12 Jun 2014

English Court clamps down on extraordinary circumstances in passenger claims

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The Court of Appeal of England and Wales has recently handed down its judgment in the ongoing litigation between Ronald Huzar and Jet2. In its judgment, the Court of Appeal has held that technical defects arising out of the operation of aircraft cannot be relied upon by airlines as constituting extraordinary circumstances for the purpose of defending EC 261 claims, even if those technical defects could not have been foreseen.

The impact of this latest in a long line of consumer-friendly judgments on EC 261 will be to make it that much harder for airlines to defend claims for compensation arising out of cancelled and delayed flights, even where cancellations and delays have been caused by unexpected flight safety shortcomings. Many commentators have expressed concern that this judgment will open the floodgates for passengers to claim compensation going back years, with some saying that this could cost the industry up to £4 billion. Consumer claims organisations, like EU Claims, are already pushing their services in the press and social media.

The facts

Mr Huzar and his family were booked to travel on flight LS0810 from Malaga to Manchester, departing 18.25 and arriving 20.25 on 26 October 2011. The aircraft experienced an unexpected technical problem during its inbound flight to Malaga. The left engine fuel advisory light indicated a possible defect in the fuel shut-off valve.

Jet2 fitted a spare valve to try and redress the fault, but the problem remained. The following day, it was found that the fault was caused by a wiring defect in the fuel valve circuit. Jet2 decided to bring in another aircraft from Glasgow to take passengers back from Malaga to Manchester. This flight arrived in Manchester at 23.28 on 27 October 2011, 27 hours later than scheduled.

Jet2 had complied with its obligations of care, providing appropriate transport, accommodation and refreshments during the delay. The only issue, therefore, was whether the airline was obliged to pay compensation.

The airline argued that the technical fault was unexpected and could not have been predicted by a regular system of inspection and maintenance, and that the wire which failed was within its expected lifespan. A District Judge sitting in the Stockport County Court accepted this, and found that in the circumstances the airline was entitled to defend the claim for compensation on the ground that the unforeseen and unforeseeable fault was an extraordinary circumstance. On appeal, a Circuit Judge sitting in the Manchester County Court accepted that the fault was unforeseeable, but disagreed that this meant that it constituted an extraordinary circumstance.

Jet2 appealed that ruling to the Court of Appeal.

EC 261 and previous guidance from the Court of Justice of the European Union

As readers will be aware, EC 261 does not expressly provide for compensation to be paid to passengers for delayed flights. The Regulation only expressly provides for compensation to be paid in respect of cancelled flights. However, the compensation regime was extended by the CJEU to cover delayed flights in its 2009 Sturgeonjudgment, and this was upheld by the CJEU in its 2012 Tui and Nelson decision.

Notwithstanding this development, airlines could defend claims for compensation if they could prove that the delay was caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. The term "extraordinary circumstances" is not defined in EC 261, but many commentators took comfort from recital 14 of the Regulation, which provides that extraordinary circumstances may include "unexpected flight safety shortcomings". Many airlines at the time thought that this meant that technical faults would constitute extraordinary circumstances.

Then, in 2008, the CJEU in Wallentin-Hermann v Alitalia started to chip away at this industry understanding of extraordinary circumstances. On being asked whether a complex engine defect discovered during a pre-flight check could entitle an airline to defend claims for compensation, the CJEU held that technical faults would not constitute "extraordinary circumstances", unless the fault stems from events which, by their nature or origin, are not inherent in the normal exercise of the activity of the air carrier concerned and are beyond its actual control.

In delivering this judgment, the CJEU was sending a clear message that airlines could not simply point to a technical fault and hope that that would be sufficient to defend EC 261 claims. What was less clear was what the CJEU meant by "actual control" – if a fault was unforeseeable and would not have been picked up during routine maintenance, did that mean that the fault was beyond the airline's "actual control", such that it would be an extraordinary circumstance?

The Court of Appeal's decision in Huzar

It was this question that the Court of Appeal was asked to consider, and one which the Court had some difficulty with. This difficulty was compounded by the fact that the CJEU's ruling in Wallentin-Hermann was not easy to understand (the English Court finding that the CJEU had put forward at least two different formulations of its ruling) and no clear explanation had been provided of how that ruling was meant to be applied in practice.

As the Court of Appeal indicated, there was two possible ways of interpreting the Wallentin-Hermann ruling:

  • An extraordinary circumstance is an event which by its nature or origin is not inherent in the normal exercise of the activity of the air carrierbecauseit is beyond its actual control, i.e. if a fault is beyond the airline's control, then it is an extraordinary circumstance. It was argued before the Court that it would be unfair to make an airline liable for compensation for events which the airline is unable to prevent.
  • An extraordinary circumstance is an event which by its nature or origin is not inherent in the normal exercise of the activity of the air carrier andthereforeis beyond its actual control, i.e. if a technical fault arises out of the aircraft's operation (the operation of aircraft being within the normal exercise of an air carrier's activity), then it cannot be an extraordinary circumstance.

The Court of Appeal concluded that the second alternative was the better interpretation, noting:

"Difficult technical problems arise as a matter of course in the ordinary operation of the carrier's activity. Some may be foreseeable and some not but all are, in my view, properly described as inherent in the normal exercise of the carrier's activity. They have their nature and origin in that activity; they are part of the wear and tear".

The fact that a particular technical problem is unforeseeable and could not be detected through routine maintenance and inspection does not, the Court said, mean that it is an "unexpected flight safety shortcoming". If the fault arises out of the operation of the aircraft, it will not be an extraordinary circumstance.

It was argued before the Court that this would not be consistent with the policy underlying the Regulation. EC 261, it was argued, should punish airlines that adopt bad practices, but it could not be said to be bad practice to cancel or delay flights when an unforeseen technical fault potentially rendered the operation of the flight unsafe. The Court saw some force in this argument, but held that the wider purpose of EC 261 is to compensate passengers for inconvenience, and passengers suffer that inconvenience regardless of the cause of the cancellation or delay.

What remains of the 'extraordinary circumstances' defence?

The Court of Appeal's decision runs counter to guidance published last year following a meeting between NEBs which was designed to bring greater clarity and uniformity of thinking on extraordinary circumstances. In that guidance, a number of "unexpected flight safety shortcomings" were listed as constituting extraordinary circumstances, including:

  • Premature failure of LLPs prior to their scheduled inspection/removal/retirement date;
  • Failure of on-condition/condition monitored parts, i.e. parts which should not require unscheduled maintenance or replacement during normal operational service;
  • Failure of necessary or required aircraft systems either immediately prior to departure or in-flight;
  • Any other technical defects which become apparent immediately prior to departure or in-flight, where the system or part has been maintained in accordance with the required maintenance programme.

The Court's judgment has the effect of rendering much of this guidance redundant, and the UK CAA has already advised airlines that it will no longer apply this guidance.

Other events which are beyond the control of the airline because they are caused by extraneous acts of third parties will continue to be extraordinary circumstances, such as acts of terrorism, wild-cat strikes, air traffic control problems and freak weather conditions. The UK CAA has advised airlines that unsettled weather conditions, such as fog, snow or thunderstorms, may not be "freakish" enough to constitute extraordinary circumstances – the only weather conditions which might now fall within this category include volcanic ash and unusually severe snow. The UK CAA is also considering whether to remove bird strikes from the list of extraordinary circumstances.

The Court of Appeal was silent about technical faults which are caused by hidden manufacturing defects (e.g. lithium batteries catching fire on Dreamliners). In its Wallentin-Hermann ruling, the CJEU held that this would constitute an extraordinary circumstance, and we think that this will remain the position.

What next?

Ordinarily, judgments of this nature set out what the law has always been. The Court of Appeal's decision would therefore usually have retrospective effect, enabling passengers to claim compensation for cancelled or delayed flights going back 6 years (the UK limitation period), notwithstanding they have previously been told that the airline will not be paying compensation because of a technical defect.

However, the UK CAA's guidance to passengers is that the judgment is not retrospective and will apply only from the date it was issued (11 June 2014), meaning that airlines are under no obligation to reassess decisions made on individual claims for compensation prior to the judgment coming into force. This would appear to be a policy decision by the CAA, presumably taken to enable airlines to better manage their claims-handling processes. The effect of the guidance on delayed and cancelled flights caused by technical defects can be summarised as follows:

Category Flight cancellations and delays going back 6 years Outcome
1 Where passenger has not complained Passenger cannot claim
2 Where passenger has complained to airline and airline dismissed complaint Passenger cannot claim
3 Where passenger has complained to airline and airline has settled complaint Passenger cannot claim
4 Where passenger has commenced legal proceedings and judgment obtained Passenger cannot reopen judicial proceedings
5 Where passenger has complained / commenced legal proceedings, and complaint / claim has been put on hold pending decision in Huzar Claim/complaint will continue

 

In our view, the UK CAA's guidance on this point is wrong, with the result that passengers in categories 1 and 2 may still be able to claim compensation (whether passengers in category 3 can claim compensation will depend on the terms of any settlement reached). There is a risk that the guidance may become the subject of future challenge if airlines, relying on that guidance, are refusing to pay historic claims.

In any event, the ruling is certainly binding on all courts in England and Wales going forwards, subject to any further appeal. It is not binding on the courts of other European countries, but may have persuasive effect if similar issues come up for consideration.

Jet2 has indicated that it intends to appeal this ruling to the UK Supreme Court (the highest court in the UK). The Supreme Court does not have to hear every appeal referred to it; the appeal must raise an arguable point of law of general public importance and many appeals referred up to the Supreme Court go unheard, because the Court does not believe them important enough. Given the significant impact this ruling is likely to have on the aviation industry, it is hoped that the Supreme Court will agree to hear an appeal if filed by Jet2. Any appeal is likely to be a lengthy process.

What will happen to claims and complaints if Jet2 does file an appeal is not clear. Many airlines may take the decision to wait to see how any appeal is dealt with before addressing such claims and complaints. The UK CAA is considering what guidance it should give to airlines in this situation. Whether courts will be willing to stay claims for compensation pending the outcome of a further appeal is also unclear, with different courts possibly taking different approaches to the issue.

What does the long-term future hold?

Looking forward, the European legislative bodies are considering whether and how EC 261 should be revised.

The European Parliament has already agreed its first position on those revisions. If adopted, the revised definition of "extraordinary circumstances" will look very similar to the position reached by the Court of Appeal. The European Council, however, may be more sympathetic to the industry, although it has yet to agree what its revised proposals might look like. If those proposals are different to the package agreed by the European Parliament, then the Parliament and Council have to engage in discussions to try and find a compromise solution.

A new EC 261 is unlikely to be agreed before spring 2015, and it is likely that the new Regulation will not come into force for another 18 months after that.

The industry is therefore likely to be facing the consequences of the Court of Appeal's judgment in Huzar v Jet2.com for some time yet.

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