Kakavas v Crown Melbourne Limited

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2009 3907

HARRY KAKAVAS
HARRY KAKAVAS	Appellant
v
CROWN MELBOURNE LIMITED (ACN 006 973 262)	First Respondent
and
JOHN WILLIAMS	Second Respondent
and
ROWEN CRAIGIE	Third Respondent

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JUDGES:	MANDIE and BONGIORNO JJA and ALMOND AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 June 2011, 15 June 2011 and 16 June 2011
DATE OF JUDGMENT:	21 May 2012
MEDIUM NEUTRAL CITATION:	[2012] VSCA 95
JUDGMENT APPEALED FROM:	Kakavas v Crown Melbourne Ltd & Ors [2009] VSC 559 (Harper J)

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EQUITY – Unconscionable conduct – Appellant gambled at Crown Casino over 14-month period and lost $20.5 million – Appellant alleged to suffer from psychiatric condition known as ‘pathological gambling’ – Appellant also subject to ‘interstate exclusion order’ for purposes of Casino Control Act 1991 at all relevant times – Whether appellant suffered from special disability or disadvantage in his dealings with first respondent – Whether first respondent had actual or constructive knowledge of any special disability or disadvantage – Whether gambling transactions were fair, just and reasonable – Appeal dismissed – Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 – Blomley v Ryan (1956) 99 CLR 362 – Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 – Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 – Casino Control Act 1991 ss 70(1), 72(2A), 76, 77(3), 78B(2) – Casino Control Act 1992 (NSW) s 81 – Trade Practices Act 1974 (Cth) s 52.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr A Myers QC with Mr P Zappia	Strongman & Crouch
For the Respondents	Mr N Young QC with Mr P Collinson SC and Mr N Hopkins	Minter Ellison

MANDIE JA:

I have had the benefit of reading in draft the reasons for judgment of Bongiorno JA and I adopt his Honour’s statement of the background facts in this appeal.

The plaintiff’s[1] claim as pleaded

[1]I will refer to Mr Kakavas as either ‘the plaintiff’ or ‘the appellant’.

The plaintiff’s claim as pleaded was contained in his second further amended statement of claim (‘the statement of claim’) delivered pursuant to leave granted by the trial judge on 25 August 2008.

The central allegation of the plaintiff was that, in or about July 2004 and at all times thereafter, he suffered from a psychiatric condition known as ‘pathological gambling’ characterised by a continuous impairment of his ability to control the frequency with which he gambled and the amount of money that he wagered.[2] The particulars of this allegation referred to the diagnostic criteria for pathological gambling set out in a manual of the American Psychiatrists Association (‘DSM-IV’) including the following criteria:

Persistent and recurrent maladaptive gambling behaviour, as indicated by excessive preoccupation with gambling; the need to increase amounts gambled to generate the desired level of excitement; continued gambling in an attempt to recoup losses; lying to conceal the extent of gambling; repeated unsuccessful attempts to cease and the commission of illegal acts to finance gambling.

[2]Para 12 of the statement of claim.

It was alleged that the plaintiff suffered from a special disability having characteristics in line with those criteria in that his ability to control the frequency with which he gambled was significantly impaired, his ability to control the amount of money that he wagered was significantly impaired, he was preoccupied by gambling to an abnormal extent and his ability to make rational decisions concerning the frequency with which he gambled and the amount of money that he wagered was significantly impaired.[3]
[3]Para 13 of the statement of claim.

It was alleged that Crown knew that there existed a psychiatric condition known as pathological gambling and that this condition was characterised by a continuous or periodic impairment of a patron’s ability to control the frequency with which he gambled and the amount of money wagered.[4] The appended particulars alleged that Crown’s knowledge was a matter of inference to be drawn from a number of matters.
[4]Para 14 of the statement of claim.

It was alleged that 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.[5] This special disadvantage was said to exist by reason of the plaintiff’s pathological gambling condition.[6]
[5]Para 26 of the statement of claim.
[6]As referred to in paras 12 and 13 of the statement of claim.

It was alleged[7] that at all times after July 2004 Crown knew of this special disadvantage by reason of its knowledge of, inter alia, the following matters:
[7]Para 27 of the statement of claim.

·the existence of a psychiatric condition known as pathological gambling;[8]
·a number of facts relating to the plaintiff, including his gambling and associated history with Crown in 1994 and 1995[9] and in 1998,[10] the exclusion order against him issued in or about September 2000 in New South Wales,[11] the fact that the NSW Exclusion Order had (by reason of amendments to the Casino Control Act 1991 (‘CCA’)) become an Interstate Exclusion Order (‘IEO’) with consequences that impacted on the plaintiff’s entitlement to enter or gamble at Crown[12] and that the plaintiff had self-excluded from various interstate casinos in the period 2000 to 2004;[13]
·the fact that the plaintiff had engaged in reckless and excessive gambling in Las Vegas during 2004 and was wagering and losing enormous amounts of money at casinos in Las Vegas and that such conduct was indicative of a person suffering from pathological gambling;[14]
·the fact that the plaintiff’s gambling conduct in Las Vegas indicated that he was or may have been suffering from pathological gambling and that he had previously sought the assistance of Crown because of his uncontrollable and compulsive need to gamble and related matters;[15]
·the fact that the plaintiff would be vulnerable to approaches by Crown to recommence and would be easily exploited into recommencing gambling at the casino;[16]
·that if permitted to enter the casino, the plaintiff would engage in extravagant gambling over extended periods of time;[17]
·that if the plaintiff was permitted to gamble at the casino, and to wager bets up to $300,000 per hand, he would not be able to control his urge to gamble and would probably incur enormous gambling losses;[18]
·that the plaintiff was the subject of an IEO, that he was prohibited from entering or remaining on Crown premises under the CCA, and that any winnings that the plaintiff may have achieved at the casino would be forfeited to the State (by reason of the provisions of the CCA relating to the IEO).[19]

[8]Para 14 of the statement of claim.

[9]See paras 4 and 5 of the statement of claim.

[10]See paras 6 and 7 of the statement of claim.

[11]See para 8 of the statement of claim.

[12]See paras 9 and 10 of the statement of claim.

[13]See para 11 of the statement of claim.

[14]See para 16(1) of the statement of claim.

[15]See para 16(2), (3), (4) and (5) of the statement of claim.

[16]See para 16(6) of the statement of claim.

[17]See para 16(8) of the statement of claim.

[18]See para 16(10) of the statement of claim.

[19]See para 16(12), (13) and (11) of the statement of claim.

Alternatively, it was alleged[20] that by reason of the said knowledge of Crown, Crown knew of facts which would cause a reasonable person to form the opinion that it was more probable than not that there was a psychiatric condition known as pathological gambling and that the plaintiff suffered from a special disability as alleged.
[20]Para 28 of the statement of claim.

It was then alleged that, in the above circumstances, certain conduct of Crown was unconscionable within the meaning of the unwritten law and in contravention of s 51AA of the Trade Practices Act 1974 (Cth) (‘TPA’).[21] The conduct of Crown alleged to be unconscionable was as follows:
[21]Para 29 of the statement of claim.

·Crown had devised a scheme designed to lure the plaintiff back to the Casino;[22]
·As at 23 December 2004, Crown knew that there was no advice or opinion from a qualified person to the effect that the plaintiff was no longer a compulsive gambler;[23]
·Crown had committed a number of relevant contraventions of the CCA;[24]
·In order to induce the plaintiff to continue to gamble at the casino, Crown supplied cash and various other specified inducements to the plaintiff;[25]
·Crown procured the plaintiff to enter and remain in the casino and gamble at the casino thereby causing him to contravene provisions of the CCA;[26]
·By reason of the foregoing conduct of Crown, Crown won approximately $36M from the plaintiff by means of ill practice within the meaning of the Gambling Regulation Act 2003;[27]
·Crown did not advise the plaintiff that it was unlawful for him to gamble at the casino while the IEO applied and that by reason of the IEO and the provisions of the CCA all of his winnings would be forfeited to the State of Victoria and Crown procured him to re-enter the casino and commence gambling when it knew that there was no material from a suitably qualified professional person supporting his ability to control his gambling urges and condition.[28]

[22]See paras 17 and 18 of the statement of claim.

[23]See para 18A of the statement of claim.

[24]See para 19 of the statement of claim.

[25]See para 20 of the statement of claim.

[26]See para 21 of the statement of claim.

[27]See para 24 of the statement of claim.

[28]See para 25 of the statement of claim.

Finally, it was alleged that, had Crown not contravened s 51AA of the TPA, the plaintiff would not have entered the casino, would not have gambled and would not have incurred the gambling losses[29] and that, by reason of Crown’s unconscionable conduct, the plaintiff had suffered loss and damage, being the gambling losses.[30]
[29]Para 30 of the statement of claim.
[30]Para 31 of the statement of claim.

The plaintiff claimed damages against Crown pursuant to s 82 of the TPA, alternatively pursuant to s 87(2)(d) of the TPA. Alternatively, the plaintiff claimed equitable compensation by reason of Crown’s unconscionable conduct.

It is unnecessary to refer in detail to Crown’s defence and counterclaim. It is sufficient to note that, while a number of particular factual matters were admitted, there was no admission of the fundamental allegations, save that Crown did admit that at all relevant times it was aware that there was literature identifying a condition described as pathological gambling which had the characteristics set out in DSM-IV.

The plaintiff’s opening

At the very outset of the trial, senior counsel for the plaintiff, Mr Myers QC, who also appeared for the appellant on this appeal, said to the trial judge:

This is a simple case. The first issue that your Honour will have to determine is whether Mr Kakavas was subject to a disability in the eyes of the law. That means relevantly, were his circumstances such that he was not able to judge what was in his own best interest?
He was a compulsive gambler, a pathological gambler in the words of the medical literature and he had a condition in that regard recognised in medical literature. He was subject to a second disability of a different kind. He was an excluded interstate person within the meaning of the Casino Control Act…
The important thing is that an excluded interstate person in Mr Kakavas’ case, was not entitled to retain any of his winnings. Crown knew that, Mr Kakavas didn’t. They didn’t tell him, they let him gamble knowing that if he won, his winnings would be forfeited to the State of Victoria.

I note that the statement of claim did not rely upon the existence and effect of the IEO as constituting a relevant disability. The statement of claim certainly referred to the existence of the IEO and of the statutory consequences but only on two bases. The first basis was that Crown’s knowledge of the IEO was relevant to the question whether Crown knew of the plaintiff’s special disadvantage constituted by his psychiatric condition. The second basis was that the conduct of Crown in relation to the IEO was part of the conduct alleged to be unconscionable.

Closing submissions at trial

The plaintiff provided the trial judge with substantial written submissions. In those submissions, it was contended that it was not essential for the plaintiff to establish that he was a pathological gambler in order to establish a relevant special disadvantage. It was submitted that even ‘problem gamblers’ who did not meet the criteria to be classified as pathological gamblers would have varying degrees of a loss of control over their gambling behaviour. It was further submitted that the plaintiff’s special disability consisted not only of an extreme pathological gambling addiction but also a ‘situational disability’ in the form of an inability to win at Crown (i.e. as a consequence of the IEO and the provisions of the CCA).

Crown (and the other defendants below) also provided the trial judge with substantial written submissions contesting each element of the plaintiff’s claim. In relation to the ‘situational disability’ case based on the IEO, Crown submitted that this was not part of the plaintiff’s pleaded case and could not be advanced and that both parties in running insisted that the case be conducted on the pleadings. The submissions went on to contend that the so-called situational disability could not fall within the concept of a special disability in equity.

Unconscionable conduct

The plaintiff’s cause of action was based on s 51AA(1) of the TPA, as then in force, which provided:

A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

In contending that the conduct of Crown was unconscionable, the plaintiff relied on the equitable doctrine enunciated in Amadio. Deane J described[31] the jurisdiction as extending:
[31]The Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 (‘Amadio’), 474.

… generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it.

and that:

Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable…

Deane J went on to say that unconscionable dealing looked to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so and then said:[32]

The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v. Ryan, Fullagar J. listed some examples of such disability: ‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary’. As Fullagar J. remarked, the common characteristic of such adverse circumstances ‘seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other’.

[32]Amadio, 474 – 475.

In Amadio, Deane J considered that Mr and Mrs Amadio were under a relevant disability in dealing with the bank because they were the weaker party to the transaction having regard to their personal circumstances, including their age, their limited grasp of written English and a number of other factors that he identified.[33] Deane J next considered whether that special disability of the Amadios was sufficiently evident to the bank to make it prima facie unfair or unconscientious of the bank to procure their entry into the transaction. His Honour considered that the bank was at least put on inquiry and the case was one where wilful ignorance was the same as knowledge.[34] The onus was thus cast on the bank to show that the transaction was fair, just and reasonable.
[33]Amadio, 475 – 477.
[34]Amadio, 479.

Mason J agreed with Deane J. He said that relief on the ground of ‘unconscionable conduct’ was usually taken to refer to the class of case in which a party made unconscientious use of his superior position or bargaining power to the detriment of a party who suffered from some special disability or was placed in some special situation of disadvantage.[35] His Honour said:

I qualify the word ‘disadvantage’ by the adjective ‘special’ in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order 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.
[35]Amadio, 461.

Pathological gambling condition

The judge considered whether the expert evidence called on behalf of the plaintiff at trial was relevant to the question whether he was under a special disability. His Honour said that it was clear that Mr Kakavas was ‘a problem, and indeed very possibly a pathological, gambler’ and that his judgment was overly influenced by a desire to gamble.[36] His Honour accepted the expert evidence that there was a condition known as pathological gambling, which was either a psychiatric condition or a behavioural disorder and that the condition was described in DSM-IV.[37] His Honour accepted that ‘some people suffer from a persistent and recurrent maladaptive pattern of gambling behaviour characterised by their failure to control the urge to gamble, leading to significant deleterious psychosocial consequences in the domains of personal, familial, financial, vocational and legal functioning’ and that Mr Kakavas was one such person.[38]
[36]Kakavas v Crown Melbourne Ltd &Ors [2009] VSC 559 [440].
[37]Kakavas v Crown Melbourne Ltd &Ors [2009] VSC 559 [443].
[38]Kakavas v Crown Melbourne Ltd &Ors [2009] VSC 559 [443]-[444].

However, his Honour said that ‘the evidence concerning Mr Kakavas’ standing as a pathological– or, at least, problem– gambler is not particularly relevant.’[39] It is apparent that his Honour considered the plaintiff’s standing as a pathological or problem gambler as ‘not particularly relevant’ for a variety of reasons but the substance of those reasons was that his Honour was of the view, on the evidence, that the plaintiff’s condition, however characterised, did not place him in a relevant position of special disability and that, in any event, Crown did not know, either actually or constructively, that the plaintiff was under any special disability. In these respects, his Honour said that, in late 2004 and early 2005, the plaintiff did not ‘present’ as such and further that ‘his level of functioning in each of the personal, familial, financial, vocational and legal levels was at that time unremarkable’ and his Honour went on to say:[40]

He was in a steady relationship with the woman who was to become, and remains, his wife. He was on excellent terms with his parents, and when in September 2005 his father fell gravely ill with heart disease, Mr Kakavas devoted much of his time in caring for the patient. His finances were, at least to outward appearances and perhaps in fact, in sound, perhaps excellent, shape. His business appeared to be flourishing. And he was respected generally on the Gold Coast, then his home territory, as a successful and law‑abiding citizen.

[39]Kakavas v Crown Melbourne Ltd &Ors [2009] VSC 559 [442].

[40]Kakavas v Crown Melbourne Ltd &Ors [2009] VSC 559 [444].

Crown submitted that, although the judge had not spelled it out, his Honour’s conclusion that the expert evidence was not particularly relevant derived in part from the very content of that evidence. Crown submitted that all of the experts accepted the proposition that the diagnosis of somebody as a pathological gambler was simply the application of a label or classification and conveyed nothing about the individual’s ability to control his behaviour at any given time and that this was also clear from the DSM-IV manual. In that manual, under the heading ‘Limitations of the Categorical Approach’, it is stated that DSM-IV is a categorical classification and that:

…there is no assumption that each category of mental disorder is a completely discrete entity with absolute boundaries dividing it from other mental disorders or from no mental disorder. There is also no assumption that all individuals described as having the same mental disorder are alike in all important ways.

Further, in the manual, under the headings ‘Use of Clinical Judgment’ and ‘Use of DSM-IV in Forensic Settings’ it is stated that DSM-IV is a classification of mental disorders that was developed for use in clinical, educational, and research setting and that:

When the DSM-IV categories, criteria and textual descriptions are employed for forensic purposes, there are significant risks that diagnostic information will be misused or misunderstood. These dangers arise because of the imperfect fit between the questions of ultimate concern to the law and the information contained in a clinical diagnosis… In determining whether an individual meets a specified legal standard…, additional information is usually required beyond that contained in the DSM-IV diagnosis. This might include information about the individual’s functional impairments and how these impairments affect the particular abilities in question. It is precisely because impairments, abilities, and disabilities vary widely within each diagnostic category that assignment of a particular diagnosis does not imply a specific level of impairment or disability.
…
Moreover, the fact that an individual’s presentation meets the criteria for a DSM-IV diagnosis does not carry any necessary implication regarding the individual’s degree of control over the behaviours that may be associated with the disorder. Even when diminished control over one’s behaviour is a feature of the disorder, having diagnosis of itself does not demonstrate that a particular individual is (or was) unable to control his or her behaviour at a particular time.

Crown also referred to the key passage in the manual relating to pathological gambling under the heading ‘Diagnostic Features’ that:

The essential feature of Pathological Gambling is persistent and recurrent maladaptive gambling behaviour … that disrupts personal, family, or vocational pursuits.

In that regard, Crown pointed to the judge’s finding that the plaintiff’s level of functioning was in all the relevant respects at the relevant time ‘unremarkable’.

I agree with those submissions by Crown. His Honour’s finding about the plaintiff’s pathological gambling condition (taking it at its highest) did not necessitate a finding that the plaintiff was in a position of special disability when dealing with Crown or, more precisely, when entering his various gambling transactions (i.e. making his wagers). His Honour was entitled to consider the whole of the evidence about the plaintiff’s behaviour and conduct before deciding whether he was in a position of special disability or disadvantage.

Special disability or disadvantage

The appellant submitted that the trial judge erroneously concluded that the appellant was not in a position of special disadvantage vis-à-vis Crown and his Honour should have found that the appellant was in such position of special disadvantage because of, inter alia, his psychiatric condition of pathological gambling. The appellant submitted that his Honour erred in his said conclusion because he rejected established law. The appellant said that the established law was that a person is at a special disadvantage if there exist circumstances which affect his ability to conserve his own interests, or seriously affect his ability to make a judgment in his own best interests.[41] This was a subjective test and the categories of circumstances which might have that effect were not closed.
[41]Citing Blomley v Ryan (1954) 99 CLR 362, 415 (per Kitto J) (‘Blomley’); Amadio, 405 (per Mason J).

The appellant said that the judge accepted the evidence that there was a psychiatric condition of pathological gambling and that the appellant suffered that condition at all relevant times. The appellant submitted that, applying the established law, the judge should therefore have concluded that the appellant suffered from a special disadvantage. The appellant submitted that the judge had rejected the established law. His Honour doubted whether an examination of disadvantage was best approached by seeking to ascertain whether there existed in the vulnerable party a diminished ability to make a judgment about his or her own best interests, or about how to conserve them.[42] His Honour devised a wrong and essentially objective test of whether there was reasonable equality between the parties which, the appellant said, was further glossed with the phrase ‘of bargaining power’.[43]
[42]Kakavas v Crown Melbourne Ltd & Ors [2009] VSC 559 [432].
[43]Kakavas v Crown Melbourne Ltd & Ors [2009] VSC 559 [434], [16].

Crown submitted in answer that the judge had correctly applied the established law.[44] Crown said that his Honour found that the parties met on equal terms, despite the appellant’s gambling problems. Crown submitted that, in any event, it was clear that the judge would have arrived at the same result on the test advanced by the appellant, namely whether the appellant’s gambling condition seriously affected his ability to make a judgment as to his own best interests. The judge did not accept that a diagnosis of problem or pathological gambling meant, of itself, that an individual suffered from a special disability.
[44]Citing Amadio at 474 (Deane J) and Blomley at 405 (Fullagar J) and 428 (Kitto J).

Crown went on to submit (in its written outline of submissions) as follows:

12. The primary judge’s factual findings bear out his conclusion that a DSM-IV diagnosis does not in itself establish a special disability. His Honour found that the appellant’s conduct demonstrated that he was in fact able to conserve his own interests and that his ability to make a judgment in his own best interests was not seriously affected. His Honour was not satisfied that the appellant found it ‘virtually impossible to resist his urges to resume gambling’ and observed:

There are a number of telling instances where he was perfectly capable of resisting the urge to lay one more bet, and where he demonstrated an ability to play in a controlled manner consonant with the behaviour of a recreational gambler.
13. In particular, His Honour found that the appellant:
(a) was able to self exclude from the Casino, having done so previously, and had a self-avowed intention to do so again if he had a relapse’ (as indicated in the Brooks report);
(b) was permitted to attend Crown’s premises from January 2005 but did not immediately commence his gambling activities at Crown, instead attending Crown on 2 occasions without gambling before commencing to gamble in June 2005;
(c) subsequently stayed at Crown on occasions without gambling;
(d) vigorously negotiated the terms upon which he would gamble at Crown before every trip to Crown, with the appellant himself describing it as like ‘negotiating with BHP ... just unbelievable’;
(e) made threats to, and in fact did, withhold his custom from Crown or direct it to other casinos;
(f) concluded gambling sessions with funds (in some cases, significant wins) which he could have, but did not, immediately gamble and took breaks in his gambling sessions, for example, to dine with friends;
(g) exhibited control in relation to various aspects of his gambling activities;
(h) has not gambled since November 2006 despite his prognosis as a problem or ‘very possibly’ a pathological gambler.’

14. The appellant submits that His Honour considered the wrong transactions in assessing the issue of special disadvantage and suggests that the relevant transactions were the wagering transactions. However, this is an even less helpful proposition for the appellant as, from a transactional perspective, the appellant received full value for his wagers and had the same odds of winning or losing a particular transaction’ (i.e. a wager) as any other gambler. In fact, the appellant was better off than most gamblers as he, like other ‘high-rollers’, had negotiated an agreement to be paid rebates or commissions on his losses. As Fullagar J stated in Blomley v Ryan in relation to the issue of the adequacy of consideration, ‘It will almost always, I think, be ... an important ingredient in considering whether a person did exercise any degree of judgment in making a contract, or whether there is a degree of unfairness in accepting the contract..
15. The appellant’s submissions on appeal make particular reference to a period of gambling from 10 March 2006 to 11 July 2006 during which the appellant incurred large losses. This is said to be the ‘clearest possible example of Crown being advantaged by the Appellant’s disability’. The appellant’s suggestion that he lost continuously during this period is wrong. Between 10 and 13 March 2006 the appellant had a significant winning run which saw him depart Crown with a cheque for $10 million representing winnings and commission.

I do not accept the appellant’s submission that his Honour rejected established law although, contrary to what his Honour thought, I do not discern there to be any real difference between the formulations of Mason J and Deane J. Deane J emphasised that the special disability had to be such that there was an absence of any reasonable degree of equality between the parties but, in reaching the conclusion that there was such a lack of equality, his Honour considered those personal circumstances of the Amadios that showed that they were unable to protect their own interests. Mason J also referred to the use of a superior position or bargaining power that existed by virtue of the innocent party’s lack of ability to make a judgment as to his own best interests. In my opinion, the trial judge, although expressing a preference for a lack of equality of bargaining power test, also had proper regard to the plaintiff’s ability to protect his own interests in the relevant transactions (i.e. the wagering transactions).[45]
[45]The appellant, throughout his submissions, emphasised that the relevant transactions were the wagering transactions and not any of the prior negotiations between the appellant and Crown, or the agreements reached between them that established the basis upon which his gambling sessions were conducted.

In my opinion, the appellant has failed to demonstrate that the judge’s conclusion that the appellant was not in a position of special disadvantage was erroneous. The appellant’s argument was that he was in a situation of special disability or disadvantage because he lacked the ability to control the frequency with which he gambled and the amount of money that he wagered or to make rational decisions about those matters. The judge rejected that argument and in my view was entitled on the evidence to do so. Further, the special disability or disadvantage must be one that exists ‘in dealing with the other party’ and that puts the person at a disadvantage in dealing with that other party. Here, the wagers were standard gambling transactions and Crown had no greater advantage over the appellant than it had over any other gambler. The house had an edge as the appellant well knew. If the appellant had gambled less frequently, he may have won less or he may have lost less. If the appellant’s wagers had been of smaller amounts, he may have won less or he may have lost less. No doubt there was some limit on what the appellant could afford to lose (although it is not clear on the evidence what that limit was) and if the appellant had gambled less frequently or in smaller amounts, that limit may have taken longer to reach (assuming that he was ‘unlucky’). In the long run, the appellant was neither more likely nor less likely to win than any other gambler. These considerations also show that the wagering transactions were in any event not unfair, unjust or unreasonable as required by the Amadio doctrine.

Other issues

On all other issues, I agree with Bongiorno JA and do not wish to add to what his Honour has said. I would dismiss the appeal.

BONGIORNO JA:

Harry Kakavas was a gambler. In the 14 months between 24 June 2005 and 17 August 2006, he gambled at Crown Casino on 30 separate occasions, turned over $1.479 billion and in the process lost $20.5 million. His game of choice was baccarat, a simple card game, a hand of which occupies only a few seconds. His preference was to bet six-figure sums on a single hand so that, as a result, he won and lost vast sums of money in a very short time.

On 6 March 2007, Mr Kakavas filed a writ in the Supreme Court by which he made a number of claims against Crown Melbourne Limited (‘Crown’), the operator and licensee of Crown Casino. He also sued John Williams, an employee of Crown and chief operating officer of the casino. Later, Rowen Craigie, a former chief operating officer and chief executive officer of Crown, was added as a defendant.

Mr Kakavas’ claim against Crown was originally framed in negligence at common law, unconscionable conduct, misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (‘Trade Practices Act’), breach of statutory duties imposed by the Casino Control Act 1991 and restitution. His claim against the Crown employees was as an accessory to Crown’s alleged contraventions of the Trade Practices Act. His claim for breach of statutory duty was subsequently abandoned and, in an interlocutory ruling, Harper J ruled that his claims in negligence, restitution and his claim pursuant to s 52 of the Trade Practices Act were not maintainable and should be struck out. After further amendment, the proceeding went to trial against the three defendants on a Second Further Amended Statement of Claim filed on 25 August 2008 alleging unconscionable conduct on the part of Crown.

Mr Kakavas’ claim, as eventually pleaded, was based on his having a ‘special disability’; a pathological gambling condition which allegedly impaired his ability to control or make rational decisions about his gambling. He claimed that the defendants knew of that disability and took unconscientious advantage of it by devising a scheme to lure him back to Crown Casino after a long period during which he had not been a patron of that particular gambling establishment, though he had frequented others in Australia and overseas. By encouraging him to gamble at Crown Casino over the period referred to, Crown had, he alleged, unconscientiously exploited his special disability to its financial advantage. As well, Mr Kakavas alleged that he suffered a further disability in that, over the whole of the relevant period, he was the subject of an ‘interstate exclusion order’ (‘IEO’). This order meant that he was legally prohibited from entering a Victorian casino and that, if he did, any winnings he achieved were forfeited to the State. He claimed that Crown took unconscientious advantage of this ‘situational disability’ by encouraging him or permitting him to gamble when he could not win, only lose.

Crown (and its employees) defended Mr Kakavas’ claims. It denied that he was under any ‘special disability’ with respect to his dealings with it. It denied taking unconscientious advantage of him. It claimed that it dealt with him at arms length. It contended that it did not act unconscionably with respect to Mr Kakavas’ status as a person subject to an IEO. It admitted that he gambled at Crown Casino between 24 June 2005 and 17 August 2006 and, by doing so, amassed losses amounting to $20,539,484. Crown also counterclaimed against Mr Kakavas for $1 million and interest in respect of a cheque which it had received from him in August 2006, which was dishonoured on presentation.

The trial

The trial of this proceeding ran over some 27 days between May and August

2009. On 8 December 2009, the trial judge, Harper J, delivered his judgment.[46] His Honour dismissed Mr Kakavas’ claim and upheld Crown’s counterclaim, entering judgment for it for $1 million with interest of $473,084.38 and costs. Mr Kakavas has appealed that judgment to this Court.
[46]Kakavas v Crown Melbourne Ltd [2009] VSC 559.
The appellant’s history with Crown

Although the appellant’s claim was confined to losses he sustained whilst gambling at Crown Casino between the dates referred to, his relationship with Crown, which went back to the opening of the casino in June 1994, was the subject of a very large body of evidence, led to seek to establish knowledge by Crown of the special disability under which he claimed he laboured with respect to his gambling. The trial judge reviewed this evidence at length. It included evidence that, in 1998, he had been convicted and imprisoned, briefly, for defrauding a finance company some years before ― activity which he claimed he engaged in because of an addiction to gambling. In 1995, whilst awaiting trial on this charge, he excluded himself from Crown Casino in accordance with the provisions of the Casino Control Act 1991[47] and, with Crown’s assistance, underwent a program for problem gamblers funded by Crown and conducted by a Dr Jack Darmody. Evidence of his self-exclusion from the casino and his treatment by Dr Darmody, as well as evidence from two psychologists, was all put before the Court which sentenced him on his plea in mitigation.
[47]Section 72(2A) of the Casino Control Act 1991 provides for a person to exclude him or herself from a casino by applying to the casino operator for an order to that effect. Such an order makes entry to the casino by the excluded person illegal.

In August 1996, Dr Darmody referred the appellant to one of those psychologists, Mr Bernard Healey, who specialised in gambling-related problems. Although he saw Mr Healey over some months, the appellant apparently continued to gamble. The trial judge quoted a passage from a report dated 9 June 1997 written by Mr Healey (for forensic purposes associated with his fraud on the finance company) to the effect that, at that time, he considered that the appellant’s problems with gambling were likely to remain with him for a considerable time because of residual anxiety and a:

hypomanic trend still, which in the past had reached distressing proportions, where he had great difficulty controlling the impulsivity associated with his excitability, which of course was significantly exacerbated by the ‘hype’ of the casino environment.

The trial judge noted that although the appellant asserted that he continued to see Mr Healey for treatment ‘many times’, Mr Healey said that the appellant did not in fact see him between June and November 1997. His Honour also found that the appellant continued to gamble at Jupiters Casino on the Gold Coast throughout 1996 and 1997 and, early in 1998, at Star City Casino in Sydney, even though he had represented to Mr Healey over much of this time that he had not been involved in any kind of gambling and that he had excluded himself from all casinos in Australia. Mr Healey reported that the appellant’s ‘attitude, his more settled functioning and clearer objectives’ were consistent with his not gambling and with his maintaining an insight into the notion of his addiction. Not surprisingly, the trial judge considered that the appellant’s lies to Mr Healey made a mockery of any therapeutic relationship between them, although in this litigation the appellant sought to characterise this behaviour as demonstrating the truth and extent of his gambling illness. No doubt the appellant’s lies to Mr Healey were calculated to enable a good rehabilitation case to be put to the sentencing judge on his plea.

In January 1998, the appellant was sentenced to two years’ imprisonment by his Honour Judge Wodak in the County Court with 18 months of that sentence wholly suspended. In sentencing him, his Honour relied on Mr Healey’s reports. He concluded that the appellant had ‘demonstrated a number of positive signs of rehabilitation’ which included his ongoing treatment and his self‑exclusion from casinos. However, in this regard, Mr Healey (and thus Judge Wodak) had been misled by the appellant. He had self‑excluded in respect of Crown Casino whilst awaiting trial but (contrary to what he had told Mr Healey) not in respect of other Australian casinos where, as the trial judge found, he had continued to gamble.

The evidence before the trial judge also included evidence that upon his release from gaol the appellant sought to have his self-exclusion order revoked by Crown. In doing so, he put himself forward to Crown as a man who was no longer troubled by gambling problems. He signed a document by which he gave assurances that he would contact Crown immediately should he have any concerns about his decision to have the self‑exclusion order revoked and agreed to ‘release and indemnify’ Crown from any liability which may arise in connection with the revocation of the order.

The appellant also produced a report dated 3 June 1998 by Mr Tim Watson‑Munro, another psychologist, who had also earlier treated him with psychotherapy. That report stated that, because of the success of this treatment, the appellant no longer felt the pathological compulsion to gamble which had formerly plagued him. Mr Watson‑Munro discussed the appellant’s application to have his self-exclusion order revoked with him and witnessed his signature on it on 3 June 1998. The appellant gave the application to Mr Bill Horman, a senior employee of Crown, and asked for his support in having the self-exclusion order revoked. Internal documentation from within Crown, prepared by Mr Horman, expressed scepticism of the appellant’s claim that he ever had a gambling problem. In one memorandum, Mr Horman referred to a threat by the appellant that he would sue Crown for ‘breach of duty of care’ if it did not accede to his request for the revocation of the self‑exclusion order. Mr Horman described the appellant as ‘a very clever and devious person’. The trial judge accepted that Mr Horman had reservations about the extent of any gambling problem from which the appellant suffered. Although not impressed with much of Mr Horman’s evidence, his Honour accepted that he did not believe that the appellant had ever felt a pathological compulsion to gamble.

Crown did revoke the appellant’s self‑exclusion order on 18 June 1998 but, immediately upon doing so, excluded him from its casino anyway by revoking his licence to enter and remain on the casino premises for an indefinite period. It did this because the appellant and another person, who was a tenant of Crown and a frequent visitor to the casino complex, were involved in a criminal matter which was before the courts ― an armed robbery with which the appellant and the other person were charged, although the appellant was later discharged at committal. The trial judge found that Crown’s action in withdrawing the appellant’s licence to enter and remain on the casino premises was warranted in the circumstances. It was not connected with any concern by Crown as to the appellant’s gambling.

The appellant was outraged by Crown’s action in excluding him from its casino, although the trial judge did not accept his evidence of a conversation he said he had with Mr Horman about his withdrawal of licence (‘WOL’) shortly after that event occurred in which he said Mr Horman referred to his ‘gambling addiction’ as being consistent with a conviction for fraud. His Honour found it unlikely that in a conversation in which he was seeking to gain permission to re-enter the casino the appellant would tell Mr Horman that he had a gambling addiction, as he claimed he did. In any event, the appellant did not gain permission to re-enter the casino although, on at least one occasion, he tried unsuccessfully through another Crown employee to influence Mr Horman to reconsider the situation.

In August 1998, relying on a short report of Mr Watson-Munro, the appellant successfully applied for a self‑exclusion order from Jupiters Casino on the Gold Coast to be revoked. In December 1998, he again applied to Crown to have his WOL revoked. He wrote to Mr Horman seeking to be readmitted to Crown Casino and threatened to ‘use every available legal forum’ to achieve that end. That letter did not refer to any gambling problem, past or present. Crown’s in-house solicitor, Mr Mathey, replied to the appellant, refusing his request. Again, there was no reference by Mr Mathey to any gambling problem suffered by the appellant.

On 15 December 1998, solicitors acting for the appellant, Pryles & Defteros, wrote to Crown concerning the appellant’s ‘exclusion order’ seeking answers to a series of questions. The letter was misconceived ― the appellant’s self-exclusion order had been revoked six months earlier, at which time his licence to enter the casino had been revoked for reasons unconnected with his prior self-exclusion or, for that matter, any problem concerned with his gambling.

Having been disabused of their misconception as to the appellant’s status with respect to Crown Casino, Pryles & Defteros wrote again, on 30 March 1999, seeking permission for their client to re-enter the casino complex but excluding its gaming area. Crown does not appear to have replied to this letter, prompting the appellant to phone its solicitor, Mr Mathey, and threaten that if he was not permitted to re-enter the casino he would sue Crown. Mr Mathey’s note of that conversation records that the appellant also said that if he got into some part of the casino complex it would be difficult for Crown to justify keeping him out of the gaming floor.

Although the trial judge accepted Mr Horman’s evidence that he, Horman, did not believe the appellant’s disavowal of any desire to enter the gaming area, in his evidence at trial the appellant said that, in a conversation with Mr Horman at the time, Horman had raised three issues ― that the DPP might directly present him for trial on the armed robbery charge upon which he had been discharged; that he might have an altercation with another frequent Crown patron, Mr Sui (a former co‑accused on the armed robbery charge), over the same matter; and that he had a gambling problem so that returning to the casino would not be appropriate. Mr Horman denied the suggestion that he referred to any gambling problem the appellant might have in that conversation, which denial the trial judge accepted.

The trial judge found that, in 1999, the appellant gambled every couple of months at Jupiters Casino on the Gold Coast, the Treasury Casino in Brisbane and Star City Casino in Sydney. This gambling was funded from his earnings as a real estate developer or buyer’s agent and from borrowing from friends.

On 6 August 2000, on his own application, the appellant was again excluded from Jupiters Casino, which fact became known to Mr Horman. In September of that year, the New South Wales Police Commissioner directed that he be excluded from Star City Casino pursuant to relevant New South Wales gaming legislation. The appellant gave evidence that he sought Mr Horman’s assistance to find out why he was so excluded but was unsuccessful in this endeavour. He was also unsuccessful in gaining re-entry to Crown Casino in early November 2000 when he again sought revocation of his WOL. Again, he threatened legal action against Crown if it did not accede to his request although he also said that he did not seek access to the gaming areas of the casino. He referred to his need to meet business contacts on the casino premises and to attend real estate auctions held in various rooms in the casino complex as his reasons for seeking readmission.

A memo of Mr Horman of 5 November 2000 directed to other Crown executives, including the third defendant, Mr Craigie, informed them that the appellant had told him he was well-established financially in his business and had ‘about $15M of stock on the go’. Mr Horman also reported in that memo that the appellant had been excluded from Star City Casino and conveyed the same information to the Casino Crime Unit on 16 November. He referred to that exclusion yet again in an internal memorandum of 22 December to the third respondent and Mr Andrew McDonald, another executive of Crown. The trial judge found that Crown was well aware of the appellant’s Star City exclusion in 2000.

The appellant gave evidence of speaking with a Mr McHarg, a close friend of his in the real estate industry, whom he had asked to speak to Mr Horman on his behalf to press for his readmission to the non-gaming areas of Crown Casino. The trial judge found that in taking this action the appellant was exploiting his friendship with Mr McHarg to achieve his true aim of being permitted to gamble at Crown Casino again. Mr McHarg, who was not called as a witness at trial, also told Mr Horman of the appellant’s exclusion from Star City and his then recent self‑exclusion from Jupiters.

In late-January 2001, the appellant’s solicitors again sought revocation of the WOL, although again limited to the non-gaming areas of the casino complex. Mr McHarg supported this application in a note to Mr Horman enclosing a newspaper cutting concerning the appellant’s recent success in business, notably on the Gold Coast property market. The application was again unsuccessful. In April, however, the appellant excluded himself from the Burswood Casino for a period of 24 months, citing as the reason ‘poor service and treatment by some staff’, although he had also been refused a $1 million credit facility which, he finally conceded (after initially denying), was the real reason for his self‑exclusion. Upon being told of the appellant’s self-exclusion from Burswood by the administration of that casino, Mr Horman replied that the appellant had become financially successful but expressed the view that as far as any future gambling was concerned, from a casino’s security perspective, extreme caution was needed.

Between 2001 and 2004, the appellant visited the Adelaide Casino where he was permitted to bet up to $100,000 per hand. However, in September 2004, he self‑excluded from this casino as well. In March 2003, the appellant visited Las Vegas for the first time. He gambled at Bellagio Casino. He told the Court that he lost all the money he took to Bellagio. He could not recall the terms on which he gambled on his first trip but subsequently he received a 15% rebate on his losses, 3% ‘front money’ and incentives such as accommodation, food, beverages and theatre tickets. Provided he deposited $1 million as front money, he was provided with a jet to fly him from Los Angeles to Las Vegas. The hand limit per bet in Las Vegas was 5% of his front money.

During 2003, the appellant travelled to Las Vegas every three or four months and lost vast sums of money, measured in millions of dollars. As the trial judge noted, the appellant’s evidence was that although he described these losses as ‘major losses’ he was able to return to Australia, get his finances in order and plan his next trip. The trial judge considered that this was not the behaviour expected of a person incapable of exercising any control over his gambling.

Shortly after he commenced visiting Las Vegas, in July 2003, an executive of Crown, Mr Ratnam, had a conversation with the appellant on the Gold Coast in which he asked the appellant why he travelled 16 hours to Las Vegas to gamble rather than gambling at Crown Casino. The appellant replied that he was barred from Crown Casino and asked Mr Ratnam to speak to Mr Horman, presumably to have the WOL revoked. The trial judge found that Crown took no steps with respect to the appellant as a result of his conversation with Mr Ratnam.

An internal Crown memorandum of May 2004 from Mr Aldridge, another Crown executive, to Mr Horman recorded that the appellant was ‘travelling very well at the moment’ and frequenting casinos both in Australia and in Las Vegas. Mr Aldridge sought advice from Mr Horman as to what steps Crown would have to take if it decided to let him back into its casino. Mr Horman replied that a couple of months earlier the appellant had told him that he was financially successful and had bought a Maserati to go with his Ferrari. Mr Horman said that he had not heard from the appellant since. In his evidence, the appellant denied the substance of this conversation including that he ever had either a Maserati or a Ferrari. In subsequent discussions with other Crown executives, Mr Horman continued to express the view that if the appellant returned to Crown and there met the other patron concerned with the armed robbery with which he, the appellant, had previously been charged, he ‘would cause considerable harm to that patron’.

On 27 October 2004, Mr Williams sent an email to Messrs Aldridge and Horman in the following terms:

Harry Kakavas has apparently just dropped between $3 and $4 million in Las Vegas last week. Bill and Howard, can you please get a draft copy of the letter in which it would take (sic) for Harry to be let back in to play at Crown. I will then discuss this with Rowen.

In his evidence, Mr Williams said he could not say who told him about the appellant’s Las Vegas activities but that as 2004 progressed the information he received about the appellant became ‘a lot more positive and complimentary’. He gave evidence of having spoken to a number of people about the appellant and of having received a telephone call from Mr Kerry Packer in which the appellant was referred to. He denied that Mr Packer indicated that he wanted the appellant to be playing in Melbourne or that he asked Mr Ratnam to obtain the appellant’s contact details. He said he told Mr Packer that the appellant had spent time in gaol and that that was the reason he was not permitted to come into the casino. Following Mr Williams’ email to Messrs Aldridge and Horman there was discussion among Crown executives as to whether the appellant should be permitted to return to Crown Casino ― that is to say whether his WOL should be revoked.

On 29 October 2004, Crown’s Persons of Interest Committee ― a committee concerned with questions surrounding the withdrawal or renewal of licences to enter the casino premises ― met and discussed the appellant. Several of Crown’s senior executives were present. Mr Horman briefed the meeting on the appellant’s background and said that he, Mr Horman, had changed his position about the appellant’s return to Crown. He thought he should be readmitted as the reason for his exclusion was, by then, well in the past and he had committed no breaches either of his earlier self‑exclusion from the casino or the casino’s subsequent withdrawal of his licence to enter it. Mr Horman said he was also concerned as to the legality of the WOL. Although at least one member of the committee, a Mr Fleming, was against the revocation of the appellant’s WOL, the committee concluded that Crown should allow him to return.

Following that meeting, there was discussion at Crown as to the process to be followed in revoking the appellant’s WOL. Mr Horman was of the view that as well as requiring the appellant to put a request for the WOL to be revoked in writing to Crown, he should produce a report from a psychologist or a psychiatrist. Mr Horman was concerned about the appellant suing Crown and raising a gambling problem although he said he did not believe the appellant had a gambling problem.

At some point after the meeting of 29 October 2004, there was a meeting of another Crown committee ― referred to by the third respondent as the ‘WOL Committee’. That committee also decided to revoke the appellant’s WOL, a decision endorsed by the third respondent. The trial judge was critical of Crown and its organisation, particularly with respect to the lack of proper records of decisions taken and with respect to Mr Horman’s grasp of the detail concerning the activities of Crown committees, which he described as ‘shaky to non-existent’.

The date on which the final decision to readmit the appellant to Crown Casino was made was never definitively determined. Mr Horman did not think that the Persons of Interest Committee or the WOL Committee decided to admit the appellant to Crown Casino at their meetings in October. He thought it was some time later. However, as the trial judge found, that such decision was made is beyond doubt.

Counsel for the appellant submitted at trial that his gambling problem was before whatever committee decided to let him return to Crown Casino and that Mr Fleming, in particular, was strongly opposed to that course, having described the appellant as ‘a risk we don’t need’ and proffering the opinion that if he was to be readmitted it should be at his, the appellant’s, request. Counsel argued that this was a clear indication that Mr Fleming was concerned about the appellant’s gambling problem and the risk for Crown in attempting to lure him back. Mr Fleming was not called as a witness at the trial.

Very shortly after receiving the email of 27 October 2004 already referred to, Mr Aldridge sent an email to Mr Horman in the following terms:

Bill,
Re this, can we make sure that the process, while covering Crown on all the appropriate aspects, is as simple as possible and the letter that we draft is as straight forward as we can make it.
Let’s meet up to discuss.

In his evidence, Mr Aldridge said that he understood at the time that the appellant was still the subject of a self‑exclusion and that customers seeking to revoke such an exclusion often asked Crown to draft the letter requesting re‑entry to the casino. Mr Aldridge said that he was not involved in drafting the letter and was not sure whether he saw it before it was sent.

The appellant told the Court that in about September 2004 he had had a conversation with Mr Ratnam in which Mr Ratnam told him that Mr Williams knew that he was betting in big amounts in Las Vegas and that he knew the sort of incentives Bellagio was giving him. He said that Williams wanted to see him back at Crown. The appellant said that Mr Ratnam told him that Williams would allow him to bet up to $300,000 per hand and would give him 20% of his losses as a rebate. He said that he told Mr Ratnam he would be happy to go back to Crown. The trial judge did not accept the appellant’s evidence that Mr Ratnam told him of incentives Crown was prepared to offer, Mr Ratnam having denied the appellant’s version. That Mr Ratnam did not speak to the appellant by phone as the appellant asserted was supported by telephone records.

Much evidence was given concerning contact between the appellant and Crown executives and employees, including Mr Williams, Mr Ratnam and Mr Doggett, another Crown employee, in the period after September 2004. According to the appellant, in about November 2004, Mr Doggett phoned him and told him that Mr Williams would like to see him back at Crown. The appellant said that when he asked Mr Doggett what was needed to allow him to return, Mr Doggett said:

Harry, because you had gambling problems in the past we would need a letter from a psychologist giving you the all clear to come back and gamble.

The trial judge found that that conversation occurred on 13 November and that it was instigated by the appellant, not by Mr Doggett.

The appellant said that in a subsequent phone call to Mr Doggett, probably in mid‑December 2004, he told Mr Doggett that he had contacted Mr Healey who refused to provide a letter without first examining him. The appellant said Mr Doggett replied that he should ‘try any psychologist, try someone on the Gold Coast’. He said that Mr Doggett also told him that in order to get the ball rolling at Crown he should ‘write a letter to say that I had overcome my gambling problems’ and attach to that letter the letter from the psychologist. The appellant said that he told Mr Doggett that he was not interested in writing letters and that if he, Mr Doggett, wanted him to come back to Crown he should write the letter ― ‘you sort it out’.

The trial judge found that Mr Williams had had phone contact with the appellant and that one call, initiated by Mr Williams on 19 November 2004, had lasted nearly 28 minutes. The appellant said that, in his first call with Mr Williams, he, Williams, said that he had heard that he was betting in Las Vegas and he wanted him back at Crown Casino. He said that Crown could provide better service and a greater betting limit than that offered by Bellagio, that credit facilities could be arranged and that the Crown jet (aircraft) would be made available. He said that Mr Williams acknowledged that he, the appellant, had had a gambling problem and that he did not want it to look as if Crown was encouraging him to gamble. The appellant said he told Mr Williams he was able to deposit $2 million in front money. He said that Mr Williams told him that he wanted him to start slowly, to enjoy the facilities and that there was no need to hurry.

Mr Williams gave evidence of a number of telephone conversations which he had with the appellant as to the terms upon which Crown would permit him to return to gamble at Crown Casino. He said the appellant was not happy with at least some of those conditions. Subsequently, there was discussion within Crown, culminating in a memo of 2 December 2004 from Mr Williams to Mr Craigie informing Mr Craigie that the appellant was happy to be assessed by ‘doctors etc.’ if, upon a positive assessment, he was permitted to come back to Crown.

Both Mr Williams and Mr Craigie were extensively cross-examined as to Crown’s relationship with the appellant and the consideration given to his readmission to Crown Casino in December 2004. Both of these Crown senior executives knew that the appellant had been asking to return to Crown for some time. Although Mr Craigie denied that he knew of the appellant’s self-exclusion from Burswood or Jupiters on the Gold Coast, he did know that the Casino Control Act1991 prevented persons the subject of IEOs from entering casinos in Victoria. However, he said that although he knew in 2000 that the appellant had been the subject of an IEO in respect of Star City Casino in Sydney, he did not bring that to mind in 2004 when the question of the appellant’s readmission was being considered. He said that this was because, in 2000, IEOs were not referred to in the legislation and Crown had had no official notification from either the Victoria Police or the casino regulator of any IEOs. For that reason, he did not appreciate the significance of the order made in respect of the appellant. The trial judge accepted this explanation. This matter is referred to, in greater detail, later in this judgment.

The appellant gave evidence that, on or about 8 or 9 December 2004, Mr Doggett spoke to him about a letter requesting the revocation of his WOL. Mr Doggett suggested that he would fly to the Gold Coast from Sydney and provide the appellant with a letter which Crown had drafted requesting readmission to the casino so that he could sign it. He said that Mr Doggett had said that Crown was ‘being very pedantic with your application’.

A day or two later, Mr Doggett met the appellant at the Coolangatta airport and gave him the draft letter. The appellant signed it. The letter read:

I wish to apply to have my Withdrawal of Licence revoked.
As I was previously self-excluded I wish to advise that I no longer have any problems with my gambling.
I have enclosed a letter from my psychiatrist/psychologist who has made a current assessment of me in regards to this area.

As the trial judge noted, at the time the letter was signed, the appellant had not, in fact, been assessed by the psychologist he subsequently attended and accordingly the letter had no enclosed psychiatric/psychological report.

The appellant said that, subsequently, Mr Williams phoned him to ask whether he had organised an assessment by a psychiatrist or a psychologist. He had not. He then looked in the Yellow Pages and chose Ms Janine Brooks, a psychologist in Broadbeach, because she was close to his home. He had a consultation with her of about an hour as a result of which Ms Brooks wrote a report dated 23 December 2004.

In her report, Ms Brooks said that she had not previously known the appellant, her only contact with him being that on the occasion of her consultation. She said she was unable to provide an assessment of his suitability for readmission to the casino but she recorded that the appellant told her that he was a compulsive gambler but had since turned his life around and that evidence of this ‘can be found in his successful standing in the community’. Ms Brooks said that the appellant had told her that he had conquered the gambling problem and that if he ever had a relapse he would self-exclude himself from the casino. Ms Brooks concluded her report with the following paragraph:

Within the stated limitations of this summary I believe that Mr Kakavas is an intelligent, highly motivated, and goal driven individual who has in the past shown himself able to self regulate his behaviour as evidenced by his ‘self exclusion’ from the Crown Casino. It also appears that Mr Kakavas has a relapse plan that he states he would not hesitate to implement.

There was considerable uncertainty as to the procedure which Crown executives followed to restore the appellant’s right to enter the casino. Mr Williams said he was not involved in the decision to revoke the appellant’s WOL. Mr Craigie said that early in January 2005 he was told by Mr Williams that the WOL Committee had decided to permit the appellant to re-enter the casino and that it had taken into account his past gambling problems in doing so. Mr Horman said that on 3 January 2005 a number of Crown executives met to discuss the then recent New Year’s Eve events at the casino. Because most of the relevant people were present, they took the opportunity to talk about the appellant and the procedure that was to be followed to revoke his WOL. According to Mr Horman, there was discussion about the appellant’s various (alleged) crimes, concerns about Mr Sui (his former co-accused on the armed robbery charge), Mr Horman’s concerns that the appellant was ‘a conman’ and the steps that could be taken to protect Crown. The decision to revoke the appellant’s WOL was accepted so that he could return to the casino. The trial judge was critical of the processes followed by Crown in deciding to restore the appellant’s licence to enter Crown Casino. He described them as ‘uncoordinated, unstructured and unsatisfactory’, even if the decision to revoke the WOL could, itself, be justified.

Towards the end of January 2005, the appellant attended the Australian Men’s Open Tennis tournament as a guest of Crown. He was picked up from Melbourne Airport by a Crown driver and accommodated at the casino hotel, where he was registered as ‘Mr Kay’. Mr Williams gave evidence that the use of the pseudonym was at the appellant’s request. He said that Crown would willingly accept a booking from any customer under a pseudonym to protect that customer’s privacy. Mr Williams said that the appellant told him he was concerned about his reputation and about people knowing that he was gambling. He wanted to keep his visits to Melbourne as ‘low key as possible’. The appellant denied that this was the case ― a denial which the trial judge did not accept.

The appellant did not gamble on this trip to Melbourne but, both whilst he was in Melbourne and after he returned to the Gold Coast, he discussed the terms of his future gambling with Mr Williams. He was concerned as to the hand limits, the discounts he would receive on losses and other matters directly concerned with his gambling as well as the means and cost of his travel and like matters. The trial judge found that he bargained with Crown ‘against the background of the inducements which the Las Vegas casinos were offering him, including travel by private jet between that city and Los Angeles’. The question of where the appellant would gamble was discussed. Mr Williams said that Crown had seven private gaming rooms ― of which five were ‘more private’, being within the hotel tower on levels 29 and 36. Subsequently, the appellant gambled in these private rooms.

The appellant said that he intended to gamble at Crown Casino in early February 2005 and that he negotiated terms with Mr Williams. Not all his demands were met. His request for a private jet to bring him to Melbourne was refused as was his request to bring $2 million front money. He said that Mr Williams objected and would only allow him to bring $1 million. He said that Mr Williams did not want him to bet more than $100,000 a hand because he wanted him ‘to start slowly’. When his demands were not met by Crown, he cancelled his February bookings and went elsewhere. On 5 March 2005, the appellant attended Crown Casino in connection with a celebration of the engagement of the daughter of one of his friends. He did not gamble on that occasion because, as he said, Crown would not agree to the hand limit he was seeking. It was too high.

There was significant evidence before the trial judge as to the nature of baccarat, its relative simplicity, its volatile nature, the similarity of its rules across casinos in many countries and the incentives provided by those casinos to attract those gamblers who sought to play. Those incentives included offering commissions on turnover or rebates on player losses or a combination of those. Complimentary food and drink, entertainment, the facility to entertain guests and even travel may be offered to VIP patrons. Of particular significance is the hand limit; the higher the hand limit the more volatile the game and, presumably, the greater the excitement.

The trial judge rejected a submission put on behalf of the appellant that the amounts of money which he gambled and the speed with which he lost it were indicative of an inability to control his behaviour. His Honour considered that the inference contended for should not be drawn. He accepted evidence from Mr Craigie that high rollers invariably request high hand limits thereby creating the situation where large losses, as well as large wins, are possible. His Honour considered that it was indicative of the appellant’s bargaining power that Crown allowed him the leeway it did with his hand limits.

The evidence before the trial judge was that after refusing Mr Williams’ terms in February 2005 the appellant gambled at Las Vegas and, to that end, transferred vast sums of money ― over $8 million ― to the Bellagio Casino between the end of January and May of that year.

The relevant gambling

Before considering the relevant occasions on which the appellant alleges Crown acted unconscionably in its transactions with him, it is necessary to define his case against Crown with some precision. As explained by his counsel at the commencement of the oral hearing of this appeal, his case was that, in respect of every separate gambling transaction that he entered into with Crown, Crown took unconscientious advantage of him. That case does not distinguish between those occasions on which he won a bet against Crown and those on which he lost. It was that every bet in each of the 30 betting programs he undertook at Crown Casino between June 2005 and August 2006 was affected by Crown’s unconscionable conduct, even though the terms on which he bet on each of those programs were virtually always the subject of specific agreement on terms negotiated on each occasion before he went to the casino or, at least, before he commenced to gamble. He normally signed those terms.

The gambling which gave rise to the loss which the appellant sought to recover in this proceeding from Crown commenced on 24 June 2005. It ceased with a visit to the Crown Casino on 17 August 2006. Between those dates, there were 30 different gambling ‘programs’ engaged in by the appellant. The trial judge analysed each of these programs in considerable detail in his judgment. Before each program, the terms upon which the appellant would gamble were negotiated between him and Mr Williams. In his evidence, he (the appellant) likened these discussions to ‘negotiating with BHP … just unbelievable’. What follows is a summary of the trial judge’s analysis of each of those gambling sessions or programs.

Program 1: 24 June 2005

On this occasion, the appellant was permitted to deposit only $1 million in front money with a hand limit of $200,000 as previously discussed with Mr Williams. He received a 20% rebate on losses and a sum equal to 3% of his front money which he referred to as ‘lucky money’. He asked for the use of Crown’s private jet to get to Melbourne but this was declined.

According to Mr Williams, before this visit the appellant drew his attention to cash payments provided by the Las Vegas venues, described as ‘airfare allowances’. Mr Williams said the appellant told him that he received these as cash or chips given upfront by the casino to be utilised as he wished. He wanted to know if Crown could match or exceed these payments. Mr Williams denied making any meaningful response to this and in particular denied discussing the prospect of payments of cash or its equivalent. The appellant denied that he told Mr Williams (or Mr Aldridge) that the Las Vegas casinos provided him with ‘lucky money’. The trial judge accepted that the benefits offered by Crown were offered with the Las Vegas competition in mind.

The appellant, on this occasion, signed a ‘Premium Player Program Agreement (Interstate)’ on a loss rebate program. This agreement provided for front money of $1 million and that, on a minimum turnover of five times the front money, the appellant would be granted a cash rebate of 20% of any losses together with a complimentary allowance of 0.20% of his front money.

The appellant’s evidence was that he started gambling late in the afternoon of 24 June and played for two and a half hours. The casino’s turnover records show that he was engaged in gambling from 5.20pm until 7.00pm and then from 9.05pm to 9.20pm. In the first session he won $1.04 million but in the second he lost $40,000, leaving him ahead by $1 million. He left Melbourne the following day without gambling again, taking with him two cheques, each for $1 million; one being the return of his front money and the other his winnings.

With respect to this program, the trial judge concluded:

This is not the account of someone who, under the disability of an addiction, had surrendered to the unconscientious behaviour of a predator prepared to exploit that victim’s vulnerability. Still less does it portray a gambler so incapacitated by that addiction as to be incapable of setting in train the straight forward process of self‑exclusion for which the Casino Control Act provides in s 72.

Programs 2 and 3: 1–3 July 2005

On this occasion, the appellant signed a Premium Player Program Agreement (Interstate) in the same terms as program 1. The trial judge considered it doubtful as to whether he received ‘lucky money’ on this occasion although he said he did. His Honour also noted that Crown’s financial records for the relevant date (and, for that matter, of 24 June) showed no record of any cash payments of sums which the appellant said he had received.

On 1 July, the appellant gambled from 3.30pm until 6.25pm and lost $1 million. He dined with eight guests and although he was credited with a $200,000 rebate on his loss he did not gamble again that day. He said that the following day either Mr Williams or Mr Aldridge offered him an advance of up to $350,000 if he could raise a like amount. He raised $345,000 in a bank cheque from a convenient ANZ branch which opened on Saturday, thereby providing a total fund of $690,000. He lost the lot. The transaction whereby the appellant obtained the funds from an ANZ bank account to continue gambling that day was camouflaged with the assistance of Crown to hide the fact that the destination of the money drawn was a casino. The trial judge held that it was the appellant who sought to engage in the camouflage but that Crown, in providing an alternative payee for the cheque, accommodated his wish, as it would have done, apparently legitimately, for any similar customer.

Program 4: 1 September 2005

On this occasion, the appellant brought $5 million in front money and the terms of play were changed to increase the maximum bet from $200,000 to $300,000 per hand. The 20% rebate on losses still applied. Mr Williams said that the appellant had asked Crown whether it would increase the rebate but it declined. The appellant said that on this occasion Mr Williams agreed to provide him with $50,000 as a complimentary bet before he started gambling with his own money. He also said that he received a box of ‘lucky money’ on the Crown jet with which he said he was provided to travel to Melbourne. But the trial judge did not accept the appellant’s evidence that he used the Crown jet on this occasion. Mr Williams gave evidence that he had agreed with the appellant that Crown would give him 1% of his front money as an ‘airfare incentive’.

The appellant said that on this occasion he also asked Mr Williams for permission to bet ‘on the tie’. To bet in this way is to bet against the house at odds of 8 to 1 on each player drawing cards to the same total value. He wanted to bet up to $75,000 per hand in this way but Mr Williams would only permit bets of up to $62,500.

Crown records show that on 1 September 2005 the appellant transferred two sums of $4.3 million and $700,000 respectively to the casino. He gambled from 4.45pm to 6.40pm and won $2.45 million. He stopped for dinner with six guests and gambled again between 9.10pm and 10.10pm. In that hour he lost $4.3 million. In his next session from 10.20pm till 12.05am he won $2.9695 million and from midnight till 1.20am he lost $5.614 million. In a final session between 1.25am and 1.45am he lost a further $555,000. In these five sessions he turned over $85.986 million.

The appellant agreed in cross‑examination that at the end of these gambling sessions he still had his 20% rebate on losses amounting to $1.01 million which he could have used for further gambling. Although he remained a guest of Crown until 4 September ― another three days ― he did not gamble again. The rebate was transferred directly to his Commonwealth Bank account and he said he used it for his next gambling trip.

There were a number of other matters which the appellant sought to rely upon as indicating that Crown was exploiting a special disadvantage which he had by reason of being a problem gambler. He referred to the attractive incentives by way of rebates and commissions which he said Mr Williams offered him. The trial judge accepted Crown’s case that it was doing no more than competing for his business. When it subsequently placed him on a commission based program which paid him 0.65% of his turnover rather than a rebate on his losses, it was because the appellant had been manipulating the rebate on loss program to his financial advantage by closing a program soon after he had first suffered a loss on that program, thereby maximising his rebate. By doing this, he could, even on those occasions on which he had a net win at the end of a gambling session, receive rebates for losses incurred in the course of that session! The commission on turnover program to which Crown transferred the appellant was not as susceptible to manipulation as the rebate on loss program had been.

The trial judge rejected a number of other arguments put by the appellant: that Crown concealed his gambling by the use of secret bank accounts and aliases and the provision of bank accounts in names other than ‘Crown’ in which to deposit money. He accepted that Crown was merely offering him services it would provide for any appropriately important high roller. He also rejected that there was anything sinister in the special commission arrangement which Crown entered into with him in September 2005. His Honour further rejected an argument based on an allegation that, on three occasions in the early hours of 18 March 2006, a Crown employee engaged in irregularities when advancing chips to the appellant without cash being tendered or a chip-purchase voucher being executed. He noted that Crown admitted this irregularity and subsequently incurred a $15,000 penalty imposed by the regulator for breach of the Casino Control Act 1991. He rejected the appellant’s submission that this was part of an exercise in inducing him to gamble. The appellant had asked for the chips. He was given them and, subsequently, he signed a voucher for them.

Finally, the trial judge considered the appellant’s ability to exercise control over his gambling. He concluded that there were many instances where he apparently conducted himself in a controlled manner while gambling and walked away before his funds were exhausted. He regarded it as significant that after the appellant’s WOL was lifted he did not gamble at the casino for six months and again, between October 2005 and March 2006 when his father was gravely ill, he refrained from gambling. It was open to the appellant, at any time, to take steps to self‑exclude ― including whilst he was not gambling. His Honour considered that this behaviour and that of telling the psychologist, Ms Brooks, that he could always self‑exclude was not the behaviour of a gambler so in thrall to his addiction that he was unable to bargain on an equal footing with Crown or to make rational judgments in his own best interests.

His Honour determined that the appellant was not entitled to the relief he claimed on the evidence he accepted. He did not deal with those causes of action which he had rejected in his earlier interlocutory ruling. He dismissed the appellant’s claim and entered judgment for Crown on its counterclaim against him as already referred to. There appears to have been no contest that the appellant was liable on the dishonoured cheque. His Honour ordered the appellant to pay the costs of Crown and its employees.

This appeal

The appellant’s Notice of Appeal contained 31 grounds but the argument before this Court (both in writing and orally) was not put by specific reference to those grounds. It concentrated rather on the principal issues in the case ― whether the appellant was at a special disadvantage in dealing with Crown, whether Crown had relevant knowledge of that disability, the case concerning his IEO, a case which had been originally pleaded alleging a breach of s 52 of the Trade Practices Act and a defence of illegality raised at a late stage by the respondent.

Special disadvantage

The appellant argued that the trial judge ought to have found that he was in a position of special disadvantage vis-à-vis Crown because of his psychiatric condition of pathological gambling. He contended that his Honour erred because he rejected established law as stated in Amadio[52] ― that a person is at a special disadvantage if there exist circumstances which affect his ability to conserve his own interests or seriously affect his ability to make a judgment in his own best interests. He contended that this formulation of the principle underlying unconscionable conduct precluded the trial judge from considering whether, as a question of fact, he and Crown met on reasonably equal terms when he played baccarat at its casino. But this is not correct. The absence of a reasonable degree of equality of bargaining power is a necessary, although not a sufficient, factual basis to support a claim of unconscionable conduct against the other party to the relevant transaction. So much is clear from the authorities relied upon by the appellant.
[52](1983) 151 CLR 447.

In Amadio, Mason J, after considering the concept of special disability as it applied to Mr and Mrs Amadio, concluded that there was a ‘gross inequality of bargaining power’ which resulted in them being ‘in a position of special disadvantage vis-à-vis the bank’ in relation to the proposed mortgage guarantee.[53] His Honour considered that, in that case, the special disadvantage under which the Amadios laboured was the outcome of their reliance on their son who misled them as to the financial position of his company. Because they were under this disadvantage or disability, they did not meet the bank on equal terms.
[53]Ibid 464.

The appellant submitted that in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd,[54] the High Court had specifically rejected ‘inequality of bargaining power’ as a test of whether there was a requisite ‘special disadvantage’ in a party seeking relief from unconscionable conduct. But the passages in that case on which reliance was placed do not support any rejection of inequality of bargaining power as a relevant consideration. Gleeson CJ makes it clear in Berbatis that a person will not be regarded as being in a position of relevant disadvantage ‘simply because of inequality of bargaining power’ (emphasis added).[55] Similarly, Callinan J explained the use by Mason J in Amadio of the description ‘special disadvantage’ as being to disavow any suggestion that the principle applies ‘whenever, and because there is some difference, even substantial, in the bargaining power of the parties’.[56] Neither of these statements of principle can be said to reject inequality of bargaining power as a relevant consideration. An inequality of bargaining power might be thought to be the normal and expected consequence of one party to an impugned transaction being unable to conserve his own interests.
[54](2003) 214 CLR 51 (‘Berbatis’).
[55]Ibid 64.
[56]Ibid 115.

This argument illustrates the fact-specific nature of the inquiry required to be undertaken by a court in determining a case such as this. Whether that inquiry is undertaken specifically as the appellant contends it should have been ― in effect to confine the inquiry to whether the claimant for relief is unable to conserve his own interests ― or whether the trial judge was entitled to approach the problem in the way he did, it is clear that his Honour made findings of fact which, on any view, precluded the appellant from succeeding. He found that the appellant was quite capable of conserving his own interests, that he met Crown on equal terms as a high‑rolling gambler meets a casino and that Crown did not act unconscionably towards him.

Although the appellant criticised comments made by the trial judge concerning a casino’s possible obligation to ‘rescue’ a gambler from himself and the difficulties inherent in deciding what is in a person’s best interests, having regard to the factual findings made by his Honour, these submissions do not advance the appellant’s case in any meaningful way.

The appellant then submitted that the trial judge was wrong to draw a conclusion that there was reasonable equality of bargaining power between the parties because the appellant could have self-excluded and so withheld his custom from the casino. He argued that this analysis said nothing about the existence of a special disadvantage because it was not directed to his personal circumstances. He contended that the availability of the option of self‑exclusion or the withholding of his patronage from the casino and the fact that he did neither does not affect his entitlement to a remedy.

This submission must be rejected. The trial judge did not base his conclusion that the appellant did not suffer from any special disadvantage known to Crown at the relevant time solely on the factors suggested, although his capacity to self‑exclude ― a capacity he had demonstrated, to Crown’s knowledge, on prior occasions with respect to a number of casinos including Crown itself ― was an important factor in determining that he could conserve his own interests. His Honour found that the appellant had resisted any urge he might have had to bet, had demonstrated a capacity to play in a controlled manner as a recreational gambler and had, from time to time, not bet at all, sometimes for long periods. At the time of trial, in mid‑2009, the appellant said that he had not gambled at all since November 2006! When gambling at Crown he had negotiated the terms on which he gambled and had threatened to and in fact had withheld his custom from Crown when he did not get what he wanted. These are not the characteristics of someone unable to conserve his own interests.

The appellant contended that the inducements offered by Crown fuelled his condition of disadvantage and affected his ability to take appropriate measures to protect himself. But the benefits provided to him were no more, the trial judge held, than were available to and enjoyed by ‘high-roller’ gamblers who frequented casinos around the world, including in Australia. They were not ‘inducements’ directed solely at him. His patronage of the casino at the level he gambled virtually entitled him to such benefits in accordance with general industry practice.

The trial judge’s finding that the appellant’s condition of pathological gambling ‘was not particularly relevant’ was reached on two main bases. The first was that it was a diagnosis made many years before the appellant’s gambling relevant to this proceeding. During the period relevant to this proceeding, he presented as, and held himself out as, a successful businessman who enjoyed high‑roller gambling on high stakes baccarat. Secondly, the appellant’s conduct, appearance, behaviour, apparently great affluence, expressed wish to gamble, assertions of being able to self-exclude and look after himself generally entitled Crown to accept him as he wanted to be accepted: as a very financially successful businessman who liked such gambling. The diagnosis of someone as a pathological gambler, as DSM-IV is careful to point out, says nothing as to that person’s capacity to exert control over his behaviour at any particular time. His Honour’s reference to the appellant’s pathological gambling as being not particularly relevant in this case was justified in all the circumstances.

The appellant argued that, in referring to his capacity to negotiate favourable treatment or inducements (scil. the benefits he received for patronising Crown Casino), the trial judge focused on irrelevant matters; the relevant matters being the gambling transactions themselves. But the appellant’s state of mind when he entered into those transactions and hence, whether he acted under the influence of a special disability at that time, could be determined not only by his conduct in gambling itself but, more importantly, by his demonstrated capacity to make decisions in his own best interests in those matters ancillary to the actual playing of baccarat and to refuse to play when he did not get what he wanted. Such things included the extraction of favourable terms from Crown as to rebates, commissions and the like, his negotiation of other financial benefits such as ‘lucky money’, the fixing of hand limits as well as the tangible benefits he received such as accommodation, food and, of course, use of the Crown jet aircraft.

As far as the gambling transactions themselves are concerned there was no unfairness to the appellant. His rebate on losses and subsequently his commission on turnover gave him gambling terms as good or better than most, if not all, ‘high‑rollers’ who gambled at Crown Casino. This is an important consideration. As Fullagar J pointed out in Blomley v Ryan,[57] quoting Page Wood VC in Wiltshire v Marshall:[58]

It will almost always, I think, be ‘... an important ingredient in considering whether a person did exercise any degree of judgment in making a contract, or whether there is a degree of unfairness in accepting the contract ...’ …

[57](1956) 99 CLR 362, 405–6.

[58](1866) 14 LT 396, 397.

The appellant contended that in the period from 10 March 2006 to 11 July 2006 he incurred losses of $30 million in one continuous ‘losing streak’ and that in 10 visits to Crown Casino during this period he did not have any net winnings on any visit. His argument was that this gambling itself was consistent with his pathological gambling condition and provided evidence of his incapacity to conserve his own interests.

There are two answers to these submissions. First, the nature of ‘high-roller’ casino gambling, particularly on high stakes baccarat, is an extremely volatile undertaking. The capacity for great losses is high ― just as is the capacity for large wins. Many people, perhaps most, would regard the very idea of such gambling as absurd if not obscene and morally reprehensible both on the part of the gambler and of the casino. But high rollers who gamble in casinos throughout the world apparently do not share such opinions or, if they do, are able to suppress them in favour of self‑indulgence with its entirely foreseeable consequences. That losing to the extent he now says he did is consistent with his being a pathological gambler says nothing, in relevant context, about whether he was unable on the occasions he gambled during the period he selected to conserve his own interests.

But there is a greater obstacle to the acceptance of this argument. In fact, the appellant did not suffer the losing streak of which he complains. On the afternoon of Monday 13 March 2006 (program 15), he left Crown Casino with $14 million and returned to the Gold Coast. He had won $10 million which he took in the form of a cheque from the casino and had retrieved a cheque for $4 million which he had deposited as front money for this gambling session. He did not return to the casino until the following Friday 17 March, although he had the Crown jet at his disposal. He said he had to get some work done in that week. Upon his return on 17 March (program 16), he won about $2.2 million in his first gambling session which he took in a Crown cheque.

Even if the appellant’s argument had been based on correct facts, it would have added nothing to his case. The evidence shows that he continued to gamble after these wins and, indeed, suffered losses as well as some significant wins. That he lost overall is not in any way surprising. It is, indeed, entirely to be predicted having regard to the house edge which always favours the casino. The longer a person plays the more certain it is that he will ultimately lose. Were it otherwise casinos would fail. There is no substance in this submission.

Notice of special disadvantage

The appellant contended that Crown had knowledge of the ‘special disadvantage’ that he was a pathological gambler or ought to have known of it. He relied on a number of matters which, he submitted, demonstrated that the trial judge’s conclusion that Crown had no reason to doubt his presentation in 2004 as a successful businessman who had conquered his past gambling problems was erroneous.

The appellant relied on two findings of the trial judge in support of this submission. His Honour did not accept a denial by Mr Williams that in September 2005 he was concerned about the appellant’s pattern of gambling. He found that Mr Williams asked Mr Horman to keep an eye on the appellant and kept notes on his behaviour and reported those to Mr Horman until the appellant’s last trip in August 2006. The second finding, which is related to the first, is that Crown had a residual concern about the appellant’s standing as a some-time problem gambler after he returned. It wished to protect itself against an allegation that it had breached a duty of care to the appellant by allowing him to gamble even though it had reasons of its own to think that his history since 1998 gave him a clean bill of health.

The appellant also relied on a number of other specific matters in support of this argument:

(1)Crown required an independent expert assessment as to his condition before revoking his WOL.
But, as the trial judge said, Crown wished to protect itself. There is nothing inconsistent in taking that precaution. That is what the trial judge accepted as the true position. He was entitled to do so.
(2)Mr Williams’ instruction to Mr Horman to monitor the appellant’s gambling behaviour.
Again, in the context of Mr Williams expressing his view that the appellant was a ‘very successful and focused businessman’, he allayed his ‘residual concerns’ by having Mr Horman ‘keep an eye’ on him. The trial judge considered this evidence carefully in the course of making his findings. There is no error in his having found as he did.
(3)The appellant’s earlier self-exclusions.
This knowledge is not inconsistent with Crown’s actions in accepting the Janine Brooks report and the trial judge’s acceptance of the value of that report having regard to its reference to the appellant’s capacity to self‑exclude.
(4)The appellant’s gambling in Las Vegas and losing millions of dollars.
The trial judge found that one of the problems of diagnosis with respect to pathological gambling was that high rollers ‘can exhibit many of the criteria of problem or pathological gamblers’. He considered this, the appellant’s Las Vegas gambling, as no doubt did Crown, and saw it as the behaviour of a high-rolling gambler with large amounts of money at his disposal. There is no inconsistency between his Honour’s treatment of this matter and any of his other findings.
(5)Crown only dealing with the appellant on a cash basis.
In the course of his judgment, the trial judge noted that although Mr Horman was ‘comfortable’ with the background checks he had made into the ways that the appellant had obtained his money, his business dealings were ‘very highly speculative in nature’ and ‘very dependent on the way the property market [was] going’. In the circumstances, it is entirely unsurprising that Crown would require the appellant to gamble only on a cash basis.
(6)Mr Healey declining to provide the appellant with the expert assessment required by Crown.
The trial judge comprehensively dealt with Mr Healey’s position. He accepted that Mr Healey’s position ― that he would have refused to endorse the appellant’s return to the casino ― was unknown to Crown. The appellant said that Mr Healey told him he would not give a supportive assessment without extensive consultations and then only if he was satisfied that it was appropriate to do so. The appellant chose not to undergo the process. The trial judge’s findings with respect to this matter are entirely supported by the evidence.

(7)Mr Aldridge’s admission that Crown knew the appellant would ‘impulsively’ gamble.
In December 2006, the appellant secretly taped a conversation he had with Mr Aldridge in which Mr Aldridge said, whilst discussing ‘incentives’, that Crown did not ‘really think we needed to [provide you with incentives] … [b]ecause you would … impulsively come down’.
The trial judge assessed this evidence and determined that in making this statement Mr Aldridge had no more in mind than that the appellant was likely to set his sights on Melbourne rather than Las Vegas when his WOL was revoked and ‘the sour taste’ of it had been expunged. The appellant’s submission as to this matter should not be accepted.
(8)Crown’s knowledge that the appellant wanted to disguise his gambling activities.
That the appellant wished to disguise his activities was not unusual. The trial judge considered this in a number of places in his judgment, including where he referred to Mr Williams’ evidence that any customer could choose to book into the casino anonymously. The casino also provided facilities for the anonymous receipt of cheques etc. There was nothing unusual in this. Apparently, it is a practice common in the casino industry. There is no substance in this criticism of the trial judge’s findings.
(9)Mr Horman’s rejection of Mr Watson-Munro’s report.
The trial judge’s finding was, in fact, that Mr Horman regarded Mr Watson‑Munro’s report as unsatisfactory because he did not believe that the appellant had ever felt the pathological urge to gamble. His Honour was entitled to make this finding on the evidence.

The appellant submitted that a finding that Crown was entitled to rely on his statements in the Brooks report was not a finding which could permit Crown to say that it was no longer on notice of a special disability residing in the appellant. This submission must be rejected. The trial judge found, on the whole of the evidence, including the report of Janine Brooks, that Crown had not acted unconscionably in permitting the appellant to gamble at its casino.

The report written by Janine Brooks was not a professional opinion. However, it contained an assessment by a psychologist of the appellant as being ‘an intelligent, highly motivated, and goal driven individual who has in the past shown himself able to self-regulate his behaviour as evidenced by his ‘self exclusion’ from the Crown Casino’. She also reported that he had a ‘relapse plan’ which he said he ‘would not hesitate to implement’. Crown was entitled to accept this at face value.

The appellant submitted that there was no evidence that Crown’s officers had knowledge of this report. It is implicit in his Honour’s reasons for judgment that he accepted the evidence of Mr Williams that he had seen the report, that he faxed it to Mr Aldridge and that it was faxed to Mr Horman. Mr Williams said he thought it was ‘fine’. There is nothing in this criticism.

The appellant also argued that having regard to the deficiencies in the Janine Brooks report Crown had not discharged an obligation on it to ensure that the appellant was not under a special disadvantage before entering into gambling transactions with him. Crown’s submissions on this issue referred to the statement of the trial judge to the effect that negligence on Crown’s part was not an issue. It had no duty of care to the appellant. It was not bound to protect him against his desire to gamble.

The question to be determined by the trial judge was whether Crown acted unconscionably in permitting the appellant to gamble. His Honour found that it did not. In reaching that conclusion, he took into account such efficacy as the Janine Brooks report had, as well as all the other evidence, including the appellant’s own persistent assertions that he wanted to gamble, that he was financially successful and all of the other matters to which reference has been made. His finding that Crown did not act unconscionably was clearly open on all of the evidence. This submission must be rejected.

The appellant submitted that, insofar as the trial judge found that Crown had not acted unconscionably because it had not ‘categorised’ him as being either at a special disadvantage or in an unequal bargaining position, he was in error. But this conclusion takes his Honour’s finding out of context. Viewed in its context, the word ‘categorised’ as used by his Honour is synonymous with ‘know’. His Honour is saying that Crown had no requisite knowledge of the appellant being at a special disadvantage because of gambling problems. That this is what his Honour meant is clear when the whole passage in his judgment is considered:

In certain circumstances, a casino might act unconscientiously in its dealings with such a person. Crown did not in this case. This was in part because it did not at any relevant time categorise Mr Kakavas as being either at a special disadvantage or being in an unequal bargaining position – and it therefore never categorised him as being exploitable. Never having categorised him in that way, Crown never dealt with him in that way. Crown accepted what Mr Kakavas wanted Crown to believe: that, by November 2004, he had become a highly respected Gold Coast businessman whose liking for the gaming tables had caused problems in the past, but who had since conquered those problems to the extent that he had been able to amass wealth from his business activity.

His Honour is talking about Crown’s belief brought about, in part at least, by the appellant’s representations and conduct generally. The appellant is correct when he says that it is not part of the law of unconscionable conduct that the stronger party must ‘categorise’ the weaker party as exploitable. Knowledge is enough, but that is what the trial judge meant.

But, for the purposes of an entitlement to equitable relief on the ground of unconscionable conduct, knowledge can be constituted constructively. As Mason J said in Amadio:

As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same.[59]

Mason J based this statement on a dictum of Lord Cranworth LC in Owen & Gutch v Homan.[60] His Lordship said:
it may safely be stated that if the dealings are such as fairly to lead a reasonable man to believe that fraud must have been used in order to obtain … [the concurrence of the surety] … he is bound to make inquiry, and cannot shelter himself under the plea that he was not called on to ask, and did not ask, any questions on the subject. In some cases wilful ignorance is not to be distinguished in its equitable consequences from knowledge.[61]

[59](1983) 151 CLR 447, 467.

[60](1853) 4 HL Cas 997.

[61]Ibid 1035.

In this case, the principle of constructive knowledge has no application. The trial judge’s findings were that, in all the circumstances, Crown was entitled to accept the appellant as he sought to be accepted. A conclusion that it should have embarked upon further investigations is precluded by those findings and in any event was specifically rejected as being necessary by the trial judge. This was entirely consistent with his findings generally. As his Honour put it in the passage immediately after that quoted above:

He was, when Crown became interested in his return as a patron, prepared to fly halfway round the world to indulge in his favoured recreational pursuit. Crown therefore transacted business with him on the footing that they were at arms length. He was a keen but not over-anxious punter; and while Crown was anxious to secure his patronage, it was not prepared to do so on any other than a basis which in the world of high rollers would be, and would be seen as being, commercial. Both parties had a credible bargaining tool. Crown had the facilities, in the form of the Casino. Mr Kakavas had his valuable custom. Each was aware that the other was thus armed with bargaining power. Crown could always prevent Mr Kakavas’ return; while Mr Kakavas could always withdraw his patronage.

There is no doubt that it was in Crown’s commercial interests for the appellant to return to gambling at its casino. Acting as any commercial organisation would, it assisted his return to patronising its casino by assisting him to have his WOL revoked by drafting his letter of request and then by providing VIP benefits to him, as the trial judge found, in accordance with industry practice for ‘high rollers’.

None of the appellant’s submissions with respect to his case of unconscionable conduct against Crown based on his being under a special disability by reason of his being unable to control a propensity to gamble excessively should be accepted.

The IEO

The facts concerning the appellant’s IEO are fully discussed at paragraphs [184] to [189] above.

At trial, the appellant argued a case (alternatively or as part of his general case) that Crown’s conduct in permitting him to gamble at its casino when he was the subject of an IEO, with the effect that he automatically forfeited any winnings to the State, itself constituted unconscionable conduct by Crown. The trial judge rejected this case. His Honour found as a fact that although Crown had been aware of the appellant’s exclusion from Star City by the New South Wales Police Commissioner in 2000 no one at Crown (and hence Crown itself) had realised the relevance of the subsequent amendment to the Casino Control Act 1991 to his situation. There was ample evidence to support this finding.

In this Court, the appellant submitted that the trial judge was in error in reaching the conclusion which he did, having regard to the findings of fact which he made. The appellant’s submissions referred to the knowledge of Crown executives of the existence of the New South Wales order, their knowledge of the amendment to the Victorian legislation and Crown’s alleged conduct in contacting him and inducing him to gamble. But this argument does not address the findings that the trial judge made as to Crown’s state of mind at the relevant time. Nor does it address a number of other factual matters concerning Crown’s (and particularly Mr Horman’s and Mr Doggett’s) knowledge of the New South Wales exclusion. His Honour’s conclusion is concerned with the lack of realisation by Crown that that order had the effect it did on the appellant at the relevant time.

The appellant’s assertion that he would not have gambled had he known the legal situation is hardly surprising. It was also highly likely that Crown would never have revoked the appellant’s WOL had it realised the true situation, although the IEO had probably the same practical effect as the WOL once it applied in Victoria. Had Crown permitted the appellant to play baccarat with knowledge of that situation ― that is to say, to play when Crown knew he could not win ― Crown would have been guilty of fraud in the fullest legal sense of that term. It would not have been wagering with the appellant at all ― a wager in respect of which one party can lose but not win is not a wager at all.[62] A perusal of the control provisions of the Casino Control Act 1991 would suggest that any such conduct would place Crown and possibly some of its employees at risk of disciplinary action by the casino regulator, if not of criminal charges.
[62]Carlill v Carbolic Smoke Ball Company [1892] 2 QB 484, 490 (Hawkins J); Tote Investors Ltd v Smoker [1968] 1 QB 509, 516 (Lord Denning MR).

The appellant sought to use the trial judge’s finding ‘that Crown was seriously careless’ in failing to rediscover the IEO as a basis for imputing to it constructive knowledge of his disability ― an inability to win. But this is not a negligence case. Crown’s conduct in this instance did not constitute unconscionability. There is no evidence of any conduct by Crown in this regard which amounted to ‘wilful blindness’, a refusal to accept the obvious or similar conduct with respect to the appellant’s IEO.

There are two things concerning the appellant’s IEO which are worth noting. First, he in fact suffered no detriment as a result of his gambling at Crown Casino whilst subject to the IEO. The terms upon which he gambled were no different to what they would have been otherwise and Crown credited him with all his winnings. There was no forfeiture, in fact, to the State.

Secondly, the primary obligation to comply with the IEO lay on the appellant. Section 77(3) of the Casino Control Act 1991 renders a person the subject of an IEO liable to a criminal penalty for entering or remaining in a casino, but no offence is committed by the casino operator. Crown committed no offence by allowing the appellant to enter the casino or to play baccarat, although it was in breach of s 76(1) of the Act in that it failed to include his name on a list of excluded persons, including persons the subject of an IEO.

In all the circumstances of this case, the appellant’s IEO was irrelevant. Crown did not act unconscionably in permitting him to gamble at its casino notwithstanding the existence of the IEO.

Misleading or deceptive conduct claim

This part of the appellant’s claim was the subject of an interlocutory application by Crown upon which the trial judge ruled on 13 December 2007 ― some 18 months before trial. His Honour granted the then plaintiff (the appellant) leave to file and serve a further version of the Statement of Claim after ruling that his s 52 claim added nothing to his claim of unconscionable conduct and should be struck out. No appeal was instituted against this ruling and, accordingly, the issues raised by it were never litigated at trial.

The appellant now contends in this Court that his Honour was wrong in law not to permit his claim pursuant to s 52 to proceed. He relied upon Gerlach v Clifton Bricks Pty Ltd[63] as authority for the proposition that he could raise this alleged error as a ground on this appeal against the judgment entered against him after trial in the Court below. Gerlach is certainly authority for the proposition that on appeal against a judgment of a trial court the Court of Appeal can correct any interlocutory error which affected the final result of the case. However, having regard to the conclusion I have come to with respect to this part of the appellant’s claim, there is no need to consider the applicability of the principle in Gerlach.
[63](2002) 209 CLR 478 (‘Gerlach’).

The trial judge disallowed the pleading of the appellant’s s 52 claim because he was not satisfied that it pleaded an implied representation by Crown to him that he could retain his winnings if he gambled at its casino. He characterised Crown’s conduct as being, if anything, a failure to inform the appellant of the consequences of his status as a person the subject of an IEO. His Honour was correct in reaching this conclusion. As already noted, the primary obligation arising from the IEO rested upon the appellant himself ― not to enter or remain in a casino in Victoria. There is no warrant for this Court to interfere with the interlocutory ruling which his Honour made or to consider any consequence of that ruling in the context of this appeal.

Illegality

Towards the end of the trial in the Court below, the trial judge granted Crown leave to amend its defence to plead the appellant’s illegality in breaching the Casino Control Act 1991 as a defence to his claim of unconscionable conduct. In this Court, the appellant claimed that his Honour was in error in allowing the amendment when no explanation had been put forward for the delay involved in seeking it near the end of the trial and ‘it inevitably caused prejudice to the appellant’.

In his judgment, the trial judge mentioned the defence of illegality but did not rule upon it, probably because he considered that the appellant’s claim against Crown failed. In the circumstances, having regard to the conclusions which I have reached as to the principal issues in this case, there is no need to consider this issue further; nor is there any need to consider the Notice of Contention filed by Crown which sought to uphold the trial judge’s decision even if the appellant had succeeded on one or more of his grounds of appeal. That Notice of Contention raised questions of causation of the appellant’s loss, his illegality in entering the casino and the alleged accessorial liability of the second and third respondents. None of these matters need now be addressed.

Conclusion

The appellant instituted this appeal with a Notice of Appeal containing 31 grounds occupying almost 11 pages. As already noted, the appeal was not argued, either by the appellant or by the respondents, either in writing or orally, by specific reference to these grounds. Rather, it was argued by reference to the issues raised in them ― the appellant’s alleged special disability, Crown’s knowledge of that special disability and the IEO. Whilst the grounds of appeal, set out as fully as they were, were of some assistance in conveying an understanding of the appellant’s case, that case was fully set out in the written outline of submissions and, of course, in the oral submissions of counsel. In the circumstances, there would appear to be no need to address these grounds serially. None of them should succeed for the reasons set out herein. This appeal should be dismissed.

ALMOND AJA:

I have had the benefit of reading in draft the reasons for judgment of Mandie JA and the reasons for judgment of Bongiorno JA.

With respect to the issues of unconscionable conduct and special disability or disadvantage, I would adopt the approach taken by Mandie JA. On all other issues, I agree with Bongiorno JA. I would therefore dismiss the appeal.

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[2012] VSCA 95

21 May 2012