Association of British Travel Agents Ltd v British Airways Plc

: Lord Justice Clarke will give the first judgment.

Introduction

This is an appeal from a judgment and order of Timothy Walker J dated 26th November 1999 and made after the trial of an action in which three travel agents, the second, third and fourth claimants, ("Jetset", "Majestic" and "Phoenix"), claimed declarations and other relief against three airlines, namely British Airways Plc ("British Airways"), Virgin Atlantic Airways Limited ("Virgin Atlantic") and Deutsche Lufthansa AG ("Lufthansa"). The appeal is brought with the permission of the judge because the issues which it raises are of some importance in the airline industry. Their resolution is likely to affect other travel agents and other airlines, although it is important to note that, subject to one exception, we (like the judge) are concerned only with the rights of the parties as at 31st March 1999, which was the date of the issue of the writ. In particular, subject to that one exception, we are not concerned with any modifications of their systems introduced by the airlines since then.

This action and this appeal arise out of new instructions given by the airlines to accredited IATA travel agents in January 1999. The reason for the litigation is that the change resulted in the airlines paying the travel agents less commission than before. The travel agents say that the annual reduction in commission is over £50 million for the whole of the United Kingdom. The airlines say that it is far less than that but, whatever the true figure, it was substantial. The judge held that the airlines were in breach of contract in reducing the commission in that way and the first issue in this appeal is whether he was right so to hold. The second issue concerns an instruction with which the judge was not asked to deal, but which is also said to entitle the airlines to pay less commission. The third issue arises out of the further conclusion reached by the judge, namely that the airlines were in breach of implied terms of their contracts with the travel agents by requiring them to show a particular charge as a tax on tickets issued by them.

Background and Agreements

The first claimant, the Association of British Travel Agents Limited "ABTA"), is the trade organisation of the British travel agency industry. Since there was some doubt as to its title to sue, it did not itself seek relief from the judge. The other claimants are members of ABTA. Most airline tickets are sold thorough travel agents who are specially accredited by IATA, which is an international trade association which represents the interests of airlines. An agent who wishes to become accredited to sell tickets on the services of IATA's 265 member airlines must enter into standard form agreements on terms dictated by IATA and its members.

Majestic and Phoenix entered into a standard form of agreement on 15th December 1993 and Jetset did so on 2nd October 1997. It is common ground that all three agreements were on the same terms. They were on the terms of IATA Resolution 824, which is entitled "Passenger Sales Agency Agreement (Version II)" and which incorporated (as the judge put it) a large substratum of IATA documentation including "the Sales Agency Rules". It thus incorporated Resolution 814, which is entitled "Passenger Sales Agency Rules". Resolution 824 was passed on 11th May 1992, whereas Resolution 814 had been passed on 17th January 1990. It is common ground that they were in force at the relevant time or times. It is also common ground that the agreements with which we are concerned are governed by English law because, by paragraph 17 of Resolution 824, such agreements are to be interpreted and governed by the law of the principal place of business of the agent.

Resolution 824 provided, so far as relevant, as follows:

"2. RULES, RESOLUTIONS AND PROVISIONS INCORPORATED IN AGREEMENT 2.1 (a) the terms and conditions governing the relationship between the Carrier and the Agent are set forth in the Resolutions (and other provisions derived therefrom) contained in the Travel Agent's Handbook ('the Handbook') as published from time to time under the authority of the Agency Administrator and attached to this Agreement. The Handbook incorporates:

(a)(i) the Sales Agency Rules,

(a)(iv) other applicable IATA Resolutions;

the Agent acknowledges that it has received a copy of the current edition of the Handbook and has acquainted itself with the contents thereof. The Agent specifically acknowledges that it has read and understands the contents of the Handbook …

the Agency Administrator shall provide the Agent with subsequent editions of the Handbook and all amendments thereto. The Agent shall be notified by the Agency Administrator of any amendments to the contents of the Handbook and such amendments shall be deemed to be incorporated herein unless within 30 days of receipt of such notification the Agent terminates this Agreement by notice in writing to the Agency Administrator.

the terms and expressions used in this Agreement shall, unless the context otherwise requires, have the meanings respectively provided for in the Sales Agency Rules. In the event of any conflict, contradiction or inconsistency between any provisions with which the Agency is required to comply under Subparagraph 2.1 of this Paragraph, and any of the provisions of this Agreement, the provisions of this Agreement shall prevail.

SELLING CARRIER'S SERVICES

the Agent is authorised to sell air passenger transportation on the services of the Carrier and on the services of other air carriers as authorised by the Carrier. The sale of air passenger transportation means all activities necessary to provide a passenger with a valid contract of carriage including but not limited to the issuance of a valid Traffic Document and the collection of monies therefor. The Agent is also authorised to sell such other ancillary and other services as the Carrier may authorise;

all services sold pursuant to this Agreement shall be sold on behalf of the Carrier and in compliance with Carrier's tariffs, conditions of carriage and the written instructions of the Carrier as provided to the Agent. The Agent shall not in any way vary or modify the terms and conditions set forth in any Traffic Document used for services provided by the Carrier, and the Agent shall complete these documents in the manner prescribed by the Carrier;

the Agent shall make only such representations as are authorised in this Agreement and by the Carrier.

with respect to previously issued Traffic Documents the Agent, its officers or employees shall issue, accept, reissue, validate or revalidate … all such Traffic Documents in accordance with the Carrier's tariffs, conditions of carriage and written instructions;

OBSERVANCE OF LAWS AND REGULATIONS

The Agent shall observe all government laws and regulations applicable to the sale of air transportation, or any other acts performed by the Agent under this Agreement, in the territory or territories where the Approved Locations of the Agent are situated and in all territories to or through which the Agent may sell air passenger transportation.

… MONIES DUE BY AGENT TO CARRIERS —REMITTANCE

a Traffic Document shall be issued immediately money is received by the Agent for specified passenger air transportation or ancillary services sold under this Agreement and the Agent shall be responsible for remittance to the Carrier of the amount payable in respect of such Traffic Document;

all monies collected by the Agent for transportation and ancillary services sold under this Agreement, including applicable remuneration which the Agent is entitled to claim thereunder, are the property of the Carrier and must be held by the Agent in trust for the Carrier or on behalf of the Carrier until satisfactorily accounted for to the Carrier and settlement made;

REMUNERATION

for the sale of air transportation and ancillary services by the Agent under this Agreement the Carrier shall remunerate the Agent in a manner and amount as may be stated from time to time and communicated to the Agent by the Carrier. Such remuneration shall constitute full compensation for the services rendered to the Carrier."

By paragraph 13 each party was entitled to give notice of termination to the other, such notice to take effect no earlier than the last day of the following month.

Section 9 of Resolution 814, which made more detailed provisions relating to commission provided, so far as relevant, as follows:

"9.1. RATE OF COMMISSION

commission paid to Agents for the sale of international air passenger transportation shall be as may be authorised from time to time by the Member, provided that the Agent complies with the applicable rules governing sales of the transportation. …

AUTHORITY TO...