Court of Appeal confirms airlines can compensate passengers directly
Bott & Co Solicitors Ltd v Ryanair DAC [12.02.19]
This week, the Court of Appeal rejected a challenge to provisions in Ryanair’s Conditions of Carriage, addressing the manner in which claims for compensation under Regulation EC261/2004 (the Regulation) must be made. The Court of Appeal held that Ryanair could continue to pay compensation directly to passengers, dismissing a claim by Bott & Co Solicitors Ltd (Bott) for fees Bott was unable to recover from its clients following Ryanair’s payment of compensation directly to its customers. It also held that the requirement in the Conditions of Carriage to present the claim direct to Ryanair in the first instance did not amount to a waiver or limitation of the passenger’s rights under the Regulation.
Bott specialise in flight delay compensation claims and, since February 2013, have acted on approximately 125,000 claims subject to a conditional fee agreement.
In July 2016, Ryanair changed its standard terms and conditions to include a claims procedure which requires passengers seeking compensation to deal directly with Ryanair, allowing 28 days for a response before instructing a third party to act on their behalf. Ryanair also created online forms for the submission of compensation claims. Bott alleged that this clause was invalid under EU law, as it limits a passenger’s right to compensation.
As a result of the conditional fee agreement alleged to be in place with its clients, Bott alleged that, where Ryanair had subsequently made a compensation payment directly to a customer who had instructed Bott, Bott were entitled to an equitable lien over the payment. This would require Ryanair to retain part of the compensation in order to cover Bott’s entitlement to fees, or to make the whole of the compensation payment directly to Bott and not to the customer.
Bott asserted that it had an equitable lien over payment of the compensation. The court determined that mere negotiation by a solicitor resulting in a recovery could not give rise to a lien, and that there had to be some form of proceedings, either by way of litigation or arbitration for an equitable lien to arise. The court found the majority of recoveries by Bott under the Regulation did not even involve a negotiation. In the absence of proceedings or arbitration (or pursuit of a claim under one of the pre-action protocols) the services Bott provided cannot be said to be litigation services. As a result, the court held that Bott was “not entitled to an interest in the compensation that equity will protect”.
Bott also asserted that Clause 15 of Ryanair’s Conditions of Carriage (which stipulates a process of pursuing claims under the Regulation) amounted to a waiver or limitation of the passenger’s rights, and was therefore in breach of Article 15 of the Regulation. The Court of Appeal agreed that the clause did not put a material obstacle in the way of making a claim, nor did it result in the customer recovering less than they were entitled to; as long as the claims procedure mandated by the airline does not present a material obstacle to the passenger in bringing such a claim, it will not fall foul of this test.
This judgment supports an airlines’ ability to choose to deal directly with passengers, even following initial contact from a claims handler (but it is important to note that this does not apply once proceedings are commenced). It also endorses contractual provisions that prescribe a specific process for bringing a claim for compensation under the Regulation, at least insofar as those provisions to do not amount to a material obstacle to bringing a claim.
This ruling will inevitably come as a blow to claims handlers specialising in Regulation compensation claims, and endorses airlines changing their General Conditions of Carriage to require claims be presented to the airline in the first instance, thus ensuring that their customers receive 100% of any compensation due to them.