Wynn Las Vegas, Llc v. Mong Henry

HCA 190/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 190 OF 2009

____________

BETWEEN

____________

Before: Deputy High Court Judge Carlson in Chambers

Date of Hearing: 29 July 2009

Date of Judgment (Handed Down): 5 August 2009

______________

J U D G M E N T

______________

Introduction

1.These are Order 14 proceedings in which the Plaintiff, a well known Las Vegas casino operator, is seeking judgment in the sum of US$3 million from the Defendant to whom it advanced this money so that he might gamble at its tables in Las Vegas. The Defendant has had the misfortune of losing all of it, notwithstanding which he says he is not liable to repay it, and at the very least because this is an Order 14 application in which he can show that there are triable issues which require that he should be taken to trial by the Plaintiff.

2.At the start of the hearing Miss Lam, who appears for the Defendant and who was only instructed the day before the hearing, has sought to persuade me to order the Plaintiff to make discovery of a Credit Agreement allegedly entered into between the Plaintiff and the Defendant on 5 August 2008 made shortly after his arrival at Las Vegas in order to gamble at the Plaintiff’s casino. I refused the application which was based on a summons returnable not before me but before a Master on 30 July which was the day following the hearing of this Order 14 summons. I said that I would give my reasons for refusing the application in the course of this judgment which I will now do.

The summons for discovery

3.The basis of the Plaintiff’s case is a Credit Agreement entered into with the Defendant on 2 August 2007 also in Las Vegas by which credit could be extended to him so that he might gamble at the Plaintiff’s casino there. This Credit Agreement can be seen at page 92 of the hearing bundle as an exhibit to the affidavit of Mr Brian Bradford sworn on 8 June 2009 in which he has provided an expert opinion on the laws of Nevada to which I will return presently.

4.In correspondence the Plaintiff’s solicitors in answer to a request that their client should produce the Credit Agreement dated 5 August 2008 have replied to say that no such agreement exists. The Defendant does not accept this response and the purpose of the summons for discovery, which is dated 24 July 2009, very late in the day and as I have said returnable before the Master the day following this hearing, is to oblige the Plaintiff through its appropriate representative to go on oath and say that no such 2008 Credit Agreement exists. If I had made such an order the Order 14 summons would have had to be adjourned to a future date so as to await the Plaintiff’s affidavit.

5.The basis for the existence of this Agreement is to be found in the Defendant’s 3^rd Affirmation which is dated 10 July 2009 [46-50]. The evidence is at paragraphs 11 to 13 [48]. It says this:

“Upon our arrival at Wynn Las Vegas at around 6pm on Monday 5^th August 2008, we were greeted by 2 local managers, who took us to a suite Mr Chan had arranged for us. Inside the suite, I was asked to sign two documents, one for check-in and the other was likely a Credit Agreement that had been prepared beforehand. They told me that after signing the Credit Agreement, I could go downstairs to obtain the Marker.

I did not read the Credit Agreement because I do not understand English and the agreement was all in English. No one explained the contents of the Credit Agreement to me; they only told me that it was part of the standard routine company policy and asked me just sign it. I was not clear on the specific terms and clauses. I signed it in order to obtain the Markers at the casino. I was not given a copy of the Credit Agreement. My solicitors had written to the Plaintiff’s solicitors requesting for copies of the Credit Agreement that was signed that night but was provided only with a copy of a credit agreement dated 2^nd August 2007, which is relied upon by the Plaintiff in this action. There is now produced and shown to marked Exhibit “MH-6” copies of the correspondence exchanged between my solicitors and the Plaintiff’s solicitors.

After signing the Credit Agreement, Mr. Chan ordered room service for us and he brought along 3 bottles of fine red wine for our consumption. At around 8pm to 9 pm, Mr. Chan took me and my friend downstairs to the V.I.P. room of the casino arranged by Mr. Chan, where I was asked to sign a marker for US$3 million. Thereafter, I gambled until around 1 a.m. when Mr. Chan suggested that we return to the room for late-night snack. Again, Mr. Chan ordered plenty of alcohol for us to consume. At around 3 a.m., Mr. Chan took me and my friend back down to the casino, where I gambled until 8 a.m., losing the entirety of the US$3 million.”

6.Mr Hunsworth in resisting this application as a blatant late attempt to have adjourned the Order 14 application, submits that the passages in the Defendant’s 3^rd Affirmation, to which I have just referred, do not begin to establish a case that such a Credit Agreement ever existed. The Defendant says that he cannot read or understand English and that he was not given a copy of the Agreement so that he could not tell what he was signing. He was told that this was just a matter of routine. It is therefore submitted that on this scanty and imprecise basis it is not possible for the court to conclude that such a document had ever existed and, in such circumstances, the Defendant has not crossed the threshold of proof that a document still exists or had existed so that the court can require the party in whose possession the document is alleged to be to produce it or to say what has become of it.

7.The other objection is that the obligation to make discovery does not arise before the close of pleadings. In this case that stage has not been reached. The Plaintiff is applying to have summary judgment entered on the basis of the case that it is presenting to the court. That application will succeed or fail on its merits on the evidence that the Plaintiff wishes to place before the court. In resisting summary judgment the Defendant is entitled to place before the court all the evidence that he says gives rise to a triable issue but he cannot require disclosure before that procedural stage has been arrived that in the litigation which, if summary judgment is entered, will not be reached.

8.Finally, Mr Hunsworth also submits that even assuming the existence of such a Credit Agreement its absence from the evidence will make no difference and certainly will not prejudice the Defendant’s case where the Plaintiff is relying on the US$3 million marker that the Defendant signed which gave him access to the credit in that amount which he was able to gamble with and eventually lose. The Defendant has accepted in his affirmation evidence that he signed the relevant marker and that he was given access to US$3 million with which he was able to gamble.

9.Miss Lam has submitted that it would not be right to go on without at least having the Plaintiff’s representative go on affidavit to confirm what was said on its behalf in correspondence as to the non‑existence of the 2008 Credit Agreement.

10.In my judgment the Defendant’s affirmation is not sufficiently clear as to whether what he signed on 5 August 2008 was in fact a Credit Agreement which he says he did during the check-in process at the casino/hotel particularly where he asserts that he cannot read English. Absent sufficiently clear evidence as to the existence of this Credit Agreement the Defendant does not even engage the provisions of Order 24. He has not passed the threshold test to be able to insist on disclosure assuming for this purpose that the document would be relevant.

11.Even if I am wrong in this view, it seems to me that no possible prejudice can be caused to the Defendant in circumstances where he admits that he signed the marker for US$3 million which is what the Plaintiff relies on as proof of the extension of credit to him based on the Credit Agreement dated 2 August 2007. Lastly, where I am exercising a discretionary jurisdiction it seems to me that this is a very late application which could and should have been made far sooner and which the Plaintiff would have been able to deal with in short order by affidavit confirming what was said on its behalf in the correspondence which denied the existence of a 2008 Credit Agreement.

12.As to whether, in principle, discovery is available to a defendant before the close of pleadings on an Order 14 summons, I would have thought that such an order would go if to deny a defendant discovery would do him a manifest injustice on the hearing of the Order 14 application given the prospect that such a defendant might have judgment entered against him. In this case for the reasons that I have given no such injustice would arise given the issues raised on the affidavit evidence. It is the marker which is evidence of the credit extended to the Defendant.

13.For these reasons I refused the Defendant’s summons for discovery and vacated the hearing before the Master on 30 July 2009 with costs to the Plaintiff.

The Order 14 application

14.In this regard the Defendant has applied to put in the expert opinion of Mr Allison, an attorney-at-law in the State of Nevada. This is a late application made with short service. Mr Hunsworth does not object and I have allowed Miss Lam to make use of Mr Allison’s evidence to which I will have regard.

15.The agreed facts in this matter are that the Defendant signed the marker for US$3 million which he proceeded to use at the Plaintiff’s gaming tables at their casino in Las Vegas and that he proceeded to lose all of it. He also admits not having repaid his debt. Once these facts are admitted the Defendant has it all to do to raise issues that ought to go to trial.

16.In order to do so the Defendant relies on the evidence of Mr Allison as he does on that of Mr Bradford who is also an attorney‑at‑law qualified to practise in Nevada. Mr Bradford’s affidavit of 8 June 2009 [39-45] was used to support an application for a stay of the action by the Defendant on the basis that Hong Kong was forum non conveniens and that the matter should have proceeded in Nevada. That summons was heard by Poon J on 19 June and dismissed on the same day with reasons handed down by the judge on 24 June.

17.Poon J decided that in view of the fact that the Plaintiff relied on the Credit Agreement signed on 2 August 2007 this agreement did not confer exclusive jurisdiction on the courts of Nevada. The parties’ experts were in agreement about that. The marker on the other hand contained the following term:

“I acknowledge that the debt for which this instrument is issued was incurred in Nevada; agree that Nevada law governs the debt and this instrument; submit to the exclusive jurisdiction of any court, state of federal, in Nevada …”

The Defendant contended, supported by Mr Bradford’s expert opinion, that it was plain enough that under the marker the parties had agreed to submit their dispute to the sole jurisdiction of the Nevada courts.

18.The Plaintiff had instructed Mr Anthony Cabot and filed an expert opinion by affidavit from him. Mr Cabot is a substantially more experienced Nevada attorney. His opinion was that the marker only bound the Defendant to litigate any dispute on the marker before the courts of Nevada. The Plaintiff was free to litigate against the Defendant in such other court or courts that might have jurisdiction over him. The Plaintiff suing on the marker could sue in Nevada in which case the Defendant was bound to litigate only there but, the Plaintiff could if it wished sue elsewhere provided that court considered it had jurisdiction over the Defendant. The judge held that Mr Cabot’s opinion in this regard was to be much preferred to that Mr Bradford on this aspect. Mr Bradford had suggested that the exclusive jurisdiction clause in the marker bound both parties to the courts of Nevada.

19.All of this said it did not matter because the action itself is not being brought on the basis of the marker which is merely evidence of the debt, the basis of the action being on 2007 Credit Agreement (at that stage the Defendant had not suggested that he had signed a later Credit Agreement on 5 August 2008 which only emerged in his further 3^rd affidavit dated 10 July 2009) which the parties were agreed did not confer exclusive jurisdiction on the courts of Nevada.

20.In those circumstances Poon J held that the action was not one that could only be tried in Nevada and this being so he concluded that Hong Kong was in all the circumstances the forum conveniens. The courts of Hong Kong having jurisdiction over the Defendant would be required to decide the case by applying Nevada law as it affects the Credit Agreement of 2007 entered into between the two parties. Accordinly, Poon J dismissed the application by the Defendant to stay the action in favour of the courts of Nevada. There has been no appeal from that order.

21.Now the Defendant is his 3^rd Affirmation raises other matters which Mr Allison, his legal expert on the laws of Nevada, suggests would render the Defendant’s indebtedness unenforceable.

22.The Defendant’s 3^rd Affirmation needs to be read in its entirety [46-49]. In this regard his evidence is supported by that of his friend Mr Chan Hang who had gambled with him. His affirmation is at pages 51‑53.

23.The Defendant’s case can be summarised in this way. He says that he had been a customer of the Plaintiff’s associated casino in Macau [Wynn Macau] during the month of June 2008 in the course of which he had lost HK$30 million of which he had settled HK$8 million leaving over the substantial balance of HK$22 million. Plainly, he was a player for high‑stakes at the Plaintiff’s tables and as such, a highly valued client whose custom the Wynn organisation wished to solicit and encourage. The Defendant says that he was attended upon by a Mr Samuel Chan a Senior Executive Vice President of the Wynn group.

24.Mr Chan proposed to him that he should issue a cheque for HK$22 million and that he would be given credit of HK$30 million to gamble with at Wynn’s Macau. If he won with this credit the cheque for HK$22 million would not be cashed and he would owe Wynn’s nothing. If he lost, the cheque would have to be cashed on the following Monday which was 5 August 2008. He agreed to this proposal and arrived at Macau on Saturday evening 3 August 2008 and started to gamble successfully, at first, until Mr Chan suggested that they go for dinner at about 1:00 a.m. where he consumed 6 or 7 sakes which made him drunk. They returned to the gaming tables at 3:00 a.m. and he played till 10:00 a.m. on 4 August by which time he had lost all of the HK$30 million.

25.Immediately after he had suffered that loss Mr Chan, who had been with him all of this time, suggested that he could arrange a credit line of US$3 million for him to play at Wynn’s in Las Vegas which would give him the chance of winning and erasing his Macau losses. The Defendant agreed and Mr Chan arranged first class air travel the next day for him, his wife and his friend Mr Chan Hang to San Francisco and from there by private jet to Las Vegas. Mr Samuel Chan accompanied them. They arrived at Wynn’s Casino and Resort on the evening of 5 August where he signed the US$3 million marker and then gambled all night interrupted by a late night meal when he says he was plied with plenty of alcohol. He then gambled on until 8:00 a.m. and lost all of the US$3 million.

26.As to his treatment by the Wynn’s organisation both in Macau and Las Vegas, the Defendant says this in his 3^rd Affirmation at paragraphs 14 and 15:

“Wynn Resorts (Macau) continually granted me higher and higher amounts of credit within an extremely short period of time. The employees at Wynn Resorts (Macau) talked to me many times, offering me large sums of credit to gamble with and even before my prior debts were settled. The employees at Wynn Resorts (Macau) were also the ones who suggested and arranged the Wynn Las Vegas LLC credit of US$ 3 million for me to gamble with. They lured and enticed me into accepting the credit of US$3 million from Wynn Las Vegas LLC.

With respect to the alleged gaming debt of US$3,000,000.00 as evidenced by the Marker, I shall put the Plaintiff to strict proof of its legality and enforceability under the laws of Nevada. My Nevada attorney, Mr. Brian L. Bradford has filed an affirmation on 15^th June 2009, I shall adopt his submission therein contained.”

27.He has relied on the affidavit of Mr Allison to deal with his complaint that he was led on by Wynn’s Casino to continue gambling in the face of substantial losses. Mr Allison has described his remit at paragraph 3 of his affidavit of 24 July 2009:

“I have been asked by the Defendant herein to make this Affidavit by way of providing an independent expert opinion as to whether the casino is under a duty not to lure the patron into obtaining further credit unless the casino takes steps to satisfy that the patron has the financial means to repay, particularly when the patron has already lost substantial sums of money. I understand that the Affidavit is to be relied on in opposition to the Plaintiff’s application for trial in the case in Hong Kong court and for summary judgment. The matters deposed to reflect my understanding of the relevant Nevada laws, as well as persuasive opinions in other jurisdictions, as derived from my experience indicated above and the information provided to me by the Defendant’s Hong Kong solicitor, Mr. David Fan of Livasiri & Co.”

He then says this at paragraph 4:

“Courts in the United States are increasingly adopting law that places a responsibility on casino operators to take adequate steps to ensure that its patrons do not engage in reckless behavior to their own detriment. For example, courts have imposed a duty on casino operators to ensure that a patron is not so intoxicated that they lose the capacity to contract. Hakimoglu v. Trump Taj Mahal Assoicates, 876 F.Supp. 625, 634 (D.N.J. 1994). Courts have also imposed a duty on casino operators to prevent compulsive gamblers from gambling to excess on the premises. See, e.g., Caesars Riverboat Casino, LLC v. Kephart, 903 N.E.2d 117, 134 (Ind. App. 2009).”

28.Regretably, and I don’t know what has gone wrong, but these two authorities not only do not support this conclusion by Mr Allison but also have decided the contrary. There were dissenting minority judgments in each of those two cases but by a majority the two authorities have decided that no such duty is to be imposed on the casino.

29.This being so Miss Lam, very properly, in discharging her duty to the court has felt unable to rely on Mr Allison’s opinion and neither has she been able to look to Mr Bradford’s opinion in the face of Poon J’s comments about his evidence where that evidence is set against Mr Cabot’s much weighter views which, as I do, the judge preferred.

My conclusions

30.The law in Hong Kong in this regard is very clear in a case such as this brought to enforce a gaming debt from Nevada. An analysis was provided by the Court of Appeal in Wong Hon v Sheraton Desert Inn Corporation (t/a as Desert Inn Resort & Casino) [1995] 3 HK 331. The headnote to the report sufficiently reproduces the court’s approach to the underlying principles:

“The plaintiff, a company incorporated in Nevada, USA, owns the Desert Inn Hotel and Casino at Las Vegas, Nevada (the casino). On 31 January 1994, the defendant applied for, and was granted by the plaintiff credit arrangements to gamble at the casino (the agreement). The application was evidenced by a form containing the defendant’s personal details and signed by him. Between 12-15 February 1994, the plaintiff provided the defendant with credit facilities for the purposes of gambling. On each occasion that the defendant drew upon the credit facilities, he executed a document known as a ‘marker’. Each marker evidenced the amount of money advanced by the plaintiff to the defendant in the form of gambling chips and recorded certain terms of the agreement. It was a term of the agreement that the amount of facilities provided by the plaintiff would be repaid in full by the defendant within 60 days of the date of each marker.

During the period 12-15 February 1994, 20 markers were executed by the defendant. The defendant then issued three cheques, drawn on Hong Kong banks, payable to the plaintiff which were however dishonoured on presentation. The defendant failed to repay any or all of the sums so advanced pursuant to the agreement. An O14 judgment was entered against the defendant. On appeal, counsel for the defendant primarily depended on the defence that there was no loan made to the defendant, a loan being the basis of the plaintiff’s claim.

Held, dismissing the appeal:

(1) The judge was right in deciding that the transaction was a loan. It was clear on the evidence of both parties to the transaction that the plaintiff had agreed to advance money to the defendant and the defendant was entitled to receive money from the plaintiff. It made no difference that the defendant might have exchanged the money immediately for chips, even if he did not actually receive the money in his own hands before receiving the chips. It was common to incur liability under an agreement of loan without seeing the cash (at 334A-C, I, 335A-B).

(2) On the principles embodied in r 200(3) of Dicey and Morris on Conflict of Laws (12th Ed) Vol 2 at 1467, an action on the loan itself would succeed if the loan was valid by its governing law. Here, the governing law of the transaction was the law of Nevada and that law, the evidence established, recognized such loans as valid (at 337I-338B).”

The judgment of Bokhary JA (as he then was) succinctly describes what the reality of the transaction amounts to [see 337H to 338C]:

“In my judgment, this is plain beyond reasonable argument to the contrary.

As a matter of substance and reality, the defendant gambled with the plaintiff’s money. And he could only do that because they had advanced it to him. In the present connection, I detect no gulf between, on the one hand, substance and reality and, on the other hand, the law whether here or in the state of Nevada. So, whether viewed through the eyes of our law or that of Nevada, the plaintiff had loaned the defendant that money.

The gambling in which the defendant engaged with that money took place in Nevada. And the evidence establishes that such gambling is lawful there.

Accordingly, the plaintiff was able to rely on the well-established principle designated r 200(3) and succinctly stated thus in Dicey and Morris on the Conflict of Laws (12th Ed, 1993) Vol 2 at 1467: ‘an action on [a loan for gambling] will succeed if the loan is valid by its governing law’. The law which governs this loan is that of Nevada, where it was made. And that law, the evidence establishes, recognizes such loans as valid.”

31.The unreported judgment of Findlay J in Las Vegas Hilton Corporation v Lo Yuk Leung [1997 No. A873] is helpful and instructive because he had been addressed on a very similar basis to that which this Defendant has advanced, that the defendant in that case had been “deliberately and cynically incited to spend large sums on gambling …” [see paragraphs 17 and 18 of the judgment]. A submission had been addressed to him that there were public policy considerations which were involved and which ought to come into play deprecating such conduct. Findlay J said this in relation to public policy, the law and gambling:

“But a reading of the Gambling Ordinance paints a false picture of public policy and morality in Hong Kong in relation to gambling. It is a matter of common knowledge to everyone living in Hong Kong that very large amounts of money are lawfully bet and won on the totalizator at every race meeting organised by the Hong Kong Jockey Club, and many people take part in frequent lawful lotteries known as the Mark Six. The public purse benefits from this widespread gambling in Hong Kong. A duty of 18% is payable on so called exotic bets, and 12% on other bets. As is also well known in Hong Kong, the Jockey Club ploughs back much of the profit it makes from this lawful gambling into community projects that benefit the Hong Kong people. So, we may understand from this that the public policy of Hong Kong as reflected in our law and morality is not against gambling per se; it is not regarded as immoral, sinful, improper or worthy of public condemnation. The public policy is that gambling should be controlled and directed so that, to some extent, it benefits the community, both through the activities of the Jockey Club and by the collection of duty, and not the private purse of casino owners and bookmakers. Paragraph 12(b): Credit for Gambling. The allegation that the giving of credit for gambling “is a particularly insidious and reprehensible activity” is a value judgment or an argument, not a factual allegation. Broadly, “insidious” means deceitful and “reprehensible” means blameworthy. I accept, of course, that giving credit to gamble encourages that gambling, but one might also argue that giving credit to buy liquor encourages the evil of drinking alcohol to excess. Paragraph 12(c): The Defendant. The defendant is said to be 71 years old and a compulsive gambler. I have nothing before me from the defendant to help me understand the significance of the plea that the defendant is a compulsive gambler. There is no suggestion that this condition results in some incapacity in law so that the defendant is not fully responsible for the promises he makes. The defendant is certainly a regular gambler for high stakes, and, it may be, a very unlucky one. After gambling in the plaintiffs casino, in December 1993, he lost US$2 million, in October 1995, he lost nearly US$3 million in April 1996, he lost nearly US$2 million. After being allowed discounts, he paid these debts. It seems he was equally unlucky at other casinos. He is presently being sued in Hong Kong by three different casinos for amounts of US$2 million, nearly US$3 million and just over US$1 million. We do not know, of course, whether, on other occasions, he won.

We have, in Hong Kong, plenty of addictive gamblers, drinkers and shoppers, and those that supply the facilities to gamble, drink and shop provide plenty of encouragement and assistance to these people to indulge their addictions. It is not conceivable that any court in Hong Kong would find it contrary to public policy or morality to allow the recovery of debts incurred by such persons in the pursuit of their addictions. That may be desirable in a Utopia, but we do not live in such a society. If a person is incapable of making rational decisions regarding his financial affairs, that is something that he, his family, his friends or the public authorities should do something about; it is not a situation in which the Hong Kong Jockey Club, or any other supplier of goods or services, should be expected to protect that person against his own inclinations that may be detrimental to his welfare and that of his family.”

32.These remarks, if I may respectfully say so, not only provide the appropriate answer to the Defendant’s complaint that he was enticed and encouraged by the Plaintiff into further gambling on credit when it knew that he was down on his luck and already substantially indebted to it but it also presents a realistic commentary on the gaming industry in its dealings with those who are prepared to engage in the risks that gambling involves, often for stakes that most people cannot imagine let alone contemplate involving themselves in.

33.It is plain from Mr Cabot’s evidence that what the Plaintiff engaged in with the Defendant was lawful under the laws of Nevada. Mr Allison and Mr Bradford have signally failed to show otherwise and there are no other reasons under Hong Kong law which should deprive the Plaintiff of the right to be repaid by the Defendant what he owes. There is simply no arguable issue that can be raised to defend this claim and therefore the Plaintiff must have judgment in the sum of US$3 million together with contractual interest at 18% p.a. pursuant to paragraph 4(2) of the Credit Agreement dated 2 August 2007, from the date of the advance of the credit to the date of judgment and thereafter at the judgment rate until payment. There will also be an order nisi that the Defendant will pay the Plaintiff its costs on the basis of a gross assessment in the claimed amount of $86,836 which, it seems to me, is a perfectly reasonable sum in the circumstances of this case and the work involved in prosecuting it to judgment.

Nicholas Hunsworth, of Messrs JSM, for the Plaintiff

Catrina Lam, instructed by Messrs Livasiri & Co, for the Defendant