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Balendra, Kavita --- "Recreational activities and exclusion clauses" [2017] PrecedentAULA 36; (2017) 140 Precedent 42

RECREATIONAL ACTIVITIES AND EXCLUSION CLAUSES

By Kavita Balendra

Imagine for a moment that there is a provider of recreational services. Perhaps they provide boat or motorcycle rides, or perhaps they provide some sporting services. Someone is injured while using these services. The injured person makes a claim. The provider believes that they have a contractual waiver that specifically excludes liability for personal injury and therefore they are not liable. But are they?

This article examines the particular issues that arise when a recreational service provider seeks to rely upon contractual waivers. Recent decisions involving claims under the Australian Consumer Law (ACL) (and its earlier iteration, the Trade Practices Act 1974 (Cth) (TPA)) for personal injury suffered during participation in recreational activities (focusing in particular on the position in NSW) have strictly applied the ACL, and limited the application of waivers that were not carefully drafted. While the article does not provide an exhaustive examination of liability under the Civil Liability Act 2002 (NSW) (CLA), it does examine briefly how the ACL interacts with the CLA.

WHY DOES THE ACL APPLY TO RECREATIONAL SERVICE PROVIDERS?

The object of the Competition and Consumer Act 2010 (Cth) (CCA), which supersedes theTPA, is ‘...to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection’.^[1] Its application is therefore necessarily broad.

In order to be able to enliven the consumer protections provided by the CCA as well as the ACL found, bewilderingly, in Schedule 2 of the CCA, it is first necessary to show that a person relying on the protections is in fact a consumer.

Section 3(3) of the ACL defines a consumer of services as follows:

(3) A person is taken to have acquired particular services as a consumer if, and only if:

(a) the amount paid or payable for the services, as worked out under subsections (4) to (9), did not exceed:

(i) $40,000; or

(ii) if a greater amount is prescribed for the purposes of subsection (1)(a) —that greater amount; or

(b) the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.

The term ‘acquired’ is defined in s2 of the ACL as follows:

‘acquire’ includes:

(a) in relation to goods—acquire by way of purchase, exchange or taking on lease, on hire or on hire-purchase; and

(b) in relation to services—accept.’

Similarly, the term ‘services’ is defined in s2 of the ACL as including:

‘(a) any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and

(b) without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under:

(i) a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods; or

(ii) a contract for or in relation to the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; ....’

In most cases where recreational services are commercially provided to members of the public, the ACL will apply.^[2]

SO WHAT EFFECT DOES THE ACL HAVE?

The ACL has a number of consequences for service providers. In particular, it imports guarantees that might not otherwise be in the contract for the provision of services. Section 60 of the ACL imports a general guarantee that ‘services will be rendered with due care and skill’.^[3] Section 61 of the ACL imports a guarantee that a service would be fit for purpose:

‘(1) If:

(a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and

(b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer;

there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose....

(3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier....’

Moreover, s267 of the ACL entitles a claimant to make a claim for the failure to comply with ‘supply guarantees’:^[4]

‘(1) A consumer may take action under this section if:

(a) a person (the supplier) supplies, in trade or commerce, services to the consumer; and

(b) a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3‑2 is not complied with; and

(c) unless the guarantee is the guarantee under section 60—the failure to comply with the guarantee did not occur only because of:

(i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or

(ii) a cause independent of human control that occurred after the services were supplied...

(3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:

(a) terminate the contract for the supply of the services; or

(b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services.

(4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.’

BUT THEY SIGNED A WAIVER!

The first determination that should be made is whether or not the waiver actually forms part of the contract as there is a real chance that the circumstances under which a waiver was signed may mean that it does not.

The Court of Appeal in Lormine v Xuereb [2006] NSWCA 200 examined the issue of whether a waiver would form part of the contract. Mason P stated:^[5]

‘The primary contract that was made either the day before the trip or when the tickets were paid for did not contain the terms of the form, nor did it give notice that there were express terms to be incorporated. The oral communications that led the plaintiff (fortuitously) to be the signing party for her family group did not convey that the document was contractual in intent or was to form a variation of an existing contract. Indeed, any contractual impact was misrepresented by the statement about head count.’

Similarly, the Court of Appeal in Alameddine v Glenworth Valley Horse Riding Pty Ltd [2015] NSWCA 219 found that the contract was completed on the day that the recreational activity (in this case, quadbike-riding) was arranged and paid for, not the following day when the participants attended the defendant’s premises and signed the application form and waiver document.^[6] The courts have tended to follow this reasoning fairly strictly and have declined to allow waiver provisions to form part of a contract in circumstances where there have been attempts to add additional terms after payment under the contract has been made.^[7]

Assuming that the waiver is part of the contract, it is important to note that protections are afforded to providers of recreational services. Section 139A^[8] of the CCA states:

‘(1) A term of a contract for the supply of recreational services to a consumer by a person is not void under section 64 of the Australian Consumer Law only because the term excludes, restricts or modifies, or has the effect of excluding, restricting or modifying:

(a) the application of all or any of the provisions of Subdivision B of Division 1 of Part 3-2 of the Australian Consumer Law; or

(b) the exercise of a right conferred by such a provision; or

(c) any liability of the person for a failure to comply with a guarantee that applies under that Subdivision to the supply.

(2) Recreational services are services that consist of participation in:

(a) a sporting activity or a similar leisure time pursuit; or

(b) any other activity that:

(i) involves a significant degree of physical exertion or physical risk; and

(ii) is undertaken for the purposes of recreation, enjoyment or leisure.

(3) This section does not apply unless the exclusion, restriction or modification is limited to liability for:

(a) death; or

(b) a physical or mental injury of an individual (including the aggravation, acceleration or recurrence of such an injury of the individual); or

(c) the contraction, aggravation or acceleration of a disease of an individual; or

(d) the coming into existence, the aggravation, acceleration or recurrence of any other condition, circumstance, occurrence, activity, form of behaviour, course of conduct or state of affairs in relation to an individual:

(i) that is or may be harmful or disadvantageous to the individual or community; or

(ii) that may result in harm or disadvantage to the individual or community.

(4) This section does not apply if the exclusion, restriction or modification would apply to significant personal injury suffered by a person that is caused by the reckless conduct of the supplier of the recreational services.

(5) The supplier’s conduct is reckless conduct if the supplier:

(a) is aware, or should reasonably have been aware, of a significant risk that the conduct could result in personal injury to another person; and

(b) engages in the conduct despite the risk and without adequate justification.’

However, it should be noted that the courts have traditionally applied this section strictly to applicable contracts. The operation of s68B of the TPA (which is substantially similar to the ACL provision) was closely examined in Motorcycling Events Group Australia Pty Ltd v Kelly [2013] NSWCA 361; 86 NSWLR 55. There, the relevant waiver provisions read as follows:

‘10. In addition, by signing this agreement and participating in the activities as student/ride day participant of the Motorcycling Events Group Australia trading as California Superbike School, the Applicant/Guardian acknowledges that the Applicant is prepared to take the Applicant's chances of injury, death or property damage, and assume the risk that the Applicant may be injured or killed while participating in the school or ride day activities.

...

12. The Applicant/Guardian hereby releases and indemnifies Motorcycling Events Group Australia trading as California Superbike School and all persons referred to in 5 & 6 above from any claims or liability for death, personal injury or property damage howsoever caused, as a condition of acceptance to partake in the event.’

In relation to whether these provisions were provisions to which s68B applied, Gleeson JA stated, at [116]:

‘The manner in which s68B is to operate in relation to a term of a contract which excludes, restricts or modifies, or has that effect in relation to the application of s74 to the contract, is expressed to be “so long as” the exclusion, restriction or modification is “limited to liability for death or personal injury”. The words “so long as” are words of limitation which impose a requirement that the relevant term of the contract “is limited to”, that is, do no more than exclude, restrict or modify liability for death or personal injury.

Gleeson JA went on to state, at [120]:

‘The manner in which s68B is to operate in relation to a term of a contract which excludes, restricts or modifies, or has that effect in relation to the application of s74 to the contract, is expressed to be “so long as” the exclusion, restriction or modification is “limited to liability for death or personal injury”. The words “so long as” are words of limitation which impose a requirement that the relevant term of the contract “is limited to”, that is, do no more than exclude, restrict or modify liability for death or personal injury.’

In applying this to the specific terms, Gleeson JA stated, at [122] – [126]:

‘As to cl 10 of the registration form, it provides for two things: an acknowledgement that the respondent is prepared to take his chances of injury, death or property damage and an assumption of the risk that he may be injured or killed whilst participating in the relevant activities.

As to cl 12 it also provides for two things: a release and an indemnity, but in each case the subject matter is the same, namely any claims or “liability for death, personal injury or property damage”.

In the case of the acknowledgment in cl 10 and the release and indemnity provided for in cl 12, the exclusion, restriction or modification referred to that is sought to be given effect to by the term in question is not limited to liability for death or personal injury. In each case, the exclusion, restriction or modification extends to liability for property damage...

It follows that the relevant terms in cl 10 and cl 12 of the registration form are not saved by s68B of the [TPA], and accordingly are rendered void by s68 of the [TPA].’

The Court of Appeal had an opportunity to further examine the application of s68B in relation to waiver clauses in Perisher Blue Pty Ltd v Nair-Smith (2015) Aust Torts Reports 82-219. The relevant waiver provision there stated:

‘Extract of terms and conditions: ALL SIGNS MUST BE READ. By purchasing or using this ticket, YOU ACKNOWLEDGE THAT ALPINE ACTIVITIES (INCLUDING SKIING & SNOWBOARDING) ARE RISKY AND DANGEROUS AND THAT YOU WILL UNDERTAKE SUCH ACTIVITIES AT YOUR OWN RISK.

.... We make no express warranties in relation to the service we provide. All warranties, representations or conditions relating to the services we provide (whether express or implied and whether arising in contract at common law or under statue [sic]) are to the maximum extent permitted by law expressly excluded. You acknowledge that our liability under any statutory right or any condition or warranty implied by the [TPA] which cannot be excluded is limited at our option to the resupply of the services or the payment of the cost of having the services supplied again. You acknowledge that we are not liable to you for any loss, damage, injury or any incidental, indirect, special, consequential or economic loss or damage (including loss of opportunities, exemplary or punitive damages) whether to person or to property and whether arising from default, negligence, misconduct or otherwise by us, our employees or our agents and you indemnify us against all claims.’

The Court of Appeal, in a joint judgment, applied the separate reasoning of Gleeson, Meagher and Basten JJA in Motorcycling Events Group and stated, at [216]:

‘The effect of the similar approaches taken by Gleeson JA and by Basten JA and Meagher JA is that any provision that purports to exclude liability for more than personal injury or death will not answer the description in s68B(1)(d) of the [TPA] and will be, by force of s68, void in its entirety and not just to the extent that it purports to exclude, restrict or modify liability for anything beyond personal injury or death. The third “potentially relevant” exclusion clause purports to exclude liability for more than personal injury and death as it extends to liability for “property”. The term is void in its entirety and those parts of it which extend the scope of its exclusion cannot be severed so that it meets the description in s68B(1)(d).’

The waiver provision must therefore be written carefully and be confined precisely in the manner prescribed by s139A of the ACL in order to have any effect.

Even if the waiver provision does comply with the strict requirements of s139A, that section does not apply where a person suffers ‘serious personal injury’ as a result of ‘reckless conduct’ on the part of the service provider in accordance with s139A(4). This provision is not found in the TPA.

A BRIEF WORD ON THE CLA

Recreational service providers may be under the impression that all the defences afforded to them under the CLA are still available to them. This is especially in view of the operation of s275 of the ACL,^[9] which states:

‘If:

(a) there is a failure to comply with a guarantee that applies to a supply of services under Subdivision B of Division 1 of Part 32; and

(b) the law of a State or a Territory is the proper law of the contract;

that law applies to limit or preclude liability for the failure, and recovery of that liability (if any), in the same way as it applies to limit or preclude liability, and recovery of any liability, for a breach of a term of the contract for the supply of the services.’

The application of this provision to the CLA defences has been examined in a line of cases commencing with the High Court in Insight Vacations Pty Ltd v Young [2011] HCA 16. There, the High Court found that s5N of the CLA (the provision specifically enabling the exclusion, restriction or modification of liability from a breach of ‘an express or implied warranty that services would be rendered with due care and skill’) was not picked up by s74(2A) of the TPA.

Similarly, the application of s74(2A)(b) to s5M of the CLA (the provision which states that no duty of care is owed by a service provider where a risk warning is provided) was considered in the decision of Motorcycling Events Group Australia Pty Ltd. There, the Court of Appeal considered that s5M of the CLA was not a section that purported to limit or preclude liability and therefore did not fall within the parameters of s74(2A).

By contrast, s5L (which dealt with whether a service provider was liable for harm suffered from obvious risks of dangerous recreational activities) was considered in Alameddine to be ‘picked up’ by the ACL. As such, this is a defence that is still open to a recreational service provider.

THE TAKE-HOME MESSAGE

MacFarlan JA in Alameddine neatly encapsulated the position in relation to an appropriately worded contractual waiver under the ACL at [65]–[66]:

‘Contractual waivers are void under s64 of the Australian Consumer Law so far as they exclude rights under the Law however s139A of the Competition and Consumer Act provides an exception for terms in contracts relating to the supply of recreational services. Relevantly, the exception only applies if the exclusion of liability is limited to personal injury (s139A(3)) and does not apply if the defendant’s conduct has been reckless (s 139A(4)). “Reckless conduct” is defined as follows:

“139A(5) The supplier’s conduct is reckless conduct if the supplier:

(a) is aware, or should reasonably have been aware, of a significant risk that the conduct could result in personal injury to another person; and

(b) engages in the conduct despite the risk and without adequate justification.”’

As recent decisions have shown, determining whether or not a recreational service provider can rely on a waiver provision is no simple task. It requires a careful examination of the circumstances under which the waiver was supplied, the wording of the waiver and the circumstances of the injury that is the subject of a claim. Where waiver provisions are concerned, one should not be too complacent.

Kavita Balendra is a barrister at 4^th Floor Wentworth Chambers practising primarily in personal injury. She was the junior in Alameddine v Glenworth Valley Horse Riding Pty Ltd [2015] NSWCA 219 and the Jet Boats case mentioned in the article. PHONE (02) 9232 2722 EMAIL kbalendra@4wentworth.com.au.

^[1] Section 2 Competition and Consumer Act 2010 (Cth).

^[2] It should be noted that the TPA contains provisions that are generally similar to the ACL and have been found to be similarly applicable. See, eg: Kishore Rohra v Ox Two Pty Ltd Trading as Ocean Extreme (ABN 46 115 919 509) & Anor; Shivani Talwar v Ox Two Pty Ltd Trading as Ocean Extreme (ABN 46 115 919 509) & Anor; Brendan John Barnes v Ox Two Pty Ltd Trading as Ocean Extreme (ABN 46 115 919 509) & Anor; Marta Barnes v Ox Two Pty Ltd Trading as Ocean Extreme (ABN 46 115 919 509) & Anor; Adam Barnes v Ox Two Pty Ltd Trading as Ocean Extreme (ABN 46 115 919 509) & Anor; Vanessa Pillinger v Ox Two Pty Ltd Trading as Ocean Extreme (ABN 46 115 919 509) & Anor [2016] NSWDC 78 (13 May 2016) – the ‘Jet Boat cases’.

^[3] The equivalent earlier provision can be found in s74 of the TPA.

^[4] A similar enabling provision can be found in s82 of the TPA.

^[5] At [20].

^[6] Per Macfarlan JA (Simpson JA and Campbell JA agreeing) at [54].

^[7] Oceanic Sun Line Special Shipping Company v Fay [1988] HCA 32; (1988) 165 CLR 197 at [16].

^[8] The equivalent earlier provision can be found in s68B of the TPA.

^[9] The equivalent earlier provision can be found in s74(2A) of the TPA.