What law must be applied in the adjudication of a claim arising out of an overseas accident that is litigated in Australia?
That question frequently arises in holiday and travel claims including in antipodean airline injury cases if the injured passenger chooses to commence the claim in an Australian jurisdiction.
Damages will be assessed according to the law of the forum unless the circumstances of the accident and its location require otherwise.
In the case of domestically litigated international airline injuries, federal law mandates that the 1999 Montréal Convention has the force of law in Australia and hence must be relied upon for the injured person’s cause of action.
Consider the case of Lina Di Falco who sustained a serious ankle injury from a fall in the cabin of an Emirates aircraft when she flew from Melbourne to Dubai in March 2015.
Her lawyers decided Victoria was an appropriate jurisdiction for her suit against the airline. She contended her injury arose out of an “accident” within the purview of the Convention for which she claimed the carrier was liable.
The airline’s insurer agreed the event was covered by Montreal but asserted the general damages thresholds of local Victorian law applied in the assessment of injury compensation.
Both parties concurred that the answer to the question of what damages law applied, lay in the interpretation of section 79 of the Judiciary Act.
That section states that if an action for an injury is brought in a state court exercising federal jurisdiction, the law of that state will – by way of s 79 “picking up” that law and applying it – govern the assessment of damages. That is, unless the Constitution or a federal law “otherwise provides” or if the state provision is “inapplicable”.
According to the airline, the Convention deals only with “liability” and not damages. State law as to damages should therefore be “picked up” and applied.
The passenger accepted that the Convention left to domestic law the questions of who may bring a claim, what damages apply and how they are calculated.
But – she argued – there was a contradiction between the federal and state regimes. On the one hand the Convention imposed on Emirates, liability “for damage sustained for death or bodily injury of a passenger” if the injury was proved to come within the Convention terms. On the other, the Wrongs Act imposed a general damages threshold that would extinguish part of her compensation entitlement.
Because of such inconsistency, the federal law that adopted the Convention must be taken – so Lina’s argument went – to “otherwise provide” so as to render the local law non-engageable. Her compensation fell, she said, to be reckoned according to the common law of Victoria.
Justice Andrew Keogh agreed.
The effect of the Convention, he reasoned, is to give the plaintiff a “right to damages for pain and suffering and loss of enjoyment of life that is expressed to be in substitution for any other civil liability or right”.
The application of the threshold in the state act would “derogate from that right by extinguishing or restricting her entitlement to recover damages”.
The relevant provisions of the state act were also ruled out for failure to meet the second s 79 requirement – “applicability” – because the impairment threshold was expressed to apply to claims for injury based on the fault of another, rather than – in the case of Montreal claims – that arise from an “accident” as described in the treaty.
The Wrongs Act did not qualify to be “picked up” by section 79 and applied as “surrogate federal law”on both counts although its failure to satisfy either one would have disqualified the engagement of s 79.
Would the general damages thresholds of the NSW Civil Liability Act be “picked up” and applied if the proceedings had been conducted in NSW or those of the Queensland ISV scale, if commenced there?
The NSW CLA gets its foot in the door under the s 79 “applicability” test because it is expressed to do so “whether the claim for damages is brought in tort, in contract, under statute or otherwise”.
But because the Convention “otherwise provides” in relation to general damages than do the CLA thresholds, those CLA provisions could not be “picked up” by s 79 and applied in the damages determination.
The Queensland CLA – like Victoria’s Wrongs Act provisions – meets neither s 79 qualification in an international airline injury scenario. It fails the “applicability” test because it applies only to “breach of duty” situations into which Convention claims do not fit. It fails to meet the second requirement because the Convention “otherwise provides” in relation to damages.
The same conclusions would likely be arrived at in relation to interstate airline travel.
What though of other holiday and travel claims, for example a claim for compensation for an injury arising by way of contract breach or breach of an ACL statutory guarantee.
Such were the circumstances of David Moore who sued Scenic Tours for his “disappointment” that his June 2013 luxury European river cruise had been spoiled by severe flooding on the Rhine and Main Rivers due to heavy flooding that befell the region early that summer.
The NSW Court of Appeal re-visited the complex issues of Insight Vacations v Young – also arrived at in a European vacation setting but in reference to the Trade Practices Act – that it famously decided 8 years earlier.
Among the many questions in issue was whether a claim for damages for distress and disappointment can be made in New South Wales for a breach of statutory warranties that occurred outside Australia and if so, whether those damages were curtailed by the 15% impairment threshold imposed by s 16 of the CLA.
The CLA could not be “picked up” and applied by operation of s 79 because “it was irreconcilable,” ruled Justice Ronald Sackville in delivering the lead judgment, “with a consumer’s entitlement to recover damages as a result of a supplier’s breach of an ACL statutory guarantee”.
He identified though that the ACL has in its own s 275, a provision specifically designed to facilitate the application of damages restrictions contained in state laws. Where an ACL cause of action is pleaded in relation to the supply by contract of services or goods to a consumer, s 275 “picks up” the NSW law and applies it as if it a term of the contract of that supply. (He left open the question of whether the same result would be arrived at if the supply occurred in the absence of a contract.)
Queensland’s CLA – applying in many cases only to “breach of duty” situations – extends its damages restrictions to all “civil claims for damages for harm” and thus in that regard, meets the “applicability” qualification identified in Di Falco so as to allow s 79 to operate.
Does s 275 “pick up” and apply the provisions of the Queensland (or for that matter Victorian) act ?
Put another way, can s 275 operate to engage Queensland’s CLA (or Victoria’s Wrongs Act) to restrict damages payable to a consumer for breach of a statutory guarantee where no breach of duty (or fault) is alleged?
The answer for Victoria* and also probably, Queensland – in relation to damages – is ‘Yes’.
In Scenic, Justice Sackville drew attention to the distinction though – based on the words used in s 275 – between the usual situation where supply of services occurs by contract and one where there is no contract between the supplier and the recipient eg where the services recipient has been gifted a concert ticket.
“The most natural reading of the statutory language is that the Court is required to consider how, if at all,” Justice Sackville explains, “the relevant State law would apply to limit or preclude the supplier’s liability if it breached a term of the contract and the consumer sought the same relief in a contract claim as he or she seeks for breach of the Consumer Guarantees.
“To put the matter another way, s 275 of the ACL requires the Court to consider how (if at all) the relevant State law would limit or preclude the supplier’s liability if the consumer had made a claim in contract for the same relief as he or she seeks in the claim for breach of the Consumer Guarantees.”
Thus it is open in Queensland and Victoria to defeat s 275 in relation to damages where the supply of services is not under a contract with the supplier.
Note that in Queensland both s 79 and s 275 can be defeated in any attempt to apply to ACL causes of action any CLA Chapter 2 and Chapter 4 immunities – eg in connection with “dangerous recreational activities”, criminal actions, intoxication and local authorities – because such claims do not rely on a “breach of duty”.
Finally, the trial judge in Scenic concluded that NSW CLA s 16 applied as “surrogate federal law” – by operation of ACL section 275 – but held that the section had no extra-territorial operation due to a presumption that such laws not intended to apply outside the state.
Justice Sackville in a somewhat tortuous examination, concluded that the geographical restraint on the operation of the CLA was not automatic. Departing from Insight Vacations, he ruled that because the CLA’s “command” as to the damages that should be awarded was “directed to a court”, it should apply to all court adjudications regardless of the locus delicti.
So notwithstanding that the breach occurred outside Australia, the state court assessing injury damages (which in NSW are taken to include “disappointment”) was bound by the CLA “command” to apply the 15% threshold, of which no evidence had been introduced.
Moore was nevertheless entitled to economic damages for the extent to which he did not get the benefit of his holiday, assessed objectively.
These two decisions – Di Falco is 12 pages, Scenic is 130 pages – serve to clarify many of the very complex issues arising from the conflict in holiday & travel claims between benevolent federal consumer laws and those of the states crafted intentionally to favour insurers at the expense of those same consumers.