The recent case of Sherman V Reader Offers Ltd , although fact specific, is a useful example of how the courts will interpret the provisions of the Package Travel, Package Holidays & Package Tour Regulations 1992 (“the Regulations”).
In December 2007 Mr and Mrs Sherman met another couple whilst on a cruise booked through Reader Offers Ltd (“ROL”). That couple told the Shermans that they had booked another cruise for September 2018 and invited the Shermans to join them. The itinerary was of particular interest to the Shermans as it included 8 days travelling along the NorthWest Passage in Canada. Accordingly, when they returned home they telephoned ROL and booked the cruise. They did not see a brochure, nor had they read one before doing so. They booked solely on the recommendation of their friends and their own experience of ROL cruises.
The following day, 10 January 2018 ROL sent an email to the Shermans attaching their standard terms and conditions (“T&Cs”), booking summary (with a basic itinerary) and an ATOL certificate. The email confirmed that “full confirmation paperwork” would follow and on 22 January the Shermans received a letter from ROL enclosing a detailed daily itinerary for the cruise.
The Shermans heard nothing more until 5 September 2018 shortly before the cruise was due to depart when they received an email from the cruise line operator, Hurtigruten which explained that due to constant changing ice conditions the embarkation point would change and that various new itineraries were being explored but that these would not include the Victoria and James Ross Straits, areas which had comprised the first three days of the proposed 8 day cruise through the NorthWest Passage.
On 7 September the Shermans emailed ROL direct saying they were disappointed the cruise had been cancelled and that as they were already in Montreal by this stage they did not consider themselves legally bound by any decision until they had returned to the UK and had a chance to take legal advice.
ROL replied the same day confirming that the cruise had not been cancelled and that it was just the embarkation point that had been changed to which Mr Sherman replied stating that he was aware the whole cruise had not been cancelled but the route through the NorthWest Passage as advertised had been cancelled. He said “I booked a cruise through the NorthWest Passage, not a cruise around Greenland!”.
The same day Hurtigruten also issued a new itinerary but due to an administrative error this was not sent to the Shermans. However, they had arranged for a meeting to be held at a local hotel in Montreal on 9 September, the day before departure and this was attended by the Shermans. This was the first time they learnt of the proposed new itinerary which only offered about 50% of the original itinerary. This was a bitter disappointment to the Shermans and they sought a refund of their monies from ROL. ROL refused and the Shermans issued proceedings seeking compensation under the Regulations.
The relevant Regulations
Regulation 9 and Schedule 2 of the Regulations sets out in detail those documents which the package provider are obliged to give to the consumer including, for example, (i) the itinerary, (ii) the dates, times and points of departure and (iii) the price of the package.
Regulation 12 implies terms into every contract making it clear that where the organizer is constrained before the departure to alter significantly an essential term of the contract, it must notify the consumer as quickly as possible in order to enable him to “take appropriate decisions and in particular to withdraw from the contract without penalty …”.
Regulation 14 also implies a term into every contract making it clear that if after departure a significant proportion of the services contracted for are not provided, alternative suitable arrangements should be made by the organizer with compensation being paid to the consumer, where appropriate.
Regulation 15 does allow the organizer to avoid having to pay any compensation to the consumer if any failures to provide the services are due to unusual and unforeseeable circumstances beyond the control of the organizer.
ROL’s T&Cs also included clauses dealing with its obligations to the consumer in the event of any change to the holiday as well as an exclusion clause which provided that it would not be liable for payment of any compensation if the event that any failure to perform their obligations under the contract was due to Force Majeure, i.e. an event which meant ROL would need to change or cancel the travel arrangements because of unusual or unforeseeable circumstances beyond their control. Such an event could include adverse weather conditions.
At first instance, the judge held that ROL were not in breach of their obligations under Regulation 9, the contract having been formed 10 January. As the detailed itinerary did not therefore form part of the contract, the judge considered that the only essential term of the contract was the stated destination contained in the basic itinerary, namely “NorthWest Passage – in the Wake of Great Explorers” which he expressed as that the cruise shall take place partially in the NorthWest Passage and in areas of historical interest by virtue of their association with the great explorers of the NorthWest Passage. He did not accept that before departure it was no longer a reasonable possibility that the cruise could take place partially in the NorthWest Passage and accordingly, he held that ROL were not in breach of their obligations under Regulation 12. Whilst he went on to hold that ROL were in breach of their obligations under Regulation 14, he concluded that ROL’s failure to provide the contract was due to unusual and unforeseeable circumstances beyond its control and that accordingly, it was not liable to pay the Shermans any compensation in view of the provisions of Regulation 15. The court therefore dismissed the Shermans’ claim. The Shermans appealed.
The Shermans appealed on 4 grounds:
Ground 1 – the contractual itinerary (Regulation 9)
Whilst the appeal court accepted that a contract had been concluded on 10 January this was not sufficient to comply with the requirements under Regulation 9 and Schedule 2 of the Regulations. Accordingly, the court took the view that the contract was superseded by a later contract on 22 January by which time all the details of the cruise including the detailed itinerary had been provided.
Having found that the contract had been superseded by the later contract, the court held that the detailed itinerary was an essential term of the contract, read to mean “of the essence”.
The NorthWest Passage stage was the distinctive, unique selling point of the cruise. The omission of the western section to go directly to Greenland was therefore a significant alteration. The cruise line was constrained before departure to alter an essential term of the contract due to conditions in the NorthWest Passage being non-navigable.
ROL had been constrained before departure to significantly alter the essential terms and in breach of its obligations under Regulation 12 had failed to notify the Shermans of the same as quickly as possible to enable them to take appropriate decisions, including in particular, to withdraw from the contract without penalty.
Grounds 3 & 4 – exclusion clauses (Regulations 14 and 15 and clauses 7.1.2 & 9 T&Cs)
The contract between the parties contained both implied terms (as per the Regulations) and express terms (as per T&Cs) as regards ROL’s liability for breach of contractual terms.
The court accepted that the cruise could not sail the NorthWest Passage due to weather conditions beyond anyone’s control, but the real question was whether these conditions were “unforeseeable”. The court was assisted by a report from an expert jointly instructed by the parties which stated, inter alia “the underlying fact remains that one can never guarantee planned passages through potentially ice infested waters will succeed without delays or even complete abandonment of plan due to changing ice conditions.”.
The court considered the expert’s evidence was powerful, uncontroverted and admitting of only one interpretation – sea ice conditions in the Canadian Arctice are “highly variable” over any time frame, long or short, nowhere more so than in the Cambridge Bay/Lancaster Sound area. The narrow window from the last week of August to the last week of September is never anymore than the “most likely” period of navigability. 2018 was a particularly bad year for ice, and that had been evident over the whole of August. But in any year, and at any time navigation is “challenging at best” and navigability prospects may change by the hour. The unpredictability of the NorthWest Passage is given at any time. The risks of ice movement are ever present.
On the accepted evidence of the expert, it was not “unforeseeable” that the ice would (continue to) close in eastwards and the NorthWest Passage would become impassable. It was the precise opposite. Where unpredictably is of the essence, defeat by ice is essentially foreseeable. As a result, ROL could not exclude liability to the Shermans under Regulation 15(2)(c)(i). A proper application of the exemption clauses in T&Cs did not produce a different result.
As a result, the Shermans’ appeal was allowed.
Whilst this case is unusual as the booking was not made on the basis of a brochure, it is nonetheless a stark reminder to all package providers of the provisions of the Regulations and how the court will often go to great lengths to ensure that consumer protection is upheld wherever possible. The appeal did not deal with the question of compensation, but it is clear from the judgment that ROL’s costs of the trial alone amounted to £60,000.00 so the proceedings as a whole are likely to have been a very expensive mistake for them and the case serves as a stark reminder that package providers would be well advised to ensure compliance with the Regulations.
What to do if you are a package provider and need legal advice
If you are a package provider and think you have a case or may have a case involving any potential breach of the Regulations which you would like to discuss please feel free to contact Ally Tow by telephone on 07894 512 991 or email [email protected]
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.