Principals or Agents?

15th January 2021 by Dominique Smith

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In this article the author provides an analysis of the case of Rosemary O’Donnell v (1) On the Beach Limited (2) Romance Club Hotel [2020] SC EDIN 51 which revolves around the perennial issue of principal and agent.

Travel Insurance

Introduction

Despite many more claims now being brought under the Package Travel and Linked Travel Arrangements 2018, some cases concerning the Package Travel, Package Holidays and Package Tours Regulations 1992 (“the 1992 Regulations”) are still trickling through the courts.

One such case that was recently heard by the Scottish Courts, namely Rosemary O’Donnell v (1) On The Beach Limited (2) Romance Club Hotel [2020] SC EDIN 51, considered whether a holiday sold by a travel agent was a package within the meaning of Regulation 2(1) of the 1992 Regulations. This case is particularly interesting, given that the travel agent had explicit terms and conditions to state that it was not providing package holidays to consumers, rather it suggested that separate contracts with each supplier and the consumer were being made.

The facts

Ms O’Donnell decided that she wished to go on holiday in Turkey with her partner and her mother. Ms O’Donnell was aware of a hotel called the Kibele Hotel, which was an attractive option to her, as her mother required the use of a wheelchair, and the hotel was suitable for such holidaymakers.

On The Beach, an online travel agent, provided a website which enabled potential customers to book holidays. Their website specified that they provided:

“ … a web search interface between you and various third party suppliers of travel products (e.g. flight, hotel or transfer). For flights, we act as an agent in processing your booking with the airline: we are not the airline’s agent. Each product you choose has its own price independent of other products booked at the same time and creates a separate contract between you and the supplier of that product … As an online travel agent, we don’t sell package holidays, we let you build your own by giving you access to a wide range of cheap flights, hotels and transfer suppliers …”

Further, it was stated on the website that by clicking to confirm a booking, the customer was agreeing to each separate third party suppliers’ booking conditions and On The Beach’s agency terms of business (“the Terms”).

On or around March 2016, Ms O’Donnell visited On The Beach’s website and selected the dates for the holiday, the number in her travelling party, and the destination to which they wished to travel. The website gave her a number of options to choose from as to flights and hotels. She selected flights at a time of her choosing, the aforementioned hotel, and transfers to and from the airport, and was presented with a price showing the cost of the individual components of the holiday. At no point did she read the Terms. She proceeded to book the holiday.

She later received a confirmation email from On The Beach on 5th March 2016, which again stated that “each travel product you book (flight, hotel, transfer or insurance) is a separate and individual booking. Each booking creates a separate contract between you and the relevant supplier … ” It additionally mentioned that the flights were reserved with Thomas Cook Tour Operations, the hotel with Magic Rooms, and the transfers with Atik Tours DLM Shuttles. Under a heading named “Booking Cost Summary”, it was noted that the total flight price was £964.68, the total hotel price was £453.51, and the total transfer price was £52.62. A discount was provided in respect of the accommodation, however Ms O’Donnell was not aware of the specific details of the discount, as this was organised by On The Beach. The booking cost summary however stated that the discount was to be allocated against On The Beach’s “surcharges, service and transaction fees and then finally against the other costs”. Ms O’Donnell paid a deposit to On The Beach at around the same time as the confirmation email.

Ms O’Donnell did not consider that she had entered into three separate contracts with the airline, hotel and transfer company separately. For all intents and purposes, she considered she had booked a package holiday with On The Beach. Her payments for the holiday were all to be made to On The Beach.

On or around 19th July 2016, during the course of the holiday, Ms O’Donnell unfortunately had an accident and suffered an injury. She subsequently claimed that On The Beach were liable for her injuries, pursuant to Regulation 15 of the 1992 Regulations, for improper performance of the holiday contract. On The Beach denied that the 1992 Regulations applied, as they considered that Ms O’Donnell had not booked a package holiday with them. The Court was therefore tasked with considering the specific issue of whether Ms O’Donnell had, in fact, booked a package holiday with On The Beach.

The Hearing

The matter came before Sheriff William Holligan. Submissions were made by both parties concerning the definition of a package. The definition of a package, as set out under Regulation 2(1) of the 1992 Regulations, states that a package is a:

“pre-arranged combination of at least two of the following components when sold or offered for sale at an inclusive price and when the service covers a period of more than 24 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; and

(i) the submission of separate accounts for difference 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 (whether modified or not) shall not of itself cause it to be treated as other than pre-arranged”

Ms O’Donnell’s counsel advanced that she had booked a package holiday with On The Beach, pursuant to regulation 2(1) of the 1992 Regulations, as the components of the holiday were sold as a pre-arranged combination at an inclusive price. It was further submitted that there was no suggestion that separate payments had been made to each service provider; rather, payment was made for all of the services. Ms O’Donnell had a contract of payment entirely with On The Beach. Her payments were not directed towards, or indeed directly received by, the other suppliers. It was argued that the definition of a ‘package’ was not only one that could be described as a traditional package holiday but could also be a holiday tailored to a consumer’s specific requirements.

On The Beach’s counsel submitted that the terms of business were incorporated into the parties’ contract, which set out in detail what the role was of On The Beach. The contract between Ms O’Donnell and On The Beach was essentially one of agency. Moreover, the order confirmation email made clear that there were separate contracts between Ms O’Donnell and the relevant suppliers. Their counsel further submitted that there was no suggestion in the documentation that the holiday constituted a package with On The Beach, nor was the ATOL protection in respect of a package. When looking at the 2018 regulations, it was submitted that they broadened the concept of package holidays and introduced the concept of linked travel arrangements, of which this was precisely such an arrangement. Consequently, it fell outside the definition of a ‘package’ in the 1992 Regulations.

The Judgment

The Court considered authorities including Club-Tour Viagens e Turismo SA v Alberto Carlos Lobo Goncalves Garrido C-400/00 ECR 2002, Rechberger v Republik Osterreich C-140/97 ECR 1999, Titshall v Qwerty Travel Ltd [2011] EWCA Civ 1569, and R (on the application of The Association of British Travel Agents Ltd (ABTA) v Civil Aviation Authority [2006] EWCA Civ 1356 and also Holiday Law 5th ed. by Grant and Mason,before reaching its decision.

The Court considered that the test as to whether a holiday was a package holiday was not subjective. The fact that On The Beach described themselves as agents, rather than principals, was additionally not conclusive. The Court found that Ms O’Donnell and On The Beach had entered into a package contract; the package comprised three qualifying services, namely transport, accommodation and transfers, which were pre-arranged. Further, the Court considered that the 1992 Regulations covered a situation where the combination of tourist services was the result of the choice of the consumer up to the moment where the parties reached an agreement and concluded a contract.

The Court additionally found that the price was inclusive, rather than aggregated, on the basis that Ms O’Donnell paid a single sum to On The Beach only. As such, she did not enter into three separate contracts with three separate service providers. The price to be paid was to be paid by instalments to On The Beach and was not attributable to different suppliers. The management of the payment was left to On the Beach. The Court therefore considered that the payment could not be broken down and identified as being attributable to the individual suppliers. Some parts of the price for the components was attributable to a sum payable to On The Beach, by way of a mark-up, for surcharges, service and transaction fees. Ms O’Donnell had no dealings with the other service providers until the holiday began.

As such, the Court concluded that the holiday was a package falling within the meaning of the 1992 Regulations.

Analysis

This case emphasises that terms and conditions do not preclude agents from being deemed to have sold package holidays under the 1992 Regulations. Whilst many more holidays sold by travel agents will now be deemed to be package holidays under the Package Travel and Linked Travel Arrangements 2018, it is important for those dealing with potential claims under the 1992 Regulations to consider closely whether there is a pre-arranged combination of components sold, or offered for sale, at an inclusive price.

When looking at Titshall, the Court of Appeal considered that the key to the resolution of the factual enquiry as to whether the services were offered for sale as the components of a combination, or whether they were being sold or offered for sale separately, lay in two features of the transaction. In that case, there was “no explicit suggestion…made to Mr Titshall that either the flights or the accommodation were available for separate purchase, the one without the other”. The inclusion of the wording “one without the other” is certainly interesting.

Applying that reasoning to this case, On The Beach advanced in the hearing that the flights and accommodation were available separately and Ms O’Donnell had booked the separate components quite separately. On their website, they had explicitly stated that customers were entering into separate contracts with suppliers. However, if one looks at the interpretation of Lord Justice Tomlinson’s words in Titshall, particularly that of the purchases being made one without the other, it doesn’t appear that On The Beach went so far as to suggest, either on their website or to the Court, that the hotel could have been separately purchased by Ms O’Donnell in the course of the booking without flights being purchased, or vice versa. Rather, they suggested they were available separately under separate contracts, but they were purchased together at the same time. There does appear to be a distinction in that.

What also appeared crucial in the determination of the case was that of the ‘mark-up’ fees that applied to the transaction, as well as the payment of sums to On The Beach. Unusually, the payment of the holiday was paid solely to On The Beach, rather than to the suppliers. What one usually sees in an agency relationship is that the deposit, or indeed payment sums, are paid to the suppliers directly, which was not the case here. In addition, therefore, the Court found that the unspecified mark-up fee, akin to the service fees in Titshall, was ultimately indicative of a package.

Click here to read the case report

Dominique Smith is a Barrister with 1 Chancery Lane
She can be contacted at dsmith@1chancerylane.com

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