Where the letter of claim is sent after the 7th of May 2018 a new regime applies for claims worth less than £25,000 though it is currently unclear as to what extent the regime will apply to UK holidays. Paul Edwards examines the new rules and questions whether this could be viewed as a missed opportunity to tackle such claims in the wider leisure and hospitality industry.
Last summer, the Government committed itself to tackling an upsurge in claims in the travel industry, reporting that since 2013 there had been up to a 500% increase in claims, an increase that was not seen in other European countries. This, it was said, was leading to an increase in cost for package holidays, was raising suspicions over the scale of bogus claims and was leading to increased costs for claims by claimant solicitors. It was felt that without some degree of fixed costs being introduced the cost of fighting claims would be out of all proportion to the damages claimed.
The Governments new rules apply to claims where:
There is encouragement that the protocol should be followed even if it technically doesn’t apply. Prior to a full letter of claim, claimants are now encouraged to send a “letter of notification”, a document that must include the booking reference. The intention is that this letter should provide the defendant with any “relevant information” that could assist with issues including both liability and quantum. The letter should be acknowledged within 14 days but these letters do not start a timetable in the same way as a formal letter of claim will.
One of the biggest difficulties in defending these claims is that the letter of claim often lacks detail, making investigation difficult. The new pre action protocol is more prescriptive and detailed. In the absence of an acknowledgement within 42 days then the claimant will be entitled to issue proceedings. A period of six months is allowed for the defendant to investigate and again more detail is provided as to the content of the response. There is to be no charge for providing copies of documents. The rest of the protocol encourages alternative dispute resolution (ADR) and provides detail surrounding obtaining evidence.
The proposed fixed costs follow a similar format to other fixed cost regimes in the fast track, with figures varying depending on value and the point the matter settled. For example:
The Government’s data, based on ABTA statistics, indicated that in 2016 the average value of a gastric illness claim was £2,100, and claims cost on average £3,800 to defend. Claimant’s costs are usually many times more than this so on the face of it a new protocol and fixed costs regime must be welcomed. There are likely to be skirmishes in the early days as claimants seek to manipulate the regime to maximize the recovery of costs, however the courts are fully equipped to deal with such issues, having dealt with similar when fixed costs came in for RTA, EL and PL claims previously.
However, there must be a risk in some cases that where claims are towards the top of the bracket, claimants will be encouraged to inflate their claims (potentially fraudulently) in order to try and escape the new regime and fall into the multi-track where costs will remain on an hourly basis, albeit subject to cost management.
We also have concerns regarding the framing of some of the definitions in the PAP as to what sorts of claimed are covered. Firstly ‘gastric illness’ means “any gastrointestinal illness arising from a breach of contract or breach of statutory duty or common law duty in respect of services, food and beverages provided in relation to a package holiday.” Secondly ‘package holiday’ means a package which is regulated by the Package Travel, Package Holidays and Package Tours Regulations 1992 (‘the Package Travel Regulations’).
This definition means that the rest of the food, beverage and leisure sectors gain no benefit from these positive reforms. It is also unlikely that the provider of UK holidays will gain any benefit due to the definition of package holiday relying on the 1992 regulations. Whilst many claims relating to sickness that occurs in the UK are brought by claimant solicitors relying on these regulations amongst other things, it is far from certain that UK-based sickness claims would fall under the umbrella of the new regime.
A closer inspection of the regulations presents a number of concerns regarding the definitions. A package holiday is defined as comprising a “pre-arranged combination” of two out of three components, where the price is inclusive and covers at least a period of 24 hours or overnight accommodation. The three components are transport, accommodation and most interestingly “other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package.” We have no real definition of what those tourist services might comprise. In 2006 the DTI published some guidance which states, for example, that where a venue puts on entertainment for all guests then this would not constitute a tourist service. Presumably this must also apply to leisure facilities too. It seems to be that tourist services might include things like theatre tickets or other admission charges.
Urgent clarification is being sought from the Government on these points to ascertain if the perceived gaps in the new regime are an oversight or deliberate. It would be disappointing if the chance to control behaviours and costs in some sickness claims were missed. We would argue that a wider, but clearer, definition of sickness claims should have been put at the heart of this package of reforms. As the rules stand there is the potential for future satellite litigation to arise out of arguing whether the new regime applies or not. It is likely that claimant solicitors are now reviewing how they frame claims so as to avoid the new protocol, and most importantly for them, the fixed costs regime.
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