Enforceability of oversees gambling debts in New Zealand
Monday, 14 November, 2011
Author: Jarrod True
In New Zealand gambling is governed by the Racing Act 2003 and the Gambling Act 2003. Gambling is prohibited in New Zealand and illegal unless it is authorised by either of those acts or it amounts to private gambling. Section 9 of the Gambling Act expressly prohibits remote interactive gambling. Remote interactive gambling is gambling at a distance by interaction through a communication device, for example, online gambling.
However, the Gambling Act only prohibits remote interactive gambling which takes place within New Zealand. If no part of the gambling is conducted within New Zealand, it is not illegal for a person based in New Zealand to participate in remote interactive gambling. An overseas operator also does not infringe New Zealand law unless they publish or arrange to publish an overseas gambling advertisement in New Zealand (with some exceptions).
However, issues may arise out of participation in overseas gambling. In particular, in relation to disputes:
- Would debts, or claims for winnings, in relation to overseas gambling be enforceable in New Zealand?
- Would a foreign judgment for a gambling debt be enforceable in New Zealand?
Enforceability of Gambling Contracts
Domestically the Gambling Act confirms gambling contracts that are authorised under the Act are enforceable at law: section 14(2). On the other hand, contracts for, or relating to illegal gambling, are illegal contracts for the purposes of the Illegal Contracts 1970: section 14(1). This means that they will only be enforceable if a Court is prepared to grant relief under section 7 of the Illegal Contracts Act 1970. The New Zealand Courts have considered enforcing illegal gambling contracts on at least two occasions. In Knyvett v Christchurch Casinos, the Court of Appeal refused to validate an illegal wager that was made by a minor at Christchurch Casino. It held that it would be contrary to public policy to allow a minor, acting in disobedience of the legislation, to retain the fruits of his unlawful conduct. In Harach v DIA, on the other hand, a District Court Judge indicated he would have been prepared to validate an agreement to share poker winnings under the Illegal Contracts Act 1970 had the agreement been proved. Every claim for relief under the Illegal Contracts Act 1970 will depend on its own facts.
As the Gambling Act does not apply to gambling occurring outside of New Zealand, however, there is no statutory bar to the enforcement of overseas gambling contracts. Whether a New Zealand Court would enforce an overseas gambling contract will depend on whether it has jurisdiction and on the proper law of the contract.
Proper Forum
A New Zealand Court would hear any claim relating to overseas gambling if it was forum conveniens. This is the forum within which the action has the most real and substantial connection. The New Zealand Courts consider a number of factors in deciding forum conveniens including:
- The relative cost and convenience of proceeding in each jurisdiction;
- The location and availability of documentation and witnesses;
- The existence of any relevant litigation in another jurisdiction and the state of those proceedings;
- The existence of any contractual submission to a particular jurisdiction;
- The strength of the plaintiff’s case;
- Where any judgment obtained would fall to be enforced;
- Whether there are any procedural advantages of one jurisdiction over the other or any existing decision that another jurisdiction is forum conveniens.
A contractual submission to any one jurisdiction is not conclusive. However, if a contract does give another jurisdiction exclusive jurisdiction over the contract, the party who is seeking to have a proceeding heard in New Zealand is likely to have to show a strong cause for why any proceeding commenced here should not be stayed.
Overseas gambling operators are likely to nominate a forum for any disputes in their terms and conditions. Operators may, however, still wish to bring proceedings in New Zealand if it is more cost-effective to do so. However, were a New Zealand-based gamer to seek to issue proceedings against an overseas operator, the operator may then rely on a jurisdiction provision to make that claim more difficult and costly.
Proper law
Even if a New Zealand court has jurisdiction, New Zealand law may not be the proper law. If the parties have expressly chosen a system of law to govern their contract, that system is generally considered to be the proper law. The proper law may even be a legal system that has no connection with the contract. If there is no express provision for any proper law, the New Zealand Courts will determine what the proper law is in accordance with New Zealand law. They will search for the legal system with the closest and most real connection with the transaction. Relevant factors are:
- The place where the contract was made;
- The place where the contract was to be performed;
- The nature and location of the subject matter of the contract;
- The currency in which any payment is to be made;
- The place of each party’s residence;
- The terminology of the contract;
- The form of the contract and any clauses selecting a particular jurisdiction over the contract.
Illegality
Illegality is determined according to the proper law of the contract. Accordingly, the Zealand Courts are likely to enforce a contract which is legal under its proper law even if it is illegal here or at the place of contracting. So if a website was based in a country where gambling was illegal but the proper law’s legal system had no such restriction, then it is likely a New Zealand Court would enforce it.
However, the Courts will not permit parties to purely domestic contracts to nominate a different proper law in attempt to circumvent New Zealand law. Further, they would refuse to enforce a contract that would be illegal under a New Zealand statute that, on its proper interpretation, applies despite the proper law of the contract. So, again if an overseas gambling website conducted any part of its operations in New Zealand, the Gambling Act would apply notwithstanding any provision for a different proper law. The operator would then have to seek relief under the Illegal Contracts Act 1970. Finally, the Courts may also refuse to enforce a contract if to do so would be contrary to New Zealand ideas of public policy or morality. It is unlikely a Court would refuse to enforce an overseas gambling debt on this ground though (see below).
Even if New Zealand law is the proper law of an overseas gambling contract, it is unlikely a Court would refuse to enforce it just because the subject matter is gambling. As above, New Zealand law prohibits domestic gambling that is not sanctioned by legislation but it does not prohibit overseas gambling. Were New Zealand law the law of the contract a Court might only refuse to enforce if there is another reason for doing so, for example, a capacity argument. Interestingly, in any event capacity is likely to be determined by the law of the country with most connection to the contract or by domicile.
Enforcement of Foreign Judgments
An overseas operator may obtain judgment overseas and then seek to enforce it in New Zealand. There are three ways in which a foreign judgment may be enforced:
- Under the Reciprocal Enforcement of Judgments Act 1934;
- By registering a memorial of the judgment under the Judicature Act 1908; and
- Under the common law.
Reciprocal Judgments Act 1934
Where the Reciprocal Judgments Act applies it must be used over the Judicature Act or the common law. The Reciprocal Judgments Act applies to the United Kingdom and a list of other countries and states to which an Order in Council has been made. Once a judgment is registered under the Reciprocal Judgments Act, it has the same effect, for enforcement purposes, as a judgment issued by the New Zealand High Court. A party may apply to set aside registration of the judgment within a set period. The grounds upon which registration may be set aside include:
- Where the judgment is not a judgment to which the Reciprocal Judgments Act applies or it was registered in contravention of the Reciprocal Judgments Act;
- The Courts of the country of the original Court had no jurisdiction to in the circumstances of the case;
- The judgment debtor (being the defendant in the proceedings in the foreign Court) did not receive notice of the proceedings in sufficient time to be able to defend those proceedings;
- The judgment was obtained by fraud; and
- The enforcement of the judgment would be contrary to public policy in New Zealand or that the rights under the judgment are not vested in the person who applied for registration.
Several cases have discussed the public policy ground which has been commonly relied upon. This exception is not available unless enforcement would shock the conscience of a reasonable New Zealander, would be contrary to New Zealand’s view of basic morality or would be a violation of essential principles of justice or moral interests in New Zealand. It is very unlikely that, without more, this would apply to prevent the enforcement of an overseas gaming debt.
Judicature Act 1908
The ability to register a memorial of a foreign judgment under the Judicature Act 1908 only applies to judgments that have been obtained in any Court of Her Majesty’s Dominions. This means all territories under the sovereignty of the Crown and commonwealth countries of which the Queen is not head of state.
Common Law
Under the common law a proceeding may be brought for full satisfaction of the judgment or, if the judgment has been partially satisfied, for the balance. A foreign judgment for a debt will be enforced in New Zealand under the common law if:
- The foreign court’s jurisdiction over the judgment debtor is recognised by New Zealand law;
- The judgment is for a debt or a definite sum of money; and
- The judgment is final and conclusive.
The High Court recognises the jurisdiction of a foreign court in certain circumstances including where a judgment debtor has previously agreed to submit to the jurisdiction of that Court in respect of the subject matter of those proceedings – i.e. there is a forum clause. If a foreign judgment satisfies the common law criteria for enforcement, it will be conclusive between the parties and the New Zealand Courts will not refuse to enforce it on the grounds that it involves what would be an error of fact or law under New Zealand law. Again, the Courts will only permit a party to resist enforcement under the common law in limited circumstances, including:
- The judgment was obtained by fraud;
- That recognition of the judgment would be contrary to New Zealand’s public policy; or
- That the proceedings in which the judgment were obtained were conducted in a manner contrary to natural justice.
For further information please contact:
Jarrod True
Phone: 07 834 6680
Email: jarrod.true@harkness.co.nz
Jarrod specialises in gambling issues and civil litigation. Jarrod is the author of the New Zealand Gambling Law Guide (www.gamblinglaw.co.nz).
