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In Pet Far Eastern (M) Sdn Bhd v Tay Young Huat & Ors (1999) 5 MLJ 558, the High Court of Malaysia (Abdul Malik Ishak J) analysed recovery of embezzled monies and the nature of illegal and void gambling contracts. The judgment dates back to 30 April 1999. Professor Maurizio Lupoi of University of Genova is to be thanked for drawing attention to this case.

D1 was an employee in charge of company P's finances and accounts. D1 forged requests for drafts to P's banks in favour of himself and of five designated payees, D2-D6. Sums amounting to RM8.25m were drawn from P's account under this scheme of fraud. RM 4.5m was deposited in D2's bank account in Malaysia. D2 alleged that D1 had in fact gambled away this sum at D2's offshore gambling casino, so that the sum was paid away for value as discharge of a debt. P sought to recover the sum from D2 on constructive trust, alleging that D2 had sufficient knowledge of the tainted provenance of the money to allow an equitable remedy, and could not claim to be a bona fide taker; or alternatively that the D1-D2 contract was void for illegality and so there had been no transfer for value. The judge accepted that all the recipients of bank drafts from P, that is D2 through D6, had no prior relationship with P and that this alone was enough to fix them all with knowledge that something was amiss in the transfer of the monies; the recipients could be taken as knowing they had no entitlement to this money. The learned judge recommended the use of Mareva injunctions against all recipients in order to determine the precise circumstances of their receipt. He rejected D2's defence of a valid gaming contract with D1, holding that despite the sale of gambling chips and the language of debt and account, the gaming agreements between D1 and D2 were void for illegality (breach of Malaysian licensing legislation) so that D2 had no contractual defence to the claim by P for recovery; the monies were therefore to be held by D2 on constructive trust for P. The offshore status of the casino was held to be unimportant, as payments in pursuit of the gambling agreements had been made within Malaysia. The judge was not entirely clear why an unjust enrichment claim for payment made without consideration was not at least possible as an alternative analysis. He held that Moses v Macferlan pointed the way for 'equitable' recovery and left it there.

The history of legislation repressing the gambling contract as nudum pactum was discussed by the judge as follows:

'In those days, the English -- fine ladies and gentlemen -- gambled freely and incessantly. Huge sums of money changed hands over cards and dice. This gave rise to the English Gaming Act 1710 which enacted that all forms of gaming were void. But the English Gaming Act 1710 did not put an end to gaming. Instead, gaming flourished. It must be emphasized that the classical principle of nudum pactum was drawn from the English Marine Insurance Act 1745. Later, when the English Gaming Act 1845 was passed -- all contracts and agreements entered by way of gaming or wagering became void. The evils of gambling are too well known and too unsavoury to elaborate. Public policy became the order of the day and the policy was to suppress gambling at all costs. The courts showed no mercy to gamblers.'

The case holds interest at a number of levels.

--
Dr Joshua Getzler
Law Fellow
St Hugh's College & Law Faculty, University of Oxford