The ‘sphere of control’ – CJEU considers tour operator liability for the criminal acts of hotel employees

Claire Mulligan, Partner, Kennedys was instructed on behalf of ABTA.

The case relates to whether a travel operator is liable in contract, under the Package Travel, Package Holidays and Package Tours Regulations 1992 (the Regulations) for a sexual assault that occurred at a hotel when the claimant (X) was on holiday in Sri Lanka in July 2010.

Chronology

• July 2010 – X assaulted and raped at hotel
• November 2016 – Dismissed at High Court
• April 2018 – Dismissed at Court of Appeal by a majority
• July 2019 - Supreme Court’s interim judgment - Supreme Court referred two questions to the Court of Justice of European Union (CJEU)
• March 2021 - CJEU judgment handed down
• TBC - Supreme Court judgment

Background

The claimant, X and her husband entered into the contract at issue with Kuoni Travel Limited (Kuoni) under which the latter agreed to provide them with a package holiday in Sri Lanka.

During the holiday, X who was intoxicated at the time, was on her way to the hotel reception when a 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 under the Regulations on the basis that the sexual assault on her by the hotel’s employee amounted to ‘improper performance’ of Kuoni’s contractual obligations. In its defence, Kuoni denied the assault constituted a breach of any obligations owed by Kuoni under the Regulations or that it constituted ‘improper performance’ of any obligation under the contact and that the hotel, not N, was the supplier.

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.

This was the first time the Supreme Court have had to consider issues of liability in the context of a package holiday. ABTA were granted permission to intervene given the significance of the decision to the travel industry.

The two questions before the Supreme Court were:

1 Firstly, did the assault of X constitute ‘improper performance’ of the obligations of Kuoni under the contract?

2 Secondly, if so, is any liability in respect of the employee’s conduct excluded by clause 5.10 (b) of the contract with Kuoni and/or Section 15(2)(c) of the Regulations, as the assault was an event that could not have been foreseen by the hotel, even with all due care/due diligence to prevent the assault from happening?

As the Package Travel Regulations 1992 legislation derives from the EC directive 90/314, the Supreme Court sought guidance on the interpretation by way of referral to the CJEU on the second question.

CJEU judgment

In the judgment handed down on 18 March 2021, the CJEU have clarified that tour operators are unable to rely upon the unforeseeable event defence for deliberate acts of hotel employees whilst delivering the holiday contract. It should be noted that both of ABTA’s submissions to the CJEU as to whether an employee can be defined as a supplier and the meaning of the defence under Regulation 15(2)(c) were accepted.

The Court found:

• 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’.
• An organiser 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.
• Acts or omissions of a supplier’s employee whilst delivering the holiday contract cannot be an event which could not be foreseen or prevented.

Comment

The CJEU’s judgment provides guidance on the scope of the unforeseeable event defence in relation to the organiser’s liability for ‘improper performance’ of Package travel, Package Holidays and Package Tours Regulations 1992 contracted obligations. However, it is unclear whether this will stretch to criminal proceedings, such as assaults or even terrorism.

Ultimately, we now await the Supreme Court’s final decision. It is evident that the terms and conditions which define the holiday contract to be delivered and indemnities within contracts with suppliers are as important as ever to protect tour operators moving forward.