Category Archives: Civil

Adventure Sports Providers Beware

To a lay bystander, Glenworth Valley Horse Riding’s entry into the business of recreational quad biking rides seems like it was handled carefully enough. They had participants sign waiver that made specific reference to the (Civil Liability) Act under which they were to ultimately seek protection. They gave riders a training assessment before letting them loose on an open trail and even had a sign posted at the spot where riders waited to be allocated a bike saying “…quad biking is an inherently dangerous activity.” But for a bit of marketing puff and a slightly over-zealous instructor their position seemed watertight.

In Alameddine v Glenworth Valley Horse Riding Pty Ltd [2015] NSWCA 219 the plaintiff sued for injuries sustained while on a quad biking excursion. The key factual finding made by the first instance judge was that the instructor sped up on the way back to the finishing point causing the plaintiff, in her attempt to keep up with him, to lose control and crash.

Given what seemed a fairly painstaking set of measures Glenworth had taken to ensure they would be protected if an accident took place, one would have thought they’d be immune from suit. The trial judge also thought so, finding that the waiver the plaintiff’s mother had signed on her behalf as part of an application form was enough to protect Glenworth.

However, the NSW Court of Appeal (Macfarlan JA with Simpson JA and JC Campbell AJA agreeing) soundly knocked down this and the several other statutory defences Glenworth alleged so as to reverse the trial judge’s decision. The manner in which it did so is informative for all providers of adventure sports in this state.

Starting with section 5L. This section provides a defence if the harm suffered by the plaintiff is the result of “the materialisation of an obvious risk of a dangerous recreational activity”.

There is some useful commentary on what is a “dangerous recreational activity” taken from a previous decision of the Court in Falla v Mourlas [2006] NSWCA 32 to the effect that the totality of circumstances need to be taken into account. As such, what is or isn’t defies any clear categorisation.

In the present case, the contents of Glenworth’s website proved problematic. In what seemed to be a bit of marketing overstatement in an attempt to attract those who might otherwise be scared away from quad biking, the website described it as ‘surprisingly easy’ and requiring ‘no experience’. Of course, once they were on site the punters were given all the heavy stuff about danger and risk by way of the waiver and signage.

Despite there being an expert in support of Glenworth who said that quad bikes are inherently unstable and susceptible to rolling, the Appeal bench was unpersuaded. So it found section 5L didn’t apply because this kind of quad biking wasn’t a “dangerous recreational activity”.

However, even if it was a dangerous recreational activity, the Court called on some ice skating rink decisions on this issue which were made before the Civil Liability Act came into force to find that if the ‘obvious risk’ defence was to apply, the risk in question had to be one which was ‘inherent’ in the activity itself. Applying that position to the facts, it found that the instructor’s conduct in accelerating so as to cause the plaintiff to go outside her comfort zone was not a risk inherent in the activity as promoted by Glenworth.

On the same basis the Court also knocked out section 5M, which dealt with risk warnings “in respect of a risk of the activity”. The instructor’s conduct was not “a risk of the activity”, the Court found. That is, it was not a risk inherent to the activity itself but one created by an outside influence (ie. the instructor’s conduct).

The Court then dealt with section 5N of the Act and contractual waivers. In this regard the Appeal Court took the view that the primary judge had made a wrong finding of fact that the contract had been entered when the application form, which included the waiver, was signed on the plaintiff’s behalf. The contract, it said, had been formed when the plaintiff’s mother had made the booking and provided payment over the phone the previous day. This is consistent with the old ‘ticket cases’ in contract law. Therefore, the waiver was not part of the contract and fell outside the reach of 5N.

Another basis the Court identified for refusing to recognise the waiver was that its wording did not specifically refer to the exclusion of liability for negligence on the part of the defendant, Glenworth. Instead it made a general reference to the ‘negligence of others’.

Even if they had made out one of the Civil Liability Act defences, Glenworth was still faced with the plaintiff’s claim for a breach of the warranty under section 60 of the Australian Consumer Law for its alleged failure to supply quad bike instruction services of a sufficient standard. The 5L and M defences have already been found to be inapplicable to a claim under this provision’s predecessor under the Trade Practices Act in past cases.

However, the Court found the waiver contained in the application form would have provided Glenworth with a defence to a breach of section 60 (pursuant to section 139A of the Competition and Consumer Act) but for it failing to limit Glenworth’s liability to only personal injury. It was wider and covered property damage too. Therefore, section 139A was not satisfied either.

So what is to be learnt by adventure sports operators? Don’t understate the dangers and physical challenges of the pastime on your website. If you are in the habit of taking payment over the phone in advance, make any waiver clear on the website. This way, it is more likely to form part of the contract. Check the wording of your waiver itself so it accords with the Court’s decision and….woah Tonto!

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Getting to know the ‘Reasonable Public Authority’

 

In Curtis v Harden Shire Council [2014] NSWCA 314, Basten JA of the NSW Court of Appeal undertook the difficult (and much needed) task of a comprehensive interpretation of section 43A of the Civil Liability Act 2002. The section is applicable in negligence actions brought against a public authority (eg. the Crown or a local council) where the complaint involves its exercise of a ‘special statutory power’, ie. something the authority has power to do that other ordinary folk do not.

 

The facts in Curtis involved the exercise of a fairly common ‘special statutory power’, the installation of traffic signs. In performing road works, Harden Shire Council had covered the surface in a layer of loose gravel. A woman lost control of her vehicle whilst driving on the road in question and fatally collided with a tree.

 

Proceedings were brought by her de facto partner for negligence on the part of the council for failing to erect either a reduce speed sign or a slippery road sign. The council defended this allegation on the basis that section 43A provided it with a complete defence. Section 43A states that Council would not be liable unless its failure to exercise the power to erect the signs was:

 

…so unreasonable that no authority having the special statutory power in question could properly consider the act or omission to be a reasonable exercise of, or failure to exercise, its power.

 

This kind of language is familiar to most lawyers not only for its turgidity but also because it echoes perhaps the most well-known of all administrative law concepts, Wednesbury unreasonableness.

 

With its awkward wording, section 43A (as does the Wednesbury standard) appears to set the standard of reasonableness at an indeterminately high level. However by more clearly defining how the test should operate in practice, Curtis goes some way towards demystifying the metes and bounds of the section.

 

Assuming it owes a duty of care, Curtis says there is a range of reasonable responses an authority in the defendant’s position should provide in order to be deemed to have acted reasonably. Whether the response in the particular matter at hand is within that range is not simply an evaluative determination the judge conducts on the face of the decision itself. Instead, a closer inspection of the evidence should reflect one way or another, what a public authority having the same expertise and powers as the defendant, and acting reasonably, should have done in response to the risk which eventuated and caused the accident (see Basten JA at [277-279] with Bathurst CJ (at [6]) and Beazley P (at [224] agreeing).

 

The difference with a Wednesbury analysis is that Basten JA’s approach involves looking behind the decision making process, rather than simply looking at the reasonableness of the decision on its face (ie. the Wednesbury approach).

 

But how do we get to know who this reasonable public authority really is?

 

At trial, the plaintiff’s case included evidence from an ex-employee of Harden Shire Council who was a technical adviser within the Council at the time of the accident. He had not given a statement/affidavit and neither the plaintiff nor Council’s own expert made any reference to his evidence in their reports (or elsewhere). This makes the writer suspect his evidence took the Council by surprise.

 

The witness gave the opinion that a sign notifying a recommended speed limit or that the road was slippery should have been installed; especially since as he described it, the road was like ‘walking on marbles’. He was of course, in as good a position as anyone to give such an opinion.

 

So whilst he was not presented to the Court as an expert in the traditional fashion, the witness embodied the hypothetical ‘reasonable public authority’ and therefore greatly assisted the Appeal Court in finding that Council’s omission was outside the range of what could be considered reasonable for an authority in its position.

 

The plaintiff may have been fortunate that it had such a willing and persuasive witness at its disposal on this key issue. Litigation lawyers well know that this is often not the case.

 

Nevertheless, in the writer’s view, Basten JA’s findings dictate that future cases in which a 43A question arises will normally require opinion from a suitably qualified expert about what was a reasonable range of behaviours for an authority in the same position as the defendant. As his Honour stated at [279]:

 

…the court must view the matter through the eyes of a responsible public authority, having particular expertise and functions.

 

The Court’s decision also reinforces a critical distinction between the law’s treatment of the ‘reasonable person’ and ‘reasonable public authority’ in this area of torts.

 

PS – an interesting question around burden of proof also arises here. Once, it is established that what the authority did (or failed to do) truly involved the exercise of a “special statutory power”, s 43A says that there is no liability unless the action exceeds the elevated level of unreasonableness it prescribes. This is a matter for the plaintiff to prove even though the section raises matters that are much more exclusively within the knowledge of the authority.

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High Court decision in Highway Hauliers tightens wriggle room on refusals

Another chapter in the ongoing battle between insurers and their insureds regarding the reach of section 54 of the Insurance Contracts Act (Cth) 1984 was recently decided by the High Court; in the insured’s favour this time.

Section 54 seeks to strike a balance between permitting insurers to include terms in an insurance policy that prevent their level of risk from increasing after the policy has commenced, versus unfairly relying on technicalities in drafting to deny the insured a valid payout.

If the effect of the insurance policy is to allow the insurer to deny coverage only by reason of some act of the insured occuring after the policy has been entered, the insurer’s right to deny indemnity is limited to a situation in which there is a causal relationship between the particular act in question and the actual loss. If there is no causal relationship, but the insurer’s interests are nevertheless prejudiced, section 54 also permits the insurer to reduce its libility to the extent such prejudice can be defined in monetary terms.

Maxwell v Highway Hauliers Pty Limited [2014] HCA 33 was an invitation to the High Court to delineate where the line between fairly limiting risk and avoiding indemnity should lie.

Highway Hauliers was in the business of freight transport and owned a fleet of trucks. The vehicles were insured under a policy which included an endorsement that all drivers undertake and receive a particular rating in a nominated driver safety attitudinal test (ie. the policy stated that no indemnity would be provided unless this condition was satisfied).

The drivers of trucks involved in the accidents said to trigger the policy had not undertaken the requisite test and the insurer invoked the term to deny liability.

At first instance and in the WA Court of Appeal the insurer conceded that the drivers’ failure to undertake the testing was not in any way causally related to the accident. In fact, the validity of the test was never established. Therefore, relying on section 54, the insured successfully claimed that the insurer’s denial of liability was invalid becuase the omission bore no causal relationsip to the loss suffered.

Nevertheless, the insurer was granted special leave in the High Court to use the case as a vehicle to test the meaning and effect of section 54. In principal, the argument put by the insurer was reduced by the High Court to this (at 17]):

[A] ‘claim’ to which s 54(1) refers is limited to a claim that is an insured risk.

Effectively, the insurer argued that the policy endorsement was simply a means of defining the scope of coverage. Therefore, on this argumemt, the failiure to have the truck drivers tested meant that the ‘claim’ never made it within the scope of the policy in the first place. As such, section 54 had no work to do, there being no valid ‘claim’.

In the end, the Court was unattracted to this argument and therefore able to dispose of the argument quite simply and with perhaps a somewhat disappointingly (but understandably) brief analysis.

In picking up an aspect of its earlier decision in Antico v Heath Fielding Pty Limited (1997) 188 CLR 652 the Court cited with approval the following words (appearing at CLR 659 of Antico):

[n]o distinction can be made, for the purposes of the section, “between provisions of a contract which define the scope of cover, and those provisions which are conditions affecting the entitlement to a claim”.

Not great news for insurers obviously.  For example, had the decision gone the other way (ie. a finding that a ‘claim’ must be found to fall within the scope of the policy before section 54 has any work to do), it would have provided a means of limiting risk through policy drafting which more narrowly defined the scope of cover.

The effect of Highway Hauliers is to make plain the position that it doesn’t matter whether the limitation on coverage the insurer seeks to enshrine in the policy is treated as an exclusion, endorsement or forms part of identifying the insured risk, section 54 will limit the insurer’s ability to deny liability on account of the actions of an insured unless those actions are causally linked to the loss itself. It seems a fair result, but one which now further confirms the strict limits facing insurers when seeking to deny liability.

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