Examination of Witnesses (Questions 141-159)
Professor Geraint Howells and Dr Christian Twigg-Flesner
25 OCTOBER 2007
Q140 Baroness Howarth of Breckland:: How
effective do you think that policing is or has been?
Dr Twigg-Flesner: We do not have any
experience of the UCPD just yet because it has not really entered
into force. I think the due date is 12 December this year, when
it has to enter into force across the EU. It might not do so in
all the Member States. That is the usual problem with directives:
they have to be transposed. The early experience with the enforcement
regulation, I understand, is a good one. The noises I have heard
from various corners are that the thing is working tolerably well
and there is some cross-border co-operation going on already.
I think there will be some reporting on this in due course and
we will see how effectively that works.
Q141 Baroness Howarth of Breckland:: In
a nutshell you are saying there is still a great need for the
Timeshare Directive, but, particularly, could you address the
holiday club issue which is one that does concern us a lot.
Professor Howells: The question of the
holiday club may come up later when we talk about the scope of
the directive and what is covered by it and so forth. As I understand
it, the point about the holiday job club is:: Is it inside the
scope of the directive? Do the information duties applying to
it provide the right sort of information that you need to be able
to make use of it? As I understand it, that is the point about
the holiday club. The same point would be made as Christian just
made about the use of the UCPD:: the UCPD could stop rogue traders,
you could have injunctions against bad selling practices, aggressive
selling practices, but it would not do anything unless there is
a new right of damages attached to it—which is still on
the agenda—for the individual consumers. I think you have
to make sure that the holiday club schemes are protected within
the timeshare regime to give those consumers those rights.
Dr Twigg-Flesner: The UCPD does introduce
some very interesting additional obligations which are not so
well known to English law at present. There is the regulation
of misleading omissions, for example—so the failure to tell
the consumer something—which historically has not been so
tightly regulated. If you fail to tell a consumer important information
that he should have in order to make an informed decision then
that constitutes a misleading omission under the directive and
that can be challenged. Previously, not saying anything, keeping
silent, was not necessarily something where the law objected if
you look at traditional English contract law.
Professor Howells: What would happen
then is that the Office of Fair Trading would seek an undertaking
or an injunction to that company to make sure that in future they
gave that information.
Chairman: That is an interesting distinction.
Thank you very much. That is most helpful.
Q142 Lord Moser:: This relates to the
relationship between the new directive and the existing directives.
I find it all rather puzzling:: you have doorstep selling, you
have distance selling directives in the Community, and another
one about package travel, but timeshare and holiday club is not
included. It was suggested to us by one of the organisations that
came to see us that the opportunity should be taken. That seems
obvious, does it not? In fact, I find it extraordinary that those
existing directives do not include timeshare and holiday regulations.
What is the future?
Professor Howells: To some extent that
might be addressed by the general directive, to see to what extent
one can harmonise. I think it is the exclusion of immovable property
from distance selling and doorstep directives which have caused
the issue because people have said, "Selling property is
different from selling goods, and so that is outside," and
timeshare becomes a sort of property right. Now, of course, timeshare
is a unique property right, in the sense that you do not really
feel like you are buying a house, you are buying the right to
use a house for a certain period of time. But if you look at the
rights given by those directives, particularly the doorstep and
distance selling, they give you a right to information and a right
to withdraw, which you have in the Timeshare Directive anyway,
so I do not know if that much is added to it. Of course in the
package travel context there are additional obligations. The person
who produces the package travel has a responsibility for the provision
of all the services, so if you are injured in a hotel overseas
due to the negligence of the hotel owner you can return a claim
against the package travel operator. But there you need a combination
of services. In the timeshare, where there is no direct combination
of services and it is simply the provision of accommodation, that
would fall outside the Package Travel Directive.
Q143 Lord Moser:: Do you see the new directive,
which is what we have been discussing, remaining partly separate
from existing directives?
Dr Twigg-Flesner: I believe so, yes.
Q144 Lord Moser:: I find that still difficult.
From the point of view of simplicity—which is, I know, not
the primary aim of the European Union!—would there be some
merit—
Professor Howells: They would say that
the horizontal directive will try to ensure that the information
obligations and the right of withdrawal are as far as possible
identical in those contexts. In a sense, it would not matter whether
you were having your rights under the Doorstep Selling, the Distance
Selling or the Timeshare Directive; as far as possible you would
have the same information duties placed on people—although
they may have to be more extensive in the timeshare context, I
would think—you would have the same right of withdrawal,
you would have the same method of exercising the right of withdrawal.
It would be very confusing for consumers if you had a right of
withdrawal on a doorstep contract, and that said you had to exercise
the right of withdrawal in one particular way—and you knew
about that because you had experience of it—and there was
a different way of exercising the right of withdrawal in the timeshare,
and you made a mistake because you used the method you were used
to. That would be very confusing. That is what the Commission
is trying to harmonise or looking to harmonise, so there is less
confusion between the different directives.
Dr Twigg-Flesner: In essence, I do not
think we think there is a problem in the fact that they are not
currently covered by the Doorstep and Distance Selling Directives
because in terms of the standard provision we have the same kinds
of rights in all these directives:: pre-contractual information
and withdrawal rights. This is really just to make sure there
are no immediate conflicts between the way the right of withdrawal
operates, for example. That is the other concern.
Professor Howells: If there is anything
we have missed, if there is an example that has been given to
you where you think people have fallen through the trap, perhaps
you could let us know and we could think about it in more in more
detail.
Chairman: I am sure we could do that.
The Committee what might want to follow that up. That is a kind
offer. Let us think about that.
Q145 Lord Trefgarne:: That takes me to
ask you a question about one area which might or might not come
within the scope of the directive and that is, for example, multi-annual
hotel reservations. If you book up, every year, the same place,
will that come within the scope of the directive? Is it right
that it should, if it does?
Professor Howells: I was thinking about
that this morning. I was thinking of some examples. The difference
between ourselves and the Commission is one of interpretation
as to whether you have a contract here or not. I was thinking
that if I booked a hotel in London for the two weeks of Wimbledon
every year for the next 10 years, and then the day before Wimbledon
came along I said to the hotel, "I haven't got a contract,
it was only a reservation," I do not think that hotel would
be too pleased with that argument. When I reserve a hotel, I am
committing myself to pay for that unless there is a cancellation
right within the contract. Very often a hotel would say, "If
you cancel over 48 hours, there is no payment payable." It
does not rule out the contract, it is just that I have exercised
my right under the contract to get out of the contract without
paying a penalty. My view is that probably when I make a reservation
with a hotel I am making a contract; whereas the Commission's
assumption seemed to be that a reservation was just a future hope
that you would turn up at the hotel. It is really the way in which
you interpret that contractual conversation.
Dr Twigg-Flesner: That may of course
be something that is different across the Member States. The Member
States may treat reservations as just that:: a reservation with
no immediate legally binding effect.
Q146 Lord Trefgarne:: Most hotels nowadays
take your credit card details when you make a reservation, which
means, I guess, that they could take money off you if you cancelled.
Professor Howells: If you cancelled outside
their terms of contracting, yes.
Q147 Lord Trefgarne:: They would say,
"Have you read our terms?" and then, if I said no, "Oh,
well, sorry. Half a day's payment comes off that." I can
just hear it.
Professor Howells: You could well see
that there would be circumstances where people would want to make
contracts for the same week.
Q148 Chairman:: Yes, on the regular visitor
approach to things—so that, instead of staying in a flat,
they stay in a hotel because it is more convenient.
Dr Twigg-Flesner: Of course a consumer
would be very surprised if they turned up at a hotel and were
told, "We don't have a room for you, we have a reservation"
and they would have no right of redress because it was just a
reservation. You would expect there to be some sort of legal redress.
Q149 Baroness Neuberger:: It is quite
common in various areas of Europe that you do turn up and they
push you instead to another hotel. Quite a lot of European countries
do not seem to think there is anything strange about not giving
you the room—which I have always thought very eccentric—so
there may be a different view.
Professor Howells: You may want to consider,
as well, that there is now no minimum period. In the previous
directive there was a seven-day minimum period, which would exclude
lots of hotel bookings. There is now no seven-day minimum period.
You may want to think about whether if you want lots of repeat
bookings they are the same contract? You may argue that these
are separate contracts:: I book every Monday but I do it under
52 different contracts. I think that may be the way round it.
Q150 Lord Trefgarne:: A contract would
only be a contract if the hotel has agreed to provide a room for
a certain price. You book up for this week and they will tell
you what the rate of the hotel is, but they will not tell you
what the rate is for five years ahead.
Professor Howells: You could have a contract
based on an assumption that you will pay the "rack rate"
at the time or the applicable rate at the time. As long as there
is some reasonable method of ascertaining what the payment will
be in the future, there could be a contract for it.
Chairman: Claridges has been much in
the public eye recently for their extraordinary guest list. Maybe
we should ask them what they do.
Baroness Morgan of Huyton:: And whether they
have such a thing as a "rack rate".
Dr Twigg-Flesner: I think the real issue
is whether they should be included at all. The Commission says
they are not included because they are not reservations. We think,
"Well, be careful, they might be included, and you might
have a very strange situation where in some jurisdictions some
hotels might find themselves challenged. What you really want
to achieve is an exclusion, so why not put this explicitly in
the Directive, saying reserving a hotel room, whether it is a
contract or not, is not subject to the directive."
Q151 Chairman:: Certainly I would be jolly
cross if I arrived in Cornwall for my spring weekend and found
that the reservation had gone. It has never happened to me. Whether
it is a contract or not I think is for the lawyers to determine,
but I think the habit in this country is that if you have made
a reservation then, unless you arrive at midnight or something,
in almost every situation you get your room.
Professor Howells: But would you expect
the hotel to have to send you all the information that they would
have to send you if it was a timeshare.
Chairman: No, I would not, and I think
we assume that when we ring them up and we give them our credit
card, we have done a deal, and the deal means that they will keep
a room for us.
Baroness Howarth of Breckland: This seems
to illustrate that there is a big difference between the UK and
Europe
Baroness Neuberger: I think so.
Q152 Baroness Howarth of Breckland:: We
want to try to get the best practice recommended through the directive
to protect consumers, so that colleagues do not arrive in Spain
and discover that there is not a room. It would be useful if we
could somehow get a mention of this and sort out what the right
future would be in Europe in the directive.
Professor Howells: We have to get to
the two issues separate. We may want to address that problem—which
may be a real problem—but I do not know if the timeshare
is the way to do it.
Q153 Lord Trefgarne:: The hotels will
be looking for protection from those customers who book and just
do not bother to turn up. They would say, "You could have
sold the room to somebody else," but the hotel would say,
"It was 11 o'clock at night and you never came." They
deserve some consideration as well.
Dr Twigg-Flesner: Indeed.
Professor Howells: There are things like
advanced payments and so forth. If they were included, it would
become quite complicated for hotels.
Q154 Chairman:: You do sometimes have
to make a downpayment, using your card for the downpayment, and
then that becomes part of your payment for the hotel bill at the
end. I think that is how it usually works.
Dr Twigg-Flesner: There is a plan to
revise the Package Travel Directive, because, of course, package
travel no longer exists in the same way as before. I wonder if
that might be an opportunity to think about things like clarifying
what constitutes a reservation if a consumer makes his own arrangements
as opposed to going through a travel agent. Very few consumers
go through the traditional package travel route these days:: everybody
books online using the websites for hotels and airlines to put
together their own packages. One of the things the Commission
was talking about at one point was to have these two separate
big regimes. On the one, the horizontal instrument, as is now
being discussed in the Green Paper, and there was also at one
point talk of a "the consumer goes travelling" kind
of directive, to cover all these various travel arrangements and
perhaps also to link it in with the air travel compensation regulations
and so on, the overbooking regulation. I do not what has happened
to these ideas. It is something that may happen later on when
they talk about package travel specifically but that is something
to keep an eye on, I think.
Q155 Baroness Neuberger:: In your note
to us you were very interested and keen on the reduction of the
length of the contract from three years to one and then you said
that you wondered whether there was actually any need for a minimum
duration of contract. You say that "reduces the possibility
of evasion, but does not remove the risk associated with `trial
packs' entirely." I am not sure I fully understood that point,
but, anyway, the Government have responded in oral evidence, and
does not really like it, saying that possibly no minimum duration
might affect the package holiday legislation—which is what
we have just been talking about. I wonder if you could expand
on that and maybe explain, in particular, why you think that perhaps
having no minimum might be the preferable route.
Professor Howells: I have to say it is
not the point I would want to go to the stake on
Baroness Neuberger:: I wondered!
Professor Howells: That said, I think
there are some Member States that have removed it altogether.
I think Finland is one.
Dr Twigg-Flesner: I have brought with
me the relevant section from a Consumer Law Compendium and I will
let you have the relevant information to that section. In the
report it is pages 419 through to 477. It is a 700-page document—we
are very proud of it. It makes a wonderful doorstop! At page 433
we explain which Member States did not have a minimum period,
even in the current implementation. We have Cyprus, Finland and
Hungary as the obvious ones with no minimum duration, and some
Member States have reduced the period as well. Some Member States
have gone away and said, "We don't need to have a minimum
period at all."
Professor Howells: If there is a technique
of getting around the directive based on 35 month trial periods,
maybe the same technique could be applied to an 11-month period,
so you have an 11-month cover with an automatic renewal and so
forth, and it gets you outside the directive.
Baroness Neuberger:: It is basically closing
that.
Professor Howells: If there were real
ways in which this could impact on the Package Travel Directive,
that would be interesting, but there must be a situation where
there was a combination of two elements, not just the accommodation
but also the travel or services being provided locally, so you
have to see how many timeshare operators would provide those additional
services and therefore be caught by it. What the implication of
that would be I have not thought through, I am afraid.
Dr Twigg-Flesner: Belgian Law, for example,
applies the timeshare rules to contracts of less than one year
duration where there is an automatic renewal clause in the contract.
Where it is envisaged that, even though it is limited to, say,
11 months, it is automatically renewed unless consumer cancels,
then they will apply the regulations as well.
Q156 Baroness Morgan of Huyton:: I have
another question about the scope of the directive. We are aware
that there is a growing pattern of the use of flexible timeshare
holiday clubs—so this is specifically about timeshares not
holiday clubs. We are unclear whether you think that is that is
satisfactorily covered, whether it is covered in Annex I, or whether
that needs to change, whether it needs to be revised to incorporate
those more clearly, or whether you think it is adequate.
Dr Twigg-Flesner: The definition of "timeshare"
includes "one or more accommodations". That is the phrase
used, so it does cover these multiple resort deals. I suspect
we have to then apply the information obligations from Annex I
to each of these properties, if there is a group of properties
that falls within the scope of the contract. The difficulty arises
when it is never clear which kind of properties might be included
in these multiple resort arrangements, if there are properties
that might be replaced by other properties and so on, and then
it might be very difficult to be able to provide this information
because they might not know which properties will eventually be
covered by the agreement. To the extent that they say, "You
can have a property in these 10 resorts, these are the 10 types
of properties we have," they would have to provide information
on each of those in order to comply with the obligations. We will
come to information later on perhaps, but there is still a risk
of overburdening consumers with a lot of information which they
might not understand or need at that point.
Professor Howells: The confusion in my
mind was that many of these packages may have some of the characteristics
of long-term holiday products. I would be worried about:: Do I
know what my points are worth? How do I know what they will get
me? How can those points not be skewed in the future to change
my rights, so that I might need five points this year to get a
villa with a swimming pool but seven points next year or whatever?
Something like the obligation at Annex III(b)—which says
"to state the exact nature of the right which is subject
under the contract"—might be usefully included in timeshare
contracts which were based on a points basis, to let me understand
what rights I have.
Chairman: That is interesting. There
is another question on information. Lord Dundee.
Q157 Earl of Dundee:: In relation to the
Timeshare Directive what type of information do you think should
be provided by the operator to the consumer automatically rather
than simply on request?
Dr Twigg-Flesner: It is a difficult one
to think of because a lot of these pre-contractual information
obligations are devised on a particular policy slant:: there is
a perception that certain items of information have to be provided.
I think the problem we have so far is that the items of information
required—and they still are, even in the current draft directive—are
very unstructured. You have a lot of different items of information
with some overlaps but there is no clear arrangement of these
various information obligations. We would like to see, first of
all, some thought being given to how this information is presented,
before we look at the detailed items of information which should
be included. Professor Howells has done some work on the ability
of consumers to process information. One of the findings that
are fairly well established now is that consumers can really only
process information that is given to them in certain chunks and
they can only really process seven different chunks of information.
In one of the research groups in which I am involved, we have
tried to identify perhaps broader categories that you could use
for information, so you have chunking categories, if you like.
This work is being fed into the Common Framework Reference. We
have a draft provision in there that basically says:: These are
the main categories of information that we find in the Acquis
Communautaire at the moment and therefore we should perhaps try
to restructure all the existing information obligations under
these broad headings and then try to see if there are any surplus
ones which we perhaps might not need at all or have only available
on request, and whether the ones that we have are perhaps duplicating
information. To us it seems important that the consumer gets information
about what they are actually buying:: some basic information about
the property; what the property involves; what facilities are
provided. Information about the price is very important. Information
about key legal rights is important, including the right of withdrawal,
and perhaps information about complaints procedures so that consumers
can find redress where they need to if something has gone wrong.
Professor Howells: I think it is very
important to say:: What do the consumers need to know, when do
they need to know it and how do they need to know it? Probably
a lawyer is not the best person to answer that question. We can
point out the need to consider these factors but I think you need
other skills to work out how that plays in. Also I think we have
to bear in mind that there are different reasons why you want
to give people information. One, which was lying behind your question,
was the decision to enter into the contract:: What decision do
I need upfront to decide if this is a contract I want to enter
into? Another very important purpose of information is to resolve
disputes later on down the line. If I have a timeshare and a few
years later I have a dispute—"They are saying I have
to pay the service charge, do I have to?" or whatever—there
you may want a very detailed amount of information to refer to
lots of points that may arise in the future. We are saying that
we need to differentiate. Clearly timeshare is a contract where
you have to give a lot of information—it is a complex product,
it is a very important purchase for people—but we have to
distinguish the need for that information for the long term with
the need to bring key points to consumers' minds. I am afraid
I am not the person to answer your question on what needs to be
brought to people's minds.
Q158 Earl of Dundee:: If you take this
aspect at its most basic, as you were explaining it to us, clearly
the position is at the moment that consumer awareness is insufficient
in regard to information presentation. The presentation of information
is not good enough. Different ways need to be worked out for how
to make it better. Might one aspect worth considering be an obligation
of the operator to have to prove that he has been responded to
on certain key categories and areas by the purchaser?
Dr Twigg-Flesner: How would that be achieved
in practice? Would you then effectively require that the consumer
perhaps signs the relevant item of information?
Q159 Earl of Dundee:: I am thinking of
something very elementary. When you catch an aeroplane these days,
they ask you:: "Do you have any bombs in your luggage?"
or something. The dialogue may not be quite like that between
the operator and the consumer but it would not be dissimilar.
There might be an obligation upon the operator to show a tick
list that he had asked certain questions, which might be quite
general questions or categories.
Professor Howells: The danger is that
they can become defensive tactics for the industry. I remember
that I once signed a form which said that I had been advised about
every possible alternative way of financing this loan. When I
said, years later, "You never mentioned this one to me,"
he said, "Oh yes, they did. You said that all had
been mentioned to you." I did not know what "all"
was. So there are ways in which those tick lists can come into
defensive tactics for the industry and the industry then says,
"We told you all this. You may not have taken it in and you
may not have processed it, but it has clearly been made and you
have clearly ticked the box." We have to make sure that information
is given to consumers and given to them in a way in which they
can really take it into account and really know exactly what they
have been told—not just, "We have given you information
on all aspects of the property" but which actually lists
which aspects you have said and be specific about what you have
told the consumer.
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