[2013] HCATrans 069
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Melbourne No M117 of 2012
B e t w e e n -
HARRY KAKAVAS
Appellant
and
CROWN MELBOURNE LIMITED (ACN 006 973 262)
First Respondent
JOHN WILLIAMS
Second Respondent
ROWEN CRAIGIE
Third Respondent
FRENCH CJ
HAYNE J
CRENNAN J
KIEFEL J
BELL J
GAGELER J
KEANE J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 4 APRIL 2013, AT 10.15 AM
Copyright in the High Court of Australia
____________________
MR A.J. MYERS, QC: May it please the Court, I appear with MR P. ZAPPIA and MR R.A. HEATH for the appellant. (instructed by Strongman & Crouch Solicitors)
MR N.J. YOUNG, QC: May it please the Court, I appear with MR N.D. HOPKINS, SC, for the respondents. (instructed by Minter Ellison)
FRENCH CJ: Yes, Mr Myers.
MR MYERS: The first matter that I wish to deal with I do so under the heading “pathological gambling”. The appellant’s case below and here today is that Crown acted unconscientiously in inviting and allowing him to gamble when it knew or ought to have known that he was suffering from a special disadvantage by reason of his pathological gambling condition. The trial judge’s approach to the matter needs to be considered first because of the way in which this matter was dealt with in the Court of Appeal. The trial judge’s approach, at least to the law, is found in the judgment at paragraphs 426 to 439 in volume 6. If I could ask your Honours to go to that.
HAYNE J: On what page?
MR MYERS: It is at 2527. His Honour asked himself the question: “Is the plaintiff under a disability?” and then addressed the legal principles. He referred, in paragraphs 428 and 429, to portions of the reasons for decision of Justice Deane in Amadio and Justice Mason in Amadio and then to the observations on the point of Justice Fullagar in Bromley v Ryan. In paragraph 431 he said this:
Mason J appears in the passage quoted above to favour the view that the relevant disadvantage is best discerned by asking whether the vulnerable party has a diminished ability to make a judgment about his or her own best interests. The next question is whether the other party knows or ought to know of this, and of its effect on the “innocent” party. Kitto J adopted the same approach in Bromley v Ryan, when he referred to a special disadvantage affecting someone’s ability “to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.”
Then his Honour said at 432:
I respectfully doubt whether an examination of disadvantage is best approached by seeking to ascertain whether there exists in the vulnerable party a diminished ability to make a judgment about his or her own best interests, or about how best to conserve them. It is generally difficult, and often inappropriately paternalistic, for an outsider – and this includes a court – to make a judgment about what is in another’s best interests.
Your Honours will see immediately that the learned judge changed the focus of his observations just slightly, but importantly. Instead of looking to see whether there was a diminished ability to make a judgment, he then posed the question making a judgment about what in fact was in the best interests of the so‑called innocent party. Then at 434 on 2530, he said:
I prefer the approach of Deane J in the passage quoted above from Amadio. Moreover, his Honour’s position seems to accord with that of Fullagar J in Blomley v Ryan. It involves an assessment not of what is in someone else’s best interests, but rather of whether reasonable equality exists between the parties. If it does not, then the stronger party must not take unconscientious advantage of its disproportionate strength. The test is essentially objective, as opposed to the overly subjective test of whether the other party is able to make a judgment about (to adopt the phraseology of Mason J in Amadio) “his own best interests”.
Then if I could invite your Honours to go over to page 2532 paragraph 439:
The true question, it seems to me, is that which, as I understand his Honour’s judgment in Amadio, is favoured by Deane J: namely, whether Mr Kakavas and Crown met on equal bargaining terms. In my opinion, they did, despite his gambling problems.
Elsewhere, his Honour accepts that despite his pathological gambling condition and I will take your Honours to that in a moment. Could I ask your Honours ‑ ‑ ‑
KEANE J: Mr Myers, is his Honour there saying anything more than that the doctrine is attracted when one party to the knowledge of the other makes a bad deal?
MR MYERS: No, his Honour probably is not saying any more than that and that would be wrong because the question is not whether it is a bad deal, but whether the person who is making the deal, the innocent party, has the capability of conserving his or her own best interests. It is a matter that focuses on the characteristics of the person and the consent that that person gives, not the quality of the deal whether some outsider would say it is a good deal or a bad deal. What his Honour did, with respect, was to focus on the latter. He rejected the position that had been put forward by Justice Mason in Amadio and said one looks to see whether they met on equal bargaining terms.
What he meant by that is made clear or clearer in paragraph 440 at the first paragraph:
As I hope I have made clear by what is written above, equality in bargaining power may be possible even if the plaintiff is under a disability.
Then paragraph 441, right at the end of that paragraph, about line 53 or 54:
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.
This being the case, the evidence concerning Mr Kakavas’ standing as a pathological – or, at least, problem – gambler is not particularly relevant.
So he is saying that the condition of mind which affects the ability to conserve one’s interest is not particularly relevant. Now, the trial judge reached this conclusion, as I have said ‑ ‑ ‑
CRENNAN J: Is the rhetorical strategy in the judgment that he accepts the disability, therefore he moves on to the unequal bargaining test to see whether unconscientious advantage has been taken?
MR MYERS: In a sense yes, your Honour. Certainly what the trial judge did was accept that Mr Kakavas suffered from a pathological gambling condition, but then he said it is not particularly relevant because he had equal bargaining power by virtue of the fact that he could withhold his custom with the casino and that gave him, as his Honour said, equal bargaining power.
CRENNAN J: There seems to be a theme in the cases that it will not be every instance of a special disability, say, drunkenness or illness, which will trigger the equity. There is always the need for the effect of the disability to be one of an equal bargaining power in circumstances where unconscientious advantage was taken of that. So the equity – I am just making the point, and tell me if I am wrong – it seems to be a theme in the cases that one does need to isolate the factor of the effect of the disability in relation to the transaction.
MR MYERS: Certainly. One certainly has to do that because it has to be a special disability, that is to say a disability which affects one’s ability to make a judgment in one’s best interests or to conserve one’s best interests in the transaction in question. Here the transactions in question – and I should say this right upfront – are the wagering transactions. They are not some global transaction about whether you come to the casino or not. It has to be judged at the gaming table.
KIEFEL J: Is that a new approach?
MR MYERS: No, that is not a new approach.
KIEFEL J: I thought the approach taken both in the pleadings and at trial was as to whether or not some advantage had been taken of him in the sense of him having been induced to come back to the casino.
MR MYERS: That was certainly so, but perhaps if I can deal with your Honour’s question by continuing to deal with what Justice Crennan said. So that what we say, consistently with Amadio, or at least certainly Justice Mason’s reasons for decision in Amadio, which have been followed and approved often, there has to be, relevantly, for the present argument, a special disadvantage in the sense that I have used it and his Honour uses the expression “special disadvantage”, not “special disability”. I do not want to make too much of a single word, but a disability is something that disables and advantage is something that you do not possess that perhaps the ordinary run of people possess, but it does not disable. He uses the words “special disadvantage”.
Then the person who is dealing has to know or be in a position where that person should have known of the special disadvantage and then one, we accept, needs to stand back and look at the whole transaction. One can imagine a case where there is a person who has a special disadvantage and it is known by the person with whom the bargain is being struck that the person with whom the bargain is being struck says, “No, no, no, you are under special disadvantage, go away and see your lawyer” or, “You’ve said that you will pay me $10,000 for this loaf of bread, but really it is only worth $2 and that is what I will accept”.
So that one has to step back and see whether there has been advantage taken, but normally it is sufficient to identify the special disadvantage, identify that it is known or should have been known, and then identify the transaction which has been entered into in the knowledge of that special disadvantage, and in this case the special disadvantage is an inability to control one’s desire to gamble.
FRENCH CJ: Well, is there a finding of inability or failure? I am looking at what his Honour says at 443, in the last five or six lines:
There remains no doubt, and I accept, that some people suffer from a persistent and recurrent maladaptive pattern of gambling behaviour characterised by their failure to control the urge to gamble –
et cetera. Does that not describe a set of behavioural characteristics along some spectrum which is marked enough to attract the label “disorder”?
MR MYERS: It does. I accept that, your Honour, and also I want to withdraw the word that I use - “inability” to conserve one’s interest or “inability” ‑ ‑ ‑
FRENCH CJ: That is expressly disclaimed in the DSM manual, is it not?
MR MYERS: Yes, and it is not a question of inability. It is a question of, as was said in Amadio, a special disadvantage that affects adversely one’s ability to consider whether the transactions are in one’s best interest or to conserve one’s best interests.
HAYNE J: But let me just understand that a bit better. Your case is that there was unconscionable taking of advantage – there was an unconscionable taking of advantage by Crown making any gaming transaction with Mr Kakavas. Is that right?
MR MYERS: Correct.
HAYNE J: There was an unconscionable taking of advantage because, you say, not that Mr Kakavas was unable to control but because Mr Kakavas what - could not adequately examine whether gambling was what - a desirable, commercially sensible, enjoyable pastime?
MR MYERS: No, but when at the gaming table he could not make a decision about how to conserve his own best interests. Gambling transactions inherently, as is accepted by our friends, are transactions that are disadvantageous to the gambler in at least the financial sense – I am leaving aside satisfaction that may be obtained and so on – but inherently disadvantageous and Mr Kakavas, as the evidence shows, was simply unable, once he got to the gambling table, to stop himself from gambling and gambling and gambling until he had lost everything and then ‑ ‑ ‑
KIEFEL J: Well, that is the ultimate result, but in the meantime, on numerous occasions he walks away from the gambling table with winnings and he stops at the point when he is winning. What are we supposed to make of that?
MR MYERS: What one is supposed to make of that is that on some occasions when you gamble you are going to win, but ‑ ‑ ‑
KIEFEL J: And you control yourself, you leave at the point where you are ahead. But it is just that in the end result, you are not going to win eventually, are you?
MR MYERS: Not at all.
KIEFEL J: Does anyone?
MR MYERS: I do not know the answer to that. Some people may, if they come for a short time, but if you come and you gamble and gamble and gamble, eventually you will lose everything.
KIEFEL J: Well, the odds are in favour of the house.
MR MYERS: They are. That is the nature of the transaction.
KIEFEL J: But just before we get too much into what happens at the gambling table, could I just be clear in my mind about what your case now is? His Honour’s findings seem to have been more directed to the question of whether or not the casino, Crown, should have negotiated with Mr Kakavas about returning to the casino. That seems to be the thrust of his Honour’s findings, his concern about whether they were able to bargain on an equal footing about whether he should come back to the casino and resume his practices. I would assume that his Honour has done that because of the way in which the case was framed.
MR MYERS: Not as the case was framed by us, but certainly the case as framed by Crown emphasised those things and his Honour really accepted the Crown case.
KIEFEL J: And are you saying now that we can put all of those discussions to one side and just concentrate upon Mr Kakavas with his approach to gambling at the gambling table? Is that what we focus upon now?
MR MYERS: What I am saying is that he had a special disadvantage and if you like – and I put it compendiously – it was an inability to properly control his gambling urge; sensibly to control his gambling urge. One can use any adverb there one wishes.
HAYNE J: But the work of that proposition is done by the modifying term.
MR MYERS: It is.
HAYNE J: It is masking the content of the proposition you are advancing.
MR MYERS: Well, there is always a question; there is no bright line which says that this is a special disadvantage and that is not. We respectfully say, what was said in Amadio by Justice Mason, is the correct test and if I can just go back to page 2528, paragraph 429, Justice Mason is quoted there as saying:
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 emphasise 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.
That is really to adopt the words of Justice Kitto in Blomley at page 405, I think.
CRENNAN J: When Justice Taylor dealt with the facts in Blomley v Ryan, he made a number of points about drunkenness. For example, he said, obviously the weaker party is in a very different position or in recovering from drunkenness, or in a state of drunkenness and in a different position, again, when sober in terms of considering the equity in an impugned transaction. In relation to the disability you have identified, an inability to control the gambling urge, is the correct analysis that Mr Kakavas is not suffering from that disability when he does walk away with his winnings?
MR MYERS: No he is suffering from that disability, but it may not always be operative. A disability of this kind may not always be operative and I think that is what is said by the experts and also in DSM‑IV, which I will come to shortly.
CRENNAN J: Justice Taylor’s point was that if the transaction, the sale of the farm, had not been affected by drunkenness, the equity would not be triggered. One always has to look at the operation of the disability in the context of the transaction.
MR MYERS: Of course, and I propose to do that, and you will see how Mr Kakavas gambled.
KIEFEL J: That raises the question: what is the transaction for our purposes?
MR MYERS: It is a wagering transaction we say, with respect. It must be.
KIEFEL J: Each wagering transaction, even if it was beneficial?
MR MYERS: It must be, yes.
KIEFEL J: That is the difficulty in this case.
MR MYERS: Each wagering transaction, even if it turns out to be beneficial, as a wagering transaction it is improvident because ‑ ‑ ‑
KIEFEL J: As it is for everyone.
MR MYERS: It is for everyone. The question in the end for the Court is whether those people in the community who are unable to conserve their own best interests at the gambling table need to be protected.
HAYNE J: Conserve their own best interests to the extent of suffering no loss, to the extent of suffering an unreasonable amount by way of loss? Conserve one’s own interests how?
MR MYERS: By not gambling.
HAYNE J: At all?
MR MYERS: At all, if one is identified as a person subject to the special disadvantage. Can I just take it a little bit more slowly and just build up the case a little. I was going to refer your Honours to the findings of his Honour that the diagnosis of pathological gambler was correct. In paragraph 1 on page 2369 the judgment begins:
The plaintiff, Harry Kakavas, was and is a problem gambler. Indeed, a diagnosis which I accept has him as a pathological gambler; and I also find that the first defendant, Crown Melbourne Ltd (“Crown”) cannot divorce itself of some knowledge of his condition.
We would think that we were home at that point. Then if I could refer your Honours to the judgment at paragraph 443 on 2533. His Honour describes the evidence:
It is generally accepted by psychiatrists and psychologists of repute that there exists a condition known as pathological gambling.
It is described in DSM‑IV and in the International Classification of Diseases it is recognised as a psychiatric disorder. Then there is the passage that your Honour the Chief Justice read to me and then at 444:
I find that Harry Kakavas was one such person.
FRENCH CJ: Does his finding about the appellant rise higher than what he said at the end of 443:
I find that Harry Kakavas was one such person.
MR MYERS: He was a person who suffered from the condition described in 443.
FRENCH CJ: “A persistent and recurrent maladaptive pattern of gambling behaviour characterised by their failure to control the urge to gamble, leading” et cetera.
MR MYERS: It does not raise higher than that because that is, in effect, the definition that is contained in the medical literature to which he refers.
FRENCH CJ: So there is nothing in that about inability to control himself? There is a pattern, perhaps, of bad judgments.
MR MYERS: A failure to control the urge to gamble?
FRENCH CJ: About an inability to control the urge to gamble.
MR MYERS: Well, the words are, I accept, that some people suffer from this pattern of gambling behaviour characterised by their failure to control the urge to gamble. So that is the essence of the behaviour.
FRENCH CJ: The limitations – how much you can make out of that is thrown up to an extent by what is said in 445 – apparent in 445.
MR MYERS: Yes, of course, but 445 is really dealing with – well, it is saying that it is often difficult to identify or diagnose. Now, we are not, at the moment, saying that Crown has to have psychological tests run on everyone who is going to put a dollar in the poker machine and 445 is also bound up with the second question of knowledge of the problem. Can I again come back to that? I should also draw the Court’s attention to, on the previous page, paragraph 440:
In my opinion it is clear that Mr Kakavas was a problem, and indeed very possibly a pathological, gambler. His judgment, as could be seen when set against the judgment of the generality of members of the community, was overly influenced by a desire to gamble. Even making allowances for the truth that we all have different priorities, and that the objects of one person’s desire are the subjects of his neighbour’s derision, nevertheless the extent to which the urge to gamble influenced the thinking and the actions of Harry Kakavas far exceeded its influence on the vast majority of his fellows.
Before leaving this I should like to go to the very last paragraph of the reasons, 2611 - this is paragraph 661, his Honour’s conclusion:
For the reasons set out above, I find that Crown did not seek to exploit the plaintiff’s gambling disability. It knew of a problem. It might have acknowledged, if asked in 2004 whether the problem would re‑surface when Mr Kakavas returned to the Casino, that that was a possibility. If asked, it ought to have acknowledged that his was a disability which on the balance of probabilities would be to its advantage were Mr Kakavas to remain as a patron over the medium to long term. It should now accept that its structures for dealing with its own desire to have Mr Kakavas resume his patronage were inadequate.
Then that is elaborated upon. Then on 2612, about the sixth‑last line:
He now seeks to blame Crown for his own decisions; to place upon it responsibility for failing to do for him that which he failed to do for himself. But this is not something to which equity can accede. The responsibility was his. In the words of the Brooks report: he knew how to self‑exclude, and he would do it if that was his wish.
That is a summary, accurately, we say, with respect, of his Honour’s reasons. Could I now just turn to how the Court of Appeal dealt with the matter? Justice of Appeal Mandie delivered reasons, with which Justice Almond agreed, and Justice Bongiorno delivered separate reasons. May I deal – and I am in volume 7 now – with the reasons of Justice Mandie first of all and I will go to paragraph 27 on page 2650.
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 disadvantage when dealing with Crown or, more precisely, when entering his various gambling transactions (i.e. making his wagers).
We accept that, but it all hinges on the word “necessitate”.
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.
Then, paragraph 29, line 50:
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. His Honour devised –
This is what we said –
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’.
Then Crown’s submissions are set out. Paragraph 32 on page 2652:
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 formulation 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.
We agree with that description of what Justice Deane decided, but not with the prefatory words that his Honour did not reject established law -
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 –
Suggesting that there is a difference, we say with respect –
also had proper regard to the plaintiff’s ability to protect his own interests in the relevant transactions (i.e. the wagering transactions).
Then, in paragraph 33, Justice Mandie gets to the nub of his reasoning. He says:
In my opinion, the appellant has failed to demonstrate that the judge’s conclusion that the appellant was no 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.
So that is a question about simply whether the judge below assessed the evidence correctly:
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 . . . These considerations also show that the wagering transactions were in any event not unfair, unjust or unreasonable as required by the Amadio doctrine.
So that is reasoning that is based upon the proposition that because the gambling transactions that the appellant entered into were the same as those which everyone else entered into there can be no taking advantage. We say, with respect, that is simply wrong because all that does is make completely immune any casino from any liability to a person who has a seriously diminished ability to conserve his or her interests in entering into wagering transactions. If you offer the same odds to the so‑called innocent party as anyone else then, necessarily, the innocent party is going to fail. Justice Bongiorno added something. This is at appeal book 2709. I am looking at paragraph 207 of the judgment:
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.
That observation of his Honour, with respect, is simply wrong. The diagnosis was made by the four experts whose evidence was received by the court and those diagnoses were made between the date of stopping gambling and the date of the trial. Two of the experts – the Crown experts – were asked to opine on whether a diagnosis could be made retrospectively and they said yes. They hedged it by saying, well, we have to rely upon the truth of the statements that were made and all four of the experts did make a diagnosis retrospectively that the appellant was at the severe end of the condition of pathological gambling.
So the first observation that his Honour has made is simply wrong, as a matter of fact, and it is a little hard to understand. Then halfway down the paragraph, at line 42:
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.
Well, to say it says nothing about that is not correct. It certainly says something about it, but one would have to concede that for one reason or another, the condition which the pathological gambler suffers from may not be as operative at some times as it is at others –
His Honour’s reference to the appellant’s pathological gambling as being not particularly relevant in this case was justified in all the circumstances.
That is the substance of his Honour’s reasoning, except that over the page at 209, he puts a proposition such as Justice Mandie put in paragraph 33:
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.
So if you get the right gambling terms, then it does not matter that you may be a pathological gambler.
GAGELER J: Do you accept that it is necessary for you to show that the gambling transactions were unfair, unjust or unreasonable?
MR MYERS: No, we say not so and, for example, Justice Deane makes that very clear – I cannot tell you the precise passage at the moment – in Amadio. He says that you do not have to show that there is an inadequacy of consideration or that the transaction itself is inherently unfair because the law is primarily looking to the quality of the assent to the transaction. The law is not primarily trying to judge whether this is a good deal or a bad deal, just as it is in the law of contract, but rather looking to see whether the judgment of the person who has entered into it and who claims to be the victim is a judgment made by a person of full capability.
KIEFEL J: Your case, as I take it, Mr Myers, has three steps. Firstly, he had a condition of pathological gambling which was diagnosed. Second, it was evident or should have been evident to Crown that he had that condition, and thirdly, that in those circumstances, Crown should not have dealt with him at all.
MR MYERS: Yes, except that the first proposition is not so much that it was a condition of pathological gambling, but that he had a special disadvantage. The special disadvantage was that he was a pathological gambler but ‑ ‑ ‑
KIEFEL J: Well, we need to elaborate what that actually means, but they are the only steps.
MR MYERS: Yes. It just is not the fact that there was a diagnosis by three psychologists and a psychiatrist that he was at the bad end of the pathological gambling spectrum. It is also that his behaviour, especially at Crown, demonstrated that he was quite unable to control the urge to gamble.
KIEFEL J: That is part of the second step, whether it was evident.
MR MYERS: Yes, it is also part of the evidence that he suffered from a serious – a special disability. You can infer from the way in which he gambled that he suffered from a special disability and Dr Blaszczynski, who was one of the four experts with whom the two Crown experts agreed, explicitly emphasises the fact that the way in which he gambled at Crown showed that he was at special disadvantage. I am sorry, that he was a pathological gambler. The passage in the reasons for decision of Justice Deane that I referred to in answer to your Honour Justice Gageler’s question is on page 475 of Amadio ‑ ‑ ‑
FRENCH CJ: On the preceding page his Honour drew a distinction, did he not, between unconscionable dealing and undue influence, the latter going to the quality of the assent.
MR MYERS: Yes.
FRENCH CJ: Just that you mentioned quality of ‑ ‑ ‑
MR MYERS: He did, but he also said that they overlapped and we say, as a general proposition, and one does not want to get into too much of a theoretical or philosophical argument, but generally the law is concerned with the quality of the assent, not the quality of the bargain. The quality of the bargain may cast some light on the quality of the assent but it is generally that.
BELL J: But dealing with unconscientious or unconscionability as distinct from undue influence the emphasis is on the unconscientious conduct of the stronger party which tends to point in the direction of the bargain.
MR MYERS: Of course it does, but it is possible that a bargain may, from an objective point of view, be fair but still produced by unconscientious conduct. The example that one sort of thinks of is the old lady who has a little timber house in the corner of the block that the supermarket developer wants and eventually, after a lot of discussion, she sells out, but she was infirm and not able to consider the transaction.
KIEFEL J: That would be undue influence, would it not?
MR MYERS: It may be undue influence. It depends on the nature of the transaction.
KIEFEL J: But is not what Justice Deane is speaking of in relation to whether or not the benefit needs to flow from the bargain addressed by his Honour at page 475 where he says it is not essential that there be adequacy of consideration “moving from the stronger party”. It may be:
unreasonable and unjust from the view point of the party under the disability.
which, I think, is what you have in mind. But the example that his Honour goes on to give about that still involves unfairness, for instance, where the benefit of the consideration moves not to the person under the disability but to some third party and instances guarantees which we see in the other cases. So it is difficult to think of a case where there has not been some kind of unfairness in the benefit or adequacy of consideration.
MR MYERS: Generally, the issue will not arise unless there has been some sort of inadequacy of consideration – generally – because there will be no economic impetus to undertake the proceedings. The example that I gave of the infirm person who is persuaded to sell the house that they have lived in for 60 years and then repents of it and does not want the specific performance being granted of the transaction that is a case where the consideration may be perfectly satisfactory and it may be not a case of undue influence, but just taking advantage of someone who is gullible and who repents of the transaction.
KIEFEL J: Given that the terms of the transaction here were universal and given that you have, I think, agreed that there are three steps in your case, which starts with and really depends for its fundamental premise upon Mr Kakavas having a particular condition relating to gambling, is not your case really more akin to one of undue influence? Is that not really where your case lies?
MR MYERS: That is not the way we have put it.
KIEFEL J: No, it might not be, but ‑ ‑ ‑
MR MYERS: I do not think it is open for me to say today undue influence. In fact, that is not the case that we want to run. We want to say, and we do say that Mr Kakavas had a special disadvantage. Notwithstanding that the terms that the casino dealt with him were the same as the terms, or relatively the same as the terms, it dealt with everyone else, they are improvident transactions from his point of view and he was unable to control his urge to enter into those improvident transactions.
FRENCH CJ: I think this question again of inability to control requires consideration of just what findings were made in that respect. You keep returning to that.
MR MYERS: Indeed; thank you, your Honour. Could I go to the evidence first of all of the psychiatrists? Their evidence, as your Honours will have seen, was accepted. May I deal with first Dr Blaszczynski and I want to go to appeal book 2141, volume 6.
HAYNE J: I am sorry, what page?
MR MYERS: 2141.
HAYNE J: Thank you.
MR MYERS: I just want to draw your Honours’ attention, without making any particular point of it, this is the original contact with Dr Blaszczynski, and then 2143 is the retainer. The questions are set out on page 2144 and Part B directs the questions to be answered with respect to certain assumptions. Paragraph 7 identifies three periods – the period from about 1993 to late 1998, and that covers the first period of Mr Kakavas’s contact with Crown. The second period means the period from about early 1999 to September 2004 when Mr Kakavas did not gamble at Crown and for most of that time did not seek to do so.
From the beginning of 2001 he had no contact with Crown seeking to come and gamble. The third period means the period from October 2004 to September 2006. October 2004 is when Crown began putting in motion the steps to get Mr Kakavas back gambling and September 2006 is the end of the period of gambling which commenced in June 2005 and went for about 14 months.
KEANE J: Did he stop gambling altogether?
MR MYERS: No, he did not stop gambling and there was evidence, and Crown knew of it, that he was gambling in Las Vegas, in particular.
KEANE J: So is this the situation that while he was suing Crown, while these proceedings were going on, he was continuing to gamble?
MR MYERS: No, there is no evidence of that at all. In fact, the evidence is that he has not gambled since shortly after he left Crown.
KEANE J: What is the evidence as to how it was that he came to stop gambling?
MR MYERS: He ran out of money. The evidence is very clear. On the last day he owed Crown a million dollars and they would not give him any more credit and he left.
KEANE J: So he gambled with others who did give him credit?
MR MYERS: Some of them did, and he got money from other sources after he left Crown.
KEANE J: So he was able to continue gambling but, nevertheless, it seems he stopped gambling altogether. Is that right?
MR MYERS: Yes, he did stop gambling altogether at a certain point.
KEANE J: It does not sound like he stopped gambling because he did run out of money. Is there evidence as to why he did stop?
MR MYERS: No, not really. I will look at that ‑ ‑ ‑
KEANE J: Thanks, Mr Myers.
MR MYERS: ‑ ‑ ‑ question, your Honour, but I think the answer is not really.
KEANE J: It would be a bit of a deficit, would it not, in your case if it be the case that he demonstrated that he could stop because he did stop?
MR MYERS: Well, not really. What the expert evidence is ‑ and I am summarising the totality of it in saying this ‑ is that sort of once a pathological gambler, always a pathological gambler. It is a little like being an alcoholic; you may keep it under control for a long period of time but if you, you know, touch the bottle then you are back in the grip of the addiction.
KEANE J: It is the difference between capacity and failing if – it is a difference between just not being able to stop and finding it hard to stop.
MR MYERS: Well, I do not think anyone would say that it is an impossibility that someone should stop, but it would be open, I suppose, for someone to join an enclosed order of monks and be removed entirely from the temptations of the gaming tables. It does appear – and it is the expert’s opinion – that if one is subject to this urge to gamble then it will always be with one.
KEANE J: If the problem is the problem that manifests itself when he is at the gaming tables, that is when he cannot stop, then the question I suppose is, in the intervals between going to the gaming tables, when on the findings it seems that for weeks at a time he was able to stay away, then he goes back.
MR MYERS: Well, at least that he did stay away, with respect, your Honour, when one says “able to stay away”. The evidence shows that at certain points he ran out of the readies and he had to go and marshal his resources again, and he did so generally speaking by borrowing. I think that is the summary of the evidence. I am going to take your Honours to that.
FRENCH CJ: Just so I understand where we are going, under paragraph 2 of your outline you have the finding which we discussed earlier at 440 in the primary judge’s judgment about the nature of his “condition”. I understand that you are not challenging the findings of fact. For what purpose are you taking us to the evidence?
MR MYERS: Well, it explains the nature of this disability, the illness of pathological gambling.
FRENCH CJ: It is not an illness, it is a disorder. It is distinct from a disease.
MR MYERS: Well, it is described as a disease. It is in the ‑ ‑ ‑
FRENCH CJ: It is not a disease. It is a disorder in DSM, is it not? There is a distinction.
MR MYERS: It is a disorder and it is also listed in the international catalogue of diseases – of illnesses.
HAYNE J: But again, at the risk of delaying you still further, can I understand where we may have got to? I would understand you to say in adopting the tripartite analysis that Justice Kiefel put to you that he had a disadvantage, he had a condition, he had a diagnosed condition and there may be some debate about which of those three terms is to be adopted. That should have been evident to Crown, Crown should not have dealt with him is the analysis that I think you have broadly adopted.
MR MYERS: That is the way I am going, your Honour, yes.
HAYNE J: In the end is the analogy which you would ultimately have us make the analogy with the person who gives away resources? It is the person who, whether through undue influence or otherwise, gives all his or her assets, the traditional case is, to the housekeeper.
MR MYERS: Allcard v Skinner when the - became a nun.
HAYNE J: But I would understand you to seek to put aside the fact that the odds were always the same, that the transactions made at the table were identical with transactions made with any other gambler on the footing, ultimately, here is a man who is giving his money away to Crown.
MR MYERS: They are improvident transactions which is a way of, I think, accepting what your Honour is saying. They are inherently improvident transactions and if you enter into enough of them you will end up with no money at all. Look, your Honours, I do not want to take too much time with the experts, but can I go to DSM‑IV, which ‑ ‑ ‑
HAYNE J: With a view to demonstrating what, that there is a well‑respected work used by medical and associated practitioners, but for what legal or forensic purpose, Mr Myers?
MR MYERS: For the legal or forensic purpose of showing that this man, according to the evidence of four experts, suffered from this condition. If I could also draw your Honours’ attention to page 2198, and there is a reference to ICD‑10 – International Statistical Classification of Diseases and Related Health Problems – and what it says is that the problems in DSM‑IV are so classified.
KIEFEL J: But DSM‑IV is subject to a caveat but it is not useful in relation to proof of particular legal standards of competence.
MR MYERS: Well, it is not conclusive but it is certainly useful because if you are subject to this condition it does tend to suggest that you may not have a certain legal standard of competence. It is not the last word – or the only word.
KIEFEL J: I am sorry, but does it not require a clinical – like most of the DSM classifications – judgment based upon extensive consultation with a person?
MR MYERS: Yes, it does require that.
KIEFEL J: So you need to go beyond DSM‑IV to what people say. In that regard, I think, the professor to whom you have referred said at appeal book 2201 at about line 60 and over to 2202 about the use of DSM‑IV in forensic settings that:
In determining whether an individual meets a specified legal standard (e.g., for competence, criminal responsibility, or disability), additional information is usually required . . . This might include information about the individual’s functional impairments . . . 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.
MR MYERS: We accept that. That is from the introduction to DSM‑IV. It is not what ‑ ‑ ‑
KIEFEL J: It is not his own view.
MR MYERS: It is not Professor Blaszczynski’s words.
HAYNE J: It is appeal book 2202.
MR MYERS: Yes, that is so.
KIEFEL J: But, here, are any of the psychologists who were called able to give evidence about his ability to control his decision to gamble in any particular transactional setting?
MR MYERS: Yes, they did. They considered the three periods, including the third period which is the period in question. If I could just go to Professor Blaszczynski’s opinion, beginning at 2304, he says that there is a condition known as “pathological gambling” – on 2305 to 2306 and then he identifies the diagnostic criteria for the condition and, in particular, in paragraph 11, he sets out the 10 criteria that are in DSM‑IV. Then over the page, at paragraph 12:
The International Classification of Diseases . . . similarly recognized pathological gambling as a psychiatric disorder. The ICD‑10 system classifies the condition within the category of Disorders of Adult Personality & Behaviour –
and so on.
KIEFEL J: Is not the process that each of the psychologists or most of the experts are undertaking to determine how many of the diagnostic criteria were met?
MR MYERS: They certainly do that.
KIEFEL J: Yes and when they come to the conclusion that it is met, they are able to say that he suffers from something that is described in DSM‑IV. But how much does that tell us?
MR MYERS: Well, it tells one quite a lot. If I can just add a reference – this is in the oral evidence of Dr Blazczynski when he is being cross‑examined. I will not read it but it is at appeal book 936, line 28 to 938, line 4 and in a longish answer, Dr Blazczynski, in a couple of longish answers, describes the process by which one reaches a conclusion. He says it is not just a matter of ticking a majority of boxes of six out of 10 and then that is it.
KIEFEL J: It requires clinical judgment, no doubt?
MR MYERS: It requires clinical judgment, but I do not mean to read it to your Honours now. If one goes to 2309 in paragraph 28, line 20:
It is my clinical opinion that Mr. Harry Kakavas met the requisite psychiatric criteria described in the Diagnostic and Statistical Manual IV-TR (2000) (DSM) for a diagnosis of pathological gambling during the first (1993-1998), second (1999 - Sept. 2004) and third (2004 – Sept. 2006) periods.
Then he describes some aspects of his behaviour. After the words “2006 periods”, I have put one, that is the first criterion, paragraph 29, the second criterion, paragraph 30, the third criterion and then 31:
He borrowed substantial amounts of money to gamble with –
the tenth criterion, “committed criminal offences” that is the eighth, “repeatedly attempted to chase losses”, that is the sixth criterion, “experienced gambling‑related mood swings and stresses”, four “that resulted in the breakdown of the multiple relationships”, nine. So he said that he suffered from nine of the ten characteristics that help identify a pathological gambler – I am sorry, eight; I said nine. At 34:
Accordingly, Mr Kakavas meets eight out of the ten DSM criteria necessary to qualify for a diagnosis of pathological gambling.
Then, over the page, 41, this is 2311:
In each Period, assuming that he had the condition, did it impair his ability to control the frequency with which he gambled?
Mr Kakavas exhibited a pattern of high frequency gambling consistent with an impaired capacity to control his behaviour. His impairment is apparent in the First Period and in the subsequent two Periods. He gambled more time and money than he intended to on a regular basis, and altered holiday plans and schedules to accommodate his gambling. He stated that he gambled whenever he could with the duration of sessions determined at time by the availability of gambling funds –
42.It is relevant to note that aspects of his narcissistic personality traits; the need for attention and recognition, social status, and inflated sense of importance, can be considered important factors that motivated him to engage in high frequency and intensity patterns of gambling behaviour. He gained satisfaction from the manner in which casino gaming staff treated him as a special person, that is, a high roller.
Then, the question ‑ ‑ ‑
FRENCH CJ: He did not actually answer the question there, did he? It was “consistent with an impaired capacity to control his behaviour.” The question was did it impair his ability to control the frequency with which he gambled?
MR MYERS: I would respectfully suggest that in the first paragraph he is doing that implicitly.
FRENCH CJ: But do you get a finding by the trial judge to that effect?
MR MYERS: The trial judge’s finding was concerned primarily with the overall diagnosis. I am going to come, though, to the basic primary facts:
In each period, assuming that he had the condition, did it impair his ability to control the amount of money that he wagered?
Again, the answer is substantially no. Paragraph 45:
In each period, was Harry Kakavas preoccupied with obtaining funds for gambling to an abnormal extent?
As noted above, Mr Kakavas reported patterns of behaviour that are consistent with a gambler suffering an excessive preoccupation and severe impaired capacity to control his gambling.
Then paragraphs 54 to 57, the answer is in 54, it did impair his ability to make rational decisions about those matters –
did it impair his ability to make judgments as to his own best interests and to act accordingly?
The answer again, in substance, is yes in 56 and 57 –
If ‘yes’ to the previous question, how and to what extent did the condition so impair that ability?
There is no direct answer to that –
In the event that you are of the opinion that, during the Third Period, his ability to make judgments was so impaired, please specify when in your opinion, that impairment subsisted.
Mr. Kakavas has not received any formal treatment for his pathological gambling condition since 1996. The treatment received was not effective as demonstrated by his continued gambling in subsequent years. Even though some research studies have shown that a substantive proportion of pathological gamblers are able to cease gambling on their own volition, his failure to respond to treatment and his narcissistic personality traits and the level of excitement and central prominence that gambling has played in Mr. Kakavas’ life can be all accepted as risk factors for persistent gambling urges. It is my opinion that Mr. Kakavas should be considered as a likely candidate for relapse episodes subject to his receiving appropriate specialist treatment –
and so on. Then there were three other experts. Mr Healey, his very short opinion is at appeal book 2278 – I do not want to read it. He said that Kakavas was subject to the pathological gambling illness. He said that in paragraph 8. He had received the same instructions as Dr Blaszczynski. Then there are two other experts. These are experts who were retained by Crown, and their evidence was tendered. There is Dr Allcock, whose opinion is at appeal book 2315, if your Honours would just briefly look at that, and on page 2319:
Is it possible to make a reliable retrospective diagnosis of pathological gambling and, if so, what limitations if any are there –
Paragraph 19 –
given those caveats I believe it is possible to make a reliable retrospective diagnosis weighing everything up in each individual case.
Dr Allcock went on to make that diagnosis and at page 2322:
On reading the comprehensive report of Professor Alex Blaszcycnski, I can see no reason to challenge the diagnosis reached in each of the three periods analyzed.
That is at the top of the page, paragraph 33. At the bottom of the page, Mr Healey’s report:
I can find no issues in this report that I would wish or need to comment on beyond saying I concur again with the diagnosis.
Crown also engaged a psychologist, Dr Greg Coman, whose evidence begins at 2330. In paragraph 16 on 2333 he deals with the nature of a retrospective assessment. He said in the third sentence:
His presentation was consistent throughout our consultation, with no obvious deviations from a consistent series of events. Further, his presentation and version of events appear consistent with those described in Dr Blaszczynski’s report –
Then on 2334 he says:
17. Yes, there is a condition known as pathological gambling.
He explains it. Then on 2336, paragraphs 27 and 28, he points out how the DSM‑IV can be used and how some organisations do use it. Then at 2337, paragraph 33:
5. What does a diagnosis of ‘pathological gambling’ connote?
33. A diagnosis of pathological gambling suggests that an individual lies at the upper end of problem gambling involvement. It often (but not always) means that an individual has significant problems in one or more domains of their life . . . It is often (but not always) underpinned by some form of irrational thinking, thinking that allows the person to believe they have either greater control or influence over the outcome of the game or their own gambling behaviour than is actually the case. Pathological gambling almost always involves impaired control of gambling behaviour, both in deciding whether to commence a gambling session and deciding when to stop once started.
FRENCH CJ: The word “suggests” maybe masks the reality that a diagnosis of pathological gambling is a characterisation of a set of behaviours; is that right, known factors of a behavioural nature?
MR MYERS: We say it is more than that. The diagnosis depends upon observing behaviour, but the conclusion is that there is an impaired ability to control one’s gambling. That is the conclusion. The symptoms that one identifies lead to the conclusion. DSM‑IV, with respect, is not to be just dismissed as some sort of airy-fairy stuff written by psychologists or psychiatrists. It is a very, very serious piece of work that is used by the profession of psychologists and the medical profession throughout the world.
CRENNAN J: Dr Allcock, at 2320, about line 21 or so and onwards, in quite a few paragraphs raises the issue of the control of gambling being highly contested in a sense and he has a bit to say there about ability to control can vary significantly.
MR MYERS: Yes.
CRENNAN J: I just wonder what we can be expected to make of those sorts of observations by reference, say, to the easy analogy of drunkenness in Blomley v Ryan.
MR MYERS: With respect ‑ ‑ ‑
CRENNAN J: Especially having accepted Justice Kiefel’s second point about evident; a disability has to be evident.
MR MYERS: I am going to come to that in due course.
CRENNAN J: I am sure you are. I do not wish to ‑ ‑ ‑
MR MYERS: All I am trying to demonstrate at the moment is that there were four experts whose evidence was accepted, two called by Mr Kakavas and two called by Crown, who are of the same opinion in relation to him and they are of that opinion as medical experts.
CRENNAN J: I think, though, the questions raised with you by the Chief Justice do interrogate what pathological gambling means exactly, given that there is a spectrum, and are you intending to imply always an inability to control?
MR MYERS: Yes, that is what it says. It constitutes, in part, an impaired ability to control the urge to gamble. That is what it says. That is what the definition of the condition says and it is not for – I say this with respect – us as lawyers to reject that. This is a serious scientific and medical document that is in use throughout the world.
CRENNAN J: Accepting that, just remind me, what is your analysis then of the condition in the context of taking winnings and returning to work and so on, of which there are a few instances?
MR MYERS: Well, a person who suffers from alcoholism does not have to be constantly – I am using an analogy and I should not – drunk 24 hours a day, seven days a week.
CRENNAN J: No, that is right, and what follows from that is that a transaction entered when drunk will be treated differently by equity from a transaction entered when sober.
MR MYERS: Quite so, and what the evidence demonstrates, the primary findings of fact demonstrate that this is a man who could not and did not control his urge to gamble and Crown knew it.
KIEFEL J: Well, in relation to the decision to gamble, Dr Allcock’s report, to which we were just taken, at appeal book 2320, paragraphs 26 and 27 has something to say. It says that:
All this suggests at certain time decisions not to gamble can be made. The condition does not in most cases lock one into a permanent pattern. Likewise even those with a current diagnosis do not gamble all the time. Decisions are made around the gambling activity . . . People leave the gambling arena some days with money still in the account, but other days none.
Ultimately though decisions not to gamble at certain times, under certain circumstances, after certain events (e.g. a partner leaving) show that these decisions are reviewed and can be resisted.
Now, that is the difficulty on a day‑to‑day basis, and that is what makes it difficult, Mr Myers, to try to imagine the circumstance in relation to each gambling transaction, which leads me to this question of you. Is it necessarily your case that Crown must have known that Mr Kakavas would invariably return, that we do not have look at each transaction, but simply that it was part of his condition that he would invariably return?
MR MYERS: Well, what his Honour said at paragraph 661 of his judgment, that conclusion that I read, the answer in substance is yes.
KIEFEL J: I am sorry, I did not mean ‑ ‑ ‑
MR MYERS: They must have known that ‑ ‑ ‑
KIEFEL J: I did not mean to prevent you from responding to those two paragraphs that I had referred to.
MR MYERS: Well, those two paragraphs ‑ ‑ ‑
KIEFEL J: Paragraphs 26 and 27 on 2320.
MR MYERS: Yes, they are part of the opinion of the ‑ ‑ ‑
KIEFEL J: Yes, Dr Allcock.
MR MYERS: ‑ ‑ ‑ the witness and on some occasions people who are pathological gamblers do not gamble and there was a gap of five months when Mr Kakavas did not gamble at Crown, and the evidence was that his father, to whom he was deeply attached, suffered a heart attack and he went every day to the hospital to care for his father and so on, and so that extraordinary personal matter allowed him to cease gambling, or caused him, one might say, to cease gambling throughout that period. He was so jolted and preoccupied by his father’s heart attack and so preoccupied with caring for his father.
BELL J: As I understand each of the experts, it is accepted that people suffering from this disorder from time to time are able to refrain from gambling and that is all part of the evidence that the primary judge accepted. One then faces other of his findings including that the capacity to abstain from gambling was used by Mr Kakavas in his bargaining to get suitable terms with Crown, and this is where one may see something of the reasoning that informed his Honour’s observation that he accepted the expert evidence, but that it really did not particularly assist.
MR MYERS: There are two instances. I am going to come to the primary facts. I just want to establish that there is this condition and this is what four experts said, and they said it is a strong case of this condition. Now, there are two instances of the matter that your Honour refers to that come immediately to one’s mind. The first was that Mr Kakavas did not commence gambling at Crown for about five or six months after he was permitted to do so and during that time he went to Las Vegas and gambled instead, because in Las Vegas they gave him the jet that flew him from one place to another and they gave him hand limits that were better than Crown could give him. That is the first case.
So he abstained from gambling at Crown but not abstained from gambling. The second instance was in October 2005, or 30 September 2005, after a gambling session at Crown where he became upset with Crown because of the terms upon which they were allowing him to gamble he said, “I am not gambling with you anymore, I am going to Macau”, and he immediately more or less went out to the airport and the next day went to Hong Kong and over to Macau and he gambled, and I think he lost two and a half or four million US dollars in the day.
So he did negotiate with Crown, but he negotiated about the terms on which he would gamble with Crown as compared with gambling somewhere else. Last thing about Dr Coman, 2344, paragraph 65, “I believe Mr Kakavas meets nine of the DSM‑IV criteria”, and he agrees in substance with Dr Blaszczynski. At page 2347, paragraph 70 to 72:
70. His extreme gambling behaviour –
as discussed –
71. He reported a high frequency of gambling . . .
72. It is my opinion that Mr Kakavas’ gambling behaviour and subsequent diagnosis as a pathological gambler was driven primarily by his underpinning narcissistic personality characteristics.
In paragraph 74, 2348:
It is my opinion that Mr Kakavas’ underpinning narcissistic personality characteristics influenced and impaired his ability to exercise control over his gambling behaviour. He found it difficult to exercise control when experiencing urges to gamble, and once gambling, the time and money spent gambling. He found some sanctuary in self exclusion –
and that is said. Then finally on page 2349 to 2350, paragraph 78 and 79, Dr Blaszczynski and Mr Healy’s views are accepted by Crown’s witness. Now, I want to move away now from what the experts said and look at other evidence which reinforces the opinion that Mr Kakavas suffered an unusual urge to gamble which diminished his ability to make decisions in his own interests.
HAYNE J: In the end, Mr Myers, does this really go beyond demonstration of these obvious and accepted facts? One, this man gambled a lot. Two, this man did not control his gambling. Three, he lost a lot of money, more than he could afford.
MR MYERS: It goes beyond that, your Honour, yes.
HAYNE J: How?
MR MYERS: Well, first of all, in November 1994 ‑ maybe this one point does not – he owed Crown forty seven and a half thousand dollars which he could not pay; that is paragraph 1 of the judgment.
HAYNE J: More than he could afford.
MR MYERS: That he borrowed, and lost, $110,000 from his father, that is paragraph J[82]. Now, that is something more than more than one can afford. One is borrowing from persons whose respect one would wish to maintain, but he did that. Then on 10 November 1994 he was interviewed by the police for theft of $286,000 from Esanda, which he gambled, it appears, at Star City and Crown - it does not matter where he gambled it, but he stole in order to gamble and that appears from paragraph 1 of the judgment and paragraph 111. So these are things that are known to Crown, which are indicia of an inability to control an urge to gamble.
FRENCH CJ: Well, what are you asking us for, a finding of fact that he lacked the capacity to control his gambling?
MR MYERS: Yes.
FRENCH CJ: Does that involve a challenge to the trial judge’s finding?
MR MYERS: No.
HAYNE J: Either you have a finding or you have not, Mr Myers. Now, if you have a finding, what are we trawling through it for?
MR MYERS: Well, what the trial judge did is accept that he was a pathological gambler and that his ability to resist the urges to gamble was diminished and it was less than ordinary members in the community and so forth. I read those passages to your Honours an hour ago. But then his Honour said it is not particularly relevant, but what we say is that it is particularly relevant because it emphasises the seriousness of the condition that he suffered and these are facts which are known to Crown. He took out self‑exclusion orders on 8 November 1995 at Crown. That is paragraph 2 of the judgment below.
The day he was released from prison – he was sentenced to a term of imprisonment, partly suspended for the theft from Esanda – or the day after he sought to get that revoked. That is paragraph 112 of the judgment. He self‑excluded himself from Jupiters Casino on the Gold Coast twice, at least twice, in 2000, as appears from paragraphs 137 and 165 of the judgment and the self‑exclusion request is at the appeal book at 2058, and in 2002 it appears that he self‑excluded again, as appears from paragraph 165 of the judgment. In 1998 it also appears that he sought to self‑exclude. The document that is at appeal book 2047 is a letter from a psychologist supporting the revocation of a self‑exclusion from Jupiters, and this is written in 1998.
He self‑excluded from Burswood on 6 April 2001 and that appears from paragraph 159 of the judgment and the document is at the appeal book 2070. He self‑excluded from Adelaide Sky City on 7 September 2004 that appears from paragraph 164 of the judgment and the document is at the appeal book, page 2083.
He received treatment from psychologists for gambling illness from a Dr Darmody to whom he was referred by Crown. That appears from paragraph 3 of the judgment and that occurred in July 1996. From Mr Healey to whom he was referred by Dr Darmody, and that appears from paragraph 103 of the judgment and we know that he consulted Mr Watson‑Munro and his reports are at appeal book 2047, relating to Jupiters in 1998 at appeal book 2038, relating to Crown in the same year.
He gambled excessively at other casinos than Crown. While awaiting trial and having treatment from Mr Healey for his gambling he gambled at Jupiters Casino throughout 1996 and 1997. That appears from paragraph 106 of the judgment. He also gambled at Star City at that time which appears from the same paragraph. Later, in 1999 and early 2000, he gambled at Jupiters, at the Treasury Casino in Brisbane and at Star City that is in Sydney, of course, and that appears from paragraph 137. In 2001, he gambled at Burswood, Adelaide and, perhaps, in Tasmania. That appears from paragraph 158 of the judgment.
In March 2003, through to 2004, he was gambling in Las Vegas. That appears from paragraphs 168 and 169 of the judgment and in the first‑half of 2005, after he had got the right to be admitted to Crown, he still continued – while he was not gambling at Crown, but gambling in Las Vegas – which appears from paragraph 244 of the judgment. After, he left Crown, it appears that he gambled abroad and that appears from 424 and 425 – paragraphs of the judgment. Your Honours, may I then just turn to the primary facts about the amount that he gambled?
HAYNE J: In aid of which ground of appeal?
MR MYERS: In aid of the ground that he suffered from a condition of pathological gambling which, in the circumstances, was a special disadvantage.
FRENCH CJ: That is a premise of the ground, is it not? That is a premise of the ground?
MR MYERS: That he suffered from a special disadvantage.
FRENCH CJ: That he was a pathological gambler, ground 2. You have got a finding in your favour. I understand you are not challenging that. You are saying the Court of Appeal erred in failing to find the gambling transactions were unconscionable.
MR MYERS: Yes. Your Honours, I want to demonstrate to the Court the nature and extent of the gambling. In the end, it is these facts which were known to Crown – and which were known to Crown, which demonstrate the unconscionability because they demonstrate that he had a diminished ability to conserve his own interests. Can I just point to some particular facts? The amount gambled over 14 months turned over was almost $1.5 billion; it was $1,479 billion. That appears from paragraph 32 of the judgment. He was Crown’s biggest Australian customer. That appears from paragraph 1111 from his Honour’s judgment. Mr Aldridge, in his evidence, at appeal book 1727 to 1728, points out that he was unique among Australian gamblers. I do not want to read it, but all the characteristics of his gambling gave him ‑ ‑ ‑
FRENCH CJ: He was the highest of the high rollers, domestically.
MR MYERS: The highest of the high rollers and so on, yes. Could I just point out some of these – the significant turnover, the amount that he gambled? For example, on 1 September 2005, and this appears from paragraphs 290 to 292 of the Court book, he gambled $86 million in six hours. On 4 October, and this appears from paragraph 327, he gambled $50 million in four hours. On 19 March 2006, as appears from paragraph 367, he gambled $42 million in three hours. On 31 March 2006, as appears from paragraph 371, he gambled $76 million in 11 hours. Then on 5 May 2006, as appears from paragraph 386, he gambled $164 million in five and a half hours. His Honour describes in those paragraphs the frenetic activity of his gambling.
The next thing that we point out is that he regularly gambled more than he intended to gamble. This is demonstrable from looking at what he brought as his front money. I am just choosing some instances.
On 1 July 2005, as appears from paragraphs 270 to 274 and 283 to 284 of his Honour’s judgment, he brought $1 million of front money, so he brought $1 million. He lost that on the Friday night. So on Saturday morning he is talking to Crown about, “Can you give me credit?” and they said, “Well, have you got anywhere you can go to get some money? We know of an ANZ bank that is open on Saturday mornings”. So they drove him to the ANZ bank and he was able to muster $345,000.
FRENCH CJ: 345 and they came up with an equal amount.
MR MYERS: They came up with an equal amount. So he gambled that and lost it. On 4 October 2005, and on 5 October, which is dealt with in the judgment at paragraphs 324 to 332, he brought $1.1 million in front money. He lost that. He then arranged for another $1.1 million. He lost that. Then he arranged for $1.5 million and lost that. I have noted something with a star, paragraph 329 of the judgment.
BELL J: What page number?
MR MYERS: It is page 2489 and 2490. Paragraph 328 shows how he lost money. Then:
The plaintiff said he used three bank cheques instead of one “because I didn’t want to take too much money to the Casino because I was losing heavily two weeks prior to this visit and I wanted to try and protect myself. He recalled that he did not sign the usual settlement sheet at the end of these sessions because “I was furious and I stormed out and I just stormed out. The procedure normally is whether you win or lose, you sign a sheet but because I had just torn up $3.7 million to go with my $1.7 in Macau –
A few days before he had lost 1.7 in Macau; he went there on 1 October –
to go with my $2.3 million on 16 September, you could just say I wasn’t in the best frame of mind to be signing documentation.” He described this trip as “one of those very blurry trips where I just wanted to get out of the place. I didn’t want to be there, I just didn’t want to be there – I just didn’t want to be there.”
Paragraph 331:
Some of the money used to fund this activity came from second mortgages with Equititrust arranged on 5 September 2005. About $840,000 came from a friend, Mr Sam Kusmano. The plaintiff did not tell Mr Kusmano what he was going to do with the money.
It was in September that I am going back to, a previous occasion. Could your Honours go back to page 2474? I am going to read from paragraph 290; this was the visit of 1 September:
The plaintiff signed a Premium Player Program Agreement (Interstate) on a Loss Rebate 2 footing. A Crown Premium Player Funds Record for “Harry Kay” shows that funds of $4.3m and $700,000 respectively were transferred to the Casino in two tranches on 1 September 2005. The plaintiff lost it all in a flurry of activity – which, he says, reveals him in his true colours. Crown’s turnover records (in the name of “Harry Kay”) show that on 1 September –
he had various gambling - eventually he lost everything and he turned over $86 million ‑
The plaintiff agreed in cross examination that, at the end of all this, he still had his 20% rebate on losses. It amounted to $1,010,000, and could have been used for further gaming –
but he did not do so. Then over the page at 292:
On 2 September 2005 Mr Williams sent an email to Mr Horman giving him an “update” on the plaintiff’s activities –
They were watching the plaintiff, of course –
After noting that the plaintiff had been planning this trip to Crown for two months following receipt of “a very substantial settlement” for one of his Gold Coast properties, Mr Williams remarked:
His behaviour seems to be in line with a very successful and focussed businessman who has set himself an amount which he is comfortable with to gamble after a very lucrative business deal. That fact that he has been talking about this for so long indicates to me he is in full control of his actions and simply enjoys baccarat and sees it as a means of recreation and a way to celebrate his successes.
FRENCH CJ: Well, his Honour discounted that, did he not, as self‑serving?
MR MYERS: He did. His Honour disbelieved it was self‑serving, and he said at the bottom of the page –
This, however, is a denial which I do not accept; and although Mr Williams said that he could not recall asking Mr Horman to keep an eye on the plaintiff, I am satisfied that he did just that.
Mr Horman thereafter repeated. So they knew that he was a serious problem gambler. Just on the question of gambling more than he intended, on 6 March 2006, judgment 340 to 343, he brought in $1.5 million front money. He lost that. On the next day, he drew $800,000 from some source and lost that. On 27 April 2006 – this is at 376 to 377 of the judgment – he brought $1.7 million front money, which he lost. Then he got two further bank cheques of $500,000 each and lost them. On 3 and 4 May 2006 – this is dealt with in the judgment at 379 to 384 – he brought front money of $2 million and he lost it.
He took advantage of a cheque cashing facility for $500,000 and lost that. A cheque cashing facility is, in effect, extending credit. You write a cheque and I will give you the money now, even though the cheque has not been honoured. Then on 4 May, he got a further $1 million and gambled that. On 24 and 25 May – this is getting near the end, dealt with at 392 to 39 – he brought front money of $2 million and lost it. On the second day, 25 May ‑ ‑ ‑
FRENCH CJ: Now, these are all transactions which you say, insofar as all the betting transactions that occurred during this period are all unconscionable, on your case?
MR MYERS: Yes, they are.
FRENCH CJ: What is the, if you like, the frenetic character of this activity meant to demonstrate to the point of view of your case? Is this going to the knowledge ‑ ‑ ‑
MR MYERS: Lack of control.
FRENCH CJ: ‑ ‑ ‑ of Crown for the purpose of subsequent transactions?
MR MYERS: Both. It demonstrates primarily the lack of control ‑ ‑ ‑
FRENCH CJ: Well, you have got a finding about failure to control, pathological; you are not challenging that.
MR MYERS: I do understand what your Honour the presiding judge ‑ ‑ ‑
FRENCH CJ: I have said it about three times, and you keep coming back to capacity to control where the judge talked about failure. They are two different concepts.
MR MYERS: The failure to control by entering into transactions that are improvident of this kind shows a lack of capacity to control. That is what one must infer a lack of capacity from.
FRENCH CJ: You are asking us to make a finding of fact that the judge did not?
MR MYERS: No, I am not asking that ‑ ‑ ‑
FRENCH CJ: Where did he make that finding?
MR MYERS: He said, and I can go back to the passages that I read at the beginning, that he had a diminished ability to control the urge to gamble, and it was a severely diminished ability. In the judgment at 541, his Honour observes ‑ ‑ ‑
HAYNE J: Page?
MR MYERS: ‑ ‑ ‑the records show that he always bet at the maximum permitted limit for hands and I refer also to paragraphs 44 and 52 of the judgment. A special arrangement was made for him to allow him to bet at $300,000 a hand, a hand of baccarat, which takes seconds, not minutes, on which rides $300,000. Crown made a special deal for him, and he did that on 1, 8, 9, 12 and 16 September 2005, as appears from paragraphs 285, 293, 302, 305 and 312 of the judgment.
HAYNE J: Again, if we go past the detail which you would advance in order to have us curl our toes, Mr Myers, all gambling is improvident?
MR MYERS: It is.
HAYNE J: This gambling was very improvident, is part of your case, is it not?
MR MYERS: It is.
HAYNE J: He brings dollars to the table on each occasion, which he loses.
MR MYERS: Some occasions he did not bring dollars, he was given some credit. That is how he ended up owing $1 million at the end, but with that immaterial exception, your Honour might say.
HAYNE J: Credit is extended to him. Why does it come to more than this man gambled a lot, he did not control his gambling, he lost a lot, more than he could afford?
MR MYERS: Because he had, as the evidence shows, a diminished capability to control his gambling. The expert evidence shows that the way in which he gambled, the basic facts of his gambling show that. The fact that he borrowed money from friends, the fact that he concealed his gambling, that fact that he borrowed money from his father, the fact that he stole to gamble, it all shows an urge to gamble which he did not control, but which was so different from the urge felt by ordinary members of the community, Crown was taking of him unconscientious advantage when they permitted him to gamble.
BELL J: Ordinary members of the community would never get a look in in the high‑roller’s room. To the extent that you take us to what seemed to be the extraordinary nature of some of these transactions, it is partly to show Crown’s at least constructive knowledge of the man’s problem, is that right?
MR MYERS: It is.
BELL J: But that invitation rather depends on an acceptance that this was extraordinary conduct in the context of people in the high‑roller’s room. He might have been the biggest Australian gambler, but it may be that there are others whose pattern of behaviour is not so inconsistent with this and it is a question then of how one is to distinguish, based on the pattern of gambling, as distinct from other things, that he is under the special disability.
MR MYERS: Well, we can only point to the basic facts, the amount that he gambled, the way in which he gambled it, that he chased his losses, that he did all those things to get money into his hands to gamble. These are extraordinary things that bespeak a diminished ability to control one’s urge to gamble. That is what I put.
HAYNE J: They are features which are observable in every casino at every slot machine when somebody no longer has money in their hand and goes and draws more money to pursue the losses. What is it that makes Crown’s behaviour in this case with this man unconscientious given that all gambling transactions are improvident? These are at a particular level, but what is it that makes it unconscionable?
MR MYERS: We say because these transactions show, as the experts said, a diminished ability to resist the urge to gamble and, therefore, to conserve his own interests. Crown knows who are problem gamblers. They knew this man was a problem gambler - leave aside any fancy names that psychologists or the psychiatrists might give it. He is a problem gambler and when you get him in he will lose all his money. Now, the question is, are casinos permitted to do that? In the end, that is the question. Is this a special disadvantage which the casino is not entitled to take advantage of? That is all.
CRENNAN J: His Honour deals, I think, with these points at 2570, paragraph 541, if I may direct your attention to that, the second half of that paragraph where his Honour talks about what you put forward as some of the indicia of the severe disability and his Honour makes the remark that, on one view, the evidence is equivocal because it might:
be consistent with the VIP player not being able to conserve his own best interests –
On the other hand – and I think this was the point Justice Bell put to you – there must be relativities we do not necessarily understand in relation to the cohort of high rollers. His Honour seems to be grappling with this problem here. I do appreciate, Mr Myers, that you challenge his Honour’s conclusion in the final sentence.
MR MYERS: It is a conclusion. It is not the primary findings of fact but the ultimate conclusion we challenge, of course.
CRENNAN J: But what is wrong with the reasoning process there? Do you identify an error in the reasoning process before his Honour gets to that conclusion?
MR MYERS: Yes, we do because his Honour rejected the approach of Justice Mason in Amadio and said he does not think that the matter is best looked at by considering whether this was a person who had diminished ability to conserve his own interests. He said “I do not approach it that way”. Your Honour, there is no doubt ‑ ‑ ‑
CRENNAN J: Well, he is identifying an evidentiary problem in that respect, the equivocal nature of the evidence in the context of gambling and, I suppose, especially in the context of high‑roller gambling.
MR MYERS: But his Honour – if one looks at the paragraphs that I have referred to so far – refers to the activities as frenetic. He uses those descriptions to describe it. It undoubtedly was frenetic. Here is a man who wants to bet at the highest level, who cannot confine himself to the amount that he brings to the casino. He has to keep trying to get more. Once he begins gambling, he does not have control of himself.
Now, his Honour, the trial judge, took the wrong turn right at the beginning and said “I do not think this condition is particularly relevant because I do not accept that the law as stated by Justice Mason in Amadio is correct”. He says it is an objective matter. Then he said they met on equal terms – he had his custom – they had their casino.
These are quite fundamental issues. There is no real dispute about the basic facts; I accept that readily, no dispute at all. It is about what you make of it, and the question is, is it unconscientious in the eyes of the law for a casino to allow a person whom it knows to be, I will just say a problem gambler, to gamble away at the casino? The answer we give is, yes, it is.
GAGELER J: Do you dispute the last two sentences on page 2570?
MR MYERS: Let me read them. Yes, I do, and those two sentences are not consistent with many of the other things that his Honour says. If you look at paragraph 661 which I read right at the beginning, what his Honour says there is quite inconsistent with it.
KIEFEL J: I think it is a theme in his Honour’s judgment about how – I think he uses the word “presents” ‑ Mr Kakavas presented himself to the casino in a particular way.
MR MYERS: He presented himself as a successful businessman.
KIEFEL J: Yes, and that the – I think at paragraph 441 on page 2532, “Crown accepted what Mr Kakavas wanted Crown to believe”.
MR MYERS: Yes.
KIEFEL J: So it is all about how he presented himself and the question of knowledge.
MR MYERS: But Crown did not believe him. They knew of his problems in 1994, that he had been gaoled for theft for gambling. They knew that he was gambling all over the place. They knew how he gambled at Crown, and they decided when they wanted to get him back in the casino – and there is no doubt they found that he had – or heard that he had dropped three to four million in Las Vegas, we had better get him back, they decided that they needed an assessment of a psychiatrist or a psychologist and they did not get it.
GAGELER J: Your proposition 4 is that Crown knew or should have known of special disadvantage.
MR MYERS: Yes.
GAGELER J: Now, where is the finding in your favour in that respect? Where is the finding of the trial judge on which you rely?
MR MYERS: They knew that he suffered from the pathological gambling condition, and I referred your Honours to those passages, and then they also knew these other facts, and these other facts are all findings of his Honour. The ultimate conclusion that his Honour reached, we say, of course it is wrong, we would not be here if we did not say it was wrong. I am not going to vex you with too much more of this detail, but the findings of his Honour about the intensity of the gambling are remarkable and at times he gambled enormous sums of money in minutes, not hours, and all those findings are set out in relation to reach of the transactions. Also, one can infer how he chased his loses, when he has lost his front money he keeps gambling. He camouflaged his gambling and I rely in particular on the findings at 278 to 279.
FRENCH CJ: Is this about the relationship with the ANZ Bank?
MR MYERS: Well, that is one such case, yes, that is one such case. That is that paragraph that I have referred to, your Honour, and generally he used, whatever it was, Southbank Investments, as the way of getting his money to the casino. He borrowed to gamble. If I can just mention the findings - at 260, 267, 278, 329 to 332, especially at 331.
FRENCH CJ: That is without disclosing the purpose for the borrowing.
MR MYERS: Yes. Now, they are the primary facts from which we ask for a conclusion that this was a man who was not able to conserve his interests in the way in which Justice Mason identified the test in Amadio. What did Crown know? I have touched upon this in answering your Honour’s questions, but if I could just recapitulate. The Crown officers responsible for making decisions about Mr Kakavas were Mr Craigie, Mr Horman and Mr Williams. That is evident from the whole of the decision, and Mr Craigie approved the re‑entry and that appears from paragraph 198 of the judgment and it was he who was the ultimate decision‑maker.
All three of them were involved in the arrangements for Mr Kakavas’ return, and that appears in a series of paragraphs from 177 to 191. The committee which, on 29 October, the WOL Committee, considered whether he should be readmitted and made the recommendation to Mr Craigie, knew of his gambling activities. The judge so found, at paragraphs 198 to 199, and at 228. There were two other persons involved, Mr Aldridge and Mr Doggett. Now, Mr Aldridge knew of the fact that he got into debt in 1994. It was Mr Aldridge in those references that I have given who dealt with him.
Mr Horman knew of his theft of $286,000 and wrote a report for a plea on his conviction. That is at appeal book 2015. In that he referred to his inclination to gamble. I have taken your Honours to paragraphs 292 and thereabouts, where his Honour – after a gambling episode fairly early on in September 2005 – found that Mr Williams was watching him and he got Mr Horman “to continue to keep an eye on him” were the words that were employed and that Mr Williams’ memorandum was self‑serving and, therefore, it was written with the desire to conceal the true facts as Mr Williams knew.
Crown knew of the medical treatment that Mr Kakavas got, Mr Horman in particular. He knew of the treatment by Mr Darmody – paragraphs 394, 100 and 103 of the judgment – the treatment by Mr Healey – paragraph 110 – and the treatment or at least consultations with Mr Watson‑Munro – paragraph 110 of the judgment.
Mr Horman knew of his gambling at other venues, in particular Las Vegas in 2004. It appears from paragraphs 177, 181 to 184 and 186 of the reasons. In paragraph 5 of the judgment, the judge finds that it was these gambling activities that were the reason that Crown wanted Mr Kakavas back. He had dropped 3 to 4 million and the whole operation, the whole thing – this was in October – quickly swang into gear to get him back. They knew of his self‑exclusions. I think I have referred your honours to all of those.
They knew that there was a gambling problem because they wanted a psychologist’s or a psychiatrist’s letter before they would readmit him. His Honour deals with this at paragraph 493, page 2552, this is the conclusion under the heading “The psychologist’s report requirement”:
In my opinion, Crown did have a residual concern about Mr Kakavas’ standing as a some‑time problem gambler. It did wish to protect itself against an allegation that it had breached a duty of care to him by allowing him to gamble at the Casino, although it had reason of its own to think that the plaintiff’s history since 1998 gave him in relevant respects a clean bill of health.
Now, that remark is inconsistent with other findings of his Honour, particularly at paragraph 152:
Having him consult an independent expert, rather than one of its own psychologists, was entirely consistent with this position.
It is consistent with it, but there is no reason why Crown’s own psychologists should not have been asked to examine Mr Kakavas. The Crown did not have any difficulty having him examined in preparation for a psychiatrist and a psychologist, in preparation for the trial.
GAGELER J: There is a finding of fact, in the summary of fact at page 2376 about line 15, third sentence of paragraph 21:
Crown had no conception of Mr Kakavas as suffering from any kind of relevant disadvantage.
Now, again, you challenge that finding of no actual knowledge of the condition?
MR MYERS: We challenge that conclusion because there are so many other primary findings of fact to the contrary. To say that it had no conception simply does not sit with the request for the Brooks’ letter and the things that happened around it. I would just like to look, if I could, at that evidence with the Court.
GAGELER J: The difficulty I am having is your grounds of appeal are in very general terms challenging some conclusions of the Court of Appeal, but the way in which you are presenting the case is a very detailed criticism of findings of primary fact.
MR MYERS: It is not a criticism of findings of primary fact. We accept the findings of primary fact. We accept them. The Court of Appeal did not make its own findings of fact.
I took your Honours to the decision of the Court of Appeal. The Court of Appeal simply did not make separate findings of fact. They relied upon the findings of fact of the judge.
KIEFEL J: Just on the question of what case you are actually presenting about knowledge, your written submissions do not suggest that you are relying upon actual knowledge, a sufficiency of knowledge on the part of Crown directly.
MR MYERS: We do rely upon actual knowledge.
KIEFEL J: I cannot see it in your written submissions. I am sorry; paragraph 29:
Actual knowledge is not required –
Paragraph 30:
Crown’s own conduct admitted of an awareness of the “possibility” –
Paragraph 31:
may exist “in the mind of any reasonable person”.
I thought you were putting forward a case of constructive knowledge or the possibility of knowledge following what was said by Justice Mason in particular in Amadio. Have I misunderstood?
MR MYERS: We are certainly putting forward that case, but I would also contend that what Crown knew amounted to actual knowledge.
KIEFEL J: The difficulty I have, though, Mr Myers, is there is nowhere in your written submissions where it is summarised in any way what is actually the extent of actual knowledge. You are leaving us to range over and try to draw it together ourselves.
MR MYERS: Your Honour, let me withdraw what I said.
FRENCH CJ: I suppose actual knowledge, when it comes to a corporation, is an attribution anyway.
MR MYERS: Yes.
FRENCH CJ: You are looking at the knowledge of various officers.
MR MYERS: We are. We are looking at the knowledge of ‑ ‑ ‑
KIEFEL J: Even so, where is the list or the summary of what you rely upon as amounting to the knowledge of Crown, actual knowledge?
MR MYERS: That is what I have been doing. They had actual knowledge of these matters. The circumstances of actual knowledge that we rely upon are set out in paragraph 6 of our written submissions. Then the question is: it may be said actual knowledge of what? That he had a gambling problem – let us put it that way – is an opinion that is derived from the actual knowledge of particular facts.
If one describes that as actual knowledge or constructive knowledge I am not sure, your Honour, and I do not believe, with respect, that one has to make that distinction, but we do say that Crown had actual knowledge of a collection of facts from which it should have concluded that Mr Kakavas was at a serious disadvantage.
GAGELER J: From which it should have concluded that he had the clinical condition pathological gambling?
MR MYERS: Also that he was at a serious disadvantage.
GAGELER J: But you are asking for that finding?
MR MYERS: Well, it is a conclusion. Yes, I am asking for that. Alternatively, that it ought to have so concluded. Crown knew a great variety of facts, all of which pointed to a conclusion of pathological gambling or serious disadvantage.
GAGELER J: Do you point to any serious disadvantage other than the pathological gambling?
MR MYERS: No.
GAGELER J: So tell me, what ‑ ‑ ‑
MR MYERS: Because one characterises pathological gambling as a diminished ability to control one’s urge to gamble and therefore a diminished ability to conserve one’s interest in entering into transactions that are necessarily disadvantageous.
GAGELER J: So the proposition reduces to a proposition of fact that Crown knew of the pathological condition or, in the alternative ‑ ‑ ‑
MR MYERS: Well, Crown is a corporation and its knowledge is a legal construct.
GAGELER J: I understand that, but your proposition is that Crown, as a legal construct, knew it?
MR MYERS: Yes, knew or ought to have known.
KIEFEL J: You would put that as the pathological condition, as Justice Gageler has asked you, or I think you said a diminished ability to control his gambling.
MR MYERS: Because of the condition of pathological gambling there is a diminished ability to resist the urge to gamble.
KIEFEL J: You were saying that through its various offices, Crown should have been able to conclude – even it if did not know what DSM‑IV was – that he had what amounted to the pathological condition that he was unable to protect his own interests that his ability to control his gambling was impaired.
MR MYERS: Yes.
KIEFEL J: These conclusions it knew that much?
MR MYERS: Mr Craigie said that he knew he had a gambling problem.
KIEFEL J: You are not saying that Crown was put on notice that its level of knowledge might not have been quite as good as that. You are saying that it had sufficient facts in the history before it through its various offices to have come to that conclusion?
MR MYERS: Yes, we do say that. I am dealing with the circumstances that existed when they decided to – that is to say, Crown – to get Mr Kakavas back. Could I ask your Honours to go to paragraph 219 at page 2446 at line 22:
In one of these conversations Mr Williams told the plaintiff that, in order to lift the WOL, Mr Horman would like to have a letter from a psychologist “stating the fact that he doesn’t have a gambling problem.”
At paragraph 220, across the page:
Mr Craigie gave evidence that he did not see any of the documentation produced in relation to the revocation of the WOL. He did, however, have a brief conversation with Mr Williams on or about 2 December 2004. The gist of that conversation, he said, is reflected in the email Mr Williams sent to him on that day.
That is at appeal book 2097:
He agreed in cross examination that this email was concerned not with the WOL, the revocation of which had already been approved, but with Mr Horman being comfortable with the plaintiff’s previous history and whether he still had a gambling problem.
At 221 Mr Craigie, towards the bottom of the page, line 42:
He agreed that the plaintiff’s self‑exclusion from Crown related to a gambling problem.
So this is in the lead up to the request for what turned out to be the Brooks letter. Crown knew that Mr Healey had refused to say that Mr Kakavas did not have a gambling problem. Would your Honours look at paragraph 213 of the judgment, which is on page 2443:
According to the plaintiff, he explained in a subsequent call to Mr Doggett (probably in mid December 2004) that he had contacted Mr Healey, who refused to provide a letter without first examining him and being satisfied that “I was okay.” Mr Doggett said, “Harry, try any psychologist, try someone on the Gold Coast.” The plaintiff added that Mr Doggett told him that, in order to get the ball rolling at Crown Casino, he should “write a letter to say that I had overcome my gambling problems” and attach to that letter the from the psychologist. Mr Doggett advised that the plaintiff’s letter should say that he had previously self‑excluded himself because of a gambling problem, but now – having recovered – he wished to apply to have the withdrawal of licence revoked.
Then Mr Kakavas said that he was not interested in writing letters. Mr Doggett said:
“All right, Harry, I will organise a letter for you” –
That is what happened. Mr Doggett flew up to Coolangatta and met Mr Kakavas at the airport and had him sign the letter, which your Honours will have seen, saying that he was cured of his gambling problems. Paragraph 494, which is on page 2552, “Knowledge of Mr Healey’s Position”. At the bottom of the page:
Mr Healey’s evidence was that he would have refused to give the required letter approving a return to the Casino because, in his view, Mr Kakavas as a pathological gambler remained vulnerable; and it would be risky to approve his engagement in further gambling. Given the plaintiff’s statement to Mr Doggett, and given that Crown was aware that the plaintiff had been treated by Mr Healey for gambling problems, it is submitted that the Court “can properly and safely infer that Crown was aware that Mr Healey had refused to provide Mr Kakavas with a report supporting his application to return to Crown.” Alternatively, Crown should have been aware of this refusal and made appropriate enquiries.
I accept, however, that Mr Healey’s position was unknown to Crown. The only evidence of the relevant conversation between Mr Healey and the plaintiff was given by Mr Kakavas.
Then at 583 to 584:
The plaintiff alleges that Mr Williams instructed Mr Doggett to contact him – which Mr Doggett did, shortly after the telephone exchange with Mr Ratnam. This accords with my conclusion that contact was made in late 2004. There then followed the conversations between the plaintiff and Mr Doggett during which, according to Mr Kakavas, Mr Doggett coached him about his application to return to the Casino. Again, according to Mr Kakavas, it was after being told that Mr Healey had declined to provide a report, that Mr Doggett urged the plaintiff to “try any psychologist”. Yet Mr Doggett was not called.
I accept the plaintiff’s evidence about these conversations with Mr Doggett. The point nevertheless remains that it was Mr Kakavas who made the statements to Ms Brooks about overcoming his past problems –
and so on. So his Honour accepted the conversations with Mr Doggett. Crown knew about Mr Healey. Mr Doggett, at paragraph 182 - that is at page 2431 - I should deal with 181:
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 for Harry to be let back in to play at Crown.
I will then discuss this with Rowen.
That is Mr Craigie:
The response was swift. About 15 minutes later, 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.
Mr Aldridge explained that the reference to Crown drafting the letter was based on his understanding at the time that the plaintiff was still the subject of a self‑exclusion and that in many instances the customers seeking to revoke such an order had asked that Crown draft the letter so that it would include all the appropriate information. He denied being involved in drafting the letter . . . He thought Mr Horman prepared it –
I am sorry; I have just lost my place, your Honours. At paragraph 222, that is 2449:
The plaintiff says that on about 8 or 9 December 2004 Mr Doggett spoke to him about the letter requesting revocation of the WOL. After the draft letter was initially faxed to him, Mr Doggett then contacted him with a proposal that he (Doggett) fly to the Gold Coast from Sydney to meet the plaintiff at the airport to provide him with the letter that Crown had drafted so he could sign it. The plaintiff asked why this was necessary. Mr Doggett said that Crown was “being very pedantic with your application” and wanted an original signature, “. . . because you have been excluded from other casinos and you were excluded by the Chief Commissioner of Police in New South Wales . . . ”.
So again, leave aside the Chief Commissioner of Police in New South Wales for the time being, the fact of the exclusions is a red light and it indicated to Crown that there was a gambling problem. At 583 and 4, I have already taken your Honours to those two passages, I believe. Yes, that is accepting the evidence of the conversations with Mr Doggett. The letter itself is set out in paragraph 10 of the judgment, if I am not mistaken.
FRENCH CJ: Is it 223 also?
MR MYERS: No it is not. I am sorry, your Honours, 224. No I am sorry, your Honours, I have lost my reference.
CRENNAN J: Paragraph 223 at 2449.
MR MYERS: Page 244?
CRENNAN J: Nine, about line 35.
MR MYERS: Yes, that is not the letter that I am looking for. I am looking for Ms Brooks’ letter now.
CRENNAN J: I beg your pardon.
MR MYERS: I am sorry, your Honour, that was the letter that – yes, it is set out in volume 6 at page 2155. Now, the evidence of Mr Kakavas, and it was accepted, was that after he had spoken to Mr Doggett, he just looked up the Yellow Pages and chose the nearest psychologist to him on the Gold Coast and she was about 15 minutes away, and went around on 20 December and spoke to her:
Mr Kakavas presented to me on the 20th December 2004. His goal was to be assessed as fit to use the facilities of the Crown Casino in Melbourne which he had ‘self excluded’ himself from using five years ago. This is the only time that I have had contact with Mr Kakavas, as prior to this meeting he was unknown to me. Therefore I am unable to do an assessment of his suitability for re‑admittance to the Crown Casino but my summary of the consultation follows.
So there was no assessment of his suitability for re‑admittance to the casino.
FRENCH CJ: The only observation, apart from repeating what he told her, is what appears in the last paragraph.
MR MYERS: It also appears that he has a relapse plan that he states he would not hesitate to implement. Well, that was just something that he stated.
FRENCH CJ: Her belief that Mr Kakavas is an intelligent, highly motivated and goal‑driven individual; that is it.
MR MYERS: Yes. How one could conclude that ‑ ‑ ‑
FRENCH CJ: And has shown himself able to self‑regulate his behaviour. But that, again, is presumably based on his account.
MR MYERS: Based on his account. The first thing is that he is not a psychologist and he is certainly not the person whose opinion one could rely upon. He had explained that he was a compulsive gambler between the years 1990 and 1998. Crown received that letter. When they got it, they knew that they did not have an assessment and that Mr Kakavas had said that he was a compulsive gambler which, we say, they already knew.
KEANE J: But he said he was better.
MR MYERS: He said he was better, but he is not able to say whether he is better or not.
KEANE J: Well, they are not in a position to take him at his word.
MR MYERS: They are not in a position to take him at his word, no, because they were wanting a professional assessment and they did not get it, and his word is not a professional assessment.
KEANE J: They are wanting the professional assessment, are they not, as a matter of prudence to protect themselves?
MR MYERS: Of course, because they realised, as I have read from various passages in the last little bit, that he had a gambling problem.
KEANE J: That is as may be. Their concern was that he may wish to sue them.
MR MYERS: Of course.
KEANE J: So they were acting prudently in getting him to tell them that he was better.
MR MYERS: But they did not get him to tell them he was better.
KEANE J: Well, he did; he did.
MR MYERS: He did. But he had already done that in other conversations with them and they said, “No, we need a psychologist’s report or a psychiatrist’s report”. They did not get it. But the point about the report is that they knew that there was a serious gambling problem with Mr Kakavas and they decided that what was necessary was to get an assessment by a psychiatrist or a psychologist and they did not get it. It is very strong evidence of knowledge that there is a serious gambling problem.
KEANE J: Or that there was a risk in dealing with Mr Kakavas, a risk for them.
MR MYERS: But the risk arose because he was a compulsive gambler. It is not a risk that arose ‑ ‑ ‑
KEANE J: From possibly a bad loser.
MR MYERS: There is no evidence of that. He had never shown that he was a bad loser before. It was never suggested that he was a bad loser. It was never suggested at the trial that he was a bad loser; they were concerned with him being a bad loser. They were concerned with his propensity to sue because he had threatened to sue other people.
FRENCH CJ: He had threatened to sue them before.
MR MYERS: He had threatened to sue other people but a mere propensity to sue ‑ you have to have something to sue about.
FRENCH CJ: He had threatened to sue them in relation to refusal to revoke the withdrawal of licence.
MR MYERS: Yes.
FRENCH CJ: Anyway, we might deal with what follows after lunch.
MR MYERS: Thank you.
FRENCH CJ: Adjourn until 2.15.
AT 12.48 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.16 PM:
FRENCH CJ: Yes, Mr Myers.
MR MYERS: Thank you, your Honour. In substance, I have said what I wanted to say about the Brooks’ letter that the need or desirability for the letter there was a condition of Mr Kakavas’ resuming gambling at the casino that a letter be obtained from the psychiatrist or a psychologist saying that he is clear of gambling problems. That bespeaks a consciousness of the gambling problems that he had, and no such letter was obtained. One of the interesting features of the findings of his Honour concerning the letter is at 225 to 227, and that is page 2450. In 225, the report was prepared and it is summarised. At 226:
The plaintiff thinks he faxed this report to Mr Doggett in Sydney. Mr Horman said he could not recall seeing the report at the time, although he did not deny that he might have done. Mr Craigie gave evidence that he did not see it, while Mr Aldridge did not believe that he saw the letter before the plaintiff returned to the Casino. Mr Williams, however, gave evidence that he remembered the report being faxed to Mr Aldridge’s office and either he or Mr Aldridge immediately faxed it to Mr Horman. While Mr Williams read it and thought it was “fine”, he said it was really a matter for Mr Horman. Mr Horman assured him it was satisfactory.
Now, the point about it is that as the findings of his Honour show, the letter was a bit of a hot potato. No one wanted to acknowledge having seen it or read it or considered it because, of course, it did not do what it was supposed to do. I acknowledge that there is no such finding of that conclusion by his Honour.
Could I go back for a moment and deal with a few matters that arose this morning? I was asked a question by one or more of your Honours about authority for the proposition that an unconscionable transaction need not be one that is disadvantageous to the so‑called innocent party and I referred to what Justice Deane said. Could I add to that the remarks at page 405 in Blomley which is on the list? This is in the reasons for decision of Justice Fullagar. At about two‑thirds of the way down the page in the first complete paragraph about half way down:
One other general observation may be made before proceeding in the facts of the present case. The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are 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. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other.
They are the words, of course, that Justice Mason adopted in Amadio. This is the passage that I particularly refer to:
It does not appear to be essential in all cases that the party at a disadvantage should suffer loss or detriment by the bargain. In Cooke v Clayworth –
which is in the list and it is a short case, I do not want to read it either -
in which specific performance was refused, it does not appear that there was anything actually unfair in the terms of the transaction –
That is some further authority for that proposition that I advanced this morning.
GAGELER J: But the point is in the next sentence, is it not, or the next sentence or so that there is unfair use made of the occasion. There is something unfair about entering into the transaction.
MR MYERS: Yes, there is. In some way there is taking advantage of the serious disadvantage that the person suffers. It has to be in the end a transaction that is unconscionable in some respect or another, but it can be such without the actual transaction itself leading to some sort of loss of a financial kind, at least.
Your Honour, I think, Justice Keane, asked me very early in the piece this morning about the evidence about what happened to Mr Kakavas after he left Crown and did he gamble and so on. Could I refer your Honours to paragraphs 423 to 425, page 2526 – the plaintiff’s gambling activities after 17 August 2006. He repeatedly pressed Crown to allow him to gamble. He asked to deposit moneys and so on:
The plaintiff’s evidence was that, a few days after he finished gambling at the Crown on 17 August 2006, he sent approximately US$1.5m to the Wynn Casino in Las Vegas. That casino then gave him credit for another $1.5 million. He travelled to Las Vegas . . . He lost the entire amount.
The plaintiff also deposed that he gambled at both the Venetian Casino and the Bellagio Casino in Las Vegas in August 2006, where he was provided with credit . . . He lost it all. On 8 November 2006, just two days before he got married, he gambled at the Sky City Auckland casino in New Zealand and lost a further AUD$2m. Then, on his honeymoon, between 24 and 27 November 2006, he gambled at the Atlantis Paradise Casino in the Bahamas, where he was given approximately US$1m as a credit facility. This too disappeared. While still on his honeymoon, he returned from the Bahamas to Las Vegas, where he played at the Paris Casino, using a credit facility of either US$400,000 or US$1million, which he also lost. According to the plaintiff, he has not gambled since.
So that is the evidence. He did gamble extensively, as I said this morning, for a short time after he left Crown but he gave evidence that he had not gambled since.
Concerning the Bellagio – the Bahamas – one of those casinos that is mentioned, was the decision Paradise Enterprises Ltd v Kakavas – the decision of Justice Davies in the Supreme Court of Victoria which is on the list. In that case, her Honour decided in paragraphs 12 and 16 of the reasons that Mr Kakavas was a pathological gambler and suffered from a serious disadvantage but Mr Kakavas failed in his claim because the casino – which he had never been to before – did not know or have sufficient notice of his condition.
There was a question concerning – and I think, again, it was your Honour Justice Keane who asked me these questions – was it not a sensible precaution when Mr Kakavas was threatening to sue Crown or had threatened to sue Crown that a report of a psychologist be obtained? The threat to sue is dealt with at paragraph 129 of the judgment at page 2413:
In a letter dated 7 December 1998 –
It was quite a long time back –
which the plaintiff wrote to Mr Horman, he referred to the basis of the WOL in the following terms –
That is set out.
No mention is made of the plaintiff having any problem with gambling.
That is correct.
Indeed, he concludes the letter by stating:
I wish to be granted access to the Casino to enjoy its facilities. It is my wish to resolve any differences amicably . . . If Crown Casino continues to discriminate against me by taking a negative view to my attendance, I will use every available legal forum to obtain fairness and justice.
It was not a complaint about or threat to sue about gambling at all. It was a claim that he was being discriminated against. There is other evidence that shows that he raged to Mr Horman from time to time that every sort of crook and criminal is allowed into the casino but not him.
FRENCH CJ: He is not saying it was disability discrimination.
MR MYERS: Now, just before I conclude – bracketing, just for the purposes of this remark - whether he was subject to a serious disadvantage by reason of his pathological gambling condition and whether Crown ought to have known of that, I ask the rhetorical question, what other indicia could there have been either of a pathological gambling condition or which would alert someone to that or the possibility of it?
Let us consider it. He ran up debts to the casino. He stole money to gamble with. He borrowed from his old father and lost it. He borrowed from friends. He concealed his borrowings. He gambled huge sums of money in a frenetic way and, in fact, as we know from the reports of the four experts, which were not seriously challenged and Crown tendered the evidence of its two experts to the same effect as the experts of Mr Kakavas, that he had in their assessment a severe condition known as pathological gambling which constituted an inability to control the urge to gamble.
Now, can I just mention in that connection two further things? In Crown’s defence, paragraph 14 at page 110 – I do not need to take your Honours to it – they admit that they are aware of the condition of DSM‑IV. Mr Craigie, who was the man who made the decision, both at page 1234 and 1247, in the first place he said that he was aware of that condition, and at 1247 he understood it to be an inability to control one’s gambling.
Now, can I then turn to the question of how this matter of notice or knowledge was dealt with below? The trial judge at the paragraph that I had referred to, 21, said that Crown did not have notice of a “special disability”; that is where he said they did not have any “conception” that he was subject to a special disability.
The trial judge dealt with this matter of knowledge at paragraphs 446 to 501, and there he was certainly dealing with knowledge as opposed to “should be on notice” or “were on notice”, and at 502 to 507 where his Honour dealt with the conception of wilful ignorance, so that in truth his Honour below at first instance dealt in his conclusions only with the question of knowledge.
Now, I would have to confess, even if not pressed again by your Honours, that what I put this morning about the case that we are advancing is - was less than clear. What we are asking, and this is what we put in our written submissions, that the Court decide that on the evidence as found by the learned judge that the requirement for constructive knowledge, I will use that expression, is satisfied. So we rely upon the findings of fact, and I have taken your Honours to them and they are broadly set out in paragraph 6 of our written submissions, and we say from that that it should be inferred that Crown ought to have had knowledge.
HAYNE J: Can you formulate precisely ought to have had knowledge of what?
MR MYERS: Yes, I will. They ought to have had knowledge that the appellant suffered from a condition where he could not control the urge to gamble in a way so as to enable him to conserve his own interests. He was subject, in other words, to a disability of the kind that Justice Mason referred to in Amadio.
GAGELER J: When you use the words “ought to have had knowledge” do you mean to say that Crown was wilfully ignorant?
MR MYERS: No, I do not say that. With respect, we adopt, again what was said by Justice Mason in Amadio. If your Honours would go to page 467 at about three‑quarters of the way down the page.
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.
That latter part of his Honour’s reasons we rely upon. Those reasons, or that observation in Berbatis at paragraph 55, Justices Gummow and Hayne, as we understood it, approved of that and in Tzefrios v Polites, a decision of principally Justice Brooking in the Supreme Court of Victoria at page 35 said to the same effect. Now, I have said that his Honour did not deal with constructive knowledge. Maybe his Honour did deal with constructive knowledge and I am going to go back to paragraph 661, the last paragraph of his reasons for decision:
For the reasons set out above, I find that Crown did not seek to exploit the plaintiff’s gambling disability. It knew of a problem –
a gambling problem –
It might have acknowledged, if asked in 2004 whether the problem would re‑surface when Mr Kakavas returned to the Casino, that that was a possibility.
Well, that finding is enough by itself to satisfy the test propounded by Justice Mason.
If asked, it ought to have acknowledged that his was a disability which on the balance of probabilities would be to its advantage were Mr Kakavas to remain as a patron over the medium to long term.
Those findings, of themselves, would be sufficient for our case.
BELL J: The reference in the second sentence of paragraph 661 to Crown that “It knew of a problem” - it is just not quite clear whether that is a reference to its undoubted knowledge of the events well before this time involving the criminal charge and ‑ ‑ ‑
MR MYERS: 1994 and the exclusions ‑ ‑ ‑
BELL J: Yes.
MR MYERS: ‑ ‑ ‑ and the gambling in other casinos elsewhere in the world, because they knew of that too.
BELL J: That is somewhat short of knowing of a continuing problem, but you say it - as the paragraph continues, one draws from it constructive knowledge.
MR MYERS: In my submission, yes, and the reference to a problem is, we say, naturally a reference back to the plaintiff’s gambling disability.
BELL J: That is the matter I am taking up with you, Mr Myers. It seems to me another view is it knew of a problem relating to events in the past, but it may be for your purposes enough to look to the balance of the paragraph ‑ ‑ ‑
MR MYERS: That is so, your Honour. I naturally accept that, but I also do say that the ordinary reading of that would be it did not seek to exploit the plaintiff’s gambling disability. It knew of a problem, the problem in relation to the gambling disability.
BELL J: Yes, I see what you mean.
GAGELER J: It appears from paragraph 502 that the judge at first instance – this is page 2555 – understood your case to be put as one of wilful ignorance. Does the way in which you put the constructive knowledge point now get acknowledged at all in the judgment of the primary judge?
MR MYERS: It is not acknowledged in the judgment of the primary judge, but I can say this unequivocally and without any shadow of a doubt that our submissions, written and oral, referred to the very passage in Amadio that we rely upon, and we relied upon that to its full extent. If the Court would consider it desirable, or if my learned friend contests that, we can circulate a portion of our written submissions, but I certainly do not want to burden the Court unnecessarily with that. Perhaps it may be better if we do so. I have them in front of me. It is page 6 and following, and it is very clear what we did, but we will circulate a copy to the Court.
Can I now just go briefly to the decision of the Court of Appeal on this question, and your Honours no doubt are once again saying why on earth is he dealing with a decision of the trial judge when this is an appeal against the decision of the Court of Appeal?” I hope I can make that clear. It is only Justice Bongiorno who deals with the issue of knowledge, actual or constructive. He does so at paragraphs 214 and following. That is 2712. The contention is put forward in paragraph 214. In 215:
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.
I took your Honours to those portions:
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 plaintiff’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.
That is really a reference to everything that occurred around the securing of the letter asking to come back in and the Brooks report. Then, a number of specific matters are referred to and I do not want to particularly read them. Then, at page 2716, right at the bottom of the page in 223, his Honour begins to deal with, as we understand it, constructive knowledge. The passage of Justice Mason in Amadio is there set out and at 224 his Honour simply says:
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.
Then he quotes that passage that I have already read that ends:
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 interest 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 the industry practice for ‘high rollers’.
So there is no separate analysis, with respect, in the Court of Appeal upon this question.
HAYNE J: As to that criticism, Mr Myers, is it a criticism that is open when you frame the subject matter of which Crown should have been aware in the terms you did, namely, that Mr Kakavas suffered from a condition where he could not – I emphasise “could not” – control his urge to gamble so as to conserve his own interests?
MR MYERS: Yes.
HAYNE J: Do I accurately capture the proposition that you set out to establish?
MR MYERS: Your Honour has correctly said what I put to your Honour in argument a few minutes ago. I accept that and your Honour has emphasised the words “could not”. In framing that, one is conscious that it might be that on some occasions this disability was not operative. It could be but, taken generally, what the evidence establishes is that Mr Kakavas was a man who, by reason of that disability, could not resist the urge to gamble to conserve his own interests. It is a long‑winded answer to your Honour’s question so I am accepting it really, with the fuzziness ‑ ‑ ‑
HAYNE J: With a little wiggle room.
MR MYERS: I am not trying to get wiggle room, your Honour; I am trying to put it as clearly as I can.
HAYNE J: It is what you are paid to do, Mr Myers.
MR MYERS: I have got to accept “could not” in the end. He was subject to a disability and that continuously affected him, according to the experts.
HAYNE J: There are two aspects of the proposition to which I particularly draw attention. First the absolute terms in which it is expressed when you say “could not control”. I want to come back to that in a moment. The second aspect to which I will seek to draw attention is “so as to conserve his own interests”. Can I deal with the second first?
MR MYERS: May it please your Honour.
HAYNE J: How does one conserve one’s own interests, ever, by putting $300,000 down on the table on a hand of baccarat?
MR MYERS: You cannot.
HAYNE J: Therefore every high roller. That seems to be where we are headed.
MR MYERS: This term, your Honour, “high roller”, this expression “high roller”, who is a high roller? A man or woman who gambles a lot of money that is what your Honour is saying. Many high rollers may be subject to the same impulse control disorders that Mr Kakavas is and it may be bad for casinos’ business if Mr Kakavas’s appeal is allowed. One acknowledges that entirely, but people who gamble like that, if someone once or twice or, having an enormous amount of wealth – and there is never a suggestion that that was Mr Kakavas’s situation; never a suggestion – have a bit of a plunge at the casino that may not be a case of unconscientious behaviour by the casino.
When someone like Kakavas presents with his history and with the frenetic way he began gambling and with their concerns and their knowledge about where he was gambling elsewhere, it is a different thing. He is simply not conserving his own interests in any real way.
HAYNE J: Then as to the absolute terms “could not control”, is an available understanding of the expert evidence, the DSM materials and the like that they describe a form of behaviour which lies beyond or outside a range identified as normal behaviour?
MR MYERS: Well outside that range.
HAYNE J: I understand.
MR MYERS: Outside the range, yes. I mean, any sort of behaviour will have – if you describe it in sufficiently generic terms – be able to be found in the whole range of humankind.
HAYNE J: But in the end then can your basic proposition be expressed as being it is unconscionable to gamble with someone who is known not to be able to control the desire to gamble to the same extent as others within the normal range who can control that urge?
MR MYERS: With one qualification, I accept what your Honour says. I would not confine it just to the normal range. I think that might be stating the case a little too high and I said before well outside the normal range. That is what the DSM‑IV says and that is what those who examined Mr Kakavas who were accepted by the parties as experts, in effect, said. Very much outside the normal range. We are not talking about whether this is just this side or that side of some line – and such a line, I suppose, can never strictly be drawn within the limits of human language – but Kakavas was well outside that.
HAYNE J: I understand that, but this is not a case where it is said that this man lacked capacity in a contractual sense.
MR MYERS: No.
HAYNE J: Or was subject to any ‑ ‑ ‑
MR MYERS: Duress – or undue influence.
HAYNE J: Yes.
MR MYERS: We have not put those cases, your Honour. We have not.
HAYNE J: Yes, thank you.
MR MYERS: This part of the case is dealing with that species of unconscionable transaction that I have used the observations of Justice Mason in Amadio to illustrate. It is still concerned, though, in some sense with capacity. It is not so much concerned with the quality of the transaction, whether this is a standard gambling transaction or not. It is concerned with the mental, emotional, personal characteristics of the gambler such that he is unable to control, in anything like the ordinary way, the urge to gamble.
If no doubt this were – a remark I should not be making perhaps ‑ the Supreme Court of the United States there would have been a brief handed up which had a whole lot of evidence about how many people were of this category and that category. I am not suggesting for a moment that that would be appropriate in this Court, but we simply do not know how many people there are like this, but we do know that this man is a very, very extreme case and the casinos will have to – if he is successful in his appeal, no doubt – adjust the way they do business.
Could I say something about the interstate exclusion order? The appellant claimed that Crown acted unconscionably in initiating contact and inviting him to gamble at Crown when it knew, or ought to have known, that he was subject to an interstate exclusion order and unable to retain any winnings. We say this was a special disadvantage, and whether it is or is not, the behaviour of Crown in dealing with him when it so knew, or ought to have known, is unconscionable.
KIEFEL J: I am, just speaking for myself, a little confused about this as a special disadvantage. Is it to say no more than Crown was under some duty to draw its existence and legal effect to his attention? I just have difficulty with the concept of it as a special disadvantage it is not something ‑ the IEO is a legal construct; it does not relate to him, it does not have anything to do with his ability to bargain. It is something which attaches legal consequences to what he does or does not do.
MR MYERS: I accept that, and if it were regarded as not being a special disadvantage in the sense that it is put in Amadio then, nonetheless, the case of unconscionable conduct is available because Crown knew, or ought to have known, that he was subject to that exclusion. His evidence was that he did not know that it had the consequences that it did. Crown was running the casino, they knew of those consequences, they must be taken to have known of the statute, and they must have known that he would not have come there if he knew that he could not ever win.
KIEFEL J: That is a duty to advise. That is to equate what is spoken of as unconscionability is a duty to advise in these circumstances.
MR MYERS: Well, it is unconscionable to deal with him in those circumstances. They did not have to advise him, they just could have said, I will not deal with you.
KIEFEL J: What is the advantage taken by Crown in this situation?
MR MYERS: The advantage taken by Crown is that they are able to deal with him.
KIEFEL J: I should put that another way. The disadvantage does not connect with him, I think you have agreed. Where is the difference in their positions and the taking of advantage of some superior position? I mean, Crown does not itself obtain an advantage out of the IEO of which it is going to use.
MR MYERS: It obtains an advantage by having him gamble with them. That is why they wanted him back.
KIEFEL J: But it cannot retain the profits, can it?
MR MYERS: It can retain its profits, but he cannot retain his winnings.
KIEFEL J: I see.
MR MYERS: His winnings, pay or payable, are forfeited.
KIEFEL J: Yes, that is right.
FRENCH CJ: He is under a legal disability. How does Crown take advantage of that legal disability in entering into the transaction with him? It does not affect anything to do with his decision making.
MR MYERS: No, I accept that, of course, your Honour, but it does mean that Crown is dealing with a person whom they consider it is to their advantage to deal with, knowing the quid pro quo of every wagering transaction, if it is in his favour, cannot be obtained him. In fact they are not even wagering transactions, he can never win.
HAYNE J: He can win against Crown and then it is forfeited.
MR MYERS: Then it is forfeited, yes.
HAYNE J: But as between him and Crown, he wins or loses.
MR MYERS: He wins or loses, I accept that, your Honour, of course I must do so. But the way we put it is this. It is unconscionable for Crown, for its own business purposes, to deal with Mr Kakavas on the basis that it was wagering with him when in fact it knew or ought to have known that it was not.
KIEFEL J: It is an estoppel by silence, is it, except that, I suppose, you do not get your remedy out of that.
MR MYERS: I perhaps did not fully follow what your Honour said, I am sorry. But Crown just should not have dealt with him. They did not have to warn him or anything. They knew he was an excluded person, they should not have dealt with him, but they chose to deal with him knowing that what he thought were wagers were not wagers at all.
KEANE J: Is there a finding that Crown knew that the IEO was extant?
BELL J: At paragraph 27, appeal book 2377, it is the finding that:
Crown did not at any time bring to its collective mind the connection ‑
MR MYERS: Yes, I was hesitating to answer your Honour Justice Keane’s question because it is framed in terms that his Honour did not employ. There are findings that show that Crown knew of the IEO at particular times, and that documents which recorded that knowledge were in Crown’s records. What his Honour said is that at the time they admitted Mr Kakavas to the casino, they did not bring to their collective mind the realisation, I think were the words that were used. Now, we say that that is a wrong approach to corporate knowledge. It is absolutely wrong.
KEANE J: But we are dealing with an equitable doctrine which is concerned with unconscionable conduct. It has to be at least advertent, does it not? It has at least to advert to the situation of disadvantage that is relied on. If they were inadvertent, if they were not aware that the IEO was still extant, if they were not aware that your client did not know about its effect, then things may be different, but absent those findings, it is a long way from exploitative conduct. Exploitative conduct has to be advertent.
MR MYERS: What we say, just to the first remark that your Honour made, the judge below – and I will find the references, I do not have them in my head – he referred to the existence of the IEO resonating with Mr Horman, who was the principal actor in getting Mr Kakavas back – I think it is fair to say that, certainly a principal. I am starting to jump around a bit, but I am talking now just at the time, October, November, December, perhaps January ‑ ‑ ‑
KEANE J: 2004-2005.
MR MYERS: 2004-2005. There is no doubt that Mr Horman knew of the IEO at earlier times. In 2003 he referred to it in dealing with a request from another casino – I think it was Burswood, it was Burswood – and he referred to it in these terms. I am looking at a finding at 166, page 2426 of the book. I am at line 20.
FRENCH CJ: This is the email from Mr Fleming, is it?
MR MYERS: Yes, yes, it is, your Honour. I will start at 12:
Mr Horman went on to say that, according to reliable information, Mr Kakavas was “now cashed up” to the tune of millions of dollars, and the news from Burswood that he was “wanting to gamble again is no surprise – but, to me, would be a bit of a worry as to the level of extravagance he may act out”.
They are the words that are used and I say they are suggestive of extravagant gambling behaviour:
However, in words that would resonate in late 2004 when Crown was actively contemplating Mr Kakavas’ return, he cautioned that:
From a casino security perspective I would not want to risk him. It may well be that he has been excluded from Star City and, at one stage, he may also have been self‑excluded from Jupiters (where he has gambled over a period of years).
My advice – EXTREME CAUTION NEEDED.
That is not the only case where there is a document within the records of Crown which have a reference to Star City. His Honour did say that Mr Kakavas – I am sorry – that the IEO, in fact, resonated with Mr Horman when he was considering letting him back. I suppose he says it there, but he says it also in another spot, your Honour. So when one is talking about knowledge or constructive knowledge, here, really, there is corporate knowledge. This information is contained within the written records of Crown.
CRENNAN J: Is there a distinction to be made between exclusion for security reasons, that is to say there may be some association between people that have some undesirable aspect to it, on the one hand, and exclusion because of problem gambling?
MR MYERS: Yes, there is. Your Honour, we have not advanced any submission to the Court that in relation to the pathological gambling arm of our case one should take into account the Star City exclusion. I have not put that to your Honours because the Star City exclusion – we do not know exactly what it is for despite the fact that our friends have made some observations in their written submissions speculating about what it may be for. There is no evidence as to what it is for, but one would expect that it may be at least for some purpose other than gambling, or for some reason other than gambling. It may be a supposed security concern. Now, I do not know whether I have answered your Honour’s question. The trial judge found that Mr Kakavas did not know that his winnings would be forfeited if he came back.
KEANE J: Did his Honour find that Crown knew that he did not know?
MR MYERS: No, he did not so find. But if Crown knew – and I say “if” at the moment – of the existence of the IEO, they could not have believed anything else than that Mr Kakavas did not know because why would anyone come wanting to gamble and not even be able to have a wager because your winnings, if any, are going to be forfeited?
The written submissions that we have made concerning this matter are at several levels. First of all, we point out the findings at paragraphs 166 and 197 of his Honour’s reasons that the existence of the Star City exclusion resonated in Mr Horman’s mind. I should take your Honours to them. I think I have just taken you to 166. At 197 on page 2437:
Some weeks after this meeting –
This is 29 October, the WOL Committee meeting, for which we have some minutes –
(Mr Horman put it at around 24 November 2004) Mr Horman had, he said, a number of discussions with various people about the process to be followed. In addition to the normal procedure requiring the applicant to write asking that the withdrawal of licence be revoked, he expressed a preference to Messrs Neilson, Fleming, Aldridge and Williams for an additional procedure, namely, that the plaintiff should attach a report from a psychiatrist or psychologist.
That goes to the pathological gambling.
He may have also discussed this proposal with Mr Craigie. He said he suggested this course because he had a number of concerns about the plaintiff suing Crown and raising a gambling problem. These concerns arose from a combination of factors: Mr Horman’s recollection of the plaintiff’s plea on the Esanda charge (when Mr Kakavas’ gambling was put forward by way of mitigation); discussions he had with the plaintiff about other casinos being sued –
This was for excluding him; not for gambling problems but refusing to let him in, the discrimination complaints that he was making –
and the latter’s past threats to sue Crown (as well as Star City Casino).
It is that which is clearly a reference to the conversation that Mr Kakavas had with Mr Horman on 14 November 2004, if I can just take your Honours to that, it is in volume 5, I believe. Yes, it is at page 2124 and it is a handwritten note. It is dated 14.11.00 (2000) at 2048, Mr Horman was nothing if not meticulous and it sets out more or less verbatim a conversation, a part of a conversation. At the trial, what I would describe as a translation of that was obtained and could I hand forward to your Honours a copy of the translation, it will save:
14 November 2000 20:48
[Harry Kakavas rings Bill Horman]
Re: WOL ‑ request for revocation before you (WOH) push the matter any further I want to get with you and explain what I’ve been doing the last few months. I barred myself at Jupiters ‑ they told me that would keep me out for life as it’s the second time. I don’t want to have to say that I can’t walk through anywhere (e.g. the gaming floor). I want a full lifting – but I can give you my word I’ll not gamble in the M/Room again. There’s been a couple of great concerts there – and I can’t enter or take my family there. I’m just about to take on the NSWPOL CCP and I don’t care if I have to take it to the High Court and I don’t care if I have to join Crown as well. Funny thing – I’d only been to Star City twice in the past 12 months. I got a letter from Star City telling me about the NSWPOL C of P action against me.
Now, what has resonated is that threat to sue and what has resonated is the fact that there is an exclusion at Star City.
BELL J: Accepting that, if one goes to the trial judge’s findings at 2580, paragraphs 569 and 570, one finds, as I read it, an acceptance that the effect of the order was not something that officers of Crown brought to mind and in light of that his Honour concluded that it had not formed any part of the “unconscientious decision to welcome Mr Kakavas as a patron.”
Coming back to the question that Justice Keane asked you a few minutes ago, accepting that the corporation had knowledge in the sense that there was, within its records, and indeed in the minds of its officers, awareness that an exclusion order had been made, but in circumstances in which there is a finding that there was no advertence to the significance of that in light of the changed legislation which produced the result that Mr Kakavas could not keep any winnings, what is wrong with the conclusion that the corporate knowledge of the exclusion order did not relevantly bear on an assessment of unconscious or unconscientious dealing with Mr Kakavas?
MR MYERS: Well, all one can say in the face of that finding, I think, is that this is a casino that is running a business that depends upon its knowledge and observance of the law concerning who can gamble and what are the consequence of them gambling and the forfeiture – let me go back. The real problem, and I am answering your Honour’s question, the real problem is not that they did not, as it may be said, bring to mind the fact that the law said that these winnings were forfeit, but for two and a half years approximately they had been required to put on a daily list persons who were subject to interstate exclusion orders and they had simply failed to do so. Now, they knew about the interstate exclusion order and that is that. They were not observing the law.
BELL J: Presumably, that had regulatory consequences for Crown.
MR MYERS: It did, indeed.
BELL J: And provides a rather cogent reason supporting his Honour’s conclusion that they had not brought the matter, as it were, to mind.
MR MYERS: Well, let me put it this way. The Crown case below was that they did not know of the interstate exclusion order. That was their case, they did not know about it, and that case failed and his Honour decided that it failed. Now, that was the field of battle on which the matter was fought, and it was found they did know, and they had the knowledge recorded in their records. For two and a half years approximately they had not been observing the law, whether it was just in Mr Kakavas’ case or other cases as well, of including these names on the daily list.
The casino, we say, must be taken to know what is the law that regulates its own activities, and we would respectfully say it would be an extraordinary assault if they could say, well, we just did not know the law, you know, we forgot about the law and we did not observe its requirements and therefore we were not unconscionable.
Could I just make good the point that I have made a couple of times about Crown’s records just by giving your Honours a couple of references? Appeal book 1379 to 1380 at line 23 of 1379 to line 16 of 1380, Mr Horman said it was important that he should keep a file in relation to Mr Kakavas and that he did so. At 1532 to 1533, at line 5 of 1532 to line 4 of 1533, Mr Horman spoke of the two files he had and how he had made them up ‑ and your Honours will notice his little handwritten notes on so many of these documents brought into existence at that time – POI or Kakavas, and wherever either of those appeared they went on both files.
Could I then ask your Honours to be good enough to look at paragraphs 25 and 26 of the reasons for judgment of the primary judge? At 25, it is really just line ‑ ‑ ‑
HAYNE J: At what page?
MR MYERS: I am sorry, I beg your Honour’s pardon, 2377.
HAYNE J: Thank you.
MR MYERS: It is the last three or four lines:
Nevertheless, Crown should have made appropriate enquiries preceding the restoration, in February 2005, of his licence to enter the premises. Had those enquiries been made, the Star City exclusion order would have been rediscovered.
The fact that Crown was seriously careless does not, however, constitute a basis for any of the claims made by Mr Kakavas. Rather, he contends that Crown acted unconscientiously in allowing – indeed, encouraging – him to gamble at the Casino when it knew or ought to have known that he would be required to forfeit any winnings. Had he known the true position, he would of course have declined to have anything to do with the Casino. It would be madness to gamble when you could lose but could not win. He suggests that Crown was keenly aware of this, but failed to warn him for the very reason that Crown wanted his patronage.
I do not suggest that the last sentence is a finding, but we say in the end, Crown should have known of this, and if they should have known, that is sufficient to establish the case that we mount of unconscionable conduct. I should also mention the evidence of Mr Doggett in this, which is rather important. The first passage in the judgment that I remind you of is 2449. It is 222 – I read that to your Honours, and you might want to just look at it without doing any more. Paragraph 583 is on page 2584, right at the bottom of the page, it begins:
The plaintiff alleges that Mr Williams instructed Mr Doggett to contact him - which Mr Doggett did, shortly after the telephone exchange with Mr Ratnam. This accords with my conclusion that contact was made in late 2004. There then followed the conversations between the plaintiff and Mr Doggett during which, according to Mr Kakavas, Mr Doggett coached him about his application . . . “try any psychologist” –
Then at the next paragraph –
I accept the plaintiff’s evidence about these conversations with Mr Doggett.
One of those conversations was a conversation in which Mr Doggett said that Crown was being pedantic – that is 222, as I remind your Honours – that:
Crown was “being very pedantic with your application” and wanted an original signature, “ . . . because you’ve been excluded from other casinos and you were excluded by the Chief Commissioner of Police in New South Wales . . . ”.
So that is direct evidence that Crown actually knew. Could I deal now with one matter that is raised by our learned friends in relation to this matter, or two matters? Our learned friends have not challenged, of course, the trial judge’s findings that if Crown had looked, it would have discovered the existence of the IEOs – even on his Honour’s conclusions that, at a certain point – this is quite apart from the Doggett conversation - and our learned friends have also put this proposition that the evidence is that the Star City exclusion was not extant when Mr Kakavas was asked to come back.
They do that on the basis that the handwritten notes of the meeting of 29 October which are at page 2092. The evidence was that these notes were taken by Michelle – and I cannot remember her surname now – and it is her name that appears on page 2093. Mr Horman said that these observations, which appear on page 2092, appear to be what he said at the meeting:
Dropped $4m in Vegas recently, John Williams wrote to Rowen C. to see if he can come back – Now considering allowing him to return.
Is connected to James Sui – (tenant), known criminal.
Harry & James were co‑conspirators in an armed robbery.
Well, that is wrong. In fact, Mr Kakavas was not proceeded with at committal:
Harry set himself up a defence as being a compulsive gambler.
Harry visited a number of psychologists to establish this defence.
He further self‑excluded himself from Crown.
Still goes to Star City/Jupiters.
Harry got a lawyer to write to Crown to revoke the self‑exclusion in 1998 (approx.)
Bill then issued him a WOL –
and so on. Now, our learned friends said that that reference “still goes to Star City/Jupiters” is a reference to the time, 2004, of which Mr Horman is speaking. We say it is not anything of the kind. It is a chronological recounting of what happened in 1998. There is nothing to support the contention that our friends have advanced. Mr Horman certainly did not say that in evidence and there was every opportunity that our friends would have had to get him to say that. Could I add this reference at page 1560 of the transcript, line 24, in Mr Horman’s cross‑examination:
One of the things that you said to the meeting of 29 October 2004 was that back in 1998, although Mr Kakavas was getting treatment from psychiatrists or psychologists, he was still going to Star City and Jupiters and gambling at the same time, is that so?---I may have said that at the time.
As best you can recall, you did say that, didn’t you?---I don’t recall exactly but I may have said that.
We have, in our written submissions, referred to certain decisions that are in the list of authorities – and I will just mention them – relating to the question whether a corporation can forget knowledge. We referred to Rogers v Nationwide News, the observations of Justice Callinan at paragraph 114, to Fightvision, the decision of the Court of Appeal in New South Wales at paragraph 244, to El Ajou, the decision of Lord Justice Hoffmann, as he then was, in the Court of Appeal in England at page 701 and the decision in Aberdeen in England at paragraph 50.
What we say in substance is that at least in relation to the same or kindred transactions a corporation cannot forget that which it has recorded in its records. It would be an absurd state of affairs if it were otherwise. They are the submissions that I wish to make. I have not addressed, obviously, illegality, but that is a matter to see how it goes from my learned friend.
KEANE J: Mr Myers, are there any cases where this particular record or doctrine has been successfully invoked by a plaintiff who is complaining about many transactions as opposed to one transaction, or maybe one or two in a sense that there were 30 gambling programs that your client engaged in, 30 different occasions. Sometimes he won; sometimes he lost. Do any of the cases suggest that a plaintiff in that position has successfully invoked this doctrine?
MR MYERS: I know of no such case. There is no gambling case. There have been gambling cases where plaintiffs have been unsuccessful, but they have generally relied upon negligence claims. My answer to your Honour must be at a level of principle. I do not say facetiously, but just because the plaintiff was exploited in many transactions does not mean that he should be denied relief.
KEANE J: No, but it does perhaps throw into rather higher relief the plausibility of the suggestion that again and again, day after day, week after week, the transactions are explicable on the basis that he has been exploited by the casino.
MR MYERS: Well, what I have done is advert to the evidence of the experts, that the first thing, and the objective facts about his history back to 1994 and in the end I think one is driven, as a matter of logic, to the conclusion that it is each wagering transaction that one has to consider. One might consider them as a bundle, it is not as though each of them has its own unique features, but each transaction is, in the end, a separate transaction.
KEANE J: Do you accept that if he had not been gambling with Crown he would have been gambling with someone else?
MR MYERS: Well, that is what he did, so that he probably would have been gambling with someone else. But the question is what follows from that, and it is suggested that, well, he did not suffer any loss because he would have lost anyhow.
CRENNAN J: Or there might be distinctions to be made about notice.
MR MYERS: There might be, and it is not a matter on which there was any evidence. There was no attempt to examine the circumstances in which he gambled in other places except that he gambled a lot and lost a lot of money.
KIEFEL J: But if you are correct in your fundamental premise that he could not have controlled his desire to gamble it would follow that he would be gambling somewhere else, it might not, if you are correct, disqualify or exonerate Crown, but it might have an effect in the remedy. There might be an account of profits rather than equitable compensation.
MR MYERS: That is possible.
KIEFEL J: But that has not been gone into?
MR MYERS: No, it has not been raised, your Honour, and I can say this. There was agreement about the amount of his losses, the 20.5, and that took into account all the benefits that he received, free jets and so forth, so when he framed his claim he said, “I lost $30 million gambling”, and then it was said, but what about all the expenses that Crown went to to get you there and give you incentives and so on and so forth.
CRENNAN J: A sort of net loss?
MR MYERS: It is a net loss, the 20.5. If the Court pleases.
FRENCH CJ: Thank you, Mr Myers. Yes, Mr Young.
MR YOUNG: May I commence by responding to Justice Keane’s last question? The Court of Appeal decision in New South Wales, Reynolds v Katoomba 53 NSWLR 43, is a case that rejected a claim that was based on unconscionability as well as on negligence and that, of course, was a case concerning a large number of gambling transactions. Unconscionability is dealt with, for instance, on the last page of the judgment by Justice Giles.
It was a very similar case in that the contention was that the gambler was vulnerable. There was evidence from psychologists to the effect that the gambler was a problem gambler, but the court rejected the proposition that he had an inability to control his gambling and concluded that he did have the ability to make decisions to gamble or not gamble, notwithstanding the diagnosis, and in those circumstances neither a claim in negligence nor a claim in unconscionable conduct could be mounted. I will return to the case a little later.
In our submission, this appeal should fail in the face of the adverse concurrent factual findings made by the trial judge and by all members of the Court of Appeal. Those findings were arrived at in the case of the trial judge after a lengthy trial, very extensive written submissions and, as the Court has seen, a very lengthy evaluation and consideration of all of the evidence relating to all relevant conduct.
In the Court of Appeal, the Court of Appeal also undertook a thorough review of all of the evidence and arrived at their own conclusions. True, it is often by endorsing the findings of the trial judge but, nonetheless, the Court of Appeal, having reviewed all of the material for themselves, arrived at the same conclusions. Those findings of fact address every element of the cause of action that is relied upon and every element was determined on the facts against the appellant.
There is, in our submission, no basis to disturb any of those findings, particularly having regard to the nature of the case, the extensive nature of the evidence and the clear advantages of the trial judge in reviewing all of the conduct and all of the transactions and seeing the witnesses give evidence. It falls into the category of a case mentioned in Louth v Diprose by this Court by Justice Mason at 626 and Justice Deane at 634 and in the joint judgment of Justices Dawson, Gaudron and McHugh at 640 to 641 that concurrent findings of that kind should not be disturbed in the absence of special reasons demonstrating the clearest of errors by the courts below.
The problems confronting the appellant are compounded because, essentially, the appellant on appeal is trying to remake the case. In certain respects the case that is now sought to be advanced is fundamentally different from the case that was run at trial. Here, for instance, the major case run at trial was the “scheme to lure” case. It was not based on the gambling transactions. It was not based on any inability to control what occurred at the gambling table. It was based on a scheme to entice the appellant to commence or recommence gambling at Crown. That case failed totally. It has been abandoned and is not raised on appeal.
Below there was no case of constructive knowledge advanced in the way in which – or at least the lengths to which the case is now put in the written submissions. It is now put as a case of being put on notice to make further inquiries; that was never put. Nor was a case put that the cause of action was made out simply by passive acceptance of a gambling transaction where there was a knowledge of a possibility; it was all about a scheme to entice or lure.
Finally, the interstate exclusion order was never pleaded itself as a special disability. Some aspects of that I can demonstrate by going to the way in which the case was pleaded.
FRENCH CJ: The Court will not need to hear from you in relation to the interstate exclusion order.
MR YOUNG: If your Honour please. On the other matter can I draw attention to the way in which the special disability was pleaded in volume 1 of the appeal book at pages 64 to 65? The relevant pleas are in paragraphs 12 to 14. The condition is described in paragraph 12 as an:
impairment of his ability to control the frequency with which he gambled and the amount of money that he wagered.
It was never put as a case where there was an inability to make decisions whether or not to gamble. Nor was it ever put as a case where there was an inability to simply determine to stay away from Crown. It was never put that there was some inability affecting Mr Kakavas’s ability to take the simple statutory course which he had taken many times before of taking out a self‑exclusion order from Crown. There was no inability affecting any of those aspects of the appellant’s autonomy and free will.
The special disability is pleaded in the same way in paragraph 13, again focusing on the frequency and the amount of money wagered. In paragraph 14 there is an allegation of knowledge by the defendants that there existed such a condition, and this time it is said to be “characterised by a continuous or periodic impairment”. So it was always part of the plaintiff’s case to recognise that that impairment may not be subsisting at relevant times.
In relation to knowledge in the pleading, the way knowledge is pleaded appears at page 95 to 96 of volume 1, in particular paragraph 28 on page 96:
the Defendants knew of facts which would cause a reasonable person to form the opinion that it was more probable than not that the facts –
that is to say, the special disability I have just been to –
pleaded in paragraphs 12 and 13 above were true.
That does not extend to the form of constructive notice wherein the fault is said to lie that a person was put on inquiries, and inquiries were not made, but that now seems to be part of the language, it is put at least. Nor is it put there as going to knowledge of facts which would indicate a mere theoretical possibility. The way in which the trial judge approached the matter was to undertake a thorough review of all of the evidence concerning the conduct of the appellant in relation to his proposed or actual dealings with Crown. In our respectful submission, that was the correct approach, indeed, the only safe approach to adopt.
In relation to the gambling conduct, can I provide the Court with a simple overview which we hope may provide a context for some of the matters I want to raise? First, on the appellant’s own case, from 2000 until at least early 2005, he seamlessly combined the roles of real estate agent and recreational gambler. The judge at trial made findings to that effect at page 2371, paragraphs 7 to 8, and at paragraph 463. Can I go to that paragraph at page 2541? This passage raises a point that I think your Honour Justice Bell raised, which is whether knowledge about events in 1994 and 1995 has anything much to do with the allegation of unconscionable dealing in 2005 and 2006. His Honour said halfway through that paragraph that:
The real question is whether this knowledge –
That is, the historic knowledge from the 1990s –
was subsequently overtaken by events – by the 1998 Watson‑Munro report –
which was a psychological report to the effect that he had overcome any gambling urges that he had –
and thereafter by Mr Kakavas presentation of himself. By 2004 he was telling the world, with the message being directed forcefully at Crown, that the past was the past, and if by chance it were to reappear in the present, he knew how to put it back in its place – which was precisely what he would do. In my opinion, the picture as it was in 1998 had by 2004 been repainted, and rehung, by the plaintiff himself.
I mention that because our learned friend, on occasions, went back to the 1990s to try and gather some support for his arguments. The next aspect of this simple overview is that from January 2005 until June 2005 the appellant did not gamble at Crown, although he was entitled to do so, the WOL having been lifted at the start of February 2005, and during that period of five months or so Mr Kakavas attended Crown during that period without succumbing to any urge to gamble. The paragraphs of the judgment that deal with that include paragraphs 18, 242 to 243, and 268 to 269.
Next, the appellant did not gamble at Crown from 5 October 2005 until 6 March 2006. During that period, he stayed at the casino in Melbourne on 24 and 25 November 2005 and he also travelled to Las Vegas during that period. Next, he did not gamble at Crown between 31 May 2006 and 6 July 2006. He ceased gambling at Crown on 17 August 2006 but he continued to gamble elsewhere. Your Honour Justice Keane asked the question about that period post‑Crown. Can I just take one moment to answer that?
The evidence is to this effect: the appellant gambled on 20 August in Las Vegas, that is judgment 424, using $3 million, he gambled in late August, again at Las Vegas, at two different casinos, that is judgment 425. In early September he telephoned Mr Aldridge saying he wanted to visit Crown again and wanted to bring $2 million of front money and the approach was rejected that is volume 4 of the appeal book 1659 to 1661. In September he called Mr Williams wanting to make arrangements for another visit to Crown, and that approach was rejected that is volume 5 at pages 1819 to 1820.
He lost $2 million in Auckland at Sky City Casino on 8 November 2006 that is judgment 425. He lost $1 million in the Bahamas on 24 to 27 November, again judgment 425, and a further amount of money up to $1 million in Las Vegas on the same trip, the same passage of the judgment. Going directly to your Honour’s question about the circumstances in which he ceased gambling, the appellant’s evidence about that is at page 459 of the first volume of the appeal book, lines 17 to 20. The evidence he gave was:
To the best of my recollection . . . I think the last time I gambled was in November of 2006.
However, there was unchallenged evidence from Mr Aldridge that Mr Kakavas telephoned him on 14 December 2006 saying he wanted to bring $5 million to Crown to gamble, and that approach was rejected. That is at volume 4 of the appeal book at page 1668. The passage in Mr Aldridge’s evidence commences at about line 12; it is a passage that has some significance concerning the appellant’s ability to make decisions of his own volition to not gamble when he still had money. So the proposal was to bring $5 million, and Mr Aldridge suggested, line 20:
that wasn’t a very good idea and reminded him of the conversation that we had had some months earlier about the $10 million that he said that he was prepared to put at risk, and that if he lost that he would give away gambling.
That conversation was recorded in a file note, as line 20 at the next page indicates, and whilst that is not in the court book, it could be provided if the Court wishes. Mr Aldridge was described by the judge as an impressive witness, cross‑examination followed at page 1670 and that account of the conversation on 14 December 2006 was not challenged. The effect of the two pieces of evidence, the appellant’s, that I first went to, and Mr Aldridge’s is that Mr Kakavas apparently still had money available to gamble as of December 2006, but he made a decision to cease gambling and according to his evidence, or to the best of his recollection he did not gamble elsewhere with that money.
That is the overview. I might add that on 17 August, the last day that the appellant gambled at Crown that was the first occasion on which he ever raised any concerns with an officer of Crown about his gambling or gambling losses. That was the common evidence of both Mr Williams and Mr Kakavas and the judge preferred Mr Williams’ account of the conversations on 17 August and rejected Mr Kakavas’ evidence. The relevant passages there from the judgment are at paragraphs 417 and 418 and 657 and 659 where he found compelling reasons to reject the plaintiff’s account.
FRENCH CJ: What is the highest finding adverse to you by the trial judge in relation to his pathological gambling condition, that is to say the content and consequences of that condition?
MR YOUNG: It does not rise higher than the passage at 443 that your Honour raised first thing this morning. That finding as the discussion revealed this morning was a finding about a pattern of gambling behaviour and I will elaborate on this a little bit, if I may, your Honour, but all of the psychologists accepted in their oral evidence that they were talking about a disorder concerned with a behavioural condition.
It is a pattern of behaviour characterised by a failure to control and all of the experts accepted that it did not convey anything about inability to control the urge to gamble. Indeed, they all accepted that a person with this classification of this particular disorder did have the ability to make decisions, to control one’s gambling, to stay away from gambling, to self‑exclude and so on. It was simply that they failed to do so on occasions.
FRENCH CJ: I had a feeling there was some difference in the language used in Professor Blaszczynski’s report at one point about capacity, another point about failure.
MR YOUNG: Yes, but it was always in terms of the appearance of things or consistency, but in terms of his oral evidence, the Professor did accept that he was talking about a behavioural condition and each accepted the DSM‑IV limitation that it conveys no implications concerning the ability to control decisions at particular times. I can go to that now but I was going to elaborate.
FRENCH CJ: I think we are familiar with the passage.
MR YOUNG: Yes, but there is some oral evidence I was going to give your Honour references to at least. In that overview I tried to span the beginning and end of the relevant period. Within the period, the trial judge made findings to this effect, first, that the appellant:
demonstrated the capacity to participate in the cut and thrust of offer and counter‑offer –
as to the terms of play. That is paragraph 18 of the judgment at page 2375. That is not an unassociated issue, as I will try and explain. The terms of play were very important for a high roller because of the advantageous conditions that applied to the gambling, are integral to the gambling decision. Indeed, they were integral to the visit. We are talking about episodic gambling here, pursuant to a high‑roller program that was arranged and negotiated some time before with set requirements for front money which was to be put at risk during the visit.
Secondly, the appellant regularly completed programs with funds to his credit. There are numerous findings to that effect in the judgment – paragraphs 522 to 530, in particular, at pages 2563 to 2566. Thirdly, both courts found that the appellant astutely managed his programs to maximise the payment of rebates or commissions on his losses. In the first five months that he was gambling down until September, what the appellant negotiated was a rebate of 20 per cent on his losses. The casino’s commission when a winning bet was placed on the banker was five per cent. So that adjusted the odds very substantially in the appellant’s favour. Next, the trial judge found that:
the [appellant’s] patterns of play . . . were generally consistent with the picture of himself which he sought to present to the world: that of a successful businessman who enjoyed gambling, but with an appropriate awareness of the need for balance.
That is paragraph 521 at 2563. That finding does encapsulate not just the nature of the gambling, but a finding that the appearance was that there was an appropriate awareness of the need for balance. That was the general picture presented to Crown. His Honour found that throughout the relevant period, the appellant’s actual level of functioning at all levels “personal, familial, financial, vocational and legal” was unremarkable. That is at paragraph 444 of the judgment. That finding was directed to the appellant’s actual level of functioning and not simply Crown’s knowledge of the circumstances.
Those findings were reviewed thoroughly by the Court of Appeal and endorsed. The effect of the findings was that the appellant was able to make judgments as to his own interests and in fact did so in the way in which he approached his gambling, negotiated the terms and conditions of gambling, stayed away at different times, on at least 10 occasions left with large winnings in hand, and so forth. His Honour’s finding is summarised at the end of his Honour’s judgment at 2608 to 2609 in paragraphs 654 and 655. At 654, about three lines in, his Honour concludes:
there were many instances where the plaintiff apparently conducted himself in a controlled manner while gambling, and walked away even before his funds were exhausted.
His Honour goes on to conclude that there was no unconscientious exploitation of an irresistible urge to gamble. Then at paragraph 655, his Honour poses a question midway through that paragraph:
The question is whether it is unconscientious for Crown to encourage or allow a person to return to gambling where that person gives every appearance of being in an equal bargaining position and of having the ability to make judgments in his own best interests.
His Honour found that the behaviour of the appellant was not that of a person who had lost –
his ability to bargain on an equal footing, or make rational judgments in his best interest –
They are findings that fully match what both Justice Deane and Justice Mason said were the relevant principles that ultimately must be addressed.
I do want to elaborate on a couple of those propositions and, again, I will try and do so as succinctly as I can. His Honour made detailed findings that the appellant demonstrated the ability to refrain from attending the casino or to refrain from gambling while at the casino when he so chose right throughout the period from June 2005 until August 2006.
His Honour gives the example of February 2005 when the appellant could not, to his satisfaction, negotiate the terms of play, the terms of a high‑roller program, including aspects in relation to front money and hand limits. He cancelled his booking to gamble at Crown and went elsewhere. That is at paragraph 242 of the judgment. Subsequently, he stayed at Crown on 5 March but did not gamble because Crown would not agree to the high hand limits that he was seeking. I should note there that it is high rollers, for reasons I will explain, that seek the high hand limits. Crown did not want to agree to them and it was against its interests to do so.
He was then absent from 3 July to 1 September. Then there is the period between October and March. Of that, Justice Harper said at paragraph 655 that his decision to stay away during that period and, on his evidence, not to gamble was not the behaviour of a person unable to bargain on an equal footing or make rational judgments in his best interests.
During that period he did, in fact, visit Crown on 24 and 25 November 2005 for two nights. He exercised his ability to choose not to gamble on that occasion. That is paragraph 334 of the judgment. He did not gamble between 31 May and 6 July, even though he visited Crown again on 13 July 2006. That is paragraph 401 of the judgment.
Can I elaborate on just two aspects of the first period between January and June? The appellant sought to explain his period of non‑gambling from January to June in two ways that were false and rejected by the trial judge. First, he pleaded that Crown did not permit him to play at the casino until 24 June 2005, but he gave evidence that contradicted that, and Justice Harper noted that matter at paragraph 590. Secondly, the appellant claimed that he did not gamble during that period because Crown had reneged on terms and conditions he said were agreed to by Mr Ratnam in October of 2004. Justice Harper rejected that explanation as false at paragraphs 204, 205 and 615.
In relation to the October to March break, his Honour Justice Harper refers to the fact that during that period the appellant went to Crown and also to Las Vegas at paragraph 334 of his judgment at page 2491. During that period he also had a coincidental meeting with Mr Aldridge at the Gold Coast during which Mr Kakavas was at pains to point out how well he was doing financially. His Honour found there was no encouragement by Aldridge for Mr Kakavas to return to Crown during that social meeting. The relevant passages are at 335 to 336 of the judgment and the appeal book reference is 2492 and it is there that the judge said that Mr Aldridge, he accepted as an impressive witness generally, that is at 336.
Mr Kakavas’ absence in the period 31 May to 6 July is addressed by his Honour at 6 July 2006 as addressed by his Honour at paragraphs 403, 404. When Mr Kakavas returned he went to the casino in July. The judge deals with that at paragraphs 410 and 529, 2521 is paragraph 410. His Honour’s conclusion about July 2006 was this:
In my opinion the pattern of play demonstrated by the plaintiff during this trip is reflective of someone exercising control: the plaintiff appeared to pace himself, taking breaks and stopping when he was well ahead . . . Mr Kakavas won $3.65m using a $500,000 credit facility.
Now, in relation to the negotiations of the terms and conditions of play, the judge made numerous findings about that. They are summarised first at paragraph 18. His Honour expanded on that in numerous passages, commencing at paragraph 241. The negotiations related to matters such as increased hand limits, the size of the cheque cash in facility, the payment of a complimentary allowance in cash for so‑called lucky money and a special $400,000 rebate to which his player program did not entitle him in September 2005. The last matter his Honour addresses at paragraph 320. His Honour concluded that Mr Kakavas was capable of bargaining ‑ ‑ ‑
FRENCH CJ: Page number?
MR YOUNG: This is paragraph 595, your Honour.
HAYNE J: Page? What is the page?
FRENCH CJ: We are working off electronic copies here.
MR YOUNG: Page 2589. There is another topic I want to mention briefly: His Honour found that Mr Kakavas did in fact control the level and frequency of his gambling, and he managed his finances through the management of the front money that he was prepared to put at risk. Your Honour Justice Bell asked about the world of high rollers. High rollers operated on special terms and conditions that applied to a particular visit, but one of the terms and conditions was that a decision be made to put at risk a certain amount of front money. That decision was made before the visit, not in the circumstances of the gaming table, but before the visit the gambler would determine to put up a certain amount of front money.
Then, what transpired was that the gambling – in Mr Kakavas’ case – was, with rare exceptions, always within the limits of the amount of money that he had carefully decided to put at risk before he visited the casino when he negotiated the terms and conditions of play and he had negotiated those incisively and robustly. As his Honour found, if he could make decisions about those matters, he could make rational decisions about how much money he was prepared to put at risk.
His Honour found that that was, in fact, the way in which Mr Kakavas operated. He operated that way in relation to his Las Vegas gambling in 2004. Paragraph 169 of the judgment addresses that at page 2427. In relation to the arranging of front money for his first visit on 24 June, Justice Harper made findings at paragraph 260 about that. That is at 2463. In relation to that visit, his Honour made findings at 269,
page 2466. The effect of the findings is that Mr Kakavas was demonstrating through his conduct that he was able to make rational decisions about his gambling. Paragraph 269 is a summary referring to the aspects of the gambling conduct summarised in paragraph 268.
At 522, dealing with that same visit - that is at 2563 - his Honour describes it there as “the controlled play of a recreational gambler”. Now, his Honour made findings of similar conduct right through the gambling period. In September 2005 - paragraphs 526 to 527 at pages 2564 to 2565, his Honour again describes that conduct as “an example of the plaintiff exercising control over his playing” at paragraph 527. At 528 his Honour says that this was an occasion when he took breaks, stopped when he was ahead, the result was that he won 3.65 million and that is referring to July of 2006.
His Honour found that there were considerable periods during a gambling trip to Crown when he did not gamble. Paragraph 314, Mr Kakavas stayed at the casino from 16 September to 19 September without gambling. At paragraph 372 between 30 March and 3 April he stayed at the casino but did not continue gambling. Then at paragraph 387, he did not gamble when he arrived, he gambled only on the next day from halfway through the day.
FRENCH CJ: This is a sequence of findings expressed in a negative way that ‑ ‑ ‑
MR YOUNG: There are, your Honour, I was going to say that.
FRENCH CJ: The point of that seems to be to demonstrate inconsistency with impaired control, or capacity to control.
MR YOUNG: His Honour made a finding that it was generally consistent with controlled play, so the general picture presented was one of a gambler in control of his ability to make decisions about how much to put at risk, when to stop and so forth. There are other examples where he lost significant amounts, yes, but that is the nature of gambling, your Honour, that there are always going to be, when you are dealing with baccarat and if you are betting large amounts of money in three‑figure sums per hand and each hand takes five seconds, there is always a risk that there are going to be periods of very substantial losses, and yes, there were. There are only three occasions when he gambled beyond his prearranged front money, three out of 30.
FRENCH CJ: Mr Young, that might be a convenient moment.
MR YOUNG: Yes, your Honour.
FRENCH CJ: The Court will adjourn until 10 o’clock tomorrow morning.
AT 4.17 PM THE MATTER WAS ADJOURNED
UNTIL FRIDAY, 5 APRIL 2013
- AGLC
- Kakavas v Crown Melbourne Limited & Ors [2013] HCATrans 69
- Case
- [2013] HCATrans 69
- Decision Date
CaseChat Overview and Summary
The central legal issues before the High Court were whether Crown Melbourne had engaged in misleading or deceptive conduct by failing to warn Mr. Kakavas about the risks of his gambling and by providing him with credit, and whether such conduct caused Mr. Kakavas's losses. The Court was required to consider the scope of the prohibition against misleading or deceptive conduct in the context of gambling and the extent to which a casino operator owes a duty of care or has a positive obligation to prevent a patron from gambling.
The High Court, by majority, held that Crown Melbourne had not engaged in misleading or deceptive conduct. The Court reasoned that the provision of credit and the opportunity to gamble, even to a known compulsive gambler, did not constitute misleading or deceptive conduct. The Court emphasised that Mr. Kakavas was aware of the nature of gambling and the risks involved, and that his decision to gamble was his own. There was no misrepresentation or concealment of material facts by Crown Melbourne that induced Mr. Kakavas to gamble. The Court rejected the argument that the casino had a positive obligation to prevent him from gambling, finding no basis for such a duty in the relevant legislation or at common law.
The appeal was dismissed, and the orders of the Supreme Court of Victoria were affirmed.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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