11 August 2003
10 June 2013
6 January 2014
Article 23 jurisdiction agreement upheld despite alleged invalidity of host contract under governing law
26 September 2013
8 January 2014
25 October 2013
On 14 September 1999, at approximately 21.20 hours local time, a Britannia aircraft came in to land at Gerona airport. Flight conditions were turbulent and, on attempting to land, the aircraft hit the runway hard. It bounced, touched down again 140 metres further on, veered off the runway and finally came to rest in a field more than one-and-a-half kilometres from the airport, having first run diagonally over an earth mound and struck and severed a number of trees. Unsurprisingly, many of the passengers were not only physically hurt, but extremely traumatised.
The passengers were all on package holidays booked with Thomson Holidays, which included flights with Britannia Airways. Inevitably, they wished to claim compensation for their physical and mental injuries. What was surprising, however, was that as far as the psychiatric aspect of their claim was concerned, they claimed against Thomson rather than Britannia. This led to a landmark decision in the recent Akehurst & ors v Thomson Holidays and Britannia Airways.
An airline's liability to compensate passengers who suffer injury on its flights is governed by the Warsaw Convention. However, the 2002 case of Morris v KLM held that the convention does not permit recovery for psychiatric injury, and so the claimants pursued Thomson for their psychiatric injuries instead.
A tour operator that sells packages is entitled, pursuant to the Package Travel, Package Holidays and Package Tours Regulations 1992, to limit its liability to pay compensation in accordance with applicable international conventions. However, if it wishes to do so, this must be spelt out clearly in the contract. It was therefore open to Thomson to limit its liability to pay compensation for death or personal injury during the course of a flight in accordance with the Warsaw Convention. The question that the court had to decide was whether Thomson's booking conditions properly incorporated the convention.
Thomson's conditions contained a clause that referred to Britannia's conditions, and stated that these would "apply to your journey". Britannia's conditions referred to the Warsaw Convention, and Thomson's contention was that the effect of this clause was to incorporate the convention into its own conditions. The court disagreed. It was held that a person reading the clause in Thomson's conditions would take it to mean that Britannia's conditions applied between themselves and Britannia, not between themselves and Thomson.
A further reason that the convention was found not to be incorporated into Thomson's conditions was that its limitations were inconsistent with Thomson's other conditions. Thomson's liability condition accepted, without qualification, liability for injury resulting from any improper performance (and specifically did not exclude liability for psychiatric injury), whereas the convention restricts recovery to "bodily injury", wounding or death caused by an "accident". This ambiguity had to be construed against the presumption for which Thomson was arguing, namely that Britannia's conditions were incorporated into the claimants' contracts.
On a separate issue, the court held that despite the crash landing, the flight was supplied to a reasonable standard. It relied on the case of Hone v Going Places, where it was held that where there is nothing to the contrary in a contract, the normal assumption will be that services will be rendered with reasonable skill and care. The judge took the view that Thomson did not, in its booking conditions, assume an absolute obligation to provide a safe flight.
It would seem that despite Thomson's failure to incorporate the convention into its conditions, it would not have to pay compensation to the passengers. However, a further clause in its conditions limited its liability for claims arising from transport
by air with an airline licensed in an EC member state, to a maximum of £85,000, providing the airline proved that it took all measures to avoid injury or death or that it was impossible to do so. The potential effect of this is that Thomson has liability up to £85,000 regardless of the cause of injury or loss involved. That sum is, on the face of it, available to compensate for any kind of injury, even where the airline would not have liability under the convention. In this case, the relevant injury was psychiatric injury.
Although this is, at first blush, alarming to operators, the decision does seem to stem from unfortunate drafting. The court appears to have accepted that, had the convention been properly incorporated into Thomson's booking conditions, Thomson would have been able to rely on it and avoid liability to compensate for psychiatric injury.
The judgment did, however, contain other findings by the judge that are potentially a greater cause for concern to tour operators. He stated that Thomson had failed to communicate and supply in writing Britannia's conditions, and it could not, therefore, have been incorporated into the claimants' contracts in any event. This has potentially significant consequences for holiday sales. The Package Travel Regulations state that a tour operator must ensure that: "all the terms of the contract are set out in writing or such other form as is comprehensible and accessible to the consumer and are communicated to the consumer before the contract is made"; and "a written copy of these terms is supplied to the consumer".
The judge accepted that Thomson's own conditions were set out in writing, and that, being in the brochure, they were properly communicated to the claimants. However, he held that Britannia's conditions were not properly communicated, commenting that it was not sufficient to tell a consumer that he can ask his travel agent to obtain a copy of any relevant conditions. Thomson's obligation was to ensure that all the terms of the contract were communicated to the consumer and telling the consumer to ask the agent to provide a copy was insufficient.
It is common practise for tour operators' conditions simply to refer to named conventions, saying that copies can be obtained by asking for them from the tour operator. So would the judge have regarded that as insufficient to incorporate those conventions into contracts between operators and clients? And what is the position when clients who do not have a brochure are simply told that the booking is subject to the operator's standard terms, or maybe not even told anything? This would be most common with telephone bookings, but could happen where bookings are made in person but there is no brochure available.
In Akehurst, whether or not the claimants had seen a brochure was not an issue, but the judge's comments seem to imply that he would have said no terms were incorporated if no brochure had been seen. This is somewhat at odds with the law of incorporation. Clauses can be incorporated into a written agreement by reference, and there is no requirement to set out fully such incorporated terms.
Although Akehurst is a county court case and not a binding precedent, it is a strident warning to tour operators of the importance of ensuring that all terms that are intended to be relied upon are actually incorporated into the booking conditions, and that the booking conditions themselves are incorporated into the tour operator's contract with its customers. Failure to do this will present tour operators (and their insurers) with greater obligations to compensate their customers. These are bad times for tour operators and in this environment it is all the more important to ensure that money is not thrown away by making compensation payments that could be avoided.
Peter Stewart is a partner and Victoria Brown a senior associate at Field Fisher Waterhouse