Mr and Mrs Hofbauer had booked a holiday in Crete with an Austrian travel agency. They had paid the full cost of the package including the air tickets and their half-board accommodation before departure.

At the end of their holiday, the owner of the hotel demanded payment in full for their accommodation and even prevented them from leaving the premises until they had paid. The travel agency was insolvent and was no longer able to pay the hotelier.

Mr and Mrs Hofbauer were thus forced to pay for their accommodation a second time. When they returned, and the travel agency's insurers refused to reimburse the money they had paid to the hotel, the consumer association brought an action on their behalf before the competent national court (the Bezirksgericht für Handelssachen Wien).

The association argued that Mr and Mrs Hofbauer were entitled to cover for "the refund of money paid over" or for the expenditure necessary for "the repatriation of the consumer" within the meaning of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours and that the insurers were therefore liable to refund those sums of money if the travel organiser became insolvent.

The national court therefore requested the Court of Justice to rule on the question whether the Directive could be interpreted in that way.

The Court observed that the purpose of the Directive was to protect consumers against the risks stemming from the payment in advance of the price of a package holiday and from the spread of liability between the travel organiser and the various providers of the services which in combination make up the package.

Accordingly, it considered that the Directive was intended to cover the situation in which a hotelier forces a holidaymaker to pay for the accommodation provided, claiming that the he will not be paid that sum by the insolvent travel organiser. The risk involved for the consumer who has purchased the package holiday derives from the travel organiser's insolvency.

The Court concluded that, since the consumer had actually paid the cost of the accommodation twice over, first to the travel organiser and then again to the hotelier, the insurer's obligation was to refund (...) money paid over'. The holidaymaker having been accommodated at his own expense, the sums he paid to the travel organiser would have to be refunded to him since, following the organiser's insolvency, the services agreed upon were not supplied to him by the organiser.

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