Olympic Council of Asia v Novans Jets LLP
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder DBE |
| Judgment Date | 19 January 2022 |
| Neutral Citation | [2022] EWHC 88 (Comm) |
| Docket Number | Case No: CL-2019-000562 |
| Year | 2022 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 88 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
Mrs Justice Moulder DBE
Case No: CL-2019-000562
Michael McLaren QC and Deborah Horowitz (instructed by The Air Law Firm LLP) for the Claimant
John Kimbell QC and Joseph Gourgey (instructed by Bargate Murray Limited) for the Defendant
Hearing dates: 13–16 December 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is a dispute concerning the termination of an “aircraft lease to purchase” agreement entered into between the claimant and the defendant following nonpayment of an invoice GL112/19 for US$282,138.43 (the “Disputed Invoice”).
The claimant (“OCA”) is an independent non-governmental not-for-profit organisation based in Kuwait. OCA's primary purpose is the promotion and organisation of sporting events throughout Asia and to act as a representative authority for the National Olympic Committees of Asian countries.
The defendant (“Novans”) is an English aircraft broking and consultancy company.
Remote hearing
Due to COVID and the witnesses being abroad, the parties requested a remote hearing and this was approved by the court in the circumstances. Both parties were represented by leading counsel and the court had the benefit of both written and oral submissions.
Background
The parties entered into the Aircraft Lease to Purchase Agreement (“ALPA”) on 31 August 2018, pursuant to which Novans agreed to charter an aircraft to OCA, by providing 1,515 block hours “for priority usage” of the aircraft from 1 October 2018 to 31 December 2022.
The price per block hour was stated in the ALPA to be US$9,505 per block hour (a “Block Hour”) such that the “Total Price” for 1515 Block Hours was USD14,400,000.
The Total Price included certain expenses identified in the ALPA but excluded other expenses (“Excluded Expenses”) such as “scheduled and unscheduled maintenance and crew accommodation”. These Excluded Expenses were payable by OCA in addition to the amount payable for the Block Hours.
The terms of payment of the Total Price for the Block Hours were by instalments such that by the time the Disputed Invoice was raised in April 2019, OCA had made the first two instalments comprising an initial payment of US$8,100,000 and a further instalment of US$1,575,000 i.e. a total of US$9.675m of the total US$14.4m
When OCA was not using the Aircraft, it could be used by Novans to offer charter flights to third parties, on the basis that pursuant to the ALPA Novans agreed to share (on an unspecified basis) with OCA the net profit generated from those aircraft charter sales.
Under the ALPA Novans also purported to grant to OCA a “priority right” to purchase the Aircraft either during the lease term (but after 31 December 2020) or at the end of the lease term at a price to be mutually agreed. OCA additionally had the option, at the end of the lease term, to extend the lease term subject to mutual agreement of the terms and conditions for such extension.
The Aircraft was operated under the Air Operator Certificate of ACASS San Marino S.r.l. (“ACASS”) as the Licensed Operator. There was a separate agreement between Novans and ACASS under which Novans was obliged to reimburse ACASS for expenses incurred.
There were two invoices issued for the Excluded Expenses in the quarter to 31 December 2018. These were cancelled and replaced by an invoice issued in January 2019 which covered all expenses for the previous quarter: on 21 January 2019, Novans issued to OCA invoice number GL111/19 for US$112,928.24.
Novans also sent a December 2018 “statement of account” and supporting documents to OCA which included an ACASS invoice to Novans dated 17 December 2018 for US$158,532.34.
On 19 March 2019, OCA paid the sum of US$158,532.34 to Novans.
Novans responded by email pointing out that the invoice was not payable by OCA and informed OCA that OCA's payment of US$158,532.34 had been applied towards invoice number GL111/19, and that the excess amount (a credit balance of US$45,604.10) would be credited to Novans' next invoice to OCA for expenses.
On 8 April 2019, Novans issued to OCA the Disputed Invoice (GL112/19 for US$282,138.43). The due date was stated to be 12 April 2019. The cover email made reference to a surplus and the statement showed a credit of US$45,000.
The Disputed Invoice was not paid. The events that followed are considered in detail in relation to the issues for determination. The key dates for the purposes of this section are as follows.
From 12 to 13 April 2019, meetings were held in Lausanne between Mr Al Musallam, the Director General of OCA, and Mr Gringuz, the Managing Director of Novans.
In May 2019 Mr Banna, the Finance Director of OCA, travelled to Kiev to meet with Novans. However no-one from Novans was available to meet him.
Novans sent a letter on 11 June 2019 giving OCA until 14 June 2019 to make payment of the Disputed Invoice.
OCA did not make the payment and by letter dated 14 June 2019 Novans purported to suspend the ALPA and the use of the aircraft.
In correspondence lawyers for OCA challenged Novans' right to suspend the contract. A “without prejudice” meeting was held in August 2019 which was unsuccessful and on 18 September 2019 Novans served notice purporting to terminate the ALPA for non-payment of the Disputed Invoice.
As at the date operations were suspended by Novans, OCA had utilised 281.9 block hours with a contract value of US$2,679,459.50, despite by then having paid for 1,017.88 block hours with a contract value of $9,675,000 (these are the amended utilisation figures now claimed by OCA).
Issues for the court
In summary OCA brings the following claims:
i) a claim that Novans has breached the ALPA, in (a) failing to co-operate in relation to OCA's queries as regards the Disputed Invoice, (b) suspending OCA's use of the Aircraft, (c) purporting to terminate the ALPA and (d) failing to share profits from third-party charters; and
ii) a claim in unjust enrichment, seeking restitution of the US$6,995,540.50 paid by OCA in respect of unused block hours (this is the lower amount now sought by OCA following the reduction to the unused block hours)
Novans' case is that:
i) the sums invoiced under the Disputed Invoice were duly payable and OCA's failure to pay amounted to a repudiation of the ALPA which Novans duly accepted in reliance on its rights under common law and the termination provisions in the ALPA in particular clause 10(b) and/or 10(c).
ii) OCA cannot rely on unjust enrichment because this would contradict the clear wording of clause 3 that any payments made by OCA would be “non-refundable”. Novans was entitled to suspend OCA's use of the aircraft as OCA had no right to call upon Novans to perform without having its expenses reimbursed.
In this judgment I have dealt primarily with those issues which in my view were necessary to resolve the claim and accordingly have not addressed all the issues raised by the parties. Where I have referred expressly to submissions on a particular issue, I have included only those submissions which in my view were necessary to deal with expressly. I have however considered the entirety of the submissions both written and oral and the omission of a reference to a particular submission should not be taken to be a failure to consider the relevant submission.
ALPA-Relevant provisions
There is no clause numbered 1 or 2 in the ALPA but prior to numbered clause 3 the following paragraphs appear after the section which clearly amount to “recitals” to the operative sections and are preceded by a heading “CLAUSES”:
“a) Lease Term, Priority and Block Hour Amount
The Lessor agrees to provide Lessee, or any other natural or legal person appointed, the requested total amount of 1515 (One Thousand Five Hundred Fifteen hours) block hours for priority usage on aforementioned Aircraft starting from 01st October 20–18 until 31st December 2022. Lessor is obliged to perform flight operations for requested flight schedule of Lessee under certain terms and conditions stated below. The lease term starts on 01.10.2018 until 31.12.2022 when this agreement extinguishes. An extension of the period of service is to be agreed not later than six months prior to end of this agreement.
b) Price per Block Hour and Total Price
9,505 USD (nine thousand five hundred five US Dollar) per block hour whereby total amount for 1515 block hour is 14,400,000 USD (fourteen million four hundred thousand US Dollar).
c) Block Hour Utilisation
Each flight leg shall be minimum 4 hours unless several flight legs are performed over a period of 5 days whereby the total shall average 4 hours.
d) Price includes
The Block Hour Prices includes aircraft, crew consisting of 2 pilots and 1 flight attendant, AOC expenses, flight planning, navigation fees fuel, insurance, aircraft wifi, crew remuneration, airport landing/take-off and handling fees of 1000 USD per leg, flight preparation.
e) Price excludes
All Expenses, not expressly mentioned as being included in clause 2E shall be payable by the Lessee and include, but are not limited to, the following: parking, catering, overnight fees, scheduled and unscheduled maintenance, crew accommodation, crew transportation, crew visas, schedule changes, aircraft de-Icing and/cold weather hangarage charges, VIP lounges, war risk insurance, Italian luxury tax, UK Air passenger duty, passenger transfers, special overflight or landing...
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