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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Wood & Anor v TUI Travel Plc (t/a First Choice) [2017] EWCA Civ 11 (16 January 2017)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2017/11.html
Cite as: [2018] QB 927, [2017] EWCA Civ 11, [2017] 1 Lloyd's Rep 322, [2017] 2 All ER (Comm) 734, [2017] PIQR P8, [2018] 2 WLR 1051
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Neutral Citation Number: [2017] EWCA Civ 11
Case No: B3/2015/0927
3YJ60681
TUI Travel PLC T/A First Choice
Grahame Aldous QC and Philip Jones (instructed by Mackrell Turner & Garrett) for the Appellant
Robert Weir QC and Andrew Young (instructed by Irwin Mitchell LLP) for the Respondent
Hearing date: 22nd November 2016
The issue in this appeal is whether Mr and Mrs Wood can recover damages, pursuant to the implied condition in section 4(2) of the Supply of Goods and Services Act 1982 ("the 1982 Act"), for acute gastroenteritis suffered whilst staying at the Gran Bahia Principe Hotel in the Dominican Republic in 2011 on an all-inclusive holiday contracted with TUI Travel Plc trading as First Choice ("First Choice"). The implied condition provides that where property in goods is transferred pursuant to a contract in the course of business, the goods must be of "satisfactory quality". His Honour Judge Worster concluded that the supply of food and drink to Mr and Mrs Wood constituted the supply of goods for the purpose of the 1982 Act. He decided that their illness was caused by contaminated food or drink that they were given in the hotel. It was not of "satisfactory quality" for the purposes of section 4(2) because it was contaminated. Mr Wood was awarded damages which included £16,500 for pain, suffering and loss of amenity and Mrs Wood £7,500. It is unnecessary to expand upon the detail of the medical problems they suffered as a result of the gastroenteritis but the levels of damages (which are not the subject of challenge) are sufficient to show that the consequences were serious and not transitory.
The 1982 Act, as its title suggests, is concerned with contracts for the supply of goods and also with contracts for the supply of services. Part I of the Act applies to "Supply of Goods" and Part II to "Supply of Services". At the relevant time, Section 1 provided:
"1 The contracts concerned
(1)	In this Act … a "contract for the transfer of goods" means a contract under which one person transfers or agrees to transfer to another the property in goods, other than an excepted contract.
(2)	For the purposes of this section an excepted contract means any of the following:-
(a)	a contract for the sale of goods; ...
(3)	For the purposes of this Act … a contract is a contract for the transfer of goods whether or not services are also provided or to be provided under the contract, and (subject to subsection (2) above) whatever the nature of the consideration for the transfer or agreement to transfer."
"4 Implied terms about quality or fitness
(1)	Except as provided by this section and section 5 below and subject to the provisions of any other enactment, there is no implied condition or warranty about the quality or fitness for any particular purpose of goods supplied under a contract for the transfer of goods.
(2)	Where under such a contract, the transferor transfers the property in goods in the course of a business, there is an implied condition that the goods supplied under the contract are of satisfactory quality.
The implied condition that the goods be of satisfactory quality is the same as is implied by section 14(2) of the Sale of Goods Act 1979 ("the 1979 Act").
"12 The contracts concerned
(1)	In this Act a "contract for the supply of services" means, subject to subsection (2) below, a contract under which a person ("the supplier") agrees to carry out a service.
(2)	For the purposes of this Act, a contract of service or apprenticeship is not a contract for the supply of a service.
In a contact 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."
There is no dispute that food is capable of being "goods" for the purposes of the 1982 Act, a term with a wide definition in section 18.
First Choice is a substantial package holiday provider. Mr and Mrs Wood booked a two week holiday, to celebrate their fortieth wedding anniversary, departing from Gatwick Airport on 30 March 2011 and returning a fortnight later. The price was paid in advance. First Choice agreed to provide or arrange return flights to the Dominican Republic, transfers to the hotel, accommodation together with the board element described as "all inclusive". That meant that all food and drink would be provided by the hotel without Mr and Mrs Wood being responsible for paying anything for it locally. Unsurprisingly, there were no terms or conditions in the contract which concerned themselves with the question of property in the food and drink provided, and when (or whether) it passed to the customers, any more than there are in the terms or conditions upon which customers purchase a meal in a restaurant or bed and breakfast in an hotel.
The claim was advanced principally under the Package Travel, Package Holidays and Package Tours Regulations 1992 No. 3288 ("the 1992 Regulations"). Those regulations were introduced to implement Council Directive 90/314/EEC on package travel, package holidays and package tours. They govern the circumstances in which a representation in a brochure is binding on a tour operator and requirements of information that must be provided to a customer. They allow a customer to transfer the benefit of the contract to another, void contractual terms allowing the operator to increase prices after the contract has been entered into save for closely defined reasons and limit the scope for altering significant terms. Regulations 14 and 15 govern liability of the tour operator when things go wrong. Regulation 14 is concerned with the position when a "significant proportion of services are not provided". Regulation 15 is concerned with proper performance of the contract:
The term "services" is not defined in the 1992 Regulations but has a broad meaning which includes transport, accommodation and ancillary services which would include food and drink provided by an hotel.
Mr Aldous QC on behalf of First Choice has not suggested that food contaminated in the way found by the judge to have been the position in this case could be considered of "satisfactory quality" for the purpose of section 4(2), if it applies. Food contaminated with bacteria such as to cause illness could hardly be described as such. Before the judge, the burden of the argument advanced by First Choice was that the contract they entered into with Mr and Mrs Wood was a contract for the supply of services. It could not be both a contract for the supply of services and a contract for the supply of goods at the same time. Thus, it was submitted, the judge should have concluded that it was a contract for the supply of services (which included the provision of food and drink) and thus all of its provisions were governed by the implied term found in section 13 of the 1982 Act that the services should be provided with reasonable care and skill. The corollary of this submission is that section 4 of the 1982 Act did not apply to the contract. In view of the finding of a lack of fault on the part of the hotel the submission, if correct, would have resulted in the claim being dismissed. On behalf of Mr and Mrs Wood, it was argued before the judge that a contract could be both a contract for the supply of goods and supply of services at the same time. The provision of food and drink was the supply of goods, even though most of what First Choice contracted to provide were services. The judge accepted that argument.
i)	The contract between Mr and Mrs Wood and First Choice was a contract for the supply of services and could not also have been a contract for the transfer of goods;
ii)	No property in goods was transferred by First Choice to Mr and Mrs Wood, in particular they never acquired property in the food or drink they consumed;
iii)	For either or both reasons the implied condition in section 4(2) of the 1982 Act formed no part of the contract, rather the applicable implied term was that found in section 13.
Mr Aldous focussed his oral submissions on the second ground. It was no longer suggested on behalf on First Choice that a single contract may not be both a contract for the supply of goods and also a contract for the supply of services. That concession was rightly made. The language of the statute itself in sections 1(3) and 12(3) of the 1982 Act makes clear that the two are not mutually inconsistent. To the extent that a contrary view was expressed at first instance in Trebor Bassett Holdings Ltd v ADT Fire and Security Plc [2011] EWHC 1936 (TCC) [2011] BLR 661 at paragraph 219 it was disapproved in the Court of Appeal in the same case by Tomlinson LJ (with whom the Chancellor and Richards LJ agreed) at paragraph 49 of his judgment: [2012] EWCA Civ 1158, [2012] BLR 441. There are many obvious everyday examples of contracts that have both elements. For example, a single contract might involve the purchase and fitting of carpets or kitchen units; or a contract to have a car serviced routinely envisages that new parts might be fitted. These are examples of contracts for work and materials which before the enactment of the 1982 Act were subject to implied terms at common law but these were put on a statutory footing following the recommendation of the Law Commission, Report on Implied Terms in Contracts for the Supply of Goods (Law Com. No. 95) in 1979.
Mr Weir submitted that both parts of the 1982 Act could apply to a single contract and that the supply of food was within the scope of Part I. He recognised that reliance upon the 1982 Act by Mr and Mrs Wood required them to show that First Choice agreed to transfer property to them in the food and drink with which they were provided. It was common ground that property would not have to pass directly from First Choice to Mr and Mrs Wood. First Choice could fulfil its contractual obligations through others. He submitted that the appellants' characterisation of the food remaining the property of the hotel at all times until it was placed in the mouth of the customers at which point it was destroyed was unreal.
"When persons go into a restaurant and order food, they are making a contract of sale in exactly the same way as they are making a contract of sale when they go in and order any other goods."
"It follows beyond all doubt that there is an implied warranty that the food supplied will be reasonably fit for human consumption. I hold that the whitebait delivered in this case were not reasonably fit for human consumption, and that there was a breach of warranty."
It is true that it is unclear whether the finding of liability was for breach of the implied condition that the food would be "reasonably fit for purpose" found in section 14(1) of the Sale of Goods Act 1893, or whether the court was founding liability on an equivalent common law implied term. That said, there was no question that the liability of the restaurant would be confined to the proof of fault on its part. The judge acknowledged that an action in negligence would lie against the restaurant on proof of a failure to take reasonable care, but that was not even alleged. The terms "reasonably fit for purpose" and "reasonably fit for human consumption" are interchangeable in this context. "Reasonably fit for purpose" is a statutory precursor of "satisfactory quality" found in section 4(2) of the 1982 Act and section 14(2) of the 1979 Act. It was not argued that the contract between the restaurant and Mr and Mrs Lockett was a mixed contract for the supply of services (cooking, presentation and serving) and materials (the food) but given the way in which the judge approached the question of liability (breach of a warranty) it is difficult to imagine that the outcome would have been any different had it been.
The PST case did not involve food but fuel supplied to a ship for its propulsion. Such fuel is known as "bunkers". The first supplier, OW Bunker Malta Ltd, contracted with the ship owners to supply bunkers of fuel oil and gasoil for the propulsion of their vessel, then lying in a Russian port. The contract incorporated the first supplier's standard terms of business. Those provided for payment 60 days after delivery. Two clauses of the contract were of particular importance in the litigation. There was a retention of title clause under which property in the bunkers was not to pass to the ship owners until the bunkers had been paid for in full. In addition a clause entitled the owners to consume the bunkers to propel the vessel from the moment of delivery. It was possible that all the bunkers would be consumed before they were paid for and inevitable that a large part of the oil delivered would be used in that period, leaving at most only a small part at the end of 60 days in which title could then pass. A chain of further contracts for the supply of the bunkers was entered into but the actual delivery was made by a company at the port where the vessel was berthed. After the bunkers had been supplied, the parent company of OW Bunker Malta Ltd, which was the second supplier in the chain, began proceedings for restructuring which constituted an event of default under a financing agreement between the OW Bunker Group and its bank. The bank asserted a right to recover as assignee the debt owed by the owners to OW Bunker Malta Ltd for the supply of the bunkers. The third supplier asserted ownership of the bunkers for which it intended to seek payment from the owners.
It was in those circumstances that the owners sought a declaration that they were not bound to pay either OW Bunker Malta Ltd or its bank for the bunkers supplied to the vessel, or alternatively damages for breach of contract, on the ground that OW Bunker Malta Ltd was unable to pass title in the bunkers. Their concern was that they might be liable to pay for the bunkers twice. Whilst this litigation involved only one ship with bunkers to the value of under $500,000, the outcome would determine the liability of a large number of ship owners. Arbitrators held that the retention of title clause combined with the owners' right to use the bunkers for the propulsion of the vessel in advance of payment, meant that OW Bunker Malta Ltd had not undertaken to transfer property in the bunkers to the owners, and accordingly the contract was not "a contract of sale of goods" within the meaning of the 1979 Act. OW Bunker Malta Ltd could not claim the price of the bunkers under that Act but were entitled to recover the sum due as a simple debt. The owners appealed and both OW Bunker Malta Ltd and the bank cross-appealed. Males J affirmed the arbitrators' decision, holding that OW Bunker Malta Ltd had not undertaken to transfer property in the bunkers because both parties had envisaged that some or all of them were likely to have been consumed in the propulsion of the vessel before payment became due. They would then cease to exist and it would become impossible to transfer property in them. The Court of Appeal upheld the judge's decision as did the Supreme Court. Lord Mance, with whom the rest of the court agreed, concluded that the agreement between OW Bunker Malta Ltd and the owners was not a straightforward agreement to transfer property in the bunkers for a price. It was an agreement with two parts. First, to allow consumption of fuel prior to payment without property passing in the fuel so consumed; and secondly to transfer property in any remaining fuel when the price for all bunkers was paid. The contract was therefore not a contract for sale within section 2 of the 1979 Act but was sui generis. His conclusion is set out in paragraph 28 of his judgment. The owners were liable for the price. Had the contract been one for the sale of the bunkers then, applying FG Wilson (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2013] EWCA Civ 1232, [2014] 1 WLR 2365, section 49(1) of the 1979 Act would preclude recovery of the price of goods in circumstances where property had not passed to the buyer. The correctness of that decision was considered by Lord Mance starting at paragraph 40 of his judgment. At paragraph 58 he concluded that it was wrongly decided and, at paragraph 60, that even if the contract in question were one for the sale of goods, section 49(1) would not have barred the claim.
Mr Aldous relied upon the reasoning in the PST case to support his contention that there was no intention that property in any food or drink served to Mrs and Mrs Wood would pass to them. Instead, the food and drink remained at all times the property of the hotel until the moment it was placed in its customers' mouths when it was destroyed, perhaps not instantaneously as with burning fuel oil, but for the purposes of legal analysis just as surely. The essential nature of a holiday contract that includes the provision of any food is simply to authorise consumption of food and drink belonging to the hotel, nothing more, he submitted.
"The parties' submissions have … lent a degree of metaphysical complexity to commonplace facts."
The supply of bunkers is commonplace in the world of shipping. The provision of holidays, hotel accommodation, and weekend breaks or even casual stops at a bed and breakfast, often include an entitlement to food and drink within an overall price. Such contracts are made millions of times a year in this jurisdiction. We too have enjoyed submissions of a metaphysical nature which might surprise the many thousands of customers who enjoyed breakfast, perhaps with orange juice, tea or coffee, in their hotels or guest houses every morning in this jurisdiction or the world over as part of package holidays. Do they ever own the food and drink they are served? Do they own it when it is served to them on a plate? Do they own it when they serve themselves from a buffet? Do they own it when it is placed in their mouths? And who owns the scraps taken away at the end of a meal? Could a customer wrap a croissant from his plate in a napkin and eat it on the move if pressed for time, or would he be taking away the hotel's property? Could the hotel demand he leave the half sausage on his plate that he does not want to eat, or is he at liberty to take it to give to his dog waiting in the car?
Underlying this appeal was a concern that package tour operators should not become the guarantor of the quality of food and drink the world over when it is provided as part of the holiday which they have contracted to provide. Mr Aldous spoke of First Choice being potentially liable for every upset stomach which occurred during one of their holidays and the term "strict liability" was mentioned. That is not what the finding of the judge or the conclusion that he applied the correct legal approach dictates. The judge was satisfied on the evidence that Mr and Mrs Wood suffered illness as a result of the contamination of the food or drink they had consumed. Such illness can be caused by any number of other factors. Poor personal hygiene is an example but equally bugs can be picked up in the sea or a swimming pool. In a claim for damages of this sort, the claimant must prove that food or drink provided was the cause of their troubles and that the food was not "satisfactory". It is well-known that some people react adversely to new food or different water and develop upset stomachs. Neither would be unsatisfactory for the purposes of the 1982 Act. That is an accepted hazard of travel. Proving that an episode of this sort was caused by food which was unfit is far from easy. It would not be enough to invite a court to draw an inference from the fact that someone was sick. Contamination must be proved; and it might be difficult to prove that food (or drink) was not of satisfactory quality in this sense in the absence of evidence of others who had consumed the food being similarly afflicted. Additionally, other potential causes of the illness would have to be considered such as a vomiting virus.
In this case, the judge heard evidence not only from Mr and Mrs Wood but also from suitable experts in the light of the medical position recorded in the records Mr Wood's admissions to hospital in both the Dominican Republic and the United Kingdom. In my view he was correct to conclude the provision of contaminated food by the hotel amounted to a breach of the implied condition found in section 4(2) of the 1982 Act. In those circumstances it is unnecessary to consider Mr Weir's alternative argument based upon the common law. I would dismiss the appeal.