This proceeding is a class action in respect of passengers aboard the ill-fated Ruby Princess who contracted COVID-19, some of whom subsequently passed away. The claims are brought in negligence and for contravention of the statutory guarantees and misleading or deceptive conduct provisions contained in the Australian Consumer Law (ACL).
The respondents contended that the class members fall into one of three separate cohorts based on the terms and conditions that were applicable to their respective contracts. One of those cohorts, the respondents contended, were bound by what were referred to as the ‘US terms & conditions’ (US Terms Group) (comprising 696 out of a total of 2,651 passengers). Those terms and conditions contained an ‘exclusive jurisdiction’ clause (requiring any proceedings to be brought in Los Angeles), a United States ‘choice of law’ clause, and a ‘class action waiver’ clause (requiring that any proceedings be brought on an individual basis, and not as part of a class action). On that basis, the respondents sought a permanent stay of the claims of members of the US Terms Group.
One of the other cohorts, the respondents contended, were bound by what were referred to as the ‘UK terms & conditions’ (UK Terms Group) (comprising 159 out of a total of 2,651 passengers). Those terms and conditions contained a ‘non-exclusive jurisdiction’ clause (with any proceedings to be brought in England) and an English / European ‘choice of law’ clause. On that basis, the respondents also sought a permanent stay of the claims of members of the UK Terms Group.
For the purposes of determining the stay application, a sample class member from each of the US Terms Group (a Mr Ho) and the UK Terms Group (a Ms Wright) were selected (albeit not as sub-group representatives formally appointed under s 33Q(2) of the Federal Court of Australia Act 1976 (Cth) (FCAA)).
The first issue which required determination was whether the ‘US terms & conditions’ were in fact incorporated into Mr Ho’s contract at all (no such issue arose in relation to the ‘UK terms & conditions’, which it was accepted were incorporated into Ms Wright’s contract and the contracts of each member of the UK Terms Group). Justice Stewart dealt with that issue (at -) by applying long-established principles of contract law as to the incorporation of terms (and particularly standard terms) into a contract (often referred to as the ‘ticket cases’); and also by seeking to determine whether the travel agent through whom Mr Ho’s booking was made was acting as the agent for Mr Ho or for the respondents (or neither). His Honour concluded that the ‘US terms & conditions’ did not form part of Mr Ho’s contract, as they were never communicated to Mr Ho and/or reasonable steps were not taken to draw them to his attention, prior to the contract being formed. His Honour also concluded (at -) that whether the ‘US terms & conditions’ were incorporated into the contracts of other members of the US Terms Group was an individual, not a common, issue, and therefore could not be determined on the present application (albeit, his Honour did state (at ) that on the evidence before the Court “it is difficult to see how any of the [US Terms Group’s] passage contracts were subject to the US terms and conditions”).
It was thus unnecessary for his Honour to determine many of the remaining issues in relation to the US Terms Group, but his Honour nevertheless did so in case the above conclusions were wrong.
His Honour next considered (at -) whether the relevant parts of the ‘US terms & conditions’ were enforceable, assuming (contrary to his earlier finding) that they had been incorporated into Mr Ho’s contract. His Honour’s conclusions may be summarised as follows:
(a) First, the ‘class action waiver’ clause (requiring that any proceedings be brought on an individual basis, and not as part of a class action) was not contrary to Part IVA of the FCAA. On its proper construction, the clause merely required persons bound by it not to commence a class action proceeding themselves, and to opt out of any class action in which they were identified as a class member. As Part IVA obviously permits class members to opt out at their will, the clause was able to work consistently with, and was not contrary to, the policy underlying Part IVA (at -).
(b) Secondly, the ‘exclusive jurisdiction’ clause in the ‘US terms & conditions’ was not an unfair term under Part 2-3 of the ACL. Importantly, however, his Honour held the ‘class action waiver’ clause was an unfair term under Part 2-3 of the ACL, and was therefore void and unenforceable. His Honour said (at ):
In my assessment, having regard to the nature of the contract in question, being one of thousands of consumer contracts for a particular cruise on board a vessel in respect of whom the non-consumer party is common, the class action waiver clause does cause a significant imbalance in the parties’ rights and obligations arising under the contract. At the time of contracting it could be assessed that if a claim arose for Mr Ho of the nature that made it economically unviable or at least questionable to pursue on his own and in circumstances where other passengers had claims raising common questions or issues, a combination of circumstances that is readily foreseeable as a reasonable possibility, the effect of the clause would be to limit Mr Ho’s practical ability to pursue such a claim; it would adversely affect, and in some cases even remove, his access to justice. The imbalance is that the clause would have the effect of preventing Mr Ho from vindicating rights available to him under the contract. That is precisely the interest that [the respondents] had in including such a clause in its US terms and conditions. That is to say, [the respondents’] interest in the clause is the very imbalance that it creates. If it was not for that imbalance, [the respondents] would have no interest in the clause. In the circumstances, the clause creates a significant imbalance in the parties’ rights and obligations arising under the contract.
(c) Thirdly, the applicant had failed to demonstrate that reliance by the respondents on the ‘class action waiver’ clause (assuming it were otherwise enforceable) would be unconscionable in contravention of s 21 of the ACL, predominantly because (at ):
… the applicant has merely asserted that the cost to Mr Ho and the [US Terms Group] of pursuing their claims individually will exceed or is likely to exceed the value of their claims. There is no evidence before the Court that allows for an assessment of whether the respondents’ reliance on the class action waiver clause would effectively deny group members access to justice. In particular, there is no evidence of Mr Ho’s financial circumstances, the value of his claim against the respondents, the cost of instructing lawyers in the US and the cost of commencing proceedings in the US District Court.
(d) Fourthly, the ‘exclusive jurisdiction’ clause and the ‘class action waiver’ clause in the ‘US terms & conditions’ were not subject to the Contracts Review Act 1980 (NSW), as on any view, New South Wales was not the proper law of Mr Ho’s contract (at -).
His Honour then turned to consider (at -) the respondents’ application for a stay of the claims of the members of the US Terms Group and the UK Terms Group. To the extent that that application was based on the ‘exclusive jurisdiction’ clause and the ‘class action waiver’ clause in the ‘US terms & conditions’, for the reasons set out above, it was strictly unnecessary to do so, as those clauses did not form part of Mr Ho’s contract. Nevertheless, the respondents contended that, even in the absence of those clauses, New South Wales and Australia were a ‘clearly inappropriate forum’ for the determination of the claims of the members of the US Terms Group and the UK Terms Group. Following an extensive review of the authorities, his Honour concluded that:
where a proceeding is commenced in breach of an ‘exclusive jurisdiction’ clause, the Court nevertheless retains a discretion not to enforce the clause, and therefore not to transfer or stay the proceeding, where there are ‘strong reasons’ to do so;
section 138 of the Competition and Consumer Act 2010 (Cth) (conferring jurisdiction on the Federal Court in respect of claims under the ACL) did not have the effect that the claims of the members of the US Terms Group and the UK Terms Group could not be stayed, but might nevertheless provide ‘strong reasons’ not to do so;
it was neither possible, nor desirable, at this early stage of the proceeding to determine which country’s laws would govern the tort (i.e. negligence) claims of the class members, including the US Terms Group and the UK Terms Group;
in the particular circumstances of this case, and based on the evidence (including expert evidence in relation to United States law), it was likely that if the claims of the US Terms Group were pursued in a United States court, that court would not decline to exercise jurisdiction in respect of the ACL claims – nevertheless, there was a significant advantage to Mr Ho and the members of the US Terms Group in having their claims pursued in the current proceeding, that advantage being his Honour’s finding (above) that the ‘class action waiver’ clause was void and unenforceable (in circumstances where such clauses have a long history of recognition and enforcement in the United States);
even if the ‘exclusive jurisdiction’ clause had been incorporated into Mr Ho’s contract, there were ‘strong reasons’ not to enforce it – principal among those was the fact that the class action in the Federal Court would still proceed in respect of those class members who are not members of either the US Terms Group or the UK Terms Group – as such, enforcement of the clause would simply result in the undesirable consequence of having multiple proceedings in different jurisdictions arising out of the same events or series of events;
even if the ‘class action waiver’ clause were valid and enforceable, the appropriate order would not be a stay of the claims of the members of the US Terms Group, but rather a ‘bespoke’ order under s 33ZF of the FCAA excluding them from the class definition, but allowing them to continue their claims as individual claims;
it follows from the above (and in particular, the finding that there were ‘strong reasons’ not to enforce the ‘exclusive jurisdiction’ clause) that the Federal Court is not a ‘clearly inappropriate forum’ for determination of the claims of members of the US Terms Group; and
for similar reasons, the Federal Court is not a ‘clearly inappropriate forum’ for determination of the claims of members of the UK Terms Group (notwithstanding the ‘non-exclusive jurisdiction’ clause applicable to their claims).
In the end result, therefore, his Honour refused the application for a stay of the claims of members of the US Terms Group and the UK Terms Group. His Honour also sought further submissions from the parties as to whether Mr Ho and Ms Wright ought now be formally appointed as sub-group representatives for the US Terms Group and the UK Terms Group respectively.
In a subsequent judgment, his Honour ordered the respondents to pay the applicant’s costs of the stay application, but declined the applicant’s application for an order that those costs be payable forthwith (Karpik v Carnival plc  FCA 1290).
On 4 October 2021 the respondents filed an application for leave to appeal from this decision.
Federal Court of Australia, Stewart J,
10 September 2021
Applicant’s Solicitors: Shine Lawyers;
Respondents’ Solicitors: Clyde & Co;
Applicant’s Funder: N/A
Austlii Link: Accessible here
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