Cash for Chips? The recovery of foreign gaming debts in Malaysia

The position of gaming contracts in Malaysia is encapsulated in Section 26 Civil Law Act 1956 and Section 31 Contracts Act 1950. Both provisions, in essence, provide that:
  1. Agreements by way of gaming and wager are void; and

  2. No action shall be brought for the recovery for anything alleged to be won on wager or deposited with any person to abide the result of any game or event on which a wager is made.
In the early years of gaming debt recovery, the existence of these provisions in Malaysian law had caused significant difficulties to foreign licensed casinos in recovering gaming debts which have been incurred outside of Malaysia. In the case of Jupiters Limited (Trading as Conrad International Treasury Casino) v Lim Kin Tong [2005] MLJU 534, the plaintiff had claimed against the defendant for sums due and owing to the plaintiff as gaming debts to the plaintiff’s licensed casino in Australia as the defendant had countermanded the cheques that were given to the plaintiff as payment for the defendant’s losses. The two questions to be determined by the Court were as follows:
  1. Whether a licensed casino could commence proceedings in Malaysia based on a dishonoured cheque; and

  2. Whether the gaming debt, being an enforceable gaming debt under foreign law, could form a subject matter of recovery proceedings against the defendant in Malaysia?
The High Court answered both the questions in the negative. In relation to (a) above, the High Court held that the cheques issued by the defendant were clearly for the purpose of gaming and that Section 26 Civil Law Act 1956 was a statutory prohibition without exception. On (b), the High Court had determined that Section 26 is a parcel of procedure based on Leroux v Brown 12 C.B. 799 and as such, should be applicable to actions instituted in Malaysia following the basic principles on conflict of laws.
Further, in The Ritz Hotel Casino Limited & Anor v Datuk Seri Osu Haji Sukam [2005] 6 MLJ 760 the High Court held that even judgments obtained for gaming debts in foreign courts cannot be registered in Malaysia.1 Here the plaintiffs had applied to register a judgment obtained in the English High Court (where the gaming transaction was lawful), however, the High Court found that even the registration of a foreign judgment for a gaming debt was against Malaysian public policy. 
In what can only be regarded as a novel approach, the High Court Judge referred to the Rukun Negara2 and various religious texts in discussing the issue of public policy and refused to consider the foreign cases referred by the plaintiff as it “involved countries that do not have a God-fearing principle as part of their philosophy as Malaysia. This position, however, was short lived as the High Court decision was subsequently overturned by the Court of Appeal.3
Recent Developments
In the recent years, the Malaysian Courts have taken a more pragmatic approach towards the registration of foreign judgments based on gaming debts. In Resorts World at Sentosa Pte Ltd v Lim Soo Kok [2016] MLJU 700, the defendant had sought to set aside the registration of a Singapore Judgment on the grounds that the judgment was contrary to public policy pursuant to Section 5 Reciprocal Enforcement of Judgments Act 1958 as it was based on a gaming debt.
The High Court drew a distinction between filing a civil suit to enforce the gaming debt and the registration of a valid foreign judgment and found that when a gaming transaction is lawful in the foreign country from where the judgment originates, the registration of the foreign judgment is not against the public policy of Malaysia.4
Subsequently, in Wynn Resorts (Macau) SA v Wang Yen Liang [2017] 11 MLJ 169 the plaintiff filed a claim against the defendant for the recovery of sums based on a credit agreement, markers and promissory note signed by the defendant for facilities amounting to HK$20 million. The defendant attempted to strike out the plaintiff’s claim predominantly on the basis that the loan/ credit facility was for the defendant to gamble in the plaintiff’s Macau casino and as gambling was illegal in Malaysia, the plaintiff’s action must be struck down.
The High Court dismissed the defendant’s application on the basis, amongst others, that there is case law that suggests that a loan for gaming credit would constitute a legal contract and is enforceable in Malaysia. The High Court held that it was not a plain and obvious case to be struck out and the court must make the ultimate findings at the end of a full trial.
Fairly recently, in Wynn Resorts (Macau) S.A. v Poh Yang Hong [2019] MLJU 2003 the High Court proceeded with the full trial for the recovery of a debt pursuant to a credit facility granted by the plaintiff to enable the defendant to gamble on credit at the plaintiff’s casino. The defendant had signed a credit agreement which was exclusively governed by Macau law and had signed markers and promissory notes so that he was provided the requisite gaming chips. The defendant did not dispute that a sum in excess of HK$33 million was outstanding under the credit facility.
The High Court found that the gaming credit granted by the plaintiff was a loan and found that the term ‘gaming credit’ makes no difference to the nature of the transaction, i.e. that it was a ‘loan that had been drawn down and had to be repaid whether or not the borrower has won or lost at the gaming table’ and that there is ‘no wager or bet at any time prior to the placing of chips on the gaming table’.
The High Court further held that the enforcement of debt arising under a credit facility to enable gambling is not contrary to Malaysian public policy and that the relevant provisions under the Civil Law Act 1956 and Contracts Act 1950 are not mandatory “procedural” provisions which fall within the lex fori concept, i.e. that the applicable substantive law is the law governing the credit agreement.5
From the above discussion, it is clear that there has been a shift in the approach of the Malaysian Courts vis-à-vis gaming contracts and they now take a more nuanced approach instead of a blanket prohibition on actions for the recovery of gaming debts.
The Malaysian Courts have recognised the validity of gaming contracts which have been entered into by Malaysians abroad and have allowed recovery of gaming debts by foreign casinos through the registration of judgments validly obtained from foreign courts in Malaysia. They have also taken a step further to draw a distinction between a wagering agreement and situations where casinos have provided “cash for chips” and have held that the latter will not fall under the statutory prohibition under Section 26 Civil Law Act 1956 and Section 31 Contracts Act 1950, providing an additional avenue for the recovery of foreign gaming debts in Malaysia.
Article by Lim Koon Huan (Partner) and Annjili Gunendran (Senior Associate) of Skrine.

1 The High Court arrived at these decisions despite the decision in The Aspinall Curzon Ltd v Khoo Teng Hock [1991] 2 MLJ 484 which provided that the registration of a foreign judgment based on a gaming debt cannot be considered to be against public policy as the contract was lawful under English law.
2 The Rukun Negara (National Principles) is a declaration of national philosophy that comprises five principles. It does not have any force of law.  
4 The defendant’s appeal against the decision and application for leave to appeal against the Court of Appeal’s decision were dismissed by the Court of Appeal and Federal Court respectively. Similar positions on the registration of foreign judgments based on gambling debts were also taken in Marina Bay Sands Pte Ltd v Ng Kong Seong [2016] 1 LNS 1007 and Marina Bay Sands Pte Ltd v Wong Kah Hin [2017] 1 LNS 680.
5 The defendant’s appeal against the decision and application for leave to appeal against the Court of Appeal’s decision have also been dismissed by the Court of Appeal and Federal Court respectively.

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