Ruined Holidays: Disappointment Recoverable Once Moore

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Ruined holidays

In the last international torts and travel law edition of Precedent in 2011, Trudie-Ann Atherton wrote of damages for disappointment following breach of holiday contracts: ‘it seems like everything old is new again’.[i] Back then, the cases of Insight Vacations Pty Ltd v Young[ii] (Insight Vacations) and Flight Centre v Janice Louw[iii] (Louw) had effectively abolished the recovery of damages for disappointment as an independent head of loss, instead encompassing it under civil liability legislation.

Fast forward to 2021 and the availability of damages for disappointment has come full circle, with the High Court in Moore v Scenic Tours Pty Ltd[iv] (Moore) clarifying that it is a recoverable head of loss in its own right. However, unfortunately for travel law practitioners, Moore still leaves important questions unanswered.

HISTORY OF DAMAGES FOR DISAPPOINTMENT

Damages for disappointment arising from the breach of a holiday contract were first established in Australia[v] by the High Court in Baltic Shipping Company v Dillon[vi] (Dillon). In that case, Mrs Dillon sought cruise ship accident compensation for injuries suffered while she was abandoning a ship after it struck a rock during a Pacific cruise. Along with claiming personal injury compensation as an injured cruise passenger, Mrs Dillon also claimed damages for the disappointment and distress that she suffered as a result of her ruined holiday. The High Court found that when the object of a contract is ‘to provide pleasure, relaxation, peace of mind or freedom of molestation’[vii] and this is not performed, disappointment is compensable.

Dillon remained good law until the introduction of the Civil Liability Act 2002 (NSW) (CLA) and its counterpart legislation across Australia. The new requirements of suffering a recognised psychiatric injury[viii] and meeting the 15 per cent of a ‘most extreme case’ threshold[ix] to receive compensation for non-economic loss for mental harm introduced ambiguity regarding the recovery of damages for disappointment for breach of a holiday contract.

In the 2010 Court of Appeal case of Insight Vacations, Mrs Young suffered injuries in a coach tour accident in Europe. Her personal injury claim against the tour company for her overseas accident was successful at first instance, and her damages included compensation for disappointment as a result of her ruined holiday as a separate head of loss. However the Court of Appeal found that grief, anxiety, distress and disappointment were elements of non-economic loss under the CLA. As such, disappointment for breach of the holiday contract was not compensable as a separate head of loss. Rather, the Court found that Mrs Young’s injuries and disappointment should have been assessed as non-economic loss as a whole under s16 of the CLA.[x] While Insight Vacations went on to the High Court,[xi] this aspect of the decision was not disputed.

In Louw, a case not involving injury, Ms Louw was awarded compensation by the Local Court for disappointment arising from the breach of a holiday contract. She had purchased a package holiday to Tahiti but, as a result of construction work, the holiday was ruined by noise, intrusion by workmen, and diminished facilities compared to those advertised in the brochure. Flight Centre appealed to the Supreme Court of NSW, which found that as Ms Louw had neither suffered a recognised psychiatric injury, nor met the 15 per cent most extreme case threshold, she was not entitled to damages under the CLA for disappointment.[xii]

As a result of Insight Vacations and Louw, the ability of holidaymakers to recover damages for disappointment for breach of a holiday contract was severely curtailed. This is how the law stood until 2020, when a series of ill-fated European river cruises set the law on damages for disappointment on a new course.

MOORE v SCENIC TOURS PTY LTD [2020] HCA 17

The facts

Mr Moore booked a luxury European river cruise for him and his wife which was described in the brochure as a ‘once in a lifetime cruise along the grand waterways of Europe’. He paid for the cruise 12 months in advance, using his life savings. The couple then awaited their holiday with much anticipation.

The couple were due to cruise from Amsterdam to Budapest over ten days. They looked forward to unpacking only once and seeing the various jewels of Europe from the convenience of their cabin. A river cruise particularly suited Mr Moore as he had back problems which made it difficult for him to spend long periods of time sitting down. 

The cruise was scheduled to depart on 3 June 2013. However, due to extensive rainfall in May and June 2013, many towns along the route were flooded. Locks were damaged and high water levels meant that ships could not pass under many bridges along the waterways.

Despite the logistical problems created by the high water levels, Scenic Tours did not cancel the cruise but instead amended the mode of transport. Rather than seeing Europe on a luxurious, all-inclusive river cruise ship, the couple and their fellow passengers travelled most of the journey by coach. They stayed in hotels, unpacking and repacking at each destination. In total, they cruised for only three out of the ten days. 

While the brochure assured passengers that the cruise would be ‘truly unforgettable’, unfortunately for Mr Moore, his ruined holiday was one that he wanted to forget.

Legal action

Supreme Court of NSW

Mr Moore sued Scenic Tours in a class action on behalf of approximately 1,500 cruise passengers affected on 13 Scenic cruises. He claimed damages for breach of the ss60 and 61 statutory guarantees of the Australian Consumer Law[xiii] (ACL), namely the company’s failure to supply the cruise with due care and skill and to provide services that were reasonably fit for purpose.

Scenic Tours argued that Mr Moore’s claim was a personal injury claim because disappointment and distress constituted an impairment on his mental condition. As a result, it claimed that in order for Mr Moore’s disappointment to be compensable, it needed to constitute a recognised psychiatric illness under s31 of the CLA and meet the s16 most extreme case threshold. This was argued on the basis that s16 limits or precludes liability, and it was therefore picked up and applied to Mr Moore’s ACL claim as a surrogate federal law under s275 of the ACL.

When the case was heard by the Supreme Court of NSW,[xiv] Garling J found that Scenic Tours had breached its ss60 and 61 statutory guarantees. His Honour agreed with Scenic Tours that Mr Moore’s claim was classified as a personal injury claim. He also found that, as a general rule, s16 of the CLA applied to the claim.[xv]

However, Garling J found that the CLA only applies to losses suffered within NSW.[xvi] As Mr Moore suffered his disappointment and distress in Europe, the s16 threshold test did not apply.[xvii] Accordingly, there was no threshold to meet for his non-economic loss, namely disappointment and distress, to be compensable. The Supreme Court ordered Scenic Tours to pay Mr Moore $10,990 for the difference between the cost of the cruise that he paid for and the value of the cruise that he received, and $2,000 in damages for his disappointment and distress.

NSW Court of Appeal

The Court of Appeal[xviii] upheld the Supreme Court’s decision that Scenic Tours had breached ss60 and 61 of the ACL.

The Court of Appeal also confirmed that Mr Moore’s claim was a personal injury claim to which s16 of the CLA applied. However it disagreed that there was a distinction between the applicability of NSW law when a loss occurred within the state or abroad.[xix] It therefore found that the s16 threshold applied to Mr Moore’s claim despite his loss occurring outside of NSW. Accordingly, the Supreme Court’s order for Scenic Tours to pay Mr Moore $2,000 for disappointment and distress was set aside.

High Court

Scenic Tours did not appeal the decision that it had breached its statutory guarantees. However, the question of whether Mr Moore’s disappointment and distress were compensable remained in dispute.

The High Court found that s275 of the ACL picked up and applied state laws that regulate the assessment of damages required to extinguish liability, such as s16 of the CLA. However, unlike the Supreme Court and Court of Appeal, the High Court found that Mr Moore’s case was not a personal injury case.

The High Court distinguished between damages for disappointment and distress caused by a breach of contract where the object of the contract was to provide pleasure or relaxation, such as a cruise, and injured feelings related to a personal injury. As Mr Moore’s loss fell into the former category, the Court held that his claim was not for personal injury. Consequently, s16 of the CLA had no application to Mr Moore’s claim.

Accordingly, Mr Moore was entitled to compensation for disappointment and distress for his ruined holiday and the Supreme Court’s award of $2,000 was reinstated.

The High Court further found that Louw had been incorrectly decided and Ms Louw should have in fact been compensated for her ruined holiday.[xx]

As the High Court found that Mr Moore’s claim was not for personal injury and s16 of the CLA therefore did not apply, it was not necessary for it to rule on whether s16 applies to losses suffered outside of NSW.

Analysis

Moore highlights the complex interplay between state civil liability legislation and the ACL. It also provides a beacon to consumers in an area of law that is difficult to navigate: it is now clear that if a holiday service provider, such as a cruise line, breaches its contract or statutory guarantees, it is obliged to compensate the consumer for their resultant disappointment and distress from their ruined holiday.

However many questions remain unanswered. In particular, if a consumer has suffered disappointment and distress related to a personal injury caused by a holiday provider, their claim might potentially still fall under s16 of the CLA. This remains the current state of the law following Insight Vacations,[xxi] however the High Court in Moore made a point of noting that it had not needed to address whether this approach was correct.[xxii]

In addition, there has been no High Court ruling on whether losses suffered outside of NSW have to meet the CLA thresholds in order to be compensable. Many cruise line operators that provide overseas holidays to Australians, including Scenic Tours, incorporate the laws of NSW into their booking terms and conditions. A decision on this issue has been long-awaited by cruise lawyers and it is unfortunate that the High Court did not need to address it in Moore. Travel law practitioners must therefore await further judicial clarification on this issue with the same anticipation as the reopening of Australia’s borders.

References

[i] TA Atherton, ‘Damages a disappointment for travellers’, Precedent, No. 107, 2011, 18.

[ii] [2010] NSWCA 137 (Insight Vacations CA).

[iii] [2011] NSWSC 132 (Louw).

[iv] [2020] HCA 17 (Moore HC).

[v] Following the English Court of Appeal decision of Jarvis v Swan Tours Ltd [1972] WLR 954. For further history see Atherton, above note 1.

[vi] (1993) 176 CLR 344 (Dillon).

[vii] Citing Bingham LJ in Wallis v Morrow (1991) 1 WLR 1421, 1445.

[viii] Civil Liability Act 2002 (NSW), s31.

[ix] Ibid, s16.

[x] Insight Vacations CA, above note 2, [129]–[130].

[xi] Insight Vacation Pty Ltd v Young [2011] HCA 16 (Insight Vacations HC).

[xii] Louw, above note 3, [31] and [38].

[xiii] Found in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

[xiv] Moore v Scenic Tours Pty Ltd (No. 2) [2017] NSWSC 733.

[xv] Ibid, [873].

[xvi] Ibid, [906]–[909].

[xvii] This was in keeping with the decision of Insight Vacations HC, above note 11, where the High Court inferred that s5N of the CLA had a geographic limitation to NSW. For further discussion, see A Naylor, ‘Recreational services and geographic limitation of the Civil Liability Act’, Precedent, No. 107, 2011, 44.

[xviii] Scenic Tours Pty Ltd v Moore [2018] NSWCA 238.

[xix] Ibid, [389].

[xx] Moore HC, above note 4, [48].

[xxi] Insight Vacations CA, above note 2.

[xxii] Moore HC, above note 4, [58].

By Victoria Roy

Victoria Roy is principal solicitor at Victory Travel & Cruise Lawyers, a boutique law firm specialising in bringing compensation claims for Australians injured overseas, in aircraft accidents and in cruise ship accidents. She has over a decade of travel law experience in the UK and Australia, and frequently presents on travel law issues at legal events. She is also secretary of the NSW Branch of the ALA and founding member of the ALA’s Travel Law Special Interest Group.

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This article – ‘Ruined holidays: Disappointment compensable once Moore’ – first appeared in Precedent, the journal of the Australian Lawyers Alliance, issue 163, published in April 2021 (Sydney, Australia, ISSN 1449-7719), pp4-7. It has been reproduced with the kind permission of the ALA. For more information about the ALA, please go to: www.lawyersalliance.com.au.

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