X v Kuoni Travel Ltd [2019] UKSC 37

A UK tourist on a Kuoni package holiday in Sri Lanka was raped and assaulted by a hotel electrician who offered to guide her to reception. The Supreme Court referred questions to the CJEU on tour operator liability under the Package Travel Directive.

Facts

In April 2010, Mrs X and her husband contracted with Kuoni Travel Ltd for a 15-night all-inclusive package holiday at the Club Bentota hotel in Sri Lanka between 8 and 23 July 2010. In the early hours of 17 July 2010, whilst making her way through the hotel grounds to reception, Mrs X encountered N, a hotel employee known to her to be an electrician, who was on duty and wearing a maintenance uniform. N offered to show her a shortcut to reception; she accepted, whereupon he lured her into the engineering room and raped and assaulted her.

Mrs X claimed damages against Kuoni for breach of contract and under the Package Travel, Package Holidays and Package Tours Regulations 1992, which implement Council Directive 90/314/EEC. It was accepted that there was no basis for identifying N as a risk in advance and no allegation of systemic or organisational negligence by Kuoni or the hotel.

Contractual and Regulatory Framework

Clause 5.10(b) of Kuoni’s Booking Conditions accepted responsibility for fault of Kuoni, its agents or suppliers in respect of holiday arrangements, but excluded liability for unforeseen circumstances which could not have been anticipated or avoided with all due care. Regulation 15 of the 1992 Regulations renders the operator liable for proper performance of the contract, subject to defences including failure attributable to a third party unconnected with the services (regulation 15(2)(b)) or to events the operator/supplier could not foresee or forestall (regulation 15(2)(c)(ii)).

Proceedings Below

At first instance, Judge McKenna held that “holiday arrangements” in clause 5.10(b) did not include an electrician conducting a guest to reception, and obiter that Kuoni could rely on the statutory defence. The Court of Appeal dismissed the appeal by a majority (Longmore LJ dissenting). The majority (Sir Terence Etherton MR and Asplin LJ) held that N’s conduct was no part of the functions for which he was employed, that N was not a “supplier” within the meaning of clause 5.10(b) or regulation 15 (the hotel being the supplier), and that there were no discernible policy reasons for imposing liability where neither Kuoni nor the hotel were at fault.

Longmore LJ dissented, considering that a four-star hotel must provide helpful staff assistance as part of reasonable performance, that the assault amounted to improper performance, and that the governing principle in English law is that a person who undertakes contractual liability retains liability even if performing through others. He observed that some employees (such as a cruise ship captain) should clearly be regarded as suppliers.

Issues Before the Supreme Court

Two main issues arose: (1) whether the rape and assault constituted improper performance of Kuoni’s contractual obligations; and (2) if so, whether liability was excluded by clause 5.10(b) and/or regulation 15(2)(c) of the 1992 Regulations. The reference to the CJEU concerns the second issue.

Submissions

For Mrs X

Counsel submitted that the contractual exclusion infringed the Unfair Contract Terms Act 1977; that the Court of Appeal majority’s approach was unduly restrictive; that the defence under regulation 15(2) does not arise where improper performance is itself fault-based; and that “supplier of services” should be given its natural meaning covering any third party supplying holiday services. If N were a supplier, the defence could not apply since he was plainly at fault; alternatively, if the hotel was the supplier, fault must be assessed from the perspective of the services the hotel was contracted to provide, including those performed by N.

For Kuoni

Kuoni relied on section 29 of the Unfair Contract Terms Act. It conceded that “supplier” need not be confined to those in direct contractual relationship with the operator but submitted that the hotel, not N, was the supplier; that “fault” in regulation 15(2) has no meaning independent of the three sub-paragraphs; that neither Kuoni nor the hotel could have foreseen or forestalled N’s criminal acts; and that N was not a supplier but was carrying on a criminal enterprise not attributable to his employer. Kuoni invited the court to formulate a special rule of attribution by reference to Tesco Supermarkets Ltd v Nattrass [1972] AC 153 and Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500.

For ABTA (intervener)

ABTA submitted that an employee of a hotel is not “another supplier of services” under regulation 15(2); that “supplier” connotes a person or entity responsible for the supply rather than an employee (drawing on the French text “prestataire de services”); and that the defence should succeed where the hotel was not vicariously liable for N’s conduct. Alternatively, regulation 15(2)(c)(ii) provides a defence where the employee’s acts, though within apparent authority, are criminal.

Judgment

The Supreme Court did not resolve the substantive issue. For the purposes of the reference, the court asked the CJEU to assume that guidance by a hotel staff member to reception was a service within the “holiday arrangements” Kuoni had contracted to provide and that the rape and assault constituted improper performance of the contract. The court referred two questions to the CJEU: (1) where a failure or improper performance results from actions of an employee of a hotel which is a provider of services under the contract, whether there is scope for the defence in the second part of the third alinea to article 5(2) and, if so, by which criteria the defence is to be assessed; and (2) whether such an employee is himself to be considered a “supplier of services” under article 5(2), third alinea.

Implications

This judgment is procedural in nature, constituting a reference under article 267 TFEU. Its immediate significance lies in recognising that the proper interpretation of “supplier of services” and the scope of the defence under article 5(2) of the Package Travel Directive are matters of EU law requiring authoritative guidance from the CJEU. The case highlights a tension between the consumer-protective purpose of the Directive (providing the holidaymaker with a remedy against the operator with whom they contracted) and the availability of a fault-based defence where a supplier’s employee commits a wrongful act neither the operator nor the supplier could reasonably have foreseen or forestalled.

The decision matters to package tour operators, hotels within the supply chain, travel industry insurers, and consumers. It leaves open, pending the CJEU’s ruling, whether an employee’s criminal conduct within apparent authority attracts liability on the part of the operator under the Directive, and whether an individual employee qualifies as a “supplier of services” distinct from their employer. The court did not resolve questions of vicarious liability, the proper construction of “holiday arrangements”, or the application of the Unfair Contract Terms Act 1977, confining its reference to the EU-law dimension of the defence.

Verdict: The Supreme Court did not determine the appeal but referred two questions to the Court of Justice of the European Union concerning the interpretation of article 5(2) of Council Directive 90/314/EEC, specifically regarding the availability of the defence and whether an employee of a hotel company constitutes a ‘supplier of services’ under the Directive.

Source: X v Kuoni Travel Ltd [2019] UKSC 37