Thursday, June 29, 2006

Does the National Gambling Act present the opportunity to gambling parties to enforce their rights against third parties impacting upon the betting transaction?
2nd Version
By Timothy Jones
Prior to 2004, all betting transactions resulted in unenforceable rights and obligations for the betting parties concerned. The National Gambling Act 7 of 2004, which legitimises the contractual relationship created by parties entering into a gambling transaction, may encourage such parties to institute actions against third parties whom they perceive to have detrimentally impacted their chances of winning. Such a situation may be illustrated by the following hypothetical scenario: a punter, after careful analyses of a particular horses form places a bet on the formidable favourite in the race. A rank outsider in the particular race succeeds in beating the firm favourite by a short head margin, causing the punter to lose his wager. Subsequent to the horse race in question, a drug test is conducted by the National Horse Racing Authority of South Africa and the results reveal that the performance of the rank outsider was unnaturally enhanced by a prohibited substance, which by the trainer’s own admission was administered to the horse under his auspices.  This article attempts to answer the question whether the punter may have a valid claim against the trainer, assuming that the other facta probanda which are required to be proved in the individual case in order to succeed with a delictual claim are present.
The punter in this set of facts can’t claim the loss of his potential winnings, as the expectation of pecuniary gain does not constitute part of his patrimony for which the law provides compensation. In order to assess the quantum of any delictual claim, one must according to the “sum-formula approach” assess the negative difference between the person’s current patrimonial position and the hypothetical position had the event not taken place. In simple terms the question to be asked is “what would the Plaintiffs financial status be if the actions of the trainer in administering the horse with steroids had hypothetically not occurred?” This sum-formula approach would presumably allow the Plaintiff in the current set of facts to claim the winnings which he hypothetically would/could have won had this act not occurred. The Appellate division has rejected the sum-formula approach in favour of the “concrete concept approach” whereby damages are assessed according to the difference between the patrimonial position of the prejudiced party prior to the wrongful act and the position thereafter. The courts, by rejecting the “sum-formula approach” in favour of the “concrete concept approach”, have expressed that they do not take any hypothetical situations into account in the assessment of damages and therefore the punter can at best claim the loss of his stake, and not the loss of his prospective winnings.
In terms of English law as described in Halsbury’s Laws of England, a wagering contract is a contract between two parties professing to hold opposite views regarding a future uncertain event, where they agree that, dependant on the outcome, one party (the bookmaker) shall  hand over a sum of money or the other party (the punter) shall loss his stake. It is the obligations in terms of this bipartite agreement that the National Gambling Act seeks to protect. It is not the rights which a party may have against remote third parties that the National Gambling Act attempts to regulate. The 1993 Commission of Inquiry into Lotteries, Sports Pools, Fund-raising activities and certain matters relating to gambling, prior to the enactment of the National Gambling Act expressed, that the intention of the proposed legislation was to regulate the relationship between the parties involved in gambling transactions. The commission stated “It is thus naïve to think that the common law rule against the enforceability of gambling transactions actually operates to discourage gambling, and the retention of the rule in this day and age seems futile”. The intention in this regard is not to protect all the rights of a party who knowingly enters into a transaction, which by its very definition involves a great deal of risk and uncertainty. The object of the act was therefore never to reduce the risk of a party entering into a betting transaction but rather to ensure that the parties entering into an inherently risky transaction do so on equal footing, so that the economically weaker party to the transaction may enforce his rights against the economically stronger party. The commission advocated that “the law be altered by statute in order to render enforceable in a court of law any contract arising out of gambling….” Thus, it becomes clear that the purpose of the new act is to ensure that the bilateral contract between the parties entering into the gambling transaction becomes enforceable. The new act does not provide the parties a remedy against other third parties that are unaware of the contract entered into as between the gambling parties. 
The punter in this set of facts will not succeed in a claim for loss of his prospective winnings as a result of the appellate division’s rejection of the “sum-formula approach” in favour of the “concrete-concept approach”. The punter is only able to claim damages in the quantum that his patrimonial position was actually diminished and not the hypothetical position assuming he had actually won the bet. The courts will have to decide whether the punter will be allowed to succeed in a claim for loss of his stake invested the race. According to various authorities, the expectation of inheritance does not form part of a person’s patrimony, the same must be said of the expectation of accruing winnings in terms of a bet. It is both a legal and commercial absurdity that a punter may have a claim against parties that adversely impact his chances of winning a bet, when the very nature and appeal of gambling is based on risk and uncertainty. Taking policy considerations into account and the flood of frivolous litigation which the courts will be inundated with, it is unlikely that a claim of this nature will be allowed to succeed.