CJEU rules in X v Kuoni

The Court of Justice of the European Union (CJEU) handed down the highly anticipated judgment in X v Kuoni yesterday. The CJEU had been asked by the Supreme Court to consider the scope of the defence set out in article 5(2) of Directive 90/312/EEC (the Package Travel Directive). Spencer Turner considers the ruling in this blog post, which also appears on LexisPSL.

We previously blogged about the first instance decision, the Court of Appeal’s decision, the interim judgment of the Supreme Court, and the Advocate-General’s Opinion.

The CJEU was broadly in agreement with the position adopted by Advocate General Szpunar in the opinion he provided in this case last year. In response to the questions referred by the Supreme Court, the CJEU has set out that an employee is not a supplier of services and that an organiser can be liable for the actions of a supplier’s employee where those actions constitute improper or non-performance of an obligation under a package travel contract. The acts of an employee are not events which cannot be ‘foreseen or forestalled’ and therefore travel operators cannot exclude themselves from liability.

What are the practical implications?

The CJEU has clearly rejected the ‘foreseeability defence’ in which the damage is caused by the employee of a supplier for services. The judgment will be a relief to claimants and claimant practitioners. It underlines that one of the fundamental objectives of the Package Travel Directive is to ensure a high level of consumer protection. The judgment is a blow for defendant travel operators. The circumstances in which a travel operator can limit their liability for the actions or omissions of the employees of their suppliers has been curtailed.

The Supreme Court asked the CJEU to assume, for the purposes of the reference, that the guidance by N 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. The Supreme Court is still to decide on this point and the focus of the court, and the parties, will now be focused on whether the acts of N were in performance of a contractual obligation.

What was the background?

This case has a long history. Mrs X and her husband had entered into a contract in April 2010 with Kuoni under which Kuoni provided a package holiday in Sri Lanka. Mrs X and her husband left for their holiday in July 2010. In the early hours of 17 July 2010, Mrs X was making her way through the grounds of the hotel at which she and her husband were staying. She came upon a hotel employee, known as N, who offered to show her a shortcut to the reception. N lured her into an engineering room where he raped and assaulted her.

Mrs X claimed damages against Kuoni by reason of the rape and assault. The claim was brought for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992 (which implement the Package Travel Directive). Her case was dismissed by HHJ McKenna in the High Court. The Court of Appeal dismissed her appeal by a majority (Longmore LJ dissenting).

The matter proceeded to the Supreme Court on two main issues:

• Did the rape and assault of Mrs X constitute improper performance of the obligations of Kuoni under the contract?

• If so, is 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 Supreme Court unanimously decided to refer two questions to the CJEU (X v Kuoni Travel Ltd [2019] UKSC 37). For the purposes of the reference the CJEU was asked to assume that the guidance by N of Mrs X to the reception was a service within the holiday arrangements that Kuoni had contracted to provide and that the rape and assault constituted improper performance. The CJEU was asked:

• Where there has been a failure to perform or an improper performance of the obligations arising under the contract of an organizer or retailer with a consumer to provide a package holiday to which the Directive applies, and that failure to perform or improper performance is the result of the actions of an employee of a hotel company which is a provider of services to which that contract relates: (i) is there scope for the application of the defence set out in the second part of the third alinea to article 5(2); and, if so, (ii) by which criteria is the national court to assess whether that defence applies?

• Where an organizer or retailer enters into a contract with a consumer to provide a package holiday to which the Directive applies, and where a hotel company provides services to which that contract relates, is 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 alinea of the Directive?

What did the court decide?

This case reaffirmed the consumer protection objectives which underpin the Package Travel Directive and that the obligations which arise from package travel contracts ‘cannot be interpreted restrictively’.

The CJEU said that where the obligations arising from a package travel contract are performed by an employee of a supplier of services, the actions of said employee can constitute improper or non-performance of the obligations which arise under a package travel contract. Consequently, the improper or non-performance, although caused by the acts of an employee who is under the control of a supplier for services, is sufficient to render the organiser liable under article 5(1) of the Package Travel Directive. This interpretation of the Package Travel Directive is justified by the consumer protections objectives of the Directive.

Article 5(2)(iii) of the Package Travel Directive provides the organiser with an exemption from liability in circumstances in which the improper or non-performance is ‘due to an event which the organiser or the supplier of services, even with all due care, could not foresee or forestall’.

The CJEU said that the ‘foreseeability defence’ must be interpreted ‘as referring to a fact or incident which does not fall within the sphere of control of the organiser or the supplier of services.’ Since the acts or omissions of an employee do fall within that sphere of control ‘those acts or omissions cannot be regarded as events which cannot be foreseen or forestalled’ within the meaning of article 5(2) of the Package Travel Directive.

Therefore, the ‘foreseeability defence’ cannot be relied upon to exclude a travel operator from liability where a customer has suffered damage as a result of the improper or non-performance of an obligation arising from a package contract concluded with the organiser, where those failures are the result of acts or omissions of employees of suppliers of services performing those obligations.

The CJEU therefore answered the questions referred by the Supreme Court as follows:

• 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.

This matter will now return to the Supreme Court where the court will be able to consider the CJEU’s judgment when deciding the two issues before it. Mrs X’s appeal on the second of those two issues will very likely succeed. The remaining battleground will be whether guidance by N of Mrs X to the reception was a service within the ‘holiday arrangements’ which Kuoni had contracted to provide and whether the rape and assault constituted improper performance of the contract.