Key points
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The TPA and the FTAs include provisions for liability to be limited in respect of the supply of recreational services. CCAAC considers that the ACL will provide uniformity in respect of the limitation of liability for recreational services and should allow limitation of liability only in respect of activities that are ‘inherently risky’.
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CCAAC considers that the existing law limiting the ability of suppliers to contract out of statutory implied conditions and warranties should be retained.
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The TPA includes exemptions to the requirement for services to be fit for a purpose that a consumer makes known to a supplier in respect of services of engineers and architects. CCAAC does not consider that there is adequate justification for these exemptions and they should not apply in respect of a consumer guarantees regime.
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Historically, implied conditions and warranties did not apply to auctions. As online auctions are often merely an alternative sales channel for consumer goods and services, CCAAC considers that the consumer guarantees should apply to online auctions but not to traditional auctions that are conducted via electronic means.
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CCAAC considers that consumer guarantees should apply to all consumer goods and services, including electricity and gas supplies.
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Limitation for recreational services Trade Practices Act 1974
Section 68B of the TPA includes a limitation of liability in relation to supply of recreational services. Specifically, a corporation is entitled to exclude, restrict or modify:
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the application of warranties (outlined in section 74) to the supply of recreational services;
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the exercise of a right conferred by section 74 in relation to the supply of recreational services; or
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any liability of the corporation for a breach of a warranty implied in section 74 in relation to the supply of recreational services,
provided the exclusion, restriction or modification is limited to liability for death or personal injury (subsection 68B(1)).
The term ‘recreational services’ is defined in subsection 68B(2) to mean services that consist of participation in:
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a sporting activity or a similar leisure time pursuit; or
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any other activity that:
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involves a significant degree of physical exertion or physical risk; and
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is undertaken for the purposes of recreation, enjoyment or leisure.
This section was inserted into the TPA in 2002 following national reforms to negligence laws. The intention of the section — as outlined in the Explanatory Memorandum to the Bill260 which introduced section 68B — was to:
permit self assumption of risk by individuals who choose to participate in inherently risky activities, and [to] allow them to waive their right under the TPA to sue the business providing the activity, should they suffer personal injury as a consequence of the service provider’s failure to supply the services with due care and skill.
State and territory legislation
Three other jurisdictions — NSW, Victoria and the NT — include provisions in their FTAs to limit liability in relation to the supply of recreational services. A fourth — SA — recently passed legislation which includes the ability for suppliers of recreational services to limit liability in some situations. Across the jurisdictions, the provisions are all broadly similar but there is some variation, including in the definition of recreational services.
A summary of the provisions in each jurisdiction is provided below.
New South Wales
Fair Trading Act 1987 (NSW)
Subsection 40M(3) of the NSW FTA — which prohibits the application of the implied terms provisions from being excluded or modified — notes that the section is subject to section 5N of the Civil Liability Act 2002 (NSW).
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Civil Liability Act 2002 (NSW)
Section 5N of the NSW Civil Liability Act 2002 allows that a term of a contract for the supply of recreation services may exclude, restrict or modify liability that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill (subsection 5N(1)). The term of the contract must be to the effect that a person to whom recreation services are supplied under the contract engages in any recreational activity concerned at their own risk (subsection 5N(3)). However, liability cannot be excluded if it is established (on the balance of probabilities) that the harm resulted from a contravention of a provision of a written law of NSW or the Commonwealth that establishes specific practices or procedures for the protection of personal safety (subsection 5N(6)).
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New South Wales (continued)
‘Recreation services’ is defined in subsection 5N(4) as services supplied to a person for the purposes of, in connection with or incidental to the pursuit by the person of any recreational activity. ‘Recreational activity’ is further defined in section 5K to include:
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any sport (whether or not the sport is an organised activity);
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any pursuit or activity engaged in for enjoyment, relaxation or leisure; and
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any pursuit or activity engaged in at a place (such as a beach, park or other public open space) where people ordinarily engage in sport or in any pursuit or activity for enjoyment, relaxation or leisure.
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Victoria
Fair Trading Act 1999 (Vic)
Subsections 32N(1) and (2) of the Victorian FTA are drafted similarly to subsection 68B(1) of the TPA. However, section 32N includes further qualifications above those in the TPA.
As well as the restriction that the exclusion only applies if it is limited to liability for death or personal injury (paragraph 32N(2)(b)), the exclusion also only applies if:
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the term contains the prescribed particulars and is in the prescribed form (or is exempted from these requirements under section 32NA) (paragraph 32N(2)(c));
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if there is a prescribed form for the term, the supplier has not made a false or misleading statement as to a material particular in or in relation to the term (paragraph 32N(2)(d)); and
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the term was brought to the attention of the purchaser prior to the supply of the recreational services (paragraph 32N(2)(e)).
Further, subsection 32N(3) prevents an exclusion applying where an act or omission, that resulted in the breach of the implied term, was done (or omitted to be done) with reckless disregard for the consequences (with or without consciousness).
The definition of ‘recreational services’ in subsection 32N(4) is identical to the definition used in the TPA.
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Northern Territory
Consumer Affairs and Fair Trading Act (NT)
Subsection 68A(1) of the NT CAFTA is to the same effect as subsection 68B(1) of the TPA.
However, as well as being limited to liability for death or personal injury (paragraph 68A(1)(d)), the exclusion must be disclosed to the person entering into the contract for the recreational services in such a manner that the person should be aware of the general effect of the exclusion and has a reasonable opportunity to consider whether or not to enter into the contract on that basis (paragraph 68A(1)(e)). The disclosure may be in writing (for example, prominent signage or written notices handed to the person), verbally (for example, asking the person if they understand and accept the effect of the exclusion) or by a combination of the two (subsection 68A(2)).
The definition of ‘recreational services’ in subsection 68A(3) is identical to the definition used in the TPA.
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South Australia
Statutes Amendment and Repeal (Fair Trading) Bill 2009 (SA)
The Bill inserts new section 74H into the SA FTA which allows a supplier to exclude, restrict or modify a warranty implied in a contract for the supply of recreational services if:
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the exclusion, restriction or modification is limited to liability for any personal injury suffered by the consumer or another on whom or on whose behalf the consumer is acquiring the services (a third party consumer) (paragraph 74H(2)(a));
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the term contains the prescribed particulars and is in the prescribed form (paragraph 74H(2)(b));
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the term was brought to the attention of the consumer prior to the supply of the services (paragraph 74H(2)(c));
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the consumer has agreed to the term in the prescribed manner (paragraph 74H(2)(d)); and
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a statement containing any other information prescribed by regulation is made available to the consumer in accordance with the requirements prescribed by regulation (paragraph 74H(2)(e)).
The supplier cannot exclude liability for damages for any significant personal injury (personal injury that is ‘not nominal, trivial or minor’) suffered by the consumer (or third party consumer) if it is established that the reckless conduct of the supplier caused the injury.
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South Australia (continued)
Subsection 74H(7) defines ‘reckless’ conduct to be where the supplier is aware, or should reasonably have been aware, of a significant risk that their conduct could result in personal injury to another and engages in the conduct despite the risk and without adequate justification.
The definition of ‘recreational services’ in subsection 74H(7) is identical to the definition used in the TPA.
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Background to the provisions
As noted above, modification of the usual operation of section 74 of the TPA for recreational activities came about because of the civil liability reforms of 2002, which were originally intended to be uniform across all jurisdictions. This uniformity did not eventuate and, as is clear from the summary of provisions above, there are differences in the way the reforms were implemented. This creates a number of anomalies in the application of the various provisions and their interaction with the TPA.
The civil liability reforms were based on the idea that those undertaking risky recreational activities should undertake some responsibility for their choices. In all States, under the civil liability reforms, there is no liability for materialisation of an ‘inherent risk’, although this is in the context of potential negligence proceedings.261 ‘Inherent risks’ are defined as risks which cannot be excluded by the exercise of due care and skill. It is arguable that these risks could not have been the subject of a negligence action in any event.
However, the civil liability reforms go further than this and in some jurisdictions restrict or minimise liability of those involved in dangerous recreational activities. Case law so far suggests that the categorisation of activities as ‘dangerous’ or ‘inherently risky’ is the most difficult question. Among consumers, this will almost always be a subjective determination, and it is unlikely that they will be in a position to know whether or not they have access to redress in any given situation prior to undertaking the activity. In this sense, the idea that consumers might make an informed choice about recreational activities, and the risks they are willing to bear, is unrealistic.
It has been suggested that gross negligence should not be able to be excluded from the operation of section 74. The report of the expert panel on the Review of the Law of Negligence (the Ipp Report) on which the civil liability reforms were based did not mention gross negligence at all. In Victoria, there is no ability to exclude gross negligence, and this is noted in the standard warning which must be given to consumers for exclusions to apply.
Further, it is argued that the definition of ‘recreational activity’ in the TPA is too broad (although it is significantly narrower than the NSW definition). In its submission to the Ipp Review, following the introduction of the Bill but prior to the section’s introduction, the ACCC expressed concern with the proposed provision.262 It highlighted the fact that the very broad definition of recreational services in section 68B encompasses activities (for example, swimming, dancing and aerobics) which would not commonly be regarded as ‘inherently risky’.
The LCA outlined these two issues in the context of the Trade Practices Amendment (Liability for Recreational Services) Bill 2002:
[The Ipp Report] reviewed the relevant Bill … and recommended that the right to exclude liability should be limited to “obvious risks”, and be only in respect of recreational activities involving a “significant degree of physical risk”. The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) raised concerns that the scope of the exemption provided by the Bill may be too wide and did not contain appropriate safeguards.
The Senate Economics Legislation Committee also reviewed the Bill before it was passed. … The Democrats and Labour [sic] senators in particular were critical of the ability of the Bill to provide “unlimited waivers… including those cases involving gross negligence” and the fact that “recreational activities” were defined in such a way as would include activities not involving any significant degree of inherent physical risk.
To ensure a timely response, given the perceived urgency of the public liability insurance “crisis”, the majority of the Senate Economics Committee recommended the Bill be enacted. This recommendation, however, was provided on the basis that “a close watching brief be maintained in relation to the operation of the Act, when it becomes law, with a view to further amendment … should the need arise.263
As the Issues Paper indicated, the terms of reference of this review do not encompass consideration of civil liability reform more generally.264 However, at a minimum, CCAAC considers that the ACL should include a single national approach to the limitation of liability for recreational services, including a consistent definition of ‘recreational services’. Further, given the stated intention of section 68B (outlined in the Explanatory Memorandum extracted above), CCAAC considers that the definition of recreational services is too broad and should be limited to cover only ‘inherently risky’ activities.
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