Where Are We Now As We Come Out Of Coronavirus Lockdown ?
By Katherine East, Solicitor at Irwin Mitchell.
It’s been a year, almost to the day, since my colleague and I wrote an article about the implications of Covid-19 on the wedding industry and, specifically, the application of consumer law.
At that stage, no one could have predicted that we would remain in a national lockdown for three long months before being released into a system of localised lockdowns, followed by a tiered lockdown system which, ultimately, resulted in a second national lockdown, before being released again into a tiered lockdown system and, finally (we hope) a third and final national lockdown.
It’s been chaotic, to say the least, and the ever changing rules have undoubtedly had a huge and potentially devastating impact on those operating in the retail, hospitality and leisure sectors. The wedding industry spans all three and, according to insurance comparison site ‘Hello Safe’, the estimated losses for the wedding industry as a result of Covid-19 are upwards of £5 billion in the UK alone.
Whether this results in a bumper year for the wedding industry in 2021 is yet to be seen. Speculation is that it will. However, Hello Safe reports that there were only 32% fewer weddings last year. That means that 68% of people who were due to get married did indeed get married; presumably having opted for smaller weddings which complied with government restrictions. At present, significant restrictions remain in place and will do well into the summer months, which is the peak season for weddings in the UK. It is therefore entirely plausible that, for the majority of couples who have had, or will be having, weddings during the pandemic, their gatherings will be or were significantly smaller than those they originally planned.
So what does this mean for venues, and what happens if a couple wants to cancel or downsize? Well, that depends on the terms of the venues’ contract, when the original wedding was booked and what discussions, if any, have taken place regarding rearrangements. We therefore need to look at the differing rules which have been implemented since 23 March 2020, when the first lockdown came into force. It is worthwhile noting that the timings given below only apply to England as the devolved regions of the UK were able to take the journey out of lockdown at their own pace. Before turning to the various lockdown rules, it’s helpful to quickly recap of the law applicable to contracts between businesses and consumers.
‘Frustration’ is a doctrine of English law which applies to all contracts where an unforeseen event renders contractual obligations impossible, illegal, or radically different from that which had been agreed when the contract was entered into.
Where frustration occurs, it brings an immediate end to the contract. All sums paid prior to the unforeseen event are recoverable but any sums yet to be paid are no longer payable, subject to the court’s discretion to allow the recovery of already incurred expenses.
Contractual relationships between businesses and consumers in England and Wales are, for the most part, governed by the terms of the Consumer Rights Act 2015 (the “CRA 2015”).
A number of provisions in the CRA 2015 apply irrespective of the terms of the contract between the business and consumer, and cannot be contracted out of, even if the terms of the contract directly contradict the provisions of the CRA 2015.
The CRA 2015 sets a minimum standard for consumer protection. Any provisions in a contract which provide additional rights and protection to a consumer over and above the provisions of the CRA 2015 are binding between the parties.
The CRA 2015 also states that any terms in a consumer contract which are unfair will not be binding on the consumer. The CRA 2015 states that a term will be considered to be unfair if “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.” Schedule 2 of the CRA 2015 provides a list of terms which may be automatically regarded as unfair and includes any terms which require a consumer to pay, or allow the trader to retain, a disproportionately high sum in compensation for services which have not yet been supplied in circumstances where the consumer chooses to cancel the contract.
Consumers who believe that their rights (whether under the CRA 2015 or a contract) have been infringed by a business can take a number of routes to seek redress, including:
bringing a civil claim in the courts;
seeking to damage the business’ reputation through social and other media attention; and
reporting the business to the Competition and Markets Authority (“CMA”).
The CMA is a department of the UK Government with authority to investigate businesses for breaches of consumer law. It can impose fines of up to 10% of a business’ turnover for certain breaches.
Whilst the CMA’s guidance is not binding, it can provide valuable insight into how the courts may interpret the fairness of certain business practices in the context of consumer rights.
As a result of the events of the last year, the CMA has produced a number of guidance notes regarding weddings in which it has concluded as follows.
If a consumer contract has been frustrated, the starting point is that the consumer should be offered a full refund.
A consumer contract is likely to have been frustrated if the business is prevented from providing, or the consumer is prevented from receiving, goods or services under the contract because of one of the lockdown laws or measures, or if the consumer has been told to self-isolate.
Businesses should not require consumers to take unreasonable or unnecessary steps in order to obtain refunds, and imposing barriers to refunds or misleading consumers as to their rights is likely to breach the provisions of the CRA 2015.
The limited exception to the starting point that a consumer is due a full refund is where a consumer has already received something of value. Such a value must be directly attributable to the contract, rather than general costs of running the business. In such circumstances, the business is entitled to deduct a contribution to the costs it has already incurred in relation to the contract in question. The CMA’s opinion is that such deductions are likely to be very unusual and would apply only in respect of ‘bespoke’ items and work conducted directly in relation to the booking in question. In the context of a wedding, such items would likely include signs and orders of service printed with the couple’s names.
Even if the contract between the consumer and the business states that any deposits or other part payments are non-refundable, terms which allow the business to keep a consumer’s money when no service has been provided are likely to be deemed “unfair terms” for the purposes of the CRA 2015.
The limited exception to the full refund rule appears to be where couples are able to claim sums lost from their insurers. In such circumstances, the venue is not required to give a refund, as the couple would then be able to recover twice in respect of the same issue.
23 March 2020 to 4 July 2020, 5 November 2020 to 1 December 2020 and 6 January 2021 to 28 March 2021
On 23 March 2020, the Government enacted regulations which made it illegal for individuals to leave their homes without reasonable excuse, or to gather with more than two people in a public place, unless members of the same household, subject to limited exceptions (the “Restriction”).
The Restriction meant that it was illegal for weddings and other events to take place and it was not certain when it would be lifted to allow gatherings to take place again.
For any weddings which were booked to take place between 23 March 2020 and 4 July 2020 (when the Restriction was lifted for the purposes of weddings), or between 5 November 2020 to 1 December 2020 or 6 January 2021 to 28 March 2021 when England was put into second and third national lockdowns, it is likely that any contract between the venue and the couple was ‘frustrated’, meaning that a couple would be entitled to a full refund (subject to limited exceptions for costs already incurred providing ‘bespoke’ goods and services).
Venues could, legitimately, offer couples a postponement date in these circumstances, but telling a couple that they could only have a postponement date, rather than a refund, is likely to amount to misleading the couple as to their consumer rights which, in the circumstances, would have allowed them to obtain a full refund. Similarly, if a venue only permitted a couple to book a postponement date which was not a like-for-like trade, for example, a mid-week date rather than the premium Saturday date previously booked, a venue which sought to impose the same booking fee would likely fall foul of consumer legislation.
Correspondence between 23 March 2020 and 23 June 2020
Until the Government’s announcement on 23 June 2020, it was not certain when the Restriction would be lifted, and it was therefore entirely possible that it would have lasted at least 6 months, which would have taken us beyond the peak summer months.
The Government first announced its roadmap out of lockdown on 10 May 2020, but did not set any specific dates for weddings until its announcement on 23 June 2020 when it confirmed that that, with effect from 4 July 2020, weddings could begin to take place with a maximum number of 30 people in attendance.
It is therefore possible that, if any couples contacted their venues before the June 2020 announcement in respect of a wedding scheduled for later in the summer, they would have had a viable argument that the contract between them and the venue had been frustrated, and they should have been offered a full refund (unless any directly attributable expenses could be shown to apply).
If frustration did not apply, it is still possible that the couple could argue for a full refund from the venue on the basis of the CMA’s interpretation of the unfair contract terms provisions of the CRA 2015, meaning that, until services are actually rendered, a couple would be entitled to a full refund (subject to any directly attributable expenses).
The second lockdown had a proposed end date of 4 to 5 weeks so this issue will likely be less relevant for weddings booked after the end of November 2020. The third lockdown did not have a proposed end date, but the vaccine rollout suggested that the lockdown would not reach the summer months. If a couple contacted their venue during the third lockdown seeking to cancel or postpone a wedding booked in the spring months, the venue would have needed to give careful consideration to how they dealt with the request, given the ambiguity surrounding the potential end date to the third lockdown.
Tiers and local lockdowns
4 July 2020 to 4 November 2020 and 2 December 2020 to 5 January 2021
On 4 July 2020 the UK moved into a system of ad-hoc local lockdowns. During this time, the following national rules applied to weddings.
4 July 2020 to 14 August 2020 – wedding or civil partnership ceremonies were allowed to take place with up to 30 guests, but receptions were limited to 6 people.
15 August 2020 to 23 September 2020 – wedding receptions were allowed to take place with up to 30 people in attendance but the celebrations were limited to a ‘sit-down meal’.
24 September 2020 to 13 October 2020 –the number of people in attendance was limited to 15 people and celebrations continued to be limited to a ‘sit-down meal’.
The UK then moved to a tiered system on 14 October 2020, under which all regions were given a tier rating which dictated what the restrictions would be for that region unless and until it moved tiers, based on the number of Covid-19 cases in the region.
In all three tiers, weddings and civil partnerships could take place with an upper limit of 15 guests, but reception events were banned for tier 3.
Between lockdowns two and three, England went back into the tier system, but on 19 December 2020 announced an additional ‘tier 4’ which was, essentially, a total lockdown for that region. The rules for tiers 1, 2 and 3 remained the same, but in tier 4 wedding and civil partnership ceremonies were not permitted to take place, with the limited exception that, where one of those getting married was seriously ill and not expected to recover, ceremonies could proceed with a maximum of 6 people present.
If a region was put into tiers 3, 4 or a local lockdown where receptions were not allowed, it is likely that frustration would apply.
In circumstances where a reception could proceed but with limited numbers of attendees, whether the contract had been frustrated would depend on whether limiting the wedding ceremony and/or reception to the number of people legally allowed would render the contract ‘radically different’ to that which was initially agreed. This will depend on whether the contract provided for minimum numbers in attendance, indicated rental numbers for seats or tables (for example), stated large capacity limits or made provision for food order quantities etc. On the basis of the CMA’s guidance, if a contract did, it seems likely that a couple would succeed in their argument that frustration applied during this period and the couple would be due a full refund (subject to the limited exceptions for directly attributable costs). Alternatively, if the ceremony and/or reception proceeded with reduced numbers, it is likely that the venue should have provided a corresponding reduction in fees where the items being charged for were dependent on numbers of attendees.
The 2021 roadmap
Wedding and civil partnership ceremonies were not permitted other than in exceptional circumstances until 29 March 2021, when ceremonies (but not receptions) were permitted with up to 6 people in attendance.
From 12 April 2021, weddings and receptions were permitted with up to 15 guests in a limited number of permitted venues, being places of worship, public buildings and other venues which are permitted to open under the current rules.
The rules are not expected to change again until at least 17 May 2021, when numbers are anticipated to increase to 30 people and the list of venues is expected to expand to include private gardens.
The Government has indicated that it hopes to lift all legal limits on social contact from 21 June 2021, but this is subject to the Government’s four-part test being satisfied by that date.
What does this mean for venues, and what if a couple now wants to cancel or downsize?
Undoubtedly, for many, circumstances will have changed significantly over the past 12 months. The average lead-time for a wedding is 18 months, so it is entirely conceivable that we are now two to three years on from when the couple initially sought to book their event.
If a couple now seeks to cancel their event, or proceed on the basis of a significantly reduced number, a venue must carefully consider whether and what it can charge the couple depending on a number of factors, including the terms of the contract, the date the initial event was booked and what conversations took place between the venue and the couple in the lead up, and also whether the couple has wedding insurance.
Some wedding and civil partnership ceremony contracts might not depend on the number of permitted guests and such considerations might therefore not be relevant, although the chance of this seems relatively small.
Of most concern would be where a couple now seeks to cancel or reduce the size of their wedding in circumstances where the original contract was frustrated as a result of lockdown legislation, and a postponement agreements was entered into on the basis of a venue misleadingly informing a couple that a postponement was their only option, rather than a refund. In such circumstances, the postponement contract may not be legally binding against a consumer.
Similarly, if a couple now seeks to cancel or reduce the size of their wedding in circumstances where the venue can show little or no directly attributable costs, then the venue may be in breach of the CRA 2015 if it seeks to enforce any clauses which allow the venue to charge or retain disproportionately high deposits or charges.
In either case, given the uncertainty which has arisen over the past 12 months and the potential for each case to fall on its individual facts, it would be sensible for venues who find themselves in a potential dispute with a couple to seek legal advice as quickly as possible to avoid any potential damage to reputation or even an investigation by the CMA.
In the absence of any potential disputes, it would be worthwhile for a venue to have its standard terms and conditions reviewed to ensure that it is protected as much as possible against the potential for costly cancellations, including making it a term of all future contracts that couples must obtain wedding cancellation insurance to help mitigate any losses.