Holiday Compensation - Damages in Package Holiday and Travel cases

When people think of their holidays, many think of sun, sea, sand and sangria, but some will need to add ‘solicitor’ to this list.

With around 16m package holidays sold to UK holidaymakers each year, inevitably some consumers don’t get what they paid for. Since the introduction of the Package Travel, Package Holidays and Package Tours Regulations in 1992 (SI no 3288) (the 'Regulations') a growing number of holidaymakers are seeking redress for failing to get the holiday they expected.

After advising on the prospects of establishing liability, advising your client on what he can expect to receive is just as important. But calculating damages in package holiday cases is difficult. Until recently, holiday claims remained one of the few types of cases where damages for distress, vexation, frustration and loss of enjoyment were recoverable (usually referred to as ‘loss of enjoyment’ or ‘distress and disappointment’ losses). However, calculating this element of a claim is fraught with difficulties, requiring extensive use of comparables.

Basic principles of assessment

Holiday claims are essentially simple breach of contract claims where one party (normally the tour operator) has failed to provide the package of component services (accommodation, flights, transfers to and from the airport, use of a representative at the destination) in accordance with the contract. So when the tour operator has breached its obligations under the contract, e.g. by not supplying the five-star hotel chosen (as in Beck v Tropical Worldwide Holidays Ltd [1999] CLY 1384), the consumer should be eligible for compensation.

That compensation can be broken down into two main headings:

(1) Diminution in value; and 
(2) Consequential loss.

In turn, consequential loss subdivides into four heads:

(1) distress and disappointment;
(2) additional expenses;
(3) physical inconvenience, and
(4) physical injury.

However, when considering loss under these headings, it should be remembered that:

(a) the tour operator is liable for the proper performance of the contract, irrespective of whether the obligations were to be performed by subcontractors (e.g. where a local bus company provides the transfers to and from the airport) (see Reg 15);

(b) the claimant can claim not only his losses, but also those of the other members of his family who accompanied him (Kemp v Instasun [1987] 2 FTLR 234); and

(c) if, after the initial problems appear, the tour operator failed to provide prompt assistance or make efforts to find a solution, this is a further breach for which damages can be recovered.

Diminution in value

The claimant will normally recover the difference, in monetary terms, between:

(a) what he was promised, and
(b) what he actually received.

So where the claimant specifically contracted to receive a hotel with a heated swimming pool, because his wife was about to have a hip operation and wished to exercise in warm water, but actually received a hotel with a cold pool, the claimant was entitled to the difference in value between the two (Forsdyke v Panorama Holidays Group Ltd [2002] 3 CL 544). If a holiday with a warm swimming pool is worth £675, and without one it is worth £225, the claimant will recover £450 as diminution in value. In respect determining (a) and (b) above, in practical terms there is at least a easy starting position for (a) - since it is almost always the price the claimant contracted to pay for the holiday (but see ‘Loss of a good holiday deal’, below).

Conversely, it is generally more difficult to reach a firm monetary figure on (b), the value of what was actually received -i.e. a defective holiday. Sometimes an arithmetical approach can be adopted; by comparing the value of purchasing a holiday with and without the component parts; eg the price of the holiday with four-star accommodation (what he bargained for), compared with a three-star hotel (what he received). Evidence of comparable holidays from brochures and hotel price lists is invaluable here.

The picture becomes much more complex where some components/facilities were absent, while others were present but substandard; valuing what was received will be harder evaluative judgment, more open to legitimate and reasonable disagreement. Use of brochures/price lists will be of only modest value, particularly where the problems were numerous and varied.

Where evidence is lacking, the best approach is to try to assess the value of each component part of the holiday (eg accommodation makes up around 40 to 50 per cent of the cost of a typical holiday to Spain, according to the Federation of Tour Operators). Then, depending on whether the component was absent or just substandard, assess what percentage of that component the claimant actually received. So if the accommodation was not provided at all (as in Duthie v Thomson Holidays [1988] CLY 1058), the diminution in value will be 100 per cent of 40-50 per cent of the cost of the holiday. Effectively, the claimant should receive about 50 per cent of his money back. While this may seem low (and somewhat out of kilter with some of the reported cases), he will also be entitled to all his consequential losses, in particular, his distress and disappointment and physical inconvenience losses, aspects that will be considered later in this article. 

Loss of a good holiday deal

Where a consumer purchases a holiday at a knocked-down price, and the tour operator subsequently cancels the holiday before the consumer departs, or the holiday is not up to standard, the consumer will be able to recover the benefit of his bargain. In Hartman v P&O Cruises Ltd [1998] CLY 3732, the claimant bought a 12-day cruise at a low fare of £858. The defendant cancelled the cruise the day before departure. The court held the claimant was entitled to the cost of going on a comparable cruise. As the market price for a comparable cruise was £2270, he was entitled to recover this amount.

Distress and disappointment

Jarvis v Swan Tours Ltd [1973] QB 233 and Jackson v Horizon Holidays [1975] 3 All ER 92 recognised in English law that holiday cases fall into an exception to the general rule that distress and disappointment losses are not recoverable for breach of contract.

The very object of the holiday contract is to provide pleasure, relaxation and peace of mind to the consumer. When the tour operator fails to provide what the contract called for, whether that was a reasonable standard of accommodation (Lynes & Graham v Airtours [1997] CLY 1773), hygienic food and drink (Duffy v First Choice Holidays [2000] 4 QR 8), facilities such as a children’s swimming pool (Hind v Evergreen Travel Services [1998] CLY 1430) or indoor sports activities (Jervis v Kuoni Travel Ltd [1998] CLY 3733), the consumer may recover damages for the distress and disappointment of not being provided with them.

While the size of the award varies according to the individual facts, the more expensive the holiday, the larger the award is likely to be (see Coughlan v Thomson Holidays [2001] CLY 4276). Likewise, the less the breach seems to have affected the claimant, the less the award is likely to be (Pegramm v Style Holidays Ltd [1999] CLY 1383). Here, a defendant may wish to make use of the claimant’s holiday photos to show he does not seem to have had too unpleasant a time.

In line with most other claims for non-pecuniary loss, reference should be made to comparable cases. While there are no JSB guidelines or Kemp & Kemp equivalents available, use can be made of the case finder [published separately]. Unfortunately, with only a patchwork of reported cases, no case is likely to be ‘on all fours’ with an authority, thereby necessitating a ‘broad-brush’ approach.

Additional expenses

Where, as a result of some failure by the tour operator, the consumer incurs additional expenses, these should be recoverable, subject to the rule of remoteness and so long as the expenses were reasonably incurred. In Crump v Inspiration East Ltd [1997] CLY 1771 the claimant recovered the cost of hiring a taxi when the transfer bus to and from the airport did not show up. Likewise, in Martin v Travel Promotions Ltd [1999] CLY 3821 the claimant’s connecting flight was delayed, causing him to miss his flight back to the UK. He recovered the cost of the telephone calls he had to make to the UK to sort out another flight.

Physical inconvenience

Although sometimes subsumed within distress and disappointment, care should be taken to ensure physical inconvenience losses (sometimes called ‘physical discomfort’) are taken into account. Only in rare cases will there have been no physical inconvenience resulting from a breach of contract (one apparent exception is Westerman v Travel Promotions Ltd [2000] CLY 4042 where instead of travelling by a ‘unique’ 1939 train for part of the trip, the claimant was transported first class on Swiss-rail and by air). Examples of physical inconvenience/discomfort occurring as a result of breaches by the tour operator include: the discomfort of waiting at airports due to flights being delayed (Davis v Thomson Holidays Ltd [1999] CLY 3826); delays and additional transfers on arrival (Halpern v Somak Travel Ltd [1998] CLY 1428); physical discomfort from substandard accommodation, eg McSharry v Lloyds TSB Bank Plc [2000] CLY 4037 where the claimant and party had to spend the first two days of their holiday cleaning their villa. Similarly in Beck v Tropical Worldwide Holidays Ltd [1999] CLY 1384, rather than a five-star room, the claimant had to stay in a small, stuffy, hot, sparsely furnished apartment away from the hotel and up some narrow steep steps. In Collinson v Travel Promotions Ltd [1998] CLY 1427, the claimant’s cabin was not adjacent to (as was required) his elderly mother’s; he was at the opposite end of the liner.

Personal injury

Where, as a result of the breach, the claimant has sustained personal injury, such losses can be claimed and quantified in the normal way. Accordingly, where the claimant suffers food poisoning from the hotel food, general damages are recoverable for the resulting illness: Middlege v Thomson Holidays Ltd [2000] 5 QR 8. In Djengiz v Thomson Holidays Ltd [2000] CLY 4038 the claimant recovered for an injury to his hip suffered while jumping for the ball in a hotel-organised game of volleyball. The court surface was made of concrete with only a small amount of sand on top!

Mitigation of loss

As with all contractual claims, the innocent party consumer is unable to recover from the contract breaching tour operator, compensation for losses which the consumer could have avoided incurring in the first place had the consumer taken reasonable steps to avoid incurring such loss. Coupled with this is an apparently concurrent and co-extensive duty imposed on the consumer by Reg 15 (9) of the Regulations to communicate at the earliest opportunity to the tour operator and the service provider that he perceives there to have been a failing on their part at the place where the services are being supplied. The most obvious way to satisfy these requirements is for the claimant to report the problem to the tour operator’s representative and service provider as soon as it arises.

The recoverability of compensation for loss breaks down into three rules:

(a) the consumer cannot recover for losses he has successfully avoided. If the loss was not actually incurred by the consumer, then it was not incurred, and so there is no loss requiring compensation with damages; 

(b) the consumer cannot recover for losses incurred but which could have been avoided if he had taken all reasonable steps to mitigate his loss. It seems from the reported cases, however, that the court is slow to refuse to allow the recovery of losses on this ground. For example, in Currie v Magic Travel Group [2001] CLY 4278 it was held the claimant had been entitled to fly home rather than accept an alternative hotel 10km away. Similarly, in McLeod v Malta Bargains Ltd, unrep, the claimant and her family found their hotel and its facilities were not up to standard. The defendant offered them accommodation at an alternative hotel, but this offer was refused as the alternative hotel did not have a swimming pool. In awarding compensation for the whole holiday, the judge implicitly accepted the claimant had not unreasonably failed to mitigate her loss by refusing to move to the alternative hotel. However, as Wheelhouse v CIT [1994] CLY 1478 shows, the court does sometimes disallow losses on this ground. In that case, the claimant was found to have acted unreasonably by flying home early rather than accepting alternative accommodation which could have enabled him to enjoy the remainder of the holiday.

(c) the consumer can recover the expenses incurred in taking those reasonable steps to avoid loss. Thus, the claimant in Crump v Inspiration East Ltd (above) recovered the cost of hiring a taxi when the airport transfer bus did not turn up. Such expense was recoverable as it was incurred to reasonably mitigate his loss. It was clearly better for the claimant to take a taxi than remain at the airport after arriving at his destination or, if returning to the airport, missing the flight home. Other obvious examples include:

(i) the cost of the entrance fee to use the next door hotel's swimming pool, because the hotel's swimming pool is unavailable; and
(ii) the cost of hiring proper equipment, when the equipment provided is insufficient.