This week, defunct tour operators Teletext Holidays and Alpharooms.com were declared to have breached the Package Travel and Linked Travel Arrangements Regulations 2018 for their delay in providing refunds for holidays cancelled by COVID-19.
The judgment, in a claim brought by the Competition and Markets Authority against two tour operators, will also be of collateral interest to travel practitioners. Unusually, this claim was for declaratory relief which was granted without a trial.
This blog post is by Peter Hale, a pupil at 12 King’s Bench Walk.
The claim was decided on the papers by Jonathan Richards, sitting as a Deputy High Court Judge of the Business and Property Courts (Chancery Division).
Truly Holdings Ltd (D1) was the parent company of both Truly Travel Ltd (D2) and Alpha Holidays Ltd (D3) which traded as Teletext and Alpharooms respectively. All three defendants are now in liquidation.
The Competition and Markets Authority (‘CMA’)
The CMA’s power to bring this claim derives from section 2 of the Enterprise Act 2002, which makes it the general enforcer of consumer protection legislation and responsible for bringing enforcement proceedings to prevent infringements and protect consumers.
The CMA received numerous complaints from customers of the defendants who had not received refunds for package holidays cancelled due to COVID-19.
In response to the CMA investigation, in May 2021, the defendants provided undertakings to “use all reasonable endeavours to pay outstanding refunds to passengers” but the CMA became concerned that the undertakings were not being complied with fully and enforcement proceedings were commenced in October 2021.
Declaratory relief
In December 2021, all three defendants were placed into voluntary liquidation and accordingly argued that the CMA’s proceedings “no longer served any purpose”.
The CMA accepted that an enforcement order would subvert the pari passu distribution of assets under insolvency rules but maintained its claim for a declaration that the tour operators had been in breach of the Package Travel Regulations (which was in any case a necessary precursor to the enforcement orders sought).
A claimant does not have a legal entitlement to declaratory relief as of right, though under section 19 of the Senior Courts Act 1981 the court has a general discretion to grant it. The judge considered the relevant principles from the caselaw and decided that this would be an appropriate case in which to exercise that discretion, if the facts of the declaration sought were proven.
Breach of Package Travel Regulations
The Package Travel and Linked Travel Arrangements Regulations 2018 came into force on 24 May 2018 and apply to travel arrangements booked on or after 1 July 2018.
Regulation 13 permits a tour operator to cancel a package travel contract before it begins due to ‘unavoidable and extraordinary circumstances’, provided that a full refund is paid. The judge was “quite sure” that the COVID-19 pandemic satisfied that definition: [26].
Regulation 14 inserts into every package travel contract an implied term that any refund required by virtue of regulation 13 must be paid to the traveller “without undue delay and in any event not later than 14 days after the package travel contract is terminated.”
This is a strict requirement: there is no provision for any extension of the 14 day period.
Earlier in the CMA investigation, the defendants had disclosed documentation which provided information on 20,179 holidays which had been cancelled since 17 March 2020. According to their own figures, as of 28 January 2021, a total of 6,818 travellers who had requested a refund had not received it.
The defendants’ undertakings to pay refunds did improve the situation somewhat, but most refunds took significantly longer than 14 days. By 31 August 2021, 932 customers were still awaiting refunds totalling almost £1m.
The judge held that this demonstrated a clear breach of regulation 14: [33]. The regulations do not entertain, and the judge therefore did not consider, any possible justification for breach: regulation 14 imposes a strict requirement even if particular circumstances render compliance difficult.
The judge accordingly made a declaration that the second and third defendants failed to pay refunds as required by the Package Travel Regulations 2018.
Comment
This litigation demonstrates the CMA taking a robust attitude towards enforcement of compliance with the Package Travel Regulations, even in the difficult circumstances created for tour operators by the coronavirus pandemic. This declaration also sets a useful precedent for customers who are forced to seek timely refunds for cancelled holidays in the future.
This judgment does not affect the rights of Teletext or Alpharooms customers to refunds for cancelled holidays, which should continue to be sought from the Travel Trust Association following those operators’ insolvency.