Australian High Court Decision Confirms Unfair Contract Term (UCT) Laws Extend Beyond Australia's Borders

Source: Rigby Cooke Lawyers

In the recent class action case, Karpik v Carnival plc [2023] HCA 39 (Ruby Princess Case), the High Court of Australia has confirmed that where at least one party to a standard contract for goods or services is acting within, or carrying out business in, Australia the unfair contract term (UCT) laws will apply to that contract.

The High Court’s decision follows significant changes to UCT laws that took effect on 9 November 2023. Those changes broadened the scope of small business contracts caught by the UCT laws and introduced significant new penalties.

With the High Court confirming the UCT laws may apply to international businesses providing goods or services to Australian consumers, international businesses should review their contracts and terms and conditions for compliance with the UCT laws.

Ruby Princess Case

The Ruby Princess Case concerned a class action proceeding brought against the charterer, Carnival plc, by a group of passengers aboard the Ruby Princess between 8 March 2020 and 19 March 2020, when a COVID-19 outbreak occurred. These passengers were adversely affected by the outbreak, claiming loss and damages in accordance with section 23 of the Australian Consumer Law (ACL).

Carnival argued that it was not liable to pay damages because its contract with passengers specified that the applicable law and jurisdiction was California, USA, and on the basis that included terms waiving the passengers’ rights to participate in any class action proceeding against Carnival.

The High Court handed down its decision on 6 December 2023, determining that Australia’s UCT laws can apply to certain contracts for the provision of goods or services outside of Australia. The class action waiver within the contract was found to be an unfair term for the purpose of the UCT laws and, consequently, void under the UCT laws (as applicable in 2020), which applied to the standard form contract.

What does this mean for UCTs?

The High Court’s decision in the Ruby Princess Case confirmed that section 5(1) of the Competition and Consumer Act 2010 (Cth) extends the scope and application of section 23 of the ACL and the UCT laws beyond Australia’s borders.

This means that where at least one party to a standard form consumer or small business contract for goods or services is acting within, or carrying out business in Australia, the UCT laws will apply.

This is significant because it means that the strengthened UCT laws and penalties will also apply to international transactions involving Australian parties.
Accordingly, international businesses must be vigilant and must consider Australia’s UCT laws when contracting with Australian consumers and/or small businesses.

Foreign businesses who supply goods and services to Australians customers under standard form contracts – specifically parties who seek to rely on class action waiver clauses and similar – should review their standard form contracts for compliance with Australia’s UCT laws without delay.