The Times 24 November 1995
Court of Appeal
The claimants booked a school ski holiday. The holiday was arranged through an ABTA company.
When the booked holiday failed because of the insolvency of the original company the claimants went off on an alternative holiday funded by ABTA. Later the claimants were told that because ABTA had refused to reimburse the insurance premium they owed £10 to the new travel company.
The issue before the court was the view that would be taken of ABTA's published statements by a hypothetical figure - namely the ordinary member of the public. Would an ordinary member of the public, reading the Notice as a whole, regard it as intended to create legal relations between ABTA and those who buy tours or holidays through its members.
Waite LJ
In the end this case depends, as with so many questions involving construction of a document, upon impression - in this instance an impression gained by the court at one remove through the eyes of the hypothetical member of the public. The issue is not an easy one, as evidenced by the fact that Lord Justice Hirst and Lord Justice Hobhouse (whose judgments I have had the advantage of reading in draft) have each reached different conclusions on it for persuasive reasons. My own view is that the Notice - notwithstanding the bewildering miscellany it contains of information, promise, disclaimer and reassurance - would be understood by the ordinary member of the public as importing an intention to create legal relations with customers of ABTA members. The words that are crucial to the present case:
"Where holidays or other travel arrangements have not yet commenced at the time of failure, ABTA arranges for you to be reimbursed the money you have paid in respect of your holiday arrangements"
would in my judgment be understood by the ordinary reader as words of clear promise which do not lose their significance or their promissory character through being associated in the same context with words connoting a lesser degree of commitment.
ABTA argues alternatively that if the Notice was intended to create contractual relations, it did so only on the basis of an offer, or invitation to treat, on the terms of the ABTA handbook (which contains an express statement that insurance premiums will not normally be reimbursed). I would reject that argument. There is nothing on the face of the Notice to draw the ordinary reader's attention to the existence of any code of obligation wider than that contained in the Notice itself. I would similarly reject the contention that the words "money you have paid in respect of holiday arrangements" are not apt to include the sums paid for insurance. The further submission that extrinsic evidence as to Mr Wallace's actual motivation in making the relevant bookings would be admissible to contradict a prima facie intention to create legal relations is not in my view maintainable. It was suggested, finally, that there was no consideration moving from the customer. I disagree. Whenever a customer is induced to deal with one of its members by ABTA's promises of protection, there is a gain to the commercial purposes for which it was founded, providing clear consideration for those promises.
I would allow the appeal and substitute for the order made by the judge a declaration in the terms prayed that ABTA is obliged to reimburse to the plaintiffs the cost of providing insurance cover for the lost holiday with Adventure Express.
Hobhouse LJ
... The relevant consideration is what if anything the document says or offers as between ABTA and the member of the public who reads it and then books with an ABTA member.
Turning to the document itself, it is accepted that the words of Bowen LJ are apt:
"It was intended to be issued to the public and to be read by the public. How would an ordinary person reading this document construe it?"
The rival contentions, both of which can be persuasively argued for as is demonstrated by the difference of judicial opinion to which this case has given rise, are whether the document is simply telling the public about a scheme which ABTA has for its own members or whether it goes further than this and contains an offer which a member of the public can take up and hold ABTA to should the ABTA member with whom the member of the public is dealing fail financially.
I prefer the latter view. I recognise that the document is headed "Notice Describing ABTA's Scheme of Protection" and that in paras 4 and 5 the present tense is used - "ABTA seeks" -"ABTA ensures" - "ABTA arranges" - and not the future tense - "ABTA will ensure" or "ABTA will arrange". These points undoubtedly support the view of the Judge and the Defendants' argument. But the document has to be read as a whole. It is clearly intended to have an effect on the reader and to lead him to believe that he is getting something of value. The scheme is an ABTA scheme in relation to its members but it is a scheme of protection of the customers of ABTA members. It emphasises that it is "to protect you their customers" and is "for your benefit". This is further underlined in para 3 where the final sentence reads:
"If an ABTA member ceases to belong to ABTA and thereafter fails financially, ABTA still protects you if you made the booking before the time when ABTA membership ceased."
ABTA is offering to protect the reader of the notice, the prospective customer. It is an inevitable inference that what ABTA is saying is that it, ABTA, will do something for the customer if the member should fail financially.
What ABTA is to do is set out in the next section: "THE PROTECTION IS THAT". These are things which ABTA is to do. It is not a scheme which reduces the risk of financial failure or bolsters the finances of the member. It is a scheme whereby ABTA is going to step in if the member fails and deal directly with the customer. What ABTA is to do in that contingency is coherently stated. If the holiday is already in progress then ABTA seeks to arrange the continuation of the booked holiday or travel as far as possible. This is because if the member has failed then the overseas hotel or charter company may refuse to provide further services to the customer because the failed member is not going to pay for them. The continuation of the booked arrangements is qualified by the words "as far as possible" because obviously there may be practical difficulties in achieving this. In my judgment the member of the public reading this document would understand, and this Court should hold, that ABTA is undertaking to use its best endeavours, free of further expense to the customer, to procure that the customer is able to enjoy the rest of the holiday for which he has booked. Similarly it says that "ABTA ensures that if you are abroad you will be able to return to the United Kingdom". This wording is unqualified and again, in my judgment, is to be understood as a promise that ABTA will see that the traveller is brought back to the United Kingdom. I wholly reject the submission made by counsel on behalf of ABTA that this simply amounted to making arrangements at the expense of the traveller; it is clearly an undertaking with a financial content.
Similarly in para 5 the problem addressed is that the customer has lost the money which it has paid to the insolvent ABTA member. Unless the wording of this paragraph is to be read as an undertaking by ABTA to see that the money paid will be reimbursed to the customer, it means nothing. In the context it must also relate to a repayment which is to occur within a short time span since it must be anticipated that the customer will very often wish to spend the money on a substitute holiday. Indeed this practical consideration is recognised by the second sentence in para 5 which clearly is not promissory but indicates that ABTA may be able to offer substitute or alternative arrangements. In my judgment there is no vagueness about the undertaking in the first sentence of para 5 nor for that matter, as I have explained, in either part of para 4. If there is any difficulty about the best endeavours part of para 4 that does not invalidate the undertaking to repatriate in para 4 and to reimburse in para 5 each of which are wholly clear and unquestionably capable of legal enforcement.
The final section of the document is headed "LIMITATIONS". The language of this section again, in my judgment, confirms the legal character of the document. Paragraph 6 makes it clear that it is only the failure of an ABTA member which is to give rise to the protection stated in the document. Paragraph 7 points out that in respect of matters for which the customer is not protected the customer should take out his own insurance; this again relates to transactions creating legal rights and liabilities. Paragraph 8, in legal terms, defines a limit to the "financial protection" which ABTA is providing to the customer. Paragraph 9, again in legal terms, stipulates that where a credit card has been used ABTA may require the customer to look first to the card company liable to reimburse the customer. Therefore the paras 6 to 9, and their inclusion in the document, all confirm the legal substance of the document and that what it is talking about are rights against ABTA which are to be legally enforceable by a customer who has chosen to deal with an ABTA member, in the event of the financial failure of that member.
In my judgment this document is intended to be read and would reasonably be read by a member of the public as containing an offer of a promise which the customer is entitled to accept by choosing to do business with an ABTA member. A member of the public would not analyse his situation in legal terms but he would clearly understand that this notice would only apply to him if he should choose to do business with an ABTA member and he would also understand that if he did do so he would be entitled to hold ABTA to what he understood ABTA to be promising in this document. In my judgment it satisfies the criteria for a unilateral contract and contains promises which are sufficiently clear to be capable of legal enforcement. The principles established in the Carbolic Smoke Ball case apply. The Plaintiffs are entitled to enforce the right of reimbursement given to them in para 5.
This conclusion also covers ABTA's further argument that it had no intention to create legal relations. The document as reasonably read by a member of the public would be taken to be an offer of a legally enforceable promise. Given that this is the effect of the document which ABTA has chosen to publish, it does not advance ABTA's case to say that ABTA privately did not intend to expose itself to any legal liability to the public. It suffices that ABTA intentionally published a document which had that effect. A contracting party cannot escape liability by saying that he had his fingers crossed behind his back.
In conclusion I must refer to some other arguments advanced before us. Miss Otton-Goulder drew attention to the fact that, in paras 1 and 2 and the footnote, references are made to other schemes. Where the company which fails is covered by some other scheme such a scheme may be relevant. Where the company is not an ABTA member it will only be some such scheme which can help the traveller. No one has suggested that ABTA members have a monopoly of the travel industry. But this does not carry the Defendants' argument any further forward. This document is addressed to those who choose to deal with ABTA members and thereby become "customers" and its subject matter is the protection which ABTA will provide to such persons if the ABTA member should fail. Like in the Carbolic Smoke Ball case, we have had urged on us the potential size of the obligations which ABTA would be accepting should a number of its members fail and the difficulty of meeting all the claims which might be made on ABTA. This was a matter for the judgment of ABTA before it chose to issue the notice. It is the job of ABTA and no concern of the customer to see that its bonding and mutual and external insurance arrangements suffice. The argument has no more merit than the equivalent argument which was advanced in the Carbolic Smoke Ball case.
The existence of consideration to support the contractual obligation of ABTA is clear. A picture was presented to us, wholly unrealistically, of ABTA as some benevolent body which gained no benefit from and had no interest in travellers choosing to deal with ABTA members. The function of ABTA is to promote its members. It was also argued that as Mr Wallace was required by the local Education Authority and by the children's parents to buy only ABTA backed holidays that meant that Mr Wallace and those on whose behalf he was acting gave no consideration because, so it was argued, Mr Wallace was already under an obligation to buy an ABTA backed holiday. Mr Wallace was under no obligation to buy any holiday at all nor were the parents. No doubt there are other tour operators and travel agents, not members of ABTA, who are able to undercut ABTA prices. ABTA's members prominently market themselves as members of ABTA and anybody who chooses to do business with them is certainly giving consideration to ABTA for any contract or 'collateral' contract which may ensue. The analogy with such cases as Shanklin Pier v Detel Products [1951] 2 KB 854, [1951] 2 All ER 471, is fully made out.
I therefore cannot agree with the judgment of Mr Justice Mitchell and consider that this appeal should be allowed. The Plaintiffs were entitled to and did accept the offer contained in the document issued by ABTA and it fills one with disquiet that any organisation in the position of ABTA should after the event, when it finds that its liabilities are greater than it had anticipated, seek to contend otherwise. As counsel pointed out, if ABTA had wished to deny that it was accepting any legal obligation to the traveller or wished to say that it was not making any promises, nothing would have been simpler than for it to have said so in the document. For obvious commercial reasons ABTA did not choose this course. To have included such words would have destroyed the value of the document in the eyes of the public and nullified the very effect which ABTA intended it to, and which it did, achieve - to induce the public to book with and entrust their money to ABTA members.
I would allow the appeal.