Judgment Highlights Why You Need to Keep Your Conditions Up to Date

A recent Judgement has highlighted the significance of keeping your travel businesses’ Terms and Conditions up to date, explains our Senior Counsel Stephen Mason.

Lawyers have a saying that “hard cases make bad law”. There were times during the tortured history of the case of Sherman v Reader Offers Ltd (ROL) that it seemed that this maxim was going to apply in spades for the travel industry.

The Shermans booked a cruise in Canada called ‘The North West Passage (NWP) – in the Wake of the Great Explorers”. The cruise was to take place in September 2018, the time of year when normally, for a few weeks (as had happened in all the 10 previous years), the ice melts and the NWP opens up. The cruise was to start at Cambridge Bay and proceed eastwards. The last few days of the cruise would be spent exploring Greenland, before guests were flown home.

The Shermans did not book an outward flight to Canada as part of the package, as they intended to visit family in that country in the weeks before the cruise.  They joined the cruise party at a hotel in Montreal where everyone stayed the night before flying to the embarkation point.

Unusually, perhaps, the Shermans saw absolutely none of ROL’s marketing material or adverts for the cruise before booking. Had they done so, they would have seen, on the face of the cruise description,  a clear disclaimer that the itinerary was subject to ice and weather conditions and changeable at the discretion off the Captain, with safety the priority. But the Shermans booked the cruise purely on the recommendation of some friends, the Maguires,  who had already themselves booked to go on it.

Mrs Sherman rang ROL to make the booking on 9th January 2018. . She paid a deposit, described as non-refundable, and received, the next day (10th January) , a short form confirmation of the booking, the ROL Terms and Conditions, and an ATOL Certificate (which is a statutory UK scheme whereby a package holiday is financially protected to comply with the Package Travel Regulations (PTRs)).  But it was only 2 weeks later that they received, for the first time, an itinerary describing in detail the planned daily progress of the cruise in Canada and Greenland, together with an invoice. This detailed itinerary did not specifically replicate the disclaimer, although the Ts and Cs did reserve the right to make changes.

In summer 2018, the ice in the NWP was melting, but it was stubbornly slow in doing so. The cruise departed from a different port, and after a few days the Captain had to give up on the NWP and cross to Greenland to spend longer there than the detailed itinerary had provided for. The Shermans felt short-changed by this, and alleged that – although ROL had, a few days before departure, sent updates in advance about changes, in particular that the cruise would no longer start in Cambridge Bay – the warnings given did not give a true flavour of the extent of the changes. ROL denied that this was the case. Their case was that a good cruise, seeing the majority of the advertised highlights, remained possible until 5 days after the cruise had actually started. At that point only did it become clear that, with the ice improvement happening too slowly, only a fraction of the NWP would ever be accessible.

The Shermans issued proceedings, which led to a trial of 8 days at Winchester County Court (during Covid – one hearing day had to be abandoned after a short time when the court clerk went down with Covid – that gives you a flavour of the trial!).  After then considering the matter for several months, the County Court Judge (CCJ) issued his 75 page judgment in April 2022.

On the first issue, about when the contract was made, and on what terms, the Judge found that the contract (booking) was made when the documentation arrived the day after Mrs Sherman’s booking call. He found that Schedule 1 to the PTRs (Article 3(2) of the Package Travel Directive (90/314/EEC) (PTD)) required that an itinerary must be provided to the consumer before the contract was made. But there was no definition of what was meant by ‘the itinerary’. He found that the short form confirmation received the day after the telephone booking contained a description of the cruise (“The North West Passage – In the Wake of the Great Explorers”), the start and end dates, the name of the ship, and the type of cabin booked. He called this the ‘basic itinerary’.  This, he held, was sufficient, in context, to be the ‘itinerary’ for the purposes of the PTRs/PTD. The contract was therefore complete on the   day after the telephone call, and therefore the detailed itinerary, arriving 2 weeks after that, was not a part of the contract.

Turning  to the cruise events themselves, he held that (in line with an expert report from an expert in Arctic navigation jointly instructed by both parties), the basic itinerary was still achievable on the day the cruise set off, and the warnings given in advance were adequate to satisfy Reg 12 PTRs on significant pre-departure changes (Article 4.5 PTD).   The abandonment of the NWP a few days later was caused by force majeure (an event which could not be foreseen or forestalled even with all due care – Reg ), (Reg 15(2) PTRs,  Article 5.2 PTD). This provided a Defence for ROL. Other claims made by the Shermans, alleging that the cruise quality was substandard, the food poor, and the ship ill-chosen for this cruise, were all found to be unjustified by the Judge. The claim was dismissed. 

It will be noted that this case was subject to the ‘old’ Package Travel Regulations from 1992 (PTD 1990), though I doubt the result would be different under the ‘new’ 2018 PTRs (the product of the ‘new’ PTD EC/2015/2302). New Reg 9 requires that the package organiser should ensure that the information listed in the PTR Schedule is contained in the contract “depending on the nature of the package” and “if relevant”.  One of many items listed in the Schedule is ‘the itinerary’.  We see this also in the ‘new’ PTD at Article 5(1)(a)(i).  So there is no reason to expect any different result from a case under the ‘new’ law.

It should be noted that all the courts in this case applied the CJEU case of X v Kuoni 2021 C-578/19; that case explained that, as the PTRs/PTD are expressed to be a consumer protection measure, obligations of package organisers should be construed widely and exceptions to those obligations should be construed narrowly.

a. Contract formation

ROL appealed to the Court of Appeal, whose judgment was published in April 2024 (Sherman v Reader Offers Ltd [2024] EWCA Civ 412). . Importantly, they overturned what both the lower judges, the CCJ and the HCJ, had said about the impact of the PTRs/PTD on contract formation. The PTRs, they said, do not affect when a contract is made. In the lead judgment of Lord Justice Males, he said this:-

  • As I have explained, both the Recorder [CCJ] and the Judge [HCJ] considered that the contract was made on 10th January 2018. The Recorder would have held that the contract was concluded in the telephone conversation on 9th January, but for the fact that what was agreed on that date did not include the elements specified in Schedule 2 to the 1992 Regulations, as required by Regulation 9. The [High Court] Judge considered that a contract was made on 10th January, but that what was sent on that date was insufficient to satisfy Regulation 9, and that the contract only became binding on Mr and Mrs Sherman when the confirmation, with its detailed itinerary, was sent on 22nd
  • In my judgment neither approach can be supported. The 1992 Regulations form part of the background to the making of the contract, but do not themselves dictate when a contract is made. That is a matter of domestic law, applying conventional principles of contract formation

In other words, the contract is concluded when it is made in accordance with normal legal principles (offer, acceptance, consideration) .  Failure to send an itinerary, or other relevant information, might or might not breach the PTRs, but the contract (booking) is still valid.

This- led the Court of Appeal to examine the contract formation on the facts of this case. No argument had ever been made by the Shermans to this effect  in any of the 3 courts, nor had it been raised by the CCJ or HCJ, but Lord Justice Males turned to the ROL booking conditions which said, inter alia:-

  • A contract will exist as soon as we issue our confirmation invoice.

On the facts of this case, the invoice was sent out by ROL 2 weeks later with the detailed itinerary. Accordingly, the detailed itinerary  was a part of the contract – not because of anything in the PTRs/PTD, but simply because of ROL’s own contract terms.

b. Warning to passengers re the change of itinerary

Consequently, the warning sent out by ROL pre-departure was inadequate to cover the changes which actually took place to the detailed itinerary. Furthermore, the warning did not spell out the rights which the Shermans had upon the happening of a significant change. Lord Justice Males put it this way:-

  • ROL’s obligation was to inform passengers, including Mr and Mrs Sherman, of this change ‘as quickly as possible’ under Regulation 12 [Article 4.5 PTD] , and to inform them of their rights. Accordingly ROL was required to explain what the proposed new itinerary would be, to inform passengers that they were entitled to cancel and receive a full refund of what they had paid, and to tell them whether a price reduction was being offered to compensate them for the change of plans (evidently it was not). ROL had all the information it needed in order to provide this information by 7th September, which would have given Mr and Mrs Sherman (who were not due to join the party until 9th September) two days to decide what to do.
  • ROL did not provide this information. It did not explain the revised itinerary until the evening of 9th September [in Montreal] , only a matter of hours before the flight to Pond Inlet was due to depart. It did not at any stage tell Mr and Mrs Sherman that they were entitled to a refund. There is no reason why it could not have done so. Accordingly ROL was in breach of the obligations which it owed under Regulation 12 of the 1992 Regulations.

This is to my knowledge the first case of binding authority in the UK which finds that, on the happening of a pre-departure significant change, it is not sufficient for the package organiser to tell the consumer about the change, but that they must also set out the consumer’s rights. The Regulations themselves do not specifically say this.

c. Force majeure

As to the force majeure defence, Lord Justice Males simply said, re the NWP:-

  • However,  I consider that there is no question of this failure being due to unusual and unforeseeable circumstances beyond the control of ROL. While the ice conditions in the Northwest Passage were undoubtedly beyond ROL’s control, and can reasonably be regarded as unusual for the time of year in the light of the [CCJ’s]  finding that the voyage described in the detailed itinerary would have been possible if ice conditions in those waters had been similar to those experienced in the preceding 10 years, it is impossible to say that those conditions were unforeseeable.  Captain Snider’s report makes it clear that navigation is not always possible, and that annual patterns that were once considered reliable are now very much less reliable. It was, therefore, entirely foreseeable that it might prove impossible to perform the cruise in accordance with the detailed itinerary.
  • Ironically, it was the very unforeseeability of ice conditions which was itself foreseeable.

It might be thought that this is not entirely correct. As has often been said, any horrors are foreseeable if you allow your imagination to run free. That’s not what ‘forseeable’ means. It means ‘reasonably forseeable’, and it might be thought that a continuous period of 10 previous years when the cruise could successfully operate would mean that it was not ‘reasonably forseeable’ that it would be impossible in year 11. But there it is.

d. Disclaimers

In holidays with inherent risks (eg a risk of changes, or whatever) , a well worded disclaimer can be effective. The disclaimer needs to be strong enough to cover the situation which arises. In his supporting judgment, another member of the Court of Appeal, Lord Justice Underhill, put it this way:-

  • It is in fact my view, as at present advised, that, where – exceptionally – the special nature of a cruise or expedition is such that the detailed itinerary is inherently uncertain, a sufficiently clear and prominent statement to that effect could affect the extent of the obligations imposed by the Regulations.  More specifically, I do not see why in a case of that kind the requirement in regulation 9 (1) (a) (read with Schedule 2) that the contract should specify “the itinerary” could not be satisfied by stating the general area to be visited and identifying particular locations only on the express basis that they would be included only if conditions permitted: it is important to note that the obligation is qualified by the phrase “depending on the nature of the package”.  If that were done, it would be potentially relevant to whether, where it becomes clear that not all the locations indicated will be visited, there had been a “significant alteration to an essential term”, within the meaning of regulation 12, or “a significant proportion of the services contracted for had not been provided”, within the meaning of regulation 14 [Article 4.7 PTD].

e. The ‘Flicker of Hope’ test

  • The ‘flicker of hope’ test is dead. This test arose out of several low level authorities ( eg Lambert v Travelsphere 2005) decided in the context of the SARS disease outbreak. These had held that a package organiser was not obliged to cancel a trip until such time as there was ‘not a flicker of hope’ that the holiday/trip could continue.. In a rare moment of unity, the CCJ, the HCJ and the Court of Appeal judges all agreed that this overstated the hurdle. The true test is that there is ‘not a reasonable possibility’ of the holiday proceeding. How much difference that makes in practice remains to be seen. These tests have been important in all the Covid cancellation cases – the same test must logically apply to the right of the consumer to cancel a package, without forfeiting cancellation charges, under Reg 12(7) of the 2018 PTRs [Article 12.2 of the 2015 Directive] – as well as cruises and many other scenarios (Caribbean hurricanes, for example).

f. Damages and compensation

So the Court of Appeal confirmed that the case should go back to the County Court for damages and compensation to be assessed. But they gave significant guidance to the County Court as to the right approach to be taken. Lord Justice Males said:-.  

  • The question will then arise whether, if they had been given that information [full detail of the itinerary change and their rights], they would have chosen to cancel. Mr Sherman was adamant in submissions to us that they would have done so, but that is not a point which we can decide. Disappointed and annoyed as they were, Mr and Mrs Sherman had come as far as Montreal and met up with their friends Mr and Mrs Maguire, and they did in fact choose to proceed after hearing what Hurtigruten had to say on the evening of 9th September, although two couples in the party chose to leave. So it is not a foregone conclusion. There will need to be evidence.
  • If the Court concludes that Mr and Mrs Sherman would have cancelled, they will be entitled to a refund of what they paid, together with some compensation for disappointment at the loss of their holiday, but such compensation will be modest, bearing in mind that disappointment is transitory and that the offer of a refund would have gone a considerable way to assuage their feelings (cf. Milner v Carnival Plc [2010] EWCA Civ 389, [2010] PIQR Q30). They could also have been expected to understand, as reasonable people, that the reason why the cruise had to be curtailed was not due to any bad faith or incompetence on the part of ROL ……….., but was simply bad luck as the ice conditions were worse than in previous years. Moreover, if they had chosen to cancel, they would have found themselves in Montreal, which for them was the departure point, and would have to pay for their flights back to London. Credit for this cost would therefore have to be given against the refund of the full price of the holiday.
  • However, if the Court concludes that Mr and Mrs Sherman would have gone ahead, they will not be entitled to a refund, but will be entitled to compensation based on the difference between the price which they paid and the value of the services actually supplied. For this purpose their complaints about the quality of service on board must be disregarded. In submissions to us, Mr Sherman described their experience on board as ‘hell’. That may be his view, but is not what the [CCJ]  found.

And he urged the parties to reach a settlement of a case which, after all, was “about a cruise in which nobody died or was injured or suffered any lasting damage”.

It can be seen that this case illuminates a number of issues concerning the practical application of the PTRs/PTD to real life situations. Most importantly, for the travel industry, the good news is this; if a senior court says “The PTRs/PTD have this effect”, eg re contract formation or anything else,  there is nothing which can be done to avoid the impact of that decision.  But if the court says “you lose because of your booking conditions and/or because of the time you sent documents out”, the conditions can be rewritten or processes can be altered. The need to keep booking conditions, disclaimers etc under review at all times is a clear lesson from this case, as is the need to advise consumers not just of any pre-departure change, but also of their consequent rights.

Versions of this article have also been published in Travel Weekly, and the International Journal of Tourism, Travel and Hospitality Law.

This article was originally published on: 11 June 2024

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