The New South Wales Supreme Court recently upheld an appeal by Air Canada against a finding that the airline’s Conditions of Carriage had the unintended effect of excluding the cap on damages for personal injuries under the Montreal Convention 1999.
Interestingly, the issue of whether the Civil Liability Act 2002 (NSW) (CLA) applies to the assessment of damages of personal injury claims under Civil Aviation (Carriers’ Liability) Act 1959 (Cth) (CACLA) and Montreal Convention was not raised in the appeal. Accordingly, the primary decision of the New South Wales Supreme Court remains as authority with regard to the application of the CLA to assessment of damages of injury claims under the CACLA in New South Wales.
Please click here if you wish to read our bulletin on the first instance decision
The Appeal decision provides useful guidance for airlines (and their insurers) regarding the importance of clarity in drafting Conditions of Carriage to reduce the risk that they may support arguments the airline has waived liability limits.
Montreal convention provisions
Article 21 of the Montreal Convention prohibits a carrier from excluding or limiting its liability for claims for bodily injury providing that the total value of the claim does not exceed 113,100 special drawing rights (SDRs) (approximately $230,000) being the applicable limit at the time of the incident (increased to 128,821 SDRs on 28 December 2019). Article 21 creates a second tier of unlimited liability above 113,100 SDRS if the carrier is unable to prove that the damage was not due to its negligence or wrongful act or omission, or the damage was solely due to the negligence or wrongful act or omission of a third party.
Article 25 of the Montreal Convention allows airlines a discretion to offer Conditions of Carriage with higher limits of liability than those provided for in the convention or to remove the liability limits entirely.
Air Canada’s conditions of carriage
Rule 105(B)(5) of the Tariff (which formed part of Air Canada’s Conditions of Carriage) stated that “for the purpose of international carriage governed by the Montreal Convention, the liability rules set out in the Montreal Convention are fully incorporated herein and shall supersede and prevail over any provisions of this tariff which may be inconsistent with those rules.”
Rule 105(C)(1) of the Tariff stated that:
“Where the Montreal Convention Applies the limits of liability are as follows:
a. there are no financial limits in respect of death or bodily injury”
The Court of Appeal decision
Allowing Air Canada’s appeal, the Court had regard to the following matters:
- The Court was not simply construing a contract as the Tariff regulates liability created by various international conventions which are separate from the Tariff;
- Air Canda’s Tariff had to accommodate the fact that it would apply to some passengers whose carriage was governed by the Warsaw regime and others whose carriage was governed by the Montreal Convention, along with a range of international regulatory requirements;
- When Air Canada did waive defences available to it under international conventions, it did so with different language, in a different section of the Tariff and explained what was being done with words of “utmost clarity”;
- Rule 105(B)(5) of the Tariff explicitly incorporated the Montreal Convention and importantly, provides that it prevails over any tariff rules that are inconsistent with the Montreal Convention. Further, there was no renunciation of any of the provisions of the Montreal Convention;
- The purpose of Rule 105(B) was to ensure the relaxation or waiver of Air Canada’s rights under the Warsaw regime (which allowed for unlimited liability subject to proof of “wilful misconduct” by the carrier) remained in place while ensuring that the Montreal Convention applied. The Court noted (at paragraph 86) that it made no commercial sense for an airline to “volunteer to accept unlimited liability for death or bodily injury or death on a no-fault basis”;
- When the Tariff is read as a whole, having regard to its purpose and objects, the meaning of Rule 105(C) is “tolerably clear”. The Court noted that its purpose was to notify passengers of the limits which applied to their contract of carriage by air. The Court further noted that the purpose of Rule 105(C) was to comply with Canadian Air Transportation Regulations which required that the tariff contain a clear statement of “limits of liability”; and
- Sub-paragraph (a) of Rule 105(C)(1) referred to “financial limits” rather than “liability limits”. It would be incorrect to construe the term “financial limits” as a removal of a carrier’s entitlement to rely upon a partial defence in the absence of negligence, especially when the preceding sub-paragraph of the Tariff (Rule 105(B)) specifically preserved the operation of the Montreal Convention.
Commentary
As noted in the Court of Appeal’s decision, airlines’ conditions of carriage need to accommodate the fact that the carriage of some passengers will be governed by the Warsaw regime while the Montreal Convention will apply to the carriage of other passengers. Further, the conditions also need to satisfy various international regulatory regimes. Consequently, when drafting conditions of carriage, airlines face a challenging task in clearly articulating the rights of the respective parties (where there may be differing compensation regimes for various passengers) and meeting regulatory requirements.
The decision of the Court of Appeal is relevant to airlines and their insurers as it highlights that liability limitation provisions in Passenger Conditions of Carriage should be drafted as clearly as possible to avoid the risk of inadvertently supporting arguments that certain liability limits have been waived by the airline.
As the issue of the application of the CLA to assessment of damages under the CACLA in New South Wales was not ventilated in the appeal, the Supreme Court’s decision at first instance remains authority for the application of the CLA (with its restrictions and thresholds on damages) to injury claims under the CACLA, rather than damages being assessed on the common law at large.
This article was written by Matthew Brooks, Partner and James McIntyre, Special Counsel.
