These points are therefore not open to the defendant, and in any case, none of them appeared to me to have any merit.

20.  In the circumstances, no arguable defence having been identified by the defendant, the appeal had to be dismissed.