[COURT OF APPEAL]

TOTE INVESTORS LTD. v. SMOKER

Gaming - Betting - Totalisator - Credit betting transactions - Backer placing bets with totalisator through intermediaries - Whether "contract of gaming or wagering" - Gaming Act 1845 (8 & 9 Vict. c. 109), s. 18.

[Reported by COLIN LAMB, Esq., Barrister-at-Law.]

The defendant entered into credit betting transactions on a totalisator, placing her bets with the horse totalisator board through the plaintiffs. She lost the bets and found herself unable to pay. When the plaintiffs brought a claim against her for the money owing, the defendant pleaded that the contract was a gaming or wagering contract and so was void under the terms of the Gaming Act, 1845, s. 18.

Held, that the contract was a simple contract with the plaintiffs who contracted in their own name but really on behalf of the totalisator board, that the totalisator board could neither win nor lose; and that accordingly the contract was not a gaming or wagering contract so as to be governed by the provisions of the Gaming Act, 1845, s. 18.¹

Carlill v. Carbolic Smoke Ball Co. [1892] 2 Q.B. 484; 8 T.L.R. 680; Ellesmere v. Wallace [1929] 2 Ch. 1; 45 T.L.R. 238, C.A. and Attorney-General v. Luncheon and Sports Club Ltd. [1929] A.C. 400; 45 T.L.R. 294, H.L. applied.

Per Lord Denning M.R. A contract by a backer who puts money on the totalisator is not a contract by way of gaming or wagering (post, p. 516G).

APPEAL from Judge Block sitting at Mayor's and City of London Court.

The plaintiffs, Tote Investors Ltd., brought an action against the defendant, Miss Barbara Mary Smoker, to recover £23 13s. 8d. owed by the defendant to the plaintiffs following credit betting transactions in which the defendant placed bets on the totalisator through the plaintiffs. At the trial before the registrar the defendant pleaded the Gaming Act, 1845, s. 1, alleging that the contracts in question were gaming or wagering contracts, and so void under the Act and that the money owed was not recoverable. The registrar found for the plaintiffs and the defendant's appeal to Judge Block was dismissed.

The defendant appealed on the grounds that the judgment was wrong in law, being contrary to a true interpretation of section 18 of the Gaming Act, 1845, and of section 1 of the Gaming Act, 1892, inasmuch as (a) none of the cases cited by counsel for the plaintiffs at the trial of the action (namely Carlill v. Carbolic Smoke Ball Co.,² Ellesmere v. Wallace³ and Attorney-General v. Luncheon and Sports Club Ltd.⁴ on which the judgment was based was of a similar nature to the present case; and (b) at the second hearing the judge said at the outset that he was bound by his own decision

1 Gaming Act, 1845, s. 18: "All contracts or agreements, whether by parole or in writing, by way of gaming or wagering shall be null and void."

2 [1892] 2 Q.B. 484; 8 T.L.R. 680.

3 [1929] 2 Ch. 1; 45 T.L.R. 238, C.A.

4 [1929] A.C. 400; 45 T.L.R. 294, H.L.

in previous similar cases and was consequently unable to consider the case according to the arguments put forward by the defendant; and (c) the Court of Appeal could consider the case de novo since none of the admittedly similar cases referred to under (b) above had gone as high as the Court of Appeal.

The defendant, Miss Smoker, in person. The facts in this matter are not in dispute; it is solely a matter of the correct interpretation of a single phrase in section 18 of the Gaming Act, 1845, and any possible bearing on it of subsequent legislation. The important phrase is "contracts or agreements ... by way of gaming or wagering."

The acknowledgment by Parliament of the existence of compulsive gambling led to the inclusion in the Gaming Act, 1845, of a section making gaming debts irrecoverable at law, and this provision has never been repealed, nor has any Royal Commission recommended its repeal. The respondents have admitted that if the transactions with or through them could be shown to be "contracts or agreements by way of gaming or wagering" then such contracts would be unenforceable at law, notwithstanding that the respondents were acting as agents only, but they say that "investments" by means of a totalisator do not come within the terms of "contracts by way of gaming or wagering." They cite the definition of a wager given by Hawkins J., in the case of Carlill v. Carbolic Smoke Ball Co.,⁵ a statement by Russell L.J. in Ellesmere v. Wallace⁶ and some extracts from the House of Lords decision in the Attorney-General v. Luncheon and Sports Club Ltd.⁷ None of these three cases is applicable in the present case in such a way as to exclude totalisator transactions from the terms of section 18 of the Act of 1845. Such transactions are covered by that section, being contracts by way of gaming or wagering or both. Even if the view is taken that contributors to a totalisator pool are not betting with the totalisator operating company, then they are betting with each other, through the agency of that company.

The statute governing the operations of the Horserace Totalisator Board contains nothing that can possibly be said to repeal by implication section 18 of the Act of 1845. In the Racecourse Betting Act, 1928, the Betting and Lotteries Act, 1934 and the Gaming Act, 1963, the totalisator is defined as a "contrivance

5 [1892] 2 Q.B. 484, 490; 8 T.L.R. 680.

6 [1929] 2 Ch. 1, 50; 45 T.L.R. 238, C.A.

7 [1929] A.C. 400; 45 T.L.R. 294, H.L.

for betting." The word "betting" is equivalent to the contracts specified in section 18 of the Act of 1845. Jowitt's Dictionary of English Law, Vol. I, p. 854, states that "no money lost at gaming or on bets can be recovered, even (Gaming Act, 1892) by a person who, as agent for the loser, has paid money to the winner." On page 231 of the same work, betting is defined as "a form of wagering contract under which money or money's worth is made payable on the result of some uncertain event, such, for instance, as a horse-race, football match or boxing contest." Stroud's Judicial Dictionary, 3rd ed. (1952), Vol. 1, p. 295, Chitty on Contracts, 22nd ed. (1961), Vol. 2, para. 616, and Anson's Law of Contract, 22nd ed. (1964), p. 306, all equate bets with wagering contracts.

The definition of the word contract does not limit its meaning to agreements between two parties only. The terms "wagering" and "betting" were interchangeable at the time when the Act of 1892 was drafted, and the Concise Oxford Dictionary defines "wager" as "bet." However, the case does not rest solely on the meaning of the term wagering in the Act of 1845, which uses the word gaming in the alternative. Gaming includes betting on horse-races. In Smith v. Wyles⁸ Ashworth J. was not inclined to construe the meaning of "gaming" in a narrow sense. Horseracing has always been included in statutory definitions of games of chance, ever since a statute of 1664 specified gaming at, inter alia, horse-racing.

Hawkins J.'s definition of a wagering contract in the Carbolic Smoke Ball case⁹ is applicable only in a narrow range of cases similar to that case. Scottish courts have consistently refused to accept the definition framed by Hawkins J.⁹ Even if the definition were applicable in the instant case, there was wagering between the appellant and the other "investors" who selected the same horse, on the one hand and all the remaining "investors" on the other hand. Either collective party could win or lose. All that Ellesmere v. Wallace¹⁰ decided was that the payment of entry fees in a contest for a fixed prize to be paid to the owner of a winning horse contained no element of betting, but that was a contract of a very different character from that in the present case.

The Attorney-General v. Luncheon and Sports Club Ltd.¹¹ dealt with a taxing statute, the Finance Act, 1926. Taxing Acts are to

8 [1959] 1 Q.B. 164; [1958] 3 W.L.R. 528; [1958] 3 All E.R. 279 D.C.

9 [1892] 2 Q.B. 484, 490.

10 [1929] 2 Ch. 1; 45 T.L.R. 238, C.A.

11 [1929] A.C. 400.

be construed narrowly and therefore any limiting statements or definitions laid down in such cases will not necessarily apply to a case concerned with a statute such as the Gaming Act, 1845. In any event, the Luncheon and Sports Club case¹¹ decided only that the bets there made were made by the contributors inter se and not with the club, which acted merely as an agent; a recognition by the House of Lords of the possibility of multi-partite betting contracts not in accord with the view of Russell L.J. in the Ellesmere v. Wallace case.¹²

The statutory rules for the operation of the Horserace Totalisator Board contained in the Betting, Gaming and Lotteries Act, 1963, do not, by implication, exclude the Board from the operation of section 18 of the Gaming Act, 1845. The transactions with the Board are made legal, but legality is not the same thing as validity. Illegality implies that a transaction is prohibited, whereas invalidity merely means that the law stands aside and refuses to assist either party against the other. The statement in the Tote Investors Ltd. rule book that "all instructions are deemed to be subject to English law and to be within the jurisdiction of the courts" cannot change the law to the point of making a legally unenforceable contract enforceable.

The totalisator company can lose vis-ˆ-vis each individual punter, and is in precisely the same position as any bookmaker who balances his book so as to make it impossible for him to lose in any event.

John Wilmers Q.C. and Brian Galpin for the plaintiff respondents. Section 18 of the Gaming Act, 1845 makes void any contract by way of gaming or wagering, and the Gaming Act, 1892 extends that provision to any payments to agents. The question for decision is: is the contract in the instant case gaming?

The respondents are agents; their duty is to pass on to the tote the defendant's bets. Their activities are governed by section 14 of the Betting, Gaming and Lotteries Act, 1963, which provides that from sponsored pool bets the tote shall deduct a certain percentage, and distribute the whole of the remainder amongst the winning punters. The tote can neither win nor lose; it merely fulfils its statutory obligation. It follows that this is neither gaming nor wagering; it is wholly different from any bookmaking. If either of the parties to an agreement win and cannot lose, the agreement is not a wagering contract: see Carlill v. Carbolic Smoke Ball Co.¹³ The definition of a wagering contract given by Hawkins J. in that case¹³ was approved in Ellesmere v. Wallace¹⁴ and in

11 [1929] A.C. 400.

12 [1929] 2 Ch. 1, 50, C.A.

13 [1892] 2 Q.B. 484, 490.

14 [1929] 2 Ch. 1.

Attorney-General v. Luncheon and Sports Club Ltd.,¹⁵ both of which decisions are binding on this court.

Secondly, placing money on a tote pool is not betting with the tote; in no circumstances is it wagering. The Vagrant Act Amendment Act, 1873, quoted in the headnote to Everett v. Shand,¹⁶ indicates that Parliament thought that wagering and betting were not synonymous. Nor is it wagering between the punters inter se: per Russell L.J. in Ellesmere v. Wallace.¹⁷

Thirdly, gaming only takes place where each player participates in the game. The tote does not take part in any game, nor does it stake any money. It is not gaming by any definition. To constitute gaming each of the players must have a chance of losing as well as winning: see Lockwood v. Cooper.¹⁸

Smith v. Wyles,¹⁹ quoted by the defendant was not a case on the Act of 1845. Ellesmere v. Wallace²⁰ was not cited in that case, and the case does not touch the totalisator. Even if the defendant is right, the game is a lawful game, and the respondents come within the proviso to section 18 of the Act of 1845.

Lastly, on the question of the implied repeal of the provisions of section 18 by the Betting, Gaming and Lotteries Act, 1963, section 14 (1) gives the Board the power and right to carry on a pool betting business on any horse race. Section 14 (2) gives the Board the right to bring an action to prevent the infringement of that right, and section 14 (3) imposes on the Board a statutory duty to deduct a fixed percentage of the takings and distribute the remainder amongst those holding winning tickets. The contract cannot be void as there is a statutory duty to pay out. If the tote must pay out, it must have the right to get in, and insofar as the statutes of 1845 and 1963 are inconsistent, there must be an implied repeal of the earlier Act.

LORD DENNING M.R. The defendant has in the past occasionally had a wager on a horse-race. Today she has been taking part in another game of chance or skill - the game of litigation. I would like to pay a tribute to the skilful and attractive way in which she has played this game. So much so that I would be disposed to decide in her favour if that could properly be done.

The question arises in this way: the defendant entered into betting transactions with a totalisator. She did it on credit. She

15 [1929] A.C. 400.

16 [1931] 2 K.B. 522; 47 T.L.R. 415.

17 [1929] 2 Ch. 1, 50.

18 [1903] 2 K.B. 428; 19 T.L.R. 610, D.C.

19 [1959] 1 Q.B. 164.

20 [1929] 2 Ch. 1.

laid her bets on horses with the plaintiffs. They placed those bets with the Horserace Totalisator Board. If she had won, she would have received her share of the winnings. But she lost, and was presented with the bill. The total sum was £23 13s. 8d. She found herself unable to pay.

The plaintiffs have brought a claim against the defendant in the Mayor's and City of London Court. She pleads the Gaming Act. She says that the contract was void because section 18 of the Gaming Act, 1845, states: "All contracts or agreements, whether by parole or in writing, by way of gaming or wagering shall be null and void." In considering this point, it is essential to know what was the contract. There is no direct evidence because the case was tried on agreed facts; but so far as I can see, it was a contract by the defendant, through the plaintiffs as intermediaries, with the Horserace Totalisator Board. She agreed to put a certain sum of money on a horse. Say it was 10s. The board agreed that they would collect all the moneys which the defendant and other people had put on the race. They would collect those moneys together and would distribute the total sum to the winners, after deducting their expenses. If the defendant's horse won, she got her share of the winnings. If it lost, she had to pay the 10s.

It has been canvassed before us whether there was a contract between groups of "investors," as they are called. The defendant suggested that there might be a contract between the group of persons who put money on the winning horses as against the rest who put money on the losing horses. I do not think that there was any such contract between groups. It was a simple contract with the plaintiffs. They contracted in their own name but really on behalf of the totalisator board.

If I were to interpret section 18 of the Gaming Act, 1845, without resort to law books, I should have thought that the contracts which the defendant made with or through the plaintiffs were contracts of gaming or wagering. The Shorter Oxford Dictionary defines a wager as:

"(1) Something (esp. a sum of money) laid down and hazarded on the issue of an uncertain event. (2) An agreement or contract under which each of the parties promises to give money or its equivalent to the other according to the issue of an uncertain event."

The dictionary defines "gaming" as "gambling." Those definitions fit this transaction. But our law books have given a special

meaning to the words "gaming" and "wagering" in this statute. The classic definition was given in Carlill v. Carbolic Smoke Ball Co.,¹ by Hawkins J., who said:

"According to my view, a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties. It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract."

That definition has been approved many times, particularly in Ellesmere v. Wallace.² I would not myself like to treat it as a rigid definition or interpret it as a statute, but it does bring out this feature: it is essential that each party may either win or lose. If one party can neither win nor lose, then it is not "gaming" or "wagering." This was accepted in the House of Lords in Attorney-General v. Luncheon and Sports Club Ltd.³ The actual decision turned on the special position of a club as a distributing agent. Nevertheless Lord Dunedin said⁴:

"Inasmuch as on the determination of the event in question - to wit, whether a certain horse is first or is placed in a race, as the case may be - the club can neither win nor lose, it follows that there is no bet with the only bookmaker alleged."

Applying this to the present case, it seems clear that the Totalisator Board can neither win nor lose. All they take out of the fund is their expenses. They are merely organisers who receive all the moneys in their hands and then pay out the total to those who have succeeded, less expenses. As they neither win nor lose, it follows that it is not a contract of "wagering." Nor is it a contract by way of "gaming." The cases show the word "gaming" adds nothing to the word "wagering." On the authorities I feel compelled to hold that a contract by a backer who puts money on the totalisator is not a contract by way of gaming or wagering.

1 [1892] 2 Q.B. 484, 490; 8 T.L.R. 680.

2 [1929] 2 Ch. 1; 45 T.L.R. 238, C.A.

3 [1929] A.C. 400; 45 T.L.R. 294, H.L.

4 [1929] A.C. 400, 406.

If I had doubts upon this score, they are resolved by the statutes which have been passed to legalise totalisators. It seems to me that Parliament has proceeded on the assumption that bets made with the totalisator are not contracts by way of gaming or wagering. The statute dates from 1934 but I need only take the latest Betting, Gaming and Lotteries Act, 1963, s. 14 (3). It provides that, where bets are made, the Totalisator Board are to deduct their expenses from "the aggregate amount staked": and shall "cause the whole of the remainder of the amount to be distributed among the persons making such of those bets as are winning bets." So the board are obliged by statute to pay over to the winners the total amount staked, less expenses. That imports that they must be able to collect the amount staked. If they are legally obliged to pay out, they must be legally entitled to collect in. Section 14 (6) states: "Nothing in this Act shall be construed ... as preventing the Totalisator Board from giving credit in any betting transaction." That imports that they can give credit, and consequently that they can recover the sums. There is no point in allowing the Totalisator Board to give credit unless they have a right to recover the sums.

The textbooks proceed on the same basis. Cheshire & Fifoot in their book on Contracts, 6th ed. (1964) at page 263 say: "The contributors to a totalisator are not making bets with each other or with anybody but are contributing to a sweepstake." Furthermore, we have been told that from the year 1949 onwards this company, Tote Investors Ltd., has brought actions in the county courts for sums due to them under contracts such as this. In every one of them the county court judges, after hearing full argument, have decided that the defence of the Gaming Act does not avail in the case of bets with the totalisator. The plaintiffs, having contracted in their own name, can sue on the contract.

Although I have been very impressed by the considerations which the defendant so ably put before us, I have come to the conclusion that this appeal fails.

LORD WILBERFORCE: I agree, and I will add a few words not in any hope of clarifying the law on the subject of gaming and wagering, for that is long past the capability, at any rate, of this court, hut in answer to the elegant and well-reasoned argument which we have heard from the defendant.

I agree entirely with what the Master of the Rolls has said as to what one might call the simple untutored approach to the words in the Gaming Act of 1945 which refer to contracts or agreements by

way of gaming or wagering. If one may reverse the words of Russell L.J. in the Ellesmere case⁵ where he said: "To the unsophisticated racing man (if such there be) I should think that nothing less like a bet can well be imagined," in this case one might say that nothing more like a bet can be imagined by the ordinary man than the transaction between the defendant or her agents, the plaintiffs, and the totalisator. However, as the Master of the Rolls has said, there has been since 1845 a whole series of decisions relating to gaming and wagering and Acts of Parliament have been passed on the strength of those decisions; and we must follow what has been decided.

The defendant puts her case in two ways. First she says that the transaction with which we are concerned was a contract or agreement of wagering with the totalisator itself. Now it is true that this contract or transaction may be described as a transaction of betting. It is so described in fact in the Betting, Gaming and Lotteries Act of 1963 which consolidated some earlier legislation and which in terms refers to transactions with the totalisator as involving bets. It is equally true, as the defendant pointed out, that in a number of contexts, including legal dictionaries, betting is equated with wagering. However, the question we have to answer here is whether betting with the totalisator can be considered and ought to be considered wagering within the meaning of the section in the Act of 1845. Now, without accepting every word and every element in the definition by Hawkins J. in the Carlill case,⁶ that element in the definition, which says that it is essential to a wagering contract that each party may under it either win or lose, does seem to me one which has been supported by authority from which it is impossible that we should depart. One may mention on the way that it has been accepted by Sir William Anson in his book on Contracts and by Cotton L.J. in Thacker v. Hardy⁷ in 1878; in more recent times it has been quite firmly adopted and made part of the law binding on us by Ellesmere v. Wallace,⁸ and also in the House of Lords case of Attorney-General v. Luncheon and Sports Club Ltd.⁹ My Lord referred to a passage from Lord Dunedin's speech in that case and I would just add to it what was also said by Lord Buckmaster¹⁰:

"A bet (sc. a wager) is something staked to be lost or won on the result of a doubtful issue, but no doubtful issue affects

5 [1929] 2 Ch. 1, 45.

6 [1892] 2 Q.B. 484, 491.

7 (1878) 4 Q.B.D. 685, C.A.

8 [1929] 2 Ch. 1.

9 [1929] A.C. 400.

10 Ibid. 405.

the respondents - they neither win nor lose on any such chance."

- words which clearly accept the conception of a bilateral chance under which both sides must be capable of losing or winning.

Now if that is the case, it must follow that the contracts in this case are not contracts of wagering because the totalisator does not run any risk either of winning or of losing. I was at one time attracted by the conception that it might be possible to isolate the individual transaction between a single "investor" on the one hand and the totalisator on the other hand and to say that under that transaction the totalisator might win or lose. But I think that that is no longer possible since the Ellesmere case¹¹ where it was accepted by Clauson J. in the Chancery Division but, as I understand the case, decisively rejected by the Court of Appeal when the case got there. So I think we have to regard the position as being that the totalisator, as the result of transactions with it, is incapable of either winning or losing and therefore not engaging in a wagering transaction.

Then the defendant puts her case in an alternative way by suggesting that there may be a wager between an individual "investor" together with those who support the same horse as he or she supports, on the one hand, and other persons who support other horses on the other. That conception of a group contract was analysed by Russell L.J. in the Ellesmere case¹² and he gave some strong reasons for holding that it is difficult to work out an intelligible conception in that way. It is possible, though difficult, to construct a contract by which one punter and those of a like mind form one group and those of the other opinion form another group, the totalisator acting merely as an agent of the two groups. I think it is just possible to do that but not without considerable difficulty. But I do not think such a contract is consistent with what has occurred here. I agree with the description which the Master of the Rolls has given of the nature of the contract. It seems to me that on the facts and on the nature of the operation of the totalisator, as we find it in the legislation, no other view is possible of the arrangement or transaction than one taking place directly between the individual "investor" on the one hand and the totalisator on the other. Therefore, I do not think that the defendant succeeds in making good her alternative line of argument.

11 [1929] 2 Ch. 1.

12 Ibid. 50.

I would only add one other word with reference to an argument submitted by the respondent and that is that section 18 of the Gaming Act, 1845, has been in some way impliedly repealed by section 14, as it now is, of the Act of 1963. That, it seems to me, is a very difficult conception. It may be that there are provisions in that section which are inconsistent with, and therefore pro tanto supersede, the Act of 1845. But I do not think that the argument succeeds in showing that the Act of 1963 or, for that matter, any other of the recent Acts have so completely removed the effect of the Act of 1845 as by that alone to make it possible for the totalisator (if it were otherwise impossible) to bring proceedings against an "investor."

For the reasons given by the Master of the Rolls and those which I ventured to add, I too would dismiss the appeal.

LORD PEARSON: I agree. I am not expressing any view as to what opinion one might have formed as to the true construction of the words "contracts or agreements by way of gaming or wagering" in section 18 if there had been no previously decided cases on the subject, but it seems to me quite clear that the decided cases to which reference has been made do establish beyond any doubt what the proper interpretation of those words is, at any rate in application to a case of this kind. A contract of wagering might have been regarded as one either involving a bilateral chance or a unilateral chance. It has been firmly established by the decisions that only a contract involving a bilateral chance is a contract by way of gaming or wagering within the meaning of section 18. By "a contract involving a bilateral chance," I mean that there are two parties to the contract, and each party may win and each party may lose, according to how the uncertain issue is eventually determined. In the present case the only contract, as I understand it, is a contract made by the so-called investor through the plaintiffs with the Totalisator Board. It is a contract under which the Totalisator Board only undertakes to carry out the organisation, collection and distribution, and the Totalisator Board does not stand to win or to lose and therefore there is no bilateral chance involved in this contract, and for that reason it does not come within section 18.

I need not seek to repeat what the Master of the Rolls has said on the point that this interpretation of section 18 has been regarded

and treated as correct in a number of subsequent decided cases and also it seems to have formed the basis and assumption on which the legislature has proceeded in making a series of subsequent Acts extending from 1918 to 1963.

I agree that the appeal be dismissed.

Solicitors: Pettit & Westlake.