The House Wins in latest lawsuit aiming to Blow up the Pokies

Betting Big

Australians love a punt. Many of us would be unsurprised to learn that Australia has the highest average gambling loss per adult of any country in the developed world ($1,241 per adult in 2016). Victorians lost $2.6 billion on poker machines in the 2016 financial year alone. These sorts of statistics are likely to be behind the Victorian state government’s decision to cap the number of poker machines in the state at 27,372, until the year 2042. This cap excludes the 2,500 pokies housed at Crown Casino.

Victoria only licensed and legalised poker machines in 1991. By legalising the machines, the state government controls the licences which net close to $2 billion in annual licence fees and taxes, that flow back in to the state budget. Clearly, the Australian gaming industry is big business. The relationship between gaming, legislative policy and the law is complex. In the last decade there have been several lawsuits which have attempted to pin the responsibility for gamblers’ losses upon casinos and gaming companies.

In 2013, the High Court unanimously rejected Harry Kakavas’ claim that his gambling addiction was manipulated by Crown Casino (Kakvas v Crown Melbourne Ltd (2013) 250 CLR 392). He alleged the casino preyed upon him and engaged in unconscionable conduct by luring him to gamble at its casino when Crown was aware he was a gambling addict and subject to a self-exclusion order. During the period in question, Kakavas lost close to $30 million gambling at the casino. Kakavas’ claim and appeals were wholly unsuccessful. The proceedings concluded when the High Court unanimously rejected his claim that gambling addiction was a “special disability” at equity and held that Crown Casino had not engaged in unconscionable conduct. The court considered that as Mr Kakavas had been able to restrain himself from gambling at different times, he was able to control his urge to gamble – it was he who made the decision to enter the gaming venue.

Despite the High Court’s finding in Kakavas, a recent lawsuit has attempted to revive the claim that problem gamblers suffer a “special disability” and are vulnerable to casino manipulation.

What message does a poker machine convey? 

On Friday 2 February 2018, Justice Mortimer of the Federal Court of Australia handed down the decision of Guy v Crown Melbourne Ltd & Anor (No 2) [2018] FCA 36 – the latest  lawsuit alleging misconduct and manipulation of gamblers by casinos and related businesses. This claim alleged that certain “poker” machines, used in the Melbourne Crown Casino, were designed with misleading or deceptive features which misrepresented the chances of winning to punters. The suit also alleged that the claimant was part of a class of individuals who, as a gambler suffered from a “special disadvantage”, and the casino engaged in unconscionable conduct in taking advantage of this disadvantage.

Justice Mortimer has dismissed this suit against Crown Casino, and in a lengthly judgment explained the lack of evidentiary support undermined the applicant’s case.

The claim focused on poker machines known as the ‘Dolphin Treasure’ machine, of which Crown had approximately 38 on the floor in Melbourne. It was alleged that the two respondents, Crown and Aristocrat Technologies Australia P/L (the designers and manufacturers of the machine) contravened s.18, 20 and 21 of the Australian Consumer Law (Cth), by:

• designing software and supplying it with certain features that misled the public about the odds of winning;
• these features were designed to prey on the vulnerabilities of a subsection of the gambling public (described by Mortimer J as ‘problem gamblers’) who had or could develop a gambling addiction, namely by rewarding gamblers when they win less than they have actually bet each play.

Each of the 38 Dolphin Treasure games on the floor at Crown had been approved by the Victorian Commissioner for Gambling and Liquor Regulation, and met the technical specifications required under the National Standard for poker machines – an important issue in the case. The National Standard required that poker machines must not (amongst other things) be factually incorrect or misleading or deceptive.

The Dolphin Treasure game differed to other poker machines as it offered players the chance to win ‘free spins’. The claimant led evidence from six problem gamblers who explained that the ‘free spin’ aspect was one of the alluring aspects of the Dolphin Treasure game. When being played, the Dolphin Treasure screen displays a ‘reel’ , which is akin to an old fashioned slot machine mechanical reel.

The three lines of the reel spin during play, and slowly come to a stop – along with a mechanical ticking noise, from left to right. To win, a combination of symbols aligned with a winning combination on the pay table, must show up from left to right on the lines gambled upon. Line 1 is the middle row of the reel, but there are up to 20 lines that can be bet upon each spin – betting on more than one line is known as a ‘multi-line’ bet. To view a multi-line bet screen, the gambler must click through to a separate screen accessed through the ‘view game rules’ option.

The game generally requires three symbols in a sequence to match in order to display a ‘win’. However, for certain symbols – the nine, turtle, seahorse and others, only two consecutive symbols are required. Critically, the machine would even indicate to a user that they had a ‘win’, when the winning credit was less than the amount bet on the round, equating to a net loss (Losses Described as Win Feature).

Unsurprisingly, whenever a player had a ‘win’ on the Dolphin Treasure game, there was an accompanying sound and flashing lights – the duration of which depended on the size of the ‘win’.

The Game information provided to the player was critical to the consumer claim. If a player clicked through to “View Game Information” it displayed a screen which set out the ‘Electronic Game Information’ and the ‘Chances of Winning’. This page included the statement: ‘Total Theoretical Return to player of this game = 87.97%”.  Poker machines are required to (somewhere on the machine) display these statistics, pursuant to reg 20(2) of the Gambling Regulations 2015 (Vic). The National Standard required that poker machines had to have a RTP (return to player) of at least 87%.

For the first four (from the left) of the columns on the reel, there were 30 programmed potential stopping positions. For the fifth column, there were 44 stopping positions. Accordingly, there were 35,640,000 combinations possible on each spin of Dolphin Treasure. The theoretical ‘return to player’ for the Dolphin Treasure game, was alleged by Aristocrat to be 87%, over the life of 35 million spins of the machine.

The claimant alleged that the reels were ‘starved’ of certain symbols or numbers. This table was used to show that certain symbols, such as the treasure chest or sunrise (wild cards), appeared only once across a 30 option reel.

Ms Guy alleged that  with these features, the Dolphin Treasure game made the following impression and misrepresentations to ‘Vulnerable Players’:

• that each reel (column of symbols) was equal in size (meaning each of the five columns had the same total number of symbols and was equal – akin to an old fashioned mechanical poker slot machine) – when in fact the reels were of different sizes ranging between 30 and 44 different symbols on each; [Equal Reel Size Representation]
• that each reel had an equal distribution of symbols – when in fact the reels were ‘starved’ of certain symbols and numbers ; [Equal Symbol Distribution Representation] and
• that the total return to player (RTP) information represented to the player that they will retain 87.83% of the total money they wage, and the risk to the player of losing is 12.17%. In reality the cycle the RTP figure is based upon is irrelevant (35 million plays) and not applicable to an individual player in one session of play [Risk Representation].

It was alleged that Crown and Aristocrat knew of the vulnerability of problem gamblers and employed the unfair tactics of the ‘oversized reel’, ‘starved reel’ and the Losses Described as Wins feature. Alternatively, it was argued that the respondents engaged in a system of conduct or pattern of behaviour that constituted unconscionable conduct under s.21 of the ACL.

Ms Guy filed expert evidence from a professor of gambling statistics, and two psychologists regarding habitual gambling and addiction and design features of the game which contribute to addiction, and the impacts and effects of problem gambling.

Crown Casino & Aristocrat’s defences

Crown and Aristocrat defended these allegations with six key points:

1. Each of the Dolphin Treasure machines had been approved by the Commission, and designed in accordance with various gaming legislation and the National Standards.
2. The alleged Representations are mere speculation and were not in actuality made by the machines – and that an ordinary and reasonable gambler would not be so misled or deceived by the features of the Dolphin Treasure game. Notably no evidence was led of an individual actually being misled in the manner pleaded.
3. There was no pleaded relationship between the respondents and an individual person, such that s.20 of the ACL could not apply.
4. The class of ‘vulnerable persons’ was challenged as being vague and lacking clarity as to when an individual should be described as ‘habituated’ or ‘addicted’.
5. The respondents argued the relationship between their two companies was an arms length business relationship – without any unusual or unconscionable aspect, and that it was not inappropriate for them to monitor the performance of their products.
6. Common features of the Dolphin Treasure game are found in many poker machines in Victoria. If the representations were upheld this would have broad implications of liability for every poker venue in Victoria.

Aristocrat led contrary expert evidence regarding gambling psychology and characteristics of ‘habituation’, addiction and problem gambling. The experts were required to enter a conclave and reach a view on a variety of questions on this topic. Justice Mortimer ultimately found that the applicant’s psychological experts were undermined in cross-examination, and Her Honour preferred the evidence of Aristocrat’s experts – who concluded that problem gamblers retain an ability to decide whether they gamble.

Justice Mortimer’s Findings

The overwhelming impression of Justice Mortimer’s findings are that the dismissal hinged upon the structure of the case presented to the court. Her Honour could not find the allegations against Crown and Aristocrat were proved, as her Honour considered there was insufficient evidence to support the representations and actions. Her Honour found that the Dolphin Treasure games:

•  did not make the ‘Even Reel Size Representation’ or the ‘Equal Symbol Distribution Representation’, as there was no evidence upon which such an inference could be drawn to the hypothetical gambler (at [352] and [357]). The spinning wheel sound and dispersed symbols feature was not supported by any evidence that these features induced these inference;
• did make the Risk Representation – that a player can expect a return approximating to the specified percentage (87.83%)  in the session they are playing –  which may be create some fleeting confusion, but was not misleading (at [422]-[431]). Her Honour recommended that the Gaming Commissioner consider examining the required wording for RTP, as it may be confusing.
• ‘losses disguised as wins’ feature was not misleading, largely as there were no evidence from individuals, studies or survey evidence regarding the effect of the impugned features.

The court was invited to find the representations were proved simply upon the inference or impression of the game from the court’s observations of it, through video recordings of the game being played. Mortimer J found the absence of direct evidence from gamblers about these impugned features made it considerably difficult to be persuaded that the representations had been made and that they had a misleading or deceptive character (at [321]).

The unconscionable conduct (s.20 and 21 of the ACL) case failed for several key reasons:

• the applicant did not identify an individual who was the ‘innocent party’ and therefore did not describe the relationship between that person and the respondents;
• the class of “Vulnerable Players” did not establish that they were subject to a “special disadvantage” because those individuals retained a level of control, even if it was impaired, over their actions. Such control was not consistent with the concept of a “special disadvantage” (at [476]); and
• no victimisation or exploitation was proved to amount to statutory unconscionability.

A critical problem to the applicant’s case was that she did not give evidence that she had ever played Dolphin Treasure at Crown Casino – she most commonly played at the Flagstaff Hotel. Mortimer J held that the applicant could not be the individual identified for the purpose of the unconscionable conduct case against the respondents. The individual must have been a victim of unconscionable conduct by Crown and/or Aristocrat (at [482]). Without an identified individual victim, the court could not find there was any “special disadvantage”.

Her Honour found that the overwhelming evidence revealed that those who used the gaming machines did so because the machines satisfied their personal or emotional needs or tendencies – and that largely they were aware the machine would come out ahead. It was noted that those who use poker machines do not gamble because it is the rational thing to do. Accordingly, her Honour did not accept that the hypothetical, reasonable gambler was especially concerned about the placement of the symbols or the mechanics of the reels, the probability calculations or details of the RTP information (at [310]).

Finally, her Honour found the evidence did not establish that the Vulnerable Players had a “special disadvantage”. Mortimer J endorsed the NSWCA in Reynolds v Katoomba RSL [2001] NSWCA 234 at [149] and Kakavas – accepting that ‘control ultimately rests with the gambler, and society encourages the problem gambler to regain control’. 

What next for problem gamblers?

Although the applicant was unsuccessful in this suit, the thorough judgment by Justice Mortimer provides a guidebook and framework to future litigants as to what hurdles they will need to overcome if pursuing casinos and gaming institutions for unconscionable conduct or misleading or deceptive conduct. On the other side of the equation, the defence strategies utilised in this case are likely to form the manual for   future gaming defendants, when responding to similar suits.

It is not inconceivable that a future problem gambler’s claim – supported with evidence of a clear and sympathetic individual ‘victim(s)’, coupled with reliable expert evidence – may be capable of successfully establishing that gambling addiction put the victim at a “special disadvantage” to a gaming institution.