How Not to Get Out Gambling Debts

Many years ago, I acted for a client who was in the business of running junkets to gambling destinations in the Caribbean. He was quite a gambler himself and managed to rack up a significant debt at a Puerto Rico casino which he neglected to pay. The casino sued him in Ontario, and he retained me to defend him.

I did come up with a number of arguments for setoffs based on his business relationship with the casino concerning the planeloads of gamblers he was bringing in, but I was intrigued by the fact that there did not seem to be very much of a defence to the casino’s claim against him for his gambling debt.

From time to time, someone comes up with an interesting defence to an action to collect gambling debts. The latest effort was put forward in a case recently decided by the Court of Appeal called Moreira et al. v. Ontario Lottery and Gaming Commission et al.

In this case, the Plaintiffs were high stakes gamblers who had lost over $2 million playing roulette at the Niagara Fallsview Casino Resort over a span of about 3 ½ years. During that time, they signed markers to the casino. When the casino demanded payment on the markers, the Plaintiffs sued first and demanded the return of all of the money that they had lost. 

As a general rule, gambling and betting are illegal in Canada. There are specific provisions in the Criminal Code prohibiting lottery schemes, games of chance and the keeping of gaming or betting houses.

However, the Criminal Code does authorize the government of each province to conduct and manage lottery schemes and games of chance in accordance with any provincial legislation.

In Ontario, the Alcohol and Gaming Commission of Ontario (“AGCO”) regulates lotteries and gaming through the Gaming Control Act (the “Act”). The Act authorizes the AGCO to approve rules of play. It also requires that casino operators make sure that their games are played in accordance with those rules of play.

The Plaintiffs argued that throughout the 3 ½ year period, the casino had in place a “floating ball rule”, which permitted roulette dealers to remove a ball from a spinning roulette wheel and to call a “no-spin”. This ended the particular game, making all bets void, and resulting in the return to the players of all bets placed on that particular game. The Plaintiffs argued that the casino had been required to have that rule approved as a rule of play by the AGCO as the regulator of provincial lottery schemes. Because it had not obtained that approval, the roulette games played were illegal and the Plaintiffs’ losses at the roulette tables should be refunded. Furthermore, since the Act prohibits any attempt to use civil proceedings to recover loans to support illegal gambling, the casino’s claim on the markers should be dismissed as well.

As it turns out, while the floating ball rule appears to be common among Ontario casinos, casino operators have never submitted the floating ball rule to the AGCO for approval. The first issue in the case, therefore, was whether or not the floating ball rule was a rule of play that had to be approved by the AGCO.

That was not the end of the analysis. The Court recognized that it also had to consider whether or not, if the casino was at fault in not obtaining approval to the floating ball rule, that meant that the Plaintiffs had a viable claim for damages or the return of their lost funds on the basis of unjust enrichment.

In this case, the first judge hearing the matter concluded that the floating ball rule is indeed a rule of play, and that stopping roulette games to remove the floating ball was contrary to provincial gaming laws. However, on the balance of the claim, the judge concluded that there was no claim for damages because each time the floating ball rule was invoked, all players had their funds returned to them. There was also no basis for a claim for unjust enrichment because no money or benefits were ever retained by the casino after each floating ball call.

The Court of Appeal disagreed with the judge at the court below on the first point. It concluded that the floating ball rule was not a rule of play and did not need approval. The Court pointed out that rules of play must be approved by the AGCO to ensure the integrity and fairness of the game. The point is to control gambling operations that might otherwise exploit individuals or harm the broader public interest. They do not include casino practices that have no impact on the fairness and integrity of the game. The practice of removing the floating ball has no such impact. Accordingly, the Court of Appeal determined that no prior approval was required.

This decision is entirely consistent with common sense. The Plaintiffs had been playing roulette for years and knew the rules perfectly well. Furthermore, the Court pointed out that the casino has always been subject to supervision by the AGCO to ensure that it is complying with the Act. That supervision included a dedicated Compliance Officer assigned to the casino who maintained an office there, regularly walked the casino floor to monitor gaming activities and had complete access to the casino’s Surveillance Department to conduct investigations and ensure compliance with the law and rules of play. At no time during the relevant period did the casino receive from the AGCO any warning or monetary penalty in connection with the operation of its roulette games. And at no time did the Plaintiffs ever contact the AGCO to complain about the way the roulette games were being operated.

There is an old saying about the definition of the word “chutzpah”. Chutzpah is what you call a person who murders his parents and then asks for leniency on the grounds that he is an orphan. That would not be an unfair way to characterize the efforts of these Plaintiffs to avoid their debts.

Rolling the dice in a casino is one thing. At least there is some chance of success. Rolling the dice in the Court of Appeal is a different matter.

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