X v Kuoni Travel Ltd [2019] UKSC 37 (24 July 2019)

LORD LLOYD-JONES: (with whom Lord Kerr, Lord Hodge, Lady Arden and Lord Kitchin agree)

The facts

1. On or about 1 April 2010 the appellant and her husband (“Mr and Mrs X”, anonymity orders having been made in respect of the appellant by the Court of Appeal and the Supreme Court) entered into a contract with the respondent tour operator (“Kuoni”) under which Kuoni agreed to provide a package holiday in Sri Lanka which included return flights from the United Kingdom and 15 nights’ all-inclusive accommodation at the Club Bentota hotel (“the hotel”) between 8 and 23 July 2010.

2. The contract provided in relevant part:

“Your contract is with Kuoni Travel Ltd. We will arrange to provide you with the various services which form part of the holiday you book with us.” (Booking Conditions, clause 2.2)

“… we will accept responsibility if due to fault on our part, or that of our agents or suppliers, any part of your holiday arrangements booked before your departure from the UK is not as described in the brochure, or not of a reasonable standard, or if you or any member of your party is killed or injured as a result of an activity forming part of those holiday arrangements. We do not accept responsibility if and to the extent that any failure of your holiday arrangements, or death or injury is not caused by any fault of ours, or our agents or suppliers; is caused by you; … or is due to unforeseen circumstances which, even with all due care, we or our agents or suppliers could not have anticipated or avoided.” (Booking Conditions, clause 5.10(b))

3. In the early hours of 17 July 2010, the appellant was making her way through the grounds of the hotel to the reception. She came upon a hotel employee, N, who was employed by the hotel as an electrician and (on the facts found by the judge) known to her as 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. N lured her into the engineering room where he raped and assaulted her.

4. In these proceedings Mrs X claims damages against Kuoni by reason of the rape and the assault. The claim is brought for breach of contract and/or under the Package Travel, Package Holidays and Package Tours Regulations 1992 (“the 1992 Regulations”) which implement in the United Kingdom Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (“the Directive”).

Relevant legislation

5. Article 5 of the Directive provided in relevant part:

“Article 5

1.

Member states shall take the necessary steps to ensure that the organizer and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organizer and/or retailer or by other suppliers of services without prejudice to the right of the organizer and/or retailer to pursue those other suppliers of services.

2.

With regard to the damage resulting for the consumer from the failure to perform or the improper performance of the contract, member states shall take the necessary steps to ensure that the organizer and/or retailer is/are liable unless such failure to perform or improper performance is attributable neither to any fault of theirs nor to that of another supplier of services, because:

-the failures which occur in the performance of the contract are attributable to the consumer,

-such failures are attributable to a third party unconnected with the provision of the services contracted for, and are unforeseeable or unavoidable,

-such failures are due to a case of force majeure such as that defined in article 4(6), second subparagraph (ii), or to an event which the organizer and/or retailer or the supplier of services, even with all due care, could not foresee or forestall.

…

In the matter of damage other than personal injury resulting from the non-performance or improper performance of the services involved in the package, the member states may allow compensation to be limited under the contract. Such limitation shall not be unreasonable.

3.

Without prejudice to the fourth subparagraph of paragraph 2, there may be no exclusion by means of a contractual clause from the provisions of paragraphs 1 and 2.”

1. Member states shall take the necessary steps to ensure that the organizer and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organizer and/or retailer or by other suppliers of services without prejudice to the right of the organizer and/or retailer to pursue those other suppliers of services.

3. Without prejudice to the fourth subparagraph of paragraph 2, there may be no exclusion by means of a contractual clause from the provisions of paragraphs 1 and 2.”

6. Regulation 15 of the 1992 Regulations provides in relevant part:

“(1)

The other party to the contract is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be performed by that other party or by other suppliers of services but this shall not affect any remedy or right of action which that other party may have against those other suppliers of services.

(2)

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 -

(a)

the failures which occur in the performance of the contract are attributable to the consumer;

(b)

such failures are attributable to a third party unconnected with the provision of the services contracted for, and are unforeseeable or unavoidable; or

(c)

such failures are due to -

(i)

unusual and unforeseeable circumstances beyond the control of the party by whom the exception is pleaded, the consequences of which could not have been avoided even if all due care had been exercised; or

(ii)

an event which the other party to the contract or the supplier of services, even with all due care, could not foresee or forestall.

…

(5)

Without prejudice to paragraph (3) and paragraph (4) above, liability under paragraphs (1) and (2) above cannot be excluded by any contractual term.”

“(1) The other party to the contract is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be performed by that other party or by other suppliers of services but this shall not affect any remedy or right of action which that other party may have against those other suppliers of services.

(i) unusual and unforeseeable circumstances beyond the control of the party by whom the exception is pleaded, the consequences of which could not have been avoided even if all due care had been exercised; or

(ii) an event which the other party to the contract or the supplier of services, even with all due care, could not foresee or forestall.

(5) Without prejudice to paragraph (3) and paragraph (4) above, liability under paragraphs (1) and (2) above cannot be excluded by any contractual term.”

7. Pursuant to section 13 of the Supply of Goods and Services Act 1982, Kuoni was required to carry out the services promised under the contract with reasonable care and skill.

The proceedings

8. At trial, Mrs X’s case was essentially that the rape and assault amounted to the improper performance of a contractual obligation. (Before the Supreme Court, although a claim for breach of the 1992 Regulations was maintained, counsel for Mrs X emphasised that the claim was essentially a claim for breach of contract.) On her behalf, it was accepted that there was no basis for suggesting that N should have been identified as a risk. Furthermore, it was no part of her case that there was systemic or organisational negligence on the part of Kuoni or the hotel (such as failure to supervise N or carelessness in selecting N as an employee) causative of the attack. The assault was caused by N alone.

9. In its defence, Kuoni admitted that it was “responsible to the claimant for the proper performance of obligations under the holiday contract whether or not such obligations were to be performed by the defendant or another supplier of services” and that the “said obligations would be performed with reasonable skill and care”. However, Kuoni denied that the rape and assault by N constituted a breach of any obligations owed by Kuoni to Mrs X under the contract or the 1992 Regulations. In particular it denied that they constituted improper performance of any obligation under the contract. Furthermore, Kuoni relied, by way of defence, on the clause 5.10(b) of the Booking Conditions and regulation 15(2)(c)(ii) of the 1992 Regulations.

10. At first instance, Judge McKenna, sitting as a judge of the High Court, concluded (at paras 44 to 48) that “holiday arrangements” in clause 5.10(b) did not include a member of the maintenance staff conducting a guest to reception. He further held, obiter, that Kuoni would in any event have been able to rely on the statutory defence under regulation 15(2)(c)(ii) because the assault was an event which could not have been foreseen or forestalled (by inference by the hotel) even with all due care. Although it was not necessary to decide the point, he held that the hotel would not have been vicariously liable for the rape and assault as a matter of Sri Lankan law, which it was agreed was the same as English law for these purposes.

11. The Court of Appeal (Sir Terence Etherton MR, Longmore and Asplin LJJ) dismissed the appeal by a majority (Longmore LJ dissenting).

12. In a joint judgment the Master of the Rolls and Asplin LJ held that on their proper interpretation, the words “holiday arrangements” in clause 5.10(b) did not include a member of the hotel’s maintenance team, known to be such to the hotel guest, conducting the guest to the hotel’s reception. This was no part of the functions for which the employee was employed (para 34). The 1992 Regulations were not designed to facilitate a claim against a tour operator for wrongful conduct by an employee of a supplier where that conduct was “not part of the role in which he was employed” and where the supplier would not have been vicariously liable under either the consumer’s domestic law or the foreign law applicable to the supplier (para 37).

13. The majority further held, obiter, that Kuoni was not liable under either the express terms of clause 5.10(b) or regulation 15 since N was not a “supplier” within the meaning of those provisions. The judge had properly held that the hotel and not N was the supplier of any services performed by N. The booking conditions referred to “our agents or suppliers”, which denoted a need for a direct contractual or promissory relationship between Kuoni and whoever was to be regarded as a supplier. Furthermore, this reading was supported by regulation 15. Nothing in regulation 15 suggested some other meaning of the word “supplier” in clause 5.10(b) or the expression “supplier of services” in regulation 15 itself. The express reservation in regulation 15(1) of “any remedy or right of action which [the package holiday operator] may have against [the] suppliers of services” was consistent with a direct relationship between the operator and the supplier and may be indicative of an assumption that there would be such a relationship. In a situation where one contracting party assumes primary and personal liability for the provision of services by agents or suppliers to a reasonable standard to the other contracting party, the natural meaning of “supplier” is the person who assumes a direct contractual or promissory obligation to provide such services and not an employee of such a person (at paras 39 to 41). There were no discernible policy reasons for imposing liability on a tour operator when neither it nor the hotel were “at fault” and the express exclusion of liability under regulation 15(2)(c)(ii) pointed clearly to the contrary. Furthermore, in such circumstances it was not realistic to suppose that the tour operator could protect itself via an indemnity from the employee or the hotel or by way of insurance (at paras 43 to 47).

14. The majority considered it unnecessary to decide the question of vicarious liability on the part of the hotel for N’s conduct because even if the hotel were vicariously liable Kuoni could nevertheless rely on the statutory defence incorporated into its booking conditions (at para 51).

The issues before the Supreme Court

This request for a preliminary ruling on a point of EU law relates specifically to the second issue.

The submissions of the parties before the Supreme Court

17. The Supreme Court granted permission to ABTA Ltd (“ABTA”) (a trade association representing British travel agents) to intervene in the appeal.

18. The parties agree that clause 5.10(b) was intended to replicate the terms of regulation 15(2)(c) which, in turn, was intended to implement article 5 of the Directive. It is further agreed that liability under regulation 15 cannot be excluded by any contractual term (regulation 15(5)). The defence in contract is coextensive with the statutory defence.

Conclusion

22. For the purposes of this reference, the Court of Justice of the European Union is asked to assume that guidance by a member of the hotel’s staff 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 of the contract.