Karpik v Carnival PLC: The Ruby Princess – Anything but smooth sailing

Introduction

On 25 October 2023, Justice Stewart of the Federal Court of Australia handed down the decision in Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280 – believed to be the first decision (globally) addressing a claim for personal injury and related damages arising from COVID-19 (COVID) infections on board a cruise ship.

The decision addresses breaches of consumer service guarantees in the Australian Consumer Law (ACL), misleading and deceptive conduct and a claim in negligence, along with the interaction between the service guarantees and the Civil Liability Act 2002 (NSW) (CLA).

Principles

• Carnival plc and Princess Cruise Lines Ltd (jointly Carnival) have been held liable in negligence, for breach of consumer guarantees relating to the supply of services under ss 60 and 61 of the ACL, and for engaging in misleading and deceptive conduct under s 18 of the ACL in a class action judgment arising from infections on the Ruby Princess cruise ship that occurred at the start of the COVID pandemic in 2020.
• The decision provides further guidance on the interaction between s 275 of the ACL and the CLA, noting that, to some extent, the interaction depends on the facts of the specific case.
• While ss 5R and 16 of the CLA were “picked up” as laws of the Commonwealth by s 275 of the ACL, ss 5H, 5I and 32 were not.
• The decision is relevant to how s 275 of the ACL interacts with the CLA, and also the interaction of s 275 with relevant civil liability regimes in all States and Territories.

Background

On 8 March 2020, the Ruby Princess cruise ship (Ship) departed Circular Quay in Sydney, embarking on a 13-day cruise around New Zealand (Cruise). Among the 2,671 passengers were regular cruise-goers Henry and Susan Karpik. The Cruise departed in the early days of the COVID pandemic.

Mrs Karpik, a very experienced mental health nurse was aware of the risks COVID could pose, but was confident staff onboard the Ship would be extra vigilant to reduce the risks, given past favourable experiences on the ship.

Unfortunately, 3 days into the Cruise Mr Karpik fell gravely ill with COVID and required intubation and ventilation. The on-board medical team informed Mrs Karpik that her husband had around 3 days to live, with a 10% chance of survival.

Whilst Mr Karpik survived, Mrs Karpik subsequently became infected with COVID (although a less severe case). Due to the culmination of events relating to her husband, she alleged developing an adjustment disorder, requiring treatment.

The Australian Government issued a directive on 15 March 2020 that only international cruise ships headed to Australia prior to that date would be permitted entry to Australia. Accordingly, the Cruise was cut short and the Ship arrived back in Sydney on 19 March.

Mrs. Karpik became the lead plaintiff in a class action against Carnival, seeking compensation for personal injury, distress and disappointment, amounting to over $360,000.00.

The decision

Justice Stewart was asked to consider whether Carnival, in commencing the Cruise and allowing it to continue:

• breached s 61 of the Australian Consumer Law by failing to provide a Cruise that was fit for purpose;
• was negligent or breached s 60 of the ACL by not exercising due care and skill in failing to take reasonable precautions to protect Mrs Karpik and fellow passengers against the risk of illness and suffering mental harm; and
• engaged in misleading and deceptive conduct under s 18 of the ACL regarding promotional and marketing material surrounding the Cruise, which promoted a commitment to safety by implementing increased monitoring, screening and sanitation protocols to protect the health of guests.

In relation to fitness for purpose, his Honour held that Carnival failed to provide a Cruise that was a safe, relaxing and pleasurable holiday, because Carnival’s pre-embarkation screening processes, hand hygiene and cleaning procedures fell short of what was reasonably expected to achieve that purpose in light of the risk COVID caused to passengers.

In respect of the claims in negligence and under s 60 of the ACL, his Honour held that Carnival breached the duty of care owed to Mrs Karpik and failed to act with due care and skill by failing to:

• cancel the Cruise;
• warn of the heightened risk of COVID on board the Ship;
• implement better pre-embarkation screening methods;
• implement a system of physical distancing on board; and
• properly isolate passengers who were displaying flu-like symptoms or providing the roommates of those passengers with face masks and appropriate PPE.

Further, his Honour held that the Cruise should have been cancelled because Carnival was aware of the risks, as well as the inadequate measures it had in place surrounding pre-embarkation screening, isolation, physical distancing and the use of PPE (including face masks).

Having found that Carnival was negligent and in breach of the consumer service guarantees, his Honour was required to consider whether certain provisions in Parts 1A, 2 and 3 of the CLA applied to the guarantees on the basis that the law of New South Wales was the proper law of the contract between Mrs Karpik and Carnival, and, therefore, those provisions were “picked up” by s 275 of the ACL as a “surrogate” law of the Commonwealth.[i]

This issue has previously been considered by the New South Wales Court of Appeal[ii] and the High Court of Australia[iii] in the Moore v Scenic Tours Pty Ltd litigation*, but primarily in relation to the operation of Part 2 of the CLA only.

*See our April 2020 article: A not so luxury cruise: when do distress and disappointment constitute personal injury?

The issue for his Honour’s determination was whether the provisions being considered had “any application to the facts of the particular case, including with regard to any geographical limitations in light of the presumption against extraterritoriality at common law”.[iv]

His Honour held that the provision limiting the entitlement to non-economic damages in s 16 (in Part 2) of the CLA applies, as did the laws relating to contributory negligence in s 5R (in Part 1A). However, his Honour held that:

• section 5H (in Part 1A) relating to a failure to warn of an obvious risk was not picked up because its intention isn’t to limit or preclude liability for a breach of the guarantees, but to deny the existence of a duty of care (which is consistent with appellate Court decisions in relation to similar provisions[v]);[vi]
• section 5I (in Part 1A) relating to inherent risks was not picked up because it was unclear whether the location of the act or omission resulting in the materialisation of the risk occurred in New South Wales, and, there are significant uncertainties regarding the application and relevance of the provision;[vii] and
• section 32 (in Part 3) requiring that the defendant ought to have foreseen that a person of normal fortitude might suffer a recognised psychiatric illness before a duty of care arises, was not picked up for reasons similar to his ruling on section 5H.

In respect of the misleading and deceptive conduct claim, his Honour held there was a breach of s 18 of the ACL, as the promotional and marketing material surrounding the Cruise promoted a commitment to safety through implementing increased monitoring, screening, and sanitation protocols to protect the health of guests.  Further,  Carnival advertised the Cruise under the trademark “comeback new”, and had sent guests an email reiterating a commitment to their health and an increase in hygiene regulations and overall safety to board the Ship.

His Honour held that Carnival made the following misleading representations:

Safe to Board representation: the representation that it was reasonably safe for passengers to embark on the Cruise was misleading given his Honour’s finding that the Cruise should have been cancelled in light of the inadequate measures to minimise the risks and dangers associated with COVID.

Reasonable Care representation: the representation that Carnival would take reasonable care for the safety of passengers during the Cruise was misleading for similar reasons.

Best Practices representation: the representation that Carnival implemented and would continue to implement increased monitoring, screening and sanitisation protocols to protect the health of passengers was misleading, particularly in light of the findings made in relation to the negligence claim.

Pleasurable Cruise representation: the representation that Carnival would supply the promised cruising services and would do all things reasonable to enable passengers to have a safe, relaxing and pleasurable cruise was misleading because, while it was reasonable to make those representations in September 2019 (prior to the risk of COVID crystalising), the representation had continued and the reasonableness of the representation dissipated once the risk of COVID became apparent.

While his Honour held that s 5R of the CLA regarding contributory negligence was picked up, he held that there was no contributory negligence, as Mrs Karpik was entitled to rely on the assurances provided by Carnival in relation to the safety of the Cruise, even if there may have been a basis for questioning her wisdom in boarding the Ship given clear and publicly known ongoing developments regarding COVID at the time.

Finally, in relation to damages, his Honour awarded Mrs Karpik damages for distress and disappointment for the cost of her cruise ($4,400.00) in accordance with the principles in Baltic Shipping Co v Dillion[viii] and out of pocket expenses for her COVID infection and the development of an adjustment disorder ($4,423.00).

However, his Honour refused her claim for additional out of pocket expenses relating to alleged Long COVID, and for non-economic loss damages. His Honour was not satisfied that Mrs Karpik suffered Long COVID and was of the view that while she had a moderate adjustment disorder in the 3 months following Mr Karpik’s COVID infection, her mental health improved after June 2020 and had essentially been resolved by early 2021.

Accordingly, his Honour held her injuries fell short of 15% of a most extreme case, and s 16 of the CLA precluded her from claiming non-economic loss damages.

Why this case is important

The decision in Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280 provides further guidance on the provisions of the CLA which will be picked up by s 275 of the ACL where consumer service guarantees have been breached in personal injury litigation. The guidance provided extends beyond the CLA and will bear on equivalent civil liability legislation in all States and Territories.

Importantly, it reinforces the position that s 275 only operates to pick up the law of a State or Territory where:

• it applies to the facts of the case; and
• the law of the State or Territory can be related back to a breach of contractual term relating to the supply of services.

The second arm of s 275 arises in a personal injury claim where the statutory consumer guarantees are pleaded because those guarantees are similar to contractual obligations to provide services that are fit for purpose and with due care and skill (as opposed to a pure common law negligence claim).

In addition, while the decision should allow the members of the class to commence settlement negotiations with Carnival for damages suffered as a result of the Cruise, there are remaining issues of common questions requiring resolution, which his Honour has asked the parties to consider following the decision. Accordingly, there may be further litigation addressing the common questions shortly.

Further, the class action supposes a number of sub-classes, being passengers on the Ship, the estates of passengers who contracted COVID on the Ship and subsequently passed away, and family members of those who contracted COVID on the Ship and suffered a psychiatric injury as a result. Each subclass is likely to have different questions requiring resolution.

There is a judgment pending in an appeal before the High Court of Australia relating to 696 passengers whose fares were subject to terms and conditions entered in the United States containing a class action waiver, and whether those passengers can be included in the class action.

Finally, while Mrs Karpik was unsuccessful in establishing an entitlement to non-economic loss damages, it is possible that other members of the class will be able to establish such an entitlement under s 16 of the CLA.

If you have a query relating to any of the information in this case note, or would like to discuss a similar matter of your own, please don’t hesitate to get in touch with Insurance Principal Richard Johnson today.

[i] The parties conceded the CLA provisions applied to the claim in negligence.

[ii] Scenic Tours Pty Ltd v Moore [2018] NSWCA 238

[iii] Moore v Scenic Tours Pty Ltd (2020) 268 CLR 326; [2020] HCA 17

[iv] At [402]

[v] For example, Insight Vacations Pty Ltd v Young (2011) 243 CLR 149; [2011] HCA 16 (where it was held s 5N was not picked up) and Motorcycling Events Group Australia Pty Ltd v Kelly (2013) 86 NSWLR 55; [2013] NSWCA 361 (where is was held that s 5M was not picked up).

[vi] At [428] to [430]

[vii] At [434] to [438]

[viii] (1993) 176 CLR 344; [1993] HCA 4