Kakavas v Crown Melbourne Ltd

• Jurisdiction: Australia Federal only
• Court: High Court (Australia)
• Judge: French CJ,Hayne,Crennan,Kiefel,Bell,Gageler,Keane JJ.
• Judgment Date: 05 June 2013
• Neutral Citation: [2013] HCA 25,2013-0605 HCA A
• Docket Number: M117/2012
• Date: 05 June 2013

[2013] HCA 25

HIGH COURT OF AUSTRALIA

French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ

M117/2012

Harry Kakavas

Appellant

and

Crown Melbourne Limited & Ors

Respondents

Representation

A J Myers QC with P Zappia and R A Heath for the appellant (instructed by Strongman & Crouch)

N J Young QC with N D Hopkins SC for the respondents (instructed by Minter Ellison)

Casino Control Act 1991 (Vic), ss 76, 77(2), 78B.

Trade Practices Act 1974 (Cth), s 51AA.

Kakavas v Crown Melbourne Limited

Equity — Unconscionable conduct — Where appellant gambled at first respondent's casino and lost $20.5 million — Where appellant diagnosed as suffering from condition known as ‘pathological gambling’ — Where appellant subject to ‘interstate exclusion order’ under Casino Control Act 1991 (Vic) — Whether gambling transactions affected by unconscionable dealing — Whether appellant suffered from special disadvantage making him susceptible to exploitation — Whether first respondent had sufficient knowledge of any special disadvantage.

Words and phrases — ‘actual knowledge’, ‘constructive notice’, ‘interstate exclusion order’, ‘special disadvantage’, ‘unconscionable conduct’.

ORDER

Appeal dismissed with costs.

1 French CJ, Hayne, Crennan, Kiefel, Bell, Gageler AND Keane JJ. Between June 2005 and August 2006, the appellant lost $20.5 million playing baccarat at the casino in Melbourne operated by Crown Melbourne Limited (‘Crown’).

2 On 6 March 2007, the appellant issued proceedings against Crown and its employees, Mr John Williams and Mr Rowen Craigie (the second and third respondents), claiming that Crown engaged in unconscionable conduct contrary to s 51AA of the Trade Practices Act 1974 (Cth) (‘the TPA’) and that Mr Williams and Mr Craigie were involved in that contravention. He also claimed compensation for losses suffered by him as a result of Crown's unconscionable conduct under the general law which informs s 51AA 1. The appellant made other claims as well, but it is not necessary to refer to them here.

3 In the forefront of the appellant's case at trial was the proposition that Crown had incited the appellant, a known problem gambler, to gamble at its casino by incentives such as rebates on losses and the offer of transport on Crown's corporate jet.

4 After a lengthy trial, the primary judge dismissed the appellant's claims and gave judgment for Crown on its counterclaim for $1 million in unpaid debts 2. On 21 May 2012, the Court of Appeal of Victoria dismissed the appellant's appeal 3.

The issues in this Court

5 In this Court the focus of the appellant's forensic strategy shifted away from the proposition that Crown lured or enticed him into its casino. The emphasis of the case advanced here, by the appellant, was upon the exploitation of the appellant's inability, by reason of his pathological urge to gamble, to make worthwhile decisions in his own interests while actually engaged in gambling.

The appellant submitted that Crown exploited his condition by allowing him to gamble at its casino.

6 The appellant submitted that, on the findings of fact made by the primary judge, he had made good his claim to relief in accordance with the statement by Mason J in Commercial Bank of Australia Ltd v Amadio4 of the ‘principle which may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created’, to relieve the innocent party of the consequences of that conduct. In stating the principle, Mason J went on ‘to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.’ 5

7 The appellant argued that the primary judge and the Court of Appeal erred by giving insufficient attention to the finding by the primary judge that the appellant is a problem gambler, and by addressing instead the question whether the appellant enjoyed equality of bargaining power with Crown. The primary judge and the members of the Court of Appeal erred, so it is said, in failing to have regard to Crown's exploitation of the appellant's special disadvantage when he was actually at the gaming table, that being the time when his pathological urge to gamble adversely affected his ability to make rational decisions in his own interests about the amount and frequency of his wagers.

8 The appellant also claimed to suffer another special disadvantage in that, at the time of his losses, he was subject to an interstate exclusion order (IEO) made in New South Wales by the Commissioner of Police. Because of the IEO, under the Casino Control Act 1991 (Vic) (‘the Casino Control Act’) any winnings payable to the appellant by Crown as a result of his gambling activities were forfeited to the State of Victoria 6. If he had known that this was the effect of the IEO, he would not have gambled at Crown's casino at all.

9 The appellant submitted that because Crown knew of, or ought to have been aware of, the appellant's special disadvantages, or was sufficiently on notice of them to have been obliged, in accordance with notions of constructive notice, to make further inquiries concerning the appellant's circumstances, Crown ought now be made to disgorge its takings to the appellant.

10 The respondents submitted that, notwithstanding the primary judge's finding that the appellant was affected by a pathologically strong predisposition to gamble, he was not in a situation of special disadvantage, much less a disadvantage which Crown sought knowingly to exploit.

11 The respondents contended that the primary judge's findings of fact support two crucial propositions: first, that the appellant's abnormally strong urge to gamble was not a compulsion which deprived him of the ability to make a worthwhile choice whether or not to gamble, or to continue to gamble, with Crown or anyone else; and, secondly, that Crown's employees did not knowingly exploit the appellant's abnormal interest in gambling. In this regard, the respondents submitted that the appellant presented as a successful businessman able to afford to indulge himself in the high stakes gambling in which he chose to engage. Crown's employees accepted him as he sought to present himself.

12 The respondents also submitted that the appellant's claim to recover his gambling losses should fail on the ground that his gambling was prohibited by statute. Further, the respondents submitted that the appellant would have continued to gamble at other casinos had he not gambled at Crown's casino. Accordingly, he suffered no compensable loss by reason of the circumstance that he happened to be gambling with Crown at the time he suffered his losses. As will become apparent, it is not necessary to address the respondents' submissions in relation to illegality and causation.

13 For the reasons that follow, the appeal should be dismissed. The reasons commence with an overview of the appellant's case and proceed to a summary of the important findings of fact in relation to the dealings between the appellant and Crown. That summary will be followed by a discussion of the appellant's arguments.

Overview

14 The decisions of this Court, in which claims for relief from unconscionable conduct have been litigated, illustrate the necessity for close consideration of the facts of each case in order to determine whether a claim to relief has been established 7. The appellant's counsel disavowed any challenge to the primary judge's findings of fact. In due course we will summarise the findings in relation to the salient dealings between the appellant and Crown; but before doing that we should make some general observations by way of an overview of the appellant's case.

15 In advancing a claim based on the principle expounded by Mason J in Amadio, the appellant relies upon the standards of personal conduct compendiously described as the conscience of equity. According to Pomeroy's Treatise on Equity Jurisprudence8:

‘the “conscience” which is an element of the equitable jurisdiction came to be regarded, and has so continued to the present day, as a metaphorical term, designating the common standard of civil right and expediency combined, based upon general principles and limited by established doctrines, to which the court appeals, and by which it tests the conduct and rights of suitors, - a juridical and not a personal conscience.’

16 The conscience spoken of here is a construct of values and standards against which the conduct of ‘suitors’ — not only defendants — is to be judged 9.

17 The principle which the appellant invokes is concerned with a species of equitable fraud. In Earl of Chesterfield v Janssen10 Lord Hardwicke LC

explained that it is a ‘kind of fraud … which may be presumed from the circumstances and condition of the parties contracting: … it is wisely established in this court to prevent taking surreptitious advantage of the weakness or necessity of another: which knowingly to do is equally against the conscience as to take advantage of his ignorance: a person is equally unable to judge for himself in one as the other.’

18 The invocation of the conscience of equity requires ‘a scrutiny of the exact relations established between the parties’ to determine ‘the real justice of the case’ 11. Where an appeal is made by a plaintiff to the standards of equity embodied in the Amadio principle, the task of the courts is to determine whether the whole course of dealing between the parties has been such that, as between the parties, responsibility for the plaintiff's loss should be ascribed to...