International Waters, Local Justice: Australian High Court Takes Against Unfair Contract Terms (UCT) in Ruby Princess – Consumer Trading & Unfair Trading

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Businesses that operate internationally should consider whether their consumer and business standard contracts may be subject to unfair contract terms (UCT) regime following the decision v Karpik v Carnival plc & Anor (2023) HCA 39.

In ours previous articlewe looked at the recent changes in the UCT regime and ours follow-up webinarwe’ve looked at which contracts and terms the scheme applies to, as well as the penalties for breach. If you are not familiar with UCT mode, we encourage you to visit these resources to get some background.

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

  • even if an entity is domiciled outside Australia, if it carries on a trade or business in Australia, its non-Australian standard contracts will be subject to Australian consumer law (LCD)

  • the class action waiver clause used by Carnival was an unfair term (and therefore void by the ACL) because it was uneconomical for passengers to pursue individual proceedings

The facts

In March 2020, an outbreak of COVID-19 occurred aboard the cruise ship Ruby Princess during a voyage between Australia and New Zealand, leading to 28 deaths and over 700 infections.

Passengers from all over the world, including the United States, purchased tickets for travel and were subject to different terms and conditions depending on where their tickets were purchased.

A representative proceeding was initiated against Carnival and the submission was filed by Mr. Ho, a representative of the American subgroup of passengers.

Carnival attempted to rely on certain terms of its US terms and conditions to stop the proceedings brought by Mr. Ho, including:

  • a choice of law clause applying the general maritime law of the United States of America;

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

  • class action waiver as follows:

“CLASS ACTION WAIVER: THIS AGREEMENT PROVIDES FOR THE EXCLUSIVE RESOLUTION OF DISPUTES THROUGH AN INDIVIDUAL ACTION ON YOUR BEHALF IN LIEU OF ANY CLASS OR REPRESENTATIVE ACTION. Notwithstanding applicable law to the contrary, you agree that any arbitration or action against the carrier will be contested by you individually and not as a member of any class or as part of a class or representative proceeding, and you expressly agree to waive any law ENTITLING YOU TO PARTICIPATE IN A CLASS ACTION…”

The way through the courts

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

  • US terms and conditions they were is not included in the contract with passengers of Mr. Ho, a

  • even if they were, the class action waiver clause was unfair 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 passenger contract and

  • the class action waiver was not an unfair term (and therefore not invalid) because:

    • did not cause a substantial imbalance in the rights of the parties

    • was reasonably necessary to protect the legitimate interests of Carnival as an international corporation doing business in various jurisdictions, and

    • it was transparent because Carnival did everything necessary to make Mr. Ho aware of the deadline.

They then appealed the decision to the High Court.

Decision and reasoning of the High Court of Australia

Application with 23 ACLs outside Australia

The Supreme Court held that the UCT regime applies to contracts with US travelers despite:

  • Mr. Ho is a Canadian resident

  • relevant entities in the Carnival group incorporated in Bermuda

  • Carnival’s principal place of business is California and

  • the contract was made in Canada and paid for in Canadian dollars

Among other things, the court noted:

“If a corporation does business in Australia, then the price for that is that the corporation is subject to and complies with laws that are supposed to provide protection to consumers.”


“There is nothing irrational about this standard, which applies to foreign corporations that choose to do business in Australia, so that they cannot seek to enforce unreasonable terms in a standard consumer or small business contract, regardless of whether in or outside Australia. Parliament prescribes that a corporation doing business in Australia should be required, if it uses standard terms in a consumer or small business contract, to comply with Australian Fairness Standards, regardless of whether the standard terms in the contract are made in Australia or made overseas” (emphasis added).

Was the class action waiver clause an unreasonable term?

The Supreme Court held that the class action waiver clause
was unfair term:

Element Finding
The term created a significant imbalance in the rights and obligations of the parties under the contract (ACL, s 24(a))

This term only benefited Carnival and existed alongside other unilateral restrictions on Mr Ho’s ability to exercise his contractual rights.

Although the deadline did not hinder him individual law to sue or his ability to exercise that right, it limited his practical ability to conduct individual proceedings that were otherwise uneconomical.

In the context of this, it may not have been economically viable for My Ho to bring an individual action against Carnival for a 13-day cruise vacation worth ~$1,800 CAD. This finding was made despite no evidence being led as to his ability to cope with the imbalance, as his individual circumstances are not relevant to the question at hand.

The term was not reasonably necessary to protect the legitimate interests of the carnival (ACL, s 24(b))

Carnival had no legitimate interest in preventing people from participating in the class action.

This was a carnival, even though it was claimed that:

  • as an international company doing business in various jurisdictions, it was interested in requiring that:

    • actions brought against him be brought in the jurisdiction from which he did business; and

    • such actions may be brought on an individual basis and not on a class basis.

  • the clause would allow it to secure economies of scale by responding to similar claims in the same forum and using the same resources.

No evidence was made as to whether the clause was reasonably necessary to protect legitimate interests.

Mr Ho would be prejudiced (whether pecuniary or otherwise) if it were claimed or relied upon (ACL, s 24(c)) This term deprived Mr Ho of protection under Part IVA of the Act
Federal Court of Australia Act 1976 (Cth), specifically the ability to group receivables that would otherwise not be economically viable as individual receivables.
Again, this was despite no evidence being led as to Mr Ho’s individual circumstances or his capacity to commence proceedings in California.
The court may consider the extent to which the expression is transparent (ACL, ss 24(2)(a) and (3))

The term was not clearly stated or readily available as:

  • was only accessible via the link in the booking confirmation email, after the passenger paid for the trip;

  • after clicking on that link, the term was contained in one of three other links to various passenger contracts; and

  • passengers had to log into the passenger portal to find out which of the three contracts applied to them.

This despite the fact that it was legible and the booking confirmation contained the words “IMPORTANT NOTICE” to alert passengers to the relevant reference that the wording contained.

If you need any help with your standard contracts or have any questions about the ACL (including the UCT regime), please contact us.

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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