COURT OF APPEAL JUDGMENT

On 24 October 2018, the New South Wales Court of Appeal delivered its judgment in relation to Scenic’s appeal.

Click here to view the judgment.

Brief summary

The Court concluded:

  1. The ‘services’ which Scenic were to provide to passengers, were luxury river cruise services, not simply any mode of transportation from point A to point B;

 

  1. Scenic breached the consumer guarantees that the services would be reasonably fit for the purpose and for the result for which they were acquired (“the Purpose Guarantee” and “the Result Guarantee”), in relation to cruises 1, 2, 3, 4, 5, 6, 7, 8, 9 and 11;

 

  1. Scenic did not breach the consumer guarantee to provide the services with reasonable care and skill (“the Care Guarantee”), by reason of its pre-embarkation conduct in relation to cruises 1, 4, 5, 6, 7, 8, 9 and 11;

 

  1. Scenic did breach the Care Guarantee, by reason of its post-embarkation conduct in relation to cruises 4, 5, 6 and 7;

 

  1. Justice Garling incorrectly calculated Mr Moore’s damages for the reduction in value of his cruise. This should have been calculated on an objective basis instead of a subjective basis;

 

  1. Passengers are not entitled to additional damages for distress and disappointment.

The judgment and orders

The judgment was written by his Honour Justice Sackville, with whom Justice Payne and Justice Barrett agreed. The judgment stretches to 184 pages, covering all aspects of Scenic’s comprehensive appeal.

The main aspects of the judgment were as follows.

  1. The services

We argued that the services Scenic were to provide consisted of a luxury river cruise in accordance with Scenic’s brochure. Scenic argued that their terms and conditions limited the scope of the services, so that they were only obliged to provide a tour from the starting point to the end point, with substituted bus trips if necessary.

The Court agreed with our argument and the findings of Justice Garling. The Court said that the services Scenic were to provide, were not rigidly curtailed by the terms and conditions appearing at the back of Scenic’s brochure in fine print. Rather, they were defined by the itinerary and standard of travel which passengers undoubtedly understood themselves to be acquiring.

However, we also argued that the services Scenic were to provide included “information services”, such as providing passengers with warnings prior to embarkation about possible disruptions to the cruise. The Court decided that the services did not extend this far, but rather were limited to the period from embarkation to disembarkation.

  1. The Purpose and Result Guarantees

We argued that the services Scenic provided were not reasonably fit for the purpose for they were acquired, and were not of a nature or quality as could reasonably be expected to achieve the result for which they were acquired. We argued that this purpose and result were the enjoyment of a five-star luxury river cruise along a particular route, with the additional services promised by Scenic.

 

Scenic, on the other hand, argued that they did not breach the Purpose and Result Guarantees. Scenic argued that passengers did not all make known their desired purpose and result, and that in any case, the services provided were in accordance with the terms and conditions.

 

Because the Court decided that the services were not defined by the terms and conditions, the Court agreed with our argument that Scenic did breach the Purpose and Result Guarantees. The Court agreed that passengers did make known their desired purpose and result, by purchasing the cruise set out in the brochure.

  1. The Care Guarantee – pre-embarkation conduct

As the Court decided that Scenic’s services did not include “information services” prior to the embarkation of each cruise, the Court decided that Scenic’s failure to provide information and options of cancellation to passengers prior to the embarkation of various cruises did not amount to a breach of their obligation to supply the services with reasonable care and skill. This means the Court found that there was no breach of the Care Guarantee in relation to cruises 1, 8, 9 and 11.

  1. The Care Guarantee – post-embarkation conduct

The Court agreed, however, that Scenic did have an obligation to provide information to passengers after each cruise had embarked. Accordingly, the Court upheld Justice Garling’s findings that Scenic breached the Care Guarantee in relation to cruises 4, 5, 6 and 7.

  1. Damages for reduction in value of the cruise

Because Scenic has breached the Purpose and Result Guarantees (and in some cases, the Case Guarantee), passengers are entitled to damages for the reduction in value of their cruise.

Justice Garling had calculated this on a ‘subjective’ basis. This means that he looked at the factors peculiar to Mr Moore’s circumstances to determine how much Mr Moore had personally suffered.

The Court decided that Justice Garling should have instead calculated the reduction in value on an ‘objective’ basis. This means that he should have looked at how much value the cruise was to a notional “reasonable person”, and not at each passenger’s individual circumstances and characteristics.

Accordingly, the Court decided that Justice Garling should re-determine this aspect of damages on the ‘objective’ basis.

  1. Damages for distress and disappointment

We argued that passengers should be entitled to damages for distress and disappointment, on top of a refund.

In the law, damages for distress and disappointment are considered “personal injury damages”. In New South Wales, there is a law which prevents recovery for non-economic loss, including personal injury damages, if the damage is not sufficiently serious (for example, broken bones or long-term physical injury would generally be sufficiently serious).

We argued that this law does not apply in this case, because the distress and disappointment was suffered overseas, not in New South Wales. Scenic argued that the limitation applies to all cases in New South Wales courts, regardless of where the damage was suffered. Unfortunately, the Court agreed with Scenic and decided that the law prevented it from awarding damages for distress and disappointment.

The Court made a number of orders to give effect to the judgment. These orders are as follows.

  1. Grant the appellant (Scenic) leave to appeal.
  2. Direct Scenic to file a notice of appeal in the form of the draft amended notice of appeal within seven days.
  3. Allow the appeal in part.
  4. Set aside Order 1 made by the primary Judge on 15 November 2017.
  5. The respondent’s (Mr Moore) claim for damages for disappointment and distress pursuant to s 267(4) of the ACL be dismissed.
  6. Direct that on the further hearing of the matter before the primary Judge, his Honour determine Mr Moore’s claim for compensation for reduction in value of the services pursuant to s 267(3)(b) of the ACL in conformity with these reasons for judgment.
  7. Set aside Order 2 made by the primary Judge on 15 November 2017.
  8. The Group Members’ claims for damages for disappointment and distress pursuant to s 267(4) of the ACL be dismissed.
  9. Direct the parties to file within fourteen days agreed Common Questions and Answers thereto that give effect to these reasons for judgment, insofar as they address the claims of Group Members to compensation and damages by reason of Scenic’s breaches and alleged breaches of the Consumer Guarantees.
  10. In the absence of agreement, direct that:

 

  1. Scenic file within 14 days its proposed Common Questions and Answers thereto, together with written submissions in support not exceeding five pages in length; and
  2. Mr Moore file within a further 14 days his proposed Common Questions and Answers thereto, together with written submissions in support not exceeding five pages in length.

 

  1. Set aside Order 2 made by the primary Judge on 31 August 2017.
  2. Order that the costs of the proceedings in the Common Law Division be determined by the primary Judge.
  3. Order that Mr Moore pay 50 per cent of Scenic’s costs of the application for leave to appeal and of the appeal.
  4. If Scenic seeks costs orders other than Orders 11, 12 and 13, it should file and serve written submissions as to costs within 14 days, such submissions not to exceed five pages in length.
  5. If Mr Moore seeks costs orders other than Orders 11, 12 and 13 or if he wishes to reply to any submissions on costs made by Scenic, he should file and serve written submissions within 28 days, such written submissions not to exceed five pages in length.
  6. If Scenic does not file written submissions seeking a variation to Orders 11, 12 and 13, it should file and serve written submissions in reply to any submissions by Mr Moore within a further 14 days.

What does this mean?

This result means that the Court has again determined that Scenic breached their obligations under the Australian Consumer Law. They remain liable to passengers on cruises 1, 2, 3, 4, 5, 6, 7, 8, 9 and 11.

Although the Court overturned some of Justice Garling’s findings in relation to the Care Guarantee, this does not significantly matter, as the Court still upheld the findings in relation to the Purpose and Result Guarantees. Passengers should be entitled to just as much damages for a breach of the Purpose and Result Guarantees as they would be for a breach of the Care Guarantee.

We now must return to Justice Garling to determine the damages to which passengers are entitled. This would be necessary no matter the outcome before the Court of Appeal, as the only damages which had been determined at this stage were the damages for Mr Moore.

Justice Garling had awarded Mr Moore a full refund ($10,990) plus $2,000 in damages for distress and disappointment. Unfortunately, we will no longer be able to claim damages for distress and disappointment (subject to any further appeal). Justice Garling will also need to reconsider the method of calculation for the refund.

Additionally, Scenic will have an opportunity to argue that it was not reasonable for passengers to rely upon Scenic’s skill and expertise. At this stage, we do not consider Scenic will have a very strong argument.

Next steps

We will now need to consider the lengthy judgment of the Court and decide on the next steps to take. These steps will include the continuation of the proceedings for the determination of damages, for the determination of whether non-Australian passengers are included in the class action, and any appeal.

Neither party has a right to appeal this judgment. However, both parties have a right to apply to the High Court of Australia within 28 days for “special leave” to appeal. This means that the parties can ask the High Court to reconsider some aspects of the decision. The High Court will then consider whether the issues raised are sufficiently important to warrant further reconsideration.

We anticipate that Scenic may apply to the High Court for special leave to appeal. We must also consider whether we wish to apply to the High Court for special leave to appeal against any of the points which we did not win in the Court of Appeal.

Accordingly, we will be making further decisions about the future conduct in coming weeks. We will provide a further update once we have further news about the future course of the proceedings.

Click here to claim compensation and damages

 

 

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