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The Supreme Court has spoken. X’s appeal has been allowed. It has been decided that a tour operator can be found liable in contract, under the Package Travel, Package Holidays and Package Tours Regulations 1992, for the non-performance or “improper performance” of the obligations it has undertaken, even in a situation where those failures are the result of acts or omissions of employees of a third party supplier of services.
Background
In April 2010, the claimant (X) and her husband entered into a contract with a tour operator, Kuoni Travel Limited (Kuoni) for a package holiday in Sri Lanka. Whilst on holiday, X made her way to the hotel reception, when a uniformed member of the hotel’s staff (N), offered to show her a shortcut. N took X to the engineering room and proceeded to assault and rape her.
X brought a claim against Kuoni for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992.
ABTA (represented by Kennedys), were granted permission to intervene, given the significance of the decision to the travel industry.
X’s case was dismissed at first instance and once again by the Court of Appeal. However, X was given permission to appeal to the Supreme Court. Following clarification and guidance from the Court of Justice of the European Union (CJEU), the case returned to the Supreme Court.
Supreme Court’s judgment
The Supreme Court had two questions to consider:
1. Firstly, did the assault and rape of X constitute “improper performance” of the obligations of Kuoni under the contract?
A broad interpretation as to holiday services under the contract was taken by the court; all ancillary services that allow for an enjoyable holiday of reasonable standard must be taken into account and would be inherent in every such contract. The court considered that guiding a guest fell within the scope of “holiday arrangement” which Kuoni undertook to provide. Further, N was only able to assault X as a direct result of purporting to act as her guide. As such, the contract was breached.
Ultimately, the court followed the CJEU’s observation: “non-performance or improper performance, although caused by acts committed by employees under the control of a supplier of serviced, is such as to render the organiser liable in accordance with Article 5(1) of Directive 90/314.”
Article 5(1) states: “Member States shall take the necessary steps to ensure that the organiser and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organiser and/or retailer or by other suppliers of services without prejudice to the right of the organiser and/or retailer to pursue those other suppliers of services.”
2. Secondly, if question one is decided in the affirmative by the court, is any liability of Kuoni in respect of N’s conduct excluded by Clause 5.10(b) of the contract and/or Section 15(2)(c) of the 1992 Regulations? Clause 5.10(b) under the heading “our commitment to you for your holiday arrangements”, provided:
"… we will accept responsibility if due to fault on our part, or that of our agents or suppliers, any part of your holiday arrangements booked before your departure from the UK is not as described in the brochure, or not of a reasonable standard, or if you or any member of your party is killed or injured as a result of an activity forming part of those holiday arrangements. We do not accept responsibility if and to the extent that any failure of your holiday arrangements, or death or injury is not caused by any fault of ours, or our agents or suppliers; is caused by you; … or is due to unforeseen circumstances which, even with all due care, we or our agents or suppliers could not have anticipated or avoided."
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The above fell into two parts: 1. Is an employee of a supplier of services themselves a supplier of services for the purpose of Article 5(2) of the Directive? In line with the CJEU, the court considered that an employee is not a supplier of services, as the employee has not entered into an agreement with the tour operator/travel organiser. The hotel was, however, a supplier and provided its services by means of its employees, whom are within the hotel’s “sphere of control”, given the employee performs their work in the context of a relationship of subordination with the employer, who retains control. The court found that a tour operator may be liable for the acts and/or omissions of an employee of a supplier of services where they constitute “improper performance” of an obligation. However, there must be a link between the act/omission which caused the damage to the consumer, and the organiser’s obligations arising from the package travel contract. 2. The scope of the exemptions from liability under Article 5(2) of the Directive A narrow view of the exemption from liability was taken by the CJEU and followed by the Supreme Court. The tour operator cannot apply the exemption to liability defence when there has been a failure of performance of a contractual obligation. The deliberate act of an employee of a supplier in the performance of an obligation arising from the package travel contract, means it is not open to the tour operator to rely upon a defence that the act was one they could not foresee or forestall. Finally, the court considered vicarious liability was not relevant in these proceedings. |
Implications and comment
It is to be remembered that this judgment of course deals with the 1992 Package Travel Directive, not the current Regulations. The judgment, however, provides important guidance as to the scope of activities (such as guiding a guest) that will fall within the services provided under a holiday contract, and the degree of protection an unforeseeable event defence will carry.
However, each case will be determined on its specific circumstances and the significance of local standards evidence in travel cases remains unaffected.
Following the Supreme Court’s decision, there are a number of factors which are crucial for tour operators to consider and take into account:
- Potentially operators may find themselves liable to a claimant where there is no corresponding liability on the part of the hotelier or supplier. Booking terms and conditions should be reviewed to ensure operators do not unwittingly accept liability for incidents outside of the holiday arrangements that they have agreed to provide and therefore outside the sphere of control of the operators or their suppliers.
- Indemnities for liabilities, costs, expenses, damages and losses, and other terms and conditions within supplier contracts will need to be reviewed and updated to provide maximum protection for the tour operator and to mitigate their losses arising from claims in connection with the provision of the services included in the package contract.
- Risk assessments should be reviewed and suppliers should consider additional CCTV in vulnerable areas of the hotel/resort and update their “house rules” and instructions given to staff. Non-client facing departments may require separate rules which implement restricted guest interaction policies.
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Travel and tourism
United Kingdom