New horizons

Since their introduction 18 years ago, the Package Travel Regulations 1992 have generated endless controversy over their actual scope. Now the directive on which they are based is finally being reviewed by the European Commission, with formal proposals for reform expected later this year.

The general direction taken by the commission would expand the protection given to consumers by the directive '“ something which claimant lawyers have welcomed.

'We are very pleased about this, because there are areas where the directive has really fallen behind in terms of protection,' says Clive Garner, head of Irwin Mitchell's international travel litigation group and chair of the Tourism Group of the Pan European Organisation of Personal Injury Lawyers (PEOPIL) In particular, according to Garner, the directive is out of sync with the trend toward 'dynamic packaging', where people tailor their holiday themselves; for example, booking their flights and accommodation separately. This sort of holiday falls outside the definition of a 'package', which the regulations take to mean a pre-arranged combination of components sold at an inclusive price.

'The whole basis of the package travel regulations was to enable passengers to be afforded the protection to pursue tour operators in the claimants' own jurisdiction,' says Daniel Scognamiglio, head of the travel team at Blake Lapthorn in Southampton. But claimants are increasingly finding themselves without this protection, and often their only recourse is to pursue their claim overseas. 'This can be very difficult and expensive,' says Scognamiglio. 'It can often take a lot longer and can mean they get lower levels of damages.'

In CAA v ABTA [2006] EWCA 1356, the Court of Appeal considered what the term 'inclusive price' meant, but was 'quite unhelpful and restrictive' in its definition, according to Garner. He feels that further clarity of definition in the directive itself is needed 'to effectively reverse the court's decision and enable more arrangements to come within the directive'.

Scognamiglio agrees that a clearer definition of 'package' is needed '“ as well as more clarity from tour operators themselves. 'Some tour operators do not make it clear on their website that what they are selling is not a package. Even where an inclusive price is stated, sometimes the company will take two payments from the customer's credit card in the hope of splitting up the package.'

He admits that the bigger tour operators, such as TUI, are 'generally very good and really stick to the rules', but feels that 'the smaller ones in particular try to flout the rules and get around their obligations under the regulations'.

There is very little legislation in place, explains Scognamiglio, for tour operators not providing a package. 'It really comes back to the Sale of Goods Act, and here there is not as much consumer protection. You'll be looking at whether there has been a breach of contract to see if the holiday lived up to expectations, or to any implied terms, rather than the tour operator being liable for the injury as result of any wrongdoing by the hotel or other party associated with the package.'

Problems with excursions

More specifically, there are also calls from claimant lawyers to extend protection for those who have booked excursions 'in resort'. Tour operators, says Scognamiglio, 'seem to want to exclude excursions from the package, so if someone were to go off to Spain and book themselves on to a jeep safari when they got out there '“ an excursion they were only told about at the welcome function '“ this is not necessarily included as part of the package'.

This can be quite a grey area for the courts, according to Scognamiglio. 'It really comes down to what the parties believe and whether the tour operator has been acting as agent for an undisclosed principle.'

In the 2005 case Moran v First Choice, the court said that based on the literature and other representations made to the victim, First Choice made it appear as though the excursion was being provided by them, rather than by an undisclosed principal; because of that the court held First Choice liable. Clive Garner feels that this was 'the right result', but that 'clarification at the European level would be helpful'. This is an issue that crops up quite frequently, he says. 'We see lots of people who get injured in excursions booked in resort and many of them sadly don't have any adequate means of redress when things go wrong.'

Scognamigilo feels that the problems with excursion-related claims have been exacerbated by less experienced firms dealing with cases. 'Some smaller firms or those that don't know what they are doing can really mess things up, in that the claim could go too far and create a precedent that is detrimental to a lot of customers,' he says. As an example, he points to Holden '“ an unreported case in

Winchester High Court which, he says, was 'run by a very small firm that clearly did not understand or appreciate the particular aspects of the package holiday. They even quoted some English jurisdiction with regards occupiers' liability in the proceedings, which was completely irrelevant. And the High Court went a bit too far with their judgment.' This, says Scognamiglio, has created a precedent whereby all the claimants now have to provide evidence as to a breach of local regulations wherever they are bringing a claim in court for breach of the package regulations, 'which can be onerous and irrelevant for a lot of claims'.

Firms, says Scognamiglio, 'should not babble in these cases'. He feels that if inexperienced firms refer cases on an early stage, 'it will save a lot of grief further down the line'.

Mark Lee, head of the travel group at Penningtons, Godalming, would place an onus on tour operators 'firstly to ensure their terms and conditions exclude liability for any accidents which occur during the course of an excursion unless it is pre-booked as part of the package. They should also give handouts to customers on arrival to explain they bear no responsibility, that they are merely acting as agent, and that the principal responsibility is with the excursion provider.'

Sometimes, he says, operators 'let themselves down as they don't always make that very clear'.

Operators, he continues, 'also need to carefully look at preparing appropriate supplier contracts, which will include indemnity clauses to oblige the supplier to indemnify the tour operator for any damages they have to pay out as a consequence of any act or omission'. They should also think carefully about the training they put in place with their tour reps, says Lee. 'The representatives on the ground need to understand that they must make it as clear as possible they are acting as agent only for any excursions arranged in resort. It would also be a good idea to implement an appropriate risk assessment procedure for the suppliers to show they have properly assessed their ability to conduct the excursion.'

Implementing Rome II

The Package Travel Regulations is not the only area of ambiguity currently troubling claimants. As predicted in last year's travel trends feature ('All roads lead to Rome', 153/8, 3 March 2009) the new Rome II legislation has caused difficulties in terms of advising clients. 'There is a range of uncertainties that Rome II creates,' says Garner, 'and although it was intended to clarify and simplify the legal rules in this area, it has had the opposite effect.' One such area of inconsistency relates to the temporal scope of Rome II; when did it actually come into force? 'This is an issue that is coming up quite regularly, and it requires clarification,' says Mark Lee. 'The only case I know where a decision was made is the county court decision of Bonsall v Cattolica Assicurazioni. The judge concluded that Rome II applies after the 20 August 2007 although the law applies from the 11 January 2009. Therefore if the actual assessment of damages takes place after 11 January 2009, Rome II should apply to the quantification of damages. It remains to be seen whether other judges will also follow this approach.'

Lee hopes to see some consistency from judges, and that eventually the issue will go to the High Court or Court of Appeal. 'We have two cases listed before a circuit judge regarding this issue, so it will be interesting to see if he adopts the same interpretation.'

But until a higher authority makes a decision on the issue, advice to clients 'is still going to be quite vague', according to Scognamiglio. While he anticipates that 'quite a few cases' will go to court on the point in the meantime, 'it is a bit of a lottery'.

Scognamiglio hopes there will be some High Court decisions on the point before the end of the year. 'Clarity on the implementation date would be helpful.'

Assessing the damage

Another uncertainty that remains is the extent to which judges will apply English law to the quantification of damages for a foreign accident. Regulation 4.1 provides that generally the law applicable in personal injury cases will be the law where the injury was sustained. This represents a fundamental change in the law, whereby assessment of damages used to be a matter for the English courts.

So, if you have an accident in Spain, but bring proceedings in a UK court under Rome II, then in general the Spanish law of quantum will apply. However, Garner points out, recital 33 of the regulation states that, specifically in RTA cases, the court can have regard to the actual financial and other circumstances of the victim, including the actual losses and the costs of care incurred by the victim in their home country. 'In this regard, the general rule in regulation 4.1 and the provisions of recital 33 conflict,' he says.

'The court has got to decide which way to go,' Garner adds. 'Does it follow the directive and award care and other costs on the basis of the Spanish rules, or does it follow the recital and award it on the basis of actual losses thereby reflecting English rules?'

In the meantime, according to Lee, the commission has recognised the problems with compensating victims of RTA abroad. 'It seems the European Commission has had second thoughts,' he says, referring to various recommendations for reform put forward in a report prepared by the commission and published on 29 January 2009 ('Compensation of victims of cross-border road traffic accidents in the EU: comparison of national practices, analysis of problems and evaluation of options for improving the position of cross-border victims').

'There are attempts by the European Parliament to ensure appropriate compensation is based on loss incurred in the victim's country of domicile, and that could result in a further review of the Rome II regulation, purely for cross-border RTA,' says Lee. 'But this is not the first time the commission has come up with a report that didn't get put into practice '“ so we will have to wait and see. For the moment, travel lawyers are having to deal with Rome II as it stands.'

Meanwhile, for those injured in accidents other than RTA, recital 33 has no effect and therefore only the law of the country in which the accident occurred will apply to determine the value of the claim. 'We want to see damages quantified according to the law of the victim's domicile, end of,' says Garner. 'It's a very simple principle; the victim gets full compensation as if they had been injured in their own country.' While he admits this would be a shift in terms of private international law principles, 'it provides a fair result for injured parties'.

Garner feels such a shift would not be unduly prejudicial to defendants, or their insurers. 'Insurers have said it will create uncertainty. We don't agree. International accidents affected by Rome II are relatively small in number in comparison with most insurers' books of business '“ probably less than one per cent.'

Interesting times

There are many more strands of complexity to both the Package Travel Regulations and Rome II than can be covered in this article.

But all the ambiguity has meant that this last year has been a time for testing the water, with regard to both the impact of Rome II and how that affects the handling of cases in practice, and how the Package Travel Regulations are being interpreted and developed. What is clear is that the uncertainty surrounding the travel and holiday legislation makes it a very interesting time for practitioners and their clients.