Guy v Crown Melbourne Ltd (No 2)

Case [2018] FCA 36

FEDERAL COURT OF AUSTRALIA

Guy v Crown Melbourne Limited (No 2) [2018] FCA 36

File number: VID 1274 of 2014
Judge: MORTIMER J
Date of judgment: 2 February 2018
Catchwords:

CONSUMER LAW – misleading or deceptive conduct – “poker” machines – whether features of the Dolphin Treasure electronic gaming machine give rise to representations about the odds of winning which are misleading or deceptive – whether representations are made by Crown Melbourne in making the electronic gaming machine available for gambling – whether representations are made by Aristocrat in manufacturing and supplying the machine – consideration of the term “theoretical return to player” – application dismissed

CONSUMER LAW – unconscionable conduct – whether there is a class of gamblers of the Dolphin Treasure electronic gaming machine who are “habituated” or “addicted” to gambling – whether such a class of gamblers are at a “special disadvantage” – consideration of expert evidence concerning the relationship between features of electronic gaming machines and gambling disorder – whether the respondents engaged in unconscionable conduct in making the machine available for play to this class of gamblers – application dismissed

Legislation:

Competition and Consumer Act 2010 (Cth), s 131C; Sch 2 Australian Consumer Law (Cth), ss 18, 20, 21, 22, 232

Evidence Act 1995 (Cth), ss 53, 136

Federal Court of Australia Act 1976 (Cth), ss 21, 37AF, 37AG, 37AI

Trade Practices Act 1974 (Cth), ss 51AC, 52

Federal Court Rules 2011 (Cth), r 2.32

Casino Control Act 1991 (Vic), ss 1, 6, 8, 59, 62A, 62AA, 62AB, 62AC, 62B, 64, 69, 72, 77, 78, 78A, 78B

Constitution Act 1975 (Vic), s 19

Gambling Regulation Act 2003 (Vic), ss 3.1.1, 3.1.5, 3.2.1, 3.4.1B, 3.4.60, 3.5.1, 3.5.3, 3.5.4, 3.5.5, 3.5.6, 3.5.29, 3.5.30

Gambling Regulations 2015 (Vic), regs 5, 11, 12, 13, 14, 15, 17, 20

Gambling Regulation Regulations 2005 (Vic), regs 22, 23, 24, 25

Gaming Machine Control (Responsible Gambling Information) Regulations 2002 (Vic)

Victorian Commission for Gambling and Liquor Regulation Act 2011 (Vic)
Cases cited:

Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 40 FLR 165

Australian Broadcasting Commission v Parish (1980) 29 ALR 228

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2) [2000] FCA 2; 96 FCR 491

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; 214 CLR 51

Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; 317 ALR 73

Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682

Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 2), [2017] FCA 709

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90

Australian Competition and Consumer Commission v Sampson [2011] FCA 1165

Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640

Bing! Software Pty Ltd v…

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AGLC
Guy v Crown Melbourne Ltd (No 2) [2018] FCA 36
Case
[2018] FCA 36
Decision Date

CaseChat Overview and Summary

Guy v Crown Melbourne Ltd (No 2) was a case in which the plaintiff, Guy, sought to hold Crown Melbourne Ltd and Aristocrat, the manufacturer of the Dolphin Treasure electronic gaming machine, liable under the Australian Consumer Law (ACL) for misleading and unconscionable conduct in relation to the operation of the machine. The plaintiff alleged that the Dolphin Treasure machine contained features that misrepresented the odds of winning and that the machine was designed in such a way as to exploit a class of gamblers who were addicted or habituated to gambling. The case was heard by the Federal Court of Australia.

The legal issues before the court were whether the features of the Dolphin Treasure electronic gaming machine gave rise to representations about the odds of winning which were misleading or deceptive and whether the representations were made by Crown Melbourne or Aristocrat. The court also had to decide whether there was a class of gamblers who were "habituated" or "addicted" to gambling and whether such a class of gamblers were at a "special disadvantage" and whether the respondents engaged in unconscionable conduct in making the machine available for play to this class of gamblers.

The court found that none of the plaintiff's causes of action were made out. The court held that the representations made by the Dolphin Treasure machine were not misleading or deceptive and that the conduct of Crown Melbourne or Aristocrat could not be characterised as unconscionable. The court also found that the plaintiff's claim remained at a hypothetical level in relation to the class of consumers she had chosen to identify.

The court dismissed the application and directed the parties to file a joint minute of proposed orders reflecting the court's reasons in relation to the s 37AF application, including proposed orders concerning the filing of a generally accessible Court Book. The court also directed the parties to file and serve submissions on appropriate orders for costs if they were unable to agree on appropriate orders for costs.

This case highlights the importance of considering the regulatory scheme governing gambling in Victoria when determining whether there are contraventions of the ACL. The court found that it was not necessary to consider the interrelationship between the ACL and the regulatory scheme in this case because the plaintiff's claims were not made out. However, in other circumstances, findings of contravention could be affected by the existence of a regulatory scheme governing the conduct of a person subject to the terms of the ACL.

Orders

Orders of the court

1. The application be dismissed.

THE COURT DIRECTS THAT:

2. The parties file a joint minute of proposed orders reflecting the Court’s reasons in relation to the s 37AF application, including proposed orders concerning the filing of a generally accessible Court Book, by 4 pm on 9 February 2018.

3. If the parties agree on appropriate orders for costs, and (if applicable) on any lump sum figures for costs, they are to file a joint minute of proposed orders on or before 4 pm on 16 February 2018.

4. In the absence of any joint proposed orders pursuant to paragraph 3 of these orders, on or before 4 pm on 2 March 2018, the parties are to file and serve submissions, limited to five pages, on appropriate orders for costs, including whether any costs orders should be made by way of a lump sum and if so, how that lump sum should be determined.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A SUMMARY OF THE FACTUAL CONTEXT FOR THIS PROCEEDING

[6]

Gambling on poker machines: a brief introduction

[8]

Crown’s business

[18]

Aristocrat’s business

[21]

The applicant and her lay witnesses (other than Dr Charles Livingstone)

[25]

The Dolphin Treasure EGM

[47]

The appearance of the Dolphin Treasure

[51]

The way the Dolphin Treasure functions: in general

[71]

The way the Dolphin Treasure functions: variation in the number of symbols on each reel

[84]

The way the Dolphin Treasure functions: variation in the frequency of symbols

[88]

The evidence about which witnesses have played the Dolphin Treasure

[93]

RELEVANT LEGISLATIVE PROVISIONS

[97]

The relevant ACL contravention provisions

[97]

The regulation of gambling in Victoria

[104]

THE APPLICANT’S ALLEGATIONS

[146]

The s 18 claim

[147]

The Equal Reel Size Representation

[153]

The Equal Symbol Distribution Representation

[155]

The Risk Representation

[157]

Members of the class to whom representations are said to be made

[160]

The s 18 claim as against Crown

[161]

The s 18 claim as against Aristocrat

[165]

The ss 20 and 21 claims

[167]

The s 20 claim against Crown

[173]

The s 20 claim against Aristocrat

[174]

The s 21 claim against Crown

[176]

The s 21 claim against Aristocrat

[178]

THE RESPONDENT’S OVERARCHING ARGUMENTS

[180]

CROWN’S RESPONSE TO THE INDIVIDUAL ALLEGATIONS

[187]

To the s 18 claim

[187]

To the s 20 claim

[196]

To the s 21 claim

[205]

The s 131C argument

[209]

ARISTOCRAT’S RESPONSE TO THE INDIVIDUAL ALLEGATIONS

[211]

To the s 18 claim

[211]

To the s 20 claim

[217]

To the s 21 claim

[225]

Aristocrat’s “formal” submissions

[229]

THE EVIDENCE

[232]

Applicant

[233]

Crown

[238]

Aristocrat

[240]

The joint expert report

[242]

The documentary evidence

[243]

The Court’s view at Crown Casino

[246]

Confidentiality orders

[249]

Ruling on the proposed s 37AF orders

[263]

THE EXPERT EVIDENCE AND THE CONCURRENT SESSION

[273]

My approach to the expert evidence

[276]

Professor Yücel

[288]

RESOLUTION

[304]

A general observation about my approach to the parties’ arguments

[308]

A general finding on the applicant’s claims

[311]

THE SECTION 18 CLAIM

[325]

What I accept from the applicant’s case

[325]

The class issue

[329]

How the view fits in with the constructed hypothetical gambler

[346]

The Equal Reel Size Representation

[350]

Even Reel Image

[351]

Spinning Reel Sound

[353]

Dispersed Symbols Image

[355]

The Equal Symbol Distribution Representation

[357]

Even Reel Image

[358]

Spinning Reel Sound

[359]

Dispersed Symbols Image

[360]

A submission relevant to both representations

[364]

The function of the “oversize” reel feature and the “starved reel” feature

[365]

The applicant’s reliance on “near misses”

[387]

The Risk Representation

[392]

Nature and function of the RTP

[392]

The alleged Risk representation is made

[412]

The Risk representation may be confusing but is not misleading

[423]

The s 18 claim as against Crown

[447]

The s 18 claim as against Aristocrat

[456]

THE UNCONSCIONABILITY CLAIMS

[460]

General findings

[461]

The pleaded class: “Vulnerable Players”

[464]

Summary of my conclusions

[476]

The section 20 claim

[478]

No “special disadvantage” established

[485]

The section 21 claim

[507]

None of the impugned conduct has the necessary unconscionable quality

[507]

Rejection of Aristocrat’s separate submission under s 21

[529]

The introduction of near misses into the ss 20 and 21 cases

[531]

CONCLUSIONS ON THE APPLICANT’S CAUSES OF ACTION

[537]

WHAT IS NOT DECIDED

[539]

The interrelationship between the ACL and the regulatory scheme in relation to gambling

[539]

The role of cognitive factors in gambling disorders and in those with difficulty controlling their gambling

[542]

The “contribution” of the identified features of the Dolphin Treasure EGM to the development or persistence of gambling disorder, or difficulties in controlling gambling activity

[546]

Accessorial liability of Aristocrat

[551]

Implications of findings of contravention

[552]

Appropriate relief

[553]

ORDERS AND COSTS

[554]

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The reel table shows that for many symbols, there is one reel where the symbol appears only once, and is otherwise unevenly distributed across the reels. The number and distribution of symbols affects the probabilities of symbols appearing in lines, after being subject to the random number generator.The evidence about which witnesses have played the Dolphin Treasure Some lay witnesses gave some evidence about their playing of the Dolphin Treasure. Likewise some lay witnesses gave some evidence about playing poker machines at Crown Casino, without specifying the Dolphin Treasure EGM. In this section I summarise that evidence. Although the applicant contends, and the respondents broadly accept (subject to their submissions about the effect on the applicant’s persuasive burden, to which I return later in these reasons) that this kind of evidence was not necessary at least for the s 18 claim, this evidence was capable of making a material contribution to the proof of the applicant’s case. The following table summarises which lay witnesses played the Dolphin Treasure EGM, where they played it, and the frequency they played. Before turning to a description of the applicant’s claims, it is appropriate to set out the applicable legislative provisions.RELEVANT LEGISLATIVE PROVISIONSThe relevant ACL contravention provisions The applicant alleges contraventions of ss 18, 20 and 21 of the ACL. Section 18 prohibits misleading or deceptive conduct:18 Misleading or deceptive conduct(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.(2)Nothing in Part 3‑1 (which is about unfair practices) limits by implication subsection (1).Note: For rules relating to representations as to the country of origin of goods, see Part 5‑3. Section 20 prohibits unconscionable conduct “within the meaning of the unwritten law”:20 Unconscionable conduct within the meaning of the unwritten law(1)A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.Note: A pecuniary penalty may be imposed for a contravention of this subsection.(2) This section does not apply to conduct that is prohibited by section 21. Section 21 also prohibits unconscionable conduct, as defined by its own terms:21 Unconscionable conduct in connection with goods or services(1) A person must not, in trade or commerce, in connection with:(a)the supply or possible supply of goods or services to a person (other than a listed public company); or(b)the acquisition or possible acquisition of goods or services from a person (other than a listed public company);engage in conduct that is, in all the circumstances, unconscionable.(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.(3)For the purpose of determining whether a person has contravened subsection (1):(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.(4) It is the intention of the Parliament that:(a)this section is not limited by the unwritten law relating to unconscionable conduct; and(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and(c)in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:(i) the terms of the contract; and(ii)the manner in which and the extent to which the contract is carried out;and is not limited to consideration of the circumstances relating to formation of the contract.

Decision

Reasons for decision

Unsurprisingly, there was vigorous objection by both respondents about the new turn taken by the applicant in closing submissions. No leave was sought to refine or further develop the applicant’s pleadings to include these allegations about near misses. I have not considered them in reaching my conclusions.CONCLUSIONS ON THE APPLICANT’S CAUSES OF ACTION I have concluded that none of the applicant’s causes of action are made out. In relation to the s 18 allegations, I find that the Equal Reel Size and the Equal Symbol Distribution representations are not made out. Although I have found the Risk representation is made, I find that at most, it gives rise to some initial confusion or misapprehension. The making of that representation does not constitute to misleading or deceptive conduct within the terms of s 18 because any initial impression or misapprehension would be dispelled once a gambler starts using the EGM, and or alternatively looks at further information available in the form of brochures on the casino floor. In relation to the ss 20 and 21 allegations, neither of these are made out, because on the evidence the conduct of Crown or Aristocrat cannot be characterised as unconscionable, whether in the meaning of the unwritten law or under s 21. Further, her claim remains at a hypothetical level in relation to the class of consumers she has chosen to identify.WHAT IS NOT DECIDEDThe interrelationship between the ACL and the regulatory scheme in relation to gambling Subject to my findings at [515]-[519] above, it has not been necessary for me to consider the respondents’ submissions about the effects of the detailed regulatory and legislative scheme in Victoria governing the provision of EGMs, including the Dolphin Treasure, to the gambling public. If I had found the alleged representations were made, and were misleading or deceptive, or there was conduct capable of being characterised as unconscionable for the purposes of s 20 or s 21 of the ACL, or both, then it would have been necessary to consider in some detail the interrelationship between the regulatory scheme and the ACL before finally determining whether there were contraventions of those provisions. For example, in relation to the Risk representation, Ms Bryant gave evidence that, in deciding whether to approve a machine or not (or approve a new version) the regulator would be unlikely to accept any departure from the wording suggested in the National Standard about the RTP. As I have found, that wording contains the same text as the Risk representation on the Dolphin Treasure EGM. Whether these sorts of matters go only to relief rather than contravention would have been one of the complex issues to be determined. Findings of contravention would have also brought into sharp focus Crown’s submissions about s 131C. As it stands, I do not need to deal with Crown’s submissions about s 131C. Although there may be other circumstances where the existence of a regulatory scheme governing conduct of a person subject to the terms of ss 18, 20 and 21 of the ACL will not prevent findings of contravention (see for instance, cases involving real estate: Director of Consumer Affairs Victoria v Hocking Stuart (Richmond) Pty Ltd [2016] FCA 1184; Director of Consumer Affairs Victoria v Manningham Property Group Pty Ltd [2017] FCA 1448; or cases involving legal practitioners: Australian Competition and Consumer Commission v Sampson [2011] FCA 1165; Nixon v Slater & Gordon [2000] FCA 531), in those circumstances, the impugned conduct could be said to be either implicitly prohibited by the regulatory scheme (such as underquoting on estimates for sale prices) or simply not dealt with at all by the scheme. Further, taking the real estate cases as an example, the level of prescription in the regulatory scheme is, relevantly, less. A good example of the specific nature of the overlap is the content and operation of V9.1.1 of the Victorian Appendix, which I have set out at [140] above. That requires an assessor to be satisfied, amongst other things, that the artwork on an EGM is not misleading or deceptive. Whether what appears on the screens through the “Even Reel Image” and the Dispersed Symbols Image” is artwork would have been another issue, but the potential for inconsistency as between the operation of approvals under the Victorian Appendix and the ACL is clear. The same is true of para 3.9.57 and 3.9.57a of the National Standard, which deal with “fairness”. No doubt there are arguments about the construction of these standards which may mean they do not engage with the applicant’s arguments, but all this highlights why the Court should not embark on any determination of all of these matters until a proceeding requires that to be done.

Ratio Decidendi

Legal Principle Established

The applicant seeks declaratory relief under s 21 of the Federal Court of Australia Act (Cth), which provides:21 Declarations of right(1)The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed.(2)A suit is not open to objection on the ground that a declaratory order only is sought. She also seeks injunctive relief under s 232 of the ACL, which provides:232 Injunctions(1)A court may grant an injunction, in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:(a) a contravention of a provision of Chapter 2, 3 or 4; or(b) attempting to contravene such a provision; or(c)aiding, abetting, counselling or procuring a person to contravene such a provision; or(d)inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or(f) conspiring with others to contravene such a provision.(2)The court may grant the injunction on application by the regulator or any other person.(3)Subsection (1) applies in relation to conduct constituted by applying or relying on, or purporting to apply or rely on, a term of a contract that has been declared under section 250 to be an unfair term as if the conduct were a contravention of a provision of Chapter 2.(4)The power of the court to grant an injunction under subsection (1) restraining a person from engaging in conduct may be exercised:(a)whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and(b)whether or not the person has previously engaged in conduct of that kind; and(c)whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind.(5)Without limiting subsection (1), the court may grant an injunction under that subsection restraining a person from carrying on a business or supplying goods or services (whether or not as part of, or incidental to, the carrying on of another business):(a) for a specified period; or(b) except on specified terms and conditions.(6)Without limiting subsection (1), the court may grant an injunction under that subsection requiring a person to do any of the following:(a) refund money;(b) transfer property;(c) honour a promise;(d) destroy or dispose of goods.(7)The power of the court to grant an injunction under subsection (1) requiring a person to do an act or thing may be exercised:(a)whether or not it appears to the court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; and(b)whether or not the person has previously refused or failed to do that act or thing; and(c)whether or not there is an imminent danger of substantial damage to any other person if the person refuses or fails to do that act or thing.