Carnival plc v Karpik (The Ruby Princess)
[2022] FCAFC 149
•2 September 2022
FEDERAL COURT OF AUSTRALIA
Carnival plc v Karpik (The Ruby Princess) [2022] FCAFC 149
Appeal from: Karpik v Carnival plc (The Ruby Princess) (Stay Application) [2021] FCA 1082 File number: NSD 1033 of 2021 Judgment of: ALLSOP CJ, RARES AND DERRINGTON JJ Date of judgment: 2 September 2022 Catchwords: CONTRACTS – contract formation – nature of agency relationship – extent of agent’s authority – imputation of agent’s knowledge – incorporation of terms – relevance of so-called ticket cases – offer and acceptance – whether there was reasonable notice of terms of contract of passage including the exclusive jurisdiction clause – whether exclusive jurisdiction clause was onerous or unusual
CONSUMER LAW – whether exclusive jurisdiction clause or class action waiver clause are unfair terms within the meaning of s 23 of the Australian Consumer Law – extraterritorial application of s 23 – whether s 23 is a mandatory law of the forum
REPRESENTATIVE PROCEEDINGS – whether class action waiver clause unenforceable – whether class action waiver clause is contrary to Pt IVA of the Federal Court of Australia Act1976 (Cth)
PRIVATE INTERNATIONAL LAW – enforcement of exclusive jurisdiction clause – whether class action waiver clause is contrary to public policy – whether there are any discretionary reasons to grant a stay of the proceedings
Legislation: Constitution (Commonwealth of Australia) ss 51(i), 51(xx), 76(iii)
Acts Interpretation Act 1901 (Cth) ss 15A, 15AA, 21(1)(b)
Admiralty Act 1988 (Cth) s 4(3)
Australian Securities and Investments Commission Act 2001 (Cth) s 12BF
Carriage of Goods by Sea Act 1991 (Cth) s 11(1)
Competition and Consumer Act 2010 (Cth) ss 2, 4, 5(1)(g)
Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law) ss 18, 20, 21, 23–25, 29, 30, 32–37, 44, 51–53, 67
Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth) Pt IVA, ss 33C, 33E, 33H, 33J, 33K, 33N–33S, 33X, 33Y
Federal Court of Australia Amendment Bill 1991 (Cth)
Federal Court Rules 2011 (Cth) r 30.01
Insurance Contracts Act 1984 (Cth) s 8
Judiciary Act 1903 (Cth) s 78B
Trade Practices Act 1974 (Cth) ss 4, 52
Trade Practices Amendment Bill 1977 (Cth)
Contracts Review Act 1980 (NSW) ss 7(1), 17(3)
Fair Trading Act 1999 (Vic)
Interpretation Act 1987 (NSW) s 12(1)(b)
Business Practices and Consumer Protection Act 2004 (BC)
Class Proceedings Act 1996 (BC) s 4
Constitution (United States of America) Art 3(2)
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De Lovio v Boit 7 FCas 418 (1815)
Detroit Trust Co v The Thomas Barlum 293 US 21 (1934)
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Dillon v Baltic Shipping Co (1989) 21 NSWLR 614
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Gonzalez v Agoda Company Pte Ltd [2017] NSWSC 1133
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546
Hollingworth v Southern Ferries Ltd (The Eagle) [1977] 2 Lloyd’s Rep 70
Hood v Anchor Line (Henderson Bros) Ltd [1918] AC 837
House v R (1936) 55 CLR 499
Incitec Ltd v Alkimos Shipping Co (2004) 138 FCR 496
Insight Vacations Pty Ltd v Young [2011] HCA 16; 243 CLR 149
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Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd [2020] FCA 1018
Jumbunna Coal Mine NL v Victorian Coal Miners’ Association [1908] HCA 95; 6 CLR 309
Kay’s Leasing Corporation Pty Ltd v Fletcher [1964] HCA 79; 116 CLR 124
King v GIO Australia Holdings Ltd [2001] FCA 270
L’Estrange v F Graucob Ltd [1934] 2 KB 394
Lauritzen v Larsen 345 US 571 (1953)
MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125
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McIntosh v Royal Caribbean 2018 WL 1732177
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Meyer Heine Pty Ltd v China Navigation Co Ltd (1966) 115 CLR 10
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National Australian Bank Ltd v Dionys [2016] NSWCA 242
New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50; 260 CLR 232
Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197
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Oltman v Holland Am. Line, Inc., 538 F.3d 1271 (9th Cir. 2008)
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RMS Titanic Inc v Haver 171 F3d 943 (1999)
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Southern Pacific Co v Jensen 244 US 205 (1917)
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The Belgenland 114 US 355 (1885)
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The Lottawana 88 US 558 (1874)
The Scotia 81 US 170 (1871)
The Tolten [1946] P 135
The Western Maid 257 US 419 (1922)
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Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163
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Wigmans v AMP Ltd (2010) 388 ALR 272
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Division: General Division Registry: New South Wales National Practice Area: Other Federal Jurisdiction Number of paragraphs: 397 Date of hearing: 14–15 February 2022 Counsel for the Appellants Mr D McLure SC with Mr T Prince and Ms A Reid
(written submissions also by Mr H Cooper)Solicitor for the Appellants Clyde & Co Counsel for the Respondent Mr I Pike SC with Mr R May and Mr D Farinha Solicitor for the Respondent Shine Lawyers Pty Ltd ORDERS
NSD 1033 of 2021 BETWEEN: CARNIVAL PLC ARBN 107 998 443
First Appellant
PRINCESS CRUISE LINES LIMITED (A COMPANY REGISTERED IN BERMUDA)
Second Appellant
AND: SUSAN KARPIK
Respondent
ORDER MADE BY:
ALLSOP CJ, RARES AND DERRINGTON JJ
DATE OF ORDER:
2 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.Order 1 of the orders of the Federal Court of Australia made on 20 September 2021 in this matter be set aside and, in lieu thereof, it is ordered that:
(a)It is declared that the passage contract as between Mr Patrick Ho and the respondents pursuant to which Mr Ho undertook a voyage on the vessel, Ruby Princess, departing Sydney on 8 March 2020, was subject to the terms of the US Terms and Conditions as that expression is used in the reasons for judgment of this Court.
(b)The proceedings in respect of the claims of Mr Patrick Ho as against the respondents be stayed.
(c)The matter be remitted to the primary judge for determination of the extent to which the reasons for decision of this Court affect the claims of other members of the class action.
3.Order 7 of the orders of the Federal Court of Australia made on 21 October 2021 in this matter be set aside and, in lieu thereof, it is ordered that the applicant pay the respondents costs of the application.
4.The respondent pay the appellants’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ALLSOP CJ:
I have had the advantage of reading the reasons for judgment of Derrington J. I agree with the orders proposed by his Honour. Subject to the following I agree with his Honour’s reasons. What follows assumes a familiarity with the reasons of Derrington J.
Was the class action waiver clause “unfair”?
The question of the applicability of s 23 of the Australian Consumer Law (ACL) is not without its difficulty, to which I will come.
Section 23 of the ACL is directed to the character of terms of a consumer contract. Whether or not a term of a consumer contract is “unfair” is not left to the unconstrained moral or social judgment of the Court. Rather, s 24 is directed to the meaning of “unfair”. It is the judgments and evaluations to be made within the consideration of s 24(1)(a) and (b) that limit the definition to the broader task of evaluative characterisation. As Gilmour J stated in Australian Competition and Consumer Commission v CLA Trading Pty Ltd [2016] FCA 377, it is contractual fairness, rooted in the importance of the contractual bargain, that is at work in the statute. True freedom of contract in a consumer context marked by the use of (entirely commercially useful and efficacious: cf in a non-consumer context, Federal Commerce and Navigation Co Ltd v Tradax Export SA [1978] AC 1 at 8 per Lord Diplock) standard form contracts, or contracts of adhesion, is protected and strengthened, not undermined, by the protection of the consumer from abuse of position or power or substantive unfairness, by reference to the legitimate commercial interests of the stronger party. It is within this frame of reference that the balance of the practical and reasonable commercial interests are to be assessed. Importantly, the evaluation must have regard to the contract as a whole, thus including the whole bargain and necessarily, its commercial context. Notions of “significant imbalance” and the “legitimate interests” of the benefitting party must also be assessed by reference to the clarity and availability of understanding found within the transparency of the term: s 24(3). Viewed thus, the importance of the upholding of a fair bargain assists in the application of the provision.
Within that framework, assuming s 23 to be applicable as a statute of the forum, it is necessary to consider whether the class action waiver clause is unfair. The primary judge rejected the contention that the exclusive jurisdiction clause was unfair, either by reference to s 23 or the Contracts Review Act 1980 (NSW). The challenge to that rejection in paragraphs 4 and 5 of the Notice of Contention was abandoned on appeal.
Thus, the question of unfairness of the class action waiver clause under s 24 is to be examined by reference to the whole of the contract. That contract includes a not unfair and enforceable foreign exclusive jurisdiction clause. Unless the class action waiver clause is to be seen as contrary to the operation and policy within Pt IVA of the Federal Court of Australia Act 1976 (Cth) or considered contrary to some public policy of Australia, it is difficult to see why the evaluative task required by s 23 should not be at least informed by the approach of courts in the United States. This is particularly so in respect of any significant imbalance and the legitimate interests of Carnival.
This perhaps throws up the question of how, if at all, the question of there being any reason not to enforce the not unfair bargain as to exclusive jurisdiction should be approached. From one perspective, even though being examined through the lens of a statute of the forum, the exclusive jurisdiction clause tends to bring into focus that this is a “United States problem”, as it were. Why should the loss of a capacity to participate in an Australian class action, by the class action waiver clause, cause any significant imbalance when the exclusive jurisdiction clause requires, if enforced, the claim to be stayed anyway? This, it seems to me, rather throws up the inappropriateness of using the loss of the capacity to participate in an Australian class action as a reason not to enforce the exclusive jurisdiction clause. When the whole contract is looked at, the parties bargained in a transparent way for the United States courts to have exclusive jurisdiction (by a clause that is not unfair under s 23) and also agreed that there would be a waiver of class action participation (a clause which, if effectively communicated, as it was, at least by the standard of transparency for s 24(3)), would be enforced in the United States.
It is difficult to see (especially in the light of s 24(2)(b)), how one can divorce or segregate the consideration of the class action waiver clause, from the consideration of the enforceability of the exclusive jurisdiction clause, as the primary judge did. Even more so, it is difficult to see why a conclusion that the class action waiver clause was unfair in causing a significant imbalance in the parties’ rights or that it was not reasonably necessary in order to protect the legitimate rights of Carnival, should mitigate against the enforcement of the fairly-bargained for exclusive jurisdiction clause. That clause is not unfair by Australian law. By the proper law of the contract it is also enforceable, as is the class action waiver clause. The loss of the procedural advantage to Mr Ho of the Australian class action is no more than that for which he freely bargained under the proper law of the contract by the exclusive jurisdiction clause. Not to enforce the exclusive jurisdiction clause is to impose an equivalent procedural disadvantage on Carnival in circumstances where the freely-bargained for exclusive jurisdiction clause is fair and enforceable under the law of the forum and the proper law of the contract.
There was nothing contrived about the choice of law in the circumstances. Mr Ho is not an Australian consumer. There was no apparent attempt in the making of the contract, or in the choice of the proper law or in the exclusive jurisdiction clause, to circumvent the operation of Pt IVA. The proper law clause, the exclusive jurisdiction clause and the class action waiver clause, in the context of the North American residence of Mr Ho, and in the context of the approach of the proper law to class action waiver clauses, and in the context of the clarity of the term in the conditions (being relevant both to the operation of the proper law and s 24) make it difficult to see why the contractual obligation on Mr Ho regarding his participation in an Australian class action is in any way unfair to him.
The above conclusion says nothing about another contract with an Australian consumer whereby it might be sought in a standard form contract to deprive a person of access to Pt IVA.
In any event, here, Mr Ho did not prove that he is disadvantaged by suffering detriment for the purposes of s 24(1)(c).
The question of Pt IVA
I have read the reasons of Rares J on this question. I prefer, with respect, the approach of the primary judge and Derrington J. There is no defeat or circumvention of a statutory purpose of Pt IVA by permitting parties in the free and fair exercise of the right to contract to agree not to participate in class actions. The scheme of Pt IVA was permissive. Construed as the primary judge did, correctly in my view, the clause places an obligation upon the contracting party to opt out of the action which by its definition has included him or her. If that is a fair contractual provision by reference to any applicable law or statute, it is difficult to see the policy, purpose or provision of Pt IVA that is offended. It may be difficult in point of analysis to distinguish the foreign contracting party in Mr Ho’s position, as described above, from the Australian consumer the subject of such a clause in an Australian standard form contract. Nevertheless, the view that any such waiver clause is unenforceable or void irrespective of the circumstances of its entry requires the statute to be such as to reveal a policy of the statute or a relevant statutory purpose not to allow people to agree not to participate in a class action under Pt IVA, irrespective of their bargaining positions or their circumstances, and irrespective of the relationship of the parties to Australia. The foregoing of such statutory rights must be contrary to the statute: Price v Spoor [2021] HCA 20; 270 CLR 450 at 460–461 [12]–[16], 466 [39] and 478–479 [76]–[78]; Westfield Management Ltd v AMP CapitalProperty Nominees Ltd [2012] HCA 54; 247 CLR 129 at 143–145 [46]–[52]; Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 at 404–407.
Parties are freely able to opt out of any action under Pt IVA. Section 33J(2) gives that right. I do not see any policy or purpose of Pt IVA infringed by a party freely and fairly agreeing in advance of receipt of the notice from the Court setting the date by which the opt out is to occur, as part of a contractual relationship, to oblige itself, herself or himself not to participate in a class action, and thereby become obliged to exercise that power to opt out.
There might be little doubt that in many cases of Australian consumer contracts it would be unfair and unjust for standard form contracts, as contracts of adhesion, to seek to impose a waiver of the operation of Pt IVA or any other statute of a State or Territory of similar character. Here, Mr Ho, who is not an Australian consumer, has entered a contract with an exclusive jurisdiction clause, a proper law clause, and a class action waiver clause valid and enforceable under the proper law. I see no aspect of the terms of Pt IVA that are offended.
If the permissive and beneficial procedure of Pt IVA is not to be capable of being waived in a free and fair bargain in advance of proceedings being brought such should be stated by Parliament. I do not discern the necessary intendment of such from Pt IVA.
The governing law of the contract
Though not the subject of argument, the nature of the contract and its proper law (the general maritime law of the United States) should not be ignored in the consideration of any discretion attending the enforcement of the exclusive jurisdiction clause. The general maritime law is federal general law of a maritime character, established and adopted not by legislation of Congress but by the operation of Article 3 section 2 of the United States Constitution (relevantly in identical terms to s 76(iii) of the Constitution) through the exercise of power by the United States federal judiciary exercising jurisdiction to apply, to use the words of Chief Justice Marshall in 1828: “the law, admiralty and maritime, as it has existed for ages”: American and Ocean Insurance Co v 356 Bales of Cotton 26 US 511 (1828) at 545–546. See also De Lovio v Boit 7 FCas 418 (1815) at 443 (Story J); The Lottawana 88 US 558 (1874); The Scotia 81 US 170 (1871) at 187–188; The Belgenland 114 US 355 (1885) at 362–363; Southern Pacific Co v Jensen 244 US 205 (1917); Panama Railroad v Johnson 264 US 375 (1924) at 385–386; Detroit Trust Co v The Thomas Barlum 293 US 21 (1934) at 43; Moragne v States Marine Lines Inc. 398 US 375 (1970) at 402; Schiffahartsgesellschaft Leonhardt & Co v A Botacchi SA De Navegacion 773 F2d 1528 (1985) at 1531–1532; RMS Titanic Inc v Haver 171 F3d 943 (1999) at 960–961.
The general maritime law stands, and has always stood, separate from the common law and was not any aspect of the effort by Story J on behalf of the Supreme Court in Swift v Tyson 41 US 1 (1842) to create a federal common law from the resolution of diversity cases, which attempt was struck down as unconstitutional in Erie Railroad v Tomkins 304 US 64 (1938).
The international character of maritime laws in different nations is not a statement of a supra-sovereign binding law, or as Holmes J put it in The Western Maid 257 US 419 (1922) at 432 “a mystic over-law” or with greater metaphor in Southern Pacific Co v Jensen “a brooding omnipresence in the sky”: at 222. Rather, it is to recognise the common source of the maritime laws of different nations recognised by Lord Justice Scott in The Tolten [1946] P 135 at 142 as the “general law of the sea” and by Justice Jackson on behalf of the Supreme Court in Lauritzen v Larsen 345 US 571 (1953) at 581–582 as “a non-national or international maritime law of impressive maturity and universality” having “the force of law, not from extraterritorial reach of national laws, nor from abdication of its sovereign power by any nations, but from acceptance by common consent of civilised communities of rules designed to foster amicable and workable relations”.
Justice Jackson recognised that the aims of such law in international commerce were stability, comity, forbearance, reciprocity, and long range national interests: Lauritzen v Larsen at 582. The relevance here might be seen to be a reluctance in a court not to enforce an exclusive jurisdiction clause providing for the jurisdiction of a federal court exercising the jurisdiction of the general maritime law of the United States, by favouring a competing local law (s 23) if it found a provision (the class action waiver clause) unfair, when not only is there a fairly-bargained for exclusive jurisdiction clause, but also the class action waiver clause would be valid by the governing law, the general maritime law of the United States. The aims to which Justice Jackson spoke of the general maritime law, in particular, comity, forbearance and reciprocity, might be seen to be just as applicable in this country in dealing with international maritime commerce, albeit international maritime consumer commerce, in a general maritime claim under s 4(3) of the Admiralty Act 1988 (Cth), in reinforcing a reluctance to disturb the effect of the freely-bargained for exclusive jurisdiction clause in a maritime contract governed by the general maritime law of the United States.
These matters were not argued and because of that, play no part in my view held otherwise that the exclusive jurisdiction clause should be enforced.
The extra-territorial application of s 23
Like Derrington J, given my view that the class action waiver clause is not unfair within the meaning of ss 23 and 24, and also given my view that s 15A of the Acts Interpretation Act 1901 (Cth) may be relevant, I wish to reserve any final view as to scope of the extra-territorial application of s 23 of the ACL, and the applicability of s 5(1)(g) of the Competition and Consumer Act 2010 (Cth) (CCA) to claims under s 23 of the ACL, for the resolution of a more testing, practical legal problem.
For example, consider a situation where an Australian resident consumer has entered into a contract of adhesion via the internet for carriage on a cruise solely within Australian waters. The contract, however, contained a provision which expressly chose the proper law of the contract to be the law of a foreign jurisdiction. On an analysis that limits the operation of s 23 to contracts the proper law of which is the law of Australia (or an Australian State or Territory), s 23 would not apply. The present case concerns a Canadian consumer who entered into a contract in Canada or the United States with a foreign corporation and which contract is governed by the general maritime law of the United States. The posited construction, however, could apply to Australian consumers. If so, it may be seen to derogate from the overarching purpose of the CCA “to enhance the welfare of Australians through … consumer protection”: s 2. Such a construction has the potential to create a significant carve-out from the applicability of s 23, which ought not to be lightly adopted, particularly in beneficial legislation where other legitimate constructional choices are available: s 15AA of the Acts Interpretation Act; New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50; 260 CLR 232 at 255–256 [32]–[33] and 270–271 [92] and Tjungarrayi v Western Australia [2019] HCA 12; 269 CLR 150 at 166 [44]. Thus, I wish to express some reservations as to Derrington J’s observations in this regard.
First, it may be thought that s 5(1)(g) is applicable to extend the operation of s 23 of the ACL to contracts that are governed by foreign law. Section 5(1)(g) of the CCA expressly extends the operation of the whole of the ACL (other than Part 5-3) in relation to “engaging in conduct” outside Australia by bodies corporate “carrying on business within Australia”. Section 4(2) of the CCA provides that “engaging in conduct” shall be read as including “the making of … a provision of a contract”. It appears open to construe s 5(1)(g) as applying to s 23 of the ACL, as dealing with a subject (the contract) the making of which is subject to the extra-territorial extension in s 5(1)(g) read with s 4(2). It might be thought to be difficult or at least unnecessary to divorce the making of the contract from the contract as made. The contract as made is the product of the “engaging in conduct”: the making of the contract. The contractual provisions to which s 23 is directed cannot exist without the act of the making of those provisions in standard form contracts to which s 23 applies and their offer to and acceptance by consumers. In the context of beneficial consumer legislation (which must be construed beneficially in accordance with the legislation’s purpose: Tjungarrayi at [44]), it may appear contrary to the purpose of the ACL to limit the operation of s 5(1)(g) to the conduct of the making of contract, but not its product. It appears at least a valid and an open constructional choice on the text of s 5(1)(g) of the CCA that it applies to s 23 of the ACL.
The applicability of 5(1)(g) of the CCA to s 23 of the ACL does not, however, resolve the question whether there is any further limitation on the application of s 23 by circumstances of necessary connection to Australia. On either view (that is 5(1)(g) of the CCA applying or not), there may necessarily be, by reason of statutory construction or constitutional limits on the Parliament’s legislative competence, further implied limitations on the extra-territorial effect of s 23. As summarised by Derrington J, the parties’ submissions canvassed a number of alternatives as to an appropriate construction of or reading down of s 23 (with or without s 5(1)(g) of the CCA). These suggested limitations included either or both: contracts entered into with Australian consumers or small business operators, and/or contracts that are to be wholly or partly performed in Australia.
On the assumption that s 5(1)(g) of the CCA does apply to s 23 of the ACL, I have reservations as to the scope of application of the presumption expressed in cases such as Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society [1934] HCA 3; 50 CLR 581 at 600–601 and Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; 225 CLR 274 at 283 [23] against the extra-territorial application of statutory provisions to contracts governed by foreign law. As the High Court has stressed, this presumption (as a narrower subset of the presumption against extra-territorial application of statutes) may operate to read down “general words” in statutes which would otherwise give rise to issues of legislative competence and may affront principles of international comity. The presumption, however, is rarely applied in circumstances where the statute itself, in this case s 5(1)(g) of the CCA, expressly provides for the circumstances in which the legislation is to have extra-territorial application: see Jumbunna Coal Mine NL v Victorian Coal Miners’ Association [1908] HCA 95; 6 CLR 309 at 363; Wanganui-Rangitikei at 601; Re Maritime Union of Australia; Ex Parte CSL Pacific Shipping[2003] HCA 43; 214 CLR 397 at 415–416 [41]–[43] and 418–419 [52]–[54].
Reference to CSL Pacific Shipping assists. In that case, the Full Bench of the Australian Industrial Relations Commission (AIRC) held that it had jurisdiction in relation to an application by three unions to add as a party to an industrial award a foreign company not carrying on business in Australia and whose only connection with Australia was as the grantor as disponent owner of a time charter over a vessel operating in Australian waters. The AIRC had jurisdiction in relation to “industrial issues” under s 5 of the Workplace Relations Act 1996 (Cth). The appellant argued that the territorial scope of the Workplace Relations Act should be read down to not apply to an employer who has no presence in Australia and whose employees are foreign non-residents by operation of s 21(1)(b) of the Acts Interpretation Act and/or the common law presumption against extra-territorial effect of legislation, citing Meyer Heine Pty Ltd v China Navigation Co Ltd [1966] HCA 11; 115 CLR 10 at 31 and the authorities collected therein. (As to the interaction of s 21(1)(b) of the Acts Interpretation Act and the common law presumption, see Leeming JA’s discussion in DRJ v Commissioner of Victims Rights (No 2) [2020] NSWCA 242; 103 NSWLR 692 at 716 [91] ff concerning the analogous s 12(1)(b) of the Interpretation Act 1987 (NSW)).
The High Court unanimously rejected both arguments, stating that the express terms of s 5(3)(b) of the Workplace Relations Act provided that an “industrial issue” included matters pertaining to the relationship between employers and maritime employees, so far as those matters relate to trade or commerce between “Australia and a place outside Australia”. As the terms of the Workplace Relations Act “were not at large”, s 21(1)(b) of the Acts Interpretation Act had no operation: 415–416 [41]–[43]. Nor was this construction of s 5(3), being within “interstate and territories and overseas commerce power”, seen to be inconsistent with the common law principle of construction that Parliament “is not readily to be taken as intending to deal with persons or matters over which, according to the comity of nations, jurisdiction belongs to some other sovereign or State”: at 416 [45] and 418–419 [52]–[54].
A similar approach appears open to be adopted with the ACL. The Parliament has provided for the express circumstances when s 23 can apply to conduct occurring outside Australia in s 5 of the CCA, including the engaging in conduct outside of Australia by “bodies corporate incorporated or carrying on business within Australia”: s 5(1)(g). If s 5(1)(g) of the CCA applies to s 23 of the ACL, the ACL (within the CCA) is arguably not a provision of an Act expressed in general terms lacking guidance as to its territorial reach, within which the presumption against extra-territorial effect has room to operate. Even if the presumption did have room to operate on s 5(1)(g), it is not, in my view, the necessary “starting point”. Presumptions are merely an aid to interpretation which must give way to the meaning of the text properly understood in context and taking into account statutory purpose: R v Independent Broad-Based Anti-Corruption Commissioner [2016] HCA 8; 256 CLR 459 at 481 [77]; and DRJ at 732 [157].
On the assumption that s 5(1)(g) does not apply and the extra-territorial application of s 23 must be construed independently, it may be accepted that the presumption against extra-territorial effect (expressed in its various forms) may be applicable to read down s 23. But as the observations of Derrington J demonstrate, this leaves a difficult question: How should it be read down?
My hesitation with the reading down or construction of s 23 that it applies only when some Australian law is the proper law of the contract, can principally be explained by reference to Kitto J’s reasons in Kay’s Leasing Corporation Pty Ltd v Fletcher [1964] HCA 79; 116 CLR 124. In that case, the Hire-purchase Agreements Act 1941 (NSW) rendered void hire-purchase agreements entered into in New South Wales which contravened provisions of the statute. The Act sought to regulate the rights and duties of persons who entered into hire-purchase agreements in New South Wales. Justice Kitto considered whether the principle in Wanganui-Rangitkei meant that contracts whose proper law was not New South Wales were not governed by the statute, even if entered into within New South Wales. At 142–143, Kitto J firmly rejected this conclusion:
The necessary restriction of the operation of ss 26c and 31 is therefore to be implied or imported upon a consideration of the context and the subject matter. In the Supreme Court it was considered that the principle to be applied was that by which this Court determined cases such as Wanganui-Rangitikei Electric Power Board v. Australian MutualProvident Society. Such cases have dealt with legislation modifying or making void contractual rights and obligations of specified descriptions; but in each instance the modification or avoidance was enacted as an end in itself and not as a sanction for contravention of statutory requirements. It was held that in order to restrain the seeming universality of the relevant enactment it should be presumed that the intention was to affect only those rights and obligations the discharge of which was governed by the law of the enacting country according to the rules of private international law. The logical appropriateness of the presumption in a case of the kind can hardly be denied. But it was made clear, particularly in the judgment of Dixon J. in the Wanganui-Rangitikei Case, that the Court was applying a rule which was one of construction only, and that the context or subject matter of legislation might supply a different restriction upon the generality of the language.
Where a provision renders an agreement void for non-compliance by the parties or one of them with statutory requirements, especially where the requirements can be seen to embody a specific policy directed against practices which the legislature has deemed oppressive or unjust, a presumption that the agreements in contemplation are only those of which the law of the country is the proper law according to the rules of private international law has no apparent appropriateness to recommend it, and indeed, for a reason of special relevance here, it would produce a result which the legislature is not in the least likely to have intended. It would mean that provisions enacted as salutory reforms might be set at nought by the simple expedient adopted in the present case of inserting in an agreement a stipulation that validity should be a matter for the law of some other country.
(Emphasis added.)
By reference to Vita Food Products Inc v Unus Shipping Company Ltd (in liq) [1939] AC 277, Kitto J continued at 143:
In the Vita Food Case the proposition was laid down that the parties to a contract may conclusively determine for themselves what the proper law of the contract shall be, provided that their expressed intention is “bona fide or legal”, and provided there is no reason for avoiding their choice on the ground of public policy. That seems to me the strongest possible reason for rejecting the proper law of the contract as the test for determining to what agreements enactments such as ss. 26c and 31 of the New South Wales Hire-purchase Agreements Act should be understood as intended to apply.
(Footnotes omitted.)
Similar views were expressed by six members of the High Court in Old UGC, in relation to the territorial reach of s 106 of the Industrial Relations Act 1996 (NSW), a provision dealing with unfair contract terms. In circumstances where the “central conception upon which the relevant provisions fasten [was] the performance of work in an industry and the work in question was performed within jurisdiction”, it was held that the fact that the proper law of the contract was not New South Wales was irrelevant and the Wanganui-Rangtikei principle could not be used to read down the operation of s 106: at 282–283 [22]–[23] (Gummow, Hayne, Callinan and Crennan JJ, with whom Gleeson CJ and Kirby J agreed); see also Insight Vacations Pty Ltd v Young [2011] HCA 16; 243 CLR 149. Justice Kirby in Old UGC at 291–292 [56] stated that “it would be astonishing if the opposite were the case”, given the beneficial purpose and context of the Industrial Relations Act:
A contrary rule would leave the statutory provisions open, in many cases, to easy evasion by the simple nomination of a governing law other than that of New South Wales. In many cases, in the new economy, such a device could not be easily impugned. From the earliest days of the consideration of the predecessors to s 106, both in the Commission itself and in this Court, judges have resisted the notion that, by “clever drafting” or otherwise, the legislation could be rendered ineffective by such verbal devices. It is unlikely in the extreme that evasion of this kind would have been contemplated by the New South Wales Parliament. This is an obvious reason why the common law rule of construction, limiting legislation addressed to contracts as normally applicable only to those whose proper law is that of the jurisdiction, does not apply in the case of s 106 of the IR Act.
The observations in Kay’s Leasing and Old UGC could be seen to be applicable to s 23 of the ACL. It can hardly be presumed that the Commonwealth Parliament intended, except with express words of necessary intendment, that bodies corporate could, by a choice of law clause in standard form contracts entered into with Australian consumers, avoid or circumvent the protection offered to Australian consumers from “unfair” contract terms for goods and services provided wholly or partly in Australia under standard form contracts. The protection of the Australian consumer is the very context and subject matter to which the ACL is primarily directed. The specific policy of s 23, making void certain provisions in standard form contracts, is directed towards practices which the legislature has deemed “unfair” (in the sense defined in s 24) and which should not be enforced as part of a fair bargain. The unlikelihood of Parliament intending the construction limiting its operation to contracts the proper law of which is Australia or some law area therein, is perhaps highlighted by the fact that a choice of law clause, which mandated the governing law of another forum (such as a law area of the United States) for a standard form contract offered to Australian consumers for goods provided and/or services performed wholly or partly in Australia could, depending on the facts and circumstances of the case, be the very type of clause to which ss 23 and 24 could be seen to be directed. As Gageler J stated in R v Independent Broad-Based Anti-Corruption Commission [2016] HCA 8; 256 CLR 459 at 481 [77]:
…any common law principle or presumption of interpretation must surely have reached the limit of its operation where its application to read down legislation plain on its face would frustrate an object of that legislation or render means by which the legislation sets out to achieve that object inoperative or nonsensical.
(Footnotes omitted.)
Whilst an analysis as discussed by Derrington J that is referable to the proper law of the contract has its clarity and simplicity and may promote harmony with conflict of laws principles, it may be seen as a construction inimical to the purpose of s 23 and the ACL as a whole, which ought not be preferred unless it is the only possible interpretation available on a plain reading of the text used: s 15AA of the Acts Interpretation Act; Kay’s Leasing at 143.
That being said, the alternatives posited by the parties for the resolution of the extra-territorial effect of s 23 of the ACL do not provide an easy solution. It would appear intuitively correct that some connecting factor or factors with Australia is required. It may be that regard must be had to read down s 5(1)(g) as applicable to s 23 by reference to some further constitutional limits of the power of the Commonwealth Parliament to legislate under s 51(i) or (xx) of the Constitution or otherwise. It may require close attention to the necessary link between a foreign corporation “carrying on business in Australia” and the conduct or transactions sought to be regulated. Section 15A of the Acts Interpretation Act may be engaged. Such arguments or considerations may require notices under s 78B of the Judiciary Act 1903 (Cth) on this point. I would also favour inviting the ACCC to address the point as an interested intervener.
Given that a final decision on these questions is not necessary for the resolution of the controversy, there is no call to reach a final view, which in any event may require the further argument to which I have referred.
The enforcement of the exclusive jurisdiction clause
In Epic Games Inc v Apple Inc [2021] FCAFC 122; 286 FCR 105 at 127 [110] (Epic v Apple), the Full Court considered that a foreign court having to apply Australian law “through the prism of expert evidence” is a factor which may weigh in favour of non-enforcement of an exclusive jurisdiction clause, including “the risk that important aspects of foreign law will be lost in translation” and “matters of meaning and context may be overlooked or misconstrued”. In matters such as Epicv Apple that involve complex questions of law and which may have precedential value for Australian courts, it may be accepted that this is a public policy reason (the weight of which will depend on the circumstances of the case) against enforcing an exclusive jurisdiction clause. Care is necessary, however, in engaging in such an evaluation. In Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; 171 CLR 538 at 559, Mason CJ, Deane, Dawson and Gaudron JJ expressed the view that there were “powerful policy considerations”, particularly international comity, “which militate against Australian courts sitting in judgment upon the ability or willingness of the courts of another country to accord justice to the plaintiff in the particular case”. That public policy consideration underpinned the choice by the High Court in Voth to favour the “clearly inappropriate forum” test over the “more appropriate forum” test for forum non conveniens analysis. Application of this factor illustrated in Epic v Apple should be focused clearly on the public policy benefits for Australia of the potential of a particular case to contribute to Australian jurisprudence on complex or unsettled questions of law, thereby informing the question whether there are strong reasons not to enforce the exclusive jurisdiction clause. It should not be based on notions of the comparative ability or inability of a foreign court to occasion justice in a particular case.
In this case, the primary judge concluded at J[313] that the “Australian law on the ACL provisions that are relied on is reasonably well established and settled” and that the “factual issues rather than the legal issues [will be] the principal debate”. In these circumstances, I agree with Derrington J’s conclusion that the public policy underlying the Full Court’s conclusion in Epic v Apple has little, if any, weight. A court applying foreign law through expert evidence in matters governed by foreign law is a well-established and fundamental tenet of private international law.
Orders
The combination of the terms of the class action waiver clause and the operation of Pt IVA does not lend itself to easy remedial solution. The construction of the clause leads to an obligation upon the contracting party to take steps to opt out. A stay of Mr Ho’s action is framed in terms of vindication of the appellants’ rights under the contract that was entered into with Mr Ho. Any difficulty otherwise in framing relief does not, however, conjure forth some policy preventing the enforceability or validity of the class action waiver clause. Any other relief in relation to group members may depend on their knowledge of the action, whether the terms and conditions were incorporated into their contracts, and possibly the operation of the proper law of the contract if there be breach of the obligations found within the class action waiver clause. These matters were not debated and so it is not appropriate to say anything further.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop. Associate:
Dated: 2 September 2022
REASONS FOR JUDGMENT
RARES J:
I have had the advantage of reading the reasons of Allsop CJ and Derrington J. I am unable to agree with the orders that Derrington J proposes for the following reasons. I have used the defined terms that Derrington J used in his reasons in what follows. Subject to the following, I agree with much, but not all, of what Allsop CJ has written on matters other than the enforceability of the class action and exclusive jurisdiction clauses.
Incorporation of the US Terms and Conditions
I am of opinion that it is not necessary to decide whether Rosanna was Mr Ho’s or Princess’ agent or was, as the primary judge found, an intermediary. As Derrington J explains, the contract between Rosanna’s employer, CruiseShipCenters, and Princess provided that, despite Princess being bound to pay CruiseShipCenters a commission on its sales of Princess’ tickets, CruiseShipCenters was not Princess’ agent but was, instead, independent of it.
However, Mr Ho knew nothing of that contract. Indeed, Princess sought and obtained suppression and non-publication orders about the contents, or on appeal some of the contents, of its contract with CruiseShipCenters on the basis that many of its terms were commercially confidential. That means that the relationship of Rosanna and CruiseShipCenters to each of Mr Ho and Princess, being the parties to the contract of carriage on Ruby Princess, must be ascertained by what a reasonable person in the position of Mr Ho and Princess would infer based on the mutually known facts, the surrounding circumstances and the genesis of their dealings, including what CruiseShipCenters printed at the foot of its emails to Mr Ho about it being the carrier’s agent: cf Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 223 per Brennan J with whom Gaudron J agreed, at 261, on the contractual formation issue.
I agree with Derrington J’s conclusion that the contract for carriage on the voyage was not made on 25 September 2018 when Mr Ho paid the deposit or on 30 October 2018 when Rosanna sent him either or both the CruiseShipCenters’ booking confirmation at 8:16 pm or Princess’ at 8:18 pm. However, in my opinion, this case is an instance calling for what Gleeson CJ described in Baltic Shipping Company v Dillon(Mikhail Lermontov) (1991) 22 NSWLR 1 at 7F–8E as the “conventional analysis” of when and how a contract is made between an ocean carrier and a passenger, exemplified in Hood v Anchor Line (Henderson Bros) Ltd [1918] AC 837.
The “conventional analysis” for long distance rail or passenger liner travel is that if the passenger purchases a ticket some time in advance of the commencement of the journey, the ticket is treated as an offer by the carrier to carry on the terms in, or expressly incorporated by, the ticket which is open to the passenger for acceptance: MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125 at 137–139 per Stephen J, 142–144 per Jacobs J and see too at 133–135 per Barwick CJ. In this scenario, in the “conventional analysis”, the passenger must have a reasonable opportunity to examine the ticket and to ascertain the terms which the carrier wishes to impose for the proposed journey. If the passenger bothers to read the terms of the ticket, he or she can decline the offer or refuse to travel if those terms are unacceptable. Ordinarily, it can be expected that he or she will not read, but simply accept, the terms, and so enter into the contract of carriage for the journey, because, realistically, there is no choice for a passenger to avoid imposed terms of that kind on offer either from the carrier proffering the ticket or its competitors. The imposed terms reflect the reality that contracts for air or sea carriage are usually contracts of adhesion to whatever the carrier stipulates.
Thus, when the proposing passenger for sea travel pays a deposit and makes a booking with a travel agent or carrier, he or she has not then made a contract for carriage on the voyage, even if, as here, the booking confirmation refers to cancellation by the passenger and the loss of the deposit or a fee. The parties are taken in such a relational situation to expect that, subsequently to receiving the booking confirmation, either the passenger will accept the offer that it conveys or the carrier will issue a ticket to the passenger for the voyage, which is an offer to carry at a later time on the terms in the contract that will come into force after the passenger has had a reasonable opportunity to consider the proffered terms of carriage. The acceptance of the carrier’s offer is signified by the passenger’s conduct, after a reasonable time, in proceeding with the voyage or arrangements for it even if he or she has not read the proffered terms and conditions, because he or she must be taken to have done so.
Here, the cancellation terms and other conditions in both booking confirmations were new and amounted to a counter-offer. Mr Ho must have understood that Princess’ booking confirmation, that Rosanna sent to him on 30 October 2018, was a communication by the cruise operator itself, as opposed to that of the travel agent, CruiseShipCenters, and that it provided new terms and important information about the voyage. As Derrington J explains in his reasons, the booking confirmation provided Mr Ho with the ability to read all the terms and conditions on which Princess offered to carry him (and his wife) and by using the Cruise Personaliser, as Princess advised him to do in its booking confirmation, he would have learnt of them. Accordingly, Princess did all that was reasonable or necessary to bring the US Terms and Conditions, including those which Mr Ho impugned, to his attention before the contract of carriage was formed.
Again, it is not necessary to decide exactly when, before the voyage, those terms and conditions became the contract of carriage for his voyage on Ruby Princess because this could have been no later than when Mr Ho accepted them at the time he first used the Cruise Personaliser.
For these reasons, I agree with Derrington J that Mr Ho was contractually bound by the US Terms and Conditions.
Enforceability of the class action waiver clause
Ordinarily, if he had made the contract in the United States, Mr Ho would expect to litigate, as he contracted to, in accordance with the exclusive jurisdiction clause; ie, in the United States District Court for the Central District of California in Los Angeles. If Mr Ho had brought a proceeding in British Columbia, there is a real question as to whether the Canadian courts would have enforced it, as will appear below. That is because of the decision of the Court of Appeal for British Columbia in Pearce v 4 Pillars Consulting Group Inc (2021) 461 DLR (4th) 205 to which the primary judge had not been referred.
Because of the conclusion to which I have come concerning the inability of parties to contract out of or waive in advance the application of Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), it is not necessary for me to deal with the parties’ arguments about whether the exclusive jurisdiction and class action waiver clauses are unfair within the meaning of ss 23 and 24 of the Australian Consumer Law (ACL) in Sch 2 of the Competition and Consumer Act 2010 (Cth).
Is the class action waiver clause unenforceable?
The Chief Justice and Derrington J conclude that the class action waiver clause is not unfair by Australian law and is enforceable. With respect, I am unable to agree. That is because Princess could not seek to contract out of Pt IVA of the Federal Court Act for the reasons below.
A judicial exegesis on public policy runs the risk of mounting an unruly horse (as Burrough J cautioned in Richardson v Mellish (1824) 2 Bing 229 at 252). However, courts may, and sometimes must, have regard to the policy of a legislature in enacting a statute. Dixon CJ explained in Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 (in a passage that McHugh, Gummow, Kirby and Hayne JJ adopted in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69]) that “the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed”.
Even when a statute does not contain an express prohibition against contracting out of its application to the relationships of the parties to the contract, the court may find that the legislative intention for the enactment was to prohibit such a contractual term having legal effect. Mason J said in A v Hayden (1984) 156 CLR 532 at 557 (and see too at 545–546 per Gibbs CJ, 571 per Wilson and Dawson JJ, 589 per Brennan J and 595 per Deane J):
some contracts are void whereas others are valid, though the court will decline to enforce the particular provision in a valid contract when enforcement of that provision would have an adverse effect on the administration of justice.
In Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 at 143–144 [46], French CJ, Crennan, Kiefel and Bell JJ explained the principles of statutory construction that are apposite to determine whether a person can contract out of, or waive, so as to be legally bound, a right that an Act appears to confer on that person, or a person in his, her or its position. They said, in relation to provisions of the Corporations Act 2001 (Cth):
The fact that Ch 5C does not contain any express prohibition against a unitholder contracting not to exercise the right given by s 601NB (44) does not conclude the question as to the enforceability of such an agreement between scheme members and a responsible entity. Windeyer J observed in Brooks v Burns Philp Trustee Co Ltd ((1969) 121 CLR 432 at 456) that a person upon whom a statute confers a right may waive or renounce his or her rights unless it would be contrary to the statute to do so. It will be contrary to the statute where the statute contains an express prohibition against “contracting out” of rights. In addition, the provisions of a statute, read as a whole, might be inconsistent with a power, on the part of a person, to forego statutory rights. It is the policy of the law that contractual arrangements will not be enforced where they operate to defeat or circumvent a statutory purpose or policy according to which statutory rights are conferred in the public interest, rather than for the benefit of an individual alone. The courts will treat such arrangements as ineffective or void, even in the absence of a breach of a norm of conduct or other requirement expressed or necessarily implicit in the statutory text (Caltex Oil (Australia) Pty Ltd v Best (1990) 170 CLR 516 at 522; Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 at 227; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 179 [71]; Miller v Miller (2011) 242 CLR 446 at 457–458 [25]; Equuscorp Pty Ltd vHaxton (2012) 246 CLR 498 at 513 [23]).
(emphasis added)
When moving the second reading of the Federal Court of Australia Amendment Bill 1991 (Cth), the Attorney-General, the Hon Michael Duffy MP, said (Hansard: House of Representatives, 14 November 1991 at 3175):
The area of concern to business appears to be whether persons having relevant claims against the respondent should be included in the group covered by the proceedings unless they choose to opt out or whether all such persons should have to take a positive step to be included, that is, to opt in.
The Government believes that an opt out procedure is preferable on grounds both of equity and efficiency. It ensures that people, particularly those who are poor or less educated, can obtain redress where they may be unable to take the positive step of having themselves included in the proceedings. It also achieves the goals of obtaining a common, binding decision while leaving a person who wishes to do so free to leave the group and pursue his or her claim separately.
(emphasis added)
The Attorney-General identified the dual purposes of equity and efficiency as underpinning the legislative choice of an opt out procedure to enable persons to obtain redress. The purpose of efficiency in the administration of justice is apparent in the structure of Pt IVA. The achievement of the efficiency in the administration of justice that a representative proceeding is calculated to achieve cannot be gainsaid. Rather than the judicial system being burdened by multiple individual actions that involve the common issues of fact or law referred to in ss 33C(1) and 33H, in which there may be different evidence and findings of fact or law, a representative proceeding will resolve, once for all, those common issues and allow the individual claims to be pursued or settled with the benefit of the common findings.
It is fundamental to the scheme of Pt IVA that, as ss 33C(1) and 33H require, the applicant identify the existence of at least 6 other persons who have claims against a proposed respondent that are in respect, or arise out, of the same, similar or related circumstances and give rise to one or more substantial issues of fact or law (common issues). The applicant can commence a representative proceeding under Pt IVA, even though those other persons may know nothing of what the applicant is doing, including ascertaining their existence, for example, where the proposed group is large.
Importantly, s 33E(1) provides that, other than the presently irrelevant exceptions in s 33E(2), an applicant is not required to obtain the consent of any person before that person is included as a group member. It follows that the statutory scheme includes, as group members, all persons (other than those excepted in s 33E(2)) who have claims that the applicant describes in an originating application under s 33H in Pt IVA, regardless of their consent. Moreover, s 33J(2) expressly provides that a group member has a right, before the date fixed by the Court under s 33J(1), to opt out of the proceeding by written notice given under the Rules, that is to be exercised after its commencement.
The Court has power to alter the description of the group only on the application of the representative party (ie, the applicant) by force of s 33K(1). If the Court makes such an order, s 33K(4) gives the Court discretionary powers that include making “an order relating to the giving of notice to persons who, as a result of the amendment, will be included in the group and the date before which such persons may opt out of the proceeding”. Group members must be given notice under s 33X(1), the form and content of which the Court has approved under ss 33X and 33Y(2), of each of the commencement of the proceeding “and the right of group members to opt out of the proceeding before a specified date, being the date fixed under subsection 33J(1)”.
In King v GIO Australia Holdings Ltd [2001] FCA 270 at [15], Sackville, Hely and Stone JJ explained the importance of an opt out notice as:
This misleading impression might well affect the decision of a group member whether or not to opt out of the proceedings. The principal purpose of the notice given under ss 33X(1)(a) and 33Y(2) is to ensure that group members can make an informed decision concerning their rights: see Law Reform Commission, Grouped Proceedings in the Federal Court (Report No 46, 1988), pars 188, 190; Femcare Ltd v Bright (2000) 100 FCR 331, at 336–337, 349. We do not think it is an answer, as Mr Burnside QC (who appeared with Ms Hanscombe for the applicant) suggested it was, that a group member who is misled by the form of notice approved by the Court could apply for and expect to receive an extension of the period during which he or she can opt out of the representative proceeding: s 33J(3). The represented group is large and group members are likely to have widely varying degrees of understanding of the claims made on their behalf and the possible outcomes of representative proceedings. It is important that any decision they make concerning opting out of the proceedings not be based on a notice that is apt to mislead them.
(emphasis added)
Usually, an opt out notice will inform group members that they have the choice to remain passive, and that they will not be exposed to any possible liability for costs or other obligations until the common issues are decided by the Court or settled by agreement, or they can opt out. Common sense and long experience of representative proceedings in this Court suggest that few group members opt out as opposed to enjoying the benefit of a free carried interest in what is usually the riskiest part of the litigation. However, most persons who become group members when a representative proceeding is filed in the Court would have no idea about the rights that any uninformed pre-proceeding agreement to a class action waiver clause would deny them.
Because the Court must approve the form and content of an opt out notice, a person cannot make a fully informed decision whether or not to exercise his, her or its right to opt out of a representative proceeding under Pt IVA in which he, she or it has been included before receiving the notice under ss 33X and 33Y and has the opportunity to consider and obtain legal advice on whether or not it is in the person’s interests to opt out. If the person could make a legally binding decision to opt out before receiving a notice under ss 33X and 33Y informing him or her of the existence of the right to remain in or opt out of a representative proceeding under ss 33J(2) or 33K(4) and the matters that the Court has determined should be in an opt out notice, the person would not be fully informed of the matters that the Parliament intended that the Court ensure would be communicated in the notice before the person opted out.
When he entered into the contract of carriage with Princess, Mr Ho did not have any information that ss 33J, 33X and 33Y of the Federal Court Act contemplate a group member must be given in a notice that the Court has approved, in order to decide, on a proper understanding of his, her or its rights, whether to opt out of this representative proceeding, which, of course, was not then in contemplation.
Just as a complete agreement clause in a contract does not operate prospectively to preclude a party to it from alleging that the other party engaged in conduct that was misleading or deceptive or likely to mislead or deceive (in contravention of s 18 of the ACL) so that he, she or it was induced to enter into the contract, a party to a contract cannot preclude the other party from being included as, or remaining, a group member in a representative proceeding under Pt IVA of the Federal Court Act. That is because Pt IVA confers a right on an applicant to commence a group or representative proceeding, such as the present, where there are common questions of fact or law affecting seven or more persons in their relationship to a respondent without needing any group member’s consent.
The Parliament intended to confer the right of a group member to opt out in the public interest so that no one can contract prospectively out of Pt IVA of the Federal Court Act: Westfield 247 CLR at 143–144 [76]. The purpose of ss 33J, 33K(4), 33X and 33Y is for the Court to give a group member the opportunity to make an informed decision to opt out of a representative proceeding.
Ordinarily, group members become so involuntarily because of the way in which the applicant frames the group definition in the originating application and statement of claim or by an amendment under s 33K. It is not apposite to describe group membership as a “right”, when s 33E(1) negates any need for a person’s consent to becoming a group member. Rather, a representative proceeding, in which group members are included, initially regardless of their consent, are justiciable in this Court provided they meet the procedural requirements in ss 33C–33H. While a person does not have to consent to being included as a group member, by force of s 33E(1), he, she or it has a right conferred by s 33J(2), exercisable at a later time, to opt out of the representative proceeding.
On a literal reading, s 33J(2) may be thought to allow a group member to opt out at any time, prospectively by agreeing to do so, before or after, a representative proceeding has been filed. However, the Parliament intended that only after the commencement of a representative proceeding under Pt IVA, would a group member, involuntarily included in the group, be able to exercise a right to opt out, and then, only after receiving an opt out notice that the Court had approved.
A group member’s right to opt out under s 33J(2), after the Court has approved the form and content of an opt out notice pursuant to ss 33X(1) and 33Y(2), is clearly a right for the group member’s benefit, not for the benefit of the respondent in a representative proceeding. A group member’s opportunity on receipt of the opt out notice to consider whether to exercise the right to opt out is direct, simple, inexpensive and entirely in the discretion of the group member’s perception of his, her or its best interests on the basis of the information in the opt out notice: cf Westfield 247 CLR at 143–144 [46].
A class action waiver clause does not have the effect of denying that the claim to which it relates exists. Rather, the clause assumes that the person has a justiciable claim but seeks to proscribe the right of that person, if Pt IVA or an analogue in another jurisdiction, applies to the claim, to choose whether or not to opt out of the proceeding before the time that the Court fixes under s 33J.
It would be odd that, if Mr Ho’s claim is one to which Pt IVA applies, because it raises common issues of fact and law arising from each of his and each of the other group members’ contracts of carriage on Ruby Princess and his and their voyage on her in March 2020, some mechanism (such as the class action waiver clause) other than the statutory procedure for opting out under s 33J can control whether he or any of them remains a group member. Mr Ho’s contract of carriage did not negate that he would have any claim at all. Rather, the class action waiver clause sought to preclude him from litigating such a claim in any representative proceeding, including one brought in this Court.
Lack of power to enforce a class action waiver clause
The text of Pt IVA does not suggest that it envisages that persons can contract out of its provisions or that the Court can order their exclusion as a group member if they did. Indeed, such a construction would undermine the Parliament’s choice of an opt out, rather than opt in, model for representative proceedings under Pt IVA. As the Attorney-General’s second reading speech showed, business interests were concerned about the impact on them of an opt out procedure. It is unlikely that the ability of a business to contract out of Pt IVA, by using the quick fix of inserting a class action waiver clause in contracts, was part of the legislative intention.
It is not difficult to envisage that, if persons can contract out of representative proceedings, businesses in Australia that would otherwise be amenable to being sued in such a proceeding will seize on that opportunity to include a class action waiver clause in standard form contracts. If such a contractual term is enforceable, then, as here, questions concerning its fairness under ss 23 and 24 of the ACL may arise.
If a respondent could rely on a pre-existing waiver or agreement to opt out of any proceeding that a potential group member could bring, so that he, she or it could not adopt the passive role of a group member during the phase of representative proceedings that resolves the common issues, then the jurisdiction that the Parliament intended to confer on the Court in Pt IVA would be neutered. A representative proceeding under Pt IVA would be rendered incapable of achieving either efficiency or equity if it could be stymied by a pre-commencement agreement to opt out or waive the right to continue as a group member, even though that person was unaware of the information that, in the future, the Court would require a group member to have in an opt out notice when considering the exercise of the right to opt out of it.
The issue concerning the relevance of the class action waiver clause (and also the exclusive jurisdiction clause) to Mr Ho and the nearly 700 other persons who are group members bound by the US Terms and Conditions, should not obscure the question of principle as to whether Pt IVA allows a respondent to enforce a term of a contract made before a representative proceeding has commenced that, in substance, requires a group member to opt out of that proceeding.
It is unlikely that the Parliament intended that persons, particularly businesses, could circumvent the operation of Pt IVA by causing persons, whom the Attorney-General described as “poor or less educated”, to sign or agree to contracts containing a class action waiver clause that, if enforceable, would set the reform at nought. A construction of Pt IVA that permitted enforcement of a class action waiver clause would negate, first, the legislative intention to enhance access to justice and the efficiency of the exercise of the judicial power of the Commonwealth, and secondly, the right of a group member to decide whether to exercise the right to opt out of a representative proceeding after it has commenced.
If the class action waiver clause were to be enforced by the Court in a proceeding under Pt IVA, it would have to compel the group member either to give a legally effectual notice under the Federal Court Rules 2011, in accordance with s 33J(2), opting out of the representative proceeding, or impose a stay on his, her or its further participation, somehow removing the group member from the group. That order would be based on a contract made before the representative action was filed under Pt IVA, despite the person not then having the information that the Act requires a group member to have before he, she or it may exercise the right to opt out of it. Yet, in the statutory context, it is difficult to see how a respondent in a representative proceeding could obtain an order in this Court for specific performance or a stay against a group member to give effect to a class action waiver clause.
There is nothing in Pt IVA of the Federal Court Act that suggests that the Court has power to compel a group member to decide one way or another whether to exercise the right to opt out relating to the exercise of that right as opposed to giving the person information. Indeed, s 33K(1) limits the powers of the Court to alter the description of the group. That is because only the representative party may apply under s 33K(1) to do so.
Here, Princess seeks enforcement of the class action waiver clause by a court order. That order would have the substantive effect of altering the description of the group by excluding persons who were bound contractually by the clause from being group members without this occurring under s 33K.
The primary judge considered that the remedy of a stay would be inappropriate because of ss 33N–33S. Those sections provide specific powers to the Court to order that a proceeding cease to continue as a representative proceeding (s 33N), then deal with the refashioned action (s 33P), and give directions for the determination of non-common issues or issues common to one or more subgroups (see 33Q–33S). His Honour reasoned, in obiter dicta, that enforcement of the class action waiver clause would require removal from group membership of persons, in Mr Ho’s position, bound by the US Terms and Conditions using what Lee J described in Dyczynski v Gibson (2020) 280 FCR 583 at 665 [337] (J343) as “some unusual bespoke order”.
In Dyczynski 280 FCR at 664–665 [336]–[337], Lee J, with whom Murphy and Colvin JJ agreed on this point (at 629 [175]), set out the ways in which a person can cease to be a group member, none of which involved the Court enforcing a respondent’s reliance on a class action waiver clause or its equivalent. While Lee J noted that the Court might be able to achieve the removal of a person as a group member “by some unusual bespoke order” (at 665 [337]), his Honour did not discuss how, on what basis or in what circumstances such an order might be made.
In my opinion, any such order would have to rely on a power that the Court has as a superior court of record under s 5(2) of the Federal Court Act or otherwise under that Act or another Act. However, the absence of any express power authorising such an order leads to the conclusion that a stay order based on the class action waiver clause would be inconsistent with the public policy considerations in Pt IVA to which I have adverted.
The position in British Columbia
As Derrington J notes, prior to the hearing of the appeal, the Full Court asked the parties for submissions about Pearce 461 DLR (4th) 205. Of course, the statutory context of Pt IVA of the Federal Court Act is different to that in both British Columbia and the United States. The ratio decidendi of Griffin JA (with whom Goepel and Abrioux JJA agreed) was that the class action waiver clause there was, first, unconscionable in the particular circumstances and, secondly, contrary to the public policy of British Columbia (at 259 [184], 260 [193]). As here, but unlike in the United States, the Class Proceedings Act 1996 (BC) provided that class members can opt out of a class action. Thus, under that Act, class members have a statutory right to opt out after the Court has certified that the matter should proceed as a class action. Griffin JA rejected the defendants’ argument that a prospective class member had the freedom to contract out of a class action before the time which the court later, after certification, sets for class members to opt out, saying (at 274 [265]–[266]):
265 What this argument blurs is the difference between an informed choice between two viable options, and an uninformed choice that leaves the consumer with no options. The choice to opt out is made after a class proceeding has been certified and the consumer has received court–approved notice. At that time, the consumer is informed of the alleged wrongs by the defendants and can make an informed choice between the benefits of continuing as part of the class or opting out to simply not pursue a claim or, less likely, to pursue a claim on their own.
266 The choice to agree not to pursue class proceedings at the time the person enters the contract is before there has been any alleged wrong. In the present context of a consumer standard–form contract, it is made in the context of a stark inequality of bargaining power where the person has no right to negotiate the terms and nothing in the contract informs them as to the negative implications this clause will have on their practical ability to sue to vindicate their rights. When later the person does realize they have been wronged and they have a potential claim, if the clause is enforceable it will be too late for them to make a choice as to how they will pursue their claim. As noted above, they will be practically precluded from advancing any claim.
(emphasis added)
Her Honor also rejected the defendants’ argument that the absence of a legislative prohibition against contracting out of the Class Proceedings Act supported a construction of that Act that a person was free to contract out of a class action before it commenced (at 274–276 [267]–[278]). She concluded that the standard form class action waiver clause in that appeal “so functionally interferes with access to the courts that it is contrary to public policy and unenforceable” (at 276 [279]).
In my opinion, the public policy of Pt IVA leads to a similar result.
As Pearce 461 DLR (4th) 205 shows, Mr Ho could not have been bound under the laws of British Columbia, where he lives, to adhere to any class action waiver clause, at least if that were the proper law of the contract and he was a group member in a proceeding there.
Conclusion on the class action waiver clause
I am of opinion that, because Mr Ho has a claim, as a group member, that is properly the subject of the representative proceeding brought by Ms Karpik, it would be against the public policy of Pt IVA of the Federal Court Act for this Court to stay that claim or to order him not to pursue it.
For the reasons I have given, Pt IVA does not enable persons to contract out of being group members before the commencement of a representative proceeding. There is no power for the Court to order a person to opt out of a representative proceeding or, other than under s 33K, to remove a person as a group member. It follows that the class action waiver clause is unenforceable in this proceeding.
The exclusive jurisdiction clause
In elucidating this point her Honour observed (at 272 [256]) that the clause would have the effect of requiring the individual claimants to bring their own action in support of their claims which would result in a waste of judicial resources, involve a duplication of fact finding, and raise the potential for inconsistent judgments. If separate hearings were required for all claimants, damage would be inflicted on all Canadians by soaking up judicial resources. It was also said (at 273 [259]) that the class action waiver would limit access to the Courts by preventing the class members from sharing costs and that, in the circumstances of the case, the participating members would not pursue an action given the low monetary value of the claim and the complexity of issues. The consequence was that the clause functionally prohibited access to the Courts. The third reason relied upon was that the class action would be frustrated, with the result that any behavioural modification in relation to the defendant’s conduct would be defeated. Griffin J also considered that the right to waive an entitlement to participate in a class action in the future was not the same as the right to waive it after being fully informed of the benefits of participating after the events in question have arisen and a claim is made. She considered this more important in the case before her where there was a substantial inequality of bargaining power.
There are a number of reasons why reliance on this decision does not assist Mr Ho. Firstly, there is no pleaded claim that the class action waiver is contrary to some amorphous overriding public policy. Second, there is nothing in the circumstances of this case to suggest that the claims are of such a low monetary value that individual claims would not be worth pursuing. On the contrary, each claim was not merely in respect of the cost of the cruise but also sought substantial damages for personal injury, distress and loss of enjoyment. Third, there was nothing to suggest that Mr Ho or any other passenger whose ticket was subject to the US Terms and Conditions would not be able to pursue his claim if they were unable to join the class action. The passengers who were engaged on a 13 day cruise for a holiday are unlike the purported class members in Pearce v 4 Pillars Consulting Group Inc, being individuals on the verge of bankruptcy. In the present case the evidence before the Court was that there are 11 separate proceedings by passengers whose ticket incorporated the US Terms and Conditions in the US District Court in California which indicates that the class action waiver does not inhibit the bringing of claims. Fourth, in the matter before the British Columbian Court of Appeal the class participants were in a vulnerable position and, in relation to the respondent, a position of significant bargaining inequality from which they were unable to negotiate. None of that exists in the present matter where if Mr Ho, who had ample opportunity to consider the terms of the passage contract, might have rejected them and sought a different 13 day cruise with another cruise company. Each of these reasons or any combination of them are sufficient to reject any claim based on the type of public policy referred to in Pearce v 4 Pillars Consulting Group Inc. That, however, should not be taken to suggest any acceptance that the very broad Canadian principles of public policy through which the courts there exercise socio-political as opposed to legal power, have any relevance in Australia.
The exclusive jurisdiction clause does not offend the Contracts Review Act
By a further ground of the Notice of Contention it was alleged that both the exclusive jurisdiction clause and the class action waiver were unfair contract terms within the meaning of s 7(1) of the Contracts Review Act 1980 (NSW). It was submitted that, by reason of s 17(3) of that Act, it applied regardless of the choice of law clause contained in the passenger contract prescribing the application of the general maritime law of the United States. That section provides:
(3)This Act applies to and in relation to a contract only if:
(a)the law of the State is the proper law of the contract,
(b)the proper law of the contract would, but for a term that it should be the law of some other place or a term to the like effect, be the law of the State, or
(c)the proper law of the contract would, but for a term that purports to substitute, or has the effect of substituting, provisions of the law of some other place for all or any of the provisions of this Act, be the law of the State.
It was submitted on behalf of Mr Ho, and apparently seriously, that s 17(3)(b) applied in this case and that, but for the choice of law clause in the passenger contract, the law of New South Wales would be the contract’s proper law. In order to establish that, it would have to be shown that the law of New South Wales was “the system of law … with which the transaction has its closest and most real connection”: Bonython v Commonwealth (1950) 81 CLR 486, 498 per Lord Simonds. At first instance, the primary judge had no difficulty in disposing of this submission. His Honour correctly concluded that, absent the choice of law clause, the proper law of the contract would not be that of New South Wales. He observed that the contract was between a resident of Canada and a Bermudan company based in California, and it was concluded in Canada with the consideration for performance being paid in Canadian dollars. His Honour accepted that on the basis that the US Terms and Conditions were part of the contract there existed an exclusive jurisdiction clause in favour of courts in the United States. As to the performance of the contract his Honour held (PJ [157]), and it is not challenged, that although the voyage commenced and ended in New South Wales, only 1.5% of it was within Australian territorial waters. 37.1% of the voyage’s duration was spent within New Zealand’s territorial sea, whilst 61.4% was spent on the high seas or in the Contiguous Zone or Exclusive Economic Zone of either Australia or New Zealand. His Honour also recognised that, had the cruise proceeded according to its original schedule even less time would have been spent in Australian territorial waters.
The fact that the voyage commenced and ended in New South Wales did not elevate the law of that State as the contract’s proper law. At best, the law of New South Wales had only a passing connection with the transaction. Whilst it is true that the primary judge did not identify the law with which the passenger contract did have its closest and most real connection, he was appropriately satisfied that it was not the law of New South Wales: (PJ [158]). No error has been shown to exist in his Honour’s reasoning in this respect.
It should be added that even if the Contracts Review Act applied to the passenger contract, the class action waiver was not an “unfair term” for the same reasons that it could not be so described under s 23.
Ground 3 – enforceability of the class action waiver under the general maritime law
It remains to determine whether the class action waiver is enforceable in accordance with the proper law of the contract, being the general maritime law of the United States. Under that law, the terms of a passenger ticket will be enforceable where (i) the provision is reasonably communicated to the passenger; and (ii) enforcement of the provision would not be fundamentally unfair: Oltman v Holland Am. Line, Inc., 538 F.3d 1271, 1276 (9th Cir. 2008); Carnival Cruise Lines, Inc. v Shute, 499 U.S. 585, 590, 595. There was no dispute in these proceedings as to the content of this part of the US general maritime law. It is apparent that the issue of the efficacy of class action waivers under the general maritime law has come before the Courts on several occasions and it is well accepted in the United States that they are valid and enforceable: See esp AT&T Mobility LLC v Concepcion 563 U.S. 333 (2011). There was no dispute as to this issue on the appeal.
It is of assistance in this case that the particular wording of the passenger contract in the form of the US Terms and Conditions was the subject of consideration in Archer v Carnival Corporation. It is to be recalled that, in that case, the passenger’s attention was brought to the US Terms and Conditions and the class action waiver by the Booking Confirmation and the link to the Cruise Personaliser in the same manner as they were in this case. The United States District Court, C.D. California, held that the clause was valid and should be enforced as a result of it satisfying the “reasonable communicativeness” test (as discussed above) and because it passed the fundamental fairness test. In the latter respect, it was held that there was no evidence of bad-faith, fraud, overreaching, or an attempt to discourage the pursuit of legitimate claims by Princess including the term in its standard US Terms and Conditions. It was accepted that class action waivers were common in many industries and their validity had been regularly upheld. Nor was the class action waiver an unconscionable term. Similar terms had previously been upheld in passage contracts for cruising and, they were not procedurally unfair because, although they were secured by the result of unequal bargaining power, there had been reasonable communication of them.
In the present case, the primary judge failed to apply the general maritime law of the United States to ascertain the validity of the class action waiver. Had he done so however, the inevitable result would have been to uphold the validity and enforceability of the class action waiver.
GROUND 6 – SHOULD A STAY BE DENIED ON DISCRETIONARY GROUNDS
On the assumption that the US Terms and Conditions applied, the primary judge determined that the exclusive jurisdiction clause was not an unfair term under s 23. In the ordinary course, Princess would, prima facie, have been entitled to a stay of the proceedings commenced in contravention of the agreement to resolve disputes in Los Angeles. However, the primary judge recognised that it was well established that the Court retained a discretion whether to stay the proceedings and that the principles on which it might be exercised had been formulated by Brandon J in The Eleftheria [1970] P 94 at 99 – 100, and had been approved and cited by Dawson and McHugh JJ in Akai Pty Ltd v The People’s Insurance Co Ltd (1996) 188 CLR 418, 428 – 429 (Akai v The People’s Insurance):
(1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not.
(2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown.
(3) The burden of proving such strong cause is on the plaintiffs.
(4) In exercising the discretion the court should take into account all the circumstances of the particular case.
(5) In particular, but without prejudice to (4), the following matters, where they arise, may properly be regarded:
(a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts.
(b) Whether the law of the foreign court applies and, if so, whether it differs from English law in any material respects.
(c) With what country either party is connected, and how closely.
(d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.
(e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would:
(i) be deprived of security for their claim;
(ii) be unable to enforce any judgment obtained;
(iii) be faced with a time-bar not applicable in England; or
(iv) for political, racial, religious or other reasons be unlikely to get a fair trial.
(Line breaks added).
Although Mr Ho bore the onus of establishing “strong grounds” or “strong reasons” to refuse Princess’s application for a stay of the proceedings: Oceanic Sun Line v Fay at 224 per Brennan J and 259 per Gaudron J; Epic Games Inc v Apple Inc (2021) 392 ALR 66, 72 [21]: his Honour determined that they existed and would have exercised the discretion to refuse to enforce the exclusive jurisdiction clause. This conclusion is challenged by Princess on a number of grounds.
The first was that the primary judge considered the issue on the basis that Princess was unable to rely upon the class action waiver as against those passengers whose passage contracts were subject to the US Terms and Conditions. On that conclusion, the members of the US subgroup would, if the action was not stayed, have had the significant advantage of being able to remain members of the class action in Australia. For the reasons which have been given above in relation to the class action waiver, the primary judge’s reliance on this factor was in error. Princess is entitled to enforce it such that, even if the claims by the US subgroup are not stayed by reason of the exclusive jurisdiction clause, the members of that group would nevertheless be required to abandon their participation in the current proceedings. It follows that the learned primary judge’s exercise of the discretion was vitiated by his reliance on the existence of “strong grounds” when the foundation for that reliance was misplaced: House v R (1936) 55 CLR 499, 504 – 505.
The second challenge concerned his Honour’s conclusion that the granting of a stay would have the consequence of fracturing the litigation. His Honour had held (PJ [332]) that if a stay was granted the current proceedings would continue in relation to those whose passage contract was subject to the UK terms or the Australian terms, which represented the vast majority of passengers on the voyage. The claims, evidence and facts in relation to the claims of those passengers would generally be identical to the US subgroup members’ claims. This, so the primary judge held, had the consequence that there would a fracturing of the litigation with essentially the same claims being brought in this Court and a Court in the United States. His Honour concluded (at PJ [333]):
There is a firm legal policy against fracturing litigation in that way. It is wasteful of the parties’ resources and it is wasteful of judicial resources. But more particularly, it runs the risk of producing conflicting outcomes in different courts. That is undesirable for a number of reasons, including that it brings the administration of justice into disrepute.
Whilst the general principle in relation to the fracturing of litigation can be accepted, it generally applies when litigation is threatened in another court between identical parties. Here, that is not the case. The parties to the different proceedings will not be the same with the result that, although the conclusions reached in the separate pieces of litigation may be different, they would not be conflicting and nor would they bring the administration of justice into disrepute. It would merely mean that different results were reached in different litigation between different parties.
The primary judge’s heavy reliance on the alleged fracturing of the litigation was misplaced. In truth, the litigation, being the claims between Princess and the individual passengers, is not fractured. Whilst the form of a class action facilitates the determination of common questions and issues, the proceedings are the accumulation of the separate individual claims. It is only the combined process of the class action which would be affected by the granting of a stay and not the individual claims. Moreover, even if it might be said that the granting of the stay would result in a fracturing of the litigation, giving that factor such substantial influence denies the presumptive weight which ought to be accorded to the parties’ bargain. The effect of the primary judge’s methodology allowed the interests of third parties to displace the balancing of rights as between the contracting parties and it would have the unsatisfactory consequence that class actions will nearly always defeat an exclusive jurisdiction clause between the defendant and some of the class members.
Mr Pike SC relied upon Incitec Ltd v Alkimos Shipping Co (2004) 138 FCR 496 (The Alkimos) to support the proposition that the unnecessary duplication of litigation is a powerful reason for not enforcing an exclusive jurisdiction clause. In that case the Australian Quarantine and Inspection Service had refused to permit the discharge of a cargo of fertilizer from the vessel, “The Alkimos”. A cargo interest, Incitec Ltd, commenced proceedings against both the vessel’s owner, Alkimos Shipping, and the time charterer, Hyundai Merchant Marine. Pursuant to cl 17 of the time charter, the London Maritime Arbitrators Association arbitration clause was incorporated and it provided that any dispute arising out of or in connection with the time charter be referred to arbitration in London. After Incitec commenced proceedings in the Federal Court of Australia, Alkimos Shipping and Hyundai Merchant Marine varied the exclusive jurisdiction clause in the time charter to replace London arbitration with proceedings in the High Court of Justice. Alkimos Shipping sought leave to cross-claim against Hyundai Merchant Marine in the Federal Court action. The Court was required to determine whether that claim should be stayed by reason of the exclusive jurisdiction clause. Allsop J (as the Chief Justice then was) refused the stay placing particular weight on the potential difficulties arising from the fragmentation of the litigation which might lead to inconsistent determinations on the same issues as between the same parties. His Honour said (at [62]):
The very existence of the possibility, if not probability, of duplicated litigation is, on modern authority of the highest persuasive stature a cogent consideration in assessing the effect of an exclusive jurisdiction clause. This is for good and powerful reasons based on the cost and inconvenience of litigation and the desire not to foster the circumstances of courts coming to different conclusions about the same facts on perhaps different, or even the same, evidence.
However, the circumstances encountered there are quite different from those of the present case. There, the cross-claim was inextricably connected with the cargo interest’s action for loss of the cargo such that the possibility of different determinations related to the same question as between the same parties. In the present matter Mr Ho’s claim for loss is distinct from that of the other claimants. His claim is based on his contractual, common law and statutory rights as against Princess in relation to the circumstances in which he suffered loss or damage, and in respect of which no other party has an interest. If the stay is granted there is no possibility of different determinations being made in relation to the same issue as between the same parties. There is nothing in The Alkimos which assists the respondent in the present matter.
In refusing the stay the primary judge also relied (PJ [336] – [337]) upon the assumption that Australian law concerning misleading or deceptive conduct could not be adequately applied by the US District Court. He purported to apply the decision in Epic Games v Apple Inc at 88, [110], to the effect that the process of determining claims in the US Court through the prism of expert evidence about the content of Australian law is not the same as ascertaining and applying the law directly. This, his Honour held, weighed in favour of refusing a stay. With respect, that reliance on Epic Games v Apple Inc was misplaced. Whilst the ability of a foreign court to apply Australian law to a dispute is a factor to be considered, necessarily the weight given to it will depend upon the centrality of Australian law to the real issues in dispute. In Epic Games v Apple Inc the claims under Part IV of the CCA and s 21 of the ACL were pivotal to Epic Games’ proceedings. They were also identified by the Full Court as being provisions of great economic significance to Australia because anti-competitive practices threaten the Australian market. The inference from the Full Court’s decision is that foreign courts ought not to determine matters relating to the proper conduct of Australian markets. Whilst the primary judge recognised that the public policy considerations were not the same in this case, he considered (at PJ [337]) there were public policy considerations which favoured ACL claims being heard by Australian courts. They were that some of the ACL’s provisions establish normative standards of commercial behaviour expected of corporations undertaking trade and commerce in Australia and that they offer protections and remedies to consumers in Australia. Whilst that might be accepted, nearly all laws impose standards of behaviour which offer protection to those whose rights have been affected and they are usually enforced by the courts of the jurisdiction in which they apply. If this were a factor of any significance it would have the result of substantially undermining the principle that the party opposing a stay in the face of an exclusive jurisdiction clause is required to establish strong grounds.
The alleged contraventions of the ACL in this matter are principally concerned with factual matters relating to express and implied representations as to the quality of the care which Princess would take in relation to the protection of the passengers boarding the Ruby Princess. Necessarily, the strength of those representations is dependent upon the knowledge of the relevant parties at the time and, in this respect, it is not unfair to observe that some of the representations pleaded in paragraphs 269 – 272 of the statement of claim are, to a degree, somewhat speculative. Moreover, the damages claim in paragraph 285 does not plead the facts necessary to establish any relevant causal nexus between the alleged representations and the losses sustained: See the line of cases commencing with the observations of French J in Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215, 222 which are set out in Jasmin Solar Pty Ltd v Trina Solar Australia Pty Ltd [2020] FCA 1018 [82]. Overall, despite the claim being poorly pleaded, it is neither complex nor does it appear to raise any difficult question of principle. There was no submission to the contrary.
The primary judge held that the claims arising under the ACL were neither novel nor complex and nor was it likely that Courts in the United States would decline to exercise their “supplemental jurisdiction” to deal with them were they to be part of proceedings pursued there. In relation to the claims under the ACL his Honour held (at PJ [313]):
… The claims have analogues in US law but, more importantly, Australian law on the ACL provisions that are relied on is reasonably well established and settled. It is on the factual issues rather than the legal issues that the principal debate is going to be in determining the claims. That seems to me to be well within what the US Court, like Australian courts, regularly does in applying foreign law. …
On the primary judge’s conclusions that the Courts of the United States would accept jurisdiction to deal with the ACL claims which turned on factual rather than legal issues, it is most unlikely that the US subgroup members would suffer any prejudice were the exclusive jurisdiction clause to be enforced. There was nothing which suggested that the foreign courts would face any difficulty in dealing with these claims. Further, there was nothing to suggest that any determination by a court in the United States would be other than purely dispositive, in the sense that there are no novel or unique legal issues which arise for consideration. Regardless of where the matter is heard there was no apparent point of principle to be resolved. That ought to have negated the primary judge’s concern (at PJ [336]) that the judgment of the US court would not contribute to the body of Australian law.
Neither is there anything unique or special about the prohibition on misleading or deceptive conduct as provided for by the ACL. Before the learned primary judge there was evidence, which he appears to have accepted, that misleading and deceptive conduct and similar tort actions are well recognised in the United States and that the issues raised by such claims would not be novel to those courts.
In these circumstances, the primary judge erred by according the ACL claims advanced in the class action some special or unique status which weighed in favour of the existence of strong grounds not to enforce the exclusive jurisdiction clause. The particular claims advanced are quite distinct from those pursued in Epic Games v Apple Inc and they are not of the type which could reasonably be accorded substantial weight in the context of the exercise of the discretion.
It was submitted on behalf of Mr Ho that, if the action is stayed and he is required to litigate in California, the class action waiver would be enforced there and he would lose the entitlement to participate in any form of group proceedings. For the reasons previously given, the class action waiver is not unfair and is enforceable in Australia and that has the consequence that he would suffer no prejudice by litigating in California. However, on the assumption that it would not be enforced here, an issue arose as to whether it could be said that the ability to avoid the clause’s operation was a legitimate juridical advantage which might generate “strong reasons” not to grant a stay based on the exclusive jurisdiction clause. Mr McLure SC submitted that there was no case where a mere procedural advantage in the local forum was sufficient to support the exercise of the discretion and that what was required was some form of substantive legal benefit such as entitlement to pursue a particular cause of action. Mr Pike SC did not identify any authority to the contrary. There is, with respect, some substance to the obvious distinction between substantive and procedural rights in this context. Whilst the entitlement to pursue a substantive claim in one jurisdiction but not in another obviously impacts the balance of the parties’ rights and obligations and is therefore inherently important, the same does not apply in relation to procedural rights. Matters of procedure are usually concerned only with the method by which substantive rights are enforced and, in any particular jurisdiction, they are the framework for the resolution of the substantive rights. Whilst the procedural scheme of courts may differ, they are generally not directed to altering the outcome of the dispute as between the parties. On that basis, whether a supposed procedural advantage is obtained in one jurisdiction or the other should be significantly less important than any variation in the parties’ substantive rights. As the guidelines articulated in Akai v The People’s Insurance indicate, the discretion to grant a stay is generally concerned with substantive rather than procedural rights. Further, to the extent to which a perceived procedural advantage might be available in this jurisdiction, the exercise of the court’s discretion not to stay proceedings brought in contravention of an exclusive jurisdiction clause will necessarily impose an equivalent detriment on the party seeking to maintain the obligation.
Mr Pike SC relied upon the observations of Kirby P in Goliath Portland Cement Co Ltd v Bengtell (1994) 33 NSWLR 414, 438 – 439, as giving some guidance as to the matters which might be taken into account in exercising a discretion not to stay a matter commenced in breach of an exclusive jurisdiction clause. However, the issue in that case was whether the proceedings in the Dust Diseases Tribunal of New South Wales should be stayed on forum non conveniens grounds and not whether a stay should be granted because the proceedings were brought in contravention of an exclusive jurisdiction clause. A further important point of distinction is that the advantage sought to be obtained in that case was the avoidance of certain limitation periods in the jurisdiction in which the torts were allegedly committed and where the causes of action accrued. Although the limitation period in the jurisdiction chosen by the plaintiff might be described as a “procedural right”, it had the effect of permitting him to advance his substantive claim whereas in the loci delicti his substantive claim was effectively nullified. In the context of the present case the denial of the right to participate in the class action does not deny Mr Ho any right to enforce his claim. He is entitled to pursue it as others have in the US District Court in Los Angeles, California. That being so, the circumstances being considered by Kirby P were far from those of the present case.
Mr Pike SC also relied upon the observations of Kiefel CJ and Keane J in Wigmans v AMP Ltd (2010) 388 ALR 272, 284 where their Honours said:
[42] In Moore v Inglis, Mason J approved the statement of Lord Esher MR in The Christiansborg that where an action is prima facie vexatious “it would lie on the party who brings the second action to [show] that it was not so”. As explained in Voth, that may be done by showing that the second action offers some “legitimate … juridical advantage” over the first. By “legitimate juridical advantages”, one refers to the advantages arising from the processes and remedies available in the courts. In Spiliada Maritime Corporation v Cansulex Ltd, Lord Goff of Chieveley instanced as examples of such advantage cases where “damages [are] awarded on a higher scale; a more complete procedure of discovery [is available]; a power to award interest [is available]; [or] a more generous limitation period [applies]”. Lord Goff qualified the relevance of such factors with the statement that “the underlying principle requires that regard must be had to the interests of all the parties and the ends of justice”.
It can be accepted that the concept of legitimate juridical advantage does extend to procedural advantages where the issue is whether or not proceedings should be stayed on forum non conveniens grounds. However, again, that is not the issue in this case which involves circumstances where the parties have agreed upon an exclusive jurisdiction clause and one seeks to avoid its effect.
Even if it were appropriate to take into account the comparative procedural advantages between the forum agreed upon and that in which the litigation has been commenced, the question must surely be whether the procedural advantage to the party who has commenced the litigation in breach of the exclusive jurisdiction clause amounts to “strong cause” for not holding that party to their agreement. In that evaluation it must be kept in mind that refusal of a stay may well have the effect of exposing the party seeking to enforce the clause to procedural obligations or requirements which they had sought to avoid and may deprive them of procedural advantages in the forum on which the parties had agreed. Save from a parochial point of view, it is not self-evident that imposing on a party the more onerous procedural obligations of the forum in which the party acting in breach of the exclusive jurisdiction clause has chosen provides support for concluding that “strong reason” has been shown not to grant a stay.
It is not necessary to decide in this case whether a court should take into account a procedural advantage of the forum to the party commencing the action which has the effect of permitting them to pursue a claim which is not available to them in the chosen jurisdiction. Here, there was no question that Mr Ho could have commenced proceedings in California as had other passengers.
The necessary conclusion is that the learned primary judge’s discretion miscarried. Mr Ho had failed to establish “strong reasons” or “strong grounds” for effectively relieving him from the effect of the exclusive jurisdiction clause to which he had agreed such that Princess should not have been denied its prima facie entitlement to a stay. The stay sought by Princess in its interlocutory application filed 28 June 2021 should be granted.
RELIEF
The nature of the relief which should be granted given Princess’s success on appeal was the matter of some debate before the Court. It was submitted that whilst Princess may be entitled to declarations as between it and Mr Ho, as the primary judge had held that there was no common question as to whether the US subgroup members entered into a contract with Princess on the passage contract terms, no other orders could be made which affect the rights of those other parties. Mr McLure SC submitted that although there was no explicit appeal from that finding, the relief which was sought by the Notice of Appeal made it clear that such was in issue. He submitted that orders should be made that Mr Ho be made the representative party of a US subgroup and that part of the proceedings should be stayed. Were it otherwise, others in the same position as Mr Ho might assert their entitlement to remain part of the class action and further proceedings would have to be pursued by Princess seeking stays in relation to those parties.
Whilst there is force to these submissions, it is preferable that the matter be remitted to the primary judge for determination as to the extent to which Mr Ho’s circumstances are replicated amongst other passengers. That is particularly so in circumstances where the issue on which the parties were joined was fact sensitive and dependent upon the agency of Rosanna when acting for Mr Ho in the booking of his ticket and the extent to which those circumstances are representative of the bookings made by other passengers is not known.
The orders of the Court should be as follows:
(1)The appeal is allowed.
(2)Order 1 of the orders of the Federal Court of Australia made on 20 September 2021 in this matter be set aside and, in lieu thereof, it is ordered that:
(a)It is declared that the passage contract as between Mr Patrick Ho and the respondents pursuant to which Mr Ho undertook a voyage on the vessel, Ruby Princess, departing Sydney on 8 March 2020, was subject to the terms of the US Terms and Conditions as that expression is used in the reasons for judgment of this Court.
(b)The proceedings in respect of the claims of Mr Patrick Ho as against the respondents be stayed.
(c)The matter be remitted to the primary judge for determination of the extent to which the reasons for decision of this Court affect the claims of other members of the class action.
(3)Order 7 of the orders of the Federal Court of Australia made on 21 October 2021 in this matter be set aside and, in lieu thereof, it is ordered that the applicant pay the respondents costs of the application.
(4)The respondent pay the appellants’ costs of the appeal.
I certify that the preceding three hundred and one (301) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington. Associate:
Dated: 2 September 2022