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North American guests aboard the Covid infected Ruby Princess zombie cruise have suffered a setback in their efforts to recover compensation from the cruise line for their devastating experience.
Nearly 700 of the 2600 passengers aboard the February 2020 Sydney – New Zealand – Sydney cruise purchased tickets on “US terms” that only allow lawsuits against cruise giant Carnival if filed in California and only if they are not by way of class action.
The Federal Court in Sydney dismissed Carnival’s application to prevent all “US terms passengers” participating Susan Karpick’s action on behalf of all guests – most of whom were from Australian and New Zealand – so as to compel those claims to be brought in California under US law.
That was in September 2021.
Twelve months later, the Federal Court of Appeal has reversed that decision but in doing so has identified several features of “unfair terms” laws and class action procedure that are likely to require consideration by the High Court before they are finally resolved.
First was whether the Carnival terms and conditions were duly incorporated into the passenger’s contract for the acquisition of services.
On this point Justice Angus Stewart had ruled in the negative, concluding that the Cruise line’s terms and conditions could not be imported into the contract after payment had been made and passage had been confirmed.
The three appeal judges came to the opposite conclusion by applying “conventional” rules for advance ticket purchases, namely that the ticket is treated as an offer by the carrier to carry on the terms of the ticket, which terms may be accepted or rejected by the passenger upon them having had a reasonable opportunity to consider same. The passenger’s embarkation signifies acceptance but earlier acts – in this case, completing an online “cruise personalizer” – will have the same effect.
Such rule applied even though “realistically”, a passenger has no choice but to accept them.
Second was whether a “class action waiver” clause is unenforceable by operation of Part IVA of the Federal Court Act itself.
Chief Justice James Allsop and Justice Roger Derrington – together with primary judge Angus Stewart – were of the view that Part IVA did not of itself prevent a party from contracting out of their class action entitlement given the absence of any provision in the Act compelling such an outcome.
Justice Steven Rares – in arriving at a robust conclusion to the contrary – examined the ‘all in’ / ‘opt out’ nature of Australian class action laws which confer a right on anyone to commence a representative action where there are common questions of fact or law, without needing any group members’ consent.
Just as an “entire agreement” clause in a contract can’t prevent a party subsequently alleging misleading or deceptive representations, a party can’t – he reasoned – be prospectively precluded from becoming or remaining a class action group member.
In his view, the construction favoured by the majority would “negate” the legislative intention to enhance efficient access to justice and “undermine” parliament’s choice of an opt out, rather than opt in, model for representative proceedings.
Permitting such waivers – Justice Rares determined – would ultimately lead to businesses routinely including a class action waiver clause in standard form contracts thereby “neutering” the court’s jurisdiction over the determination of litigation involving common questions of fact or law.
He enlisted for support, a 2021 decision by the British Columbia Court of Appeal which ruled that a class action waiver “is contrary to public policy and unenforceable” because it “so functionally interferes” with access to the courts.
The Third major issue was whether Justice Stewart was correct in concluding that a class action waiver clause was an “unfair term” that offended Australian Consumer Law s 23.
Justices Allsop and Derrington ruled to the contrary – at least in the context of acquisition of services by a person outside Australia – because Carnival had a legitimate interest in avoiding the burden of class actions.
According to the latter, class actions “can be abused to oppress defendants by the enormous costs billed by the claimants’ legal practitioners and the large portion of recoveries required by funders. They have the potential to impose in terrorem settlements on defendants”.
“The enormity of the claim together with the costs of defending it provide a significant incentive for a defendant or its insurer, to attempt to settle rather than face the ruinous sequelae of an adverse judgment”.
The majority came to the same conclusion in relation to the issue No 4 – whether the exclusive jurisdiction clause was unfair – because of the Cruise giant’s legitimate interest in requiring actions brought against it to be conducted in the jurisdiction from which it carried on its business.
They noted however – as was the case with the class action waiver – different considerations might apply if such a provision was sought to be enforced as against a consumer who acquired Carnival’s services in Australia.
Justice Rares dissented – being of the same mind as Justice Stewart – by holding that the exclusive California jurisdiction clause should not be enforced even in respect of North American consumers because it would oust that of the court which in any event was not “clearly an inappropriate forum”.
Fifthly, the court addressed whether ACL s 23 should be allowed to operate extra-territorially upon any corporation carrying on business in Australia by operation of s 5 (1)(g) of the Competition and Consumer Act.
No final decision on this point was necessary and the majority expressly stated that the decision should be left for another occasion.
Justice Derrington was though inclined to a negative view while the Chief Justice thought that it might apply extraterritorially in some circumstances.
It is not unrealistic to say that the decision represents a crossroads for the future of class actions and the scope of unfair terms laws in Australia. The path which each of these issues follows can only be resolved by the High Court.
Categories: Cruise ship injury , Civil procedure