Optimares S.p.A. v Qatar Airways Group Q.C.S.C.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Calver |
| Judgment Date | 07 October 2022 |
| Neutral Citation | [2022] EWHC 2461 (Comm) |
| Docket Number | Case No: CL-2020-000630 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 2461 (Comm)
Mr Justice Calver
Case No: CL-2020-000630
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mark Beeley (instructed by Orrick, Herrington & Sutcliffe (UK) LLP) for the Claimant
Edward Cumming KC and Emma Hughes (instructed by Norton Rose Fulbright LLP) for the Defendant
Hearing dates: 11th July 2022 – 29th July 2022
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 on Friday 7 th October 2022.
(A) The Contractual Framework
(i) The Purchase Agreements
In 2018 and 2019 the Claimant (“ Optimares”) and the Defendant (“ Qatar Airways”) entered into Purchase Agreements 1 for Optimares to design, manufacture, sell and deliver business class seats for the Boeing 787–9 aircraft, business class seats for the Boeing 777–9 aircraft and both economy and business class seats for the Airbus 321 aircraft (“ the Purchase Agreements”). 2 These contracts covered work done by Optimares prior to the signing of the Purchase Agreements, as well as forward-looking work, and envisaged that Optimares would fabricate a number of “shipsets”, that is, groups of seats for installation into the aircraft (known as a “ retrofit”). 3 The Parties provided that Qatar Airways would place orders for the shipsets by issuing purchase orders to Optimares and these purchase orders were governed by the terms of the Standard Conditions and the Purchase Agreement. 4 The prices for the Products were contained in Exhibit No 6 to the Purchase Agreement and all prices were in the Base Year United States Dollars. 5
On delivery of the Product referred to in the relevant purchase order to the satisfaction of Qatar Airways, Optimares would invoice it and that invoice would be payable within 45 days of receipt. 6 The Parties had agreed in the Purchase Agreement that time of delivery was of the essence and that Optimares had to meet the applicable “ on-dock-dates”. 7 The Parties also provided that orders for shipsets would be placed no later than five months prior to the relevant on-dock-date. 8
In addition to payments due on delivery of the Products, the Purchase Agreement also provided for the payment of “non-recurring costs” (“ NRC”) in accordance with an agreed schedule. NRC were, in essence, those costs incurred by Optimares in developing and producing the Product, covering the phases of design, development, engineering and final certification of the seat. Payment of these NRC was to be made in four instalments each of 25% thereof, contingent on Optimares reaching the four milestones in the development and completion of the relevant programme, namely the Initial Technical Meeting (“ ITCM”), 9 Critical Design Review (“ CDR”), 10 First Article
The Purchase Agreements expressly incorporated Qatar Airways' Standard Conditions 14 and provided that, in the event of inconsistency between the Purchase Agreement and the Standard Conditions, the terms of the relevant Purchase Agreement would prevail. 15 The Product Specification document (Exhibit No 12 to the Purchase Agreement) was subordinate to both of these contractual documents. 16
The relevant Standard Conditions and terms of the Purchase Agreement are set out in Annex 1 to this Judgment.
(B) How the issue of contractual construction arises
I agree with the submission of Mr. Edward Cumming KC, who appeared at trial with Ms. Emma Hughes for Qatar Airways, that the Purchase Agreements principally fall to be interpreted by an examination of their terms, the key provisions of which appear in Annex 1 below. Whilst the terms of the Purchase Agreements are clearly favourable to Qatar Airways who no doubt had the whip hand in the negotiations, they were nonetheless subject to some negotiation between the parties (with Optimares suggesting modifications to the drafts after a review of the contracts, including by its IP lawyers). It is clear that Optimares was keen to enter into the Purchase Agreements 17 and made the choice to contract on the terms that it did.
At paragraph 4 of the Amended Particulars of Claim, Optimares relies upon two matters for what it describes as the “ backdrop” to the entering into of the Purchase Agreement, as follows:
“(a) Representatives of [Qatar Airways], including Messrs Akbar Al Baker and Rossen Dimitrov, made it clear to Optimares during the course of 2018 that if Optimares wished to win contracts from [Qatar Airways], it should not take on new business for existing clients and/or decline to take on new clients, such that [Qatar Airways] would have priority access to Optimares' production lines.
(b) The same representatives of [Qatar Airways] demanded during the course of 2018, as a condition to continuing negotiations, that Optimares secure a bigger plant and make substantial capital investments in its facilities. Optimares met such conditions”.
Qatar Airways disputes both of these points factually. But the outcome of this factual dispute does not matter, as even assuming in Optimares' favour that both points are factually proven, they cannot alter the clear wording of each of the relevant Purchase
Mr. Beeley (a partner at Orrick, Herrington & Sutcliffe solicitors), who appeared on behalf of Optimares, submitted that Optimares incurred millions of euros in costs in progressing the works and was on the cusp of delivering shipsets when, on 23 March 2020, Qatar Airways served termination notices in respect of all four contracts and the Purchase Orders which had been placed under them. Qatar Airways disputes this and alleges that Optimares was guilty of numerous delays prior to it terminating the contracts. Once again, in my judgment, in view of the clear terms of the Purchase Agreements, the outcome of this dispute does not matter.
The termination notices served by Qatar Airways stated as follows:
“ This letter (this “Letter”) constitutes formal written notice that, pursuant to Clause 12.2.3 of the Standard Conditions, we hereby exercise our right to terminate the following (for our convenience and without incurring any liability whatsoever):
(a) the Purchase Agreement (together with the Standard Conditions), with such termination being effective three (3) months from the date of this Letter; and
(b) all Purchase Orders issued under the Purchase Agreement, with such termination being effective fourteen (14) days from the date of this Letter. Without prejudice to your continuing obligations under the Purchase Agreement and pursuant to Clause 12.3.2 of the Standard Conditions, we hereby demand that you repay the following (“Costs”):
1. all sums previously paid by us to you together with Interest thereon, within ten (10) calendar days of the relevant termination; and
2. all Freight Charges paid or incurred by us for Products and Spare Parts affected by such termination”.
This was one day after Optimares had served notices of allegedly excusable delay under all four contracts on 22 March 2022 in the following terms:
“ The event of Excusable Delay is the outbreak of COVID-19, and in particular the Italian Government's response to it. As Qatar Airways has been aware, since 10 March 2020 the entirety of Italy has been on Government mandated ‘lock down’. Further measures taken across the EU have meant that testing and other certification by third parties has been impossible. We are also receiving large number of force majeure declarations from our suppliers.
This has made all manufacturing and related processes effectively impossible, and has removed the Supplier's ability to perform the Purchase Agreement in any meaningful fashion. The circumstances fall within the definition of Excusable Delay as set out in section 13.1.1 of the Standard Conditions.
As matters stand, we are unable to provide a meaningful estimate as to when the Supplier will be able to resume its operations under the Purchase Agreement, but will update Qatar Airways as matters develop. As matters stand, we cannot identify any measures within our control to minimise or overcome the Excusable Delay, but will continue to review this in light of section 13.1.5 of the Standard Conditions…”
In paragraphs 6–10 of its written opening, Optimares submitted as follows:
“ 6. Optimares does not dispute that Qatar had in some circumstances a right to terminate for convenience, but says:
(a) that right was not available where Excusable Delay had been invoked under the contracts (which Optimares had done so days before given the Italian shutdown of all non-essential industry due to the outbreak of COVID-19); and
(b) that right was not exercisable in order to re-award the same works to another contractor at a lower price (to the extent the disclosure has been made by Qatar, it is clear that prior to termination Qatar was deep in discussions with Adient, and it has sought to redact all pricing data in relation to this new contract from its disclosure). Adient is part owned by Boeing, who also owns BGS, who was serving as D's integrator for the B787 and B777 programmes – and who became an increasing impediment to C's forward works at the very time Adient was speaking with D about replacing C.
7. Accordingly, Optimares was wrongfully terminated, and should be entitled to its lost profits and its costs thrown away. In any event, even if the termination were valid, Optimares should be entitled to its...
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Termination Provisions: The English High Court Continues To Adopt A Strict Approach To Contractual Construction
...ultimately to a judge) if the true meaning of the contractual terms ever becomes the subject of a commercial dispute. Footnotes 1. [2022] EWHC 2461 (Comm) 2. [2017] AC 1173 3. [2019] EWHC 778 (Ch) 4. Per Lord Neuberger in Arnold v Britton [2015] UKSC 36 at paragraph 15, quoting from Lord Ho......