X v Kuoni: Supreme Court unanimously allows Claimant’s appeal

The Supreme Court has handed down judgment in X v Kuoni Travel Ltd (ABTA intervening) [2021] UKSC 34, unanimously finding in favour of the Appellant. It follows the ruling of the CJEU in March of this year.

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 Respondent was represented by William Audland QC, Nina Ross and Achas Burin of 12 King’s Bench Walk on instructions from Gary Tweddle at MB Law.

Background

The Appellant and her husband purchased an all-inclusive package travel holiday to Sri Lanka in July 2010 from the Respondent tour operator. This was therefore a holiday to which the now-repealed Package Travel Regulations 1992 (‘the Regulations’) applied.

On the night of the injury, the Appellant was making her way through the hotel grounds. She came upon a man, N, who was employed by the hotel as an electrician and known to her to be such. N was on duty and wearing the uniform of a member of the maintenance staff.

N offered to show her a shortcut to reception, an offer which she accepted. Sadly, N lured her into the engineering room where he raped and assaulted her. Mrs X claimed damages against Kuoni for the improper performance of a contractual obligation and/or under the Regulations.

It was common ground between the parties that there was no basis for suggesting that N should have been identified as a risk by his employer or the tour operator. Furthermore, it was no part of the Appellant’s case that there was systemic or organisational negligence (such as failure to supervise N or carelessness in selecting N as an employee) causative of the attack: it was a random criminal act.

The Respondent denied that the rape constituted improper performance of any term, express or implied, under the contract. Furthermore, it relied on the defence in regulation 15(2)(c)(ii) which states:

The other party to the contract is liable to the consumer for any damage caused to him by the failure to perform the contract or the improper performance of the contract unless the failure or the improper performance is due neither to any fault of that other party nor to that of another supplier of services, because […] such failures are due to […] an event which the other party to the contract or the supplier of services, even with all due care, could not foresee or forestall.

Issues

The second issue had been the subject of a preliminary reference to the Court of Justice of the European Union (‘CJEU’) as to the proper interpretation of the Directive upon which the Regulations were based. That decision was covered previously here.

Judgment

The Supreme Court, composed of only four members since the sad death of Lord Kerr, handed down a unanimous judgment in the Appellant’s favour.

The first issue:

In considering the scope of the obligations under a contract for a package holiday, it was necessary to have regard to the nature of the subject matter:

I accept the submission of Mr Weir QC on behalf of the appellant that the purpose of the agreement, namely to confer an enjoyable experience, encourages a broad, not a narrow, interpretation of the holiday services contracted for.

This approach

necessarily requires that the services include so much more than the actual mechanics of travel or the provision of a mattress and overhead cover for the night. The precise content of the ancillary services may vary from one contract to another. However, for example, the obligation to provide the service of cleaning the hotel with reasonable care and skill would be inherent in every such contract. So would the service of looking after and serving holidaymakers courteously in matters relating to their holiday experience.

A term of the package travel contract that referred to ‘holiday arrangements’ is properly construed as meaning that hotel staff would provide guests with assistance with ordinary matters affecting them at the hotel as part of their holiday experience ([32], [35]).

Construing the scope of services which a tour operator has undertaken to provide merits a broad approach in light of the purpose of the Directive, which is to provide a high level of consumer protection, and recalling that holidays are meant to be enjoyed ([29]-[30], [36]).

To consider N’s employment as an electrician is to distract attention away from the holiday contract and toward an employment contract ([33]). Furthermore, the rape itself did not mark the termination of service provision and the start of a criminal enterprise. The correct focus is to think of the fact that N was able to assault Mrs X only as a result of purporting to act as her guide ([34]).

The second issue:

Two questions had been referred to the CJEU.

The first was whether N himself was a supplier of services. The court confirmed he was not ([40]).

An employee would not be regarded as a supplier where they had not themselves concluded any agreement with the package travel organiser but merely performed work on behalf of some entity who has entered such an agreement. Unlike an employee, a supplier of services was not subject to any relationship of control or subordination when providing services ([39]).

Of course, none of this prevents suppliers of services or tour organisers being liable where acts or omissions by employees constitute breaches of the obligations arising from the package travel contract ([42]).

The second question was whether a defence was available in situations such as this, wherein improper performance of the contract 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 considered that the defence should be construed strictly since it exempts suppliers and organisers from liability. It confirmed that this defence was not coterminous with force majeure. Echoing the CJEU, the Supreme Court helpfully confirmed that the defence exempts organisers from liability resulting either from events which cannot be foreseen, irrespective of whether they are usual, or from events which cannot be forestalled, irrespective of whether they are foreseeable or usual.

The significance of the reference, in the legislation, to absence of fault was that the word ‘event’ 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 ([44]).

Following this reasoning, the acts or omissions of an employee cannot constitute ‘an event’ since employees were defined as those in a relationship of subordination/control.

Comment

The most obvious impact of this judgment is that tour operators will rarely be able to avail themselves of the defence under regulation 15(2)(c)(ii) if an employee’s conduct is involved in the causal chain that leads to damage being sustained.

This is so even where an employee’s action is so far outside the course of their ordinary duties, or indeed ordinary decency, as to be a criminal act. This state of affairs is due to the stipulation that an ‘event’ is outwith one’s control, whilst an ‘employee’ is within a relationship of control.[1]

Similar definitions raised problems for the old Salmond test of vicarious liability, and led to it being replaced by the rather more detailed modern common law doctrine. The practical upshot is that this particular defence under regulation 15(2)(c)(ii) will now be relegated to a very narrow class of cases, such as freak weather events, even though it is said not to be synonymous with force majeure.

On the other hand, the Supreme Court did not think it necessary or desirable to consider vicarious liability ([50]):

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.

In one sense, the reasons are obvious. This was not a claim brought in negligence and the court wished to avoid making travel claims more complex. However, from another perspective, vicarious liability undeniably forms part of the background rules governing package travel contracts within the industry as a whole. A tour operator is unlikely to be able to recover an indemnity from a supplier in respect of the criminal act of that supplier’s employee which was not attributable to any negligence or fault on the part of the supplier.

There is another way in which vicarious liability looms in the background. The rule formulated by the CJEU and adopted by the Supreme Court resembles the law of vicarious liability. ‘Luring’ is conceivably an improper way to perform an employee’s function as a guide, but sexual assault is a different kind of action altogether. The Respondent argued that, at the moment of the assault, N was not performing the contract poorly, he was not performing it at all.

Lord Lloyd-Jones responded to this point by saying ‘the correct focus’ was on the causal and temporal link between the assault and the contractual service ([34]). This is reminiscent of Lord Toulson’s words in Mohamud v Morrisons [2016] UKSC 11, when he said that there was ‘an unbroken sequence of events’ or ‘a seamless episode’ between the employee’s legitimate conduct and the assault.

This kind of open-textured test has the benefit of flexibility. But the difficulty it introduces for the lower courts in policing difficult cases at the boundaries is perhaps shown by the need for rapid clarification of Mohamud in Morrisons v Various Claimants [2020] UKSC 12.

Where does this leave us? The Supreme Court held that a tour operator is liable for the non-performance or improper performance of the obligations it has undertaken where those failures are the result of acts or omissions of employees of suppliers of services performing those obligations ([50]).

However, it did not grapple with the question of when an employee’s acts or omissions will be attributed to the supplier. The Supreme Court rejected ABTA’s submission that vicarious liability was relevant and did not address the Respondent’s submission that contractual principles of attribution were relevant. The CJEU declined the Respondent’s invitation to provide an autonomous European definition of attribution, thus providing the Supreme Court with no guidance on the issue.

The result is that we are left with a test at [34] that echoes the close connection test for vicarious liability whilst explicitly decrying it: the test is to focus on what service the consumer was promised and then to consider whether the employee was providing that service when the act or omission complained of took place, or was purporting to provide it, or was able to commit the act or omission complained only as a result of purporting to provide that service.

Finally, it is worth noting that this case clarifies several matters relevant to ongoing litigation governed by the repealed Regulations.

Firstly, it is now beyond doubt that employees of suppliers of services are not themselves counted as suppliers.

Secondly, it is clear that the third indent of Article 5 and in regulation 15(2)(c)(ii) refers to two alternative types of events: those foreseeable and those forestallable. An event need not be both unforeseen and unpreventable in order to trigger the defence.

Thirdly, the court has helpfully clarified that it will take a broad approach to construing the scope of obligations under a contract for enjoyment and a restrictive approach to construing defences.

Fourthly, the court dismissed the Appellant’s suggestion that the Unfair Contract Terms Act rendered void the exclusion clause in the holiday contract. The practice of modelling standard terms of holiday contracts upon the wording of a statute continues to be valid, as do such clauses. Thus, there is no advantage in a claimant pleading a contractual case alone, discarding their cause of action under the Regulations, because both causes of action will stand and fall together.

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[1] The Supreme Court embraced the bluntness of this rule, see e.g. at [48] and again at [50]: ‘… a simple rule whereby a tour operator is liable for the non-performance or improper performance of the obligations it has undertaken where those failures are the result of acts or omissions of employees of suppliers of services performing those obligations.’