Resorts World at Sentosa Pte Ltd v Lee Fook Kheun (AA-29NCC-424-12/2021)

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." (Underlined emphasised) [16] His Lordship reiterated the same principle earlier in the judgment by stressing that the court must not be deceived by the guise of the label attached to the transaction. Whatever description the parties may adopt, the court must ascertain the true nature of the arrangement. His Lordship stated: "[46] Likewise in the present case, this court cannot accept the credit facilities granted to the appellant as pure loans and 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." (Underlined emphasised) [17] Accordingly, this court is satisfied that the judgment debt is founded upon a gambling-related credit facility which is void ab initio. It is therefore unenforceable in Malaysia and cannot lawfully serve as the basis for the present bankruptcy proceedings. UNENFORCEABILITY UNDER SECTION 26(4) OF THE CIVIL LAW ACT 1956 [18] The JD specifically relies on Section 26(4) of the Civil Law Act

I shall reproduce the entire section 26, which states: Section 26. Agreement by way of gaming or wagering to be null and void.

(e) the court regards it as immoral, or opposed to public policy [23] Further, the phrase "no action shall be brought or maintained" in section 26(2) is couched in mandatory language. It constitutes an overriding statutory bar under the lex fori doctrine. In Jupiters Ltd (Trading as Conrad International Treasury Casino) v Gan Kok Beng & Anor [2007] 7 MLJ 228; [2007] CLJU 240; [2007] 4 MLRH 100, the court held that Malaysian law, being the law of the forum, prevails over the law of the place (lex loci contractus) where the contract was made. Consequently, although a gambling debt may be lawful and enforceable in the foreign jurisdiction where it arose, it nevertheless remains unenforceable in Malaysia because section 26 of the Civil Law Act 1956 embodies the public policy of this country. [24] Accordingly, I hold that section 26 of the Civil Law Act 1956 operates as an overriding statutory expression of Malaysian public policy. It declares gaming and wagering contracts void and prohibits using the judicial process to recover gambling losses. The court must therefore give full effect to Parliament's intention and ensure that the judicial process is not utilised, directly or indirectly, to enforce obligations which the law has declared to be null and void. ADDRESSING THE JUDGMENT CREDITOR’S CONTENTIONS DOCTRINE OF ISSUE ESTOPPEL [25] The central issue before this Court is whether the Bankruptcy Court is precluded by the doctrine of issue estoppel from re-examining the legality of the judgment debt under section 26 of the Civil Law Act 1956, when the issue of illegality had earlier been raised and dismissed during the registration proceedings under the Reciprocal Enforcement of Judgments Act 1958 (“REJA”). The question assumes greater significance in light of the subsequent pronouncement of the Federal Court in Dato’ Ting Ching Lee (supra), which authoritatively declared gambling-related credit facilities to be void ab initio. [26] At the outset, this court accepts the settled principle that a bankruptcy court exercises a special and distinct jurisdiction. Bankruptcy proceedings are different from ordinary adversarial litigation because they are not confined solely to the rights of the immediate parties before the court. They engage the State's insolvency regime via-a-via the Director General of Insolvency and the Jabatan Insolvency Malaysia, which affects not only the debtor and the petitioning creditor but also other creditors and the proper administration of justice. For this reason, the bankruptcy court may, in appropriate cases, look beyond the judgment debt and examine whether the debt genuinely exists. This principle was firmly established by the Supreme Court in Sovereign General Insurance Sdn Bhd v Koh Tian Bee [1987] MLRA 326; [1988] 1 MLJ 304; [1988] 1 CLJ 155, where the court held that the bankruptcy court is not bound merely by the existence of a judgment. The court retains the jurisdiction to inquire into the validity of the judgment debt where there is evidence of fraud, collusion, or a miscarriage of justice. As Lee Hun Hoe CJ (Borneo) observed: "[11] An irregularity or formal defect in the judgment is no sufficient reason for going behind it: Re Beauchamp [1904] 1 KB

As a general principle, the validity of the judgment debt will only be inquired into when there is evidence of fraud or collusion or miscarriage of justice. Re Flatau [1889] 22 QBD 23; Re Howell [1915] 84 LJKB 399." (Underlined emphasised) [27] The underlying rationale is clear: the court must ensure that the bankruptcy process is not used to enforce a debt that is not legally sustainable. [28] The JC argues that illegality issue had already been determined during the REJA registration proceedings and is therefore barred by issue estoppel. While the doctrine undoubtedly serves the important purpose of ensuring finality in litigation, it is not absolute. It cannot operate as an absolute rule to compel a court to enforce what is illegal or void under the law. The doctrine exists to advance justice, not to perpetuate injustice. [29] In this regard, the decision in Re Sebastian, ex parte Metroplex Leasing & Credit Corp Sdn Bhd [1990] 3 MLJ 248; [1989] CLJU 165; [1989] 3 MLRH 721 is particularly instructive. There, the court recognised that even where earlier proceedings had taken place, the bankruptcy court retained jurisdiction to investigate the legality of the underlying consideration. The court acknowledged that, where the debt itself is founded on an unlawful transaction, the bankruptcy jurisdiction may be invoked to prevent a miscarriage of justice. This principle is entirely consistent with the supervisory nature of insolvency jurisdiction. The following passage from Re Sebastian (supra) is particularly relevant and merits reproduction here: “Reference is made in the footnotes to that passage in Halsbury to Re Fraser, ex parte Central Bank of London [1892] 2 QB 633 where the English Court of Appeal held that the court of bankruptcy has power at the instance of the debtor himself, to go behind the judgment and to enquire into the validity of the debt even though the debtor has previously applied in the action to set aside the judgment and his application has been refused and the refusal affirmed by the Court of Appeal. And in view of the provision of s 92(1), I see no reason why that power to go behind or around the judgment may not be exercised in an application to review, rescind or vary the receiving and adjudicating orders that had been made” (Underlined emphasised) [30] The matter becomes even clearer following the Federal Court’s decision in Dato’ Ting Ching Lee (supra). The Apex Court authoritatively held that gambling-related credit facilities constitute a composite gambling contract and are therefore null and void ab initio under section 26(1) of the Civil Law Act 1956, read together with section 31(1) of the Contracts Act 1950. Significantly, the Federal Court stressed that “the court must be alert to whatever term, system, or devise used to evade the law” to disguise the true nature of the transaction. The court must look at the substance and reality of the arrangement. [31] The significance of Dato' Ting Ching Lee cannot be overstated. Prior to that decision, the High Court in Wynn Resorts (Macau) SA v Poh Yang Hong [2019] MLJU 2003]; [2019] CLJU 2323; [2019] MLRHU 1845 treated a gambling credit facility as a separate loan and held it enforceable regardless of the gambling outcome. The court stated: "Hence, the credit that was given, was in the nature of a loan which had been drawn down and had to be repaid whether or not the borrower had won or lost at the gaming table." The court further elaborated in paragraph 145: "...the present action was not an action for recovery of gambling winnings or to enforce a wagering contract but was one by a casino to recover monies due and owing by a punter under a gaming credit facility..." [32] However, that approach in Wynn Resorts (supra) has now been expressly rejected by the Federal Court in Dato' Ting Ching Lee (supra). Consequently, what may previously have been perceived as an enforceable debt must now, on the authority of Dato' Ting Ching Lee (supra), be regarded as void ab initio. [33] Further, the legal effect of Dato' Ting Ching Lee (supra) extends beyond the parties to the appeal. In Letchumanan Chettiar Alagapan (As Executor to SL Alameloo Achi (Deceased)) & Anor v Secure Plantation Sdn Bhd [2017] 4 MLJ 697; [2017] 5 CLJ 418; [2017] 3 MLRA 501, the Federal Court affirmed the well-established principle that, unless expressly stated otherwise, its decisions operate retrospectively. In explaining this principle, His Lordship Richard Malanjum CJ (Sabah and Sarawak) observed: "[79] It should be a given that ‘when the judges state what the law is, their decisions do … have a retrospective effect’... As Lord Goff of Chieveley in his speech demonstrates, in the absence of some form of prospective overruling, a judgment overruling an earlier decision is bound to operate to some extent retrospectively... once the higher court... has stated the changed law, the law as so stated applies not only to that case but also to all cases subsequently coming before the courts for decision, even though the events in question... occurred before the Court of Appeal decision was overruled... Developments in the common law apply retrospectively unless, exceptionally, the court makes an order for prospective overruling..." (Underlined emphasised) [34] Therefore, the legal principles laid down in Dato' Ting Ching Lee (supra), apply equally to existing and pending cases in that the legal effect of the debt in question was never valid in the first place. [35] In these circumstances, this court cannot shut its eyes merely because the judgment had earlier been registered under REJA. Although the judgment was validly registered, this court is not a mere rubber stamp. Registration under REJA does not transform a void obligation into a valid debt. Neither can the procedural finality override substantive illegality. If the bankruptcy court were compelled to ignore the subsequent authoritative pronouncement of the Federal Court and proceed to enforce a debt now said to be void ab initio, the court itself would become an instrument for enforcing a transaction prohibited by statute and contrary to public policy. [36] This Court is mindful that finality in litigation is an important principle. However, finality cannot prevail over legality. This principle was recognised as early as Swan v Bank of Scotland (1836) 10 Bligh NS 627; [1835] UKHL 2_SM_67, where Lord Brougham in House of Lords explained that once a statute declares that no debt may arise from an unlawful transaction, the Court cannot recognise any legal claim founded upon it. His Lordship stated: "The statute has therefore in terms said that no debt shall arise from dealings contrary to the stamp provisions... whatever is done shall be void quoad creating a demand or claim by the party paying against the party receiving." Lord Brougham further explained the legal consequence of such statutory prohibition in unequivocal terms: "The statute has taken away the debt, and the obligation vanishes with it." His Lordship also warned that the courts must not permit parties to achieve indirectly what the statute expressly prohibits directly. He observed: "Nothing can be more plain than that if such decisions as the present could be supported, the 13th section of the statute would become at once a dead letter... the parties would thus be concluded, and the Court precluded from going into the fraudulent and illegal dealing which had rendered the whole transaction void by prohibiting any claim or debt from arising out of it." [37] Those observations by Lord Brougham made in early 19th century remain applicable today as it should to the present case. Once Parliament has declared that no enforceable debt can arise from a prohibited transaction, the Court cannot lend its process to enforce that obligation, whether directly or indirectly. To do otherwise would defeat the legislative purpose and undermine the public policy embodied in the statute. [38] Accordingly, this court holds that the doctrine of issue estoppel does not preclude the bankruptcy court from re-examining the legality of the judgment debt in the present circumstances. The supervening pronouncement of the Federal Court in Dato' Ting Ching Lee (supra) fundamentally alters the legal character of the debt. It triggers the bankruptcy court’s duty to prevent a miscarriage of justice. Having considered the true nature of the transaction, this court finds that the judgment debt arose from a gambling-related credit facility and is void under section 26 of the Civil Law Act

It is therefore unenforceable and cannot lawfully support a bankruptcy order. [39] The JC contends that the bankruptcy court should only concern itself with the validity of the CP under Section 5(1) of the Insolvency Act 1967. However, the court’s power to "go behind a judgment" is a vital safeguard. Where a debt is contrary to a statute (section 26 of the Civil Law Act 1956) and public policy, the court cannot turn a blind eye to the illegality of the underlying consideration. [40] The JC submits that public policy under REJA should be construed narrowly. However, such an approach cannot override clear statutory prohibitions under Malaysian law. The court must uphold the law of the forum where enforcement is sought. In Dato' Ting Ching Lee (supra), the Federal Court adopted the approach in Star City Pty Ltd v Tan Hong Woon [2002] 2 SLR 22, emphasising that courts must not permit parties to circumvent domestic law. A debt that is void ab initio under Malaysian law remains void. It cannot be transformed into an enforceable obligation merely by being registered as a foreign judgment under REJA. EARLIER FEDERAL COURT DISMISSAL IN LEAVE APPLICATION [41] The JC's reliance on the Federal Court's dismissal of the JD's earlier application for leave to appeal against the refusal to set aside the bankruptcy notice is misplaced. A refusal of leave does not involve a determination on the merits and therefore does not create any binding precedent. It merely signifies that the case did not satisfy the threshold under section 96 of the Courts of Judicature Act

It cannot be construed as either an endorsement or a rejection of the legal principles in issue. In contrast, this Court is bound by the substantive ratio decidendi of the Federal Court in Dato' Ting Ching Lee (supra), which represents a full consideration of the law after argument on the merits and expressly overruled Wynn Resorts (Macau) SA v Poh Yang Hong [2019] MLRHU 1845; [2019] MLJU 2003; [2019] CLJU 2323, which had previously recognised the enforceability of gambling-related credit facilities. Accordingly, the governing law is now that such claims are void and unenforceable, and this Court is bound to apply that authoritative decision. ISSUE OF DELAY [42] The JC characterises the JD's application as a mere delaying tactic. I am unable to agree. The circumstances of this case do not support such a contention. The JD is entitled, as a matter of law, to pursue every legitimate avenue available to challenge proceedings that carry serious and irreversible consequences, particularly bankruptcy. The exercise of those legal rights cannot, without more, be regarded as an abuse of the court's process. More importantly, the JD's challenge is founded upon the doctrine of stare decisis. The recent decision of the Federal Court in Dato' Ting Ching Lee (supra), which represents a significant development in Malaysian law concerning the enforceability of gambling-related debts, is binding on this Court. The JD's reliance on that authoritative decision is neither frivolous nor speculative, but is grounded in a genuine legal basis. I therefore find that the present application is not a delaying tactic but a bona fide application founded upon a binding development in the law which this court is duty-bound to apply. DOCTRINE OF FUTILITY [43] I am unable to accept the JD's reliance on the doctrine of futility based on his age, ill health, and alleged lack of assets. Those personal circumstances do not determine the legal enforceability of the debt. [44] The debt was incurred almost a decade ago. A debtor cannot rely on the natural passage of time, advancing age, or deteriorating health to escape a legal obligation. Had this been a valid commercial debt, those matters would not have constituted a defence to bankruptcy proceedings. [45] Equally, the JD cannot have the best of both worlds. Having voluntarily chosen to gamble on credit, he cannot now rely on the consequences of that decision i.e. his age, financial position, or health, in order to obtain relief from the court. If the law refuses to recognise gambling debts because they are contrary to statute and public policy, it likewise cannot extend relief based on the personal consequences arising from the very gambling transaction. The outcome of this appeal therefore does not turn on sympathy for the JD, but on the legal character of the debt. [46] This court applies public policy firmly and consistently. Gambling is a matter of personal choice, and a person who elects to gamble must bear the consequences of that decision. If he chooses to risk his wealth, he should do so with money already under his control, not by taking on credit for gambling. It is not the role of the courts to convert obligations arising from conduct which Parliament has declared contrary to public policy into legally enforceable rights. [47] Accordingly, my decision to set aside the creditor's petition rests solely on the illegality of the underlying gambling-related credit facility under section 26 of the Civil Law Act 1956, and not on the JD's age, health, or financial circumstances. PUBLIC POLICY CONSIDERATION [48] This court is of the considered view that public policy is not a peripheral consideration in the administration of justice but an overriding principle which courts are duty-bound to uphold whenever it becomes apparent on the facts before the court. The administration of justice does not merely concern the adjudication of private rights between litigants. Courts are also guardians of the integrity of the legal system and must ensure that judicial processes are not utilised to enforce transactions, arrangements, or conduct which are contrary to law, injurious to public welfare, or offensive to the conscience of the law. [49] The courts have consistently held that technical pleading requirements do not prevent them from considering issues of public policy. In Setiausaha Kerajaan Negeri Selangor (Perbadanan) v Perbadanan Riadah Sdn Bhd & Another Appeal [2016] 4 MLRA 632; [2016] MLJU 365; [2016] CLJU 1497, the Court of Appeal held that whether public policy has been pleaded is a "non-issue". Once illegality or public policy concerns become apparent, the court has a duty to address them. The court further observed that its power to intervene cannot be restricted when issues of illegality or public interest arise, whether involving public authorities or private parties. The court stated: “Whether it is a pleaded case of the parties or not is a non-issue when it relates to illegality, public policy or issues such as where the state exchequer will be short-changed. Support for the proposition is found in a number of cases. To name a few are as follows: (i) China Road & Bridge Corporation & Anor v. DCX Technologies Sdn Bhd [2014] 5 MLRA 289; (ii) Merong Mahawangsa Sdn Bhd & Anor v. Dato’ Shazryl Eskay Abdullah [2015] 5 MLRA 377; and (iii) Ayr Harbour Trustees v. Oswald [1883] 8 App Cas 623. Pleaded issues and the jurisprudence advanced by case law relates to party to the litigation only. The dimension for court intervention cannot be caveated when issues such as illegality or public policy become apparent when it arises in consequence of conduct of government or government agencies or private persons etc” (Underlined emphasised) [50] Similarly, in Wan Abdul Kudus Wan Awang & Anor v Nik Sapeia Nik Yusof & Ors [2000] 5 MLRH 341; [2000] MLJU 760; [2000] CLJU 175, the High Court recognised that the court possesses an overriding duty and inherent jurisdiction to refuse enforcement of promises or arrangements which are contrary to public policy, even if such illegality is not specifically pleaded by the parties. [51] The same approach is reflected in other cases, such as Yap Hoi Liong v Skyrich Development Sdn Bhd [2023] MLRHU 821; [2023] MLJU 3345; [2023] CLJU 2864, where the court refused to enforce a claim for legal fees by an unauthorised practitioner on the basis that such enforcement would undermine the integrity of the legal profession and offend public policy. Likewise, in Amman Singh v Vasudevan [1973] 1 MLJ 210; [1972] CLJU 7; [1972] 1 MLRH 539, the court held that agreements intended to interfere with the proper administration of justice are void under section 24 of the Contracts Act 1950 as being contrary to public policy. His Lordship Mohamed Azmi J. in Amman Singh (supra) expressed: "When the agreement was made, it was without the knowledge of the other creditors and the Court. Since the consideration is unlawful, the agreement is void under s. 24 of the Contracts (Malay States) Ordinance. It is therefore unenforceable at the instance of the plaintiff." … "Further, the agreement should be regarded as an act opposed to public policy. One of the group of cases where the Courts have refused to enforce agreements as being against public policy is where its objects interfered with the proper workings of the machinery of justice. (Chitty on Contract, 23rd Edn. p. paras. 803 and 804)." [52] This court is of the clear view that where the law of the land declares a gambling contract to be null and void, such prohibition must be given full effect. There can be no indirect or disguised means of enforcement through the courts. Parties cannot circumvent the statute by recharacterising the transaction as a “credit facility” or by any other label. To permit such an approach would amount to a backdoor enforcement of what the law expressly prohibits. This would undermine the statutory scheme and erode the clear public policy against the enforcement of gambling-related debts. The court must therefore reject any attempt to achieve indirectly what cannot be done directly. CONCLUSION [53] In light of the Federal Court's decision in Dato' Ting Ching Lee (supra), the debt relied upon by the JC is, in substance, a gambling debt which is null and void ab initio under section 26 of the Civil Law Act 1956 and therefore unenforceable in Malaysia. This decision is based solely on the illegality of the debt. The JD's age, health, financial circumstances and reliance on the doctrine of futility are not determinative and do not form the basis of this court's decision. [54] Accordingly, the JD’s appeal is allowed. The decision of the SAR dated 13 February 2025 is set aside, and the creditor’s petition in Enclosure 34 is dismissed. [55] Although the JD has succeeded in this appeal, I do not consider this an appropriate case for an award of costs. The dispute arises from a gambling transaction, which is contrary to Malaysian public policy. Consistent with the approach taken by the High Court in The Ritz Hotel Casino Limited & Anor v Dato' Seri Osu Haji Sukam [2005] 6 MLJ 760; [2005] 3 CLJ 390; [2005] 1 MLRH 450, the court should not assist either party by awarding costs in proceedings founded upon such transactions. As Ian Chin J (as His Lordship then was) observed: "the defendant is not deserving of costs as he had engaged in activity that his religion frowns upon and which it would be against public policy to assist him by way of awarding him costs." [56] Accordingly, while the appeal is allowed, there shall be no order as to costs. Dated : 6th July 2026 [MOSES SUSAYAN] JUDGE HIGH COURT IN MALAYA AT IPOH, PERAK Counsel : For the Appelant : Leong Cheok Keng (together with Chan Kok Keong, Farhan Sapian & Jason Tiew) Advocates and Solicitors [Messrs Leong & Tan] Ipoh, Perak For the Respondant : Jasmine Kuan Jie Min (together with Natasha Neena Yau) Advocates and Solicitors [Messrs Skrine] Kuala Lumpur (Notice: This Grounds of Decision is subject to official editorial revision) Headnotes: INSOLVENCY LAW: Bankruptcy – Creditor's petition founded on foreign judgment registered under Reciprocal Enforcement of Judgments Act 1958 – Whether Bankruptcy Court may go behind registered judgment – Gambling-related credit facility – Composite gambling contract – Whether credit facility merely a guise to circumvent statutory prohibition – Sections 26 Civil Law Act 1956 and 31 Contracts Act 1950 – Public policy against enforcement of gambling debts – Doctrine of issue estoppel – Effect of subsequent Federal Court decision in Dato' Ting Ching Lee v Ting Siu Hua – Retrospective application of binding precedent – Whether registered judgment transforms void obligation into enforceable debt – Public policy overriding procedural finality – No order as to costs despite succeeding.