Xiufang Sun, also known as Lily Sun, was involved in ‘loan-sharking’ at Auckland’s Sky City casino the High Court ruled when blocking her attempts to enforce securities taken for loans and ordering unpaid loans need not be repaid.
Justice Gordon ruled Ms Sun was in the business of raising loans for unsuccessful gamblers, enabling them to keep gambling in the hope of ‘chasing back’ their losses. Interest rates of five per cent per week, amounting to between 200 and 300 per cent per annum, were oppressive and in breach of the Credit Contracts and Consumer Finance Act. It is not illegal to provide someone with funds to gamble, but it is illegal to use these funds to gamble on the borrower’s behalf. Loans outstanding were cancelled as an illegal contract under the Contract and Commercial Law Act. Ms Sun was formerly a blackjack dealer at Sky City.
Gambler Candy Xiao cried enough when her supposed debt to Ms Sun reached $800,000. Ms Sun was threatening to sell off an apartment and her family home to recover payment. In the High Court, Ms Sun said $800,000 amounted to the sum total of interest-free loans made by a friend. Ms Xiao said it was an accumulation of rolled-over interest compounded into loans initially totalling not much more than $133,000. Ms Xiao did not keep detailed records of her borrowings; she was hiding a gambling habit from her husband.
Justice Gordon did not believe Ms Sun’s claim to not be charging interest. Evidence was given that in a January 2014 WINZ application for a sole parent benefit Ms Sun denied having any savings or being owed any money. Subsequent enquiries found some $98,800 moving through four separate bank accounts over the following eleven months. With a WINZ investigation deepening, Ms Sun had an acquaintance open a bank account on her behalf and then made significant cash deposits and withdrawals through this account. One source of funding for Ms Sun’s lending was a Sky City acquaintance, also a former blackjack dealer. The High Court was told interest was promised at four per cent per week with Ms Sun charging Ms Xiao five per cent, keeping the one per cent difference as commission.
The High Court was told Ms Xiao agreed to an exclusion from gambling at Sky City for just over three months in 2014 after found attempting to bet at blackjack after a final card had been dealt. Ms Sun offered to bet on her behalf during this exclusion period to ‘chase-back’ losses while Ms Xiao watched from a viewing area above the gaming floor. This amounted to illegal gambling: ‘distributing the turnover of gambling’. The evidence was that while Ms Sun reported shared winnings some days (but then retained Ms Xiao’s share as payment of overdue interest) she tended to keep the wins and report the losses to Ms Xiao (who then required further loans to cover both a day’s losses and daily accumulating interest). Within twelve months, Ms Sun was demanding interest at about $40,000 per week. Ms Xiao’s continuing inability to pay would be met with anger from Ms Sun followed by offers of a further loan and veiled threats of harm if payments were not made. There were threats to tell her husband about her gambling debts and threats of potential physical harm from the criminal underworld. Ms Sun’s former partner is currently serving a ten year jail sentence for importing methamphetamine.
Ms Xiao signed multiple loan agreements each specifying an increased amount still owing. Interest clauses were left blank in each agreement. This was because there was a private side agreement as to interest payable, Justice Gordon ruled.
The total amount borrowed by Ms Xiao was disputed. Sky City records assembled from chip purchases and a record of gambling at the tables indicated that Ms Xiao had lost in net terms about $133,000 during the period Ms Sun funded her gambling. It was acknowledged this figure could be out by some tens of thousands of dollars; the casino does not track each gamblers betting to the last dollar. But the casino’s VIP loyalty card system does provide a good trace. Ms Xiao had repaid Ms Sun at least $100,000 in various instalments; money borrowed from friends or stolen out of her husband’s safe at home. Justice Gordon ruled no more need be paid. The balance of some $33,000 amounted to an illegal loan and was not enforceable. Ms Sun’s claim to still be owed $700,000 was dismissed.
Xiao v. Sun – High Court (26.03.18)
18.066