Jones v Sky City Auckland Limited HC Auckland CP 229-Sw/0l

[2001] NZHC 599

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP.229-SW/0l

UNDER The Judicature Amendment Act 1972
The New Zealand Bill of Rights Act 1990
The Casino Control Act 1990
The Consumer Guarantees Act 1993
The Fair Trading Act 1986

BETWEEN MARTYN RAYMOND JONES
Plaintiff

AND SKY CITY AUCKLAND LIMITED
First Defendant

AND SKY CITY CASINO MANAGEMENT LIMITED
Second Defendant

Hearing: 4 July 2001

Counsel: Peter Spring and Sean McAnally for plaintiff
Simon Stokes and Paul O’Neill for defendants

Judgment: 6 July 2001

JUDGMENT OF POTTER J

Solicitors: Keegan Alexander Tedcastle & Friedlander, DX CP 21504, Auckland Rudd Watts & Stone, P.O. Box 3798, Auckland

[1] Martyn Jones seeks an order that Sky City Auckland Limited (“Sky City”) be held in contempt for breach of an undertaking to the Court dated 17 May 2001 and be fined in respect of such contempt

[2] Issues

[a] Is Sky City in breach of the undertaking to the Court dated 17 May 2001 (“the undertaking”)?

[b] If so, are the breach/breaches deliberate and wilful?

[c] If so, what penalty should be ordered against Sky City?

Standard of Proof

[3] The following principles are not in dispute between the parties -

[a] An undertaking given to the Court by a person in pending proceedings, on the face of which the Court sanctions a particular course of action, has the same force as an injunction, and a breach thereof is contempt of Court.

Malevez v Knox [1977] 1 NZLR 463, 467; 9 Halsbury’s Laws of England (4th ed) para 75.

[b] The words of the undertaking must be read against the relevant background and given their ordinary meaning (Malevez v Knox at p.467).

[c] The breach of undertaking must be proved beyond reasonable doubt (Country Colours Limited v Resene Paints Limited (CP.2153/91, High Court Auckland, 29 September 1992, Anderson J); Television New Zealand Ltd v Newsmonitor Services Ltd (1997) 12 PRNZ 168; Kang v Yu (1993) 13 PRNZ 380, 383.

[d] The breach must be proven to be deliberate and wilful (Country Colours Limited v Resene Paints Limited; Douglas Pharamaceuticals Ltd v Nutripharm NZ Ltd (No 2) (1998) 12 PRNZ 176; Morris v Douglas (1996) 10 PRNZ 363 per Paterson J at p.366 -

“The conduct must be shown to have been contumacious or wilful and it is necessary to establish that conduct to the standard of proof beyond reasonable doubt. Casual, or accidental, or unintentional disobedience to an order of the Court is not enough to justify either sequestration or committal. If disregard is wilful, then it is contumacious.”

Factual Background

[3] Martyn Jones is a regular patron of the Sky City Casino at Auckland. He is a successful player. He claims that between April 1996 and April 2001 he accumulated winnings of approximately $711,000 principally at the game of Blackjack.

[4] His efforts have earned him the designation of “restricted player”, a status conferred by Sky City on a number of selected patrons at the Casino, currently more than 20 in number. Certain restrictive provisions in the Rules governing Casino Games issued by the Casino Control Authority, are applied by Sky City, to restricted players.

[5] Following an incident on 27 April 2001 Sky City alleged that Mr Jones stole a $100 chip from another patron. On 28 April 2001 he was banned from the Casino by a trespass notice issued pursuant to s.67 of the Casino Control Act 1990.

[6] On 8 May 2001 Mr Jones issued civil proceedings against Sky City and applied for an interim injunction.

[7] The relief sought in the statement of claim was for orders that the trespass notice 3056 served on 28 April 2001 be declared invalid, unlawful and of no further effect, and that Sky City be prohibited from issuing any further notices upon Mr Jones in relation to or arising out of the incident on 27 April 2001, and for such further and other relief as may seem just. (The further and other relief sought has been significantly amplified in two subsequent amended statements of claim filed in the substantive proceedings).

[8] The application for interim injunction sought orders restraining Sky City -

[a] From banning, refusing entry, excluding or ejecting Mr Jones from the Casino;

[b] From refusing to serve Mr Jones or depriving him of facilities at the Casino;

[c] From taking any action pursuant to or in reliance upon the trespass notice.

[9] The parties obtained a priority fixture in August 2001, for the hearing of these proceedings and by consent memorandum dated 17 May 2001 advised the Court of the basis upon which interim settlement of the matter had been agreed.

[10] The consent memorandum included an undertaking to the Court by Sky City in the following terms -

“The defendant undertakes to the Court that it will not take any action pursuant to or in reliance upon trespass notice 3056 served upon the plaintiff on 28 April 2001 until further order of the Court and will afford the plaintiff the same level of service and use of facilities that was extended to him prior to the issue of the trespass notice.”

The undertaking also included agreements as to confidentiality and publicity, and timetable orders to advance the proceedings.

[11] Following the giving of the undertaking by Sky City Mr Jones returned to the Casino and in the first two weeks of June won $133,425 at Blackjack.

[12] On 15, 16 and 18 June 2001, Sky City implemented various operational changes at the Casino which give rise to the claim by Mr Jones that Sky City has breached the undertaking. The operational measures were -

[a] Commencement of the use of a “cut card” device (“CCD”);

[b] Allocation of what Mr Jones describes as a “personal supervisor”;

[c] Installation of continuous shuffling machines (“CSMs”) on all high denomination tables.

[13] Mr Jones claims that these operational measures reduce the level of service available to him previously and are in breach of the undertaking.

[14] Sky City does not dispute the introduction of the operational measures but says that they are routine operational measures introduced as part of the usual functioning of the Casino, and are not in breach of the undertaking.

Scope of Undertaking

[15] Sky City claims that the purpose of the undertaking was to allow Mr Jones back into the Casino and that it was not concerned with the matters of which Mr Jones now complains. Sky City argued that -

[a] The undertaking has to be interpreted in the light of the proceedings as they then stood. Mr Jones sought only relief in respect of the trespass notice so the principal purpose of the undertaking was to allow him back to the Casino pending the hearing.

[b] The undertaking was not intended, and should not be interpreted, to effectively place Mr Jones in a position where he is better off than had the trespass notice not been issued, and in an exclusive position by comparison with other restricted players at the Casino, in that he alone can claim exemption from operational measures legally introduced at the Casino.

[c] Sky City is the building owner and is not responsible for operations at the Casino. The operations company is Sky City Casino Management Limited (‘Sky City Management”) which has subsequently been joined as a defendant to the proceedings. The undertaking should be interpreted in the light of Sky City’s status as building owner. The reference in the undertaking to “same level of service” refers to use of the VIP room, a facility at the Casino which is not available to Mr Jones.

[16] I reject the contentions of Sky City in relation to the undertaking.

[17] Firstly, the words of the undertaking are clear and unambiguous - Sky City undertakes to afford to the plaintiff the same level of service and use of its facilities extended to him prior to issue of the trespass notice on 28 April 2001. “Level of service” cannot be so construed as to be limited to access to the Casino and the building facilities. The issue of access is clearly taken care of in the first part of the undertaking, by which Sky City undertakes to take no action on the trespass notice.

[18] Secondly, the relief sought in the proceedings in the context of which the undertaking was given, was not only defined by the statement of claim, but the application for interim injunction issued contemporaneously. It clearly sought restraints against Sky City refusing service to Mr Jones. Mr Spring for Mr Jones, emphasised that the undertaking was carefully and deliberately negotiated to ensure that pending the determination of the substantive proceedings, the status quo would be maintained as far as Mr Jones was concerned. Mr Jones was abundantly aware that simply negotiating a stay of the trespass notice would not maintain the status quo because he could be admitted to the Casino but declined service and access to the gaming tables.

[19] Thirdly, it is irrelevant that Mr Jones may, by the undertaking, be placed in a “better off” position than before the trespass notice, and in relation to other patrons. These are consequences of the decisions of Sky City, to give the undertaking (no doubt for good reasons) and then to make operational changes during the period while the undertaking was in force.

[20] Finally, Sky City elected to give the undertaking. In doing so Sky City undertook either itself to perform, or to procure the performance, of the undertaking by whatever associated or subsidiary entity was responsible in the matters the subject of the undertaking.

[21] I conclude that the undertaking is in respect of not only a stay of action on the trespass notice, but an obligation on Sky City to afford to Mr Jones access to and use of both facilities and service at the Casino, at the same level as prior to the issue of the trespass notice.

Has the undertaking been breached?

[22] Mr Jones claims breaches in three respects.

CCD

[23] Dealer-dealt Blackjack (as opposed to CSM Blackjack) is played normally with a “shoe” of 8 decks of cards shuffled together and placed in the shoe from where they are dealt.

A “cut-card” is placed in the shoe and when the cut-card is reached that particular round ends. The cards behind the cut-card remain unused and are never used.

The position of the cut-card is governed by rule 7.6 of the Gazetted Blackjack Rules - it may be inserted into the stack no more than halfway in front of the back of the stack, i.e. at the fourth deck.

The further from the back of the shoe, that the cut-card is placed, the fewer the cards which are actually used in a particular round. This has two effects -

[a] The reduction in the numbers of cards played decreases the actual game time;

[b] The greater the number of cards left unplayed, the more difficult it is for a skilful player (Sky City uses the description “card counting” player) to be successful, because it becomes increasingly difficult to actually guess the ratio of high denomination cards to low denomination cards that can be expected to be dealt; it increases the “unknown” factor in respect of cards in the stack.

[24] Mr Jones claims that since early 1996 the operators of Sky City have been inserting the cut-card as far forward as possible and on occasions in breach of r.7.6. He has made a number of complaints to the Casino Control about this, including two complaints in April 2001. The nature of his complaint in this respect is described in his first affidavit sworn 7 May 2001 where he states -

“When I play, I notice that the cut-card is inserted between 3.5 decks and 4.4 decks forward of the last card. This began as early as July 1996. As I understand it, the law requires that the Casino “cut-off’ no more than half of the shoe (4.0 decks), so any cut greater than 4.0 is illegal but this has been done to me on several occasions. The Casino moves the cut-card forward on every table I play on, for as long as I play on it, thereby dramatically changing the odds at the game - which is why I believe the Casino does it. I have observed that I am only one of two players the Casino treats in this way.”

[25] In his third affidavit sworn 2 July 2001 Mr Jones states -

“Prior to 28 April 2001 there was no cut-card device in use. Accordingly, dealers placed the cut-card manually using individual judgment. As a consequence of this, some dealers tended to cut off less of the shoe, while others would cut off more. Because of the importance of the positioning of the cut-card to me, I deliberately choose to play with those dealers who were cutting off less.

In being able to do so, I was able to achieve an average of approximately 2.5 decks being cut off over the few months immediately preceding the issue of the trespass notice. As I have already said, the position of the cut-card is very important to me, so I have made a point of becoming skilful at being able to estimate the amount of the shoe cut off.

In paragraph 5.9 of his affidavit, Mr Caban deposes that the cut-card device cuts off approximately 3.25 decks. He continues at paragraph 5.10 that it has proved to be extremely accurate. As a result of thus, I am worse off in terms of the cards played per deck by three quarters of one deck.”

[26] Mr Jones’ complaint is that, on the basis that he could by choice of dealers achieve a cut off of less than 2.5 decks on average, he is worse off than before 28 April by three-quarters of a deck, because the CCD accurately and consistently cuts off (according to the evidence of Mr Caban, general manager of the Casino) at 3.25 decks.

[27] Mr Caban in his affidavit sworn 28 June 2001, says that Mr Jones is in fact better off with the introduction of the CCD. It is a simple plastic device measuring the cut off point at 3.25 decks, which has proved very reliable since its introduction. That, says Mr Caban, is an improvement on the situation which has been the subject of previous complaints by Mr Jones to the Inspectorate of cut offs breaching the four deck limit in r.7.56. Mr Caban says that the CCD was introduced because the Casino Control Authority required Sky City most recently by letter of 29 May 2001, to develop procedures to remedy the breaches complained of, ironically by Mr Jones himself.

[28] There is a conflict in Mr Jones’ evidence which he attempts to explain on the basis that in his affidavit of 7 May 2001 he was describing generally the practice in relation to the insertion of the cut-card, whereas in his affidavit of 2 July 2001 he was describing his particular experience over the few months immediately preceding the issue of the trespass notice. I find that explanation unconvincing. In para 28 of the May affidavit Mr Jones deposes that the Casino moves the cut-card forward, so it is inserted between 3.5 decks and 4.4 decks forward of the last card, on every table I play on. Assuming that to be true, it would not have been possible for Mr Jones to achieve the average 2.5 decks cut off, which he claims he has been able to do over the last few months.

[29] On the basis of his own evidence I am unable to accept that the introduction of the CCD has resulted in a reduction in level of service to Mr Jones.

Supervisors

[30] Mr Jones claims that since 16 June he has been allocated a “personal supervisor” who follows him from table to table, trespasses into his personal space, and subjects him to far more supervision and therefore control, than was the case before 28 April 2001. This in turn affects his use of the facilities. He says that prior to 28 April 2001, while every table had a supervisor, that supervisor would also be responsible for other tables. A supervisor now follows him from table to table.

[31] Mr Caban’s explanation is that to comply with the Gaming rules, a supervisor must follow the CCD to ensure it is used in accordance with the rules and to prevent any abuse. The CCD is used on tables where restricted players play, therefore both the CCD and the supervisor follow the restricted players. Mr Jones is a restricted player so this routine applies to him as it does to the other restricted players. Mr Jones has not been allocated a personal supervisor.

[32] It is possible that Mr Jones’ interpretation of the situation is not correct. Alternatively, there is a direct conflict between the evidence of Mr Jones and Mr Caban as to what the role of the supervisors is in relation to Mr Jones on the one hand, and the CCD and all restricted players on the other. I am not satisfied to the high standard of proof required, that from 16 June 2001 the change in the conduct and responsibilities of the supervisors in relation to Mr Jones, has been such as to reduce the level of service and use of facilities previously provided to him at the Casino.

CSM’s

[33] CSM’s have been used at the Casino since introduction of a 12 months trial period from 21 July 2000. The Casino Control Authority required that during the trial period CSM’s should be used on no more than 50% of the open blackjack tables at any time in a Casino. By letter of 30 May 2001 to Sky City the Casino Control Authority approved operation of CSM’s on a permanent basis but declined an application from Sky City for 100% use - the 50% use restriction remained. The Authority stated at the conclusion of its letter -

“The Authority took the view that to allow this technology to be used on all blackjack tables would be unfair to skilled blackjack players and on that basis was not minded to lift the present restriction.”

[34] Mr Jones states that from 18 June 2001 CSM’s have been placed on all the high denomination tables, whereas previously there were none on the $100 tables and at least one $50 table and one $25 table operating without a CSM. (This is not disputed by Sky City). Mr Jones could therefore wager at high denomination tables free of CSM’s which, as confirmed by the Casino Control Authority, are disadvantageous to skilled blackjack players.

[35] Mr Caban says that following the advice from the Casino Control Authority on 30 May that CSM’s could be operated on a permanent basis, Sky City had to decide where to place its 8 CSM’s, since it had been denied the opportunity it sought to have 100% coverage. The use of CSM’s had been trialed initially at low denomination tables, then at higher denomination tables, and the decision was taken on the basis of those trials to install the 8 CSM’s on the high denomination tables from 18 June. He says this was an operational decision made pursuant to the advice from the Casino Control Authority, it was not a decision directed at Mr Jones.

[36] Nevertheless, it is apparent that the installation of CSM’s on all the high denomination tables, reduces the level of service available to Mr Jones prior to 18 June. He is a skilled player. Skilled players are disadvantaged when CSM’s are used. With the CSM’s on all the high denomination tables Mr Jones can only wager at the lower denomination tables which have no interest for him. (Sky City accept that Mr Jones plays almost exclusively at higher denomination tables). He thus is deprived of the access and service that he previously enjoyed at the high denomination tables.

[37] I find a breach of the undertaking by Sky City has been established in respect of the use of CSM’s. It is then necessary to determine whether the breach was deliberate and wilful.

[38] Mr Spring for Mr Jones submitted that the introduction of the CCD’s, “personal supervisor” and CSM’s in the space of 3 days was no coincidence. It followed promptly Mr Jones’ significant winnings of $133,425 in the first 2 weeks of June. Mr Spring submitted there was an undeniable inference that the steps taken were deliberate, specifically designed to prevent Mr Jones continuing his winning course until the substantive proceedings could be heard and determined.

[39] Mr Stokes for Sky City maintained that none of these measures were directed at Mr Jones; in particular, the decision to place the CSM’s on the high denomination tables was an operational decision taken in the normal course of business, and in direct response to the decision of the Casino Control Authority conveyed by letter of 30 May 2001, that CSM’s could be used on a permanent basis, but to a maximum 50% coverage. He reminded the Court of Mr Caban’s evidence, that the Sky City decision to place the CSM’s on the high denomination tables followed a carefully monitored trial period, and was implemented on the basis of the experience of that trial period.

[40] I am required to be satisfied beyond reasonable doubt that the action of Sky City in placing the CSM’s on the high denomination tables, was a deliberate and wilful breach of the undertaking to the Court, before a finding that the defendant is in contempt may be made. On the evidence before me I am not so satisfied. The explanation provided by Mr Caban in relation to the placement of the CSM’s is credible. While the chronology of Mr Jones’ banning, the undertaking, his success at Blackjack in the first 2 weeks of June and the installation of the CSM’s on the high denomination tables, might suggest an adverse inference against the defendant, it does not satisfy the requisite standard of proof.

Conclusions

[41] I find that the defendant has breached the undertaking in respect of the installation of CSM’s at the high denomination tables on or about 18 June 2001, but that the breach was not deliberate and wilful.

Result

[34] The plaintiff’s application that the defendant be held in contempt of Court, is dismissed.

Costs

[35] While I have found the defendant not to be in contempt, I have found a breach of the undertaking. Breaches of undertaking to the Court are most seriously regarded. The defendant’s breach, notwithstanding I have found that does not constitute contempt, has given rise to the plaintiff bringing this application which in the light of my findings was justifiable. I therefore award to the plaintiff costs on a solicitor and client basis in respect of this application.

[36] If costs cannot be agreed between the parties leave is reserved to apply, the plaintiff within 21 days, the defendant within 28 days of the date of this judgment. If such an application becomes necessary I will require full details of the costs claimed by the plaintiff and the basis upon which those costs are assessed.