Karpik v Carnival Plc ARBN 107 998 443 & Anor

[2023] HCATrans 33

[2023] HCATrans 033

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S130 of 2022

B e t w e e n -

SUSAN KARPIK

Applicant

and

CARNIVAL PLC (ARBN 107 998 443)

First Respondent

PRINCESS CRUISE LINES LIMITED (A COMPANY REGISTERED IN BERMUDA)

Second Respondent

Application for special leave to appeal

KIEFEL CJ
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION

ON FRIDAY, 17 MARCH 2023, AT 11.29 AM

Copyright in the High Court of Australia

KIEFEL CJ:   In accordance with the protocol for remote hearings, I will announce the appearances for the parties.

MR J.T. GLEESON, SC appears with MR R.J. MAY for the applicant.  (instructed by Shine Lawyers)

MR D.A. McLURE, SC appears with MR T.O. PRINCE for the respondents.  (instructed by Clyde & Co)

KIEFEL CJ:   Yes, Mr Gleeson.

MR GLEESON:   Thank you, your Honours. The single special leave question that we have framed at page 232 has three components to it, each of which is an aspect of general application. Could I identify them at the outset. The first question is whether section 5(1)(g) of the Competition and Consumer Act, set out at page 243, operates to extend the unfair terms jurisdiction of Part 2, Division 3 of the ACL to contracts made outside Australia with defined consumers or small businesses by either Australian corporations or, in this case, a foreign corporation carrying on business in Australia.  We submit the answer to that question will be yes.

The second aspect of the question, which will arise under sections 23 to 25 of the Australian Consumer Law – set out on pages 243 to 245 – is whether, in deciding if a term of a standard form consumer or small business contract is unfair, does the ACL require Australian standards of fairness to be applied or, as the Chief Justice below has indicated, it can include an inquiry into the standards of fairness under the putative foreign forum.  We submit the answer to that part of the question is:  it is wholly Australian standards of fairness that are applied and, when those standards are applied, a class action waiver clause will always be unfair by Australian standards.  Your Honours, the final aspect of the question is whether, under Part IVA of the Federal Court Act and the State analogues, class action waiver clauses are always void for offending the public policy which underlies the Act.

Your Honours, in terms of the general importance of those questions, could I add these submissions.  While Mr Ho – the particular test case here – is a resident of British Columbia and signed up to the US terms of the respondent, we would say the questions arise equally for any Australian consumer signed up to the same standard form class action waiver clause, and that is because there is nothing in the text of either the ACL or of Part IVA which limits those provisions by reference to the residence of the claimant.

The Chief Justice below contemplated a different answer to that question, that it may be that Australian consumers would be protected against class action waiver clauses while foreign consumers would not.  We submit that is an error of law which requires consideration and correction.

KIEFEL CJ:   Mr Gleeson, for the question of public importance, or general importance, do you rely principally upon the ground relating to section 23 and section 5(1)(g) and the extraterritorial effect? I ask that because, of course, the waiver clause is one peculiar to this contract and it might be seen to be, therefore, of lesser importance.

MR GLEESON:   Your Honours, that is the strongest ground of the claim to public importance because, if it is correct, it applies well beyond this particular class action waiver clause or any class action waiver clause.  It applies generally to whether the unfair terms jurisdiction of this part of the ACL does have the extraterritorial effect, we submit. 

So, it is at least as wide as the whole of the unfair terms jurisdiction.  Your Honours, it is even wider, because in the decision we have referred to, Valve Corporation, the full Federal Court held – we submit, correctly – that section 5(1)(g) extends the extraterritorial operation of another part of the ACL – the consumer guarantee part – in Part 3, point 2, which is a critical part of the ACL. And Justice Derrington, at least, has purported to cast extreme doubt upon the correctness of the Full Court decision in Valve which, we would submit, is quite erroneous of him to do.

To take up the other aspect of your Honour’s question, so far as this is a class action waiver clause, the way we seek to put it is that partly section 23 but also Part IVA means that class action waiver clauses are contrary to the policy of the statute – particularly to the extent we rely upon Part IVA and we seek to embrace Justice Rares – that will be a general application to all class action waiver clauses.  

We did not put that part of the case on the basis of the particular circumstances of Mr Ho; we put it at the higher level, the Part IVA, as the Court identified in BMW v Brewster as the two public purposes – one is the efficiency of the administration of justice, the other is access to justice – and those purposes are contradicted by class action waiver clauses.  But, otherwise, as I have said, the strongest ground for public importance is the section 23 point because it extends far beyond class action waiver clauses.

Your Honours, what I wanted to say in development of the argument could, perhaps, first – by reference to section 5(1)(g) – commence with what the Chief Justice below said on the topic between pages 97 and 100 of the book, commencing, in particular, at paragraph 22. If leave were granted, we would wish to contend that what Chief Justice Allsop said, particularly at paragraph 22, is good in law; that is, that section 5(1)(g) has given us the answer – and the complete answer to the question – when the relevant provisions of the ACL operate extra‑territorially. That is the first aspect of his reasoning. The second aspect is that the relevant engaging in conduct is the making of the provision of the conduct, which is what occurred here overseas.

So, if paragraph 22 – supported by the following reasoning – is correct, we would submit that we would succeed on that aspect of the appeal and there is no ground to read‑in any further limitations by reason of principles of international law in order to keep the statute within appropriate bounds.  To that extent, we would be arguing that what Justice Derrington has said, over some 75 paragraphs, is incorrect.

The ultimate point of his Honour Justice Derrington’s reasoning is found at page 188, at paragraph 292, where his Honour, seemingly, has said, despite the text of the provision which says it does apply to section 23, it, in fact, does not.  Instead, there is a limitation to contracts – the proper law of which is the law of Australia.  That, we submit, is the error which requires correction.  And it requires correction for the reasons given by the Chief Justice; that it would completely circumvent the operation of the ACL if you could bind a party to a standard form, foreign choice of law clause and thereby avoid the operation of the statute altogether.  So, your Honours, that is the first aspect of the question.

KIEFEL CJ:   Mr Gleeson, I think the respondent says that if one deals in the first place with the term and the unfairness question, in particular, it would not be necessary to reach questions of extraterritoriality; it might conclude the matter.

MR GLEESON:   Yes, your Honour.  That is the high point of the respondents’ opposition to leave.  Our answer to that is that this is one of those category of cases where it is necessary to get the logically anterior question right in order to understand the scope of the unfair terms jurisdiction.  That can be seen, again, from Chief Justice Allsop’s reasoning between pages 93 and 94, because although his Honour has later told us he is inclined to our view on the anterior question, in paragraph 5 on page 93, he has said that the task under section 23 is:

at least informed by the approach of courts in the United States.

So, when applying the Australian standard of section 23, his Honour has said that there is some form of renvoi, even if a weak one, to the law of the foreign forum indicated by the choice of law clause and the exclusive jurisdiction clause so that you approach the question of fairness by the standards of the United States.

What we wish to submit is that if one gets the section 5(1)(g) question correct, the Parliament has made a decision that if you are a foreign corporation who chooses to carry on business in Australia, then the contracts that you make overseas are governed by the Australian standards of fairness found in sections 23 to 25. So that to get the section 5(1)(g) question right means that what is in paragraph 5 would be exposed as being in error, and likewise paragraphs 6 and 7.

Could your Honours just pardon me for one moment.  Thank you, your Honours.  Likewise, in paragraphs 6 and 7, where his Honour is, as it were, deferring to the United States approach to the fairness of class action waiver clauses, that is wholly in error.  One decides it simply by Australian standards because the Parliament has said Australian standards apply to the conduct, even though it has occurred in the United States.

Your Honours, on that point, you will have observed on page 94, at paragraph 9 – and likewise, paragraph 13 on page 95 – that his Honour has said the answer might be different if it was an Australian consumer. So, what his Honour appears to be contemplating is that, although section 5(1)(g) might apply, there is nevertheless a variable standard within section 23, whereby if you are an Australian consumer, even if you have signed up to US standard terms, the court does not look at the US approach to the enforceability of such a clause.

That shows, we would submit, that the 5(1)(g) question is intertwined with what is the correct approach to section 23.  We would submit it is irrelevant whether you are an Australian consumer or a foreign consumer.  Once the statute has applied extraterritorially, the contractual term is considered by the Australian standards.

Your Honours, whether one ends up being bound by the Australian terms or the US terms could be wholly fortuitous for the reasons the Court will see back on page 22 in the primary judge’s findings of facts. At paragraph 39, if you book on a computer system, it is your IP address that determines whether you end up on the US terms with a class action waiver clause or the Australian terms. That means that an Australian who happens to be in the US and books through an ordinary US website will end up on the US terms, whereas had they booked in Australia, they would be on the Australian terms. It also means wherever you are in the world, if you use a VPN to Australia, you will get the Australian terms. We would want to submit once you get section 5(1)(g) rights, those incidental and fortuitous happenings as to whether you end up on one set of terms or another should not dictate the answer to the question of fairness under section 23.

Your Honours, could I say one thing about the third aspect of the question, which is the Part IVA public policy issue.  As I have indicated, we

seek to put this at the higher level – the class action waiver clauses in general offend the public policy of Part IVA.

The principle we embrace is that which Justice Rares identified at page 108, paragraph 53, in this Court’s decision in Westfield.  What we take from that is that being a group member is not merely a matter of private right, but the statute evidences a purpose or a policy that the group action procedures are available for the reasons indicated in BMW v Brewster.  A class action waiver clause contradicts that essential purpose because what happens is, if the clause is enforced, a person is bound to opt out without regard to the person receiving the relevant information which the statute requires. 

So, we would seek, on this point, to embrace the reasons of Justice Rares.  I would also indicate, your Honours, on page 115, that the Full Court referred the parties below to the decision in British Colombia v Pearce – which happens to be Mr Ho’s home jurisdiction.  What is set out there at paragraphs 265 to 266 from Pearce, on a scheme which is like our scheme because it is an opt out scheme, reflects what we submit to be the public policy evident from Part IVA.  Neither Justice Derrington nor Chief Justice Allsop, we would submit, with respect, have squarely grappled with the essential part of the relevant reasoning in Pearce – which is here found.

Your Honours, where that would leave the prospects of an appeal is, if we are correct on either of the strands we have just identified, then the discretion to stay Mr Ho’s proceedings is miscarried and, on a re‑exercise of that discretion on the proper basis – for the reasons given by Justice Rares, at page 117 to 118 – the order below would be reversed.

They are our submissions, your Honours, unless there are questions.

KIEFEL CJ:   Yes, thank you, Mr Gleeson.  Yes, Mr McLure.

MR McLURE:   Your Honours, as we have said in writing, proposed ground 1 only arises if ground 2 is successful, so I will deal with ground 2 first. For the reasons which I will develop, we submit that the errors attributed to Chief Justice Allsop and Justice Derrington in relation to the proposed ground 2 proceed on a misconception about what section 24 of the Australian Consumer Law required and where the onus lay to make out the elements of that provision.

Could your Honours please turn to page 244 of the book, where you will find section 24. Your Honours will see subsection (1) specifies three cumulative criteria for unfairness. Subsection (2) specifies two mandatory considerations on the question of unfairness, they being transparency and consideration of “the contract as a whole”. Subsection (3) gives content to the concept of transparency, and subsection (4) assigns the onus for establishing the element in (1)(b) to the party seeking to claim the benefit of that term – in this case, of course, the respondent. It is otherwise common ground that the onus lies on the applicant to establish the elements in (1)(a) and (1)(c).

So, dealing with those matters, both Chief Justice Allsop and Justice Derrington found that the class action waiver clause was transparent for the purposes of subsection (2)(a), and there is no challenge to that finding.  As required by subsection (2)(b), both their Honours approached the question of determining the unfairness of a class action waiver clause by considering it in the context of the contract as a whole.  Specifically, they considered that term and the way in which it interrelated with the exclusive jurisdiction clause and the choice of law clause, selecting the general maritime law of the United States.

If your Honours could look, please, at page 92 of the book, paragraph 4 at the bottom of the page.  The correct starting point for the analysis of the contract as a whole was recognition of the applicant’s concession that the exclusive jurisdiction clause was not unfair within the meaning of section 23.  There was no challenge to the fairness of the clause selecting the general maritime law of the United States as the law to govern the parties’ contract.  Going over the page, paragraph 5, as your Honours have already seen, in the second line, the Chief Justice approached this:

by reference to the whole of the contract.

Then, in the passage that our learned friend drew attention to, in the last three lines of that paragraph, there what his Honour is recording are matters which may be relevant to the question required by section 23, rather than disregarding section 23 and applying foreign law.  At paragraph 6, if your Honours would look at the sentence beginning the fifth‑last line; that is:

When the whole contract is looked at –

what the Chief Justice is recording is that those terms, operating together, resulted in the United States courts having exclusive jurisdiction over litigation between the parties where, according to the law of the United States, the class action waiver clause would be enforced.  Then, relevantly, in paragraph 7, at the foot of page 93, third line from the bottom:

proper law of the contract –

that is, the general maritime law of the United States, made the class action waiver clause enforceable.  So, contrary to the applicant’s submission, the Chief Justice did not fail to consider whether the class action waiver clause was unfair within the meaning of sections 23 and 24 of the Consumer Law.  Rather, what his Honour did was he held that the class action waiver clause was not unfair within the meaning of those provisions, because the enforcement of that clause in accordance with the general maritime law of the United States was the consequence of the parties’ not unfair agreement that any litigation between them would be conducted in California, according to United States law. 

The errors that are attributed to Justice Derrington concern the way that he dealt with the factors in section 24(1). The first challenge to his reasoning concerns the significant imbalance factor and the complaint is that he did not grapple with the potential for representative proceedings to make some economically unviable claims viable if pursued through representative proceedings. But that submission is not correct.

If your Honours would turn to page 175, at paragraph 255 your Honours will see Justice Derrington explicitly dealt with that very issue.  In the third line, his Honour was recording the challenge to that same finding made by the primary judge about economic viability.  His Honour accepted the submission put for the respondents that there was no evidence to support it, bearing in mind that this was a matter in respect of which the applicant had the onus of proof.

The criticism that his Honour then goes on in the paragraph to engage in speculation about what lawyers in California might be prepared to do is misplaced.  His Honour there is explaining why the applicant’s failure to adduce any evidence about those matters was significant.  No complaint is made, or is proposed to be made, by the applicant about the inference that Justice Derrington draws at the foot of page 175 about the existence of 11 other proceedings in United States courts at the time this application was determined by the primary judge.

Then, looking over the page at 176, paragraph 256, no complaint is made by applicant about the significance that Justice Derrington attached to the United States being a so‑called “no costs” regime.  Then, looking at paragraph 257 in the second half, that contains generalised observations by his Honour about the relative advantages and disadvantages of individual proceedings in comparison to representative proceedings.  There is no suggestion from the applicant that those observations are wrong at a general level and the applicant led no evidence to suggest that any different view should prevail in relation to the particular circumstances of this case.

Paragraph 258 is more of the same point about the relative financial capacity of Mr Ho and Princess.  Again, there was no evidence of Mr Ho’s financial capacity, either at the time that he entered into the contract or at the time that Princess sought to enforce the clause.  There is no suggestion that Justice Derrington was wrong to find that any court – or at least the United States courts – would seek to protect against one party using its financial strength to oppress the other, leaving aside that there was no basis to suggest that that is something that the respondents would do in any event.

These matters means that the applicant failed to discharge the onus in relation to the significant imbalance element in section 24(1), and that is reason alone for this ground not to have sufficient prospects of success, bearing in mind they are cumulative elements. But dealing with the other two briefly – that is the legitimate interest element. Justice Derrington’s reasons for that start at paragraph 260 on page 177 of the book. The principal complaint made about Justice Derrington’s reasons there concerns the idiosyncratic interests of Princess, which is referred to at paragraph 262 in the second line. It is not correct, we submit, to hold up that component of Justice Derrington’s reasons as being the pivotal issue on which he found that there was a reasonable protection of the respondents’ legitimate interests.

In this section of his Honour’s judgment, he collects the submissions made by both parties about the relative advantages and disadvantages of individual proceedings over representative proceedings.  What his Honour ultimately arrives at is the conclusion at page 180, in the last five lines of paragraph 267, the sentence beginning:

It suffices to observe that the class action procedure can be abused to oppress defendants –

then the first sentence of paragraph 268.  These are conclusions – that is, those I have just mentioned – which the applicant does not challenge.  That is sufficient to establish the respondents’ legitimate interest.  The class action waiver clause was not an unreasonable means of protecting that interest in circumstances where, firstly, the passengers retained the right to sue individually, and secondly, even in a representative proceeding as this case demonstrates where there are claims for personal injury damages, and distress and disappointment damages, there is an inevitable component of individual assessment which does not happen for free.

The third element – the detriment element in section 24(1)(c) – the principal complaint about that concerns the second sentence of paragraph 269. The submission that is put for the applicant is that because Justice Derrington said:

It is not doubted that he will be denied the benefits of the protection –

that is sufficient to establish detriment.  But that submission, we submit, cannot be accepted for the reasons given in the next sentence of his Honour’s reasons, it being a matter on which the applicant bore the onus, having no evidence of his financial capacity either at the time he entered into the contract of at the time Princess sought to enforce the contract.

Can I move then to ground 2(b), which is the public policy point in relation to Part IVA.  Most, but certainly not all cases concerned with rendering contracts unenforceable by reason of public policy concerned the administration of justice in relation to criminal laws.  The applicant’s submission that any contract having only a slight tendency to interfere with the administration of justice is too broad to be accepted, and it is not supported by the various ways in which parties can lawfully contract out of civil litigation in courts, such as by arbitration agreements, expert determination agreements and settlements.  Our learned friends cite in support of this argument the observation of Justice Mason in Heydon, but what his Honour also said in that case is that one would one find a contract void as against public policy where the contract is incontestably, on any view, inimical to public interest.

Ultimately, the applicant’s argument in relation to public policy depends on reading into section 33J of the Federal Court of Australia Act a prohibition on claimants opting out of representative proceedings until the court approves a notice in relation to that.  The significant intrusion that this would affect upon the rights of a represented claimant to commence their own proceedings, or to settle their own claims, or to disavowing the association with proceedings commenced without their consent is such that this could not be a matter for implication.  As to proposed ground 3, this would involve an appeal against the exercise of a discretion on a matter of practice and procedure ‑ ‑ ‑

KIEFEL CJ:   Mr McLure, I do not understand the applicant to be pressing this as a basis for the grant of special leave.

MR McLURE:   I will move beyond that then.  I will just, finally, address proposed ground 1.  We accept that proposed ground 1 raises an important question, in the sense that it is one that this Court has not previously considered.  However, it is not worthy of special leave for two reasons.  Firstly, it will only arise, as we have said, if proposed ground 2 is successful and, for the reasons we have given, we submit that that does not have sufficient prospects of success.

Secondly, the applicant’s contention is too broad to have sufficient prospects of success.  The applicant does not challenge the conclusion of Justice Derrington, at paragraph 291 – which your Honours will find at page 187 – that the objective, as distinct from selected proper law of the contract, was not the law of Australia.  The chosen law was not the law of Australia either. 

Consequently, for the applicant’s contention in relation to section 5(1)(g) to be correct, it would have the consequence adverted to by Justice Derrington at paragraph 300, which we have spelt out in the written submissions; namely, that section 23 could apply to a contract between a foreign corporation and a foreign consumer, having no connection whatsoever with Australia for the sole reason that the corporation was carrying‑on an unrelated business in Australia. That contention, we submit, is too broad to be correct if that is the one propounded by the applicant in the special leave question.

Those are our submissions, your Honours.

KIEFEL CJ:   Yes, thank you.  Anything in reply, Mr Gleeson?

MR GLEESON:   Thank you, your Honours.  With respect to Mr McLure, he has not grappled with our argument as to the link between ‑ ‑ ‑

KIEFEL CJ:   We appear to have lost Mr McLure.  Mr McLure, are you there?  I think we might have to adjourn briefly, Mr Gleeson, to re‑establish contact with Mr McLure.

The Court will adjourn briefly.

AT 12.04 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.06 PM:

KIEFEL CJ:   Yes, Mr Gleeson.

MR McLURE:   I apologise, your Honours, for that.

KIEFEL CJ:   Not at all, Mr McLure.  Yes, Mr Gleeson.

MR GLEESON:   Thank you, your Honours. Dealing first with ground 1, with respect to Mr McLure, he has not grappled with the way in which we present the section 5(1)(g) question as interrelated with the question of what are the standards of fairness under section 23. That remains an important question for the Court to consider. His other ground 4 dismissing ground 1 arose on page 190, where he said that our argument is too broad and will have “anomalous consequences”. This is paragraph 300. Whether it has those consequences and whether that is correct in law is the very issue that needs to be grappled with under section 5(1)(g).

In any event, I would note – if your Honours went back to page 36, paragraph 128 – the present case does not raise the anomaly in paragraph 300. In the present case, the respondent, Mr McLure’s client, owns the Ruby Princess, time charters the Ruby Princess, sells and markets the cruises in Australia, and, as it happens, overseas, and everyone travels on the same boat to and from Sydney. That is the context in which we seek to apply section 5(1)(g) and section 23.

Your Honours, as to ground 2(a), Mr McLure said that the Chief Justice correctly looked at the whole of the contract, but, coming back to page 93 that I dealt with in‑chief, what Chief Justice Allsop has interpreted as looking at “the whole of the contract” is looking to the standards of law that would be applied to the enforceability of the clause under the foreign forum but, apparently – see paragraph 9 over the page – not if the consumer was an Australian consumer.  So, the critical question of law within section 23 is whether, as we commend, it has a single standard of fairness not referable to foreign law standards and not referable to the residence of the consumer.  That remains an important question.

Finally, as to Justice Derrington, Mr McLure said there are lots of individual paragraphs we did not take issue with.  This is a special leave application where we are identifying the issues of principle to show that an error of law has occurred against which there needs to be a re‑exercise of discretion.  And, against that background, we would ultimately be contending – and this is my final submission – if your Honours go back to page 39, paragraph 144 , that what JusticeStewart said in that paragraph as to why the clause created a:

significant imbalance in . . . rights and obligations –

namely, its tendency to limit the ability of persons to pursue the claim effectively or at all with:

Princess’s interest in the clause –

being:

the very imbalance that it creates.

That is the critical feature which renders the clause unfair by Australian standards.

May it please the Court.

KIEFEL CJ:   Yes, thank you, Mr Gleeson.  The Court will adjourn to consider the course that it will take.

AT 12.10 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.14 PM:

KIEFEL CJ:   There will be a grant of special leave in this matter.  What is your estimate of time for the hearing, Mr Gleeson?

MR GLEESON:   Your Honours, if there are interventions, which we expect there may be from the ACCC ‑ ‑ ‑

KIEFEL CJ:   Yes.

MR GLEESON:   ‑ ‑ ‑ and potentially under the 78B notices, I think the Court would need to allow 1.5 days.  If there are no interventions, it is probably a day.

KIEFEL CJ:   Mr McLure?

MR McLURE:   I agree, your Honour.

KIEFEL CJ:   Yes, thank you for that.  You will have your solicitors contact the Deputy Registrar for the usual directions.

The Court will now adjourn until 12.30 pm.

AT 12.15 PM THE MATTER WAS CONCLUDED