THE MIRAGE CASINO-HOTEL v. TAO HIU MING WILLIAM

CACV 159/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 159 OF 1999

(ON APPEAL FROM HCA NO. 11023 OF 1998)

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J U D G M E N T

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Keith J.A. (giving the first judgment at the invitation of Godfrey J.A.):

Introduction

1. The Defendants are husband and wife. They enjoyed gambling at a casino at the Mirage Hotel in Las Vegas, which was owned and operated by the Plaintiff. They are alleged to have borrowed considerable sums of money from the Plaintiff to finance their gambling. It is said that the loans are still outstanding. Accordingly, the Plaintiff sued them for the recovery of the sums lent and interest, and sought summary judgment against them under Ord. 14. Master Jones gave the Plaintiff summary judgment. The Defendants appealed, but their appeal was dismissed by Cheung J. They now further appeal to the Court of Appeal.

The loans

2. The sums which the Plaintiff claims were lent to the Defendants were all lent in the space of two weeks in 1997. Eight sums, totalling US$2,966,500.00, were alleged to have been lent to the 1st Defendant between 20th April and 4th May. Seven sums, totalling US$1,332,000.00, were alleged to have been lent to the 2nd Defendant between 26th April and 30th April. The loans were alleged to have been made in the form of chips to be used for placing bets. Each of the loans was alleged to have been evidenced by markers signed by the Defendants recording (a) the time and date on which the chips were handed over, (b) the value of the chips, and (c) to which of the two Defendants the chips were issued. Copies of those markers were exhibited to one of the affidavits filed on behalf of the Plaintiff, and the originals have been inspected by the Defendants' solicitors.

3. None of these facts have been admitted by the Defendants, but the crucial point for present purposes is that none of them have been denied. It is for a defendant to satisfy the court that there is "an issue or question in dispute which ought to be tried". Thus, the fact that the Defendants have not disputed these facts means that there is no issue to be tried in relation to them.

The Statement of Claim

4. A technical point was taken by Ms. Audrey Eu S.C. for the Defendants. She pointed out that the Statement of Claim pleaded that the Defendants had originally signed "credit agreements" with the Plaintiff, under which the Defendants had applied for, and had been granted, credit arrangements to gamble at the casino. It was then pleaded that it was pursuant to these credit agreements that the Plaintiff had provided credit facilities to the Defendants, which the Defendants drew on by executing the markers. Ms. Eu's point was that that is plainly incorrect, because the documents which the Defendants had originally signed were not credit agreements and had not amounted to applications for credit. Accordingly, the making of the loans on which the Plaintiff sues could not have been pursuant to the "credit agreements". In the light of that, Ms. Eu contended that the summons for summary judgment under Ord. 14 should be dismissed in view of the following principle in the Supreme Court Practice 1999, Vol. 1, para. 14/1/6:

"The statement of claim must be complete and good in itself; any defect or omission .... cannot be corrected or supplemented by the plaintiff's affidavit .... If the defect is one of substance, the application for summary judgment will be dismissed ...."

5. I agree entirely that the documents which the Defendants had originally signed do not look as if they were either credit agreements or applications for credit. There appear simply to be the forms which gamblers complete when they wish to open an account with the casino. But I do not think that that renders the defect complained of in the Statement of Claim as one of substance. The fact that the Statement of Claim might have wrongly recited the route by which credit facilities were provided to the Defendants is immaterial. The Plaintiff's actual case is that (a) the loans were made when the Defendants executed the markers, and (b) the markers evidenced the amount of money advanced to each Defendant in the form of gaming chips. That is pleaded in para. 5 of the Statement of Claim. The supposed defect in the Statement of Claim is not, therefore, a material defect, which should have resulted in the dismissal of the summons.

The alleged discount

6. The Defendants' primary defence to the claim relates to a discount which they claim they were granted by the Plaintiff. They had been gambling at the casino for many years. During those years, the Defendants had got to know Philip Wang, the Plaintiff's Executive Vice-President, Far East Marketing. His job title suggests that his role was to encourage potential gamblers from South East Asia to gamble at the casino. Indeed, that is exactly what the Defendants say he did with them. Although some of the details are in dispute, it is not disputed by Mr. Wang that high rollers would be given inducements to continue giving the casino their business.

7. According to the Defendants, these inducements included substantial discounts. In his first affirmation, the 1st Defendant said:

"I recall that in February 1997 I had a drink with Philip at the hotel lounge of the Mirage, the matter of discounts offered by the Mirage came up in our conversation. Philip told me that the more one loses the greater the discount the Mirage would give. When I asked him for exact details, he said the Mirage once gave a customer who lost US$3m. a 30% discount. When I asked him what would the discount be if the loss exceeded this amount, Philip said the discount would be 50%. Prior to this discussion, on our previous visits, the maximum that we had lost would be about US$1m. and our discount was 15%.

In April 1997, when I was visiting the Mirage, I saw Philip outside the Mirage Gift Shop. We chatted and I told him that my wife and I were going to leave shortly because we were losing money. I asked him what exactly would be the amount of the discount if my and my wife's losses exceeded US$3m. He indicated to me clearly that we would receive an exceptional discount of 50% on the entire amount of our losses ('the promised Discount') ...

The promised Discount was extremely important to me since my wife and I could have stopped gambling and left at that time. However, based on the promised Discount and in reliance upon it (of which I informed my wife at that time), we were encouraged and induced to try our luck again since our understanding was that we would need to pay only half of our losses if such losses exceeded US$3m. We did lose over US$3m. although the exact amount was unclear to us at the time ..."

It is on this basis that the Defendants contend that, if they are obliged to repay the loans made to them, they are only obliged to repay 50% of them.

8. This allegation is denied by Mr. Wang. He admits that the Plaintiff gives discounts, but those discounts are only for prompt repayment of loans and only up to a maximum of 15%. The discounts are on a sliding scale. Thus, if loans of between US$100,000.000 and US$1m. are repaid promptly, they will attract a discount of 10%. If loans in excess of US$1m. are repaid promptly, they will attract a discount of 15%. Accordingly, if a gambler promptly repaid a loan of US$2m., he would qualify for a discount of 10% on the first US$1m., and a discount of 15% on the second US$1m. To qualify for a discount on the ground of prompt repayment, the repayment would have to be made "within 60 to 90 days" of the grant of the original loan. The Plaintiff denies that Mr. Wang ever promised the Defendants a discount of 50%, though it admits that it was prepared to give them a discount of 15%.

9. However, the statements in which the Plaintiff recorded the amounts due by way of repayment of these particular loans by the Defendants do not entirely support the Plaintiff's case. In the first place, the statements show that a discount of 15% was being given in respect of the total sums lent, not simply in respect of the amount by which the total sums lent exceeded US$1m. Secondly, although there is a dispute as to when the statements were first sent to the Defendants, the Plaintiff admits that the statements were sent in January 1998. That meant that the Plaintiff was prepared to grant the Defendants a significant discount on the repayment of the loans, even when much more than 90 days had elapsed since the original grant of the loans. In other words, discounts were not limited to cases of prompt payment. Either the Plaintiff's policy was not as Mr. Wang describes it, or the Plaintiff's policy was one which Mr. Wang was free to depart from if he chose. Indeed, there is evidence that the Plaintiff was prepared to give discounts in excess of 15%. The Defendants have filed evidence from other gamblers, who claim that they were offered discounts by the Plaintiff greater than 15%, or were told that there were circumstances in which a discount of more than 15% might be given.

10. In his clear and concise judgment, the judge did not regard these factors as particularly significant. I do not share that view. If Mr. Wang was free to depart from the Plaintiff's policy if he chose, it would not be so unthinkable for him to promise a 50% discount on the sums lent in order to encourage a high roller to gamble even more. After all, it would not be as if the chances of the gambler winning or losing would be affected. The only effect would be that the profit which the casino would make on the unsuccessful gambling of a particular high-rolling gambler would be less than if such a discount had not been granted. However, having said that, although it would not be unthinkable for Mr. Wang to have promised the Defendant a 50% discount, it would still, I think, have been very surprising for him to have promised them a discount of that magnitude.

11. What the judge regarded as highly significant was the correspondence between the parties. He set out the relevant terms of that correspondence in his judgment, and I do not propose to repeat them here. It is sufficient to state that in the early part of that correspondence the Defendants were not asserting that Mr. Wang had promised them a 50% discount. Indeed, in the first letter the Defendants were requesting a 50% discount, and in a subsequent letter, having said that Mr. Wang had assured them that they would receive "a very substantial discount" if they lost more money, the 1st Defendant said that he was prepared "to settle the matter promptly" if they were granted a 40% discount. It was only in the third letter that the 1st Defendant claimed that Mr. Wang had promised a 50% discount. The judge concluded that

".... if Mr. Wang had in fact promised them a 50% discount, which induced them to gamble and [lose] over US$3,000,000, they would have said so in the very first letter in response to the demands of the Plaintiff. "

For their part, the Defendants' case is that the first two letters were preceded by a complaint to officers of the Plaintiff (who the Defendants named) that they had not been given the discount of 50% promised by Mr. Wang. Moreover, the Defendants say that the first two letters were drafted by the 1st Defendant's brother-in-law, because the 1st Defendant's command of English was insufficient. And in an affirmation sworn by the 1st Defendant in support of his application to set aside a statutory demand issued as a result of the judgment entered by the master, the 1st Defendant said:

"As is customary with the Chinese way of doing things, we took a very courteous attitude, notwithstanding that our position was very clear with regard to the 50% discount promised by Mr. Philip Wang."

12. I share the judge's scepticism about this correspondence, and I bear in mind that the mere assertion by a defendant of the facts upon which he relies is not enough to obtain leave to defend. The facts which he asserts must be credible. As Godfrey J.A. said in Ng Shou Chun v. Hung Chung San [1994] 1 HKC 155 at p.158G, the issue is not whether the defendant's assertions are to be believed (by which he meant, I think, that the issue is not whether the defendant's assertions will, or are likely to, be believed at trial). The issue is whether those allegations are believable - in the sense, I think, that it is possible that they will be believed at trial. At the end of the day, although I think that the Defendants' chances of being believed are remote, I cannot say that the Defendants' claim that they were promised a 50% discount by Mr. Wang is so improbable that it cannot possibly be believed. In my view, therefore, the Defendants should have leave to defend 50% of the claim for the repayment of the loans. But because their defence to 50% of the claim for the repayment of the loans is so shadowy - in the sense that their chances of being believed at trial are so remote - this is classically a case in which the Defendants should be required to pay the amounts, to which this part of the dispute relates into court.

The Defendants' accounts with the Plaintiff

13. Over the years, both Defendants had had accounts with the Plaintiff. They could make deposits into those accounts of cash, cheques or gaming chips. Similarly, they could withdraw cash, cheques or gaming chips if they chose. Sometimes their accounts were in credit. At other times their accounts were in debit, because they had drawn on such credit facilities as the Plaintiff had afforded them.

14. Mr. Adrian Huggins S.C. for the Plaintiff accepted that if the Defendants' accounts were in credit, they would be entitled to set off against the loans to which the 15 markers related the amount of the credit balances of the accounts. The Defendants did not keep their own records of deposits into and withdrawals from their accounts. They relied on the Plaintiff to keep a proper and complete record of their deposits and withdrawals. Accordingly, they put the Plaintiff to strict proof that

(a) there were nil balances in the accounts at the beginning of the two weeks of gambling during which the 15 markers were executed,

(b) they did not make any deposits to those accounts during those two weeks which should have been set off against the markers.

Ms. Eu contended that the need for the Plaintiff to prove these matters strictly amounts to "some other reason" within the meaning of Ord. 14 r. 3(1) for there to be a trial of the action.

15. The Plaintiff has attempted to provide the Defendants with the "strict proof" for which the Defendants asked. Every deposit into an account is evidenced by a hand-written deposit slip signed by the customer and a cashier. Every withdrawal from an account is evidenced by a computer-generated withdrawal slip signed by the customer. Copies of what the Plaintiff contends are all the deposit and withdrawal slips signed by the Defendants have been produced, together with a schedule prepared by the Plaintiff's solicitors which records the information recorded on the slips. They show a nil balance on each of the Defendants' accounts after every period of gambling at the casino, including nil balances immediately before the Defendants began to execute the 15 markers to which the Plaintiff's claim relates. It is true that the schedule stopped immediately before the Defendants began to execute the 15 markers, and therefore the Plaintiff has not furnished any evidence that there were no deposits into the accounts during the two weeks in which the Defendants incurred the losses to which the claim relates. But if the Defendants made deposits during those two weeks, whether in the form of cash, cheques or chips, I would have expected the Defendants to assert that somewhere in their various affirmations. They did not do that.

16. There is another compelling reason for concluding that the Plaintiff has provided the Defendants with the strict proof for which they asked. The markers which the Defendants signed were credit markers. The evidence filed on behalf of the Plaintiff is that credit markers would only be issued once the customer no longer has any funds in his account. That makes sense. If the customer has funds in his account, he does not need credit, and any withdrawals from his account will be evidenced, not by credit markers, but by withdrawal slips. There is no reason whatever to doubt that evidence.

17. I should add that the Plaintiff's evidence is that its policy is to return credit markers to the customer when the customer pays the Plaintiff the amount stated on the marker. The point is made that the fact that the 15 markers in this case were retained by the Plaintiff shows that the amounts claimed remain due and owing. I do not regard that point as in any way telling. As I have said, the Defendants do not assert that they made any deposits during the period when the markers were issued. Their case is that they might have made deposits prior to their disastrous spell of gambling in April and May 1997 which were not credited to their accounts.

18. For these reasons, this is not a case in which the Plaintiff should be required to prove strictly its case on the state of the Defendants' accounts. I do not therefore go along with Ms. Eu's contention that there is "some other reason" for a trial of the action. But that is not quite the end of the matter. It was argued on behalf of the Defendants that on particular occasions in the past sums were deposited into their accounts or transferred between their accounts for which credit had not been given to them. If it is possible that that occurred, there was, to use the other rubric in Ord. 14 r. 3(1), "an issue or question in dispute which ought to be tried", and it is to the two allegations relating to uncredited deposits and transfers which I turn.

19. Firstly, for reasons which it is unnecessary to explain, the Plaintiff filed evidence relating to various deposits into and withdrawals from the 2nd Defendant's account in September 1995. There were 10 deposits which totalled US$772,500.00, and two withdrawals which totalled US$390,000.00. The net amount deposited was thus US$382,500.00. In due course, the 2nd Defendant requested that this amount (plus an air fare allowance payable to her of US$33,000.00) be transferred to the 1st Defendant's account. An inter-office memo recorded that this request had been complied with on 16th December 1995. At the hearing before Cheung J., the point was made that neither the net deposit into the 2nd Defendant's account of US$382,500.00 nor the sum allegedly transferred to the 1st Defendant's account had been referred to in the summaries prepared by the Plaintiff's solicitors. It was suggested that that shows that the Defendants were not given credit for all the sums supposedly credited or transferred to their accounts.

20. The Plaintiff's lawyers were unable to deal with that allegation at the hearing before Cheung J., because they had not anticipated the point which was going to be made. As it is, though, a computer printout of the 1st Defendant's account shows that on 16th December 1995 the sums of US$382,500.00 and US$33,000.00 were deposited into his account. Accordingly, credit was in fact given for the very sums for which it was contended that credit had not been given. The affidavit which exhibited this printout purported to explain why this series of transactions had not been included in the summaries prepared by the Plaintiff's solicitors. I have not understood that explanation, but I do no think it matters since the fact that sums were so credited is beyond doubt.

21. However, I have concluded that this affidavit and the exhibits to it cannot be taken into account. The affidavit had been the subject of a summons for leave to file additional evidence for this appeal. Ironically, Mr. Huggins did not pursue the application, because he believed that the Plaintiff could not satisfy all the conditions for the admission of fresh evidence on appeal laid down in Ladd v. Marshall [1954] 1 W.L.R. 1489. Ms. Eu wanted to comment on the evidence, even though Mr. Huggins felt that he was unable to rely upon it. We permitted her to do so de bene esse since the evidence related to matters which were not within the knowledge of the Defendants, and in case there was something in the evidence which might have helped them. In the end, there was nothing in the evidence which I thought assisted them, and I therefore decline to take the evidence into account. But had I taken it into account, I would have concluded that it laid to rest the Defendants' concern about whether the net amount deposited was credited to their accounts.

22. But even without that evidence, the fact remains that neither of the Defendants have asserted that the Plaintiff failed to credit the amounts to their accounts. The Plaintiff's obligation to credit these amounts to the Defendants' accounts arose in 1995. The sums were very substantial, even to high-rolling gamblers. The Defendants would inevitably have become aware, sooner rather than later, that sums totalling US$415,500.00 had not been credited to their accounts. They could not have been so ignorant about the current state of their accounts not to have noticed such a large discrepancy. There is, therefore, not a question in dispute which ought to be tried in respect of the alleged failure to credit these sums to the Defendants' accounts.

23. Secondly, on one of the requests for credit facilities signed by the 2nd Defendant in 1993, the words "4 mil HK Dollars Check In" appear. Ms. Eu submitted that that must be a reference to a deposit of HK$4m., and yet no reference is made to such a deposit in the summaries prepared by the Plaintiff's solicitors. However, although the request had been exhibited to one of the early affirmations, the point which Ms. Eu made on it was a completely new one. Mr. Huggins was simply unable to deal with the point on the appeal. But the critical fact is that the 2nd Defendant has never asserted that she deposited HK$4m. at that time into her account. There is, therefore, not a question in dispute which ought to be tried in respect of the failure to credit this alleged deposit to the 2nd Defendant's account.

The claim for interest

24. The Plaintiff claimed interest on the sums lent to the Defendants. The interest on the sums lent to the 1st Defendant was said to amount to US$636,037.39 by the date of the issue of the writ, and the interest on the sums lent to the 2nd Defendant was said to amount to US$286,164.74 by the date of the issue of the writ. Judgment was given for those amounts of interest. The rate of interest was 18%, which is what was provided for in the documents which the Defendants originally signed when they began gambling at the casino, and in various requests which they made for temporary credit facilities. The issue here, therefore, is whether those documents provided for the contractual rate of interest in respect of the particular loans, the repayment of which the Plaintiff now seeks to recover.

25. The judge did not explain why he regarded one or other or both of these classes of documents as covering the loans to which the appeal related. It may be that he was not fully addressed on that issue. But Mr. Huggins, in my view rightly, conceded that there is a triable issue as to whether either of these classes of documents covered the loans. Accordingly, he conceded that there is a triable issue as to whether there was a contractual rate of interest. It follows that the judgment for interest at the rate of 18% cannot stand.

26. That does not mean that no interest is payable. The Plaintiff is entitled to statutory interest under section 48(1) of the High Court Ordinance (Cap. 4). Such interest is payable from the date when the Plaintiff's causes of action accrued. No express stipulation as to the time for repayment of the loans was made in the markers or elsewhere. Nor can it be implied from the dealings between the parties that the loans would only be repayable on demand. Accordingly, as the judge correctly found (but subject to a new point not taken before the judge) the loans became due and owing on the dates on which the markers were executed: see Chitty on Contract, Vol. 2, 28th. ed., para. 38-230. It is common ground that the loans were governed by the law of Nevada, but there is no evidence on what the law of Nevada is on the topic, and it is therefore presumed that it is no different from the law of Hong Kong.

27. The new point is this. There are obscure hand-written comments, in the box marked "Disposition/Special Instructions", on the back of the forms which the Defendants had originally signed which read "30 days HK office" or "Net 30 days Hong Kong". There is no evidence at all as to what those are references to. Rather than becoming embroiled in a debate as to the meaning of these comments, Mr. Huggins was content for the Defendants' liability for statutory interest, for present purposes, to be treated as arising 30 days after the dates when they would otherwise have arisen, i.e. 30 days after the execution of the markers.

28. It follows that the Plaintiff is entitled, in place of the judgment for the specific sums entered by the master, which were based on a contractual rate of interest of 18%, to judgment for interest pursuant to section 48 of the High Court Ordinance on half of each of the sums to which the markers related from 30 days after the date of the markers. Ms. Eu and Mr. Huggins agreed that the rate of interest should be prime plus 1%. The Defendants must, however, have unconditional leave to defend the balance of the Plaintiff's claim for interest.

Conclusion

29. For these reasons, I would allow this appeal, I would set aside the orders of the master and Cheung J., and in place of them, I would make the following orders:

(i) there be judgment for the Plaintiff against the 1st Defendant for the sum of US$1,483,250.00,

(ii) there be judgment for the Plaintiff against the 2nd Defendant for the sum of US$666,000.00,

(iii) there be judgment for the Plaintiff against both Defendants for interest on those sums pursuant to section 48 of the High Court Ordinance from 30 days after the dates of the relevant markers up to the date on which this judgment is handed down at the rate of prime plus 1%, and thereafter until payment pursuant to section 49 of the High Court Ordinance at the judgment rate,

(iv) if the 1st Defendants pays the sum of US$1,483,250.00 into court within 28 days of the handing down of this judgment, the 1st Defendant shall have leave to defend the balance of the Plaintiff's claim for the repayment of sums lent, i.e. US$1,483,250.00,

(v) if the 2nd Defendant pays the sum of US$666,000.00 into court within 28 days of the handing down of this judgment, the 2nd Defendant shall have leave to defend the balance of the Plaintiff's claim for the repayment of sums lent, i.e. US$666,000.00,

(vi) if the Defendants do not pay these sums into court by such date, the Plaintiff shall be at liberty to enter judgment against the Defendants for the balance to its claims for the repayment of sums lent, i.e. for the further sums of US$1,483,250.00 and US$666,000.00 respectively,

(vii) the Defendants are to have unconditional leave to defend the balance of the Plaintiff's claim against them for interest.

The order nisi which I would make as to costs would be to order the Defendants to pay to the Plaintiff its costs of and occasioned by the Ord. 14 summons, up to and including the hearing before Master Jones. After all, the Plaintiff has at all times been entitled to summary judgment for a substantial sum. However, the costs incurred since then in connection with the appeals from his order and that of Cheung J. are, in my opinion, in a different category. The order nisi which I would make in relation to those costs are that they be in the cause.

The bundle of exhibits

30. Finally, the exhibits to the various affidavits and affirmations were included in one lever-arch file. The file contained 535 pages in all. It was very unwieldy, and difficult to handle. Moreover, the fact that so many pages had been cramped into it meant that the arcs of the file which I was provided with did not meet. When I turned pages in the file, they became dislodged unless I remembered every time to hold the arcs together. It called to mind the Eleventh Law of Sedley J.'s Laws of Documents [1996] JR 57:

"Documents shall be held together, in the absolute discretion of the solicitor assembling them, by:

(a) a steel pin sharp enough to injure the reader,

(b) a staple too short to penetrate the full thickness of the bundle,

(c) tape binding so stitched that the bundle cannot be fully opened, or

(d) a ring or arch binder so damaged that the two arcs do not meet."

(Emphasis supplied.)

I understand the desirability of reducing the number of files to be provided to the court, but practitioners should remember para. 16 of the Practice Direction relating to civil appeals to the Court of Appeal:

"Lever-arch files and ring-binders must not be over-filled (and should never include more than 250 pages) and care must be taken to ensure that the rings close and fit properly so that the pages can be turned over easily."

I trust that the Practice Direction will be complied with in future.

Godfrey J.A.:

31. I have had the advantage of reading in draft the judgment prepared by Keith J.A. I entirely agree with it and there is nothing I can usefully add. We will make the orders proposed in Keith J.A.'s judgment.