Proposals for a new Package Travel Directive: Performance of the Package

The full article can be found in the September edition of the Travel Law Quarterly

One of the most important questions surrounding the new Package Travel Directive has been whether there would be much change to the current liability regime imposed by the Package Travel Regulations. Will, for example, the fault based liability provisions remain (as we interpret them inEngland) remain or is it likely that a much stricter approach will be adopted in future. These issues are considered in this article, which examines Chapter IV of the proposed directive, entitled “Performance of the Package”.  This covers Articles 11 to 14, which concern matters currently dealt with by Regulations 14 and 15 of the Package Travel Regulations 1992 (mirroring Articles 4 (7) and 5 of the original Package Travel Directive, 90/314 EEC). No doubt Chapter IV will be considered very carefully by travel lawyers, since it is from the existing Regulations 14 and 15 that much litigation has arisen. Will this trend continue when the new Directive is introduced?

Outline of Chapter IV

Article 11

Article 11 covers what happens when things go wrong after departure.

First, it is important to note that the “organiser” will be in the firing line when things do not go as planned. Article 11(1) provides that the organiser is responsible for the performance of the travel services included in the contract. “Organiser” is defined in Article 3(8) as “a trader who combines and sells or offers for sale packages, either directly or through another trader…” Note here that the concept of trading as agent is preserved but otherwise, the definition of “organiser” is wide ranging. This is considered in another article within this edition of TLQ.

Article 11(2) covers situations where the holiday is not provided in accordance with the contract. This is termed a “lack of conformity” with the contract. In these circumstances, the organiser is obliged to remedy the lack of conformity unless this is “disproportionate”. No further explanation is given as to what this means.

If a significant proportion of the services cannot be provided, then the organiser is obliged by Article 11(3) to make “suitable alternative arrangements” at no extra cost to the traveller for the continuation of the package. This, however, should be read in conjunction with Articles 11(4), (5) and (6) which cover situations where the organiser cannot offer suitable alternative arrangements or the traveller does not accept such arrangements because they are not comparable to what was agreed in the contract. If that is the case, the organiser is obliged to provide “equivalent” transport to the place of departure or to another place to which the traveller has agreed and, where appropriate, compensate the traveller in accordance with Article 12.

These obligations are, however, limited in “unavoidable and extraordinary circumstances” (Article 11(5)). Such circumstances are, unsurprisingly, not defined but where they arise, the organiser does not have to pay for any continued stay exceeding €100 per night and three nights’ stay per traveller, save for persons with reduced mobility, pregnant women and unaccompanied children as well as people in need of medical assistance, provided the organiser was notified of their particular need at least 48 hours before the start of the package. These limitations have been introduced to reflect the changes to the denied boarding regulation (261/2004) and to ensure that organisers do not find themselves in a worse position than carriers could do under Regulation 261. (Article 11(6)).

Article 11(7) provides that if alternative arrangements result in a package of lower quality or cost the traveller shall be entitled to a price reduction and, where appropriate, damages. This should be read in conjunction with Article 12 (3), summarised below.

Article 12

Article 12 covers price reduction and compensation for damages.

Article 12 (1) states that a traveller is entitled to an “appropriate price reduction” for (a) any period during which there was a lack of conformity; or (b) where alternative arrangements provided in accordance with Article 11 result in a package of lower quality or cost. In other words, if the contract goes wrong after departure and cannot be remedied so as to give the traveller what he or she has paid for, it seems they will be entitled to an “appropriate” price reduction. This presumably includes situations covered by Article 11(7), where the organiser has made suitable alternative arrangements but which do not come up to the same standard as what was originally agreed in the contract.

Article 12(2) covers the thorny issue of compensation. Under this article, the traveller is entitled to receive compensation from the organiser for any damage, including non-material damage, which the traveller sustains as a result of any lack of conformity.

Note, however that under Article 12(3) the entitlement to price reduction or compensation set out in Articles 12(1) and (2) will not apply if the organiser proves that the lack of conformity is: (i) attributable to the traveller, or (ii) attributable to a third party unconnected with the provision of the services contracted for and is unforeseeable or unavoidable, or (iii) due to unavoidable and extraordinary circumstances. There is a further important limitation in that any entitlements shall cease if the traveller fails to inform the organiser without undue delay of any lack of conformity, which the traveller perceives on the spot if that information requirement was clearly and explicitly stated in the contract and is reasonable taking into account the circumstances of the case. We will look at what this might mean shortly.

Article 12 (4) affords organisers the ability to rely upon international conventions in order to limit compensation. Organisers may also limit compensation by reason of the contract, save that such limitations shall not apply to personal injury and damage caused intentionally or with gross negligence and should not amount to less than three times the total price of the package.

Consumers’ rights under other EU travel directives are protected by reason of Article 12(5), though this makes clear that travellers may not, in relation to the same facts, accumulate rights under different legal bases.

Finally, Article 12(6) provides that the prescription period for introducing claims shall not be shorter than one year.

Article 13

Briefly but importantly, Article 13 introduces a requirement for member states to ensure that any messages, complaints or claims in relation to the performance of the package can be made directly to the retailer who sold the package. If the retailer is not the organiser, it will then have an obligation to forward such messages etc to the organiser without undue delay. The incentive for this to happen quickly is Article 13, which prescribes that receipt by the retailer shall also constitute receipt by the organiser.

Article 14

This provides that the organiser will have an obligation to give prompt assistance to a traveller in difficulty but limits this to (a) providing appropriate information on health services, local authorities and consular assistance; and (b) assisting the traveller in making distance communications – i.e. telephone or email – and alternative travel arrangements.

Interestingly, although the organiser has an obligation to help, it can charge a reasonable fee if the situation is caused by the traveller’s negligence or intent.

How does this compare to the current Regulations?

Articles 11 to 14 cover the same ground as set out in the current Regulations 14 and 15. There are, however, a number of differences, some of which are likely to be significant.

One of the most important changes is that Articles 11 to 14 impose obligations upon the “organiser” rather than upon the “other party to the contract” as is currently the case. This distinction is important since it is the party selling the package to the customer (save in agency situations) that is responsible to remedy things when they go wrong. Thus, it could be for a travel agent to put things right in situations where they might be quite remote from what is actually happening if they are considered the organiser under the Directive. No doubt this will give rise to some interesting cases in due course.

Regulation 14 and Article 11

To remind ourselves, Regulation 14 covers circumstances where, after departure, there is a failure to provide a significant proportion of the services contracted for (or where it becomes clear that this is likely to be the case). In such circumstances, the organiser must make “suitable alternative arrangements” for the continuation of the package, and, where appropriate, compensate the consumer for the difference between the services to be supplied under the contract and those which are actually supplied.

Article 11 expands upon this by introducing the concept of “lack of conformity” with the contract, (later developed in Article 12). Whereas the current Regulation 14 only covers situations where a “significant” proportion of the services is not provided, the new Article 11 requires the organiser to remedy any “lack of conformity” unless this is “disproportionate”. There is no qualification as to significance: any lack of conformity is caught and needs to be remedied. The scope of the holiday contract will therefore be of paramount importance. Presumably, existing cases such as Jones v Sunworld (where a lagoon was held to fall within the scope of services to be provided under the contract) and Djengiz v Thomson Holidays Ltd (where a volley ball game on a public court was within the scope of the contract) will remain good law.

It is submitted that the obligation to put things right when anything goes wrong already exists under the current Regulations, even if Regulation 14 does not make that clear. A consumer can, for example, sue for damages under Regulation 15, citing “improper performance”, though the organiser can rely upon the statutory defences.

One grey area to date has been when the entitlement to compensation under Regulation 14 arises. The case of Lara Tanner & Others v TUI UK Ltd considered this point. Briefly, the claimants sued for damages for loss of enjoyment following a dreadful cruise around theMediterranean, where due to extremely rough weather conditions, enjoyment of their holiday was severely curtailed and the cruise ship only called at two of the scheduled five ports. A large number of passengers were violently sick and the Topaz sailed through winds of force 8/9 for over 56 hours. Claims for compensation (damages for loss of enjoyment) were brought under Regulation 14.

The judge found that it was not appropriate to compensate the consumers for the difference between what was to be supplied and what had been supplied. He considered that the adverse weather was clearly not the fault of the tour operator and that it would be quite wrong to expect the tour operator to provide compensation in those circumstances. A person taking a cruise takes the risk of adverse weather conditions and so the claims failed.

Interestingly it was conceded in Tanner that Regulation 15(2), which offers the tour operator statutory defences to claims for damages for improper performance, has no application in the context of a Regulation 14 case. That, however, appears to be changing since Article 12 states that an organiser will now not have to compensate the consumer or offer a price reduction if it can prove that the lack of conformity is due to the circumstances set out in Article 12(3)(a) or (b). One wonders whether a claim like Tanner would get very far in future, since under the new Directive an operator would simply be able to point to Article 12(3)(a)(iii) and argue “unavoidable and extraordinary circumstances”, although for more discussion on what this might mean, see below.

Finally, one other difference worth noting is that whereas now the consumer can decline to accept suitable alternative arrangements for “good reasons”, in future this will only be possible where the arrangements “are not comparable to what was agreed in the contract”. For comment on this, see below.

Overall, however, Article 11 does not seem to differ radically from Regulation 14.

Regulation 15 and Article 12

The approach taken by the drafting committee when looking at the liability provisions has been one of the most important questions surrounding the new Directive. Would the new Article reflect the current approach of Regulation 15? To remind ourselves, under Regulation 15, the “other party to the contract” is liable to the consumer for damages for failure to perform the obligations under the contract unless that other party can show (in summary) that it was not its fault because it was: (a) down to the consumer; (b) down to someone else; or (c) due to “unforeseeable and unavoidable circumstances beyond the [tour operator’s] control, the consequences of which could not have been avoided even with all due care, or an event which the other party to the contract even with all due care could not foresee or forestall.”

Whereas (a) and (b) above seem to be preserved in Article 12, the language used in Regulation 15(2)(c) has been altered in the new Directive. Instead of the two defences currently available (unforeseeable and unavoidable circumstances etc… or an event which the tour operator could not forsee or forestall), Article 12(3)(a)(iii) will allow an organiser not to pay compensation or a price reduction only in “unavoidable and extraordinary circumstances”. What exactly does this mean? It is arguably tighter than the current wording. Could there be situations where the tour operator is not currently liable when in future they may well be? Is, for example, a hurricane in the Caribbeanan “unavoidable and extraordinary circumstance”? There is of course some debate already as to whether such a circumstance would fall within Regulation 15(2)(c) but the new wording seems to make this even less likely. Can it really be said that it is extraordinary to experience a hurricane in September in the Caribbean? An hurricane may be unavoidable but Article 12 requires it to be unavoidable and extraordinary.

Another interesting contrast is the way in which Article 12 links the time a complaint is made to the entitlement to claim for compensation or a price refund. Nowhere in Regulation 15 is it explicitly stated that the operator can exclude liability because the consumer did not complain at the time. Regulation 15(9) indicates that an operator can oblige a customer to communicate any perceived failure at the earliest opportunity and there have been a few cases where the court has considered whether a 28 day limit for bringing complaints was reasonable and could limit the consumer’s entitlement to claim. No clear guidance has materialised however: in Davison v Martyn Holidays the court held that 28 days was unreasonable, whereas in Sargent v C.I.T. the court thought it fair.

It seems likely that cases of this type will increase since Article 12(3)(b) will allow an organiser to refuse a claim for compensation or a price reduction if they do not inform the organiser “without undue delay” of any lack of conformity which they perceive on the spot. This obligation to report must be stated clearly within the contract and must be reasonable taking into account the circumstances of the case.

Article 13 and Regulations 15 (8) and (9)

Whereas now a consumer must complain to the supplier of services (for example, the hotel in a resort if it is sub-standard) as well to the tour operator, under Article 13 a consumer will only need to complain to the person from whom they bought their holiday. So, if a travel agent sold a holiday as agent, the consumer will be able address everything to the agent, rather than the organiser. The agent must then have a means by which this is transmitted to the organiser.

This removes the need for complaining to the resort but not the need to complain whilst in the resort because of Article 12(3)(b) above. Presumably agents and operators will have to state clearly on the booking documents exactly where complaints should be directed and make it easy for customers to complain from abroad.

Comment

At this stage, any useful comment is necessarily limited since much will depend upon how the directive is altered over the coming months. On the one hand it could be argued that the new directive will not alter significantly the current approach to a tour operator’s liability but on the other hand the current drafts begs a number of questions, some of which look to be a litigator’s paradise. When introduced, the Directive should see that the courts are kept busy for a good time to come. Some of the potential issues are set out below.

Arrangements “not comparable to what was agreed in the contract” – Article 11

This provision is interesting since it seems to limit the right of a consumer to refuse to carry on a holiday in circumstances where they are not receiving what they paid for. Whereas now a consumer can decline alternative arrangements for “good reasons”, when the new Directive comes in, a consumer’s right to refuse alternative arrangements will be restricted to arguing that what is offered is not comparable to what was agreed. But what exactly does this mean? How will the courts compare? Is, for example a 5 star holiday inPerthcomparable with a 5 star holiday inSydney? Is that like for like or something completely different? Using the hurricane example from before, is a holiday in Antigua which replaces an agreed holiday inJamaicacomparable or completely different? This surely is an area that will be the subject of some discussion for years to come. What is comparable for some may not be so for others. We will have to see what materialises.

“Lack of conformity” – Article 12

What exactly does this mean? Presumably the starting point as now will be the terms of the contract but how will conformity be tested? Will Wilson v Best Travel and all the cases that follow it remain as good law in relation to compliance with the local standard or will there be a continued attack on this approach?

“Unless disproportionate” – Article 11

An operator has to remedy any lack of conformity unless “disproportionate”. Again, what does this mean? Disproportionate to what: the price of the holiday; the difficulty in putting things right or some other factor? How is an operator meant to weigh this up? If, for example, a Christmas dinner is promised on a cruise in December but for some reason cannot be provided, what is an operator meant to do? In the context of a 3 week cruise one meal is insignificant but as a Christmas dinner, it could be considered the highlight of the cruise. So should extra effort be taken to replace it or is that “disproportionate”? Phrases such as this will no doubt keep litigators occupied for some time yet.

Time limit for complaints – Article 12

Although the Directive prescribes that consumers must complain as soon as possible (and preferably whilst on holiday it seems), it seems unlikely that failure to do this will ultimately prove fatal to a claim. Whilst the Directive is drafted fairly strongly, there is enough within the clause (and within existing English law) to suggest that consumers who do not complain as soon as they might have done will probably still be able to do so at a later stage. Whilst tour operators might be tempted to draft stringent requirements for customers who wish to complain, they will need to consider, for example, the Unfair Contract Terms Act and current guidance on exclusion clauses. It seems unlikely that this provision will work to exclude personal injury claims (and possibly may not be effective in excluding many claims at all).

Conclusion

Overall, the new provisions do not seem radically different from those that we have got used to working with over the past 20 years. It looks likely that fault based liability will remain, presumably based on the relatively established (but still developing) line of cases. Beyond that, whilst there may be some changes, it seems that the new Directive is likely to continue the development of what we have today rather than introduce a radical re-think to a tour operator’s obligations and liability when things go wrong.

Alex Padfield

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