Averting disaster with choice of law and jurisdiction clauses

22nd July 2021 by Tom Collins

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At 2.11pm on 9^th December 2019 Whakaari, an active volcano island off the New Zealand coast, explosively erupted launching a plume of molten rock and ash 3.7km into the air. Of the 47 people on the island at the time of the eruption, 22 were killed by falling ash and rock and the remaining 25 were injured; the majority needing intensive care for severe burns.

All but nine of those on the island were passengers on a shore excursion from the cruise ship MV Ovation of the Seas, which was five days into a 12 day cruise around New Zealand. Among them were three members of the Browitt family, from Melbourne: Paul and his daughters, Krystal and Stephanie. All three suffered horrific injuries. Krystal died from her injuries the same day. Paul died from his injuries in hospital, a month later. Stephanie survived but suffered third-degree burns to 70% of her body and remained in hospital for six months. She subsequently underwent more than 20 surgeries, including the amputation of her fingers. Maria, Stephanie and Krystal’s mother, Paul’s wife, had remained on board the cruise liner while her family went on the excursion. She suffered severe psychiatric injury as a result of what happened and is now Stephanie’s full time carer.

The corporate structure of Royal Caribbean

The MV Ovation of the Seas was operated and provisioned by RCL Cruises, a company headquartered in London with a branch in Australia. RCL Cruises is a subsidiary of Royal Caribbean Cruises Ltd, a Liberian company headquartered in Miami, Florida.

Royal Caribbean Cruises owns the Royal Caribbean International brand, is responsible for developing policy for Royal Caribbean International’s shore excursion programme and had approved the onboard promotion and sale of the Whakaari excursion undertaken by the Browitt family on 9^th December 2019.

Proceedings in Florida and New South Wales

In December 2020, Maria and Stephanie Browitt issued a claim against Royal Caribbean (on their own behalf and on behalf of Paul and Krystal’s estate) in Miami in respect of their injuries and losses. In essence, the Browitt family contended that Royal Caribbean knew or ought to have known that background activity at Whakaari had recently increased and that a volcanic eruption was imminent, and failed in their duty to warn them.

In response, Royal Caribbean Cruises and RCL Cruises issued an anti-suit injunction in the Federal Courts of Australia against the Browitt family. The companies sought to rely on a Choice of Law clause contained within the contract of carriage, which, they argued, gave the Courts of New South Wales exclusive jurisdiction over the Browitt family’s claims. The clause was as follows:

We both agree that any dispute or claim will be dealt with by a court located in New South Wales, Australia to the exclusion of the courts of any other state, territory or country.

In a ruling on 18^th June, the Honourable Justice Stewart rejected the claim for an injunction, holding that Royal Caribbean Cruises was not a party to the contract of carriage which contained the clause and that the clause was not wide enough to encompass a claim against it.

 

• The Choice of Law clause was contained in RCL Cruise’s standard terms and conditions for the Australian market. Whilst the Court accepted that these had not been drawn to Mrs Browitt’s attention by the booking agent Flight Centre, (1) had she asked to see them, they were freely available in RCL Cruise’s brochure and on its website and (2) she had had the opportunity to read them before authorising the booking agent to enter into the contract on her behalf. They were therefore incorporated into the contract, including the Choice of Law clause
• The Court however went on to conclude that Royal Caribbean Cruises and RCL Cruises could not both be parties to the contract. The terms provided that ‘The parties to that contract are yourself and either Royal Caribbean Cruises Ltd or RCL Cruises Ltd, depending on which of those entities will be operating the cruise ship on which you sail’ (emphasis added). As Royal Caribbean Cruises played no part in the operation of the MV Ovation of the Seas, it was not party to the contract.
• Further, the wording of the Choice of Law clause was limited to any ‘dispute or claim’ and therefore was limited to disputes or claims between the parties. The Browitt family were not claiming against RCL Cruises. Had the clause been phrased differently, to include claims or disputes ‘in connection with’ the cruise, the Court accepted it might have encompassed claims made against non-parties to the contract of carriage.

It followed that the Browitt family were not constrained to bring their claims against Royal Caribbean in the Courts of New South Wales or pursuant to Australian law.

Comment

Readers might wonder why a family domiciled in Melbourne would wish to bring a claim in Florida pursuant to US law and why a company headquartered in Florida would wish to defend the claim in New South Wales pursuant to Australian law. The answer lies in the sharp differences between the compensation regimes in the two jurisdictions. Under Australian law, the Civil Liability Act 2002 caps damages for non-economic loss (such as pain and suffering) and does not permit awards for exemplary, punitive or aggravated damages. Crucially, Australian law does not recognise a duty to warn of an obvious risk – and what constitutes an ‘obvious’ risk includes events which have a low probability of occurring.

The decision is a timely reminder of the need for careful drafting of Choice of Law/Jurisdiction clauses. Where multiple companies within the same corporate structure provide distinct services to tourists, care is needed to ensure that each company gains equal protection under the clause.

Tom Collins is a barrister at 1 Chancery Lane, London

He can be contacted at [email protected]

 

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