Cut the BS: The FC emphatically states that the Courts must look at the reality of the transaction, as opposed to what the parties allege
- Gavin Jayapal
- Mar 26
- 8 min read
The recent (26.02.2025) FC Decision of Dato Ting Ching Lee v Ting Siu Hua [CIVIL APPEAL: NO. 02(f)-27-08/2024(Q)] has caused quite a stir. Many assume that debts that they have incurred in Malaysia (e.g., from Genting) are irrecoverable.
This is incorrect.
The FC never once stated that debts validly incurred are irrecoverable. The FC specifically stated as follows:
[93] I do not deny that gambling premises are operating in this country but those premises are licensed and regulated under the relevant laws. That does not mean that gambling is not against public policy. As discussed earlier, the negative effect of gambling activities resulted in the government policy to curb gambling activities and enact laws that nullify any gaming contracts and make any claim for recovery of gambling debts unenforceable.
Legal gambling activities in Malaysia are regulated and licensed. The operators have a licence from the Minister of Finance and the debts incurred are fully recoverable.
The question of law posed
Dato Ting actually deals with a larger issue: the public policy argument. The FC has emphatically determined (in-line with the previous decision of Triple Zest v ABT, where illegality masked by a moneylender was deemed illegal) that illegality conducted overseas cannot be ratified here.
The facts
The Appellant (Dato Ting) went to Cambodia. He took a credit facility of ~US$1.7m to gamble, at the Naga Casino. He did not repay this.
Upon returning to Malaysia, the Respondent took-out an article that was defamatory of Dato Ting. This was also published in a WeChat account.
Dato Ting filed a suit for defamation. The Respondent counterclaimed for the credit facility (~US$1.7m).
Proceedings at the HC and CA
The HC dismissed both the claim and counterclaim.
The CA dismissed Dato Ting’s appeal but allowed the Counterclaim. Both Courts held themselves to be bound by the decision of Wynn Resorts v Poh Yang Hong [2019] MLJU 2003, affirmed by the CA.
Outcome at the FC
The FC in Dato Ting Ching Lee v Ting Siu Hua [CIVIL APPEAL: NO. 02(f)-27-08/2024(Q)] was tasked with determining 1 question of law:
“In construing whether any claim for monies given in the form of credit amounts to a gambling debt or otherwise, should the approach be the approach adopted by the Singapore Court of Appeal in Star City Pty Ltd (formerly known as Sydney Harbour Casino Pty Ltd) v Tan Hong Woon [2002] 1 SLR (R) 306, i.e. to ascertain the overall purpose of the same by considering it in its entirety as a composite contract?”
Gaming contracts are null and void
The FC began by outlining a 3-stage method of investigation:
[37] In the present case, the first essential question is whether there was a gaming or wagering contract when the appellant was granted the credit lines and the rolling rebate by Huang Group to the appellant. Next, whether the granting of the credit lines and rolling rebate was independent of the gaming activities by the appellant at the casino and to be considered a pure loan and enforceable under Malaysian law. Further, whether the recovery of money based on credit lines and rolling rebate is the recovery of gambling debt unenforceable under Malaysian law.
The FC then went on to consider the above in the context of a composite contract:
[38] It is undisputed that the credit lines and the rolling rebate were for the appellant to purchase the Naga Casino’s gambling chips so he could gamble at the casino. That was what he did and he lost and had to pay for the amount of the credit lines and rolling rebate. Now, the main issue here is whether the granting of credit lines and the rolling rebate was a loan distinct from the appellant’s gaming activities in Naga Casino and as such is not a gambling debt or whether it is a composite contract with the gaming activities by the appellant at the Naga Casino.
Put another way, was the money lent a standalone loan or was it a composite contract (i.e., the purpose of the loan could not be separated from the lending)?
The FC held that the loan could not be separated from the gambling activity:
[41] Reverting to the issues at hand, was the granting of the credit lines and rolling rebate in the present case a genuine loan distinct from the gaming activities by the appellant at the Naga Casino? In my view, it cannot be so, the credit facilities were meant for the sole purpose of gambling at the Naga Casino. Without the credit facilities, the appellant obviously could not obtain the casino chips for gambling. Further, the credit facilities could not be used for other purposes but for gambling at Naga Casino. Thus, the credit facilities could not be termed as a genuine loan independent of the appellant’s gaming activities at Naga Casino.
On the facts, it was not as if the loan of US$1.7m could be spent by Dato Ting at any place other than the casino. As such, it was a composite contract with the gambling activity.
The Court went on to consider the reality and true purpose of the loan:
[43] This court should not ignore or brush aside the glaring fact that the credit facilities were for gambling purposes and accept that they were pure loans. The reality of the transactions must be examined objectively and in totality. In the present case, the reality is that granting the credit facilities to the appellant was gaming or wagering transactions. To conclude otherwise is to allow parties to get around the law and indirectly defeat the law.
[46] Likewise in the present case, this court cannot accept the credit facilities granted to the appellant as pure loans and were legitimate transactions. The guise of legitimate transactions in whatever terms used should not shackle the long arm of the law to have its effect. As mentioned earlier, the reality is that it was a gaming or wagering transaction, and without credit facilities, the appellant could not gamble at Naga Casino. The term loans in reference to the credit facilities to the appellant is actually a gambling debt unenforceable under Malaysian law.
[48] In the present case, the credit lines and rolling rebate granted to the appellant undeniably arose from gaming transactions at Naga Casino. In addition, the STG Agreement signed between Naga Casino and Huang Group further fortified the granting of credit facilities to the players to gamble at Naga Casino, is part and parcel of the gaming transactions.
[62] The principle of reality of transactions was also applicable in our neighbouring country Singapore in addressing the issue of gaming or wagering transactions. Singapore law is the same (pari materia) as Malaysian law where any gaming or wagering contract is null and void and unenforceable. It is apposite to reproduce the Singapore provisions in this area of law to assist in a better understanding and clear explanation of the issues.
The FC then considered and applied the rationale of the Singaporean Court of Appeal:
[64] In the Court of Appeal case Star City Pty Ltd v Tan Hong Woon [2002] 1 SLR(R) 306 almost a similar issue was raised and decided by the apex court of Singapore.
[66] In coming to its decision, the court also applied the principle of the transaction's reality in determining the claim's enforceability.
[68] The court in that case also ruled that the exchange of a cheque for casino chips is an essential part of the composite gambling contract.
The FC then proceeded to overrule Wynn Resorts:
[72] In Wynn's case, the trial judge did not consider the reality of the transaction in granting the credit facility to the defendant. Likewise, the Court of Appeal in the present case. In reality, the credit facility was to obtain casino chips for gambling and no other. This was a composite gambling contract and a mere signing of a credit agreement does not make the transaction lawful and enforceable under Malaysian law. The credit agreement cannot be separated from the gaming transaction at the casino as the credit facility granted was an essential component of the gambling activities using only the casino chips.
[73] If this court were to accept the ratio in Wynn’s case, it would defeat the intention of the legislature to enact the provisions alluded to earlier and make the said provisions obsolete or redundant. This is because by merely signing a credit agreement, parties can go around the effect of sections 24 and 31(1) of the Contracts Act 1950 and sections 26(1) and 26(2) of the Civil Law Act 1956. This could not be the position especially when the government had announced its intention to curb gambling or wagering. The court must be alert to whatever term, system, or devise used to evade the law. The court must enforce the law when it is plain and unambiguous as the provisions mentioned in the present case. Thus, Wynn’s case is no longer good law.
[82] Reverting to the present case, whatever the terms or labels used concerning the money claim against the appellant, it was in reality a gambling debt that occurred at the Naga Casino arising from the credit facilities granted to the appellant to gamble. Reading the respondent’s pleadings, it is beyond doubt that the respondent was claiming the recovery of the appellant’s gambling debts.
[83] The claim against the appellant, in essence, viewed in totality, was for the recovery of money upon gaming or wagering transactions in Naga Casino Cambodia. It was a gambling debt. This claim is unenforceable under Malaysian law as explained earlier.
Public policy
The Court then went on to state that gambling activities are against public policy. However, there are laws and regulations in-place for licensed and regulated premises to operate:
[92] On this issue, I echoed the same view as mentioned in the authorities cited above and wish to emphasize here that there is nothing good or beneficial for the public if gambling activities were to be encouraged. That was why the government took a clear stand when voiced its view in Parliament to combat online or offline gambling. The intention of the legislature was also translated in the statutes by section 24, 31(1) of the Contracts Act 1950 and section 26 of the Civil Law Act 1956 as elaborated earlier. Public perception of gambling is also without doubt that gambling activities are something bad and should be discouraged. Thus, gambling activities and their transactions are against public policy.
[93] I do not deny that gambling premises are operating in this country but those premises are licensed and regulated under the relevant laws. That does not mean that gambling is not against public policy. As discussed earlier, the negative effect of gambling activities resulted in the government policy to curb gambling activities and enact laws that nullify any gaming contracts and make any claim for recovery of gambling debts unenforceable.
In concluding, the FC allowed the appeal and dismissed the Counterclaim.
Critical analysis
Dato Ting underscores the determination of the Courts to stamp-out illegal transactions. When one reads this decision against the backdrop of previous FC pronouncements such as Triple Zest v ABT, it becomes crystal that the Courts are enjoined to look at the substance of the transaction, as opposed to what the parties have stated in the documents.
The documents oftentimes belie one’s intention. A careful and close analysis will enable the Court to determine the raison d'être for an agreement, notwithstanding what the parties may suggest through the agreement.
I personally am of the opinion that Dato Ting adds to a considerable body of policy against illegality. It shows that the Malaysian Courts are unafraid to stand strong against attempts to weaponise the legal system for illegal purposes.
GAVIN JAYAPAL
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