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Damages for distress or disappointment for breach of contract or breach of consumer guarantees: Moore v Scenic Tours Pty Ltd

Damages for distress or disappointment for breach of contract or breach of consumer guarantees: Moore v Scenic Tours Pty Ltd

Published on September 17, 2020 by Bill MaddenBill Madden

As first published by Lexis Nexis and Australian Civil Liability, August 2020, Vol 16, No 4, Page 56

Abstract

Various important aspects of the interplay between the Australian Consumer Law and civil liability legislation, in the context of a contract between the parties and a claim for damages for disappointment and distress for breach of a contract, was addressed in Moore v Scenic Tours Pty Ltd1. The reasons for judgment provide answers to some but not all of the issues raised in this and earlier High Court decisions.
Two narrow but significant issues were addressed by the High Court in Moore v Scenic Tours Pty Ltd, above.2

Facts

The appellant Mr Moore had booked, through a travel agent in New South Wales, a European river cruise to be supplied by the respondent Scenic Tours Pty Limited (“Scenic”).3 Before the High Court, it was not in dispute that Scenic’s attempts to perform its contractual obligations were attended by breaches of consumer guarantees in ss 60 and 61 of the Australian Consumer Law.

Mr Moore’s claim for damages under s 267(4) of the Australian Consumer Law4 included damages for disappointment and distress for breach of a contract to provide a pleasant and relaxed holiday, recognised as a compensable head of loss in the 1993 High Court decision Baltic Shipping Co v Dillon.5

In his separate but concurring judgment in Moore v Scenic Tours Pty Ltd, Edelman J conveniently noted that in Baltic Shipping Mason CJ, with whom Toohey and Gaudron JJ agreed on this point, listed the circumstances based on earlier authority in which those non-economic losses are recoverable (with the last being relevant here, as explained below damages for injured feelings in an action for breach of promise of marriage;

  • damages for pain and suffering, including mental suffering and anxiety, where the breach of contract causes physical injury to the plaintiff;
  • damages for physical inconvenience including fatigue;
  • damages for mental suffering directly related to physical inconvenience such as vexation and discomfort; and
  • damages for distress, vexation and frustration where the very object of the contract has been to provide pleasure, relaxation or freedom from molestation.6

The following passage from the reasons of Mason CJ in Baltic Shipping expands on the last point:

On the other hand, as a matter of ordinary experience, it is evident that, while the innocent party to a contract will generally be disappointed if the defendant does not perform the contract, the innocent party’s disappointment and distress are seldom so significant as to attract an award of damages on that score. For that reason, if for no other, it is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation. In cases falling within the last-mentioned category, the dam- ages flow directly from the breach of contract, the promise being to provide enjoyment, relaxation or freedom from molestation.7

Before the High Court in Moore v Scenic Tours Pty Ltd was the question of whether s 16 of the Civil Liability Act 2002 (NSW) (CLA NSW) applied to damages for disappointment and distress, so as to preclude the recovery of damages of that kind.

Section 16 provides that 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. A definition for non-economic loss appears in s 3 CLA NSW, as follows:

“non-economic loss” means any one or more of the following—

(a) pain and suffering,

(b) loss of amenities of life,

(c) loss of expectation of life,

(d) disfigurement.

Section 16 sits within Pt 2 CLA NSW, which by reason of s 11A applies to and in respect of an award of personal injury damages.8 The term personal injury damages is defined in s 11 as damages that relate to the death of or injury to a person, with injury also defined in s 11 as meaning personal injury including pre-natal injury, impairment of a person’s physical or mental condition, and disease.

It is also relevant to note s 11A(2) CLA NSW provides that Pt 2 CLA NSW applies regardless of whether the claim for the damages is brought in tort, in contract, under statute or otherwise.

First submission: what is the effect of s 275 of the Australian Consumer Law?

The defendant argued that Mr Moore’s entitlement to damages under the Australian Consumer Law (Common- wealth legislation) was constrained by CLA NSW and in particular s 16 of that Act (state legislation) by reason of s 275 of the Australian Consumer Law, which reads:

275 Limitation of liability etc.
If:
(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 services.

Mr Moore sought to counter that argument by saying that properly construed, s 275 is directed to state and territory laws that limit or preclude liability for breach of contract and is not concerned with laws that limit the assessment of damages once liability has been established. He argued that s 16 CLA NSW is a law that governs the assessment and quantification of “damages” rather than a law that imposes a limitation upon “liability”.9

The High Court did not accept that argument, focusing on the words in s 275 recovery of any liability. The court held:

… Section 275 contemplates limitations upon both “liability” and “recovery”; the reference to “recovery” must be given effect. “Recovery” is readily understood to encompass the amount of money assessed as compensation for the loss for which the defendant is liable.10

… The evident purpose of s 275 is to pick up and apply State and Territory laws that limit the amount of compensation or damages that might otherwise be recovered under s 267(3) and (4) of the ACL.11 ….

… It is difficult to see any reason why the purpose would be to apply State and Territory laws limiting heads of compensable loss but not to apply State and Territory laws regulating the quantification of damages recoverable. The extrinsic materials do not suggest any such reason for taking that course, or any reason why s 275 should not pick up and apply State laws, like s 16 of the CLA, which regulate the quantification of the damages required to extinguish a liability for loss.12

Second submission: do damages for disappointment and distress constitute personal injury damages for non-economic loss?

Scenic argued that Mr Moore’s disappointment and distress was an injury for the purposes of Pt 2 CLA NSW because it was an impairment to his mental condition. Conversely, Mr Moore submitted that his claim for damages for disappointment and distress for breach of contract fell outside Pt 2 CLA NSW because the damages he claimed by way of compensation for his disappointment and distress did not relate to personal injury. He characterised the reaction of disappointment and distress to the breach of such a promise — a promise that had been bought and paid for — as a normal and healthy response to that disappointment rather than an impairment of the plaintiff’s mental condition.13

The submission by Scenic was said to elide the distinction between loss being disappointment and dis- tress for breach of a contract to provide a pleasurable and relaxing experience and loss being disappointment and distress that is consequential upon personal injury.14 The High Court therefore found in favour of Mr Moore on this issue, stating succinctly:

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.15

The High Court noted that in Baltic Shipping, 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.16

Accordingly, the disappointment and distress of this kind is not non-economic loss under Pt 2 CLA NSW, the text and structure of which makes clear that that non- economic loss is a head of loss associated with personal injury as pain and suffering.17

In his separate judgment, Edelman  J  agreed  that  Mr Moore was correct in his submission that Pt 2 CLA NSW is concerned exclusively with claims for damages for personal injury and those damages do not extend to compensation for expectation loss, including distress or disappointment, where that loss is not consequential upon physical injury. That is so whether the claim is brought for a breach of contract, or a breach of the consumer guarantees in s 61(1) and (2) of the Australian Consumer Law.

Third submission: does s 16 CLA NSW apply where the damages claimed are suffered outside of New South Wales?

As Mr Moore’s appeal succeeded given the outcome of his second submission, it was not necessary for the High Court to rule upon the third submission. It may be relevant to note that the New South Wales Court of Appeal had held that s 16 applied as there was a sufficient geographic connection with New South Wales because s 16 CLA NSW is expressed to apply to a claim for damages in a New South Wales court.

When s 16(1) of the Civil Liability Act is read with s 11A and the definition of “court” in s 3, the relevant matter or thing in and of New South Wales is seen to be the awarding of damages in New South Wales by a court or tribunal. In my  opinion,  there  is  no  contextual  reason  for  reading  s 16(1) as subject to any other geographical limitation.18

Referring back to the transcript of the special leave application, counsel for Mr Moore can be seen to have submitted that the finding of the New South Wales Court of Appeal was in error.19 The issue of extra-territorial application of the CLA NSW was touched on but not resolved in an earlier decision of the High Court.20

Discussion

Mr Moore’s appeal was allowed given the outcome of his second submission above, as s 16 CLA NSW did not apply to damages for disappointment and distress for breach of contract, such that his recovery of such damages was not precluded by the section.21

The High Court noted that nothing in the text of the CLA NSW suggests that Pt 2 was enacted with a view to limiting the liability of a defendant for claims that do not involve personal injury as defined in the CLA NSW.22 Reference was made to the analogous position where an act of false imprisonment itself causes psychiatric injury, insofar as an action for false imprisonment claims damages for loss of dignity and harm to reputation associated with the deprivation of liberty it is not a form of injury within s 11 CLA NSW.23

The decision arguably does not preclude recovery of personal injury damages in addition to damages for disappointment and distress for breach of contract, if able to be separately identified on the facts.

As to the effect of the decision in jurisdictions other than New South Wales, it will be necessary to have regard to the wording of the legislation in each jurisdiction to see whether the provisions regarding assessment of general damages/non-economic loss somehow extend to breach of contract or breach of consumer guarantees, which may be thought unlikely given focus of the Review of the Law of Negligence, described  by Edelman J as the excessive strain on insurance schemes established to indemnify defendants against their liability under the common law for loss relating to personal injury.24

The reasoning of the High Court as to state laws being picked up and applied to claims for damages under s 267(4) of the Australian Consumer Law appears to be of general application to laws (and in particular, civil liability laws) in jurisdictions in addition to New South Wales, subject of course to a careful consideration of the phrase applies to limit or preclude liability, and recovery of any liability. There may be civil liability legislative provisions which are aimed at other things, such as admissibility of evidence.25 Alternatively, it may be that there will remain a conflict between Common- wealth and state legislation, in which case the Common- wealth legislation will prevail.26

The issue of extra-territorial application of civil liability legislation remains for consideration by the High Court at some later time.

Also remaining for later judicial consideration is the possibility of factual circumstances, other than holiday bookings, in which it might be said that the very object of a contract was to provide pleasure, relaxation or freedom from molestation. One example is referred to in Baltic Shipping, where reference was made to Heywood v Wellers in which the plaintiff instructed a solicitor to obtain an injunction to protect the client from molestation and the solicitor negligently failed to do so. The client recovered damages for the mental distress she suffered in consequence of being molested.27 Such a contract to prevent molestation may well be uncommon; however, broader scope may exist for contracts to be characterised as having the object of provision of “pleasure” so as to give rise to entitlements for damages for distress or disappointment for breach of contract.

Key points:

1. Damages for disappointment and distress based on breach of contract and not due to personal injury will not be subject to the damages limitations contained within the CLA.

2. Whether a similar argument may succeed in other jurisdictions and circumstances will require a careful consideration of the wording and the cause of the alleged disappointment.

3. The issue of extra-territorial application of the CLA remains to be judicially considered.

*Link to previously published Moore v Scenic Tours Article by Katherine Driscoll on 6 May 2020.

Footnotes

1. (2020) 377 ALR 209; [2020] HCA 17; BC202003224.

2. Hearing 11 February 2020, Judgment 24 April 2020. Special leave had been granted to appeal from Scenic Tours Pty Ltd v Moore (2018) 361 ALR 456; 339 FLR 244; [2018] NSWCA 238; BC201809862, which in turn was an appeal from Moore v Scenic Tours Pty Ltd (No 2) [2017] NSWSC 733; BC201706772. The High Court delivered a judgment of Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ, with a separate judgment by Edelman J.

3. Mr Moore commenced representative proceedings pursuant to ss 157 and 158 of the Civil Procedure Act 2005 (NSW) on behalf of himself and other persons (“group members”) who booked and paid for 23 river cruises with Scenic (Group Members). The  trial,  however,  was  concerned  with  only  13 river cruises scheduled to embark between 19 May 2013 and 12 June 2013.

4.  Section 267(4) provides that the consumer may, by action against the supplier, 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 con- sumer would suffer such loss or damage as a result of such a failure.

5. (1993) 176 CLR 344; 111 ALR 289; [1993] HCA 4; BC9303547.

6. Moore v Scenic Tours [68].

7. Baltic Shipping [44].

8. With certain exceptions provided for in s 3B CLA NSW.

9. It was not in issue in the appeal that for the purposes of s 275 Australian Consumer Law, the proper law of the contract between Mr Moore and Scenic is the law of New South Wales.

10. Moore v Scenic Tours  [33].

11. Moore v Scenic Tours  [35].

12. Moore v Scenic Tours  [38].

13.  Moore v Scenic Tours [39]–[40].

14. Moore v Scenic Tours  [42].

15. Moore v Scenic Tours  [41].

16. Moore v Scenic Tours  [43].

17. Moore v Scenic Tours  [46].

18. Scenic Tours Pty Ltd v Moore (2018) 361 ALR 456; 339 FLR 244; [2018] NSWCA 238; BC201809862, [388] per Sackville AJA (Payne JA and Barrett AJA agreeing).

19. Moore v Scenic Tours Pty Ltd; Scenic Tours Pty Ltd v Moore [2019] HCATrans 108.

20. Insight Vacations Pty Ltd v Young (2011) 243 CLR 149; 276 ALR 497; [2011] HCA 16; BC201102833, [16]: The Civil Liability Act made no express provision for any extra- territorial operation. It made no provision which dealt directly with whether the Act’s provisions were to apply to claims for breach of a contract whose proper law was not the law of New South Wales or to other claims where the application of choice of law rules would result in the lex causae being a law other than that of New South Wales. It may be — it is not possible to be certain — that the unstated assumption of the provisions was that, because all kinds of claims, however based, were treated as if they were species of a claim for a tort of negligence, the Act would apply to cases in which New South Wales would be the lex causae because it was the lex loci delicti. Or it may be that the unstated assumption was that the provisions would apply to any claim for negligence that was brought in any of the courts of New South Wales. It is neither possible nor profitable to explore those questions further.

21.  The reasons for judgment did not extend to a possible claim under s 60 or s 61 of the Australian Consumer Law absent a contract between the parties. It seems likely, however, that an entitlement to damages for disappointment and distress would not arise, absent some specific provision in the legislation.

22.  Moore v Scenic Tours  [47].

23.  Moore v Scenic Tours  [41].

24. Moore v Scenic Tours  [47].

25.  An example may be s 5D(3)(b) Civil Liability Act 2002 (NSW).

26. See for example Gill v Ethicon Sarl (No 5) [2019] FCA 1905, [4456].

27. [1975] EWCA Civ 11; (1976) QB 446.

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