X v Kuoni – The Supreme Court Hands Down Judgment

BREAKING NEWS – THE SUPREME COURT HANDS DOWN JUDGMENT
X v Kuoni [2019] UKSC 37

The long awaited decision in the remarkable case of X v Kuoni has been today handed down by the Supreme Court and it seems we do not yet have the answers we were hoping for!

In the judgment, drafted by Lord Lloyd-Jones (with whom all of the other four judges who heard the case agreed), the Supreme Court has unanimously decided to refer two questions to the Court of Justice of the European Union. It seems we will have to wait a little bit longer for a decision in this fascinating case!

The basic facts

This matter of course involved the package holiday of Mrs X, who travelled to Sri Lanka along with her husband back in July 2010. Whilst saying at their hotel accommodation, Mrs X was assaulted and subsequently raped by a male employee, who was acting under the pretence of ‘guiding’ her to the hotel reception.

Mrs X subsequently reported the incident to hotel management and, upon her return to the UK, issued a claim against Kuoni alleging breach under both the terms and conditions of her holiday contract and the Package Travel Regulations 1992.

The legal timeline so far…

The matter proceeded through the legal system, being first heard before His Honour Judge McKenna in the High Court. At this hearing, McKenna found in favour of Kuoni, stating that the Sexual assault did not amount to a failure of performance or indeed improper performance of the holiday contract – the actions of the employee were too far removed from what had been sold to the Claimant. Judge McKenna went further and found that, even if the actions of the employee had fallen within the contract terms, they would have been exempt in accordance with 15(2)(c)(ii) of the PTRs.

The Claimant appealed the decision and the matter was heard before the Court of Appeal in March 2018. With a two to one majority, the court again found in favour of Kuoni, reiterating the findings of Judge McKenna.  The talking point however about this decision was the fact that CoA went even further, ‘opening floodgates’ it was claimed, and ‘driving a coach and horses’ through the current law as we know it. The Master of the Rolls and Asplin LJ, in their majority decision, found that an employee of the hotel was not a ‘supplier’ in accordance with the definition as given in the 1992 Regulations. Rather, they stated, it was the hotel itself that was the supplier – not its staff. Of course, this finding shocked many in the industry, with people asking how a concrete building can be classified as a supplier in its own right! Surely a hotel cannot run without its staff, and those staff subsequently form part of the supplier definition? This must have been what the 1992 regulations had meant…?

This was just one of the arguments raised by the Claimant when she further appealed to the Supreme Court in May 2019.

The two main arguments before the court were as follows:
  1. Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the contract? and
  2. If so, is any liability of Kuoni in respect of N’s conduct excluded by clause 5.10(b) of the contract and/or regulation 15(2)(c) of the 1992 Regulations?

Mr Weir QC, arguing on her behalf, stated that all services provided whilst on holiday were, by definition ‘holiday services’ and therefore the action of the employee fell within this category. He further argued that it was not possible to separate the employee from the hotel and if the hotel is deemed to be a supplier, then that embraces the services of its employees as well.

Mr Audland QC for the Defendant argued that it is not reasonable to find that a ‘guiding’ service would be available to customers at the hotel at all hours of the day and night – this was therefore not a contractual ‘holiday service’. He further argued that a “supplier” includes every legal person in the contractual chain; it does not include every individual agent of the legal persons in that chain. If the employee is held to be a “supplier” this will create an unlimited liability and the tour operator will have no defence where there is no fault. This, he said, cannot be the intention of the legislation.

The decision (or indecision!) of the Supreme Court

The legal arguments are indeed complex and would seem the Supreme Court agreed, now seeking assistance from the CJEU on two specific issues.

Reading between lines, the implication is that the Supreme Court are likely to find that guidance by a member of the hotel’s staff was a service within the “holiday arrangements” which Kuoni had contracted and therefore agreed with the Claimant that the rape and assault constituted improper performance, however, the matter does not end there and the two questions referred by the Supreme Court are as follows:

(1) Where there has been a failure to perform or an improper performance of the obligations arising under the contract of an organizer or retailer with a consumer to provide a package holiday to which the Directive applies, and that failure to perform or improper performance is the result of the actions of an employee of a hotel company which is a provider of services to which that contract relates:

(a) is there scope for the application of the defence set out in the second part of the third alinea to article 5(2); and, if so,

(b) by which criteria is the national court to assess whether that defence applies?

(2) Where an organiser or retailer enters into a contract with a consumer to provide a package holiday to which the Directive applies, and where a hotel company provides services to which that contract relates, is an employee of that hotel company himself to be considered a “supplier of services” for the purposes of the defence under article 5(2), third alinea of the Directive?

So what now?

It seems the industry will have to wait a bit longer to achieve clarity in this complex case as well guidance on the liabilities of tour operators, their suppliers, and other staff members further down the ‘chain’. One can imagine the CJEU is somewhat busy at the moment(!) so when such guidance will be received … we shall have to wait and see.

A link to the full Supreme Court judgment can be found here: https://www.supremecourt.uk/cases/docs/uksc-2018-0102-judgment.pdf

This is a big development and we are expecting a lot of questions! Should you have any queries regarding this matter, or how it may affect your business or any ongoing litigation issues, please contact Krystene Bousfield at krystene@travlaw.co.uk or on 01132 580044.

The Travlaw Team

 

 

 

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