Dear Colleagues;
Yesterday’s decision of the High Court of Australia in Moore v Scenic Tours Pty Ltd [2020] HCA 17 (24 April 2020) http://www6.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/2020/17.html
(sorry for the delayed note) concerned the question whether damages for
disappointment and distress following a failed holiday experience, amounted to
“personal injury”. As one might think from the framing of that question, the
answer is that it does not! But it is interesting to see why the question
arose, and how the lower courts had thought that it might.
The question came up
because the “tort reform” legislation in NSW, the Civil Liability Act
2002, imposes strict limits on “non-economic loss” as a component of damages in
a personal injury claim (see s 16), and the relevant part of the CLA, Part 2,
“applies regardless of whether the claim for the damages is brought in tort, in
contract, under statute or otherwise” (s 11A).
Mr Moore and his wife
had suffered the disappointment of a ruined European river cruise due to
flooding of the rivers (and, they claimed, the failure of their travel company
to warn of this or properly deal with the consequences). Their claim could have
been brought as a breach of contract action, but they chose to sue for breach
of statute, the relevant Commonwealth legislation being the Australian Consumer
Law ("ACL"), Competition and Consumer Act 2010 (Cth), Sch 2 .
The ACL provides a number of “consumer guarantees” which apply to consumer
contracts made with corporations; the relevant guarantees replicate
long-established implied contractual terms:
[9]…“it was alleged
that Scenic failed to exercise due care and skill in the supply of the tours, in
breach of the guarantee in s 60 of the ACL; that the severe disruptions to the
river cruises rendered the services comprising the holiday tours unfit for the purpose for which Mr Moore and each of the group members acquired
them, in breach of the guarantee in s 61(1) of the ACL; and that the tours were
not of a nature and quality as could
reasonably be expected to achieve the result that Mr Moore and each of the group members wished the
services to achieve, in breach of the guarantee in s 61(2) of the ACL.”
ACL s 267(4) allows a
consumer to recover compensation for “loss or damage suffered by the consumer.”
Of course it has long been
established that, while breach of contract claims do not usually allow recovery
for distress and annoyance caused by such breach, an exception to this
principle is contracts the very purpose of which is relaxation and enjoyment
such as a “tour” contract- in Australia, Baltic Shipping Co v Dillon
(1993) 176 CLR 344; see also of course Jarvis v Swans Tours Ltd [1973]
QB 233. The courts have transferred this concept of “loss” to the consumer
guarantees under the ACL. (See Edelman J at [67]: “The assumption of all the
parties to this litigation has been that the damages recoverable under s 267(4)
for non-economic loss are governed by the same principles as common law damages
for breach of contract.”)
Scenic Tours,
however, claimed that the limits imposed by s 16 CLA 2002 applied to this
claim, and hence (since it was agreed that Mr Moore’s damage on this head did
not meet the statutory threshold) they were not liable to pay damages for this
head of loss. (The amount involved for Mr Moore was fairly small, some $2000,
but his claim was one of a large number of others being mounted, so it was
worth their while arguing the point.)
Why did the NSW
Act apply to limit a claim made under Commonwealth law? Because the
Commonwealth had chosen to subject the claims to these sort of limits in s 275
of the ACL:
“If:
(a)
there is a failure to comply with a guarantee that applies to a supply of
services under Subdivision B of Division 1 of Part 3-2; and
(b)
the law of a State or a Territory is the proper law of the contract;
that
law applies to limit or preclude liability for the failure, and recovery of
that liability (if any), in the same way as it applies to limit or preclude
liability, and recovery of any liability, for a breach of a term of the
contract for the supply of the services.”
The High Court
held that s 275 did have the effect that ACL claims could be “limited or
precluded” by State or Territory law- see the joint judgment of KIEFEL CJ,
BELL, GAGELER, KEANE, NETTLE AND GORDON JJ at paras [32]-[38]; and this
included limits on amounts of damages as well as liability limits. (See the
comment at [33] on trying to differentiate these two ideas: “the distinction
that Mr Moore seeks to draw is as difficult to appreciate as it was for Mr
Moore's counsel to articulate”!)
But Mr Moore’s
counsel had a much better reception for his other argument, that even if s 16
CLA applied to the claim in theory, in this case it could not, since Part 2 of
the CLA only applied to “personal injury” claims. The court agreed that a claim
for “distress and disappointment” at a failed holiday could not be shoe-horned
into the definition of “personal injury” in the CLA. While the definition
includes “impairment to his mental condition”, counsel for Moore rightly noted
that “a reaction of disappointment and distress to the breach of such a promise
[for an enjoyable holiday] – a promise that had been bought and paid for – is a
normal and healthy response to that disappointment rather than an impairment of
the plaintiff's mental condition”- see [40].
The argument
that such damage fell within the scope of s 16 had been built on some passing
comments in Baltic about “distress” which had then been applied in some
later single judge decisions following the first such ruling in Flight
Centre Ltd v Louw (2010) 78 NSWLR 656, which the High Court is now clear
was “incorrectly decided”- [48].
There was a
further issue here, which was, even if s 16 CLA would otherwise apply, did it
apply to a case occurring outside NSW (here, of course, outside Australia
altogether)? But the joint judgment said that since the case could be decided
on the “personal injury” point, it would not discuss that issue.
Edelman J
delivered a judgement concurring with the joint judgment in reasons and orders,
but offering some further interesting analytical comments on the different
types of contract damages that may be awarded, referring at [63] to
“compensation directly for the performance interest and compensation for
consequential losses”. I leave to colleagues more versed in contract law than I
am to make any comment on these issues.
In the current
COVID-19 context we in Australia have just seen the departure of the cruise
ship Ruby Princess after its disastrous visit here where hundreds of
passengers were allowed to disembark with apparently inadequate health checks,
and who were subsequently found to have COVID-19. There are allegations that
the ship owners should have known the disease was on board before the
passengers embarked on the final cruise (a round trip to NZ and back). No doubt
some may be considering that their holiday was accompanied by “distress and
disappointment”, so the HC decision here may be of some benefit to them
recovering for at least that component of their loss. (Those who actually
contracted the disease, and sadly the families of some who have since died, will
have much larger amounts to sue for which would indeed amount to “personal
injury”, no doubt.)
Regards
Neil
NEIL FOSTER
Associate Professor, Newcastle Law School
Faculty of Business and Law
409 Hunter St
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T: +61 2 49217430
E: neil.foster@newcastle.edu.au
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