At a time when the travel industry is facing unprecedented economic challenges, the decision handed down by the High Court on the 24th April in Moore v Scenic Tours Pty Ltd has the potential to further increase the financial risks associated with tour operating.

Background

The facts can be summarized as follows:

  • Scenic Tours promoted in its 2013 marketing material “once in a lifetime cruises” along the grand waterways of Europe, with guests expected to “enjoy a level of inclusive luxury service that is unsurpassed on the waterways of Europe”.
  • A customer, Mr Moore, purchased a 10 day cruise on board the Scenic Jewel from Amsterdam to Budapest.
  • Mr Moore claimed that he purchased the cruise on the expectation of a “pleasant and relaxed” vacation, where he could unpack his bags and enjoy a luxurious and relaxing cruising experience.
  • The cruise was disrupted due to once-in-a-century flooding which resulted in high water levels on the Rhine and Main Rivers. Scenic opted to operate modified itineraries rather than cancelling.
  • Instead of cruising for 10 days, many hours were spent on a bus and cruising was restricted to 3 days. The cruise began on a different vessel to the Scenic Jewel and a change of vessel was required twice.
  • Mr Moore brought proceedings on behalf of around 1,500 passengers of 13 affected cruises, claiming that Scenic failed to satisfy consumer guarantees that are implied in every consumer contract pursuant to Australian Consumer Law.
  • Mr Moore claimed the disruptions rendered the travel arrangements unfit for the purpose for which he acquired them and that the arrangements as delivered were not of a nature as could be expected to achieve the result he wished the services to achieve (a pleasant and relaxing holiday).

Legal Issue

Broadly speaking, at trial, the NSW Supreme Court found that Scenic failed to satisfy the following consumer guarantees:

  • services are to be provided with due skill and care: Scenic should have contacted passengers, informed them of the circumstances and given them the opportunity to cancel.
  • services are to be reasonably fit for purpose: the substitution of a land alternative was not reasonable or appropriate for the purposes Mr Moore acquired the services, being a relaxing and luxurious river cruising experience.
  • services are to be of a nature and quality as might be reasonably expected to achieve the result desired by the customer: by making a booking based on marketing literature, Mr Moore was impliedly making it known that the result he desired was to experience a cruise with the benefits promised, and this result was not obtained.

As a result, the NSW Supreme Court awarded Mr Moore $10,990 in compensation for reduction in value of the services delivered and $2,000 in damages for disappointment and distress.

Scenic appealed to the NSW Court of Appeal, which upheld the trail judge’s conclusion that Scenic had breached consumer guarantees. However, the Court of Appeal overturned the primary judge’s damages award for disappointment and distress, effectively on the basis that:

  • a claim for damages for ‘disappointment and distress’ constitutes a claim for personal injury damages; and
  • the ‘disappointment and distress’ suffered by Mr Moore did not meet the injury threshold required to make a personal injury claim.

Mr Moore appealed this decision to the High Court, on the basis that his damages claim for disappointment and distress was not a claim for personal injury.

Decision

The High Court agreed with Mr Moore and held that a claim for disappointment and distress is not a claim for personal injury.  Accordingly, the High Court ordered:

  • the reinstatement of $2,000 in damages to Mr Moore for disappointment and distress; and
  • the trial judge to consider whether other group members (i.e, the other circa 1,500 passengers) may be entitled to damages for disappointment and distress.

Depending on individual circumstances, there is a real prospect that the vast majority of the 1,500 passengers will be awarded similar damages for disappointment and distress.

Implications

The decision has vast and potentially far-reaching implications for the travel industry in general. To illustrate the potential reach, in the Scenic case, the High Court referenced the decision in Flight Centre v Louw.

In that case, a customer claimed damages from Flight Centre for disappointment and distress in relation to an overseas holiday that was disrupted by construction noise and inaccessibility of parts of the resort due to construction.

The court at the time found in Flight Centre’s favour. However, in Scenic, the High Court stated the case was incorrectly decided. In other words, a customer would have a good claim to damages for disappointment and distress due to construction noise and resort amenities not being available if the customer was not made aware of these matters prior to booking.

Other potential examples include:

  • airline passengers being bumped to a lower ticket class
  • political instability during a journey causing distress
  • changed itineraries and missed ‘once in a lifetime experiences’ due to adverse weather conditions known prior to departure

What to do

Booking Conditions

Coronavirus has illustrated the importance of having a robust and enforceable set of booking conditions to put operators in the best possible position when things go wrong. Although it is not possible to contract out of the Australian Consumer Law guarantees, there are some options available to limit liability where trips need to be amended or cancelled for reasons outside of an operator’s control.

Marketing Material

Marking material should be constantly reviewed to ensure services are not being over-promised and statements are not misleading.

Travel Agent Representations

A travel agent is the agent for the tour operator, not the customer. This means that any representations made by a travel agent about a product will be deemed made by the operator. For this reason (and others), it is important that tour operators have travel agents agree standard agency terms, which make the agent responsible for any representations made by the agent which are not approved by the tour operator.

Supplier Agreements

Where the operator does not control the services being delivered, supplier agreements should be put in place to flow down the risk of customer claims for ‘disappointment and distress’ caused by supplier faults.  

Please contact Aaron Zoanetti on (03) 9614 7707 to discuss any issues further.

Authors