Exclusion clauses: being too specific could unseat your case

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

This recent High Court decision shows that care is needed when drafting an exclusion clause so that the circumstances in which it applies are not defined too narrowly. Otherwise, it may work against the party seeking to rely on the clause.

Mrs Young purchased a European coach-tour package from Insight Vacations (Insight). Mrs Young was injured whilst on tour. She was standing in the tour bus when it braked suddenly.

Mrs Young commenced proceedings in New South Wales on the basis that it was an implied term of her contract that the services supplied would be rendered with due care and skill. This had not occurred and, as a result, she had been injured.

Mrs Young succeeded at trial and was awarded damages of $22,371 with costs. Insight appealed to the Court of Appeal of the Supreme Court of New South Wales, successfully reducing the damages awarded to $11,500, but its appeal on liability was dismissed. By way of special leave, Insight appealed to the High Court.

It was not disputed that section 74(1) of the former Trade Practices Act 1974 (Cth) (TPA) implied a term that the supply of the coach tour services be rendered with due care and skill.

However, Insight argued that:

1. Section 74(1) TPA was subject to section 5N of the Civil Liability Act (NSW) (CLA) (there is no equivalent Queensland provision), which excludes liability for breaches of contract in connection with “recreation services”. Leaving aside whether the tour package was a supply of “recreation services”, the court found that section 5N of the CLA did not apply because the supply of services was wholly outside New South Wales, which meant the CLA could not apply.
2. The following exemption clause in its contract with Mrs Young applied:

Where the passenger occupies a motorcoach seat fitted with a safety belt, neither the operators nor their agents or cooperating 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. ” (our emphasis)

Mrs Young was travelling on a coach that had a safety belt, but the High Court held the exemption clause did not apply and Insight was therefore liable for her injuries. By using the word “seat” with reference to when the exemption applied, Insight had limited the exclusion only to situations where the passenger was seated. Had Insight worded their exemption clause so that it was not so narrow, for example by removing the word “seat”, then the exemption may have applied to exclude liability for injuries whenever the passengers were on (“or aboard”) a motorcoach fitted with a safety belt.

While it is important that an exclusion clause avoids ambiguity by being clearly expressed, this case shows how being too specific may limit liability farther than intended.

For further information please contact Cooper Grace Ward team members Priya Panwar, Gillian Bristow or Brady Cockburn.