Trident Turboprop (Dublin) Ltd v First Flight Couriers Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMR JUSTICE AIKENS :,THE HONOURABLE MR JUSTICE AIKENS
Judgment Date17 Jul 2008
Neutral Citation[2008] EWHC 1686 (Comm)
Docket NumberCase No: 2008-126

[2008] EWHC 1686 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand,

London, WC2A 2LL

Before :

The Honourable Mr Justice Aikens

Case No: 2008-126

Between:
Trident Turboprop (dublin) Limited
Claimant
and
First Flight Couriers Limited
Defendant

Mr George McPherson (instructed by Allen & Overy, Solicitors, London)) for the Claimant

Mr Neil Vickery (instructed by TWM, Solicitors LLP, Reigate, Surrey) for the Defendant

Hearing dates: 11 th June 2008

Approved Judgment

THE HONOURABLE MR JUSTICE AIKENS MR JUSTICE AIKENS
1

This is an application by the claimant (“Trident”), for summary judgment of its claim against the defendant (“FFCL”) pursuant to CPR Part 24. Trident is a company which owns and leases commercial aircraft. FFCL is one of India's leading express courier companies with a very large annual turnover.

2

On 5 th September 2005, Trident entered into two Aircraft Operating Lease Agreements with FFCL (“the Lease Agreements”). Under each Lease Agreement, Trident, as the lessor, agreed to lease to FFCL, as lessee, an ATP type aircraft manufactured by BAE System Regional Aircraft Limited (“BAE”). The two aircraft had the serial numbers 2051 and 2054. I will refer to them respectively as “Aircraft 2051” and “Aircraft 2054”.

3

The two Lease Agreements are in identical terms. I will refer below to the relevant clauses of the contracts.

4

Trident's claims arise under both Lease Agreements. In short, Trident alleges that it is entitled to summary judgment because FFCL was in breach of its obligation to pay rent under each of the two contracts. Trident claims that the continuing failure of FFCL to pay rent entitled it to terminate both Lease Agreements and to recover possession of the two aircraft.

5

Trident claims three principal types of loss. First, it claims unpaid rent of US$405,333.30. Secondly, it claims the costs of putting the two aircraft into a proper “Re-delivery Condition”. This claim is for US$2,053,926. Thirdly, Trident claims damages equal to the estimated further loss of rent until the aircraft were re-leased. This claim is for US$576,000. In addition, Trident claims interest on late payment of rent (US$7,591.02) and estimated legal costs of US$39,868.90. Trident alleges that it is entitled to these last two sums pursuant to various clauses in the Lease Agreements.

6

Trident has a further claim. This is for damages for conversion, which are said to arise out of FFCL's failure promptly to return the aircraft to Trident after it had terminated the Lease Agreements.

A. The Outline Facts

7

In 2004 FFCL wished to buy or lease cargo aircraft to carry express cargo across India to different destinations. FFCL appointed Taneja Aerospace and Aviation Limited (“TAAL”) as a consultant, so it could recommend to FFCL a suitable aircraft for this project. In September 2004, Mr Raj Singh, the Director of Sales for BAE, approached Mr Santosh Deshpande of TAAL. Mr Singh offered ATP type aircraft for use by FFCL on its proposed cargo routes.

8

FFCL then conducted negotiations with BAE which led to the execution of the two aircraft leases. FFCL alleges that all the negotiations as to the terms of the aircraft leases were conducted between FFCL and BAE; the delivery of the aircraft was organised between FFCL and BAE and the two leases were signed by Antoine Chateauvieux of BAE on behalf of Trident.

9

During the negotiations between FFCL and BAE there were discussions about two particular matters. First, the payload that the aircraft would be able to carry on the various proposed routes; secondly, flight times for those routes. In July 2005 BAE provided FFCL with a Route Analysis and Performance Study, giving payload projections and flight times if an aircraft was carrying the maximum payload. It is FFCL's case that many of the representations about the payload and flight times in the July 2005 study were materially inaccurate. FFCL alleges that BAE acted as Trident's agent in making these representations. FFCL also alleges that it would not have taken the two aircraft (plus a third, “Aircraft 2039”) under the Lease Agreements, but for the representations that were made in this study.

10

On 24 May 2006, Aircraft 2054 was delivered to and accepted by FFCL at Lidköping airport in Sweden, having been inspected by Mr Gopalakrishna, FFCL's Chief of Operations, and other technical experts of FFCL. The Acceptance Certificate confirmed that “Delivery” under the terms of the Lease Agreement was effected on 24 May 2006 and that the aircraft was inspected by the technical experts of FFCL from 17 May 2006. The certificate also stated that the aircraft complied fully with the condition required on delivery by the Lease Agreement, save to the extent set out in an Acceptance Reservations Agreement contained in Appendix 4 of the Acceptance Certificate. This aircraft began to operate for FFCL in August 2006.

11

Aircraft 2039 was delivered in July 2006 and began to operate in October 2006.

12

Aircraft 2051 was delivered on 16 October 2006 at Southend airport. There was the same inspection procedure as for Aircraft 2054. This aircraft began to operate in November 2006.

13

FFCL alleges that all three aircraft were unreliable and prone to defects, with the result that FFCL was unable to achieve its operational objectives. There is no need to set out details of these alleged defects. However, one particular issue concerning Aircraft 2054 must be mentioned. When it was accepted in August 2006, it was established that the life remaining on the port main landing gear of the aircraft was only 2,725 cycles. This was less than the agreed life. FFCL alleges that it accepted this deficiency after assurances from BAE that it would loan a serviceable landing gear when needed by FFCL. It is said that BAE subsequently denied having made such a commitment and did not fulfil it.

14

FFCL's continuing concerns about alleged payload shortfall problems and flight times led to BAE producing a further Route analysis study in August 2007. This study gave longer flight times and lower payloads than the July 2005 study. However, FCCL alleges that it was unable to achieve even the lower August 2007 payload figures.

15

On 30 th August 2007, FFCL decided to stop operations with all three ATP aircraft because of alleged payload shortfall, defects in the aircraft, longer flight times and poor spares support. On the same day FFCL sent an email to BAE, informing BAE of its decision to discontinue all ATP operations with immediate effect. The email requested BAE to consider the position of FFCL “ and advise us on the way forward from our position”.

16

FFCL stopped paying rent under the two Lease Agreements with which I am concerned as from September 2007. Trident alleges that this put FFCL in breach of its obligation under the Lease Agreements to pay rent promptly on a monthly basis in the amount set out in schedule 8 of the Lease Agreements: clause 5.2. Trident alleges that the failure by FFCL to make any payments after September 2007, or FFCL's late payments constituted an “Event of Default” within clause 17(a) of the Lease Agreements. Trident says that it was therefore entitled to serve a Notice of Default under clause 18 of the Lease Agreements, which it did on 18 th October 2007. FFCL initially accepted that its decision to cease making payments under the Lease Agreements put it in breach of the Lease Agreements and entitled Trident to serve notices of termination on 30 January 2008. 1 However, FFCL now alleges that it rescinded the two Lease Agreements on 30 th August 2007, because of defects in the aircraft or misrepresentations, by deciding to stop using the aircraft on that date. FFCL says that the rescission was effective before Trident's purported termination. FFCL alleges in the alternative that if it did not rescind the Lease Agreements by the email of 30 th August 2007, then it retains the right to rescind them, such that no rent would be payable to Trident and there would be no claim by Trident for breach of contract.

B. The terms of the Lease Agreements

17

The terms of the two Lease Agreements are comprehensive and long. I will not set them out in the body of this judgment. Instead I have set out the relevant clauses in the Appendix. These are: 4, 5.2, 5.3, 7, 17(a), 18(1), 18.2, 19.1., 19.2, 21.10, Schedule 4 and Schedule 8. (I have not reproduced Schedule 8).

18

In summary the effect of the relevant provisions were these: from the moment of the “Delivery Date” of each aircraft, FFCL was under an obligation to pay rent on a monthly basis: clauses 5.2 and Schedule 8. 2 Therefore FFCL became liable to make monthly payments of rent to Trident in respect of each relevant aircraft from those dates. Clause 7 of the Lease Agreements states that FFCL's obligation to make rent payments is “ absolute and unconditional”. Clause 5.3 provides that payment is to be made “ on or before the due date in immediately available funds”. Clause 21.9 provides that prompt payment is “ ofthe essence” in the Lease Agreements. Under clause 5.4, in the event of a late payment, FFCL is bound to pay default interest on the overdue amount.

19

Clause 17(a) of the Lease Agreements provides that a failure by FFCL to make any payment on time constitutes “an Event of Default”. Under clauses 18.1 and 18.2, if a failure to make payments on time is “ continuing”, Trident becomes entitled to various remedies including the right to terminate the Lease Agreements: clause 18.1(a).

C. Trident's claims and FFCL's defences

20

In the Notice of Default dated 18 th October 2007 sent by Trident to FFCL, Trident identified two Events of Default. The first was a failure to pay aircraft rentals for September and October 2007. The second was an alleged disclosure of the terms of

the Lease Agreements and an attempt to agree...

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