In both Menz v Wagga Wagga Show Society and Moore v Scenic Tours Pty Ltd, the courts considered the operation of s275 of the Australian Consumer Law (ACL) and whether it ‘picked up’ and applied the Civil Liability Act 2002 (NSW) (CLA) in respect of the claims insofar as they were based on a breach of statutory guarantee.

Section 275 of the ACL provides that:

If

1. there is a failure to comply with the guarantee that applies to a supply of services under Subdivision B of Division 1 of Part 3-2; and
2. the law of a State or a Territory is the proper law of the contract;
3. 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

In Menz, the plaintiff sought damages in respect of personal injury. She was injured following a horse riding accident. The plaintiff made claims in negligence, for breach of contract, and for breach of the statutory guarantee with respect to services contained in s60 of the ACL. The defence was ‘dangerous recreational activity’ under the CLA.

The NSW Court of Appeal held that the claim for the breach of the statutory guarantee was limited by references to the defences available under the CLA.

The Court held ‘the federal guarantee [contained in s60 of the ACL] is not unqualified. Section 275 of the Australian Consumer Law makes certain State laws which limit or preclude liability applicable to the Federal regime’. The Court also noted that the outcome might change given that the High Court’s decision was then still reserved in the matter of Moore.

On Friday 24 April 2020, the High Court delivered its judgment in Moore.

In Moore, the claim was for damages in respect of ‘disappointment and distress’ arising out of Scenic Tours’ breach of the statutory guarantees contained in ss60 and 61 of the ACL.

Mr Moore had booked a holiday cruise supplied by Scenic Tours which was severely disrupted by adverse weather conditions. It was not in issue that Scenic Tours’ attempts to perform its contractual obligations were attended by breaches of consumer guarantees.

Scenic Tours contended that s275 of the ACL picked up and applied the CLA. It contended that Mr Moore’s disappointment and distress were part of his ‘mental impairment’ claim and thus needed to be considered by reference to Part 2 of the CLA, which limited the amount of damages awarded in claims for personal injury unless a specified level of impairment was met. In particular, it was contended that Mr Moore’s level of mental impairment failed to meet the threshold requirements of s16 of the CLA.

Mr Moore had a number of contentions, including that his claim for disappointment and distress were not personal injury claims and therefore Part 2 of the CLA was not applicable.

The High Court determined that provisions in the CLA could operate to limit liability or damages for claims for breach of statutory guarantee made under the ACL.

It found that:

On the natural reading of s275, the section is concerned to allow a State or Territory law comprehensively to limit or preclude both liability and recovery of compensation by way of damages for that liability if the State or Territory law has the effect in relation to other contracts governed by the law of the State or Territory.

The High Court then concluded:

…the evident purpose of s275 of the ACL was to ensure the application of State and Territory laws that limit the extent of recovery for breach of a contract otherwise governed by that law.

Mr Moore’s claim for disappointment and distress were not part of his mental impairment claim and on this basis, the CLA did not apply so as to limit his entitlement to damages. Had the court found that ‘disappointment and distress’ were instances of mental impairment, then the claim would have been determined by reference to the CLA, as it was in Menz, and Mr Moore’s entitlement to damages would have been reduced.

The impact of these decisions is significant: reducing exposure or limiting damages for corporate insureds in connection with a variety of claims in which a breach of the statutory guarantee provided for in s60 of the ACL is alleged, together with negligence and breach of contract based on want of reasonable care.