Summary Of Travel Agent Banned For 7 Years
Travel Agent Banned For 7 Years is the case of The Secretary of State for Business, Energy and Industrial Strategy v Barnsby [2022] EWHC 971 (Ch).
It sprouted after the Creditors Voluntary Liquidation of Pure Zanzibar Limited (“the Company”).
What Did The Company Do?
The Company was a travel agency and between 4 February 2010 and 31 March 2017, the Company was the holder of an Air Travel Organisers Licence (“ATOL”) issued by the Civil Aviation Authority (“CAA”). As the Company was a travel agent it, therefore, operated in a regulated trade having to comply with a raft of statutory provisions in order to engage in such activities.
Key Case Fact
After 31 March 2017 the Company was no longer authorised to engage in certain travel agency activities because it was no longer ATOL registered and yet not all such activities ceased. This was not a case of a mere technical breach of the regulations alone; it was aggravated because of the financial loss suffered by various consumers.
The key point to note from the case is that if you operate for a single second when you are not authorised to do so your conduct may give rise to criminal offences. You could find yourself being disqualified as a company Director as a result.
What Court Order Did The Claimant Seek?
The Secretary of State for Business, Energy and Industrial Strategy (“the SoS”) entreated the Court to consider a Disqualification Order against Targuin Barnsby (“TB”) of 11 years under Section 6 of the Company Directors Disqualification Act 1986 along with a compensation order under Section 15A Company Directors Disqualification Act 1986.
The Court’s Assessment Of The Defendant
Defendant, TB, was sole Director of the Company throughout ie. from incorporation in 2006 until the Company collapsed into Liquidation. TB held 80% of the shares in the Company.
The Court was not prepared to afford TB a ringing endorsement saying:
In short, whilst the Defendant was undoubtedly truthful in his testimony in certain respects, he was prepared to deviate from the truth when it suited his purposes. At times, I am satisfied that he knowingly told untruths. At others he appeared to have persuaded himself of an alternative narrative when reality became unpalatable. Overall, save where the Defendant’s testimony is supported by contemporaneous documentation, I have come to the conclusion that it should be viewed with caution.
The ATOL Expired
ATOL is the well-known financial protection for consumers of packaged holidays. If a consumer buys a package holiday and the travel business stops trading then ATOL will step in and help a consumer avoid financial losses.
It is a criminal offence under Regulation 69 of the Civil Aviation (Air Travel Organiser’s Licensing) Regulations to undertake certain trading activities such as acting as an airline ticket agent in what is known as ‘flight accommodation’ without having a valid ATOL in place.
The Company’s ATOL expired on 31 March 2017 as inter alia, the Company failed to provide the requisite accounting information to the CAA. Yet the Company still afterward took on new bookings and payments unlawfully which should have been ATOL protected. Certain consumers were provided documents suggesting that the Company had ATOL coverage.
The Company also hoovered up money from a consumer whose holiday it could not lawfully provide.
These customers did not get a refund of their money and they did not get their holidays either. These were not ATOL protected.
CAA Accounting Requirements
The CAA has the ability to impose conditions upon ATOL renewal such as the need for a company to improve liquidity. This appears to have led to the Court’s observation as follows:
… I consider it legitimate to conclude that on or by 25 July 2017, the CAA had expressed some concerns about the Company’s financial position and were considering imposing conditions on renewal.
It appears that the CAA was assessing the ATOL renewal months later and still awaiting accounting information.
The ATOL Breaches
Having not had the ATOL position renewed by 31 March 2017 the Company had to remove reference to ATOL on its documents and publications. However, it seems that the Company did not satisfy the Court it had done so:
On the evidence before me it is clear (and I so find) that consumers were misled by the Company’s various breaches of Regulation 16(b)(i) addressed above. In this regard (to the extent of the breaches found proven) …
The Court’s Findings
The Court made the following key findings:
170. On the evidence which I have heard and read, I am satisfied that in instructing the Company’s staff on or shortly after 1 April 2017 that the Company could continue to take holiday bookings that included flights notwithstanding the expiry of its ATOL, the Defendant caused material and continuing contraventions by the Company of Regulations 9(b) and 17(1) of the 2012 Regulations over the period 1 April 2017 to 19 December 2017.
171. I am also satisfied that the Defendant’s conduct (1) in failing to instruct the Company’s staff at any material time after the expiry of the Company’s ATOL that they could not accept holiday bookings which included flights (2) in failing to take reasonable steps to monitor the small number of bookings taken by the Company after expiry of its ATOL in order to ensure that no licensable bookings were being taken and (3) in failing to cancel any such bookings which were taken and refund the customers, allowed material and continuing contraventions by the Company of Regulations 9(b) and 17(1) of the 2012 Regulations over the period 1 April 2017 to 19 December 2017.
172. I am further satisfied that the Defendant caused the Company to fail to refund a deposit to Mr Welfare, contrary to Regulations 9 and 26(1)(b) of the 2012 Regulations.
…
183. Overall, the Defendant’s most serious failings in my judgment were in (1) causing continuing material contraventions by the Company of Regulations 9(b) and 17(1) of the 2012 Regulations over the period 1 April 2017 to 19 December 2017 and (2) allowing continuing material contraventions by the Company of Regulations 9(b) and 17(1) over that period. In my judgment, this was woefully reckless and incompetent conduct on the part of a sole director of a Company operating in such a highly regulated framework. It put customers’ money at significant risk. It could have caused consumers further loss had the Company not ceased to trade. Moreover, it was a criminal offence for the Company to undertake such activities as it did over the relevant period. The impact of these failings was exacerbated by the continued use of the ATOL logo and attendant ATOL references, which misled consumers as to the legal protection they would receive if they purchased or continued with holiday bookings arranged with the Company.
…
189. I accept that the Defendant acted honestly and was not motivated by personal gain. In my judgment, however, he has by his conduct as found proven shown recklessness and incompetence to a marked degree. In my judgment, his conduct as found proven renders him unfit to be a director of or otherwise concerned in the management of a Company.
The Travel Agent’s Ban
The Director was banned for 7 years from acting as a Director.
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