Court orders agency to refund client’s £1k deposit after they refuse to pay holiday balance

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By Linsey McNeill
19/07/2022
Home » Court orders agency to refund client’s £1k deposit after they refuse to pay holiday balance

A small claims court has told a cruise specialist it must refund a client’s £1,000 deposit, which was forfeited when the couple failed to pay the holiday balance.

The agency, which has its own ATOL, had argued it was entitled to keep the deposit as the cruise was cancelled due to non-payment of the full amount by the due date.

The company, which doesn’t want to be named, had included a clause in its booking terms and conditions stating deposits would be forfeited if the balance wasn’t paid.

The couple had originally booked to travel in November 2020, but tried to cancel the cruise  in August 2020 due to the pandemic. When warned by the agency that they would forfeit their deposit if they did, they transferred their booking, free of charge, to November 2021.

However, when the cruise line subsequently cancelled the November 2020 voyage, the couple requested a refund from the agency, but they were denied this on the basis that they had already transferred their holiday to November 2021.

They started court proceedings to recover the £1,000 deposit, and failed to pay the balance of the holiday for the November 2021 cruise by the due date in August 2021 and their holiday was cancelled by the agency.

In their evidence to the court, the clients claimed their contract had been frustrated because their original cruise was cancelled. They also argued that the cruise wouldn’t offer the experience they’d expected when they booked in February 2020.

The court ruled in the couple’s favour, stating that under the Package Travel Regulations section 12(7) ‘in the event of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and which significantly affect – (a) the performance of the package, or (b) the carriage of passengers to the destination, the travellers may terminate the package travel contract before the start of the package without paying any termination fee’.

MD of the cruise specialist told Travel Gossip: “I feel this ruling changes deposit terms and conditions in travel as we know it.

“It questions the loss of deposit on any cancelled bookings that were due to depart since the start of the pandemic, and also the legal value of deposits in general.”

However, he said he will likely appeal the ruling after Travel Gossip sought legal advice on his behalf.

Lawyer Nick Parkinson, Senior Associate at Travlaw, said: “Based upon the information I have seen it seems that [the ATOL-holder] has a good prospect of successfully appealing the decision. 

“The decision is not consistent with a number of other court decisions, or ABTA guidance. 

“Firstly, it is not clear that the claimant actually cancelled the holiday at all, rather it seems that the reason for cancellation was actually non-payment of the balance payment. 

“ Secondly, even if the claimant did cancel the holiday, they cancelled several months before departure – at which point it was far from clear whether or not the holiday would be affected by any ‘unavoidable and extraordinary circumstances’. 

“In other words, the cancellation fails the ‘flicker of hope test’ that is often referred to in the travel industry.”

Travlaw warned ATOL-holders in a similar situation that appeals must be lodged within 21 days of the court ruling.

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