Review of the Carriers and Innkeepers Act 1958, May 1998

Chapter 5 – Common Law

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OVERVIEW

5.1 This Chapter outlines the complicated case law that applies to the relationship between innkeeper and guest. At common law, innkeepers are strictly liable for the theft or disappearance of, and possibly for injury to, their guests’ property. While legislation was enacted in most States of Australia to give innkeepers a measure of protection from their common law liability, the legislation relies on many common law concepts, including those of "inn" and "guest". These common law definitions are uncertain in their application to modern dealings. Further, the extent of liability at common law is uncertain, and there are contradictory views on the ability of an innkeeper to contract out of common law liability.

5.2 It is important to understand the situation at common law, not only as an aid to interpreting the legislation, but to understand what the position would be if the legislation were repealed and not replaced. As the Office of Parliamentary Council Victoria ("OPC") advised the Committee, if the Act were repealed, innkeeper’s liability would be determined according to common law principles.[101] In fact, the common law applies to innkeepers in Queensland and South Australia, where legislation introduced to protect innkeepers has been repealed without replacement.[102]

5.3 The first step is to understand to whom the law applies. In other words, it is necessary to determine who may be considered an innkeeper and who is a guest at common law.

"INNKEEPER"

5.4 At common law, an "inn" is:

[A] house where the traveller is furnished with everything which he or she has occasion for whilst upon his or her way and common inns are instituted for passengers or wayfarers, though it is not necessary, in order that a person may be a guest, that the person must have come for more than temporary refreshment. [103]

5.5 The above definition was approved by the Supreme Court of Victoria in the 1917 case of Webster v Opitz.[104] However, the definition may be traced back to much earlier English cases.[105]

5.6 The cases demonstrate that the following are considered not to be "inns":

• a refreshment bar, structurally severed, though part of licensed premises; [106]

• a fully licensed alehouse; [107]

• an ordinary coffee house;[108]

• a restaurant;[109]

• a boarding-house.[110]

5.7 An innkeeper is, of course, the keeper of an "inn". However, if accommodation is provided under some special contract, for example to a lodger (rather than to a "guest"), and the host is not prepared to provide accommodation to any and all reasonable comers, the host is not an innkeeper.[111] The distinction between "guest" and "lodger" is discussed below.

5.8 It is clear that the definitions discussed above were developed over the course of several centuries. The language of the case law - references to alehouses and coffee houses - seems outdated and inappropriate for modern dealings between guests and the owners of hotels, guesthouses and other forms of contemporary accommodation.

5.9 Further, while the common law definition suggests that an "inn" must be a place that offers both sleeping accommodation and refreshments, it appears from the definition approved in Webster v Opitz that the guest need not engage sleeping accommodation for the common law liability to apply.[112] This aspect is discussed further below.

"GUEST"

5.10 At common law, a "guest" is:

5.11 Traditionally therefore, in order to be a guest at common law, a person was required to be a "traveller". A person was not a traveller, according to the authorities, where he or she was a local resident and/or used the facilities for mere temporary refreshment:

5.12 However, by the end of the 18^th century it was recognised that it was not necessary for the guest to stay the night in order for the innkeeper to be liable, but that a passing visit for refreshment was sufficient. It was also irrelevant that a person came from nearby. This was confirmed by the leading case of Orchard v Bush & Co.[115] The plaintiff in that case, a local resident, had his coat stolen while he was eating dinner at an inn. The innkeeper argued that merely taking temporary refreshment was not enough to make the plaintiff a traveller. The Court held that a person need not engage sleeping accommodation to be considered a "guest":

5.13 Orchard v Bush was applied in the more modern case of Williams v Linnitt,[117] where an innkeeper argued that a local resident who came to drink at the inn with friends was not a traveller. The Court held that any person who came to an inn for the purpose of receiving such accommodation as the innkeeper could give him, which he was ready to pay for, and who was so received by the innkeeper, was a traveller and entitled to the protection given by the common law to a guest. This was so even though the person was a local resident and came for no more than temporary refreshment and did not intend to stay the night at the inn.

5.14 The Court added, however, that:

5.15 The common law distinction between a guest and a lodger, referred to above, is particularly significant.[119] This distinction also has a long history, and may be summarised as follows:

5.16 In Daniel v Hotel Pacific Pty Ltd,[121] a majority of the Full Court of the Supreme Court of Victoria considered the meaning of "guest" at common law in the context of a provision of the Licensing Act 1928. The majority held that a person who books accommodation in advance at a hotel for a definite period and who subsequently arrives at the hotel to occupy the accommodation reserved on the terms agreed, is not a guest but a lodger.

5.17 Today, it is generally the custom to book hotel accommodation in advance and for a stated minimum time.[122] If the decision in Daniel is correct, those who book accommodation in advance and then take up the accommodation on the agreed terms would be "lodgers" not "guests", and so not able to rely on an innkeeper’s common law liability.

5.18 Lowe J, of the majority in Daniel, recognised the difficulty of applying archaic legal concepts to modern situations:

5.19 Nevertheless, His Honour held that, in all of the circumstances, the plaintiffs were lodgers rather than guests:

5.20 Sholl J, who dissented, explained the seventeenth century context in which the definition was developed:

5.21 Sholl J indicated why he considered the majority’s decision inappropriate for application to modern dealings:

The use in modern times of the telephone, the telegraph, and the post is so universal, and accommodation in hotels is often so much in demand, that it would seem mere anachronistic eccentricity for the law to impose on an hotelkeeper a greater duty towards the smaller class of mere casual arrivals, who come [to a hotel] without any notice at all, and one fortunate enough to obtain accommodation, than to the many who have the common sense and the courtesy to send a prior communication; or to impose towards a person who refuses to state the length of his stay a greater duty than towards one who is prepared to book for a definite time.[126]

5.22 His Honour proposed the following test to distinguish between "guest" and "lodger":

[W]hether there has been initially or subsequently - ie before on, or at some time after the visitor’s reception - and either expressly or by implication, an arrangement (a) which contemplates or involves an intended "permanence" of stay, ie a stay for a long time ... especially (b) if accompanied by the absence of any other permanent home …or (c) which in some other way makes the visitor a member of the innkeeper’s household in a character differing from that of an ordinary hotel guest ….[127]

5.23 Sholl J concluded that, in all the circumstances, the plaintiffs were ordinary hotel guests. His Honour observed that:

5.24 In Turner v Queensland Motels Pty Ltd,[129] a husband and wife travelled from Adelaide to Brisbane where they stayed in a motel for an indefinite period, the accommodation having being booked for them in advance by a travel agent. No deposit had been paid. A thief entered their room and stole some of their property. The Queensland Court of Appeal held that the travellers were "guests" of the motel, and that their status could only be changed by special contract. The mere circumstance of booking accommodation in advance through an agent did not cause them to lose their status as "guests" and become "lodgers". A "special contract" in this context meant:

5.25 In a recent Supreme Court of Victoria decision, Oakford Executive Apartments Ltd v Van der Top[131], O’Bryan J considered the decisions in Daniel and Turner. The guests in Oakford, whose property was stolen from their apartment, had also booked their accommodation in advance. His Honour referred to the judgment of Sholl J in Daniel as "very persuasive", and held that the parties in Oakford had not entered into a special contract which differentiated the travellers from ordinary guests of an innkeeper. O’Bryan J further held that the circumstance that such accommodation was pre-booked did not change the essential character of their status from "guests" to lodgers.

5.26 The debate has not, however, been determined by the decision in Oakford Apartments. O’Bryan J, as a single judge of the Supreme Court of Victoria, was bound by the decision of the Full Court in Daniel, while the decision of the Queensland Court of Appeal in Turner could merely be persuasive. Yet his conclusion is arguably contrary to the decision of the Full Court in Daniel, despite the comments of Lowe J in that case. While the correct result appears to have been reached, a decision of the Full Supreme Court, or of the High Court, is necessary to put the matter beyond doubt in Victoria. It is at least arguable, therefore, that an innkeeper is not liable to a person who books accommodation in advance and then takes up the accommodation on the agreed terms.

5.27 The determination of who may be considered a guest at common law is clearly a difficult task. The case law discussed above was developed over the course of several centuries and, due to outdated terms and concepts, seems hardly appropriate for application to modern dealings between owners of accommodation establishments and their guests.

5.28 The Committee considers that the concept of "traveller" is irrelevant to a modern definition of guest and, further, that the decision in Daniel produces an inappropriate and undesirable distinction between guests and lodgers.

LIABILITY OF INNKEEPERS

5.29 At common law, innkeepers have been held strictly liable for the property of their guests since the earliest recorded laws and cases.[132] Liability is "strict" as it arises without proof of negligence and does not depend on the law of bailment or contract law. In effect, innkeepers are insurers of the goods of their guests, subject to any available defence.[133]

5.30 The innkeeper is strictly liable in respect of goods located within the "hospitium", or bounds, of the inn. It is not necessary that the goods be specially deposited with the innkeeper, or in the special keeping of the innkeeper. The obligation extends to goods in the room occupied by the guest, even though the innkeeper has no knowledge of the goods.[134] The OPC considered that, for this reason, it was perhaps necessary to limit liability of innkeepers, except where the loss or damage was due to some default, neglect or wilful act of the innkeeper or an employee (as is currently the situation under the Act).[135]

5.31 Further, the innkeeper may be liable even though the goods are not exclusively in the possession of the innkeeper because the person who brings the goods to the inn may deal with them. The innkeeper is also liable for goods specifically placed in his care.[136] It is not difficult to imagine the potential for fraudulent claims against an innkeeper given this extensive liability.

5.32 The Committee considers that the exposure of innkeepers to liability under the common law places an unfair burden on the innkeeper who should, in some circumstances, be protected from this unlimited liability, as is the case under the current Act.

Extent of liability

5.33 Another problem with the common law is that there is some uncertainty as to the extent of an innkeeper’s liability. In some cases it has been held that liability extends only to the loss of a guest’s goods and not damage, unless the damage was caused by the innkeeper’s negligence. In other cases, the innkeeper has been found strictly liable for damage or injury as well as loss.[137]

5.34 In Winkworth v Raven[138], a guest’s car was damaged by the water in the engine freezing, while in the garage of an inn.[139] The Court held that an innkeeper was not liable for damage to a guest’s property, in the absence of negligence:

5.35 Winkworth v Raven was applied in Williams v Owen[141], where the guest’s car was extensively damaged by a fire in the inn’s garage. The Court held that the innkeeper was under no absolute responsibility as to render him responsible for the injury to the car, in the absence of negligence, because his responsibility as an innkeeper did not extend to responsibility for injury to a guest’s goods as distinct from their loss or theft.

5.36 However, the Court in Williams acknowledged, and distinguished, an earlier case in which an innkeeper had been held liable for injury to a guest’s goods. In Day v Bather[142] a horse was brought to an inn by a guest. The horse was injured while being exercised by one of the innkeeper’s staff. The innkeeper was held liable for the injury. And in a New South Wales case early this century, an innkeeper was held liable for injury to a guest’s goods caused by a fire on the inn’s premises.[143]

5.37 The position, then, in respect of liability for injury to a guest’s goods, is far from clear. As the OPC advised the Committee:

An innkeeper would be strictly liable at least for any loss of a guest’s property. It is unclear whether liability at common law extends to damage other than damage caused by the neglect or misconduct of the innkeeper or its employees ….[144]

5.38 The Committee notes that the extent of an innkeeper’s liability at common law is uncertain, and believes that the position should be made clear in relevant legislation (as is currently the case[145]). The Committee is inclined to the view that innkeepers should be liable for both loss of and damage to a guest’s property, subject to such protections as afforded in relevant legislation.

Defences

5.39 At common law, the unlimited liability of innkeepers is subject to certain defences, which an innkeeper may raise in order to avoid liability. The defences which may be available to the innkeeper are:

5.40 In order for an innkeeper to escape liability on the first ground, the guest’s negligence must have caused the loss. Negligence in this context is constituted by the guest failing to exercise the ordinary care that a prudent person could reasonably have been expected to exercise in the circumstances. What constitutes negligence is a question of fact in each individual case.[148] The Australian Hotels Association ("AHA") noted, in its submission to the Committee, that at common law the onus is on the hotelier to disprove negligence, rather than on the guest to prove negligence, as is the case under the State legislation.[149] Ms Margaret Kearney, President of the AHA, submitted that, if the proposed repeal of the Act occurred, hotels would have to spend time and money in proving their case in the courts.[150]

5.41 It is very difficult for an innkeeper to prove that a guest has assumed exclusive responsibility for the goods so as to relieve the innkeeper of liability.[151] Such a defence may succeed in a situation where, for example, a guest’s wallet is stolen from his or her pocket while at the inn. However, a court found that there was no exclusive possession where property was stolen from a locked suitcase at an inn.[152] Where there is doubt, the courts usually resolve the matter in favour of the guest.[153]

5.42 As indicated above, an innkeeper is only strictly liable for loss or damage to goods that are within the bounds of the inn. This includes goods that are not within the building itself, but have been left in a place in which it was clearly intended that they should be kept (for example, a separate storage building).[154]

5.43 The Committee considers that there is still a role for most of these defences as a means of protecting innkeepers from unlimited liability. However, the Committee holds the view that the defences refer to certain archaic concepts that are inappropriate for modern dealings, such as "acts of the enemies of the Sovereign". These concepts should be encapsulated in a more modern form of defence covering situations where the loss of or damage to a guest’s property was due to circumstances completely beyond the control of the innkeeper.[155]

Contracting out of common law liability

5.44 As will be discussed in Chapters 6 and 7 of this Report, most States in Australia, including Victoria, have enacted legislation that restricts the application of unlimited common law liability to innkeepers. However, in South Australia and Queensland that legislation has been repealed, and the common law applies. Innkeepers in Queensland have attempted to protect themselves by including terms in contracts with guests, or displaying notices, which include exclusion or limitation of liability clauses.[156] Even in States with protective legislation, some innkeepers have sought further protection from unlimited liability for property in safe custody by contractual limitation or exclusion clauses.[157]

5.45 The OPC advised the Committee that the application of the common law to modern dealings between innkeeper and guest may be excluded if the relationship between the parties was governed by an agreement.[158] However, it appears that an innkeeper cannot contract out of the common law strict liability by special agreement. First, because the liability is independent of the law of contract or bailment, and secondly as (it has been stated) the common law has never permitted innkeepers to contract out of it.[159]

5.46 There are not many cases on this issue, and those that exist appear to contradict one another. One case cited in favour of innkeepers being permitted to contract out of their common law liability is Huntley v Bedford Hotel[160]. The case involved a claim for compensation by Lady Huntley for £1,300 worth of jewellery stolen from her hotel room at the Bedford Hotel in Brighton (England) where she was staying on holiday. Under the Innkeepers Act 1863 (UK), the hotel’s liability was limited to £30 unless there was negligence on the part of the hotel. As required by the Act, there was a statutory notice of limitation posted in the hall of the hotel, and another notice in the guest room which stated that "articles of value, if not kept under lock, should be deposited with the manager, who will give a responsible receipt for the same". The jewellery was kept in a locked jewellery box in a locked trunk in Lady Huntley’s dressing room.

5.47 Lady Huntley argued successfully at the trial that the notice in the room constituted a special contract by which the hotel had agreed to accept full liability if the jewellery was kept under lock. This was overturned by the Court of Appeal. Lord Esher MR held that the notice in the bedroom was the only evidence of a special contract, and that that notice had to be considered in conjunction with the fact that an ordinary notice under the Act was displayed in the hall. That being so, he concluded, there was no evidence that the innkeeper intended to contract out of the Act. Lord Esher also rejected the findings made at the trial of negligence on the part of the hotel and contributory negligence by Lady Huntley.

5.48 It is important to note that the special contract that Lady Huntley sought unsuccessfully to establish involved a greater liability than the limitations in the Act. The question of contracting out of the liability of an innkeeper at common law did not arise. Therefore the case does not appear to support the proposition that an innkeeper may contract out of that liability.[161]

5.49 In Carpenter v Haymarket Hotel Ltd[162] a guest, in her hotel room, changed her diamond ring for a pearl ring. She left the diamond ring in her jewellery case in her locked room and went out. The next morning she discovered the diamond ring was missing. The usual statutory notice was displayed in reception, and a further notice in the guest room declared that the hotel would not be responsible for any lost property and directed guests to deposit all articles of value at the office.

5.50 The trial judge found that the guest had not been negligent, but that the innkeeper was absolved from liability because the guest had ignored the notice in her room. The trial judge came to this conclusion on the basis of an earlier decision in which the court found that a guest’s failure to heed a warning notice to deposit cash for safekeeping was negligent.[163] However, the decision of the trial judge in Carpenter was overturned on appeal, and it was held that the earlier case merely decided that failure to heed the notice was, in the circumstances of that case, evidence of negligence by the guest. The court held (as did the trial judge) that the plaintiff in Carpenter had not been negligent. The notice could not, therefore, relieve the innkeeper from liability.

5.51 The leading English case on the subject is Williams v Linnitt[164]. A farmer frequented the local inn to drink with his friends. On the night in question, he left his car in the carpark in front of the inn, from where it was stolen. The carpark had a sign on it which stated that the proprietor of the inn would not be liable for loss of or damage to any vehicle or to anything in, on or about the vehicle. The farmer sued for the full value of the car as, under the Innkeeper’s Liability Act of 1863, there was no exclusion of or limit on an innkeeper’s liability for motor vehicles.

5.52 The majority of the Court of Appeal held the innkeeper liable. Lord Denning dissented on the ground that the carpark was not within the bounds of the inn. However, it was unanimously held that innkeepers cannot contract out of their liability for guest’s property. In fact, the defendant conceded to the Court of Appeal that, if the carpark was within the bounds of the inn, he could not contract out of his liability.

5.53 Asquith LJ stated:

Goods placed within those limits by the traveller are "infra hospitium" and, except by notice under the Innkeepers’ Acts and to the extent that such a notice operates, the innkeeper cannot limit his absolute liability for them. He cannot by a special agreement contract out of his strict liability.[165]

5.54 Lord Denning agreed and noted that the very existence of the Act impliedly affirmed that innkeepers were unable to contract out of their common law liability for, if innkeepers were able to contract out of their liability, the protection offered by the Act would not have been necessary.[166]

5.55 The English Law Reform Committee, which conducted a review of the law in this area, stated in its second report:

5.56 The issue was considered recently by the Victorian Supreme Court in Oakford Executive Apartments v Van der Top[168], where guests signed a pro forma Reservations Agreement that contained the following provision:

Oakford Executive Apartments shall not be liable for or liable to compensate Guests for loss, theft or damage of personal property on, or brought into the unit or in the immediate vicinity of any of the units.

5.57 The guests’ apartment was robbed and they sought to recover the full value of their loss. The Magistrates’ Court held that an innkeeper could not rely on an exclusion clause in a special contract with guests.

5.58 On appeal, O’Bryan J upheld the findings at trial that the apartments constituted an "inn" and that the plaintiffs were "guests". The judge reviewed the authorities and concluded:

5.59 It is clear from the reasoning in the case that His Honour’s reference to a "special contract" means a contract which changes the character of a customer from a "guest" to a lodger (as discussed above in this Chapter). This has always been recognised at common law as an exception to an innkeeper’s liability.[170]

5.60 The cases therefore demonstrate that innkeepers cannot by contract limit or exclude the strict liability imposed upon them at common law for the safety of the property of their guests.[171] Further, and possibly the most persuasive factor against innkeepers now being able to contract out of their common law liability, is the fact that under the 1859 Act, innkeepers in Victoria could contract out of their common law liability. This situation was changed by the amending Act of 1948.[172]

5.61 It is worth noting, however, that where an innkeeper displays a notice such as that in Carpenter, while the notice will not of itself exclude liability, non-compliance by the guest may constitute evidence of negligence on the part of the guest which, if proven, would exempt the innkeeper from liability.[173]

5.62 Even if it were possible for an innkeeper to contract out of common law liability, there would be a number of practical difficulties with putting this into practice. First, the exclusion or limitation of liability clause would need to be incorporated as a term of the contract. To that end, the innkeeper would need to ensure that the guest had reasonable notice of any term purporting to limit liability in order for the term to be incorporated[174]. A notice in a hotel carpark and at reception may not be sufficient notice.[175]

5.63 Secondly, notice must be given at or before the time of entering into the contract. If the exclusion or exemption clause was included in a notice displayed on the door of a guest’s room, this term would not be incorporated as the contract would have been formed before the guest arrived in the room.[176] In fact, there is some doubt as to when a contract does come into existence between an innkeeper and a guest - when the reservation is made, when a deposit is paid, or when a guest checks in at reception.[177] Further, the effect of the involvement of a travel agent on the principles of privity of contract is not clear.[178]

5.64 Another obstacle is that exemption and limitation clauses are strictly construed against the person seeking to rely upon them. Consideration would also have to given to translating notices, where appropriate, into other relevant languages such as Japanese, in order for the contract to bind non-English speaking guests.[179]

5.65 Finally, where innkeepers do display notices or use contracts wrongfully purporting to exclude or limit liability, these may offend the consumer protection legislation.[180]

5.66 Ms Margaret Kearney, President of the AHA, pointed out the problems in those jurisdictions where the common law applied, Queensland and South Australia. She believed that there was a conflict between cases decided in the two States as to whether it was possible for an innkeeper to contract out of his or her common law liability.[181] This issue is discussed at length above.

5.67 The Committee concludes that an innkeeper may not contract out of his or her common law liability. The Committee notes therefore that an innkeeper is subject to almost unlimited liability (subject to any relevant defences) at common law. The Committee considers that innkeepers should be protected to some extent from this unlimited liability.[182]

INNKEEPER'S LIEN

5.68 At common law, an innkeeper has a general lien, for payment of the bill, over all goods which are received as part of the guest’s luggage and have come into the innkeeper’s possession as a direct result of the relationship of innkeeper and guest. The lien acts as a balance for the innkeeper’s unlimited common law liability.[183] The innkeeper’s exercise of the lien is confined to his or her remuneration owed for services rendered as an innkeeper.[184]

SUMMARY OF PROBLEMS WITH COMMON LAW

5.69 In summary, the problems with the application of the common law to the relationship between innkeeper and guest are as follows.

1. The definitions of inn and innkeeper are outdated, and uncertain in their application to modern forms of accommodation and accommodation providers.

2. The definition of guest is uncertain due to:

(a) the conflict between the line of authority that requires a guest to be a "traveller", and recent cases which have found that a local resident who visits an inn for temporary refreshment may be a guest; and

(b) the distinction drawn by the courts between a guest and a lodger, which precludes most travellers today, who book their accommodation in advance and then take up the accommodation on those terms, from being considered guests;

3. Common law liability is strict and unlimited (except where a defence applies).

4. It is uncertain whether there is liability at common law for loss to property only, or for both damage to and loss of property.

5. Some of the common law defences are outdated, for example the defence of acts of the sovereign’s enemies.

6. Innkeepers are unable to contract out of their common law liability.

5.70 The OCP stated in its submission to the Committee that:

These [common law] principles are uncertain and their applicability to modern dealings inappropriate...

5.71 The AHA acknowledged, in its submission to the Committee, that some protection may be available to innkeepers at common law, but submitted that there were "grey areas" which required legal interpretation and clarification.

5.72 The Committee notes the existence of these considerable problems in relation to the application of the common law. The Committee agrees that the common law is uncertain and that the rights and obligations of innkeepers and their guests should not be left to the common law for determination.

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