Is a gambling debt illegal and unenforceable in Malaysia?
14 October 2020
In the case of Wynn Resorts (Macau) S.A. v Poh Yang Hong  MLJU 2003, the Malaysian High Court sided with Wynn Resorts (Macau) in a multi-million-dollar lawsuit against a punter who had gambled at the Macau-based casino and had owed it millions of dollars.
In His Lordship’s decision in January 2019, Justice S. Nantha Balan allowed Wynn Resorts (Macau)’s claim to be entered against the Defendant in the sum of HK$33,186,554.00 (equivalent to RM17,257,000.00), with interest thereon, being the amount owing under a gaming credit facility.
The Defendant’s appeal to the Court of Appeal had been dismissed. The Defendant has filed an application for leave to appeal to the Federal Court, which is fixed for hearing in November 2020.
- Credit agreements and money owing under credit agreements are not “wagering agreement” or money won on wager under the Civil Law Act 1956 and the Contracts Act 1950.
- Enforcement of a debt owing under a credit facility is not contrary to public policy.
The Plaintiff is a licensed casino operator in Macau, whose concessionaire status was given judicial recognition by the Hong Kong High Court. The Plaintiff offers credit facilities to patrons with sound credit ratings. The Defendant is a Malaysian citizen, who is ordinarily resident in Malaysia and gainfully employed in Malaysia. The Defendant is a “seasoned gambler” with a high credit reputation. During many of his visits to the Plaintiff’s casino, the Defendant was able to obtain substantial gaming credit facilities to gamble at the casino.
The Plaintiff’s claim in this action arose out of the Defendant’s gambling stint at the Plaintiff’s casino on 22nd May 2014. The Defendant sought and was given a gaming credit facility of up to HK$40 million, to enable the Defendant to gamble at the casino. The gaming chips are only useable within the Plaintiff’s casino and that too at the gaming tables only.
The Defendant made partial repayment of the amounts that were outstanding under the credit facility. The claim against the Defendant in the action is for the balance sum of HK$33,186,554.00 with interest thereon at 18% per annum from 22nd May 2014, until the date of full payment or realisation and cost.
The issues that arose were:
- whether the credit agreement which facilitated the Defendant’s gambling activity by way of gaming credit and which then enabled him to be given the requisite number of gaming chips is a “wagering agreement”;
- whether this is an action by the plaintiff to recover money “won” on a “wager”;
- whether the enforcement of such a debt is contrary to public policy; and
- whether Malaysian law is applicable under the doctrine of lex fori.
In allowing the Plaintiff’s claim, Justice S Nantha Balan held as follows:
The Credit Agreement is not a “wagering agreement”
- What is prohibited by the Civil Law Act 1956 and the Contracts Act 1950 are “agreements by way of gaming or wagering”, and no action shall be brought or maintained in any Court for recovery of any sum or valuable thing alleged to be “won upon any wager”.
- If an activity is to be construed as a game or a wager, then the obligation to pay under a casino game must depend upon the outcome of the “game” or “wager”, thus having an element of chance or uncertainty. On the other hand, under a gaming credit, the obligation to repay arises immediately once the casino chips are made available to the casino player (punter) on credit regardless of whether the player engages in a gaming activity or not.
- The “bet” or “game” or “wager” is made when the bet is placed and not when the credit facility is given or when drawdown is made to obtain gaming chips. Thus, the credit agreement is merely a prelude to the making of a bet, but the credit agreement or the signing of the markers or promissory notes are not themselves “the bet” or “wager”. Regardless of the fortune or misfortune of the customer at the gambling table, the amount that was given on credit must be repaid.
- Although the credit agreement and the “markers and promissory notes were “intricately linked” to gaming or wagering, it adds nothing to the search for the definition of the agreement.
Enforcement of such a debt of not contrary to public policy
- The enforcement of a debt which arises under a credit facility to enable the defendant to gamble at the Plaintiff’s casino is not contrary to Malaysian public policy.
- Freedom to contract should prevail and flourish and contracts which have been freely and voluntarily entered into should not be arbitrarily invalidated or declared as void on grounds of public policy.
- Since Malaysia allows for legalised betting gaming and gambling activities to take place and collects tax revenue from these activities, it cannot be said that legal action for recovery of amounts outstanding under gaming credit facilities which relates to gambling activity is frowned upon in Malaysia.
- Rather than precluding any recovery action to compel a gambler to settle his gaming credit debt, there is in fact a strong and compelling public policy which supports the position that those who borrow in order to gamble should not be entitled to seek refuge under the protection of a nebulous and tenuous argument of “public policy” to evade and avoid their legal obligation to repay their debt which is owed to those who gave them credit facilities, albeit to gamble.
The Macau law which is applicable in relation to the credit agreement
- Under the lex fori doctrine, it is mandatory for the Malaysian procedural law to be applied rather than the procedural or adjectival law of Macau, but in terms of the substantive law vis-a-vis the credit agreement, it is Macau law which is applicable. There is no dispute that under Macau law, the credit agreement is valid and lawful.
- Thus, the Civil Law Act 1956 and the Contracts Act 1950 do not apply to the facts of this case.
The High Court decision is useful in clearing the uncertainties as to whether it is lawful to sue on a “gambling debt” in Malaysia. Justice S Nantha Balan reviewed many of the earlier cases decided by the Malaysian Courts, and opined:
‘The previous cases such as for example, Star Cruise and Jupiters which had by a strained and convenient interpretation, construed an action to recover monies owing under gaming credit as an action by the casino to recover monies “won on a wagering agreement” are in my view plainly, fundamentally and conceptually wrong.’
Contrary to earlier cases where the Courts have conflated gaming debt or gaming credit with gaming contract or wagering contract, Justice S Nantha Balan explained in great details the distinction between the two, and that Malaysian law only prohibits the latter.
If the Defendant’s application for leave to appeal to the Federal Court is allowed, we will await further guidance or confirmation on the law by the Federal Court. Otherwise, Justice S Nantha Balan’s decision stands as good law and would serve as a useful precedent for future cases of the same nature.
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