Payless Travel Ltd v Baba Krupa Holidays [2004] EWCA Civ 472

Case No B2/2003/2524

[2004] EWCA Civ 472

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

Venue ON APPEAL FROM BIRMINGHAM CIVIL JUSTICE CENTRE

(MISS RECORDER MACUR QC)

Venue Royal Courts of Justice

Date Friday, 26 March 2004

Strand

London, WC2

B E F O R E:

LORD JUSTICE RIX

LORD JUSTICE LONGMORE

Between

PAYLESS TRAVEL LTDAppellant

-v-

Between

BABA KRUPA HOLIDAYSRespondent

(Computer-Aided Transcript of the Stenograph Notes of

Smith Bernal Wordwave Limited

190 Fleet Street, London EC4A 2AG

Tel No: 020 7404 1400 Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

MR G KIRK (instructed by Chartwell and Sadlers Solicitors, London SE15 2LB) appeared for Appellant

MR R C D REES (instructed by P M Suchak & Co Solicitors, Leicester LE4 6QR) appeared for Respondent

J U D G M E N T

Friday, 26 March 2004

LORD JUSTICE RIX:

[1]This is the appeal of Payless Travel Ltd from a judgment of Miss Recorder Macur QC given in the Birmingham County Court. It arises out of a holiday booking for 23 March 2002 with an airline called Balkan Bulgarian Airlines ("Balkan") which, unfortunately, went wrong. When the passengers turned up at the airport with their tickets to fly with Balkan to Dubai they were told that their names were not on the passenger lists for the flight, and Balkan refused to carry them. In the circumstances, costs were incurred on behalf of the passengers by their travel agent, Baba Krupa Ltd, who are the respondents to this appeal. Those costs included, in the main, the cost of one night's hotel accommodation while alternative arrangements were made, and in particular the additional costs of booking on an alternative airline. In the end, the majority of the passengers did manage to get off to Dubai two days later on 25 March 2002.

[2]As a result of these difficulties the recorder found that Payless Travel who, at Baba Krupa's request, had procured the airline tickets from Balkan, were in breach of their duties to Baba Krupa and gave judgment in the sum of £9,254.98 which, together with interest, amounted to a total judgment sum of £10,259.08. As I have said, most of those damages were made up by the cost of an overnight stay at an hotel, and in particular the extra costs of the replacement airline tickets.

[3]The judgment proceeded on the basis that there was a contract between Payless Travel and Baba Krupa to procure the airline flight tickets, and that in connection with that contract Payless Travel was in breach of their implied duty to use skill and care in and about their obligations. Although I am not sure that the recorder mentions in her judgment the source of that implied contractual obligation, it is common ground that it is to be found in section 13 of the Supply of Goods and Services Act 1982. That section reads as follows:

"In a contract for the supply of a service where the supplier is acting in the course of a business there is an implied term that the supplier will carry out the service with reasonable care and skill."

That was the contractual duty which was concerned in this case.

[4]The recorder found that the tickets for the flight in question had been issued to the named passengers on 23 February 2002. She also records that on the same day a fax was sent by Payless Travel to Balkan recording the names of the passengers in question. In as much as Baba Krupa's case at trial depended upon an allegation that no tickets had ever been issued in the first place, the recorder rejected that submission. Nevertheless, within a few days of the issue of those tickets things began to go wrong.

[5]On 1 March 2002 Balkan sent to Payless Travel a letter addressed to their managing director, Mrs Kalavati Mavji, in these terms:

"Subj: 20 pas group booking 09-17 March 2002 Dear Mrs Mavji Further to our telephone conversation yesterday 28th February 2002, please be informed that we are now cancelling the above group of 20 seats as its time limit has run out and no passenger names have so far been submitted. Further to the above, I would like to inform you that by holding allocations on our flights for groups supposedly to be sold by Payless Travel and their subagents does not produce the required revenue, quite the opposite - we are turning away other clients and therefore suffering losses. The above practice contradicts your statement at our meeting on 25th of February 02 that Payless Travel supports Balkan with 'year round' sales. I have been directed by our Head Office to cancel all existing Payless Travel (and those of their subagents) as of 23rd of March 2002. This gives you enough time to make alternative bookings on your own system based on 'free sale' of the available seats or offer your clients alternative arrangements. Please contact me if further information is required."

It may be that in that dispute which had arisen between Balkan and Payless Travel Balkan, who wrote that letter under the name of their manager, Mr Georgi Avgarsky, had failed to appreciate that within the last few days they had received the passenger names in respect of the flight of 23 March 2002, which is the subject matter of these proceedings. All that, however, is rather lost and mysterious in the background to this litigation, and because Balkan became insolvent and were never party to this litigation, was never properly investigated or elucidated at trial. Be that as it may, it came to be the case of Payless Travel that following the receipt of that letter Mrs Mavji had spoken on the telephone to Mr Avgarsky on the next day, 7 March, and in the course of that conversation had received from Mr Avgarsky an oral assurance that the flight of 23 March was on and that the cancellation as of 23 March (referred to in that letter) was off. Whether, however, such a conversation had taken place with that result was in issue at the trial below.

[6]This litigation began with a claim by Payless Travel against Baba Krupa to enforce payments due (about £6,000-odd) under invoices which had been issued. As I understand it those invoices were not concerned with the flight of 23 March, in respect of which no invoices had ever been issued, but in respect of other invoices. There was no defence to that claim, but it may be - I am not sure - that it had not been paid because of the difficulties which had arisen about the flight of 23 March. Indeed, as early as 12 April 2002 Baba Krupa had written to Payless Travel setting out in detail their claim for loss and damage arising from the abortive flight. The claim which was there set out in detail totalled £9,974.97.

[7]In any event, Payless Travel made application for summary judgment for payment of their £6,000 or so worth of invoices and succeeded. There was, however, a Part 20 claim (or counterclaim) by Baba Krupa against Payless Travel in respect of the losses arising out of the abortive flight. It was in that context that in support of Payless Travel's application for summary judgment, but also dealing with the Part 20 counterclaim, Mrs Mavji made her first witness statement dated 28 October 2002. In that witness statement she not only dealt with the subject matter of Payless Travel's claim, but also with Baba Krupa's counterclaim. At paragraph 16 she referred to the issue of the tickets. At paragraph 17 she referred to the faxing of the passenger names to Mr Georgi Avgarsky on 23 February 2002, and at paragraph 18 she said as follows:

"I was therefore amazed that my legal representatives were recently shown a list which, they were told, was provided to the 23 March 2002 passengers at the check in counter. Assuming the list is what Baba Krupa's Solicitors understand it to be, the Baba Krupa passenger names were not on that list. Frankly, I have no idea why. What I can say is that we did everything in our power to ensure that this booking was properly made, and we followed precisely the same procedure we had used for the successful bookings which took place both in the week preceding 23rd March 2002 and in the following week."

[8]At trial the recorder did not find Mrs Mavji's evidence credible. In the light of that paragraph in her first witness statement it is easily understandable why that was so, because in the context of the 23 March abortive flight counterclaim, Mrs Mavji was saying that that flight was just like any other flight that Payless Travel had booked with Balkan, and that she frankly had no idea why there were any difficulties with it. She did not there mention the letter from Balkan of 1 March 2002 or her own explanation of how that cancellation had been set aside in the telephone conversation of the next day. Indeed, the letter of 1 March was at no time disclosed by Payless Travel to Baba Krupa in this litigation until at, or perhaps immediately before, the trial, when Payless Travel's copy of it was produced. That copy contained at the foot of Mrs Mavji's manuscript the following notation:

"2/3/02 Spoke to George and said that the group tickets are already issued and given to agents for 23/3/02."

[9]However, even before that copy of the letter had been produced at or immediately before trial by Payless Travel themselves, Baba Krupa had obtained from Balkan their copy of that letter and had relied on it in a witness statement. It was as a result of the reliance on that letter obtained by Baba Krupa from Balkan that Mrs Mavji for the first time referred to it in her second witness statement dated 11 July 2003. She there referred to a copy of that letter saying that it commented in her own handwriting that she had spoken to Mr Avgarsky and that he had reassured her that existing bookings would in fact be honoured. That is not the notation which is found at the foot of the letter, as my citation above indicates. She went on in that second witness statement to say that she telephoned Mr Avgarsky to assure him that the existing bookings were definite and she said that he confirmed to her that the bookings, including that for 23 March, would be honoured. That was the evidence that she gave at trial. She also gave evidence that there were some follow up conversations with Mr Avgarsky to the same effect. However, her evidence was, as I have said, not accepted by the recorder. The recorder said at paragraph 15 of her judgment:

"I am afraid that I do not accept that evidence as being accurate, or indeed credible. I regard it to be strange that such evidence, if it did exist before the filing of her statement, did not find its way into either of the statements that Mrs [Mavji] has filed in these proceedings. Indeed, it is a matter of note that the letter that came into the possession of Baba Krupa Travel had been faxed by, or on behalf of, Balkan Bulgarian Airlines. This had not previously been disclosed in the summary proceedings which preceded this claim, or it seems in these present proceedings. I received today a copy of the fax with the manuscript note of Mrs [Mavji] through Mr Kirk."

The recorder went on to say in paragraph 18:

"I am somewhat perplexed to understand how the annotated letter is representative, as Mrs [Mavji] says it is, of the agreement she said she reached with George [Avgarsky]. In fact I take the point made by Mr [Rees] in his cross-examination of Mrs [Mavji] that that annotation does not record what she said was an agreement made between them. It seems clear to me that any reasonable operator in these circumstances, if they had had such a conversation and received such an assurance, would have required that information to be provided in writing, not least because the cancellation itself was in writing."

[11]It seems to me that in those passages the recorder is rejecting Mrs Mavji's evidence as not credible in total. That is why she says that she is perplexed to understand how the annotated letter reflects the oral agreement about which Mrs Mavji gave evidence. That is why she said that if there had been such a conversation and such an agreement it would have been reflected in some further writing, not least because the cancellation itself was in writing. It seems to me that that is a plain rejection of Mrs Mavji's evidence as a whole, including her evidence that she had a conversation in which it was agreed that the cancellation as from 23 March had been put aside and the flight reinstated for Travel Payless' clients.

[12]On behalf of Payless Travel, nevertheless, Mr Kirk has submitted that the opening sentence of paragraph 15 of the judgment (which I have cited above) only relates to a small part of Mrs Mavji's evidence, that relating to a further telephone conversation with Mr Avgarsky in the days following 22 March. I do not so read the judgment.

[13]It was in these circumstances that the recorder found that Payless Travel were in breach of their implied duty to use care and skill in carrying out their contract of service in at least two respects. First, in failing to alert Baba Krupa about the cancellation contained in Balkan's letter of 1 March, and secondly, in failing to ensure with Balkan that the threat to cancellation had been removed and in failing to do so in writing.

[14]Apart from her rejection of Mrs Mavji's evidence as a whole, the recorder was thereby, as I understand her judgment, indicating that even if there had been perchance some casual telephone conversation about the flight of 23 March, it was not in a form which would fairly reflect to Mrs Mavji and Balkan that the flight of 23 March had plainly and clearly been put back into effect.

[15]On the basis of those two separate breaches of the implied duty the recorder went on to deal with the question of damages. She said this:

"20. It [Payless Travel] significantly fell down from the reasonable care and skill that was implicit in the contract and I find as a fact that the reason that 34 passengers did not travel on 23 March 2002 was, on the balance of probabilities due to the fact that their ticket, once issued, had been cancelled. 21. Since this cancellation had been known to Mrs [Mavji], then she was under a clear duty, as required by the implicit terms of the contract, to make amends either by alerting Baba Krupa Holidays to the situation, or else by seeking assurance in cast iron form from Balkan Bulgarian Airlines."

She then turned to the schedule of damages and dealt with the various heads of claim, not all in favour of Baba Krupa.

[16]On this appeal there is one and only one essential ground of appeal which is that the recorder had failed to establish the legally causative connection between findings of fact that she made and the loss that she found. Despite the brevity of that single ground of appeal, the skeleton argument submitted in support of it has ranged more widely and discursively over the claim as a whole. In parts, it appears to question the scope of Payless Travel's duty as a travel agent, in effect, I think, to raise the question as to whether Payless Travel had any remaining duty at all once it had issued the tickets on 23 February; second, it traverses at times over the question of breach, and suggests that that question might be in issue on this appeal. It nowhere traverses over the question of quantum. In as much as there is any doubt as to the intended width of the submissions which Mr Kirk wished to raise in this appeal, it is, however, relevant also to point out paragraph 34 of the skeleton argument in which this appears:

"Discerning a lack of care in one element of the booking process, the learned Judge felt able to conclude that [Payless Travel] was in breach of its obligations to [Baba Krupa]. She was, of course, entitled to find that [Payless Travel] did not do as it ought to have done in respect of seeking reassurance that the booking would not be cancelled, and that this constituted a breach. [Payless Travel] accepts the finding of fact, that no 'cast iron' written confirmation was sought, though not that this necessarily constitutes a breach. The basis of the appeal, however, is that of legal causation."

[17]That passage would seem to confirm that the single ground of appeal raised in the notice of appeal is indeed the only ground which is live at this hearing. Nevertheless, because of the more discursive submissions to be found in the skeleton, the court raised with Mr Kirk at the beginning of this hearing whether he was seeking to raise - whether or not he had been given permission to do so - any question under the alternative headings of duty, breach or quantum. He informed the court that he was not, and that he was raising only the question of causation. The appeal has proceeded upon that basis although it is fair to say that in the course of his submissions Mr Kirk has sought to touch on issues not only of duty and breach, but also of quantum, a matter which had not even been raised thus far in his skeleton. Thus, Mr Kirk sought in the course of his submissions this morning again to query whether Payless Travel had any duty over and beyond the formal issue of the travel tickets or whether, on the basis of the evidence heard by the recorder, she had been correct to find the breaches that she did find, and indeed whether her judgment was to be properly interpreted as I have interpreted it above. He also sought to submit, for the first time dealing with quantum, that it was not shown exactly how the failure to warn Baba Krupa about the cancellation difficulties and the failure definitively to ensure that the cancellation had been put aside had led to the damages in question, in particular the additional costs of buying in, on a spot basis as it were, substitute tickets to Dubai. For instance, Mr Kirk sought to suggest that there was no evidence that cheaper tickets could have been obtained at any earlier time by Baba Krupa on behalf of its clients from any carrier other than Balkan.

[18]I have set out the factual background of this appeal in detail in the way that I have done above because of the way in which Mr Kirk's submissions this morning have traversed all these matters. I have to say for myself, however, that it is quite clear to me that the only ground of appeal which Mr Kirk is entitled to argue on this appeal is the issue of causation. In any event I would go on to make the following remarks briefly about duty and breach and quantum.

[19]So far as duty is concerned, it is common ground that there is a duty to use skill and care in or about the provision of the services. The only question is whether it can be said that the duty stopped on the issue of tickets. In my judgment, the recorder was right to find that once a problem of a cancellation had arisen it was Payless Travel's duty to inform Baba Krupa. For instance, Reynolds on Agency, 17th Edition 2001, under article 42, dealing with a contractual agent's duty to use due skill and care, makes the points at paragraph 6-017 that an agent employed for the purpose of effecting a contract between the principal and third party must use due skill and care in making that contract and that he must use proper care to ensure that the contracts they make are binding in law; and further, that such an agent is under a duty to keep his principal informed about matters which are of his concern. In London Borough of Bromley v Ellis

[1971] 1 Lloyd's Rep 97

at 99 Lord Denning MR said:

"The brokers were, I think, under a duty of care to look after Mr Ellis' interests."

That is something that Payless Travel had failed to do in this case for the reasons given by the recorder.

[20]I have already set out my reasons for interpreting the recorder's judgment as rejecting Mrs Mavji as a credible witness and in finding that there was no oral agreement to reinstate the flight of 23 March. In those circumstances I do not see how it can be questioned in any way that Payless Travel were in breach of their obligation of care and skill in relation to Baba Krupa and the arrangement and procurement of the travel flights in question.

[21]As for quantum, Mr Kirk accepted at one point in his skeleton and again in his submissions today, that it was a natural and foreseeable consequence of the passenger flights being cancelled that that would have financial repercussions and that the essential question on appeal was who should bear the legal responsibility for that. No question of quantum appears in that submission. In any event, if Payless Travel had wanted to raise the point that no cheaper tickets could have been obtained from any airline other than Balkan, so that the extra cost of the substitute tickets did not flow, for instance, from the delay in informing Baba Krupa about the difficulties about the flight in question, then that was a point which would have had to have been flagged up in the pleadings and raised at trial. No such flagging up of any such point was raised in the pleadings or in any of the witness statements; nor is there any sign of any such point having been raised at trial. Ultimately, of course, all these points relating to duty, breach and quantum are not within this appeal in any event.

[22]I come, therefore, to the final narrow point which is that legal causation has not been established. It is true that the judgment of the recorder does not deal specifically with the way in which the breach led to damages. She clearly took it for granted that if 34 passengers were going to turn up for a flight which they thought they were booked on the damages in question ensued from any breach involved in the failure to give them warning of the cancellation of their tickets or any breach involved in the failure to ensure that any improper cancellation had been put aside. I am therefore not surprised that there is not an express discussion of the sole legal issue raised on this appeal which is whether the recorder was entitled to find causation of loss under the doctrine of common sense for which the decision in this court of Galoo v Bright Grahame Murray

[1994] 1 WLR 1363

(see especially at 1374G-1375A) is a well-known modern authority. In my judgment, it is plainly a matter of common sense which the judge was entitled, in effect, to take for granted, that the two breaches of duty which she found and identified would lead to the kind of damages which Baba Krupa were claiming.

[23]The only other point made by Mr Kirk under the heading of causation was the submission that in truth the true dominant or effective cause of Baba Krupa's loss was the cancellation of the booking by Balkan and not Payless Travel's breach of contract. It may well be that the cancellation of the booking was another dominant or effective cause of Baba Krupa's loss. But Baba Krupa were not suing Balkan, and it is not clear to me what cause of action Baba Krupa, as distinct from their clients, would have had against Balkan. There might have been proceedings between the holders of passenger tickets and Balkan on the ground that the contracts evidenced by those tickets were invalidly cancelled by Balkan. I am prepared to assume that as between the passengers holding those tickets and Balkan it may well be that Balkan would not have been able to rely upon anything that might have gone wrong in its relationship with Payless Travel as a defence against a claim by the passengers themselves. That, however, is not the point in this litigation. This litigation is concerned with a claim by Payless Travel against Baba Krupa relying upon he the quite separate breaches and quite separate contract between those two parties. Even if, as between Balkan and those passengers, the invalid cancellation of those tickets was the common cause of the passengers' loss, it still remains plainly the case that the breaches found by the recorder were the effective causes of the losses which have been awarded against Payless Travel in the judgment below.

[24]At some points of Mr Kirk's skeleton and submissions, I have wondered whether there was a separate submission to the effect that the airline's cancellation of the passenger bookings was a new intervening cause. In my judgment it was not. It was precisely because of the notice given by the airline of its cancellation of those passenger flights and because of Payless Travel's totally ineffective attempt (if indeed any attempt was made at all) to reinstate that flight for its clients that Payless Travel were in breach of contract. The breach arose out of and followed Balkan's cancellation.

[25]For all these reasons it seems to me that this appeal must fail. It must fail on the limited point raised by it, and even if Mr Kirk was given the fullest licence to travel over not only the issue of causation but also over all issues of duty, breach and quantum as well, the same result must ensue, which is that this appeal must be dismissed.

LORD JUSTICE LONGMORE:

[26]The individual passengers in this case had been issued tickets for travel to Dubai on 23 March 2002. Those tickets were issued to them by Payless Travel Ltd for carriage by Balkan Bulgarian Airline. Those tickets on their face no doubt obliged the airline to carry the passengers to Dubai on that date. The passengers had made their arrangements through the travel agents, Baba Krupa Holidays Ltd, who themselves dealt with Payless Travel. We know nothing of the contract between Payless Travel and Balkan Bulgarian Airline, but there must have been one. Some date before the date of travel Balkan asserted that Payless Travel were in breach of their obligations and cancelled the reservations made by Payless.

[27]On the findings of the judge, Payless failed to inform Baba Krupa of this cancellation. As a result, the passengers turned up at the airport with tickets apparently valid for travel to Dubai. Not surprisingly, Baba Krupa incurred considerable expenditure in accommodating the passengers at the airport and buying for most of them other tickets to Dubai two days later. Baba Krupa sued Payless Travel and after a trial before Miss Recorder Macur QC they recovered those losses.

[28]At the trial, Mr Reese for Baba Krupa submitted that Payless had promised Baba Krupa that the passengers would travel to Dubai on 23 March 2002, and that Payless Travel were liable regardless of fault. The learned recorder rejected that submission and held that Payless Travel's obligation to Baba Krupa was only to exercise reasonable care and skill in and about the obtaining of a contract of air carriage for the passengers. That was presumably pursuant to section 13 of the Supply of Goods and Service Act 1982. The recorder's conclusion on this aspect of the case has not been challenged on this appeal by Mr Reese, who relied on the recorder's conclusion that Payless Travel had not exercised reasonable care and skill because first, they failed to alert Baba Krupa to the cancellation by the airline, and second, they failed to try to get the airline to withdraw the cancellation.

[29]The point taken by Mr Kirk on behalf of Payless Travel on this appeal is that the loss suffered by Baba Krupa was caused not by any breach of contract on the part of his clients, but by the cancellation of Payless Travel's reservations by the airline. He relied, as my Lord has indicated, on Galoo v Bright Grahame Murray and, following the remarks of Lord Justice Glidewell in that judgment, Mr Kirk submitted that the common sense of the matter was that the airline's conduct was the effective or the dominant cause of the loss.

[30]Like my Lord, I cannot accept that for one moment. Payless Travel assumed a duty of skill and care to their client, Baba Krupa, in and about the obtaining of a contract of carriage for Baba Krupa's passengers. If such a contract is cancelled it is self-evident that the client should be informed. The client has no way of knowing whether such cancellation is valid by virtue of the terms of a contract with which he has nothing to do. It is, to use Lord Justice Glidewell's phrase, common sense that "an effective cause" of Baba Krupa's loss was Payless Travel's failure to inform Baba Krupa of the airline's cancellation; their failure to try to persuade the airline to withdraw that cancellation may well have been another effective cause.

[31]For these short reasons I entirely agree with the judgment that my Lord has just delivered and the appeal will be dismissed. (Appeal dismissed; appellant will pay the costs of the appeal, such costs to be the subject of a detailed assessment).