Following a Federal Court of Australia ruling that Carnival was negligent in its management of the Ruby Princess COVID-19 outbreak in March 2020, Carnival appealed the decision on grounds of liability and the lead plaintiff appealed her limited award of damages. The Full Court of the Federal Court of Australia has recently dismissed both appeals in their entirety.
This case note follows on from our previous analysis of the initial trial decision in Karpik v Carnival plc (The Ruby Princess) (Initial Trial) [2023] FCA 1280. That decision found in favour of the plaintiffs in relation to injuries and losses suffered during the COVID-19 outbreak aboard the Ruby Princess cruise. You can read our case note on that decision here: The not so sea-nic route: Federal Court of Australia decides the Ruby Princess class action in Karpik v Carnival plc.
In issue
The lead plaintiff, Mrs Karpik, appealed the initial trial decision, challenging the findings of the trial judge in relation to damages for personal injury and distress and disappointment. Carnival also filed a cross-appeal, challenging the trial judge's findings on liability.
In considering both appeals, the Full Court of the Federal Court of Australia, comprising Justices Markovic, Derrington and Jackson, was required to determine the following:
- whether the trial judge erred in finding that Carnival had breached the consumer guarantees under sections 60 and 61 of the Australian Consumer Law (ACL),
- whether Carnival owed and breached a duty of care in negligence to passengers and their family members,
- whether the trial judge erred in concluding that the services were not reasonably fit for purpose or likely to achieve the desired result, and
- whether the trial judge erred in its assessment of Mrs
Karpik's damages, namely:
- denying damages for non-economic loss by applying the 15% threshold under the Civil Liability Act 2002 (NSW) (CLA),
- whether the refund of cruise costs was a bar to awarding damages for distress and disappointment, also known as Dillon damages per the High Court decision of Baltic Shipping Co v Dillon (1993) 176 CLR 344, and
- whether feelings of stigmatisation fall within the scope of Dillon damages.
The background
The background relating to the Ruby Princess class action is discussed in further detail in our case note, linked above.
Briefly, in March 2020, the Ruby Princess cruise departed Sydney for New Zealand. During the voyage, COVID-19 spread among passengers and crew, leading to numerous infections and 28 deaths. Mrs Karpik and her husband were among those who contracted the virus. Mr Karpik became critically unwell, and Mrs Karpik later developed an adjustment disorder.
In the representative proceedings, Mrs Karpik alleged that Carnival had breached the ACL by failing to meet the consumer guarantees that the cruise was reasonably fit for purpose, and engaged in misleading and deceptive conduct by holding out that the ship was 'safe to board' (among other things). She also asserted that Carnival failed to provide services with due care and skill and was negligent in its management of the COVID-19 outbreak onboard the cruise. As a result, Mrs Karpik sought damages for physical and psychological injury, disappointment, distress, and out-of-pocket expenses.
The trial judge upheld Ms Karpik's claims but limited the damages awarded. The court awarded Mrs Karpik $4,423 for treatment expenses related to her COVID-19 infection and the adjustment disorder she developed from the ordeal, and $4,400 for distress and disappointment damages. The trial judge did not consider that the severity of her injuries exceeded the NSW threshold for non-economic loss damages.
Carnival's cross-appeal
Carnival raised 16 grounds of cross-appeal, challenging the trial judge's findings on all significant issues of liability. Carnival asserted that the trial judge:
- Erred in finding that Mrs Karpik made known to Carnival that the purpose of her trip was to have a 'safe, relaxing and pleasurable cruise holiday' within the meaning of section 61 of the ACL. In particular, it argued that the concepts of a 'safe, relaxing and pleasurable cruise' were 'mere desires and hopes' that were insufficiently precise to constitute a 'particular purpose' under the ACL.
- Misapplied the consumer guarantees by relying on hindsight and events that occurred after the services were supplied, including the extent of the COVID-19 outbreak.
- Incorrectly concluded that the cruise services were not reasonably fit for purpose or could not reasonably be expected to achieve the desired result.
- Erred in finding that Carnival owed a duty of care in negligence to passengers, particularly in relation to risks of viral transmission and psychiatric injury to family members.
- Incorrectly found breaches of due care and skill under section 60 of the ACL, and misleading and deceptive conduct under section 18 of the ACL.
Mrs Karpik's appeal
In assessing damages, the trial judge put the damages claimed by Mrs Karpik into two categories: personal injury damages and distress and disappointment damages (i.e. Dillon damages).
In respect of personal injury damages/non-economic loss, Mrs Karpik argued that the trial judge erred in finding that the severity of her non-economic loss was 8% of a most extreme case, thereby denying compensation under section 16 of the CLA.
As for Dillon damages, Mrs Karpik contended that the trial judge erred in finding that almost all of her feelings of distress, disappointment, anxiety and frustration arose out of personal injury - either to her or to her husband - and were therefore not compensable by an award of Dillon damages, and that any such damages she was entitled to had been offset by the full refund she received for the cruise.
In particular, Mrs Karpik submitted that her circumstances were far worse than those endured by passengers in similar cases, namely, Dillon, which pertained to a sinking ship, and Scenic Tours Pty Ltd v Moore [2020] HCA 17, where the core complaint concerned substitution of bus tours for cruise segments.
Mrs Karpik also argued that the trial judge erred in excluding her feelings of stigmatisation from the scope of any award for Dillon damages on the basis that such feelings are an injury to dignity or reputation, rather than distress caused by a failure to comply with a guarantee.
The decision at trial
The Full Court dismissed both the appeal and cross-appeal.
In rejecting Carnival's cross-appeal, the court upheld the trial judge's findings that Carnival breached the statutory guarantees under section 61 of the ACL.
The court concurred that a 'safe, relaxing and pleasurable cruise' was not a mere aspiration and that this purpose had been objectively and impliedly communicated as the purpose and desired result. It was also noted that subjective elements aside, safety (including 'health safety') is an inherently objective and assessable concept.
It was similarly held that Carnival had breached its duty of care, and the guarantee in section 60, by failing to cancel the cruise.
On the issue of negligence, the court upheld the trial judge's finding that Carnival owed a duty of care to passengers to take reasonable care to prevent reasonably foreseeable physical injury in relation to the physical condition of the vessel, its operation, and navigation risk. It further commented [at 163], 'If that duty does not include reasonably foreseeable injury in the form of disease, it is a small incremental step to extend the recognised category of an "injury" under section 11 of the CLA to include it'. The court agreed that this duty also extended to psychiatric injuries, and that the statutory test for 'normal fortitude' under section 32(1) of the CLA had been satisfied.
In considering whether a duty of care existed, the court noted several other Australian cases in which cruise ship operators had acknowledged that they had a duty of care to prevent reasonably foreseeable injury to passengers. Although the Ruby Princess could be distinguished in that it involved a catastrophic health event (as opposed to the collapse of timber decking, for example), in each case, there was no dispute that the operator of the vessel owed passengers a duty of care.
In assessing the scope of the duty of care and whether it had been breached, the court agreed with the trial judge's finding that passengers on a ship were 'captives', much like passengers on an aircraft, and the widespread transmission of a life-threatening disease onboard a confined vessel posed risks far beyond those typically encountered in leisure travel.
The court deemed it appropriate that the trial judge had considered information that came to light after the voyage, including widespread transmission and cruise-wide infection data, in assessing whether the services were fit for purpose. The court reaffirmed that compliance with the ACL guarantees a strict liability standard, akin to warranty for latent defects, and not dependent on the service provider's knowledge at the time.
As such, even accepting compliance with public health guidelines at the time, it was held that the measures implemented by Carnival fell short of what was reasonable given its knowledge of the heightened risk of contracting COVID-19 on board the ship compared to the general community, and the fact that outbreaks had already occurred on the Diamond Princess and the Grand Princess (both operated by Carnival), among other cruise ships.
As for Mrs Karpik's appeal, the Full Court accepted that she suffered an adjustment disorder but upheld the trial judge's finding that the severity of her condition fell below the 15% threshold required to claim non-economic loss under section 16 of the CLA. This was on the basis that Mrs Karpik's COVID-19 symptoms were mild, and her adjustment disorder was of moderate severity and a relatively short duration.
The court also upheld the trial judge's reasoning in respect of Dillon damages, finding that while Mrs Karpik's experience was 'no doubt distressing and disappointing', there was a distinction to be made between distress and disappointment due to a spoiled holiday and distress arising from physical or psychiatric injuries (referring to Dillon).
While Mrs Karpik was entitled to some Dillon damages for the disappointment and distress she experienced between disembarking the ship on 19 March 2020 and being admitted to hospital on 21 March 2020, this did not exceed the refund for the cruise issued to Mrs Karpik.
The court ultimately considered that Mrs Karpik's compulsory self-isolation and her experience of witnessing Mr Karpik's illness post 21 March 2020 were outside the scope of risk assumed by Carnival.
It was also held that stigmatisation is not a recognised head of damage under this category. The court commented that Mrs Karpik's feelings of stigmatisation did not stem from Carnival's failure to comply with a guarantee, but rather how she was received by third parties when they discovered she had been a passenger on the Ruby Princess.
Implications for you
This case demonstrates the potential breadth of protection afforded under the ACL and the courts' willingness to enforce those protections, even in novel or catastrophic circumstances.
Service providers are held to objective standards and cannot avoid liability merely by complying with industry norms or guidelines.
The threshold for non-economic loss under the CLA remains a significant barrier in psychological injury claims, and refunds may extinguish claims to Dillon damages for distress and disappointment.
Note: This matter has also been considered by the High Court. Prior to the initial trial, an issue arose as to whether passengers who had purchased the cruise services whilst they were overseas and were therefore subject to different contractual terms and conditions, could join in on the class action proceedings. Read our case note on that decision here: High Court of Australia lifts stay for international plaintiffs in Ruby Princess class action.
Karpik v Carnival plc (The Ruby Princess) [2025] FCAFC 96
Australian Consumer Law - Current
Legislation
Civil Liability Act 2002
(NSW)
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