Cosmos Holidays Plc v Dhanjal Investments Ltd

A contractual indemnity is construed from its language, read in the context of the clause and contract as a whole and against the relevant factual background. Where it covers loss arising from services supplied to a tour operator, the court should not add a limitation such as ‘at the hotel’ when the words contain no such restriction. Services forming part of an all-inclusive arrangement may include facilities supplied away from the hotel. A contractual acknowledgment of the tour operator’s liability for failures by the local provider may confirm that the indemnity was intended to protect against liabilities to clients. Standard terms drafted by one party are construed contra proferentem only where ambiguity remains.

Cosmos, a tour operator, contracted with a Kenyan hotelier to reserve rooms and provide an all-inclusive holiday programme. The programme included an overnight stay and other amenities at an elephant camp some miles from the hotel. After clients were attacked at the camp, they sued Cosmos in contract and tort. Cosmos settled those claims and sought an indemnity from the hotelier under clause 2(a).

HHJ Grenfell determined preliminary issues in Cosmos’s favour, including the construction issue. Permission to appeal was confined to whether the indemnity extended to the camp or was limited to services supplied at the hotel.

The Court of Appeal unanimously dismissed the appeal.

1. Contractual interpretation. The correct approach derived from Lord Hoffman’s five principles in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, qualified in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251. The primary source was the contractual language, understood according to conventional usage. The relevant provision had to be read in the context of the clause, the contract as a whole and the factual matrix. Background material had to be relevant and reasonably available.
2. Construction of clause 2(a). The second sentence indemnified Cosmos against losses, liabilities, claims or expenses arising from any cause whatsoever out of or in connection with the supply of services to Cosmos. It did not say services supplied at the hotel. The court should not add that limitation.
3. The first sentence’s reference to those using the hotel or any of its amenities was not confined to the physical hotel. Water sports were an example of amenities taking place away from it. The same reasoning applied to the camp and its facilities, which formed part of the all-inclusive services supplied by the hotelier under the contract.
4. Clause 1, acknowledging Cosmos’s liability under the EU directive on package travel, package holidays and package tours and the UK Package Travel, Package Holidays and Package Tours Regulations 1992, provided relevant context. It supported the conclusion that the indemnity was intended to protect Cosmos against liabilities to its clients arising from the hotelier’s services. The lower court’s construction was therefore correct.

• Court of Appeal (Civil Division): [2009] EWCA Civ 316. Appeal dismissed.
• Leeds County Court: HHJ Grenfell’s order dated 7 May 2008, following a trial of preliminary issues, held that the indemnity covered the camp. Permission to appeal was limited to the construction issue.