[COURT OF APPEAL]

REGINA v. KNIGHTSBRIDGE CROWN COURT,

Ex parte MARCREST PROPERTIES LTD.

[CO/564/82]

Gaming - Club - Gaming licence - Company owning club found not to be fit and proper persons to hold licence - Finding of use for unlawful purpose based on use under earlier licence - Error of law - Effect - Club's course of dealing by accepting cheques with knowledge that cheques would be dishonoured - Gaming losses compromised by acceptance of lesser sums - Whether breaches of statute - Gaming Act 1968 (c. 65), s. 16 (1) (a) (b) (2), Sch. 2, para. 21 (1) (e)

Judicial Review - Certiorari - Crown Court - Oral judgment containing error of law - deficiencies in judgment - Decision not affected - Whether certiorari available

On May 11, 1971, a company obtained a licence under the Gaming Act 1968 to carry on the business of a licensed casino in premises in London. The licence was renewed and continued in force until May 2, 1978, when it expired, and a new licence was granted on that day. In January 1980 the company transferred the licence to the applicants. In December 1981, the Gaming Board and the Commissioner of the Metropolitan Police jointly applied to the gaming licensing justices, under paragraph 36 of Schedule 2 to the Gaming Act 1968, for cancellation of the licence on the grounds that the applicants were not "a fit and proper person" to hold a licence and that while the licence had been in force the premises had been used for unlawful purposes. The justices found both allegations proved and made an order cancelling the licence and disqualifying the applicants from holding a licence in respect of the premises for three years. The applicants appealed to the Crown Court but before the appeal was heard they sold the entire shareholding to one B. for a nominal sum of £1,000. The Crown Court upheld the findings of the justices and dismissed the appeal, confirming the order for cancellation and disqualification. The applicants applied for an order of certiorari to bring up and quash the decision of the Crown Court on the ground that there were errors of law on the face of the record. The point was taken for the first time that one of the grounds for the Crown Court's decision, that while the licence had been in force the premises had been used for an unlawful purpose, had been based on unlawful user during the currency of the earlier licence whereas the licence which came into force on May 2, 1978, was "the licence" for the purpose of paragraph 21 (1) (e) of Schedule 2 to the Act of 1968. The Divisional Court, while accepting that the Crown Court had made an error of law, nevertheless held that that error of law had not affected the court's decision that the applicants were not "a fit and proper person" to hold a licence and that the applicants had suffered no injustice. The court dismissed contentions that the Crown Court had been in error in holding that the acceptance by the applicants of further cheques from persons whose previous cheques had been dishonoured, knowing that they would be dishonoured, and the acceptance of lesser sums in discharge of debts of larger sums, constitutes breaches of section 16 (1) of the Act¹ and refused the order of certiorari.

1 Gaming Act 1968, s. 16 (1) (2) (3): see post, pp. 307F-308A.

On appeal by the applicants, on the grounds that the error of law found by the Divisional Court and the two other errors of law justified the making of the order, and that the judgment of the Crown Court was so unsatisfactory that, taken with the errors of law, justice demanded that its decision be quashed and a new hearing of the complaints ordered:-

Held, dismissing the appeal, (1) that the course of dealing between the applicants and their customers over a long period, whereby the applicants repeatedly accepted cheques from persons whose previous cheques had been dishonoured in circumstances in which the applicants knew that those cheques would not be honoured on first presentation, demonstrated that it was the intention of the parties that there was to be no legal right to have a cheque honoured when it was presented and since the only lawful cheque contemplated by section 16 (2) of the Act of 1968 was one in which there was a common expectation of payment on presentation within two days, what was provided was a sham and amounted to granting unlawful credit within section 16 of the Act (post, p. 308F-H).

Snook v. London and West Riding Investments Ltd. [1967] 2 Q.B. 786, C.A. applied.

(2) That when a cheque was given by a customer to enable him to take part in the gaming and was subsequently dishonoured, prima facie a debt had been incurred in respect of losses in the gaming and unless that prima facie case could be destroyed by the customer establishing that he never used the cash or tokens purchased by means of the cheque, or that he in fact made no loss as a result of being enabled through the acceptance by the casino of his cheque to take part in gaming, the acceptance of a sum less than the face value of a dishonoured cheque amounted to the release of part of a debt in respect of losses incurred in the gaming and was a clear breach of section 16 (1) of the Act (post, pp. 309D-F, 310B-C, D-E).

C.H.T. Ltd. v. Ward [1965] 2 Q.B. 63, C.A. and Cumming v. Mackie, 1973 S.L.T. 242, considered.

(3) That, notwithstanding the deficiencies in the Crown Court judgment, in particular the references to the exercise of discretion, the judgment as a whole showed that the court had directed itself correctly on the approach to the restructuring of the company by the sale to B. which had taken place before the hearing and there was ample evidence to justify the Crown Court's decision that, despite the restructuring, the company was not a fit and proper person to hold the licence and that that finding was not reached as a result of any error of law (post, pp. 310F-H, 312C-D).

(4) That though it was admittedly wrong in law for the Crown Court to have found that incidents which took place during the currency of the first licence could be relied on as showing that the premises had been used for an unlawful purpose while the second licence was in force, that conduct was fully capable of establishing, as it did, that the applicants were not fit and proper persons to hold a licence (post, p. 306C-F); that the point was technical and without merit and the finding of use of the premises for unlawful purposes was based on allegations which did not go outside the ambit of the material relevant to the applicants being fit and proper persons and had the point been taken it would have made no difference to the exercise by the Crown Court of its discretion; that the Divisional Court had properly concluded that the applicants had suffered no injustice as a result of the error of law, and accordingly, assuming without deciding that the Crown Court had exceeded its jurisdiction in making the error of law, the Divisional Court had validly exercised its discretion in refusing the order of certiorari (post, p. 313A-F).

Reg. v. Knightsbridge Crown Court, Ex parte International Sporting Club (London) Ltd.

Reg. v. Knightsbridge Crown Court, Ex parte International Sporting Club (London) Ltd. [1982] Q.B. 304, D.C. and Rex v. Stafford Justices, Ex parte Stafford Corporation [1940] 2 K.B. 33, C.A. applied.

Decision of the Divisional Court affirmed.

The following cases are referred to in the judgment:

C.H.T. Ltd. v. Ward [1965] 2 Q.B. 63; [1963] 3 W.L.R. 1071; [1963] 3 All E.R. 835, C.A.

Cumming v. Mackie, 1973 S.L.T. 242.

Reg. v. Knightsbridge Crown Court, Ex parte International Sporting Club (London) Ltd. [1982] Q.B. 304; [1981] 3 W.L.R. 640; [1981] 3 All E.R. 417, D.C.

Reg. v. Stafford Justices, Ex parte Stafford Corporation [1940] 2 K.B. 33, C.A.

Snook v. London and West Riding Investments Ltd. [1967] 2 Q.B. 786; [1967]2 W.L.R. 1020; [1967] 1 All E.R. 518, C.A.

The following additional cases were cited in argument:

Aziz v. Knightsbridge Gaming and Catering Services and Supplies Ltd. The Times, July 6, 1982.

Baldwin & Francis Ltd. v. Patents Appeal Tribunal [1959] A.C. 663; [1959] 2 W.L.R. 826; [1959] 2 All E.R. 433, H.L.(E.).

Campex Research and Trading Corporation's Application [1970] R.P.C. 282, D.C.

Glynn v. Keele University [1971] 1 W.L.R. 487; [1971] 2 All E.R. 89.

Kavanagh v. Chief Constable of Devon and Cornwall [1974] Q.B. 624; [1974] 2 W.L.R. 762; [1974] 2 All E.R. 697, C.A.

McDonald v. Green [1951] 1 K.B. 594; [1950] 2 All E.R. 1240, C.A.

Malone v. Metropolitan Police Commissioner [1979] Ch. 344; [1979] 2 W.L.R. 700; [1979] 2All E.R. 620.

Midland Bank Trust Co. Ltd. v. Green [1980] Ch. 590; [1979]3 W.L.R. 167; [1979] 3 All E.R. 28, C.A.

O'Reilly v. Mackman [1982] 3 W.L.R. 1096; [1982] 3 All E.R. 1124, H.L.(E.)

Pearlman v. Keepers and Governors of Harrow School [1979] Q.B. 56; [1978] 3 W.L.R. 736; [1979] 1 All E.R. 365, C.A.

Racal Communications Ltd., In re [1981] A.C. 374; [1980] 3 W.L.R. 181; [1980] 2 All E.R. 634, H.L.(E.).

Reg. v. Birmingham Justices, Ex parte Lamb, The Times, December 4, 1982.

Reg. v. Campbell, Ex parte Nomikos [1956] 1 W.L.R. 622; [1956] 2 All E.R. 280, D.C.

Reg. v. Knightsbridge Crown Court, Ex parte Ladup (unreported), March 18, 1980, D.C.

Reg. v. Northumberland Compensation Appeal Tribunal, Ex parte Shaw [1952] 1 K.B. 338; [1952] 1 All E.R. 122, C.A.

Reg. v. Orpin [1975] Q.B. 283; [1974] 3 W.L.R. 252; [1974] 2 All E.R. 1121, C.A.

Reg. v. Southampton Justices, Ex parte Green [1976] Q.B. 11; [1975] 3 W.L.R. 277; [1975] 2 All E.R. 1073, C.A.

Sirros v. Moore [1975] Q.B. 118; [1974] 3 W.L.R. 459; [1974] 3 All E.R. 776, C.A.

Smith, Kline & French Laboratories' Patent [1967] R.P.C. 123, D.C. and C.A.

Society of Medical Officers of Health v. Hope [1960] A.C. 551; [1960] 2 W.L.R. 404; [1960] 1 All E.R. 317, H.L.(E.).

Stedman v. Gooch [1793] 1 Esp.3.

Tatam v. Reeve [1893] Q.B. 44.

APPEAL from the Divisional Court of the Queen's Bench Division.

In July 1982, the applicants, pursuant to leave given by McCullough J., applied to the Divisional Court of the Queen's Bench Division for an order of certiorari to remove into the High Court and quash an order made by Knightsbridge Crown Court (Judge Friend sitting with justices) dismissing an appeal from a decision of South Westminster Licensing Justices cancelling a licence held under the Gaming Act 1968 in respect of premises situate at 163, Knightsbridge, London, S.W.7, and disqualifying the applicants from holding a gaming licence in respect of the premises for a period of three years and to remit the matter for rehearing.

The grounds on which relief were sought were (1) that the order of the Crown Court was wrong in law and (2) that the Crown Court had exceeded its jurisdiction and/or made errors of law which were apparent on the face of the record.

The Divisional Court (O'Connor L.J. and Comyn J.) heard the application in October 1982. On October 22 the court held that one of the errors of law alleged had been established, viz., that the Crown Court, in ordering that the licence ought to be cancelled on the ground that the premises had been used for an unlawful purpose during the subsistence of the licence, had taken into account use for an unlawful purpose during the currency of the earlier licence which expired on May 2, 1978. The court, however, took the view that the point was technical and without merit and that the court's finding of unlawful user did not affect the exercise of the court's discretion and its decision since the court made no error of law in reaching its conclusion that the applicants were not fit and proper persons to hold a licence. The Divisional Court came to the conclusion that the applicants had suffered no injustice as a result of the error of law made by the Crown Court, that no other errors of law had been established, and dismissed the application for an order of certiorari.

The applicants appealed on the grounds (1) the Divisional Court wrongly held that the acceptance of cheques from persons whose previous cheques had been dishonoured in circumstances in which the payee knew that those cheques would not be honoured on first presentation amounted to a sham, and accordingly the unlawful granting of credit contrary to the provisions of section 16 (1) (a) of the Gaming Act 1968. (2) The Divisional Court wrongly held that the acceptance by a casino company of a sum less than the face value of a dishonoured cheque was a release in respect of losses incurred by a person in the gaming, contrary to section 16 (1) (b) of the Act of 1968. (3) Contrary to the finding of the Divisional Court the Crown Court failed to give the reasons for their decision in a proper or intelligible form. (4) By reason of the erroneous reliance by the Crown Court on the ground that while the licence had been in force the relevant premises had been used for unlawful purposes and/or by reason of the errors of law set forth in (1) (2) and (3) above, and the actual or apparent reliance thereon by the Crown Court for its decision that the applicants' licence ought to be cancelled and the premises disqualified for three years the applicants were entitled, ex debito justitiae, to the relief claimed. (5) The Divisional Court misdirected itself in fact and in law in holding that the finding that while the licence had been in force the relevant premises had been used for unlawful purposes, contrary to paragraph 21 (1) (e) of Schedule 2 to the Act of 1968, did not affect the Crown Court in arriving at its

determination to cancel the licence and to disqualify the premises for three years and that the applicants had suffered no injustice as a result of the error made by the Crown Court.

The facts are stated in the judgment of the court.

Gavin Lightman Q.C. and Jeffery Onions for the applicants.

Simon Tuckey Q.C. and Jeremy Nicholson for the Gaming Board.

John Ryman for the Commissioner of Metropolitan Police.

December 20. ACKNER L.J. read the following judgment of the court. On December 9, 1981, on the application by the Commissioner of Police for the Metropolis and by the Gaming Board, the gaming licensing justices for the South Westminster Petty Sessional Division cancelled the gaming licence held by Marcrest Properties Ltd. in respect of the casino club, the Knightsbridge Sporting Club, 163, Knightsbridge, London, S.W.7. They also made an order of disqualification prohibiting a licence under the Gaming Act 1968 from being held in respect of the premises during a period of three years.

The justices made this decision after a hearing lasting some 20 days on the grounds:

"(1) Marcrest Properties Ltd. is not a fit and proper person to be the holder of a licence under the Gaming Act. (2) If the licence were not cancelled the club would be managed by and carried on for the benefit of persons other than Marcrest Properties Ltd., who would themselves be refused the renewal or grant of a licence under the Act on the grounds that they are not fit and proper persons to be holders of such a licence. (3) While the said licence has been in force, the premises have been used for unlawful purposes."

Marcrest appealed to the Crown Court, but before May 18, 1982, when the hearing commenced, they had restructured themselves by the sale of the entire shareholding for a nominal £1,000 to a Mr. Barnett, who nobody suggested was not a fit and proper person. This restructuring operation was carried out, no doubt in order to take advantage of the decision in Reg. v. Knightsbridge Crown Court, Ex parte International Sporting Club (London) Ltd. [1982] Q.B. 304, where the Divisional Court held that the question whether a company was a fit and proper person to hold a licence had to be considered in the light of any restructuring of the company which had occurred since the hearing before the justices. This tactical move eliminated the justices' second ground of decision referred to above.

The hearing before the Crown Court lasted some 14 days. The appeal was dismissed and the orders of cancellation and disqualification were confirmed.

Application was then made to the Divisional Court for judicial review, it being contended that the record disclosed at least four errors of law. The Divisional Court accepted that there was one error of law; it also held that the judgment delivered by the Crown Court was, in certain respects, slipshod, confused and mistaken, but in the end the court had applied the right test. It concluded that Marcrest had suffered no injustice as a result of the error of law and, in the exercise of its discretion, it refused the application for an order of certiorari.

Marcrest now appeal to this court and Mr. Lightman on their behalf contends: (1) the error of law which the Divisional Court found (and which is not contested by the respondents) entitled Marcrest to an order for certiorari, and the Divisional Court wrongly exercised its discretion in refusing to make such an order. (2) That there were two other errors of law made by the Crown Court which the Divisional Court should have found, and that these errors, or either of them, justified the grant of an order for certiorari. (3) That the judgment of the Crown Court was so unsatisfactory that, taken with the error of law which was established in the Divisional Court and/or the other error or errors of law which the Divisional Court should have found, justice demanded that its decision be quashed and a new hearing of the complaints ordered.

The error of law found by the Divisional Court. To appreciate the nature of the error, it is necessary to refer shortly to the history of this casino. In May 1971, Knightsbridge Sporting Club Ltd. was granted a licence to operate this casino at 163, Knightsbridge. The licence was renewed annually, but allowed to expire in May 1978 for a purely technical reason. Where premises are enlarged a licence cannot be renewed. A new licence has to be granted. Such a new licence was granted in May 1978. On January 22, 1980, the licence was transferred to Marcrest. This licence was renewed in May 1980, but in 1981 the Gaming Board and the commissioner applied for cancellation of the licence under paragraph 36 of Schedule 2 to the Gaming Act 1968, which application was duly referred to the licensing authority, who, by virtue of the powers conferred upon them by paragraph 42 of that Schedule, were entitled to "cancel the licence on any of the grounds specified in paragraph 20 or paragraph 21 of this Schedule." The Gaming Board and the commissioner alleged that Marcrest was not "a fit and proper person to be the holder of a licence under this Act" (see ground (b) in paragraph 20), and that "while the licence has been in force, the relevant premises have been used for an unlawful purpose..." (see ground(e) in paragraph 21).

There is no requirement for the provision of detailed particulars of the grounds for the application for the cancellation of a licence. Regulation 7 of the Gaming Clubs (Licensing) Regulations 1969 provides that the application shall be made in writing in the appropriate form set out in Schedule 2 to the Regulations. The form (form 43) provides that the application "is made on the grounds specified in the statement, of which two copies are attached." Marcrest were, however, left in no doubt as to the nature of the complaints made against them. They were provided with a six-page statement of amended grounds and, in addition, they were not only furnished with copies of statements of witnesses to be called in support of the application, but even with the names and addresses of witnesses whom the commissioner or the Gaming Board did not propose to call, but who might be able to give relevant information, Marcrest had to meet a case of flagrant breaches of the requirements of the Gaming Act 1968, involving inter alia, the unlawful granting of credit.

The totality of the material relied upon was all relevant to establish that Marcrest were not fit and proper persons to be the holders of a licence under the Act, and in the amended statement of grounds the whole of the unlawful conduct of Marcrest from 1974 to 1980 was set out in six pages of particulars in support of the allegation that Marcrest were not fit and proper persons. At the end of the statement of grounds there was a further allegation that while the licences were in force the

premises had been used for an unlawful purpose with a reference to the details already given.

In finding this latter complaint proved, the Crown Court (and for that matter the justices) undoubtedly relied upon many of the incidents which occurred in 1975 and 1976 during the period of the first licence. It was never suggested, either to the justices or to the Crown Court, that they were not entitled so to do. However, in the Divisional Court, Mr. Lightman, who had not appeared either before the justices or before the Crown Court, successfully submitted that "the licence" in ground (a) in paragraph 21 of Schedule 2 referred to above, refers to the licence of which renewal is sought, and he very properly supported this submission by reference to the definition of "relevant premises" in paragraph 2 (2) of the Schedule which reads: "'the relevant premises,' in relation to a licence under this Act . . . means the premises in respect of which the licence is for the time being in force. . . ." He accordingly validly submitted that quite clearly this was the second licence, namely, the one granted in May 1978, and that it was wrong in law for the Crown Court to find that incidents before 1978 could be relied upon as showing that the premises had been used for an unlawful purpose while the licence was in force.

Despite the highly competent representation on both sides, this simple point was overlooked until the hearing before the Divisional Court. We do not find this altogether surprising. The conduct which was alleged, and which both the justices and Crown Court were fully satisfied had been established, did not lose its character of being unlawful because it occurred prior to the currency of the second licence. Nor did the fact that it took place prior to May 1978 disentitle the commissioner and the board from relying upon it in order to establish that Marcrest were not fit and proper persons. The point, if it had been taken, would merely have prevented any reliance being placed on this earlier conduct in support of the additional ground provided by paragraph 21 (e). Thus, such earlier unlawful conduct, while fully capable of establishing, as indeed it did, that Marcrest were not fit and proper persons to hold a licence, could not be used additionally to support the further ground of the application.

We can fully understand that if those then appearing for Marcrest had focused on this point, they might well have decided that tactically there was little or no merit in raising the point, because of its wholly technical nature in the circumstances of the dispute. They might well have thought that it was far better to concentrate on seeking to establish, as they strenuously attempted throughout the two lengthy hearings, that the allegations, all of which were relevant to the issue of unfitness, were unfounded.

Did Marcrest unlawfully grant credit to their customers? In the amended statement of grounds for cancellation it was alleged that the premises were habitually used, during the years 1875 to 1977, for the unlawful purpose of granting credit to enable players to take part in gaming at the club contrary to the provisions of section 16 of the Gaming Act 1968. This unlawful granting of credit was alleged to have been done in several ways, as follows: (i) By accepting markers of IOU's on "house cheque" forms which were never banked. (ii) By sending the cheques or markers to head office or Gramgas Securities Ltd. to maintain a fiction that there was a compliance with the provisions of section 16 (3) where there was none. (iii) By repeatedly accepting so-called cheques

from persons whose previous cheques had been dishonoured in circumstances which amounted to a "sham" because the management knew that these "cheques" would not be honoured on a first presentation, and (iv) by allowing to mark on "house cheque" forms signed by customers the name of a bank at which the customer did not bank so that these "cheques" would be referred to drawer marked "no account." (v) By allowing punters credit at the tables in particular in the Salon Prive.

The fourth reason gave nine examples of granting unlawful credit. It is sufficient to refer to two of them. In the first Sheikh Fahd Al-Tobaishi over a period of 15 months cashed 71 cheques totalling £966,000 all of which were referred to drawer in an unbroken sequence. In August and November 1976, after £175,000 had been accepted from him in discharge of a much larger debt in breach of the provisions of section 16 (1) (b), cheques totalling £450,000 were accepted from him, and all were dishonoured.

In the second, Dr. Frangistas between February 4, 1976, and February 19, 1976, signed 11 "house cheque" forms as markers for the total sum of £523,000. None were delivered to a bank for collection or payment within two days as required by section 16 (3) of the Act, and in April 1976 a director on behalf of the licence-holder accepted the sum of £75,000 in discharge of this debt of £523,000 in breath of the provisions of section 16 (1) (b) the Act.

All these allegations were found proved by the justices and the Crown Court. However, it is in relation to Al-Tobaishi that the first of the two questions of law raised by Marcrest in the Divisional Court arises, and which, as previously stated, was decided adversely to Marcrest.

It is contended that the repeated acceptance of cheques from persons whose previous cheques had been dishonoured in circumstances in which Marcrest know that those cheques would not be honoured on first presentation did not amount to a sham, and accordingly did not amount to the unlawful granting of credit contrary to the provisions of section 16 (1) (a) of the Gaming Act 1968.

Section 16 of the Act provides:

"Subject to the next following subsection, where gaming to which this Part of this Act applies takes place on premises in respect of which a licence under this Act is for the time being in force, neither the holder of the licence nor any person acting on his behalf or under any arrangement with him shall make any loan or otherwise provide or allow to any person any credit, or release, or discharge on another person's behalf, the whole or part of any debt, - (a) for enabling any person to take part in the gaming. or (b) in respect of any losses incurred by any person in the gaming. (2) Neither the holder of the licence nor any person acting on his behalf or under any arrangement with him shall accept a cheque and give in exchange for it cash or tokens for enabling any person to take part in the gaming unless the following conditions are fulfilled, that is to say - (a) the cheque is not a post-dated cheque, and (b) it is exchanged for cash to an amount equal to the amount for which it is drawn, or is exchanged for tokens at the same rate as would apply if cash, to the amount for which the cheque is drawn, were given in exchange for them; but, where those conditions are fulfilled, the giving of cash or tokens in exchange for a cheque shall not be taken to contravene subsection (1) of this section. (3) Where the holder

of a licence under this Act, or a person acting on behalf of or under any arrangement whit the holder of such a licence accepts a cheque in exchange for cash or tokens to be used by a player in gaming to which this Part of this Act applies, he shall not more than two banking days later cause the cheque to be delivered to a bank for payment or collection."

The clear purpose of section 16 is to protect the punters against themselves. They are not to be given by the casinos so much rope that they may eventually hang themselves, figuratively or otherwise. The granting of all credit except cheques which comply with subsection (2) is prohibited. This is clear from the very wide words of section 16 (1) "any credit," the only exception being limited to that which is provided for in subsection (2). Parliament clearly intended that if the conditions laid down in subsection (2) were not complied with, then section 16 (1) would be breached.

Were the Al-Tobaishi cheques a sham? Both Mr. Lightman and Mr. Tuckey, for the board, rely upon the following observations by Diplock L.J. in Snook v. London and West Riding Investments Ltd. [1967] 2 Q.B. 786, 802:

"As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a 'sham,' it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure (1882) 21 Ch.D. 309 and Stoneleigh Finance Ltd. v. Phillips [1965] 2 Q.B. 537), that for acts or documents to be a 'sham,' with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a 'shammer' affect the rights of a party whom he deceived."

We agree with O'Connor L.J. that the test propounded by Diplock L.J. was fulfilled in the present case. Marcrest and the punters were intending to give to third parties or to the court the appearance of creating between them legal rights and obligations different from the actual legal rights and obligations (if any) which they intended to create.

The course of dealing between Marcrest and their customers over a long period and involving numerous cheques, demonstrated that it was the intention of the parties that there was to be no legal right to have a cheque honoured when it was presented. The only lawful cheque contemplated by section 16(2) and (3) of the Act of 1968 is one in which there is a common expectation of payment on presentation within two days. What was provided was a "sham"; it was no better, if as good, as a post-dated cheque. As the Lord Justice rightly commented, its function was merely to record a loan of money or tokens to that value.

Is the acceptance of a sum less than the face value of a dishonoured cheque a breach of section 16 (1) of the Act? This raises the second of

the two points of law which Mr.Lightman complains was wrongly decided against his clients in the Divisional Court. He contends that where a sum less than the face value of dishonoured cheque is accepted, this does not amount to the release of part "of any debt in respect of any losses incurred by any person in the gaming." He contends that it is but a compromise of a sum owing on the cheque or cheques. This raises the question: how can a debt in respect of losses incurred in the gaming arise? If a customer loses either cash at the tables or tokens that he has bought with cash, then he owes no debt to the casino. He has gambled with cash or the equivalent and he has lost cash or the equivalent. We agree with the Divisional Court that a debt to the casino can only arise where credit has been given by the casino to the customer.However, as previously stated, the only lawful credit that the casino can give is to accept cheque to enable the customer to take part in the gaming.Again, as previously stated, such a cheque must comply with section 16 (2) and (3). Thus the only way in which a debt in respect of any loss incurred in gaming can lawfully arise is if that cheque is dishonoured.

Mr. Lightman contends that when a casino issues tokens against a cheque, there is at that moment no debt in respect of any losses incurred by the customer giving the cheque. The customer might decide not to gamble and then to cash them in and walk out of the casino. Alternatively, he might gamble and win and cash in all the tokens and walk out of the casino. He thus contended that it did not follow that when the cheque was dishonoured there was any debt in respect of any losses incurred by the customer in the gaming.

In our judgment, when the cheque is given by the customer to enable him to take part in the gaming, and is subsequently dishonoured, then prima facie a debt has been incurred in respect of losses in the gaming. Of course, if the customer can establish that he never used the cash or tokens purchased by means of his cheque, or that he in fact made no loss as a result of being enabled through the acceptance by the casino of his cheque to take part in gambling on their premises, then he will have destroyed the prima facie case that the cheque which was dishonoured had created a debt in respect of a loss incurred by him on the occasion of their cashing his cheque.

Mr. Lightman has drawn our attention to C.H.T. Ltd. v. Ward [1965] 2 Q.B. 63. He submits that it was to make provision for the situation revealed in that case that the release provisions in section 16 were enacted. He was unaware of this case when appearing in the Divisional Court, and he submits that had it been brought to that court's attention it would not have held that person who gives a cheque to a casino in return for tokens or cash for the purpose of gaming, will only owe the casino money in the event of losing money in gaming. In that case members obtained chips form the proprietors of the club, who then debited the member's account for the total face value of the chips handed out. The normal practice was for a member who had finished playing to hand any chips remaining in his possession to the cashier, who then credited his account with the cash equivalent of the face value of the chips. Members' accounts with the club were sent to them at their addresses for settlement on a weekly basis. This was therefore a plain case of granting credit. The old legislation did not make loans for lawful gaming illegal. The situation in that case is amply covered by section 16 (1) which clearly prevents the running up of debts at the tables, or allowing a customer to

game with chips not paid for. This case does not, to our mind, in any way help in the solution of the question: how can a lawful debt in respect of losses incurred in gambling arise?

Our attention has also been called to the Scots case of Cumming v. Mackie, 1973 S.L.T. 242. The case was concerned essentially with the Gaming Act 1710, but Lord Fraser did in the course of his judgment refer to section 16 of the Act of 1968. He said, at p. 245:

"Clearly the provision of money against a post-dated cheque might amount, in substance, to lending money, but the implication of the section seems to be that the granting of money against a cheque which is not post-dated is not giving credit or making a loan."

We cannot accept that this is the implication. The implication appears to us to be quite clear, that the giving of a cheque which does comply with the conditions laid down by section 16 (2), results in the lawful grant of credit. Both the facts and the statutes with which Lord Fraser were concerned were different from the present case and accordingly Lord Fraser's finding in that case does not help us in this case.

The chips are purchased only for the purposes of enabling the purchaser to take part in the gaming. If they are used and a loss is incurred, that loss will arise before the cheque is in fact dishonoured.

Mr. Lightman forcefully urges that to make it unlawful for a casino to compromise a dishonoured cheque will, in practice, cause casinos to sustain on occasions serious losses which might otherwise have been mitigated. We fully appreciated this fact. There may well be hard cases resulting from the casino being obliged to recover their debts in full or not at all. In our judgment, however, these commercial disadvantages cannot affect the proper construction of the section. Moreover, it seems to us be fully consistent with the policy of the legislation, which is to ensure that licensees do impose realistic limits on the credit which they accord to their customers.

The defects in the judgment of the Crown Court: Mr. Lightman repeated before us the complaint he made in the divisional Court, namely, that in considering the effect of the restructuring of the company, referred to at the outset of this judgment (which took place before the appeal was heard in the Crown Court) Judge Friend became hopelessly confused when trying to apply the guidelines Laid down by the Divisional Court in Reg. v. Knightsbridge Crown Court. Ex parte International Sporting Club (London) Ltd. [1982] Q.B. 304.

Before considering the deficiencies of the Crown COURT judgment, it is right to bear in mind that this was an extempore judgment, in which the reasons for the decision were given in abbreviated or summary form, and that the circuit judge has been given no opportunity to make any revisions that he might have thought necessary. It is surprising, and regrettable, particularly since the judge had been previously criticised by the Divisional Court in previous similar cases, that he did not take the trouble to reserve his judgment and ensure that his use of "discretion" was not, as the Divisional Court very properly described it, slipshod.

In his judgment he says:

"Mr. Tuckey on behalf of the Gaming Board put forward certain submissions to us as being foundation for the ground why we should not exercise our discretion and find them fit and proper persons or exercise our discretion in respect of the appellants."

The first reference to "exercise our discretion" in that sentence is meaningless, and we have no doubt that if the judge had made the effort to write out his judgment or been given the opportunity to revise his oral judgment, it would have been deleted.

On the same page there is the net reference to discretion. It is in these terms:

"I am bound to say, having heard all the facts and circumstances of this case we, in our judgment, say that what was submitted by Mr. Tuckey on that aspect of the case was right. For that reason (one of the reasons) we could not exercise our discretion, because of the past misconduct, and say that we would grant this licence."

The submission to which the judge was making reference was based upon the observation made by the Divisional Court in the course of its judgment in the International Sporting Club case, at p. 318, which had been set out verbatim by Judge Friend in hi judgment, namely:

"There may well be cases in which the wrongdoing of the company licence holder has been so flagrant and so well publicised that no amount of restructuring can restore confidence in it as a fit and proper person to hold a licence; it will stand condemned in the public mind as a person unfit to hold a licence and public confidence in the licensing justices would be gravely shaken by allowing it to continue to run the casino."

Mr. Tuckey had submitted in substance that the evidence made it clear that the misconduct had been so bad that it was incapable of being cured by reconstruction. In what sense the judge was using the words "exercise our discretion" in this second reference is by no means clear.

His third reference to "discretion" is on p. 6 of the judgment and is in these terms:

"[Mr. Tuckey] said that even if we did find that the company, as restructured, was a fit and proper person, nevertheless the unlawful conduct in the past was such that we should not exercise our discretion in allowing this appeal."

No valid complaint can be made in regard to this reference. Judge Friend concluded his judgment in these terms:

"I am bound to say that we find the unlawful use and purposes proved, we are satisfied about that and we accept the submissions made by the Gaming Board why we should not exercise our discretion in that respect. In the result we have come to the conclusion that the justices, as I say, were right in coming to the decision which they did and we are not now satisfied upon the restructuring that the appellant company is a fit and proper person. We are also satisfied that the past misconduct which amounted to an unlawful purpose has been proved. We find no ground, upon the evidence before us, why we should exercise our discretion and not cancel the licence so far as that is concerned.

"We refer once again to what Griffiths L.J. said. He said: 'There may well be cases in which the wrongdoing of the company licence holder has been so flagrant and so well publicised that no amount of restructuring can restore confidence in it as a fit and proper person to hold a licence'; . . . That is exactly this case 'It will stand condemned in the public mind as a person unfit to hold a licence.' Agreed in this

case. 'Public confidence in the licensing justices would be gravely shaken by allowing it to continue to run the casino.' There we are. We accept those and, as I say, for those reasons we are satisfied that this appeal must be dismissed.

"I have not gone into all the details of all the various arguments which have been put forward. It simply comes to this: we are satisfied the justices were right, with one or two qualifications about the premises not being used for an unlawful purpose because the unlawful purpose was done in South Audley Street. We are not satisfied that the restructuring has cured this, particularly when the only restructuring that has so far occurred is that there has been some change in the staff, further cashiers have been brought in because it was thought there were not enough there already. No, we cannot exercise our discretion and we do not. In the result, the appeal is dismissed in all respects, that is to say the licence is cancelled and the disqualification remains for three years."

We agree with the Divisional Court that the judgment as a whole shows that the Crown Court directed itself correctly on how it should approach the restructuring of the company which had taken place before the hearing. There was ample evidence to justify the Crown Court's decision that, despite the restructuring,the company was not a fit and proper person to hold the licence. We agree with the Divisional Court that this finding was not reached as a result of any error of law.

Was the Divisional Court in error in refusing, in the exercise of its discretion, to grant Marcrest an order for certiorari notwithstanding the error of law, referred to in the first heading, made by the Crown Court?

Mr. Lightman contends that the Crown Court, in having regard to the unlawful use of the premises under a previous licence to found a complaint under paragraph 21 (1) (e) of Schedule 2 to the Act, acted in excess of their jurisdiction. Accordingly, Marcrest are entitled to the remedy of certiorari ex debito justiciae and accordingly the Divisional Court were wrong in refusing to grant that order.

Mr. Tuckey contends that the error was merely an error of law on the face of the record, it was an error made in the exercise of a lawful jurisdiction, and not an error of law in excess of jurisdiction. The same point arose in the International Sporting Club case [1982] Q.B. 304, where the court stated, at p. 319:

"As we are of the view that the judgment forms part of the record and discloses error of law, it is not necessary for us to express our opinion on the alternative ground that the court exceeded its jurisdiction. To some extent the two points are inter-related because if the judgment is part of the record it is not necessary for this court to seek by subtle reasoning to find excess or abuse of jurisdiction in order to enable it to do justice by quashing a decision founded on error of law. Upon this difficult question of jurisdiction we are at the moment divided."

We propose to resist the temptation of deciding whether Mr. Lightman or Mr. Tuckey is right because it is common ground that even if the Crown Court, by making the error referred to, acted in excess of its jurisdiction, there still remains in the court a residual discretion to grant or refuse the order. There must, however, as Sir Wilfrid Greene M.R. said in Rex v. Stafford Justices, Ex parte Stafford Corporation [1940] 2 K.B. 33, 44, be something in the circumstances of the case which make it right

to refuse the relief sought. In this case the point of law which was successfully raised in the Divisional Court was rightly said by O'Connor L.J. to be "technical and without merit." This, as previously stated, may will have accounted for the point being overlooked on all sides. the finding of use of the premises for unlawful purposes was based on allegations which did not go outside the ambit of the material relevant to Marcrest not being fit and proper persons. The Crown court was merely permitted, by the failure of Marcrest to take the point, to apply another, and technically incorrect, label to those self-same allegations, namely, unlawful user while the licence (the current licence) had been in force. Had the point been taken, it would have excluded none of the evidence relied upon by the Gaming Board and the commissioner to establish the unfitness of Marcrest and could therefore have made no difference to the finding that they were not fit and proper persons to hold a licence.

Would it have made any difference to the exercise by the Crown Court of its discretion? We are quite satisfied the answer must be no. As was pointed out by the Divisional Court in the International Sporting Club case (see p. 319), if the court concludes that even at the date of the rehearing and taking into account the restructuring, the company is not a fit and proper person to hold a gaming licence, it is difficult to see how they could exercise their discretion otherwise than by cancelling the licence. The finding that the use, which was undoubtedly unlawful, was also a breach of paragraph 21 (1) (e), adds nothing to the gravity of the conduct of Marcrest which was described in the Crown Court as "disgraceful." The Divisional Court properly asked itself whether, in the circumstances, Marcrest suffered any injustice as a result of the error of law and concluded that they had not. We would have reached the same conclusion, but that is not the test. It was for the Divisional Court to decide whether or not to exercise its discretion, and we can only interfere if it is established that that discretion was exercised erroneously. We are quite satisfied that there is no basis for such a contention. Accordingly, taking Marcrest's position at its most favourable, namely, that the error of law which the Crown Court made resulted in their exceeding their jurisdiction, a situation which we assume and do not decide, the discretion existed to refuse the order applied for and that discretion was validly exercised against Marcrest.

While we accept that the order for disqualification for three years is a serious addition to the penalty of cancellation, the Crown Court, who over a period of many days heard the evidence, having reached the conclusion that the conduct of Marcrest in the running of the premises was "disgraceful," were fully entitled to exercise their powers under paragraph 49 of Schedule 2 to the Act of 1968 and make the disqualification order which they did. In our judgment it is quite unreal to suggest that if the technical point about unlawful user had been taken, they would have refrained from imposing the additional penalty of disqualification.

Solicitors: Durrant Piesse; Gregory Rowcliffe & Co.; Solicitor Metropolitan Police.

E. M. W.