Contract for gambling services found void by Swedish court due to gambler’s gambling problems, leading to a repayment of net losses

The Swedish Patent and Market Court of Appeal has found an agreement for the provision of gambling services between a gambler and a gambling operator invalid due to the gambler’s gambling problems and the gambling operator’s intrusive marketing toward the gambler. The gambling operator was imposed to repay net losses of EUR 527,395 and pay damages for mental suffering of SEK 10,000 to the gambler.

Background

On 21 February 2019, a Swedish consumer sued the Maltese gambling operator BML Group Ltd in the Patent and Market Court of Sweden and claimed that the gambling operator should be ordered to repay nearly EUR 15 million to the consumer, as well as damages for physical and mental suffering amounting to SEK 1,000,000 (roughly EUR 900,000). The basis of the claims was, amongst others, that the agreements between the consumer and the gambling operator were invalid with regard to Sections 33 and 36 of the Swedish Contracts Act (regarding good faith and fairness). The gambling operator contested the claims.

The background of the case was as follows. The consumer, in the following referred to as “P.L.”, is a Swedish resident. During the years of 2009­–2014, P.L. was a customer of the gambling operator and played on the company’s online casino, that was licensed in Malta. On 16 January 2012, P.L. was upgraded to a so-called VIP-customer. The total sum that P.L. converted at the gambling operator’s online casino amounted to EUR 14,969,491. In total, P.L. lost EUR 709,625 during his gambling at the gambling operator’s casino, of which EUR 527,395 derived from his time as a VIP-customer. In October 2014, P.L. contacted the gambling operator and requested that the company should close his gambling account, which the gambling operator did. Thereafter, P.L. sought medical attention and was diagnosed with gambling addiction.

During the time when P.L. was a customer of the gambling operator, the gambling operator regularly sent marketing messages to P.L. via e-mail and text messages. The marketing messages had a character similar to newsletters and general advertising, but often contained bonus offers and the like that needed to be converted into gambling within a certain time in order to be usable. Once P.L. became a VIP-customer, he received personalised marketing and was contacted directly by employees of the gambling operator.

Pursuant to Section 33 of the Swedish Contracts Act, a contractual obligation, which in and of itself is valid, cannot be asserted if the circumstances at the time of the conclusion of the agreement were such that it would be contrary to good faith and honour to invoke the contractual obligation with knowledge of said circumstances, when the person invoking the obligation can be assumed to have knowledge of these circumstances. The provision was included already in the original version of the Swedish Contracts Act of 1915. The intention of the legislator was for Section 33 to function as a general or blanket clause supplementing the more concretely oriented invalidity rules, enabling the courts to consider also circumstances other than those specifically mentioned in the proposed legal text.

Pursuant to Section 36 of the Swedish Contracts Act, a term of a contract may be modified or set aside if such term or condition is unconscionable having regard to the contents of the agreement, the circumstances prevailing at the time of the conclusion of the agreement, subsequent circumstances, and circumstances in general. Where a term is of such significance for the agreement that it would be unreasonable to demand the continued enforceability of the remainder of the agreement with its terms unchanged, the agreement may be modified also in other respects, or may be set aside in its entirety. Upon determination of the application of Section 36, particular attention shall be paid to the need to protect those parties who, in their capacity as consumers or otherwise, hold an inferior position in the contractual relationship. Section 36 was introduced as an amendment to the Swedish Contracts Act in 1976.

Each time P.L. played on the gambling operator’s online casino, P.L. and the gambling operator entered into a new agreement. P.L. argued that the gambling operator knew or ought to have known that P.L. was a gambling addict and that, therefore, the agreements between him and the gambling operator were invalid with regard to Section 33 and Section 36 of the Swedish Contracts Act.

First instance – Patent and Market Court

The Patent and Market Court found that it was not proven that the gambling operator had known or ought to have known that P.L. was a gambling addict. Therefore, the contracts were not considered invalid and the gambling operator could not be liable for damages. The marketing measures of the gambling operator in relation to P.L. were tried separately by the court, but the court found that neither these should give rise to any payment obligation for the gambling operator.

The judgment of the Patent and Market Court was appealed by P.L. to the Patent and Market Court of Appeal, which rendered its judgment on 21 December 2023.

Second instance – Patent and Market Court of Appeal

In the Patent and Market Court of Appeal, P.L. adjusted his claim and claimed that the gambling operator should pay him EUR 709,525 or another amount that the court would find reasonable or, alternatively, EUR 527,395 or another amount that the court would find reasonable. The new alternative claims for repayment equal the money that the gambling operator got to keep from P.L.’s gambling, i.e. P.L.’s net losses. The claim for damages of SEK 1,000,000 remained, but P.L. no longer claimed that the gambling operator had caused him physical harm.

The Patent and Market Court of Appeal begun with an assessment of whether the agreements between P.L. and the gambling operator were invalid with reference to Section 33 of the Swedish Contracts Act. With reference to the preparatory works of the Swedish Contracts Act, the court stated that the provision is of general sort and that it was introduced with the purpose of creating a protection against dishonourable business transactions. The court further stated that the provision has been applied, for example, in a case where a legal action was taken by a person with mental weakness that was related to old age, which expressed itself in an increased amenability to psychological influence. The provision has also been applied in similar situations where a person due to senile dementia, depression or illness had a lack of resistance to persuasion and the like. However, there were no precedent regarding such a situation as the one in the present case.

After the clarifications of P.L.’s claim that had been made in the appeal, P.L. was claiming (i) that the gambling operator at some point during the time P.L. was a customer, at the latest when he became a VIP-customer, learned that P.L. had serious gambling problems, (ii) that the gambling operator directed extensive and aggressive marketing against him, and (iii) that the gambling operator through the marketing – contrary to law – had promoted a lottery organised abroad concerning a gambling form that was not allowed in Sweden at the time.

P.L. had, both in first and second instance, referred to an expert opinion by a professor in statistics who also had researched the field of gambling addiction. The opinion was based on player data concerning P.L. that had been obtained from the gambling operator. The purpose of the expert opinion was to analyse P.L.’s gambling behaviour on online casino during the years 2009–2014 and to illustrate how the gambling operator’s marketing and transactions had affected the gambling. The assessment was made based on a number of indicators of gambling problems also used to diagnose gambling addiction. The indicators were, for example, that the player overconsumes the game, that the player tries to win back large losses and that the player loses control over his or her gambling.

In the expert opinion, it was stated that the analysis indicates that P.L. developed a gambling addiction with a clear start during the period May 2010–November 2011, that the serious problems increased during December 2011–May 2013 and that there was a continued very clear high-risk behaviour during June 2013–October 2014. Based on the analysis of player data, it was, according to the expert opinion, very likely that P.L. would have been diagnosed as a gambling addict already in the autumn of 2010. In addition, it was stated that there was a strong connection between the marketing measures taken by the gambling operator through, for example, deposits of bonuses on the gambling account and P.L.’s gambling pattern.

P.L. also, in both first and second instance, referred to an expert opinion by a doctor in psychology who had researched the field of gambling addiction and had been active with treatment activities against gambling addiction. In the expert opinion, it was stated that the portal criterion for gambling addiction diagnoses is the loss of control and that this occurred more or less immediately in P.L.’s case. Furthermore, it was stated that online casino is the gambling form with highest risk and that a large part of people who regularly play at online casinos have or develop a gambling addiction. Overall, the assessment was made that it was clear that P.L. played far more than what is considered healthy and that there were several clear signs that he had lost control of his playing.

With reference to the two expert opinions, which the court thought were well substantiated, the court found that P.L. had serious gambling problems at least since December 2011. The next question was if, and if so when, the gambling operator learned that P.L. had serious gambling problems.

It was undisputed between the parties that P.L. became a VIP-customer on 16 January 2012. According to P.L., this was on the gambling operator’s initiative, which was not disputed by the gambling operator. The court stated that the gambling operator at that time obviously must have noted P.L.’s gambling pattern. The Patent and Market Court of Appeal’s opinion was that it also appeared from the investigation in the case that at least at the time when P.L. became a VIP-customer, there were clear signs that he had lost control over his gambling, and that these signs were manifested in his gambling pattern and were thus also visible to the gambling operator. During a period of two years and nine months after P.L. became a VIP-customer, his gambling was extensive. He deposited the equivalent of approximately SEK 8.6 million in today’s monetary value into his player account and made a net loss of approximately SEK 5.8 million. According to the Patent and Market Court of Appeal, it was not possible to draw any other conclusion from the investigation in this part than that P.L.’s gambling at the gambling operator deviated markedly from what can be considered healthy gambling. The Patent and Market Court of Appeal’s assessment was that the gambling operator at least since 16 January 2012 knew that P.L. had serious gambling problems.

As regards the gambling operator’s marketing, it appears from the investigation that the company regularly sent P.L. marketing e-mails, both with newsletters and general advertising but also with offers of bonuses and the like that had to be converted into games within a certain time limit in order to be used. This continued also after the gambling operator became aware of P.L.’s serious gambling problems. Furthermore, the court stated that it appeared from the investigation that P.L. subsequently also received marketing from the gambling operator which was addressed to him personally and that he was also contacted by people at the company who introduced themselves as his contact person.

Altogether, the Patent and Market Court of Appeal concluded that the gambling operator at least at the time when P.L. became a VIP-customer knew that P.L. had serious gambling problems and that, despite this knowledge, the company continued to intrusively market gambling services towards him. Not only did the previous marketing continue, but additional marketing measures were added that were directed at P.L. personally, e.g. by the gambling operator’s employees actively seeking him out. The court’s opinion was that the gambling operator must have known at this stage that due to his gambling problem, P.L. was in a vulnerable position and therefore found it difficult to defend himself against the marketing, especially bonus offers and the like that encouraged further gambling. In addition to this, the court stated, the marketing referred to a form of gambling that was not permitted in Sweden at that time and which was associated with a significant risk for those who gamble to suffer from gambling addiction. These circumstances should, according to the Patent and Market Court of Appeal, be taken into account in the assessment, regardless of whether the gambling operator’s actions involved a violation of the promotion ban in the previous Swedish Lottery Act or were in conflict with the provisions of the Swedish Marketing Act.

With reference to the above, the Patent and Market Court of Appeal found that it must be considered contrary to faith and honour to enforce the agreements against P.L. The agreements were therefore deemed invalid and the gambling operator was ordered to return P.L.’s net losses after 16 January 2012 to P.L., i.e. EUR 527,395.

As regards the claim for damages due to mental suffering, P.L. referred to a medical certificate from December 2014, which showed that P.L. during the medical examination exhibited the criteria of a severe and completely uncontrolled and accelerating gambling addiction with strong anxiety, worry and depression. As a result, his ability to work was deemed to be completely impaired during the period 1 December 2014–31 March 2015. The court stated that it followed from the investigation that P.L. suffered from medically demonstrable mental suffering as a result of the gambling addiction he had developed. The court also found that there was a causal and temporal connection between the intrusive marketing that the gambling operator undertook from 16 January 2012 with knowledge of his serious gambling problem and his mental distress. The court considered that the fact that P.L. could suffer mentally as a result of the gambling operator’s marketing must have been foreseeable by the gambling operator.

The Patent and Market Court of Appeal therefore concluded that the gambling operator had negligently caused P.L.’s mental suffering and that the gambling operator therefore was liable for damages to P.L. The amount was set to SEK 10,000.

Reflections

This case law from the Patent and Market Court of Appeal is completely new in Swedish jurisprudence. The paragraphs in the Swedish Contract Act invoked by the gambler have not been applied in a case similar to this one before.

The judgment from the Patent and Market Court of Appeal has been appealed by the gambling operator to the Supreme Court, but the Supreme Court is yet to decide whether to grant a leave for appeal. It thus remains unknown whether the judgment from the Patent and Market Court of Appeal will be preserved. Nonetheless, it is possible that the case may have a significant impact on the Swedish gambling market. For example, a similar case against a major gambling operator is currently pending in a Swedish District Court. Although that case is yet to be decided, the outcome in this case is likely to in some way affect the currently pending case.

As a final comment, it can be noted that the gambling operator in this case did not have a Swedish gambling license at the time of events in the case. However, it is not clear how and to what extent this affected the court’s assessment.