Nobody reads T&C's – but the High Court’s Ruby Princess decision shows consumer law may protect us anyway
- Written by James D Metzger, Senior Lecturer in Law & Justice, UNSW Sydney
How many times have you booked travel - like a cruise or a tour - and simply clicked that you’ve read and agreed to the terms and conditions for your trip without actually reading them?
What if something went wrong on your trip and it turned out the terms you didn’t read prevented you from suing in certain courts?
This was just one problem faced by some of the passengers on the now infamous Ruby Princess cruise ship, which was supposed to be making a pleasant trip from Sydney to New Zealand and back in March 2020, but instead became the location for one of the most well-known early outbreaks of COVID.
Now, the High Court has found that consumers can be protected even if they haven’t fully read their terms and even if they were outside Australia when they accepted them.
Read more: Stormy seas ahead: confidence in the cruise industry has plummeted due to COVID-19
Class action against cruise lines
As a result of the outbreak, Susan Karpik brought a class action suit in the Federal Court of Australia against Carnival plc and Princess Cruise Lines Ltd, the owners and operators of the ship.
The suit alleged that Princess had not taken appropriate safety precautions to best ensure passengers did not get COVID while on board. Karpik won her suit on her own claims, with the Federal Court finding Princess was liable to her, including for damages related to her husband’s death from COVID.
This was also a win for the other 2,600 passengers, who can now rely on the Federal Court’s ruling that safety precautions were not taken.
Karpik and most of the Ruby Princess passengers were subject to Australian terms and conditions for their travel. However, nearly 700 passengers were subject to US terms and conditions.
These terms stated that any lawsuit related to travel on the Ruby Princess could only be brought in US Federal Court in Los Angeles, California, and that passengers were not allowed to sue in a class action - known as a class action waiver.
This means any lawsuit could only be brought individually, something that could be very expensive for each of the passengers. Princess argued that these passengers were bound by the US terms and therefore could not be part of the Australian class action.
International complications
The 700 passengers were represented by Patrick Ho, a Canadian citizen who had booked his cruise through a Canadian travel agent. He argued he was not made sufficiently aware of the US terms for them to apply. He also argued the class action waiver was unfair under Australian law and so could not be enforced.
Judge Stewart of the Federal Court agreed with some of these arguments and found the class action waiver was unfair under the Australian consumer law and that Ho could remain in the class.
But Princess then appealed to the Full Federal Court, which disagreed with Judge Stewart and found Ho had sufficient notice of the US terms before taking his trip and had agreed to them.
The court also found no unfairness in any of the terms under Australian law. This meant that Ho - and the 700 other passengers - could not be part of the Australian class, or any other class action.
The passengers then appealed that decision in the High Court.
What did the High Court decide?
Yesterday, the High Court unanimously ruled in favour of the passengers. In so doing, it put companies doing business in Australia on notice that Australia’s consumer protection laws apply both inside and outside the country’s borders.
It decided the class action waiver was unfair to the passengers. This was because Australian consumer law prohibits unfair consumer contracts and because the express terms of that law apply to companies doing business in Australia, regardless of whether they are headquartered in Australia or overseas.
As the High Court explained, a price of a company doing business in Australia is that it must adhere to Australia’s consumer protection laws.
As the High Court made clear, the consumer laws exist for the protection of people who enter into contracts with companies.
Parts of those contracts may be considered unfair where there are terms that are one-sidedly beneficial for the company, where that benefit is not necessary to protect a legitimate interest of the company, and where the consumer is harmed in some way by the existence of the benefit.
All these elements were present in the US terms as applied to Ho.
As the High Court found, the class action waiver was only beneficial to Princess. The only interest served was to reduce passengers’ ability to sue as a class (and therefore Princess’s need to defend itself against such a suit) and that Ho would be harmed by not being able to be a part of a legitimate Australian class action.
The High Court further found that since the class action waiver was unfair, there were good reasons not to enforce the additional term that all suits had to be brought in US courts in California.
This decision stands as a strong protection for consumers entering into agreements with companies doing business in Australia. It also makes class actions in Australian courts more available for consumers who might benefit from the protections the Australian consumer laws offer.
It is still a good idea to read your terms and conditions before agreeing to anything. But as the High Court has just ruled, you may not be completely out of luck if you don’t.
Authors: James D Metzger, Senior Lecturer in Law & Justice, UNSW Sydney
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