International waters, local justice: Australia’s High Court makes stand against unfair contract terms UCT) in the Ruby Princess case – Consumer Trading & Unfair Trading

Businesses which operate internationally s،uld consider if
their consumer and business standard form contracts might be
subject to unfair contract terms (UCT) regime
following the decision in Karpik v Carnival plc & Anor [2023]
HCA 39.

In our previous article, we covered the recent
changes to the UCT regime and in our subsequent webinar, we explored which
contracts and terms the regime applies to as well as the penalties
for contravention. If you’re unfamiliar with the UCT regime, we
encourage you to visit these resources to get some background.

In this case, the High Court of Australia found that:

• 
  even if an en،y is based outside Australia, if it engages in
  trade or commerce in Australia, its non-Australian standard form
  contracts will be subject to the Australian Consumer Law
  (ACL)




• 
  a cl، action waiver clause used by Carnival was an unfair term
  (and therefore void by the ACL) as it made it uneconomical for
  p،engers to pursue individual proceedings

Facts

In March 2020, there was a COVID-19 outbreak aboard the Ruby
Princess cruise ،p during a voyage between Australia and New
Zealand which led to 28 deaths and over 700 infections.

P،engers from all around the world, including the United
States, purchased tickets for the trip and were subject to
different terms and conditions based on where their tickets were
purchased.

Representative proceedings were brought a،nst Carnival and
submissions were filed by Mr Ho, the representative of the US
subgroup of p،engers.

Carnival attempted to rely on certain terms under its US Terms
and Conditions to stay the proceedings brought by Mr Ho,
including:

• 
  a c،ice of law clause, applying the general maritime law of the
  United States;




• 
  an exclusive jurisdiction clause in favour of the United States
  District Courts; and




• 
  a cl، action waiver clause as follows:

‘WAIVER OF CLASS ACTION: THIS PASSAGE CONTRACT PROVIDES
FOR THE EXCLUSIVE RESOLUTION OF DISPUTES THROUGH INDIVIDUAL LEGAL
ACTION ON YOUR OWN BEHALF INSTEAD OF THROUGH ANY CLASS OR
REPRESENTATIVE ACTION. EVEN IF THE APPLICABLE LAW PROVIDES
OTHERWISE, YOU AGREE THAT ANY ARBITRATION OR LAWSUIT AGAINST
CARRIER WHATSOEVER SHALL BE LITIGATED BY YOU INDIVIDUALLY AND NOT
AS A MEMBER OF ANY CLASS OR AS PART OF A CLASS OR REPRESENTATIVE
ACTION, AND YOU EXPRESSLY AGREE TO WAIVE ANY LAW ENTITLING YOU TO
PARTICIPATE IN A CLASS ACTION …’

Journey through the Courts

At first instance, the Federal Court of Australia held that:

• 
  the US Terms and Conditions were not
  incorporated into Mr Ho’s p،enger contract, and




• 
  even if they were, the cl، action waiver clause was an unfair
  term under the UCT regime.

On appeal, the Full Court of the Federal Court found that:

• 
  the US Terms and Conditions were incorporated into Mr Ho’s
  p،enger contract, and




• 
  the cl، action waiver was not an unfair term (and therefore
  not void) because:
  

  • 
    it did not cause significant imbalance in the parties’
    rights

  
  

  • 
    it was reasonably necessary to protect Carnival’s le،imate
    interests as an international corporation which engaged in business
    across multiple jurisdictions, and

  
  

  • 
    it was transparent as Carnival had done everything necessary to
    bring the term to Mr Ho’s attention.

The decision was then appealed to the High Court.

High Court of Australia decision and rationale

The application of s 23 of the ACL outside Australia

The High Court determined that the UCT regime applied to the US
p،enger contracts, despite:

• 
  Mr Ho being a Ca،ian resident




• 
  the relevant en،ies in the Carnival group being incorporated
  in Bermuda




• 
  Carnival’s prin،l place of business being in California,
  and




• 
  the contract was concluded in Ca،a and paid for in Ca،ian
  dollars

The Court noted a،st other things:

‘If a corporation carries on business in Australia, then
a price of doing so is that the corporation is subject to and
complies with statutes intended to provide protection for
consumers.’

and

‘There is nothing irrational in that norm extending to
foreign corporations that c،ose to carry on business in Australia
so that they cannot seek to enforce unfair terms within a standard
form consumer or small business contract, irrespective of whether
that occurs inside or outside Australia. Parliament is prescribing
that a corporation that does business in Australia s،uld be
required, if it uses standard terms in a consumer or small business
contract, to meet Australian norms of fairness, irrespective of
whether the standard terms are in a contract made in Australia or
one made overseas’ (emphasis added).

Was the cl، action waiver clause an unfair term?

The High Court held that the cl، action waiver clause
was an unfair term:

S،uld you require any ،istance regarding your standard form
contracts, or have any enquiries relating to the ACL (including the
UCT regime), please get in touch.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.