Hooper v Primeau is an intriguing Québec case, one brimming with contradictory allegations of fraud, infidelity, and sham transactions. This bulletin deals with the legal consequences flowing from a singularly unique fact found by the trial judge – namely that two experienced businessmen bet $517,000 on a best of three game of Rock, Paper, Scissors. After the match, the winner had the loser sign a notarized recognition of debt contract that was secured by a hypothec (mortgage) over the loser’s house. The winner subsequently attempted to enforce the gambling debt and hypothec, leading to litigation.
At issue was whether the gambling contract was valid and enforceable. Under Québec’s Civil Code, these are two separate issues and will be addressed in turn. Validity and enforceability for private-law purposes are also distinct from whether a gambling contract complies with Canada’s Criminal Code provisions on gambling (although this was not a criminal prosecution and, understandably, the Criminal Code was not raised by either side in this case).
Beginning with validity, gambling contracts in Québec are valid only if they satisfy either branch of a two-branch test:
- the gambling contract is specifically authorized by a law or regulation (e.g., gambling via state-run lottery schemes); or
- the gambling contract fulfills the following three requirements: (i) the wager relates to the outcome of a lawful activity, (ii) the outcome of that activity depends solely on the skill or physical exertion of the participants, and (iii) the amount wagered is not immoderate given the circumstances.
For obvious reasons, the statutory authorization branch was not applicable here. As a result, the validity of the gambling contract – and the $517,000 debt to which it gave rise – turned on whether the Rock-Paper-Scissors match satisfied the second branch of the validity test.
On the second branch, two of the three requirements were disputed. While no one questioned the lawfulness of playing Rock-Paper-Scissors, Mr. Hooper argued that Rock-Paper-Scissors was a game of pure chance, rather than an activity of skill or physical exertion. The court disagreed, ruling that Rock-Paper-Scissors involves skill in various ways, such as rapid execution of the chosen move, observation of an opponent’s move, and strategic choice of move over the course of the three-game match. Thus, the first two requirements were met.
However, the judge also found that the amount of the bet was immoderate in the circumstances, because Mr. Hooper was in a financially-precarious position and could not afford to engage in bets on the order of more than $500,000. Thus, the gambling contract failed to fulfill the third requirement and was therefore invalid.
Turning from validity to enforceability, the trial judge ruled that even if the contract had been valid, it would have been unenforceable. In Québec, gambling contracts that are not specifically authorized by a law or regulation (again, like state-run lotteries) cannot be enforced by legal process, even if valid. So the winner can’t force the loser to pay, but neither can the loser force the winner to return any amounts voluntarily paid. Here, the gambling contract was not authorized by law, and was thus unenforceable.
Mr. Primeau, the winner of the bet, tried to argue that because the gambling debt had been recognized in a subsequent contract (the same one that created the hypothec on the loser’s house), this subsequent contract should be enforceable even if the original gambling debt was not. This argument was swiftly rejected on the basis that one cannot do indirectly that which is forbidden directly. Thus, signing a second contract cannot be used to circumvent the unenforceability of an otherwise unenforceable gambling debt. In addition, with regard to the hypothec, by similar logic, because the gambling debt was invalid and unenforceable, the hypothec on Mr. Hooper’s house was also invalid.
LESSONS FOR BUSINESSES
Hooper v Primeau contains a number of important lessons for business owners whose operations could be characterized as involving gambling contracts subject to Québec civil law, including online gaming sites and video game developers whose games may involve wagering:
- First, it serves as a reminder that even if a business is not prohibited under the gambling provisions of the Criminal Code and is consistent with applicable provincial regulatory regimes, gambling contracts may not be enforceable as a matter of private law. This is probably the most important lesson: businesses should not assume that regulatory compliance alone will be enough to guarantee civil enforcement.
- Second, this is one of the few non-lottery cases to consider the validity and enforceability of gambling contracts under Québec law. It contains helpful guidance on the meaning of a game of skill or physical exertion, plus an (admittedly extreme) example of whether a wager is immoderate in the circumstances. Extrapolating from this case, an argument can be made that wagering on the outcome of online computer gaming could qualify as a game of skill (and perhaps even physical exertion, given that perception and reflexes were considered relevant to the analysis).
- Third, it confirms that an invalid or unenforceable gambling transaction cannot be rehabilitated by incorporating it into a subsequent contract or transaction that is otherwise legal. If an activity involves a gambling contract under Québec law that results in a debt, the parties will not have the benefit of the courts or other remedies available to creditors to enforce the contract. Activities should be both valid and (de facto) enforceable from their inception, since subsequent activity will be unable to change the initial status of the contract. Similar comments would apply to measures taken to secure gambling debts.
As always, businesses should be aware that gambling, even where legal, is a heavily-regulated activity, such that legal compliance strategies must address both private law (e.g., Québec Civil Code and its common-law provincial equivalents) and public law (e.g., Criminal Code, Gaming Control Act, etc) issues.