13
Jul
22
Briefings, Travel & Cross Border Claims
Special Briefing - Holiday Cancellations and Refunds: Is the Flicker of Hope Test a Thing of the Past?

The Covid-19 pandemic and the measures taken in response to it have revealed a number of fault lines in all areas of the law. These areas of uncertainty are slowly being resolved as the courts grapple with claims brought in the aftermath of the various lockdowns to which the UK was subjected in 2020 and 2021. One of the sectors most significantly affected was of course the travel and tourism industry, which is still recovering from the chaos wrought by the seemingly endless stream of travel advisories, mandates, and lockdowns during this period. Consumers, not unreasonably, do not see why they should pay for cancelled holidays and flights; and their rights are protected under the Package Travel and Linked Travel Arrangements Regulations 2018 and Regulation (EC) No.261/2004 respectively. But what of the more difficult cases, where a consumer has chosen to cancel a holiday when in fact (s)he could have taken it, or a tour operator reasonably (but wrongly) believes that the holiday could go ahead as planned and therefore does not offer the traveller the option of choosing a refund?

Until recently there was very little reported caselaw in relation to these questions, the only two cases of note having been decided under the predecessor to the 2018 Regulations, the Package Travel, Package Holidays and Package Tours Regulations 1992. But the Supreme Court in X v Kuoni Travel Limited [2021] 1 WLR 3910 has recently provided guidance as to the general approach to be taken to interpretation of the Regulations, and of course, the 2018 Regulations are now in force. What is the position in the light of these developments?

The Old Law

Pursuant to Regulation 12 of the Package Travel, Package Holidays and Package Tours Regulations 1992:

In every contract there are implied terms to the effect that—

(a) where the organiser is constrained before the departure to alter significantly an essential term of the contract, such as the price (so far as regulation 11 permits him to do so), he will 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 or to accept a rider to the contract specifying the alterations made and their impact on the price; and

(b) the consumer will inform the organiser or the retailer of his decision as soon as possible.

Where Regulation 12 applied, pursuant to Regulation 13:

(1) The terms set out in paragraphs (2) and (3) below are implied in every contract and apply where the consumer withdraws from the contract pursuant to the term in it implied by virtue of regulation 12(a), or where the organiser, for any reason other than the fault of the consumer, cancels the package before the agreed date of departure.

(2) The consumer is entitled…

(c) to have repaid to him as soon as possible all the monies paid by him under the contract.

(3) The consumer is entitled, if appropriate, to be compensated by the organiser for non-performance of the contract except where…

(b) the package is cancelled by reason of unusual and unforeseeable circumstances beyond the control of the party by whom this exception is pleaded, the consequences of which could not have been avoided even if all due care had been exercised.

The application of these Regulations was considered in the context of the SARS epidemic of Spring 2003. In Lambert v Travelsphere Limited [2005] CLY 1977 the appellate court held, albeit obiter, that although a tour operator cannot shut its eyes to an obvious danger so as to deny that it is constrained to alter an essential term, it is permissible for it not to alter the term until there is not a ‘flicker of hope’ that the contract can be performed in accordance with the original term. In order for a tour operator to be constrained to alter a term, it must be absolutely inevitable and unavoidable for it to be altered. The decision was followed in Clark v Travelsphere Limited, Leeds County Court, unreported, 22nd October 2014, in which the ‘flicker of hope’ test was applied in favour of the tour operator.

Recent Developments

There the matter rested for some time. On countless occasions over the last 15 years or so the flicker of hope test has been applied in the County Courts, usually generating results advantageous to tour operators.

In the last couple of years, however, a number of developments have occurred which call the test into question.

First, the Court of Justice of the European Union, and then the Supreme Court in X v Kuoni Travel Limited [2021] 1 WLR 3910, clarified the correct approach to the 1992 Regulations, namely that since they are intended primarily to provide consumer protection, the duties owed by tour operators should be construed widely, whereas any defences under the Regulations should be interpreted narrowly. It is suggested that this reading applies equally to the successor to the 1992 Regulations, so that this approach is to be deployed in relation to the 2018 Regulations.

Secondly, in Sherman, Sherman v Readers’ Offers Limited, unreported, 3rd May 2022, Recorder Bowes QC, sitting at Winchester County Court, reconsidered the flicker of hope test in the light of the interpretational guidance in X v Kuoni. In a wide-ranging judgment which also deals with contractual construction and the status of basic and detailed itineraries (together with various causes of action, from unilateral mistake. to misrepresentation, to breach of the ABTA Code of Conduct, to breach of the Human Rights Act 1998) he founds as follows in relation to the flicker of hope test:

“In my judgment, the expression “a flicker of hope” does not constitute a formulated test for deciding whether a tour operator is constrained to alter an essential term of the contract and arguably would set the bar too low, having regard to the clear expression of policy in relation to the PTR set out by the Supreme Court in Kuoni.

“Constrained” is an ordinary English word, which is defined in the Cambridge Dictionary as meaning “forced to act or behave in a particular way”.

Applying the “broad view” of the PTR as set out in Kuoni, in my judgment a tour operator is constrained to alter significantly an essential term of the contract if there is no longer a reasonable possibility that the contract can be performed in accordance with that essential term.”

It appears, then, (although the decision in Sherman is no more binding than those in Lambert and Clarke) that in cases brought under the 1992 Regulations, following X v Kuoni and Sherman the flicker of hope test may have fallen away, to be replaced by a ‘reasonable possibility’ test, which seems to be a far lower hurdle for a consumer to surmount.

The 2018 Regulations

Regulation 11 of the 2018 Regulations sets out the position where, before the start of the package, the organiser:

(a) is constrained by circumstances beyond the control of the organiser to alter significantly any of the main characteristics of the travel services specified in paragraphs 1 to 10 of Schedule 1;

(b) cannot fulfil the special requirements specified in paragraph 1 of Schedule 5; or

(c) proposes to increase the price of the package by more than 8% in accordance with regulation 10(4).

In such circumstances the organiser:

must, without undue delay, inform the traveller in a clear, comprehensible and prominent manner on a durable medium, of —

(a) the proposed changes referred to in paragraph (3) and, where appropriate, in accordance with paragraph (7), their impact on the price of the package;

(b) a reasonable period within which the traveller must inform the organiser of the decision pursuant to paragraph (5);

(c) the consequences of the traveller’s failure to respond within the period referred to in sub-paragraph (b); and

(d) any substitute package, of an equivalent or higher quality, if possible, offered to the traveller and its price.

(5) The traveller may, within a reasonable period specified by the organiser—

(a) accept the proposed changes; or

(b) terminate the contract without paying a termination fee.

As with the 1992 Regulations, the obligations under the 2018 Regulations are triggered by the organiser being ‘constrained to alter’ important aspects of the services to be provided under the contract. There is no obvious reason why the 2018 Regulations should not be interpreted in the light of the guidance given in X v Kuoni, or, indeed, why the judgment in Sherman should not be preferred over that in Lambert as regards the meaning of this phrase. It may be, therefore, that the flicker of hope test has had its day and that it is time it was replaced by a new, more consumer-friendly, interpretation of the Regulations.

Sarah Prager appeared for the successful Defendant in Sherman v Readers’ Offers Limited, instructed by Travlaw Legal Services Limited.

 

Written by or involving: Sarah Prager

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