The High Court of Australia unanimously allowed an appeal from the New South Wales Court of Appeal, holding that damages for disappointment and distress for breach of a holiday cruise tour contract were not precluded as damages for “personal injury” by s 16(1) of the Civil Liability Act 2002 (NSW) (‘CLA’).
Mr Moore and his wife booked a cruise of grand waterways of Europe with Scenic Tours Pty Ltd (‘Scenic’). The cruise was to be on a luxury ship called the Scenic Jewel, and suited the Moores because Mr Moore had undergone spinal surgery and needed to spend significant time sitting down. He chose this tour because he did not want to have to keep packing and unpacking. He gave evidence that he booked the tour 12 months in advance, and used his ‘life’s savings’ to pay for it. The tour commenced in Paris on 31 May 2013, but the river cruise portion along the Rhine, Main and Danube Rivers was scheduled to depart from Amsterdam on 3 June 2013, and to conclude two weeks later in Budapest. However, the Rhine and Main rivers flooded, and the Moores only had three days of cruising. They spent ten days on a bus, and had to change ship at least twice. The cruise fell far short of the Moores’ expectations.
The Moores were lead plaintiffs in representative proceedings for approximately 1,500 disappointed plaintiffs who had booked cruises with Scenic that had been scheduled to depart between 19 May 2013 and 12 June 2013, and had been affected by flooding.
Section 60 of the Australian Consumer Law (‘ACL’) provides a consumer guarantee that services will be rendered with due care and skill:
If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.
Section 61 of the ACL provides a consumer guarantee that services will be fit for purpose:
(a) a person (the supplier ) supplies, in trade or commerce, services to a consumer; and
(b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer;
there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.
(a) a person (the supplier ) supplies, in trade or commerce, services to a consumer; and
(b) the consumer makes known, expressly or by implication, to:
(i) the supplier; or
(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made;
the result that the consumer wishes the services to achieve;
there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.
(3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier.
(4) This section does not apply to a supply of services of a professional nature by a qualified architect or engineer.
Section 276 of the ACL provides that the consumer guarantees cannot be contracted out of, and contractual terms cannot be used to limit liability for breach of consumer guarantees. However, s 275 of the ACL holds that if a law of a State or Territory is a proper law of the contract, it may limit liability for breach of consumer guarantees.
Mr Moore claimed two species of damages outlined in s 267 of the ACL:
- Difference in value between the price he paid for the tour and the actual value of the tour, pursuant to s 267(3); and
- Damages for disappointment and distress, pursuant to s 267(4), as loss or damages which was reasonably foreseeable as likely to result from the breach.
The first kind of damages were no longer in issue before the HIgh Court. However, Scenic argued that the second species of damages for disappointment and distress constituted damages for ‘personal injury’ within the meaning of Part 2 of the CLA, and that consequently, s 16(1) of the CLA precluded recovery because the non-economic loss in question was not 15% of the most severe case. It argued that s 16(1) of the CLA was picked up as a limitation on the Moores’ recovery by s 275 of the ACL.
The trial judge found that Scenic had breached the consumer guarantees contained in ss 60 and 61 of the ACL, and that the Moores were entitled to $10,990 in damages for difference in value pursuant to s 267(3) of the ACL, and $2,000 for disappointment and distress pursuant to s 267(4) of the ACL, plus interest. He held that s 16(1) of the CLA was picked up by s 275 of the ACL, and that to his surprise, it limited recovery, but that it only applied in New South Wales, and not to losses suffered outside New South Wales.
On appeal, the New South Wales Court of Appeal overturned the trial judge’s decision, and held that s 16(1) was not geographically limited to losses suffered in New South Wales, as long as the loss sued for was sought in a court in New South Wales.
Mr Moore appealed to the High Court of Australia on three bases:
- That s 275 of the ACL did not pick up and apply s 16(1) of the CLA;
- That damages for disappointment and distress arising from a ruined holiday were not damages for “personal injury” within the meaning of s 16(1) CLA; and
- That s 16(1) did not apply to losses occurring outside New South Wales.
The High Court rejected the proposition that s 275 of the ACL did not pick up and apply s 16(1) of the CLA, but they allowed the appeal on the basis that damages for disappointment and distress arising from a ruined holiday were not damages for “personal injury”. Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ delivered a joint judgment (‘the plurality’), and Edelman J delivered a separate judgment.
Did s 275 of the ACL pick up and apply s 16(1) of the CLA?
Section 275 of the ACL reads as follows:
(a) there is a failure to comply with a guarantee that applies to a supply of services under Subdivision B of Division 1 of Part 3-2; and
(b) the law of a State or a Territory is the proper law of the contract;
that law applies to limit or preclude liability for the failure, and recovery of that liability (if any), in the same way as it applies to limit or preclude liability, and recovery of any liability, for a breach of a term of the contract for the supply of the service.
At  – , the plurality rejected Mr Moore’s argument that s 275 applied only to liability, and that s 16(1) of the CLA applied only to the calculation of damages once liability had been established. In particular they referred to the fact that the section includes a reference to ‘recovery of any liability’ which seems to encompass calculation of damages. Moreover, there was nothing in the text or legislative history of the section which meant it should be limited in the fashion suggested. Consequently, s 16(1) of the CLA was picked up and applies as a limitation upon damages pursuant to s 275 of the ACL.
Did damages for disappointment and distress for breach of contract constitute personal injury damages for non-economic loss?
The plurality, with whom Edelman J agreed at , said at :
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. In this regard, Mr Moore’s claim for damages for his disappointment and distress resulting from Scenic’s breach of contract can be seen as no more a claim relating to personal injury than would be a claim for damages for the indignation occasioned by false imprisonment or defamation.
They rejected the argument that damages for disappointment and distress were a form of personal injury damages for non-economic loss which fell under the purview of s 16(1) of CLA. First, at  – , the plurality referred to the High Court’s decision in Baltic Shipping Co v Dillon  HCA 4, another case in which a disastrous cruise resulted in an award of damages for disappointment and distress for breach of contract. It was observed that the Court in Dillon accepted that where the object of a contract was to provide pleasure or relaxation, damages for disappointment and distress were 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 said the kind of damages outlined in Dillon were not “non-economic loss” for the purposes of Pt 2 of the CLA, and that “non-economic loss” in that Part was to be understood as damages for pain and suffering associated with physical injury or psychiatric injury (at ). Mr Moore was not psychiatrically injured: his loss was disappointment arising from a disastrous holiday.
In making this assessment, the plurality noted at  –  that there had been suggestions in some New South Wales case law that damages for disappointment and distress associated with a disastrous holiday were damages for personal injury in Flight Centre Ltd v Louw  NSWSC 132 and Tralee Technology Holdings Pty Ltd v Yun Chen  NSWSC 1259. The High Court said that these cases were incorrect, insofar as they suggested that disappointment and distress constitute an “impairment” of a person’s mental condition under s 11 of the CLA. New South Wales v Ibbett  NSWCA 445 and New South Wales v Corby  NSWCA 27 were entirely distinguishable cases because they involved the question whether apprehension of physical injury encompassed personal injury, not the breach of a holiday contract. Insight Vacations Pty Ltd v Young  NSWCA 137 was a breach of a holiday contract case where the plaintiff’s disappointment arose directly from the plaintiff’s physical injury. Although leave to appeal to the High Court in Insight Vacations had not been granted, this should not be taken to be approval of any reasoning in that case that disappointment and distress for breach of contract was a form of personal injury.
Edelman J’s additional reasoning on why Part 2 of the CLA did not encompass expectation damages for breach of contract
Edelman J agreed with the plurality’s conclusions at , but also added further observations in support of the conclusion that damages for distress and disappointment for breach of contract were not encompassed by Part 2 of the CLA.
Edelman J said at  that damages pursuant to s 267 of the ACL had two components, namely: “compensation directly for the performance interest and compensation for consequential losses. The two components are provided for separately in s 267(3) and s 267(4) of the Australian Consumer Law respectively.”
At , Edelman J said:
Where contract damages provide compensation directly based on the performance interest, that component of the award is not concerned with loss in any real or factual sense. … The aim of this component of the award is to provide the promisee with the difference between the value of what was promised and the value of what was received. The promisee had a primary right to performance of the contract so, upon termination, the law generally provides for a secondary right for the value of the performance that was not received or the difference in value due to the defect.
This, he said, was compensated for by s 267(3) of the ACL.
However, he said at :
A promisee might also suffer true, consequential, loss from a breach of contract. These consequential losses might include economic (financial) losses to the promisee to the extent that they go beyond the value of the promised performance and are within the boundaries of legal responsibility. They can also include some non-economic losses.
His Honour noted at  that Dillon contemplated several possibilities of non-economic damages arising from breach of contract, but said at  that damages for “mental harm” arising from breach of contract fell into three broad categories:
(i) “pain and suffering” consequent upon physical injury that arises from the breach of contract;
(ii) “vexation and discomfort” consequent upon physical inconvenience that arises from the breach of contract;
(iii) “distress or disappointment” in contracts for the provision of pleasure or relaxation.
His Honour theorised that: “It may be that the common principle underlying recovery in these disparate categories is that in each category, unlike in contracts generally, a promisor will usually be taken to have assumed the risk of liability for such distress.”
Edelman J distinguished these forms of damages from those available in tort for personal injury, and said at  that the terms of Part 2 of CLA indicated that it was “concerned only with claims for personal injury, assertions of violations of the integrity of body and mind that have traditionally been brought as a claim for a tort.” Thus, at , he concluded that Part 2 of the CLA “does not apply to either of the components of a claim for compensatory damages for breach of contract, namely the performance interest or consequential losses.”
|High Court Judgment|| HCA 17||24 April 2020|
|High Court Documents||Moore v Scenic Tours Pty Ltd|
|Full Court Hearing|| HCATrans 7||11 February 2020|
|Special Leave Hearing|| HCATrans 189||13 September 2019|
|Appeal to NSWCA|| NSWCA 238||24 October 2018|
|Trial decision|| NSWSC 733||31 August 2017|