As Greater Manchester prepares to enter stricter restrictions, Kemp Little’s Farina Azam looks at what different levels of lockdown mean for holidays and refunds
Greater Manchester is due to enter ‘tier three’ lockdown restrictions Friday morning, making it the third region in England to enter that level on the government’s scale.
Tier three is described as ‘very high risk’ for Covid infections spreading, but for those areas in or entering the very high alert area, restrictions do not make holidays and travel illegal.
Government guidance states that while it is advising people not to travel into or out of a very high alert area, people can do so where necessary as part of a longer journey, or when going to an airport, port or international rail terminal to travel abroad.
It reiterates its guidance that people must not travel abroad if they are experiencing any coronavirus symptoms, are self-isolating as a result of coronavirus symptoms, are sharing a household or support bubble with somebody with symptoms, or have been told to self-isolate after being contacted by NHS Test and Trace. And if people are travelling abroad, they must only do so with members of their household or support bubble.
Wales is to enter a stricter, ‘fire-break’ lockdown on Friday, until November 9. This position contrasts with that of Manchester and other areas in tier three, Liverpool and Leicester.
Under Wales’ lockdown, travel is limited to essential travel only. People are not permitted to travel into Wales for holidays, and people living in Wales are not permitted to go on holiday.
Travel abroad is only permitted for people with a reasonable excuse, and a holiday would not be considered such. Hotels in Wales must also close for the duration of the lockdown.
For residents of tier three areas, travel abroad is still permitted and as such the tier three restrictions do not prevent them from going on holiday. If the customer wishes to cancel their holiday, a package organiser is entitled to impose its standard cancellation charges.
For residents in Wales (and any other areas which may enter a local lockdown), restrictions do prevent them from going on holiday – and to do so would be illegal. As a result, it could be argued that the holiday contract has been frustrated, which is ultimately a matter for a court to decide. However, on the assumption that the holiday itself is able to go ahead as contracted, there is nothing within the Package Travel Regulations 2018 (PTRs) which makes the organiser liable to refund the customer in these circumstances.
However, the Competition and Markets Authority (CMA) did issue some guidance in light of Covid-19 which made it clear that it expects companies to offer refunds to customers who have to cancel or are unable to receive services due to lockdown laws in the UK. Although the guidance also states that there may limited exceptions to the full refund rule. For example, the business may be able to deduct a contribution to the costs it has already incurred in relation to the specific contract in question (where it cannot recover them elsewhere).
As such, a package organiser’s staggered table of cancellation charges should, if calculated in accordance with the PTRs, reflect a genuine pre-estimate of the loss to be incurred by the organiser if the customer cancels their booked holiday. On this basis, it could be argued that the organiser’s cancellation charges reflect costs incurred by the organiser, which cannot be recovered elsewhere – and as such, the organiser should be entitled to impose them on the customer as per the CMA guidance.
However, I’d issue some words of caution on this point. Firstly, the CMA has made it clear it expects such exceptions to the refund rule to be relatively rare and the amounts deducted from refunds to be limited. And, under the PTRs, customers can ask organisers to justify the cancellation charges being imposed and, as such, if you choose to impose your standard cancellation charges you need to be confident they are compliant with the PTRs. If you’re in doubt, I would recommend deducting only costs which have been incurred by the business and cannot be recovered elsewhere – which may mean the customer is entitled to a higher refund than they otherwise would be.
It’s also worth noting that the CMA’s guidance is just that – guidance, it’s not legally binding and a court may well agree or disagree with its position. We have some interesting months ahead when customer claims for refunds finally hit the courts and start being heard.