A not so luxury cruise: when do distress and disappointment constitute personal injury?
Originally Published by Richard Johnson on Friday, May 1, 2020 9:04:15 AM
On 24 April 2020 the High Court handed down a decision addressing whether a claim for "disappointment and distress" arising from a breach of statutory guarantees in supplying services is a claim for personal injury damages. The decision also addresses the interaction between the consumer guarantees set out in the Australian Consumer Law (ACL) and Part 2 of the Civil Liability Act 2002 (NSW) (CLA).
Author: Richard Johnson
Judgment date: 24 April 2020
Citation: Moore v Scenic Tours Pty Ltd [2020] HCA 17
Jurisdiction: High Court of Australia
In 2012 David Moore booked a holiday for himself and his wife with Scenic Tours Pty Ltd (Scenic). The holiday included a river cruise starting in Amsterdam on 3 June 2013 and travelling along the Rhine, Main and Danube Rivers, ending in Budapest. Scenic promised "a once in a lifetime cruise along the grand waterways of Europe".
The cruise was far from what Moore and his wife expected.2 Due to extensive rainfall, the water levels of the rivers were too high, so they spent on 3 of 10 days cruising, in some cases on a lesser standard ship, and the remainder of the holiday travelling by road coach between docked cruise ships.
Moore and his wife were not the only customers of Scenic to suffer this experience; Scenic operated 13 cruises departing between 19 May 2013 and 12 June 2013, each being impacted by the weather to various degrees.
Moore, as the lead plaintiff in a class action relating to the 13 cruises, sued Scenic alleging breaches of the consumer guarantees in sections 60 and 61 of the ACL3 relating to the exercise of due care and skill (Care Guarantee), and the provision of services that are fit for purpose (Purpose Guarantee) or achieve a particular result (Result Guarantee).
In respect of each cruise, it was alleged that Scenic's failure arose because it knew or ought to have known about the adverse weather conditions and cancelled or rescheduled the cruise.
In respect of the alleged breaches Moore claimed:
At trial Garling J held that Scenic breached the Care Guarantee in relation to 10 cruises, and the Purpose and Result Guarantees in relation a different combination of 10 of the 13 cruises.
His Honour awarded compensation under subsection 267(3) equivalent to the total cost of Moore's trip plus interest, and damages under subsection 267(4) in the sum of $2,000 for distress and disappointment. However, in doing so he felt bound to follow a line of New South Wales Supreme Court authorities holding that such damages were personal injury damages and, by operation of section 275 of the ACL, subject to the limitations imposed on awards of non-economic loss by Part 2 of the CLA.
However, he held that Part 2 of the CLA had no extra-territorial application, and did not apply given the services were provided to Moore outside New South Wales.
Scenic appealed the trial judge's decision.4 Most of the trial judge's findings were in issue before the New South Wales Court of Appeal.
Importantly for present purposes, the Court of Appeal5 held that Part 2 of the CLA had extra-territorial application in this case and restricted the application of subsection 267(4) of the ACL. Accordingly, it held the claim for disappointment and distress was a claim for personal injury damages, the effect being that disappointment and distress were not recognised psychiatric conditions to justify an award of non-economic loss damages under section 16 of the CLA.
The High Court was asked to consider whether Part 2 of the CLA was "picked up" as a law of the Commonwealth by section 275 of the ACL so as to limit an award of damages under subsection 267(4) of the ACL.
Critically, the High Court rejected the reasoning of both the trial judge and the Court of Appeal. The majority6 held that while section 275 of the ACL will "pick up" section 16 of the CLA and apply it to an award of non-economic loss damages, it did not apply in this case.
Instead the majority drew the distinction between damages for distress and disappointment flowing from a breach of an agreement promising enjoyment or relaxation on the one hand,7 and damages for "pain and suffering, including mental anguish and anxiety"8 flowing from a breach of contract causing physical injury.9 In doing so the majority held the decisions of the New South Wales Supreme Court the trial judge felt bound to follow had been decided incorrectly.10
Accordingly, Moore was entitled to damages under subsection 267(4) of the ACL for disappointment and distress caused by the breach of contract, because his cause of action did not arise out of personal injury, and Part 2 of the CLA did not operate to limit his entitlement to those damages.
In a separate judgment, Edelman J (who agreed with the majority) has provided a useful commentary on the distinction between subsections 267(3) and (4) of the ACL, and that both types of damages are recoverable in any given case: subsection (3) provides compensation for loss in value, whereas subsection (4) provides damages for true consequential losses arising from breach of the guarantee, including non-economic losses. Both heads of damage are available for breach of contract, and for breach of statutory guarantee.
The High Court has now confirmed its decision in Baltic Shipping v Dillon and reinforced that damages are available for breach of contract or statutory guarantee for distress and disappointment where not consequent upon physical injury. This is a distinct head of damage to non-economic loss damages recoverable for mental anguish or anxiety that flow from a breach of contract or statutory guarantee connected with personal injury.
Where there is a connection with personal injury, section 275 of the ACL operates to apply the relevant state or territory civil liability regime the subject of the contract, including procedural requirements and limitations applying with respect to damages for personal injury. This is important as the limitations on personal injury damages contained within Part 6B of the CCA do not extend to claims arising from a breach of the consumer guarantees in Part 3-2 of the ACL.
Underwriters should consider whether to include coverage for damages for distress and disappointment not consequent upon injury within the scope of liability policies that generally provide coverage for personal injury and property damage only.
1 (1993) 176 CLR 344.
2 A detailed description of their experience and subsequent interaction with Scenic is set out in the first instance trial judgment: Moore v Scenic Tours Pty Ltd (No. 2) [2017] NSWSC 733 at [87] to [134].
3 Competition and Consumer Act 2010 (Cth), Schedule 2.
4 Scenic Tours Pty Ltd v Moore [2018] NSWCA 238.
5 Payne JA, Sackville and Barrett AJJA.
6 Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ.
7 [2020] HCA 17 at [46] referring to Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 365.
8 [2020] HCA 17 at [55] quoting Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 362 per Mason CJ.
9 For example, Insight Vacations Pty Ltd v Young (2010) 78 NSWLR 641.
10 [2020] HCA 17 at [48] referring to Flight Centre v Louw [2011] NSWSC 132 and Tralee Technology Holdings Pty Ltd v Yun Chen [2015] NSWSC 1259.
Author: Richard Johnson
Judgment date: 24 April 2020
Citation: Moore v Scenic Tours Pty Ltd [2020] HCA 17
Jurisdiction: High Court of Australia
Principles
- A claim for damages for "disappointment and distress" is not a claim for "personal injury damages" when it arises from a breach of contract or statutory guarantee not consequent upon injury. This reinforces the Court's judgment in Baltic Shipping v Dillon,1 which held such damages constitute a separate head of claim, particularly where the breach relates to a promise to provide enjoyment and relaxation.
- Such claims are not subject to the restrictions on personal injury damages created by Part 2 of the CLA.
- Section 275 of the ACL operates to apply the law of a state or territory restricting or precluding liability, or restricting recovery of damages where there has been a breach of a statutory guarantee contained in section 60 or 61 of the ACL.
- In a claim for personal injury where the law of New South Wales applies to a breach of section 60 or 61 of the ACL, section 275 of the ACL "picks up" Part 2 of the CLA.
- The same principle applies with respect to restrictions on personal injury claims in the civil liability legislation of each state and territory, when the law of a state or territory is the law of the relevant contract.
- The application of state and territory civil liability laws to personal injury claims arising from a breach of the statutory guarantees relating to the supply of services is important given the limitations on personal injury damages in the Competition and Consumer Act 2010 (Cth) (CCA) do not apply to claims arising from the breach of those statutory guarantees.
Background
In 2012 David Moore booked a holiday for himself and his wife with Scenic Tours Pty Ltd (Scenic). The holiday included a river cruise starting in Amsterdam on 3 June 2013 and travelling along the Rhine, Main and Danube Rivers, ending in Budapest. Scenic promised "a once in a lifetime cruise along the grand waterways of Europe".
The cruise was far from what Moore and his wife expected.2 Due to extensive rainfall, the water levels of the rivers were too high, so they spent on 3 of 10 days cruising, in some cases on a lesser standard ship, and the remainder of the holiday travelling by road coach between docked cruise ships.
Moore and his wife were not the only customers of Scenic to suffer this experience; Scenic operated 13 cruises departing between 19 May 2013 and 12 June 2013, each being impacted by the weather to various degrees.
Moore, as the lead plaintiff in a class action relating to the 13 cruises, sued Scenic alleging breaches of the consumer guarantees in sections 60 and 61 of the ACL3 relating to the exercise of due care and skill (Care Guarantee), and the provision of services that are fit for purpose (Purpose Guarantee) or achieve a particular result (Result Guarantee).
In respect of each cruise, it was alleged that Scenic's failure arose because it knew or ought to have known about the adverse weather conditions and cancelled or rescheduled the cruise.
In respect of the alleged breaches Moore claimed:
- compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services pursuant to subsection 267(3) of the ACL; and
- damages for loss or damage suffered because of the failure to comply with the guarantee if it was reasonably foreseeable such loss or damage would be suffered as a result of such a failure pursuant to subsection 267(4) of the ACL.
Litigation history
At trial Garling J held that Scenic breached the Care Guarantee in relation to 10 cruises, and the Purpose and Result Guarantees in relation a different combination of 10 of the 13 cruises.
His Honour awarded compensation under subsection 267(3) equivalent to the total cost of Moore's trip plus interest, and damages under subsection 267(4) in the sum of $2,000 for distress and disappointment. However, in doing so he felt bound to follow a line of New South Wales Supreme Court authorities holding that such damages were personal injury damages and, by operation of section 275 of the ACL, subject to the limitations imposed on awards of non-economic loss by Part 2 of the CLA.
However, he held that Part 2 of the CLA had no extra-territorial application, and did not apply given the services were provided to Moore outside New South Wales.
Scenic appealed the trial judge's decision.4 Most of the trial judge's findings were in issue before the New South Wales Court of Appeal.
Importantly for present purposes, the Court of Appeal5 held that Part 2 of the CLA had extra-territorial application in this case and restricted the application of subsection 267(4) of the ACL. Accordingly, it held the claim for disappointment and distress was a claim for personal injury damages, the effect being that disappointment and distress were not recognised psychiatric conditions to justify an award of non-economic loss damages under section 16 of the CLA.
Decision
The High Court was asked to consider whether Part 2 of the CLA was "picked up" as a law of the Commonwealth by section 275 of the ACL so as to limit an award of damages under subsection 267(4) of the ACL.
Critically, the High Court rejected the reasoning of both the trial judge and the Court of Appeal. The majority6 held that while section 275 of the ACL will "pick up" section 16 of the CLA and apply it to an award of non-economic loss damages, it did not apply in this case.
Instead the majority drew the distinction between damages for distress and disappointment flowing from a breach of an agreement promising enjoyment or relaxation on the one hand,7 and damages for "pain and suffering, including mental anguish and anxiety"8 flowing from a breach of contract causing physical injury.9 In doing so the majority held the decisions of the New South Wales Supreme Court the trial judge felt bound to follow had been decided incorrectly.10
Accordingly, Moore was entitled to damages under subsection 267(4) of the ACL for disappointment and distress caused by the breach of contract, because his cause of action did not arise out of personal injury, and Part 2 of the CLA did not operate to limit his entitlement to those damages.
In a separate judgment, Edelman J (who agreed with the majority) has provided a useful commentary on the distinction between subsections 267(3) and (4) of the ACL, and that both types of damages are recoverable in any given case: subsection (3) provides compensation for loss in value, whereas subsection (4) provides damages for true consequential losses arising from breach of the guarantee, including non-economic losses. Both heads of damage are available for breach of contract, and for breach of statutory guarantee.
Why this case is important
The High Court has now confirmed its decision in Baltic Shipping v Dillon and reinforced that damages are available for breach of contract or statutory guarantee for distress and disappointment where not consequent upon physical injury. This is a distinct head of damage to non-economic loss damages recoverable for mental anguish or anxiety that flow from a breach of contract or statutory guarantee connected with personal injury.
Where there is a connection with personal injury, section 275 of the ACL operates to apply the relevant state or territory civil liability regime the subject of the contract, including procedural requirements and limitations applying with respect to damages for personal injury. This is important as the limitations on personal injury damages contained within Part 6B of the CCA do not extend to claims arising from a breach of the consumer guarantees in Part 3-2 of the ACL.
Underwriters should consider whether to include coverage for damages for distress and disappointment not consequent upon injury within the scope of liability policies that generally provide coverage for personal injury and property damage only.
1 (1993) 176 CLR 344.
2 A detailed description of their experience and subsequent interaction with Scenic is set out in the first instance trial judgment: Moore v Scenic Tours Pty Ltd (No. 2) [2017] NSWSC 733 at [87] to [134].
3 Competition and Consumer Act 2010 (Cth), Schedule 2.
4 Scenic Tours Pty Ltd v Moore [2018] NSWCA 238.
5 Payne JA, Sackville and Barrett AJJA.
6 Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ.
7 [2020] HCA 17 at [46] referring to Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 365.
8 [2020] HCA 17 at [55] quoting Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 362 per Mason CJ.
9 For example, Insight Vacations Pty Ltd v Young (2010) 78 NSWLR 641.
10 [2020] HCA 17 at [48] referring to Flight Centre v Louw [2011] NSWSC 132 and Tralee Technology Holdings Pty Ltd v Yun Chen [2015] NSWSC 1259.