In the case of Vukani Gaming Eastern Cape (Pty) Ltd v Nailing Wen 518 (Pty) Ltd, a full bench of the Eastern Cape Division of the High Court, Makhanda, found that an entity which legally operates gambling premises has the requisite legal standing to apply to the court for an interdict to restrain illegal gambling activity from continuing. The court found that in these circumstances, an interdict to restrain the continuation of illegal gambling should be granted.
Background
Vukani Gaming Eastern Cape (Pty) Ltd ("VG") maintained a route operator license, authorising it to offer for-play limited pay-out machines ("LPMs") for gambling purposes. VG had service agreements with site operators, which operated the LPMs at VG's premises. The site operators were liable for payment of 60% of the net profits and dividends to VG.
VG suspected that illegal gambling was taking place at the premises of Flaming Cherries Internet Lounge and Triple Cherries Internet Lounge ("the Lounges") which were less than a kilometre from VG's premises. VG thus enlisted the services of two investigators to investigate the legality of these Lounges, who concluded that illegal gambling was indeed taking place. They found that:
- The Lounges depict that they are internet cafés;
- All patrons were participating in illegal gambling;
- Cashiers loaded credits in exchange for cash onto the computers which had games similar to slot machines in licensed casinos;
- Users of the computers would need to determine how many credits they want to bet;
- The games displayed a credit increase or decrease, depending on whether the user had won or lost; and
- When a user stops playing, they cash out from the cashier the number of credits displayed on the computers.
VG reported the matter to the Provincial Gambling Board and requested the Lounges to desist from the illegal conduct. However, there was no reaction from the Provincial Gambling Board VG applied to court for an interdict to restrain the continuation of the gambling activity at the Lounges.
Legal Framework
The provisions of the National Gambling Act 7 of 2004 ("the Act") make it clear that gambling activity involves the placing or accepting of a bet or wager. An activity is a gambling game if it is played upon payment of any consideration, with the chance that the person playing the game might become entitled to or receive a pay-out. This result is determined by the skill of the player, the element of chance or both.
The conduct of making available gambling, unless it is licensed or is social and permitted by the Act, is prohibited and constitutes a criminal offence.
Findings in the court a quo
The court of first instance found that VG had not attempted to bring the illegal gambling activities to the attention of the police. Since criminal prosecution was available to VG as a remedy via the Act, it had an alternative legal remedy. As such, the court concluded that VG had not exhausted this alternative remedy and accordingly was not entitled to an interdict. VG appealed to the Full Bench of the High Court in Makhanda
Findings in the appeal court
It was common cause that the Lounges did not dispute the findings of the investigators and that they had no gambling licenses. The Lounges did however question the impartiality of the investigators. However, no evidence was found in this regard. As such, the court reached the conclusion that the Lounges were in fact facilitating illegal gambling at their premises. based on the reports compiled by the investigators.
The court had to determine if VG had the requisite legal standing to apply for the interdict. Given that the unlicensed Lounges were unlawfully taking revenue away from VG through operating illegal gambling, the court found that this constituted unlawful competition adverse to VG's interests. As such, the court had no doubt that VG had legal standing.
The court also held that the remedies available in terms of the Act were not adequate for an entity such as VG. The fact that the Lounge's offending conduct constituted a criminal offence punishable by prosecution did not result in an adequate remedy available to VG. In this regard, the court found that it was irrelevant whether or not VG reported the matter to the National Gambling Board.
In addition, the court explained that the remedies available in the Act are aimed at dealing with past transgressions, the object is the punishment of those such as the Lounges which engaged in illegal gambling facilitation. Given that VG was facing ongoing harm due to the present and potential future unlawful conduct of the Lounges, the Act did not provide VG with adequate remedies. Instead, an interdict was the most appropriate remedy for such present and potential future unlawful conduct.
Conclusion
The court reversed the findings of the court a quo. In doing so, the interdict was granted in favour of VG. The Lounges were thus restrained from continuing to engage in the illegal gambling activities.
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