Flight Centre v Janice Louw [2011] NSWSC 132

Supreme Court New South Wales

Medium Neutral Citation: Flight Centre v Janice Louw [2011] NSWSC 132 Hearing dates: 17 February 2011 Decision date: 02 March 2011 Before: Acting Justice Barr Decision: See paragraphs [42] and [43] of the judgment. Catchwords: Breach of contract - action for damages for inconvenience, distress and disappointment - whether for personal injuries. Damages for inconvenience, distress and disappointment - whether award governed by Civil Liability Act 2002. Legislation Cited: Civil Liability Act 2002 Supreme Court Act 1970 Cases Cited: Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 Insight Vacations Pty Limited v Young [2010] NSWCA 137; (2010) 268 ALR 570 Jarvis v Swans Tours Limited [1973] QB 233 New South Wales v Corby [2010] NSWCA 27 Sansauer v Vanity Clinic Pty Limited [2007] NSW DC 178 State of New South Wales v Ibbett [2005] NSWCA 445; (2005) 65 NSWLR 168 Category: Principal judgment Parties: Flight Centre Ltd t/as Infinity Holidays (Plaintiff) Janice Louw (First Defendant) Francois Louw (Second Defendant) Representation: Counsel: N Kabilafkas (Plaintiff) M W Anderson (First and Second Defendants) Solicitors: David Smith (Head Legal Counsel Flight Centre Limited) Etheringtons Solicitors (Defendants) File Number(s): 2010/299114

Judgment 1HIS HONOUR: In this summons the plaintiff, Flight Centre Limited, seeks relief under s 69 Supreme Court Act 1970 from the effect of orders made in the Small Claims Division of the Local Court by the third defendant, Local Court Assessor Olischlager (the Assessor) in favour of the first and second defendants, Janice Louw and Francois Louw. 2The plaintiff is a travel agent. Part of its business, which trades as Infinity Holidays, arranges bookings of holiday accommodation and travel. The first and second defendants wished to go on holiday to a tropical resort, so they went to the premises of Infinity Holidays and spoke to an employee. The employee recommended an hotel called Le Meridien at Bora Bora, Tahiti. The first and second defendants accepted the recommendation and bookings were made. The first and second defendants stayed at the hotel from 11 to 22 April 2009. 3On most days during that period construction work was being carried out at the hotel, interrupting the first and second defendants as they rested in their room. The workers distressed them with their noise. They distressed the first defendant by staring at her. Part of the beach, assessed as 33%, was rendered inaccessible by the presence of construction vehicles. The first and second defendants had not been given notice of any of these matters. 4The first and second defendants sued the plaintiff. Their claim was framed in contract but the precise way in which breach was pleaded is of no present importance. Relevantly, the particulars of damage were pleaded thus: a. The Plaintiffs suffered loss, inconvenience and distress, disappointment as a result of the construction that were present every weekday starting Monday 13 April at 9:00am and continued until 4:00pm on a daily basis from Monday to Friday with the resultant noise and eyesore. ... e. The total cost of the accommodation and flights for the Plaintiffs was $14,696. The Plaintiffs incurred further charges for meals and travel insurance. However, the Plaintiffs confine their claim to the jurisdiction of the Small Claims Court and claims $10,000 in damages for breach of contract resulting in inconvenience, distress and disappointment. 5The Assessor heard the case and awarded the first and second defendants damages of $4,898.66. He awarded interest and ordered the plaintiff to pay the costs of the first and second defendants. 6In this summons the plaintiff seeks an order quashing the whole of the decision of the Assessor and an order directing him that there being a verdict and judgment for the plaintiff. 7It was submitted by counsel for the first and second defendants that I ought not to deal with the merits of the summons but dismiss it in my discretion. That, it was submitted, was justified because the amount awarded by the Assessor was small and because even if the Assessor erred in law his judgment was not binding on other assessors and courts likely to entertain suits for damages for inconvenience, disappointment and distress. 8I have decided that I should deal with the summons on its merits. I take into account the amount involved and the non-binding nature of the assessment. However, it seems to me that there are other factors which combine to justify a hearing. First, as was common ground, there is no other method of review, no right of appeal. Limited rights of appeal exist from the General Division of the Local Court to the District Court, but not from the Small Claims Division. Secondly, the summons seemed to me to raise questions likely to recur from time to time, if not frequently, in claims brought before the Local and other courts. Counsel for the plaintiff gave examples of cases - I will not list them - decided according to the principles for which he contended. They were determined in the District Court, the Local Court and in specialist tribunals. I am aware also of an unreported District Court decision which appears to support the correctness of the Assessor's decision and to which I shall refer in this judgment. So the matters raised appear to me to be of general importance and to justify this court's considered decision. 9The plaintiff argued its case on two grounds. The first was stated as follows: 1. There is an error of law apparent on the face of the record of the proceedings as in making his decision in relation to the First and Second Defendants, the Third Defendant failed to limit the award of damages in accordance with section 16 of the Civil Liability Act 2002 (NSW). 10A question of the applicability of the Civil Liability Act , 2002 (the Act) was raised before the Assessor, who stated that under the general law a plaintiff may recover damages where the object of the contract sued on was to provide pleasure and enjoyment or freedom from mental distress. The Assessor referred to Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344. In that case it was held that the plaintiff, whose tour ship sank, could recover damages for disappointment and distress suffered as a consequence. The Assessor also referred to Jarvis v Swans Tours Limited [1973] QB 233 as an example of a case where the plaintiff had recovered damages for disappointment and distress caused by the breach of a contract to provide a stipulated holiday. Of course, in neither of those cases had the plaintiff to show that the Act did not apply. 11The Assessor went onto consider Insight Vacations Pty Limited v Young [2010] NSWCA 137; (2010) 268 ALR 570 and concluded that it was not binding upon him because in that case the plaintiff suffered personal injuries, whereas in the case before the Assessor the plaintiff had suffered no personal injury. The Assessor concluded thus: 20. The Civil Liability Act 2002 was introduced to address a number of perceived increases in awards for damages, primarily arising from personal injury claims. The Act does not restrict all claims for damages. In respect to claims for distress and disappointment claims might only be restricted where they fall within the head of damages referred to as pain and suffering as a consequence of a personal injury claim. In the present case, there being no personal injury suffered, the issue as to whether damages for distress and disappointment can be recovered is determined under the principles outlined in the Baltic Shipping Co case. 12By s 3, "non-economic loss" means any one or more of the following: (a) pain and suffering, (b) loss of amenities of life, (c) loss of expectation of life, (d) disfigurement. 13Part 2 of the Act is entitled P ersonal injury damages . By s 11: "injury" means personal injury and includes the following: (a) pre-natal injury, (b) impairment of a person's physical or mental condition, (c) disease. "personal injury damages" means damages that relate to the death of or injury to a person. 14Relevantly, s 11A governs the application of Pt 2 in these words: (1) This Part applies to and in respect of an award of p e rsonal injury damages, except an award that is excluded from the operation of this Part by section 3B. (2) This Part applies regardless of whether the claim for the damages is brought in tort, in contract, under statute or otherwise. (3) A court cannot award damages, or interest on damages, contrary to this Part. 15As to s 11A(1), none of the exclusions provided for by s 3B is relevant here. 16Relevantly, s 16 provides: (1) No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at least 15% of a most extreme case. 17It was submitted for the plaintiff that s 16 applied to the assessment of damages in the present case. The award made by the Assessor was stated to be for "inconvenience, distress and disappointment". It was submitted that that constituted the "impairment of a person's... mental condition" and so was for injury as defined in s 11. By the same section, the damages awarded were therefore personal injury damages. By s 11A(1), Pt 2 applied to an award for personal injury damages. S 16, which lies within Pt 2, therefore applied to the award made in favour of the first and second defendants. 18In State of New South Wales v Ibbett [2005] NSWCA 445; (2005) 65 NSWLR 168 a police officer for whose actions the State of New South Wales was responsible assaulted the respondent by acting aggressively towards her and pointing a pistol at her. She sued in the District Court and recovered an award of damages including damages for the assault. The award contained a component for exemplary damages, but the primary judge declined to make an award for aggravated damages. S 3B(1)(a) of the Act provided that the Act did not apply to civil liability or to awards of damages in respect of an intentional act done with intent to cause injury or death. S 21 provided that in an action for the award of personal injury damages a court could not award exemplary or punitive damages or damages in the nature of aggravated damages. In the appeal and cross-appeal to the Court of Appeal the question arose whether s 3B(1)(a) applied, so as to bring s 21 into effect, and there was discussion about whether anxiety and distress might constitute impairment for the purposes of s 11. Ipp JA said this at [122] - [125]: 122 The damages sustained by Mrs Ibbett were, according to the trial judge's findings, caused by "anxiety and distress". The State contended that s 3B(1)(a) did not apply because the anxiety and distress did not amount to an "injury" within that section. 123 The State submitted that s 11 supported its argument. Section 11 provides that in Pt 2 "personal injury damages means damages that relate to the death of or injury to a person," and that, in Pt 2: "Injury means personal injury and includes the following: (a) pre-natal injury, (b) impairment of a person's physical or mental condition, (c) disease." The State contended that the meaning of injury as defined in s 11 should be applied to the meaning of injury in s 3B(1)(a). 124 I would not uphold this submission. In my view, anxiety and distress would be an "impairment" of a person's mental condition in accordance with the ordinary meaning of "impairment", as the word is used in s 11. 125 In my opinion, irrespective of whether the ordinary meaning of the word is attributed to "injury", or whether it is given the meaning defined in s11, the word is wide enough to encompass anxiety and stress. 19Basten JA said this at [211] - [212]: 211 The Plaintiff sought to escape from these questions by arguing that her award was not an award of "personal injury damages", because it did not relate to injury, for the purposes of s 21. Although "injury" is defined in s 11 to include "impairment of a person's physical or mental condition", that terminology, she argued, was not intended to include impairment constituting something less than a recognised psychiatric condition. The trial judge held, in awarding damages with respect to the assault: "Even in the absence of evidence that the assault caused any medically (including psychiatrically) identifiable injury, the anxiety and distress caused by the assault should be compensated by an appropriately substantial award of general damages ..." There being no recognized psychiatric illness, there was, the Plaintiff argued, no impairment of her mental condition. 212 There may be a doubt as to whether limiting the concept of "impairment of mental condition" to an impairment involving a recognised psychiatric illness accords with the general understanding of the term "impairment" or with its use in the statute. In ordinary usage, the term "impairment" connotes a diminution of an antecedent state of affairs or a departure from an objective standard. In discrimination law the term is used to describe departure from a standard; in tort law, it is used to describe departure from a state of affairs caused by the act of the tortfeasor. The ordinary meaning of the term may not reflect a distinction drawn by the law between emotional distress and a psychiatric condition. (As to the nature of the distinction see generally Tame v New South Wales (2002) 211 CLR 317 at [285]-[296] (Hayne J).) 20In State of New South Wales v Corby [2010] NSWCA 27 the Court of Appeal was concerned with assaults by persons for whose actions the state of New South Wales was responsible. The plaintiff below was an offender in custody. S 26C of the Act precluded the recovery of damages by such a person who had as a consequence suffered a degree of impairment less than 15%. The plaintiff accepted that he could not cross that threshold but maintained an entitlement to aggravated and exemplary damages. The State of New South Wales, the defendant, moved to strike out the statement of claim but the court held that s 26C did not preclude and award of aggravated or exemplary damages. The State appealed. Basten JA, with whom the other members of the Court of Appeal agreed, said at [47]: 47 In the present case, the plaintiff sought to contend that even aggravated damages fell outside the concept of "personal injury damages" in the Civil Liability Act . However, to reach that conclusion, it was necessary to adopt a definition of "injury" which did not include matters such as humiliation and injury to feelings. That position is untenable. The general damages available for compensation for tortious conduct include damages for pain and suffering. There is no basis for limiting pain and suffering to physical suffering. Accordingly, there is no ready basis for distinguishing between an assessment of general damages and aggravated damages. As explained in Ibbett, aggravated damages are a form of general damages. 21In Insight Vacations Pty Limited v Young the respondent sued a tour company for the consequences of a collision in which her coach was involved. The primary judge compensated her for frank injuries but made a further award for her disappointment at being unable to enjoy the rest of the tour on account of the collision. One of the issues on appeal was whether the award for disappointment was erroneous. It was held by Spigelman CJ and Basten JA that grief, anxiety, distress and disappointment were elements of pain and suffering within the definition of non-economic loss in s 3 of the Act and that the primary judge erred in separating out those elements from other elements of non-economic loss. 22Spigelman CJ said this at [15]: 15 The distinction drawn by the trial judge between damages for 'disappointment' and damages for 'distress' was unpersuasive. To excise one element so as to avoid the constraints imposed by s 16 of the Civil Liability Act is an artificial exercise that does not accord with the definition of non-economic loss. [79] [127] [129] Kokl v Kablar [1989] NSWCA 127; Pascoli v Spittle (1989) 9 MVR 573, considered. 23and at [78] - [79]: Damages 78 In view of the conclusion to which I have come it is not strictly necessary for me to deal with the appeal on damages. However, because of the possibility I advanced in State of New South Wales v Ibbett [2005] NSWCA 445; (2005) 65 NSWLR 168 at [21]-[22], I should indicate that I accept the reasoning of Basten JA and Sackville AJA on this issue. I accept Basten JA's analysis of the applicability of the reasoning in State of New South Wales v Corby [2010] NSWCA 27 and of the reasoning of Ipp and Basten JJA in Ibbett. I prefer the characterisation that grief, anxiety, distress and disappointment are elements of pain and suffering, rather than of "loss of amenities of life", within the definition of "non economic loss" in s 3 of the Civil Liability Act. 79 I agree with Basten JA that the distinction between "distress" and "disappointment" drawn by the trial judge is unpersuasive. I agree that his Honour erred in awarding damages for disappointment. 24Basten JA said at [109]: 109 The second matter challenged in relation to damages was the inclusion of an amount of $8,000 on account of disappointment and inconvenience, in diminution of the contractual purpose, which was to provide a holiday, pleasure and relaxation, being matters compensable in accordance with Baltic Shipping Company v Dillon [1993] HCA 4; 176 CLR 344. The applicant did not seek to challenge the existence of such a head of damages; rather, it complained that the award of an additional amount for such a factor contravened s 16 of the Civil Liability Act. Section 16 provided that "the damages for non-economic loss are to be determined in accordance with the following Table", specifying a proportion of a maximum amount, depending upon an assessment of the suffering of the plaintiff as a proportion of a most extreme case. 25and at [113]: 113 One question raised by the definitions in s 11 is whether injury to feelings, disappointment, inconvenience, or any other similar state of affairs, can constitute an "impairment" of a person's mental condition. Secondly, even if the injury does not fall within the terms of the definition, the definition is inclusive and not necessarily comprehensive. Thirdly, damages for a particular loss may constitute "personal injury damages" because they are damages that "relate to" an injury to a person and may relate to another injury (such as a physical impairment) which does fall within the definition. Fourthly, and to the contrary effect, some forms of monetary compensation for injury may not constitute "personal injury damages", because they are not of a kind usually recoverable on an action in negligence. 26In the present summons it was submitted by counsel for the plaintiff that these authorities supported its contention, namely that the ordinary and natural meaning of the words "impairment of a person's... mental condition" as used in s 11 embraces inconvenience, distress and disappointment. That being so, the Assessor was obliged to observe the requirements of Pt 2, including s 16. Since he did not do so there was an error of law. 27Counsel for the first and second defendants submitted that, as the Assessor recognised, there was a claim only in contract, and that damages for foreseeable disappointment and distress were therefore recoverable. Counsel referred to Baltic Shipping Co v Dillon . It was submitted that there was no claim for personal injury and that Insight Vacations Pty Ltd v Young was distinguishable because in that case there was physical injury. Counsel relied on the repeated statement of the Assessor that he was not dealing with an action for personal injury. 28Counsel referred to an unreported judgment of the District Court in Sansauer v Vanity Clinic Pty Limited [2007] NSW DC 178. The plaintiff had paid for a series of applications of heat to her face intended to remove blemishes. The blemishes were not corrected but increased. Judgment had been entered for the plaintiff and it fell to the court to assess damages. Counsel appeared for the plaintiff but the hearing was ex parte. Accordingly the court was left without a contradictor. The question relevant to the present summons was dealt with thus: 8. I turn now to the other head of damage claimed, namely damages for disappointment and distress. 9. The first matter for determination is whether the recovery of such damages is in any way limited by the Civil Liability Act 2002 . In my view, that Act does not apply. The damages claimed are not damages that relate to an injury and are not, therefore 'personal injury damages' within the meaning of s 11A of that Act. 10. The next matter for consideration is whether it is appropriate to award damages of this nature, for breach of contract. I am satisfied that the damages claimed fall within that class of damage contemplated by the principles enunciated in Baltic Shipping Co v Dylan (1993) 176 CLR 344. 29The lack of assistance the District Court received in that matter explains the brevity of the relevant part of the judgment. I do not find the decision of assistance. 30In response to these submissions counsel for the plaintiff acknowledged that the judgments of the Court of Appeal were not precisely in point and therefore not binding, but submitted that they were persuasive. 31It seems to me that much assistance is to be gained from the several remarks of the members of the Court of Appeal in the cases cited. In my opinion the inconvenience, distress and disappointment experienced by the first and second defendants constituted non-economic loss for the purposes of s 3, being pain and suffering. In my opinion they constituted impairment of the mental condition of each of the first and second defendants and so amounted to personal injury. It follows that the assessor was obliged to ask himself, in accordance with s 16, whether the severity of the non-economic loss was at least 15% of a most extreme case. He did not do so. The plaintiff has established that there was an error of law and has made good its case on the first ground. 32The second ground is stated thus: There is an error of law apparent on the face of the record of the proceedings as in making his decision in relation to the First and Second Defendants, the Third Defendant failed to limit the award of damages in accordance with section 31 of the Civil Liability Act 2002 (NSW). 33Part 3 of the Act is entitled Mental harm . It contains these sections. 34S 27 is as follows: "consequential mental harm" means mental harm that is a consequence of a personal injury of any other kind. "mental harm" means impairment of a person's mental condition. "negligence" means failure to exercise reasonable care and skill. "personal injury" includes: (a) pre-natal injury, and (b) impairment of a person's physical or mental condition, and (c) disease. "pure mental harm" means mental harm other than consequential mental harm. 35Relevantly, s 28 is as follows: (1) This Part ... applies to any claim for damages for mental harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise. 36S 31 is as follows: There is no liability to pay damages for pure mental harm resulting from negligence unless the harm consists of a recognised psychiatric illness. 37It was submitted that the first and second defendants suffered pure mental harm and that it resulted from negligence. Since there was no finding by the assessor that the first and second defendants suffered from any recognised psychiatric illness, therefore, there was no liability in the plaintiff to pay damages. 38It seems to me for the reasons that I have given that the first and second defendants suffered an impairment of their mental condition. By s 27, therefore, they suffered mental harm. There is no question of consequential mental harm, since they did not suffer personal injury of any other kind. It follows that they suffered from pure mental harm. By s 31 there was no liability to pay them damages resulting from negligence unless the harm consisted of a recognised psychiatric illness. Pure mental harm can exist which does not consist of a recognised psychiatric illness: see State of New South Wales v Ibbett per Ipp JA at [126] and Basten JA at [213] 39In my opinion the pure mental harm suffered by the first and second defendants resulted from negligence constituted by the plaintiff's failure to exercise reasonable care and skill. The assessor said this at paras [11]-[13] of his judgment: 11 In the present case the plaintiffs approached the defendant seeking advice as to an appropriate holiday destination. It was not a case where the plaintiffs had determined their course of travel and simply required the defendant to make appropriate arrangements. The plaintiffs actively sought the advice of the defendant and relied upon the skill, knowledge and experience of the defendant. The plaintiffs informed the defendant of that they were after a unique and special tropical holiday, that they had not been on this type of overseas holiday previously. It is apparent that they relied almost heavily upon the advice provided by the defendant in firstly changing the time of travel from February to April at the suggestion of the defendant and then following the recommendation given by the defendant to stay at Le Meridien Hotel at Bora Bora in Tahiti. The defendant has not provided any evidence suggesting that, at the time the contract was formed, it was not aware that the plaintiffs were relying upon the skill, knowledge and experience in arranging a holiday that met the plaintiffs requirements. 12 In the circumstances, the court is satisfied that the terms alleged were implied in this contract. Flight Centre's subsidiary "Infinity Holidays" described itself on its website as "providing Australian travellers with quality local and international holidays for over 12 years. We cover a wide range of destinations, including an extensive range of local Australian getaways, exotic Asian escapes, relaxing South Pacific Island retreats, explore North America and lose yourself discovering Europe, Britain and Ireland." It is apparent that it held itself out to be an expert in holiday destinations and the plaintiffs relied on that purported expertise. If it had not been for the purported expertise of the defendant, it is likely that the plaintiffs may have made arrangement through a different travel agency. In that sense the implied term was both necessary and reasonable. Based on the evidence given by Mr Louw it seems that it would have been apparent to both parties that the plaintiff was providing a recommendation based on information provide by the plaintiffs and the defendant effectively warranted that the holiday would meet the plaintiffs' requirements and purpose. 13 The court is satisfied that the defendant breached the implied term. It failed to provide a holiday destination that met the plaintiffs' requirements that the holiday was to be a relaxing and tranquil tropical resort. The defendant should have been aware of the construction work at the Hotel through its subsidiary. It should have known that the construction work had the potential to detract from the aesthetic surroundings and potentially compromise the relaxing experience of the location. 40In my opinion those statements amount to a finding that the plaintiff failed to take reasonable care and skill in giving its advice. That was negligence as defined by s 27. It follows that there was no liability for the harm suffered by the first and second defendants and that the Assessor erred in law in awarding damages. The plaintiff has made good the second ground. 41I should make clear that if the plaintiff had succeeded on the first ground but not the second I would not have remitted the matter to the Assessor for further consideration since the first and second defendants could not cross the threshold of s 16. 42I make the following order: (1)Quash the orders of the Assessor directing a verdict and judgment for the plaintiffs in the Local Court in the sum of $4,898.66 together with costs and interest and substitute therefor an order that a verdict and judgment for the defendant be entered in the Local Court. 43The plaintiff did not ask for an order that the first and second defendants pay its costs thrown away in the Local Court. I make no such order. The plaintiff did not ask for the costs of the summons. I make no such order.