Melco Subsidiary, Former Business Partner Prepare for Macau Court Battle

Posted on: May 10, 2022, 08:35h. 

Last updated on: May 10, 2022, 12:09h.

Erik Gibbs Read More
Expertise: Asia Pacific Gaming, Gaming Business, Global Gaming.

COD Resorts Limited, a subsidiary of Melco Resorts & Entertainment, is ready to face a former business partner in court. The company wants millions of dollars after Luk Hing Investment Limited defaulted on payments on a property it owns in Macau.

Club Cubic
The former Club Cubic, now Para, in City of Dreams Macau. The nightclub’s former operator is going to court with City of Dreams subsidiary COD Resorts Limited over the facility. (Image: South China Morning Post)

In October of last year, Melco’s COD Resorts Limited took control of Club Cubic, a nightclub at its City of Dreams Macau integrated resort. It did so, according to the company at the time, because its operator, Luk Hing Investment Limited, failed to keep up with its obligations. It fell behind in its payments, leading Melco to take it back and rename the club, Para.

At the same time, COD submitted a civil case against its former business partner, looking to recuperate the $10.95 million Luk Hing owed. That led to a countersuit this past January, and the case is now finally making its way to a Macau courtroom, according to Inside Asian Gaming.

When Melco reclaimed Club Cubic last year, Luk Hing acknowledged that COVID-19 had hurt its business. This led to revenue losses, which made it difficult to keep up with its financial obligations. However, its other properties avoided damage. These properties included the Cubic Space+ nightclub in Zhuhai City and a restaurant in Hong Kong,

Melco Seeks Recovery

As a result of the pandemic, Luk Hing wanted some type of rent relief from its Club Cubic obligations. It tried to work out a deal with COD. But its partner wouldn’t budge.

When COD hit it with the lawsuit, Luk Hing scoffed. If it couldn’t make the rent payments, it wouldn’t be able to pay a lawsuit claim. The company called the suit “disproportional and unreasonable,” and made a claim of its own.

There was equipment in Club Cubic that it owned, and it wanted $738,920 for that equipment through its countersuit. However, COD rejected the claim, and this past March stated that it owned all equipment inside the venue, per the terms of the contract.

After COD reclaimed Club Cubic and changed its name to Para, it reopened the venue this past January. Since then, it was started to regain ground, although it still faces difficulty from the prolonged COVID-19 presence in the region.

Macau Becomes Litigious City

The gaming industry in Macau has seen a number of high-profile lawsuits over the past few years, although three recent cases stand out from the rest, and could end up costing them a lot of money.

As Macau’s gambling scene changes, every penny is going to count. Las Vegas Sands just won a reprieve and avoided a $7.5-billion payout when a judge determined Marshall Hao had no case in his breach-of-contract lawsuit.

Others aren’t so lucky. MGM China, the Asian subsidiary of MGM Resorts International, could have to pay as much as $30 million if the court decides it is responsible for any junket partners’ debt. The case stems from the interpretation of an existing law governing financial responsibility among business partners.

Although it’s an interpretation of the law, any ambiguity is going to be cleared up. Macau’s new draft gambling laws specifically lay out who is responsible for those debts.

That case follows a similar one involving Wynn Macau. Last November, the Court of Final Appeal sided in favor of a gambler who turned over his money to junket operator and Wynn partner Dore Entertainment. As a result, Wynn became the owner of a $747,482 debt and had to provide restitution to the gambler.

The COD/Luk Hing dispute involves a different type of debt, based on real estate agreements, not gambling. Therefore, and because it’s relatively small in nature, it likely will reach a conclusion quickly.