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International Life Leisure Ltd v Revenue & Customs  UKVAT V19649 (12 July 2006)
VAT TOMS tour operator whether supplies of hotel and other holiday accommodation in France made by appellant under its booking conditions made as agent for accommodation suppliers or within ambit of TOMS as made to and then re-supplied by appellant as agent for undisclosed principal or as principal held supplies made as agent for undisclosed principal or as principal appeal dismissed
VAT TOMS if supplies made by Appellant as agent for hotel / accommodation providers are contracts with those suppliers of such accommodation consistent with agency status in each case held that contracts not so consistent appeal dismissed
MANCHESTER TRIBUNAL CENTRE
INTERNATIONAL LIFE LEISURE LIMITED Appellant
- and -
THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: David Demack (Chairman)
Arthur Brown FCA CTA
Sitting in public in Manchester on 13 and 14 March 2006
David Goy QC instructed by Messrs Slaughter & May, solicitors, London, for the Appellant
Nicholas Paines QC, and Caroline Neenan, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2006
- The question for decision in this appeal by International Life Leisure Limited ("ILL") is whether certain supplies of predominantly French holiday accommodation in France it makes are made by it as agent for a hotel or other accommodation provider, and are thus outside the ambit of the Tour Operators Margin Scheme ("the TOMS"), as it contends, or are made to and then resupplied by it dealing with customers in its own name, i.e. as principal or as agent for an undisclosed principal, and are within the TOMS, as Her Majesty's Commissioners for Revenue and Customs ("HMRC") maintain.
- For the purpose of the appeal, that question must be divided into two parts. First, we must decide whether the booking conditions in ILL's holiday brochures have the effect of its acting as agent for hotel and other accommodation providers. Only if they do they, secondly, must we decide whether ILL's contracts with three specifically identified providers each has the effect of its acting as agent for the provider.
- Strictly speaking, the subject matter of the appeal is HMRC's refusal by letter of 3 July 2002 to authorise repayment claims made by ILL in respect of accounting periods 08/01, 11/01 and 02/02 in a total of £600,008.78. Those claims were made to recover tax paid by ILL under the TOMS, which it now maintains were outside that scheme.
- When the dispute between the parties first arose, ILL contended that it made supplies outside the TOMS in respect of accommodation provided by Disneyland, Center Parcs, Maison Vacances and certain other groups, but it now accepts that those supplies were within the TOMS. But in relation to the following three contracts it maintains its initial stance:
(1) its standard contract for letting cottages and houses owned by private individuals ("seasonal lettings contract");
(2) its contract with Ace Tour, and other similarly worded contracts relating to hotel accommodation; and
(3) its contract with Pierre & Vacances Tourisme France ("P&V").
- In its Notice of Appeal, given on 8 July 2002, ILL gave the following reasons for appealing:
"The Appellant purchased the shares in the business and registered for VAT upon acquisition of the shares as a VAT group. The Appellant is aware that the Commissioners are in dispute with the previous owners of the business concerning the treatment of supplies of holiday accommodation in France under the previous registration.
The Appellant has undertaken an extensive review of accommodation contracts, the majority of which are under the French jurisdiction, and have concluded that supplies of accommodation in France are made by the French owners directly to the Appellant's customers. The Appellant is merely acting as agent in arranging for the accommodation to be provided. As the accommodation supplies are made as agent there is no requirement to include such supplies within the tour operators margin scheme as prescribed by the VAT (Tour Operators) Order 1987.
The Appellant has prepared and rendered its returns on this basis. The returns show repayments due to the Appellant. The Commissioners have refused to make the repayments but have neither issued assessments nor provided reasons for withholding of repayment. Full information has been disclosed to the Commissioners."
(The first sentence of those reasons is incorrect. As we understand the situation, in 2001 International Life Leisure Group Limited acquired the share capital in ILL).
- Before us, the case for ILL was presented by Mr David Goy QC, and that for HMRC by Mr Nicholas Paines QC leading Miss Caroline Neenan. We were presented with two agreed bundles of copy documents, and took oral evidence from Mr N I Leppard, the managing director of ILL throughout the period relevant to the appeal. From that evidence, we find the following facts to have been established.
- ILL was registered as the representative member of a group of companies for VAT purposes on 30 April 2001. (Prior to that date, it had been registered under a different registration number). Its main business is offering a variety of self-drive holidays, including arranging supplies of accommodation in cottages, holiday villas, hotels, apartments, tents and mobile homes, predominantly in France. In essence, it markets and effects bookings of properties mainly owned by private individuals, and accommodation in owned and managed hotels. (Exceptionally, ILL does own some tents and mobile homes in France, and is registered for TVA in France in respect of supplies of them. The services so supplied do not form part of the present appeal). In addition, ILL enters into arrangements to market properties for agents who in turn act for a number of owners of properties. It enters into contracts with accommodation owners and other providers for the purpose. ILL does not maintain the properties with which it deals, nor does it furnish or clean them. Those matters are dealt with by the accommodation providers themselves.
- ILL produces two annual brochures featuring the properties and hotel accommodation it has agreed to market: its main brochure (published by ILL trading as "French Life Holidays"), and a brochure dealing specifically with short breaks (published by ILL trading as "European Life Holidays"). It supplies the brochures through two channels. First, it provides them direct to the public. Secondly, it provides them to other travel agents who may make reservations for customers at the travel agents' offices. The brochures contain booking conditions and other information relevant to bookings. (We shall refer to the booking conditions contained in the 2001 French Life brochure as "the Booking Conditions", it being agreed that they are representative for the purposes of the appeal).
- As a result of the way in which ILL markets properties and hotel accommodation, it requires minimal capital investment and carries no significant liabilities. If it successfully markets a property or accommodation, it receives commission for its efforts. The amount paid by the holidaymaker to ILL is in turn paid net of commission to the accommodation provider. If ILL's marketing is unsuccessful, it earns no income but equally suffers no loss, as in most circumstances (and particularly in those covered by the present appeal) ILL then has no obligation to pay the accommodation provider anything. The only real risk to ILL lies in the marketing costs it incurs in relation to the properties.
- In a very few cases, ILL gives a property owner a rental guarantee. Where it does so, it accounts for VAT under the TOMS. (Contracts which include such a guarantee are not included in the appeal).
- As mentioned above, ILL markets its brochures both through travel agents and direct to holidaymakers through other forms of advertising. Where a holidaymaker contacts it directly, typically he will first request a brochure or visit a website which contains the same information as the brochure. The brochure or website contains the Booking Conditions and "Pricing Information and How To Book". So far as relevant to the appeal, those items provide as follows:
"'Us'" and 'French Life Holidays' are references to International Life Leisure Limited acting as agents of the travel and accommodation providers.
Your contract is with International Life Leisure Limited, trading as French Life Holidays, which acts as agent for travel and accommodation providers, a bonded member of the Association of British Travel Agents Membership No. V6190, and we hold an air travel organisers licence No. 2694 issued by the CAA. This means that your money will be refunded or you will be repatriated if already abroad in the unlikely event that your arrangements cannot be provided due to our insolvency.
The contract between us
French Life Holidays are agents for the travel and accommodation providers who have agreed to be bound by these booking conditions
Your contract with French Life Holidays on behalf of the travel and accommodation providers comes into existence when we issue our confirmation invoice which will specify the names of the travel and accommodation providers for whom we act as agents.
You Pay the Balance
The balance of the price of your holiday must be paid at least 8 weeks before the departure date. If the full holiday cost is not paid on time, we have the right to treat your booking as cancelled by you. In this case, the cancellation charges shown under "IF YOU CANCEL YOUR HOLIDAY" will be payable.
If you change your Booking
If after our confirmation invoice has been issued, you wish to change any detail on your booking confirmation, we will do our utmost to make the changes, provided that notification is received in writing at our offices by the first named person on the booking, or from their Travel Agent. This must be accompanied by a payment of £20 for each change or £40 for each change if travel documents have been issued, to cover our administration costs. Any changes within 8 weeks of departure may, in addition to the above charges, also incur cancellation charges from outside suppliers such as ferry companies etc. Any changes to your dates or accommodation may be treated as a cancellation of the original booking and hence be subject to cancellation charges. Individual party members may be substituted on payment of the above mentioned charges, except for flight bookings. Some flights are non-refundable and, therefore, any amendment to a flight booking may incur full cancellation charges.
If you cancel your holiday
You may cancel your holiday completely or in part at any time providing the first named person on the booking notifies us in writing either via the Travel Agent with whom you made the booking or directly. As cancellation incurs administration costs and carries the risk that it may not be possible for the holiday to be resold, the following cancellation charges are payable:-
|Period before departure within which written cancellation is received by us
||Amount of cancellation charge shown as a percentage of the holiday price*
|More than 57 days
|43 57 days
||30% (or deposit, whichever is greater)
|36 42 days
||40% (or deposit, whichever is greater)
|28 35 days
|[14 28]? days
|? days or less
If the reason for the cancellation is covered under the terms of an insurance policy, you may be able to reclaim these charges, less any excess. "Holiday price" means the total holiday cost where the whole booking is cancelled. Where only part of the booking is cancelled "holiday price" means the total cost payable by the person(s) cancelling. In all cases "holiday price" excludes insurance premiums and amendment charges, which are not refundable in the event of your cancellation. Where part of a booking is cancelled, the remaining party members may have to pay additional costs (e.g. single room supplements).
If you have a complaint
All other holidays
Our hotel manager, accommodation agent, or other provider, must be contacted to give them the opportunity to resolve the problem to your satisfaction. Where possible, your complaint should be confirmed in writing. It is important that you also contact our office immediately.
Prices in this brochure were calculated on the basis of known travel and accommodation costs at 31/10/00. The holiday information and prices shown in this brochure are taken from information provided by the travel and accommodation providers and may have changed by the time you come to book your holiday
If we change your holiday
The arrangements offered in this brochure are planned months in advance. Occasionally, we have to make changes to and correct errors in brochure and other details both before and after bookings have been confirmed, and cancel confirmed bookings. Whilst we always endeavour to avoid changes and cancellations, we must reserve the right to do so
Most changes are minor. Occasionally, we have to make a "significant change". When we refer to a "significant change" in these booking conditions, we mean one or more of the following changes when made before departure: a change of cottage, villa or apartment to one outside a 40 mile radius of the one originally confirmed, a change of hotel to one outside a five mile radius of the one originally confirmed, a change of resort for camping, a change of accommodation to that of a lower standard (for the whole or major part of the time you are away),
All other changes are treated as "minor" changes. If we have to make a significant change or cancel, we will tell you as soon as possible. If there is time to do so before departure, we will offer you the choice of the following options:
(a) (for significant changes) accepting the changed arrangements or
(b) purchasing alternative arrangements from us of a similar standard to those originally booked, if available. (If the chosen alternative arrangements are less expensive than your original ones, we will refund the difference but if they are more expensive, you will have to pay the difference), or
(c) cancelling or accepting the cancellation, in which case you will receive a full and quick refund of all the monies you have paid to us.
Please note: the above options are not available where the change made is a minor one.
If we have to make a significant change or cancel eight weeks or less before departure, we will pay you compensation subject to the following exceptions. Compensation will not be payable and no liability beyond offering the above mentioned choices can be accepted where we are forced to make a change or cancel as a result of unusual and unforeseeable circumstances, beyond our control, the consequences of which we could not have avoided even with all due care. No compensation will be payable if we cancel as a result of your failure to make all payments due in full and on time.
|No of days before departure a significant change or
cancellation is notified to you or your Travel Agent
|Compensation per party
|More than 56 days
|43 56 days
|29 42 days
|15 28 days
|14 days or less
In all cases, our liability for significant changes and cancellations is limited to offering you the above mentioned options and, where applicable, compensation payments. We regret we cannot pay any expenses, costs or losses incurred by you as a result of any change or cancellation. No compensation is payable for minor changes or where we make a significant change or cancel more than eight weeks before departure.
Very rarely we may be forced by "force majeure" (see below) to change or terminate your confirmed arrangements after departure but before the scheduled end of your time away. This is extremely unlikely but if the situation does occur, we regret we will be unable to make any refunds [unless we obtain any refunds from our suppliers], pay you any compensation or meet any costs or expenses you incur as a result.
FORCE MAJEURE: We regret we cannot accept any liability to pay any compensation where the performance or prompt performance of our contractual obligation is prevented or affected by "force majeure". In these booking conditions, "force majeure" means any event which, we or the supplier of service(s) in question could not, even with all due care, foresee or avoid. Such events may include war or threat of war, riot, civil strife, industrial dispute, terrorist activity, natural or nuclear disaster, fire, adverse weather conditions [closure or congestion of air, rail or sea port, technical problems with transport, cancellations or changes of schedules by scheduled airlines] and similar events beyond our control.
Our liability to you
Please note clauses (1), (2) and (5) below do not apply to bookings of one type of service only, i.e. accommodation only or transport only.
(1) We make every effort to ensure that all arrangements are made correctly and efficiently. We accept responsibility on behalf of the travel and accommodation providers if any of the services which are agreed to be provided to you under this contract prove deficient or not of a reasonable standard. We also accept responsibility for what our employees, agents, suppliers and subcontractors do or do not do (providing they were at the time carrying out work authorised by us) except where death, personal injury or illness results (dealt with separately below). This acceptance of responsibility is subject to "force majeure" and the other terms of these booking conditions. We do, however, limit the maximum amount we may have to pay for any and all claims or parts of claims which do not involve personal injury, illness or death
(2) Subject to these booking conditions, we accept responsibility on behalf of the travel and accommodation providers should you or any member of your party suffer death, personal injury or illness as a result of any failure to perform or improper performance of any part of this contract by any of our employees, agents, or subcontractors and by the travel and / or accommodation providers for whom we act as agents except in the following situations. [We consider it unnecessary to identify those situations].
(5) If you or any member of your party suffers illness, injury or death through misadventure as a result of an activity which does not form part of your contracted arrangements nor an excursion sold through us, we will provide you with all reasonable assistance. This assistance may include our making a contribution towards your initial legal costs in taking action against the person(s) responsible providing you request this within 90 days of the incident in question. All assistance (financial or otherwise) is subject to our reasonable discretion and a maximum total to ourselves of £5,000 per booking.
Pricing Information and How to Book
Once you have chosen your holiday destination, please call our reservations department on
Alternatively, you may wish to go to your nearest ABTA travel agent who will handle all the formalities on your behalf.
Self Catering Holidays
Accommodation only or ferry excluded holidays. If you prefer to make your own travel arrangements, the price of the accommodation is as follows:
Cottages, villas, camping and apartments deduct £50 from the total ferry inclusive price for the party
Hotels use the extra night price based on your arrival date at each hotel and add an administration charge of £20
Cottages, Camping, Hotels and Apartments. A deposit of £150 per party plus the appropriate premium for personal insurance must be paid at the time of booking.
Villas. A deposit of 30 per cent of the basic holiday cost plus the appropriate premium for personal insurance must be paid at the time of booking.
- Having decided on the travel and/or accommodation of which he wishes to take advantage, the holidaymaker then makes a booking and pays the deposit. Payment of the deposit confirms the booking and results in ILL automatically issuing a confirmation invoice to him.
- A typical confirmation invoice, which relates not only to a seasonal letting of a house owned by Mr J C Farebrother but also to a hotel booking contract with Ace Tour (to be found at Tab C page 2 of bundle 1), takes the following form:
"Mrs S W Agent Code : A1752
[Address] INVOICE & CONFIRMATION
Kent Reference : B659917/5
Print Date : 03 Aug 2005
Page : 1 of 1
****** CLIENT COPY ******
Dear Mrs W
Thank you for your booking. Please check that all the details listed below are the exact requirements of your party. Should you have any queries please contact us immediately on the above telephone number. Due to transport operator booking conditions fuel surcharges may apply.
Ferry : SEAFRANCE All inclusive price: 37.00
DOVER EASTERN CALAIS O/H CAR 1
10 AUG 01 dep 08 15 Adults 5
Reference: 3853591 Children 1
Hotel: Kyriad Brive La Gaillarde
19100 Brive La Gaillarde
ACE TOUR ENVERGURE SERVICE
Date : 10 Aug 01 for 1 night
F80004 Twin Room Category Room Price 1 38.00
F80004 Twin Room Category Room Price 1 38.00
F80004 Twin Room Category Room Price 1 38.00
Notes : This hotel price is based on bed only.
Accom : La Petite Maison du Romarin B17 Nights-2 Ads 952.00
J C Farebrother
Date : 11 Aug for 7 nights
Notes : Please Note; The swimming pool and tennis court at this property are for
the shared use of up to 30 properties.
Ferry : SEAFRANCE All inclusive price: 37.00
CALAIS - DOVER EASTERN O/H CAR 1
19 AUG 01 dep 08 15 Adults 5
Reference: 3853591 Children 1
Supplement: Travel Insurance Declined Qty Overall 1 0.00
Supplement: Property Damage Waiver Qty Overall 1 21.00
Note : At property ref: B104 you will be required to pay a Security
Deposit of approximately 1000 French Francs."
- The invoice contains only the one reference to Mr Farebrother. It does not name him as owner of La Petite Maison de Romarin, or contain any information to indicate that ILL is acting as his agent in the letting of his property. On the basis that that invoice is representative, we find that the confirmation invoice issued to the holidaymaker typically contains the name of the accommodation provider (who is usually the owner), albeit that he is not designated as the owner on the invoice.
- The holidaymaker is required to pay the balance of the holiday price at least eight weeks prior to the date on which his holiday is due to start. About four or five weeks prior to his departure, he is sent a ticket pack which includes the booking itinerary, local information, accommodation information and relevant accommodation and transport vouchers.
- In relation to accommodation other than that in hotels, directions to properties contained in the documents sent in advance to the holidaymaker state that it is the owner or his keyholder who will show the holidaymaker to the property. ILL is never the keyholder. Contractually, it is for the owner to arrange for a person to welcome a holidaymaker and to collect the key on departure or arrange for a responsible person to do so. The holidaymaker is specifically directed to what ILL calls the "Important Note". It advises him to contact the keyholder or (if not the owner) his local agent in the event of any problem with the accommodation, since it is the owner's responsibility to maintain the property and to ensure that it is properly equipped and furnished. ILL's representatives are unable to enter the property to address any problem themselves; the most they can do is try to ensure that the owner fulfils his obligations to maintain the property.
- In the case of sales of hotel accommodation, ILL states the name of the hotel on its confirmation invoice. Again the supporting documents contain the "Important Note" stating that the holidaymaker should report any problems with the accommodation direct to the hotel staff in the first instance.
- Where a holiday is sold through a travel agency, the booking process is much the same as for a direct sale except that the travel agency acts as the channel for payment of the deposit and balance, and issues its own invoices direct to the holidaymaker. However, the travel agency still receives ILL's own confirmation documents, including its confirmation invoice and ticket pack, for onward transmission to the holidaymaker.
- As previously stated, this appeal is concerned with three types of contract entered into it by ILL. They are:
(a) its seasonal lettings contract;
(b) its contract with Ace Tour (the contents of which are reflected in contracts with certain other hotel operators); and
(c) its contract with P&V.
We shall deal with each contract in turn.
(a) The Seasonal Lettings Contract
- The seasonal lettings contract takes a standard form. In it, ILL agrees with private individuals to let cottages and houses owned by them. Its contents, so far as relevant to the present appeal and indicating its overall flavour, read as follows:
Seasonal Lettings Contract
"Between International Life Leisure trading as French Life Holidays hereafter referred to as the agent and
hereafter referred to as the signatory
The agent is appointed as sole letting agent as described in the terms, conditions and periods detailed in this document for the property / properties mentioned in Annexe 1.
The agent has exclusivity on the sales on a free-sell basis until the release date as mentioned in Annexe 1. After this date, the agent will continue to free-sell. Any request to take back any weeks not booked by the agent must be made in writing and are only effective once the agent has confirmed this in writing.
The rates offered by the agent are as mentioned in Annexe 1.
The signatory authorises the agent to set the rental rates to be paid by clients and to retain the difference between such rates and the rental rates to be paid to the signatory as referred to in this agreement without reference or accounting to the signatory.
Payment will be made by the agent by the means as mentioned in Annexe 1.
Confirmation of Bookings
The agent will confirm all bookings in writing. When the agency receives payment from the client, the signatory will be notified in writing that they have a contract directly with the clients concerned.
Provision of accommodation
The accommodation must be supplied as booked by the agent. If not, suitable alternative accommodation must be provided by the signatory which must, as a minimum, comply with the brochure description of the original accommodation booked.
The signatory is responsible for ensuring that a security deposit is taken from the client on arrival at the accommodation
The agent cannot accept any responsibility for collection / refunding of the deposit and is unable to arbitrate between the client and the signatory in this regard.
Property Management and Maintenance
The signatory shall ensure that the property is thoroughly cleaned and prepared for the arrival of the next client. The signatory shall ensure that the property / properties is / are adequately equipped for the maximum occupancy of the property and should remain so equipped for the duration of the contract. The signatory shall ensure that all contents are maintained in proper working order and the property should at all times be in good decorative condition.
Repairs and Modifications
The signatory shall be responsible for all repairs to the property
Health and Safety
The signatory confirms that the property / properties comply and will at all times comply in full with all applicable local, regional, national, trade and other laws, regulations and codes of practice
relating to hygiene, fire, safety and other standards for those using the property.
The signatory agrees to indemnify the agent for the full amount of claims, liabilities, demands, damages, expenses, losses, refunds, fines, costs and all other sums which the agent, its employees or agents, become responsible for as a result of a breach of this agreement
All cancellations must be notified to the signatory in writing when received by the agent. If the property is not re-let, the charges as shown in Annexe 1 will apply. The agent will pay these charges to the signatory upon receipt of an invoice from the signatory.
[We were not supplied with a copy of the annexes to the seasonal lettings contract and so cannot include them at this point.]
- There is nothing in the seasonal lettings contract to support an assertion by ILL that the accommodation providers agree to be bound by the Booking Conditions. Nor was any other evidence adduced to show that accommodation providers so agree. We therefore find that the accommodation providers are not bound by the Booking Conditions.
- Individuals may either approach ILL direct to enquire whether it will market their properties, or it will use its regional network to find owners of potentially suitable properties. Once ILL and a property owner have made contact, its regional representative inspects the property to ensure that it is suitable and meets requisite health and safety standards. If his property meets with the representative's approval, the individual and the regional representative discuss the terms of ILL's seasonal lettings contract. The standard terms of the seasonal lettings contract always apply, but the owner may specify the amount of rent ILL is to be charged for the property, the identity of the keyholder and any cancellation terms.
- It goes without saying that the rental charges ILL makes to its customers always exceed those charged by the signatory to the seasonal lettings contract to ILL. The basic seasonal lettings contract (which includes no guarantee in relation to rent) is used for approximately 40 per cent of ILL's business in France. Where in exceptional cases rental guarantees are given by ILL, it accounts for VAT under the TOMS. (Those contracts are not relevant to the appeal).
- Following confirmation of a booking, ILL provides the accommodation provider with details of the persons who are to occupy his property. As previously mentioned, the accommodation provider is responsible for dealing with any complaints or problems arising during the course of the holiday. He is also liable for all repairs to the property and arranging its insurance; for collecting and refunding any security deposit; and for other client care obligations such as arranging for a person to welcome a holidaymaker and for key collection at the end of the holiday. ILL is not obliged to make any rental or other payments to the accommodation provider except in relation to confirmed bookings.
- ILL must pay any cancellation charges which may become due under the seasonal lettings contract to the accommodation provider at the rate specified therein. Such charges, if any, are shown in Annexe 1 to the contract (which is particular to each accommodation provider) in the section entitled "Cancellation Terms". If no cancellation charges are specified in the contract, they are not payable. In 2001, approximately 25 per cent of seasonal letting contracts did not provide for cancellation charges.
- Where cancellation charges are specified, from a practical point of view ILL claims, and we accept, it is sensible for it to collect those charges for onward transmission to the accommodation provider. If it did not do so, each time there was a cancellation, the owner would have to pursue the individual holidaymaker, who, typically being located in another country, might prove difficult to follow.
- Cancellation rates vary slightly from contract to contract, depending on what the accommodation provider requires. For instance, a contract may provide that cancellation with no notice at all may result in a charge of 100 per cent of the rental rate charged by the owner to ILL or, if up to 28 days notice is given, only 25 per cent of the rental rate will be payable. On the other hand, a contract may provide that 100 per cent of the rental rate charged by the owner to ILL will be payable for cancellations made with six days notice or less, and only 25 per cent for cancellations made within seven to 14 days of the holiday date. Since the holidaymaker will have paid for the holiday in full at least eight weeks before departure, the charge is simply paid by ILL to the accommodation provider from the advance payment. The only way ILL could incur a loss as a result of a cancellation charge becoming due would be if it had failed to collect the balance by the due date so that it only held the holidaymaker's deposit. In practice, this is most unlikely to occur since ILL always sends a reminder to a holidaymaker in advance of the due date for payment of the balance and, if it is not paid, treats the booking as cancelled.
- Under the "Rental" clause, ILL is authorised to set the rental rates for accommodation to be paid by holidaymakers, and retains the difference between those rates and the rental rates to be paid to accommodation providers as its commission. It claims that in doing so, it is adopting a common way for an agent to secure commission. (We shall deal with that claim shortly). The practice also means that even where ILL has to pay cancellation charges to the accommodation provider, those charges should always be less than any balance due from the holidaymaker according to the scale of cancellation charges specified in the Booking Conditions. Cancellation charges therefore do not in practice result in ILL accepting any risk.
(b) Ace Tour Contract
- In the period covered by the appeal, there were two contracts between Ace Tour and ILL. The first, extracts from which are set out below, was dated 12 October 2000 and related to supplies of hotel rooms in the Ace Tour chain of hotels in the year 2001. The second, dated 29 August 2001, related to supplies of accommodation in the year 2002. We shall refer to the two contracts together as "the Ace Tour contract", since both contained substantially the same terms and conditions and were in a standard form issued by Ace Tour. They were and are typical of the type of contracts entered into by ILL with parties offering accommodation through a large number of hotels.
- The terms of the Ace Tour contract relevant to the appeal are as follows:
"Credit contract (VAPS / VAPS Open) 
The following companies International Life French Life Holidays
hereafter referred to as "tour operator" and Ace Tour
hereafter referred to as "Envergure Tourisme"
have agreed the credit contract on the following terms:
Bed & Breakfast
Article 1 Object of Contract
Envergure Tourisme agrees to provide favourable rates and conditions of sale for reservations in Le Marine, Kyriad, Clarine, Climate de France and Campanile hotels. In exchange, the tour operator agrees to promote the hotels according to the following conditions.
Article 3 Promotion
The tour operator agrees to allocate at least half a page of their brochure for the promotion of the three hotel chains
Article 4 Rates
Rates are quoted below and are valid regardless of the rack rate.
Article 5 Hotels
This contract relates to the hotels mentioned in the attached list.
Article 6 Bank Guarantee
The tour operator agrees to provide the following guarantee: a floating deposit to the value of 50,000 FF payable on 1 January 2000. This deposit will be returned or used as payment against the outstanding balance at the end of the contractual period.
A bank guarantee to the value of 10,000 FF to be received on 1 January 2000 and to be valid for the whole duration of the contract.
Article 7 - Payment terms
At the end of each month, Envergure Tourisme will send an invoice to the tour operator detailing all reservations confirmed during the previous month.
Article 11 Cancellations
In case of cancellation, the reservation will not be charged if
- The cancellation is made directly to Envergure Toursime Central Reservations up to 72 hours before the clients' arrival
- The cancellation is made directly to the hotel between 72 hours before the clients' arrival and 6pm on the date of arrival.
After 6pm on the day of arrival, all rooms will be invoiced.
Article 12 Disclaimer
Envergure Tourisme accepts no responsibility for any complaints relating to the tour operators resale price of the voucher.
Article 13- Legal Procedures
Any dispute arising during the validity of this contract are subject to French law under the Court of Meaux.
Article 14 Cancellation of Contract
We find that under the Ace Tour contract, which as we understand it continues to include terms similar to those in the 2000 contract (so that we propose to use the present tense in dealing with it), Ace Tour offers ILL favourable rates and conditions of sale for the reservation of rooms in a number of hotels in its chain, assuming rooms are available. ILL is allocated a number of rooms, rather than specific rooms, and Ace Tour can withdraw or amend its allocation at any time, so that there may no longer be rooms available for ILL at the time a holidaymaker wishes to make a reservation. In exchange, ILL agrees to promote Ace Tour's hotels in accordance with the conditions set out in the contract. ILL does not act as sole agent for Ace Tour nor does it guarantee any payments before bookings are secured.
In the case of default by either party on their contractual obligations, and where written notice by recorded delivery is not answered within eight days, this contract will cease to be valid."
Similarly to the way in which the seasonal lettings contract operates, ILL makes its profit by charging more for hotel rooms than it is itself charged for them by Ace Tour. It is under no obligation to inform Ace Tour of the charges it makes for rooms.
We were informed, and accept, that the requirement of a bank guarantee payment or a floating deposit is a regular feature of contracts with French hotel operators.
ILL is also responsible for paying charges for "no-shows" and cancellations made within 72 hours of the customer's arrival date. As in the case of ILL's seasonal lettings contract, from a purely practical point of view it is sensible for it to accept that responsibility in respect of such last minute cancellations. Moreover, ILL bears no risk in any event since the Booking Conditions provide that the holidaymaker will forfeit his entire payment if he cancels within 21 days of his arrival date, so ILL can simply apply that part of the amount he has paid in discharge of any cancellation charge for which it is contractually liable to Ace Tour.
(c) P&V Contract
The contract between ILL and P&V relating to the appeal period was produced on 27 October 2000 and signed on 17 April 2001. The purpose of the contract is defined at the outset as giving ILL "the mission of marketing the Pierre & Vacance Tourisme products", those products, as we understand it, including mobile homes, caravans, etc. The provisions thereof relevant to the present appeal are the following:
"Tour Operator Contract between the undersigned Pierre & Vacances Tourisme France
hereinafter "Pierre & Vacances" on the one hand and International Life Leisure Limited
hereinafter "the tour operator" on the other hand.
The tour operator and Pierre & Vacances are currently negotiating the special conditions of their possible collaboration that would consist in the marketing by the tour operator of tourism products managed by Pierre & Vacances. Notwithstanding the absence of a final agreement on the special terms of their collaboration, the parties nevertheless agree to adhere, as of this date, to the framework stipulated in the general conditions laid down in section I. It is understood that the said general conditions of their collaboration shall not take full effect until the parties reach agreement on the related special conditions as specified in section II, in accordance with the conditions set out below.
Whereupon the parties agreed as follows:
Section I General Conditions Tour Operator Contract
Article 1: Purpose of the Contract
By way of this contract, Pierre & Vacances grants, in accordance with the general conditions of this section and the special conditions set forth in section II, to the tour operator who accepts under the same conditions, the mission of marketing the Pierre & Vacances tourism products defined and operated by the latter under the "Pierre & Vacances" name and / or any other name specified below in the special conditions. The tourism products entrusted to the tour operator pursuant to this contract shall consist of a set of residential units for one season, as defined in full below in the special conditions.
Article 2: Marketing Conditions
The tour operator undertakes to offer for rental to its clients the residential units included in the set for all the periods of the season indicated in the special conditions.
The tour operator shall, under its sole responsibility, market the Pierre & Vacances tourism products in accordance with the general and special conditions laid down in this contract and with the regulations and customary practice applicable in the profession by way of : publication and circulation on all advertising media
that it shall see fit and subject to complying with the provisions below,
With the assistance of its distribution network which markets its own tourism products and for which it shall be answerable under all circumstances.
2.3 Fundamental and Determining Conditions
2.3.1 Respect of Tariffs
The rental tariffs of the residential units forwarded by Pierre & Vacances to the tour operator for the performance of its mission are specified in the special conditions and are tariffs in French francs or foreign currency, deemed to be inclusive of all taxes (except tourist tax), for each period included in the season indicated in the special conditions.
Article 4: Cancellations
Any cancellation shall be notified in writing (post, fax or email) to the Central Planning Department at Pierre & Vacances. Cancellations taking place between the 30 day and the arrival day shall give rise to payment by the tour operator to Pierre & Vacances of the following indemnities, calculated as of the date of receipt at Pierre & Vacances of the cancellation receipts and not as of their issue dates.
(c) Occupation Guarantee
Any cancellation of the occupation of a residential unit that has been guaranteed by the tour operator at the revision [text missing on photocopied page] of the residential units shall give rise to payment by the tour operator of an indemnity equal to 100 per cent of the net amount due by the tour operator to Pierre & Vacances regardless of the time the cancellation occurs.
Article 5: Reservation Conditions
In connection with the performance of its mission, the tour operator undertakes not to offer for rental the residential units for a number of persons in excess of that for which they have been designed and as specified in the special conditions.
The tour operator shall be personally liable both with respect to its personal actions and those of distribution network, for the sales conditions offered to its clients, the consent and conditions of signature of all reservations or rental contracts with the said clients and the latter's compliance with the applicable provisions of consumer law.
The tour operator undertakes both personally and through its distribution network, to inform clients of a Pierre & Vacances products with which it contracts, that a guarantee deposit is intended to indemnify, subject to any action Pierre & Vacances, against all damage and/or disturbances of any nature whatsoever for which the Tour Operator's clients may be responsible, both in the building's private or communal areas or even, in a general manner, in the resort. The guarantee deposit shall be returned at the end of the stay after the inventory of the apartment has been carried out.
Article 6: Duration of Stays
Arrival: Saturday as of 17 h 00.
Departure: Saturday up to 10 h 00.
For stays under or over seven nights or when the arrival/departure takes place other than Saturday / Saturday, the Tour Operator must obtain written confirmation from the central planning department of Pierre & Vacances, unless specifically stated in the Special Conditions. In the case of any stay of less than one week, a minimum 3-night stay will be required unless specifically stated, otherwise in the Special Conditions. In the event a one-week stay is extended, every additional night shall be invoiced at 1/7th of the price of the week commenced.
Article 7: Client's Claims
In the event of a client's claim or dispute, the tour operator shall directly be responsible for the amicable or judicial settlement and the consequences arising therefrom.
Pierre & Vacances shall provide the tour operator with all the information at its disposal that may be necessary or helpful for the settlement of the said dispute within 21 days of reception of the tour operators request, on condition that it contains all information regarding the extent of the said claim and the grounds for it, the client's name, the place and the date of the stay, and the type of apartment reserved, within no more than two months of the end of its client's stay.
In the event that the tour operator settles the dispute by way of a compromise agreement, he shall inform Pierre & Vacances thereof. In the event of a dispute caused by an error by Pierre & Vacances, any compromise agreement arranged by the tour operator that awards the client an indemnity in kind or in cash shall obtain the consent of Pierre & Vacances before final conclusion. In the absence of such consent, the tour operator shall alone bear the financial cost of the said compromise agreement.
Article 8: Discount Payment
The tour operator shall benefit, in exchange for the performance of its marketing mission, from a discount inclusive of all taxes, on the Pierre & Vacances tariffs that the tour operator undertakes to pass on to the latter as and when the sales are registered for the season and under the conditions set out in the special conditions.
Article 10: Applicable Law. Attribution and Jurisdiction
For the performance of this contract or any notification or service arising therefore, the parties declare that they elect domicile in their respective registered offices indicated at the top of this document.
The parties expressly agree that all the provisions laid down in the general and special conditions of this contract are solely governed by French national law applicable in such matters.
In the event of a dispute regarding the validity, interpretation, performance of this contract, later agreements for the parties liability, it is agreed to attribute sole jurisdiction to the competent Paris court.
Once again ILL makes its profit by charging more for the "residential units" it markets for P&V than it is itself charged for those products, but in this case is restricted to charging the rental tariffs referred to in clause 2.3.1 of the P&V contract.
Package Travel, Package Holidays and Package Tours Regulations 1992 ("the PTR")
In recent years consumer protection has been increased in the travel industry. It has meant that even companies operating purely as agents in terms of accommodation or travel contracts are required to accept obligations to the holidaymaker. The key travel industry regulations in this respect are the PTR. They regulate the marketing, sale and performance of package holidays (as defined in the PTR) sold or offered for sale in the United Kingdom, and apply to every package holiday sold. They give the consumer enforceable rights against tour operators such as ILL in the event of problems arising in relation to his holidays.
The regulations particularly relevant in the instant case are numbers 2, 11, 12, 13 and 15. They are to be found in the Schedule to our decision. It is common ground that for the purposes of the PTR , ILL is "the other party to the contract".
ILL accepts that it has no defence to a claim made under the PTR that in selling a holiday it is acting merely as agent of a third party. The PTR are designed to enable a dissatisfied holidaymaker to pursue his case with a single supplier, the travel organiser, instead of with individual suppliers such as hoteliers or airlines. One of the ways in which ILL discharges its obligations under the PTR is to have an ABTA bond. Guidance on the PTR has been issued by the Office of Fair Trading ("OFT") which may take out consumer enforcement orders for infringements of the regulations (OFT Guidance). The OFT Guidance sets out acceptable standards for terms to be used in booking conditions for package holidays.
We accept that many of the Booking Conditions are standard terms designed to satisfy the consumer protection requirements of both the PTR and the OFT. But there are four particular aspects of the Booking Conditions which HMRC rely upon to show that ILL does not act as agent for accommodation providers. They are:
(a) The complaints procedure;
(b) The reservation by ILL of the right to raise or lower the price of unsold holidays;
(c) Compensation payments to holidaymakers in the event of a significant change or cancellation of a holiday; and
(d) A section entitled "Our Liability to You".
In relation to (a), it will be recalled that the Booking Conditions provide that, in case of complaint, the holidaymaker is required to contact both the relevant hotel manager, accommodation agent, or other accommodation provider, to give him the opportunity to resolve the problem, and also to notify ILL. ILL agrees to deal with all complaints of which it receives written notice within 28 days of a complaint arising. ILL claims, and we accept, that the complaints procedure included in the Booking Conditions accords with the requirements of regulation 15(9) of the PTR. It further claims, and again we accept, that, in any event, it would not be in its commercial interests to create ill will among its customers by disclaiming all responsibility for problems arising from the supplies of accommodation it has arranged on behalf of the accommodation providers.
We shall now deal with those items seriatim.
ILL then claims that the "Brochure Price" clause in the Booking Conditions entitling it to raise or lower the price of unsold holidays accords with regulation 11 of the PTR. That regulation states that terms to the effect that prices may be revised are void and of no effect unless the terms specifically provide for the possibility of upward or downward revision, as well as satisfying certain other conditions. In particular, in claiming that ILL does not act as agent, HMRC rely on the provision which entitles ILL to alter the selling price of holidays which have not been sold during the life of a brochure edition. In response, ILL observes that brochures are produced well in advance of the season to which they relate, and the wording allows alterations in prices to reflect changes and events that occur between brochure editions. It is plain, and we find, that ILL does not comply with the conditions laid down in regulation 11(2) of the PTR. The Booking Conditions neither state precisely how a revised price is to be calculated, nor do they confine price revisions to those matters listed in regulation 11(2)(b), as in each case the PTR require. Consequently, we accept HMRC's claim that ILL does not act as agent for accommodation providers in relation to regulation 11.
Regulations 12 and 13 of the PTR are designed to give consumers a number of specific rights where their holiday is cancelled, or significant changes to essential aspects of it are made before departure; and in particilar regulation 13(3) entitles consumers, if appropriate, to compensation for cancellation. ILL observes that paragraph 3.20 of the OFT Guidance states that it is common practice in package holiday booking conditions to limit compensation for cancellation and changes before departure to a set sliding scale such as that for which the Booking Conditions provide, and claims that the OFT does not object to the use of such scales because this gives the consumer the benefit of a degree of certainty. In our judgment, the provisions contained in the 'If we change your holiday' section of the Booking Conditions go some way to meeting the requirements of Regulations 12 and 13 of the PTR, but do not meet all of them. As Regulations 12 and 13 contain terms which are implied in "every contract" to the extent that the Booking Conditions do not satisfy them, it cannot be said that ILL is acting as agent for the hotel or accommodation provider. It is no defence for ILL to rely on OFT guidance: that does not represent the law.
ILL further claims the "Our Liability to You" section of the Booking Conditions is specifically designed to meet the consumer protection requirements of regulation 15 of the PTR. It observes that that regulation is applicable only where a holidaymaker has purchased a package, rather than a single service, i.e. accommodation only or transport only; that Regulation 15(1) of the PTR makes a tour operator liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether they are to be performed by the tour operator or by other suppliers of services; and that Regulation 15(2) further makes a tour operator liable to the consumer for any damage caused by him by failure to perform the contract or the improper performance of the contract, save in certain specified circumstances. Paragraphs (1) and (2) of the 'Our liability to You' section restrict claims by ILL's customers, whereas paragraphs (1) and (2) of Regulation 15 do not. In those circumstances, again we find that the Booking Conditions do not comply with the PTR. Thus, ILL cannot be acting as agent for the hotel or accommodation provider.
HMRC also rely on provisions in the Booking Conditions relating to cancellation charges to show that ILL does not act as agent for accommodation providers. The Booking Conditions provide for cancellation charges to be paid to ILL in the event of a customer cancelling a holiday either wholly or in part. The charges operate on a sliding scale and ILL claims they reflect the period before departure within which written notice of cancellation is received by it. ILL has adopted a standardised cancellation policy as it acts for a number of different accommodation providers, and claims it would be impractical for it to administer different cancellation policies for each property. Most of the properties ILL markets are abroad and the terms on which it acts as agent vary enormously. Standardising terms and conditions in relation to cancellations is therefore operationally sensible, and also ensures that the holidaymaker has a clear understanding of the terms. ILL further claims that its policy is to collect overall sufficient sums to meet the charges imposed by accommodation providers and consequently eliminate any commercial exposure for it. OFT Guidance states that it is usual practice for booking conditions to include a term providing expressly for the cancellation of bookings by consumers and that such terms commonly set out a scale of cancellation charges that impose a fee for cancellation that rises with the approach of the departure dates. More particularly, the OFT Guidance does not object to the use of such sliding scales on the basis that they provide consumers with the certainty of knowing precisely how much they are liable to lose by cancelling at any given point. In our judgment, ILL acts as principal in imposing cancellation charges since the percentage rates thereof are arbitrary and are not those, if any, charged by the accommodation provider.
The Booking Conditions also indicate that ILL has the ability to hold a security deposit in relation to particular accommodation and to deduct amounts from the deposit if necessary. In the event of any charges in excess of the security deposit held by ILL, the holidaymaker is required to reimburse the owner or agent via ILL. In practice, ILL holds security deposits for properties very rarely, and it was not its usual practice to do so for any of the properties the subject of contracts in the period concerned in the appeal.
The remainder of our findings of fact are to be found at appropriate points in our answers to the various questions before us.
Legislative Provisions relating to VAT
Pursuant to article 9(2)(a) of the Sixth VAT Directive (77/388/EEC) ("the Sixth Directive") and article 5 of the VAT (Place of Supply of Services) Order 1992, the grant of any interest or right over land and the supply of intermediary services in connection therewith are treated as made where the land is situated. Pursuant to article 13B(b)(1) of the Sixth Directive and Item 1(e) of Schedule 9 to the Value Added Tax Act 1994 ("the 1994 Act") the supply of holiday accommodation is standard-rated. In the absence of a special scheme, this would require a tour operator which provides package holidays in other Member States to register for VAT in all those Member States.
Article 26 of the Sixth Directive provides a "special scheme for travel agents" which requires them to account for VAT on the gross margin entirely within their country of establishment:
"(1) Member States shall apply value added tax to the operations of travel agents in accordance with the provisions of this Article where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities. This article shall not apply to travel agents who are acting only as intermediaries and accounting for tax in accordance with Article 11(A)(3)(c). In this Article travel agents include tour operators.
(2) All transactions performed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member state in which the travel agent has established his business or has a fixed establishment from which the travel agent has supplied the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22(3)(b), in respect of this service shall be the travel agent's margin, that is to say, the difference between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and services provided by other taxable persons where those transactions are for the direct benefit of the traveller.
In relation to the reference in article 26(1) to travel agents or tour operators who 'deal with customers in their own name', article 6(4) of the Sixth Directive provides generally that:
(4) Tax charged to the travel agent by the other taxable persons on the transactions described in paragraph 2 which are for the direct benefit of the traveller, shall not be eligible for deduction or refund in any Member State."
Consistently with the provisions of article 6(4), article 26 treats a travel agent or tour operator as himself receiving and then making a supply where he deals with customers 'in his own name', irrespective of whether he is 'acting on behalf of another'.
"Where a taxable person acting in his own name but on behalf of another takes part in a supply of services, he shall be considered to have received and supplied those services himself."
Following inevitably from article 6(4), it is common ground that, as a matter of EC law, the fact that a supplier is acting on behalf of another does not prevent his dealing with customers 'in his own name' within the meaning of the Sixth Directive. (The converse of acting 'in his own name' is 'acting in the name of another').
Article 26 of the Sixth Directive was implemented in United Kingdom VAT legislation by provisions now contained in section 53 of the 1994 Act. Details of the special scheme for tour operators are to be found in the VAT (Tour Operators) Order 1987 ("the 1987 Order") and VAT Notice 709/5 "Tour Operator's Margin Scheme" ("TOMS").
Section 53 of the 1994 Act provides:
"(1) The Treasury may by order modify the application of this Act in relation to supplies of goods or services by tour operators
(2) Without prejudice to the generality of subsection (1) above, an order under this section may make provision
(a) for two or more supplies of goods or services to be treated as a single supply of services;
(b) for the value of that supply to be ascertained, in such manner as may be determined by or under the order, by reference to the difference between sums paid or payable to and sums paid or payable by the tour operator.
Details of the special scheme for which section 53(1) of the 1994 Act provides are to be found in articles 2 and 3 of the VAT (Tour Operators) Order 1987. They read as follows:
(3) In this section "tour operator" includes a travel agent acting as principal and any other person providing for the benefit of travellers services of any kind commonly provided by tour operators or travel agents".
"2. This Order shall apply to any supply of goods or services by a tour operator where the supply is for the benefit of travellers.
3(1) Subject to paragraphs (2), (3) and (4) of this article, a "designated travel service" is a supply of goods or services
(a) acquired for the purpose of his business; and
(b) supplied for the benefit of a traveller without material alteration or further processing;
by a tour operator in a Member State of the European Community in which he has established his business or has a fixed establishment
(2) the supply of one or more designated travel services, part of a single transaction, shall be treated as a single supply of services.
VAT Notice 709/5/98 sets out the provisions of the Tour Operators' Margin Scheme ("TOMS") for the purposes of article 7 of the 1987 Order. Tour operator is defined in the glossary section of this notice as follows:
- A travel agent acting as principal, including those acting as undisclosed agents; or
- A person providing, for the direct benefit of a traveller, services of a kind enjoyed by travellers and commonly provided by tour operators or travel agents.
Submissions and conclusion on the Booking Conditions
Mr Goy first observed that the VAT legislation assumed as a general matter that where a person acted as agent in making a supply, the supply in question would not be made either to or by him (see section 47(3) of the 1994 Act and Commissioners of Customs and Excise v Music & Video Exchange  STC 220): if it were not so both principal and agent could be regarded as making the same supply. Thus, he submitted, if ILL were acting only as agent in arranging accommodation, the almost inevitable conclusion was that the accommodation was neither provided to or by it: it was outside the TOMS.
It was common ground that case law indicated that the concept of "supply" for the purposes of VAT was not identical to that of contractual obligation. In Commissioners of Customs and Excise v Reed Personnel Services  STC 588 at page 595, Laws J indicated that:
"There may be cases, generally (perhaps always) where three or more parties are concerned, in which the contracts definition (however exhaustive) of the parties' private law obligations nevertheless neither caters for nor concludes the statutory question, what supplies are made by whom to whom?"
and where two or more parties were concerned with a supply:
Laws J went on to say that the nature of a VAT supply was to be ascertained from the whole facts of the case. Applying that approach in the instant case, Mr Goy submitted that the question which arose was whether, looking at the facts as a whole, the contracts in question involved the supply of accommodation both to and by ILL: only if they did so, and ILL was acting as principal, were they within the TOMS. In determining whether the contracts did involve supplies both to and by ILL the answer to that question, the nature of the contractual obligations existing between the parties, while relevant, was not determinative. It was a feature of agency, claimed by ILL to exist in the instant case, that the actions of the agent in entering into contracts on behalf of his principal created direct contractual relations between the principal and the third party, and correspondingly direct contractual obligations between the principal and the third party.
the parties' contractual arrangements, even though exhaustive for the purposes of their private law obligations may not and indeed they need not define and conclude issues arising as to supplies under the  Act, and where they do not the resolution of such issues remains a question of fact for the tribunal".
The position of agents, as referred to at paragraph  above, could be modified where an agent acted "in his own name" (see section 47(3) of the 1994 Act). But, Mr Goy submitted, that was not the position where as here, a person clearly indicated that he was acting on behalf of another, even if the name of his principal was not made known (see Express Medicare Limited v Commissioners of Customs and Excise (2000) Decision No 16969) and, in the transactions in point in the appeal, ILL did not "act in [its] own name". ILL disputed HMRC's case that it was acting as agent in providing the accommodation in question.
Against a background of it being common ground that all holiday reservations made by ILL's customers were made subject to the Booking Conditions, Mr Goy maintained that they made plain that ILL acted as agent for accommodation providers: it could not be clearer that ILL was contracting on behalf of third party providers see e.g. the paragraph entitled "The Contract between us". On the face of it, such a contract, being governed by English law, would not result in ILL assuming liabilities to the customer (see Halsbury's Laws of England, Volume 1(2) paragraphs 168-170). Such liabilities would exist between the principal and the customer alone. In that connection, he maintained that there was nothing in the Booking Conditions that took away liability that a principal assumed to the customer, but they nevertheless clearly indicated that ILL incurred certain obligations to its customers directly.
Even companies operating purely as agents were required to take on obligations to the customer under the PTR. In particular, Mr Goy contended that regulation 15(1) of the PTR meant that it was no defence to a claim made under the PTR that a person selling a holiday was acting merely as agent of a third party: but, he contended, the PTR clearly indicated that nothing in them affected the liabilities of third party suppliers.
He claimed that many of the terms of the Booking Conditions were designed to satisfy the consumer protection requirements of the PTR. Thus, the 'Our liability to you' section of the Booking Conditions was designed to meet the consumer protection requirements of the PTR. In the event that no such provisions had been included in the Booking Conditions, it would have remained the case that claims could have been made against ILL directly under the PTR. That the liabilities assumed by ILL went no further than required by the PTR was, in Mr Goy's submission, shown by the fact that, if the customer booked accommodation only, the PTR did not create any liability on ILL, nor did the Booking Conditions.
He maintained that the existence of liabilities on ILL under the PTR would not have existed irrespective of whether provision for them was included in the Booking Conditions, so that they did not change the nature of the supplies made. All that ILL purported to do was to contract as agent for accommodation providers: the fact that in doing so it incurred indirect liability for the satisfactory performance by the accommodation provider of his obligations did not change what ILL supplied. It did not provide the accommodation, even if it incurred liabilities in respect of the provision of accommodation by third parties (see Music & Video Exchange).
Mr Goy submitted that the following other conditions found in the Booking Conditions likewise were intended to reflect the PTR:
(a) the Complaints Procedure reflected the requirements of regulation 15(9) of the PTR;
(b) the Brochure Price section was in accordance with regulation 11 of the PTR;
Again, it was ILL's case that the existence of conditions that accepted the reality of statutory consumer protection did not alter the identity of the person who made the supply. If the supply would, but for such provisions, have been made by the accommodation provider directly to the ultimate consumer, then the existence of such provisions did not change the position.
(c) the compensation provisions applicable on holiday cancellation or significant changes reflected regulations 12 and 13 of the PTR.
In response to a specific allegation of HMRC in the statement of case that, if a customer cancelled a holiday, cancellation charges were payable to ILL, on the basis of Mr Leppard's evidence Mr Goy maintained that the imposition of such charges was intended to enable ILL to collect sufficient sums to meet the charges imposed by accommodation providers and thus eliminate any commercial exposure for it.
Mr Goy did, however, accept that there were certain features of ILL's contractual arrangement with customers that were not common in ordinary "agency" arrangements, but submitted that they did not transform the nature of the supplies made and, in particular, did not change the identity of the person providing accommodation: to a large extent they were nothing more than a reflection of consumer protection legislation.
Mr Paines opened his submissions by observing that, at common law, (see e.g.Halsbury's Laws of England Volume 1(2) at paragraph 1) agency is:
"the relation which exists where one person has the authority or capacity to create legal relations between a person occupying the position of principal and third parties.
He submitted that it was a feature of agency (said by ILL to exist in this case) that the actions of the agent in entering into contract on behalf of his principal created direct contractual relations between the principal and the third party, and correspondingly direct contractual obligations between the principal and the third party. To determine whether ILL had acted as agent so as to create direct contractual relations between customers and the hotels or accommodation providers, he contended that it was necessary to analyse both (a) the terms of the relationship between ILL and the hotel / accommodation provider, in particular in order to see whether the accommodation provider entered into direct contractual relations with the customers, and (b) the terms of the relationship between ILL and the customer, in order to see whether ILL had indeed placed the customer in direct contractual relations with the accommodation provider. He observed that 'labels' used in the documentation were not determinative: it was necessary to look at the effect of an agreement (see e.g. Maierhofer v Finanzamt Augsburg-Land (Case C-315/00): and, as Lord Templeman observed in Street v Mountford  AC 809 at page 819:
Whether that relation exists in any situation depends not on the precise terminology employed by the parties to describe their relationship, but on the true nature of the agreement or the exact circumstances of the relationship between the alleged principal and agent. If an agreement in substance contemplates the alleged agent acting on his own behalf, and not on behalf of a principal, then, although he may be described in the agreement as an agent, the relation of agency will not have arisen
Mr Paines maintained that the concepts in the Sixth Directive were autonomous concepts of Community law. Accordingly, the national courts were required to construe domestic legislation which implemented a directive, so far as possible, in the light of the wording and purpose of that directive: the Marleasing principle (recently analysed by the Court of Appeal in Commissioners of Customs and Excise v IDT Card Services Ireland Limited  EWCA Civ 29 at paragraphs 73 to 92 and 108). The relevant principles of Community law might be summarised as follows:
the consequences in law of the agreement once concluded can only be determined by the consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade").
(a) The principles of avoidance of non-taxation, avoidance of double taxation and the prevention of distortion of competition were general principles of the Sixth Directive (paragraph 95 of IDT)
Mr Paines observed that the requirement of VAT law that, in order to escape taxation under the TOMS, ILL must have acted, not in its own name, but in the name of the hotel / accommodation provider required an additional examination of the documentation: and that documentation must have amounted to a contract between the customer and a named other contracting party, viz. the hotel / accommodation provider. Under the contracts ILL entered into with the providers (not necessarily the owners) of hotels and self-catering accommodation it created package holidays, including travel and accommodation, which were advertised in annual brochures in the name of French Life. The price was a package price. The terms of the contract entered into by the customer were in writing and contained in the brochure, the Booking Conditions, and the confirmation invoice: there was no written communication between the customers and the accommodation providers.
(b) In determining whether a transaction fell within article 26, the tribunal had to have regard to its "essential features", irrespective of the way in which have been might be artificially presented (see e.g. Maierhofer at paragraph 39). The transaction had to be looked at from the customer's perspective (see Lord Slynn's observations in Card Protection Plan Limited v Commissioners of Customs and Excise  STC 174 at paragraph 25).
He submitted that it was sensible to start by examining the Booking Conditions and the other documents passing between ILL and the customer did not amount to ILL acting in the name of the accommodation provider, the appeal must fail. He maintained that the first thing that the Booking Conditions made clear was that a contract existed between the customer and ILL: the first section thereof was headed "The contract between us". Under that contract, ILL (not the accommodation provider) undertook obligations to the customer, including to pay compensation if (a) ILL made a 'significant change' to the booking see the section headed 'If we change your holiday'; and (b) an element of the package was not provided or was defective, or a member of the party suffered an injury see the section headed: 'Our Liability to You'. The customer undertook obligations to ILL, notably to pay it the package price in agreed stages or to pay ILL's cancellation charges, where incurred due to cancellation. The customer's obligation was to pay those charges, set by ILL in respect of the package as a whole, to ILL: the customer did not undertake any obligation vis ΰ vis any hotel or accommodation provider. The obligation could not be that of the accommodation provider for he could not go to the customer and demand the package price.
Mr Paines observed that the Booking Conditions purported to create a contract between the customer and named travel, hotel and self-catering accommodation providers see the statements "Your contract is with International Life Leisure Ltd trading as French Life Holidays, which acts as agent for travel and accommodation providers", and "Your contract with French Life Holidays on behalf of the travel and accommodation providers comes into existence when we issue our confirmation invoice which will specify the names of the travel and accommodation providers for whom we act as agent". Having identified the issue as to whether the documentation in truth had that effect, he submitted that for two reasons it did not.
First, the Booking Conditions contained terms that were inconsistent with ILL acting as agent for a named principal. ILL could arrange the holiday destination, including change from accommodation provided by one accommodation provider to accommodation provided by another. Moreover, ILL itself undertook contractual liability to the customer to ensure that the accommodation was provided, and to the requisite standard: that was not consistent with ILL having simply put the customer into contractual relations with the hotel / accommodation provider. The fact that the liability under the section "Our liability to you" reflected statutory liability which ILL understood itself to incur pursuant to the PTR did not alter the fact that the contract contained provisions for liability, undertaken by ILL as a matter of contract, that were inconsistent with it being merely agent for a named principal.
Secondly, the documentation failed to identify ILL's supposed principal by name: even if there were a direct contract at all, it could not be a contract with a named principal. ILL claimed that the confirmation invoice issued to a holidaymaker "typically" specified the name of the owner, albeit that he was not designated as the owner on the invoice, i.e. that his name appeared on the invoice but with no indication of his status or position; and certainly no indication that he was a party to the contract. Similarly, in the case of a confirmation invoice for an hotel booking; it failed to specify the name of the hotel provider.
And, in the example of an accommodation voucher supplied with an ILL ticket pack, the name of the accommodation provider was mentioned under the heading "Property Agent's address"; he was nowhere identified as the other party to the contract.
Mr Paines observed that the hotel / accommodation provider did not know what his (supposed) selling price to the customer was. Consequently, the provider could not account for the VAT for which he was (on ILL's hypothesis) liable, since he was unaware of the value of his supposed direct supply to the holidaymaker.
He summarised the effect of the documentation as that ILL was not acting as an intermediary, putting a named accommodation provider into contractual relations with the customer and then dropping out of the picture: ILL was acting as principal, or at the very least acting in its own name. For his claims in that behalf, he relied on the opinion of the Advocate-General in Case C-305/03 Commission v United Kingdom.
That case concerns article 26aC of the Sixth Directive, which provides for a special scheme for the taxation of goods sold by an auctioneer 'acting in his own name'. The Advocate General dealt with the situation where goods are sold by an auctioneer 'acting in his own name', as follows:
"A Preliminary observation on the subject matter of the action
The classification for tax purposes of the auction transactions at issue depends essentially on whether the auctioneer sells the works of art in his own name or in someone else's name, as the parties confirmed in their answers to the Court's questions.
Only if the auctioneer acts in his own name does he make a supply of goods within the meaning of Article 4 of the Sixth Directive. The taxable supply then normally consists in the transfer of the 'right to dispose of tangible property as owner' (Article 2(1) in conjunction with Article 5 of the Sixth Directive). Under Article 5(4)(c) of the Sixth Directive, a transfer of goods pursuant to a contract under which commission is payable is treated as a supply. That is logical, because the seller transfers the goods to the agent for him to sell them in his own name to a third party, even though he is not their owner.
Article 26aC of the Sixth Directive gives the Member States the option, in cases where the auctioneer acts in his own name, to charge value added tax on his margin only and not on the full auction price.
On the other hand, if the auctioneer acts in someone else's name the supply relationship comes into being directly between the seller of the goods (the auctioneer's principal) and the buyer. In that case the auctioneer does not have to pay any value added tax on the supply; only the seller may have to (if he sells the work of article in connection with his economic activity, for instance as an art dealer). The auctioneer is, however, taxable on the service supplied by him. The taxable amount is the corresponding consideration which the auctioneer receives in the form of the commission. The result is that, when he acts in someone else's name, it is mostly only the auctioneer's margin which is taxed.
In this situation Article 26aC of the Sixth Directive does not apply, as the wording of the first subparagraph shows. Nor is there any need to apply a special rule to the auctioneer's transaction since even under the general rules he only has to pay tax on his margin, as the consideration for the service he provides. There is also no place for the application of Article 5(4) of the Sixth Directive.
Whether the auctioneer acts in his own name or in someone else's name depends on the specific contractual relations between the persons involved. According to the United Kingdom Government, national law allows for both those alternatives. The Commission agrees. In its view, however, the auctioneer usually acts as an 'undisclosed agent' (better formulated as 'agent of the undisclosed principal'), that is, an agent who does not disclose who the principal is.
In the case of undisclosed agency, the auctioneer acts in his own name, in the view of both parties. That is not precluded by a possible assumption by buyers that the auctioneer is not in fact acting for an unidentified principal. That view is convincing, at least as far as questions of value added tax are concerned, as it makes it possible to ascertain the taxable person without difficulty. The civil law relationships between the persons concerned may perhaps have to be judged differently.
Mr Paines maintained that the Advocate General's opinion accorded with the guidance given by the ECJ on the meaning of 'intermediary' in Commissioners of Customs and Excise v CSC Financial Services Ltd  STC 57 at paragraph 39:
We accept Mr Goy's submission that many of the terms of the Booking Conditions are included to satisfy the PTR, and that those terms do not change the nature of the supplies ILL makes, nor indeed the identity of the person who makes those supplies. But in our judgment, that acceptance is of no assistance to ILL in the instant case.
"[Negotiation] refers to the activity of an intermediary who does not occupy the position of any party to a contract relating to a financial product, and whose activity amounts to something other than the provision of contractual services typically undertaken by the parties to such contracts. Negotiation is a service rendered to, and remunerated by a contractual party as a distinct act of mediation. It may consist, amongst other things, in pointing out suitable opportunities for the conclusion of such a contract, making contact with another party or negotiating, in the name of and on behalf of a client the detail of the payments to be made by either side. The purpose of negotiation is therefore to do all that is necessary in order for two parties to enter into a contract, without the negotiator having any interest of his own in the terms of the contract.
It is plain, as Mr Paines observed, that there is a contract between ILL and its customer and under that contract, as explained in the section of the Booking Conditions, entitled "The Contract between us", ILL undertakes obligations to the customer. In return, the customer undertakes to pay ILL the package price (or to become liable for cancellation charges). Critically, in our judgment, the customer does not undertake any obligation vis a vis any hotel or accommodation provider: the latter cannot go to the customer and demand the package price. We consider that fact fatal to ILL's case on the Booking Conditions question. The documentation is clearly in error in stating that ILL acts as agent for the travel and accommodation providers. Our reasons for so finding are those advanced by Mr Paines, as set out in paragraphs  to  of our decision. Equally fatal, again in our judgment, is the fact that the hotel / accommodation provider does not know the price for which he has supposedly supplied the accommodation.
Superficially, the submissions of Mr Goy, all of which we have considered in detail, are attractive but fail to address the matters to which we referred in the last preceding paragraph, and which we consider fatal to ILL's case. Indeed, not only do those matters remain unanswered by ILL, but, in our judgment, are unanswerable.
It follows that we find that ILL is acting as principal under the Booking Conditions, or is at the very least acting in its own name. Whichever be the case, the supplies it makes fall to be included within ILL's TOMs calculations. In so holding, we adopt Mr Paines' submissions in every particular. We therefore dismiss the appeal, and award HMRC their costs thereof. If those costs, calculated on the standard basis, cannot be agreed, we direct that they be determined by a Costs Judge.
Submissions and conclusion on the seasonal lettings contract
Whilst strictly it is unnecessary for us to deal with the remaining questions before us, we propose to do so as it may be of assistance to a higher court should our decision be the subject of an appeal.
In relation to ILL's standard form of seasonal lettings contract, Mr Goy accepted that, even though the Booking Conditions provided that ILL supplied accommodation as agent for accommodation providers, whether it did so in fact turned principally on the nature of its arrangements with those providers. He observed that the standard form of contract provided for ILL to be appointed as "sole letting agent", and contended that that was the character of the agreement throughout. Under it, the accommodation provider was responsible for the maintenance and repair of the premises, for "client care" matters, and agreed to indemnify ILL against any losses arising as a result of a breach of any terms of the agreement. Under the agreement, ILL was not obliged to make any rental or other payments to the accommodation provider except where bookings were confirmed.
He submitted that it would be erroneous to characterise the agreement as one under which the accommodation provider supplied accommodation to ILL for it to supply to its clients: there were no supplies of accommodation unless ILL had identified a client and made a booking. If no client was identified nothing happened, and no payments were made to the accommodation provider. To claim that in those circumstances the arrangement involved supplies both to and by ILL was, in his contention, artificial in the extreme. He maintained the true analysis to be that ILL was merely authorised on specific terms to market the property concerned for holiday lets, and a letting fell properly to be treated as a letting made by the accommodation provider directly to the ultimate consumer.
It was not inconsistent with the character of the agreement as one which appointed ILL a mere letting agent that ILL was authorised to set rental rates to be paid by its client, and for ILL to retain the difference between such rates and the amounts payable to the accommodation provider (see Music & Video Exchange). Mr Goy claimed that arrangement simply to be the means whereby ILL was remunerated as agent. He particularly emphasised that ILL was "authorised" by the agreement to act in that way, and maintained that it was difficult to see why such authority would be needed were the nature of the arrangement such that the accommodation provider was providing or supplying accommodation to ILL for it to make onward supplies to clients.
In certain cases, Mr Goy explained, the contract provided for the cancellation of charges to be paid by ILL to the accommodation provider. That that was so did not expose ILL to commercial risk as it would either have received full payment from its client, or would have been entitled to cancellation charges from him so as to enable it to meet any charges payable to the accommodation provider.
He therefore submitted that under a standard form letting contract supplies of accommodation were not made to and by it, but were made directly to the ultimate customer: the Booking Conditions were wholly consistent with that being the position. Thus payments received by ILL in respect of lettings of such accommodation did not fall to be taken into account under the TOMS.
Mr Paines submitted that on a proper construction of the seasonal lettings contract, the accommodation provider made the accommodation available to ILL; and ILL then made an onward supply of the accommodation as part of a package holiday. He maintained that both supplies were plainly dependent upon the existence of a confirmed booking: the fact that no payments were made in the absence of a confirmed booking did not indicate that the supply was made directly by the accommodation owner to the customer.
Pursuant to the terms of the seasonal lettings contract, the accommodation owner incurred certain obligations to ILL in respect of the presentation of the property. Mr Paines contended that they were consistent with ILL having undertaken contractual obligations to the holidaymaker regarding the accommodation: they were not consistent with the accommodation provider being in direct contractual relations with the holidaymaker. In particular, the contract contained only obligations of the accommodation provider vis a vis ILL, together with provisions for indemnity of ILL by the accommodation provider. Moreover, there was nothing in the seasonal lettings contract to support the assertion in the Booking Conditions (see "The Contract between us") that the accommodation owners agreed to be bound by the Booking Conditions.
The clause entitled "Rental" purported to authorise ILL as agent to set the price payable by the holidaymaker to the accommodation provider, and to retain any balance over the rate received by the accommodation owner from ILL by way of "commission". But, Mr Paines observed, the difference was retained by ILL 'without reference or accounting' to the accommodation owner. He submitted that the displacement of ILL's duty to account a fundamental obligation of an agent of itself negated agency.
In relation to the seasonal lettings contract, we again prefer the submissions of Mr Paines to those of Mr Goy. We are unable to find anything artificial in ILL's arrangement with accommodation providers that supplies of accommodation have been made to it and in turn it has made supplies of them until it has identified a client and made a booking. The terms of the contracts are, in our judgment, not consistent with the accommodation provider being in direct contractual relations with the holidaymaker, i.e. ILL's customer. Critically, we accept that there is nothing in the seasonal lettings contract to support ILL's assertion in the Booking Conditions that the accommodation owner agrees to be bound by the Booking Conditions. It will be recalled that we earlier found that he is not so bound.
Another, equally critical, factor in our judgment is ILL's contractual ability to set the price for accommodation and retain the difference between it and the price it has agreed for the accommodation with its provider 'without reference or accounting' to the provider thereof. We entirely agree with Mr Paines' submission that the clause in question negates agency.
It follows that we hold that, on a proper construction of the seasonal lettings contract, the accommodation provider makes the accommodation available to ILL which, in turn, makes an onward supply as part of a package holiday. Thus, ILL is liable to account for VAT on such supplies under the TOMS.
Submissions and conclusion on the Pierre & Vacances contract
In relation to the P&V contract, Mr Goy principally relied on the following matters to claim that payments made in respect of P&V accommodation were outside the scope of the TOMS. First, he observed that, as a marketing contract, it contained detailed provisions relating to the marketing of the product concerned (see in particular section 1, article 2.3 of the contract) and the use of photographs, description of the products concerned, and use of the P&V trade name. He added that, under the contract, the residential units in question were "entrusted" to ILL, and were at its disposal so as to allow it to make reservations of the accommodation in question. ILL was required to notify P&V as and when reservations were made (see article 3.3), and the price charged for the accommodation was strictly controlled by P&V (article 2.3.1), with ILL receiving a "discount" from such charges, so that it was rewarded for its performance. If ILL made no reservations, it had no liability to P&V, being neither obliged to pay a deposit or provide any guarantee. The contract contained provisions for liability in the event of client claims (see article 7): if P&V were at fault they were ultimately responsible for meeting clients' claims. And the contract made ILL responsible for paying cancellation charges (see article 4): any risk to ILL under that article was mitigated and / or eliminated by the cancellation charge provisions in the Booking Conditions.
Taking the contract as a whole, Mr Goy submitted that it was not a contract under which P&V could be regarded as supplying accommodation to ILL for onward supply to its customers: the contract provided for ILL to "market" the properties, and that was its true character. ILL was selling accommodation on behalf of P&V on terms strictly controlled by P&V where, save as regards cancellation terms, it accepted no risk regarding the sale or non-sale of accommodation. Coupled with the terms of the Booking Conditions, he further submitted that the only analysis could be that the accommodation user provided directly by P&V to customers of ILL, and payments made in respect of such accommodation fell outside the TOMS.
Mr Paines maintained that there was simply nothing in the P&V contract that purported to authorise ILL to create contractual relations between P&V and the holidaymaker. It was entitled "Tour Operator Contract", and ILL was described in it as 'the Tour Operator'. The preamble referred to 'collaboration' between ILL and P&V; article 1 ('purpose') referred to ILL's 'mission of marketing' the products. He submitted that, contrary to a claim by ILL, that did not amount to ILL acting as agent. By article 2, ILL undertook vis a vis P&V to offer the accommodation to its (ILL's) clients 'under its [ILL's] sole responsibility'. In Mr Paines' submission, that amounted to a negation of any liability of P&V vis a vis ILL's customer, and was wholly contrary to any suggestion that P&V authorised ILL to place P&V in direct contractual relations with ILL's customers (necessarily involving direct contractual liability of P&V to ILL's customers).
Mr Paines further contended that article 4, which made ILL liable for cancellation charges, was inconsistent with a contract contemplating direct contractual relations under which the customer would be liable for cancellation charges. The fact (relied upon by ILL) that it took a deposit from the customer to cover it against that liability was not to the point: the P&V contract contemplated only contractual relations between P&V and ILL not between P&V and the customer. Similarly, he maintained, article 7 made ILL (not P&V) liable to the customer for defective accommodation; in the event that the defect was the fault of P&V, it would, subject to certain conditions, provide back-to-back compensation to ILL. That again, he submitted, was consistent with the back-to-back nature of the supplies between P&V and ILL and between ILL and the holidaymaker.
Of ILL's reliance on P&V's control of ILL's onward prices, Mr Paines contended that it was simply a resale price maintenance clause, and could not create agency. Nor, he added, was there anything in the P&V contract to substantiate a claim by ILL that P&V had agreed to be bound by the Booking Conditions. The terms of the P&V contract were, in his submission, on the contrary incompatible with agency.
Moreover, Mr Paines finally observed the contract was governed by French law with exclusive jurisdiction conferred on the courts of Paris (article 10). If P&V were authorising ILL to create direct contractual relations between P&V and the holidaymaker (which it was not), he claimed that they could only be contractual relations governed by French law, and subject to that exclusive jurisdiction: yet ILL's contract with its customer was governed by English law and actionable in England. If ILL's agency analysis were right, Mr Paines submitted that it would have exceeded its authority.
We accept the submissions of Mr Paines that there is nothing in the P&V contract that purports to authorise ILL to create contractual relations between P&V and the holidaymaker. We need not repeat the reasons he gave in support of the submission; they are clearly and concisely set out in paragraph  of our decision.
In our judgment, the P&V contract contemplates contractual relations only between P&V and ILL witness the points made by Mr Paines on articles 4 and 7 of the P&V contract (see paragraph  of our decision). The contract as a whole cannot be construed as one under which ILL makes supplies of P&V accommodation as agent for P&V.
In relation to P&V's control of ILL's onward prices, we agree with Mr Paines that the article in question is simply a resale maintenance price clause, and does not create agency. Indeed, we go further and hold that the terms of the P&V contract are incompatible with agency.
That leaves the jurisdictional question, i.e. the fact that ILL's contract with the holidaymaker is governed by English Law, whereas the P&V contract is governed by French law and provides for the Paris court to have exclusive jurisdiction. Once more we accept the point made by Mr Paines that, if ILL's agency analysis is correct, it will have exceeded its authority.
As ILL's agency argument does not withstand analysis, again it follows that ILL is liable to account for supplies of P&V accommodation it makes under the TOMS.
Submissions and conclusion on the Ace Tour Contract
Under article 1 of the earlier Ace Tour contract, Envergare Tourisme ("ET") agrees to provide favourable rates and conditions of sale for reservations in specific hotels and in return ILL agrees to promote those hotels. Article 3 of the contract explains in detail ILL's promotional duties, and proceeds to provide for how and the terms on which it may make bookings in the hotels. Under the contract, ILL is allocated a number of rooms, and the supplier can withdraw or amend the allocation at any time, so that there may in fact be no rooms available for ILL at the time a customer wishes to make a booking. Once a room has been booked, a voucher is to be issued by ILL which, by article 9 of the contract, could "be used as payment in all hotels concerned".
Mr Goy relied on those terms as establishing a contract under which ILL was authorised to market and make bookings of the accommodation in question. It was authorised to receive payment and issue a voucher which a customer could use as payment when he arrived at an hotel. On that basis, Mr Goy maintained that the accommodation was provided by the hotel to the ultimate customer: ILL was authorised to take and make bookings for the hotels concerned, and provide the means of payment for such bookings via the issue of a voucher.
He contended that there was nothing surprising in article 6 of the Ace Tour contract providing for a floating deposit or guarantee bearing in mind that ILL was responsible for receiving payment for reservations in accommodation which customers might have in fact occupied before payment was received by Ace Tour As with the other contracts in point in the appeal, he maintained that it was for a practical reason that the Ace Tour contract made provision at article 11 for cancellation charges: it was easier for ILL which was not exposed to risk to be responsible for collecting such charges under the Booking Conditions and be responsible to Ace Tour, than for Ace Tour to have to seek redress against the ultimate customers.
He submitted that in all the circumstances, it would be a misdescription of the position to describe Ace Tour as making supplies of accommodation to anyone other than the ultimate customer: ILL's role was a limited one relating to the marketing, making of reservations, and provision of a voucher for payment for the accommodation to be provided by Ace Tour to the ultimate customer. Mr Goy therefore further submitted that the correct conclusion was that the accommodation in question was neither supplied to nor by ILL, and was therefore outside the TOMS.
Mr Paines observed that there was nothing in the Ace Tour contract to support ILL's assertion that Ace Tour authorised it to create contractual relations between Ace Tour and a customer of ILL. The conditions under which ILL agreed with Ace Tour to 'promote' its hotels included, at article 4 of the agreement, the prices operating between Ace Tour and ILL; and pursuant to article 7 they were invoiced to ILL. Further, ILL provided a floating deposit guarantee of its own obligations (article 6).
Of ILL's claim that it was 'authorised to issue a voucher', Mr Paines observed that the voucher in question was not one issued as agent for Ace Tour. On the contrary, article 12 clearly referred to ILL's 'resale' of the voucher for which Ace Tour accepted no responsibility. He submitted that that was inconsistent with the issue of the voucher being in law the act of Ace Tour.
He also contended that article 14 referred to the contractual obligations of ILL and Ace Tour, and did not contemplate any obligation existing directly between Ace Tour and the customer. Further, he contended, Ace Tour did not know the price at which (allegedly) it, through the agency of ILL, had issued the voucher.
Nothing in the contract supported ILL's assertion that Ace Tour had agreed to be bound by the Booking Conditions. On the contrary, Mr Paines maintained, the exclusion of any responsibility of Ace Tour for ILL's pricing of the voucher negated any intention to create an agency.
Cancellation charges were levied by Ace Tour if the cancellation were made within 72 hours of the customer's expected arrival, whereas under the Booking Conditions ILL benefited from more favourable terms, e.g. if the customer cancelled within 28 to 35 days of the start of the holiday, he was required to pay 60 per cent of the agreed charge. Similarly, the holidaymaker was required to pay ILL eight weeks prior to departure, whereas ILL was invoiced monthly for the previous month's reservations, with payment due within 30 days of the receipt of the invoice. Mr Paines claimed that that further showed that the terms of the Booking Conditions were set, as between ILL and the customer, by ILL on its own account, and not as agent.
Finally, in relation to the Ace Tour contract, Mr Paines repeated his jurisdictional submission mutatis mutandis to be found at paragraph 106 of our decision relating to the P&V contract, i.e. that if ILL's agency analysis were correct, it would have exceeded its authority.
We observe that for present purposes, the Ace Tour contract is not dissimilar to the P&V contract. It too contains nothing to support ILL's contention that the contract authorises ILL to create contractual relations between Ace Tour and a customer of ILL, as Mr Paines submitted.
Vouchers issued by ILL for Ace Tour are not issued as agent for Ace Tour, but, again as Mr Paines observed, are 'resold' by ILL, and Ace Tour accepts no responsibility therefor. We accept, and thus find, Mr Paines' submission that in those circumstances, ILL cannot be acting as agent for Ace Tour.
We also accept Mr Paines' submission that article 14 of the Ace Tour contract does not contemplate any direct contractual relationship between Ace Tour and ILL's customers, and hold that there is no such relationship.
And, as in the case of the Booking Conditions, we consider it fatal to ILL's analysis that Ace Tour does not know the price at which it has, allegedly, supplied the hotel accommodation voucher. A fortiori, we so hold in relation to the question whether Ace Tour agrees to be bound by the Booking Conditions. As Mr Paines further submitted, the exclusion of any responsibility of Ace Tour for ILL's pricing of the voucher negates any intention on the part of Ace Tour to create an agency.
The jurisdictional question raised in relation to the Ace Tour contract is identical mutatis mutandis to that which arises in relation to the P&V contract (see paragraph 106 above). For the same reason we gave earlier, we hold that if ILL's agency analysis is correct, it will have exceeded its authority.
As we have held that in relation to all three of the contracts with which the secondary part of the question before us is concerned, assuming we have arrived at an incorrect conclusion on the primary question, ILL does not act as agent for the hotel / accommodation providers, and is liable to account for VAT on the relevant supplies under the TOMS.
(1) In these Regulations -
"organiser" means the person who, otherwise than occasionally, organises packages and sells or offers them for sale, when directly or through a retailer.
"the other party to the contract" means the party, other than the consumer, to the contract, that is, the organiser or the retailer, or both, as the case may be;
"package" means the pre-arranged combination of at least two of the following components when sold or offered for sale at an inclusive price and when the service covers a period of more than twenty-four hours or includes overnight accommodation: -
(c) other tourist services not ancillary to transport or accommodation and accounting or a significant proportion of the package,
(i) the submission of separate accounts for different components shall not cause the arrangements to be other than a package
(ii) the fact that a combination is arranged at the request of the consumer and in accordance with his specific instructions (whether modified or not) shall not of itself cause it to be treated as other than pre-arranged;
"retailer" means the person who sells or offers for sale the package put together by the organiser.
(2) In the definition of "contract" in paragraph (1) above, "consumer" means the person who takes or agrees to take the package ("the principal contractor") and elsewhere in these Regulations "consumer" means, as the context requires, the principal contractor, any person on whose behalf the principal contractor agrees to purchase the package ("the other beneficiaries") or any person to whom the principal contractor or any of the other beneficiaries transfers the package ("the transferee")."
"11. Price revision
(1) Any term in a contract to the effect that the prices laid down in the contract may be revised shall be void and of no effect unless the contract provides for the possibility of upward or downward revision and satisfies the conditions laid down in paragraph (2) below.
(2) The conditions mentioned in paragraph (1) are that-
(a) the contract states precisely how the revised price is to be calculated;
(b) the contract provides that price revisions are to be made solely to allow for variations in:-
(i) transportation costs, including the cost of fuel,
(ii) dues, taxes or fees chargeable for services such as landing taxes or embarkation or disembarkation fees at ports and airports, or
(iii) the exchange rates applied to the particular package; and
(3) Notwithstanding any terms of a contract,
(i) no price increase may be made in a specified period which may not be less than 30 days before the departure date stipulated; and
(ii) as against an individual consumer liable under the contract, no price increase may be made in respect of variations which would produce an increase of less than 2 per cent, or such greater percentage as the contract may specify, ("non-eligible variations") and that the non-eligible variations shall be left out of account in the calculation."
"12. Significant alterations to essential terms
In every contract there are implied terms to the effect that-
(a) where the organiser is constrained before the departure to alter significantly an essential term of the contract, such as the price (so far as regulation 11 permits him to do so), he will notify the consumer as quickly as possible in order to enable him to take appropriate decisions and in particular to withdraw from the contract without penalty or to accept a rider to the contract specifying the alterations made and their impact on the price; and
(b) the consumer will inform the organiser or the retailer of his decision as soon as possible."
"13. Withdrawal by consumer pursuant to regulation 12 and cancellation by organiser
(1) The terms set out in paragraphs (2) and (3) below are implied in every contract and apply where the consumer withdraws from the contract pursuant to the term in it implied by virtue of regulation 12(a), or where the organiser, for any reason other than the fault of the consumer, cancels the package before the agreed date of departure.
(2) The consumer is entitled-
(a) to take a substitute package of equivalent or superior quality if the other party to the contract is able to offer him such a substitute; or
(b) to take a substitute package of lower quality if the other party to the contract is able to offer him one and to recover from the organiser the difference in price between the price of the package purchased and that of the substitute package; or
(c) to have repaid to him as soon as possible all the monies paid by him under the contract.
(3) The consumer is entitled, if appropriate, to be compensated by the organiser for non-performance of the contract except where-
(a) the package is cancelled because the number of persons who agree to take it is less than the minimum number required and the consumer is informed of the cancellation, in writing, within the period indicated in the description of the package; or
(b) the package is cancelled by reason of unusual and unforeseeable circumstances beyond the control of the party by whom this exception is pleaded, the consequences of which could not have been avoided even if all due care had been exercised.
(4) Overbooking shall not be regarded as a circumstance falling within the provisions of sub-paragraph (b) of paragraph (3) above."
"14. Significant proportion of services not provided
(1) The terms set out in paragraphs (2) and (3) below are implied in every contract and apply where, after departure, a significant proportion of the services contracted for is not provided or the organiser becomes aware that he will be unable to procure a significant proportion of the services to be provided.
(2) The organiser will make suitable alternative arrangements, at no extra cost to the consumer, for the continuation of the package and will, where appropriate, compensate the consumer for the difference between the services to be supplied under the contract and those supplied.
(3) If it is impossible to make arrangements as described in paragraph (2), or these are not accepted by the consumer for good reasons, the organiser will, where appropriate, provide the consumer with equivalent transport back to the place of departure or to another place to which the consumer has agreed and will, where appropriate, compensate the consumer."
"15. Liability of other party to the contract for proper performance of obligations under contract
(1) The other party to the contract is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be performed by that other party or by other suppliers of services but this shall not affect any remedy or right of action which that other party may have against those other suppliers of services.
(2) The other party to the contract is liable to the consumer for any damage caused to him by the failure to perform the contract or the improper performance of the contract unless the failure or the improper performance is due neither to any fault of that other party nor to that of another supplier of services, because
(a) the failures which occur in the performance of the contract are attributable to the consumer;
(b) such failures are attributable to a third party unconnected with the provision of the services contracted for, and are unforeseeable or unavoidable; or
(c) such failures are due to
(i) unusual and unforeseeable circumstances beyond the control of the party by whom this exception is pleaded, the consequences of which could not have been avoided even if all due care had been exercised; or
(ii) an event which the other party to the contract or the supplier of services, even with all due care, could not foresee or forestall.
(3) In the case of damage arising from the non-performance or improper performance of the services involved in the package, the contract may provide for compensation to be limited in accordance with the international conventions which govern such services.
(4) In the case of damage other than personal injury resulting from the non-performance or improper performance of the services involved in the package, the contract may include a term limiting the amount of compensation which will be paid to the consumer, provided that the limitation is not unreasonable.
(5) Without prejudice to paragraph (3) and paragraph (4) above, liability under paragraphs (1) and (2) above cannot be excluded by contractual term.
(6) The terms set out in paragraphs (7) and (8) below are implied in every contract.
(7) In the circumstances described in paragraphs (2)(b) and (c) of this regulation, the other party to the contract will give prompt assistance to a consumer in difficulty.
(8) If the consumer complains about a defect in the performance of the contract, the other party to the contract, or his local representative, if there is one, will make prompt efforts to find appropriate solutions.
(9) The contract must clearly and explicitly oblige the consumer to communicate at the earliest opportunity, in writing or any other appropriate form, to the supplier of the services concerned and to the other party to the contract any failure which he perceives at the place where the services concerned are supplied".
Release Date: 12 July 2006
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