The New South Wales Supreme Court recently found that the wording of an airline’s Conditions of Carriage had the unintended effect of excluding the cap on damages for personal injuries under the Montreal Convention. However, the Court also found that the New South Wales civil liability legislation applied to the assessment of damages.
The decision provides useful guidance for airlines (and their insurers) regarding the following matters:
- ensuring that the wording of documents forming part of the Conditions of Carriage does not inadvertently remove liability limits imposed by relevant conventions; and
- 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).
Facts
The plaintiffs were travelling on an Air Canada flight to Sydney on 11 July 2019 when the aircraft encountered turbulence, causing it to drop. The plaintiffs commenced proceedings under the CACLA alleging that they had suffered injuries to their cervical spines and psychological injuries.
The parties accepted that the Montreal Convention applied to the claim.
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 (approximately $230,000) being the applicable limit at the time of the incident. Article 21 creates a second tier of unlimited liability above 113,100 special drawing rights 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.
The plaintiffs alleged that that the Tariff (which formed part of the Conditions of Carriage) removed the cap on damages in Article 21 of the Montreal Convention.
Rule 105(B) of the Tariff stated that:
‘for the purpose of international carriage governed by the Montreal Convention, the liability rules set out in 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.’
However Rule 105(C) 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’
Air Canada submitted that the purpose of Rule 105(C) was to give effect to the two-tiered system of liability and the creation of the second, uncapped fault-based tier of unlimited liability.
The issues of interpretation of the Conditions of Carriage and the application of the CLA to the assessment of damages were referred to the Court for separate determination.
The decision
Justice Rothman observed that the Court’s role was to interpret the meaning of Rule 105(C) rather than the Montreal Convention and further noted that:
- if Rule 105(C) was only a reference to Article 21, it was perplexing that the drafter did not specify the liability tier to which the Rule applied;
- it was also curious why Rule 105(C) was necessary as Rule 105(B) already acknowledged the binding operation of the Montreal Convention; and
- the language of Rule 105(C) was ‘so clear and unambiguous’ that it would detract from the contract’s commercial sense to adopt the interpretation proposed by the airline.
Accordingly, the Court concluded that the Montreal Convention’s cap on damages did not apply to the claims.
This left the question of the method of assessment of damages, namely whether the CLA applied to the assessment of damages in injury claims under the CACLA.
The Court noted that there were conflicting decisions on this point:
- in Grueff v Virgin Australia Airlines [2021] FCA 501 Griffiths J noted (in obiter) that the CLA may be applicable; and
- in Bradshaw v Emirates [2021] FCA 1407 Stewart J reached the opposite view.
In a detailed discussion of these decisions and the provisions of the CACLA and the CLA, the Court noted that:
- the Montreal Convention left the quantification of heads of damages for bodily injury to domestic law;
- damages arising from a bodily injury could be assessed under the CLA without creating any tension with the CACLA; and
- it was not convinced that the differences between the definitions of ‘bodily injury’ under the Montreal Convention and the ‘injury’ under the CLA created inconsistency between the CACLA and CLA.
Accordingly, the Court found that the CLA would govern the assessment of the plaintiffs’ damages despite the CACLA claims being a ‘no-fault’ regime.
Commentary
The decision is relevant to airlines and their insurers as it highlights that:
- when drafting liability limitation provisions in Passenger Conditions of Carriage, care needs to be taken to ensure that those provisions do not inadvertently exclude the liability limits imposed by conventions or legislation – drafters should consider whether it is preferable to simply adopt the convention or legislation without ‘explanatory’ provisions that might exclude the liability limits created by the conventions or legislation; and
- for injury claims under the CACLA in New South Wales, the CLA will apply to the assessment of damages which provides restrictions and thresholds on damages rather than damages being assessed on the common law at large.
This article was written by Matthew Brooks, Partner and James McIntyre, Special Counsel.
