The Weekly Roundup: the Catastrophe Edition

Articles | Mon 19th Jul, 2021

This week has seen a number of interesting decisions, both domestically and abroad, in relation to jurisdiction and related matters. As we all know, getting jurisdictional issues wrong can have far-reaching consequences for a claim, both in respect of where the claim might be brought, but also whether it is proportionate (or even possible) for it to be brought at all. Tom Collins reminds us of just how much difference a well-drafted choice of law and jurisdiction clause can make. Andrew Spencer emphasises how important it is to effect full and frank disclosure when making applications for service outside the jurisdiction (and indeed any other ex parte application); the consequences of failing to do so can be catastrophic. By way of example, in a judgment given on 16^th July 2021 in Tither v B.A.I. S.A. Andrew Baker J referred to an ex parte application founded on ‘half truths’ and ‘seriously misleading’ evidence. The order made in response to the application was set aside, service of the claim form was set aside, and the claim is now time-barred and the Claimant’s cause of action under the Athens Convention extinguished. Sarah Prager just thanks her lucky stars that she was acting for the Defendant in that matter and not, therefore, placed in the embarrassing position of having to report the judge’s comments back to the Claimant’s solicitors.

Averting Disaster with Choice of Law and Jurisdiction Clauses

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.

About the Author

Called in 2010, Tom Collins is ranked in the Legal 500 as a specialist in Travel Law. He has considerable experience across a wide range of travel and private international law disputes and has advised claimants and defendants in multi-party actions.

Courting Disaster with Failure to Make Full and Frank Disclosure

The decision in Haddad v Rostamani [2021] EWHC 1892 (Ch) is a further reminder about the importance of full and frank disclosure when making applications for service out (see the Weekly Roundup from 28^th June). The claimant successfully applied to serve a claim alleging that the defendants had misappropriated partnership assets in Dubai. There had already been related litigation in Dubai, which the claimant had lost. In its application the witness statement in support contended that there was “no overlap” between these earlier proceedings in and the instant claim. However, the claimant omitted to mention that the defendants, in response to the letter before action, had indicated that they considered the issue had already been decided by the courts in Dubai and that they would rely on the principal of res judicata. This omission was a breach of the duty to make full and frank disclosure. The defendants applied to set aside the order. The judge held that the evidence provided was “positively misleading” and “the result of deliberate conduct as opposed to accidental omission”. Of itself, this would have been sufficient to cause the judge to set aside the order granting permission to serve proceedings out of the jurisdiction.

There are two further interesting issues raised in the case. The first of these is the extent to which it is possible to impeach an adverse decision in a foreign court.

As noted above, the defendants contended that the matter had already been decided by the courts in Dubai. The judge agreed: the matter had been determined by the final appeal court in Dubai. The claimant sought to go behind this decision, contending that the Dubai decision had been reached in breach of natural justice and should not found an issue estoppel in England. But this requires that that the decision offend against principles of substantive justice: absent this, even if the decision is wrong or “manifestly wrong” then this is not sufficient and the aggrieved party should seek to correct an error of substance by using such remedies as are available in the foreign legal system (Adams v Cape Industries Plc [1990] Ch 433, at 566G). The judge held that the criticisms levied by the claimant against the Dubai decision did not meet this threshold.

A further interesting twist is the discussion about the principle of illegality. The U.A.E. has restrictive laws preventing non-nationals from holding more than a 49% interest in U.A.E. companies, and has had similar laws preventing non-nationals from owning land. The 50/50 partnership alleged by the claimant (a UK national) would have had the effect of circumventing these rules. The defendant sought to rely on an illegality defence, contending that the court should not enforce a contract the purpose of which was to breach a foreign law, and that the court should treat the contract as void. The judge carried out a similar balancing approach to that set out by the Supreme Court in Patel v Mirza [2016] UKSC 42, whilst noting that this decision concerned the domestic law of ex turpi causa, rather than enforcement of a contract which would be in breach of the laws of a foreign country. Although on a technically different defence – and involving different underlying public policies – the flexible approach set out in Patel was the appropriate one to follow. This approach meant that a finding of illegality did not mean the contract was necessarily treated as void for all purposes. The judge undertook a balancing act and noted, in particular, that the consequence of breaching the company ownership restriction in the U.A.E. was that the assets of the company are distributed in accordance with the true agreement – meaning that the court would not be undermining the U.A.E. law by undertaking the sought of division of assets that the claimant was seeking. On that basis the judge considered that the claimant had the better argument that the contract had legal consequences in English law, and the application would not be set aside on grounds of illegality.

About the Author

Andrew Spencer was called to the Bar in 2004, and is listed in the Legal 500 as a Band 1 practitioner in travel law. He acted for the Claimant in the seminal case of Japp v Virgin Holidays Limited [2013] 11 WLUK 131, in which the Court of Appeal considered the time at which applicable local standards should be determined for the purposes of liability under Regulation 15(2) of the Package Travel Regulations; but he is equally comfortable acting for Claimants and Defendants in all travel related claims.

…And Finally…

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