Exploring defences available to UK tour operators over pre-departure cancellations following the COVID-19 outbreak

Date published

05/05/2020

Services

Sectors

Locations

As the Package Travel and Linked Travel Arrangements Regulations 2018 (2018 Regulations) make clear, there is a requirement for tour operators to make a refund if they cannot provide the holiday the customer booked. However, it was clearly never the intention of the 2018 Regulations to cover such wide-scale interruption as we have seen since the COVID-19 outbreak, and as Germany, France, Italy, Spain, Denmark and Belgium have recently relaxed such refund requirements, we consider what options UK tour operators have.

Background

Currently, no judgments provide guidance on viable defences to the question of the customers right to a cash refund in the unique situation of a COVID-19 outbreak. However, in Tanner v TUI [2005], the court considered compensation and refunds under the Package Travel Regulations 1992 (the 1992 Regulations) and contract law, which may provide some guidance to tour operators as to their liability under the 2018 regulations.

The case involved a Mediterranean cruise in which the ship should have called at five ports but only docked at three due to gale force winds. Due to the extremely high seas, no hot food was provided, pools were shut and passengers were contained in their cabins for safety reasons. A group action was brought for breach of contract along with breach of Regulation 14 of the 1992 Regulations, with the claimants alleging that a significant proportion of the services contracted for were not provided by the defendant.

The 1992 Regulations and contract law

The judge concluded that Regulation 14 applied in this case as a cruise to visit 5 ports but which only visited 3 ports, constituted a failure to provide “a significant proportion of the services contracted for”. And as such, there is an obligation on the tour operator to:

provide suitable alternative arrangements at no extra cost to the consumer for the continuation of the package, and where appropriate to compensate the customer for the difference between the services to be supplied under the contract and those supplied.

When considering whether it was appropriate for there to be compensation under Regulation 14, the judge confirmed that whilst the customers had not got the cruise they had booked, as this was through no fault of the tour operator but rather bad weather, that it seemed quite wrong that the tour operator should provide compensation or a refund for the services not provided.

The judge also confirmed that Regulation 15 provided a defence when failures are due to either unusual and unforeseeable circumstances beyond the control of the tour operator, the consequence of which could not have been avoided even by use of all due care and due to an event which the other parties to the contract even with all due care, could not foresee or forestall.

The judge then went on to consider the contractual basis of the claim confirming that if there is no breach of contract, as non-performance of a contract is justified by events beyond the parties’ control, it would not be appropriate for passengers to be compensated for not having had the benefit of those services.

For all of those reasons the claim in Tanner was dismissed.

Application to current situation

Applying the decision in Tanner to the current situation, we suggest that it is conceivable to assert that where it is impossible for a tour operator to provide the contract booked, due to the COVID-19 outbreak, that they may be able to rely on a ‘Tanner-type’ defence under the 2018 Regulations.

Regulation 13 confirms that where:

“…the organiser is prevented from performing the contract because of unavoidable and extraordinary circumstances and notifies the traveller of the termination of the contract without undue delay before the start of the package….The organiser…may terminate the package travel contract and provide the traveller with a full refund of any payments made for the package”.

We would suggest the word ‘may’ in Regulation 13 is akin to ‘where appropriate’ in the 1992 Regulations. And whilst Regulation 15 provides for compensation, we suggest this is not payable, as COVID-19 would fall under the defence of being ‘unavoidable and extraordinary circumstances’. As such we believe that a similar defence as used in Tanner could apply in the current climate, under the 2018 Regulations.

It would therefore follow that Tanner could also be used as a defence to claims brought by consumers pursuant to Regulation 12, which allows for the traveller to terminate the holiday pre-departure:

in the event of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and which significantly affect the holiday…..and the traveller is entitled to a full refund of any payments made for the package.

We would also suggest that given the judge in Tanner decided to revisit contract law to assert there is no fault on the tour operator, confirming that it would be inappropriate to order reimbursement, that this is clearly also comparable to the current COVID-19 outbreak.

In addition, and again following the logic of Tanner, we would propose that where a tour operator has not been refunded by its suppliers for accommodation and transport elements of a package, and where a refund of the holiday cost has been offered in the form of a credit for a future holiday, that this would allow a tour operator to assert it has ‘refunded sums paid’ by consumers and there “were good reasons why it was impossible to provide those services and therefore it would not be appropriate for passengers to be compensated for not having had the benefit of those services”.

Comment

Whilst the 2018 Regulations clearly were not drafted with an event such as the COVID-19 outbreak in mind, it would seem nevertheless that they do allow for unavoidable and exceptional circumstances which this clearly is, and in such circumstances there is a defence available to tour operators over pre-departure cancellations by applying the decision in Tanner to this current situation.

Related items:

Focus area

Coronavirus (COVID-19)

As developments unfold, Kennedys experts across the world advise on what the COVID-19 pandemic means for you and your business.

Go to focus area