Travel - An industry under siege

  • TurkAlert
  • Published 27.04.2020
Moore v Scenic Tours Pty Ltd [2020] HCA 17 (24 April 2020)

Already under siege from COVID-19 and dealing with the unfair contract term implications of the Financial Services Royal Commission, the travel industry must now deal with the impact of this decision. 

Further scrutiny will also be targeted at the travel insurance sector this week when Tim Wilson, chair of the House of Representatives Standing Committee on Economics, commences his inquiry into insurers’ response to the Royal Commission and the issues raised by COVID19. 

Today we look further into the implications of this High Court decision for the travel industry.

Summary

In Moore v Scenic the High Court ended a somewhat endless river of dissatisfaction with its unanimous decision that disappointment and distress damages are separate to damages for pain and suffering and may be awarded where the very object of a contract is to provide pleasure, relaxation or freedom from molestation. 

In doing so the High Court followed its decision in Baltic Shipping.1  

Background

Mr Moore, a full time high school teacher from the NSW Central Coast (the “Plaintiff”) booked a European river cruise along the Rhine and Main rivers with Scenic Tours Pty Ltd (the “Defendant”) that was said in a brochure, among other things, to be

         ...a once in a lifetime cruise along the grand waterways of Europe…immersed in all inclusive luxury…truly unforgettable… 2

The Plaintiff’s cruise was scheduled to leave Amsterdam on 3 June 2013

Prior flooding meant there were unusually high water levels at the commencement of the cruise, resulting in much of the tour being conducted by a motor coach rather than a ‘luxury’ riverboat as advertised. This change also affected 1,500 other passengers on a number of the Defendant’s other scheduled cruises. 

The Parties’ Arguments 

On the 29 July 2014 the Plaintiff commenced representative proceedings on behalf of himself and the 1,500 other affected cruise passengers under sections 157 and 158 of the Civil Procedure Act 2005 (NSW) in the Supreme Court of New South Wales. 

The Plaintiff’s Australian Consumer Law claims under the Competition and Consumer Act 2010 (Cth) (the “ACL”) were that the services supplied by the Defendant: 

  1. were supplied without due care and skill, contrary to the care guarantee in section 60 of the  ACL; 
  2. were not fit for purpose, contrary to the purpose guarantee in section 61(1) of the ACL; and 
  3. were not of a nature and quality as could reasonably be expected, contrary to the result guarantee in section 61(2) of the ACL. 

The Defendant primarily relied upon the contract between the parties alleging that its services were not required to be that of a luxury standard, but merely that it had been:

     … contracted to provide a tour at a particular time, which included a river cruise to the extent that river conditions allowed it; to provide reasonable endeavours to provide the tour booked in accordance with the itinerary and to use reasonable efforts to substitute, where required, a motor coach for a vessel, for example.3 

The Primary Judgment 

On 31 August 2017 the primary judge (Garling J) handed down his judgment in favour of the Plaintiff and the 1,500 affected cruise passengers in the representative proceeding, awarding the Plaintiff $12,990 plus interest. 

This amount represented $10,990 awarded for compensation for loss of value of the cruise and $2,000 in disappointment and distress damages under section 267(4) of the ACL for breaches of the purpose and result guarantees at points two and three above,4 and in line with the decision of the High Court in Baltic Shipping.5 

The primary judge also considered the application of section 16 of the Civil Liability Act 2002 (NSW) (the “CLA”) operating by application of section 275 of the ACL: 

  • Section 275 of the ACL applies limitation laws of a State or Territory where it is the law of the contract. 
  • Section 16 of the CLA prevents damages for non-economic loss being awarded unless such damages are at least 15% of a most extreme case – which the Plaintiff’s non-economic loss most certainly was not. 

If section 16 of the CLA applied, the Plaintiff’s (and 1,500 other passengers’) claim for disappointment and distress damages would be defeated. 

The primary judge found that as the loss suffered occurred outside NSW section 16 of the CLA did not operate to limit the Plaintiff’s claim for disappointment and distress damages. In line with Baltic Shipping the Plaintiff was entitled to these damages. 

On Appeal 

The Court of Appeal partly allowed Scenic’s appeal and on 24 October 2018 found: 

  • that the primary judge had erred in concluding that the Defendant had breached the care guarantee – as there was no duty to inform of the altered conditions prior to commencement; 
  • the Court of Appeal did however agree that the services subsequently provided were not fit for purpose and did not provide the result guaranteed. The award for $10,990 was remitted to the primary judge for re- assessment. 

More importantly, the Court of Appeal also held the primary judge erred in awarding $2,000 in disappointment and distress damages under section 267(4) of the ACL as the Court of Appeal concluded that the primary judge should have, under section 275 of the ACL, applied section 16 of the CLA to limit the damages for disappointment and distress claimed. 

The Court of Appeal considered section 16 of the CLA to apply to the Plaintiff’s claim for non-economic damages as it did not consider the geographical location of the loss to limit the application of the CLA when the applicable law of the contract was NSW law.6

Interestingly, in obiter the Court of Appeal noted that these proceedings had still not been finalised more than 5 years from the end of the scheduled cruises. During this time: 

  • the Plaintiff’s Statement of Claim was amended on several occasions; 
  • a motion was brought by the Defendant to restrain the Plaintiff’s solicitors from acting due to a rather interesting retainer agreement; and 
  • $200,000 was paid by the Plaintiff by way of security for costs by a company called ‘Humpbackpackers Pty Ltd’ of which one of the Plaintiff’s solicitors and his brother were directors.7  

The Court of Appeal also noted that on 30 January 2014 (seven months after the cruise) the Defendant had been ordered by NCAT to pay two other disappointed passengers from the very same cruise ship $11,826 in damages in a judgment five pages in length. NCAT accepted that section 16 of the CLA applied to the two passengers’ claim for compensation for ‘…stress and inconvenience…’ and it was refused.8 

Setting Sail for the High Court 

Continuing his voyage of dissatisfaction, the Plaintiff sought special leave to appeal to the High Court to press his claim for damages for disappointment and distress.

Specifically: 
      …Mr Moore submitted that his damages claim for disappointment and distress falls outside the scope of Pt 2 of the CLA because such damages are not damages that relate to personal injury. Scenic contended that disappointment and distress constitutes an impairment of his mental condition, and that therefore Mr Moore’s claim falls within the scope of Pt 2 of the CLA.9

The High Court considered sections 11 and 11A of the CLA which define ‘injury’ and the application of Part 2 of the CLA, which includes section 16. Section 11 of the CLA relevantly states: 

     …11 Definitions 

      In this Part—

      injury means personal injury and includes the following—
      …

     (b) impairment of a person’s physical or mental condition…10

Ending the flow of dissatisfaction, the High Court unanimously agreed with the Plaintiff in that: 

      …Disappointment at a breach of a promise to provide recreation, relaxation and peace of mind is not an “impairment” of the mind or a “deterioration” or “injurious lessening or weakening” of the mind…11 

     …a claim of the kind made by Mr Moore in this case stands separately and apart from a claim for damages for disappointment and distress associated with physical injury.12 

The High Court followed the decision in Baltic Shipping noting that: 

      …In Baltic Shipping, every member of the Court accepted that disappointment and distress “caused by the breach of a contract ... the object of the contract being to provide pleasure or relaxation” is a compensable head of loss separate and distinct from injured feelings compensable under the rubric of pain and suffering and loss of amenities of life associated with personal injury…13 

The High Court noted that in Baltic Shipping:

     …Mason CJ, with whom Toohey and Gaudron JJ relevantly agreed, took stock of the exceptions to the general rule that damages could not be      recovered for injured feelings caused by a breach of contract, and described one exception in favour of claims for “damages for distress, vexation and frustration where the very object of the contract has been to provide pleasure, relaxation or freedom from molestation”. That exception was identified as a category separate and distinct [from]...a claim for “damages for pain and suffering…14 

The Plaintiff’s case was:

     …readily distinguishable because Mr Moore’s disappointment and distress was not occasioned by any physical injury. Mr Moore made no claim that he had suffered any physical injury or recognised psychiatric illness by reason of his experience…15   

Accordingly, the High Court reinstated the primary judge’s order for disappointment and distress damages. 

Interestingly, the High Court whilst stating it unnecessary because of the disappointment and distress exception to consider the application of section 16 of the CLA noted that it did not see any reason why section 275 of the ACL would not “…pick up and apply State laws, like s 16 of the CLA…”16

Takeaways

Consumers may in accordance with section 267(4) of the ACL seek damages for disappointment and distress arising from a breach of consumer guarantees under sections 60 and 61 of the ACL where the primary purpose of a contract is to provide recreation and relaxation.   

Section 16 of the CLA will not assist service providers to limit these damages as they do not fall within the meaning of a ‘personal injury’ under the CLA.

Australian Competition and Consumer Commission chairman Rod Sims has said that original refund arrangements or cancellation policies must be honoured.17

The Department of Foreign Affairs and Trade’s level four ‘Do Not Travel’ ban is still in effect and in the current climate is unlikely to be lifted anytime soon. 

Tomorrow the travel insurance sector’s response to the Financial Services Royal Commission and COVID-19 will be scrutinised by Tim Wilson; whilst hanging over the entire insurance industry are the as yet unseen ramifications of unfair contract terms legislative changes which received Royal Assent back in February.   

With everything that is happening, the travel industry is unlikely to ever be the same again however, there are always opportunities for those with innovative and resilient businesses.

1 Baltic Shipping Co V Dillon (1993) 176 CLR 344.
2 Moore v Scenic Tours Pty Limited (No.2) [2017] NSWSC 733 [3]. 
3 Ibid, [47]. 
4 Ibid, [935] and [944].
5 Baltic Shipping Co V Dillon (1993) 176 CLR 344.  
6 Scenic Tours Pty Ltd v Moore [2018] NSWCA 238, [389]-[391].
7  Moore v Scenic Tours Pty Ltd [2015] NSWSC 237; Moore v Scenic Tours Pty Ltd [2015] NSWSC 1777.  
8 Harold and Aileen Childs v Scenic Tours Pty Ltd [2014] NSWCATCD 128.
9 Moore v Scenic Tours Pty Ltd [2020] HCA 17 [19]. 
10 Civil Liability Act 2002 (NSW) s 11. 
11 Moore v Scenic Tours Pty Ltd [2020] HCA 17 [41]. 
12 Ibid [57]. 
13 Ibid [43]. 
14 Ibid [44]. 
15 Ibid [55]. 
16 Ibid [38]. 
17 Matt Coughlan 2020, CTH: Travel companies warned over refund policy, Commercial Law, Competition and Trade Practices AAP 2020.

 

Michael Adie

Partner

P: 02 8257 5768

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