X V KUONI TRAVEL LTD [2021] UKSC 34
FACTS:-
The Claimant entered into a contract with Kuoni under which Kuoni agreed to provide a package holiday in Sri Lanka. She was raped by an electrician “N” employed by the hotel in which she was stayed. She claimed damages against Kuoni for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992 (SI 1992/3288) (“the 1992 Regulations”) which implemented in the United Kingdom Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (“the Directive”).
JUDGEMENT :-
The UK Supreme Court considered the relevant legislation. It was accepted that there was no basis for suggesting that N should have been identified as a risk. Furthermore, it was no part of X’s case that there was systemic or organisational negligence on the part of Kuoni or the hotel (such as failure to supervise N or carelessness in selecting N as an employee) causative of the attack. The assault was caused by N alone.
At first instance, the trial judge held that the words “holiday arrangements” in the contract for the holiday, did not include a member of the maintenance staff conducting a guest to reception. He further held, obiter, that Kuoni would in any event have been able to rely on the statutory defence under regulation 15(2)(c)(ii) of the 1992 Regulations because the assault was an event which could not have been foreseen or forestalled (by inference by the hotel) even with all due care. Although it was not necessary to decide the point, he held that the hotel would not have been vicariously liable for the rape and assault as a matter of Sri Lankan law, which it was agreed was the same as English law for these purposes. The Court of Appeal dismissed the appeal by a majority.
The issues before the Supreme Court were as follows :-
Issue 1: Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the package travel contract?
Issue 2: If so, was any liability of Kuoni in respect of N’s conduct excluded by the contract and/or regulation 15(2)(c) of the 1992 Regulations?
The parties agreed that the relevant clause 5.10(b) of the contract was intended to replicate the terms of regulation 15(2)(c) of the 1992 Regulations, which, in turn, was intended to implement article 5 of the Directive. It was further agreed that liability under regulation 15 could not be excluded by any contractual term (regulation 15(5)). The defence in contract was co-extensive with the statutory defence.
Article 5(2) of the Directive set out a series of defences available to a holiday provider, firstly for failures that were attributable to the consumer, failure attributable to an unconnected third party which were unforeseeable and unavoidable, and (the third line or indent to Article 5(2)), failures that were “due to a case of force majeure such as that defined in article 4(6), second sub-paragraph (ii), or to an event which the organizer and/or retailer or the supplier of services, even with all due care, could not foresee or forestall.”
On 24 July 2019 the Supreme Court made a preliminary reference to the Court of Justice of the European Union (“CJEU”) ([2019] UKSC 37). The Supreme Court invited the CJEU, for the purpose of the reference, to assume that guidance by a member of the hotel’s staff of Mrs X to the reception was a service within the “holiday arrangements” which Kuoni had contracted to provide and that the rape and assault constituted improper performance of the contract. The Supreme Court then referred the following questions, relating to Issue 2, to the CJEU:
(1) Where there was a failure to perform or an improper performance of the obligations arising under the contract of an organiser or retailer with a consumer to provide a package holiday to which Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours applied, and that failure to perform or improper performance was the result of the actions of an employee of a hotel company which was a provider of services to which that contract related:
(a) was there scope for the application of the defence set out in the second part of the third line to article 5(2); and, if so,
(b) by which criteria was the national court to assess whether that defence applied?
(2) Where an organiser or retailer entered into a contract with a consumer to provide a package holiday to which Council Directive 90/314/EEC applied, and where a hotel company provided services to which that contract related, was 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 line of the Directive?
The CJEU delivered its judgment on 18 March 2021 in the following terms:
“The third indent of article 5(2) of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours, in so far as it provides for a ground for exemption from liability of an organiser of package travel for the proper performance of the obligations arising from a contract relating to such travel, concluded between that organiser and a consumer and governed by that Directive, must be interpreted as meaning that, in the event of non-performance or improper performance of those obligations, which is the result of the actions of an employee of a supplier of services performing that contract:
- that employee cannot be regarded as a supplier of services for the purposes of the application of that provision, and
- the organiser cannot be exempted from its liability arising from such non-performance or improper performance, pursuant to that provision.”
The UK Supreme Court now addressed the issues above.
Issue 1: Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the package travel contract?
The court would accept that the purpose of the agreement, namely to confer an enjoyable experience, encouraged a broad, not a narrow, interpretation of the holiday services contracted for. That would include the service of looking after and serving holidaymakers courteously in matters relating to their holiday experience. It appeared that under N’s contract of employment with the hotel he was expected to act in conformity with the hotel’s house rules which had been provided to N when he started his employment. These house rules provided that the principal objective of employees should be to look after guests, serve them courteously and make them comfortable. The fact that N’s conduct was so grossly egregious did not alter the fact that this was a breach of the package travel contract between Mr and Mrs X and Kuoni.
The CJEU made clear that a broad approach should be adopted when seeking to identify the scope of ancillary obligations undertaken under a package travel contract.
Issue 2: If Issue 2 was decided in the affirmative, was 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?
The question referred by the Supreme Court to the CJEU fell into two parts.
(a) Was an employee of a supplier of services himself a supplier of services for the purposes of article 5(2) of the Directive?
The Directive did not define the concept of “supplier of services” nor did it refer expressly to the law of the member states in that regard. The CJEU considered that the usual meaning of the phrase “supplier of services” referred to a natural or legal person who provided services for remuneration, a meaning shared by the various language versions of that provision.
The CJEU also considered that an employee of a supplier of services could not himself or herself be classified as a supplier of services within article 5 of the Directive. By definition, a supplier of services was not subject to any relationship of subordination when he or she provided his or her services, with the result that an employee could not be regarded as a supplier of services for the purposes of applying article 5 of the Directive.
However, the CJEU then went on to consider the liability of an organiser under article 5(2) of the Directive for the acts of an employee of a supplier of services. It emphasised that the fact that an employee of a supplier of services could not himself or herself be regarded as a supplier of services in the context of the application of the system of contractual liability established by the Directive did not preclude that employee’s acts or omissions from being treated, for the purpose of that system, in the same way as those of the supplier of services employing him or her.
The CJEU considered that in view of the objective of ensuring a high level of consumer protection, the obligations arising from a package travel contract could not be interpreted restrictively.
The CJEU would start from the premise that X being accompanied to reception by a member of the hotel staff was a service falling within the scope of the holiday arrangements which Kuoni contracted to provide under the contract at issue, and that the rape and assault committed by N on X constituted improper performance of that contract.
It followed that, in a situation such as that at issue in the main proceedings, a travel organiser such as Kuoni might be held liable to a consumer such as X for improper performance of the contract between the parties, where that improper performance had its origin in the conduct of an employee of a supplier of services performing the obligations arising from that contract.
(b) The scope of the exemptions from liability under article 5(2) of the Directive
This was the second part of the question referred to the CJEU.
According to Article 5(2), the organiser was liable for damage suffered by the consumer as a result of the failure to perform or improper performance of the package travel contract, unless such failure to perform or improper performance was attributable neither to any fault of the organiser nor to that of another supplier of services because one of the grounds for exemption from liability contained in that provision applies to it. These grounds for exemption included that laid down in the third indent of article 5(2) which referred to situations in which the non-performance or improper performance of the contract was due to an event which the organiser or the supplier of services, even with all due care, could not foresee or forestall.
The CJEU considered that since that ground for exemption from liability derogated from the rule in article 5(1) laying down the liability of organisers, it must be interpreted strictly. The event which could be foreseen or forestalled referred to in the third indent of article 5(2) of the Directive must be interpreted as referring to a fact or incident which did not fall within the sphere of control of the organiser or the supplier of services.
The acts or omissions of an employee of a supplier of services, in the performance of obligations arising from a package travel contract, resulting in the non-performance or improper performance of the organiser’s obligations vis-à-vis the consumer did fall within that sphere of control. This meant that those acts or omissions could not be regarded as events which could not be foreseen or forestalled within the meaning of the third indent of article 5(2).
Consequently, it must be held that the third indent of article 5(2) of Directive 90/314 could not be relied on in order to exempt organisers from their obligation to make reparation for the damage suffered by consumers as a result of the non-performance or improper performance of obligations arising from package travel contracts concluded with those organisers, where those failures are the result of acts or omissions of employees of suppliers of services performing those obligations.
The Supreme Court said that Kuoni could not invoke the exemption from liability established by the third indent of article 5(2) of the Directive or the corresponding provision in regulation 15(2)(c)(ii) of the 1992 Regulations, which implemented the Directive, as a defence to a claim for improper performance of obligations under the package travel contract because that improper performance was caused by the acts of N, an employee of the hotel which was a supplier of services performing those obligations. Kuoni was liable to Mrs X under regulation 15 of the 1992 Regulations.
Kuoni was also liable to Mrs X for breach of the package travel contract. It was common ground between the parties that clause 5.10(b) of that contract was intended to replicate the terms of regulation 15(2)(c) which, in turn, was intended to implement article 5 of the Directive.
Kuoni was liable to Mrs X both under the 1992 Regulations and for breach of contract.
The Supreme Court said that it was not necessary to address issues relating to vicarious liability, which was not relevant here. The liability that arose under the Directive did not depend on vicarious liability for the acts of an employee. Moreover, to introduce the principle of vicarious liability into the operation of the Directive scheme would defeat its purpose by rendering the pursuit of claims against tour operators unnecessarily complex and expensive. Questions of vicarious liability of a hotel for the acts of its employees would be likely to be governed by the law of the place where the hotel was situated, with the result that differing systems of national law would apply.
FACTS:-
The Claimant entered into a contract with Kuoni under which Kuoni agreed to provide a package holiday in Sri Lanka. She was raped by an electrician “N” employed by the hotel in which she was stayed. She claimed damages against Kuoni for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992 (SI 1992/3288) (“the 1992 Regulations”) which implemented in the United Kingdom Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (“the Directive”).
JUDGEMENT :-
The UK Supreme Court considered the relevant legislation. It was accepted that there was no basis for suggesting that N should have been identified as a risk. Furthermore, it was no part of X’s case that there was systemic or organisational negligence on the part of Kuoni or the hotel (such as failure to supervise N or carelessness in selecting N as an employee) causative of the attack. The assault was caused by N alone.
At first instance, the trial judge held that the words “holiday arrangements” in the contract for the holiday, did not include a member of the maintenance staff conducting a guest to reception. He further held, obiter, that Kuoni would in any event have been able to rely on the statutory defence under regulation 15(2)(c)(ii) of the 1992 Regulations because the assault was an event which could not have been foreseen or forestalled (by inference by the hotel) even with all due care. Although it was not necessary to decide the point, he held that the hotel would not have been vicariously liable for the rape and assault as a matter of Sri Lankan law, which it was agreed was the same as English law for these purposes. The Court of Appeal dismissed the appeal by a majority.
The issues before the Supreme Court were as follows :-
Issue 1: Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the package travel contract?
Issue 2: If so, was any liability of Kuoni in respect of N’s conduct excluded by the contract and/or regulation 15(2)(c) of the 1992 Regulations?
The parties agreed that the relevant clause 5.10(b) of the contract was intended to replicate the terms of regulation 15(2)(c) of the 1992 Regulations, which, in turn, was intended to implement article 5 of the Directive. It was further agreed that liability under regulation 15 could not be excluded by any contractual term (regulation 15(5)). The defence in contract was co-extensive with the statutory defence.
Article 5(2) of the Directive set out a series of defences available to a holiday provider, firstly for failures that were attributable to the consumer, failure attributable to an unconnected third party which were unforeseeable and unavoidable, and (the third line or indent to Article 5(2)), failures that were “due to a case of force majeure such as that defined in article 4(6), second sub-paragraph (ii), or to an event which the organizer and/or retailer or the supplier of services, even with all due care, could not foresee or forestall.”
On 24 July 2019 the Supreme Court made a preliminary reference to the Court of Justice of the European Union (“CJEU”) ([2019] UKSC 37). The Supreme Court invited the CJEU, for the purpose of the reference, to assume that guidance by a member of the hotel’s staff of Mrs X to the reception was a service within the “holiday arrangements” which Kuoni had contracted to provide and that the rape and assault constituted improper performance of the contract. The Supreme Court then referred the following questions, relating to Issue 2, to the CJEU:
(1) Where there was a failure to perform or an improper performance of the obligations arising under the contract of an organiser or retailer with a consumer to provide a package holiday to which Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours applied, and that failure to perform or improper performance was the result of the actions of an employee of a hotel company which was a provider of services to which that contract related:
(a) was there scope for the application of the defence set out in the second part of the third line to article 5(2); and, if so,
(b) by which criteria was the national court to assess whether that defence applied?
(2) Where an organiser or retailer entered into a contract with a consumer to provide a package holiday to which Council Directive 90/314/EEC applied, and where a hotel company provided services to which that contract related, was 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 line of the Directive?
The CJEU delivered its judgment on 18 March 2021 in the following terms:
“The third indent of article 5(2) of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours, in so far as it provides for a ground for exemption from liability of an organiser of package travel for the proper performance of the obligations arising from a contract relating to such travel, concluded between that organiser and a consumer and governed by that Directive, must be interpreted as meaning that, in the event of non-performance or improper performance of those obligations, which is the result of the actions of an employee of a supplier of services performing that contract:
- that employee cannot be regarded as a supplier of services for the purposes of the application of that provision, and
- the organiser cannot be exempted from its liability arising from such non-performance or improper performance, pursuant to that provision.”
The UK Supreme Court now addressed the issues above.
Issue 1: Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the package travel contract?
The court would accept that the purpose of the agreement, namely to confer an enjoyable experience, encouraged a broad, not a narrow, interpretation of the holiday services contracted for. That would include the service of looking after and serving holidaymakers courteously in matters relating to their holiday experience. It appeared that under N’s contract of employment with the hotel he was expected to act in conformity with the hotel’s house rules which had been provided to N when he started his employment. These house rules provided that the principal objective of employees should be to look after guests, serve them courteously and make them comfortable. The fact that N’s conduct was so grossly egregious did not alter the fact that this was a breach of the package travel contract between Mr and Mrs X and Kuoni.
The CJEU made clear that a broad approach should be adopted when seeking to identify the scope of ancillary obligations undertaken under a package travel contract.
Issue 2: If Issue 2 was decided in the affirmative, was 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?
The question referred by the Supreme Court to the CJEU fell into two parts.
(a) Was an employee of a supplier of services himself a supplier of services for the purposes of article 5(2) of the Directive?
The Directive did not define the concept of “supplier of services” nor did it refer expressly to the law of the member states in that regard. The CJEU considered that the usual meaning of the phrase “supplier of services” referred to a natural or legal person who provided services for remuneration, a meaning shared by the various language versions of that provision.
The CJEU also considered that an employee of a supplier of services could not himself or herself be classified as a supplier of services within article 5 of the Directive. By definition, a supplier of services was not subject to any relationship of subordination when he or she provided his or her services, with the result that an employee could not be regarded as a supplier of services for the purposes of applying article 5 of the Directive.
However, the CJEU then went on to consider the liability of an organiser under article 5(2) of the Directive for the acts of an employee of a supplier of services. It emphasised that the fact that an employee of a supplier of services could not himself or herself be regarded as a supplier of services in the context of the application of the system of contractual liability established by the Directive did not preclude that employee’s acts or omissions from being treated, for the purpose of that system, in the same way as those of the supplier of services employing him or her.
The CJEU considered that in view of the objective of ensuring a high level of consumer protection, the obligations arising from a package travel contract could not be interpreted restrictively.
The CJEU would start from the premise that X being accompanied to reception by a member of the hotel staff was a service falling within the scope of the holiday arrangements which Kuoni contracted to provide under the contract at issue, and that the rape and assault committed by N on X constituted improper performance of that contract.
It followed that, in a situation such as that at issue in the main proceedings, a travel organiser such as Kuoni might be held liable to a consumer such as X for improper performance of the contract between the parties, where that improper performance had its origin in the conduct of an employee of a supplier of services performing the obligations arising from that contract.
(b) The scope of the exemptions from liability under article 5(2) of the Directive
This was the second part of the question referred to the CJEU.
According to Article 5(2), the organiser was liable for damage suffered by the consumer as a result of the failure to perform or improper performance of the package travel contract, unless such failure to perform or improper performance was attributable neither to any fault of the organiser nor to that of another supplier of services because one of the grounds for exemption from liability contained in that provision applies to it. These grounds for exemption included that laid down in the third indent of article 5(2) which referred to situations in which the non-performance or improper performance of the contract was due to an event which the organiser or the supplier of services, even with all due care, could not foresee or forestall.
The CJEU considered that since that ground for exemption from liability derogated from the rule in article 5(1) laying down the liability of organisers, it must be interpreted strictly. The event which could be foreseen or forestalled referred to in the third indent of article 5(2) of the Directive must be interpreted as referring to a fact or incident which did not fall within the sphere of control of the organiser or the supplier of services.
The acts or omissions of an employee of a supplier of services, in the performance of obligations arising from a package travel contract, resulting in the non-performance or improper performance of the organiser’s obligations vis-à-vis the consumer did fall within that sphere of control. This meant that those acts or omissions could not be regarded as events which could not be foreseen or forestalled within the meaning of the third indent of article 5(2).
Consequently, it must be held that the third indent of article 5(2) of Directive 90/314 could not be relied on in order to exempt organisers from their obligation to make reparation for the damage suffered by consumers as a result of the non-performance or improper performance of obligations arising from package travel contracts concluded with those organisers, where those failures are the result of acts or omissions of employees of suppliers of services performing those obligations.
The Supreme Court said that Kuoni could not invoke the exemption from liability established by the third indent of article 5(2) of the Directive or the corresponding provision in regulation 15(2)(c)(ii) of the 1992 Regulations, which implemented the Directive, as a defence to a claim for improper performance of obligations under the package travel contract because that improper performance was caused by the acts of N, an employee of the hotel which was a supplier of services performing those obligations. Kuoni was liable to Mrs X under regulation 15 of the 1992 Regulations.
Kuoni was also liable to Mrs X for breach of the package travel contract. It was common ground between the parties that clause 5.10(b) of that contract was intended to replicate the terms of regulation 15(2)(c) which, in turn, was intended to implement article 5 of the Directive.
Kuoni was liable to Mrs X both under the 1992 Regulations and for breach of contract.
The Supreme Court said that it was not necessary to address issues relating to vicarious liability, which was not relevant here. The liability that arose under the Directive did not depend on vicarious liability for the acts of an employee. Moreover, to introduce the principle of vicarious liability into the operation of the Directive scheme would defeat its purpose by rendering the pursuit of claims against tour operators unnecessarily complex and expensive. Questions of vicarious liability of a hotel for the acts of its employees would be likely to be governed by the law of the place where the hotel was situated, with the result that differing systems of national law would apply.