Insight Vacations Pty Ltd v Young [2011] HCA 16 (11 May 2011)

I refer you to the summary of the judgment in relation to the facts and issues, and in particular, whether a contract made pursuant to s.5N of Civil Liability Act 2002 (NSW) limiting liability for “recreational services” extra territorially could exclude the operation of s.74(1) of the Trade Practices Act 1974 (Cth.). The claimant was successful on liability. The High Court dismissed the defendant’s appeal.


Did s 74(2A) pick up s 5N?


A contract for the supply of transport services to a tourist on holiday being a contract for services to be supplied in connection with or incidental to the pursuit by the tourist of what the Civil Liability Act identified as a recreational activity, would s 74(2A) of the TPA give effect to an exemption clause in that contract? There are two reasons for concluding that the exemption clause in Insight’s contract with Mrs Young was not given effect by s 74(2A): one founded in Div 2 of Pt V of the TPA (ss 66-74), the other in s 5N of the Civil Liability Act.


Section 74(2A) of the TPA hinged about the identification of a law of a State or Territory as one which, on being picked up and applied as a surrogate federal law, “applies to limit or preclude liability for the breach” of either the warranty about due care and skill implied by s 74(1) or the warranty about fitness for purpose implied by s 74(2). It provided that the relevant State or Territory law applies “in the same way as it [that is, the State or Territory law] applies to limit or preclude liability, and recovery of a liability, for breach of another term of the contract”.


This drafting may be contrasted with s 68A and s 68B of the TPA. Section 68A was inserted in the Act in 1977[12], several years before s 74(2A) was inserted; s 68B was inserted in 2002[13].


Both s 68A and s 68B (and s 74(2A)) are to be understood against the background provided by s 68 of the TPA. Section 68 provided, in effect, that any term of a contract that purports to exclude, restrict or modify the application of, the exercise of a right conferred by, or any liability for breach of a condition or warranty implied by any of the provisions of Div 2 of Pt V of the TPA, or is a provision that has that effect, is void. Sections 68A, 68B and 74(2A) qualified the general avoiding provisions made by s 68. More particularly, s 68A and s 68B qualified s 68 by excluding from its avoiding effect a term of a contract that meets the description given in the relevant provision. Thus s 68A(1) excluded from the general avoidance worked by s 68 a term of a contract for supply of certain kinds of goods or services that limits the liability for breach of a condition or warranty (other than the undertakings as to title, encumbrances and quiet possession implied by s 69) to liability to replace or repair goods (or pay for repair or replacement) or, in the case of services, to liability to supply the services again (or pay for supplying the services again). The exclusion worked by s 68A(1) was itself subject to the exception identified in s 68A(2) but that need not be examined.


Section 68B qualified the general avoiding effect of s 68(1) in respect of a term of a contract (made after s 68B commenced operation) for the supply of “recreational services” by excluding from that general avoiding effect a term that excludes, restricts or modifies the application of s 74 in respect of death or personal injury. Section 68B(2) defined “recreational services”. That definition differed from the definitions of “recreational activity” and “recreation services” in the Civil Liability Act and no party submitted that s 68B was engaged in this matter.


For present purposes it is important to notice that both s 68A and s 68B dealt directly with a term of a contract (where the term meets certain criteria). By contrast, s 74(2A) dealt with a State or Territory law which satisfies relevant criteria. In these circumstances, s 74(2A) should not be construed as picking up and applying as a surrogate federal law a provision, such as s 5N of the Civil Liability Act, which in its terms does not limit or preclude liability for breach of contract. In terms, s 5N does no more than permit the parties to certain contracts to exclude, restrict or modify certain liabilities[14] and limit the operation of any other part of the written law of New South Wales that would otherwise apply to avoid or permit avoidance of such a term[15]. That is not a law of the kind described in s 74(2A) of the TPA. Section 68 therefore operated to render the exemption clause void in so far as the clause applied to the warranties implied by s 74.

Did s 5N apply to this contract?


As already indicated in these reasons, s 5N of the Civil Liability Act did not apply to the particular contract Mrs Young made with Insight. The reference in s 5N(1) to “a term of a contract for the supply of recreation services” should be read as subject to a geographical limitation to its application. Although the contract between Mrs Young and Insight was governed by the law of New South Wales it was to be performed wholly outside the State.


Section 12(1)(b) of the Interpretation Act 1987 (NSW) (“the Interpretation Act“) provided that:

“In any Act or instrument:

(b) a reference to a locality, jurisdiction or other matter or thing is a reference to such a locality, jurisdiction or other matter or thing in and of New South Wales.”

This provision, which is, of course, subject to contrary intention[16], may be reason enough to read s 5N as subject to a geographical limitation. Whether s 12(1)(b) has this consequence would require consideration of s 31(1) of the Interpretation Act and its provision that Acts are to “be construed as operating to the full extent of, but so as not to exceed, the legislative power” of the State Parliament. But as was explained by Kitto J in Kay’s Leasing Corporation Pty Ltd v Fletcher[17], the question of geographical limitation arises regardless of the engagement of a provision such as s 12(1)(b) of the Interpretation Act[18]. Section 12(1)(b) does not identify which of the several possible elements of s 5N is to be read as a “matter or thing in and of New South Wales”. So, is it the reference to a “contract” in s 5N that is limited? Is the reference to a “contract” to be read as limited to contracts that are made in the State, or to contracts, wherever made, whose proper law is that of the State? Or is there some geographical limitation to be applied by reference to the compound notion of “a contract for the supply of recreation services”? That is, is s 5N limited to those supplies that are to be made in New South Wales?



As Kitto J pointed out in Kay’s Leasing[19], it is necessary to reconcile the generality of the language used in a provision like s 5N with the geographical limitation to which the legislative power of a State parliament is subject. And that reconciliation must be undertaken upon a consideration of the context and the subject matter of the Act in question.


In some cases, of which Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society[20] is, perhaps, the pre-eminent example, the reconciliation is achieved by limiting the operation of the relevant provision to contracts whose proper law is that of the enacting State. But that is not the only form of geographical limitation that may be adopted and it may not be the form of limitation that an Act, on its proper construction, should be found to bear. As Kitto J pointed out in Kay’s Leasing[21]:

“Such cases [as the Wanganui-Rangitikei case] have dealt with legislation modifying or making void contractual rights and obligations of specified descriptions; but in each instance the modification or avoidance was enacted as an end in itself and not as a sanction for contravention of statutory requirements.” (emphasis added)

It could be presumed, in circumstances of the kind considered in the Wanganui-Rangitikei case, that the legislative intention was to affect rights and obligations the discharge of which was governed by the law of the enacting country (or State). And in such a case to construe the relevant Act as applying only to contracts whose proper law was the law of the enacting country or State would take proper account of the Act’s context and subject matter.


The statutory provisions at issue in Kay’s Leasing avoided an agreement for non-compliance with statutory requirements. To hold, in that case, that the provision was engaged only in respect of contracts whose proper law was that of the enacting State (New South Wales) would have permitted easy evasion of the reach of the avoiding provision (by the parties contracting for a different proper law)[22]. Accordingly, Kitto J concluded[23] that the contracts to which the provisions in question in Kay’s Leasing were directed should be understood as being contracts entered into in New South Wales regardless of what the parties chose to identify as the proper law of the contract. And in Akai Pty Ltd v People’s Insurance Co Ltd[24], the Court considered a provision of the Insurance Contracts Act 1984 (Cth) that sought to deal directly with the problem identified by Kitto J by taking, as its criterion of operation, the law that was, or absent express contractual provision to the contrary would be, the proper law of the contract.


More recently, in Old UGC Inc v Industrial Relations Commission (NSW)[25], this Court considered a question about the territorial reach of unfair contract provisions of the Industrial Relations Act 1996 (NSW). Six members of the Court held[26] that because the central conception upon which the relevant provisions fastened was the performance of work in an industry, and the work in question in that case was performed within the jurisdiction, the fact that the relevant contract was not governed by the law of New South Wales was irrelevant and that no question of reading down the operation of the section according to territorial limitations arose.


What geographical limitation is there to the operation of the Civil Liability Act? The central focus of the whole of Pt 1A of that Act is liability for negligence (an act or omission involving a failure to exercise reasonable care and skill). As noted earlier, s 5A(1) provides that Pt 1A applies to any claim for damages for harm resulting from negligence, regardless of how the claim is framed. As also noted earlier, one natural geographical limitation that could be given to s 5A(1) is to read “any claim” as “any claim in the courts of New South Wales”, leaving the applicability of the provisions of the Act in a claim brought in a court of another jurisdiction to the application of principles governing the choice of law[27]. Or, “any claim” could be read as “any claim where the law governing that claim is the law of New South Wales”. It is not necessary in this case to decide whether those are the only available constructions or to choose between them. The relevant geographic limitation is to be identified in the provisions of Div 5 of Pt 1A.


Unlike the statutory provisions in issue in the Wanganui-Rangitikei case, Div 5 of Pt 1A of the Civil Liability Act does not modify or make void contractual rights and obligations of specified descriptions. Unlike the provisions in issue in Kay’s Leasing, Div 5 of Pt 1A does not seek to avoid any agreement for non-compliance with statutory requirements. Rather, Div 5 of Pt 1A, and s 5N in particular, is directed to limiting liability for negligence in relation to recreational activities, among other things by permitting parties to contracts to stipulate effectively for the exclusion, restriction or modification of any liability to which the Division applies that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill.


In considering Div 5 of Pt 1A it is first to be recalled that s 5J(1) limits the application of the Division to “liability in negligence for harm to a person (the plaintiff) resulting from a recreational activity engaged in by the plaintiff”. Some, but not all, elements of the definition of “recreational activity” are identified in s 5K by reference to where the activity occurs: “any pursuit or activity engaged in at a place (such as a beach, park or other public open space) where people ordinarily engage in” certain kinds of pursuit or activity. There is no reason to read those references to place as extending beyond places in New South Wales. Taken together, ss 5J(1) and 5K point decisively to reading s 5N as reaching all cases in which the contract in question (wherever it is made and by whatever law it is governed) is for the supply of recreation services in New South Wales.


That construction of the provision reads “contract for the supply of recreation services” as a compound expression. The relevant geographical limitation of the compound expression directs attention to the place of performance of the contract. Where are the relevant recreation services to be supplied? And once that reading is adopted, it follows that it is neither necessary nor appropriate to construe the sub-section as importing any other geographical limitation (or extension) of its operation. More particularly, if s 5N(1) is read, as it should be, as a provision which is hinged about the place of performance of the relevant contract, there is no satisfactory basis upon which the provision could be construed as including, in the class of contracts to which s 5N(1) applies, contracts that are to be performed outside New South Wales but whose governing law is the law of that State. Reading s 5N(1) as hinging on the place of performance of the contract best gives effect to the purposes and text of the provision when it is read in its statutory context.


Although it is not necessary to decide the final question identified at the start of these reasons (about the proper construction of the exemption clause in the contract between Mrs Young and Insight), it is desirable to say something shortly about that matter.

The exemption clause


The text of the clause was set out earlier. It will be recalled that the first part of the clause read: “Where the passenger occupies a motorcoach seat fitted with a safety belt” (emphasis added). That element of the clause should be given its ordinary meaning[28]. It limits the times to which the clause applies to the times when the passenger occupies a seat. That is, it should be read as referring only to times when the passenger is seated, not to times when the passenger stands up to move around the coach or to retrieve some item from an overhead shelf or for some other reason. The contract of carriage did not require passengers to remain seated at all times while the coach was in motion. The provision of a lavatory at the rear of the coach shows that the operator accepted that a passenger could, and sometimes would, get out of his or her seat.


If the introductory words of the exemption clause had omitted the word “seat”, it might have been possible to say that the exemption clause applied to any occasion when the passenger was aboard (or “occupie[d]”) a motorcoach fitted with seat belts, regardless of whether and why the passenger got out of the seat. But that is not how the clause was cast. The words “occupies a motorcoach seat” should be understood as meaning sitting in the seat and able to wear the safety belt. Mrs Young was not sitting in her seat when she fell. The exemption clause did not apply.


The appeal should be dismissed with costs.


Brisbane Barrister – David Cormack

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