Analysis of the High Court Decision in the Kakavas Litigation
Question: In Kakavas v Crown Melbourne Ltd [2013] HCA 25 (5 June 2013) the High Court appears to
have restricted the application of the equitable principles relating
to unconscionable/unconscientious conduct to circumstances where:
? The victim is impecunious;
? The disability affects his or her ability to look after his or her own best interests in his or her everyday
life and not just in regard to the transaction with the
wrongdoer; and
? The perpetrator is aware of the disability, but IS NOT ACTING in the normal course of their business.
Is this an arguable summary of the High Court?s decision in this case? Support your arguments with
reference to precedent and scholarly publications and articles.
referencing:
You must always use the Australian Guide to Legal Citation, 3rd ed. for your referencing.
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Analysis of the High Court Decision in the Kakavas Litigation
The case of Kakavas v. Crown Melbourne Limited restricts the potential of a gambler to
sue gambling houses and bookmakers in equity to a patron for unconscionable exploitation of
their vulnerabilities. The decision of the court, however, does not lock out actions by some
categories of gamblers whose ability to make rational judgment with reference to their DSM-5
gambling disorder, or other modes of vulnerability, is questionable, and there is proof that
casinos and bookmakers knew of such vulnerabilities 1 .
The court pointed out that the doctrine of unconscionable conduct relies on the factual
circumstances of the particular case. Thus, in the case of Kakavas, the facts did not show that the
casino was liable to patron for unconscionable conduct. An influential aspect was that gambling
was naturally a risky transaction for both parties involved because the very aim of the game is to
cause financial loss to the rival party. The court viewed gambling as an ordinarily ‘rivalrous
activity’ that it made no sense to allege victimization after incurring financial loss in the lawful
conduct that took place in the context of the transaction. Equity courts do not stigmatize the
normal course of dealing in a lawful activity as a mode of victimization with regard to the
gorging of the proceeds of that activity.
In a unanimous judgment, the High Court quashed Kakavas’s argument. The court
decided that Kakavas’s pathological urge to gamble did not amount to a special disadvantage that
could make him vulnerable to exploitation by the casino. Thus, Kakavas had the capacity to
1 Freckelton, I, ‘Pathological Gambling and Civil Actions for Unconscionability: Lessons from the Kakavas Litigation,’
Psychiatry, Psychology and Law, (2013) 20(4): 479-491.
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make rational judgment in his own interest to avoid gambling with the Crown. By engaging in
the gambling, he voluntarily assumed the risks associated with it.
The first issue that the court considered was whether Kakavas suffered from a special
disability. Kakavas was a well-known gambler who waged millions of dollars on a regular basis
and mostly sustained huge losses. Because of this, many casinos sought him out with incentives.
Kakavas also used to cease gambling on several occasions when he visited Crown so that he
could entertain guests. The court was also guided by the assessment of the primary judge that
Kakavas was ‘a natural salesman and negotiator’ that was robust and confident. In fact, the
numerous incentives he enjoyed were a result of his skilful negotiations with Crown in return for
his patronage. Thus, Kakavas was not suffering from any special disadvantage. Although the
primary judge established that Kakavas was a pathological gambler, the fact that he was able to
self-exclude indicated that he could control his interests in a rational manner.
The second issue that the court considered was whether the Crown was sufficiently aware
of Kavasas’s alleged special disadvantage. The court accepted the claim that Crown was aware
of Kakavas’s history of gambling problems, and that he had undergone treatment. However, the
court unanimously rejected the argument by Kakavas that the Crown should be deemed to have
received notice if it had investigated as a reasonable man would have done in the situation. The
employees of Crown never appreciated in an actual or constructive sense that the claimant had a
special disability that hindered his capacity to choose to gamble with Crown in so far as a charge
of conscience in equity is concerned.
The court indicated that constructive notice could not be extended to commercial
transactions. Nonetheless, the court acknowledged that in some circumstances, willful blindness
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or ignorance to a special disability would amount to knowledge of the disability. The definition
of willful ignorance was considered in Owen and Gutch v Homan 2 to mean the failure to make an
inquiry on any dealing that objectively leads a reasonable person to think that a fraudulent tactic
was employed to gain an unfair advantage. Critics argue that the court merely contrasted
predation and indifference to the best interests of the weaker party, but did not give a precise
elaboration 3 .
The decision of the High Court was based on the facts of the case 4 . The provision under
section 51AA is a question of fact to be decided in line with the special circumstances of the
case. In this case, the claimant failed to prove that the he was not in a capacity to make rational
choices in his own interests to restrain from engaging in gambling with the casino. Basing on the
circumstances and the wider context of gambling transitions, Kakavas’s claim was bound to fail 5 .
The third issue was whether the casino had taken advantage of the plaintiff’s gambling
addiction. In establishing the state of mind required to take action on unconscionable conduct,
the court used a higher threshold than it had ever done in previous cases by requiring that the
claimant proves the stronger party’s ‘predatory state of mind’. The learned judges were of the
opinion that mere indifference or inadvertence by the alleged stronger party is not sufficient to
claim that the party was not acting in the normal course of business. Thus, indifference, or
inadvertence does not amount to exploitation or victimization.
2 (1853) 4HLC 997 [10 ER 752] at 275, cited at [155].
3 Bigwood, Rick, ‘Kakavas v Crown Melbourne Ltd – Still Curbing Unconscionability: Kakavas in the High Court of
Australia,’ Melbourne University Law Review, (2013)37,346:446-510.
4 Paterson, Jeannie and Ryan, James, ‘Casino not liable for bets made by problem gambler: Kakavas v Crown Melbourne Ltd,’
Melbourne Law School Opinions on High Court Blog (2013),
5 Ibid. Paterson.
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References
Bigwood, Rick, ‘Kakavas v Crown Melbourne Ltd – Still Curbing Unconscionability: Kakavas
in the High Court of Australia,’ Melbourne University Law Review, (2013)37,346:446-
510.
Freckelton, I, ‘Pathological Gambling and Civil Actions for Unconscionability: Lessons from
the Kakavas Litigation,’ Psychiatry, Psychology and Law, (2013) 20(4): 479-491.
Owen and Gutch v Homan (1853) 4HLC 997 [10 ER 752] at 275, cited at [155].
Paterson, Jeannie and Ryan, James, ‘Casino not liable for bets made by problem gambler:
Kakavas v Crown Melbourne Ltd,’ Melbourne Law School Opinions on High Court Blog
(2013),
