Close v Wilson [2011] EWCA Civ 5

Case No B2/2009/1921[2011] EWCA Civ 5
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BARNSLEY COUNTY COURT
HHJ Bullimore
8BY00806
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday 14 th January 2011
Before
LADY JUSTICE ARDENLORD JUSTICE WILSONLORD JUSTICE TOULSON
Between
GARY CLOSEAppellantCOLIN WILSONRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7404 1424Official Shorthand Writers to the Court)
Mr Matthew Slater and Mr Rory Brown (instructed by The Bar Pro Bono Unit) appeared for AppellantThe Respondent appeared in person for in personHearing Hearing date: 12 October 2010
Judgment
[1]This is an appeal against the dismissal by HH Judge Bullimore of a claim brought by the Claimant, Mr Gary Close, in the Barnsley County Court for repayment of £20,000 which he had paid to the Defendant, Mr Colin Wilson, for the purpose of betting.[2]At the trial, which was heard in Sheffield on 20 July 2009, both parties represented themselves.[3]Certain matters were undisputed. In July 2007 Mr Close paid £20,000 to Mr Wilson, comprising a sum of £10,000 followed soon afterwards by sums of £8,000 and £2,000, for betting purposes. No money was repaid to Mr Close. On 10 April 2008 Mr Close through solicitors made a written demand for repayment of £20,000 which was not forthcoming.[4]Proceedings were issued on 23 May 2008.[5]Mr Close’s case set out in his Particulars of Claim was that in 2003 he had paid to Mr Wilson the sum of £1,000 for the purpose of Mr Wilson placing bets on horses to lose certain races, i.e. “laying” the horses. The terms were set out in a short written agreement signed by both parties and dated 4 February 2003. The selection of bets was a matter entirely for Mr Wilson, but the agreement stipulated that Mr Close’s “capital investment” was “guaranteed to be paid back…no matter what happens when laying the horses”. If the venture was profitable, the profit would be shared. In due course the £1,000 was duly repaid with profit.[6]It was Mr Close’s case that the payment of £20,000 in July 2007 was on the same basis, except that Mr Wilson was to account to him monthly and Mr Close was to receive a set percentage return on the value of his investment.[7]Mr Wilson’s defence was that the arrangement made in July 2007 was different from the arrangement made in 2003 and that there was no guarantee that the money would be repaid. That would depend on whether the betting was successful.[8]There was a dispute about what happened to the £20,000. According to Mr Wilson, the betting was unsuccessful and all the money was lost. Most of the betting was done through Betfair. According to Mr Close, analysis of documents disclosed by Mr Wilson showed that £15,000 had gone into Mr Wilson’s Abbey National account and that large amounts had been used by him for his personal benefit, in paying credit card and other bills, cash withdrawals and other purposes. There was no trace of what had happened to the remaining £5,000. Mr Close accused Mr Wilson of dishonesty.[9]When the case came to trial there were two main factual questions. First, on what terms was the £20,000 advanced? Secondly, how was the £20,000 used?[10]On the second issue Mr Close had come prepared to take the judge through the documents in some detail.[11]A day had been allocated for the hearing, but the case was not reached until after lunch. Mr Close complains that the judge did not allow him the opportunity to take him properly through the documents to show what had happened to the money, but made it clear from an early stage that the claim was bad because it related to gambling.[12]His account has some support from the terms of the judgment.

The judge said:

“4. Now, at a fairly early stage I referred the claimant to two Acts of Parliament which were current then, but which have been repealed from September 2007 by the Gambling Act of 2005. The first of these Acts of Parliament is the Gaming Act of 1845. Section 18 says: “All contracts or agreements, whether by parole or in writing, by way of gaming or wagering shall be null and void.”
So that seems fairly clear and straightforward, although there are a number of other lines dealing with matters which I do not think arise here. Then there is the Gaming Act of 1892. In Section 1 it says:
“Any promise expressed or implied to pay any person any sum of money paid by him under or in respect of any contract or agreement rendered null and void by the Gaming Act of 1845…”
And then there is a little bit I will leave out:
“…shall be null and void.” 5. The case today illustrates why Parliament, all those years ago, decided to make agreements or arrangements about betting or gaming null and void. In other words, that they could not be sued on. It was because inevitably, there are large differences of view about what has happened, what the original agreement was and so on and so forth, and Parliament took the view that the time of the court should not be taken up with trying to resolve those difficulties.” “All contracts or agreements, whether by parole or in writing, by way of gaming or wagering shall be null and void.” “Any promise expressed or implied to pay any person any sum of money paid by him under or in respect of any contract or agreement rendered null and void by the Gaming Act of 1845…” “…shall be null and void.”
[14]After referring to parts of the evidence he said “13 …But at the end of the day what does all this come to? It is a squabble about betting and gaming. That is exactly what Parliament was addressing in those two Acts of the 1800’s; such agreements, arrangements, are null and void. They do not amount to anything, so they cannot be sued on.”[15]That is the ratio of the judgment.[16]The judge went on to say that he could find no evidence of fraud, but that it was impossible to trace through all the documents. He added that “It is not part of my job to do that and I think those Acts of Parliament indicate that.”[17]On the appeal Mr Close was represented, through the good offices of the Bar Pro Bono Unit, by Mr Matthew Slater, assisted by Mr Rory Brown, to whom we are indebted for well-presented written and oral submissions. Mr Wilson represented himself.[18]Mr Wilson said that, contrary to Mr Close’s suggestion, the judge at the trial considered the documents in some detail, and he submitted that the judge made what amounted to a clear factual finding that Mr Wilson applied the £20,000 properly in accordance with the parties’ agreement. But the judge did not go that far. The furthest he went was to say that there was evidence of £15,000 out of the £20,000 going into Mr Wilson’s Abbey National account, and of sums totalling a little under £13,500 being placed by Mr Wilson with Betfair. This did not account for the full £20,000 and, while the judge said that he saw no evidence of fraud, he did not make a positive finding about what happened to all the money. He did not regard that as necessary because of the view which he took about the effect of the Gaming Acts 1845 and 1892.[19]The appeal therefore has to be approached on the basis that the judge did not make any finding about the terms on which the £20,000 was advanced or what happened to all of it.[20]The issues on the appeal are therefore whether Mr Close would have valid claims: a) if the agreement included a promise, as he claims, for the return of the full £20,000; and/or b) if not all of the money was lost on unsuccessful bets, for repayment of the balance.

First issue

[21]For this purpose I make the assumption that the £20,000 was advanced on the terms alleged by Mr Close, although it is only an assumption for the sake of argument, since this court cannot decide what the facts were, and the assumption may be wrong. In referring to “the agreement”, I will therefore mean the agreement alleged by Mr Close, without intending to imply that he is right about the terms of the agreement.[22]The fact that a contract relates to gambling is not in general a bar to its enforcement under the present law, because s 335(1) of the Gambling Act so provides. But that provision did not come into force until 1 September 2007, and the £20,000 was advanced to Mr Wilson in July 2007, when s 18 of the Gaming Act 1845 and s1 of the Gaming Act 1892 were still in force.[23]The agreement was not itself a wagering contract within the meaning of the 1845 Act, but the question is whether the promise to repay the £20,000 fell within s1 of the 1892 Act. That section provides:
“Any promise, express or implied, to pay any person any sum of money paid by him under or in respect of any contract or agreement rendered null and void by the Gaming Act 1845 or to pay any sum of money by way of commission, fee, reward, or otherwise in respect of any such contract, or of any services in relation thereto or in connexion therewith, shall be null and void, and no action shall be brought or maintained to recover any such sum of money.”
[24]The section has given rise to a considerable body of case law and some complexity. Mr Slater submitted that 1) the relationship between Mr Close and Mr Wilson was one of principal and agent; 2) when an agent receives money on behalf of his principal, the agent has a duty to account to the principal; 3) it does not matter for this purpose that the money is derived from a gaming contract, which was itself unlawful, because the money still belongs to the principal.[25]There is certainly authority, which Mr Slater cited, for the principle that an agent who places a bet for his principal is accountable for any winnings which he receives. The leading cases on the point, since the 1892 Act, are De Mattos v Benjamin (1894) 63 LJQB 248, Thomas Cheshire & Co v Vaughan Brothers & Co [1920] 3 KB 240 and MichaelJeffrey v Bamford [1921] 2 KB 351. The explanation of the principle is that although an agreement by an agent to place a bet for the principal is an agreement to enter into a void contract, and therefore the agent cannot be sued for failing to do so, any money which he in fact receives through placing the bet is nonetheless money which he receives on behalf of his principal. The principal is therefore entitled to recover that money from the agent as money had and received or, in modern terminology, under the law of restitution. It is no answer for the agent to say that he received it in respect of a null and void contract. Scrutton LJ explained in Cheshire v Vaughan at page 256 that the case fell within the principle stated by Lord Ellenborough in Griffith v Young (1810) 12 East 513, 514,:
“If one agrees to receive money for the use of another upon consideration executed, however frivolous or void the consideration might have been in respect of the person paying the money, if indeed it were not absolutely immoral or illegal, the person so receiving it cannot be permitted to gainsay his having received it for the use of that other.”
[26]Before the 1892 Act, there was also authority that an agent who placed a losing bet for his principal was entitled to be indemnified by his principal against the agent’s loss in paying the amount of the bet. The majority of the Court of Appeal so held in Read v Anderson (1884) 13 QBD 779, but there was a strong dissenting judgment by Lord Brett, MR, and the effect of the decision was reversed by the 1892 Act.[27]In Tatam v Reeve [1893] 1 QB 44 the claimant was not involved with the placing of bets for the defendant, but paid some gaming debts of the defendant at the request of the defendant, who refused to repay him. It was held that his claim was barred by s1 of the 1892 Act. The court rejected the argument that s1 was confined to cases like Read v Anderson where the claimant was party to the placing of the bet. The words of the section covered any promise to repay a payment made “in respect of” a wagering contract.[28]In Saffery v Mayer [1901] 1 QB 11 the defendant invented a scheme for backing horses. Not for the first or last time for schemes of that kind, the inventor was able to find a backer but the scheme did not live up to expectations. The backer put up £500 on the adventure and the money was lost. The backer went bankrupt and his trustee in bankruptcy sued the defendant for £250, on the ground that the profits and losses were to be shared equally. It was held, following Tatam v Reeve, that the action was barred by s1 of the 1892 Act. The claim was based on an implied promise by the defendant to repay to the bankrupt a sum of money which the bankrupt had paid “in respect of” wagering contracts. The court described the arrangement as a joint venture, the bankrupt providing the money and the defendant providing the brains and skill. That is a good summary of the arrangement in the present case.[29]In Saffery v Mayer the court did not treat any part of the money paid by the bankrupt as a loan to the defendant. There are, however, cases where the courts have considered the effect of the 1892 Act on the recoverability of loans used by the borrower for the purposes of wagering contracts. They have held that a loan would not be invalid under the Act merely because it was anticipated that the borrower would use it for gambling purposes, but it would be invalid if the terms of the loan required it to be so used: MacDonald v Green [1951] 1 KB 594 and Al Tamimi v Khodari [2009] EWCA Civ 1109. The same applies whether the loan was for payment of past gambling debts (MacDonald v Green) or for future gambling (Al Tamimi v Khodari). In the present case, if the payment of £20,000 by Mr Close to Mr Wilson were characterised as a loan, which is a possible analysis, it was a loan on terms that Mr Wilson was to use it for placing future bets and was to repay it with a share of profits from the betting.[30]I do not think that it ultimately matters whether the relationship between Mr Close and Mr Wilson is regarded as one of agency, loan or, as I think, a joint venture of an individual kind. On any view, Mr Wilson’s assumed promise to repay the £20,000 was a promise to repay money paid by Mr Close in respect of bets which were to be placed. The promise was therefore void under s1 of the 1982 Act. Accordingly the judge was right that it did not matter whether in fact the promise was made or not.

Second issue

[31]I do not agree with the judge that it was immaterial whether the whole of £20,000 was used for the purposes for which it was advanced, the entire agreement being void. If part of the money was used for bets which were successful, it follows from the authorities which I have cited that Mr Close would be entitled to the proceeds under the law of restitution. If part of it was used by Mr Wilson for his own purposes, Mr Close would likewise be entitled to recover that sum under ordinary principles of restitution. It would be simply a case in which Mr Wilson had used money outside the scope of the agreement under which it had been provided. The unenforceable nature of the agreement itself would be no bar to the Mr Close’s restitutionary claim if the money was used for a purpose extraneous to the agreement. Mr Close’s claim would not amount to enforcement of the agreement. It would be for the recovery of money put by Mr Wilson to his own use.[32]I would therefore allow the appeal on the second issue, set aside the judgment and order a re-trial of it before another judge.[33]I agree.[34]I also agree.