Cruise passenger contractual rights were examined by the Federal Court in September 2021 as part of the Ruby Princess Class Action litigation. That decision allowed the almost 700 US passengers to remain part of the 2600 passenger class action being brought in Australia for compensation arising from the COVID-19 outbreak on the March 2020 voyage. You can read my analysis of that decision here.
Fast forward to September 2022 and the Full Court of the Federal Court has allowed the cruise line’s appeal in Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149 (2 September 2022)
As a result, US passengers on the Ruby Princess are banned from being part of the Australian class action.
In reaching its decision, the court carefully examined the cruise booking process to determine whether certain terms and conditions had been incorporated into the contract. It also examined the fairness of exclusive jurisdiction clauses and class action waiver clauses.
The case therefore has far reaching implications for consumers and travel lawyers.
Cruise Passenger Contractual Rights Turn On Booking Process
The March 2020 Ruby Princess voyage had passengers from various home countries.
Princess’ bookings for North American passengers had US Terms and Conditions. These terms and conditions included two important clauses:
- an exclusive jurisdiction clause that litigation over cruise disputes could only be brought in California; and
- a class action waiver clause preventing dissatisfied passengers from participating in a class action
In 2021 the Federal Court found that the US Terms and Conditions had not been incorporated into the contract. However, after carefully examining the booking process, the Full Court of the Federal Court reached a different view.
The lead US passenger in the class action, Mr Ho, booked his cruise via a travel agent. The travel agent and Princess had a ‘Strategic Sales Agreement’ that set out the terms and conditions under which travel agents could make bookings.
The Federal Court of Appeal found that the travel agent was Mr Ho’s agent. When the travel agent utilised Princess’ POLAR booking system and made Mr Ho’s booking, Mr Ho was fixed with her knowledge of Princess’ terms and conditions regardless of whether he had personal knowledge of them.
Further, the Full Court of the Federal Court found that Princess offered its cruises for sale, and the travel agent accepted the offer in respect of Mr Ho’s Ruby Princess booking.
As an ‘advanced ticket’ sale, the court found that Princess’ offer was to carry Mr Ho on the cruise subject to the terms and conditions of the ticket. As long as Princess did all that was reasonably necessary to bring the terms and conditions to Mr Ho’s attention after he made a payment, he could reject or accept them once he had reasonable opportunity to consider them.
The court found that Mr Ho had been given reasonable opportunity to consider the terms and conditions. He had been directed to a path to access them shortly after making the booking, however he had not chosen to do so until he logged into to the ‘Cruise Personaliser’.
It was found that Mr Ho had accepted the US Terms and Conditions when clicking through them to access the ‘Cruise Personaliser’. This was some nine months after making the booking.
Mr Ho was therefore bound by the US Terms and Conditions that his travel agent knew about, but he had not read or yet been directed to at the time he made a payment.
Was the Exclusive Jurisdiction Clause Unfair?
Few clauses affect cruise passenger contractual rights as much as exclusive jurisdiction clauses. These clauses determine where a passenger can litigate a dispute with the cruise line.
The Federal Court had previously found that, if validly incorporated, the exclusive jurisdiction clause would not have been an unfair contract term under s.24 Australian Consumer Law. However it had found that there were other strong reasons for not enforcing it.
At the appeal, Justices Allsop and Derrington confirmed the validity of the exclusive jurisdiction clause. In particular it gave little or no weight to the public policy arguments against a foreign court deciding a case under the Australian Consumer Law from Epic Games Inc v Apple Inc [2021] FCAFC 122; 286 FCR 105 that the first instance judge had considered.
Justice Rares was in the dissenting minority. In is view, the exclusive jurisdiction clause should not be enforced. This was on the basis that whilst its existence forms a strong ground for the Australian courts to refuse to exercise its jurisdiction, it does not exclude or oust the jurisdiction of the Australian courts. In his view, the Australian Federal Court was not a clearly inappropriate forum despite the exclusive jurisdiction clause and the clause should not have been enforced.
Was the Class Action Waiver Clause Unfair?
Australians have the ability to bring class actions in the Federal Court under Part IVA Federal Court of Australia Act 1976 (Cth). However, the US Terms and Conditions had a class action waiver clause forbidding passengers from participating in a class action.
The Federal Court of Appeal examined whether the class action waiver clause was an unfair term under s.24 of the Australian Consumer Law.
Examples of unfair contractual terms include:
- a term that limits, or has the effect of limiting, one party’s right to sue another party (s.25(k))
However, the Federal Court of Appeal found that the examples of clauses in s.25 ACL ‘may’ be unfair rather than necessarily ‘are’ unfair.
The Federal Court of Appeal found that the clause was neither unfair nor against public policy.
However, it should again be noted that Mr Ho was a North American resident, and class action waiver clauses are accepted in the United States. Whether the same decision would be found if an Australian consumer argued that a class action waiver clause was unfair remains to be seen.
Implications for Australian Travellers and Travel Agents
This decision firstly reinforces the importance for Australian travellers to ask for and read the terms and conditions that apply to their booking. Cruise passenger contractual rights are governed by their booking contract. Passengers can be bound by terms and conditions even if they have not read them and after payment has been made.
If a particular clause like a cancellation clause, or refusal to board clause on pregnancy or medical grounds would change whether the passenger wants to travel, the passenger needs to inform themselves of the terms and conditions as soon as possible.
Given that a travel agent’s knowledge is fixed to its clients, responsible travel agents should also be open and transparent about booking conditions and provide these to clients.
If a passenger has been injured on a cruise or holiday and is seeking compensation but finds themself facing an exclusive jurisdiction clause, it is important to get legal advice.
Whilst this latest Full Court of the Federal Court decision relates to an overseas resident bringing a claim in Australia, the judgment suggests a climate in favour of corporations rather than individual consumers when it comes to assessing the fairness of contractual terms.
In contrast, other jurisdictions such as England and Wales are clear that exclusive jurisdiction clauses forcing consumers to travel long distances and use unfamiliar procedures are unfair, and therefore not valid under local unfair contract rules. It is unfortunate that Australia does not have a more consumer friendly approach and name foreign exclusive jurisdiction clauses as an example of unfair contract terms in s.25 Australian Consumer Law.
For more information on how Victory Travel & Cruise Lawyers can assist with cruise and travel law claims, read about our expertise here.
This report does not comprise legal advice and neither Victory Travel & Cruise Lawyers nor the author accepts any responsibility for it. For advice on your specific circumstances, book an appointment with a lawyer.
