Crockfords Club Ltd v Mehta: CA 8 Jan 1992

The Defendant had gambled at the plaintiff’s casino, using cheques drawn on a company to obtain chips, all of which he lost. The cheques not having been honoured, Crockfords sued the Defendant for repayment of the loan made to him on the issue of the chips, and applied for summary judgment. At first instance, Henry J held that the cheques had been accepted in conditional repayment of the loan, so that on dishonour of the cheques, the Defendant remained liable on the loan. He then held that, just as section 16(2) and (4) validated the cheques, so they validated the underlying loan.
Held: A cheque which had been given in exchange for gaming tokens which complied with the Act was to be enforced as would be any other cheque. The use of such tokens was regulated and supported by the law. No new sub-species of contract was created by the Act.
Lloyd LJ said: ‘The legislative purpose of section 16 of the 1968 Act was to discourage gaming on credit. But consistently with that overall objective Parliament had to allow machinery for enabling lawful gaming to take place at licensed clubs. Otherwise those taking part in the gaming would have had to bring their own cash. The solution adopted was a neat one, and is to be found in section 16(1) and (2). Provided the cheque meets the requirements of subsection (2) and subsection (3), the giving of cash or tokens in exchange for the cheque does not contravene subsection (1).
The error in Mr Glick’s argument is to treat section 16(2) as if it only validated the cheque. It does more than that. It validates the whole transaction. Subsection (1) is subject to subsection (2). Subsection (2) provides that the transaction-that is to say the giving of the cash or tokens in exchange for the cheque-shall not contravene section 16(1). Provided the cheque complies with subsections (2) and (3) there is nothing in subsection (1) to prohibit the underlying loan.
What then was the purpose of section 16(4)? The explanation, like so much else in our law, is historical. The old legislation did not make loans for lawful gaming illegal. The Act of 1710 is concerned with securities. It provides that all securities for repaying money knowingly lent for gaming should be ‘utterly void frustrate and of none effect to all intents and purposes whatsoever’. But this was found to work injustice on an innocent holder for value-that is to say a third party to whom the security may have been negotiated without notice. So 125 years later, by the Act of 1835, Parliament amended the law so as to provide that the security should not be void, but should be deemed to have been given for an illegal consideration. Nothing in either Act affects the underlying loan.
The subsequent history is traced in CHT Ltd v Ward [1965] 2 QB 63. It was argued that it would be absurd to invalidate the security but to leave the contract of loan unaffected. That cannot have been Parliament’s intention. This argument was accepted by the Divisional Court in Carlton Hall Club Ltd v Laurence best reported in 98 LJKB 305. It was held that the consideration for the security which was deemed to be illegal as between immediate parties under the Act of 1835 tainted the loan itself.
It was to prevent this line of argument being resurrected that Parliament found it necessary, or at any rate desirable, to enact section 16(4). The source of the taint has now been removed. There is no longer, therefore, any basis for the argument that the underlying loan is illegal or unenforceable. Indeed, to turn the argument the other way, it would surely be absurd to hold that Parliament had, by the Act of 1968, made the cheque enforceable, but made it a criminal offence to enter into the underlying contract of loan.’

Lloyd LJ
Gazette 08-Jan-1992, [1992] 1 WLR 355
Gaming Act 1968 16
England and Wales
Cited by:
CitedAspinall’s Club Ltd v Al-Zayat CA 19-Oct-2007
The claimant had sued the defendant for non-payment under a cheque for andpound;2 million. The cheque had been issued to replace earlier cheques given but not met, for sums staked for gambling at the claimant’s casino. The defendant said that the . .
CitedGrosvenor Casinos Ltd v National Bank of Abu Dhabi ComC 17-Mar-2008
Banker’s reference no guarantee
An Arab businessman lost pounds 18m at the claimant casino, and wrote scrip cheques against his account with the defendant. The claimant obtained judgment, but being unable to enforce that judgment pursued his bank. The club had used a system where . .
CitedThe Ritz Hotel Casino Ltd v Al Daher QBD 15-Aug-2014
The claimant sought to recover andpound;1m on unpaid cheques. The cheques represented half of the sum gambled away by the defendant in one evening. She now alleged that the claimant had not complied with its duties under the 2005 Act to act . .

Lists of cited by and citing cases may be incomplete.

Contract, Banking

Leading Case

Updated: 01 November 2021; Ref: scu.79676