The Weekly Roundup: the CJEU Edition

It’s been another busy week in the courts for travel practitioners; no sooner did we have the judgment of Griffiths J in Troke v Amgen Seguros Generales [2020] 11 WLUK 67 (the incidence of penalty interest a matter of procedure for the law of the forum and not of the substantive law of the tort), than we received the decision of Marcus Smith J in Morgan v TUI [2020] EWHC 2944 (Ch) (the need or otherwise for local standards evidence, and the reinvigoration of the line of reasoning in Evans v Kosmar Villa Holidays [2007] 10 WLUK 573). More extensive Special Briefings on the implications of both decisions will be with you this week, but suffice to say that both overturn the previously accepted orthodoxy. Meanwhile, the Court of Justice of the European Union has provided guidance on the operation of the Denied Boarding Regulations, and the Advocate General has released his much-awaited opinion in X v Kuoni Travel (Case C-578/19). Tom Collins reminds us what it’s all about…

No ‘unforeseeable event’ defence for deliberate acts of hotel employees: the Advocate General’s opinion in X v Kuoni

Advocate General Szpunar delivered his much anticipated opinion in X v Kuoni Travel Ltd (Case C-578/19) last week, following a referral to the CJEU by the UK Supreme Court in July last year.

The opinion, which is likely to be followed by the CJEU in its judgment, deals a significant blow to tour operators in limiting the circumstances in which they are able to avoid liability for the acts and omissions of employees of its suppliers.

Background

Those who have followed X v Kuoni in its long journey through the High Court, Court of Appeal and Supreme Court will be familiar with the facts:

Mrs X and her husband entered into a package holiday contract with Kuoni for return flights to Sri Lanka and two weeks’ all-inclusive accommodation at a hotel in July 2010.

The booking conditions incorporated into the contract, which were standard terms used in the industry, provided that: ‘Your contract is with [Kuoni]. We will arrange to provide you with the various services which form part of the holiday you book with us’. Clause 5.10(b) of the contract provided that:

‘… 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.’

In the early hours of 17^th July 2010, whilst making her way through the grounds of the hotel to the reception, X came upon N, an electrician and hotel employee, who was on duty and wearing the uniform of a member of the hotel staff. After offering to show X a shortcut to reception, N lured her into an engineering room where he raped and assaulted her.

At first instance, Judge McKenna dismissed the claim on the grounds that “holiday arrangements” in clause 5.10(b) did not include a member of the maintenance staff conducting a guest to reception. He further held, obiter, that Kuoni would in any event have been able to rely on the statutory defence under regulation 15(2)(c)(ii) of the Package Travel, Package Holidays and Package Tours Regulations 1992 (“the PTR”) because the assault was an event which could not have been foreseen or forestalled (by inference by the hotel) even with all due care. The Court of Appeal (Sir Terence Etherton MR, Longmore and Asplin LJJ) dismissed the appeal by a majority (Longmore LJ dissenting).

The questions referred

On a further appeal, the Supreme Court decided that a referral to the CJEU was necessary to determine the appeal. In essence, the issues referred were as follows:

1. Where there has been a failure to perform/improper performance of a package holiday contract due to the actions of an employee of a hotel supplier, (1) is the defence under regulation 15(2)(c)(ii) of the PTR available to a tour operator in principle and if so (2) how does the defence operate? Alternatively,
2. Is an employee of the aforesaid hotel himself a ‘supplier of services’ for the purposes of regulation 15(2)(c)(ii)?

It is important to point out that the CJEU was asked to assume for the purposes of its decision that (1) a member of maintenance staff conducting a guest to reception was within the scope of the ‘holiday arrangements’ contracted for and (2) the rape and assault constituted improper performance of the contract. Neither issue has yet been determined by the Supreme Court.

The opinion of the Advocate General

In resolving the issues referred, the AG noted that Directive 90/314 (implemented by the PTR) (“the Directive”) intended to ‘ensure a high level of protection for consumers’ and guaranteed the right of tour operators, in appropriate circumstances, to seek an indemnity from a supplier in respect of any liability to consumers.

Concept of ‘supplier of services’

Dealing with the second question first, the AG noted that the concept of a ‘supplier of services’ was not defined by the Directive and having regard to the meaning and scope, it had to be determined by reference to the context and objective pursued by the legislation. He considered that an employee of a supplier of services is not, themselves a ‘supplier of suppliers’, per se for the following reasons: (1) The concept of a ‘supplier of services’ appears in the context of the liability of an ‘organiser’. Unlike a hotel, which provides services to a consumer for remuneration by the organiser, an employee of a hotel is remunerated by the organiser and provides their services as part of a subordinate relationship with the hotel. (2) Whereas the Directive allows an organiser to pursue remedies against a supplier of services, there is no equivalent right against an employee of that supplier.

Organiser’s liability for the acts/omissions of an employee of a supplier of services

The AG considered the real issue, raised by the first question, was whether, within the system of liability created by the Directive, the acts or omissions of an employee of a supplier is to be treated as acts or omissions by the supplier. His analysis can be summarised as follows:

• An organiser’s liability under the Directive stems from the performance (or improper performance) of its contractual obligations. Where a consumer suffers loss or damage as a result of an act or omission which is connected with the organiser’s obligations under the contract, it cannot escape liability because it did not personally perform those acts/omissions.
• An organiser is therefore liable for the acts or omissions of an employee of a supplier of services provided that they are in performance of either (1) the contractual obligations (namely, the provision of accommodation or transport) or (2) services ancillary to the provision of those obligations.
• The AG gave the following examples of services which may be ancillary to the provision of accommodation by a hotel under a package holiday contract: ‘porter services, catering, valet parking, concierge services, table service, room service, bicycle hire and cleaning or maintenance services’.

The AG considered that:

65. In those circumstances, it is clear to me that an employee of a hotel may, in principle, be regarded as performing the contractual obligations arising from a package travel contract where he is on duty, wearing the uniform of a member of hotel staff and thus appears to guests/consumers to be a trustworthy person, whether the obligations are performed in the hotel premises or outside its facilities, provided that the obligations in question arise from the package holiday contract or are obligations regarded as being ancillary to the services sold or offered for sale by the organiser under that contract.
66. Thus, if the porter services, the maintenance of facilities or the conducting of guests to reception are either services ancillary to the accommodation service or services directly stipulated in the contract, the organiser must be liable where the hotel porter damages or loses luggage, assaults a guest whilst performing the obligation of conducting him to his room or to reception, burns a guest by spilling soup or assaults a guest whilst providing table service.

The AG concluded that ‘In all those scenarios, it must clearly be found that the contract was improperly performed and that, therefore, the actions of the hotel employee must be attributed to the supplier of services within the context of the system of liability of the package travel organiser under Article 5 of Directive 90/314’. He considered that an organiser would however escape liability if, for instance, ‘the employee of a hotel assaults a hotel guest outside his working hours or on a day on which that employee is on leave’.

Operation of the defence under regulation 15(2)(c)(ii)

The AG considered that the defence to liability provided by regulation 15(2)(c)(ii) of the PTR (article 5(2) of the Directive) simply did not apply in the present case: The Defence applies where the failure to perform/improper performance of the contract is due to ‘an event which the organiser … or the supplier of services, even with all due care, could not foresee or forestall’. The AG considered that there would need to be an event ‘outside the organisational structure of the supplier of services or an objective factor’ and could not ‘under any circumstances include wrongful acts committed intentionally which, in themselves, constitute the failure to perform or the improper performance of the contractual obligations’.

He regarded is as ‘illogical’ even to ask whether an intentional act of a supplier could have been foreseen or forestalled.

Conclusion

The emphatic rejection of the ‘unforeseeable event’ defence where loss is caused by the deliberate act of an employee of a supplier means the focus of the enquiry will now be on whether the particular act was in performance of a contractual obligation or a service ancillary to a contractual obligation. What those obligations are and what evidence will suffice to prove that the employee was (or was purporting to) perform them will vary from case to case; however it is clear that here, the AG gave far less weight than the High Court and Court of Appeal to the fact that portering was not (and was known by X not to be) part of the employee’s role.

It remains to be seen, of course, whether the CJEU will reach the same conclusion as the AG, let alone by the same reasoning, but on the assumption it does, this opinion is clearly good news for the protection of consumers under package holiday contracts. It reinforces the system of obligations and indemnities between the consumer, organiser and supplier and the fair allocation of risk between them.

About the Author

Tom Collins is a barrister at 1 Chancery Lane, London. He is a specialist in travel and private international law and is ranked as a leading individual in the Legal 500 directory.

Airlines’ Duties under the Denied Boarding Regulations: the Decision of the CJEU in NM v ON (Case C-530/19)

It was bound to happen sooner or later. What wasn’t clear was who was going to be liable for it. In NM v ON an airline cancelled a flight, and in satisfaction of its obligations under Article 9(1)(b) of Regulation (EU) 261/2004, known to you and me as the Denied Boarding Regulations, accommodated its passengers overnight at a hotel. One of the passengers duly had an accident owing, she alleged, to the state of the hotel premises, and sued the airline for damages.

The question referred by the domestic court before whom the claim was brought was whether the airline was liable for damages flowing from the satisfaction of its obligations under the Regulations.

The Court answered in the negative. The duty of the airline extends only to arranging accommodation; unlike an organiser under the Package Travel and Linked Travel Arrangements Regulations 2018, it does not then take on liability for the acts or omissions of the hotelier in question.

As the Court observed (at paragraph 25):

“The context of Article 9(1)(b) of Regulation No 261/2004 supports an interpretation whereby air carriers are not required to organise the actual implementation of the accommodation arrangements themselves. Article 9(2) of that regulation provides that air carriers are required, in the context of the right to care of the passengers concerned, to offer them free of charge, inter alia, two telephone calls or emails. However, although it follows from that provision that the air carrier must in fact make the means of making those calls or of sending those emails available to passengers free of charge, it cannot be inferred from that fact that that carrier is thus required to organise, on its own responsibility, the implementation of the telecommunications operations necessary for that purpose.”

Furthermore, the Court had already, in Rusu, Case C‑354/18, held that the Regulation does not provide for the compensation of individual damage, redress for which requires a case-by-case assessment of the extent of the damage caused.

As a consequence the claim for damages fails.

This, it is suggested, must be right; the Denied Boarding Regulations are intended to ensure that people whose flights are delayed or cancelled are not left friendless in an airport. They were never intended to extend liability to airlines for the acts or omissions of independent subcontractors. Whether or not an airline could send passengers to a hotel it knew or ought to know is unsafe or unsuitable is likely to be another matter, however; the parameters of the duty, as opposed to the recoverable loss, remain undetermined to that extent.

About the Author

Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade. She was recently named Best Lawyers’ Travel Lawyer of the Year 2020/2021 and the Lawyer Monthly Women in Law Awards 2020: Personal Injury.

…And Finally…

Regular readers know that when we spot a good job opportunity, we bring it to your attention. This week’s post is unpaid, but when we tell you that Royal Caribbean are seeking pretend passengers for mock cruises, you’ll understand why. The Volunteers of the Seas (no, really) will be used as subjects to test virus prevention protocols aboard the cruise operator’s liners before normal cruising operations return. We’re packing the 1CL steamer trunks as we speak, barely pausing even to wonder whether the Athens Convention will apply to the Volunteers, on account of their not being carried on the ships pursuant to a contract of carriage (spoiler: it won’t, but we don’t suppose that will stop them).