Written by Peter CarterNovember 22, 2013
A motorcycle racing company has implored the Supreme Court to rigorously apply a federal “recreational services” antidote to protect its contractual liability waiver against consumer protection anti-avoidance measures, in the to defence of a serious injury compensation claim of one of its injured participants.
David Kelly was struck from his bike on a crossover at the Eastern Creek Raceway in December 2007 by another rider travelling at a higher speed in a more advanced training session. He sued the event organiser for breach of an implied warranty that his training would be delivered with due care and skill pursuant to an implied term in their contract.
The event organiser appealed the District Court finding that the federal antidote was inapplicable and that it was liable in contract to Kelly for injury compensation damages. On appeal it sought to uphold the integrity of its exclusion of liability clause which specified the participant “hereby releases and indemnifies you organiser any claims of liability for death, personal injury or property damage howsoever caused as a condition of its acceptance to participate in the event”.
The lower court agreed that the exclusion clause was effective to confer immunity on the event organiser but only with respect to its tort liability. In his parallel contract claim, Kelly relied upon TPA s 74 as implying into the contract a provision that the services “will be rendered with due care and skill” and TPA s 68, which renders void any term or contract that purports to “exclude restrict or modify” the effect of s 74.
The lower court accepted this reasoning.
Because the exclusion clause “provides a release from claims liability which would arise from breach of an implied warranty” it was inconsistent with the conferral by s 74 of the right to sue for the breach and was therefore contrary to s 68 and thus prima facie void to the extent of the inconsistency.
The appeal on this point was primarily concerned with the application of TPA s 68B, – the antidote to the consumer protection anti avoidance measures that was inserted in 2002 as a response to the ” insurance crisis” – which neutralises the effect of s 68 in relation to “recreational services”.
It specifies that a term of the contract for the supply “recreational services” is not void under s 68 “by reason only that the term excludes restricts or modifies ….. liability from breach of warranty implied by s 74 “so long as” the exclusion restriction or modification “is limited to liability for death or personal injury”.
Accepting that the motorcycle training contract was one relating to “recreational services”, the court was thus required to decide whether the exclusion clause otherwise activated the s 68B antidote. It identified a number of ways in which an exclusion clause – that on the face of it was would meet the description in s 68B – could actually fall foul of it, because the clause did not “only” restrict “the application of s 74 to the supply of recreational services”.
For example the contract may also purport to also exclude liability for the supply of goods; or other services.
Likewise if the clause purported to exclude liability for things other than “death or personal injury” it would – given the plain meaning of the words in the section, “so long as” – also be beyond s 68B’s neutralising reach.
In this case the exclusion clause specified and exclusion of liability for “death or personal injury or property damage”. The inclusion of the additional words “or property damage” meant that the exclusion clause went too far and was incapable of attracting s 68B exculpation.
The antidote was ineffective, s 68 continued to apply to preserve the operation of s 74, and the exclusion clause was therefore void. So far so good for Kelly. The court then addressed the event organiser’s Civil Liability Act immunity.
It had relied on section 4M of the NSW Civil Liability Act which specifies “a person does not owe a duty of care to another who engages in recreational activity to take care in respect of a risk of the activity of the risk was the subject of a risk warning to the plaintiff”.
There is no identical provision in the Queensland CLA but the concepts are similar.
The court noted that “because the contract claim invoked federal law, the whole of the proceedings were an exercise federal jurisdiction. Thus the operation of the Civil Liability Act relied upon by the appellant could only have effect through the agency of federal law”.
The court was therefore required then to address sections 79 and 80 of the Judiciary Act (Cth) to determine to what extent state laws, specifically the CLA, applied. It noted the first general principle: that if the state law was inconsistent with the federal law, the state law would be disregarded to the extent of the inconsistency.
The second general principle: if there is no obvious inconsistency, the state law will be among the laws that must be applied by a court in that state exercising federal jurisdiction. Such law will be “picked up” and binding on such state court under Judiciary Act s 79 “except as otherwise provided by the Constitution or the laws of the Commonwealth.”
If not “picked up” by that means, a state law will still be applied in such state court exercising federal jurisdiction by way of Judiciary Act s 80, insofar as “the laws of the Commonwealth are not applicable or their provisions are insufficient to carry them into effect will to provide adequate remedies or punishment”. This is the third general principle.
In such a case “the common law in Australia as modified by the Constitution and by the statute law in force in the state shall, insofar as it is applicable and not inconsistent with the Constitution and the laws of the Commonwealth” govern such court.
In the instant case however, the relevant CLA section could not be considered “picked up” by s 80 or by s 79 so as to apply in federal jurisdiction because s 74 “makes other provision” in respect of the duty referred to in the CLA section.
The permissive CLA s 5N which allows a term of a contract for the supply of professional services to exclude restrict or modify liability was likewise not picked up by s 74 “because it was not a law which limited for precluded liability from breach of contract was merely a law which permitted a contract to make such provision” as per Insight Vacations v Young.
These are particularly difficult concepts. They nonetheless offer some scope to advocates attempting to circumvent the pervasive contra-consumer measures taken in the injury compensation field over the last decade.
Since Kelly’s 2007 accident at Eastern Creek, the TPA has been replaced by the Competition and Consumer Act. The construction of CCA s 139A is very similar and may well be interpreted to have the same terminal effect upon the efficacy of exclusion clauses that go beyond “mere” injury or death in the case of recreational services.
Motorcycling Events Group Australia Pty Ltd v Kelly Basten JA Meagher JA Gleeson JA  NSWCA 361 29/10/13 – view decision