The Many Victims of Problem Gambling
The harm done by problem gambling does not stay with the gambler: it has a wide reach. In the introduction to its 2020 Report on the social and economic impact of the gambling industry, the House of Lords Select Committee wrote –
For every problem gambler, six other people are adversely affected by gambling-related harm: a total of some two million people. This can lead to the breakup of families, the loss of employment, loss of homes, crime, financial ruin and, in the worst cases, suicide.
The focus of this article is on problem gamblers who steal in order to fund their addiction. A surprising number do. One has only to Google “problem gambler stole money” to see confession after tragic confession of thefts, embezzlements, and frauds to fund an addict’s gambling. A recent unsuccessful claim in the High Court illustrates how difficult it is for a problem gambler’s victim to obtain redress.
Dhir v Flutter Entertainment Limited
An action against the problem gambler is futile if he is penniless – which he almost always is: he has lost everything he possesses, as well a great deal of what other people used to possess. So what is the victim to do, when money is unlawfully taken from him and frittered away on gambling?
In Dhir v Flutter Entertainment Limited, the victim tried suing the gambling operator instead of the gambler, on the ground that money the gambler had lost remained his all along and was traceable into the gambling operator’s hands – meaning it was recoverable in law. The opening paragraph of the judgment of Griffiths J sets out the basic facts:
The Claimant (Amarjeet Dhir) is a Dubai-based businessman who advanced money to another businessman in Dubai which he thought would be invested in the local property market. Unknown to him, the man taking his money (Tony Parente) was a gambling addict. As Mr. Parente now admits, he applied money he had been given by Mr Dhir (and, it seems, others) to fund his gambling habit. One of the gambling businesses with which he lost a lot of money in a short space of time was the defendant, through that part of its operations branded as Paddy Power. Mr Dhir now seeks to recover from Paddy Power money in its hands which he says represents the money he is entitled to recover from Mr. Parente.
The action failed: the case turned on the relevant law applicable to the agreement between Mr. Dhir and Mr. Parente, which the judge found to be the onshore law of Dubai. The judge rejected the claimant’s argument that the agreement created a relationship recognised by onshore Dubai law as a fiduciary relationship. He said:
“In my judgment, on the evidence, including the expert evidence, it created a relationship which was neither equivalent nor akin to a fiduciary relationship. It had none of the key characteristics of a fiduciary relationship in English law.”
The relationship between the parties being one of creditor/debtor, Mr. Parente did not steal the money held on trust by him: he simply failed to repay what he had been lent. The lack of a fiduciary relationship was fatal to each of the heads of claim, and one by one they fell: the money could not be traced; there was no valid claim for ‘knowing or unconscionable receipt’ of the sums appropriated and gambled; nor was there an arguable claim for unjust enrichment.
A victim with a beneficial interest in monies held on trust by a third party who then choses to gamble them away might have fared better. A trust can arise by various routes, including an express agreement, by law where monies are advanced for a specific purpose (a Quistclose trust) or by a “constructive” trust, where monies are stolen.
If a trust relationship exists, then the claimant can seek to trace his money into the hands of the eventual recipient on the basis of unjust enrichment, subject to “change of position” and “bona fide purchaser for value” defences (the latter of which was not available in the landmark case of Lipkin Gorman v. Karpnale  2 A.C. 548 as gambling contracts were not then enforceable). There is also potential for claims against the recipient based on accessory liability for breach of the third party’s fiduciary duties, which require proof of either dishonesty or a state of knowledge on the part of the recipient that means it is unconscionable for it to retain the benefit.
Because Mr Dhir’s claim failed at the first hurdle – there was no trust – the Court did not need make any determinations as to whether the defendant’s knowledge was sufficient to make out the requisite standard of “knowing or unconscionable receipt”.
The Gambling Commission
When a problem gambler tries to self-exclude but is knowingly wooed back into gambling by a licensed operator – which was the position in Flutter – the Gambling Commission has ample powers with which to punish the operator, including the imposition of financial penalties, divestment of profits, and the suspension, or even the revocation, of its operating licence. In its Report, however, the House of Lords Select Committee was not convinced that the Commission made enough use of these powers:
Fines currently imposed and penalties agreed by the Gambling Commission do not make a sufficient impact on large corporations. They should reflect not just the seriousness of the offence but the size of the offender. In the case of repeat offences or other extreme circumstances the Commission should demonstrate much greater willingness to exercise its power to withdraw an operator’s licence.
The Government’s discouraging response was –
The Gambling Commission uses the full range of its regulatory tools and it is only in a limited number of cases that compliance interventions prove insufficient to address identified risks and the use of enforcement powers is required.
A regulatory settlement by an errant operator, in lieu of a financial penalty, allows the Commission to recompense (at least to some extent) the victims of a problem gambler’s dishonesty; but the Commission will not return money even to identified victims where it cannot categorically determine the ‘clean’ origin of the funds used to gamble. If there is doubt about the source of funds, any divestment of improper gains – so that the operator does not make a profit from his regulatory failures – will usually go to a gambling charity instead.
Problem gamblers as victims
Although it may be a bitter pill for the likes of Mr. Dhir to swallow, the problem gambler may himself be considered a ‘victim’ of operators who ignore his requests for self-exclusion – or, even worse, agree to help him but renege on their assurances, as they did in Flutter. As a ‘victim’ of the operator, the addict might try to get his money back with a view to repaying the persons he has stolen from – the altruistic intent has sometimes been expressed, if not always believed.
Mr. Parente is widely portrayed, not just by himself, as a victim rather than a villain.
The Select Committee considered the remedies available to the gambler/victim, and referred to the initially promising, but ultimately disappointing case of Calvert v. William Hill Credit Limited:
The claimant, a greyhound trainer, was successful at betting on greyhounds—too successful, and the bookmakers limited his betting. He turned to other forms of betting, became (in the words of the judge) a pathological gambler, and ruined himself. He twice attempted to self-exclude from William Hill, but although he was assured by their employee that he was self-excluded, the employee failed to implement this, and Mr Calvert continued to bet with them. When he ran out of money he sued William Hill on the basis of a breach of a duty of care owed to him. The judge held that, while there was no general duty of care, the failure to implement his self-exclusion was a breach of a narrow duty of care arising out of the employee’s assurance. But the judge decided that Mr Calvert would have carried on gambling with other operators and ruined himself anyway, so his claim failed because he was unable to prove that the breach of duty had caused the relevant losses. The Court of Appeal concurred.
Calvert was followed in Hillside (New Media) Limited v. Baasland, in City Index Ltd v. Balducci, in Ritz Hotel Casino Ltd v. Al Daher, and in Ritz Hotel Ltd v. Al Geabury. The Committee recommended –
The law should be amended to make an operator who contravenes provisions of the licence conditions and social responsibility codes liable to an action for breach of statutory duty at the suit of a customer who has suffered loss as a result of that contravention.
It remains to be seen whether that recommendation will be acted on. The Government’s response to it was again complacent –
Gambling operators must already abide by strict licensing requirements or face firm action from the Gambling Commission, up to and including loss of their licence to operate. This regulatory regime acts as a deterrent against negligent or irresponsible operator behaviour. In addition, a dispute resolution mechanism is in place for complaints that are principally contractual in nature (for instance, where they relate to an operator’s terms and conditions).
The difficulty with the Select Committee’s solution may be finding the right balance: self-excluded problem gamblers who gamble while excluded and win tend not to kick up too much of a fuss. A scenario might easily be created in which the self-excluded gambler can recover his losses in an action against one operator—whilst holding onto his winnings from another. ‘Win-Win’ has a certain attraction and is unlikely to break a gambling addiction.
Mr. Dhir, whose loan to Mr. Parente was gambled to extinction, couldn’t get his money back (and there is no shortage of Mr. Dhirs). Problem gamblers who try to break their addiction have been encouraged to keep gambling, even when there is good reason to suspect the source of the funds they are gambling with – but they too have had little or no success in getting the money coaxed out of them refunded. And to cap it all, regulatory enforcement against errant licensed operators is said by the Select Committee to be inadequate.
So what is going wrong? If we may personify ‘gambling’ for a moment, the villain of the piece is perhaps gambling itself, not the licensed operator, not the Gambling Commission, not even the dishonest gambling addict. The over-liberal credo of the Budd Report of 2001 insufficiently acknowledged the harm that gambling can do – “the breakup of families, the loss of employment, loss of homes, crime, financial ruin and, in the worst cases, suicide”; and the Gambling Act of 2005, in thrall to Budd, did not simply let the genie out of the bottle, it positively encouraged it: licensing authorities must now “aim to permit” premises to be used for gambling. Those who are rightly concerned about the potential adverse social consequences of gambling may not fully appreciate the extent to which they were ushered in by the 2005 Act. For example, under the legislation it repealed there could be “no more betting offices than are really required by demand” (Lord Parker CJ in Ex parte Thomas) – the same applied to casinos; and the advertising of facilities for gaming was all-but prohibited.
Fifty-five years after Ex parte Thomas there is no demand criterion, gambling advertising is rampant, half the adults in this country gamble at least once a month, and a third of a million of them are problem gamblers.
Gerald Gouriet QC
Francis Taylor Building
 “Gambling Harm – time for Action” Introduction @ paragraph 4
  EWHC1510 (QB)
 ibid @ 239
  EWHC 3336 (Comm)
  EWHC 2562 (Ch)
 EWHC 2847 (QB)
  EWHC 2294
 GA 2005, section 153
  1 WLR 359