This article was written by Moira Saville and Liam Burgess
In a case with potential implications for class actions arising from Covid-19 travel disruptions, the High Court ruled on Friday that plaintiffs can recover damages for 'disappointment and distress' resulting from the disruption of their cruising holidays.
The decision overruled a previous judgment of the NSW Court of Appeal, which had found that such damages were not available because of the limitations in the Civil Liability Act 2002 (NSW) (CLA).
A river cruise gone wrong
The appellant had booked a two week European river cruise with Scenic Tours. The cruise was severely disrupted by adverse weather and as a result he only spent three days cruising (on three different ships) with the remainder of the trip spent travelling by bus.
Representative proceedings were commenced in the Supreme Court of NSW on behalf of the Appellant and around 1,500 other cruise passengers.
The appellant alleged that Scenic breached the consumer guarantees in the Australian Consumer Law (ACL) by failing to exercise due care and skill in supplying the tour (in breach of ACL s 60); that the disruptions rendered the tour unfit for the purpose for which it was acquired (ACL s 61(1)); and the tour was not of a nature and quality that could reasonably be expected (ACL s 61(2)).
The appellant's case was that Scenic knew or should have known about the weather disruptions that were likely to occur to each scheduled itinerary. Instead it chose not to cancel the cruises or inform the passengers in a timely manner to give them the opportunity to cancel their booking.
Does the CLA prevent claims for disappointment and distress?
The appellant argued that the ACL permits a court to award damages for disappointment and distress because the contract with Scenic was one aimed at providing enjoyment, relaxation, pleasure and entertainment and therefore came within the exception to the general prohibition on recovery of damages for disappointment and distress identified by the High Court in Baltic Shipping Co v Dillon (1993) 176 CR 344.
There had been doubt about whether the principles in Baltic Shipping still applied in light of the CLA. Scenic argued that the ACL picks up and applies s 16 of the CLA precluding a claim for damages for disappointment and distress. Section 16(1) of the CLA provides:
"No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at least 15% of a most extreme case."
It was common ground that the loss suffered would not meet the 15% threshold in s 16. 'Non-economic loss' under the CLA includes 'pain and suffering' and loss of 'amenities of life', and Scenic argued that disappointment and distress falls within these categories. The appellant submitted that his damages claim for disappointment and distress fell outside the scope of the CLA restriction because the damages sought were not damages that related to personal injury. Scenic countered that disappointment and distress constitutes an impairment of mental condition, and that therefore the appellant's claim falls within the scope of the CLA definition of personal injury.
The primary judge found that Scenic had breached the consumer guarantees. His Honour accepted that the CLA limited recovery for losses of this type, but found the restriction did not apply to losses suffered outside NSW and therefore did not apply in this case. Damages for the disappointment and distress were therefore awarded.
Scenic appealed and the NSW Court of Appeal upheld the finding that Scenic had breached the consumer guarantees in ss 61(1) and (2) of the ACL. The Court of Appeal also agreed that s 16 of the CLA applied to limit Scenic's liability under the ACL, but disagreed with the primary judge's finding that s 16 had no application outside NSW. The Court of Appeal therefore set aside the award of damages for disappointment and distress. The Appellants appealed to the High Court.
The High Court found that CLA did not prevent the award of damages. The CLA only limits damages for personal injury, and disappointment or distress resulting from breach of a contract to provide recreation and relaxation is not a personal injury.
The significance of the decision appears to be limited, however, to claims arising from the class of contracts considered in Baltic Shipping where "the very object of the contract has been to provide pleasure, relaxation or freedom from molestation". The Court did not need to consider the circumstances where such damages might be recovered for breach of other types of contracts, or the correctness of the general principle that damages for injured feelings caused by breach of contract are not recoverable unless the claim falls within a limited class of exceptions. The decision also confirms that recovery of damages for disappointment and distress will be restricted by the CLA where it arises from personal injury, including psychological injury.
The decision has the potential to increase the viability of class actions based on disrupted holiday and recreational activities.