Tour operator’s liability under the Package Travel Directives

X -v- Kuoni Travel: Supreme Court, 30 July 2021

In January 2019 we reported [1] on the decision [2] of the English Court of Appeal in this difficult claim under the Package Travel Directive. A holidaymaker was raped by a hotel maintenance employee when she asked for directions in the hotel. She brought a claim against the tour operator under the Package Travel Regulations 1992[3], which implemented the EU’s first Package Travel Directive[4].

The first instance judge and, by a majority, the Court of Appeal found that Kuoni was not liable. Largely this was because the “holiday arrangements” which the tour operator contracted to deliver did not include a maintenance employee offering the holidaymaker guidance to the hotel reception. Those courts also considered that the express exclusion of liability within the 1992 Regulations was applicable in circumstances where, it was accepted throughout, neither the hotel nor the tour operator were at fault, in that the assault could not have been prevented even with the exercise of all due care.

After the Court of Appeal decision, the Supreme Court made a preliminary reference[5] to the European Court of Justice (CJEU) on questions of construction of the Package Travel Directive: whether the statutory defence is available when a failure to perform the tour operator’s obligations is attributable to the conduct of a service provider’s employee, and whether that employee is himself considered to be a “supplier of services”.

In determining whether there had been a breach of contract the Supreme Court was clearly influenced by the subject matter of the contract. “A holiday is intended to be a pleasant and enjoyable experience.” This required a broad interpretation: providing a holiday of the required standard involves much more than just accommodation, transport and meals. Guiding a guest around the hotel was part of that service. On that basis the Supreme Court disagreed with the Court of Appeal that the fact that the conduct that was not part ‘of the role in which [the staff member] was employed’ took it outside the scope of the holiday arrangements for which the traveller had contracted.

There was also extensive argument about whether the employee in question was himself a ‘supplier of services’. The original Package Travel Directive and the 1992 Regulations contain an exemption from liability in the case of an unforeseeable event which could not have been avoided by the supplier of services even when exercising all due care. If the employee was himself a supplier, that defence simply could not apply.

However, while the CJEU and the Supreme Court concluded that the employee could not himself be a supplier of services, for want of a contractual relationship with the tour operator, both went on to address the liability of the tour operator for the acts of an employee of a supplier of services. Since an employee acts under a contractual obligation, his conduct falls within the sphere of control of the organiser and/or the supplier of services. For that reason the tour operator cannot rely on the exemption to avoid liability to travellers for damage suffered as a result of improper performance of services as a result of acts or omissions of employees of their service providers.

Conclusions

Both the CJEU and the Supreme Court were clearly influenced by the objective of the Directive in securing a high standard of consumer protection and from that perspective the CJEU decision may be seen as ‘result orientated’. Although the underlying litigation arose in England, the CJEU’s decision is applicable across the EU and so organisers throughout the EU should consider its implications. Travel businesses will wish to consider a number of observations in the light of these decisions.

1. The tour operator’s terms and conditions were drafted in terms of responsibility for shortcomings that may be read as being more generous than expressly provided under the Directive and the 1992 Regulations. While the Supreme Court considered that the terms and conditions reflected the obligations under the 1992 Regulation and in particular that the limitati0n of liability was coexistent with the statutory defence, travel businesses will wish to consider whether their terms and conditions go further than is necessary.
2. The case was decided under the original Package Travel Directive and the 1992 Regulations. Package holidays being contracted now will be subject to the second Package Travel Directive[6] and the Package Travel and Linked Travel Arrangements Regulations 2018[7]. While the principles are similar, the precise wording is different, and the Kuoni judgments paid close attention to the detail of, in particular, the exemption in the 1992 Regulations, which is differently expressed in the 2018 Regulations. While these judgments are a clear pointer to how PTD2 will be interpreted, similar fact patterns, if relitigated under the current law, might come to different results.
3. In any event, the tour operator is only responsible for the ‘holiday arrangements’ that are contracted for. The Supreme Court was influenced by the fact that it was a four-star hotel with a range of facilities described, while acknowledging that the range of ancillary services may vary from one package to another – which does beg the question of whether they would reach the same conclusion on all facts if the holiday was avowedly marketed as a ‘bargain basement’ service. There may be a difference between a service that is integral to the operation of a hotel and extra facilities such as a travel desk which assists holidaymakers in buying side tours that are clearly outside the scope of the original package.
4. There was passing reference in the lower courts to the limitations on a tour operator’s ability to secure insurance protection against this liability. That issue did not seem to feature in the Supreme Court’s reasoning. However, we have seen policies designed expressly to protect tour operators – at least in part - from what is a strict statutory liability. Commercial risk – i.e. assumption of an obligation in excess of the statutory minima – might be a different matter, but the Supreme Court decided this case on the statutory exposure. There is clear merit in exploring the availability and any limitations of this cover.
5. Moreover, the fact that the tour operator has liability to its customer does not limit its ability to seek recourse against its overseas suppliers. While the Supreme Court reached its conclusion without addressing the concept of vicarious liability, a tour operator’s recourse may be less clear cut if local law limits an employer’s vicarious liability where an employee is plainly acting unlawfully. Although the Supreme Court recognised there may be difficulties in securing unlimited indemnity, tour operators should consider such recourse in their contracts with service providers.

[1] Is a travel company liable for rape? (twobirds.com)

[2] X -v- Kuoni Travel Ltd, [2018] EWCA Civ 938

[3] SI 1992/3288

[4] Council Directive 90/314/EEC of 13 June 1990

[5] Case C-578/19 Kuoni Travel: CJEU judgment, 18 March 2021

[6] Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015

[7] SI 2018/0634