On 24 April 2020, the High Court of Australia allowed an appeal in Moore v Scenic Tours Pty Ltd [2020] HCA 17, holding that damages for disappointment and distress for breach of contract or the consumer guarantees are not precluded by the non-economic loss provisions of Part 2 of the Civil Liability Act 2002 (NSW) (CLA).
The decision is timely and is likely to be welcomed by cruise passengers including those whose voyages were impacted by the COVID-19 pandemic – though whether any given claim is successful will depend on a number of factors, including whether the relevant service provider acted reasonably in its response.
Factual background
In 2012, the lead plaintiff Mr Moore decided to spend his life savings on a cruise aboard the Scenic Jewel. The cruise was advertised by the respondent, Scenic Tours (Scenic Tours) as a “truly unforgettable … once in a lifetime cruise along the grand waterways of Europe” on which guests would be treated to “all-inclusive luxury”.
Unfortunately for Mr Moore, the cruise was disrupted by poor weather, and was perhaps “unforgettable” for all the wrong reasons. Instead of ten days of cruising on the Scenic Jewel, Mr Moore cruised for only three days aboard a different vessel, and spent many hours travelling by bus. As a result, the holiday fell far short of what was promised by Scenic Tours.
The case was run as a class action, with Mr Moore acting as the lead plaintiff for approximately 1,500 other passengers of 13 cruises operated by Scenic Tours that had also been disrupted by poor weather, scheduled to depart between 19 May 2013 and 12 June 2013.
Relevant law
Mr Moore commenced proceedings in the Supreme Court of New South Wales on his behalf and on behalf of the other group members, alleging breaches of the consumer guarantees. The consumer guarantees regime is contained in Part 3-2, Division 1 of the ACL, which is located in Schedule 2 of the Competition and Consumer Act 2010 (Cth).
Under the ACL, consumers have a statutory right to take action against the supplier or manufacturer of goods or services (and to seek a broader range of remedies) in circumstances where the goods or services do not comply with the guarantees set out in the ACL.
Specifically, Mr Moore alleged that:
- Scenic Tours failed to exercise due care and skill in the supply of the tours, in breach of the guarantee in s 60 of the ACL;
- the severe disruptions to the cruise rendered the services unfit for purpose, in breach of the guarantee in s 61(1) of the ACL; and
- the tours were not of a nature and quality as could reasonably be expected to achieve the result that Mr Moore and the group members wished the services to achieve, in breach of the guarantee in s 61(2) of the ACL.
Section 267(4) of the ACL provides that if a supplier fails to comply with a consumer guarantee, the consumer may recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of the failure.
Key issue
Mr Moore claimed damages for disappointment and distress. He alleged that it was reasonably foreseeable that such damages would result from Scenic Tours’ failure to comply with the consumer guarantees, given that it was the very purpose of the cruise to provide enjoyment, relaxation, pleasure and entertainment. Damages for disappointment and distress were previously recognised as a compensable head of loss for breach of contract in another High Court decision involving a cruise gone awry, in Baltic Shipping Co v Dillon (a decision pre-dating the CLA).
The NSW Court of Appeal found that Scenic Tours had breached the relevant consumer guarantees in respect of Mr Moore’s cruise. That is, the cruise was not reasonably fit for purpose, was not provided with due care and skill, and was not of a nature and quality that might reasonably be expected to achieve the result that Mr Moore wished to receive (being a luxury all-inclusive cruise on the waterways of Europe for the entirety of the 15 day itinerary period).
On appeal to the High Court, Scenic Tours did not dispute this, instead arguing that Mr Moore’s claim was precluded by s 275 of the ACL, which provides that state laws limiting contractual liability such as the CLA also apply to breaches of the consumer guarantees. This argument had been (somewhat reluctantly) accepted by the Supreme Court of NSW.
Relevantly, Part 2 of the CLA precluded claims for less severe economic loss – specifically, loss that is not “at least 15% of a most extreme case”. This threshold is unlikely to be reached in the absence of physical injury or psychiatric illness, and the parties agreed that it had not been reached in this case.
The key issue for the High Court was therefore whether Part 2 the CLA did apply. If so, Mr Moore would not be entitled to damages for the disappointment and distress resulting from his failed holiday. Whether Part 2 applied in turn depended on whether Mr Moore’s damages claim for disappointment and distress constituted ‘personal injury damages’ within the meaning of Part 2.
Mr Moore submitted that his damages claim for disappointment and distress fell outside the scope of the relevant provisions of the CLA because they did not relate to personal injury. On the other hand, Scenic Tours contended that disappointment and distress constituted an impairment of Mr Moore’s mental condition, and that therefore the claim fell within the scope of the relevant provisions of the CLA.
Decision of the High Court
According to the High Court, and contrary to the submission of Scenic Tours, “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. Frustration and indignation as a reaction to a breach of contract under which the promisor undertook for reward to provide a pleasurable and relaxing holiday is, of itself, a normal, rational reaction of an unimpaired mind.”
The Court referred to its previous decision in Baltic Shipping, noting that in that case, “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 referred to the purpose of Part 2 of the CLA, being to address excessive strain on insurance schemes. The Court noted that nothing in the text of the CLA indicated that it was enacted in order to limit the liability of claims that do not involve personal injury as defined in the CLA (and therefore to abrogate the entitlement of defendants to make claims like that of Mr Moore).
Accordingly, the Court held that the disappointment and distress suffered by Mr Moore was not “non-economic loss” within the meaning of Part 2 of the CLA, and Mr Moore’s claim was therefore not precluded by the CLA and s 275 of the ACL.
Conclusion
The Court’s decision clarifies that a claim for damages for breach of contract or the consumer guarantees for disappointment and distress which is not consequent upon physical or psychiatric injury, but which instead flows directly from a breach of a contract to provide pleasure, relaxation and freedom from molestation, is not a claim in respect of non‑economic loss relating to personal injury within the scope of Part 2 of the CLA.
This is contrary to the decision of Barr AJ in Flight Centre Ltd v Louw [2011] NSWSC 132 (and subsequent decisions applying that case), which had rendered the common law restrictions on contractual damages for non-pecuniary loss largely irrelevant, thereby making it very difficult for unhappy holidaymakers to seek a remedy which accounted for their shattered expectations. This might be considered a ferry-tale ending for Australian holidaymakers, who can now rest assured that they will no longer be without redress in such circumstances.
Image: Wikimedia Commons – U.Gomez / CreativeCommons ShareAlike 4.0 / remixed to B&W and resized
