Key points from X v. Kuoni [2021] UKSC 34 – Defendants’ Options Narrowed

In a unanimous judgment, the Supreme Court has sided with consumers in its final judgment in this long running case (X v. Kuoni [2021] UKSC 34). We have previously discussed this case in detail both following the interim decision in the Supreme Court (First Article) and following the judgment of the CJEU (Second Article). The case arose from a tragic set of facts, and it is regrettable that it has taken the claimant as long as it has to finally receive closure. The full background and case history is set out in the first of those previous articles.

As previously predicted by this author, the judgment has arguably done more damage to the position of defendant tour operators than the situation which was the status quo prior to the judgment in their favour in the Court of Appeal.

In simple terms, the case contains useful guidance to be applied when considering:

1. Whether there has been a breach in a contract for package holiday services within the meaning of the Package Travel, Package Holidays and Package Tours Regulations 1992 (and more widely for contracts under the new Package Travel and Linked Travel Arrangements Regulations 2018, and domestic contracts for the provision of holiday services);
2. In the event of a breach of a contract to which the package travel regulations (and particularly the 1992 regulations apply) in what circumstances statutory defences are available to tour operators.

The major issues which arise from the judgment are:

1. The services provided for in a contract for holiday services are to be given a broad rather than a narrow interpretation [29-31] and [47]. This is due to the accepted purpose of such a contract to provide enjoyment and is justified with reference to the fact that, exceptionally, damages for loss of enjoyment are available for breaches of contracts of this type. Accordingly, so long as those services are “necessary for the provision of a holiday of a reasonable standard”, it will be immaterial whether they are actually specified within the contract itself. This will no doubt be a flashpoint for future litigation but given the clear indication of the Supreme Court in this case it is not an argument which defendants can anticipate winning regularly, particularly in package tour cases;
2. For the purposes of determining whether there has been a breach of the contract for holiday arrangements it is immaterial whether the person who provided the service to the insufficient standard was employed by the supplier of services for that purpose [33]. The fact that the conduct was criminal did nothing to alleviate the burden on the supplier of services/organiser of the holiday. This raises an interesting question of whether a person who was not under any relationship of employment with the supplier of services could provide a service which breached the contract – it would seem that they certainly could. I suspect the point will be of largely academic interest due to the fact that the new Package Travel and Linked Travel Arrangements Regulations 2018 make clear that an organiser has available a defence where the breach is “Attributable to a third party unconnected with the provision of the travel services included in the package travel contract and is unforeseeable or unavoidable” (Regulation 16(4)(b));
3. Summarising the position of the CJEU, while an employee of a supplier of services is not themselves a supplier of services, the supplier is nonetheless responsible for any and all of their actions in providing holiday services (as now widely defined). The actions of an employee form part of the supplier of services (and hence the organisers) ‘sphere of control’ and as such voluntary actions by that employee cannot be actions that could not have been foreseen or forestalled. The defences in the 1992 regulations (and likely the 2018 regulations) will therefore not be available where the breach is caused by the voluntary action of an employee of a supplier of services providing any holiday service;
4. (Obiter, but clearly very persuasive) The analysis of vicarious liability has no place when considering contractual breaches for the supply of holiday services [50]. This is all the more acute when considering the cross jurisdictional application of the scheme under the package travel directives.     

The Implication

Prior to X v. Kuoni [2018] EWCA Civ. 938 (after which it appeared to be habitually invoked) the defence that exceptional actions of an employee could not have been foreseen or forestalled was rarely successfully called upon, even in the cases to which the 1992 regulations applied. The Supreme Court has now effectively confirmed the position already clear from the judgment of the CJEU; that the defence is of very limited scope and essentially no application where the breach is caused by the voluntary actions of an employee. This approximately apes the position now relatively clear from the drafting of the 2018 Regulations.

In clarifying this position, the court has limited the scope for defendants to rely on suggestions that Defendants were not liable in breach of contract for services which formed part of the holiday but which had not specifically been referred to in the brochure or terms and conditions.

They have also confirmed that defences to the effect that a defendant was not vicariously liable for some actions of employees are not going to find favour. This provides a position where a hotel operator in Bogner Regis defending an action in negligence may have available to them a wider variety of defences than a UK based holiday organiser defending the actions of a hotel in Bogota.

Article by Frederick Lyon of Farrar’s Building.

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