The Dekagram 20th March 2023

Articles, News

20/03/2023

In the context of news that millions of pounds’ worth of County Court judgments in Great Covid Refund Claims remain unpaid, and with further millions of pounds’ worth of refund vouchers as yet unclaimed, we were interested to see that a voucher-holding passenger represented herself to claim the cash value of a voucher, claiming that she could not use it to visit her preferred destination (Japan) because it had not reopened its borders. We admire her use of her A level in law, although we can’t help but deprecate litigants acting in person and without instructing counsel. Other recently successful litigants in person include the Shermans, in their appeal to the High Court, also arising out of a refund claim, although not on this occasion a Covid-related one. Yes, you’ve guessed it – this edition of the Dekagram is about refunds.

Cancellation Claims: Sherman v Reader Offers Limited [2023] EWHC 524 (KB) Revisited

The facts

The facts were unusual. The Claimants, who acted in person, had booked a North West Passage cruise holiday costing over £20,000 over the telephone, without having first seen a brochure or advertisement, and entirely on the recommendation of friends they had made on a previous Antarctic cruise. The basic itinerary provided to them when they booked was for a cruise holiday entitled ‘Northwest Passage – in the Wake of the Great Explorers’ to take place between 8th and 24th September 2018. The Claimants were subsequently provided with a detailed itinerary which set out the embarkation point and ports of call, some of which were in the North West Passage, and others in Greenland, from where they would then be transferred to Copenhagen for their return flights to the UK. There was some dispute over whether this much more detailed itinerary was a term of the contract such that any alteration to it entitled the Claimants to a full refund; the court at first instance found against them on this, since it had been provided only after the formation of the contract.

The claim centred around whether prior to the holiday departure date the Defendant’s supplier, Hurtigruten, had been constrained to alter significantly an essential term of the contract, thus entitling the Claimants to a refund pursuant to Regulation 12 of the Package Travel, Package Holidays and Package Tours Regulations 1992. The problem arose because in 2018 the break up of ice in the Arctic, and in particular in the North West Passage, occurred very much later and to a lesser extent than in previous and subsequent years, rendering it impossible for the cruise to follow the detailed itinerary and causing much of that itinerary to be abandoned as the vessel spent some time in the mouth of the Passage, before sailing to Greenland, where the rest of the itinerary was performed as described in the detailed itinerary. The Claimants asserted that Hurtigruten was aware that this would be the case before the holiday began and that this entitled them to a refund under Regulation 12; the Defendant contended that at the time of departure it was still possible for much of the itinerary to be provided as planned and that therefore no refund was payable. Furthermore, Regulation 14 (which relates to post-departure alterations) was not engaged either, and even if it was,  the tour operator had a defence under Regulation 15(2)(c)(i) – the failure to provide a cruise through the North West Passage as set out in the itinerary was due to unusual and unforeseeable circumstances outside Readers Offers’ control.

The decision

At first instance the court found as a matter of fact that the relevant itinerary was the basic one provided at the time of contract formation and not the detailed one provided subsequently. Further, at the time of departure, Hurtigruten and Readers Offers reasonably believed that it would be possible to visit the North West Passage and to provide a good cruise experience. Nevertheless, as it turned out, and due to unusual weather conditions, some of the detailed itinerary could not be provided, and this amounted to a post-departure alteration under Regulation 14, for which compensation was payable if this was appropriate. In the instant case, however, it was not appropriate. The Defendant had made out the Regulation 15(2)(c)(i) defence. The claim therefore failed.

The appeal

The Shermans appealed on the basis that because Regulation 9 of the Package Travel Regulations sets out information to be provided to consumers prior to formation of the contract, albeit dependent on the nature of the booking, the contract could not have been formed prior to the provision of that information, which included a detailed itinerary which, notwithstanding the express terms of the contract, was binding.

Regulation 9(3) made it an implied condition of a package holiday contract that the provider should ensure that the contract contained at least the elements specified in Schedule 2. It was also an implied condition that the provider should ensure that all the terms of the contract were communicated before the contract was made. Regulation 9 did not determine when a contract was formed or what its express terms were; and it did not by itself insert the Schedule 2 details into a contract, but use of the expression “implied condition” rather than “implied term” used elsewhere in the Regulations signalled something of potentially fundamental significance, something which, unless satisfied, went to the extent to which the other party was bound. If the “implied condition” in Regulation 9 was not satisfied, then the consumer might be entitled to regard themselves as not bound by the contract, at least until the condition was fulfilled. Schedule 2 at item 6 required that the contract should include the itinerary, and at item 7 the details of visits, excursions or other services included in the total price. A cruise itinerary which omitted any mention of a route or stopping places strained the ordinary meaning of the word to breaking point. Accordingly, the judge’s finding that the tour operator had complied with the Regulation 9 implied condition could not be sustained. The appellants would have been within their rights to decline to consider themselves bound by any contract until they received a detailed itinerary, which then became a term of the contract.

Furthermore, the detailed itinerary was an essential term of the contract within the meaning of Regulation 12, and although the express terms explicitly provided that it was subject to change, the decision to replace the original confirmed itinerary with a circular tour of the eastern section of the Northwest Passage could properly be described as a significant or major change, as the Northwest Passage stage was the most distinctive aspect of the cruise. “Constrained” in Regulation 12 had to be considered on the basis not of an abstract formulation of words, but of practicability in real life and of the choices available at the time. The tour operator had been constrained before departure to alter significantly an essential term of the contract, but the consumers had not been notified as quickly as possible in order to enable them to take appropriate decisions and in particular to withdraw from the contract without penalty. Therefore, the respondent was in breach of Regulation 12.

As regards the tour operator’s defence that the inability to provide the detailed itinerary as advertised was due to unusual and unforeseeable adverse weather conditions, the breach of Regulation 12 was not the failure to follow the detailed itinerary, but rather to inform the consumers of the alteration. The failure to inform the appellants as quickly as possible of the change of itinerary had not been due to force majeure or to unforeseeable or unavoidable circumstances beyond anyone’s control; it was due to an administrative oversight.

Moreover, the reason the ship could not cruise the Northwest Passage was because of the presence of ice, which was not unforeseeable. On the accepted evidence, it was not unforeseeable that the ice would close in eastwards and the passage would become impassable. Non-navigability due to ice was within the range of the respondent’s entirely knowable, and known, omnipresent and substantial risk. That was why they monitored it closely and continuously with expert assistance. The judge had not tested the unforeseeable circumstances element of the test against the expert’s clear evidence as to the ever-present danger of unpredictable sea ice. Therefore, the respondent was not entitled to rely on the exemption from liability in Regulation 15 on this basis.

Conclusion

In giving judgment Collins Rice J commented that the way the Regulations interlink with each other and with the common law rules on contract formation is complex, and it is suggested that this complexity has led her into error. It is difficult to see how Regulation 9 can affect contract formation in the absence of express wording to this effect, and equally hard to see how the industry can operate with any degree of business efficacy if it is to be held to every detailed itinerary published – it is not at all unusual, for example, for cruise itineraries to change as a result of the actions of port authorities. Moreover, in her judgment the judge fettered the hitherto unrestricted discretion contained within Regulation 14 by reference to the defences contained in Regulation 15, before deciding in the face of the expert evidence that ice conditions which had pertained for the last decade were inherently unpredictable.

For all of these reasons it is suggested that caution should be exercised when relying on the judgment, which is nevertheless binding on the County Court judges who are likely to hear the majority of the Covid refund claims. It will be interesting to see whether it is followed in future, or whether judges will find reasons to depart from the results it produces, which will almost always favour consumers over tour operators. But not always; if the judge is right about Regulation 9, and consumers are not bound by booking contracts until all the Schedule 2 information has been provided, it must surely follow that neither are tour operators, which will therefore retain the right to cancel bookings even after they have been confirmed and an unrefundable deposit paid. This, it is suggested, is a rather surprising result.

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 Deka Chambers, Matthew Chapman KC, Jack Harding, Dominque Smith, Tom Yarrow and Henk Soede, 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 undertakes purely domestic high value personal injury work as well as cross border work and has a wealth of experience of difficult and sensitive cases. She will be appointed a KC in March 2023.

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Sarah Prager KC

Call 1997 | Silk 2023

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