AFSA is seeking feedback on draft guidance concerning the offence of gambling or hazardous speculations prior to bankruptcy, under s 271 of the Bankruptcy Act: Practice Guidance (IGPG) on Gambling Offences.
Some background might assist.
The offence refers to pre-bankruptcy conduct that materially contributed to, or increased the extent of, the bankrupt’s insolvency, or lost any of his or her property, by gambling or by speculations that, having regard to the bankrupt’s financial position at the time and any other material circumstance, were rash and hazardous. The gambling or speculations are not to be connected with a trade or business. The penalty is imprisonment for a period not exceeding one year.
History
Gambling has some long history connected with the law of bankruptcy. As one example, 18th century law provided that
any debtor who lost £15 in one day in a card game, dice, tennis, billiards, shovel-board or cock-fighting
lost the benefit of new legislation in favour of debtors.[1]
Australian colonial law continued with that connection. In one case,[2] involving a man running a business, the Court referred to serious losses carrying
“lamentable disaster to a man’s creditors who in their turn may be forced to become bankrupt themselves”.
It is fraudulent to use money which really belongs to creditors by betting on
“such a ‘glorious uncertainty’ as a horse race … this so-called ‘Sport of Kings’ must not be allowed to become a pastime for needy persons engaged in commercial pursuits. Trusting to luck is a poor maxim for commercial enterprise”.
A four-month prison term was imposed.
A bankrupt businessman lost his appeal against his sentence in a New Zealand case. His “gambling was extraordinary” with VIP status at the casinos at Auckland, Christchurch and Adelaide, with individual losses exceeding NZ$200,000. He also had a “heavy involvement in horse racing” and shortly before his bankruptcy, “he lost a watch valued at NZ$27,000 in a bet with a friend”.
“The likely success of the argument that his gambling did not materially increase the extent of the insolvency must, in the light of these facts, be put at long odds”.[3]
Should there be a connection with bankruptcy at all?
The draft practice guidance factors in the many legal, social and health issues that can apply, and in the context of trustees’ obligations to refer offences to AFSA and AFSA’s decision to refer matters for prosecution to the CDPP.
While AFSA is seeking guidance on existing law, there is much to consider as to whether or how to deal with gambling activity and losses in the context of bankruptcy.
A 2007 article[4] is as relevant now as it was then, examining how gambling and gambling debts are treated in bankruptcy; the extent to which gambling is a cause of bankruptcy; whether gambling debts should be treated differently from other debts; the attempts to deter and/or punish gambling through the use of criminal sanctions; whether gamblers should be denied, or have delayed, their discharge; and whether gambling transactions prior to bankruptcy are, and should be, avoidable by the trustee in bankruptcy.
It is also hard to disconnect the claimed offence of gambling with governments’ financial and other support for the gambling industry, in particular in NSW. Estimates suggest that Australians lost approximately $25 billion on legal forms of gambling in 2018–19, representing the largest per capita losses in the world.[7]
Then there is the reality of the medical classification of what is termed “disordered gambling” [5] being
“associated with marked functional impairment including other mental health problems, relationship problems, bankruptcy, suicidality and criminality”.[6]
Despite this, gambling today is pervasive due to the variety of opportunities including at pubs and the increasing use of technology such as online applications on mobile phones. And opportunities for rash or hazardous speculations are readily broadcast.
Figures
There are limited current figures from AFSA but academia has produced more detail, that
- between 1997 and 2009 there was a 215% increase in the proportion of non-business-related bankruptcies caused by gambling or speculation;
- in 1997, gambling or speculation caused 1.30% of non-business-related bankruptcies, compared to 4.10% in 2009.[8]
The cost
As to reporting of gambling offences by trustees, see my The contributions of bankruptcy trustees to AFSA’s regulation of criminal conduct – Murrays Legal of 3 August 2021. I refer to the broader context of the fact that bankruptcy trustees, and liquidators, and creditors in insolvencies, contribute much to the government, in effect for free. The trustees and the creditors pay.
Nevertheless, AFSA says that trustees have a statutory duty to refer any evidence of an offence to the Inspector General in Bankruptcy (or to relevant law enforcement authorities): s 19(1)(h)(i). The AFSA website has a webform where practitioners can submit a referral. Practitioners are expected to request evidence relating to the person’s gambling, and treatment if available, and include it in the referral to AFSA.
“There is no sufficiency of evidence test for practitioners; practitioners are legally obliged to refer any evidence of an offence under the Act to AFSA for investigation”.
That could call for some fine assessment of the legal niceties of the offence, and its proof, as usefully discussed in R v Tu Van Be Nguyen[9]; and beyond that AFSA suggests information on the medical or other treatment available to the bankrupt.
It is then up to the Inspector-General to decide whether to refer it to the CDPP.
There are limited AFSA statistics on the number or proportion of gambling offences reported by trustees, and those referred for prosecution. Charges under the Bankruptcy Act are generally in the top five of referrals to the DPP; and AFSA is in the top five as referrer. These no doubt significantly meet a KPI of under the Bankruptcy Act. Quite impressive for a small body of law. The focus on criminality in bankruptcy remains, in some quarters.
Submissions to ARITA are due by 12 September 2025.
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[1] The Journey from Ear-Cropping and Capital Punishment to the Bankruptcy Legislation Amendment Bill 1995 by Gino Dal Pont and Lynden Griggs.
[2] Re Godfrey (No 2) (1930) 2 ABC 156.
[3] R v Raymond [2001] NZCA 242 at [23].
[4] Duns, John, “Other People’s Money: Gambling and Bankruptcy” (2007) 31(1) Melbourne University Law Review 87.
[5] Prevention and Treatment of Gambling-Related Harm, August 2024, PS #45, Position Statement of the Royal Australian and New Zealand College of Psychiatrists (RANZCP) and the Royal Australasian College of Physicians (RACP). It refers to the International Classification of Diseases 11th Revision (ICD-11) and the Diagnostic and Statistical Manual of Mental Disorders Fifth Edition (DSM-5), both of which outline and describe the clinical condition ‘gambling disorder’, under the broad category of addictive behaviours and substance and addictive disorders.[2, 3] The ICD-11 also includes ‘hazardous gambling or betting’, a term which recognises the risk of harm caused by gambling when the threshold of ‘disorder’ is not met.
[6] Gambling disorder in the UK: key research priorities and the urgent need for independent research funding (2022) 9(4) Lancet Psychiatry 321-329, H Bowden-Jones et al.
[7] Australian Institute of Health and Welfare, Gambling in Australia. 2021.
[8] Personal Insolvency in Australia: An Increasingly Middle-Class Phenomenon, Ian Ramsay and Cameron Sim, (2010) 38(2) Federal Law Review 283.
[9] [1996] ACTSC 86
