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14 May 2020

Door (re)opened for disappointed tour groups: High Court paves way for group member compensation

By Greg Williams, Sheena McKie and Alexandra Brien

Although awards of damages for disappointment and distress have been infrequent in Australia, this case may pave the way for further claims of this nature.

The High Court has confirmed that damages for "disappointment and distress" may be available for breaches of consumer guarantees, and are not otherwise precluded by the application of NSW Civil Liability Act in the absence of claims for personal injury. The case is the first of its kind addressing these kinds of damages under the Australian Consumer Law (Moore v Scenic Tours Pty Ltd [2020] HCA 17).

The appellant, Mr Moore, booked a holiday cruise tour with the defendant, Scenic Tours Pty Ltd, for himself and his wife. The tour was promoted in Scenic's brochure as "a once in a lifetime cruise along the grand waterways of Europe", with guests on board treated to "all inclusive luxury". However, the tour was "severely disrupted" by adverse weather conditions, resulting in a cruise of only three days, instead of ten, and involving extended periods of travel via bus.

Mr Moore commenced representative proceedings in the Supreme Court of New South Wales on his own behalf and on behalf of 1,500 other passengers of 13 Scenic cruises scheduled to depart during May and June 2013. Mr Moore alleged that Scenic failed to exercise due care and skill in supply of the tours (breaching section 60 of the Australian Consumer Law (ACL)) and the severe disruptions to the river cruises meant that those services (the holiday tours) were not fit for the purpose for which Mr Moore and each group member acquired them (breaching section 61(1) of the ACL) nor were the tours of a nature and quality as could be reasonably expected to achieve the result Mr Moore and each group member wished the services to achieve (breaching section 61(2) of the ACL).

History of the proceedings

Mr Moore and each group member claimed relief under section 267 of the ACL for breach of the consumer guarantees, including compensation for the difference between the price paid and the value of the services which were in fact provided (section 267(3), and for disappointment and distress (section 267(4). Section 267(4) provides for compensation to be paid for loss resulting from failure to comply with a consumer guarantee where it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

At first instance, Justice Garling held that Scenic had failed to comply with the consumer guarantees in sections 60, 61(1) and 61(2) of the ACL, awarding Mr Moore $10,900 in compensation for loss of value and $2,000 in damages for disappointment and distress. On appeal, the NSW Court of Appeal upheld the conclusion that Scenic failed to comply with consumer guarantees in sections 61(1) and 61(2) (although not section 60), and also set aside the award of damages for disappointment and distress. It did so on the basis that another NSW law, section 16 of Civil Liability Act 2002 (NSW) operated to preclude the award of damages for disappointment and distress. Section 16 sits within a part of the Civil Liability Act which regulates the damages which may be awarded for personal injury.

Questions for the High Court

The High Court decided that the Court of Appeal was wrong to set aside Mr Moore's award for disappointment and distress. In order to reach this decision it had to consider two critical issues:

  • whether section 275 of the ACL has the effect of applying section 16 of the Civil Liability Act 2002 (NSW) to claims for damages under the ACL. Section 275 of the ACL imports, into certain actions for failure to comply with a consumer guarantee, State or Territory law which limits or precludes liability for breaches of contract for the supply of services; and
  • if section 275 of the ACL does apply section 16 of the Civil Liability Act, whether section 16 precluded Mr Moore from recovering damages for disappointment and distress.

The High Court (Chef Justice Kiefel, and Justices Bell, Gageler, Keane, Nettle and Gordon agreeing; Justice Edelman agreeing in a separate judgment) held that, while section 275 of the ACL does pick up and apply section 16 of the Civil Liability Act, the loss suffered by Mr Moore falls outside what is covered by Part 2 of that Act. In summary:

Does section 275 of the ACL apply section 16 of the NSW Civil Liability Act?

First instance: Yes

NSW Court of Appeal: Yes

High Court: Yes

Is a claim for "disappointment and distress" a claim for damages relating to injury of a person under the Civil Liability Act?

First instance: Yes

NSW Court of Appeal: Not considered

High Court: No

Does section 16 of the Civil Liability Act apply to loss suffered outside NSW?

First instance: No

NSW Court of Appeal: Yes

High Court: Unnecessary to consider

Does section 16 of the Civil Liability Act apply to Mr Moore's claim?

First instance: No

NSW Court of Appeal: Yes

High Court: No

Award for disappointment and distress

First instance: $2,000

NSW Court of Appeal: Set aside

High Court: $2,000 reinstated

 

Does section 275 of the ACL pick up and apply section 16 of the Civil Liability Act?

The High Court concluded that the "evident purpose" of section 275, read within the context of sections 267(3) and (4) of the ACL is to "...ensure the application of State and Territory laws that limit the extent of recovery for breach of a contract otherwise governed by that law". The Court did not see any reason in the language of section 275 or the extrinsic material suggesting that the purpose of that provision was to apply State and Territory laws which limit heads of compensable damage but not those laws which regulate the quantification of damages which may be recoverable.

Do damages for disappointment and distress constitute personal injury damages for non-economic loss?

The High Court found there was force in Mr Moore's submission that "the disappointment of a contractual expectation of recreation, relaxation and freedom from molestation is not "impairment" of a person's mental condition within the meaning of "injury" in s 11; nor is it "non-economic loss" under s 3 of the CLA."

The High Court observed that Scenic's submission invited the Court to elide the distinction between:

  • loss as disappointment and distress for breach of contract to provide a pleasurable and relaxing experience; and
  • loss as disappointment and distress consequential upon personal injury,

which the Court described as "untenable" in light of the High Court's decision in Baltic Shipping Co v Dillon (1993) 176 CLR 344.

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".

The Court also cited with approval Chief Justice Spigelman's observations about personal injury in New South Wales v Ibbett (2005) 65 NSWLR 168, namely:

"The concept of 'personal injury'... has rarely, if ever, been used to refer to harm to reputation, deprivation of liberty, or to injured feelings such as outrage, humiliation, indignity and insult or to mental suffering, such as grief, anxiety and distress, not involving a recognised psychological condition."

Calling it a "correct appreciation of the effect of this Court's decision in Baltic Shipping", the Court confirmed that "this case stands separately and apart from a claim for damages for disappointment and distress associated with physical injury". No physical or psychiatric injury or impairment needs to be suffered for disappointment and distress to be recoverable.

The High Court confirmed that disappointment and distress (where there has been breach of a contract to provide pleasure or relaxation) is not "non-economic loss" under Part 2 of the Civil Liability Act (and, relevantly, section 16). This is because it is not non-economic loss associated with personal injury. Accordingly, the requirement to meet 15% of a most extreme case before awarding damages for non-economic loss did not need to be met by Mr Moore.

What does this mean for claimants and defendants?

The decision confirms that damages for disappointment and distress may be awarded in cases involving a major failure under the ACL or a breach of contract for the provision of certain types of services, provided that the disappointment and distress is not consequent on personal injury. Although awards of damages for disappointment and distress have been infrequent in Australia, this case may pave the way for further claims of this nature both in relation to services such as tours and cruises, but also potentially extending to product claims not involving personal injury.

 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.