Access to gambling has been a hot topic in society and the media in recent times.  However, in its recent decision in Kakavas v Crown Melbourne Ltd [2013] HCA25, the High Court of Australia confirmed that in the absence of relevant legislation there is no general duty upon a gambling operator such as a casino to protect gamblers from themselves.  The law may reunite a person with money lost in a commercial transaction to a “predator”; but this expression denotes a very high bar requiring a plaintiff to demonstrate special circumstances.

A problem gambler

Harry Kakavas was a high roller with a gambling problem.  He started gambling at Crown Casino in Melbourne in 1994, at the age of 27.  In the course of that year he lost $110,000 of his father’s money.  He also defrauded Esanda Finance Corporation of $286,000.  Harry claimed the fraud was committed to support a gambling addiction.

While criminal proceedings were pending, Harry applied for and was granted a self-exclusion order by Crown Casino which prevented him from gambling at the casino.  Crown Casino also referred Harry to a doctor who ran a program for problem gamblers.

In early 1998, Harry was sentenced to serve four months in gaol.  After his release, he repeatedly applied for Crown Casino to revoke his self-exclusion order but was unsuccessful.

In 2000, Harry was excluded from Star City Casino in Sydney.  He moved to the Gold Coast in Queensland and chose to exclude himself from casinos there and in Perth.  Crown was aware of Harry’s exclusion from the three casinos.

Request to return to Crown Casino

In 2003, Harry met with a manager of Crown Casino and discussed how well Harry was doing and his trips to gamble in Las Vegas.  Harry indicated that he wished to be able to return to Crown Casino.

Crown Casino proceeded to consider the request.  Its enquiries revealed that Harry was “travelling well” financially, whilst losing money gambling in Las Vegas.  Crown Casino was prepared to consider Harry’s return to its casino on a written application together with an opinion by a psychiatrist or psychologist stating that he no longer had any gambling problems.

Harry proceeded to see a psychologist who specialised in gambling related diseases, Mr Healy, who had diagnosed Harry as a “classic pathological gambler” prior to his gaol sentence.  Healy declined to provide Harry with a report clearing him of gambling problems.  Harry informed a senior Crown officer of this fact and was urged to try another psychologist.

Harry saw another psychologist, Ms Brooks.  She reported that she was unable to do an assessment of his suitability for re-admission to Crown Casino.  She also reported Harry as saying “he had conquered his past demons” and if he had a relapse he would not hesitate to self-exclude himself from Crown Casino.

Shortly thereafter, Crown Casino decided to allow Harry to return to its casino and issued a notice to that effect.

Harry loses over $20 million

Between June 2005 and August 2006, Harry visited Crown Casino to gamble on 28 occasions.  He was provided with “lavish inducements including the use of a private jet, special rebates and commissions and free food, beverages and accommodation”.  He did not attempt to employ the self-exclusion mechanism and promoted his financial capacity to Crown consistently.  On some occasions Harry won heavily, in the millions of dollars.  On other occasions he lost heavily.  Between June 2005 and March 2006, he had made profits of $2.7 million on a turnover of $480 million.

Harry did not gamble at all at Crown Casino between October 2005 and March 2006.  He then resumed and by August 2006, had made a net loss of $20.5 million on a turnover of about $1.5 billion.  This level of gambling activity made Harry one of Crown Casino’s largest Australian players but not in the same league as its top international players.

When Harry last gambled at Crown Casino on 17 August 2006, he had a conversation with a senior officer and expressed concerns about his losses.  This was the first time he had discussed with any Crown Casino employee the losses he had sustained.  Harry was told to “have a rest for a while”.  Thereafter, Harry repeatedly pressed Crown Casino to allow him to gamble at the Casino but was denied.

In March 2007, Harry commenced proceedings against Crown Casino seeking recovery of the $20.5 million which he had lost at its casino in 2005-2006.

Decision of the High Court

The law in Australia says that where a party to a transaction was under a special disability in dealing with the other party, the transaction may be set aside if the disability was sufficiently evident to the stronger party to make their conduct unfairly exploitative/victimising.

Some examples of such disability include poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, and lack of assistance or explanation where assistance or explanation was necessary.

Harry relied on such a principle, arguing as follows:

  • his special disability was a pathological gambling condition which meant he was unable to make worthwhile decisions in his own interests so far as gambling with Crown Casino was concerned;
  • Crown Casino knew or ought to have known of that special disability;
  • By offering him inducements to gamble at its casino, Crown Casino deliberately preyed upon and unfairly exploited Harry’s condition.

As to allegation 1, the Court disagreed that Harry was under a special disability.  The Court observed that across the 28 occasions he gambled at Crown Casino in 2005-2006, Harry showed himself capable of resisting the urge to lay one more bet and demonstrated an ability to play in a controlled manner like a recreational gambler.

As to allegation 2, the Court found that Harry did not "present" to Crown Casino as a pathological gambler.  His business affairs appeared to be flourishing and his demeanour in the witness box before the trial judge was particularly significant:

“(T)he plaintiff struck me as someone who was a natural salesman and negotiator…  He was determined, eloquent and ready with a quick riposte.  He was robust and confident … Whatever the configuration of his inner landscape in 2005 and 2006, in my view Mr Harry presented the world with a charming and confident façade."

Harry argued that although Crown Casino may not have had actual knowledge of his pathological urge to gamble, it should reasonably have known this.  He pointed to the refusal by his former psychologist, Mr Healey, to provide a report on his condition at the end of 2004 and the absence of a full assessment by Ms Brooks.  The High Court also rejected this argument and observed that the law:

“requires proof of a predatory state of mind.  Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose.  The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm's length commercial transaction.”

Turning finally to allegation 3, Court found that in offering standard VIP complimentary benefits to Harry, Crown Casino was not attempting to ensnare a man who had given up gambling.  It was, rather, legitimately seeking to compete for the business of a man who was already an active “high roller”, including travelling to Las Vegas to gamble.  Harry had chosen to gamble and the only remaining choice was where.  Crown Casino’s conduct could not fairly be regarded as “predatory”.

Conclusion

  • This decision confirms that it is not the role of the Courts to “legislate” for perceived gaps or deficiencies in the law.  That is the role of Parliament.  In the words of the High Court, “(t)o describe the business of a casino as the victimisation of the gamblers who choose to frequent it might well make sense in moral or social terms … but it does not make a lot of sense so far as the law is concerned, given that the conduct of the business is lawful.”
  • The High Court's use of the expression "predatory" confirms that the evidentiary bar to have a transaction set aside under the special disadvantage principle is very high.  There must be a level of bad faith on the part of the stronger party in taking advantage of a clearly defenceless person.  For example, there was no suggestion that Harry was an incompetent card player or played at Crown whilst intoxicated.  He was a high roller with access to large sums of money and the potential to win $20 million himself from Crown Casino.  In appropriate cases, where there are special circumstances, the law will act to protect a party to a commercial transaction from exploitation/victimisation but this was not such a case.