Tamimi v Khodari: Pre-September 2007 Gambling Loans Potentially Unenforceable

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

If, prior to September 2007, you loaned or borrowed money for the purpose of future gambling, or for the repayment of gambling debts, and the loan in question is yet to be repaid, this article is essential reading.

When the Gambling Act 2005 came into force on 1 September 2007, one of the things it did was make gambling debts legally enforceable for the first time. However, the Court of Appeal has recently found that loans made prior to that date could be unenforceable if it was a stipulation of the loan that the money was used for future gambling (or, incidentally, for repaying gambling debts).

In the case in question, Mr Tamimi was a wealthy businessman and heavy, compulsive gambler. Mr Khodari was his apparently extremely dedicated bank manager, who would respond to urgent requests, often in the middle of the night, to come to the casino and personally lend Mr Tamimi money so that he could try to recoup his gambling losses. The loans were normally repaid within a few days, along with ten per cent interest. However, the relationship broke down in 2007 and an amount of around £240,000 remained unpaid. Mr Khodari then sued Mr Tamimi for the unpaid amount.

In his defence, Mr Tamimi claimed that his promises to repay the money were unenforceable under Section 1 of the Gaming Act 1892, which (until it was superseded from 1 September 2007 by the Gambling Act 2005) rendered promises to pay money in respect of gambling contracts void. On the facts of the case, the Court found that the debt was in fact enforceable, because it was not a stipulation of the contract that the money be used for gambling. Indeed, Mr Khodari did not care how the money was spent, as long as he was repaid with interest and retained the goodwill of his important client. If the loan had not been used for gambling, Mr Tamimi would not have been in breach of contract. Mr Khodari was therefore entitled to recover his loan.

However, what is significant is that the Court made it clear that the Gaming Act 1892 could, in principle, make any loan made for the purposes of future gambling (or, for repaying gambling debts) unenforceable if it was a stipulation of the loan that the money was so used. Nevertheless, the Court also limited the principle by clarifying that, even if the loan was given in casino chips (as some of Mr Khodari's loans were), that was not sufficient to constitute a stipulation that the loan be used for gambling, as Mr Tamimi was free to cash in those chips rather than gambling with them.