As the COVID-19 pandemic erupted, the some 2,700 passengers and 1,100 crew members on the Ruby Princess cruise ship featured prominently in Australian news headlines. Many of whom were onboard the ship contracted the virus.

Having suffered emotional distress because of the outbreak on the ship, the lead applicant, Mrs Karpik, commenced representative class action proceedings against Carnival plc, the operator of the Ruby Princess. She asserted that Carnival breached the Australian Consumer Law, and that they were negligent in their management of the outbreak on the ship.

The Federal Court recently found in favour of the lead applicant.

In issue

Stewart J, of the Federal Court of Australia, was asked to determine whether Carnival, the operator of the Ruby Princess, breached the Australian Consumer Law (the ACL), was negligent in its management of the COVID-19 outbreak on the cruise ship, and was otherwise liable in damages to Mrs Karpik, the lead applicant. Her claim against Carnival was founded on three bases, that Carnival:

  • Failed to meet the consumer guarantee under s 61 of the ACL that the cruise experience was reasonably fit for purpose. She formulated that purpose as being one which provided 'a safe, relaxing and pleasurable holiday'.
  • Engaged in misleading and deceptive conduct within the meaning of s 18 of the ACL, as Carnival failed to provide a cruise liner which it represented would be 'safe to board' and in which Carnival employed 'reasonable care' and 'best practices', to provide a 'pleasurable cruise'.
  • Contravened the consumer guarantee imposed by s 60 of the ACL, for Carnival to provide the cruise services with due care and skill. She also alleged that in contravening s 60 of the ACL, Carnival was also negligent, in failing to take reasonable precautions to protect her from illness and emotional distress.

In the event that Mrs Karpik succeeded in her claim, Stewart J was required to determine what regime applied to the assessment of damages, and the extent of that application. These issues arose predominantly from the interaction of State and Federal legislation, and whether State law could be imported into the Federal jurisdiction.

The background

At the time of the cruise, Mr and Mrs Karpik were 72 and 69 years old, respectively. Both were retired from full-time work and enjoyed taking holidays on cruise ships.

On 30 January 2020, the World Health Organisation (WHO) declared the COVID-19 outbreak a Public Health Emergency of International Concern. By the time the Ruby Princess departed from Circular Quay, Sydney, on 8 March 2020, there had been 100,000 confirmed cases of the virus across 90 countries. Three days later, the WHO declared COVID-19 a global pandemic, and it was around this time that Mr Karpik fell severely ill, experiencing weakness, breathlessness, and persisting high fevers. On 15 March 2020, the Ruby Princess began to make its journey back to Sydney, several days earlier than expected, and it was during this time that Mrs Karpik also began to feel unwell.

On 19 March 2020, the Karpiks disembarked the Ruby Princess. Over the next few days, Mr Karpik’s condition worsened dramatically, to the point that he was intubated and ventilated, and placed into a medically induced coma. Although Mr Karpik ultimately recovered from the virus after two months of hospitalisation, Mrs Karpik said that the entire ordeal caused her mental anguish and a psychiatric disorder, which was compounded when she also contracted COVID-19.

Against this background, Mrs Karpik commenced representative class action proceedings against Carnival.

The decision at trial

Stewart J accepted that Carnival failed to meet the s 61 ACL consumer guarantee to provide services, in the form of a 'safe, relaxing and pleasurable holiday', which were fit for purpose. He reasoned that, in light of the prevalence of the outbreak at the time, and given that Carnival’s other cruises ships encountered difficulty managing the COVID-19 outbreak, there was very little possibility that Carnival could provide a cruise which was safe, relaxing, or pleasurable.

His Honour also found that Carnival ought to have cancelled the cruise altogether and that in combination with the deficient safety practices ultimately employed on the cruise, Carnival’s 'safe to board', 'pleasurable cruise', 'best practices' and 'reasonable care' representations were misleading and deceptive, within the meaning of s 18 of the ACL.

In terms of the ACL s 60 due care and skill consumer guarantee and negligence claims, Stewart J accepted that Carnival owed Mrs Karpik a duty to take reasonable care for her health and safety. His Honour found that Carnival breached that duty, as it should have cancelled the Ruby Princess Cruise in light of the global climate and its past experiences on the Princess and Grand Princess cruises earlier that year.

Considering that the representative proceedings were brought ostensibly under the ACL (Federal legislation), an interesting issue arose as to whether certain provisions of the Civil Liability Act 2002 (NSW) (the NSW CLA) applied to this claim. Carnival relied upon certain defences and limitation provisions under the NSW CLA in the proceedings.

Section 275 of the ACL provides that if there is a failure to comply with an applicable consumer guarantee, and the law of a State or Territory governs the contract which contained that guarantee, then that law applies to limit or preclude liability for the failure, and recovery of that liability. That is, s 275 provides a mechanism for State or Territorial legislation to be 'surrogated' and applied in proceedings involving Federal jurisdiction.

In particular, Stewart J was required to consider whether the NSW CLA limitations on non-economic loss damages (s 16), and the contributory negligence (s 5R), no duty to warn of obvious risk (s 5H), inherent risk (s 5I), and normal fortitude (s 32(1)) defences could apply to this case, by virtue of the ACL s 275 'surrogate' mechanism.

In considering the issue at large, his Honour determined that even if a State or Territorial law is 'picked up' by the ACL, an incisive issue was whether the law had any application to the facts of the particular case, including with regard to any geographical limits, given the presumption against extraterritoriality at common law (the concept that State and Territorial laws should not apply to issues outside of those laws’ inherent jurisdictions).

Stewart J found that the ACL 'picked up' the limitations on non-economic loss damages and the contributory negligence defence under the NSW CLA. He applied the findings in Moore v Scenic Tours Pty Ltd [2020] HCA 17, which dealt with a similar issue, to conclude that the application of that limitation and defence did not contravene the presumption against extraterritoriality. However, his Honour did not consider that the other NSW CLA defences Carnival relied upon (no duty to warn of obvious risks, inherent risks, normal fortitude test in pure mental harm cases) were 'picked up' by the ACL. He reasoned that those defenses either did not apply to the claim, or were not true limitation defences which limited the extent of liability. In relation to the latter, his Honour found that the failure to warn and normal fortitude defences were defences which went to the issue of whether there was a liability in the first place.

Having found in Mrs Karpik’s favour, Stewart J went on to assess damages. He awarded her $4,423 for treatment expenses for her COVID-19 infection and the adjustment disorder she developed from the ordeal, and $4,400 for distress and disappointment damages. He did not consider the severity of her injuries exceeded the NSW threshold for non-economic loss damages.

Implications for you

Beyond the interest which attaches to the relative novelty of COVID-19 litigation, Karpik v Carnival plc exemplifies how the ACL and State or Territorial civil liability regimes can interact with each other, in the context of personal injury claims brought with a consumer law element.

Certain defences under the various civil liability regimes can be 'picked up' by ACL s 275. However, it has to be established that a business failed to meet a statutory guarantee, and that the law of a State or Territory governed the contract which contained that guarantee.

Once it has been determined that the ACL 'picks up' certain defences, the next important consideration is whether the defences apply to the facts and circumstances of the case, whether the defence is one which limits the degree of liability, rather than a point which goes to whether there is any liability altogether, and whether it infringes on the presumption of extraterritoriality.

Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280