Malaysian Court Says Gambling Debt Cannot Support Bankruptcy Case

The Ipoh High Court has ruled that gambling debts cannot be used as the basis for bankruptcy proceedings in Malaysia, citing the Federal Court’s decision in the Datuk Ting Ching Lee case last year. The judge said gambling-related credit facilities remain unenforceable in Malaysia, even when the debt was lawfully incurred in another jurisdiction.

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Court Relies On Apex Ruling

High Court judge Moses Susayan allowed the appeal by 75-year-old judgment debtor Lee Fook Khuen to set aside the bankruptcy proceeding brought against him by Resorts World at Sentosa Pte Ltd. The proceeding had been endorsed by the High Court’s senior assistant registrar on Feb 13 last year after Lee failed to pay a debt of S$5.930 million that had been registered by the Singapore High Court in August 2018.

Lee had obtained a platinum-status credit facility of S$10 million and incurred the debt through gambling in Singapore. He did not appeal the judgment there, and it was later registered at the High Court of Malaya under the Reciprocal Enforcement of Judgments Act 1958 in November 2018.

He later tried to set aside enforcement of the judgment, but failed through to the Federal Court. That left Resorts World able to move ahead with bankruptcy proceedings over the unpaid sum. Although the casino operator succeeded before the senior assistant registrar last year, Moses overturned that decision in May.

Gambling Debts And Public Policy

In his 26-page written judgment released on Monday, July 6, Moses said he was bound by the Federal Court’s ruling in the Datuk Ting Ching Lee v Ting Siu Hua case, which had already authoritatively decided that gambling-related credit facilities are not separate loan transactions. Instead, the apex court held that they form part of a composite gambling contract and are void ab initio.

Moses said Malaysian law treats gambling debts as debts of honour, with no legal obligation to repay them. He also noted that even if such a debt is lawful and enforceable in the country where it arose, it remains unenforceable in Malaysia because Section 26 of the Civil Law Act 1956 reflects public policy in this country.

The judge said Section 26(1) of the Contracts Act makes all contracts or agreements by way of gambling or wagering null and void, while Section 26(2) bars any action in court to recover money or valuable things won on a wager. He added that if a debt is founded on an illegal or void transaction, such as a gambling contract, the court can refuse to enforce it because it would conflict with public policy.

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No Backdoor Enforcement

Moses also said the bankruptcy court retains jurisdiction to examine the underlying nature of a debt even when it has been registered under REJA. In his view, the prohibition against enforcing gambling debts overrides procedural finality.

He said the law does not allow indirect or disguised enforcement through the courts when a gambling contract is declared null and void. He added that parties cannot avoid the statute by relabelling the transaction as a credit facility or using any other label, because that would amount to a backdoor enforcement of what the law expressly prohibits.

The judge said the court must reject any attempt to achieve indirectly what cannot be done directly. On that basis, he set aside the bankruptcy order and made no order as to costs, saying courts should not assist parties in disputes arising from transactions that are contrary to public policy by awarding costs.

Appeal Filed By Resorts World

Lee was represented by lawyers Leong Cheok Keng and Chan Kok Keong, while Jasmine Kuan Jie Min appeared for Resorts World. Chan later confirmed to The Edge that Resorts World has filed a notice of appeal against Moses’ judgment.

The ruling reinforces the position that gambling-related debt will not be treated as an enforceable basis for bankruptcy in Malaysia, even where the original debt was recognised overseas.

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Source: The Edge Malaysia