Swissport (UK) Ltd v Aer Lingus Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Peter Prescott QC |
| Judgment Date | 14 May 2007 |
| Neutral Citation | [2007] EWHC 1089 (Ch) |
| Docket Number | Appeal Court No: CH/2006/PTA/0720 |
| Court | Chancery Division |
| Date | 14 May 2007 |
[2007] EWHC 1089 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Peter Prescott QC (Sitting as a Deputy Judge of the High Court of Justice)
Appeal Court No: CH/2006/PTA/0720
Mr Stuart Isaacs QC and Mr Glen Davis (instructed by Speechly Bircham) for the Appellants
Mr Christopher Harrison (instructed by Olswang) for the Respondents
Hearing date : 27 March 2007
I direct that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
Mr Peter Prescott QC:
This is an appeal from a decision of Deputy Master Hoffmann of 15 September 2006. He gave summary judgment for the claimants (“Swissport”) against the defendants (“Aer Lingus”) in the sum of £998,849.32, inclusive of interest, in respect of charges for ground handling services performed for Aer Lingus at Heathrow Airport. He ordered that there be payment out of court to Swissport in the sum of £750,000 and accrued interest. The legal costs were to be assessed in detail if not agreed and Aer Lingus were required to pay £25,000 on account of those costs.
I understand that the transcript of the Deputy Master's judgment was not available until 17 October 2006. There were also certain interim applications for stays of execution and for permission to appeal, which I need not describe.
I should explain or mention certain matters at the outset.
(a) Ground handling services includes cleaning the aircraft, handling the passengers' baggage, and so forth.
(b) Swissport did perform ground handling services at Heathrow for Aer Lingus pursuant to a contract, whereby Aer Lingus incurred charges.
(c) Aer Lingus do not now dispute the amount of those charges. Together with interest, they amounted to the sum that the Deputy Master held to be due.
(d) Swissport are insolvent. They ceased trading and went into administration on 16 November 2004. On or about 10 November 2006 (which was after the date of the Deputy Master's decision) they went into liquidation.
(e) There are said to be employment proceedings, still unresolved, that would or might affect the outcome of the present case. The claims were brought by former employees or their unions. They have failed so far, but there is an appeal pending before the Employment Appeal Tribunal. Its decision should be available soon.
Aer Lingus contend that summary judgment is not appropriate because they have a counterclaim whose value exceeds the ground handling charges, alternatively, a set-off. The value of that counterclaim or set-off is said to be affected by the outcome of the employment proceedings.
The Facts
The background to this case is described in the transcript of the Deputy Master's judgment. Further background is apparent from the decision of the Employment Tribunal for London South of 8 August 2006. For present purposes I think I can summarise the facts as follows.
Aer Lingus have a large business at Heathrow Airport, Terminal 1. Their aircraft fly in or out of there around 22 times a day, carrying 1.2 million passengers a year. The ability of Aer Lingus to satisfy any relevant claim is not in question.
Formerly, Aer Lingus employed their own staff to provide ground handling services for its flights into and out of Heathrow Airport. But in 1999 they decided to outsource. Thus by a contract of 30 November 1999 Aer Lingus transferred their Heathrow ground handling business to Swissport and by a contract of the same date Swissport agreed to provide ground handling services for Aer Lingus at a fixed cost per flight. The ground handling agreement was to be in force until 30 November 2009.
It was pursuant to those contractual arrangements that Aer Lingus incurred the ground handling charges that the Deputy Master held to be due.
The business transfer agreement had to make provision about the transfer of employees and this was addressed by Clause 10. I shall revert to that later.
Matters continued in that vein until 2004, when Swissport tried to re-negotiate the contract: they said they were losing money, mainly because of high labour costs. Aer Lingus refused to budge. The contract was at a fixed price per flight, it still had about 5 years to run and, so far as Aer Lingus were concerned, the real commercial benefits had yet to accrue. Eventually Swissport ceased trading and went into administration. Specifically:—
(a) On 15 October 2004 Swissport's parent company wrote to say that Aer Lingus was a very valuable customer with whom they wished to pursue “a strong and lasting relationship” but that they wanted an urgent meeting to discuss a “New Collaboration Model”. Aer Lingus did not reply.
(b) On 27 October 2004 Swissport wrote again, this time purporting to impose substantially higher handling charges at Heathrow Airport with effect from the 1 st November 2004. They said “It is the only way we can continue to handle Aer Lingus”. The letter concluded: “Should you decide not to accept these rate increases from this point, then please regard this letter as 60 days notice, in writing, that we will not handle Aer Lingus flights at LHR, effective from 1 st January 2005”.
(c) On 1 November 2004 Aer Lingus replied, pointing out – correctly – that Swissport had no right to impose higher handling charges unilaterally, nor to determine the contract upon notice. They demanded immediate confirmation that Swissport's demands would be revoked.
(d) On 5 November 2004 Swissport said that their directors had become increasingly concerned about the company's unsustainable losses over the recent months and that unless Aer Lingus could agree within the next 7 days to modify the contract “to make it a commercially viable contract”, their directors would be forced to consider placing the company in some form of insolvency proceedings very shortly thereafter. The letter added that Aer Lingus' existing contractual rights were “of no practical relevance” because any claim would rank with the unsecured creditors.
(e) On 10 November 2004 Aer Lingus replied to the effect that it had been Swissport themselves who had insisted on a ground handling agreement, with fixed rates, that was to last 10 years, and that their parent company had given assurances at the time to support Swissport.
(f) Early in the morning of 16 November 2004 Swissport ceased to provide the ground handling services at Heathrow Airport and their employees who turned up to work were locked out. Later that day Swissport went into administration. (It is Aer Lingus' case that Swissport went out of business, not because of rising costs that could not have been foreseen, but because their parent company had decided no longer to support them.)
Although Aer Lingus were aware that Swissport were threatening to cease trading, they nevertheless had to react with considerable energy in order to plug the gap. Aer Lingus managed to do so. They flew in skeleton staff from Dublin and they went to other contractors to get the services of extra staff. They kept going. Apparently they did not miss a flight.
It may seem obvious that Swissport's breach of contract must surely have inflicted very considerable damage upon Aer Lingus: not only did Aer Lingus have to scramble around to keep their Heathrow services going but they would have had to engage extra staff or the services of outside contractors – presumably at 2004 (not 1999) rates. However, such was the efficiency of Aer Lingus (or, perhaps, the previous inefficiency of Swissport) that Aer Lingus did not suffer any damage by taking the reins into their own hands: in fact they saved money. That Aer Lingus did not suffer damage because of Swissport's termination of the ground handling services – on the contrary, that they saved money – was evidence not contradicted. See paragraph 40 of the first witness statement of Mr Kahn and the analysis of Deputy Master Hoffmann at paragraph 6 of his judgment.
The TUPE Claims
As a result of the collapse of their ground handling business at Heathrow, Swissport dismissed some 750 employees. Inevitably a considerable number of those employees found jobs with Aer Lingus or with those outside contractors that provided the ground handling services to Aer Lingus in place of Swissport. The next stage in the saga was that many of those employees, or trade unions claiming to represent them, brought claims not only against Swissport but also against Aer Lingus. They claimed that prior to 16 November 2004 there had existed an 'undertaking' within the meaning of TUPE 1 that was in the hands of Swissport and this 'undertaking' or part of it had been transferred to Aer Lingus. If that point were to succeed they would go on to say that their employments came to an end as a result of the transfer of the undertaking and they would claim compensation.
Aer Lingus have defended those claims. But they say that, even so, they face a contingent liability as a result of those employment claims or for having to indemnify outside contractors against such claims.
The employment claims, or a segment of those claims, came before the Employment Tribunal for London South. The Tribunal decided to determine a preliminary point and heard evidence over 4 days. On 8 August 2006 it ruled that the claims failed at the outset. Its formal ruling was as follows:
“Prior to 16 November 2004 there did not exist an undertaking within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) that was identifiable as being the provision of ground handling operation services by [Swissport] to [Aer Lingus] at Heathrow Airport. Accordingly, when on 16 November 2004 [Swissport] ceased to trade and [Aer Lingus]...
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