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Mrs Young claimed that Insight Vacations had breached an implied duty to act with due care and and skill under section 74(1) of the Trade Practices Act 1974 (TPA) (now the Competition and Consumer Act 2010) after she was injured whilst travelling on a motorcoach as part of the package purchased through Insight Vacations. Despite the fact that there was an exclusion of liability clause in the contract between the parties, the High Court found that Insight Vacations was liable to Mrs Young.
The case is yet another salutary lesson on the importance of carefully crafting exclusion clauses - a principle that applies as much in technology contracting as it does to contracts for travel or other services.
The (unfortunate) facts
Mrs Young was travelling around Europe with her husband on a motorcoach. Somewhere between Prague and Budapest, she stood up to retrieve something from her bag which was stowed in the overhead luggage shelf. The coach braked suddenly; she fell backwards and suffered injury.
She sued Insight Vacations in the District Court of NSW, asserting that the company was liable for her injuries because it had breached an implied term in the contract between them that it would render services with due care and skill.
In response, Insight Vacations sought (amongst other things) to rely on an exclusion clause contained in the contract between the parties. The clause stated:
Where the passenger occupies a motorcoach seat fitted with a safety belt, neither the Operators nor their agents or co-operating organisations will be liable for any injury, illness or death or for any damages or claims whatsoever arising from any accident or incident, if the safety belt is not being worn at the time of such accident or incident.How did the High Court construe this clause?
The High Court did not find it necessary to finally decide whether Insight Vacations could rely on the exclusion clause as drafted. This is because it knocked the exclusion clause out for other reasons (namely, it found, in essence, that the exclusion clause was rendered ineffective because of section 68 of the TPA).
However, as courts sometimes do, it went on to consider the effectiveness of the clause (as drafted) anyway.
The Court focussed on the first part of the clause: 'Where the passenger occupies a motorcoach seat fitted with a safety belt' [emphasis added]. It held that these words should be given their ordinary meaning - with the result that the exclusion clause would only apply to those times where the passenger occupies his or her seat. That is, the clause did not operate protect Insight Vacations from liability where a passenger stands up to move about the coach or retrieve some item from the overhead shelf.
It observed that, if the contract had omitted the word 'seat', things might have been different (that is, the exclusion clause might have applied whether Mrs Young was seated or not). But this was not how the clause was drafted. Quite simply, Mrs Young was not sitting in her seat when she fell - and so the exclusion clause did not apply.
Implications for technology contracting
This is a clear example of how courts will read down exclusion clauses where they can (particularly where personal injury or death is involved).
If you are a supplier of technology goods or services, you should carefully consider your limitation and exclusion clauses. Ask yourself: are they too narrowly cast or ambiguous? Do they expressly refer to all of the heads of liability that you wish to completely exclude (for example, loss of profit, loss of revenue, loss of customers, loss of goodwill and loss of data)? Do they take into account recent changes to the Competition and Consumer Act 2010 (formerly the Trade Practices Act)?
And if those clauses have been hanging about in your contracts for a while (a bit like old luggage?), perhaps it's time to revisit them.
Partner: Paul Kallenbach
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