Interaction between the ACL and CLA (NSW) for personal injury damages

Jul 2020 |

Introduction

It is not uncommon in injury claims to plead alternative claims under the Civil Liability Act 2002 (NSW) (CLA) and breaches of the consumer guarantees under the Australian Consumer Law (ACL). Section 275 of the ACL limits liability where there is a failure to comply with a guarantee and a state or territory law is the proper law of the contract, and that state or territory law limits or precludes liability and recovery of that liability (if any).

Whilst the CLA explicitly contains a statutory threshold for non-economic loss damages, a question always remained as to whether the statutory threshold applied to the ACL remedies. The High Court’s decision of Moore v Scenic Tours Pty Ltd1 has made it clear that:

  • section 275 of the ACL picks up and applies pt 2 of the CLA and in particular s 16, introducing the statutory threshold to non-economic loss claims arising from personal injury; and
  • damages for disappointment and distress which are otherwise not associated with physical or psychiatric injury do not fall under pt 2 of the CLA and is a separate and distinct compensable head of damage.

The facts

In 2013, Mr Moore booked a luxury European river cruise with Scenic Tours Pty Ltd (Scenic). The cruise was to depart from Amsterdam on 3 June 2013 and arrive in Budapest on 17 June 2013. Mr Moore’s cruise (Cruise 8) was seriously affected by high water levels on the Rhine and Maine Rivers. As a consequence, passengers on Cruise 8 experienced substantial disruptions to their itinerary.

Mr Moore commenced representative proceedings on behalf of himself and persons who booked and paid for river cruises with Scenic (Group Members). Mr Moore and the group members submitted that Scenic supplied services:

  • without due care and skill in contravention of s 60 of the ACL;
  • that were not fit for the purpose for which Mr Moore and the group members acquired them, in contravention of s 61(1) of the ACL; and
  • that were not of a nature and quality as could be reasonably expected to achieve the result which Mr Moore and the group members wished the services to achieve, in contravention of s 61(2) of the ACL,

(collectively referred to as the Consumer Guarantees).

At first instance, the trial judge held that s 275 of the ACL picks up and applies the CLA as a surrogate federal law, but because s 16 of the CLA has no extra‑territorial operation, the CLA had no part to play for non-economic loss sustained outside Australia.

The trial judge also found that the ACL applied to the CLA because the ‘distress’ and ‘disappointment’ experienced by Mr Moore constituted non-economic loss for the purposes of s 3 of the CLA, being pain and suffering. It was suggested that the ‘distress’ and ‘disappointment’ amounted to  ‘Impairment of a person’s… mental condition’ and was therefore an award for personal injury pursuant to s 11 of the CLA and that once so defined, the provisions of s 16 would apply.

The trial judge concluded that Scenic had breached the Consumer Guarantees and awarded Mr Moore $2,000 pursuant to s 267(4) of the ACL.

In doing so, the trial judge rejected Scenic’s argument that the Court was precluded from awarding any damages to Mr Moore because s 16 of the CLA precludes an award of damages for non-economic loss ‘unless the severity of non-economic loss is at least 15% of a most extreme case’.

NSW Court of Appeal

On appeal, the Court was asked to determine whether s 16 of the CLA, on its proper construction, applied to limit or preclude Scenic’s contractual liability for non-economic loss arising from a breach of a contract which occurred outside Australia.

The Court agreed with the trial judge that s 275 of the ACL picks up and applies the CLA as a surrogate federal law to limit Scenic’s liability under the ACL but disagreed that s 16 had no application to loss sustained outside of New South Wales. The Court noted that the proper law of the contract determines the relief to which the plaintiff is entitled.

The Court set aside the damages awarded to Mr Moore for disappointment and distress under s 267(4) of the ACL.

High Court’s decision

Mr Moore appealed to the High Court. The High Court was asked to determine the following issues:

  1. Whether s 16 of the CLA does not apply as a surrogate federal law because s 275 of the ACL does not pick up and apply those state or territory laws that affect the assessment of compensation for loss suffered. 
  2. Whether loss consisting of disappointment and distress for breach of a contractual obligation to provide a pleasant and relaxed vacation is not precluded by the provisions of pt 2 of the CLA because those provisions are concerned exclusively with claims for damages for personal injury. Mr Moore submitted that his claim for the disappointment of his expectation of a pleasant and relaxed vacation was not a claim for personal injury.
  3. Whether s 16 of the CLA has no application where the loss for which damages are claimed is suffered outside of New South Wales. 

Issue 1

Mr Moore contended that s 275 of the ACL applies to state and territory laws that limit or preclude liability – not to state or territory laws that limit the assessment of damages after liability had been established, and that s 16 of the CLA is one such state law concerned with limiting the assessment of damages. The High Court considered the distinction ‘difficult to appreciate as it was for Mr Moore’s counsel to articulate’ and inconsistent with the natural reading of s 275, which the High Court considered limited both liability and recovery.

The High Court noted that ss 267(3) and 267(4) of the ACL supports the ordinary meaning it ascribed to s 275, noting that those subsections plainly contemplate the quantification of an amount that may be recovered by way of satisfaction of the defendant's liability.

Ultimately, the High Court rejected Mr Moore’s argument, finding that the ordinary meaning of s 275 permits a state or territory law to limit or preclude both liability and recovery of compensation by way of damages for that liability if the state or territory law has that effect in relation to other contracts governed by the law of that state or territory.

Issue 2

Scenic argued that Mr Moore’s claim for disappointment and distress is an ‘injury’ for the purposes of pt 2 of the CLA because it is an impairment to his mental condition. Scenic also argued that disappointment and distress constitutes ‘pain and suffering’ or ‘loss of amenities of life’ within the definition of non-economic loss in s 3 of the CLA.

Mr Moore argued that his claim for disappointment and distress for breach of contract falls outside the non-economic loss envisaged under pt 2 of the CLA because the damages he claimed for his disappointment and distress did not relate to personal injury, such disappointment and distress being a healthy response rather than an impairment of a persons mental condition.

The High Court accepted Mr Moore’s argument. The High Court acknowledged that Mr Moore did not allege he suffered any physical or psychiatric illness as a result of the breaches of the consumer guarantees. In so doing, the High Court reached a different view to that of the trial judge who considered himself bound by authority in Flight Centre Ltd v Louw2 to find that damages for disappointment and distress are caught by pt 2 of the CLA.  

The High Court considered the decision of Flight Centre was analogous to Mr Moore’s claim in that the plaintiff in Flight Centre claimed damages for inconvenience, distress and disappointment, which was not predicated on any alleged physical or psychiatric injury. However, the High Court held that Flight Centre was incorrectly decided. It referred to the decisions of Insight Vacations Pty Ltd v Young3, New South Wales v Ibbett4 and New South Wales v Corby5 referred to by the Appeal Court in Flight Centre and held that: 

  • the court in Flight Centre was incorrect to suggest that Ibbett and Corby are authority that a claim for damages for breach of contract for disappointment and distress which is not consequent upon physical or psychiatric injury, is a claim in respect of non-economic loss relating to personal injury within the scope of pt 2 of the CLA; and
  • Insight Vacation was distinguishable because in that case the damages claimed for disappointment and distress suffered by the plaintiff were directly occasioned by her physical injury suffered during the course of a European tour purchased from the defendant.

The High Court held that Mr Moore’s position was supported by the High Court’s earlier decision in Baltic Shipping Co v Dillon6. In Baltic Shipping the High Court was unanimous in its finding that disappointment and distress ‘caused by the breach of a contract … the object of the contract being to provide pleasure or relaxation’ is an independent and distinct head of damage from injured feelings compensable due to pain and suffering and loss of amenities of life associated with personal injury under pt 2 of the CLA.

The High Court held that pt 2 of the CLA is concerned with damages for personal injury and that Mr Moore’s claim for disappointment and distress unrelated to any personal injury is not non-economic loss under pt 2 of the CLA. Accordingly, only where a claim for breach of contract or breach of Consumer Guarantees involves damages ‘consequential upon personal injury’ do, the CLA’s statutory threshold on non-economic loss damages apply.

Issue 3

The High Court considered it unnecessary to rule upon this argument.

Conclusion

The High Court’s decision helpfully clarifies the interaction between the CLA and the ACL. Insurers may now confidently apply the thresholds in s 16 of the CLA in relation to remedies sought under the ACL, where such remedies are a consequence of personal injury. However where there is no link between the disappointment and distress and the personal injury, the damages will be determined according to the common law.

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1 (2020) 377 ALR 209.
2 (2010) 78 NSWLR 656.
3 (2010) 78 NSWLR 641.
4 (2005) 65 NSWLR 168
5 (2010) 76 NSWLR 439.
6 (1993) 176 CLR 34.
 
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