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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Association of British Travel Agents Ltd (ABTA), R (on the application of) v Civil Aviation Authority (CAA) & Anor [2006] EWHC 13 (Admin) (16 January 2006)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2006/13.html
Cite as: [2006] EWHC 13 (Admin)
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QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| R. (THE ASSOCIATION OF BRITISH TRAVEL AGENTS LTD) ("ABTA") |
Claimant |
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| - and - |
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CIVIL AVIATION AUTHORITY ("CAA") |
Defendant |
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- and - |
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| THE SECRETARY OF STATE FOR TRADE AND INDUSTRY |
Interested Party |
____________________
Smith Bernal WordWave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Robert Griffiths QC and Andrew Tabachnik (instructed by the Defendant)
____________________
Crown Copyright ©
- The claimant is the Association of British Travel Agents ("ABTA"). It is the leading trade association for travel agents and tour operators. The defendant is the Civil Aviation Authority ("CAA"). The Secretary of State as Interested Party has not appeared or made representations. One of the CAA's functions is "the licensing of the provision of accommodation in aircraft." At issue in this application for judicial review are the circumstances in which a travel agent is obliged to have an Air Travel Organiser's Licence ("ATOL"). At the heart of the dispute between ABTA and the CAA is the definition of "package" for the purposes of the Civil Aviation (Air Travel Organisers' Licensing) Regulations 1995 as amended in 2003 ("the ATOL Regulations"). ABTA challenges the CAA's view in that regard contained in its Guidance of 4 March 2005 under the rubric "Sale of Air Package Arrangements: Advice on the need to provide consumer protection" ("the Guidance"). It sets out how the CAA intends to interpret and enforce (including by possible criminal sanction) the applicable regulations.
- The CAA also takes the point that judicial review is not in any event an appropriate remedy in the case.
- The CAA was constituted by the Civil Aviation Act 1971. The provisions relating to it were consolidated in the Civil Aviation Act 1982 ("the Act"). It is section 3(b) of the Act, as amended, which provides that a function of the CAA is "the licensing of the provision of accommodation in aircraft."
- Section 71 of the Act provides that,
- As Lord Justice Gibson said when giving the judgment of the Court of Appeal in R (on the application of Jet Services Ltd.) v Civil Aviation Authority [2001] 2 All ER (Comm) 759 at page 771,
- The ATOL is such a licence.
- The preamble, among other things, states,
- By Article 1, the purpose of the Directive
- By Article 2,
- By Article 4
- By Article 7
- The Directive is of course not limited to a package with the component of air travel.
- The PTR implement the Directive. They deal with consumer protection in respect of package travel, holidays and tours (see the preamble). They are not limited to packages involving air travel. The definition of package is in the same terms as in the ATOL Regulations: see paragraphs 20-3 below.
- Paragraph 15 of the PTR sets out the "Liability of the other party to the contract for the proper performance of obligations under contract." By paragraph 15,
- By Regulation 16(1),
- Regulation 17 provides that the "other party to the contract" shall ensure a bond is entered into which is payable in the event of the insolvency of that other party.
- An ATOL requires such a bond.
- Regulation 2 defines "contract" as,
- It defines "the other party to the contract" as,
- The ATOL Regulations were made under the Act. Part II deal with "Regulation of Provision of Accommodation in Aircraft." Paragraph 3 provides,
- The first four words of paragraph 1 and paragraph 1A were added by the 2003 amendment of the Regulations.
- Paragraph 1(2) of the ATOL Regulations defines "flight accommodation," "package" and "a ticket provider" in the following terms.
- The ticket provider is the person who writes out the ticket for the consumer. A travel agency which writes out such tickets is a provider.
- Part IV provides for offences and penalties. A person who contravenes paragraph 3 of the Regulations may face a fine and up to two years' imprisonment on indictment.
- For historical reasons, an airline itself does not need to have an ATOL.
- According to Mr. Reynolds, the (now retired) Chief Executive of ABTA, there was concern that unscrupulous travel agents could evade the ATOL requirement when selling package holidays. As he puts it in paragraph 17 of his witness statement,
- In short, if Mr. Reynolds is right, the unscrupulous travel agent was selling the consumer what was in fact a package holiday. To evade the requirement to have an ATOL as the supplier of air accommodation, he artificially separated component parts of the package and presented what was in truth one contract between the consumer and the travel agent as two separate sales: the sale of an airline ticket on behalf of an ATOL registered supplier of air accommodation and the discrete sale of hotel accommodation. The consumer might not be protected in respect of what was represented to be the distinct sale of hotel accommodation. On the basis of Mr. Reynolds' statement the Regulations were amended to deal with the situation where the substance of the transaction was the single sale of a package holiday and the appearance was of two or more distinct transactions between the consumer and the travel agent.
- In July 1998 the CAA in a Guidance Note said that,
- On 15 April 1997 David Clover, Head of Enforcement and Consumer Affairs of the CAA, confirmed with an ABTA travel agent that,
- In August 2002 the CAA issued a consultation paper on "Proposed Amendments to the ATOL Regulations" subtitled "Contract Splitting to Package Holiday Sales." In the introduction it is said,
- Under the heading "Definition of the Current Problem" it is said,
- Mr. Griffiths QC on behalf of the CAA rightly submits that in that paragraph the CAA is anticipating that by the change in the Regulations a package might consist of a number of separate contracts.
- Mr. Haddon-Cave QC on behalf of ABTA submits that paragraph 29 encapsulates his case as to the effect of the 2003 amendments.
- In their letter of 10 October 2002, in response to the CAA's consultation paper, ABTA set out the problem highlighted in this application.
- In July 2004, after the passing of the 2003 Regulations but before the Guidance, the CAA gave "Advice to Government" ("CAP 751"). Its subject was "Financial Protection for Air Travellers and Package Holidaymakers in the Future." As paragraph 1.2 makes clear, the Advice followed detailed consultation and research. A consultation paper was published in 2003. A first draft was issued in March 2004. It was amended in the light of comments received and after further consideration. Mr. Haddon-Cave submits it is not consistent with the interpretation of the Regulations in the Guidance and now urged upon me by the CAA.
- Paragraph 3.1 states
- Paragraphs 3.3 and 3.4 state that,
- In his witness statement, David Moesli, the CAA's Deputy Director of the "Consumer Protection Group" states that these paragraphs were written in very general terms as part of the background to future protection proposals. They are not linked to the Guidance. I do not find that easy to follow.
- At paragraph 5.4 the CAA shows how as a result of changes in the pattern of buying the number of holidays protected by an ATOL has fallen. At paragraph 5.6 this is said,
- In its consideration of the possible scope of protection the CAA observes (in paragraph 6.3) that,
- The CAA's recommendations are set out in paragraph 7. Among other things it states,
- Mr. Haddon-Cave submits that in these paragraphs the CAA is effectively saying that what may appear to the consumer to be a package holiday may not be in law (the "quasi-package"). It is not a package because its component parts are sold separately. No contractual package exists. If sold by the travel agent, what matters is whether the substance of the transaction between the consumer and the travel agent is the separate sales of the different component parts. If so, the CAA is accepting it is outside the ATOL Regulations.
- As it seems to me, what the CAA is effectively saying to Government is this. First, there is an inexorable trend towards buying separate travel facilities. Second, what is in substance the sale of separate facilities may appear to the consumer to be a package when it is not. Third, the sale of such "quasi-packages" is outside the protection of the Directive, the PTR and the ATOL Regulations. They only protect the consumer if the substance of the transaction is a real package. In other words, the definition of package in the Regulations only encompasses packages "narrowly defined." It does not encompass "quasi-packages". For in such a situation there is in substance "no contractual package." The consumer may think he is protected when he is not. Fourth, the only way this lacuna in the law can be filled is by legislation.
- The submission appears to accept (and it seems to me to be the case) that whether the transaction takes place on the internet or at the travel agent cannot affect its substance.
- The Guidance Note was issued in March 2005: in other words, a little over 12 months after the Advice to Government. Mr. Haddon-Cave submits its contents are not consistent with the July 2004 Advice. It assumes a wider construction of the meaning of an air package for the purposes of the ATOL Regulations than did the Advice. It is necessary to set it out in some detail. It is entitled "Sale of Air Package Arrangements: Advice on the need to provide consumer protection."
- In paragraph 1 what is said to be the "Background" is set out.
- In fact, the Guidance Note affects not only holidaymakers. It deals with the sale or offer for sale of any sort of travel package.
- Paragraph 1.5 sets out the definition of package from the PTR.
- Under the heading "Package Travel Definitions" paragraph 2 purports to set out the meaning of the words "package," "pre-arranged" and "inclusive price." Parts of those definitions are said by the claimant not to be in accordance with the Regulations. As has the claimant, I shall underline those parts.
- Under the heading "package," the Guidance states at paragraph 2.3,
- Under the heading "pre-arranged," the Guidance states at paragraph 2.4,
- Under the heading "inclusive price," the Guidance states at paragraph 2.5,
- Paragraph 2.6 states that,
- Paragraph 3 deals with "General Comments." Paragraph 3.2 deals with the position when the consumer specifies what he wants without any input from the travel agent. The travel agent merely makes the relevant bookings. It is said,
- Paragraph 3.3 states that,
- Paragraph 3.4 states that,
- Paragraph 3.5 states that,
- Paragraph 4 deals with those situations where an ATOL is required.
- Paragraph 5 sets out examples of where an ATOL is not needed.
- In the "Summary" in paragraph 6 it states,
- Paragraph 6.3 deals with consequences to the travel agent who fails to comply.
- This is clearly stating that the Guidance now sets out the basis upon which the CAA will monitor and prosecute travel agents, among others.
- On its website (and in a leaflet) the CAA seeks to explain what a package is. Under the heading "How can I tell if a holiday is a package," it states,
- If you ask a travel agent to meet your specific requirements…it won't normally be a package.
- …some tour operators offer brochures (or websites) from which you can create a "tailor made" holiday by choosing your flights and hotel from limited lists, and what you buy from these operators will usually be a package.
- Many websites…will offer you the ability to put together a package by choosing a flight from the airline, and then choosing the other items you want. But you may find that the firm providing the hotel or car hire is quite separate from the airline, and that you pay for the two items separately. If so, it won't be a package."
- Mr. Haddon-Cave submits this guidance is correct. It effectively defines a package more narrowly than does the Guidance. It reflects a correct understanding of the ATOL Regulations.
- Mr. Moesli in his witness statement states that this is designed exclusively for the public to provide it with some guidance. The CAA will amend the advice when agents are complying with the Guidance.
- Mr. Reynolds states that ABTA's understanding of the effect of the 2003 amendment is to prevent the unbundling of what is in truth a package: in other words to prevent a contract with the consumer being split. It is not to prevent the travel agent providing the consumer at the same time with different travel services if they are provided outside a package. He sets out how important this is to the travel industry. What he says comes to this. Many ABTA members are retail travel agents. They sell travel services to the public. Many of them are small businesses. When they sell the travel services they normally do so as agents for the providers of those services. The travel agents have their own ABTA bonding scheme. Their profit margins are small. If the Guidance is correct as to the width of the definition of "package," those agents will have to have an ATOL in addition to the bonding they provide through ABTA. That will have very significant financial implications. Something in excess of 3.5 million journeys would be affected. In excess of £16.5 million additional bonding premium would have to be paid. Some of that is already being paid, for there are now travel agents who see no option but to comply with the Guidance.
- Mr. Haddon-Cave, for reasons which will become apparent, submits that the Guidance is manifestly wrong. It does not accurately reflect the ATOL Regulations. It should be quashed by the court. No distinction can be drawn in principle between this case and Gillick v West Norfolk and Wisbech AHA and Another [1986] AC 112. The well-known observations (at page 193F) of Lord Bridge apply equally to both.
- Here, submits Mr. Haddon-Cave, it is sought to quash detailed guidance intended to be acted upon by the travel industry. It is based, he submits, on a legally erroneous understanding of the law. It is a simple issue. Is the CAA's construction of the law correct?
- Mr. Griffiths submits that judicial review is not appropriate in this case. He does so for a number of reasons.
- First, the Guidance Note does not lay down any binding legal principles. It is not intended to do so. It says so in terms. It only offers an interpretation of the ATOL Regulations, making quite clear that it is neither comprehensive nor determinative: see paragraphs 1.2 and 2.6 of the Guidance.
- Second, each case must depend upon its own facts. The exercise sought by the claimant is hypothetical. It is theoretical. In the absence of specific facts, my view cannot help the travel industry. It would be wrong to lay down any principles of law in the absence of such facts when each case must be fact specific: see paragraph 3.5. It would have been possible for the claimant to agree some facts upon which the court could rule. It failed to do so. It is up to individual travel agents to take their own advice and act accordingly. A test case could then be brought on the basis of such action.
- Third, the meaning of the word package, which is at the heart of this application, is a question of mixed fact and law. The court's task would amount to no more than giving the words of the regulations their ordinary and natural meaning. That is inappropriate for judicial review.
- Fourth, if rulings are made in such a context, there is the risk of a conflict between the civil and criminal court should there be a criminal prosecution of a travel agent in the future.
- Fifth, to quash such Guidance would have the effect of discouraging the CAA from providing helpful and practical guidance in the future.
- Sixth, this case is different from Gillick (above). There, it was possible to identify a pure point of law. Here it is not.
- In support of his submissions, Mr. Griffiths relies upon, among other cases, R v Inland Revenue Commissioners, ex parte Bishopp [1999] STC 531. In that case Dyson J (as he then was) refused declaratory relief in respect of a pre-transaction ruling by the Inland Revenue. Among other reasons he did so, was that the dispute was based to a significant extent on hypothetical facts. It was by no means certain that if the Inland Revenue's ruling were quashed the taxpayer would act pursuant to it. Gillick was different. The guidance there was being currently acted upon by doctors.
- It seems to me, as Mr. Haddon-Cave submitted, there are substantial differences between that case and this. Two stand out. That case concerned tax advice asked for by the taxpayer. This case concerns guidance promulgated of its own volition by the CAA. In that case, it was by no means clear that the taxpayer would act were the court to declare the advice unlawful. In this case, it is intended that the Guidance be followed. Following it would have significant financial implications for the travel industry. To fail to do so would be to run the risk of a prosecution.
- The other authorities referred to by Mr. Griffiths can equally be distinguished. R v Secretary of State for the Home Department, ex parte Wynne [1993] 1 WLR 115 concerned a prisoner who wanted to conduct his case for judicial review. It was hypothetical because the prisoner had not made a formal application for his production in court, as he was required to. R v London Waste Regulation Authority, ex parte Specialist Waste Management Ltd. [1989] COD 288 concerned a statement made at a meeting. Moreover, Gillick was not referred to. Lever Brothers and Unilever v Manchester Ship Canal [volume 78] Lloyds List Law Reports, 508, concerned the interpretation of a private Act of Parliament.
- In my view, this is a case appropriate for judicial review. I say so for several reasons.
- The CAA is a statutory body. It is the regulatory and prosecution authority for the travel industry. Although the Guidance is said to be only that and subject to the decision of the court, it is elsewhere described as formal and is plainly intended to be a basis of regulating and possibly prosecuting travel agents. It says as much in paragraph 6. It would not be appropriate for a public body to regulate and possibly prosecute on the basis of guidance which is manifestly wrong in law. It is in the public interest, if that be the case, that such erroneous guidance be withdrawn.
- The Guidance has the clearest effect on travel agents. Most will obtain ATOLs on its basis. Doing so will incur substantial cost. That is not hypothetical. If the Guidance is not in accordance with the law, that cost will be unnecessarily incurred. Although Mr. Griffiths submits the travel agent may take his own advice and act accordingly, given the possible sanctions, it would be a brave travel agent who did so. In the final analysis he would leave himself open to the possibility of up to two years' imprisonment. It is not in the public interest for travel agents effectively to be pressurised into obtaining ATOLs if the law manifestly does not require them to.
- The claimant's case is that on a proper understanding of the ATOL Regulations parts of the Guidance cannot on any factual basis be right. They reflect a misunderstanding of the law. It is not in my view necessary in such circumstances for the claimant to agree some facts upon which the court could rule. There is no question of the court considering hypothetical factual situations.
- As I have said, Mr. Griffiths submits that because the language of the regulations is not technical and that my task would amount to no more than giving the words of the regulation their ordinary and natural meaning, that is inappropriate for judicial review. In such a case, as I understand him, he is submitting the facts would be all important. I do not agree. It is eminently a matter for the court to decide what the ordinary and natural meaning of a statutory provision is. In most cases it will do so with a specific factual background. However, if the words in dispute are incapable of having the meaning ascribed to them the court can say so. That is not hypothetical.
- Neither is it necessary to await a test case. I am not attracted by the suggestion that it is up to individual travel agents to take their own advice and act accordingly. As I have said, it seems to me understandable that a travel agent does not want to risk prosecution by acting contrary to the Guidance, whatever legal advice he may have received.
- Although Mr. Griffiths did not accept it in argument, it seems to me apparent that in the Guidance the CAA has taken a different and wider view of the effect of the ATOL Regulations than it has often, although not invariably, taken previously. The CAA's apparent inconsistency as to the legal definition of a package does not of itself help me in construing the ATOL Regulations. However, it may suggest that the CAA is not as confident in the legal effect of the Regulations is as is now submitted. It could lend force to a suggestion by ABTA that the CAA is by the Guidance seeking to legislate by the back door. For if the effect of the Guidance is effectively to force travel agents to take ATOLs because they do not wish to take the risk of not doing so, the lacuna apparently previously accepted by the CAA would for practical purposes be closed. That reinforces my view that if the Guidance is manifestly wrong, the court should say so.
- I see no danger of any conflict between this court and a criminal court. My view of the meaning of the ATOL Regulations will be authority to which the criminal court would have regard in any prosecution in the ordinary way.
- The public interest in quashing guidance which is manifestly wrong seems to me to outweigh any discouragement to the CAA from providing helpful and practical guidance in the future. Guidance which is manifestly wrong could not be said to be helpful or practical.
- I see no distinction in principle between this case and Gillick (above). It is possible to identify a pure point of law. The public interest is in quashing this Guidance if it is wrong.
- I should mention one further matter. In assessing the Guidance I am not concerned with applying the Wednesbury test, as Mr. Griffiths at one time suggested. I am not deciding whether the CAA could reasonably have issued guidance in the terms it did. I am deciding whether the Guidance is in accordance with the law. Although that is the extent of my role, it would on any view seem difficult for the CAA when acting reasonably to issue guidance manifestly not in accordance with the law.
- Mr. Haddon-Cave submits the following is the appropriate approach when construing the ATOL Regulations.
- First, the words should be given their ordinary and natural meaning in their context, having regard to their obvious legislative purpose of providing protection to passengers who have paid for flight accommodation: see Jet Services (above).
- Second, Mr. Haddon-Cave submits that what amounts to a package for the purposes of the ATOL Regulations is a question of substance, not form. If the reality is that what the travel agent sells the consumer is a package, then the form in which it is sold is irrelevant. He submits that the invariable legal effect of the sale of a package by the travel agent will be a single contract between the consumer and the travel agent. Mr. Griffiths agrees that what is important is the substance of the transaction. He agrees that such things as the billing arrangements are irrelevant to that substance. He submits however that the contractual arrangements "should not be allowed to result in the non-application" of the regulatory regime.
- Third, Mr. Haddon-Cave submits that the meaning of package for the purposes of the ATOL Regulations should be the same under the PTR Regulations. Again, I do not understand that to be in dispute.
- Fourth, for there to be a package, the three requirements under the ATOL Regulations must be satisfied. It must be "pre-arranged." There must be a "combination." It must be "sold or offered for sale at an inclusive price." I do not understand Mr. Griffiths to disagree.
- Fifth, Mr. Haddon-Cave submits that the mischief at which the 2003 amendments were directed was the public being misled by "contract splitting:" in other words, directed against the travel agent who sold what was in reality a package and pretended that he was selling separate or unconnected components of a journey. There is an issue about this.
- Sixth, Mr. Haddon-Cave submits that given this is a penal Regulation, if there is any doubt or ambiguity as to its meaning, it should be resolved in favour of the travel agent. I agree. That of course does not necessarily mean, as Mr. Griffiths emphasises, it must be interpreted in a narrow way. If his submissions as to the width of the meaning of ATOL Regulations are unambiguously right, then that wide interpretation must be applied.
- This is at the heart of Mr. Haddon-Cave's submissions. His submission comes to this. An inclusive price is a single, comprehensive or overall price. It is more than a total or aggregate price. "Inclusive" connotes something extra. It is analogous to the distinction between the sale in the supermarket of "three for the price of two," as opposed to the bill produced at the checkout. The bill is simply an arithmetical total of different and separate purchases. An "inclusive price" imports an element of things tied or linked together in a financial sense. If it is a package, one element cannot be removed. The buyer has the choice of taking or leaving it. A sale at an inclusive price does not mean, submits Mr. Haddon-Cave, that the individual components cannot be identified, or made up in different ways; for example, with different choices of hotels or flights or whatever.
- If, submits Mr. Haddon-Cave, an inclusive price is no more than a total price, there would be no purpose in the reference to "inclusive." It would be enough for it to be an "inclusive price" if the travel agent presented the consumer with a bill containing several different and separate elements. As he rhetorically puts it, what on the CAA's case would not be inclusive?
- Subsection (i), submits Mr. Haddon-Cave, means that if the reality is that the sale is of a package, the travel agent cannot escape that reality merely by submitting different accounts for different components.
- Mr. Griffiths disagrees. He submits that the concept of an "inclusive price" focuses on whether the different components are sold or offered for sale together, on a composite basis. That is emphasised by subsection (i). It is enough that the travel agent should be asking the consumer to pay a price which may reflect several completely separate or discrete components of a holiday, provided they were bought or offered for sale together. It is irrelevant that each component may be provided by a different supplier without any connection with another supplier or that one component has no relationship, whether financial or in any other way, with another component. The total amount due represents an inclusive price (whether on a single bill or different bills representing the different component parts). The price is "inclusive" if it is no more than the arithmetical total of different and discrete components provided by any number of suppliers through the agency of the travel agent. In such a case the travel agent will be selling or offering to sell a package holiday. In other words, the price may be inclusive and what is sold a package irrespective of the number of different contractual relationships there may be.
- Mr. Haddon-Cave further submits that if the substance of the sale is of a package at an "inclusive price," there will only be one contract between the consumer and the travel agent. If what is sold amounts to the sale of several separate components with different legal characteristics: for example, the sale of a flight on behalf of one principal: the sale of a hotel room on behalf of a different one and so on, then what is sold will not be a package. In short, Mr. Haddon-Cave submits that giving the words "inclusive price" their ordinary and natural meaning will result in there being a single contract between the travel agent who sells the package and the consumer who buys it. A single contract is a characteristic of the sale of any package. An arrangement involving several contracts between the consumer and different parties cannot amount to a package. The ATOL Regulations go no further than preventing the travel agent falsely separating the components of what in truth is a single contract.
- Mr. Haddon-Cave submits that nothing in the Directive nor the PTR contemplate more than one contract with the consumer in a package. When construing the meaning of "package" for the purposes of the Directive or the PTR (and therefore the ATOL Regulations), the English law of agency is not excluded. The provisions in the PTR relied upon by Mr. Griffiths (to which I shall shortly come) do no more than contemplate the possibility that more than one person might be liable under the those regulations. Mr. Haddon-Cave makes the following points.
- The normal English law of contract applies. It cannot have been Parliament's intention in the ATOL Regulations to make a person in respect of whom there is no contractual relationship a party to the contract. That, submits Mr. Haddon-Cave, will be the consequence of the CAA's interpretation of the ATOL Regulations. The normal law of agency applies just as much to the sale of holidays by the travel agent as it does in any other area of the law. If the travel agent sells or offers to sell a discrete component of (say) a holiday, and does so on behalf of a principal, whether or not he is a party to that contract depends on the application of the normal law of agency. Had it been Parliament's intention to exclude it, the PTR and/or the ATOL Regulations would plainly and unequivocally have said so: see Bennion on Statutory Interpretation, Fourth Edition, section 327 at pages 887 and 889; section 331, page 915-8.
- The PTR continually speaks in terms of "the" contract and "the other party to the contract." Paragraphs 2, 6(3), 7(1), 8(1) and 9(1) do so. That does not suggest that there may be a package involving more than one contract with the consumer.
- Paragraph 15 deals with the liability of "the other party to the contract;" paragraph 16 deals with the requirement of bonding by "the other party to the contract." The reference in paragraph 2 to "the other party to the contract" in terms of "the organiser or retailer or both" does not point to there being more than one party when a package is sold. Whether "the organiser or retailer or both" are liable depends upon the application in any given circumstances of the English law of contract. The reference in paragraph 2 to a contract meaning "the agreement linking the consumer to the organiser or retailer or both" does not oust the application of the law of agency.
- Far from seeking to oust the established law of agency, the ATOL Regulations in terms refer to and rely on it. Paragraph 3(1)(c) speaks of a person acting as "an agent on behalf of a disclosed identified principal." Paragraph 3(1A)(a) speaks of a person acting "in the capacity of an agent." The reference in that paragraph to a "single contract" is a reference to the English law of contract. There are further references to people acting as agents or to the capacity in which a person acts: see paragraphs 3(2)(a), 3(2)(b), 4(2)(a).
- In support of his submission that the English law of agency is not excluded by the PTR and the ATOL Regulations, Mr. Haddon-Cave relies upon the decision of Mr. Justice Douglas Brown in Hone v Going Places Leisure Travel MA993390.
- In that case the defendant was a travel agent. Although the documentation was not clear, it acted as agent for two tour companies which went into liquidation. The claimant sued relying on the PTR. The submission was that because the agreement "linked" the claimant to the defendant, the retailer, the defendant was liable under paragraph 15. Counsel for the claimant accepted that if the retailer made it plain he was acting as an agent for the tour company, there would probably be no liability. Such an extension of the liability for travel agents would have to be made clearer in the PTR than it was.
- Mr. Justice Douglas Brown held that
- He found that the first was the case on the facts. The defendant only disclosed he was acting for a principal after the contract was made. In the Court of Appeal (reported at [2001] EWCA Civ 947), Lord Justice Longmore, with whose judgment Lord Justice Henry and Mr. Justice Carnworth (as he then was) agreed, said that by Regulation 15, the other party to the contract was responsible for the proper performance of the contract, whoever actually performed the service.
- Moreover, submits Mr. Haddon-Cave, it is only the definition of "package" which is lifted from the PTR into the ATOL Regulations. Even if for the purposes of those Regulations a "package" may connote more than one contract, those parts which do so have not been reproduced in the ATOL Regulations. There is therefore no basis for construing the word "package" in the ATOL Regulations by reference to a different piece of legislation, presumably intentionally not included.
- Mr. Griffiths disagrees. He relies on both the Directive and the PTR as showing that there can be a "package" where different components are provided by two or more different principals. He emphasises the width of the words in the Preamble to the Directive which state that
- The Directive contemplates a number of different contracts, he submits. Article 1 refers to the Directive's purpose in approximating the provisions regarding the sale of packages. Article 2, paragraph 5 of the Directive defines contract in terms of "the agreement linking the consumer to the organiser and/or retailer." Article 5 emphasises the breadth of the provisions. Article 7 refers both to the organiser and the retailer providing evidence of security and Annex (j) refers to the obligation to include in the contract if relevant to any package special requirements which the consumer has communicated to the organiser or retailer.
- Paragraph 2 of the PTR defines "contract" as meaning "the agreement linking the consumer to the organiser or retailer or both, as the case may be." That contemplates, suggests Mr. Griffiths, that there might be more than one contractor. It defines "the other party to the contract" (other than the consumer) in terms of "the organiser, or retailer or both, as the case may be." Paragraph 15 refers to the liability of the organiser or the retailer or both to the consumer.
- He submits that the wording of ATOL Regulation 3(1A)(a) does not, as the claimant contends, contemplate that a package can only exist under a single contract. It contemplates a package where all the components are not made available under a single contract.
- In short, the language used in both the Directive and the PTR envisage that there may be more than one contract in a "package." The English law of agency does not apply. Construing a "package" to embrace a combination of elements supplied by two or more principals is perfectly natural. There may be a "package" when there is more than one contract involving the travel agent and the consumer. The word "inclusive" must be construed in that light.
- Mr. Haddon-Cave submits that the word "arranged" in its ordinary and natural meaning means something that is put together. "Pre-arranged" means something that is put together by the travel agent before the consumer sees it. The ordinary and natural meaning of "pre-arranged" having regard to the wording in subsection (ii) means, first, that the combination can be put together at any time up to the sale; second, that the consumer can wholly dictate the component parts of the package.
- It follows, submits Mr. Haddon-Cave, that advice or information from the travel agent is not necessarily needed for something to be "pre-arranged."
- In support of that submission Mr. Haddon-Cave relies on the decision of the European Court of Justice in Club-Tour, Viagens e Turismo SA v Garrido [2002] ECR 1-4051. In that case, among other things, the European Court held that Article 2(1) of the Directive,
- On the basis of those arguments, Mr. Haddon-Cave submits there are a number of errors in the guidance. Some are important, others less so.
- Paragraph 2.5 of the Guidance reflects the CAA's wider view of "inclusive price." It is said by Mr. Haddon-Cave to be one of the four principal errors in the Guidance. It states that,
- Mr. Haddon-Cave submits it does matter if the cost is made up of separate sums. It suggests it is sufficient for an inclusive price for there without more to be a series of separate sums, when it is not. Mr. Griffiths submits there is nothing wrong with this paragraph. It merely states that there may be a package if the cost is made up of separate sums as set out. It does not say it will invariably be a package.
- Mr. Haddon-Cave submits that paragraph 5.2 amounts to the second "principal error" in the Guidance: that it is wrong to state that,
- He relies on his submissions regarding "pre-arranged." He submits that to suggest that any role played by a travel agent in advising or influencing the consumer as to a change in any element of the arrangements originally decided upon by the consumer cannot without more turn the transaction into a package. It is wrong to state that the crucial element in defining a possible package is the influence of the travel agent over the arrangements. Indeed, the ATOL Regulations provide in terms that the fact the details of an arrangement are specified by the consumer, whether or not modified by the travel agent, does not mean there is no pre-arrangement.
- Furthermore, submits Mr. Haddon-Cave, there is nothing in this paragraph about the requirements of an inclusive price as he defines those words.
- Mr. Griffiths submits that the "arranged" aspect of "pre-arranged combination" connotes or includes in the present context an element of meaningful contribution by the travel agent. The CAA's skeleton argument observes that if ABTA is right, that would mean a wider ambit for the word "package" than contended for by the CAA.
- Mr. Haddon-Cave's third "principal error" is that it is wrong to state in paragraph 4.3 that,
- He submits that it cannot be the case that the offer of a choice of travel facilities will without more mean that the resulting sale will be a package. That is to ignore the fact that a travel agent can sell different, discrete facilities of (for example) a holiday on behalf of different principals. Mr. Griffiths submits there is nothing wrong with this paragraph.
- Mr. Haddon-Cave's fourth "principal error" is that paragraph 4.8 is wrong in stating that,
- Mr. Haddon-Cave submits that without more this cannot be right. Mr. Griffiths submits that this is helpful guidance. Commitments or contracts with a supplier are capable of coming within the definition.
- Mr. Haddon-Cave submits that other errors flow from the four "principal errors."
- He submits it is wrong to state in paragraph 2.3 that,
- Mr. Haddon-Cave submits that what the consumer thinks he is getting is irrelevant to the definition of package. Mr. Griffiths submits there is nothing wrong with this. It does not say there would be a package.
- Mr. Haddon-Cave submits that it is wrong to state in paragraph 3.2 that,
- Essentially, his submissions are that this injects into the test the extraneous element of advice. Mr. Griffiths submits that this turns on the meaning of the word "arranged." There is nothing wrong with what is said.
- Mr. Haddon-Cave submits that it is wrong to state in paragraph 3.3 that,
- Mr. Haddon-Cave submits that the influence of the travel agent is irrelevant. There is too no reference to the most important aspect of "inclusive price."
- Mr. Griffiths submits there is nothing wrong with what is said. It is not seeking to suggest when invariably there will or will not be a package.
- Mr. Haddon-Cave submits it is wrong to state in paragraph 4.2 that,
- Again, Mr. Haddon-Cave submits consideration should have been given to the importance of the "inclusive price." Mr. Griffiths submits that there is nothing wrong with what is said. It states no more than that where the substance is a package, it will be caught by the ATOL Regulations.
- Mr. Haddon-Cave submits it is wrong to state in paragraph 4.4 that,
- Again, Mr. Haddon-Cave submits consideration should have been given to the importance of the "inclusive price." Mr. Griffiths submits this is an example of an element which should be included into a contract in accordance with Annex (j) of the Directive. It is an example of a "combination arranged at the request of the consumer."
- Mr. Haddon-Cave submits that it is wrong to state in paragraph 4.5 that,
- Mr. Haddon-Cave submits that it is not the case that automatically the offer of an alternative selected by the travel agent will result in a package. It depends upon the nature of the contractual relationship. Mr. Griffiths submits there is nothing wrong with this.
- Mr. Haddon-Cave submits it is wrong to state in paragraph 4.6 that,
- He submits that this paragraph goes too far. Whether there is a package requiring the agent to have an ATOL licence will depend upon the nature of contractual relationship between him and the consumer. Again, Mr. Griffiths submits this is correct. It refers to a combination being put together by the travel agent.
- Mr. Haddon-Cave submits it is wrong to state in paragraph 4.7 that,
- Mr. Griffiths submits that depending on the facts, this may be right.
- Mr. Haddon-Cave submits it is wrong to state in paragraph 5.4 that,
- The linking of documentation without more does not create a package, submits Mr. Haddon-Cave. Mr. Griffiths submits there are no errors of law disclosed here. What is said is not to be construed as definitive.
- Mr. Haddon-Cave is also critical of the summary in paragraph 6.1 which states that,
- Again, Mr. Griffiths submits there is no error of law here. What is said is not to be construed as definitive.
- As it seems to me a number of things follow from the definition of "package" within the ATOL Regulations.
- First, the definition contemplates that a travel agent may sell or offer to sell to the consumer the component parts (transport, accommodation and other tourist services) outside a package. In other words, the fact a travel agent may sell or offer to sell these component parts at the same time does not automatically mean that what he is selling or offering to sell is a package.
- Second, to amount to a package what is sold or offered for sale must accord with the definition in the ATOL Regulations: crucially, the component parts must be sold or offered for sale at a price which is "inclusive." The sale or offer for sale of the component parts at a price which is not "inclusive" means that what is sold is not a package.
- Third, the words "inclusive price" should be given their ordinary and natural meaning. The ordinary and natural meaning of the word "inclusive" connotes more than a mere arithmetical total of the component parts of a price. If the substance of a transaction is the sale by the travel agent of separate and discrete components of (for example) a holiday, with no one part being connected with or dependent upon any other part (other than that they are sold together), to call the resulting price "inclusive" is in my view to stretch the ordinary and natural meaning of that word. It is in reality no more an "inclusive price" than is the total price of goods at the check out of a supermarket. For the sale of a package at an inclusive price the relationship between the component parts of that package must be such as to mean that the consumer is buying and paying for them as a whole: that the sale or offer for sale of one component part is in some way connected with or dependent on the sale or offer for sale of the others.
- Fourth, while not determinative of the meaning, that would accord with what most members of the public would understand when considering the words "inclusive price" in conjunction with the word "package."
- Fifth, again, giving the words their ordinary and natural meaning, subsection (i) says no more than this: the "submission of separate accounts for different components shall not cause the arrangements to be other than a package" if the substance of the arrangement is a package: in other words, if, among other things, it is a sale or offer for sale at an "inclusive price."
- Sixth, the interpretation above does not involve inserting words. It is a question of interpreting the words which are there.
- Seventh, the use of the words "inclusive price" in the context of the Directive and/or the PTR does not in my view mean a broader interpretation should be given to the words: that a meaning different from the ordinary and natural one should be applied.
- Eighth, the PTR do not exclude the application of the English law of contract. There is continual reference to "the" contract and "the other party to the contract:" see paragraphs 2, 6(3), 7(1), 8(1) and 9(1). In my view, whether the agreement links the consumer to the organiser or retailer or both depends upon the application of the English law of contract, in particular the law of agency. So too do decisions as to whether the organiser or retailer or both are parties to the contract or whether under Regulation 15, the organiser or retailer or both are liable under it. If by application of the English law of contract the retailer is liable under the contract between him and the consumer, he cannot escape his liability by blaming the lack of proper performance of the obligations under it on someone else. For, additionally, he is responsible for the proper performance by others who may supply services under the contract. Equally under Regulation 16 the retailer must provide sufficient evidence of security. In short, that there may be such an additional obligation upon the retailer does not mean that the normal English law of contract has no relevance. It means that in the case of the sale of a package, the retailer cannot escape liability by pointing to someone else's failure: that he must provide sufficient bonding to give that obligation value.
- Furthermore the ATOL Regulations in terms refer to and rely on the English law of contract. Paragraph 3(1)(c) speaks of a person acting as "an agent on behalf of an disclosed and identified principal." Paragraph 3(1A)(a) speaks of a person acting "in the capacity of an agent." The reference in that paragraph to a "single contract" is a reference to the English law of contract. There are further references to people acting as agents or to the capacity in which a person acts: see paragraphs 3(2)(a), 3(2)(b), 4(2)(a).
- Although the PTR provide for an extension of liability in the limited and specific ways set out within them, they do not, as it seems to me, mean that a wider definition of "inclusive price" than that understood to be the ordinary and natural one, should be applied.
- Although in the Preamble to the Directive and elsewhere the obligations said to arise as a result of it are expressed in broad terms, the Directive relies in its definition of "package" upon the concept of an "inclusive price." For the reasons I have expressed when considering the PTR and the ATOL Regulations it does not seem to me that the Directive results in the broad definition of a package as advocated by the CAA.
- Ninth, it does seem to me that a single contract between the travel agent and the consumer will be the usual characteristic of the sale or offer for sale of a package at an inclusive price. However, it is not necessary for present purposes to go as far as deciding that in every sale or offer for sale by a travel agent at an inclusive price there will invariably be a single contract. What is crucial is that the price is inclusive in the way I have defined that concept.
- I have of course considered the authorities mentioned earlier in the judgment. However, in the final analysis, they do not seem to me decisive of the issue I have to decide. The issue resolves itself into one of the application of the ordinary and natural meaning of the words used.
- I agree with Mr. Haddon-Cave's submissions as to the meaning of "pre-arranged." Applying its ordinary and natural meaning in its context means, first, that the combination can be put together at any time up to the sale. Second, that the consumer can wholly dictate the component parts of the package. Advice or information from the travel agent is not necessarily needed for something to be "pre-arranged."
- In the light of my interpretation of the ATOL Regulations, I turn now to the individual paragraphs of the Guidance. I shall deal with Mr. Haddon-Cave's "principal errors" first.
- By omitting any mention of the proper interpretation of an "inclusive price" this paragraph is in my view inadequate and misleading. It does matter if the cost is made up of separate sums. If I am right, it is only if the total of those separate sums amount to an inclusive price as I have defined it that what is sold can be a package.
- First, there can be a pre-arrangement for the purposes of the ATOL Regulations whether or not the consumer specifies those arrangements and whether or not they are modified by the travel agent. The Regulations say so. That is consistent with Garrido (see above). It is wrong to state that the travel agent cannot be held responsible for a service over whose choice he had no influence. Second, whether or not the arrangement may be a package depends not upon the features set out in the paragraph, but crucially upon whether what the travel agent sells or offers to sell is at an "inclusive price." Third, whether or not it is sold at an inclusive price depends upon those features to which I have already referred.
- In short, therefore, it does seem to me that the paragraph wrongly sets out the law. To some extent, that error benefits ABTA. However, it is wrong to say without more that if "one or more elements are not available and the agent recommends alternatives/changes, this may become a package."
- The paragraph appears to state that there will inevitably and without more be a package for the purposes of the ATOL Regulations when the travel agent offers the consumer a choice of travel arrangements (provided a flight is included). That does not seem to me to be right. It is not enough to bring the arrangements within the ATOL Regulations for the travel agent without more to offer a whole range of different and discrete possible travel arrangements on behalf of different providers. Such a sale will not necessarily be at an inclusive price as properly understood.
- It seems to me that while what the consumer thinks he is getting may be a relevant consideration, it cannot be a test. Indeed, as the CAA's Advice to Government makes clear, the problem is that the consumer may well be misled into believing that what may appear to be a package is not for the purposes of the ATOL Regulations.
- This seems to me peripheral. What the consumer thinks he is getting is not a test of a package. It is irrelevant to the definition.
- I have already expressed my view agreeing with Mr. Haddon-Cave's submissions in respect of paragraph 5.2. Essentially his submissions are the same regarding paragraph 3.2. I would only add this. It is difficult to understand why, if the travel agent suggests one flight rather than another, the arrangement might then become a package.
- It is right that the arrangements are different from those in paragraph 3.2. It is right too that a travel company may be able to construct a package. The question of the travel agent's influence is not material. Whether, in any given case the travel agent has constructed a package will depend crucially upon whether it is a sale at an inclusive price.
- If this amounts to saying that the advertisement of any individual travel facilities which can be combined inevitably amounts to a package for the purposes of the Regulations, that seems to me wrong. Whether it amounts to a package depends upon the features to which I have already referred, particularly that of an inclusive price.
- This seems to me too wide. The provision by a travel agent of information on a combination of services does not without more amount to a package. It requires an offer to sell them (or the sale of them) at an inclusive price. In other words, whether it amounts to a package depends upon whether the nature of what is offered or any agreement which is reached between the agent and the consumer. The agent may sell the consumer a package as defined by the Regulations. He does not necessarily.
- Again, this seems to me to go too far. If the travel agent's cheaper alternative is sold at an inclusive price with the other components, an ATOL will be needed. For the reasons I have expressed, it may not be.
- Again this seems to me to go too far. For the reasons I have expressed, it is only if what the agent puts together is a package sold at an inclusive price that this is correct.
- Although on its own this paragraph is peripheral, it does not spell out that tailor made or dynamic packages will need an ATOL if the sale is at an inclusive price. To that extent it is inadequate or misleading.
- Again, this is peripheral. However, although relevant, the documentation is not the deciding feature as to whether or not there is a package. What matters is the substance of the transaction. Indeed, it might be possible for a travel service sold later to be sold at an inclusive price with, for example, a flight sold earlier. In such a case, there could be a package.
- It is not necessary to analyse this paragraph. It effectively encapsulates the CAA's approach in the earlier paragraphs. It omits the crucial element of "inclusive price." It is therefore to that extent wrong or misleading.
- It follows that I have concluded that the Guidance is wrong to the degree which requires it be quashed. The remedy now sought by ABTA is limited to such an order. In the light of what I have said, that is the order I make.
- I should add this. Mr. Griffiths, as I have said, submitted that a restricted interpretation of the ATOL Regulations would make them difficult to apply. There would be less protection for the consumer. The fundamental difficulty, as it seems to me is this. The Directive and the legislation following it were, as the CAA has in the past stated, based upon a concept of a "package" which is now to a significant extent out of date. The use of the words "inclusive price" reflected that old concept of a package. It may be, as the CAA has said, that fresh legislation is needed to cover the current way in which flights are sold. Although my ruling might, as Mr. Griffiths submitted, make it more difficult to decide in any given case if what the travel agent is selling or offering to sell amounts to a package, I do note the CAA's current advice to consumers does appear adequately to do so.
Mr Justice Goldring:
The issue
The statutory background
The Civil Aviation Act 1982
"(1) Provision may be made by regulations made by the Secretary of State for securing that a person does not…
(a) make available, as a principal or an agent, accommodation for the carriage of persons…on flights…or
(b) hold himself out as a person who, either as a principal or an agent or without disclosing his capacity, may make such accommodation available,
unless he…holds and complies with the terms of a licence issued in pursuance of the regulations…"
"The need for such licensing was perceived following a number of financial failures by tour operators providing package holidays…which left holiday makers stranded abroad or with no flight to take them on the holiday for which they had paid."
The European Council Directive on package travel, package holidays and package tours of 1990 ("the Directive")
"Whereas the consumer should have the benefit of the protection introduced by this Directive irrespective of whether he is a direct, contracting party, a transferee or a member of a group on whose behalf another person has concluded a contract in respect of a package."
"is to approximate the laws, regulations and administrative provisions of the Member States relating to [travel] packages sold or offered for sale in the territory of the Community."
"1. "package" means the pre-arranged combination of not fewer than two of the following when sold or offered for sale at an inclusive price and when the service covers a period of more than twenty-four hours or includes overnight accommodation:
(a) transport;
(b) accommodation;
(c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package.
The separate billing of various components of the same package shall not absolve the organiser or retailer from the obligations under this Directive…
5. "contract" means the agreement linking the consumer to the organiser and/or retailer."
"2. Member States shall ensure that in relation to the contract the following principles apply…
Annex (j) special requirements which the consumer has communicated to the organiser or retailer when making the booking and which both have accepted."
"The organiser and/or retailer party to the contract shall provide sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency."
Package Travel, Package Holidays and Package Tours Regulations 1992 ("PTR")
"(1) The other party to the contract is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be performed by that other party or by other suppliers of services but this shall not affect any remedy or right of action which that other party may have against those other suppliers of services.
(2) The other party to the contract is liable to the consumer for any damage caused to him…"
"The other party to the contract shall at all times be able to provide sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency."
"the agreement linking the consumer to the organiser or the retailer or to both, as the case may be."
"the party, other than the consumer, to the contract, that is, the organiser or the retailer, or both, as the case may be."
The regulations made under the Civil Aviation Act 1982
"(1) Subject to regulation 3(1A), only persons of the following descriptions may make available flight accommodation in the United Kingdom…
(b) a person who holds a licence authorising him to do so…
(c) a person who acts as agent on behalf and with the authority of a disclosed identified principal who is a licence holder…
(e) a person who acts as a ticket provider."
(1A)
(a) A person shall not make available flight accommodation which constitutes a component of a package in the capacity of an agent for a licence holder except where all the components of the package are made available under a single contract between the licence holder and the consumer.
(b) A person shall not make available flight accommodation which constitutes a component of a package in the capacity of a ticket provider.
(2) No person shall…hold himself out as a person who may make available flight accommodation unless:
(a)
(i) he is entitled to make available that accommodation as…a licence holder…[or] an agent for a licence holder…"
"[F]light accommodation" means accommodation for the carriage of a person on a flight…in any part of the world…
"[P]ackage" means the pre-arranged combination of at least two of the following components when sold or offered for sale at an inclusive price…
(a) transport;
(b) accommodation;
(c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package, and
(i) the submission of separate accounts for different components shall not cause the arrangements to be other than a package;
(ii) the fact that a combination is arranged at the request of the consumer and in accordance with his specific instructions…shall not of itself cause it to be treated as other than pre-arranged…
…[A] ticket provider" means a person who, in respect of the making available of flight accommodation, supplies to the person from whom payment is accepted a valid ticket…"
The criminal sanction
The position of the airlines
The history of the 2003 Amendment
"In part as a result of representations on the topic from ABTA, in the late 1990s the CAA became concerned with the practice of what has been called "contract splitting." This refers to the practice by some firms not holding an ATOL of advertising flights and hotel accommodation as a package and then taking the deliberate step of selling them under separate contracts in order to avoid the requirements of holding an ATOL. The effect of this device being that whilst the flight accommodation would be governed by an ATOL because it is sold as agent for an ATOL holder, the other services would not because they were being sold separately."
The CAA's Guidance of July 1998
"Where a flight and additional facilities are sold to the same consumer, but not in a package which is quoted at a single inclusive price, they may be covered separately under the licence…This arrangement is not intended to allow genuine inclusive packages to be "unbundled"…
…where an ATOL holder sells flights covered by [airline bonds] along with other facilities, and the separate items are at no stage quoted to the consumer at a single inclusive price, the extra facilities only may be bonded under the ATOL…The CAA will require evidence in the form of brochures and documentation to show that items are always quoted separately…Where an inclusive price is quoted at any stage (in either advertising or invoices) the product will be regarded as a package and must be fully bonded."
The CAA's letter of 15 April 1997
"…we are content for your…advertisements to show the combined cost of flights and separate accommodation…on the proviso that these advertisements include [a]…statement which alerts the potential customers to the fact that ATOL only covers the flight element…"
The CAA's paper of August 2002
"This paper seeks the views of the recipients on a possible change in the ATOL Regulations to deal with a gap in consumer protection that arises from a practice known as "contract splitting." This occurs when a firm sells flights and accommodation under separate contracts, and as a result the customer may not receive the protection which is envisaged by the Package Travel Regulations."
"The problem arises from a misalignment between the ATOL Regulations and Package Travel Regulations. The practice of "contract splitting" by unlicensed firms typically involves a flight sold as agent for an ATOL holder and accommodation sold separately as a principal…
…The public will usually believe that they are buying a package, and may be misled by reference to ATOL into believing that all the components are protected by ATOL. Any disclaimers will normally appear in small print…
17. The CAA's view is that products that fall within the scope of the…Directive and appear to the public to be packages should have the protection that is envisaged by the Package Travel Regulations, and that if a flight is involved then the firms who sell them should be brought within the licensing scope of the ATOL Regulations…
18. The CAA believes that the change can best be effected by an amendment to the ATOL Regulations so that an ATOL is required for sales that contain air travel and are within the scope of the [PTR]… irrespective of the number of contracts involved in the sale…"
"…19. The proposed amendments are to regulations 1 and 3. Regulation 3 currently provides for a number of categories of people who may sell travel without holding a licence, and two particular categories are the authorised and disclosed agent of a licence holder and person who is a "ticket provider." It is these exclusions from licensing that are currently used to provide the air travel component in split contract packages, and the CAA proposes that the exclusions in regulation 3 should be narrowed so that firms in these categories are no longer excluded from licensing if they create packages. Regulation 1 would then be amended to incorporate a definition of a package…identical to that in the PTR…
23…There will be no impact on consumers who wish to create their own holidays by buying the components separately…
29. The CAA's proposal is aimed essentially at sales that the consumer would perceive as packages, which fall generally into two categories. One is where the separate items have clearly been packaged before being offered for sale; the second…is that of "tailor made" holidays where an operator offers a limited selection of flights and accommodation from which the consumer is intended to make his choice to form a package. In many cases the clearest evidence that a package falls into one of these two categories may be the existence of advertising…and where this is the case enforcement action can be…effective…"
ABTA's letter of 10 October 2002
"…Bringing the concept of a package as defined in the PTRs into the ATOL Regulations…will not solve the problem of defining a package…
It is important to note that travel agents putting together flight seats and accommodation etc. at the request of a client at the time a booking is made, without any advertising of the possibility of combining the elements in question are simply carrying on the normal business of a travel agent. This is distinct in most cases from agents who are selling split contract packages, which are advertised as such and/or involve some pre-planning by the agent as to the possibility of the elements being combined. This is obviously a complex and often grey area but normal travel agency business should not be caught."
The CAA's Advice to Government, July 2004
"The CAA's consultation was prompted by evidence that the ATOL system, which has historically provided effective consumer protection for holidaymakers at reasonable cost, would be constrained in its ability to do so in the future because of changed circumstances and legislation that no longer fits the realities of how holidays are now sold. There have been substantial changes in recent years, principally as a result of the availability of cheap flights direct from airlines and the ease with which flights and accommodation can be bought over the internet: this has led to an increasing tendency for people to buy separate holiday components rather than pre-arranged packages and these sales fall outside both the ATOL Regulations (and their primary enabling legislation) and the…Directive. They therefore carry no statutory protection against the insolvency of any of the suppliers."
"Most of the assumptions on which the…legislation [is] based are clearly invalid today…Finally, the proportion of holidays now bought as packages has declined sharply both because it is easy for independent travellers to buy separate components and because many holidays which appear to be packages are legally otherwise as a result of there being separate suppliers. It must be…concluded that neither the ATOL Regulations nor the [PTR] now provide the protection for the substantial majority of holidays and leisure travel that was envisaged…
The problem of "quasi-packages," where technically no package exists because there are separate suppliers, is aggravated by the fact that many of the flights and other facilities bought separately are to established package holiday destinations which would formerly have been served by tour operators selling a protected product, and by the fact that the Internet sites through which they are available are constructed so that, in many cases, customers do not realise they are not buying a package."
"It seems to the CAA important to emphasise that without regulatory change there is no reason to expect a reversal in this trend, which is driven by a demand for cheap flights and by technology which enables holiday components to be bought separately…if no regulatory action is taken the trend may in reality increase more sharply…as a result of competitive reactions by major tour operators, who may arrange their businesses to avoid the costs of protection."
"…it is doubtful whether it would be sensible to define a system on the basis of "packages" because of a trend towards buying separate travel facilities."
"…Protection should extend to packages, including in circumstances where an airline facilitates the sale of other holiday components although legally no package will exist in those circumstances…
…The CAA believes that there is strong evidence that the need and demand for consumer protection in air travel remain, but it regards the conclusion as inevitable that ATOL does not now provide the protection that was envisaged when it was set up and will be increasingly unable to meet the public's expectations. There are essentially two reasons for this. The first is that under EU legislation holiday protection is required only for "packages," narrowly defined as components that are provided by the same supplier: many quasi-packages are however now arranged so that there are separate suppliers, although the product is often presented in such a way that the consumer does not appreciate that no contractual package exits…"
Guidance Note 26
"1.1 This Guidance Note deals with the financial protection of holidaymakers. It has been produced to help travel organisers and agents understand the definition of an air package set out in the relevant…Directive…the [PTR] and the…[ATOL Regulations]…it also takes account of decisions of the European Court…It is a response to market developments such as split contracts and is designed to help travel organisers and travel agents decide what parts of their businesses need ATOL protection."
"1.2 This Guidance…explains the types of air package business which a travel company is required to protect under an…ATOL. The Note should be read in conjunction with the Regulations. The purpose of this Guidance…is to explain the background to the Regulations and to offer an interpretation of certain provisions. Only the courts can give a determinative view on the law…
1.4 The…Regulations were amended on 1 October 2003 with the intention that the practice of splitting an air package contract by way of separately documenting the flight, accommodation and other services, was brought within the scope of the ATOL Regulations. As part of the amendment, the ATOL Regulations incorporated a description of a package identical to that contained in the PTR…
1.5…[which] mirrors the definition…in the [Directive]."
"The definition is at paragraph 1.5. One reasonable test is to consider what the consumer thinks he is getting when he approached the agent or travel organiser; artificial arrangements to sell components at separate times and with separate billing would not mean that a package had not been sold."
"Where a combination of facilities is advertised in any form, including in a brochure, on Teletext or on a website, this will be taken as evidence of a pre-arrangement. Additionally, if a combination of travel facilities is offered from which a consumer is able to choose their (sic) holiday arrangements, then these will also be taken as evidence of prearrangement; it does not mean that it is necessary to have made reservations or taken allocations in advance."
"This term refers to the price of the package. It does not matter if the cost of a package is made up of separate sums relating to the value of each element (travel, accommodation, other ancillary tourist services). In these circumstances, the whole arrangement can still be sold at an inclusive price."
"…it should also be noted that whether a combination of travel facilities does or does not amount to a package for the purposes of the Regulations will depend on the facts of each individual case; the mere fact that the word "package" is not used by the consumer is not decisive."
"…In general, such arrangements are not seen as creating a package because the travel agent would not have played a role in influencing the arrangements."
"The introduction of new sales channels, and particularly web based sales, has enabled travel companies to source individual items rather than simply retail another company's travel arrangements to their customers. In addition, the sale of individual holiday items over the internet and the rapid expansion of no-frills airlines has led consumers to expect that their travel arrangements can be "dynamically packaged" or "tailor made" to suit their own requirements. Consequently, travel companies are able to construct packages from individual components and arrangements are quite different from the scenario at 3.2."
"As travel agents' sales of combinations of arrangements, including air transport, potentially become packages, there are circumstances in which travel agents will need an ATOL to provide the public with financial protection for this activity. The following sections describe the ways in which the sale by an agent of combinations of travel arrangements, including air transport, may become sales of a package with a consequent requirement of an ATOL; this guidance is based upon the regulatory requirements…
"In the ultimate analysis the question of whether an ATOL is required for any individual transaction will depend upon the particular facts of that transaction. The examples given in sections 4 and 5…are just that- examples. It is important to recognise that unless a transaction falls within one of the examples in section 5 [where an ATOL is not required], an ATOL may still be required even if the circumstances of any individual transaction do not fall precisely within any of the examples listed in section 4…"
"…4.2 If travel facilities are advertised by an agent in a brochure, a shop window display, on Teletext, in a newpaper advertisement or on a website, and it is clear that these can be combined to form a package, or the agent offers to provide individual package quotations based on an advertised range of options, then such packages require ATOL cover…"
"4.3 If an agent offers a consumer a choice of travel facilities, including a flight, the resulting sale will be a package requiring the agent to hold an ATOL…"
"4.4 If a consumer requests a flight and accommodation and/or other tourist services to a particular resort or destination and asks an agent for details of suitable arrangements and the agent provides information on a combination of services, rather than a package from an ATOL holder, then this is a package under the [Regulations]…"
"4.5 In some instances a consumer may have been offered an ATOL protected package, but asks the agent whether there is a cheaper alternative; if the agent decides to offer an alternative that he has selected himself, rather than a package from another ATOL holder, then the agent will need his own ATOL.
4.6 Following the 2003 ATOL…amendment, if an agent puts together a package utilising a scheduled flight, provided to the consumer on a "ticket provider" basis, (ie the consumer paid for the flight and received a valid ticket for travel [from the agent] immediately in return,) then the package will require to be covered by an ATOL.
4.7 If an agent advertises that he can provide tailor-made holiday arrangements or he can provide dynamic packages, then he will need an ATOL to cover the majority of such sales…
4.8 If an agent has taken commitments or contracts with a supplier for any item offered as part of an air package, then the package will require an ATOL."
"5.2 A consumer may approach an agent to buy a number of services which the customer specifies with no influence from the agent…this is not defined as a package…as there is no prearrangement by the agent and the agent cannot be held responsible for a service over whose choice the agent had no influence. All services must…be separately documented. If one or more elements are not available and the agent recommends alternatives/changes, this may become a package."
"5.4 A consumer buys a flight from an agent (which may be ATOL protected) and at a later date returns to buy accommodation. The sale of the two services at different times does not unless they are linked by documentation, create a package. However such transactions must genuinely take place at different times and cannot be a device to avoid providing package protection."
"6.1 Travel firms which sell air package arrangements which they have constructed themselves will in the majority of cases need to hold an ATOL to protect those sales. From the agent's perspective this means that if they have selected specific travel components, or they have offered for sale travel facilities including a flight, then the resultant sale will usually be a package. From the customer's perspective, if he approaches an agent and explains that he wants to buy a flight and accommodation and/or other services, or merely that he wants to buy a holiday, then it is likely that the arrangements will have been sold or offered for sale to him as a package."
"The CAA undertakes monitoring of travel firms to ensure compliance with the ATOL Regulations. With the issue of this new guidance the CAA will be carrying out increased monitoring of travel agents, and firms should be aware that it is the CAA's policy to prosecute in cases where firms have been made aware of the compliance requirement but have failed to obtain a licence…"
The CAA's current advice to consumers
"The best guide is that if you pay one firm, in a single transaction, for a range of holiday items…it's a package. It can be offered in a brochure or on a website, and will normally be sold at a single inclusive price. Some points to look out for are:
The importance to the travel industry of the Guidance
The appropriateness of judicial review
The claimant's argument
"We must now say that if a government department, in a field of administration in which it exercises responsibility, promulgates in a public document, albeit non-statutory in form, advice which is erroneous in law, then the court, in proceedings in the appropriate form commenced by an applicant…who possesses the necessary locus standi, has jurisdiction to correct the error of law by an appropriate declaration…the occasions of a departmental non-statutory publication raising…a clearly defined issue of law…will be rare…[the court should not proffer] answers to hypothetical questions of law which do not strictly arise for decision."
My conclusion to whether the case is an appropriate one for judicial review
The argument on the merits
A sale or offer for sale "at an inclusive price"
"[Regulation 15] taken with…Regulation 2, does not…make a retailer liable for the performance of the contract unless…[the] agent is acting for an undisclosed principal in which case the claimant can sue either principal or agent…[or] the retailer, either on his own or jointly with another operator provides the package."
"…the consumer should have the benefit of the protection…irrespective of whether he is a direct contracting party, a transferee or a member of a group on whose behalf another person has concluded a contract in respect of a package."
"Pre-arranged"
"…must be interpreted so as to include holidays organised in accordance with the consumer's specifications…[it may be] put together at the time the contract is concluded between the travel agent and the consumer…" See paragraphs 19 and 20.
The errors alleged in the Guidance
Paragraph 2.5 of the Guidance
"…It does not matter if the cost of a package is made up of separate sums relating to the value of each element (travel, accommodation, other ancillary tourist services). In these circumstances, the whole arrangement can still be sold at an inclusive price."
Paragraph 5.2 of the Guidance
"…[it is not] a package…[if]…there is no prearrangement by the agent and the agent cannot be held responsible for a service over whose choice the agent had no influence…If one or more elements are not available and the agent recommends alternatives/changes, this may become a package."
Paragraph 4.3 of the Guidance
"If an agent offers a customer a choice of travel facilities, including a flight, the resulting sale will be a package requiring the agent to hold an ATOL…"
Paragraph 4.8 of the Guidance
"If an agent has taken commitments or contracts with a supplier for any item offered as part of an air package, then the package will require an ATOL."
Other errors relied upon by the claimant
Paragraph 2.3
"One reasonable test [of package] is to consider what the consumer thinks he is getting when he approached the agent or travel organiser; artificial arrangements to sell components at separate times and with separate billing would not mean that a package had not been sold."
Paragraph 3.2
"[It is not]…a package because the travel agent would not have played a role in influencing the arrangements."
Paragraph 3.3
"…travel companies are able to construct packages from individual components and [these] arrangements are quite different from the scenario at 3.2 [where the travel agent had not influenced the arrangements]."
Paragraph 4.2
"If travel facilities are advertised by an agent in a brochure, a shop window display, on Teletext, in a newspaper advertisement or on a website, and it is clear that these can be combined to form a package, or the agent offers to provide individual package quotations based on an advertised range of options, then such packages require ATOL cover…"
Paragraph 4.4
"If a consumer requests a flight and accommodation and/or other tourist services to a particular resort or destination and asks an agent for details of suitable arrangements and the agent provides information on a combination of services, rather than a package from an ATOL holder, then this is a package under the [Regulations]…"
Paragraph 4.5
"In some instances a consumer may have been offered an ATOL protected package, but asks the agent whether there is a cheaper alternative; if the agent decides to offer an alternative that he has selected himself, rather than a package from another ATOL holder, then the agent will need his own ATOL."
Paragraph 4.6
"Following the 2003 ATOL…amendment, if an agent puts together a package utilising a scheduled flight, provided to the consumer on a "ticket provider" basis…then the package will require to be covered by an ATOL."
Paragraph 4.7
"If an agent advertises that he can provide tailor-made holiday arrangements or he can provide dynamic packages, then he will need an ATOL to cover the majority of such sales…"
Paragraph 5.4
"[If a] consumer buys a flight from an agent…later…buy[s] accommodation…The sale of the two services at different times does not unless they are linked by documentation, create a package. However such transactions must genuinely take place at different times and cannot be a device to avoid providing package protection."
Paragraph 6.1
"Travel firms which sell air package arrangements which they have constructed themselves will in the majority of cases need to hold an ATOL to protect those sales. From the agent's perspective this means that if they have selected specific travel components, or they have offered for sale travel facilities including a flight, then the resultant sale will usually be a package. From the customer's perspective, if he approaches an agent and explains that the wants to buy a flight and accommodation and/or other services, or merely wants to buy a holiday, then it is likely that the arrangements will have been sold or offered for sale to him as a package."
My conclusions
A sale or offer for sale at an inclusive price
Pre-arranged
The Guidance
Paragraph 2.5
Paragraph 5.2
Paragraph 4.3
Paragraph 4.8
Paragraph 2.3
Paragraph 3.2
Paragraph 3.3
Paragraph 4.2
Paragraph 4.4
Paragraph 4.5
Paragraph 4.6
Paragraph 4.7
Paragraph 5.4
Paragraph 6.1
Conclusion