Non-Recovery Of Gambling Debts Under Malaysian Law

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Gambling contracts occupy a contentious place in legal discourse, with their enforceability varying widely across jurisdictions. While some systems uphold them, others void them as contrary to public policy. 

The Malaysian courts have consistently approached gambling contracts with caution, primarily due to their potential conflict with public policy and statutory prohibitions. In practice, contracts tied to unauthorised or unlicensed gambling are generally void and unenforceable under Malaysian law. The recent Federal Court’s decision in Dato’ Ting Ching Lee v Ting Siu Hua [2025] 3 AMR 291 affirmed that credit facilities extended for the specific purpose of gambling were void and unenforceable as they contravene public policy and statutory prohibitions on gaming contracts.

Background Facts

The Appellant appealed against the Court of Appeal’s decision allowing the Respondent’s counterclaim for the recovery of US$ 1.5 million in credit lines and US$ 193,800 in rolling rebate granted for gambling at Naga Casino, Cambodia. 

The Respondent was appointed by the Huang Group to promote gambling activities, where the Respondent arranged a trip for the Appellant and others to the casino. At the Appellant’s request, the Respondent extended credit lines and rebate facilities. The Appellant later failed to repay the sums, prompting the Respondent to publish payment demands in Sin Chew Daily and WeChat. In response, the Appellant sued for defamation, while the Respondent counterclaimed for the gambling-related debts. 

The High Court dismissed both claims.

In respect of the counterclaim for the recovery of monies, the High Court held that it was, in substance, an attempt to recover gambling debts, which was illegal under Sections 24 and 31 of the Contracts Act 1950 (CA 1950) and Section 26 of the Civil Law Act 1956 (CLA 1956) and thus, was unenforceable under the law.

The Court of Appeal reversed the High Court’s decision and found that there was an enforceable oral agreement between the Appellant and the Respondent for the credit lines and rolling rebate. The Court of Appeal held that the credit lines and rolling rebate did not constitute gambling debts but a loan or credit facility, granted prior to the actual act of gambling and thus, valid. 

The Appellant appealed to the Federal Court.

The Appeal

The main issues before the Federal Court were whether the credit facilities or credit agreements granted to the Appellant for the sole purpose of gambling constituted a gaming contract and whether the sum claimed by the Respondent was a gambling debt unenforceable under Malaysian law.

The Appellant argued that the true nature and purpose of the transaction must be viewed as a composite contract. Based on the evidence and the structure of the transaction, the Appellant claimed that the Respondent claim was effectively for the recovery of gambling debts or money won from wagers and not a straightforward loan. As such, the Respondent’s claim was void and unenforceable under Section 26 of the CLA 1956 and Sections 24 and 31 of the CA 1950. 

The Respondent replied that the two lines of credit and the rolling rebate were not gambling debts but credit facilities in the form of an oral agreement that did not involve any uncertainty in the outcome of the two lines of credit and the rolling rebate. 

The Appeal Before Federal Court 

The Federal Court held that the credit facilities were expressly and exclusively intended to facilitate the Appellant’s gambling at the Naga Casino. Without them, the Appellant would not have been able to obtain casino chips and the facilities had no purpose beyond gambling. The Federal Court stressed that such arrangements could not be cloaked as independent, bona fide loans.

The Federal Court cautioned against accepting a formalistic view that ignored the substance of the arrangement. Instead, it adopted a reality-based approach, holding that the nature of the transaction must be examined objectively and in totality. Given the circumstances, the facilities clearly constituted gaming or wagering transactions. To conclude otherwise, the Federal Court warned would invite abuse by allowing parties to circumvent the law through artful characterisation, thereby defeating the statutory prohibitions.

The Federal Court stressed that legal terms should not obscure the true nature of the transaction, which, in this case, was fundamentally a gambling or wagering transaction.

The principle of examining the reality of a transaction was not new to Malaysian legal principles. The Federal Court cited Pet Far Eastern (M) Sdn Bhd v Tay Young Huat [1999] 5 MLJ 558, where it was held that false labelling of a gambling debt as an account stated or as a loan does not alter its true nature. The court in that case made it clear that "a rose is still a rose no matter what you call it." In line with this reasoning, the Federal Court reiterated that the true nature of the transaction must be determined objectively and that the legal form of a transaction could not alter its substance.

The Federal Court went on to characterise the arrangement as a composite gambling contract. The so-called credit facilities were not standalone financial instruments but formed an integral part of the gambling transaction. Casino chips were merely tools of convenience and devoid of intrinsic monetary value. The exchange of credit for chips and the exclusive purpose of using those chips for gambling meant that all related arrangements collectively constituted a gambling transaction. 

Public Policy

The Federal Court decisively held that gambling contracts are not only prohibited by statute but also void for being contrary to public policy. The court acknowledged that public sentiment toward gambling in Malaysia is overwhelmingly negative, viewing it as an immoral activity that leads to financial hardship and social breakdown. As such, even if parties dress gambling arrangements in the form of credit agreements or loans, the underlying nature of the transaction remains impermissible. The court has a duty to look beyond form and strike down such transactions when they offend the law and public conscience. Accordingly, the Federal Court concluded that gambling arrangements, regardless of how they are structured, violate public policy and were therefore, null and void.

Conclusion

The Federal Court’s decision carries significant implications for parties engaged in casino credit arrangements or any financial transactions linked to gambling activities, whether domestic or cross-border. Regardless of how a credit arrangement is structured or labelled, the court will examine the true nature and purpose of the transaction to determine its legality.

30 May 2025