How tight is the liability cap for injury on an aircraft?

Air Canada promises: there are no financial limits in respect of death or bodily injury in its tariff general rules.

Does this promise mean that the liability cap for compensation for an injury on an aircraft under the Montreal Convention 1999 does not apply if an injury occurs on an Air Canada flight?

The promise was put to the test when Air Canada defended claims for injuries caused by turbulence during an international flight.

The decision is Air Canada v Evans [2024] NSWCA 153 (Leeming LA, Payne JA and Griffiths JA agreeing) (21 June 2024).

In this article we examine the reasons why the Court of Appeal of the NSW Supreme Court agreed with Air Canada that the promise of no financial limits did not apply to remove the monetary limit (i.e. the liability cap) imposed under the Montreal Convention.

The turbulence

The passengers (Evans) were flying on Air Canada Boeing 777-233LR on international flight AC033 travelling from Vancouver to Sydney on 11 July 2019.

Their injuries were caused when the aircraft suddenly plunged after encountering severe clear air turbulence over the Pacific Ocean.

Before the incident, the aircraft had been flying for several hours in smooth air and clear of cloud. No significant weather was forecast along the route of flight. The seatbelt sign was off. The snack service was being prepared in the galleys. The severe turbulence was a single event encountered for 10-15 seconds.

After the incident, the crew administered first aid and the aircraft was diverted back to Honolulu where 31 passengers and 6 cabin crew were treated for injuries caused when they were flung upwards and then crashed down to the cabin floor or onto seat armrests due to turbulence.

Refer to Transportation Safety Board Canada investigation report

The passenger claims

In the proceedings, two passengers sought substantial damages for personal injuries. Ms Renae Evans alleged that she sustained a discogenic injury to two levels of her cervical spine, necessitating a disc replacement at C5-6 and a fusion of C6-7, as well as psychological injuries. Her daughter Ms Stephanie Evans alleged that she sustained soft-tissue injuries to the whole of her spine as well as psychological injuries.

Air Canada accepted it was liable to compensate the passengers for their personal injuries pursuant to Article 17 of the Montreal Convention 1999 which is incorporated into Australian law by section 9B of the Civil Aviation (Carriers’ Liability) Act 1959 (Cth).

Article 17 - Death and Injury of Passengers

The carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

But although it accepted liability, Air Canada sought to limit the amount payable to the monetary limit (the liability cap) under Article 21.

Article 21 - Compensation in Case of Death or Injury of Passengers

For damages arising under paragraph 1 of Article 17 not exceeding 100,000 Special Drawing Rights for each passenger, the carrier shall not be able to exclude or limit its liability.
The carrier shall not be liable for damages arising under paragraph 1 of Article 17 to the extent that they exceed for each passenger 100,000 Special Drawing Rights if the carrier proves that:

1. such damage was not due to the negligence or other wrongful act or omission of the carrier or its servants or agents; or
2. such damage was solely due to the negligence or other wrongful act or omission of a third party.

Note: In 2019, the monetary limit was 113,100 SDRs (Special Drawing Rights), which equated to US$160,828 / AUD$230,000. It is currently 128,821 SDRs.

In summary, under Article 21 the liability of an airline to compensate for death or personal injury is two-tiered:

Up to the monetary limit, liability is strict - an airline cannot resist a claim for compensation if the passenger proves that the injury occurred on board (or during boarding or disembarking) the aircraft.
In excess of the monetary limit, the airline is presumed to be liable, but can resist a claim for compensation by proving it had taken precautions against a risk of harm that was foreseeable, such as by giving a risk warning, or that the passenger was responsible for their injury, such as by ignoring a warning or request.

The Air Canada defence

Air Canada relied upon Article 21(2)(a) to limit its liability for the passengers’ claim to 113,100 SDRs (the liability cap). From the facts, Air Canada could rely on the weather forecasts to discharge the onus that it was not negligent.

But it had a problem because in Rule 105 in its tariff it promised there were no financial limits to its liability.

RULE 105 – LIABILITY OF CARRIERS

…

(B) Laws and provisions applicable

…

(5) For the purpose of international carriage governed by the Montreal Convention, the liability rules set out in the Montreal Convention are fully incorporated herein and shall supersede and prevail over any provisions of this tariff which may be inconsistent with those rules.

(1) Where the Montreal Convention applies, the limits of liability are as follows:

(a) There are no financial limits in respect of death or bodily injury.

The primary judge found that Rule 105(C) was ‘clear and unambiguous’ to remove the monetary limit for injury claims under the Montreal Convention, as an airline is permitted to do under Article 25 of the Montreal Convention.

Article 25 provides that: a carrier may stipulate that no limits of liability whatsoever.

The Court of Appeal analysis

The Court of Appeal examined the context for Rule 105(C) of the Air Canada tariff general rules.

The Court started by examining the way the monetary limit had developed over the course of time in the conventions governing international air carriage:

The first international convention on international air carriage was the Warsaw Convention, which was done on 12 October 1929. The purpose was to “achieve uniformity of the law relating to liability of air carriers”. A monetary liability limit for death or injury claims was set of 125,000 gold francs. To recover a higher amount, a passenger needed to prove that the death or injury was caused by the carrier’s “wilful conduct or recklessness”. The purpose of the monetary limit was to provide certainty to passengers that they would recover compensation up to the limit, and at the same time, to protect airlines against unlimited liability which could result in bankruptcy. The rules in the Convention relating to carrier’s liability were modified, including by the Hague Protocol in 1955, the Guadalajara Convention in 1961 and the Montreal Protocol No 4 in 1975.
The IATA Intercarrier Agreement of 1996 provided that the recoverable compensatory damages were to be determined under the law of the domicile of the passenger. Also, that a carrier may waive any defence up to a specified monetary amount. 131 airlines signed the agreement, including all IATA airlines.
The Montreal Convention 1999 introduced a new monetary limit of 100,000 SDRs for strict liability. It commenced on 4 November 2003. Instead of a passenger being required to prove the carrier’s “wilful misconduct” to recover damages above the monetary limit, the carrier is presumed to be liable and bears the onus to prove that the injury was not caused by its “negligence or other wrongful act or omission”. As a result, the precautions an airline takes for passenger’s safety to protect against passenger claims for death or injury are significant for an airline to prove it is not liable above the monetary limit.

The Court of Appeal carefully analysed Rule 105(C) and found:

“the “core explanation” for the presence of the “limits of liability” in Rule 105(C) was compliance with the Canadian Air Transportation Regulations that the tariff contains a clear statement of the “limits of liability” to which the carriage was subject.”
There is no reference in Rule 105 to Article 25 which permits a carrier to remove limit of liability, which indicates the monetary limit still applies.
The terminology in Rule 105 is ‘financial limits’, not “liability limits”, which indicates the liability limit is not removed.
A complete waiver of liability would disentitle Air Canada to rely on the Article 21(2) defence that the injury was caused by the negligence or wrongful act of the passenger, which indicates that it was not intended to remove the monetary limit.

The Court of Appeal allowed the appeal. The Court found that Rule 105(C) did not remove the monetary limit cap for strict liability.

As a result, the passengers were limited to 113,100 SDRs in their claims for compensation for their personal injuries.

Comments

These proceedings can be seen as an ingenious attempt to break the monetary liability cap in the Montreal Convention. The attempt failed.

The decision confirms that when the promise is made that there are no financial limits in respect of death or bodily injury, it is to be read as allowing applications to be made above the monetary liability cap (in accordance with Article 21(2)).