Karpik v Carnival plc (The Ruby Princess)
[2025] FCAFC 96
•29 July 2025
FEDERAL COURT OF AUSTRALIA
Karpik v Carnival plc (The Ruby Princess) [2025] FCAFC 96
Appeal from: Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280 File number: NSD 1592 of 2023 Judgment of: MARKOVIC, SARAH C DERRINGTON AND JACKSON JJ Date of judgment: 29 July 2025 Catchwords: CONSUMER LAW – cross-appeal – purpose guarantee in s 61(1) and result guarantee in s 61(2) of the Australian Consumer Law (ACL) – alleged error in finding that purpose and result of acquiring services was to have a “safe, relaxing and pleasurable cruise” – potential overlap of purpose guarantee and result guarantee – grounds of cross-appeal not made out
CONSUMER LAW – cross-appeal – alleged error in finding breaches of purpose and result guarantees – compliance with guarantees is an objective test – inferences from facts and events before and after supply of services are permissible – grounds of cross-appeal not made out
CONSUMER LAW – cross-appeal – s 267(4) of the ACL – causation of loss from breaches of purpose and result guarantees – alleged error in refraining from analysing each specific shortcoming in the services provided – grounds of cross-appeal not made out
CONSUMER LAW – scope of guarantee – due care and skill guarantee in s 60 of the ACL – alleged error in finding of failure to supply services with due care and skill – grounds of cross-appeal not made out
NEGLIGENCE – cross-appeal – scope of duty of care –alleged error in finding that owner and operators of passenger vessel owe a duty of care to passengers to care for their health and safety including in relation to the risk of harm caused by infectious disease – grounds of cross-appeal not made out
NEGLIGENCE – cross-appeal – breach of duty of care – alleged error in finding that the respondents had breached their duty of care owed to the applicant – consideration of precautions a reasonable person in respondents’ position would have taken – grounds of cross-appeal not made out
DAMAGES – where personal injuries suffered were COVID-19 infection and associated adjustment disorder – consideration of availability and assessment of distress and disappointment damages – where appellant received a full refund of cost of cruise holiday – whether refund properly a credit against distress and disappointment damages – grounds of appeal not made out
DAMAGES – personal injury damages for non-economic loss – alleged error in assessment of severity of non-economic loss assessed against a most extreme case – grounds of appeal not made out
Legislation: Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 18, 54, 60, 61, 267
Trade Practices Act 1974 (Cth) ss 74, 74D
Civil Liability Act 2002 (NSW) ss 5B, 5C, 5D, 5E, 11, 16, 32
Residential Tenancies Act 1999 (NT) s 122
Cases cited: Adcock v Blue Sky Holidays Ltd (unreported, Court of Appeal, 13 May 1980)
Addisv Gramophone Co Ltd [1909] AC 488
Amaca Pty Ltd v Booth [2011] HCA 53; 246 CLR 36
Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Baltic Shipping Co v Merchant; “Mikhail Lermontov” (unreported, NSW Court of Appeal (1994) BC9402491)
Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191
BNL20 v Minister for Home Affairs [2020] FCA 1180
Boensch v Pascoe [2019] HCA 49; 268 CLR 593
C. Czarnikow Ltd v Koufos [1969] 1 AC 350
CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; 239 CLR 390
Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; 75 NSWLR 649
Cameron v Qantas Airways Ltd [1995] 55 FCR 147
Christopher Hill Ltd v Ashington Piggeries Ltd [1972] AC 441
Collins v Insurance Australia Ltd (2022) 109 NSWLR 240
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1
Cruise Group Pty Ltd v Fullard [2005] NSWCA 161
CSL Australia Pty Ltd v Formosa [2009] NSWCA 363; 261 ALR 441
David Jones Ltd v Willis (1934) 52 CLR 110
Dependable Motors Pty Ltd v Ashford Shire Council (1959) 101 CLR 265
Fisher v Nonconformist Pty Ltd [2024] NSWCA 32; 114 NSWLR 1
Francis v Lewis [2003] NSWCA 152
Gharibian v Propic Pty Ltd (t/as Jamberoo Recreation Park) [2007] NSWCA 151
Graham Barclay Oysters Pty Ltd v Ryan [2000] FCA 1099; 102 FCR 307
Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; 211 CLR 540
Griffiths v Peter Conway Ltd [1939] 1 All ER 685
Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145
Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31
Hobbs v London and South Western Railway Co (1875) LR 10 QB 111
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; 247 CLR 613
I & L Securities v HTW Valuers [2002] HCA 41; 210 CLR 109
Jarvis v Swans Tours Ltd [1973] QB 233
Jones v Bartlett [2000] HCA 56; 205 CLR 166
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; 243 CLR 361
Kurrie v Azouri (1998) 28 MVR 406
Langdon v Carnival PLC [2024] NSWCA 168; 115 NSWLR 78
Malik v Bank of Credit & Commerce International SA [1997] UKHL 23; [1998] AC 20
Medtel Pty Ltd v Courtney [2003] FCAFC 151; 130 FCR 182
Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128; 196 FCR 145
Milner v Carnival plc [2010] EWCA Civ 389; 3 All ER 701
Minister for the Environment v Sharma [2022] FCAFC 35; 291 FCR 311
Modbury Triangle Shopping Centre Pty Ltd v Anzil [2000] HCA 61; 205 CLR 254
Moore v Scenic Tours Pty Ltd (No 2) [2017] NSWSC 733
Moore v Scenic Tours Pty Ltd (No 4) [2022] NSWSC 270; 409 ALR 259
Moore v Scenic Tours Pty Ltd [2020] HCA 17; 268 CLR 326
Morris v Leaney [2022] NSWCA 95
Nolan v TUI (UK) Ltd [2016] 1 Lloyd’s Rep 211
Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313
Priest v Last [1903] 2 KB 148
Qantas Airways Ltd v Cameron [1996] FCA 349; 66 FCR 246
Royal Caribbean Cruises Ltd v Rawlings [2022] NSWCA 4; 107 NSWLR 51
Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217; 72 NSWLR 559
Scenic Tours Pty Ltd v Moore [2018] NSWCA 238; 361 ALR 456
Scenic Tours Pty Ltd v Moore [2023] NSWCA 74
Shaw v State of New South Wales [2012] NSWCA 102; 219 IR 87
Shirt v Wyong Shire Council [1978] 1 NSWLR 631
Shoalhaven City Council v Pender [2013] NSWCA 210
Smith v Carnival Plc trading as P&O Cruises Australia [2018] NSWSC 782
Smith v Leurs [1945] HCA 27; 70 CLR 256
State of New South Wales v Napier [2002] NSWCA 402
Swift v Fred Olsen Cruise Lines [2016] EWCA Civ 785
Tapp v Australian Bushmen’s Campdraft & Rodeo Association Ltd [2022] HCA 11; 273 CLR 454
Waine v Carnival Plc trading as P&O Cruises Australia [2022] NSWDC 650
Wallace v Kam [2013] HCA 19; 250 CLR 375
Youngv Chief Executive Officer (Housing) [2023] HCA 31; 278 CLR 208
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 360 Date of hearing: 27–29 August 2024 Counsel for the Appellant: Mr J Sexton SC, Ms C Ernst and Mr M Gvozdenovic Solicitor for the Appellant: Shine Lawyers Pty Ltd Counsel for the Respondents: Mr J Hutton SC, Mr J Kennedy and Mr H Cooper Solicitor for the Respondents: Clyde & Co (until 5 June 2025)
Corrs Chambers Westgarth (from 5 June 2025)ORDERS
NSD 1592 of 2023 BETWEEN: SUSAN KARPIK
Appellant
AND: CARNIVAL PLC (ARBN 107 998 443)
First Respondent
PRINCESS CRUISE LINES LIMITED (A COMPANY REGISTERED IN BERMUDA)
Second Respondent
AND BETWEEN: CARNIVAL PLC (ARBN 107 998 443)
First Cross-Appellant
PRINCESS CRUISE LINES LIMITED
(A COMPANY REGISTERED IN BERMUDA)
Second Cross-AppellantAND: SUSAN KARPIK
Cross-Respondent
ORDER MADE BY:
MARKOVIC, SARAH C DERRINGTON AND JACKSON JJ
DATE OF ORDER:
29 JULY 2025
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The cross-appeal is dismissed.
3.The appellant must pay the respondents’ costs of the appeal, to be taxed by a Registrar of the Court if not agreed.
4.The respondents must pay the appellant’s costs of the cross-appeal, to be taxed by a Registrar of the Court if not agreed.
5.There be liberty to apply on or before 26 August 2025 in relation to paragraphs 3 and 4 above.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
On 8 March 2020 the Ruby Princess cast off from the Overseas Passenger Terminal at Circular Quay in Sydney and headed towards New Zealand with approximately 2,671 passengers and 1,146 crew on board. It was the start of a 13-day cruise, referred to as voyage RU2007, which would see the ship head to several ports in New Zealand before returning to Sydney. At the time Australia was bracing itself for the novel coronavirus pandemic, which had already affected other parts of the world: see Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280 (PJ) at [1]. We will refer to the novel coronavirus in these reasons as the virus or COVID-19. The unfolding of the pandemic caused the voyage to be cut short, ending back in Sydney on 19 March 2020.
Susan Karpik, the appellant, and Henry Karpik, her husband, were among the passengers on board the Ruby Princess. During the voyage, Mr Karpik fell ill with the virus although, as the primary judge identified, whether he contracted the disease on board the vessel or before boarding was a matter in dispute. Mr Karpik was gravely ill and nearly died. He spent nearly two months in hospital. Many other passengers fell ill and some passed away: PJ[2]. Mrs Karpik also claimed to have contracted the virus, which was disputed, although her symptoms were relatively minor.
The day after disembarkation, Mr Karpik was taken by paramedics from his home to hospital where he spent nearly two months, during which time he was intubated, ventilated, and placed into an induced coma. Mrs Karpik witnessed her husband’s suffering but was not able to be by his side for a long period, as she was required to be in isolation at home for some 16 days after the voyage. On 27 March 2020, whilst still self-isolating, she was informed that Mr Karpik’s condition was critical and deteriorating and that he had only about a 10% chance of survival. Mercifully, Mr Karpik’s condition began to improve over the next few days and, despite a long and difficult recovery, he survived. Mrs Karpik claimed that the impact of these events on her mental health was significant: PJ[2].
On 23 July 2020 Mrs Karpik as lead applicant commenced a representative proceeding in this Court against Carnival plc, the time charterer of the vessel, and Princess Cruise Lines Ltd (a company registered in Bermuda), its owner and operator, as respondents. She sought damages for personal injuries, distress and disappointment of more than $300,000. The Group Members on whose behalf Mrs Karpik brought the proceeding comprised: “Passenger Group Members”, being passengers on RU2007 who are not deceased; “Executor Group Members”, being the executor or administrator of a person who was a passenger on the vessel who died by reason of contracting the virus during RU2007; and “Close Family Group Members”, being close family members (as that term is defined in the Civil Liability Act 2002 (NSW) (CLA)) of a passenger who contracted the virus during the voyage and died or became severely ill and who suffered a recognised psychiatric injury from mental or nervous shock in connection with the passenger dying or becoming severely ill.
Mrs Karpik relied on an amended originating application and a further amended statement of claim. As developed before the primary judge Mrs Karpik alleged:
(1)the services provided by the respondents failed to comply with the guarantees in s 61 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth). Mrs Karpik contended that the services were not reasonably fit for the intended purpose, being a safe, relaxing and pleasurable holiday from which she and other passengers would return feeling refreshed and reinvigorated, or as might reasonably be expected to achieve the desired result;
(2)in making certain representations in their promotional material for the cruise and an email to passengers which reiterated a commitment to safety by taking certain steps to protect their health and by inviting passengers to board the vessel without any accompanying health warning, the respondents contravened s 18 of the ACL; and
(3)in reliance on s 60 of the ACL and the tort of negligence, the respondents owed her a duty of care to take reasonable precautions to protect her from illness and from suffering mental harm on account of her husband’s illness, which they breached.
The respondents filed a defence in which, as summarised at PJ[11], they contended:
(1)Mr Karpik did not contract COVID-19 on board and Mrs Karpik never contracted COVID-19;
(2)on the claim made pursuant to s 61 of the ACL, no purpose or desired result was ever communicated to them but, in any event, their services were not relevantly deficient;
(3)on the claim made pursuant to s 18 of the ACL, the communications on which Mrs Karpik relies could not be reasonably interpreted as giving rise to the representations pleaded; and
(4)on the negligence case, that they did not owe passengers a duty of care that extends to protecting against the risk of contracting COVID-19 and, even if they did, they did not breach their duty of care, essentially because they complied with all relevant guidelines of peak health bodies.
The matter proceeded to trial on Mrs Karpik’s claim alone, on the basis that a number of common issues of fact and law could be conveniently decided in respect of all Group Members. Following a lengthy hearing, on 25 October 2023 the primary judge published his reasons and directed the parties to bring in proposed orders. Commencing at PJ[1047] his Honour summarised his findings on each of Mrs Karpik’s claims. Relevantly:
(1)on the critical factual issues, the primary judge found that Mr Karpik most likely contracted COVID-19 on board the Ruby Princess and Mrs Karpik contracted COVID‑19 from Mr Karpik on the voyage and suffered a recognised psychiatric illness in the form of an adjustment disorder as a result of Mr Karpik’s illness and hospitalisation but she did not suffer from “Long COVID”: PJ[1048];
(2)the primary judge made findings as to the application of the CLA to Mrs Karpik’s claims: PJ[1049];
(3)his Honour found that the respondents did not comply with the guarantees in subsections 61(1) and (2) of the ACL: PJ[1050];
(4)in relation to Mrs Karpik’s claims alleging negligence and breach of s 60 of the ACL, the primary judge found that the respondents owed Mrs Karpik a duty to take reasonable care for her health and safety, including in relation to the risk of harm caused by COVID-19 infection, and with respect to a recognised psychiatric illness arising from Mr Karpik having contracted COVID-19 on the voyage. His Honour found that in relation to the claim in negligence, the “normal fortitude” test or requirement in s 32(1) of the CLA was satisfied. His Honour found that Carnival and Princess breached their duty of care in a number of ways: PJ[1051];
(5)his Honour found that the respondents contravened s 18 of the ACL by making four misleading representations referred to as a “Safe to Board Representation”, “Reasonable Care Representation”, “Best Practices Representation” and “Pleasurable Cruise Representation”: PJ[1052]; and
(6)causation and loss were established on each of the causes of action: PJ[1053].
There is no challenge to the findings summarised at (1) and (2) above. The respondents challenge the findings at (3)-(6).
In assessing damages, the primary judge:
(1)did not award any personal injury damages on the claims made pursuant to ss 60, 61(1) and 61(2) of the ACL or the negligence claim because he assessed Mrs Karpik’s case as being 8% of a most extreme case (MEC) (PJ[1007]) which as non-economic loss was less than the statutory threshold of 15% provided for in s 16 of the CLA (PJ[1054]);
(2)found that out of pocket expenses on the personal injury damages were recoverable on the ss 60, 61(1) and 61(2) claims and the negligence claim, in the sum of $4,423.48 plus interest (PJ[1055]); and
(3)found that distress and disappointment damages, which would be available on all causes of action, did not exceed the refund paid to Mrs Karpik with the result that no such damages were payable. The primary judge also found that most of Mrs Karpik’s feelings of distress and disappointment were “tied up in her adjustment disorder” and that her feelings of stigmatisation were not compensable under this head of damages (PJ[1026]-[1029], [1056]).
Mrs Karpik challenges the assessment and findings at (1) and (3) above.
On 24 November 2023 the Court made Orders including that:
Judgment
1.Judgment be entered against the respondents in the amount of $4,423.48 plus prejudgment interest.
Costs
2.The respondents pay the applicant’s costs of the proceeding, up to 5 October 2022, subject to prior interlocutory costs orders, which are not disturbed, with the question of the applicant’s costs from 5 October 2022 to be reserved.
3.The applicant’s costs be fixed in a lump sum.
4.Within 14 days of the Court determining the question of the applicant’s costs from 5 October 2022, the applicant file and serve a Costs Summary of no more than 20 pages in compliance with [4.10]-[4.11] of the Costs Practice Note (GPN COSTS).
5.Within 28 days of the Court determining the question of the applicant’s costs from 5 October 2022, the respondents file and serve a Costs Response of no more than 15 pages in compliance with [4.13]-[4.14] of the Costs Practice Note (GPN COSTS).
6.In the event that the parties cannot agree on the amount of the lump sum, within 42 days of the Court determining the question of the applicant’s costs from 5 October 2022, the parties inform the Associate to Stewart J and file and serve submissions of no longer than 10 pages addressing the law as to costs on relevant issues.
7.Pursuant to r 1.37 of the Federal Court Rules 2011 (Cth) a Registrar is to determine the amount of the lump sum in such manner as they see fit, including, if considered appropriate, on the papers.
On 7 February 2024 the Court made further Orders including that:
1.Pursuant to s 33Z of the Federal Court of Australia Act 1976 (Cth) (Act), the common questions and answers from the initial trial of the applicant’s claim are set out in Annexure A (Common Questions).
2Pursuant to s 33ZB(a) of the Act, the Common Questions are binding on all group members as defined in the further amended statement of claim filed on 24 March 2021 other than on any person who has opted out of the proceeding under s 33J.
3.The costs of the initial trial from 5 October 2022 up to and including 5 February 2024 be reserved.
Both Mrs Karpik, on the one hand, and Carnival and Princess, on the other, appeal from the Orders made on 24 November 2023 and 7 February 2024: by amended notice of appeal filed on 6 March 2024 Mrs Karpik appeals from part of Order 1 made on 24 November 2023. She no longer presses her appeal from Order 3 made on 7 February 2024; and by further amended notice of cross-appeal filed on 27 August 2024 Carnival and Princess appeal from Orders 1 to 7 made on 24 November 2023 and Orders 1 and 2 made on 7 February 2024.
As Mrs Karpik’s appeal is a challenge to the findings by the primary judge in relation to personal injury and distress and disappointment damages and the respondents’ cross-appeal challenges the primary judge’s findings on liability, we will address the cross-appeal before turning to the appeal.
CARNIVAL AND PRINCESS’ CROSS-APPEAL
In their cross-appeal the respondents raise 16 grounds of cross-appeal which, as noted above, challenge the primary judge’s findings in relation to liability.
Legislative scheme
Before addressing the grounds, it is convenient to set out the relevant legislative provisions which were the subject of findings by the primary judge. They are found in the ACL and the CLA.
The ACL
Section 18 of the ACL concerns the prohibition against misleading or deceptive conduct and relevantly provides a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Division 1 of Pt 3-2 of the ACL concerns consumer guarantees and Subdiv B concerns guarantees relating to the supply of services. Mrs Karpik made claims pursuant to s 60 and s 61 of the ACL. Those sections relevantly provide:
60 Guarantee as to due care and skill
If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.
61 Guarantees as to fitness for a particular purpose etc.
(1) If:
(a)a person (the supplier) supplies, in trade or commerce, services to a consumer; and
(b)the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer;
there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.
(2) If:
(a)a person (the supplier) supplies, in trade or commerce, services to a consumer; and
(b) the consumer makes known, expressly or by implication, to:
(i) the supplier; or
(ii)a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made;
the result that the consumer wishes the services to achieve;
there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.
…
The guarantees in subsections 61(1) and (2) are referred to respectively as the purpose guarantee and the result guarantee.
Section 267 of the ACL provides for the remedies available to consumers when a supplier of services fails to meet a consumer guarantee. That section relevantly provides:
(1) A consumer may take action under this section if:
(a)a person (the supplier) supplies, in trade or commerce, services to the consumer; and
(b)a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3‑2 is not complied with; and
(c)unless the guarantee is the guarantee under section 60—the failure to comply with the guarantee did not occur only because of:
(i)an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or
(ii)a cause independent of human control that occurred after the services were supplied.
(2)If the failure to comply with the guarantee can be remedied and is not a major failure:
(a)the consumer may require the supplier to remedy the failure within a reasonable time; or
(b)if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time—the consumer may:
(i)otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or
(ii)terminate the contract for the supply of the services.
(3)If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:
(a)terminate the contract for the supply of the services; or
(b)by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services.
(4)The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.
…
The CLA
It was common ground that s 5B and s 5C of the CLA apply to the question of whether the respondents breached their duty of care to Mrs Karpik and to Mr Karpik insofar as Mrs Karpik’s claim for damages for her alleged adjustment disorder was concerned. Sections 5D and 5E similarly apply in relation to causation. Those sections provide:
5B General principles
(1)A person is not negligent in failing to take precautions against a risk of harm unless—
(a)the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and
(b)the risk was not insignificant, and
(c)in the circumstances, a reasonable person in the person’s position would have taken those precautions.
(2)In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things)—
(a)the probability that the harm would occur if care were not taken,
(b)the likely seriousness of the harm,
(c)the burden of taking precautions to avoid the risk of harm,
(d)the social utility of the activity that creates the risk of harm.
5C Other principles
In proceedings relating to liability for negligence—
(a)the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible, and
(b)the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done, and
(c)the subsequent taking of action that would (had the action been taken earlier) have avoided a risk of harm does not of itself give rise to or affect liability in respect of the risk and does not of itself constitute an admission of liability in connection with the risk.
5D General principles
(1) A determination that negligence caused particular harm comprises the following elements—
(a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and
(b) that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused (scope of liability).
(2)In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.
(3)If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent—
(a)the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and
(b)any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest.
(4)For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.
5E Onus of proof
In proceedings relating to liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.
Also relevant to the appeal is s 16(1) of the CLA, which has been referred to above and which provides, in relation to personal injury damages, that “[n]o damages may be awarded for non‑economic loss unless the severity of the non‑economic loss is at least 15% of a most extreme case”.
The purpose and result guarantees: grounds 2-8
Ground 2: the purpose and result guarantees
By ground 2, the respondents contend that the primary judge erred in finding that Mrs Karpik made known to them that the particular purpose for which the relevant services were acquired, within the meaning of s 61(1) of the ACL, was to have a safe, relaxing and pleasurable cruise holiday. Ground 2 similarly includes the contention that Mrs Karpik did not make known that this was the result that she wished to be achieved, within the meaning of s 61(2).
The terms of s 61 are set out above. There was no issue at trial that the respondents had supplied, in trade or commerce, services to Mrs Karpik as a consumer, so s 61(1)(a) and s 61(2)(a) were each satisfied.
The primary judge’s reasons
The primary judge identified the issues before him under s 61(1) of the ACL as concerning whether Mrs Karpik had made known to the respondents a particular purpose for which she was acquiring the relevant services, and whether it had been established that the services were not reasonably fit for that purpose. Similarly, in relation to s 61(2), the issues were whether Mrs Karpik had made known to the respondents the result she wished to achieve and whether the services were not of such a nature and quality, state or condition that they might reasonably have been expected to achieve that result. The respondents did not rely on the defence in s 61(3), which operates if the consumer did not rely on the skill or judgement of the supplier or if it was unreasonable for the consumer to do so.
After reviewing the services that the respondents were to provide to Mrs Karpik, by reference to the passage contract, brochures and other pre-cruise communications, the primary judge identified the particular purpose that Mrs Karpik made known “was to have a safe, relaxing and pleasurable cruise holiday substantially in accordance with the advertised and booked itinerary”: PJ[469]. His Honour held that the desired result that Mrs Karpik had made known was the same.
The primary judge then addressed a submission that the respondents had made (as he understood it) that this was a usual and ordinary purpose for a holiday, and so could not be a “particular” purpose under s 61(1)(b) of the ACL. His Honour described the respondents as submitting that a particular purpose, as distinct from the general or usual and ordinary purpose for which the services are supplied, must be made known to the supplier in order for the “care guarantee” found in s 60 to have any work to do beyond the purpose guarantee in s 61(1). His Honour understood the respondents to be making a similar submission as to the need for precision in the expression of “the result that the consumer wishes the services to achieve” for the purposes of s 61(2). They also submitted that there was no good reason to construe s 61(2) in a manner that would allow the desired result to be any less particular or communicated with any less precision.
The primary judge relied on the authority of Scenic Tours Pty Ltd v Moore [2018] NSWCA 238; 361 ALR 456 (Scenic CA (No 1)) to reject those submissions. On the basis of that case, and other authorities referred to in it, his Honour held that it is not necessary to show a more specific purpose than the only purpose for which the relevant services are generally acquired.
The primary judge also considered a submission by the respondents that an obvious desire on the part of passengers to have a pleasurable cruise did not amount to the communication of a particular purpose, because both the passengers and the cruise line may be reasonably expected to know that innumerable circumstances might arise where the cruise line could not guarantee that purpose. His Honour rejected that submission because s 61(1) does not give rise to an absolute guarantee; the services are only guaranteed to be reasonably fit for the particular purpose, and such that they might reasonably have been expected to achieve the desired result.
The respondents’ submissions on the cross-appeal
Under the rubric of ground 2 the respondents purport to identify two errors on the part of the primary judge.
The first error, they say, stems from a misunderstanding on the part of the primary judge of the submissions they made to him at trial. According to their submissions on appeal, at trial their point was that “desires or hopes” were insufficiently precise to fall within s 61(1), and that wishes that a holiday might be “safe, relaxing and pleasurable” were mere desires and hopes. They contrast this with a purpose that is the particular reason, use or function for which the consumer is acquiring the services.
In the respondents’ principal written submissions on the cross-appeal (RWS), the reference to definite or concrete uses or functions is footnoted with numerous cases said to be analogous (many under the sale of goods legislation), including: use as a hot water bottle (Priest v Last [1903] 2 KB 148 at 154); a tractor to be used for road work (Dependable Motors Pty Ltd v Ashford Shire Council (1959) 101 CLR 265 at 271); and herring meal used as food for mink (Christopher Hill Ltd v Ashington Piggeries Ltd [1972] AC 441 at 477, 490). The respondents contrast such specific purposes with “hopes or goals”, such as that the holiday might be “relaxing” or “pleasurable”.
Senior counsel for the respondents relied in particular on the characterisation of the consumer’s purpose given in Scenic CA (No 1), submitting that in that case, which also involved pleasure cruises, the purpose was confined to that of experiencing the cruise services that were to be provided.
The respondents thus do not criticise the primary judge’s conclusion that a particular purpose can be the main and only purpose for which particular services are acquired. For example, walking can be the “particular purpose” for which shoes are acquired: David Jones Ltd v Willis (1934) 52 CLR 110 at 122. The respondents say, however, that this does not address the submission they made at trial.
The respondents rely on the differences between s 61(1) and s 61(2) to bolster their submission: a purpose cannot be the same thing as a result, as that would render s 61(2) superfluous. In oral submissions senior counsel for the respondents emphasised this point. He submitted that because s 61(1) requires services to be reasonably fit for the particular purpose, the purpose must be specific enough to allow that to be assessed. By contrast, the result guarantee in s 61(2) only requires that the services are such that they might reasonably be expected to achieve the result. In his submission, that accommodates results that can have broader subjective qualities, such as pleasure or relaxation. That subjective quality is also accommodated by the requirement in s 61(2) that the result be one “that the consumer wishes the services to achieve”.
The primary judge’s second error, according to the respondents, is that his Honour failed to take into account that the parties, objectively and reasonably in the circumstances, would not expect that a cruise provider could guarantee a safe, relaxing and pleasurable cruise, given the exigencies involved.
Consideration
It is not at all clear that the primary judge misunderstood the submissions made to him. The respondents rely on two paragraphs from their written closing submissions at trial, but without context. The first (para 548) contains the submission that “[a]morphous, recondite or indeterminate purposes are not capable of satisfying the requirements of s 61(1). It is impossible for the supplier to discern the existence of such purposes, or to guarantee that the services supplied will be reasonably fit for them”. But how this was related to the objective of enjoying a “safe, relaxing and pleasurable cruise” as found by the primary judge is not possible to tell from the excerpt of the submissions put before us. The second paragraph from the closing submissions cited (para 572) appears not to go to this point, but to go to the primary judge’s second alleged error, which we address below. The fact that, in the course of doing so, it refers to Mrs Karpik’s objective as a “desire or hope” hardly rises to the level of a submission that this was not enough to satisfy the requirements of s 61(1), which his Honour is said to have misunderstood.
In any event, if we address the submission now sought to be made on its terms, it does not demonstrate that the primary judge erred. It can readily be accepted that the purpose that is made known to a provider of services must have a sufficiently precise meaning. It must be specific enough to allow the provider to judge the extent of the risk that the services are not reasonably fit for that purpose: see, in the slightly different sale of goods context, Griffiths v Peter Conway Ltd [1939] 1 All ER 685 at 692. But the purpose found by the primary judge here was sufficiently precise.
Nothing in the ordinary meaning of the text of s 61(2) suggests that subjective purposes are inherently unsuited to enliven the purpose guarantee. It does not assist for the respondents to affix mildly pejorative labels such as “hopes or goals” to that purpose. It must be recalled that the context here is quite different to most of the examples cited by the respondents. It is unsurprising that the purposes for which herring meal is acquired by a mink farmer, or a tractor by a road contractor, can be expressed in concrete terms. It does not follow that such terms are always required in different contexts.
The context here was that the Karpiks were contracting with the respondents to obtain a holiday. As our discussion below of ground 1 of the appeal shows, the law recognises that the object of contracts of that kind can be the achievement of subjective states of mind, such as pleasure and relaxation: see in particular Young v Chief Executive Officer (Housing) [2023] HCA 31; 278 CLR 208 at [71] (Gordon and Edelman JJ).
The primary judge’s description of such states of mind, as found in the purpose for which the services here were acquired, is not afflicted by any problematic imprecision. Whether or not services are reasonably fit for the purpose of providing consumers with a pleasurable or relaxing experience is a matter that can be judged by the provider of the services and, if necessary, evaluated by a court.
The respondents’ submission has even less force when it comes to the particular aspect of the purpose most obviously not achieved here: a safe cruise. In contrast to pleasure and relaxation, safety is an inherently objective concept. The primary judge included “health safety” as well as navigational and operational safety within that concept, and the respondents do not assert that he erred in doing so. The law is well accustomed to assessing whether situations are objectively safe (systems of work, for example). In Gharibian v Propic Pty Ltd (t/as Jamberoo Recreation Park) [2007] NSWCA 151, the New South Wales Court of Appeal had no difficulty in finding, in relation to services that were supplied for a recreational activity, tobogganing, that the purpose for which the toboggan and the toboggan run were supplied was to enable the consumers to undertake the toboggan run safely: at [49].
Parenthetically, this gives rise to doubt about whether the main point on which ground 2 is based goes anywhere. As will be seen in relation to ground 3 below, it was primarily the lack of safety in the cruise that led the primary judge to find that the purpose and result guarantees had been breached. Even if the respondents were to succeed in persuading us that subjective feelings of pleasure and relaxation are not capable of being the subject of the purpose guarantee, it is unlikely that that would lead us to overturn the finding that they breached the guarantees as to the safety of the cruise. Further, the respondents did not articulate how success on their first point would lead to any different conclusion in respect of the result guarantee.
Nevertheless, to return to the main thread of the argument, Scenic CA (No 1) does not require any conclusion that subjective or aspirational purposes, such as to experience pleasure and relaxation, cannot be the subject of the purpose guarantee. We accept, as the respondents submit, that the characterisation of the lead plaintiff’s particular purpose that was endorsed by the Court of Appeal in that case referred to enjoying his cruise in accordance with the published itinerary, with “enjoy” being used there as a synonym for “experience” rather than “take pleasure”: see Scenic CA (No 1) at [194], [212]-[213], [223], [226] and especially [231]. We do not rely on it as positive authority for the proposition that subjectively pleasurable feelings can be a particular purpose within the meaning of s 61(1) of the ACL.
But we are not bound to accept the particular characterisation approved in Scenic CA (No 1) as dictating what must be found in this case. Identifying the purpose for which goods or services are provided is a question of fact in each case: see David Jones at 117. The way the question is framed and answered will depend on the particular circumstances of each case; most obviously the evidence, but also the way that the issue is defined in the pleadings (as to which see Scenic CA (No 1) at [212]) and forensic decisions about what does and does not need to be proved.
In Scenic CA (No 1), for example, whilst superficially similar to this case in that both involve pleasure cruises, the complaint of the plaintiffs was that due to conditions on the rivers in question, they did very little actual cruising and spent much of the time on buses. It did not concern illness and pandemic. The services that a plaintiff might choose to rely on in that case may be different to those that will be identified as relevant in a different case. Further, there is no suggestion that the particular point raised here was argued in Scenic CA (No 1). The respondents’ reliance on it does not advance their position on the question of construction they raise.
Nor do we accept the respondents’ submission that “particular purpose” in s 61(1) must be understood in such concrete terms so as to distinguish it from the “desired result” that is the subject of s 61(2). In truth, the difference between the two concepts can be elusive, as several of the examples cited by the respondents illustrate. To take one, in Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128; 196 FCR 145 at [171], the Full Court (Keane CJ, Bennett and Gordon JJ) found that Mr Peterson had implicitly made known to a pharmacist that a particular medication was being acquired for the purpose of use as a treatment for arthritic pain without gastrointestinal side effects. It follows from this that the result that Mr Peterson wished to achieve was a lessening of his arthritic pain without gastrointestinal side effects.
We do not suggest that a purpose guarantee can always be reframed as a result guarantee, but there is plainly a deal of potential overlap between the application of the two provisions. Pointing to specific examples of overlap does not mean, however, that the field of operation of the two provisions is the same, so that one is redundant. Even with substantial overlap, each can have its own work to do. That a particular case, such as this one, may fall within that overlap does not mean that every case will. The respondents’ submissions do not establish inevitable redundancy in the two provisions on the approach to them taken by the primary judge. They therefore do not establish a need to depart from the ordinary natural meaning of the provisions in order to accommodate their place in s 61 and the ACL as a whole. The asserted need to draw a sharp distinction between the two provisions does not advance the respondents’ position in relation to ground 2.
It is true, as the respondents submit, that by using the word “wishes”, s 61(2) can extend to a result that a consumer hopes to achieve. If that is communicated, the service provider is taken to guarantee that the services might reasonably be expected to achieve that result. But it does not follow that the particular purpose in s 61(1) cannot be a purpose expressed in terms of a subjective experience which is the reason for which the consumer acquires the services. There is no need to exclude that kind of purpose from s 61(1) for the sake of differentiating it from s 61(2).
Finally, to return briefly to Scenic CA (No 1), senior counsel for the respondents submitted that the Court of Appeal in that case treated the result that was the subject of a s 61(2) guarantee as different from the purpose that was the subject of s 61(1). But we do not read it that way. At [281], Sackville AJA described the result that the passengers impliedly communicated they wished for as “the result from the services which Scenic assured them in the Brochure that they would receive”. The brochure in question assured passengers that they would receive certain services and see certain sights: see Scenic CA (No 1) at [187], [204]. In other words, it described the services that the passengers would receive, where, as we have described, the “particular purpose” found by the Court of Appeal was to experience the cruise in accordance with the published itinerary. It is not obvious that there is any difference in kind between the particular purpose and the wished for result that supports the respondents’ argument. In any event, as we have said, that such a question of fact was resolved in a certain way in Scenic CA (No 1) is of limited assistance in this different case.
In this case, there is simply no problematic indeterminacy that precluded the respondents (or the Court) from evaluating whether the services they provided would be (or were) reasonably fit for the purpose of providing a safe, relaxing and pleasurable cruise.
Turning to the respondents’ second point – that the primary judge failed to take into account the objectively ascertained reasonable expectations of the parties – it starts with a submission that reasonable expectations can modify what is implicitly made known to a supplier. As a general proposition, that may be accepted; implication almost always necessarily depends on context, and reasonable expectations may form part of that context.
The submission that follows this can also be accepted: a safe, relaxing and pleasurable time cannot be absolutely guaranteed, given the exigencies involved. The respondents rely on Merck in connection with this submission too. They say, that at [172]-[173], the Full Court held that by acquiring prescription medication, a consumer does not make known a purpose that the medication is safe or without the risk of life-threatening conditions.
Indeed, at [172] in Merck, their Honours observed that the purpose that Mr Peterson had made known was “not to be understood as including, as a negative element of that purpose, some quality of absolute safety or complete absence of side-effect”. Their Honours observed further, at [173], that when a patient acquires a prescription medication from a pharmacist, it is not presumed in law or obvious in fact that the patient impliedly makes known to the pharmacist that he or she is acquiring the medication for “some generalised purpose of safety or absence of adverse side-effects”.
For two reasons, however, none of this advances the respondents’ position on ground 2.
The first reason is that the guarantees in s 61 are not absolute guarantees. The supplier is not taken to guarantee that the purpose or result will always be achieved; so the asserted unreasonableness of expecting that it will be achieved in all circumstances is not relevant.
To make that point by reference to the present case, by itself there is nothing unreasonable (or even remarkable) about holidaymakers implicitly communicating to a cruise line that they are acquiring its services for the purpose of having a safe, relaxing and pleasurable time. The same can be said when they make it known that is the result they want to achieve. What might be unreasonable would be an expectation that the purpose or result would be achieved no matter what happens during the cruise. But any expectation that a purpose or result will be achieved, no matter what, does not form part of the purpose or result itself as conveyed. Nor is it a consequence of the operation of s 61 of the ACL, which provides for guarantees that are less than absolute, indeed that are reasonable. For the purposes of assessing what the consumers have implicitly conveyed, any more stringent expectation is beside the point.
Consistently with this, in Moore v Scenic Tours Pty Limited (No 2) [2017] NSWSC 733 (Scenic TJ (No 2)) at [392] Garling J observed (in the course of making findings that were not disturbed in Scenic CA (No 1)):
It is also worth noting that the particular purpose does not have to be an objectively reasonable one. The ACL simply provides that if a particular purpose is made known, and the supplier of services goes on to supply those services knowing (either expressly or impliedly) of that purpose, then the purpose guarantee is brought into effect.
The second reason these submissions do not assist the respondents is that the passages relied on in Merck were addressing a different point. In that case the primary judge had found that the drug supplied to Mr Peterson was not reasonably fit for purpose because it doubled the risk of a heart attack. The point the Full Court was making was that it was unlikely that after obtaining a prescription for the drug from a doctor, Mr Peterson had made known to the pharmacist from whom he bought it that he had some generalised purpose of safety or absence of adverse side effects. It was a factual point, relevant to the quite different facts before the Full Court in Merck. The Full Court’s reasoning does not involve any general point about the proper construction of the statutory precursor to s 61.
Conclusion on ground 2 of the cross-appeal
Ground 2 is not made out.
Ground 3: breach of the purpose and result guarantees
By ground 3 of the cross-appeal, the respondents contend that the primary judge erred in finding that the services provided by the respondents did not satisfy the requirements of the statutory guarantees in s 61(1) and s 61(2) of the ACL. As will be seen, the primary basis of this ground is that his Honour erred in applying what is now known about the circumstances to his assessment of whether the services were reasonably fit for purpose or might reasonably be expected to achieve the wished for result.
The primary judge’s reasons
The primary judge first considered a number of cases which, he said, assisted in giving the right meaning to the term “reasonably fit for purpose”. Those that are relevant to the present ground of cross-appeal were:
(a)Gharibian, where at [62] it was held that liability under the implied warranty that goods were reasonably fit was strict, in the sense that the supplier’s liability does not depend on whether it exercised reasonable care (PJ[485]-[488]);
(b)Medtel Pty Ltd v Courtney [2003] FCAFC 151; 130 FCR 182 at [70], which the primary judge understood as authority for the proposition that an assessment of whether goods were fit for purpose was to be undertaken in light of information concerning the goods available at time of trial (PJ[489]);
(c)Scenic TJ (No 2) at [395], where Garling J observed that the qualification “reasonably” means that not every small lapse or shortfall in the provision of services will result in a breach of the purpose guarantee (PJ[490]); and
(d)Scenic CA (No 1) at [235]-[236], which the primary judge considered provided examples of minor variations in promised services which would not amount to them not being reasonably fit for purpose, and also illustrated the role that, in the process of assessing the services, was played by events outside the control of the service provider (PJ[494]-[495]).
The passage following this in the primary judgment needs to be read in full to appreciate the course of his Honour’s reasoning on the application of these principles. We emphasise the following key points.
For reasons that need not be repeated, Mrs Karpik did not have a safe, relaxing or pleasurable cruise, meaning that the purpose and result that she had made known were not achieved. The primary judge then posed the question of whether that was because the services were not reasonably fit for that purpose or not of such a nature or quality that they might reasonably be expected to achieve the result. His Honour described that as “not a straightforward question”: PJ[499]-[500].
The primary judge reviewed the state of the global pandemic at the time that RU2007 departed (acknowledging that the World Health Organization (WHO) had not yet called it a pandemic). In summary: COVID-19 was spreading worldwide; deaths had been caused; and the risk of transmission was heightened on cruise ships. His Honour also mentioned (PJ[502]) outbreaks that had already occurred on the Diamond Princess and the Grand Princess, operated by the respondents, as well as certain Nile River cruises. It is worth digressing a little at this point to describe some findings that were made earlier in the judgment in relation to the outbreaks on those two Princess cruise ships, as these are relevant not only to breach of the purpose and result guarantees, but also to the negligence case we address further below.
At PJ[57]-[63] the primary judge described the circumstances of the Diamond Princess, which departed on a cruise from Yokohama Port, Japan on 20 January 2020 on a 16-day round trip which included travelling to Hong Kong. At PJ[63] the primary judge found that the respondents knew:
(1)by 7 March 2020 that over 600 passengers who had been on the Diamond Princess cruise had tested positive for COVID-19, over 300 of those confirmed cases showed no symptoms of COVID-19 at the time of specimen collection for testing, and more than five passengers died due to the virus: PJ[61]; and
(2)when RU2007 departed Sydney, seven passengers from the Diamond Princess cruise had died due to the virus, nearly 700 of the approximately 3,700 passengers who had been on the Diamond Princess had tested positive for COVID-19, and over 40% of the people on the Diamond Princess cruise who tested positive for COVID-19 were asymptomatic at the time of testing: PJ[62].
At PJ[64]-[68] the primary judge described the circumstances of the Grand Princess, which departed San Francisco on 11 February 2020 on a round trip voyage to Mexico and Hawaii, returning on 21 February 2020 (first round trip) and again departed San Francisco on 21 February 2020 on a round trip voyage to Hawaii (second round trip). The primary judge found (at PJ[68]) that the respondents knew the following matters about those voyages before the embarkation of passengers on the Ruby Princess for RU2007:
(1)by 4 March 2020 at least one passenger from the first round trip had tested positive for COVID-19 and at least one had died from the virus. On or about 4 or 5 March 2020, after Princess was notified of the positive test, it commenced cancelling all social activities planned for the remainder of the second round trip and by 5 March 2020, the United States Centers for Disease Control and Prevention (CDC) had reported another positive case from the first round trip and that one of the individuals was being treated in an intensive care unit: PJ[65];
(2)by 6 March 2020 over 20 passengers on the second round trip had tested positive for COVID-19 and by 7 March 2020 there were 11 positive cases from the first round trip: PJ[66]; and
(3)on 7 March 2020 at 5.00 pm CT (9.00 am on 8 March 2020 in Sydney) Princess reported to the press that of 45 guests and crew who were tested for the virus on the second round trip, 21 people had tested positive, comprising two guests and 19 crew. Those 45 people had been selected for testing on the basis that they had presented with influenza-like illness (ILI) on the voyage and were regarded as the highest risk cohort and required by the CDC to be tested. It was also reported that it was believed that the index case on the vessel, ie, the person who took the virus onto the vessel, was a guest on the first round trip and that the virus had spread from that person to other guests and crew. The problem for the second round trip was that the crew remained on board: PJ[67].
The primary judge found that these matters were relevant to the questions of whether the purpose guarantee and result guarantee had been breached, because they showed that there was a significant risk that one or more passengers or crew on RU2007 were infected, irrespective of whether they displayed symptoms: PJ[501]-[502].
His Honour also examined what happened after cruise RU2007, including the many cases of COVID-19 and the deaths that developed and occurred in the days and weeks that followed it. While in any individual case the source of transmission may be open to question, looked at as a population (PJ[503]):
it is highly probable that a very substantial number of people contracted COVID-19 on the cruise, and some of those people died. That speaks to the services not being reasonably fit for the safety purpose. To put it rhetorically, how can the services have been reasonably fit to keep passengers safe when so many became infected with COVID-19?
The primary judge held that “in light of what was known about the virus at the time” it was doubtful that it was possible to provide cruising services that were reasonably fit for the purpose of providing a cruise that was safe and relaxing and pleasurable. Quarantining everyone in their cabins might have achieved the first objective but not the second and third: PJ[504].
The primary judge considered that this conclusion was supported by measures that were taken during cruise RU2007. These were (PJ[504]):
(1)the respondents’ decisions, first, to offer full refunds on cancellations of cruises departing from 9 March 2020 and thereafter and, second, to suspend all cruises worldwide from 13 March 2020;
(2)the CDC’s “No Sail Order” on 14 March 2020, including its recordal of its prior advice and that of the US Department of State against cruise travel; and
(3)the Australian Government’s decision on 15 March 2020 to, in effect, stop all cruising from and to Australian ports.
From the respondents’ decision to adduce no evidence to explain their decision to cancel all cruises, his Honour inferred that the evidence would not have assisted them by showing that they took that measure for any reason other than that it was not possible to provide safe cruises. At that point his Honour said (PJ[506]):
To the extent that any hindsight reasoning applies here, it is permissible given that information known at the time of trial is to be taken into account in considering whether services were fit for purpose at the time they were supplied. In the weeks and months following the cruise, a lot more was learnt about the virus, its modes of transmission, steps that should be taken to guard against its transmission (eg, far more rigorous screening, physical distancing and masks), and the drastic measures of social control that would be implemented. The legislator put the risk of such matters becoming known only after the relevant services were provided at the door of the service provider, not the consumer. In that sense, the purpose and result guarantees are a little like statutory warrantees of merchantable quality allocating the risk of latent defects to the vendor – to the extent that it could not have been known at the time of the cruise that the services were inadequate to keep the passengers safe from coronavirus, the services were latently defective for which the supplier is liable under the statutory guarantees. Thus, even if there was no negligence by the respondents in their provision of the services, by the statutory provisions they bore the risk of the services not being reasonably fit or not being of the requisite nature and quality.
The primary judge did not consider that the difference between the cruise and the proposed itinerary meant that the purpose guarantee was not met. Essentially, “the substance of the cruise was maintained” and it was only cut short through third party government action: PJ[508].
As for specific shortcomings in particular measures, such as pre-embarkation screening and hand hygiene and cleaning, the primary judge would have found a deficiency in screening only, “if it were necessary”: PJ[509]. However, his Honour did not consider it useful to evaluate each alleged shortcoming in isolation. Rather, he concluded:
The point is that the services as a whole were required to be reasonably fit for the purpose of providing a relaxing, safe and pleasurable cruise, and they were not. They failed to keep the passengers safe, and they could not reasonably have been expected to keep the passengers safe in light of what we know about the virus and what occurred in the days and weeks following the cruise.
The primary judge thus found that in the circumstances the respondents had failed to comply with the purpose and result guarantees.
The respondents’ submissions on the cross-appeal
We pass over the first part of the respondents’ submissions, which proceed on the assumption that they succeed on ground 2. Setting that aside, the respondents submit that the primary judge erred by using hindsight reasoning in his construction of the word “reasonably” in s 61 of the ACL. They submit, relying on Scenic CA (No 1), that that word makes due allowance for the inevitable vicissitudes that can affect the ability to fulfil a purpose. This means that “reasonably” means something more than “approximately”. In the context of s 61(2), the respondents submit, it modifies expectations, “a concept intertwined with then-known circumstances”: RWS [16]. According to the respondents, this can only be an assessment of those circumstances at the time the services were supplied.
The respondents then say that the same meaning must apply for the purposes of ACL s 61(1) so that for the purposes of both s 61(1) and s 61(2), whether services are reasonably fit or what one might reasonably expect must be assessed “in light of then-known circumstances”: RWS [17] (emphasis added). Later in their written submissions, and correspondingly, the respondents submit that his Honour erred by taking into account a number of matters arising after the initial supply of the services.
Still later, the respondents criticise hindsight reasoning in the course of a submission that Medtel does not support that reasoning. It was concerned with the implied condition of merchantability of goods, which was not qualified by reasonableness. It is logical that knowledge acquired after the time of supply about the state of the goods at that time would be relevant. But it is said to be different for services.
In any event, according to the respondents, one looks at the position from the point of view of the consumer. In oral submissions, senior counsel for the respondents submitted that the analogy here of the approach endorsed in Medtel was to ask:
when Mrs Karpik acquired these services, if she had known everything about the services, not seeing the future, not knowing whether the risk of COVID eventuated, but if she had known everything about the services that was known at trial, would she have purchased them?
Senior counsel emphasised the finding that Mrs Karpik knew at this time that there was a risk of acquiring COVID-19.
The respondents also give as an example of why hindsight reasoning cannot be used that a ship might sink due to a freak event and for reasons unconnected with any deficiency in services. They characterise the primary judge’s approach as sanctioning reasoning, in such a case, that the mere fact of the sinking meant that the services were not fit for the safety purpose.
The respondents also submit that the primary judge misconstrued “reasonably” as only allowing a small departure from the permitted purpose or desired result. It was on this footing, they say, that his Honour found that the number of people who contracted COVID-19 on the cruise meant that the services were not reasonably fit for the purpose of providing a safe cruise.
The respondents assert that, for the primary judge, the fact that the cruise turned out not to be safe meant, without more, that the services were not fit for the safety purpose.
Overall, the respondents criticise the primary judge for declining to analyse the services provided and their nature and quality and the circumstances surrounding their provision to assess whether those services were reasonably fit for the purpose of safety and such that they could reasonably be expected to achieve that result. That, they say, was the analysis required.
Consideration
There are three themes in the respondents’ submissions under ground 3: that things occurring and matters that become known after the time of provision of the services cannot be taken into account for the purpose of assessing compliance with the purpose and result guarantees; that the primary judge wrongly reasoned that the adverse (and tragic) consequences of the cruise meant, without more, that the guarantees had not been met; and that his Honour wrongly considered that the question was whether there were more than small departures from the purpose or result that were the subject of the guarantees. We will take each in turn.
As to whether it is permissible to take into account matters arising and knowledge acquired after the provision of the services, the respondents’ argument depends: first on positing that the Court is to look at it from the point of view of a reasonable consumer; secondly, on attributing to that hypothetical person the actual knowledge of Mrs Karpik; and thirdly, concluding that since she knew there was a risk of COVID-19 on board, she could not reasonably expect a safe, pleasurable and relaxing cruise. According to the respondents, this line of reasoning leads to the conclusion that knowledge about the circumstances acquired after the time of provision of the services cannot be taken into account, because what is required is to place the reasonable consumer into the position and knowledge of the actual consumer.
To approach it in that way would be wrong. As to the first step in the respondents’ argument, the purpose guarantee in s 61(1) is expressed in terms that do not require consideration of the matter from any particular person’s point of view. The guarantee is expressed in purely objective terms: it is that the services that are supplied, and any product resulting from them “will be reasonably fit” for the purpose that has been made known. Questions as to the state of mind and knowledge of the supplier and the consumer may come into the inquiry mandated by s 61(1)(b), concerning what the consumer expressly or impliedly has made known to the supplier about the consumer’s subjective purpose in acquiring the services. But once that inquiry is over and the purpose has been identified, the terms of the guarantee, and so the test of whether it has been met, are objective. They are not said to be assessed from the point of view of any actual or hypothetical person.
Similar things may be said of the result guarantee in s 61(2). Once it is established that the consumer has made known expressly or by implication that they wish for a particular result, the question that the section poses is an objective one. It is whether, at the time of provision of the services, they and any product resulting from them “will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result”. The nature and quality, state or condition of the services must be assessed, so as to determine whether the services might reasonably be expected to achieve the result.
We do not accept that this last requirement means that the reasonable expectations of any person need to be identified. It is purely an objective standard which is to be judged by reference to the actual nature and quality, state or condition of the services, regardless of what the supplier or the consumer might know about them at the time of the supply.
Gharibian is consistent with this view of s 61, albeit it concerned a statutory precursor, s 74 of the Trade Practices Act 1974 (Cth) (TPA). That section relevantly imposed an implied warranty that any materials supplied in connection with services “will be reasonably fit for the purpose for which they are supplied”. The services in question were the provision of tobogganing and the materials supplied were the toboggan and toboggan run. As has already been mentioned at [40] above, Ipp JA (with whom Mason P agreed and Tobias JA agreed on the s 74 issue) had no difficulty with a finding that the purpose for which the materials were supplied was to undertake the toboggan run safely. The toboggans supplied by the respondent had brakes that stopped working in wet conditions, and the appellant was injured when she was using one of the toboggans on the toboggan run and it started to rain. The respondents were not negligent, due to the presence of warnings, weather checks and other measures. But it was held unanimously that the materials supplied were not reasonably fit for purpose (Mason P at [2], Ipp JA at [57] and Tobias JA at [81]).
It is not necessary to describe in any detail Ipp JA’s dispositive reasoning on this point, which may be found in Gharibian at [54]-[57]. That reasoning concerned the particular facts of the case. It is only necessary to observe that the inquiry his Honour conducted was focused exclusively on the objective characteristics of the toboggan and the toboggan run. What might, or might not have been reasonably expected, by the consumer, the supplier or anyone else did not come into it. That is especially salient in view of the prominent warnings given by the supplier, which may be taken to have modified the reasonable expectations of the consumer at the time of supply, and indeed helped to save the supplier from the claim of negligence.
Gharibian is therefore inconsistent with the respondents’ argument (and was not addressed by them). Further, as the primary judge found, the Court of Appeal endorsed as well‑established the principle that liability (as it then was) under s 74 of the TPA was strict, and not dependent on whether the supplier exercised reasonable care: at [62].
As to the second step in the respondents’ argument, it is based on an assertion (drawn from other areas of the law) that “reasonable expectations” is “a concept intertwined with
then-known circumstances”: RWS [16]. That may be so in respect of the reasonable person who is central to the law of negligence. But as Gharibian confirms, the question here is not what was required in order to take reasonable care, in view of the knowledge that any person had (or ought to have had) at the relevant time. The question concerns the qualities of particular services and any product resulting from those services. Mrs Karpik’s subjective state of knowledge is not relevant to that question; if any person’s knowledge is relevant, it is that of a hypothetical reasonable consumer in all the circumstances.
The respondents’ submissions seek to insert the subjective element of what a reasonable person would know or do in an actual person’s position, into the different concept of what can reasonably be expected based on the actual state of services (or goods) at the time of supply. That would in turn limit the matters that could be taken into account to those which were known (or ought to have been known) at the time of supply. But there is no warrant in s 61 to apply a semi-subjective test taken from a different area of the law.
Since, contrary to that semi-subjective approach, compliance with the purpose guarantee in s 61(1) depends on the objective characteristics of the services, it is a short step to find that those characteristics are to be assessed on the basis of all the evidence available at trial, not solely by reference to what any party knew or should have known at the time of supply. To the extent that this exposes the supplier to liability for things that were not known at the time, that is readily explicable by a policy choice by the legislature that the risk of loss arising from matters that could not have been anticipated is better placed on the supplier than the consumer: see Scenic CA (No 1) at [184].
It is necessary, however, also to consider the authority of Medtel, on which the respondents relied heavily. That case concerned the supply of a pacemaker which was one of four models that had been the subject of a hazard alert issued by the Therapeutic Goods Administration. The alert had warned that for those models, there was an increased risk of early battery depletion due to potential short circuit. But the evidence was that the pacemaker that was supplied to the appellant did not have that defect and was unlikely to develop it in the foreseeable future. The question was whether the pacemaker was nevertheless not of merchantable quality for the purposes of s 74D of the TPA. The increased risk of malfunction that led to the issue of the hazard alert only became known after the appellant was fitted with the pacemaker.
In view of the argument advanced by the respondents here, it is relevant to note that s 74D(3) of the TPA specified when goods were not of merchantable quality in the following terms:
Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to:
(a) any description applied to the goods by the corporation;
(b) the price received by the corporation for the goods (if relevant); and
(c) all the other relevant circumstances.
The Full Court held unanimously that the pacemaker supplied to the appellant was not of merchantable quality. It was common ground that this was to be determined as at the time of supply of the goods to the consumer. It was also common ground that at least some information that was not available at that time could be taken into account at the time of trial for the purpose of making that determination.
Nevertheless, Branson J (Jacobson J agreeing) examined as a “critical question” (at [57]) how much later acquired information could be taken into account. In the course of that examination, Branson J held that a requirement that was defined by what it was “reasonable to expect” was concerned with what it was objectively reasonable to expect at the time of supply to the consumer. Her Honour did not frame this by reference to what a reasonable person in the position of the consumer or the supplier would expect; rather, the fitness for purpose of the goods was to be measured against “what was objectively reasonable to expect, in terms of fitness for purpose, in all the relevant circumstances”: Medtel at [64]. As s 74D(3) required, this included the description applied to the goods by the manufacturer. This was not because of the effect that description might have on the state of mind of the consumer, or of a hypothetical reasonable consumer. Rather, it was because “[w]hat it is objectively reasonable to expect in terms of fitness for purpose of goods of one description may be quite different from what it would be reasonable to expect of goods of another description”: Medtel at [64].
Justice Branson then considered Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 (the Hardwick Game Farm case). In that case, a toxic substance found in meal fed to poultry led to fatalities and other ill effects in the birds; the presence of that substance was not known, and could not reasonably have been expected to be known, at the time of supply of the meal. The House of Lords was split on the extent to which after-acquired knowledge was relevant; some of the Law Lords held that all such knowledge was relevant (Lord Reid at 75‑76, Lord Morris of Borth-y-Gest at 92 and Lord Guest at 108-109).
Justice Branson, however, preferred the approach of Lord Pearce (with whom Lord Wilberforce agreed) in Hardwick Game Farm. His Lordship would have taken into account qualities of the goods that were inherent in them at the time of the supply, but not knowledge (for example) of techniques that were only discovered after the event, that might have transformed the goods. The example Lord Pearce gave of something that could not be taken into account was a simple antidote, discovered two years after supply, that would have easily rendered harmless goods that were in fact toxic at the time of supply. Justice Branson summarised the position thus (at [70]):
In my view, in the context of s 74D of the Act, the approach of Lord Pearce to the use of after-acquired knowledge in the Hardwick Game Farm case is compelling. Section 74D, as is mentioned above, calls for the quality, or fitness for purpose, of the goods to be measured against what it was reasonable to expect in that regard at the time of the supply of the goods to the consumer. That measurement must be undertaken, in my view, in the light of information concerning the goods available at the time of trial. However, the issue remains whether the goods were as fit for the relevant purpose as it was reasonable to expect at the time of their supply to the consumer.
In his separate concurring judgment, Moore J was content to accept the common position of the parties that merchantability at the time of supply could be determined by reference to the facts known at the time of the hearing: Medtel at [28], [36]. His Honour did not appear to consider Lord Pearce’s particular reservation germane, observing (at [45]) that facts now known should not be drawn on selectively, there being “no rational basis, nor any basis evident from the Act, for suggesting the court should do anything other than consider all the facts and conclude the goods were not of merchantable quality”. His Honour also noted that while it was again common ground that condition of the pacemaker was to be assessed as at the time of supply, its condition after that time was relevant to the extent that it might enable an inference to be drawn about its condition at the time of supply: Medtel at [39]-[40].
In Medtel at [43] Moore J noted that in the Full Court judgment of Graham Barclay Oysters Pty Ltd v Ryan [2000] FCA 1099; 102 FCR 307 (Graham Barclay FC) it was held that the court must consider the reasonable expectations of a reasonable consumer placed in the position of the actual consumer. His Honour seemed to be referring to the following passage in the judgment of Lindgren J (Lee J agreeing):
533The words “as it is reasonable to expect” suggests a question as to the identity of the person or persons, the reasonableness of whose expectation is in question and is to be determined by the court. Possible contenders are:
(1)the consumer or other person who suffers loss or damage;
(2)a reasonable consumer placed as that actual consumer or other person was;
(3)a reasonable bystander (in effect, the court).
534In my opinion consistently with both the objective nature of the standard aimed for and the consumer protection purpose of the provision, it is the second or third category of person whose reasonable expectation is called into service by the statute, and in my opinion a reasonable bystander would seek to put himself or herself in the position of a reasonable consumer placed as the actual consumer or other person was. Accordingly, it is right to inquire into the reasonable expectations of a category (2) person.
Like Medtel, this part of Lindgren J’s judgment concerned s 74D of the TPA (the subsequent High Court appeal did not concern that aspect of the case). In any event, after referring to this authority in Medtel at [43], Moore J concluded that the assessment of the state or condition of goods at the time of supply was one to be made objectively.
No error in the primary judge’s approach to the assessment of Dillon damages, nor any appellable error as to quantum, has been demonstrated.
Conclusion on ground 1 of the appeal
Ground 1 cannot succeed.
Ground 2: relationship between Dillon damages and personal injury
Similarly, ground 2 of the appeal cannot succeed.
By ground 2, Mrs Karpik contended that the primary judge erred in finding that almost all of her feelings of distress, disappointment, anxiety, frustration, and so on arose out of personal injury either to her or to her husband, with the result that his Honour incorrectly concluded that those feelings are not compensable by an award of Dillon damages.
The parties were agreed that it is necessary to distinguish between distress and disappointment that was consequent upon Mrs Karpik’s injuries (the adjustment disorder) and that which was not. Having found that Mrs Karpik did not suffer from Long COVID (a finding not challenged on appeal), the primary judge found that many of the symptoms she relied on for the Long COVID diagnosis may have arisen from her adjustment disorder, which is compensated separately, or from some other cause or ailment. As his Honour said (PJ[1020]), “[t]hey all manifest physically and are not compensable as Dillon damages”. The primary judge held that, as a consequence, there was very little left to compensate Mrs Karpik for by way of Dillon damages, because “almost all of those feelings, or experiences of hers … arise out of personal injury to her (COVID infection and adjustment disorder) or to her husband (COVID infection)” (PJ[1021]). Mrs Karpik submitted that this is his Honour’s error.
Contrary to Mrs Karpik’s submission, the primary judge did not erroneously conflate Dillon damages with distress and disappointment consequent upon personal injury and so fail to award Dillon damages post the onset of her adjustment disorder. His Honour distinguished clearly between her distress and disappointment consequent upon her cruise experience and the matters which arose after 21 March 2020.
Mrs Karpik submitted that the primary judge should have awarded Dillon damages for the “rational” distress and disappointment she suffered in response to her cruise holiday being ruined, alongside an award of personal injury damages in respect of the “irrational” distress subsumed by her adjustment disorder.
There are two difficulties with the case advanced by Mrs Karpik on appeal.
First, to the extent that Mrs Karpik may have continued to suffer “rational” feelings of disappointment and distress after 21 March 2020, those feelings were not consequent upon any breach by the respondents of promises in relation to the cruise. In particular, it is apparent from Mrs Karpik’s own evidence that her distress about her husband’s condition after 21 March 2020 was caused in large part by the lack of communication from the hospital staff on 22 March 2020 about his intubation and induced coma (PJ[220]), followed by the circumstances of 27 March 2020, “the worst day of her life” (PJ[222]), when she was told he likely would not live. These are not circumstances that flow naturally from any breach of the respondents’ promises to provide an enjoyable and relaxing cruise.
Mrs Karpik’s evidence as to her period of self-isolation was largely confined to the distress she suffered as a result of being unable to be with her husband. The primary judge found that the period from when Mr Karpik was intubated on 22 March 2020 until he began to show small improvements sometime in the last week of March was “incredibly distressing for Mrs Karpik, made worse by not being able to see her husband or speak face to face with his ICU team” (PJ[220]). Again, this is not a consequence that can be visited upon the respondents. It was not until 15 March 2020, almost a week after the Ruby Princess had departed Sydney, that the Australian Government announced that all international arrivals would need to self-isolate for a period of 14 days irrespective of symptoms and that the Australian borders were going to be closed. The closure of Australia’s borders was unprecedented. Prior to 15 March 2020, only Australian citizens and permanent residents returning from mainland China and Iran had been required to self-isolate. In light of what was known at the time, it cannot be said that the respondents had, by their contractual terms, assumed the risk that all returning passengers would be required to self-isolate, regardless of symptoms, for a period of 14 days. In any event, Mrs Karpik’s evidence was that she was “very relieved” when she heard of the Government’s announcement (PJ[204]), so it cannot be said that the prospect of self-isolation caused her any particular distress or disappointment.
Further, despite Mrs Karpik’s having received instructions to go into home isolation for 14 days upon returning, she did not immediately follow those instructions. Her affidavit evidence, as referred to by the primary judge, is that shortly after arriving home on 19 March 2020, she drove Mr Karpik to the Coronavirus Testing Clinic at Wollongong Hospital (Karpik Affidavit at [164]). After subsequently taking him to the Emergency Department, Mrs Karpik drove Mr Karpik home (Karpik Affidavit at [166]). Once Mr Karpik was hospitalised on 21 March 2020, Mrs Karpik commenced self-isolation at home (Karpik Affidavit at [171]). Mrs Karpik said that she remained alone in the downstairs area of the house whilst her daughter and grandson remained in the upstairs area (Karpik Affidavit at [172]). To that extent, she was not entirely isolated. Despite Mrs Karpik’s distress at being unable to be with her husband, it might reasonably be inferred that it was some comfort to Mrs Karpik to know that she was not completely alone at this difficult time. Even if Mrs Karpik had not been required to self-isolate, it is far from clear that she would have been able to visit her husband. Her affidavit attests that it was not until after Mr Karpik had returned two negative COVID-19 tests, on 12 April 2020, that Mrs Karpik was permitted to visit him (Karpik Affidavit at [194]). Her mandatory 14-day period of isolation had ended a week earlier on 5 April 2020.
Secondly, there does not appear to have been any evidence before the primary judge which could have led his Honour to conclude that Mrs Karpik had “rational” feelings of distress and disappointment in relation to the cruise over and above the factors that arose after 21 March 2020 (set out in PJ[219]-[233]). In particular, his Honour accepted the expert psychiatric evidence that Mr Karpik’s admission to the ICU and his near-death experience were a substantial contributing factor to Mrs Karpik’s post-cruise adjustment disorder which constituted her personal injury (PJ[918]).
Having assessed the evidence given by Mrs Karpik and the expert psychiatric evidence, the primary judge held that Mrs Karpik, “a person vulnerable to experiencing depressive and anxiety symptoms, suffered from a new adjustment disorder as a consequence of the voyage and its aftermath,” and “[f]rom March to June 2020” she was “very distressed and depressed and required professional psychiatric treatment” (PJ[938]).
No error is shown in the primary judge’s conclusion that Mrs Karpik’s distress and disappointment after 21 March 2020 “was clearly associated with the adjustment disorder injury”.
Conclusion on ground 2 of the appeal
There is no substance to the complaint agitated by ground 2.
Ground 3: damages for feelings of stigmatisation
By ground 3, Mrs Karpik contends that the primary judge erred in excluding her feelings of stigmatisation from the scope of any award for Dillon damages for the reason that “it is an injury to dignity or reputation rather than being distress and so on caused by a failure to comply with a guarantee” (PJ[1027]).
Mrs Karpik’s evidence was that on a number of occasions upon mentioning that she was a passenger on the Ruby Princess, “the person or people whom I am addressing will immediately move away from me and act in a fearful manner” (Karpik Affidavit at [254]). Regardless of whether or not, with the benefit of having lived through the COVID-19 pandemic, one would consider such behaviour to be peculiar to persons who had been on board a ship which had experienced an outbreak of COVID-19, the question of principle to be determined on this appeal is whether feelings of stigmatisation generally fall within the scope of Dillon damages.
Mrs Karpik relied on the decision of the New South Wales Court of Appeal in Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217; 72 NSWLR 559 in which an employee of the Church was found to have been wrongfully dismissed without notice. The Court of Appeal held, however, that damages for injury to reputation or to feelings arising from the breach were not recoverable. In the passage specifically relied upon by Mrs Karpik as authority for the proposition that distress damages can be the result of loss of esteem, Basten JA said, at [54]:
What is meant by the concept of injury to reputation is not entirely clear in these circumstances. This was not a case in which the appellant sued for defamation based upon a statement published by the respondent. Rather, it seems to have fallen into one of two separate categories identifiable from the case-law relating to damages for breach of contract. Thus, on one view it could constitute part of the distress suffered by the appellant as the result of loss of esteem of friends, colleagues and acquaintances. However, damages on that account have been treated as generally unrecoverable for breach of contract: see Fink v Fink [1946] HCA 54; 74 CLR 127 at 144, where Dixon and McTiernan JJ stated:
Resentment, disappointment and the loss of esteem of friends are not proper elements [of loss, recoverable in an action on contract].
Whilst Basten JA acknowledged the exceptions to the general rule recognised in Baltic Shipping, the exception is that the damage flows directly from the breach of a contract to provide enjoyment, relaxation or freedom from molestation (Baltic Shipping at 365 (Mason CJ)). It was, therefore, not relevant to the case advanced in Russell.
The subsequent decision of the New South Wales Court of Appeal in Shaw v State of New South Wales [2012] NSWCA 102; 219 IR 87 suggests that “actual financial loss” is required before damages for loss of reputation are recoverable.
In Shaw, five members of the Court (Beazley JA, McColl JA, Macfarlan JA, Barrett JA and McClellan CJ at CL) took the opportunity to reconsider Russell because of the possibility of an inconsistent outcome (at [6]). The claims in contract did not seek damages for distress or injured feelings, nor for damage to reputation. Rather, damages were claimed for financial loss actually sustained (in the form of salary or other remuneration not obtained) which, it was pleaded, flowed from the breach of the employment contract.
Barrett JA, with whom all members of the Court agreed, surveyed the jurisprudence of England, Canada, New Zealand, Fiji, Samoa, Trinidad and Tobago and Hong Kong dealing with the recovery of damages in contract for loss of reputation (and the chances of obtaining new employment). In particular, his Honour referred (at [72]-[73]) to the decision of the House of Lords in Malik v Bank of Credit & Commerce International SA [1997] UKHL 23; [1998] AC 20 where, with the concurrence of Lords Goff of Chieveley, Mackay of Clashfern and Mustill, Lord Steyn said, at 52:
Provided that a relevant breach of contract can be established, and the requirements of causation, remoteness and mitigation can be satisfied, there is no good reason why in the field of employment law recovery of financial loss in respect of damage to reputation caused by breach of contract is necessarily excluded.
Earlier, I drew attention to the fact that the implied mutual obligation of trust and confidence applies only where there is “no reasonable and proper cause” for the employer’s conduct, and then only if the conduct is calculated to destroy or seriously damage the relationship of trust and confidence. That circumscribes the potential reach and scope of the implied obligation. Moreover, even if the employee can establish a breach of this obligation, it does not follow that he will be able to recover damages for injury to his employment prospects. The Law Commission has pointed out that loss of reputation is inherently difficult to prove: Law Commission, Consulation [sic] Paper No. 132 on Aggravated, Exemplary and Restitutionary Damages, p. 22, para 2.15. It is, therefore, improbable that many employees would be able to prove “stigma compensation”. The limiting principles of causation, remoteness and mitigation present formidable practical obstacles to such claims succeeding. But difficulties of proof cannot alter the legal principles which permit, in appropriate cases, such claims for financial loss caused by breach of contract being put forward for consideration.
(Emphasis added.)
In considering the Australian jurisprudence, Barrett JA (at [95]-[96]) drew specific attention to the exception to the general rule recognised in Baltic Shipping but noted that all members of the High Court had quoted Lord Loreburn’s observations in Addisv Gramophone Co Ltd [1909] AC 488 at 491 to the effect that damages awarded to a dismissed employee for breach of contract “cannot include compensation either for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment”. However, Barrett JA went on to observe that “Baltic Shipping itself was concerned with only compensation for injured feelings. There was no occasion to deal directly with the compensability of ‘the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment’”. His Honour said, at [117]:
At large in both Baltic Shipping andRussell was the question whether, if a dismissed employee establishes breach of contract on the part of the employer and shows that he or she, despite reasonable efforts, did not find new employment for a particular period, the financial loss actually sustained through unemployment for that period is compensable (assuming that a causal link is proved). It is arguable that loss of that kind is, in the words of Alderson B in Hadley (at 355), loss which “may fairly and reasonably be considered” as arising “according to the usual course of things” or “may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it”.
(Emphasis added.)
It is uncontroversial that Mrs Karpik did not suffer any actual financial loss because of her perceived stigmatisation. Nor can the terms of the contract reasonably be construed to have promised to protect, or at least not harm, passengers’ reputations, and thereby (potentially) bring them into the scope of the exception recognised in Baltic Shipping. We leave open the issue of whether, in different circumstances, a contract to provide enjoyment and/or pleasure may also have as one of its objects that of not causing harm to a person’s reputation. One example might be a contract to participate, for enjoyment, in a reality television show.
The primary judge was correct, in the circumstances of this case, to deny the inclusion of Mrs Karpik’s feelings of stigmatisation within the assessment of Dillon damages. Plainly, those feelings were not occasioned by a failure on the part of the respondents to comply with a guarantee, but rather were caused by the observations and actions of third parties towards Mrs Karpik which were associated with her having been a passenger on the Ruby Princess.
In any event, the evidence which was said to have given rise to Mrs Karpik’s feelings of stigmatisation was so insignificant that it could not reasonably be considered to have made any material difference to the quantum of Dillon damages arrived at by the primary judge.
Conclusion on ground 3 of the appeal
Ground 3 cannot be sustained.
Ground 4: reduction in damages for refund of ticket price
By ground 4, Mrs Karpik contends that the primary judge’s reduction of the quantum of Dillon damages by the amount of the refunded ticket price is without precedent and wrong as a matter of fact and law.
It was submitted by the respondents at trial that, “[w]ere the Court to find it necessary to assess distress and disappointment damages, the Court would take account of the refund already provided and, thus, would not award further damages for ‘distress and disappointment’”. Oral submissions to the same effect were also made. The primary judge noted that Mrs Karpik did not dispute that the refund can properly be taken as credit against the Dillon damages (PJ[1029]), though she later contended on appeal that no express concession had been made on this point at trial. On appeal, Mrs Karpik submitted that the refund should be taken as credit against any reduction in value damages claimable under s 267(3) of the ACL, rather than against her Dillon damages, or that it should be characterised as an ex gratia payment that cannot be credited against any of her damages. This is not the way in which Mrs Karpik presented her case below.
No evidence was led as to the precise nature of the refund. On appeal, Mrs Karpik contends that the onus lies on the respondents to establish the extent to which any amount received was in diminution of her claim and, in the absence of any evidence having been led by the respondents, prima facie the refund was gratuitous. That point could have been raised before the primary judge. Despite being on notice from the respondents’ written and oral submissions, it was not.
Moreover, the reality is that Mrs Karpik has received a full refund for a cruise which, as the primary judge found, took place almost exactly as promised, unlike the circumstances in the Moore v Scenic cases or Baltic Shipping. There was no total failure of consideration. There was no entitlement to a refund of the fare (Baltic Shipping at 353). In Baltic Shipping, Deane and Dawson JJ (at 382) also emphasised the need to avoid double compensation where both restitution of the fare and damages for disappointment and distress had been claimed. A similar point was made by the Court of Appeal of England and Wales in Milner. In that case, the claimants were disappointed when their promised “legendary experience” became less so when their chosen cabin amidships became unusable after bad weather, and they were moved around the ship without any certainty as to when a suitable cabin might be made available. The claimants were offered, and accepted, a refund of approximately 80% of the fare paid.
In assessing damages, Ward LJ said, at [42]:
In approaching the task of assessing damages, I accept that it is permissible to make the assessment under two heads, first the diminution in value and then the distress and disappointment. I do, however, stress that judges should always be alert to ensure that there is no duplication of damages and so it is always salutary to stand back and look at the sum of the two elements in the round before arriving at the figure to award.
In the present circumstances, as was acknowledged by Mrs Karpik during oral submissions, she has received recompense in the form of a 100% refund of the fare, despite there being no total failure of consideration. As the primary judge recorded, Mrs Karpik did not claim any reduction in value damages under ACL s 267(3) (PJ[1029]). As has already been observed, the primary judge assessed her distress and disappointment as being equivalent to having lost the entire experience for which she had paid. Accordingly, were the refund not to be credited against the Dillon damages, Mrs Karpik would be doubly compensated.
Conclusion on ground 4 of the appeal
There was no error by the primary judge in reducing the Dillon damages to nil because of the refund. Ground 4 cannot succeed.
Grounds 5-7: non-economic loss and the 15% threshold under the CLA
Grounds 5-7 challenge the primary judge’s assessment of Mrs Karpik’s non-economic loss. In particular, Mrs Karpik contends by ground 5 that the primary judge erred in finding that the severity of her non-economic loss was 8% of the MEC for the purposes of s 16 of the CLA. She contended further that the primary judge failed to give adequate reasons for arriving at his assessment of 8% (ground 6) and maintained that he erred in failing to find that the severity of her non-economic loss is at least 15% of the MEC (ground 7). We deal with these grounds together.
Mrs Karpik did not challenge the primary judge’s factual findings in relation to her personal injuries. Those findings were (PJ[1000]):
(1)Mrs Karpik contracted COVID-19, although her symptoms were mild; and
(2)Mrs Karpik suffered an adjustment disorder of moderate severity and relatively short duration.
In respect of the latter injury, the evidence, accepted by the primary judge, was that from March to June 2020, Mrs Karpik was very distressed and depressed and required professional psychiatric treatment. Although her symptoms were medically significant, she did not report ever experiencing thoughts of self-harm or suicidal ideation. The primary judge found (PJ[938]) that:
[her] mental health improved from June 2020 when her social functioning returned to normal and she has returned to her baseline state of psychological health and appears to be working and socialising at the level that she was prior to the cruise.
As to her COVID-19 symptoms, the primary judge summarised (PJ[892]):
her symptoms were mild or, as submitted on her behalf in closing, “relatively minor”. She started suffering from headaches and diarrhoea from about 18 March. On 19 March, she was feeling unwell. On 21 March, she was very tired, had headaches and diarrhoea and did not sleep well. By 24 March, she had a “scratchy” throat. She appears to have recovered thereafter.
There is no basis for Mrs Karpik’s complaint that inadequate reasons were given by the primary judge for his assessment. His Honour had previously made detailed findings about her injuries (PJ[298]-[313] and [875]-[938]) and his Honour summarised these at PJ[1000] and [1005]. His Honour then set out in some detail (PJ[1006]) the comparator cases he had found of some assistance. Contrary to Mrs Karpik’s submission that the primary judge failed to identify a most extreme case against which he compared her injuries, his Honour explained (PJ[1003]) the task he was required to undertake by reference to the decision in Kurrie v Azouri (1998) 28 MVR 406. His Honour was clearly cognizant that a MEC includes cases involving, for example, quadriplegia, serious brain damage, and perhaps also serious scarring and disfigurement, especially to young children.
Mrs Karpik sought to rely on two cases, brought by plaintiffs who suffered an injury on a cruise which resulted in an adjustment disorder, in support of her contention that the primary judge’s assessment of 8% was too low. To the contrary, both cases tend to support the primary judge’s assessment.
The first, Smith, concerned injuries suffered by a 14-year-old girl when three ceiling panels collapsed on her during a cruise. By the time of trial, she was 21. The trial judge found that she had suffered permanent neck injuries, involving ongoing pain and interference with the normal activities of her life, including her principal hobby of dancing (at [74]). These symptoms were expected to worsen with age, and she would continue to have ongoing psychological symptoms in response to her pain (at [80]). The Court assessed her damages at 33% of a MEC (at [81]).
The second, Waine v Carnival Plc trading as P&O Cruises Australia [2022] NSWDC 650, concerned a plaintiff who suffered a traumatic miscarriage in her second trimester during and after a cruise. The ship was unequipped to deal with her condition and the ship’s doctor failed to advise the plaintiff of, inter alia, the risks of travelling during an incomplete abortion. The plaintiff suffered a serious form of PTSD which continued at the time of trial, some four years later. In assessing her non-economic loss at 30% of a MEC, the trial judge observed (at [185]), “[t]he experts agree that it seems likely to persist and only can be improved rather than healed by treatment and medication. It is a condition that … impacts much of her daily life, social interactions, spousal connection, and work and career”.
Given the unchallenged findings of the primary judge set out above, in particular that, within three months of the onset of the adjustment disorder, Mrs Karpik’s “social functioning returned to normal” and that by trial, she had “returned to her baseline state of psychological health and appear[ed] to be working and socialising at the level that she was prior to the cruise”, the submission that the severity of her non-economic loss should, by reference to these cases, have been assessed as at least 20% of a MEC must be rejected.
Conclusion on grounds 5-7 of the appeal
No basis has been shown for disturbing the primary judge’s assessment of Mrs Karpik’s non‑economic loss. Grounds 5-7 cannot succeed.
DISPOSITION
For these reasons, each of the cross-appeal and the appeal are dismissed. Specifically, we have upheld the primary judge’s conclusions that:
(1)the respondents breached the consumer guarantees in s 61 of the ACL, and those breaches caused the losses to Mrs Karpik that were consequent on the COVID-19 that she and Mr Karpik suffered, including Dillon damages;
(2)the respondents breached their common law duty of care and the guarantee of due care and skill imposed by s 60 of the ACL by failing to cancel cruise RU2007 and failing to warn Mrs Karpik of the heightened risk of COVID-19 on board the cruise, and those breaches caused the physical and psychiatric injuries that were consequent on her and on Mr Karpik’s COVID-19;
(3)the primary judge was correct, however, to conclude that Mrs Karpik’s Dillon damages consequent on the breaches of the s 61 consumer guarantees did not exceed the refund of the ticket price which the respondents have made to her, and that the refund was properly treated as a credit against those damages; and
(4)the primary judge was also correct to conclude that the severity of Mrs Karpik’s non‑economic loss within the meaning of s 16 of the CLA was less than 15% of the most extreme case, meaning that Mrs Karpik is not entitled to personal injury damages under that head.
It remains only to explain why it has not been necessary to deal with the grounds of appeal that concern misleading or deceptive conduct under s 18 of the ACL. At PJ[863]-[866] the primary judge put the damages claimed by Mrs Karpik into two categories: personal injury damages and distress and disappointment (Dillon) damages. Save for the finding under s 16 of the CLA, the personal injury damages would have been awarded for both the consumer guarantee breaches and negligence. Mrs Karpik was entitled to Dillon damages for the breaches of the s 61 consumer guarantees and for the breaches of s 18 of the ACL: see PJ[1025], [1043].
None of the parties have challenged these aspects of the primary judge’s reasoning. It follows that the grounds of the cross-appeal that we have upheld are sufficient to support Mrs Karpik’s entitlement to Dillon damages and the entitlement she would have had to personal injury damages were it not for s 16 of the CLA. Upholding or dismissing the grounds of the
cross-appeal concerning misleading or deceptive conduct therefore could not have made any difference to the outcome of the cross-appeal taken together with the appeal.
COSTS
Each of the appeal and the cross-appeal have failed in their entirety. There is no reason why the costs of each should not follow the event. There will be orders for those costs to be taxed by a Registrar of the Court.
However, there will be liberty to apply in the event that a party wishes to apply for different orders, for example for the assessment to take place on a lump sum basis.
I certify that the preceding three hundred and sixty (360) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Markovic, Sarah C Derrington and Jackson. Associate:
Dated: 29 July 2025
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