Incorporation of terms, their reasonableness and estoppel – Goodram v Camelot

On 22 April 2020, two individual’s lives changed for ever, after they bought a winning scratch card with a prize of GBP4 million. Or so they thought. A month later, Camelot, the body licensed by the Gambling Commission to operate the lottery, refused to pay out.

The subsequent court case¹ that followed provides a useful and interesting judgment on the English law position regarding incorporation of terms, and the reasonableness of clauses relied upon.

Background

Messrs Goodram and Watson bought five scratch cards from Waitrose in Clapham High Street with what they claimed was their friend’s debit card. One of those scratch cards netted a GBP4 million prize. Goodram contended that his friend had given him the debit card in a Soho brothel, in exchange for Goodram paying his friends “bill” in cash, which was the only method of payment accepted by the establishment. On Goodram’s case, he was authorised by the individual to use the debit card to reimburse himself the cost of his acquaintance’s invoice.

Claiming the prize

Goodram telephoned Camelot’s claim line and his story quickly unravelled.

Goodram and Watson were homeless, and held no bank account. How they had purchased the scratch card with a debit card therefore raised suspicions. The claim was escalated to Camelot’s Security Operations Team, who identified that Goodram did not know the cardholder’s full name, did not know where he lived, and could provide no further details or information about him except that he was called John².

The genuine cardholder subsequently confirmed to his bank that he had not authorised the payment and that the transaction was fraudulent. Camelot refused to pay out the GBP4 million prize.

Legal action

On learning of Camelot’s refusal, Goodram and Watson commenced legal proceedings for breach of contract. In the interim period, Goodram and Watson’s barrister sent Camelot a cheque for GBP50, to cover the cost of the scratch cards, which Camelot cashed.

Camelot applied for summary judgment³ seeking dismissal of the claim. The Court was required to consider four issues:

1. The terms of the Contract between the Claimants and Camelot, and incorporation thereof;
2. Whether Camelot’s decision to reject their claim and rescind the contract was reasonable;
3. Whether Camelot was estopped from rejecting the Claimants’ claim by reason of the newsagents paying out GBP10 in respect of one of the other winning scratch cards; and
4. The effect of the cashing of the GBP50 cheque by Camelot.

Incorporation

Camelot relied on the well-established legal principle that contractual terms may be incorporated by notice and thus the Claimants had agreed to the Rules of the lottery/scratch card game when they purchased the scratch cards. Clause 13.1 of the Rules, which Camelot submitted formed part of the contract, stated:

"Any person who obtains a Scratchcard or submits a Scratchcard for validation or who claims a Prize in whatever capacity, agrees to be bound by the provisions of any applicable legislation, these Rules… ."

The Rules further went on to afford Camelot the right to withhold a Prize “until it is entirely satisfied that a Scratchcard is valid and the claim has been made in good faith”, and “until it has carried out all appropriate checks and enquiries if in its discretion it believes, on reasonable grounds, that the Scratchcard holder… is not the rightful owner of that Scratchcard or otherwise lawfully entitled to claim the Prize.”

The Claimants submitted the Rules had not been incorporated into the contract as the only reference made to them on the scratch card was on the reverse towards the bottom in very small font, which they argued was barely legible.

The Court decided that the Claimants’ argument had no real prospect of success as they clearly knew there was printing on the scratch card and “if they had wished to refer to the terms and conditions… they would have read the ticket and seen the reference to the rules on the reverse side of the ticket”. Senior Master Fontane further commented “[t]he words "National Lottery Rules for Scratch card Games and the Procedure for this Game apply" are in small print, but even on a reduced sized photocopy they are clearly legible, and they are in bold.”

The Master therefore held that the Rules had been incorporated into the contract between the Claimants and Camelot and that Camelot was entitled to rely upon the clauses in refusing to pay out the prize.

Reasonableness and Estoppel

The Claimants further argued that Camelot’s refusal to pay out was unreasonable, and that Camelot were estopped from rejecting the GBP4 million claim as they 1) had already paid out on the other winning scratch card (via the newsagents) and that 2) the GBP50 cheque sent to Camelot in lieu of the refunded fraudulent card payment was cashed and so their position in law was inconsistent with Camelot claiming that the contract is either void or voidable.

A relevant clause of the Rules on both the incorporation and reasonableness arguments was 12.1, which states:

"Camelot's decision about whether or not a Scratchcard is a Winning Scratchcard (or in relation to any other matter or dispute that arises out of the payment or non-payment of Prizes) will be final and binding, provided that it is a reasonable decision (and subject to Rule 12.4). Without limiting the effect of the previous sentence, following any such decision made by Camelot, Camelot may (at its discretion) reimburse the cost of the Scratchcard or replace the disputed Scratchcard with a Scratchcard for any current Game of the same price."

Rule 12.2 states:

"The remedy in Rule 12.1 will be the Player's sole and exclusive remedy, and any reimbursement or replacement will fully discharge Camelot from any liability in respect of such a dispute ……."

The Claimants argued that that rule 12.1 is so onerous or unusual that it falls within the legal principle⁴ that even if the party knew that the document contained or referred to conditions generally, he will not be bound by such a condition unless it is fairly and reasonably brought to his attention.

The Master rejected the Claimants’ claims:

“…the fact that Clause 12.1 subjects Camelot's decision to a requirement of reasonableness, means that it could not be described as onerous. If Camelot's decision was unreasonable, in Wednesbury terms, then the Claimants could successfully challenge it, and would not be bound by it. Such clauses are not unusual and there is considerable jurisprudence in relation to how the reasonableness of any decision should be assessed. It does not abrogate any statutory rights. A consumer who disagreed with a decision taken by Camelot would still be able to pursue that dispute by the statutory ADR scheme, as well as by litigation, but would have to demonstrate that Camelot's decision was unreasonable to a Wednesbury standard. The evidence submitted on this application is that the Rules have been approved by the Gambling Commission, which would presumably not have done so if it considered that these were in any way inconsistent with the licensing objectives under the Gambling Act 2005. There could be no real prospect of success in challenging clause 12.1 on such ground….”

The Master went on to hold that Camelot’s decision was indeed reasonable to a Wednesbury standard⁵.

The Master dismissed the Claimant’s estoppel argument as Goodram and Watson would have had to rely upon the payment of the GBP10 prize prior to purchasing the GBP4 million scratch card, which was not the case. Similarly, the issuing of the cheque for GBP50 occurred after Camelot had decided to reject the claim, and so the cashing of said cheque had no bearing on Camelot’s decision.

There was no compelling reasons why the matter should proceed to trial and therefore, all of the Claimants’ arguments being dismissed, the court granted summary judgment in favour of Camelot.

Comment

The case provides an interesting illustration of when a gambling operator, or indeed any business, might legitimately refuse to pay out winnings / perform a contract based on contractual terms. The case further affirms the longstanding principle that inclusion of contractual terms by notice is a valid means of incorporation.

Postscript

Goodram and Watson were subsequently charged with fraud in relation to the use of the debit card. Both pleaded guilty and in December 2021, were sentenced to 18 months in prison, and when reporting restrictions on this earlier judgment were lifted.

¹ Goodram & Anor v Camelot UK Lotteries Ltd [2020] EWHC 2499 (QB).
² Perhaps unsurprisingly, it later transpired that the card holder was not called John.
³ Summary judgment is a procedure under Civil Procedure Rule 24 by which a Claimant or Defendant can apply to have the other party’s claim summarily dismissed if it considers that a claim or issue (or a defence to a claim or issue) has no real prospect of success, and there is no other compelling reason for a trial..
⁴ Allen Fabrications Ltd v ASD Ltd [2012] EWHC 2213 (TCC)
⁵ A reasoning or decision is Wednesbury unreasonable (or irrational) if it is so unreasonable that no reasonable person acting reasonably could have made it (Associated Provincial Picture Houses Ltd v Wednesbury Corporation (1948) 1 KB 223). The test is a different (and stricter) test than merely showing that the decision was unreasonable..