The Long Arm Of The (Australian Consumer) Law

11 Dec 2023

 

In Karpick v Carnival plc [2023] HCA  39, the High Court of Australia extended the extraterritorial reach of the Unfair Contract Term (UCT) Regime in the Australian Consumer Law (ACL).

The decision is of particular significance given the expanded UCT Regime imposing additional prohibitions, remedies and substantial penalties that came into operation on 9 November 2023 (see prior posts here).

All corporations that carry on business in Australia and elsewhere need carefully review and consider whether their contracting practices, that may not be illegal in other jurisdictions, could nevertheless fall foul of the UCT Regime in the ACL.

In brief, The High Court held unanimously:

  • Section 23 of the ACL applied to a contract entered into in Canada between a resident of Calgary and Canadian-based CruiseShipCenters, which incorporated US Terms and Conditions.
  • In deciding what law should apply, focus on the primacy on the law of the contract or lex causae (including the High Court’s own prior decision in Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418) is misplaced.
  • There is no general presumption against the extraterritorial operation of Australian legislation, and choice of law rules do not create any fundamental rights. In deciding what law applies, the proper approach is to focus first on interpretation of the local (Australian) law.
  • Section 23 and the balance of Part 2-3 of the ACL prescribe a norm of conduct in relation to unfair terms in standard form consumer contracts. The UCT Regime extends generally to conduct outside Australia by corporations that carry on business in Australia, whether they are domestic or foreign corporations.

  • The Full Federal Court was, accordingly, wrong to:
    • stay part of an Australian representative proceeding on the basis that “Class Action Waiver” and exclusive US law and jurisdiction clauses in the contract’s US terms applied; and

    • find that the Class Action Waiver term was not unfair (albeit consistent with what some US cases in other circumstances had concluded).
  • The Class Action Waiver clause was a void UCT, because it:

    • caused a significant imbalance in the parties' rights as it only applied to passengers and discouraged them from vindicating their rights;

    • was not necessary to protect Carnival's legitimate interests, and 

    • caused detriment to the passenger by denying him the benefits of the Australian representative proceeding.

The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.