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High Court delivers important decision for the Tourism Industry

  • Market Insight 28 April 2020 28 April 2020
  • Asia Pacific

  • Marine

On 24 April 2020, the High Court allowed the appeal in Moore v Scenic Tours Pty Ltd [2020] HCA 17. The Court confirmed that damages for "disappointment and distress" are available to consumers for a breach of consumer guarantees for travel and recreational contracts, overturning the decision of the NSW Court of Appeal.

The decision will have flow-on effects for those that operate in the tourism industry.  It highlights the importance of reviewing the accuracy of advertising materials, not overstating what is offered and pointing out to consumers any limitations or changes to the service that may apply, due to changed circumstances.

Background

The plaintiff, Mr David Moore, booked a holiday tour through Scenic Tours. The trip was a river cruise in Europe through the Rhone, Main and Danube rivers. Scenic Tours promoted the trip as "a once in a lifetime cruise" and that passengers would be treated to "all-inclusive luxury". Mr Moore specifically chose the trip as, following spinal surgery, he had difficulty sitting down for long periods and carrying his luggage. The cruise would allow him to walk around and he would not have to unpack his belongings more than once. Unfortunately for Mr Moore, adverse weather on the trip significantly affected how the cruise proceeded. Most of the journey was instead taken by bus and even when travelling by ship, the passengers had to change vessel twice. Mr Moore felt the holiday fell well short of the promises made by Scenic Tours.

A class action was commenced by approximately 1500 passengers of the 13 cruises offered by Scenic Tours that were scheduled at the same time as Mr Moore, with Mr Moore taking the position as lead plaintiff. Mr Moore claimed that Scenic Tours had failed to exercise due care and skill in the supply of the tours and were in breach of consumer guarantees under the Australian Consumer Laws (ACL) specifically:

  1. The tours were unfit for the purpose for which the passengers had acquired them, in breach of s61(1) of the ACL
  2. The tours were not of a nature or quality as could reasonably be expected to achieve the result that the passengers wished the service to achieve, in breach of s61(2) of the ACL

Proceedings at Trial and Appeal

The trial judge accepted that Scenic Tours had failed to comply with the consumer guarantees and awarded Mr Moore $10,990 in compensation for loss of value and $2,000 for damages in disappointment and distress.

Scenic Tours appealed to the Court of Appeal. The Court of Appeal agreed with the primary judge that Scenic Tours had breached its obligations under the ACL, but determined that Mr Moore was not entitled to damages for disappointment and distress. This was because the Civil Liability Act 2002 (NSW) (CLA) precluded damages for non-economic loss in personal injury cases unless the loss was at least 15% of the most extreme case (for example a paraplegic). The Court of Appeal determined that the State CLA was picked up and applied by the Federal ACL. The Court of Appeal concluded that because Mr Moore's loss was not at least 15% of the extreme case, he was not entitled to damages for disappointment and distress.

The Court of Appeal concluded that because Mr Moore's loss was not at least 15% of the extreme case, he was not entitled to damages for disappointment and distress.

Appeal to the High Court

Mr Moore was granted leave to appeal to the High Court on the issue of his entitlement to damages for disappointment and distress.

Mr Moore made three challenges to the Court of Appeal's decision:

  1. The ACL did not pick and apply the restrictions in the CLA;
  2. Damages for disappointment and distress do not constitute personal injury damages for non-economic loss and therefore the restrictions in the CLA did not apply;
  3. The CLA has a geographic restriction and therefore did not apply because the damage occurred outside of NSW.

Mr Moore argued that compensation for disappointment and distress did not relate to personal injury but was a normal and healthy response to a breach of a contractual promise to provide recreation, relaxation and freedom from molestation.

Scenic Tours responded that Mr Moore's disappointment and distress was an "injury" because it was an impairment of his mental condition and that a person's mental condition is impaired when expectations of pleasure, entertainment or relaxation in holiday cases are unfulfilled or dashed. Alternatively, Scenic Tours claimed that disappointment and distress constitutes "pain and suffering” or "loss of amenities of life" within the definition of "non-economic loss" in the CLA.

High Court Decision

In a unanimous decision (Kiefel CJ, Bell Gageler, Keane Nettle and Gordon; Edelman J concurring) the High Court accepted Mr Moore's second submission and determined that damages for disappointment and distress do not constitute personal injury damages for non-economic loss and therefore the restrictions in the CLA did not apply.

The High Court agreed that frustration and indignation as a reaction to a breach of contract under which the promisor undertook to provide a pleasurable and relaxing holiday is the normal and rational reaction of an unimpaired mind and was therefore not a claim for personal injury.

The Court determined that damages for "non-economic loss" under the CLA are restricted to heads of loss for personal injuries; "pain and suffering" refers to actual physical hurt occasioned by an accident or its aftermath, damages for "emotional harm" require a diagnosed psychiatric injury and, "loss of amenities of life" requires a comparison between the ability to enjoy life before and after the claimed injury. In the present case, no physical or psychiatric injury was alleged to have resulted from the breaches of the ACL.

The Court confirmed that damages for disappointment and distress caused by the breach of contract if the object of the contract is to provide pleasure, as previously confirmed by the High Court in Baltic Shipping v Dillon (1993) 176 CLR 344, remains the law of Australia and had not been restricted by subsequent tort law reforms as encapsulated in the CLA.

In confirming the Baltic Shipping principle, the High Court distinguished the more recent NSW line of authority of Insight Vacations Pty Ltd v Young (2010) 78 NSWLR 1259. In Insight Vacation the plaintiff claimed disappointment and distress damages as a direct result of physical injuries suffered on a European holiday tour, and that because of her injuries, she could not enjoy her holiday. The Court distinguished Mr Moore's case on the basis that there was no claim he had suffered any physical injury or psychiatric illness because of his experience and that damages of the kind in Baltic Shipping (and the present case) stand separate and apart from a claim for damages for disappointment and distress associated with physical injury.

Interestingly the High Court decided not to consider the issue of whether the CLA has any geographic limitations when damage was suffered outside of NSW.

Analysis

Although the quantum of Mr Moore's entitlement to damages for disappointment and distress was only $2,000, multiplied across the whole representative proceedings, such a modest amount could have represented an addition $3 million in damages. The case reinforces Australia's strong consumer protection laws, the need  for tourism operators to comply with consumer guarantees, and the importance of keeping consumers aware of problems that may arise to allow them to make alternative arrangements if they wished. An important element of the case were the promises made in Scenic Tour's brochure of a luxurious, once in a lifetime holiday. In light of this decision, operators should carefully review advertising material.

Should you wish to discuss this case and the effect it may have on the cruise or tourism industry, please contact Clyde & Co's partners Ernest van Buuren or Maurice Thompson.

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