Credit Suisse AG v Arabian Aircraft & Equipment Leasing Company EC and Others
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Mackie |
| Judgment Date | 24 April 2013 |
| Neutral Citation | [2013] EWHC 1094 (Comm) |
| Docket Number | Case No: 2012 Folio 1167 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 April 2013 |
2013 EWHC 1094 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Rolls Building
7 Rolls Buildings
London EC4A 1NL
His Honour Judge Mackie QC
(Sitting as a Judge of the High Court)
Case No: 2012 Folio 1167
Mr Andrew Lydiard QC (instructed by Messrs Ince & Co) appeared on behalf of the Claimant.
Mr Charles Graham QC and Mr James Tumbridge (instructed by
Messrs Gowlings (UK) LLP) appeared on behalf of the Defendants.
Approved Judgment
His Honour Judge Mackie QC:
This is an application for summary judgment by the Claimant, Credit Suisse AG, against three Defendants: Arabian Aircraft & Equipment Leasing, Mr Mansour Ibrahim Al-Tassan and Bahrain Executive Air Services Company, known as "Bexair".
The application is supported by various bundles of documents and two witness statements from a solicitor, Mr McInnes. It is opposed by a witness statement from another solicitor, Mr Harris, which is supported by that of an expert, Mr McDonald, who had some involvement in the issues which arise in the action.
I am grateful for the assistance of submissions from Mr Lydiard QC for the Claimant and from Mr Graham QC and Mr Tumbridge for the Defendants.
Although there are three Defendants, no separate issue arises in relation to the individual Defendants. The case of the other Defendants stand or fall with that as against the First Defendant. The application is for summary judgment on liability, with damages to be assessed; alternatively, a conditional order for payment of the sums in dispute into court; alternatively for a conditional order for an interim payment on account.
I bear in mind at all stages that this is an application for summary judgment. The Claimant has to show that the Defendants have no real prospect of success if they are going to succeed. I also bear in mind, as always, the guidance given by (the then) Mr Justice Lewison in Federal Republic of Nigeria v Santolina Investment Corporation & Ors [2007] EWHC 437 (Ch). If at any point, when expressing a view about something, I omit to say it, it can be taken to be a finding that it is to a "no real prospect" standard.
The background is that, by a lease agreement entered into on 15 th March 2004, the First Defendant leased a Canadair Challenger aircraft from Credit Suisse. The Second Defendant guaranteed the First Defendant's obligations. The First Defendant had agreed to buy the aircraft for some $13 million. Credit Suisse was to fund it. The Purchase Agreement was assigned to Credit Suisse, which then paid the seller and there was a finance lease back to the First Defendant, with options to purchase. The aircraft was sublet to the Third Defendant, Bexair.
The lease has to be read as a whole and in context the particular clauses relied upon are as follows. Clause 6.1 provides that, in the absence of circumstances that do not arise here:
"… on the Expiry Date the Lessee shall, at its own expense, redeliver the Aircraft Package to the Lessor at the Redelivery Location in the condition specified in clause 6.3 [that is to say in broad terms a good condition]."
Clause 7 has various provisions for the payment of the rent and what is to happen if a payment is not made.
There is a promise by the Defendant, in clause 11, not to create any security interests, which includes a lien. The Defendant was, as one would expect from a relatively standard form document, obliged to keep the aircraft in good repair, operating condition and so on.
Clause 18 provides the focus for some of the legal argument in this case. Clause 18.1 provides that non-payment of rent and breaches of other obligations are to be Events of Default. By clause 18.2(A):
"An Event of Default shall constitute a material breach of a condition of and a repudiation by the [Defendant] of its obligations …"
By 18.2(B)(ii), the Claimant was to be entitled to:
"… accept such repudiation, to terminate the leasing of the Aircraft Package under this Agreement and require the Lessee to redeliver the Aircraft Package to the Lessor at the Redelivery Location."
(D) provides that:
"… termination of the leasing of the Aircraft Package under this Agreement shall not relieve the Lessee from any of its obligations under any of the Operative Documents which remain unsatisfied."
There is then clause 18.4, under which the claim, if not brought at the outset, is brought now. It provides, in relevant part, that:
"… whether or not the Lessor shall have exercised … any of its rights under clause 18.2 … the Lessor may … following a default or Event of Default, require the Lessee to pay to the Lessor on the demand of the Lessor by way of agreed further compensation and not as a penalty an amount equal to the aggregate of:
(A) all arrears of Rent …;
(B) any loss, damage, expense, cost or liability …;
(C) all amounts of Rent which would have fallen to be paid under this Agreement from the date of such termination up until the Initial Expiry Date … but for the early termination of the leasing of the Aircraft Package, calculated at the same rate for the notional balance of the Term as at the date of such termination, discounted over the notional balance of the Term at the Discount Rate applicable on the date of such termination."
(D) relates to the Residual Book Value and from that is deducted "the aggregate of the Fair Market Value of the Aircraft on the date of such termination", a definition to which I will return.
By June 2008, the aircraft was in the possession of Bombardier. In the course of that month, if not before, it is common ground that it asserted a lien which extended, on its account, to some $1.1 million. The aircraft was with Bombardier and remained so until a contract for its sale was entered into in December 2011.
On 3 rd June 2009, following what are conceded to be failures to pay money, Credit Suisse served Notice of Default on the First Defendant and on the Guarantor. In October 2009, Credit Suisse served notice to terminate the lease under clause 18.2(B)(ii), together with a demand for payment of the sums then due.
There is a dispute between the parties about the operation of clause 18 in the context of the other clauses in the agreement.
As the demand for payment initially stated, the claim in this case is for amounts payable under clause 18.4 of the lease. It is true that the Particulars of Claim do not identify 18.4 specifically, but what is being claimed is by reference to the elements in that clause. The way that worked is that the Claimant says that the amount due at the end of the leasing was $835,546.58 and there are various components to that. Credit was given for the proceeds of an additional security required at the time of the deal, of $2.742 million and also the proceeds of sale of the aircraft when it was sold at the end of 2011 for $4.996 million.
A considerable period of time has elapsed since the demand in October 2009, during which Credit Suisse has been seeking to obtain the benefit of its security in various ways. There is a chain of correspondence to which I have been taken. There was a letter agreement, dated 6 th January 2010. Settlement discussions were still taking place in May 2010. In August 2010, Credit Suisse complained to Bombardier about Bombardier's refusal to release the aircraft and its deterioration. The aircraft was, it seems, deteriorating because it was being kept in unsatisfactory conditions by Bombardier and Bombardier were doing nothing about it. The Third Defendants had some knowledge of what was going on, although they had no control. Eventually, a settlement agreement between Credit Suisse and Bombardier was entered into on 11 th February 2011. Credit Suisse now claim for payment.
The Defendants, while conceding that repudiation took place, submit that the Claimant cannot show that they have no real prospects of defending the claim and that this matter must go to...
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