Chapter 15

Miscellaneous breaches

Introduction

1. On 10 March 2021, the Commission wrote to Crown Melbourne enquiring whether it had engaged in any conduct that was, or might be, in breach of a number of statutes, including the Casino Control Act.¹
2. In its response, Crown Melbourne provided the Commission with details of some breaches of the Casino Control Act.² Those details did not disclose the breaches that are the subject of this chapter.

Bank cheques

3. By section 68(2) of the Casino Control Act, a casino operator is prohibited from, among other things:
   • accepting a wager made otherwise than by money or chips
   • lending money
   • providing money or chips as part of a transaction involving a credit card or debit card
   • extending any other form of credit.
4. There are exceptions to the prohibition. By section 68(3) a casino operator ‘may establish for a person a deposit account into which is to be credited the amount of any deposit to the account comprising: (a) money; or (b) a cheque payable to the operator; or (c) a traveller’s cheque’.
5. By section 68(4) the operator ‘may issue to the person who has established the deposit account and debit to the account chip purchase vouchers or money, not exceeding in total value the amount standing to the credit of the account’.
6. Crown Melbourne has adopted the following practice in relation to bank cheques (strictly speaking, banker’s drafts); that is, cheques drawn by a bank on itself (or another bank) in favour of a payee.
7. If a patron is the named payee on a bank cheque, Crown Melbourne will exchange that cheque for chips for a value equal to the face value of the bank cheque. To effect the transaction, patrons must sign the reverse side of the cheque and write their membership number. The exchange then takes place before Crown Melbourne presents the bank cheque for payment through the clearing system.
8. The question that arises is whether this practice falls within sections 68(3) and (4). The answer to this question requires the resolution of two issues:
   • Is a bank cheque bearing only the signature of the payee ‘a cheque payable to [Crown Melbourne]’ within the meaning of section 68(3)?
   • If it is, does section 68(4) permit the account to be debited before the bank cheque is presented for payment and payment is made?
9. The answer to the first issue depends on the application of rules relating to cheques. The relevant rules taken from the Cheques Act 1986 (Cth) and, where applicable, from common law principles are:
   • a cheque must be payable to a specified person or to the order of a specified person
   • alternatively, a cheque may be payable to the bearer
   • a cheque payable to a specified person or to the order of a specified person may be negotiated by indorsement
   • there are several types of indorsement: in blank, special, restrictive and conditional
   • if the indorsement is in blank (that is, it is not endorsed to a specified person) the cheque is payable to the bearer
   • there will be an indorsement in blank if the payee merely signs the back of the cheque without anything more.³
10. To every banker the expression that a cheque that must be ‘payable to the operator’ will be regarded as a term of art that will take its meaning from the Cheques Act and so require the operator to be named or otherwise indicated with reasonable certainty on the cheque.
11. The contention made by Crown Melbourne that the obligation that the cheque be ‘payable to the operator’ is satisfied if the operator (Crown Melbourne) is entitled (as the bearer) to present the cheque for payment is not correct.⁴ It does not apply the well-understood meaning of the expression ‘payable to [a named person]’.
12. The answer to the second issue is more contentious.
13. There are only two ways in which Crown Melbourne can debit a deposit account for chip purchase vouchers or money. One is for Crown Melbourne to credit the deposit account with the relevant amount of its own funds. The other is for Crown Melbourne to wait for the patron’s cheque to be cleared and the patron’s funds to be credited to the deposit account.
14. The construction question is whether Crown Melbourne’s own funds or the patron’s funds can be credited to the deposit account, or whether it is only the patron’s funds that can be credited to the account.
15. The answer depends upon what is contemplated by sections 68(3) and (4).
16. There is no clear answer. The better view, however, is that section 68(3) assumes that the deposit that will be credited to the deposit account will come from the patron and not the casino operator.
17. Whatever be the answer to the second issue, Crown Melbourne’s practice of dealing with bank cheques is in breach of section 68, at least because it is crediting to a patron’s account a bearer cheque rather than a cheque payable to Crown Melbourne.

Blank cheques

18. Crown Melbourne has a practice involving blank cheques; that is, cheques that do not specify a certain sum in money that is to be paid to the payee.
19. The practice is that certain patrons who have a black card can attend at the Cage, and sign a counter cheque drawn on the patron’s bank that is payable to Crown Melbourne but has no amount written in. The patron is from time to time given chips with which to gamble. At the end of a gambling session, the patron’s debts are ‘consolidated’ and the amount due to Crown Melbourne is written on the cheque.
20. Unless an exception applies, this practice is in contravention of section 68(2) because it involves extending credit to the patron.
21. Crown Melbourne contends that the practice is confined to patrons who are not ordinarily in Australia and are participants in a premium player arrangement or a junket.
22. If this were correct, then the prohibition against giving credit imposed by section 68(2) would not apply by reason of section 68(8), which provides that a casino operator might provide chips on credit to a non-resident who is participating in a premium player arrangement or junket.
23. However, Crown Melbourne’s contention seems not to be supported by the evidence. One of the hosts who was called said the practice was permitted for ‘important customers’.⁵ This host was a host to local patrons, not patrons from overseas.⁶ Another host said the practice applied to local Australian customers.⁷ Mr Peter Lawrence, General Manager VIP Customer Service, Mahogany Room, also gave evidence about the practice. He did not say that it only applied to foreign patrons.⁸
24. On the evidence, it seems likely that the blank cheque practice is in breach of section 68(2).

Bank accounts

25. Section 123(1) of the Casino Control Act provides that a casino operator must:

1. keep and maintain separate accounts at an authorised deposit-taking institution ... for all banking transactions arising under this Act in relation to the operator; and
2. … provide the Commission … with a written authority addressed to the authorised deposit-taking institution … to comply with any requirements of an inspector ...

26. Between 2014 and 2019, a subsidiary of Crown Melbourne, Southbank, maintained a bank account that was used by patrons to deposit funds they needed for gambling at the Melbourne Casino. As a result, over the years, patrons deposited hundreds of millions of dollars into the Southbank account.
27. The question is whether Crown Melbourne was in breach of section 123(1) by causing Southbank to establish an account into which patrons paid their funds rather than establishing an account in its own name into which patrons’ funds would be deposited.
28. The short point of construction is whether the account to which section 123(1) applies must be the account of the casino operator. That depends on what is meant by the requirement that the casino operator must ‘keep and maintain’ an account.
29. The relationship between a banker and its customer is one of contract. The relationship is that of debtor and creditor.
30. Accordingly, the construction question comes down to this: can a casino operator be said to ‘keep and maintain’ an account with a banker if it is not a party to the contract with the banker?
31. Crown Melbourne contends that it need not be the customer.⁹ This contention cannot be correct. Whatever be the content of the obligation to ‘keep and maintain’ an account, the account can neither be kept nor maintained by the casino operator if it is not a contracting party with the bank.
32. A person cannot be said to ‘keep’ a thing that is under the control of, or is maintained by, another person.

Accounting records

33. Section 124(1) of the Casino Control Act provides that a casino operator must keep such accounting records as correctly record and explain the transactions and financial position of the operations of the casino.
34. Crown Melbourne accepts that the record keeping for the CUP process, which is dealt with in Chapter 13, did not properly explain the true nature of the transactions involved in that process. Accordingly, section 124(1) was breached on hundreds of occasions.
35. There may well be another contravention. Crown Melbourne has an electronic customer management system that recorded details of the funds deposited into the Southbank account that were then dealt with by the Cage staff.
36. When entered into the management system, deposits made by an individual patron were aggregated into one entry instead of being recorded as separate deposits. According to Ms Bergin, SC, the result was that the management system ‘did not give a complete picture of what was occurring in the underlying bank accounts. Important information which could be seen in the bank statements was lost in the process of data entry into the [management system]’.¹⁰
37. It seems from the observations made by Ms Bergin, SC that, apart from the management system, Crown Melbourne maintained no accounting records of the money deposited into the Southbank account so as to be able to see the amount of any individual deposit.
38. Certain of the information stored in the management system (but not all stored information) is properly characterised as an accounting record. An ‘accounting record’ is a business record that explains the transactions entered into by a person carrying on a business.¹¹
39. If the management system is the only accounting record maintained by Crown Melbourne of money deposited in the Southbank account, it is difficult to see why there were not contraventions of section 124.

Contracts

40. Clause 48(1)(b) of the Casino Agreement and clause 41.41(b) of the Management Agreement provide, in substance, that Crown Melbourne must comply with all the laws applicable to the subject matters of those agreements.
41. During its inquiries, the Commission has identified many contraventions by Crown Melbourne of its legal obligations. The relevant findings are scattered throughout this Report.
42. Crown Melbourne acknowledges that, as a result of those contraventions, there have been breaches of the Casino Agreement and the Management Agreement.

Endnotes

_{1 Exhibit RC0148 Letter from Solicitors Assisting to Crown Melbourne Directors, 10 March 2021.}

_{2 Appendix G deals with the response of Crown Melbourne.}

_{3 Cheques Act 1986 (Cth) ss 3, 19–22, 24; MJL Rajanayagam, The Law Relating to Negotiable Instruments in Australia (Butterworths, 1980) [7.15]; Bernard Riley, Bills of Exchange in Australia (The Law Book Company, 3rd ed, 1976) 100; Peacock v Rhodes (1781) Doug 633, 636.}

_{4 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021,
280–5 [H.68]–[H.75].}

_{5 Transcript of Employee 6, 21 May 2021, 579–80.}

_{6 Transcript of Employee 6, 21 May 2021, 551.}

_{7 Transcript of BZ, 4 May 2021, 51.}

_{8 Transcript of Peter Lawrence, 8 June 2021, 1750–4.}

_{9 Responsive submission Crown Melbourne Limited and Crown Resorts Limited, 2 August 2021, 151 [D.219].}

_{10 Exhibit RC0445 Bergin Report Volume 1, 1 February 2021, 209 [33].}

_{11 LexisNexis Australian Legal Dictionary (2nd ed, 2016), ‘accounting record’.}