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Qantas Airways Ltd v Aravco Ltd

Qantas Airways Ltd v Aravco Ltd

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Case Copied 22 April 1996 39 min read

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HIGH COURT OF AUSTRALIA

BRENNAN CJ, GAUDRON, McHUGH, GUMMOW AND KIRBY JJ

QANTAS AIRWAYS LIMITED v ARAVCO LIMITED

(1996) 185 CLR 43

27 May 1996

Trade practices—Consumer protection—Supply of services—Contractual indemnity—Implied statutory warranty of "due care and skill"—Whether indemnity has the effect of modifying liability under warranty—Trade Practices Act 1974 (Cth) s 74(1). Words and phrases "effect"—"modify". Trade Practices Act 1974 (Cth) ss 68, 68A, 74(1).

Headnote

Hearing

CANBERRA, 22 April 1996
#DATE 27:5:1996

Counsel for the Appellant: A. R. Emmett QC with J. T. Gleeson

Solicitors for the Appellant: Ebsworth and Ebsworth

Counsel for the Respondent: D. F. Jackson QC with D. J. Fagan

Solicitors for the Respondent: Holman Webb

Orders

1. Appeal allowed.
2. Set aside the orders of the New South Wales Court of Appeal and in lieu thereof order that the appeal by the cross-defendant against the declaration and the order of Giles J against the cross-defendant be dismissed with costs.
3. The respondent pay the appellant's costs in this Court.
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

Decisions

BRENNAN CJ, GAUDRON, McHUGH AND GUMMOW JJ. The question in this appeal is whether s 68 of the Trade Practices Act 1974 (Cth) ("the Act") makes void a contractual term which required the respondent ("Aravco") to indemnify the appellant ("Qantas") against all liabilities incurred by Qantas arising out of or in any way connected with the performance of services by Qantas to Aravco.

Factual background
2. Qantas entered into a contract with Aravco to perform certain services in relation to an aircraft operated by Aravco but owned by BAT Industries Plc ("BAT"). As a result of Qantas' negligence, the aircraft suffered damage. Subsequently, BAT sued Qantas in the Supreme Court of New South Wales for the damage to the aircraft. Qantas admitted liability for the damage, but, by a cross-claim, it sought indemnity from Aravco for the damages that it had to pay to BAT. Qantas' claim for indemnity was based on cl 4 of its contract with Aravco.

3. Clauses 4 and 7 of the contact between Qantas and Aravco provided:
"4. The Operator agrees regardless of any negligence on the part of
Qantas to release, hold harmless and indemnify Qantas from and against all liabilities, claims, damages, losses, costs and expenses of whatever nature, howsoever occurring which may accrue against or be suffered by Qantas arising out of or in any way connected with the performance of the said services unless caused by wilful misconduct on the part of Qantas or any of its servants or agents acting within the scope of their employment."
"7(1) Pursuant to S 68A of the Trade Practices Act 1974 this clause
applies in respect of any of the goods or services supplied under this contract which are not of a kind ordinarily acquired for personal, domestic or household use or consumption, provided that this clause will not apply if the customer establishes that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1996] HCA 12
Decision Date: 22 April 1996

CaseChat Overview and Summary

Qantas Airways Ltd (Qantas) appealed to the High Court of Australia against a decision of the Full Federal Court concerning the interpretation of a contractual indemnity clause in the context of the *Trade Practices Act 1974* (Cth) (TPA). The dispute arose from a contract for the supply of services, where Qantas sought to rely on an indemnity clause to limit its liability for breach of an implied statutory warranty of due care and skill under s 74(1) of the TPA.

The central legal issue before the High Court was whether the indemnity clause in the contract had the effect of modifying, or could be construed as having the effect of modifying, Qantas's liability under the statutory warranty of due care and skill implied by s 74(1) of the TPA. This required the Court to consider the operation of ss 68 and 68A of the TPA, which render void any term that purports to exclude, restrict, or modify liability imposed by certain provisions of the Act, including s 74(1).

The High Court held that the indemnity clause did not have the effect of modifying Qantas's liability under s 74(1). The Court reasoned that the indemnity clause operated independently of the statutory warranty and did not seek to limit or exclude the obligation to exercise due care and skill. Instead, it dealt with the allocation of risk between the parties in the event of a claim by a third party. The Court distinguished between a term that modifies liability and a term that allocates responsibility for the consequences of liability, finding that the indemnity clause fell into the latter category. Therefore, the indemnity clause was not void under s 68 or s 68A of the TPA.

Orders