Package Holiday refunds - Whatever would have been, would have been - Lexology

As we hit the two-year anniversary of the start of the COVID-19 pandemic in Europe, more and more cases are beginning to drift through the court system with facts arising from the devastating impact on global travel caused by the novel coronavirus. Consumers, schools, travel agents, tour operators, airlines, hotels and insurance companies are all major actors in this extraordinary drama.

Indeed, 'extraordinary' is the mot juste for one interesting battleground which has seen recent skirmishes: claims for refunds under the Package Travel and Linked Travel Arrangements Regulations 2018, where package holidays have been cancelled by the traveller for pandemic-related reasons, and the organiser has charged a cancellation/termination fee, or kept hold of a deposit.

As a reminder, regulation 12(7) of the 2018 Regulations provides:

"…in the event of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and which significantly affect—

(a) the performance of the package, or

(b) the carriage of passengers to the destination,

the traveller may terminate the package travel contract before the start of the package without paying any termination fee."

On a cursory reading, the provision seems to grant an easy win for the covid-concerned consumer wishing to cancel pre-emptively and claim a full refund, but there is plenty of material there for a penny-pinching organiser to work with. Taking an extremely common set of facts and rewinding the clock back to early 2020: imagine a British traveller has a package booking (concluded in England and within scope of the 2018 Regulations) for a holiday to Spain to take place in July 2020. March comes and the UK enters its very first lockdown; Spain appears to be faring as badly, if not worse. The consumer decides come the start of April that she is going to cancel the package and gives the organiser notice. The organiser accepts the cancellation but the consumer is charged a termination fee.

How is such a position defensible? An organiser would be extremely hard-pushed to argue that the COVID-19 pandemic did not constitute 'unavoidable and extraordinary circumstances' such that regulation 12(7) was not, at least in principle, in play. Indeed, recalling that the 2018 Regulations were a domestic implementation of the 2015 EU Package Travel Directive (2015/2302), the Directive itself gives a non-exhaustive list of such circumstances in Recital (31), which includes "significant risks to human health such as the outbreak of a serious disease at the travel destination".

But there are four (somewhat interlinked) arguments which can legitimately be made by organisers:

• The language of regulation 12(7) is in the present tense. It is not intended to give consumers power to cancel without fees except for holidays which are imminent at the time of cancellation.
• Relatedly, regulation 12(7) is expressed without any probabilistic qualifiers. It is not intended to give consumers power to cancel without fees except where it is certain that performance of the contract is significantly affected.
• Regulation 12(7) is geographically limited: the extraordinary circumstances which affect performance of the contract have to be occurring at the place of destination (or immediate vicinity) and not at the place of departure.
• It is implicit from the structure of 12(7) that it must be the extraordinary circumstances occurring at the destination which have caused the traveller to cancel and not anything else.

It is a truism that each case will turn on its individual facts, and these four arguments have the potential to be more or less successful depending on particular features of the disputes in which they are raised. Taking the paradigm above and tweaking it – it does not take much to see that arguments (a) and (b) might be more successful (from an organiser's point of view) where a holiday is cancelled in early 2020 and was not due to take place until 2021; or arguments (c) and (d) might have more purchase where the holiday was to the Maldives (which did not report its first death until 30 April 2020). But a few general observations can be made about the potential battlelines in these types of cases.

On the first proposition, it is of course right to say that regulation 12(7) is expressed in the present tense: the extraordinary circumstances must be "occurring" at the destination, and they must "affect" performance of the package or carriage. That said, in every situation in which regulation 12(7) is engaged there is an element of looking to the future; in accordance with the provision's own terms, the traveller's cancellation will always occur "before the start of the package". The interpretation which is pressed by organisers is that the use of the present must mean it is only the imminent future which is in scope, as that is the only way to explain the tense used. This interpretation, however, pushes a false pedantry: once it is accepted that a present tense is covering future activity, there is nothing semantic which ties it only to the immediate present. Consider phrases such as 'when he arrives', or 'if you come back'. The verbs in those, although in the present tense, could be occurring at any point in the future. If the provision in 12(7) were intending to limit the traveller's right to cancel temporally, there would surely be a qualifier attached to the phrase "before the start of the package": for instance 'immediately' or 'no more than a week'. Similar temporal qualifiers, for example, are applied to an organiser's rights to cancel in regulation 13.

Returning to Recital (31) in the Directive, the policy objective for Article 12(2) (implemented in the UK by regulation 12(7)), is that travellers "should also have the right to terminate the package travel contract without paying any termination fee where unavoidable and extraordinary circumstances will significantly affect the performance of the package" (emphasis added). Where there is interpretative doubt in the UK instrument, the Directive is a useful tool for understanding the intended effects; here the Recital gives a strong indication that the UK legislators did not intend to impose a restriction on the time between cancellation and performance of the package.

The better argument is not one which requires a restrictive view of verb tenses, but which points to the lack of a probabilistic qualifier: the regulation tells us that the extraordinary circumstances must affect performance of the contract; not that they are 'likely to affect' or 'realistically will affect' or 'might well affect'. But given that a traveller is necessarily looking at the future when deciding whether to cancel "before the start of the package", and the future is (special providence aside) uncertain, 'likelihood' has surely to form part of the analysis.

Interestingly, both the Directive and the 2018 Regulations elsewhere have a qualifier in the same context: Annex I Part B to the Directive and Schedule 2 Part 2 of the Regulation contain the information which must be provided to the consumer (by way of a hyperlink) before the conclusion of the contract informing him/her of his /her rights under the Regulations. That wording includes information that "Travellers may terminate the contract without paying any termination fee before the start of the package in the event of exceptional circumstances, for instance if there are serious security problems at the destination which are likely to affect the package" (emphasis added). It is perhaps too much of a shoe-horning exercise, however, to say that the Annex/Schedule interpolates 'likely' into regulation 12(7) so as to define that as the requisite probability threshold.

Organisers, for their part, will likely argue for an implicit modifier which is as near as certainty as can be obtained, and will be analogously assisted by some of the case law under the Package Travel (etc.) Regulations 1992. Using Lambert v Travelsphere [2005] CLY 1977, the argument is that a traveller should not be able to rely on regulation 12(7) where there remains a 'flicker of hope' that the package could be properly performed.

The decision in Lambert, however, looks at cancellation of the holiday from the opposite direction – that is from the perspective of the organiser not wanting to change its terms; the decision in that case supported the proposition that a tour operator for its part was not obliged do so while there was still a flicker of hope that the contract could go ahead. That was fatal to the consumer's case because under the 1992 Regulations a consumer's only entitlement to cancel in these types of extraordinary circumstances and get a full refund came in situations where the tour operator had made alterations to the contract; there was no equivalent to regulation 12(7) in the 1992 Regulations which might allow a consumer to cancel prior to, or without, the tour operator making any alterations. Regulation 12(7) clearly gives greater power to the traveller than was available under the 1992 Regulations, and it is that new power which needs to be interpreted.

In the absence of express wording, civil courts have a default probability threshold for determining facts – the 'balance of probabilities'. In respect of past events the balance of probabilities approach allows a court to say 'such and such happened' if in the court's assessment there was marginally more than a 50% chance that it did happen. But courts also conduct the same exercise in relation to future 'facts': in a claim for damages where recovery of future losses is sought, a court will consider on the balance of probabilities if those losses will in fact be suffered. If there is more than a 50% chance the losses will accrue, then the court determines they will and awards them.

Could a simple balance of probabilities test be the exercise required by regulation 12(7)? If there is a greater than 50% chance that the extraordinary circumstances will affect performance of the package, is that enough? The problem with that approach is that it asks courts in 2022, say, when looking back at the situation at a particular time in 2020 to make a probability assessment of the likelihood of, what is by now, another past event. We are not in the future; we are in the conditional future perfect – what would have been going to happen? It is not, properly understood, a 'fact-finding' exercise (even in wider sense which allows the future to be determined as fact).

Regulation 12(7) is ultimately focused on an apprehension of the future at a snapshot in time. The more logical approach in my view would therefore be to take another of the court's default approaches and look at the position through a reasonableness lens. What would it have been reasonable at the relevant time for the reasonable person to have apprehended about the future? In the COVID-19 context, this will involve an analysis of the information available at the time about the pandemic and its spread and a projection for what the situation might look like weeks or months down the line. Given the number of countries legislating for 'lockdowns' in spring/summer 2020, and that these measures often had expiry dates on them, in many cases this will be a simple exercise of saying that the measure was not due to be repealed until such and such a date, and the holiday was due to take place before then, therefore it was reasonable to apprehend that the holiday would be affected by that lockdown.

When it comes to the final two arguments – geography and causation – both are dealt with by HHJ Craven in the recent case of Brynmawr Foundation School v Holiday World International Travel Limited (t/a Leisure World Schools) (Cardiff County Court: Trial 7 December 2021), where a school's educational ski-trip to the USA in April 2020 was cancelled. It was argued by the defendant in that case, that the cancellation was more to do with the situation on the ground in the UK and not the USA (where the first lockdown effectively banned all non-essential journeys and activities), and the cause of the cancellation was therefore not exceptional circumstances at the place of destination.

The Judge's reading of regulation 12(7), however, was that there is nothing in its express wording requiring there to be a causative link between the extraordinary circumstances and the travellers' cancellation. There were two questions of fact to be determined: (i) the existence of extraordinary circumstances at the place of destination; (ii) the cancellation itself (not likely to be a contentious point). The first did not need to be the cause of the second. In this case there were, of course, extraordinary circumstances occurring in the UK which would have prevented the trip from taking place, but so too were their exceptional circumstances occurring in the USA. Provided the latter was true, there was no need for it to have been the driving cause of the cancellation.

In a sense, the Judge's conclusions on the lack of express wording on causation meaning the cancellation could be uncoupled from the extraordinary circumstances is a typically 'European' result. The CJEU's decision in Lokman Emrek v Vlado Sabranovic (C218/12), for instance, although it looked at a different area of the consumer regime, was a very similar rejection of the argument for an implicit causal link between two ingredients of a provision where there was no such express wording. In the post-Brexit era, where English and Welsh courts will gradually begin to deviate from European legal principles it may be that the defendant's argument in Brynmawr that the extraordinary circumstances at the destination must surely drive the cancellation will gain more cogency; particularly given the English courts' predilection for the 'but for' test.

No doubt there will be many more of these cases which come through the county courts, potentially travelling up to the higher courts seeking answers to these questions. At present, there is still plenty of room for argument, and this particular drama is yet in its first act.