The Supreme Court of New South Wales recently considered the assessment of damages for distress and disappointment when a tour operator failed to deliver the luxury European river cruise experience which the plaintiffs had purchased.
The numerous plaintiffs had purchased various European river cruise holidays from Scenic Tours. The cruises had been marketed as a “once in a lifetime cruise along the grand waterways of Europe” in which passengers would be immersed in luxury and would have a “truly unforgettable journey”.
The cruises in 2013 were unforgettable, but for the wrong reasons. Adverse weather resulted in the plaintiffs having to change vessels, stay in hotels and spend many hours travelling by bus instead of the comfort of a cruise boat.
The plaintiffs sued Scenic Tours alleging that it had failed to provide the luxury European river cruises which they had purchased.
The High Court found that the plaintiffs were entitled to damages and distress for disappointment under the Australian Consumer Law (ACL) (Moore v Scenic Tours  HCA 17). Please click here if you wish to read our bulletin on the High Court’s decision.
Defence relating to reliance (s61(3) of the ACL)
The Court rejected a submission that the plaintiffs did not rely on Scenic Tours’ skill and judgment to provide the advertised cruises. The Court noted that:
- the plaintiffs could not exercise any control over the provision of the cruises or services to be provided;
- the marketing material emphasised that passengers would enjoy a ‘hassle-free holiday’, suggesting that Scenic Tours would exercise its skill and judgment in providing the cruises;
- there was no hint in the brochures that the cruises might not be provided in accordance with what was represented in the brochures;
- when considering the terms and conditions of the contract as a whole, it was not persuaded that a reasonable consumer would understand that any reliance on Scenic Tours’ skill and judgment was not available or that it would be unreasonable to rely on their skill and judgment; and
- the reliance upon Scenic Tours was plain at the time of booking as the choice offered to the intending passengers was whether to book the cruises or not. There was no scope to negotiate an individual tour.
The Court then considered the assessment of the damages to which the plaintiffs were entitled for:
- the difference in value between the tours provided and the prices paid for the tours;
- distress and disappointment; and
- consequential economic loss of airfares (s267(4) of the ACL).
Damages for loss of value of services (s267(3)(b) of the ACL)
Depending on their itineraries, the various cruises were affected to differing extents by the adverse weather.
In assessing damages for the reduction in value of the services provided by Scenic Tours, the Court accepted the evidence of Ms Dianne Butler, who had experience in designing package tours and reviewing the performance of the package tours. Ms Butler assessed the value actually received by the passengers with reference to the number of nights spent on the cruise, and the daily cost of coach travel. Ms Butler then applied a discount to the calculated price to reach the price at which the package could be marketed to a fully informed consumer.
The Court concluded that the measure of each plaintiff’s loss would be based upon the percentage difference between the price paid for the cruise and the total of the base cabin price and value of services actually received.
Damages for distress and disappointment
The Court made the following relevant observations with regard to the assessment process:
- the assessment involves a “comparison between the expectations of the individual traveller and the reality of what that traveller was provided”;
- while each plaintiff was entitled to have their damages assessed on an individual basis to reflect their individual experience, the Court must also have regard to the objective facts about the extent to which each cruise failed to provide the advertised luxury river cruise;
- the assessment of this head of damage is not confined by the Civil Liability Act 2002 (NSW);
- damages for distress and disappointment are not entirely comparable to damages for psychiatric injury in personal injury cases. Inconvenience and discomfort are transitory and do not result in disability; and
- damages should not be for a token or nominal amount. They should be assessed by applying a sense of fairness and justice to the circumstances proved.
The awards of damages ranged from $6,000 (usually for passengers whose cruises had experienced the least reduction in value) to $12,000 (usually for passengers whose cruises had experienced the greatest reduction in value).
Damages for consequential economic loss of airfares (s267(4) of the ACL)
The Court found that plaintiffs who had purchased airfares for the sole purpose of undertaking the cruises were entitled to a full refund of the airfares and taxes paid on the airfares.
Plaintiffs who had undertaken additional travel apart from the cruises had received the full benefit of the airfares and were not entitled to refunds.
Travellers who are disappointed with their package tour or cruise experience still need to demonstrate that there was a breach of the guarantees implied by the ACL. This will depend upon the individual circumstances of each case.
As a risk management strategy, tour operators should review their booking terms and conditions to ensure they clearly set out the circumstances in which cruises or packages may be subject to alteration and the type of changes that may be required. Such provisions may provide a basis to defend claims for breaches of the ACL or at the very least, mitigate claims for damages.
However, for tour providers facing claims by disappointed travellers, the decision provides the following useful guidance:
- travel and tour operators (particularly for overseas destinations) will likely have difficulty in demonstrating that passengers did not rely on their skill and judgment in providing the travel services;
- damages for reduced value of the tour or cruise will be assessed by comparing the price paid for the travel services and the value of the services provided (which will be a matter for expert evidence); and
- damages for distress and disappointment will depend upon the circumstances of each case. While damages in the present case ranged from $6,000 to $12,000, higher awards might be made for claims arising from longer (and more expensive) tours with a high level of disruption.
Ultimately, travel operators cannot control weather events which may impact upon the tours or cruises which they are marketing. However, once it becomes apparent that the tour or cruise will fall substantially short of what has been marketed to passengers, consideration should be given to cancelling the tour and offering a refund or alternative packages. While potentially costly, such measures would be more cost-effective than years of litigation, legal costs, compensation payments and associated negative publicity.
Cancelling a tour is a drastic step and travel operators can be overtaken by uncontrollable events (such as weather or even war) with insufficient time to cancel a tour or cruise. When claims inevitably arise, the most appropriate strategy for travel operators is to engage with the passengers and attempt to resolve the claim quickly and sensibly – as seen in this case, the alternative may be almost a decade of litigation with total legal costs and compensation payments exceeding the cost of an early commercial resolution.
If you have any queries, you are welcome to contact the HWL Ebsworth Lawyers Shipping and Trade team.
This article was written by Matthew Brooks, Partner and James McIntyre, Special Counsel.