Ever been on a holiday that didn’t quite add up to what you thought it would be? That is what happened to David Moore and his wife when they embarked on their much-awaited Scenic Tours cruise in 2013. The trip differed to what Mr Moore had read in the brochure. How could a touring company deliver something so drastically different to what was advertised?

On 31 August 2017, the Supreme Court of New South Wales held in Moore v Scenic Tours Pty Limited (No.2) [2017] NSCSC 733 that Scenic Tours was not allowed to deliver services that differed significantly from their advertisement and promises. The Court also found Scenic Tours in breach of consumer guarantees. This case illustrates that businesses that provide services must ensure that they are aware of the consumer guarantees when advertising products and services.

Background of the Case

Mr Moore and his wife had booked a European river cruise with Scenic Tours (Scenic) scheduled to embark on June 2013. It was to depart from Amsterdam to Budapest. In the months leading up to the cruise, Europe’s rivers were affected by high water levels due to extensive rainfall and melting snow, resulting in the flooding of waterways and the damaging of river locks making them inoperative.

As a result, the cruise was not as advertised – Mr Moore and his wife travelled around Europe mostly by coach and changed ships on two occasions.

A class action commenced against Scenic in 2014. Mr Moore was the representative of a group of passengers from 13 different Scenic cruises, claiming compensation and damages arising from breach of the consumer guarantees for services under the Australian Consumer Law, (ACL), found in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

Mr Moore’s Claim

The key claim raised by Mr Moore was based on Scenic having breached the statutory guarantees which provide that where a person (or company) provides services to a consumer, there is a guarantee that services will:

  • be provided with due care and skill;
  • be reasonably fit for the particular purpose the consumer has acquired the services for (that purpose being made known to the supplier);
  • achieve the desired result the consumer wishes the services to achieve (that result being made known to the supplier or other person involved in the negotiations or arrangements for the services).

Mr Moore argued that Scenic had breached the guarantee of providing due care and skill by:

  • Failing to make enquiries about nature and extent of the flooding and rising river levels in Europe in late April and early May 2013, thereby being unable to determine that the scheduled cruises could not proceed without substantial disruption or delay.
  • Failing to cancel or delay the tours where it appeared likely the cruises could not proceed or offering guests an alternative, or allow them to cancel altogether.

Breaching Guarantees

Mr Moore also argued that Scenic breached the ‘purpose’ and ‘result’ guarantees. This was because the guests did not experience travel and accommodation on cruises along the European rivers, or river cruising to the scheduled destinations at all. 

Under the ACL, there is a distinction between a ‘major failure’ and a ‘minor failure’ of the service guarantees. Minor failures are those that can be rectified within a reasonable time.

There will be a major failure of services where either:

  • the customer would not have engaged the service if they had known the nature and extent of the problem,
  • the service does not meet the reasonable expectations a customer would have had (a failure to meet the due care and skill guarantee), and the problem cannot be rectified within a reasonable time,
  • they do not meet the ‘purpose’ and ‘result’ guarantees, and the problem cannot be fixed within a reasonable time, or
  • the supply of services creates an unsafe situation.

Where there is a major failure with a service, the customer can choose to cancel the contract and seek a refund, or pay a reasonable sum for the work already done, or keep the contract and negotiate a price for the reduction in value of the service as a result of the failure.

Mr Moore argued these breaches were a major failure to comply with the consumer guarantees and sought compensatory damages under the ACL.

Scenic’s Position

Scenic argued that the poor weather and flooding which caused the adverse consequences to the cruises were circumstances entirely beyond its control. Further, Scenic argued that such occurrences of the weather were an ordinary incident of river cruising, which should have been anticipated by passengers.

The Services

Mr Moore and Scenic took differing views about what the ‘services’ actually comprised, and so the court had to assess each of their positions at the outset.

The ‘services’ as asserted by Mr Moore were that Scenic would arrange luxury cruises along European rivers and would monitor, assess and inform passengers whether the itineraries could proceed as arranged.

Scenic argued it merely contracted to provide a tour at a certain time, which included a river cruise to the extent the river conditions allowed it. It argued that it would take reasonable endeavours to provide the tour in line with the itinerary, including where necessary to substitute alternative transport.

The company pointed to various clauses in its terms and conditions to support this broad definition. Mr Moore’s definition, on the other hand, was extrapolated from the contents of the brochure he had been provided for the tour (which did not indicate the boat and coach tour options were interchangeable).

What Did the Court Say?

The Court disagreed with Scenic’s position and accepted that the brochure is the appropriate starting point as this formed the ‘offer’ of services, described in detail, which the customers accept by paying their deposit. Scenic’s view would have allowed it to take its guests from Amsterdam to Budapest by coach and stay at hotels on the way, without there being any breach of contract of failure to fulfil the consumer guarantees.

The Court acknowledged that there must be some latitude to things occurring outside of Scenic’s control, and which the terms and conditions provide for, which cause some short-term changes to the itinerary. However, the approach of Scenic was to allow it to provide something entirely different from what was offered.

Scenic’s Knowledge of the River Conditions

There was a substantial amount of evidence submitted to establish Scenic’s level of awareness of the river conditions leading up to the departure date, including internal emails, weather reports, comments made by the cruise directors to passengers, and reports compiled by the cruise directors as to what was happening on individual cruises as they unfolded. It was abundantly clear that the itineraries would be substantially interrupted, and Scenic would not be able to provide the services promised to its passenger.

Breach of the Consumer Guarantees

The ‘purpose’ and ‘result’ guarantees

By booking the cruise, Mr Moore wanted to experience the five-star cruise he had booked in the manner set out by Scenic – a company that presented itself as a specialist in providing travel and recreation services. This would be the ‘purpose’ for which made Mr Moore decide to go with Scenic.

Similarly in respect of the ‘result’ guarantee, the Court concluded that by booking, Mr Moore was receiving the assurances and enticements provided by Scenic in its brochure.

The limited amount of river cruising, coupled with changing between ships, travelling by coach and staying in various hotels led the Court to conclude that there was a breach of the ‘purpose’ guarantee. The Court also concluded that the Scenic was in breach of the ‘results’ guarantee on the basis it had failed to provide services that its guests would be satisfied with.

The Due Care and Skill Guarantee

The Court noted that the application of care and skill was required when supplying the services, to avoid the risk of Mr Moore and other passengers suffering financial harm, as well as disappointment and distress. Despite knowing about the risks, Scenic encouraged customers to book the cruises and take out insurance.

Scenic had a duty to contact passengers about this likelihood and given them a choice as to whether they went on the cruise, or wished to cancel. On this basis, there was a breach of the due care and skill guarantee.

The Court concluded that the breaches amounted to a ‘major failure’ as customers would not have chosen to go ahead with the booking if they knew the cruise would not go ahead.

Key Takeaways

Businesses that provide services must ensure they are aware of the guarantees under the ACL for their customers. The Supreme Court’s decision in Moore v Scenic Tours makes it clear that where a business is unable to provide the services in substantially the same form as what has been promised or advertised, it has an obligation to make its customers aware of this as early as possible and offer remedies provided for under the ACL (either offer alternative services, offer a refund, or negotiate a reduced price for the drop in value). If you have any questions or need advice in relation to consumer guarantees, contact our  LegalVision’s consumer lawyers on 1300 544, 755.

Bonnie-Anne Talese
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