Lawyers keen to take action against the owner of the Ruby Princess, Carnival Cruises, face the daunting prospect of figuring out how a global organisation that operates through a series of tax havens can be brought to court in Australia.
The company, which pays no tax in Australia, faces a multitude of potential legal suits and potential criminal charges as lawyers and police investigate the events that led to its final cruise from Sydney.
The company is in deep financial distress due to the coronavirus pandemic, and even before the outbreak was laden with $10bn of debt that needs to be repaid or renegotiated within the year.
The Ruby Princess left Sydney on 8 March and returned early on 19 March after a cruise to New Zealand. Since then there have been more than 660 Covid-19 cases and at least 13 deaths associated with Ruby Princess passengers.
But lawyers are now focusing on what happened on the previous cruise, which disembarked on 8 March in Sydney.
The two cruises
The Australian has reported that 158 cases of sickness had been logged by the ship in a government portal used to monitor the condition of cruise ship passengers arriving in Australia, leading the Department of Health to classify the ship as “medium risk”.
But it has been widely reported that an email from the ship’s master to the Port Authority of New South Wales on 8 March stated there were “no ill passengers or crew on board” and the ship was permitted to dock, and then load a further 2,700 passengers within a matter of hours.
This was a month after the Ruby Princess’s sister ship, the Diamond Princess, had been quarantined at Yokohama, Japan, and the world had watched horrified as Covid-19 spread like wildfire through the passengers and crew.
Yet the illness on the Ruby Princess does not appear to have triggered additional safeguards or second thoughts about the next cruise.
There is also heightened interest in what the Ruby Princess told the Port Authority and the ambulance service when it docked in the early hours of 19 March.
According to a report in the Sunday Telegraph, there was a series of exchanges at midnight between the Port Authority, executives of Carnival Cruises and ambulance staff, which raise serious questions about whether Carnival was candid about the health of the two passengers transferred and the overall health of the passengers aboard.
More than 110 passengers were ill, with 17 showing influenza-like symptoms. Three had been swabbed for Covid-19, but NSW Health and Australian Border Force allowed 2,700 passengers to disembark at 6am and travel home, some on planes interstate, before the test results came in.
A corporate rabbit warren
Deciding who, if anyone, can be held to account for the debacle will involve delving into Carnival’s complex corporate structure.
In Australia Carnival trades as Carnival Australia but its status and structure is entirely opaque. Until recently, the NAB director Ann Sherry was billed as Carnival Australia’s chairman, but Carnival says she no longer holds the role.
A search of the corporate registry shows there is no Australian company named Carnival Australia. Instead, the words are a business name owned by one of the companies atop Carnival’s globe-spanning corporate tree, the UK-registered Carnival PLC.
According to Carnival’s filings with the US Securities and Exchange Commission, the group’s only Australian subsidiary is the oddly named A.C.N. 098 290 834, which has paid-up share capital of $100 and is owned by Carnival PLC.
Sherry is not and has never been a director of this company, and Carnival’s spokesman, David Jones, did not respond to specific questions about what it did. Nor did he respond when asked when Sherry ceased to be chairman of Carnival Australia, how she could be an officer of an entity that does not exist and how the group’s local operation was structured.
Attempts to contact Sherry have been unsuccessful. There is no suggestion that she played any role in the events surrounding Ruby Princess.
At the top of the group sit Carnival PLC and another company called Carnival Corporation, which is registered in the Central American tax haven Panama. The two companies operate together as one entity – a structure that allows it to be listed on stock exchanges in London and New York.
Most of Carnival’s fleet of more than 100 ships are registered in tax havens around the world – including Panama, Bermuda and the Bahamas – although some are registered in the UK.
The two companies file one set of accounts, which show that even before the Covid-19 outbreak stranded its ships around the world it was heavily indebted. Accounts filed with the US Securities and Exchange Commission show Carnival lost US$770m ($1.24bn) in the three months to the end of February.
It owed more than $10bn that had to be repaid within 12 months, including $4.7bn in customer deposits for cruises that now mostly appear unlikely to happen, and a further $9.7bn that has to be paid back later on.
Against the $10bn in current debts, it had just $2.9bn in current assets.
To help it survive, last week Carnival went to its shareholders and lenders for an emergency cash injection, raising $6.25bn. But despite its US listing, the group isn’t eligible to benefit from Donald Trump’s $500bn industry bailout package owing to its offshore structure.
They appear to have put profits before the safety of passengersVicky Antzoulatos, Shine Lawyers
Neither Carnival PLC nor Carnival Corporation paid any Australian tax in 2017-18, the latest year for which government data is available.
A.C.N. 098 290 834 is also not listed on a tax office list of large and foreign-owned corporations that paid tax that year.
Jones did not respond to Guardian Australia’s specific questions about Carnival’s finances, including whether the group was solvent and could refund customers.
“Carnival Australia represents seven of the corporation’s nine cruise lines that sail in this region,” he said. “We comply with all listing requirements in the US and the UK including lodgement of reports, which are available for you to see and would cover questions that you have raised.”
The legal hurdles
Whether criminal charges will be laid against Carnival or any individual executives or crew members will depend on the police investigation and whether investigators conclude that any actions amount to a deliberate breach of Australia’s strict biosecurity laws.
Civil claims, however, now seem certain and damages could stretch into the millions, as passengers seek reparation for the cost of cruises and damages for the distress caused by being infected with Covid-19 or living under the threat of being exposed.
Shine Lawyers is preparing a class action on behalf of the 2,700 passengers who were on the Ruby Princess’s final cruise. So far 30 people have signed on, while litigation funders have expressed interest in bankrolling the case.
Shine’s NSW practice leader for class actions, Vicky Antzoulatos, said the firm had already done considerable work on a potential class action against Carnival as it had investigated bringing a similar case in 2019 over several outbreaks of norovirus on the Sun Princess.
“There are some jurisdictional issues but it is listed in the UK and this is a giant of world companies,” Antzoulatos said. “We are confident that despite current events, this company has the wherewithal to pay out.”
Shine’s case would most likely be brought in the federal court and involve claims of breaches of Australian consumer law as well as possible claims of breaches of contract and negligence. At the least, the claim is likely to seek the return of the ticket price to passengers – estimated by Shine to be an average of $3,000 a person – and damages for loss of enjoyment.
Generally a person cannot sue for disappointment or distress after a breach of contract, but contracts to provide leisure services are different.
The issue of damages for disappointment is now before the high court, which has heard argument in a case about Scenic Cruise in Europe in 2013. Because of high water levels, passengers were forced to take buses, rather than cruising Europe’s rivers, prompting a class action by passengers against the cruise company.
The passengers on the Ruby Princess potentially have much more to complain about but the high court decision will be an important precedent.
The key question
In the meantime, Shine will be seeking information on why Carnival chose to run the cruise in the first place, given that the previous cruise had 158 instances of sickness.
“The ship was turned around in a matter of hours,” Antzoulatos said. “It beggars belief that they could have sanitised the ship from top to bottom.
“There is a massive issue about disclosure. If passengers had been told that the previous passengers were displaying symptoms consistent with coronavirus, would they have got on?
“There are some very serious questions that have to be asked of the operators. They appear to have put profits before the safety of passengers,” she said. “They also had the experience of the ship off the coast of Japan, so they would have been well aware of the risks.”
Shine will be keeping a close eye on the outcome of the criminal investigation, which is likely to yield information and facts to inform the class action.
The case is expected to be lodged in the federal court in coming weeks.
Jones, Carnival’s spokesman, told Guardian Australia the company was “not going to respond to commentary by class action lawyers”.