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Articles, News | Mon 22nd Jan, 2024
Another year, another consultation, this one a Call for Evidence to inform the upcoming review of the Personal Injury Discount Rate. This will be the first review where the Lord Chancellor will consult with an expert panel as well as the Treasury, and the Call for Evidence is being issued to obtain evidence on claimants, awards of damages, investments and relevant deductions, in order to inform the panel’s analysis. The consultation will run for 12 weeks, closing on 9th April 2024; copies can be downloaded here.
Choppy Waters for Consumers: force majeure in travel contracts affected by Covid-19
Case note – Tschernischen v Clipper Ventures PLC (Unreported, Clerkenwell County Court, 12 January 2024)
A crewmember in a round-the-world yachting race was not entitled to compensation despite it being delayed by two years due to the COVID-19 pandemic. The Court held that a term which excluded refunds, even for an indefinite delay in performance, was not unfair.
The facts
The claimant, Christoph Tschernichen, paid almost £50,000 to be a crewmember on a gruelling annual round-the-world yacht race organised by Clipper Ventures plc, the defendant.
The race, which was estimated to take 11 months from start to finish, was split into eight separate legs, commencing in London in September 2019. The first four legs were uneventful. The fifth leg set off from Sydney and was due to finish six weeks later in Zhuhai, China in February 2020. During the course of the fifth leg, the number of Covid-19 cases in China escalated rapidly and lockdown restrictions imposed by the Chinese authorities prevented the race organisers from using its ports. The race had to be re-routed to Subic Bay in the Philippines, where the yachts were then impounded by the Philippines authorities. The race had to be halted and shortly afterwards, the WHO declared Covid-19 to be a global pandemic and international travel became all but impossible. There were then several unsuccessful attempts to re-commence the race until it finally re-commenced in March 2022, finishing in London in July 2022, some two years late.
The claimant, who had taken a 12-month sabbatical from work to compete in the race, was unable to join the race when it re-commenced and his place was taken by a professional crewmember. He then sought a refund of the sums paid in respect of the legs he could not compete in.
The contract
The contract provided that the defendant ‘will not be liable to You for any failure to perform, or delay in performing, [the defendant’s] obligations under this Agreement where that failure or delay is due the occurrence of a Force Majeure event’.
The contract permitted the defendant, in the event of force majeure, to either terminate or postpone an individual leg or the race as a whole ‘for such a period of time as in all the circumstances is reasonable’.
If the defendant terminated (cancelled) all or part of the race, participants were entitled to a pro-rata refund. There was no such right if the race was merely postponed, however. On the face of it, the defendant was entitled to repeatedly postpone the completion of the race for an indefinite period without becoming liable to offer a refund.
The claimant conceded, at the start of trial, that the Covid-19 pandemic did constitute (or lead to) a ‘force majeure’ event but contended (among other things) that:
(i) the postponement in this case was so long that it should be treated as a cancellation or alternatively,
(ii) the exclusion of liability for ‘any failure’ or ‘delay’ in performance due to a force majeure event, was an unfair term and hence unenforceable under section 62 of the Consumer Rights Act 2015. The claimant relied, in particular, on the fact that the defendant was entitled to withhold refunds for those (like him) who could not complete the race even if they were later able to re-sell his berth.
The decision
In an ex tempore judgment, District Judge Sterlini dismissed the claim.
The Court held that there were no grounds for conflating a delay with a cancellation, however long it lasted for. On the claimant’s construction, the defendant would become liable to offer a full refund to every participant if only one leg of the race was delayed by a single day: that outcome could not have been intended by the parties and would make the whole venture unviable. There was a clear, conceptual difference between a cancellation and a delay and the defendant’s conduct evinced a consistent intention to complete the race, which it in fact did. The contract was, in any event, unambiguous and the Court was required to apply it, Rainy Sky SA v Kookmin Bank [2011] UKSC 50 [2011].
The Court also concluded that a general exclusion of the right to a refund in the event of delayed performance was not unfair, even where the delay was potentially indefinite. The Court applied the guidance of the House of Lords in Director General of Fair-Trading v First National Bank PLC [2001] UKHL 52 and concluded that the term did not create a ‘significant imbalance in the rights of the parties’ and was ‘expressed fully, clearly and legibly containing no concealed pitfalls or traps’. The nature of the contract was such that crewmembers had to be committed and flexible, even where the planned itinerary changed, and it was therefore reasonable to limit their rights to a refund. The defendant’s reliance on the force majeure provisions was constrained in that (i) the delay had to be caused by the force majeure event itself and (ii) could not last for longer than was reasonable.
Comment
This case involved a specialist and perhaps unusual travel contract but the issues raised by it are encountered with increasing frequency. The impact of the Covid-19 pandemic on global travel and travel contracts has led to much greater reliance on force majeure provisions and other exclusions of liability, which in turn, are being thoroughly tested through the Courts. This case highlights the need for clear and careful drafting of force majeure terms and that where this is achieved, the Courts will be slow to relieve a consumer of their obligations, even in the most unusual and unfortunate circumstances.
Tom Collins acted for the defendant, instructed by Rachel Fereday, Partner at Awdry Law.
About the Author
Called in 2010, Tom Collins is ranked in the Legal 500 as a specialist in Travel Law. He has considerable experience across a wide range of travel and private international law disputes and has advised claimants and defendants in multi-party actions.
“A New Hope”: The Hague Convention and what it means for you
On 12th January 2024, Lord Bellamy (acting on behalf of the Ministry of Justice) signed the 2019 Hague Convention (“the Hague Convention 19”). This provides a new means of enforcing cross-border judgments, and goes some way to rectify the difficulties with enforcement after British withdrawal from membership of the European Union.
What is the Hague Convention (2019)?
The full title of the Hague Convention 19 is “the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters”. It is intended to simplify the recognition and enforcement of judgments for litigants in the UK and in other jurisdictions that accede to the Convention. At present, only the European Union (bar Denmark) and Ukraine are parties to the Convention.
Article 4 of the Hague Convention 19 provides as follows:
Article 5 of the Hague Convention 19 sets out the minimum requirements for a judgment to be eligible for recognition. Examples include the defendant was habitually resident (Article 5(1)(a)), or that they were found liable for the tortious harm (Article 5(1)(j)).
Article 7 provides that a judgment shall not be enforced on grounds including that it was obtained by fraud (Article 7(1)(b)), that it was manifestly incompatible with public policy (Article 7(1)(c)), or that it was inconsistent with a judgment given by a court of the requested state (Article 7(1)(e)).
As a matter of procedure, the party seeking recognition and enforcement must produce a certified copy of the judgment and documents to establish that the judgment has effect in the state of origin (Article 12(1)(a/c). In the case of a default judgment, the requesting party must also include an original or certified copy of a document establishing that the document instituted proceedings or an equivalent document was notified to defaulting party (Article 12(1)(b)).
Why did the UK sign this agreement?
For most cases, Hague 19 will “increase certainty and predictability, promote the better management of transaction and litigation risks, and shorten timeframes for the recognition and enforcement of a judgment in other jurisdictions”.
Previously, the UK was only a signatory to the Hague Convention 2005. This only assists parties where there is an exclusive jurisdiction clause agreed between them. This is very unlikely to be the case in cross-border personal injury litigation, or those seeking to enforce wider consumer rights. The prior status quo, therefore, was that victims of cross-border injuries would need to rely upon domestic rules of enforcement. This generated uncertainty, delay and additional cost. The ratification of the Hague Convention 19 will significantly reduce the exigencies required by domestic methods of enforcement.
What are the limitations of the Hague Convention 2019?
The Hague Convention 2019 is not a panacea for the difficulties of cross-border enforcement, however. The Association of Personal Injury Lawyers (APIL) have identified a number of lacunas within this framework:
The tort gateway and indirect damage
Under Article 5.1(j), for a claim in tort to succeed, the damage must have occurred in the state of origin, irrespective of where the harm occurred. APIL have identified that cross-border victims who fall under the following circumstances may find that their judgments are unenforceable because of this requirement:
There is an open question as to whether a claimant in that situation can rely on the Hague Convention 2019 because the Convention requires the “act or omission” to have occurred in the state of origin of the judgment. The countervailing argument is that a distinction ought to be drawn between ‘act’ in the state of origin and the ‘consequences’ which are in the state of judgment. Nevertheless, practitioners must consider this issue properly before relying upon the Hague Convention 19.
Fatal Accidents
Article 5.1(j) provides that the harm must be “directly caused”. The risk is that enforcement of a judgment pertaining to loss of financial dependency on the deceased is precluded because such losses are ‘indirect’. This position is open to debate, especially given that a financial dependency claim ‘arises from death’ and therefore could fall within scope.
The Public Policy Exception
In the past, some foreign courts have been reluctant to enforce English judgments on the basis that recoverable costs were excessive. For example, the Greek Court of Appeal has previously ruled against enforcement of an English costs award on the basis that costs were excessive. While this judgment was overruled by the Greek Supreme Court, it raises the issue that a court in another jurisdiction may seek to deploy similar arguments.
Carriage of Passengers and Goods
Article 2.1(f) excludes the carriage of passengers and goods from the Hague Convention 2019. This exclusion means that a passenger in a road traffic accident cannot rely on this Convention to enforce a judgment for damages.
Interim damages, costs awards and preliminary requests for disclosure
Under Article 3(1)(b) of the Hague Convention 2019, the definition of “judgment” excludes interim measures. Accordingly, interim payments (which are vital to fund care costs and rehabilitation) are excluded from the ambit of this Convention.
When will the Hague Convention enter into force?
The Hague Convention 19 will enter into force in the UK twelve months after it is ratified. This will likely be around 2025.
Concluding Thoughts
As practitioner Cheryl Palmer-Hughes has suggested, the Hague Convention 2019 ought to be the “first of many steps, and not the end point”. The ultimate goal would be for the UK Government to rejoin the Lugano Convention to fill the gaps left by British withdrawal from the European Union. Only when the Lugano Convention is rejoined can those who would have suffered injury abroad obtain justice.
About the Author
Anirudh Mandagere has a broad practice across all areas of chambers’ specialisms, acting for both claimants and defendants, and is an enthusiastic and valued member of the travel team. Before joining Deka Anirudh worked as a judicial assistant at the Court of Appeal and taught law at the London School of Economics.
Call: 2010
Call: 2019
