The Great Pretender: Implications of the High Court's Decision in Kakavas v Crown

Kakavas v Crown Melbourne Ltd [2013] HCA 25 (5 June 2013) (‘Kakavas Appeal’) is an unusual case because it involves two substantial wealth litigants — a successful businessman and a casino — in a claim seeking equitable relief for unconscionable conduct. In almost all regards the appellant (Harry Kakavas) and the respondents (Crown Casino and two of its employees) did not suffer any significant imbalance. Crown was a successful business, and Kakavas a successful businessman. They both presented affluence and skill in financial management.1 The contended imbalance that Crown allegedly exploited was that the appellant is (or at least was) a pathological problem gambler.2

Although at first impression the Kakavas Appeal might suggest that the High Court has severely restricted the application of equitable principles relation to unconscionable conduct to cases where the victim is impecunious or has a wide-reaching disadvantage, closer examination of the judgment indicates that the finding against the appellant was a result of deficiencies in his case. Neither does the Kakavas Appeal support the contention that the High Court has restricted equitable relief to circumstances where the perpetrator is not acting in the normal course of their business. Instead, as Freckleton correctly points out, ‘[t]he High Court’s decision in respect of Mr Kakavas was far from surprising. On the facts his case was not strong.’3

The following statement by the High Court in the Kakavas Appeal (and the remainder of the paragraph from which it is extracted) demonstrates the challenge of finding victimisation in circumstances where it is not normally encountered:

It is necessary to be clear that one is not concerned here with a casino operator preying upon a widowed pensioner who is invited to cash her pension cheque at the casino and to gamble with the proceeds. One might sensibly describe that scenario as a case of victimisation.4

In cases where ‘the gambler may be evidently intoxicated, or adolescent, or senescent, or simply incompetent’5 it is easier to objectively observe some form of victimisation or, at the very least, a set of circumstances that create fertile ground for a casino to take advantage of the gambler.

The High Court has not restricted the application of equitable principles; rather it has acknowledged the difficulty of establishing victimisation where the disability or disadvantage suffered is not prominent in the plaintiff’s life or does not lend itself to ready identification. Impecuniosity is a clearly identifiable disadvantage that would, even if only superficially, give the appearance of an imbalance in power.6

The appellant lacked a disadvantage that would undoubtedly indicate such an imbalance. The appellant lost $20.5 million to the respondent, but at no point was the value of this loss in relation to the appellant’s wealth established. A wealthy businessman spending such a sum on entertainment, regardless of the kind of entertainment, is not unusual.7 The courts were charged with establishing whether or not that sum had moved voluntarily from Mr Kakavas to Crown and, if not, had Crown received those funds by taking advantage of the appellant’s pathological gambling problem in a manner that could be described as unconscientious?

Assuming that, in the absence of any facts to the contrary, the appellant’s loss was ‘a drop in the ocean’, the High Court remarked that:

In the present case there was no finding that the appellant could not afford to indulged himself as he did, much less that Crown knew that he could not do so. Nor was there any suggestion that the appellant gambled while intoxicated, or that he was, and was regarded by Crown as, an incompetent card player … [I]t is clear that the appellant had access to large sums of money and that he presented himself to Crown as a successful businessman whose pleasure it was to gamble and who could afford to sustain heavy losses … .

It is in this context that one must consider the appellant’s claim that he was victimised by Crown by virtue of his abnormal desire to gamble … .8

This is an explicit acknowledgement that the appellant lacked a clear connection between a disadvantage and a resulting detriment that, even in the absence of that disadvantage, would be typical of the lifestyle of a wealthy gambler. In blunt terms: it is difficult to discern a wealthy high roller who loses $20.5 million over 12 months from a wealthy, high-rolling problem gambler who loses the same amount over the same period.

Gambling is a former of entertainment in which, axiomatically, persons of means are most capable of participating. Thus, the High Court was merely drawing attention to the difficulty a plaintiff will have in establishing unconscientious conduct in circumstances which appear initially to be unremarkable. The Court was not restricting the application of equitable principles to circumstances in which the ‘victim’ is impecunious.

Not only is the appellant’s contended disability difficult to discern against the backdrop of his wealth, it is not pervasive enough to be easily identified. There was limited evidence that the appellant actually suffered from a gambling addiction: ‘it was far from clear that he was a gambling addict without volition or with seriously impaired capacity to make reasoned decisions in respect of his gambling.’9 The psychiatrists’ reports were conflicting,10 and the appellant had shown an ability to refrain from gambling generally, including self-imposed exclusions.11

This is not to say that it is not a valid disability, but that its disabling effect on the appellant is exceptionally narrow and occurs in very limited circumstances. The addiction did not manifest itself in a pervasive disability: Harry Kakavas was not a slot jockey trapped by gaming machines. The facts make it clear that the appellant was instead a baccarat player12 who frequented Crown Casino two or more times per month on average,13 ‘had the capacity to self-exclude [and] participate in negotiations with Crown involving the cut and thrust of offer and counter-offer’ and was ‘quite capable’ of declining visits to the casino for several months.14

The High Court here was not restricting the application of equitable principles to cases where the disability substantially impairs the plaintiff in their general life but was illustrating that, in a similar way to the above discussion, a very narrow disability poses a special challenge to the courts. These two factors of the disability — its lack of depth in relation to the appellant’s status as a successful property developer, and its lack of breadth in relation to how far it affected the appellant in his daily life — are the keys to understanding the reasoning behind the High Court’s judgment.

Fullager J provided examples of ‘special disadvantages’ in Blomley v Ryan (1956) 99 CLR 362 that would attract equitable protection: ‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkeness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is needed.’15 This illustrative, non-exhaustive list16 indicates a ‘common thread’ to the disadvantages.

Firstly, they are capable of having a seriously detrimental effect on the individual’s quality of life. There was limited-to-no evidence in the Kakavas Appeal that the appellant suffered such a disabling disadvantage because a gambling addiction like that of the appellant’s did not appear to be an infliction causing difficulty, distress or other hardship in life. Thus, plaintiffs seeking protection will have a more difficult time presenting a successful claim if they cannot show that they are unable to afford or tolerate the disadvantage.

Secondly, these disadvantages are more likely to affect the individual in more than one aspect of their life. A reasonable person is more likely to assume that poverty, sickness, age, sex, infirmity, drunkenness, illiteracy and lack of education would affect the individual in several areas of their life. The less prominent the disability is, the harder it is to show that it exists and, if it does, that it affects the individual in any great way. It is the prominence of the disability that challenges the court: the less prominent a disability, the more reluctant the court will be to accept that it is either genuine or is so serious as to have a detrimental effect on that person’s quality of life.

Justifiably, one might draw attention to Louth v Diprose (1992) 175 CLR 621 to counter the argument that a plaintiff will have difficulty in receiving the protection of equity where the disability is not particularly prominent. The difference between the Kakavas Appeal and Louth v Diprose is that the latter case involved a disability that was clearly taken advantage of by the defendant. In the Kakavas Appeal the High Court was acknowledging that if the appellant had been able to successfully demonstrate that he had a disability that was either prominent in one aspect of his life or pervasive across several aspects of his life, and that Crown knowingly took advantage of that disability he would have a strong claim. Unfortunately for Mr Kakavas he did not have a prominent or pervasive disability and so relied entirely upon proving that his special disadvantage caused him to be victimised by Crown and Crown alone.

In circumstances such as Louth v Diprose and the Kakavas Appeal, the courts needed to consider the following question: ‘could anyone take advantage of this disability?’ If the question is answered in the negative, the courts must give greater consideration to the relationship between the parties and the circumstances in which alleged victimisation occurred. This is to say that the High Court was, in an admittedly protracted way, highlighting the notion that plaintiffs whose ‘special disadvantages’ are limited to very small areas of their lives will need to go to greater lengths to establish that the defendant had victimised them. The Court must examine the nature of the transaction to determine how the ‘special disadvantage’ affected the plaintiff in relation to their dealings with the defendant.

Not only did the applicant have difficulty in establishing that he had a prominent or pervasive ‘special disadvantage’, his claim of unconscionable conduct was directed at a casino. Here too the appellant encountered difficulty.

In Louth v Diprose, the plaintiff’s disadvantage related only to his dealings with the defendant and therefore one might argue that, given the above discussion, the facts in that case are similar enough to the Kakavas Appeal such that the latter case ought to have been decided along the same lines. This argument would, however, necessarily overlook the fact that the nature of the transaction, including the relationship between the parties, is manifestly different. A solicitor giving thousands of dollars to a client is unusual and one can observe that without his infatuation, Louth would likely not have behaved that way, and the defendant took advantage of that. Had the defendant instead been a charity and the plaintiff a sufferer of compulsive philanthropy the outcome of the case may well have been different.

Although this flippant example of ‘compulsive philanthropy’ is purely illustrative, it demonstrates how difficult it is to find victimisation in circumstances where the transaction is unremarkable. To the detriment of the appellant’s case there was little to suggest that the transactions were anything other than routine for either party. Mr Kakavas presented himself as a wealthy businessman who liked to gamble17 and who, over the course of the 12 months he gambled at Crown, did not raise any concerns that he was losing money until his final visit.18 Crown’s management appears to have accepted what Mr Kakavas intended them to believe.19

The appellant negotiated many perks for himself, including use of a private jet, catering, rebates on losses, accommodation for himself and guests, and a number of conveniences to allow him to gamble in greater comfort.20 All of this suggests an enjoyment derived from gambling. There is little evidence to suggest that the appellant was reluctantly in the grasp of some disabling compulsion to gamble, and much less that Crown went out of its way to take advantage of the appellant because of it.

Crown was not only acting in its ordinary course of business, it was negotiating and transacting with a wealthy, confident businessman who presented himself as a high roller and not a pathological gambler. The comparison to a widowed pensioner must again be revisited to drive this home. A widowed pensioner who presents herself as a wealthy gambler will find it vastly more difficult to receive the protection of equity if the other party takes this representation on face value.

Thus the High Court was not restricting the application of equitable principles to circumstances where the perpetrator is aware of the disability but is not acting in the normal course of their business. If the High Court was restricting the application of equitable principles at all, it was restricting their application in circumstances where the claimant has gone out of their way to hide their ‘special disadvantage’ from the other party. This author is presently unaware of any precedent for such a situation.21

Although the High Court did consider impecuniosity and the extent to which the pathological gambling addiction had an impact on the appellant’s everyday life, neither of these were clinching reasons for the judgment. The appellant accepted that Crown did not know it was more than the luxurious indulgence of a successful high roller.22 The comment of the High Court that ‘[g]ambling transactions are a rare, if not unique, species of economic activity in a civilised community, in that each party sets out openly to inflict harm on the counterparty’23 highlights why casinos do not make good defendants in unconscionable conduct cases — casinos and their patrons are openly attempting to take money from each other in games of chance as a means of entertainment.

Had Mr Kakavas had a stronger case on any of the material facts he may have been successful. However, in the absence of any ability to demonstrate the gambling addiction was a serious affliction or that Crown had taken advantage of it, the High Court has merely confirmed that a plaintiff with a weak case will have a greater burden than a plaintiff with a strong claim. ‘Mr Kakavas’s gambling addiction simply did not meet [the] standard.’24

In The Juliana, Lord Stowell generalised that:

A court of law works its way to short issues, and confines its views to them. A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case.25

This approach was confirmed by the High Court in at least three cases, one of which was the Kakavas Appeal.26 Mr Kakavas lost the case because the circumstances, taken together, could not support his claim for unconscionable conduct: ‘context and circumstances are paramount in the inquiry as to whether “victimisation” can sensibly be held to have occurred between the transacting parties.’27 As Freckleton concludes:

the doors of the courts have not been closed completely against gamblers who seek legal redress by demonstrating that they have been victimised by casinos … as a result of their pathological gambling behaviour or condition. However, they will need to do more than establish that, at the relevant times, they suffered from [a] ‘gambling disorder.’ They will need … to show that key aspects of this were apparent to the party that they seek to sue and that this ‘especial disadvantage’ was taken advantage of and that, thereby, they were financially exploited. As Mr Kakavas’ case has shown, this will not be easy to prove to the requisite level.28

  1. Kakavas v Crown Melbourne Ltd [2009] VSC 559 (8 December 2009) [444]. 

  2. Kakavas Appeal [2013] HCA 25 (5 June 2013) [5]. 

  3. Ian Freckleton, ‘Pathological Gambling and Civil Actions for Unconscionability: Lessons from the Kakavas Litigation’ (2013) 20 Psychiatry, Psychology and Law 479, 489. 

  4. Kakavas Appeal [2013] HCA 25 (5 June 2013) [30]. 

  5. Ibid. 

  6. Blomley v Ryan (1956) 99 CLR 362, 405 (Fullager J), 415 (Kitto J). 

  7. See, eg, Brad Tuttle, ‘The Splurge Surge: Luxury Spending on the Rise’, Time (online), 1 May 2013 <>. 

  8. Kakavas Appeal [2013] HCA 25 (5 June 2013) [32]–[32]. 

  9. Freckleton, above n 3. 

  10. Kakavas Appeal [2013] HCA 25 (5 June 2013) [43]–[46], [64]–[66]. 

  11. Ibid [33]. 

  12. Ibid [1]. 

  13. Ibid [75]. 

  14. Ibid [108]. 

  15. Blomley v Ryan (1956) 99 CLR 362, 405. 

  16. Ibid. 

  17. Rick Bigwood, ‘Kakavas v Crown Melbourne Ltd — Still Curbing Unconscionability: Kakavas in the High Court of Australia’ (2013) 37 Melbourne University Law Review 463, 473. 

  18. Kakavas Appeal [2013] HCA 25 (5 June 2013) [70]. 

  19. Ibid [31]–[32]. 

  20. Ibid [109]. 

  21. Databases consulted include LexisNexis, Westlaw AU and AustLII. 

  22. Bigwood, above n 17. 

  23. Kakavas Appeal [2013] HCA 25 (5 June 2013) [25] 

  24. Bigwood, above n 17, 508. 

  25. The Juliana (1822) 2 Dods 504, 521. 

  26. Jenyns v Public Curator (Qld) (1953) 90 CLR 113, 119; Tanwar Enterprises Pty Ltd v Cauchy (2003) 217 CLR 315, 325; Kakavas Appeal [2013] HCA 25 (5 June 2013) [123]. 

  27. Bigwood, above n 17. 

  28. Freckleton, above n 3, 490.