Australian Consumer Law Can Apply to Contracts Made Outside Australia

The Facts

The Ruby Princess class action involves claims under Australian Consumer Law (‘ACL’) against Carnival for damage and loss suffered by the passengers of the cruise that took place in March 2020. It is alleged passengers contracted COVID, resulting in instances of death because of Carnival’s failure to take appropriate measures to protect the passengers. Of those passengers existed a sub-category of 696 passengers referred to as the ‘US subgroup’. The US subgroup held contracts with Carnival that were formed outside of Australia and contained ‘US Terms and Conditions’.

The US Terms and Conditions contained a choice of law clause applying the general maritime law of the United States, an exclusive jurisdiction clause in favour of the Central District of California and a class action waiver clause. Carnival sought to rely upon the class action waiver clause to stay the US subgroup’s representative proceedings whereas Karpik asserted s 23 in Pt 2-3 of Ch 2 of the ACL (unfair contract terms) applied to the US Terms and Conditions and that the class action waiver was unfair and therefore void.

Extraterritorial Application of the ACL

The extraterritorial application of s 23 of the ACL was the centre point of this appeal. The common law presumption against extraterritoriality, being that subject to contrary intent, statutes describing acts, matters or things will not have an extraterritorial effect, is based on interpretation. It was found that s 5(1)(c) and (g) of the Consumer and Competition Act 2010 (Cth) (‘CC’), extends the application of the ACL protections to conduct outside of Australia where a business carries on business within Australia. When further read alongside s 23 of the ACL, the statute is a clear departure from a presumption against extraterritoriality. The High Court further went on to state that there would be nothing irrational in extending these protections onto those who carry out business in Australia and it be that Parliament’s intention is to require corporations conducting business in Australia to meet the norms of fairness irrespective of where those contracts are made.

One of the issues Carnival took with s 23 of the ACL applying to contracts made outside of Australia concerned the potential for “absurd and capricious results”. The example provided was where a company manufactures vehicles in Europe and sells them in Australia and therefore is subject to s 23 in relation to the other cars it sells within Europe. The High Court rejected this argument, finding that whether Australian law or judgments are recognised in other jurisdictions is a matter for foreign law and in any event, it would always be open for a respondent to stay a proceeding on the basis the Court is an inappropriate forum for the proceeding. In that example, whether an Australian court is an inappropriate forum to bring a claim, will depend on the general circumstances of the case including the connection of parties to the jurisdiction.

Unfair Contract Terms

After finding that s 23 of the ACL applied to the US Terms and Conditions contained in contracts formed outside Australia, the High Court considered whether the class action waiver clause was an unfair term or not. In finding the class action waiver was an unfair term, the High Court addressed the elements of s 23 as follows:

1. Does the class action waiver cause a significant imbalance in the parties rights under the contract?
   
   The High Court found the class action waiver did cause a significant imbalance in the Us subgroup’s rights under the contract because whilst the waiver did not remove the existence of a Us subgroup’s right to sue or their capacity to sue Carnival, it acted to prevent or discourage them from bringing a claim where the cost of doing so as an individual may be uneconomical.
   
2. Does the term protect the legitimate interest of a party?
   
   It was found that there was no legitimate interest in Carnival preventing the Us subgroup from participating in class actions.
   
3. If the term is applied or replied upon, does it cause detriment?
   
   It was stated that this question does not require significant detriment, not does it need to be limited to a financial detriment and can extend to a party being disadvantaged in a practical effect. 
   
4. On the balance, is the term transparent?
   
   It was found the term was not transparent because it was not presented clearly or readily available. Once passengers booked the cruise and received their booking confirmation email, that email contained a link to a website which displayed three contracts and it was for the passenger to ascertain which of those contracts applied to them. It was in one of those contracts that the class action waiver term is found. 

Exclusive Jurisdiction Clause

Whilst the exclusive jurisdiction clause was found valid and not an unfair contract term, the High Court retained a discretion whether to stay the proceedings and in exercising that discretion, found the Us subgroup had a strong judicial advantage in remaining in the class action and fracture the litigation. It was also found to stay the proceeding may result in denying the Us subgroup access to justice.

Practical Implications

This case highlights the importance of businesses engaging in business within Australia yet forming or entering contracts outside of Australia to be mindful of their obligations with respect to unfair contract terms. The High Court has made it clear that unfair contract terms have an extraterritorial reach. There has also been much debate about the benefit (or not) of class actions, particularly with regard to the significant cost of litigating class actions, it has also been made clear that terms limiting consumer’s access to participating in class actions is at the detriment of the consumer and of no legitimate protection of the business.