This is an appeal from an order made on 16 January 2006 by Mr Justice Goldring in the Administrative Court in proceedings for judicial review brought on the application of The Association of British Travel Agents Limited (“ABTA”). By his order the judge declared that a guidance note issued by the Civil Aviation Authority (“the CAA”) – Guidance Note 26: “Sale of Air Package Arrangements: Advice on the need to provide consumer protection” – was unlawful. The judge went on to quash the guidance note.

Guidance Note 26 (“the Guidance Note”) was issued by the CAA on 4 March 2005 in order “to help travel organisers and agents understand the definition of an air package set out in the European Council Directive (PTD), the Package Travel Regulations (PTR) and the Civil Aviation (ATOL) (Amendment) Regulations (‘The Regulations’)” and “to help travel organisers and travel agents decide what parts of their business need ATOL protection” – paragraph 1.1 of the Guidance Note. It is said to be a response “to market developments such as split contracts” – (ibid).

Paragraph 1.2 of the Guidance Note is in these terms:

The force of that criticism (if made out) is compounded by the warning in paragraph 6.3 of the Guidance Note:

It was in those circumstances that the judge rejected the submission, advanced on behalf of the CAA, that the Guidance Note was not susceptible to challenge in proceedings for judicial review. He rejected that submission for the reasons which he set out at paragraphs [80] to [88] of his judgment [2006] EWHC 13 (Admin). The submission was not pursued, as such, in the appellant’s notice or in the skeleton argument filed on behalf of the CAA; although it was said that the judge should not have embarked on the exercise which he did in what was described as “a factual vacuum”. It is, I think, enough to observe at this stage that, if the judge was correct in his view that the Guidance Note contains an interpretation of the requirements in the ATOL Regulations which was wrong or misleading, then it is clearly in the public interest that the Guidance Note be amended or withdrawn.

The CAA is a body corporate now constituted by the provisions in section 2 of the Civil Aviation Act 1982. Its functions include functions conferred by or under that Act with respect to (amongst other matters) the licensing of the provision of accommodation in aircraft – section 3(b) of the Act. Section 71 of the Act enables provision to be made by regulations for securing that a person does not (a) make available, as a principal or an agent, accommodation for the carriage of persons on flights or (b) hold himself out as a person who, either as a principal or an agent or without disclosing his capacity, may make such accommodation available unless he is the operator of the relevant aircraft or holds and complies with the terms of a licence issued in pursuance of the regulations.

Regulations made under the 1982 Act for the purposes of section 71 include the Civil Aviation (Air Travel Organisers’ Licensing) Regulations 1995 (SI 1054/1995) and the Civil Aviation (Air Travel Organisers’ Licensing) (Amendment) Regulations 2003 (SI 1741/2003). The 1995 Regulations provide that no person shall, in the United Kingdom, make available flight accommodation unless he is an operator, a licence holder, an agent for a licence holder, an exempted person or a ticket provider: terms which were defined in regulation 3(1). “Licence holder” means the holder of an air travel organiser’s licence (“ATOL”) granted by the CAA under the Regulations.

The 2003 Regulations introduced a new regulation - regulation 3(1A) - in these terms:

The explanatory note to the 2003 Regulations draws attention to the fact that the terms in which “package” is defined for the purposes of the ATOL Regulations to which I have just referred are identical to those contained in regulation 2 of the Package Travel, Package Holidays and Package Tours Regulations 1992 (SI 1992/3288). Those regulations (“the Package Travel Regulations”) were made under section 2(2) of the European Communities Act 1972 in order to give effect, in domestic legislation, to the Council Directive of 13 June 1990 on package travel, package holidays and package tours (90/314/EEC). The Directive, at article 2.1, defines “package” in terms which are not materially different from those in the regulations:

The purpose for which Council Directive 90/314/EEC was adopted appears from article 1: “to approximate the laws, regulations and administrative provisions of Member States relating to packages sold or offered for sale in the territory of the Community”. The Directive is to be interpreted with the following recitals in mind:

Article 5.1 of the Directive requires Member States to take the necessary steps to ensure that the organiser and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organiser and/or retailer or by other suppliers of services – but without prejudice to the right of the organiser and/or retailer to pursue those other suppliers of services. Article 7 requires that the organiser and/or retailer party to the contract shall provide sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency. The “contract”, for the purposes of those provisions means “the agreement linking the consumer to the organizer and/or the retailer” - article 2.5 of the Directive.

Member States were required to bring into force measures necessary to comply with the Directive before 31 December 1992. The Package Travel Regulations, which were made on 22 December 1992 and which came into force on the following day, were made in order to meet that requirement. “Organiser”, “retailer” and “contract” have the same meanings in the regulations as in the Directive. The expression “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”. “Consumer” means, in the context of the definition of “contract” the person who takes or agrees to take the package; and, in other contexts, has the same extended meaning as in the Directive.

Regulation 15(1) of the Package Travel Regulations (Liability of other party to the contract for proper performance of obligations under contract) gives effect to article 5.1 of the Directive. It is in these terms:

The significance of regulation 16 in a case where the package is one in respect of which the other party to the contract is required to hold an ATOL is that the CAA may refuse to grant a licence unless satisfied “that the resources of the applicant and the financial arrangements made by him are adequate for discharging his actual and potential obligations in respect of the activities . . . in which he maybe expected to engage if he is granted the licence.” – regulation 6(2) (b) of the ATOL Regulations. In practice, as I understand the position, the CAA will normally require a bond as a condition of granting an ATOL.

It is important to keep in mind that a “package”, for the purposes of the Directive and the Package Travel Regulations, may or may not include flight accommodation. Whether the package includes flight accommodation or not, the person who takes or agrees to take the package will be the “consumer” for those purposes; the person who organises the package and sells or offers it for sale (whether directly or though a retailer) will be the “organiser”; and the person who sells or offers for sale the package put together by the organiser will be the “retailer”. The “contract” will be the agreement linking the consumer to the organiser or to the retailer (or to both) as the case may be; and “the other party to the contract” will be the party to the contract other than the consumer – that is to say, the other party to the contract will be the organiser or the retailer (or both) as the case may be. For convenience I will refer to the other party to the contract as “the counter-party”. Whether the package includes flight accommodation or not the counter-party will be liable for the proper performance of the obligations under the contract (regulation 15(1) of the Package Travel Regulations) and the counter-party will be obliged to provide sufficient evidence of financial security (regulation 16(1) of those Regulations). But, if the package is one in respect of which the counter-party is required to hold an ATOL, the obligation imposed by regulation 16(1) of the Package Travel Regulations does not require the counter-party to ensure that arrangements described in regulations 17, 18, 19, 20 or 21 of the Package Travel Regulations are in force. In such a case, the obligation is, in effect, met through the CAA’s requirements for the grant of an ATOL.

The ATOL Regulations – in relation to the provision of flight accommodation which constitutes a component of a package - must be read in conjunction with the provisions of the Directive and the Package Travel Regulations. The effect of the ATOL Regulations – in the case where flight accommodation is a component of a package – is to restrict the persons who can be “the other party to the contract” for the purposes of the Package Travel Regulations. The counter-party, in such a case, must be the holder of an ATOL (“a licence holder”) or the operator of the relevant aircraft. Further, it is only where all the components of the package are made available under a single contract between the customer (or consumer) and a licence holder, that flight accommodation can be made available by a person acting in the capacity of an agent; and then only if that person is acting in the capacity of an agent for a licence holder – regulation 3(1A) (a) of the ATOL Regulations. Flight accommodation which constitutes a component of a package cannot be made available by a person acting in the capacity of a ticket provider – regulation 3(1A)(b). It will follow that, where flight accommodation is a component of a package, the person who will be liable (under regulation 15(1) of the Package Travel Regulations) for the proper performance of the obligations under the contract will be a licence holder or (perhaps) the operator of the relevant aircraft; and the financial security of that person (if a licence holder) will be ensured by the fact that he is the holder of an ATOL.

It is against that regulatory background that the concept of “package” – as a pre-arranged combination of at least two of the prescribed components “when sold or offered for sale at an inclusive price” – falls to be addressed.

The enquiry, in any given case within the scope of the Guidance Note, is whether the flight accommodation which is made available “constitutes a component of a package”. If it does, then the restrictions to which I have just referred – imposed by regulation 3(1A) of the ATOL Regulations – apply. If it does not, then the position remains as it was before the introduction of that regulation in 2003.

There can be no doubt that flight accommodation is capable of being a component of a package – it falls squarely within sub-paragraph (a) of the definition (transport). Nor can there be any doubt that flight accommodation will not be a component of a package unless it is sold or offered for sale with some other service which falls within one or other of sub-paragraphs (b) and (c) of the definition (accommodation and other, non-ancillary, services). And the two (or more) components together must cover a period of more that twenty-four hours or include overnight accommodation. But there are the further requirements that the components of the package must be sold or offered for sale as a “pre-arranged combination” and “at an inclusive price”.

The requirement that the components of the package must be sold or offered for sale as a “pre-arranged combination” is met not only where the components are put together by the organiser without input from the customer (typically, the brochure holiday) but also where the components are put together by the organiser in accordance with the specifications of the individual customer (or consumer) or group of customers (typically, the ‘customised’ holiday) – Club-Tour, Viagrens e Turismo SAv Alberto Carlos Lobo Gonçalves Garrido (Case C-400/00) [2002] ECR I-4051. And the requirement is satisfied not only in cases where the components have been put together and offered for sale by the organiser in advance of any contact with the individual customer but also in cases “where the combination of tourist services is the result of the wishes expressed by the customer up to the moment when the parties reach an agreement and conclude the contract” – ibid, paragraph [19]. It can be seen, of course, that the principle is expressly stated, as proviso (ii), in the definition of “package” in both the Package Travel Regulations and the ATOL Regulations (as amended in 2003). That proviso did not appear in the Directive, which was the text which the Court of Justice was required to consider in the Garrido case.

The question, then, is what (if anything) does the requirement that the components be sold or offered for sale “at an inclusive price” add to the requirement that the components be sold or offered for sale as a pre-arranged combination. It is the answer to that question which lies at the heart of the dispute between ABTA and the CAA. The CAA’s view, expressed at paragraph 2.5 of the Guidance Note, is that:

The judge addressed that question at paragraphs [153] to [166] of his judgment. At paragraph [156] he said this:

The CAA does not challenge the judge’s conclusion that: “For the sale of a package at an inclusive price the relationship between the component parts of that package must be such as to mean that the consumer is buying and paying for them as a whole” – paragraph 52 of its skeleton argument in this Court. It is said that it did not dispute that proposition in the Administrative Court: “nor is it inconsistent with the Guidance”. It submits that the proposition “is an echo of the CAA’s argument that the concept of ‘inclusive price’ taken in conjunction with that of ‘pre-arranged combination’ focuses on whether the different components are sold or offered for sale together, on a composite basis”.

At first sight, therefore, there is now little, if anything, between the parties on this question. The requirement that the components be sold or offered for sale “at an inclusive price” must be read in conjunction with the requirement that the components be sold or offered for sale as a pre-arranged combination. The price is the price of the combination.

In many cases – indeed, I suspect, in the majority of cases – the price of the combination will not be the aggregate of the prices for which the components within the combination would have been sold or offered for sale if each component had been sold or offered for sale as a separate service outside the combination. That may be because some of the components (for example, the services of the organiser’s local representative) would not be available as a separate service outside the combination. Or it may be because some of the components can be provided more cheaply if provided in conjunction with other components - the hotel may provide a courtesy airport transfer service. Or it may be that, in order to sell the package, the organiser will price attractively: the organiser will offer the package of services at a price which is below the aggregate of the prices which would be charged if the components had been sold separately. In those cases there is unlikely to be difficulty in reaching the conclusion, on the facts, that the components (including flight accommodation) are being sold as a pre-arranged combination and at an inclusive price. The same could be said of cases – which, I suspect, are likely to be rare indeed – in which the price of the combination exceeds the aggregate of the prices for which the components would have been sold or offered for sale separately.

The more difficult cases are those in which the price for the whole is equal to the aggregate of the prices for which the components would have been sold or offered for sale separately. The principle is, perhaps, easier to state than to apply in practice. If the components are offered for sale as a pre-arranged combination – albeit that the components are not combined (and, perhaps, not all identified) until “the moment when the parties reach an agreement and conclude the contract” (to adopt the language of the Court of Justice in the Garrido case) – then the price for the combination will be “an inclusive price” notwithstanding that it may have been calculated, arithmetically, by aggregating the prices of the components: that is to say, notwithstanding that the price for the combination is the aggregate of the prices for which each component would have been sold or offered for sale if it had been sold or offered for sale as a separate service outside the combination. The factual question to be resolved – on a case by case basis – is whether the services are being sold or offered for sale as components of a combination; or whether they are being sold or offered for sale separately, but at the same time.

The point may be illustrated by examples. Suppose a customer, in London, who wishes to spend a week at a named hotel in, say, Rome. He asks his travel agent what the trip will cost him. The agent ascertains that the cost of the return flight will be £X, the cost of accommodation will be £Y and the cost of the airport transfers will be £Z. Without disclosing the individual cost of each service, the agent offers the customer flights, accommodation and transfers at a price of £(X+Y+Z). The customer accepts without further inquiry. In that case there would be little doubt – as it seems to me – that the services were sold as a pre-arranged combination and at an inclusive price.

Now suppose that the agent has informed the customer that the cost of flights will be £X, the cost of accommodation will be £Y and the cost of transfers will be £Z; and has explained to the customer that he can purchase any one or more of those services, as he chooses, without any need to purchase the others. He has explained, in effect, that the customer can choose to purchase the other services elsewhere; or to make other arrangements. In that case – as it seems to me – there would be little doubt that the services are not offered for sale as a pre-arranged combination and at an inclusive price.

What, then, if the customer chooses, and contracts for, one of those services. It is plain that that service would not be sold as a pre-arranged combination: it is not sold in combination with any other service. And it is plain that that position would not alter, if having paid for one of those services, the customer subsequently decides to take, and contracts for, another of the services. Nor would the position alter if, after paying for the second service, the customer later decides to take, and contracts for, the third service. And it would make no difference if, having entered into three separate contracts and received three separate invoices, the customer were to pay the three invoices with a single cheque. The position would be the same. There would have been no sale of a pre-arranged combination of components at a single inclusive price. Rather, there would have been three separate sales of independent services, the aggregate of the prices payable for the three separate services being satisfied by a single payment.

Nothing in the preceding paragraph is inconsistent with proviso (i) to the definition of “package” in the Package Travel Regulations or the ATOL Regulations (“the submission of separate accounts for different components shall not cause the arrangements to be other than a package”) or with the proviso to the definition in the Directive (“The separate billing of various components of the same package shall not absolve the organiser or retailer from the obligations under this Directive”). As the judge explained at paragraph [158] of his judgment, if the arrangements would otherwise be a “package” – because the services are sold or offered for sale as components of a pre-arranged combination and at an inclusive price – the substance of the arrangements is not altered by invoicing the components separately. But, if the arrangements would not otherwise be a “package” – because the services are, in fact, sold or offered for sale separately – separate billing merely reflects the substance of the arrangements. The most that could be said is that composite billing might be evidence (in the particular case) that the services had been sold as a package.

Returning to the second of the examples which I have set out, difficult questions of fact are likely to arise if the customer chooses and contracts for two or more of the services on the same occasion. The principle is not in doubt. If the services are sold or offered for sale as components of a combination, there is a package: if they are sold or offered for sale separately but at the same time, there is no package. The question whether they are sold as components of a combination - or separately but at the same time - is a question of fact. That question may not be easy to resolve in the particular case.

The views expressed in the Guidance Note need to be read in context; and, in particular, with the structure of the note in mind. The Guidance Note is divided into six sections: (1) Background, (2) Package Travel Definitions, (3) General Comments, (4) Examples of where an ATOL is Required, (5) Example of where an ATOL is not Required and (6) Summary. Section 2 includes what is described as “a summary of key points” in respect of the definition of “package” and the terms “pre-arranged” and “inclusive price”. It is necessary to have in mind those points - and the general comments in section 3 - when reading sections 4 and 5 of the Guidance Note.

Section 3 contains the following paragraphs:

The judge identified “the four principal errors” on which ABTA relied at paragraphs [121] to [130] of his judgment. He addressed those alleged errors at paragraphs [169] to [173] of his judgment; and held that each had been made out.

The first of the “principal errors” is in paragraph 2.5 of the Guidance Note. The paragraph appears under the heading “Inclusive price”. I have already set out the text earlier in this judgment. The issue between the parties is whether, in stating that “it does not matter” if the cost of a package is made up of separate sums relating to the value of each element, the paragraph is to be taken to mean that where services are sold at the same time in circumstances where the total price is the aggregate of the individual prices there will necessarily be a package for the purposes of the ATOL Regulations; or is to be taken to mean only that there may be. ABTA submits that the paragraph has the former meaning; and that, understood in that sense, the paragraph is misleading. The CAA submits that the paragraph means only that there may be (but not necessarily will be) a package if the total cost is the aggregate of the individual prices; and that that is a correct view of the regulations.

The judge held (at paragraph [169]) that:

In the Administrative Court ABTA criticised paragraph 5.2 of the Guidance Note. The paragraph is in these terms:

ABTA did not need to pursue its criticism of paragraph 5.2 in this Court. The point was conceded by the CAA.. The criticism remains well-founded.

The third of the “principal errors” addressed by the judge is in paragraph 4.3 of the Guidance Note:

I agree with that view. The question, in the particular case, is whether the services are sold or offered for sale as components in a pre-arranged combination; or whether they are being sold or offered for sale separately, but at the same time. It is only in the former case that the price – the price of the combination – is properly to be regarded as an “inclusive price” for the purposes of the ATOL Regulations.

The fourth of the “principal errors” was said to be in paragraph 4.8 of the Guidance Note:

For my part, I do not find it easy to see what it was that the judge had in mind in making that observation in the context of paragraph 4.8. It may be (as the CAA suggests at paragraph 60 of its skeleton argument on this appeal) that paragraph [173] of the judgment was directed at paragraph 2.3 of the Guidance Note, and not at paragraph 4.8. But, if so, the criticism of paragraph 4.8 which the judge identified at paragraph [130] is not addressed at all. [I note that the CAA does not address it in its skeleton argument on this appeal].

ABTA’s criticism of paragraph 4.8 - as it appears from sections D, G and H(5) of the skeleton argument which was before the Administrative Court – was that the paragraph suggests that, whenever an agent has taken commitments from, or made contracts with, a supplier for travel services which are sold or offered for sale to a customer at the same time as other travel services, the transaction will be treated as the sale or offer for sale of a package. ABTA made the point (correctly) that the fact that an agent has taken commitments from, or made contracts with, a supplier for any item sold or offered for sale (with other travel services) to a customer does not necessarily lead to the conclusion that the services which are the subject of those commitments or contracts are sold as a package for the purposes of the ATOL Regulations.

If the paragraph were to be read as ABTA suggests, the criticism would be well-founded. But, as it seems to me, that would be to give the paragraph a meaning and effect which it does not have. Its meaning is controlled, I think, by the words “any item offered as part of an air package”. The premise underlying the paragraph is that the service in respect of which the agent has taken commitments from, or made contracts with, a supplier is offered for sale as part of an air package. Given that premise the conclusion is correct: “then the package will require ATOL cover”. Properly understood, the paragraph does not suggest that whenever the agent has taken commitments from, or made contracts with, a supplier for a service which the agent then sells or offers for sale to a customer at the same time as other travel services the transaction will be treated, necessarily, as the sale or offer for sale of a package.

There are other statements in the Guidance Note which are said to contain or reflect errors of law. Paragraph 2.3 – under the heading “Package” - is in these terms:

As I have already indicated, the reason which is relied upon in support of the final sentence of paragraph 3.2 - “such arrangements are not seen as creating a package because the travel agent would not have played a role in influencing the arrangements.” - is open to the same criticism as that made of paragraph 5.2. ABTA did not pursue the point in this Court. It does, however, criticise the final sentence of paragraph 3.3:

ABTA criticises much of the guidance given by way of example in section 4 of the Guidance Note. In addition to the “principal errors” which it identifies in paragraphs 4.3 and 4.8, ABTA takes issue with all or part of the following paragraphs:

Paragraph 4.7:

As I have said, section 5 of the Guidance Note contains examples of cases in which the CAA takes the view that an ATOL is not required. I have already addressed the criticism of paragraph 5.2 which was made in the Administrative Court. As I have said, it was not necessary for ABTA to pursue that criticism in this Court, I am satisfied that it was well-founded. Criticism is made, also, of words in paragraph 5.4. The paragraph is in these terms:

Paragraph 6.1 contains the following general observation, by way of summary:

I have not referred, in the preceding paragraphs of this judgment, to the circumstances which gave rise to the issue of the Guidance Note. Those circumstances are set out by the judge at paragraphs [26] to [44] of his judgment. It seems to me that a consideration of those circumstances is of little or no assistance in ascertaining what the Directive and the regulations actually require or in determining whether the criticisms which ABTA has made of the Guidance Note are well-founded. But they are, I think, of some relevance to the question whether, having found that some, at least, of those criticisms are made out, the Court should order that the Guidance Note be withdrawn.

It is common ground that the 2003 Regulations (SI 2003/1741) were made in order to meet a problem which arose from a misalignment between the 1995 ATOL Regulations and the Package Travel Regulations. The problem is described in a Consultation Paper issued by the CAA in August 2002 – “Consultation on Proposed Amendments to the ATOL Regulations: ‘Contract Splitting’ in Package Holiday Sales”:

In some instances, there may (in contravention of the Package Travel Regulations) be no protection in place for the non-travel components like accommodation. This carries the risk that in the event of the agent’s failure the customer will lose the part of his payment that related to accommodation.

Even when non-travel items are separately bonded, there may still be problems. For example, if an operator fails having sold a villa bonded with a trade body and a flight as agent for an ATOL holder, the price of the villa will be reimbursed by the trade body, but the flight will still be available, although the customer may not want to use it without the villa. If he chooses not to do so, the ATOL holder will not be obliged except within normal cancellation terms to make a refund, and there may be no other source of reimbursement. Similarly, there may be circumstances where a refund is available for the flight but not for the villa even though the latter cannot be occupied because no flight is available.

The public will usually believe that they are buying a package, and may be misled by reference to ATOL into believing that all the components are protected by ATOL. Any disclaimers will normally appear in small print. They may also believe that they can obtain protection by paying by credit card, which may not be the case.”

Paragraphs 27 to 32 of the Consultation Paper are relevant to the issue addressed by the Guidance Note. They appear under the heading “Other Implementation Issues”:

In response to the Consultation Paper, ABTA pointed out, in a letter dated 10 October 2002, that an alignment of the ATOL Regulations with the Package Travel Regulations – by bringing the concept of “package” as defined in the Package Travel Regulations into the ATOL Regulations – would leave unresolved the underlying question as to what arrangements fell within that definition. ABTA wrote:

Following consultation, the CAA confirmed its view, in a paper issued in December 2002 – “Proposal for an Amendment to the ATOL Regulations: ‘Contract Splitting’ in Package Holiday Sales” - that the way forward was by an amendment to the ATOL Regulations, so that an ATOL was required for sales that contain air travel and are within the scope of the Package Travel Regulations, irrespective of the number of contracts involved in the sale – paragraph 19 of the December 2002 paper.

Paragraph 25 of the December Proposal – under the heading “Definition of a Package” – may be seen as an attempt to meet the point made by ABTA in its October letter. The paragraph is of relevance in the present context:

There can be no quarrel with the view that advertising, the publication of a brochure or the taking, by the agent, of commitments on aircraft seats or hotel beds are all useful indicators that services are being offered for sale as a package. But it is of importance that those indicators are recognised for what they are: evidential pointers to the true nature of what is offered for sale to the customer. The underlying question is always whether the services are being sold or offered for sale as components of a combination: or whether they are being sold or offered for sale separately, but at the same time. The indicators may point to the answer to that question. But the presence or absence of one or other of the indicators in the particular case will not, necessarily, be determinative of that answer.

The 2003 Regulations – which gave effect to the recommendation expressed in paragraph 19 of the December 2002 Proposal – came into force on 8 October 2003. But it is clear that, in the view of the CAA, the amendments were not able to meet the problem, because (put shortly) the existing systems of regulation had been overtaken by changes in the market. In an “Advice to Government: Financial Protection for Air Travellers and Package Holidaymakers” (CAP 751) published in July 2004, the CAA expressed the conclusion that:

I have indicated my view that there are passages in the Guidance Note which are actually or potentially misleading; although I do not go so far as the judge in upholding all (or substantially all) the criticisms advanced by ABTA. It was submitted to us on behalf of the CAA that we should not make any order disposing of this appeal without first seeking a preliminary ruling from the Court of Justice. The questions which we were invited to refer to that Court were posed in these terms:

I am not persuaded that this is an appropriate case in which to seek a reference from the Court of Justice. For my part, I do not think that the dispute between the parties turns on any point of principle. As I have said earlier in this judgment, it seems to me that there is now little, if anything, between the parties as to the question which has to be posed and answered in those cases in which two or more of the travel services described in article 2 of the Directive are sold or offered for sale at the same time. Are the services being sold or offered for sale as components of a “pre-arranged combination” – giving that phrase the meaning adopted by the Court of Justice in the Garrido case - or are the services being sold or offered for sale separately? If the services are being sold or offered for sale as components of a pre-arranged combination, then the price for the combination is an “inclusive price”; notwithstanding that the price for the combination is the aggregate of the prices for which each component would have been sold or offered for sale if it had been sold or offered for sale as a separate service outside the combination. If the services are being sold or offered for sale separately, then there is no “pre-arranged combination” to which the concept of “an inclusive price” can have any application.

The premise upon which the first of the two questions which the CAA sees a reference to the Court of Justice is based is that “a travel agent organizes and offers to sell . . . a combination of at least two of the components referred to in the definition of package”. Given that the services are offered for sale as components of a combination, the answer to that first question is not, I think, in doubt. The sale of the services in combination will be at an inclusive price if the sum payable to the agent is “comprehensive in the sense of covering all that is offered for sale”. I do not understand ABTA to suggest otherwise.

Nor, given the premise, would the answer to the first of the two questions turn on whether the agent was acting as principal or as agent for two or more distinct suppliers. In each case the services would be sold or offered for sale as components of a pre-arranged combination and the price for the combination would be an inclusive price. The difference, of course, between the two factual situations described in the second of the two questions is that the agent would, necessarily, be acting in contravention of regulation 3(1A) of the ATOL Regulations if he were to make available flight accommodation which constitutes a component of a package in the capacity as agent for two or more distinct suppliers, whether or not the suppliers were themselves licence holders. If the agent were acting as principal, he would, himself, need to hold an ATOL licence.

The issue in the present appeal is whether the judge was wrong to take the view that the Guidance Note should be quashed. That turns, in the first instance, on whether he was wrong in holding that there were passages in the Guidance Note which mis-stated the law or were otherwise misleading. In order to decide whether the relevant passages do mis-state the law, or are otherwise misleading, it is necessary to read the Guidance Note as a whole. Even if (contrary to my own view) the answers to the two questions on which the CAA seek a reference to the Court of Justice were in doubt, the answers to those questions would provide no assistance in resolving the issue in the appeal. The questions are not directed to that issue.

I am satisfied that the Guidance Note is misleading, or potentially misleading to the uninformed reader, in the following respects:

In the absence of any explanation as to what is meant by the phrase “sold or offered for sale at an inclusive price”, the uninformed reader might be led by the two sentences in paragraph 2.5 of which complaint is made to think that “inclusive price” was synonymous with “total price” – so that where services are sold at the same time in circumstances where the total price is the aggregate of the individual prices there will, necessarily, be a package for the purposes of the ATOL Regulations. As I have sought to explain, that is not the effect of the Regulations.

The statements in paragraphs 3.2 and 5.2 to the effect that arrangements are not seen as creating a package where the travel agent has taken no part in influencing the customer’s choice are misleading. In the light of the decision of the Court of Justice in the Garrido case and proviso (ii) to the definition of “package” in both the Package Travel Regulations and the ATOL Regulations, it is irrelevant whether or not the agent has influenced the customer’s choice.

The statement in the first sentence of paragraph 4.3 that, if an agent offers a customer a choice of travel facilities including a flight the resulting sale will be a package, is over-simplistic and misleading. It is only where the services are sold or offered for sale as components in a pre-arranged combination that there will be a “package” for the purposes of the ATOL Regulations. Where flight accommodation is made available as one of a number of services sold or offered for sale separately (albeit at the same time) the agent is not to be treated as a person within regulation 3(1A) of those Regulations.

The statement in paragraph 4.4 is not accurate. The provision of information does not, of itself, bring the agent within regulation 3(1A) of the ATOL Regulations. What is required is that flight accommodation is made available as a component of a package. The provision of information may, but will not necessarily, lead to the conclusion that the flight accommodation is offered for sale as one of a number of components in a pre-arranged combination.

The statement in paragraph 4.7 that “he will need an ATOL to cover the majority of such sales” is unhelpful. “Tailor-made holiday arrangements” are not necessarily within the definition of “package” for the purposes of the ATOL Regulations; although some will be. The statement does not enable the uninformed reader to identify the circumstances in which an ATOL will, or will not, be required.

The words “unless they are linked by documentation”, which qualify the first sentence in paragraph 5.4, are misleading in that they suggest that common documentation will, necessarily, lead to the conclusion that the sales which are the subject of that documentation are components in a pre-arranged combination. That is not a necessary conclusion.

In my view the cumulative effect of the statements to which I have referred is that the Guidance Note is likely to give the uninformed reader a misleading impression as to the circumstances in which regulation 3(1A) of the ATOL Regulations requires that the agent be a licence holder. It is clear, from the circumstances which gave rise to the issue of the Guidance Note, that the CAA appreciated that the definition of “package” in the Directive and the Package Travel Regulations gave rise to difficulties of interpretation and that the introduction of that concept into the ATOL Regulations by the amendments made in 2003 was, at best, a compromise which did not really meet the need for consumer protection in the changed market conditions which the CAA had identified. In my view it is not satisfactory that the uninformed reader of the Guidance Note might be led to think that regulation 3(1A) has a wider reach than, on a proper interpretation, it can be given.

The judge quashed the Guidance Note. But the Guidance Note contains nothing which affects existing or future rights: there is no need for an order that it be quashed. It is, I think, accepted that an order directing that the Guidance Note be withdrawn would be the appropriate relief in the circumstances that it has been found to be misleading. Subject to any further representations which the parties may wish to make on that point, that is the order which I would make. Save to that extent necessary to make that substitution, I would dismiss the appeal.

I agree.

I also agree.