07/25/2012 03:33 EDT | Updated 09/24/2012 05:12 EDT

B.C. judge orders 'illegal loan' re-paid

In an unusual decision, a B.C. Supreme Court judge has ordered a Vancouver man to pay back a loan used to finance an illegal gambling operation.

The case involves a loan set at an annual interest rate of 60 per cent - just below the amount defined as criminal.

Thomas Lai borrowed $50,000 from Philip Tsoi at a rate of 5 per cent interest a month. Lai paid $2,500 in interest a month for 16 months — $40,000 in total — but only $4,000 towards the principal.

Tsoi sued him when he had trouble coming up with more payments.

In an unusual move, Lai admitted to the court that he was using the loan to finance an illegal mah-jong gambling house. He was also lending the money out at even higher rates of interest.

That put the judge in a quandary, because the court can't enforce contracts made in pursuit of crime.

But the judge ruled that there were exceptions.

“[Tsoi] submits that at worst he may have been blinded by his own greed, but that he had no intent to violate the law,” Justice Gregory Bowden wrote in his ruling.

And secondly, letting Lai off the hook for a loan on terms he agreed to would give him a windfall the court decided he didn't deserve.

The judge ordered the principal paid back, but without any further interest.