Preston v Star City Pty Limited (No 3)

[2005] NSWSC 1223

CITATION:	Preston v Star City Pty Limited (No 3) [2005] NSWSC 1223
HEARING DATE(S):	04/11/2005
JUDGMENT DATE :	5 December 2005
JUDGMENT OF:	Hoeben J at 1
DECISION:	Application to strike out dismissed - leave granted to re-plead parts of statement of claim.

CATCHWORDS:	Strike out application - Pt 15 r 26 Supreme Court Rules - duty of care owed by casino to patron - known weaknesses of patron - whether deliberate conduct constitutes negligence - need for internal consistency within statement of claim - vicarious liability.
LEGISLATION CITED:	Supreme Court Rules Pt15 r 26
CASES CITED:	Agar v Hyde (2000) 201 CLR 552 Cole v South Tweed Heads Rugby League Football Club Limited (2004) 217 CLR 469 Deatons v Flew (1949) 79 CLR 370 Dey v Victorian Railways Commissioners (1979) 78 CLR 62 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Graham Barclay Oysters Pty Limited v Ryan (2002) 211 CLR 540 Lister v Hesley Hall Limited (2002) 1 AC 215 NRMA Insurance Limited v AW Edwards Pty Limited NSWCA, (11 November 1994, unreported) Perre v Apand (1999) 198 CLR 180 Preston v Star City Pty Limited [1999] NSWSC 1273 Preston v Star City Pty Limited [2003] NSWSC 321 Reeves v Commissioner of Police of the Metropolis (2000) 1 AC 360 at 368C-D Reynolds v Katoomba RSL All Services Club Limited (2001) 55 NSWLR 43 South Tweed Heads Rugby League Football Club Limited v Cole & Anor (2002) 55 NSWLR 113 State of NSW v Lepore (2003) 212 CLR 511 Vairy v Wyong Shire Council [2005] HCA 62 Williams v Humbert v W & H Trademarks (Jersey) Ltd (1986) 1 AC 368
PARTIES:	Alexander Preston - Plaintiff Star City Pty Limited - Defendant
FILE NUMBER(S):	SC 20334/1998
COUNSEL:	D Graham - Plaintiff A Sullivan QC/M Condon - Defendant
SOLICITORS:	Gells - Plaintiff Corrs Chambers Westgarth - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOEBEN J

Monday, 5 December, 2005

20334/1998 – Alexander PRESTON v STAR CITY PTY LIMITED (No 3)

JUDGMENT

1 HIS HONOUR:

Nature of proceedings
Two applications are before the court. There is an application by the plaintiff to rely upon a document entitled “Fifth Further Amended Statement of Claim” (hereafter called the fifth statement of claim). This is opposed by the defendant on the basis that the amendments sought to be added are bad in law and that consequently it would be futile to allow the plaintiff to proceed on that document.

2 The second application is by the defendant. It seeks to strike out those parts of the fifth statement of claim, which allege negligence against the defendant and its vicarious liability for a servant, Mr Elam. It is agreed by the parties that if the defendant’s application is successful then that will defeat the plaintiff’s motion since the amendments in the statement of claim relate to those issues. The paragraphs of the fifth statement of claim under challenge are 10, 11, 13, 14, 15, 16, 17, 18 and 35.

3 The defendant’s strike out application is made on three bases:

(i) The pleadings do not disclose a duty of care.

(ii) Insufficient particulars relating to the claim in negligence have been provided.

(iii) The facts relied upon in relation to para 35 are not sufficient to establish vicarious liability on the part of the defendant.

4 In answer to the submission that the plaintiff has failed to provide adequate particulars of his negligence claim, the plaintiff submits that full discovery has not been provided and he will only be in a position to provide these particulars when that has occurred.

5 Although some general complaints were made by the defendant as to the inadequacy of particulars, no detailed submissions were made to me on that issue. The submissions, both oral and in writing, focused upon the existence of a duty of care and to a lesser extent, the defendant’s vicarious liability for the actions of Mr Elam. Accordingly, I have not dealt with the question of particulars or discovery in this judgment.

Defendant’s submissions

6 The defendant acknowledged that many of the matters raised before me were considered by Wood CJ at CL and dealt with in Preston v Star City Pty Limited [1999] NSWSC 1273. That case involved strike out proceedings in relation to an earlier statement of claim. The defendant submitted, however, that there have been a number of important decisions in this field since that judgment which would lead the court to reach a different conclusion. The decisions relied upon were Reynolds v Katoomba RSL All Services Club Limited (2001) 55 NSWLR 43, South Tweed Heads Rugby League Football Club Limited v Cole& Anor (2002) 55 NSWLR 113 and Cole v South Tweed Heads Rugby League Football Club Limited (2004) 217 CLR 469.

7 Emphasis was placed on the Reynolds case. It was submitted that the facts of that case were very close to those relied upon by the plaintiff in the fifth statement of claim. Reynolds was a case of a problem gambler, who gambled at the Katoomba RSL Club, and who had sought the help of the licensee of the premises to help him stop gambling. Relevant findings of fact in that case were:-

“(a) The defendant club through its secretary manager ought to have been aware that Mr Reynolds was a problem gambler.
(b) Mr Reynolds had told the secretary manager:
“I have a problem. I can’t control myself. Once I start I can’t stop. Please don’t cash my cheques or give me credit or start me off, even if I beg you.”
(c) It was common for the club to cash personal cheques for Mr Reynolds.
(d) In late 1991 Mr Reynolds commenced to drink heavily and in so doing became more reckless in gambling, chasing his losses, betting more to try to recover them and so losing more.”

8 Specific reliance was placed upon the following statements by Spigelman CJ in Reynolds.

“His Honour’s findings of fact about the appellant being a “problem gambler” did not extend so far as finding that in some way he had been deprived of the ability to control his own actions. …” [7]
“On the approach of Gummow J, with whom Gleeson CJ agreed with additional observations, in my opinion the appellant fails in limine. Save in an extraordinary case, economic loss occasioned by gambling should not be accepted to be a form of loss for which the law permits recovery. I make allowance for an extraordinary case, without at the present time being able to conceive of any such case.” [9]
“In the present case there is no interest of the character identified by Gummow J in Perre v Apand Pty Limited. The interest sought to be protected is the avoidance of a risk of loss of money through gambling. That risk, when it came to pass, was entirely occasioned by the appellant’s own conduct. It is not an interest which, in my opinion, the law should protect.” [15]
“In my opinion the law should not recognise a duty of care to protect persons from economic loss where the loss only occurs following a deliberate and voluntary act on the part of the person to be protected. There may, however, be an extraordinary case where a duty should be recognised. The present case is not such.” [17]

The defendant submitted that those statements of principle were applicable to the fifth statement of claim notwithstanding that the plaintiff was also relying upon a claim for personal injury, being psychiatric damage, as well as economic loss.

9 The defendant relied upon the importance in Reynolds of protecting the autonomy of the individual. The significance of this protection had been forcefully restated in the joint judgment of Gaudron J, McHugh J, Gummow J and Hayne J in Agar v Hyde (2000) 201 CLR 552. As their Honours pointed out “In many activities, the danger is part of the activity’s attraction.” Spigelman CJ quoted with approval the following statement by Lord Hoffman in Reeves v Commissioner of Police of the Metropolis (2000) 1 AC 360 at 368C-D:

“There is a difference between protecting people against harm caused to them by third parties and protecting them against harm which they inflict upon themselves … This philosophy expresses itself in the fact that … a duty to protect a person of full understanding from causing harm to himself is very rare indeed.”

10 Reliance was placed upon a further statement by the Chief Justice:

“This Court should be very slow indeed to recognise a duty to prevent self inflicted economic loss. Loss of money by way of gambling is an inherent risk in the activity and cannot be avoided … Nevertheless, whether a duty arises in a particular case must depend on the whole of the circumstances, even in the case of an inherent risk …” [27]

11 In anticipation of the plaintiff’s reliance upon vulnerability as a basis for the existence of a duty of care, the defendant referred to the analysis by Spigelman CJ of that concept at paras [29]-[43]. In that analysis the Chief Justice referred to parts of the judgment of McHugh J in Perre v Apand (1999) 198 CLR 180:

“In many cases, there will be no sound reason for imposing a duty on the defendant to protect the plaintiff from economic loss where it was reasonably open to the plaintiff to take steps to protect itself. The vulnerability of the plaintiff to harm from the defendant’s conduct is therefore ordinarily a prerequisite to imposing a duty. If the plaintiff has taken, or could have taken steps to protect itself from the defendant’s conduct and was not induced by the defendant’s conduct from taking such steps, there is no reason why the law should step in and impose a duty on the defendant to protect the plaintiff from the risk of pure economic loss.” [118]

And:
“Where another body of law can effectively deal with economic loss, a court should be slow to use negligence law to impose a duty of care on a defendant. This is particularly important where to do so would interfere with a coherent body of law in another field.” [120]

12 The conclusion of Spigelman CJ as to vulnerability in the Reynolds case was:

“[46] This knowledge of vulnerability must be placed in a context that the duty is to prevent the self-infliction of harm by an individual whose autonomy the common law respects. It is also to be placed in the context where the appellant had available to him other means of obtaining cash, perhaps not as immediate or convenient, but other means did exist. Furthermore, other clubs and forms of gambling were available to him.
[47] The discussion of vulnerability in the judgments in Perre v Apand and Crimmins and the authorities cited therein, place considerable emphasis on the practical inability of the injured party to take steps to protect him or her or itself, whether because of ignorance of the risk or otherwise. There was no such practical inability in the present case.
[48] It may well be that the appellant found it difficult, even impossible, to control his urge to continue gambling beyond the point of prudence. However, there was nothing which prevented him staying away from the club. The suggested duty on the club to advise him to resign his membership emphasises the point. He could have resigned at any time. The requests to refuse to cash cheques when asked, did not shift his personal responsibility for his own actions to the club. There was no reason for the club to honour one request rather than the other.
[49] In my opinion this combination of circumstances is such that no duty of care was owed of the character for which the appellant contended. The risks were obvious. As Gleeson CJ said with respect to the analogous situation of a participant in sport: “The only way to avoid risk of injury is not to play”. ( Agar v Hyde) The appellant must accept responsibility for his own actions. There was no duty of care. There was no unconscionable conduct…”.

13 On the issue of vulnerability reliance was placed by the defendant on the observations of Giles JA in Reynolds at [141]:

“Vulnerability and control are related, and are important in determining whether a duty of care is recognised, for their absence as well as for their presence. If a defendant has no control or but remote control over the conduct of or affecting the plaintiff, a duty of care as regards that conduct can hardly be imposed on the defendant – see Agar v Hyde . Where a plaintiff wishes to conduct himself in a particular way even one involving possible harm, the importance attached to individual autonomy restrains the imposition of a duty of care requiring that he be prevented or hindered from so conducting himself ( Perre v Apand, Agar v Hyde) . Vulnerability connotes that the plaintiff is unable to look after his own interests and is open to the control of the defendant …”

Giles JA went on to say at [148]:

“The gambler’s vulnerability comes from the extent to which his control over the exercise of his rights is compromised. The club has the indication that the gambler’s control over the exercise of his rights, that is his ability to prevent his gambling and suffering loss, is compromised. That directs attention to the nature of the gambler’s condition and whether recognition of a duty of care is an appropriate response to the condition.
[149] The condition is ordinarily neither permanent nor constant in its effect. The evidence of the consultant psychiatrist spoke of a gambling problem in terms of difficulty stopping gambling, but did not suggest total absence of control or inability to regain control. As the course of the appellant’s gambling shows, at some time a gambler can with assistance or by his own will cease to be a problem gambler, and when a problem gambler there is a range from relatively harmless, albeit undesirable, indulgence to harmful over indulgence. The law pays regard to physical and mental disabilities, and for example to impulsiveness and less than rational conduct of the very young, in fashioning duties of care, but the gambler’s disability is of a different character. Control ultimately rests with the gambler, and society encourages the problem gambler to regain control. In the present case, with the benefit of the evidence of the consultant psychiatrist, the trial judge did not accept that the appellant “did not have a free will to exercise”, and the appellant’s counsel expressly said that the case was not put as one in which the appellant “had lost the capacity to make choices for himself” or “had been deprived of all choice of action in every respect”.

14 The defendant submitted that in the context of the voluntary consumption of alcohol, similar statements of principle were to be extracted from the majority of the High Court in Cole. This is despite the fact that there was no unanimous ratio in that two of the majority based their decision on the absence of a duty of care and two on an absence of breach of duty. Even those two justices (Hayne and Gummow JJ) appear to have had some doubts as to the existence of the postulated duty of care in that case ([90]).

15 Relying upon those statements of principle the defendant challenged the fifth statement of claim. It accepted, as it had to, that to the extent that para (9) asserted matters of fact, those facts would be established. It submitted that those facts were the same as had been established in Reynolds. It submitted that no additional force was given to the word “gambler” by juxtaposing the word “problem”.

16 It was against that factual background that the duty of care and breach of duty of care arose. In order to understand the defendant’s argument it is necessary to set out paras 10 and 11 of the fifth statement of claim:

10. By reason of the matters pleaded in paragraphs 1-9, at all material times the Defendant owed the Plaintiff a duty to exercise reasonable care and skill:

(a) to conduct its casino operations in a manner consistent with the minimisation of the potential for financial, social and personal harm (including physical and psychiatric injury) to the Plaintiff;

(b) to conduct its casino operations in a manner which did not increase, or exacerbate the potential for financial, social and personal harm (including physical and psychiatric injury) to the Plaintiff,

(c) in the supply of alcohol to him prior to or while he was gambling at Sydney Harbour Casino or Star City Casino,

(d) in the provision of advice to him about the nature and extent of his gambling problem and the need for him to seek assistance to control it, and

(e) in the offering and provision of inducements to gamble at Sydney Harbour Casino or Star City Casino.

11. Between in or about November 1996 and in or about March 1998 the Defendant breached its duty of care to the plaintiff.

Particulars of Breach

(a) The Defendant, by its servants or agents, induced the Plaintiff to take part in gaming in its casinos by:

(i) informing the Plaintiff orally that if the Plaintiff remained a “high roller” patron the Defendant would make available business contracts to the Plaintiff or his nominees for the benefit of the Plaintiff, including:
(A) a contract for designs of merchandise bearing the logo of Star City and other designs;
(B) a contract for the purchase of works or art for Star City premises;
(C) a contract for the supply of prints;

(D) a contract for the supply of a painting;

(E) a contract for the supply of a Christmas gift package for all VIP members (which members numbered approximately 12,000 to 15,000);
(F) appointment as a licensee to manufacture and sell products bearing the logo of Star City.
(ii) supplying complimentary products, services and privileges to the Plaintiff including liquor free of charge; and

(iii) providing a cheque cashing facility for use by the Plaintiff.

(b) The Defendant, by its servants or agents, induced the Plaintiff to take part in gaming in its casinos by:
(i) informing the Plaintiff orally that if the Plaintiff remained a
“high roller” patron the Defendant would make available business contracts to the Plaintiff or his nominees for the benefit of the Plaintiff, including:
(A) a contract for designs of merchandise bearing the logo of Star City and other designs;
(B) a contract for the purchase of works or art for Star City premises;
(C) a contract for the supply of prints;
(D) a contract for the supply of a painting;
(E) a contract for the supply of a Christmas gift package for all VIP members (which members numbered approximately 12,000 to 15,000);
(F) appointment as a licensee to manufacture and sell products bearing the logo of Star City.
(ii) supplying complimentary products, services and privileges to the Plaintiff including liquor free of charge; and


(iii) providing a cheque cashing facility for use by the Plaintiff.

(c) The Defendant by its servants or agents:

(i) allowed the Plaintiff to gamble at the Sydney Harbour Casino and the Star City Casino when it knew or ought to have known that the Plaintiff was intoxicated;
(ii) supplied the Plaintiff with alcohol on the premises of the Sydney Harbour Casino and the Star City Casino when it knew or ought to have known that the Plaintiff was intoxicated;
(iii) changed orders for non-alcoholic drinks given by the Plaintiff to the Defendant’s bar staff with the consequence that the Plaintiff was supplied with alcoholic drinks instead of non-alcoholic drinks;
(iv) influenced the Plaintiff to order alcoholic drinks instead of non-alcoholic drinks;
(v) engaged in the conduct pleaded in paragraphs 11(c)(i) knowing that this could:
(A) have a detrimental effect on the ability of the Plaintiff to take part in gaming in a manner which did not diminish his prospect of winning;
(B) have a detrimental effect on the ability of the Plaintiff to take part in gaming in a manner which did not diminish his prospect of winning;

(C) impair the Plaintiff’s judgment, reasoning and control;
(D) impair the Plaintiff’s appreciation of the consequences of the offer and acceptance of inducements;
(E) increase the prospect that the Plaintiff would continue to gamble and lose.
(d) The Defendant failed to display appropriate consumer protection warnings and notices at the entrances to its casinos and/or in the VIP rooms and/or near the cashiers and/or near the bars, stating that:
(i) the consumption of alcohol can have a detrimental effect on the ability of patrons to take part in gaming in a manner which maximises their prospects of winning and impair judgment, reasoning and control;
(ii) patrons should not take part in gaming while under the influence of alcohol;
(iii) patrons who have gambling problems can telephone identified help-lines for assistance.

17 The defendant submitted that sub paras 10(a) and (b) were vague in the extreme and set out the same duty as had been rejected in Reynolds. The same was true of (d). In relation to sub paras (c) and (e) the defendant submitted that these statements of duty were rejected in Cole and that in any event they defined the duty in terms of breach of duty, a process which was rejected by the High Court in Graham Barclay Oysters Pty Limited v Ryan (2002) 211 CLR 540 and in Vairy v Wyong Shire Council [2005] HCA 62 at [98].

18 Four principal breaches of duty were relied upon with a number of sub-headings. They were:

(a) Inducing the plaintiff to take part in gaming in its casinos.

(b) Inducing the plaintiff to continue to take part in gaming in its casinos, knowing that he had already suffered significant losses.

(c) Allowing him to continue gaming in its casinos when his ability to make rational decisions had been adversely affected by alcoholic intoxication.

(d) Failing to provide appropriate consumer protection warnings about gambling and alcohol intoxication.

19 The defendant submitted that the inducements relied upon did not constitute a breach of the duties of care specified. There was confusion in the way in which these and alcoholic intoxication were further particularised in that there were allegations of deliberate acts designed to reduce the plaintiff’s ability to make rational decisions. In relation to the provision of warnings and notices, the defendant relied upon Vairy for the proposition that the contents of the suggested warnings were so obvious that a failure to provide same was not capable of constituting a breach of these alleged duties.

20 In respect of paragraphs 12-18 of the fifth statement of claim the defendant submitted that the basis for the plaintiff’s claim was not clear. Although various allegations appeared to be made under the overall umbrella of a claim in negligence, the particular allegations involved deliberate conduct on the part of the defendant through its servants and agents, which of its very nature could not constitute an action on the case. Emphasis was placed on para 15, which it was submitted contained an allegation of a deliberate plan on the part of the defendant to render the plaintiff incapable of making proper decisions for himself. What in fact was being alleged was not negligence, but some kind of unspecified fraudulent conduct designed to unfairly separate the plaintiff from his money.

21 The final point made on behalf of the defendant was that para 35 of the fifth statement of claim was bad in law because the particulars provided were not capable of establishing that the defendant was vicariously liable for his conduct in allegedly assaulting the plaintiff.

Plaintiff’s submissions

22 In written submissions the plaintiff accepted that “for the pure economic loss claim, the law has not yet recognised a duty of care in the terms alleged by the plaintiff”. Because this category of claim was within an emerging area of law, it was inappropriate to strike out the claim before evidence had been taken.

23 By reference to concepts of foreseeability, proximity and the incremental approach by way of analogous reasoning, the plaintiff submitted that the duties of care relied upon were the product of the logical development of the law of negligence in well-recognised categories. These categories were:

(i) The control or supervision of premises (ie occupiers).
(ii) The exercise of special skills or expertise.
(iii) The reliance by one party on another.
(iv) The assumption of responsibility by one party for the other.
(v) Control or supervision of the organisation of activities.
(vi) Vulnerability.

24 Applying those principles to the operation of a casino the plaintiff submitted that the defendant controlled the operations of the casino and supervised the premises, it exercised special skill or expertise in the business of gambling. The plaintiff relied upon the expertise or skill of the defendant in providing a proper and responsible gambling organisation. The defendant, which also supplied liquor at its gambling premises, as an expert in gambling knew or ought to have known that the plaintiff was a vulnerable problem gambler, particularly when intoxicated. Those circumstances gave rise to the duty pleaded.

25 In relation to that submission the plaintiff restated parts of the judgment of Wood CJ at CL in relation to the previous strike out application by the defendant. Those conclusions, it was submitted, were unaffected by the decisions in Reynolds and Cole and remained valid.

“[113] If these are the relevant additional criteria, then again it seems to me well arguable that they could be established by the plaintiff. The defendant had the capacity, and the responsibility to exercise close control over its operations, of its staff and of those patrons who were allowed to enter its premises for the purpose of gambling. It set the rules for the games, it provided the machines and chips, which gamblers were to use, and it had the power to allow people to remain at its tables, or warn them off the premises.
[114] It is also well arguable that as a high roller with an unhealthy addiction or attraction for gambling, the plaintiff was vulnerable, particularly if allowed to gamble while intoxicated or if supplied with further liquor, especially free liquor, when in that state. Again, no great imagination is needed to conclude that an intoxicated gambler is less able to exercise judgment and control over his decision to turn to the tables at all, let alone to make informed judgments as to the way he should play any game of chance. While all such games do depend to a great degree upon fortune, they do not wholly do so since there is usually some room for an exercise of skill and judgment.
[115] The extent of that control and vulnerability, it might fairly be said, would be significantly affected if the facts alleged by the plaintiff are established, as to him being deliberately plied with alcohol when intoxicated, or as to his drinks being deliberately “switched”. Similarly, if the plaintiff can show that he was identified by the casino as a problem gambler and deliberately targeted with inducements, whether of free alcohol or business contracts or otherwise, so as to encourage him to continue betting in a disastrous way.
[116] Additionally there is the factor of knowledge of the risk and of its consequences which Kirby J considered relevant Perre v Apand Pty Limited at [132]. If the plaintiff can establish the allegation that the defendant knew of his losses and vulnerability, and of those of similarly addicted gamblers, then that knowledge could legitimately, in my view, be taken into count in determining the existence of a duty of care.”

26 By reference to the decision in Reynolds, the plaintiff submitted that the special facts of his case brought it within the category of “extraordinary cases” identified by Spigelman CJ. At the very least it was arguable that this was so and accordingly the plaintiff should be given the opportunity to adduce evidence to establish it.

27 The plaintiff also relied upon the importance of “vulnerability” which was identified by Spigelman CJ in Reynolds as a factor which if established, would go a long way towards establishing the existence of a duty of care. The special facts of this case, in particular the combination of an addiction to gambling and alcoholic intoxication, meant that the plaintiff was not able to take steps to protect himself from the defendant’s conduct. At the very least it was arguable that the plaintiff was vulnerable in this way.

28 In oral submissions, the plaintiff sought to restate the distinction between his situation and that considered in Reynolds and Cole and then to deal with the specific criticisms made of the structure and content of the fifth statement of claim.

29 It was submitted that the decisions of Reynolds and Cole involved ordinary patrons of a club or liquor outlet. This case was about a special kind of patron –

“It is a case about a big spending gambler who was attracted or enticed to gamble at the defendant’s facilities and through its negligence in the conduct of its operations was or became vulnerable to greater losses and a greater risk of physical harm and economic harm that would ordinarily be the case with somebody going to a casino. … Here you have a situation where the degree of loss that someone may suffer through gambling is greatly increased by the negligent way in which the operations are conducted, through the offering of inducements, plying the plaintiff with alcohol in circumstances where he was a big spending gambler and a problem gambler, a compulsive problem gambler.”

30 In relation to para 10 of the fifth statement of claim it was sought to give further content to the duties therein specified by submitting that the defendant had a duty not to take advantage of a person with a problem so as to maximise his losses. Although the duty was not pleaded in that way, it was submitted that the duty was expressed sufficiently broadly to pick up that concept.

31 In relation to the offering of inducements, it was conceded on behalf of the plaintiff that this involved deliberate conduct on the part of servants and agents of the defendant. It came within the tort of negligence because the offering of inducements was part of the way in which the defendant operated its business. Accordingly, the defendant had to exercise reasonable care in offering inducements when dealing with vulnerable persons such as the plaintiff. It failed to do so.

32 The same argument applied in relation to the provision of alcohol to the plaintiff whilst he was gambling. Although this involved deliberate acts on the part of servants of the defendant, the negligence arose because of the failure on the part of the defendant to properly supervise and control the provision of alcohol to persons who to its knowledge or that of its servants had a gambling problem. The plaintiff expressly rejected the suggestion that the defendant in its corporate consciousness deliberately set out to “intoxicate” the plaintiff, thereby rendering him more liable to incur gambling losses.

33 In relation to the provision of warnings, the plaintiff frankly conceded that this aspect of duty and breach of duty might be weak in that such warnings would have stated the obvious, but that was not a reason for striking out that aspect of the pleading. Evidence could be led as to the cumulative effect of such warnings. What the defendant had to establish in a strike out application was not that the case brought against it was weak, but that it was untenable and in relation to warnings, this had not been established.

34 In relation to paras 14-18, the plaintiff agreed that he was in effect raising the same allegations of breach of duty as had been particularised in para 11 but in a slightly different way.

35 No specific submissions were made in relation to para 35 of the fifth statement of claim.

Applicable legal principle

36 The defendant is proceeding under Pt 15 r 26 of the Supreme Court Rules which deals with defective pleadings. Part 15 r 26 provides:

“26(1) Where a pleading -
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or
(c) is otherwise an abuse of the process of the court,
the court may at any stage of the proceedings, on terms, order that the whole or any part of the pleading be struck out.”

37 The leading case in this area remains General Steel Industries Incv Commissioner for Railways (1964) 112 CLR 125 which was a strike out case. Barwick CJ after reviewing the case law observed at 129:

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action – if that be the ground on which the court is invited, as in this case, to exercise its power of summary dismissal – is clearly demonstrated. The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them” (the pleadings) “to stand would involve useless expense”.”

38 Barwick CJ later noted in relation to the earlier decision of the High Court in Dey v Victorian Railways Commissioners (1979) 78 CLR 62:

“Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.”

39 In NRMA Insurance Limited v AW Edwards Pty Limited NSWCA, (11 November 1994, unreported) Kirby P, with whom Powell JA agreed, said in relation to developing doctrine:

“The more complex and arguable is the legal point, and the more dependent it may seem to be upon debatable factual premises, the less likely is it that the pre-emptory relief sought by a party will be appropriate to the circumstances of the case, particularly where it would have the consequence of terminating proceedings altogether or terminating them forever against one party.”

40 Under the General Steel test more is required of the defendant upon whom the onus rests, than demonstrating that a plaintiff’s chances of success are slim. (Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 271 and 293.) It is a test which has been consistently applied. The formulation of the test, in terms which requires the defendant to show that the plaintiff’s claim is so untenable that he cannot possibly succeed, or is obviously or almost incontestably bad, is also in accordance with a long line of authority in the United Kingdom (Williams v Humbert v W & H Trademarks (Jersey) Ltd (1986) 1 AC 368 at 435-436 and 441.)

41 The strike out power is not appropriate in a case where the issue primarily relates to a conflict as to matters of fact or of credit. This is a case where significant issues of fact and credit are likely to arise but they have not been addressed in this application. The defendant’s application as it must, assumes for the purposes of the motion that the facts alleged can be made good.

42 The question for determination seems to come down to whether a reasonable cause of action is disclosed, ie a cause of action which has some chance of success or which could conceivably give the plaintiff a right of relief or which, although weak, is properly debatable and has some apparent legitimate basis if the facts upon which it is to be based are made good.

43 In Edwards (p11) Kirby J pointed out that an examination of the detailed facts going to the precise relationship between the parties and a full understanding of their dealings, may be important in discerning the extent of any duty of care which the plaintiff can establish in relation to a defendant. That observation is relevant to the present case. The matters pleaded will almost certainly need to be fleshed out to reveal the precise manner in which the defendant dealt with the plaintiff as a gambler and as a “high roller” (if that is what he is shown to have been).

Decision

44 As was accepted by the defendant, the onus which it has to discharge is a heavy one. This is particularly so when the evidence which is actually adduced at trial may be determinative of the precise relationship between the parties which itself may determine whether a duty of care exists or not and if it does exist, its content.

45 It seems to me that the assertions of fact in para 9 of the fifth statement of claim go beyond those found in Reynolds. In Reynolds the plaintiff’s addiction to gambling was known but nothing was done to assist him despite his requests. The allegations in para 9 go beyond that. Para 9 asserts not only knowledge of the weakness, but active encouragement and exploitation of it. That is a consideration absent from Reynolds and Cole.

46 I appreciate that some of the terminology in para 9 of its very nature is imprecise. It is difficult to give an exact meaning to concepts of “intoxication” and “problem gambler”. The terms, however, do have meaning and what is being asserted on behalf of the plaintiff is reasonably clear.

47 It is also true that sub paras 10(a) and (b) are expressed in very general terms. There is some degree of repetition in that one is the converse of the other. Nevertheless sub para 10(b) does articulate the basis of the plaintiff’s claim, ie that the defendant was under a duty not to exacerbate and actively exploit weaknesses in the plaintiff of which it was aware. As to whether the defendant owed such a duty to the plaintiff may depend upon evidence as to the extent of the plaintiff’s “weakness”, the extent of the defendant’s knowledge and the extent to which the defendant (if at all) sought to exploit those matters. A final decision as to the existence of that duty can only be arrived at when the evidence is complete.

48 Sub paras 10(c), (d) and (e) do no more than provide content to the general statement of duty in sub paras 10(a) and (b). As to whether such duties as are found to bind the defendant have that content may also depend upon the evidence at trial.

49 Para 11 contains a number of factual assertions of breaches of the duties allegedly owed by the defendant to the plaintiff. As to whether these breaches are made out are matters of fact and degree, which will depend upon the evidence.

50 In relation to those statements of duty and breach, I accept the plaintiff’s submission that the conclusions of Wood CJ at CL (set out in para [25] hereof) remain open despite the decisions in Reynolds and Cole. The factual issues sought to be raised in this case do enable it to be distinguished from Reynolds in an interlocutory application of this kind.

51 If they were the only considerations it follows that I have not been satisfied by the defendant that the claim made by the plaintiff is so obviously untenable that it cannot possibly succeed. In the course of argument, however, there were a number of matters raised which require further consideration.

52 I share the concern of the defendant in relation to sub para 11(c). The same problem arises in para 15. Despite the submissions by the plaintiff that any intentional conduct on the part of the defendant’s servants such as “spiking” the plaintiff’s drinks did not reflect the corporate intention of the defendant, that is not the way in which this aspect of breach of duty has been pleaded.

53 The pleading asserts that in addition to allowing the plaintiff to engage in gambling activities whilst intoxicated the defendant changed drink orders so that alcoholic drinks were supplied instead of non-alcoholic drinks and influenced the plaintiff to order alcoholic drinks with the express intention of intoxicating or further intoxicating him or with reckless indifference as to whether or not this occurred. No differentiation is made in the pleading between the state of mind of the employees acting with this intention and the purpose and the intention of the defendant as a corporation.

54 Whatever cause of action is raised by this pleading, it is not a cause of action grounded in negligence. It is no function of this Court to identify the cause of action which such a pleading might give rise to. It might involve some element of deceit, some element of trespass to the person or even some element of quasi-contract. There may be an overlap with the undue influence/unconscionability claim. What it does not give rise to is a claim within the tort of negligence.

55 Accordingly, I propose to strike out sub para 11(c)(iii) and (iv) and (vi) and para 15. I propose to grant leave to the plaintiff to re-plead those parts of para 11 if he wishes to conform with the oral submissions made, ie that it was not the corporate intention of the defendant that its servants and agents so behave, but that it was negligent in allowing them to do so. Subject to what follows such leave to replead will extend to para 15.

56 If, however, in addition to that allegation the plaintiff wishes to raise in the pleadings that the defendant as a corporation deliberately set out to subvert the plaintiff’s capacity to make rational decisions in relation to consuming alcohol and engaging in gambling, this will need to be specifically and separately pleaded. It should not be pleaded as a count in negligence because it is not a form of negligence. The precise cause of action will need to be identified and the particulars on which it is based set out. Since this will raise a cause of action not so far pleaded, the plaintiff will need to seek leave to further amend the statement of claim to raise it. This will require a formal application.

57 Although this point was not specifically raised by the defendant in its submissions on the motion, I have some concerns with the structure of the fifth statement of claim insofar as paras 13-18 are concerned. By way of illustration, para 13 asserts a number of factual issues. Paragraph 14 asserts in relation to one of those factual matters (ie the supply of alcohol when the plaintiff was intoxicated) certain knowledge on the part of the defendant. Those facts and knowledge are then picked up in paras 17 and 18 by further assertions that as a result of those matters the plaintiff was unable to exercise an independent, objective and informed judgment as to whether or not he should engage in the activity of gambling in the defendant’s casino. Set out in that way those paragraphs do not disclose a cause of action or legal basis for the allegations in paras 17 and 18. It is not clear from the pleading whether those paragraphs are dependent upon the duties of care set out in para 10. If that was the intention it has not been made clear.

58 As currently pleaded paras 13, 14, 16, 17 and 18 of the fifth statement of claim contain a number of assertions as to facts and knowledge on the part of the defendant without tying those matters down to the claim in negligence which is the context in which they appear. I propose to grant leave to the plaintiff to further amend the fifth amended statement of claim to set out more precisely how those allegations fit into the claim in negligence.

59 In may well be as seems to have been assumed by the parties in submissions that those paragraphs do no more than repeat, in a slightly different way, the same allegations of breach as are set out in para 11. If that is so, the plaintiff’s legal advisers may wish to give consideration to deleting those paragraphs altogether since on that approach they add little to the statement of claim. If they do add something to the allegations of breach of duty which is not included in para 11, then their relationship to the duty identified in para 10 needs to be clearly set out.

60 I am mindful that this last criticism goes to matters of form in relation to the clarity with which those paragraphs were pleaded. In such circumstances the essential test is one of intelligibility. That test turns upon the question of whether the nature of the case that the plaintiff wishes to make has been set out with sufficient clarity so as to allow the defendant to know what it is that it must meet. I am of the opinion that those paragraphs in their present form do not make clear how they fit within the overall claim in negligence. The defendant is entitled to have those matters clearly identified. Accordingly those paragraphs of the fifth amended statement of claim require amendment.

61 In relation to para 35 of the fifth statement of claim, I note that Hidden J in Preston v Star City Pty Limited [2003] NSWSC 321 considered a similar question. The paragraphs which he had under consideration were then numbered 34 and 34A and were expressed in the following terms:

“34. The abovementioned actions which constituted Mr Elam’s assault on the plaintiff were performed within the scope of Mr Elam’s authority in employment in that they were incidental to his role of (a) dealing with complaints by clients of the Casino and (b) furthering or protecting the economic interests of his employer, in that they were intended to prevent the plaintiff from engaging in further activities which either threaten the Casino’s licence under the Casino Control Act 1992 (NSW) and/or were contrary to the economic interests of the Casino.
34A. Further or alternatively the defendant is and was at all material times vicariously liable for the actions which constituted Mr Elam’s assault on the plaintiff in that they were so closely connected with his employment it would be fair and just to hold the defendant vicariously liable.”

62 The application before Hidden J was an appeal from a decision of Master Malpass refusing leave to amend the statement of claim to raise those matters. The basis for the Master’s refusal of the amendment was that to allow it would be futile in that the law in Australia was as stated in Deatons v Flew (1949) 79 CLR 370. Lister v Hesley Hall Limited (2002) 1 AC 215 on which the proposed amendments were based, was not part of the law of Australia.

63 When considering that matter Hidden J had before him the decision of the High Court in State of NSW v Lepore (2003) 212 CLR 511. His Honour concluded that:

“Their Honours do not speak with one voice about how the test for vicarious liability should now be expressed. Deatons has not been overruled and Gummow and Hayne JJ saw no need to venture outside the statements of principle to be found in it. On the other hand, Gleeson CJ’s formulation appears consonant with that of Lord Steyn in Lister. Kirby J’s certainly is. Gaudron J used the language of estoppel without reference to the question whether it would be “fair and just” to hold an employer liable, but her Honour saw the closeness of the connection between the employee’s conduct and the nature of his or her duties as a relevant matter.”

64 Applying the decision in Lepore to the proposed amendments to the statement of claim, his Honour concluded that the basis of liability in para 34A was not “hopeless” so as to render the amendment obviously futile. Very much would depend upon the closeness of the connection between Mr Elam’s conduct and the nature of his duties as an employee of the defendant. His Honour therefore allowed the appeal and allowed the amendment.

65 The question which Hidden J had to consider was very similar to that before me. In effect the same argument was raised before his Honour as is raised before me, ie that the pleading in para 35 is so obviously untenable that it cannot possibly succeed. In that regard I agree with the analysis of the law by Hidden J and I agree with his Honour’s conclusion, ie that the basis of liability set out in para 35 is arguable and may depend upon the facts actually adduced at trial. Accordingly I am not prepared to strike out para 35.

Conclusion and orders

66 For the reasons set out above I propose to allow the plaintiff to rely upon the fifth amended statement of claim subject to it being further amended. In relation to the defendant’s motion, I decline to strike out the paragraphs of the statement of claim which purport to rely upon the tort of negligence. For the reasons indicated, however, significant parts of the statement of claim need to be re-pleaded and leave will be granted to the plaintiff to do so. It follows that paragraph 1 of the defendant’s consolidated motion of 2 March 2004 will be dismissed.

67 The question of costs has troubled me. In a fundamental respect the defendant has failed in its motion in that it has failed to satisfy me that the plaintiff’s claim in negligence is so obviously untenable that it cannot possibly succeed. Nevertheless, the defendant has identified a number of defects in the statement of claim which must be remedied. Issue was clearly joined between the plaintiff and the defendant on those matters.

68 The costs order which I propose is that the plaintiff should have fifty percent of his costs of the motion. Since, however, the question of costs was not argued before me, I do not propose to make that order unless and until the parties have had an opportunity to read this judgment and put arguments to me on the question of costs, if they so wish.

69 The orders which I make are as follows:

(1) Leave is granted to the plaintiff to rely upon the document described as the fifth further amended statement of claim.

(2) Paragraph 1 of the defendant’s motion to strike out those paragraphs of the fifth further amended statement of claim, which relate to the plaintiff’s claim in negligence, is dismissed.

(3) I strike out sub-paragraphs 11(c)(iii), (iv) and (vi) and paragraph 15 of the fifth further amended statement of claim. Leave is granted to the plaintiff to replead those matters as part of his claim in negligence.

(4) The plaintiff is ordered to re-plead paragraphs 13-18 so as to specify how those paragraphs relate to the plaintiff’s claim in negligence.

(5) Costs are reserved.

(6) I grant liberty to the parties to approach the court on two days’ notice for the purpose of fixing a date to argue the question of costs if the parties so wish.

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