Dear Colleagues;
This will mostly be of interest to Australians, though others might be amused by the knots being tied by the so-called “tort reform”
exercise in a federation. The NSW Court of Appeal in Perisher Blue Pty Ltd v Nair-Smith
[2015] NSWCA 90 (9 April 2015) http://www.caselaw.nsw.gov.au/decision/552455b4e4b0fc828c995366 has held that, in its application to a contract-based claim for personal injuries,
Part 2 of the Civil Liability Act 2002 (NSW) is invalid due to the operation of s 109 of the Commonwealth Constitution and its inconsistency with the provisions of former s 74(1) of the
Trade Practices Act 1975 (Cth).
A couple of points of explanation:
- The CLA 2002 is usually thought of as imposing limits on tort actions, not contract claims. But Part 2 of the Act, which imposes limits on damages in personal injury claims, applies to a claim for “personal injury damages” “regardless of whether the claim for damage is brought in tort, contract, under statute or otherwise”- s 11A (2).
- This case involved a plaintiff who had been injured through being struck with a ski lift chair, in circumstances where she had a contract with the ski lift operator. So her claim, while it was framed in negligence, was also made in the alternative for breach of a contractual term to provide services with due care and skill.
- The former TPA 1975 s 74(1) required, as a matter of federal law supported by the “corporations” power, that all contracts for the provision of services include a term as to due care and skill.
- Essentially the invalidity of Part 2 of the CLA here was because limiting the damages that could be recovered, under State law, was seen to be contrary to a right
enjoyed by a plaintiff to “full contractual liability” under this term implied by Federal law. As the CA put it (following an earlier High Court decision dealing with other State legislation):
- 194 The phrase “full contractual liability” must be understood as a reference to the full amount of damages recoverable at common law undiminished by any State’s or Territory’s legislation and free from any intrusion by such legislation.
- Since the events here the TPA has been “transformed” into the Competition and Consumer Act 2010 and the relevant provision requiring services to be provided with “due care and skill” is now contained in the Australian Consumer Law (Sched 2 to that Act) s 60. It seems that the same sort of reasoning would apply to this provision as applied to the former TPA s 74.
- There was also an issue in relation to a clause in the contract which purported to exclude liability; those who are interested can read the discussion here at paras [196]-[219] where the CA concludes that due to the operation of other provisions of the Federal law the exclusion clause(s) were ineffective.
The implication of the decision is that, in NSW, and arguably elsewhere in Australia, if it is possible to bring a
claim for personal injury damages in reliance on a contractual obligation implied by the Federal ACL, it will be worth doing so to avoid the restrictions imposed on personal injury actions by State law. (Unless and until pressure mounts for amendment to the
Federal law!)
I should add that, while the plaintiff succeeded on all these Constitutional
points, her award of damages was over-turned because the CA ruled against her on causation- see [164]. Slightly oddly, the court then moves very quickly to state that, since the negligence claim failed, the claim based on the implied contractual warranty also
failed:
170 The statutory warranty that, on the respondent’s case, was incorporated into her contract with the appellant was an implied warranty that the ski lift services provided by the appellant would be “rendered with due care and skill”.
171 The conclusions in relation to the negligence claim mean that there was no breach of such an implied warranty.
While the ultimate result of the claim is probably correct given the findings on causation, I would have thought that the above comment needed to be supplemented by a note about the law of causation as it applies to a contractual
claim. It has to be said that, contrary to what is said in [171], the court’s earlier comments actually lead to the conclusion that there
was a breach of the implied warranty (in the negligence claim they find that there had been a breach of duty.) But presumably as there was no
causation of the relevant harm from that breach for the law of negligence, they were able to find that this link was also not established in the law of contract. I assume it is necessary
to award damages for breach of contract to find that the breach has caused the plaintiff’s harm, and I assume that causation is generally decided under the common law in relation to breach of contract in the same way it is decided under the law of torts. In
fact under the CLA 2002, in light of s 5A, causation in a contract claim based on “negligence” (defined in s 5 to mean “failure of reasonable care and skill”) will also have to be determined by the principles set out on Part 1A of the CLA (including s 5D which
deals with causation).
Of course it might be argued that, if Part 1A would alter the common law of contractual recovery to diminish “full contractual liability” in a claim based on an implied obligation read in by Federal law, then Part 1A might
also be to that extent invalid. But the CA here do not spell this out, and further consideration of the operation of Part 1A may need to await another decision.
Is this decision likely to be appealed? The interesting constitutional issues might suggest so, but in fact since the plaintiff lost on the very fact-specific question of causation it might be thought that the chances of
a successful special leave application may not be strong. While the defendant would have an interest in overturning the findings on the CLA, since it won on the facts it will have no reason to appeal. So as much as one might want the HCA to consider some of
these issues, again that may have to wait for another case.
Regards
Neil
neil foster
T: +61 2 49217430
E: neil.foster@newcastle.edu.au
MC177 (McMullin Building)
The University of Newcastle (UON)
University Drive
Callaghan NSW 2308
Australia
CRICOS Provider 00109J
Associate Professor
Newcastle Law School
Faculty of Business and Law
Faculty of Business and Law
T: +61 2 49217430
E: neil.foster@newcastle.edu.au
Further details: http://www.newcastle.edu.au/profile/neil-foster
My publications: http://works.bepress.com/neil_foster/ , http://ssrn.com/author=504828
The University of Newcastle (UON)
University Drive
Callaghan NSW 2308
Australia
CRICOS Provider 00109J
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