Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
Consideration and gaming contracts.
Facts
The plaintiffs were a firm of solicitors at which Cass was a partner. Cass was a compulsive gambler and dishonestly obtained money from the firm’s bank account to gamble at the defendant’s club. Out of £229,908 gambled he lost £154,695. Cass used the money to buy gambling chips from the club which were used to place bets and could be exchanged for winnings but were worthless in themselves and remained the property of the club. When Cass was convicted of theft the solicitors sought to recover the money from the club.
Issues
Under s.18 Gambling Act 1945 gaming contracts were rendered void. The plaintiffs argued that as a result there was no valuable consideration and the thief could not pass good title to the stolen money under the equitable tracing rules, even if the recipient was an innocent party. The club argued that it had given consideration for the chips and that they were an innocent recipient. They also argued that, as the money had been mixed with other money, it could not be traced.
Decision/Outcome
Their Lordships found for the plaintiffs. The gaming contract was void under the 1945 Act and the chips were only a mechanism for facilitating gambling; the gambler did not buy them. Therefore, the club had not given valuable consideration. Under equitable tracing rules, an innocent person receiving stolen money only had to repay the owner if they had not given consideration for it. However, as it would have been unjust to require the defendants to repay money in reliance of which they had changed their position, they only had to repay the net amount lost by Cass, which was £154,695.
Updated 19 March 2026
This article remains broadly accurate as a summary of the decision in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 and the legal principles it established, particularly regarding unjust enrichment, the defence of change of position, and the tracing of stolen funds. However, readers should note two important points of current law.
First, the article refers to s.18 of the Gaming Act 1845 (not the “Gambling Act 1945” as stated — this appears to be a typographical error in the original article that could cause confusion). The Gaming Act 1845 was the statute in force at the time of the decision and rendered gaming contracts void.
Second, and more significantly, the Gaming Act 1845 has since been repealed and replaced by the Gambling Act 2005. Under s.335 of the Gambling Act 2005, gaming contracts are no longer automatically void; they are now enforceable. This changes the legal landscape materially: the specific statutory basis on which the House of Lords held that the club had not given valuable consideration would not apply in the same way to a transaction governed by the 2005 Act. The broader principles established by the case regarding unjust enrichment and the change of position defence remain good law and continue to be applied by the courts, but the reasoning tied to the voidness of gaming contracts is specific to the pre-2005 legislative framework.
Students should therefore treat this case primarily as authority for the development of unjust enrichment as an independent cause of action in English law and the recognition of the change of position defence, rather than as a current statement of the law on gaming contracts.
