CHRIS AU v. STEVE YOON SOO KIM

HCA 1285/2014

[2022] HKCFI 148

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1285 OF 2014

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J U D G M E N T

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Introduction

1.  In this trial, the Plaintiff claims against the Defendant for HK$7,208,550 arising from 33 sessions of poker games.  The poker games were played during the period between 7 April 2008 and 25 November 2008 (“the Period”)  between four players (“the Players”), namely the Plaintiff, the Defendant, Jonathan Hwang (“Jonathan”)  and David Kim (“David”).

2.  It is the Plaintiff’s case that each session of the poker games[1] forms a separate contract between the Players.  During the Period, the Players kept a ledger (“the Main Ledger”)  on the results of each game and after the last session on 25 November 2008, the cumulative loss of the Defendant to the other players on the Main Ledger was in the amount of HK$8,795,250.  After deducting the value of certain assets[2] of the Defendant under control or in the possession of the Plaintiff, the sum owed by the Defendant to the Plaintiff is HK$7,208,550.

3.  The Defendant disputes liability on the Plaintiff’s claim, and counterclaims for HK$527,250, being the value of the assets the Plaintiff used to set off the alleged indebtedness as mentioned above.

4.  In summary, the case of the Defendant is that:

a.  There were no legally binding and enforceable contracts between the parties because of a lack of an intention to create legal relations. 

b.  For the card games which took place on or after 29 September 2008 when the modified “Numbers” game was introduced, these games were artificial and not genuine poker games, and were not played with an intention that the results would be legally binding on the parties. 

c.  Further, the alleged agreements between the parties lacked sufficient certainty to amount to legally enforceable contracts. 

d.  Even if there were valid gaming contracts formed between the parties, the contracts are unenforceable on the ground of illegality and/or being contrary to public policy in that:

(i)  The playing of the 33 games amounted to unlawful gambling under section 3(1)  of the Gambling Ordinance (Cap 148)  (the “Ordinance”), and any contract which seeks to recover winnings arising from unlawful gambling should not be enforced.

(ii)  The sole or predominant purpose of the 33 games was for the Players to gamble at high stakes poker and win money from each other, and they were not played on a “social occasion” under section 3(2)  of the Ordinance.

(iii)  There was at least one or more games played at the restaurant premises of Dakota Prime which were not “private premises” under section 3(2)  of the Ordinance.[3] Those games were also illegal by reason of this as well.

(iv)  As a result of the shifting of $825,000 in losses from David to the Plaintiff and Jonathan on 11 August 2008, the games were not played “for the private gain of any person otherwise than to the extent of a person’s winnings as a player of or at the game” under section 3(2). David made a private gain from the games which was greater than his winnings at the games played.

(v)  The Plaintiff, together with Jonathan and David, deliberately concealed the existence of a side ledger (the “Side Ledger”)  from the Defendant from 11 August 2008 onwards.  The Side Ledger made the positions shown in the Main Ledger circulated between all the Players false and inaccurate.  The purpose of concealing the Side Ledger from the Defendant was to persuade or induce him to continue to participate in gambling.  The other players also colluded together to the detriment of the Defendant.  This amounted to cheating at gambling within the meaning of section 16 of the Ordinance.

e.  The Defendant, by way of counterclaim, is entitled to recover the value of the assets which had nothing to do with the card games and wrongly appropriated by the Plaintiff in partial satisfaction of the alleged indebtedness with respect to their card games.

5.  At trial, only the Plaintiff and the Defendant gave evidence.  Although the factual evidence spanned over a year with reference to hundreds of emails and there were conflicting versions of facts given by the witnesses in certain aspects, the overall factual background was fairly uncontroversial.   

6.  As it turned out, the conflict of evidence is rather insignificant for determination of the main issues, which are legal rather than factual in this matter. 

Facts

7.  The following summaries are taken from the parties’ opening submissions with modifications.

8.  The Plaintiff was a businessman who operated the restaurant “Dakota Prime” and the club “Prive” in Central.  Jonathan and David were bankers employed by BNP Paribas and Merrill Lynch respectively.  The Defendant was an employed foreign lawyer in a Hong Kong law firm.

9.  From December 2007 to February 2008, the Players met up with other friends to play high-stakes poker (“Fight Club 1”).  These games were played at the Plaintiff’s office on Wyndham Street.  A total of 15 games were played.  The Defendant knew Jonathan and David from Fight Club 1.

10.  There is a dispute as to when the Plaintiff and the Defendant knew each other.  According to the Plaintiff, he met the Defendant in late 2004 or early 2005 in a poker game at the American Club.  The Defendant says he only knew the Plaintiff from 2007 onwards.

11.  Apart from playing poker games, the interactions between the Plaintiff and the Defendant also included a) investing in Dakota Prime at around July 2008; b) the Defendant purchasing a car from the Plaintiff in July 2008; and c) the Plaintiff helping the Defendant purchase car parts and fix the Defendant’s car throughout July to December 2008.

12.  In early April 2008, the Players started to meet up regularly for gaming sessions again ( “Fight Club 2”).  These games were played on credit using poker chips with the results recorded in the Main Ledger. 

13.  In each of the gaming sessions of Fight Club 2, the Players would play various card games including but not limited to “No Limit Texas Hold’em Poker”, “Pot Limit Omaha Poker”.  In later sessions[4], a modified version of the “Numbers” game was also one of the games which were played by the Players.

14.  There were a total of 33 gaming sessions for Fight Club 2.  The first session was played on 7 April 2008 and the last session on 25 November 2008.

15.  It is the evidence of the Plaintiff that:

(1)  In Fight Club 2, after each of the 33 sessions, the winnings and losings of each of the Players would be circulated and recorded and set out in the Main Ledger.  The Main Ledger recorded who participated in the session, the cash payments made and the net gains or losses of each of the Players.  The Defendant himself would update and circulate the Ledger from time to time.

(2)  The Players often discussed rules and terms of payment, but none of those discussions resulted in any concretely or unequivocally agreed rules and terms for payment.  None of the so-called rules and terms put forward by the Defendant (i.e.  the so-called “April Payment Rule”, “May Extension Rule”, ‘August Payment Rule”, “One Million Dollar Rule”, “September Payment Rule”, “Final Extension”)  were enforced by any of the Players.

(3)  On 11 August 2008 (session 20), the Plaintiff, David and Jonathan agreed to a one-off adjustment of David’s losses whereby HK$675,000 and HK$150,000 of his losses were shifted to the Plaintiff and Jonathan respectively.  Those shifted losses were not waived and were fully enforceable against David.

(4)  After session 21 (played on 12 August 2008), the Plaintiff and David were in a cumulative losing position of HK$2,852,850 and HK$105,700 respectively.  For a short period of time after session 21, the Defendant refused to play any further games and made repeated demands for payment.

(5)  This led to the Plaintiff to offer “pay-to-play” payment on or around 25 August 2008. In simple terms, the Plaintiff proposed that he would make immediate payments to pay towards the outstanding balance in order to “buy” the chance to continue playing.

(6)  The “pay-to-play” arrangement was accepted by the other Players.  It was recorded on the Main Ledger and led to a game on 25 August 2008.  Subsequent emails sent by the Defendant himself and the fact that he voluntarily participated in the later gaming sessions fully demonstrate that he has accepted the “pay-to-play” arrangement.

(7)  On 29 September 2008, in the middle of session 25, the Defendant was informed by Jonathan of the one-off adjustment of David’s losses. The Defendant did not attempt to make any issue or complaints in relation to the adjustment at the material time and continued to play.

(8)  On 16 October 2008, after session 27, the Plaintiff was winning HK$1,163,850 overall whereas the Defendant was losing HK$633,650 overall.  In other words, the Plaintiff was no longer in a cumulative loss position and the Defendant was, for the first time, in a cumulative loss position.

(9)  Thereafter, there were 6 more sessions and the Defendant lost in 5 of those sessions.  After the last session on 25 November 2008, the Defendant was in a cumulative loss position of HK$8,795,250.

16.  It is the evidence of the Defendant that:

(1)  In Fight Club 1, there were never any clear rules as to settlement. The biggest loser of Fight Club 1, Charlie Han, never fully settled his losses of HK$1,655,000.

(2)  Similarly, in Fight Club 2, there was never any immediate payment of losses.  The Defendant circulated the Main Ledger for some of the sessions, sometimes with figures provided by the Plaintiff as the Defendant may have left early before the sessions ended.

(3)  Although the Plaintiff believed that there would be settlement at the end of April 2008, this was disregarded by the Players.  Jonathan, who had a cumulative loss position of HK$266,000 at the end of April 2008, requested and obtained a one-month extension to pay his losses at the end of May 2008.  On 27 May 2008, the Plaintiff, who was in a cumulative loss position of HK$353,900, also asked for an extension to settle his losses.  The Players later also requested for postponing settlement to the end of August 2008.

(4)  Although various rules regarding time and amount of settlement and buy-ins and re-buys were proposed and discussed, there was no clear consensus. The one rule which Players appeared to respect was that if any player reaches a cumulative loss of HK$1,000,000, he would have to immediately pay HK$500,000 pro rata to the other players (the “One Million Dollar Rule”).  The One Million Dollar Rule was set out as part of the agreed rules in an email dated 11 June 2008 circulated to all the Players.  This was after the previous rounds of extensions because the Players realized that everyone could get one.

(5)  Such was the Players’ respect for the One Million Dollar Rule that on Session 20 on 11 August 2008, the Plaintiff, David and Jonathan made the first Side Ledger adjustment in order to keep David’s losses from reaching HK$1 million on the Main Ledger.  At that time, the Plaintiff, David and Jonathan were all having net losses, and only the Defendant had a positive balance of HK$2,038,550.

(6)  The Plaintiff then lost a very substantial amount of money at the next session, session 21, on 12 August 2008.  After session 21 the Plaintiff had a net loss of HK$2,852,850.

(7)  Due to the Plaintiff’s losses surpassing the HK$1 million mark, there was a call among the Players for him to settle according to the One Million Dollar Rule before he would be allowed to play again.  The next game was played on 25 August 2008, when the Plaintiff paid HK$250,000 to the other players. The Plaintiff’s method of pay-to-play would continue for the next few games.

(8)  By 29 September 2008, before session 25 was played, only the Plaintiff was in a net loss position while the other three Players were all in a positive position on the Main Ledger.  In the middle of session 25 that day, Jonathan, who was also frustrated that the Plaintiff was not settling his losses, showed the Defendant emails between the Plaintiff, Jonathan and David showing that they kept records apart from the Main Ledger, had pooled their winnings and losses together rather than playing independently, and that the Main Ledger was not an accurate reflection of the results of the game sessions played.

(9)  This was a shocking revelation to the Defendant.  As a result, the Defendant introduced a new game to the sessions, which is the modified “Numbers” game.  The Defendant invented this. 

(10)  He told the other Players that “Numbers” was a “bullshit” game and not a “real game”, and that it would be the only game played from this point onward. The Defendant could reluctantly accept the results of “Numbers” game be recorded in the Main Ledger as long as the Plaintiff fulfilled his promise to pay by the end of September.

(11)  When October 2008 came and the Plaintiff did not settle but asked for a further extension till 15 October 2008, the Defendant formed a view that the Plaintiff and the other Players were not serious on settlement and were never going to settle.  The Plaintiff asked for one more session on 8 October 2008 and said that he would settle afterwards.  The Plaintiff still did not settle his losses before the next game on 16 October 2008.  This repeated refusal to settle was a common theme for the Plaintiff throughout.  The Defendant emailed the other Players saying “let’s hang out together at Disneyland from now on” since any notion of settlement was illusory.

(12)  On 16 October 2008, the Defendant agreed to meet to play if the Plaintiff pay-to-play in order to negotiate a deal for settlement.  The Defendant wanted transparency on the Side Ledger, reconciliation with the Main Ledger and full payment by the Plaintiff, and then the games could return to normal.  Instead, the bets at this session became even more absurd and astronomical compared to the rest of Fight Club 2 games before this.  At the end of the session, the Plaintiff paid the meagre sum of HK$32,000 to the Defendant despite the Plaintiff being in a net winning position and the Defendant with a net loss.

(13)  Since session 25 on 16 October 2008 onwards, the Defendant continued to attend the sessions in an attempt to discuss with the other Players on the Side Ledger reconciliation and settlement, but meetings became much shorter and the session would end when negotiations reached a standstill.

(14)  Moreover, since Dakota Prime opened for business on or around 10 October 2008, some of the game sessions occurred at the Dakota Prime restaurant premises from that date onward instead of the Plaintiff’s office.

(15)  As the Sessions dragged on with no progress on negotiations and the Defendant’s losses as shown on the Main Ledger snowballs, the Defendant made pay-to-play payments at each session mirroring the Plaintiff’s previous acts in jest.  The Defendant also started making allegations that the Plaintiff, David and Jonathan kept a Side Ledger, hoping that they would come clean, but to no avail.

(16)  The Defendant gradually lost all hope of a fruitful negotiation with the other Players.  Facing the Plaintiff’s chasing for payment of the sums on the Main Ledger, the Defendant responded, pointing out that the Side Ledger made the Main Ledger results after its creation void.

(17)  Finally, the Defendant was exasperated, and before he was about to depart Hong Kong after the global financial crisis, made a settlement proposal to return the Plaintiff’s pay-to-play money such that no one is out-of-pocket for Fight Club 2.  The Defendant transferred to the Plaintiff HK$65,000, which would set off the balance of the pay-to-play monies paid by both sides and the value of the Defendant’s car and car parts. 

(18)  The Plaintiff was not satisfied with the Defendant’s proposal, and after receiving the HK$65,000 transfer, also appropriated the Defendant’s investment of HK$250,000 in shares of Dakota Prime.  Unbeknownst to the Defendant, the Plaintiff had already removed the Defendant from Dakota Prime email updates to shareholders.

Findings of fact

17.  After hearing the evidence of the Plaintiff and the Defendant and considering the documentary evidence, I am of the view that both of them are not telling the whole truth.  However, by weighing their evidence, I would say on the whole I prefer the evidence of the Defendant to that of the Plaintiff. 

18.  For the Defendant’s evidence, I find it difficult to accept his proposition that he treated the “Numbers” game as merely “unreal”.  At the point of time he introduced this game he still maintained a major lead in the Main Ledger.  He was serious about getting the Plaintiff to pay up his loss which can be reflected in the emails and the fact that the Plaintiff had to come up with a pay-to-play arrangement in order to continue playing the games. 

19.  Although the emails showed that the Defendant was quite frustrated in being not able to get the Plaintiff to pay, there was no reason why he would start treating the poker games as “unreal”, as so doing may jeopardize his chance of realizing his gains from the previous games.  The fact that he described the game as a “bullshit” game does not necessarily mean that he treated the game as not real.  In my view, it was probably out of the fact that it was a game which does not require much skill.

20.  The following are some of the reasons why I found the Plaintiff’s evidence not generally credible:

(a)  The Plaintiff has been mendacious at the outset regarding the existence of the Side Ledger.  The Plaintiff maintained a clear position of denying the existence of the Side Ledger until the Defendant successfully discovered from Merrill Lynch an abundant amount of emails between the Plaintiff, David and Jonathan evidencing it. 

(b)  Moreover, the Plaintiff has failed to disclose those emails with David and Jonathan without giving any satisfactory reason.  I am of the view that the Plaintiff had deliberately concealed his possession of the relevant record of emails hoping that the Defendant was unaware of or unable to obtain the same.  It is unbelievable that only those emails were lost while the Plaintiff was able to discover hundreds of other emails during the relevant period relevant to the case.  And the Plaintiff has only come up with such an explanation first time when he was testifying in the witness box.

(c)  The Plaintiff has not been truthful to the court regarding his address, which was relevant to whether he was required to provide security for costs.  In his Writ of Summons filed in 2014, the Plaintiff provided an address at Baguio Villa giving the impression that he was based in Hong Kong but in fact he had already moved to Singapore in 2010.  Clearly, he was giving false information to avoid paying security for costs.  His explanation that his lawyers put in the address without checking with him is simply incredible.

(d)  In cross-examination, the Plaintiff was evasive and he refused to give direct answers to questions relating to his personal savings.  He initially declined to answer the amount of money he held in his savings account at the relevant time, and it was only after the court indicated that it was a relevant question that he managed to say that he did not recall.  His claim that he did not even have a rough recollection of how much money he had in his bank account at the time is incredible. 

21.  I am not minded to list out all the matters which undermined the credibility of the Plaintiff.  They are set out in detail in the closing submission of Mr Jin Pao S.C.[5], counsel for the Defendant, to which I agree.

22.  My findings of salient facts are as follows:

(a)  The Players had been serious about the poker games (including the “Numbers” game)  played in Fight Club 2 and had the intention throughout that the loss of each player would be eventually paid up by the losers;

(b)  The sole purpose for the Players to meet up in the 33 game sessions was to gamble in poker games;

(c)  The Players had agreed the One Million Dollar Rule as the rule for payments but the rule had not been complied with.  At a later stage, the Players agreed to a pay-to play rule;

(d)  There was a Side Ledger maintained by the Plaintiff, David and Jonathan initially with a view to circumvent the One Million Dollar Rule to the prejudice of the Defendant without his knowledge;

(e)  Some of the games were played at the VIP room of Dakota Prime;

(f)  During the Period, the bets of the games became higher and higher and in the latter part of the period escalated to a level disproportionate to the earnings of the Players.

DISCUSSION

Formation of contract

23.  I am not minded to set out the basic principles for contractual certainty and the intention to create legal relations as they are rather uncontroversial.

24.  The intention of the Players for losers to meet payments was very clear. A ledger was created to record the results of each game and it was circulated for approval every time.   There were serious discussions of the rule for payments in that different proposals had been considered and in the end the “One Million Dollar Rule” was made to be one of the “agreed terms”.  So much as the Players respected this rule that a discreet side ledger was created with a view to get round it.  There was a clear understanding of the Players’ obligation to pay.

25.  In my judgment, provided that the obligation to pay is clear it is not necessary for the Players to expressly agree to a time for payment to give sufficient certainty to make their agreement a legal contract.  A term that payment will be made within a reasonable time can be implied.  Even if an express term is required, the “One Million Dollar Rule” was agreed as the term for payment, albeit that it has never been complied.

26.  The stakes of the poker games were high and the Players met up solely for the poker games.  No one had ever said the loss was not meant to be paid and to the contrary they were all very serious about payment.  In my view, the intention to create legal obligations was very clear.

Illegality

27.  The law on common law illegality is based on the principle that a person may not derive a legal right from his own illegal act.  There should be a direct causal link between the illegality and the claim, distinguishing between those illegal acts which are collateral or matters of background only, and those from which the legal right asserted can be said to result[6].

28.  In the present case, if the 33 game sessions amounted to unlawful gambling, the gaming contracts seek to enforce winnings would be directly attributable to the illegal gambling, any contractual claim to seek recovery for winnings arising from the games would be unenforceable on the ground of illegality.

29.  Under section 2 of the Ordinance:

a.  “Gambling” includes “gaming, betting and bookmaking”. 

b.  “Gaming” is defined as the “the playing of or at any game for winnings in money or other property whether or not any person playing the game is at risk of losing any money or other property”.

c.  “Game” is defined as including “a game of chance and a game of chance and skill combined and a pretended game of chance or chance and skill combined”.

30.  It cannot be disputed that the playing of the 33 game sessions amounted to “gambling” within the meaning of the Ordinance. 

31.  Under section 3(1)  of the Ordinance, gambling is unlawful save as provided for under sub-sections (2)  to (8).  In the present case, the Plaintiff only relies on the exception in section 3(2)  to argue that the 33 games were a lawful form of gambling. 

32.  Section 3(2)  of the Ordinance provides that:

“Gaming is lawful if the game is played on a social occasion in private premises and is not promoted or conducted by way of trade or business or for the private gain of any person otherwise than to the extent of a person’s winnings as a player of or at the game”.

33.  The parties have different views as to who bears the burden to prove the application of section 3(2). 

34.  Mr Terence Tai, counsel for the Plaintiff, submitted that if the Defendant intends to rely on s.3(1)  to argue that the Gaming Contracts are illegal, the Defendant must show that the exception under s.3(2)  does not apply.

35.  With respect, I disagree with Mr Tai.  It is true that the Defendant pleaded illegality as a defence and hence the burden rests on him to prove that the gaming contracts are illegal under the law.  However, under the Ordinance gambling is unlawful save as the exceptions provided for under sub-sections 3(2)  to 3(8).  It means that if it is gambling then it is prima facie illegal under the law.  It would be the burden of the Defendant to prove that the poker games satisfied the meaning of gambling under the Ordinance and the burden will then be shifted to the Plaintiff to establish any of the exceptions.  Otherwise the Defendant will have to disprove the existence of any of the exceptions which would be too much a burden for a party in a civil case.

36.  In my view, the burden rests on the Plaintiff to establish that the 33 games fall within the exception under section 3(2).  Having said that, however, in view of the ample objective evidence available for consideration and my findings on the evidence, the question of burden is insignificant for this court to come to a conclusion on this issue.

37.  In order to establish the exception, the Plaintiff must satisfy the court that the games:

a.  were played on a “social occasion” and in “private premises”; and 

b.  were not promoted or conducted:

i.  by way of trade or business; or

ii.  for the private gain of any person otherwise than to the extent of a person’s winnings as a player of or at the game. 

Social Occasion

38.  Mr Tai argued that the court ought not to consider the issue of social occasion as it was not properly pleaded in the Defendant’s pleadings.  I disagree.  The Defendant has pleaded illegality as a defence and expressly relied on s3(2)  of the Ordinance to establish illegality.  It would not be right to require the Defendant to anticipate what exception the Plaintiff was going to rely on and plead specifically which element within an exception was going to be put in issue.

39.  In any event, the Plaintiff relies on s3(2)  to disprove illegality and has therefore submitted each and every element under the subsection for the court’s consideration.

40.  Mr Pao succinctly summarized in their opening submission the relevant principles in relation to what amounts to “social occasion” within the meaning of the Ordinance to which Mr Tai did not tend to take exception.

41.  There is no statutory definition of “social occasion”.  In determining whether a game was played on a “social occasion”, an objective test should be applied and all the circumstances of the gathering should be taken into account. The actual stakes of the games played at the gathering is a relevant consideration[7].

42.  The essential character of the gathering is important.  In deciding whether gaming occurred on a “social occasion”, it is necessary to determine and balance whether the predominant purpose was the hope of winning money from the game played, or was merely recreational in nature[8].

43.  In R v Kwong Yiu Hung, Silke VP posed the following question which is illustrative[9]:

“Here, in my judgment, there was a dual use: the hope of winning money at Pai Kau and lunch time recreation. Which of them was, if either, predominant?”

44.  In HKSAR v Man Kwok Yau[10], Nguyen J applied the above legal principles and held that the gambling which occurred at a village store was not on a “social occasion” even if evidence was accepted that the participants in gambling were clansman or inhabitants of a small village, and that the premises on which they were found was a regular meeting place and it was their habitual practice to gather at these premises to engage in social gambling.

45.  With the above principles in mind, I have no difficulty in finding that the 33 game sessions were not played on a social occasion as stipulated under s3(2)  of the Ordinance.

46.  Mr Tai put much emphasis on the fact that the Players were not strangers but friends.  However, this is but one of the factors for consideration and not at all decisive.  As can be seen from the principles highlighted above, it would be the purpose of the Players that counts the most. 

47.  The stakes of the games were extremely high, objectively speaking, or peculiar to the Players.    The largest single win of the Plaintiff was for $3,214,900.  The largest single loss of the Defendant was for $3,146,000.  There were single hands where almost $4 million were at stake between the Players, and sessions where Jonathan and the Defendant bought in for $4.36 million and $3.4 million respectively.

48.  It can be seen from the Players’ conduct at the material time that most of their concern was on the money at stake rather than enjoyment of the games. The change of playing the “Numbers” game, with the consent of all parties, ostensibly revealed the Players’ primary intention to gamble.  The game sessions turned very brief. 

49.  In my view, the poker games in question were played in a way far out of in a social occasion stipulated under s.3(2)  where friends and relatives were allowed to gamble for fun and social purpose. 

50.  In the premises, s.3(2)  cannot come into play and the 33 game sessions were illegal gambling under the Ordinance and hence the gaming contracts arising therefrom are unenforceable. 

51.  Moreover, it would be against public policy to allow this kind of gaming contract to be enforceable in this honorable court where the stakes of the games are extremely high.  This will in a sense encourage people to engage in such games and their normal life can be ruined because of this. 

Private Premises

52.  With my findings on the issue of social occasion, it would be sufficient to dispose of the present proceedings.

53.  On the issue of whether some games were played not in private premises, as I mentioned earlier I accept the evidence of the Defendant that the games played on 24 and 27 October 2008 were played at the VIP room in Dakota Prime.  I accept that the entitlement to use the VIP room was just subject to a minimum charge and therefore it cannot be said to be private premises.

Cheating at Gambling

54.  Section 16(1)(b)  of the Ordinance provides that it is a criminal offence for any person to:

“fraudulently or by any deception whatsoever by words or conduct, including a deception relating to the past, the present or the future and a deception as to the intentions or opinions of any person, directly or indirectly persuades, incites or induces another person to take part in gambling or a lottery”.

55.  In HKSAR v Yau Wai-hung[11], the Court of Appeal held that the operative words in section 16(1)(b)  are “persuades, incites or induces by deception”.  Whether or not the fraud did actually cause the intended result was immaterial.  At §59, Yeung JA (as he then was), giving judgment for the Court, stated:

“ We were satisfied that the offence was completed when the defendants fraudulently made the misrepresentation with the view to persuade, incite or induce PW1 to gamble. The fact that the fraudulent misrepresentation did not cause the intended result was not material. Clearly the defendants intended the fraudulent offer of job opportunities as a means to persuade, incite or induce PW1 to gamble, which was the substance of a charge under s 16(1)(b)  of the Gambling Ordinance.”

56.  It is my finding that the Plaintiff, together with Jonathan and David, maintained the Side Ledger to the prejudice of the Defendant, probably to overcome the One Million Dollar Rule.   

57.  However, there is no clear evidence as to the real purpose of the continued keeping of the Side Ledger as the One Million Dollar Rule has later been apparently disregarded and a new “pay-to-play” rule has come into play.

58.  Although I agree with Mr Pao that there has been a collusion amongst the Plaintiff, Jonathan and David at the back of the Defendant in keeping a Side Ledger and there exists a certain degree of unfairness, I am of the view that there is insufficient evidence to establish the mental element in the offence with sufficient certainty under section 16(1)(b).

59.  I therefore find that the Defendant failed to establish a contravention of section 16(1)(b)  on the part of the Plaintiff. 

Conclusion

60.  As I have found that the 33 gaming contracts are illegal under section 3(1)  of the Ordinance, they are unenforceable in law under the principle of illegality.

61.  Hence, the Plaintiff’s claims against the Defendant shall be dismissed.

Counterclaim

62.  The Defendant is entitled to the repayment of the value of the assets wrongly appropriated by the Plaintiff in purported partial satisfaction of the alleged debt.

63.  The valuation of the shares in the Dakota Prime and the dividends arising from such shares is not disputed.  The only dispute relates to the valuation of Defendant’s car.  There is no evidence of the actual proceeds the Plaintiff did receive for the car, as he could not recall.  I do not accept that the Defendant agreed to sell his car at $150,000 as otherwise the Plaintiff would not have informed him later that someone offered $250,000 after it was fixed.

64.  I accept the Defendant’s way of valuation by subtracting the repair costs of $60,000 from the offered value of $250,000 as the value appropriated by the Plaintiff.

65.  The total sum repayable by the Plaintiff to the Defendant under the counterclaim is therefore $454,000, comprising $250,000 for the Dakota Prime investment, $14,000 – for the Dakota Prime dividends and $190,000 for the car.

Dispositions

66.  The Plaintiff’s claims are dismissed.

67.  The Defendant is successful in his counterclaim.  The Plaintiff is to pay the sum of $454,000 to the Defendant with interest thereon at half judgment rate from the date of Judgment until payment.

68.  Costs order nisi that costs of this claim and counterclaim be to the Defendant to be taxed if not agreed.