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Hinchliffe, Sarah --- "Gambling - An Update on Duty of Care in Victoria" [2008] MqJlBLaw 4; (2008) 5 Macquarie Journal of Business Law 87

Gambling — An Update on Duty of Care in Victoria

SARAH HINCHLIFFE^[∗]

The Productivity Commission report, Australia’s Gambling Industries (1999), found that levels of problem gambling are of major concern. According to the report, around 330,000 (2.3 per cent) adult Australians have significant gambling problems, and for every one of these an additional 5 to 10 people are adversely affected in a direct way by their gambling. A vital question one is to ask is to what degree does a gambling venue owe a duty of care to its patrons? While cases such as Reynolds v Katoomba RSL [2001] NSWCA 234; (2001) 53 NSWLR 43 have recognised that no such duty is owed, this article will discuss the extent to which Australian courts are beginning to recognise that a duty of care is owed by gaming premises.

I Introduction

For many people gambling is a legitimate part of their leisure and recreation activities. While most people who gamble do so in a responsible manner and enjoy gambling as entertainment, for some it is a cause of problems for themselves, their families and the community. Yet, what duty do gambling venues owe their patrons? Generally, it is understood that no duty of care is owed to problem gamblers to prevent them from suffering gambling loss. However, recent Australian case law suggests that certain circumstances permit a successful claim in negligence to be established.

II When can negligence be claimed?

Some recent cases have addressed the issue of when a claim for negligence can be made, namely Preston, Foroughi and Kakavas. In particular, the courts in both cases left the door open for a claim to be made out successfully in negligence for economic loss incurred through gambling in an ‘extraordinary’ case.

While many cases are settled between parties, the question of whether registered club owes a duty of care to a member who it knew, or ought to have known, to be a problem gambler, to protect the person against financial loss from gambling, was considered by the NSW Court of Appeal in Reynolds v Katoomba RSL All Services Club Ltd^[1]. In that case, the plaintiff brought a claim against the Katoomba RSL Club to recover substantial losses incurred while gambling on poker machines on the Club’s premises. Notwithstanding the fact that the Club was advised that the plaintiff was a problem gambler and was requested not to cash his cheques or extend credit, no steps were taken to prevent him gambling, and the plaintiff's cheques continued to be cashed by the Club. Spigelman CJ, Powell and Giles JJA unanimously held that no such duty was owed.^[2]

Chief Justice Spigelman has observed that economic loss occasioned by gambling should not be accepted to be a form of loss for which the law permits recovery, except in ‘exceptional circumstances’.^[3] Although, no examples were given of circumstances when such a case may arise. Reynolds was classified as an ordinary case by Spigelman CJ, where a duty of care should not be recognised as the loss occurred following a ‘deliberate and voluntary act on the part of the person to be protected.’^[4] As a result, an extraordinary case may occur when action by the venue operator reduces the ability of a gambler to exercise control over their own actions.

His Honour looked to authoritative statements of principle by the High Court in Perre v Apand Pty Ltd^[5] and Agar v Hyde^[6] on the acceptance by individuals of personal responsibility for their own actions.^[7]

Spigelman CJ stated that the Court should be slow to recognise a duty to prevent self-inflicted economic loss, as ‘loss of money by way of gambling is an inherent risk in the activity and cannot be avoided.’^[8] Nevertheless the possibility that a claim of negligence in an extraordinary case may be successful was left open as it was held that ‘whether a duty arises in a particular case must depend on the whole of the circumstances, even in the case of an inherent risk’.

In Preston v Star City Pty Ltd (No 3)^[9], Hoeben J permitted a claim in negligence to proceed to trial because the allegations went beyond those made in Reynolds.^[10] This case is an indication that the Australian law relating to claims in negligence for pure economic loss is still developing. The claim in that case concerned negligence and breach of statutory duty relating to losses of approximately $3 million suffered by the plaintiff in gambling at the Sydney Star City Casino.^[11] In particular, that Star City knew of the plaintiff’s problem and actively encouraged and exploited it through the provision of a cheque cashing facility, services and privileges, liquor that was free of charge and that Star City informing the plaintiff ‘that if he remained a high roller patron it would make available various business contracts related to its procurement needs or promotions.’^[12] On appeal Wood CJ acknowledged that a duty of care in this context might not ‘go so far as preventing the offer of a limited or reasonable range of inducements and complimentary services’;^[13] nevertheless, he stated that a duty of care may exist to prevent ‘the provision of significant credit facilities or excessive encouragement through incentives, of a person who has specifically asked to be barred or to go beyond a limit that he has asked the casino to set.’^[14] In refusing to strike out the claim for negligence, Wood CJ acknowledged that the Court should be astute not to risk stifling the development of the law.^[15] Rather, ‘the evolving nature of the tort of negligence, and the incremental approach that appears to be favoured [in Perre v Apand] make it inappropriate to take this step merely because no category of case of this kind has been recognized in this country.’^[16]

The Court in Foroughi v Star City Pty Limited^[17] held that the alleged duty of care was weaker than that argued in Reynolds. In Foroughi, the Court found that the plaintiff was not owed a duty of care by Star City to prevent self-inflicted economic loss from gambling when the plaintiff breached his voluntary exclusion order since he ‘expressly and voluntarily undertook responsibility for his own conduct in agreeing not to enter the gaming areas of Star City and to seek assistance and guidance of a qualified and recognized counsellor.’^[18] Jacobson J’s statement recognises that claims may be made successfully by gamblers in extraordinary cases and implies that in merely ordinary cases ‘a gambler who enters a casino in breach of a voluntary exclusion order and suffers losses will have no redress in the form of a damages claim against the casino’.^[19] Foroughi indicates that the Courts will not automatically conclude that a duty of care exists where a gambler is excluded.

The case Kakavas v Crown Limited and John Williams^[20] refers also to ‘extraordinary circumstances’ cites by Spigelman CJ in Reynolds. In that case, a gambler has sued Crown Casino to recover approximately $30 million in gambling losses alleging that he was induced to gamble at Crown Casino. The plaintiff alleged that, despite his access to the casino being restricted by voluntary and compulsory exclusion orders, the CEO of Crown Casino ‘devised a scheme to the Plaintiff to recommence gambling at the Casino’ and requested Crown Casino employees 'to contact the Plaintiff and to do what was necessary to induce the Plaintiff to recommence gambling at the Casino.’^[21]

The actions of the casino may very well fall within the category of ‘extraordinary circumstances’ and a duty of care found if it is proved that Crown Casino encouraged the plaintiff to gamble, notwithstanding exclusion orders.

III Distinguishing the cases

• Each of these cases, the plaintiff alleges active encouragement and exploitation to gamble by the relevant gaming operator.
• Reynolds recognised the principle that problem gamblers cannot recover economic losses suffered from gambling.
• In Reynolds, it was held to have been the plaintiff’s own “choice” whether to use the gambling facilities or not.^[22]
• Reynolds was also distinguished on the ground that the regulatory framework for a registered club is not the same as that for a casino.^[23]
• In Reynolds, the defendant had engaged in active inducement or deliberate conduct designed to take advantage of the plaintiff’s personal failings.^[24]
• In Kakavas, the plaintiff was subject to both voluntary and involuntary exclusion orders and was therefore legally barred from entering casinos. Whereas in Preston, the plaintiff was only subject to a voluntary exclusion order.

It is important to keep in mind that, even if a private right of action would exist against the venue, section 78(2) of the Casino Control Act 1991 (Vic) combines two prerequisites of knowledge on the part of the casino operator, or other person to whom the section applies. These requirements are, first, knowledge that a particular person is in the casino, and, second, knowledge that the person is the subject of an exclusion order.^[25]

The authorities and the legislative history of the Casino Control Act 1991 (Vic) (‘the Victorian Act’) also make it plain that the legislation does not confer a private right of action for damages.^[26] This is likened to the Casino Control Act 1992 (NSW) (‘the NSW Act’), where the legislative history and the case law indicate that the intention of the NSW Act was not to confer a private right of action for damages on problem gamblers who may enter a casino in breach of an exclusion order.^[27] In his report concerning the Inquiry into the Establishment and Operation of Legal Casinos in New South Wales,^[28] the Hon Sir Lawrence Street AC KCMG rejected that there is a statutory duty with a correlative right of action created upon the gambler to sue the casino for damages.^[29] This view has also been supported by Wood CJ in Preston who, in Common Law, referred to the Street Report to support the view that the requisite legislative intention to confer a private right of action was not to be found in the NSW Act.^[30]

IV Conclusion

The defined categories that constitute an “extraordinary” are yet to be seen. Nevertheless, it appears that excessive inducements combined with knowledge of the gambler’s problems, particularly if evidenced by an exclusion order, may be adequate for a [gambler] plaintiff to successfully claim recovery of gambling losses, on the basis of a breach of duty of care.

^[∗] Sarah Hinchliffe, LLB, Assistant Lecturer, Department of Business Law and Taxation, Monash University. Barrister and Solicitor (Victoria, High Court).

^[1] [2001] NSWCA 234; (2001) 53 NSWLR 43 (‘Reynolds’).

^[2] See also Foroughi v Star City Pty Ltd [2007] FCA 1503; (2007) 163 FCR 131 (‘Foroughi’).

^[3] Reynolds [2001] NSWCA 234; (2001) 53 NSWLR 43, 45 per Spigelman CJ.

^[4] Reynolds [2001] NSWCA 234; (2001) 53 NSWLR 43, 46 per Spigelman CJ.

^[5] [1999] HCA 36; (1999) 198 CLR 180.

^[6] [2000] HCA 41; (2000) 201 CLR 552.

^[7] Reynolds [2001] NSWCA 234; (2001) 53 NSWLR 43, 47.

^[8] Reynolds [2001] NSWCA 234; (2001) 53 NSWLR 43, 48.

^[9] [2005] NSWSC 1223 (Unreported, Hoeben J, 5 December 2005) (‘Preston 3’).

^[10] See Preston v Star City Pty Limited [1999] NSWSC 1273 (Unreported, Wood CJ, 22 December 1999) (‘Preston’).

^[11] Preston v Star City Pty Limited [1999] NSWSC 459 (Unreported, Harrison M, 18 May 1999) [3].

^[12] Preston [1999] NSWSC 1273 at [5] per Wood CJ.

^[13] Preston [1999] NSWSC 1273 at [190].

^[14] Preston [1999] NSWSC 1273 at [133].

^[15] Preston [1999] NSWSC 1273 at [110].

^[16] Preston [1999] NSWSC 1273 at [118].

^[17] Foroughi v Star City Pty Limited [2007] FCA 1503; (2007) 163 FCR 131.

^[18] Ibid, 148.

^[19] Foroughi [2007] FCA 1503; (2007) 163 FCR 131, 150. See also Preston 3 [2005] NSWSC 1223.

^[20] [2007] VSC 526 (Unreported, Harper J, 13 December 2007).

^[21] Ibid at [16].

^[22] Preston [1999] NSWSC 1273 at [128].

^[23] Preston [1999] NSWSC 1273 at [130].

^[24] Preston [1999] NSWSC 1273 at [156].

^[25] See Rixon v Star City Pty Ltd [2001] NSWCA 265; (2001) 53 NSWLR 98, 108.

^[26] Foroughi [2007] FCA 1503; (2007) 163 FCR 131, 132.

^[27] See New South Wales, Second Reading Speech, Legislative Assembly, 5 March 1992, 513, 514 and 516.

^[28] (27 November 1991) at [4.6.6] to [4.6.10] (‘the Street Report’).

^[29] Ibid.

^[30] Preston [1999] NSWSC 1273 at [87]. See also Preston v Star City Pty Limited [1999] NSWSC 459 (Unreported, Harrison M, 18 May 1999) [28].