21 Oct 2020 9:00AM
The law doesn’t exempt airlines from issuing reimbursements, only compensation
SINCE the outbreak of the Covid-19 pandemic, there has been a huge number of flight cancellations.
The latest Waypoint Report of the Malaysian Aviation Commission (Mavcom) informs that airlines are adjusting their seat capacities weekly due to uncertainties in travel demand and restrictions.
Even as early as June, 29.6 million seats had been cancelled, representing 35.4% of Malaysian carriers’ total seat capacity.
Foreign carriers operating to and from Malaysia had also cancelled 9.2 million seats (33.6% of total seat capacity).
Cancellations occur as a result of either the airlines or the passenger deciding to not fly.
An airline’s decision to do so may be due to a temporary loss of landing rights because of a lockdown or it is economically not viable for the airline to proceed with the flight.
A passenger’s decision may be due to quarantine restrictions, cancellation of an event for which the flight was booked, or simply fear of travel due to the pandemic.
Mavcom has an unenviable task relating to refunds. Covid-19 has placed passengers and airlines under immense stress.
Many passengers have lost their jobs. Airlines have substantially reduced their workforce, facing possible bankruptcy.
In an event of an airline filing for bankruptcy, consumers may not get any refund at all.
Mavcom has, by way of a FAQ on its website, informed that the cancellation of flights by airlines is caused by extraordinary circumstances and refund options offered to passengers is a commercial decision.
However, when it comes to cancellation by consumers, Mavcom’s position is that the refund value would depend on the terms and conditions of the ticket.
Consumers are aggrieved by this. The position adopted by Mavcom is also not in compliance with the law.
Mavcom’s consumer protection code
Mavcom had issued a consumer protection code that was published in the gazette on June 30, 2016.
Cancellation of flights by the airline is covered in schedule 1 of the code. When there is a cancellation of a flight by the airline, the passenger shall be offered reimbursement, within 30 days, of the full cost of the ticket at the price at which it was bought, including taxes and fees.
The code does provide that the airline shall not be obliged to pay compensation if it can prove that the cancellation is caused by extraordinary circumstances defined as those that may, in particular, occur in cases of war, meteorological conditions, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an airline.
Even if the effect of the pandemic is read as an extraordinary circumstance, this provision only exempts the airline from paying compensation.
It does not exempt refund of the price paid for the ticket.
The code does not deal with cancellation of flights by consumers except to provide that airlines shall disclose all terms and conditions of the contract, including refund and rebooking fees, before the purchase of the ticket.
Consumer Protection Act is the applicable law
Section 2 (1) of the Consumer Protection Act 1999 (CPA) states that it shall apply in respect of all services that are offered or supplied to consumers in trade, including any trade transaction conducted through electronic means.
Section 2 (2) states the industries to which the CPA shall not apply. The aviation industry is not listed in section 2 (2). Hence, the aviation industry is bound by the CPA.
Contracting out is an offence
The CPA explicitly provides that the provisions of the CPA shall have effect notwithstanding anything to the contrary in any agreement and that every supplier who purports to contract out of any provision of the CPA commits an offence.
MAVCOM has to give effect to CPA
Access to the Tribunal for Consumer Claims for matters governed by the Mavcom Act 2015 is no longer possible due to an amendment made to the CPA in 2015.
The Act grants Mavcom immense powers to enforce consumer rights. A consumer complaint lodged with MavcomM will result in the appointment of any member of the commission or a committee to hear and determine the complaint.
In determining the complaint, the member or the committee may require for cost to be paid to the party in whose favour the decision is made. Mavcom may register its decision as a judgement of the high court and enforced as such.
A person aggrieved with a decision of Mavcom may, within three months from the date of decision, appeal to the high court, a costly venture that few consumers would undertake unless consumed by an acute sense of injustice or severe disgruntlement.
Though Mavcom has adjudicative powers, the legal rights of the consumer are those specified in the CPA, and commission has to give effect to them.
CPA on refunds for cancellation
Section 63 of the CPA governs refunds in relation to consumer services contracts when there is a cancellation. The section provides that a cancellation of a consumer contract for services may be made by communication by the consumer of the intention to do so.
Section 64 (1) (a) states that the consumer shall be entitled to obtain from the supplier a refund of any money paid unless a court (or the Tribunal for Consumer Claims) orders that the supplier may retain the whole or any part of the money paid.
Admittedly, there is a provision in the CPA that provides that there shall be no right of redress against the supplier under the CPA in respect of the failure of the service provider to comply with the implied guarantee as to fitness for particular purpose (section 54) or to time of completion of the contract (section 55) where the failure is due to a cause independent of human control (section 58).
However, this does not apply to the right of cancellation of the contract and the right to a refund.
Is there no relief possible for the airlines when the consumer cancels a contract and a refund is due?
There is. Section 65 of the CPA provides the power to a court to provide relief, including permitting the supplier to retain all or part of the money paid by the consumer.
For doing so, the court may take into consideration the extent to which the supplier would have been able to perform the contract and such other matters as the court thinks fit.
The power to grant ancillary relief is that of the court alone, not the Tribunal for Consumer Claims, and certainly not Mavcom.
For any authority other than the court to grant such relief would be ultra vires, i.e. beyond its legal power or authority.
No relief under Covid-19 Act 2020
Parliament has passed the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 and it will become law when it receives royal assent, and is published in the gazette.
The Transport Ministry could have, if it considered appropriate, sought to protect the aviation industry under Part II of the Act which deals with inability to perform contracts. The aviation industry is not covered under Part II of the Act.
The minister in charge of law has power to add to the list of agreements covered under Part II of the Covid-19 Act 2020, and perhaps representations need to be made by the airlines or the regulators for this purpose.
Unless Parliament by law provides otherwise, pursuant to section 64 (1) (a) of the CPA, consumers are entitled to a return of funds when there is a cancellation of a flight by the airline or the consumer. – The Vibes, October 21, 2020
Prof Emeritus Datuk Sothi Rachagan is a former dean of the Universiti Malaya Law Faculty, vice-chancellor of Perdana University and Nilai University, and president of the International Association of Consumer Law. He serves on the boards of numerous international consumer protection bodies.