Selasa, 04 Januari 2011

Holiday law

Happy new year, Brown Couch readers. Here's a holiday story, for those still on holidays or just wishing they were.
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For his 1969 Christmas holiday, Mr Jarvis went on a tour. He tidied his desk at the local council at Barking, England, and set off for two weeks' skiing in Morlialp, Switzerland.



(Switzerland)

The brochure from which Mr Jarvis had selected his tour promised a 'house-party holiday' at the Hotel Krone ('Mr Weibel, the charming owner, speaks English'), with a welcome party on arrival, afternoon tea and cakes for seven days, Swiss dinner by candlelight, a fondue party, a yodeler evening, and a farewell party in the hotel's Alphutte Bar. Mr Jarvis was looking forward to his holiday very much indeed.

He returned very disappointed.

For a start, Mr Jarvis had expected to be one of a house party of 30 or so people, but during the first week, there were just 13 guests. In the second week, there was no house party at all - Mr Jarvis was the only person there. And Herr Weibel, as it turned out, could not in fact speak English.

The skiing was a disappointment too. In the first week, the only skis available were 3 ft-long mini-skis; in the second week, Mr Jarvis was able to get some ordinary length skis, but because of the boots his feet got rubbed and he could not continue.

To complete the catalogue of Mr Jarvis's disappointments, I refer now to the judgment of Lord Denning MR in the English Court of Appeal, where Mr Jarvis took his suit against the tour operator, Swan Tours, for breach of contract (Mr Jarvis, you see, was a solicitor):

There were many other matters, too. They appear trivial when they are set down in writing, but I have no doubt they loomed large in Mr Jarvis's mind, when coupled with the other disappointments. He did not have the nice Swiss cakes which he was hoping for. The only cakes for tea were potato crisps and little dry nut cakes. The yodler evening consisted of one man from the locality who came in his working clothes for a little while, and sang four or five songs very quickly. The 'Alphütte Bar' was an unoccupied annexe which was only open one evening.

The result, held Lord Denning, was that Mr Jarvis's holiday was 'pretty well ruined'. The Court ordered that he should be compensated not merely half the amount he paid for the tour (as the County Court had ordered), but an amount in excess of what he paid, recognising the contract's specific purpose of providing entertainment and enjoyment to the plaintiff, and 'the disappointment, the distress, the upset and frustration caused by the breach.' After all, 'Mr Jarvis has only a fortnight's holiday in the year. He books it far ahead, and looks forward to it all that time. He ought to be compensated for the loss of it.'

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Jarvis v Swan Tours [1972] EWCA Civ 8 is a case beloved by law students and one of the foundational cases in what might be called 'holiday law': the law of contracts that promise to provide enjoyment and of the special types of non-economic loss that arise from breach of these contracts. Holiday law explores exceptions to the general rule that a party to a contract who has suffered a breach is not entitled to compensation merely for the feeling of disappointment or distress caused by the breach.

This area of the law has deeper foundations in the case of Hobbs v London and South Western Railway Co (1875) LR 10 QB 111, in which the defendant failed to convey the plaintiff all the way to his destination, and was ordered to compensate him for the 'physical inconvenience' of having to walk the remaining five miles home. As we've seen, Jarvis v Swan Tours goes further, and did not limit Mr Jarvis's compensation to merely physical inconvenience (his rubbed feet, perhaps) but to his 'distress... disappointment... [and] upset'. In Australia, the principal case in the holiday law caselaw is Baltic Shipping Company v Dillon [1993] HCA 4, in which the High Court considered the disastrous holiday of Mrs Dillon and 122 other passengers of the cruise ship 'Mikhail Lermontov', which struck a shoal and sank off the South Island of New Zealand. There Mason CJ sets out the general rule about compensation for breach of contract, and the holiday law exception:

the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation.

Now, you might be thinking: that's all very well, but what does holiday law have to do with tenancies? It's this: residential tenancy agreements are, like holiday contracts, contracts 'the object of which is to provide [to the tenant] enjoyment, relaxation or freedom from molestation', and breaches of terms of residential tenancy agreements (particularly the terms about quiet enjoyment, habitability, security and repairs and maintenance) are capable of causing physical inconvenience to tenants.

Therefore, like holiday-makers, residential tenants (and, for that matter, residential park residents) can make claims for compensation for the disappointment and distress they suffer when landlords breach their contracts.

This proposition was first established by the NSW Supreme Court in Residential Tenancies Tribunal v Offe [1997] NSWSC 10752 and affirmed by that court in Strahan v Residential Tenancies Tribunal [1998] NSWSC 30008. In Strahan, a park resident suffered the inconvenience and embarrassment of dirt and mud being tracked through their dwelling for over a year as a result of the park operator failing to seal a road as required; the resident was held to be entitled to compensation in the amount of $1000. Since then, the Tribunal has regularly made similar orders. Here are some examples:

  • Over a period of four months, a tenant with an infant suffered three break-ins and interrupted an attempted fourth in insecure premises where the landlord refused to install window locks – $3 000 for distress and inconvenience (Ferguson v Crawford [2003] NSWCTTT 148).
  • A tenant and her two young children were without a working hot water service for six weeks because of unrepaired plumbing defects – $320 for inconvenience (Saxby v Turner [2007] NSWCTTT 219).
  • The friend of a tenant suffered multiple hypodermic needle stick injuries while cleaning premises that were let in an unclean condition by the landlord – $750 for the tenant’s distress (Potts v Pious [2007] NSWCTTT 71)
  • A tenant and his family was required to vacate premises not approved by the local council for use as residential premises – $1 500 for inconvenience (Murphy v Xiao and Gao [2007] NSWCTTT 120).
With respect, the Tribunal's orders in these particular cases, and in non-economic loss cases generally, have been modest, responsible and uncontroversial. These sorts of orders properly reflect the community’s expectation that the value accorded to the home life of individual persons and their families will be acknowledged at law - and they have probably also sent a message to landlords that they should take care to comply with their contractual and statutory obligations.

That, at least, was the way things were until the case of Insight Vacations Pty Ltd v Young (2010) NSWCA 137 - another holiday law case, but this time the law has been turned on its head - with potentially similar upheaval in residential tenancies law. In Insight Vacations, the NSW Court of Appeal considered the effect of the Civil Liability Act 2002 (NSW) on compensation for 'distress and disappointment' arising out of a ruined holiday, and held that the thresholds and restrictions of that Act did apply to the plaintiff's claim.

The effect of the Civil Liability Act in this regard is reduce the compensation payable for all but the most extreme cases of non-economic loss, and to knock out small claims (ie less than 15 per cent of 'the most extreme case') altogether. Claims arising out of residential tenancies will nearly always be less than that threshold - the TU reckons each of the examples given above would not meet the theshold - so it may be these sorts of compensation orders will now be difficult or impossible to get.

That's a big change to the way the law has operated for more than 10 years now. There may still be some avenues for pursuing these claims - for example, where the landlord's breach is an 'intentional act' (Civil Liability Act s 3B(1)(a)) - so tenants who have suffered non-economic loss and are thinking of bringing a claim are urged to seek advice from a Tenants Advice and Advocacy Service.

The best thing that could happen, though, is for the Government to acknowledge that claims arising out of residential tenancies legislation were never intended to be subject to the Civil Liability Act, and to formally exempt such claims from that Act. As for whether claims arising from ruined holidays should also be exempt, we'll leave that to a latter-day Mr Jarvis to take up.