Plaintiff v First Defendant

Supreme Court of Victoria|2007-12-13|Before: HARPER J

PRACTICE AND PROCEDURE - Application to strike out statement of claim in whole or in part - Negligence - Economic loss - Alleged pathological gambler - Whether a duty of care owed by casino to patron - Unconscionable conduct - Relevance of casino's alleged knowledge of patron's gambling problem - Allegations of inducement and exploitation of patron's vulnerability.

1 The plaintiff, Harry Kakavas, claims that he has lost money - some $30,000,000 - through gambling at a casino operated in Melbourne by the first defendant, Crown Ltd. He claims that this loss was caused by Crown's unconscionable conduct towards him. He also alleges a cause of action in negligence, another for misleading and deceptive conduct and yet another in restitution. Breach of statutory duty was pleaded, but later abandoned. Finally, the plaintiff alleges that the second defendant, John Williams, "aided, abetted, counselled or procured" Crown to engage in the misleading and deceptive conduct of which (according to Mr Kakavas) the company is guilty.

2 The defendants contend that, as these causes of action are presently pleaded, none can be made out. Accordingly, on 5 June 2007, they issued a summons by which they seek orders that the proceeding be permanently stayed and that judgment be entered for them. In the alternative, they seek an order that the amended statement of claim, which was filed on 11 May this year, be struck out. If the Court is not prepared to accede to either of these alternatives, then the defendants seek - in the further alternative - orders that certain specified portions of the amended statement of claim be struck out.

3 The amended statement of claim with which I am concerned opens with an allegation that Crown is the operator - pursuant to a licence granted under Part 2 of the Casino Control Act 1991 ("the CCA") - of the Crown Casino in Melbourne ("the Casino").[1] Mr Williams is and at all material times was its chief operating officer. As such he was also an officer of the first defendant within the meaning of that expression in s.9 of the Corporations Act 2001.[2]

4 The amended statement of claim further alleges that the plaintiff commenced gambling at the Casino in about 1994.[3] Later in that, and in the following, year he had a number of meetings with employees of Crown.[4] During those meetings, the plaintiff disclosed to the employees that he had "an uncontrollable and compulsive urge to gamble and that unless he was prevented from so doing, he would continue to gamble at the casino in a reckless manner."[5]

5 Particulars of the disclosures are given. They include allegations that the plaintiff met on numerous occasions with a Mr William Horman, the first defendant's General Manager, Community Affairs. At those meetings, Mr Horman and the plaintiff discussed the plaintiff's gambling history not only at the Casino in Melbourne but also at a casino on the Gold Coast. An element of this was what the plaintiff described as his "uncontrollable and compulsive urge to gamble".[6] He also told Mr Horman about his involvement in the dishonest acquisition of a large sum of money which he subsequently used for gaming at the Casino. At one of these meetings, the plaintiff (as he alleges) asked Mr Horman "to help him obtain exclusion orders with respect to other Australian casinos."[7]

6 Many other relevant meetings were, according to the amended statement of claim, held during this period. Mr Williams attended as Crown's representative. These meetings covered the same ground as those had with Mr Horman. In addition, however, Mr Williams discussed with the plaintiff the assistance which Crown, through Mr Horman, was providing to him. It took the form of advice and counselling.[8]

7 By s.72 of the CCA, a casino operator may, on the voluntary application of a person, give a written order to that person prohibiting him or her from entering, or remaining in, a casino. According to the amended statement of claim,[9] the plaintiff - acting on Crown's advice - made such an application or about 8 November 1995. The application was granted, and a written order was then completed in accordance with the legislation.[10] Its effect was that the plaintiff was prohibited not only from entering the Casino, but also from remaining in it should he, despite the prohibition, enter that forbidden territory.

8 The exclusion order which by this means came into existence was (as is pleaded by the amended statement of claim)[11] revoked by Crown on 19 June 1998. This revocation was, however, immediately succeeded by something which, as the plaintiff sees it, was even more restrictive than the exclusion order itself. On that day, Crown delivered by hand to the plaintiff a letter telling him that Crown had withdrawn his licence to enter into or remain in not simply the Casino, but also any part of the Crown complex of which the Casino was merely a constitute entity. The withdrawal had immediate effect, and was of indefinite duration.[12]

9 The plaintiff contends that, to the extent that the 19 June letter prohibited his entry into or remaining upon the Casino, it amounted to an exclusion order within the meaning of s.72 of the Act.[13] According to this argument, it was and is as much an exclusion order as that issued at the plaintiff's instigation in November 1995.

10 In the years that followed, the plaintiff's ability to gain access to Australian casinos was further limited. On 6 August 2000, pursuant to a voluntary application made by him, the plaintiff was excluded from both Jupiter's Casino on the Gold Coast and the Treasury Casino in Brisbane. In May the following year, the Burswood Casino in Perth was added to the list. It in turn was followed on 7 September 2004 by the Sky City Casino in Adelaide.[14]

11 Each of these exclusion orders was initiated by the plaintiff. By contrast, in or about September 2000, and acting pursuant to s.82 of the Casino Control Act 1992 (NSW), a delegate of the New South Wales Commissioner of Police issued an order which excluded the plaintiff from entering on or remaining in the Star City Casino in Sydney.[15]

12 At the time that the Sydney exclusion order was issued, it could not under the then Victorian legislation be given effect in this State. That situation changed, however, with the enactment of the Gaming Legislation (Amendment) Act 2002. Section 12 of the amending Act inserted a new s.76(4) into the CCA. The new provision requires the Chief Commissioner of Police to inform each casino operator that an interstate exclusion order ("IEO") has been made; and to do so as soon as she becomes aware of the fact of its making.

13 The CCA was further amended by the insertion, pursuant to s.12 of the amending Act, of a new sub-s.(2) to s.77. By that provision, any person who has been excluded from a casino by order of a Chief Commissioner of Police of another State or Territory will automatically be excluded from a Victorian casino.

14 For the purposes of making good, or at least strengthening, one or more of the causes of action upon which he relies, the plaintiff alleges that from July 2004 or thereabouts he has suffered from a special disability. It is a psychiatric condition known as "pathological gambling". It is, according to the amended statement of claim, "characterised by a continuous or periodic impairment of his ability to control the frequency with which he gambled and the amount of money that he wagered."[16]

15 Each defendant knew of the plaintiff's special disability.[17] Indeed, each was aware not only of the existence of that disability, but also of all the facts alleged in paragraphs 14, 15 and 16 of the amended statement of claim. These included allegations that "amongst the persons gambling at the Casino it was likely that some of them would or might suffer from" it, and that the plaintiff displayed its symptoms. During the course of 2004, the plaintiff had "engaged in reckless and excessive gambling in Las Vegas". This had resulted in his "losing enormous amounts of money".[18] It was also an indication that he "was or may have been suffering from pathological gambling"[19], and "would be vulnerable to approaches by the Casino to recommence gambling at the Casino and would be easily exploited into recommencing gambling at the Casino."[20] This gambling would be extravagant, would continue over extended periods,[21] and would probably result in enormous losses.[22]

16 Despite, or perhaps because of, their knowledge, the defendants in late 2004 concocted a scheme to lure the plaintiff back to the Casino. If he was going to indulge in large-scale, reckless gambling, better his losses be incurred in Melbourne's Crown Casino than benefit the industry in Las Vegas.[23] Instructions were accordingly given to Crown employees "to do whatever was necessary to induce the plaintiff to return and recommence gambling."[24] There followed approaches from Mr Williams and other employees who offered the plaintiff inducements, such as permission to bet up to $3000,000 per hand, and a 20% rebate on losses.[25]

17 According to the plaintiff, that was not all. Particulars are given to the effect that a Crown employee, Richard Doggert, suggested that "a letter from a doctor giving you the all clear to gamble" be obtained. The plaintiff made the attempt, but was told by his psychologist that "he was not prepared to provide such a letter without first conducting extensive consultations with the plaintiff" and being satisfied with the results. When Mr Doggert was told of this, he said, in effect: "Just get me a letter from any psychologist. Try someone on the Gold Coast". Mr Doggert allegedly added that he would draft the plaintiff's application to Crown to recommence gambling. The plaintiff says that, consistently with this, at the Coolangatta Airport on 9 December 2004 Mr Doggert delivered a letter for the plaintiff to sign. It purported to be from Mr Kakavas to Crown seeking revocation of the withdrawal of his licence. It referred to another letter, which it said was enclosed. This second item of correspondence was, it was said, a letter from the plaintiff's psychologist. The plaintiff signed the covering letter, which concluded with the words: "I have enclosed a letter from my psychiatrist/psychologist who has made a current assessment of me in this area."[26] The amended statement does not allege that the plaintiff saw the "enclosure ". Nor does it say whether or not it is the plaintiff's case that the letter ever existed.

18 The plaintiff also alleges that the Defendants' encouragement and procurement included promoting gaming at the Casino to him, in breach of s. 78A of the CCA.[27] Both he and his friends were provided with complimentary tickets to the Australian Open tennis, accommodation at the Casino hotel, limousine transport in Melbourne, and food and drinks. The plaintiff was told that an alias, "Mr Harry Kay", would be used because Crown wanted to keep his visit "low profile". He alleges that in Crown's records he was treated "as a VIP gambler from a country other than Australia". He was given access to "the Crystal Club and the private gambling salons" at the Casino and told to contact the second defendant if he had any problems. What is more, in further breaches of s. 68 of the CAA, Crown in July and August 2005 provided him with lines of credit totalling $3,845,000.[28]

19 Crown also flew the plaintiff in Crown's private jet between Melbourne and Coolangatta, Sydney and Coolangatta, and the Gold Coast and Manilla. On about six or eight of those occasions, which totalled approximately 30 in all, Crown's chief pilot gave him a box containing cash. The amounts involved ranged from $30,000 to $50,000. Moreover, on "at least three occasions" he was given bags with similar amounts of cash at his arrival at the Casino or at the Casino hotel.[29] He and his friends were in May 2006 given tickets to the soccer match between Australia and Greece at the Melbourne Cricket Ground.[30]

20 By these means, "Crown procured and induced the plaintiff to recommence gambling and to continue to gamble during 2005 until about August 2006 at the Casino."[31] The resultant gambling losses amounted (according to the amended statement of claim) to about $30,000,000.[32] The converse is that Crown benefited to a like amount; but its winnings were "by means of ill practice within the meaning of s.2.3.5 of the Gambling Regulation Act 2003."[33]

21 The first cause of action pleaded by the plaintiff as arising out of this alleged behaviour on the part of the defendants is that of unconscionable conduct. According to the amended statement of claim, "at all times after July 2004, the plaintiff was at a special disadvantage in his dealings with Crown, in that his ability to make decisions and judgments as to what was in his own best interests, and to act accordingly was significantly impaired."[34] The defendants knew this,[35] and in addition or alternatively knew of facts from which a reasonable person would form the opinion that, more probably than not, the plaintiff suffered from a psychiatric condition known as pathological gambling, the characteristics of which are set out in paragraph 13 of the amended statement of claim.[36] In these circumstances, the conduct of Crown in providing the alleged inducements to return to the Casino was unconscionable, and resulted in the plaintiff re-entering the Casino, gambling when there, and incurring the gambling losses - none of which would otherwise have occurred.[37] The element of causation is therefore to be found in Crown's unconscionable conduct, as a result of which the plaintiff suffered loss and damage.[38]

22 Looked at in the light of ordinary concepts of fair and just dealing, it is at least arguably wrong, morally and ethically, for a casino operator by conscious and deliberate policy to prey upon a patron known by the operator to be a compulsive gambler (as that expression is used in the amended statement of claim). It there means a person who has "an uncontrollable and compulsive urge to gamble and [who] unless he was prevented from so doing, ... would continue to gamble ... in a reckless manner"[39] and whose "ability to make decisions and judgments as to what was in his own best interests, and to act accordingly was significantly impaired."[40]

23 The moral and ethical position may be judged against the provisions of the CCA. It forbids the operators of casinos from, among other things, promoting gaming.[41]

24 But to say that is to say no more than perhaps the law should align itself with the moral and ethical position, and in doing so provide the gambler with a private remedy in the form of recovery of his or her losses, in whole or in part. It is not of itself a reason to conclude that the law necessarily should, still less that it does, provide such a remedy. It is, after all, also arguable that people should be responsible for their actions. Most gamblers lose most of the time. Why should some be favoured with the pleasure without the pain?

25 Whether the law does or should provide the remedy for which Mr Kakavas contends is not for me, on a strike-out application, to say. It is sufficient that the argument that it does make such provision is not so obviously untenable that it cannot possibly succeed.[42]

26 Crown submits that "the plaintiff does not actually plead that Crown took unconscientious advantage of his alleged special disadvantage."[43] This is perhaps literally true; but even if so, that plea is, I think, implicit. If necessary, I would give the plaintiff leave to replead this portion of its claim. Of greater significance is the fact that the defendants do not submit that unconscionable or unconscientious conduct can never give rise to a cause of action (as opposed to forming the basis for a defence, which clearly it can do). Rather, the substance of the defendants' position on this point is that "there are no authorities known to the defendants that support the proposition that pathological gambling gives rise to a special disadvantage"[44] assuming such a condition is known to science.

27 This may be so. But the question is one of fact as much as law. Until the experts have spoken, the law cannot decide whether or not the proposition applies in a particular case. And, if experts have already spoken, what they might have said in other times and in other places cannot determine the fate of the summons issued by the defendants on 5 June this year.

28 There are, it seems to me, good reasons to think that unconscionable conduct may in some circumstances give rise to a viable cause of action. One's instinctive impression that justice so demands is of course an altogether unreliable basis for the conclusion that it does. But the matter may be tested by reference to recent developments in the law of negligence. It is now, I think, at least arguable that a duty of care - sufficient if breached to give rise to a cause of action in negligence, and thereby sustain a claim for damages for economic loss - may arise if the plaintiff is known by the defendant to be vulnerable to harm, and yet by careless conduct the defendant, while not pursuing any legitimate interest, induces the plaintiff to do or refrain from doing something which exposes that vulnerability and thus is a cause of harm. In Perre v Apand Pty Ltd,[45] McHugh J said:

What is likely to be decisive, and always of relevance, in determining whether a duty of care is owed is the answer to the question, "How vulnerable was the plaintiff to incurring loss by reason of the defendant's conduct?" So also is the actual knowledge of the defendant concerning that risk and its magnitude. If no question of indeterminate liability is present and the defendant, having no legitimate interest to pursue, is aware that his or her conduct will cause economic loss to persons who are not easily able to protect themselves against that loss, it seems to accord with current community standards in most, if not all, cases to require the defendant to have the interests of those persons in mind before he or she embarks on that conduct.

29 I proceed therefore on the basis that the circumstances postulated by his Honour might give rise to a duty of care. If so, it is difficult if not impossible to strike out at this stage in the proceedings a pleading that alleges the same circumstances. These circumstances include the lack of any legitimate interest to pursue. To the extent that the CCA forbids the behavior in question, the absence of any such interest necessarily follows.

30 As pleaded, however, the present case is stronger than that envisaged by McHugh J. This is so because Mr Kakavas pleads more than mere carelessness. He alleges that the defendants deliberately set out to take advantage of his vulnerability. And they did so without having any legitimate interest to pursue. What they did was in breach of the CCA, and therefore not in pursuit of legitimate commercial advantage.

31 The above reasoning seems to be consistent with the conclusion to which Hoeben J came in Preston v Star City Pty Ltd (No. 3).[46] That was a case with many similarities to this. The plaintiff by his statement of claim asserted, in his Honour's words, that:

... the defendant changed drink orders so that alcoholic drinks were supplied instead of non-alcoholic drinks and influenced the plaintiff to order alcoholic drinks with the express intention of intoxicating or further intoxicating him or with reckless indifference as to whether or not this occurred.[47]

These, his Honour held, were allegations which, if proved, would (or at least might) give rise to a cause of action. He added that if "the plaintiff wishes to raise in the pleadings that the defendant ... deliberately set out to subvert the plaintiff's capacity to make rational decisions in relation to... engaging in gambling, this will need to be specifically and separately pleaded."[48] His Honour had previously noted that:

[i]t is no function of this Court to identify the cause of action which such a pleading might give rise to. It might involve some element of deceit, some element of trespass to the person or even some element of quasi-contract. There may be an overlap with the undue influence/unconscionability claim.[49]

32 The attempt by the plaintiff, Mr Preston, to formulate his claim against the operators of the Star City Casino had struck a number of hurdles even before Hoeben J was asked to approve an application by the plaintiff to rely upon his fifth further amended statement of claim. In 1999, Wood CJ at CL heard an appeal from a Master of the Supreme Court of New South Wales who had refused to strike out the statement of claim in its then form.[50] In dismissing the appeal, while ordering that portion of the statement of claim be struck out, with leave to file an amended statement of claim, his Honour said:[51]

The defendant [as operator of the casino] had the capacity, and the responsibility to exercise close control over its operations, of its staff and of those patrons who were allowed to enter its premises for the purpose of gambling. It set the rules for the games, it provided the machines and chips which gamblers were to use, and it had the power to allow people to remain at its tables, or warn them off the premises.

It is also well arguable that as a high roller with an unhealthy addiction or attraction for gambling, the plaintiff was vulnerable, ...

The extent of that control and vulnerability, it might fairly be said, would be significantly affected ... if the plaintiff can show that he was identified by the casino as a problem gambler and deliberately targeted with inducements, ... so as to encourage him to continue betting in a disastrous way.

33 However it is described, and by whatever name it is called, in my opinion the plaintiff has in paragraphs 1-30 of his statement of claim pleaded a cause of action that is not so obviously untenable that it cannot possibly succeed. These paragraphs will not, therefore, be struck out.

34 The plaintiff also pleads a causes of action in negligence. It is this upon which the defendants concentrate their attack. The plaintiff says that Crown owed him three duties of care.[52] According to the amended statement of claim, they are:

(a) not to exacerbate or actively exploit the plaintiff's weakness in relation to gambling, which weakness was known to it;

(b) to advise him that, as he was subject to an IEO, he could not lawfully enter the Casino; and

(c) not to revoke his exclusion order without first inquiring whether: (i) he suffered or may suffer from pathological gambling; (ii) he exhibited any of the characteristics of a special disability having the characteristics described in paragraph 13 of the amended statement of claim; and (iii) he had complied with and satisfied each of Crown's requirements for the revocation of a self-exclusion order.[53]

35 The "special disability" is said to be characterised by: (i) an impairment of the plaintiff's ability to control the frequency with which he gambled; (ii) an impairment of his ability to control the amount of money that he wagered; (iii) a preoccupation with gambling to "an abnormal extent"; and (iv) a significant impairment of his ability to make rational decisions concerning the frequency with which he gambled and the amount that he wagered.[54]

36 The amended statement of claim alleges that Crown acted in breach of these duties in a number of respects. Two might be said to involve carelessness. First, Crown failed to advise the plaintiff that it was unlawful for him to gamble at the Casino during the period when the exclusion order and the IEO applied.[55] Secondly, it did not advise him that all of his winnings would be forfeited to the State of Victoria.[56]

37 The other breaches are of a different category. As alleged, they involve not carelessness but deliberate action, carefully planned. I have already noted[57] the claim that the defendants deliberately set out to take advantage of Mr Kakavas' vulnerability. According to the amended statement of claim, Crown invited, encouraged and procured the plaintiff to enter and remain in the Casino for the purposes of gambling. It did so by devising the scheme alleged in paragraph 17 of the amended statement of claim, and then putting that scheme into operation as alleged in paragraphs 18-20. Likewise, it procured his re-entry into the Casino, and his renewed gambling, when it knew (a) that there was no basis for revoking the exclusion order, and (b) that there was no evidence from a suitably qualified professional person supporting the plaintiff's ability to control his gambling urges and condition. And, finally, it procured and encouraged him to gamble at the Casino when it knew about his vulnerability and his gambling history. It did this by offering him special inducements, including cash payments and the ability to wager bets of $300,000 per hand, to re-enter the casino and commence gambling.[58]

38 All these allegations are initially pleaded as giving rise to a cause of action in unconscionable conduct. There is, however, a difficulty in also putting them forward, as the plaintiff does, as supporting a cause of action in negligence. The notion of negligence is incompatible with deliberate action specifically designed to achieve the end about which complaint is made. I agree with Hoeben J that "[i]f ... the plaintiff wishes to raise in the pleadings that the defendant ... deliberately set out to subvert the plaintiff's capacity to make rational decisions in relation to ... gambling, this ... should not be pleaded as a count in negligence because it is not a form of negligence."[59]

39 Even were this not the case, a further central question emerges. It is whether, and if so in what circumstances and to what extent, a casino operator has a duty of care to protect a problem gambler against financial loss attributable to gambling.

40 Such a duty of care does not arise merely because, to the casino operator's knowledge, the gambler has a gambling problem. So much is, I think, clear from the decision of the NSW Court of Appeal in Reynolds v Katoomba RSL Services Club Ltd.[60] The appellant, Mr Reynolds, was a member of the defendant club. It was equipped with gaming facilities. The plaintiff became over-fond of them. He told the secretary/ manager that he had a gambling problem. He asked that his cheques not be cashed, "even if I beg you". His father, with whom he was in a business partnership and who felt obliged to make good funds that his son had gambled away, asked that the son be denied entry to the club. This was refused "because he hasn't done anything wrong".

41 While the trial judge found the appellant to be a problem gambler, he did not find that he had been deprived of the ability to control his own actions. Nor did he find that the club induced the appellant to gamble. True, the club did not seek to impose a limit on the appellant's gambling, still less to act upon the father's request to ban his son from the premises; but the activities of the club, including providing gambling facilities, were legitimate, the appellant was a club member who had broken no rules, and the cashing of the cheques did not involve any breach of the relevant legislation. More particularly, it was Mr Reynolds and not the club who took the initiative with his gambling, and Mr Reynolds who asserted that the club had a duty to protect him from himself. In contrast to the circumstances postulated in the passage from the judgment of McHugh J in Perre v Apand Pty Ltd to which I referred in paragraph 28 above, the Katoomba RSL Services Club was pursuing its legitimate purposes; and Mr Reynolds was easily able, by the simple expedient of not visiting the club or any other gaming establishment, to preserve the interest he sought to preserve: that is, the avoidance of risk of the loss of his money through gambling.

42 The Court of Appeal held that this was not an interest which the law should protect.[61] Mr Reynolds had no legal right that had been impaired. He was an autonomous being; and the law now emphasises "the acceptance by individuals of a personal responsibility for their own conduct".[62] The court should therefore "be very slow indeed to recognise a duty to prevent self-inflicted economic loss."[63]

43 As pleaded, Mr Kakavas' position differs from that of Mr Reynolds. Where the latter took the initiative, Mr Kakavas was passive. His was not - or, at least, was not wholly - self-inflicted harm. The Casino, as he would have it, deliberately set out to exploit his known weakness, and in doing so was guilty of ill practice within the meaning of s.2.3.5 of the Gambling Regulation Act 2003. In his case, the breach was not of an imputed duty of care to prevent his self-inflicted economic loss, but of a duty not to prey upon what the Casino knew was a psychological problem he had in resisting the temptations of the gaming tables. The one was a duty of care which, following principles espoused in such cases as Perre v Apand Pty Ltd,[64] Agar v Hyde[65] and Reeves v Commissioner of Police of the Metropolis,[66] the NSW Court of Appeal rejected as not being recognised by the law. The other was not a duty of care, but a duty not actively to exploit the weakness of a targeted victim.

44 In Reynolds v Katoomba RSL Services Club Ltd., Spigelman C J said:

Save in an extraordinary case, economic loss occasioned by gambling should not be accepted to be a form of loss for which the law permits recovery. I make allowance for an extraordinary case, without at the present time being able to conceive of any such case.[67]

45 I respectfully agree with the general principle that the law should not permit recovery of economic loss resulting from gambling. I likewise agree with what the Chief Justice later added:

The interest sought to be protected is the avoidance of risk of loss of money through gambling. That risk, when it came to pass, was entirely occasioned by the appellant's own conduct. It is not an interest which, in my opinion, the law should protect.

In my opinion the law should not recognise a duty of care to protect persons from economic loss, where the loss only occurs following a deliberate and voluntary act on the part of the person to be protected. There may be, however, an extraordinary case where a duty should be recognised. The present case is not such.[68]

46 Nevertheless, Hoeben J in Preston (No.3) held that a duty of care might be breached so as to give rise to a cause of action in negligence, where the defendant operator of a gambling establishment, knowing that a patron was a "problem gambler", carelessly failed to ensure that its employees did not exploit that patron's weakness. His Honour was of the opinion, which I respectfully share, that such a case falls outside the general principle expounded by the Chief Justice in Reynolds. Similarly, a duty might be breached where the operator, again with the relevant knowledge, carelessly (and therefore by definition not deliberately or recklessly) failed to have that knowledge in mind when taking steps that amounted to unwitting exploitation of the patron. On this basis, it seems to me that cases such as Preston (No.3) and Reynolds can not only be reconciled, but can also be distinguished from the proceeding in which Mr Kakavas is the plaintiff.

47 The present case differs from both because all but two of the allegations here assert that Crown preyed on Mr Kakavas. But to the extent that, in Preston (No3), the plaintiff moved beyond his claims that the casino was careless in managing its employees, and alleged active involvement by the operator in "switching" Mr Preston's drinks and deliberately continuing to serve him alcohol when it knew he was drunk, the cases are similar; and I agree with Hoeben J in the conclusion that these allegations of active and deliberate intervention by the casino operator in the knowledge of, and for the exploitation of, the patron's vulnerability should be allowed to go to trial, albeit not as claims in negligence.

48 The two exceptional allegations in this case are those that might be said to involve mere carelessness. I referred to them at paragraph 36, above. First, Crown failed to advise the plaintiff that it was unlawful for him to gamble at the Casino during the period when the exclusion order and the IEO applied. Secondly, it did not advise him that all of his winnings would be forfeited to the State of Victoria.

49 The Casino has a statutory duty, imposed by s.72 of the CCA, to tell a person against whom an exclusion order has been made that he or she has been prohibited from entering or remaining in the Casino. In my opinion, this duty carries with it a correlative private right. It is in any event at least arguable that it does. As was said by Dixon J in O'Connor v Bray Ltd:

Whatever wide rule may ultimately be deduced, I think it may be said that a provision prescribing a specific precaution for the safety of others in a matter where the person upon whom the duty laid is, under the general law of negligence, bound to exercise due care, the duty will give rise to a correlative private right, unless from the nature of the provision or from the scope of the legislation of which it forms a party a contrary intention appears.

50 On the other hand, the plaintiff pleads that he was, on 19 June 1998 advised by Crown that his licence to enter any part of the Crown complex had been withdrawn indefinitely. Any fair reading of the amended statement of claim tells the reader that the relevant notice was received at the same time as receipt of notice of the revocation of the exclusion order which had been made almost two years earlier and was extant until its revocation that day. Consistently with the account given in the pleading, anybody of ordinary mental capacity would appreciate that the one form of exclusion immediately followed the revocation of the other. Not only that, but (as the plaintiff alleges) he was, on being induced to return in January 2005, given a false name ("Harry Kay") and was passed off "as a VIP gambler from a country other than Australia."[69] In these circumstances, and in the absence of an allegation that he suffered from mental disability, or that he believed that his right to enter had been renewed, Mr Kakavas cannot claim that he was not told, and did not know, that it was unlawful for him to gamble at the Casino. And even were the relevant breach to be proved, the plaintiff would have difficulty establishing that it was a cause of loss. As presently pleaded, this head of negligence could not possibly be made good.

51 In my opinion, for the reasons given in the several judgments in Reynolds, Crown was under no duty of care to tell Mr Kakavas that as an excluded person he would forfeit all his winnings to the State.

52 It follows that the plaintiff has not pleaded a cause of action in negligence. The allegations on which he relies to make out that cause of action will however support another, to which he has attached the label "unconscionable conduct". I am not concerned with the label. For the reasons I have given, those allegations are sufficient to support an argument, which cannot be dismissed as fanciful, that a viable cause of action exists upon which the plaintiff is entitled to go to trial.

53 On 27 September 2007, after argument had been heard in this case, Jacobson J in the Federal Court delivered judgment in Foroughi v Star City Pty Ltd.[70] Mr Foroughi was a patron of the Star City Casino in Sydney as well as the Crown Casino in Melbourne. After a two-day splurge in which he left much money behind at both, he asked that Star City make a voluntary exclusion order forbidding him to return. His request was met. Several weeks later, he decided to test the casino's ability to detect his presence. He was "very surprised" that he re-entered unimpeded, and remained inside undetected. So "he went back many times, gambling very large amounts of money."[71] He continued to gamble, undetected, even after issuing proceedings in which he asserted that Star City owed him a duty of care "the content of which is not entirely clear, but which appears to have been to take reasonable steps to prevent him from entering the gaming areas of the casino and/or to remove him from the casino."[72]

54 In written submissions received from each of the parties before me, each claimed that the judgment of Jacobson J supported their position. In my opinion, it assists neither. Mr Foroughi relied on alleged representations made to him to the effect that, were he to attempt to gamble at Star City, he would be caught. His Honour rejected the plaintiff's "evidence of the representations which [the plaintiff] alleges to have been made to him."[73] The claim in misleading conduct therefore failed. The claim in negligence was answered by reference to Reynolds, which his Honour held to be indistinguishable and which he followed.[74] The judgment continues:

While it is true that the question of whether a duty of care exists must depend on all the circumstances of the case, the claimed duty in the present proceedings is on an even weaker foundation than that which was relied upon by the plaintiff in Reynolds v Katoomba RSL.

Here, Mr Foroughi expressly and voluntarily undertook responsibility for his own conduct in agreeing not to enter the gaming areas of Star City and to seek assistance and guidance of a qualified and recognised counsellor.

More recent authority does not assist Mr Foroughi's claim. In Preston v Star City Pty Ltd (No. 3), Hoeben J permitted a claim in negligence to proceed to trial because the allegations went beyond those made in Reynolds v Katoomba RSL. The claim was that Star City knew of the plaintiff's problem and actively encouraged and exploited it. No such claim is made in the present proceedings.[75]

55 Mr Kakavas also pleads that Crown is guilty of misleading and deceptive conduct. Crown represented, or so the plaintiff alleges, that he was lawfully permitted to enter and remain in the Casino for the purposes of gambling.[76] For the reasons I have given in paragraph 50 above, however, it is impossible in my view for this allegation to stand with others, not said to be alternatives, pleaded in the amended statement of claim.

56 A further representation is alleged. It is that the plaintiff was entitled to retain his winnings. This "representation", if made, was false. By s.78B of the CCA, the winnings of a person who is subject to an exclusion order are forfeited to the State. According to the amended statement of claim, the impugned representation was not made explicitly, but is to be implied from the defendants' conduct, including their conduct in inducing Mr Kakavas to re-commence gambling at the Casino.

57 In my opinion, this allegation is properly to be seen as forming an element in the (as the plaintiff would have it, wrongful) conduct of Crown and Mr Williams. Had the plaintiff been told that any winnings would be forfeited to the State, the inevitable result (so the plaintiff asserts) would have been to deprive the inducements of any effect. They would have come to nothing, because he would not have been attracted by them. It was for this reason that the defendants avoided mentioning this topic to him.

58 In my opinion, allegations about an implied representation sit much more happily, in this context, with unconscionable conduct than with a separate claim for misleading and deceptive conduct, with all the Trade Practices Act connotations they carry with them. The inducements which form the basis of the argument that the plaintiff was treated unconscientiously are, on this hypothesis, seen in their true context when the failure to inform about forfeiture is part of the picture. It is, in other words, better seen as a failure to inform than as an implied representation.

59 It is, I think, appropriate to add another word or two to the above. One of the significant problems with contemporary litigation is the pleading of a multiplicity of causes of action where one merely duplicates another. The plaintiff's attempt to plead misleading and deceptive conduct is an example. As a separate cause of action, it adds nothing, in my opinion, to that which the plaintiff has labelled "unconscionable conduct". That is where its work is to be done. It should, in my opinion, be restricted to that aspect of the claim. So too the allegations of accessorial liability in the second defendant, Mr Williams.

60 The claim in restitution raises much the same considerations. It relies on the same allegations as the "unconscionable conduct" claim. If the plaintiff fails under the latter head, his cause of action in restitution will also fail. But if the "unconscionable conduct" claim succeeds, nothing further will be gained in substance, even were that success to be translated into like success in restitution. The latter therefore has no useful part to play. It should not remain in any fresh version of the statement of claim.

61 For the reasons given above, those parts of the amended statement of claim that plead separate causes of action in negligence, misleading and deceptive conduct and restitution should be struck out. On the other hand, the cause of action labelled by the plaintiff as "unconscionable conduct" is not so clearly untenable that it cannot possibly succeed. The plaintiff should have leave to replead his claim in accordance with this judgment. I will hear counsel on any consequential orders.

[1] Amended statement of claim, para. 1.

[7] Particulars under para.4 of the amended statement of claim.

[12] Ibid, and the particulars under that paragraph.

[13] Amended statement of claim, para. 7.

[23] This, it seems to me, is the effect of the particulars under para. 18 of the amended statement of claim.

[25] Particulars under para. 18 of the amended statement of claim.

[26] Particulars under para. 18 of the amended statement of claim.

[27] Amended statement of claim, para. 19.

[28] Ibid, and the particulars under that paragraph.

[30] Particulars under para. 20 of the amended statement of claim.

[42] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 126 at 129 per Barwick CJ.

[43] See, for example, the defendant's reply submissions dated 21 September 2007 at [14].

[44] Defendants' outline of submissions in support of application (5 June 2007).

[50] Preston v Star City Pty Ltd [1999] NSWSC 1273.

[52] Amended statement of claim, para. 31.

[58] Amended Statement of Claim, para. 32.

[59] Preston v Star City Pty Ltd (No. 3) [2005] NSWSC 1123 at [56].

[61] See, for example, the judgment of Spigelman CJ at [15].

[69] Particulars under para. 19(1) of the amended statement of claim.

[76] Amended statement of claim, at para. 37(1).

Gaming Legislation (Amendment) Act 2002

Gambling Regulation Act 2003

At a glance

Court

Decision date

Before

Source

Judgment (107 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (4)