Tort liability of a horse racing winning strategy dealer
Repeatedly solicited by employees of a horse racing winning strategy dealer like "You can win a bet", "There's a surefire race" and so on, a consumer paid money to the dealer 100 times, about 45,000,000 yen in total. Later, the consumer claimed damages against the company for employer's liability and against the CEO for joint tort liability on the ground that solicitation and charging for the information by the employees constituted torts.
The court construed that the contract for selling the information constituted a fraud and ordered the company, etc. to pay damages about 49,000,000 yen based the company's torts, and did not adopt comparative negligence considering maliciousness of the company's conducts. (Final Judgment by the Yokohama District Court on August 27, 2015)
- Page 67 of Hanrei Jiho No.2270
Summary of the case
- X (Consumer)
- Y1 (horse racing winning strategy dealer)
- Y2 (CEO of Y1)
- Parties concerned:
- A & B (Y1's employee)
X is a man then in his 50s, born in 1952. In early December 2010, A began to solicit X repeatedly, saying like "If you pay a fee for horse racing tips, I will tell you which is the right horse" and so on. X had lost money at horse races many times, and thought that X could win a bet if X paid the fee. X believed A's words and transferred money to a bank account specified by A several times. Later, B said to X "I won't let A serve you anymore. I have more surefire information". Then, X bought betting slips based on B's advice, but none of them won. Every time X lost, B solicited X to upgrade the membership, and repeatedly charged X for information, etc., saying "Next time I will spot a winning horse", "In order to get your money back from the information source, you need to prepare 2,000,000 yen to cover legal fees" and so on. X transferred money to Y1's and Y2's accounts 100 times in total, which amounted to about 45,000,000 yen. X sometimes asked for a refund, but B never accepted such a request, saying "Next time it will be successful".
One year and a half after X's initial payment, X filed a suit against Y1 and Y2 for torts, claiming the amount of X's total payment to the company, damages for pain and suffering (2,000,000 yen) and legal fees (about 4,000,000 yen), which amounted to about 51,000,000 yen. Soon after X's attorney froze Y1's and Y2's accounts, Y2 sent messages to X via email such as "Please lift the freeze on my account. If you do, I will pay you 25,000,000 yen" and "If I get arrested, no money will be refunded".
Solicitation and charging of horse racing information fee, etc. by A and B constitute torts and A and B shall be liable for damages inflicted on X, because A and B demanded unlawful and hefty charges for horse racing information, etc. although the information was neither reliable nor useful, and made X send a huge amount of money within a year and a half (100 times, about 45,000,000 yen in total), telling various lies. It is construed that Y2 had committed a series of frauds together with A and B in an organized and planned way on the ground that Y2 had run the horse racing information dealing company with A and B and that the payee's account was held by Y2. Therefore, Y2 shall be liable for damages inflicted on X based on corporate tort liability. Y1 also shall be liable for damages inflicted on X under Article 350 of the Companies Act (Liability for Damages Caused by Acts of Directors) and Article 715 (1) of the Civil Code (Liability of Employers).
With regard to comparative negligence, Y2, etc. alleged "Purchase of all the betting slips was finally decided by X. So we shall never be held liable for torts", but the court negated their allegations. The court construed that it couldn't be said that comparative negligence was reasonable from a viewpoint of fairness among parties concerned considering maliciousness of torts by Y2, etc., although X had lost his composure when paying charges for horse racing information, etc., which amounted to about 45,000,000 yen.
The court completely affirmed X's claim for legal fees, but negated X's claim for damages for pain and suffering because "It is construed that X's mortal damage will be relieved if X's financial damage will be redressed unless the circumstances are exceptional".
In the above case, the consumer was financially damaged by the fraudulent company which pretended to be a "horse race winning strategy dealer", and the consumer claimed damages against the company and the court affirmed the claim. "A horse racing winning strategy dealer" (gambling information fraud) is one of the fraudulent businesses: they propose an untrue deal to consumers, persuading as if consumers can surely make profits from the information in order to defraud consumers of money. Similar damages have been spread, and numerous civil trials have been held over these problems. Reference precedents below include judgments over cases related to betting strategy (e.g. loto, lottery, pachinko). According to the judicial precedents related to fraudulent dealers who solicited consumers with false information and took a huge sum of money from consumers, most dealers were ordered to pay damages for torts. Judicial precedents related to pachinko winning strategy dealers include a decision of annulling a contract based on consumer's mistake (Reference precedent 4) and a decision of annulling a contract based on the Consumer Contract Act (Reference precedent 5).
Whether or not comparative negligence should be applied is a debatable issue in deciding a tort related case. In the above judgment, comparative negligence was not adopted on the ground that it could not be said that there had been enough circumstances to justify comparative negligence from a viewpoint of impartiality among parties concerned considering malicious intent of Y1 and Y2, although the consumer had been careless. In the reference precedents 1 and 2 related to lottery winning strategy, however, 30% negligence was apportioned to the plaintiff under the rule of comparative negligence. In the reference precedent 1, the reason was stated as followed: "It is reasonable to apportion 30% negligence to the plaintiff on the ground that the plaintiff was liable for trying to make profits by unjustly getting prior information on a lottery, which was negligent, although it is unreasonable to say that the plaintiff was negligent in believing the false information and sending money because the dealer was so artful in making the plaintiff send money many times when the plaintiff was confused, while there are many questionable points in the background of cheating the plaintiff into sending money".
Decision over comparative negligence in the above case appears to be reasonable. It is the way of fraudulent dealers to presume on consumers' fault and desire. Given the high illegality and maliciousness of the dealer, comparative negligence should not be adopted although the victim was at fault to some extent. It is problematic to adopt comparative negligence putting some of the blame on a victimized consumer, because this stance might lead to admitting these kinds of intentional fraudulent transactions in a way.
- Judgment by the Tokyo District Court on February 22, 2016 (Westlaw Japan)
- Judgment by the Tokyo District Court on May 11, 2015 (LEX/DB, Westlaw Japan)
- Judgment by the Tokyo High Court on February 20, 2014
- Judgment by the Tokyo District Court on January 12, 2012
- Judgment by the Tokyo District Court on May 28, 2011