Triple Seven MSN 27251 Ltd v Azman Air Services Ltd

JurisdictionEngland & Wales
JudgePeter MacDonald Eggers,Mr Peter MacDonald Eggers
Judgment Date05 June 2018
Neutral Citation[2018] EWHC 1348 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2016-000627
Date05 June 2018
Between:
(1) Triple Seven MSN 27251 Limited
(2) Triple Seven (CIS) Limited
Claimants
and
Azman Air Services Limited
Defendant

[2018] EWHC 1348 (Comm)

Before:

Mr Peter MacDonald Eggers QC (Sitting as a Deputy Judge of the High Court)

Case No: CL-2016-000627

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

COMMERCIAL COURT (QBD)

Royal Courts of Justice

Strand, London, WC2A 2LL

Stephen Midwinter QC (instructed by Elborne Mitchell LLP) for the Claimants

Philip Newman (instructed by Debello Law Limited) for the Defendant

Hearing dates: 16 & 17 April 2018

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.

Mr Peter MacDonald Eggers QC

Peter MacDonald Eggers QC:

Introduction

1

The Claimants were the registered owners of two Boeing 777-200 ER aircraft (MSN 27251 and MSN 27252) and leased them to the Defendant (“Azman”) by two separate lease agreements dated 20th June 2016, one lease in respect of each aircraft. Each lease agreement was for a period of five years.

2

It was understood that the aircraft would be used by Azman to transport passengers from West Africa to the Kingdom of Saudi Arabia for the Hajj and Umrah pilgrimages. On 11th May 2016, the National Hajj Commission of Nigeria (“NAHCON”) confirmed that Azman was approved to participate in the airlift of pilgrims to and from Saudi Arabia for the 2016 Hajj. However, this was not the only approval which was required in order to participate in the 2016 Hajj airlift; the approval of the Saudi authorities was also required.

3

On 15th June 2016, NAHCON sent a letter to Azman informing it that the General Authority of Civil Aviation of Saudi Arabia (“GACA”) had excluded Azman from participation in the 2016 Hajj airlift because it had not met Saudi economic, security and safety requirements. However, Azman did not receive this letter until some hours after it had signed the lease agreements on 20th June 2016. Azman sought to persuade GACA to change its mind and to approve Azman to participate in the airlift for the 2016 pilgrimage, but these attempts were not successful.

4

The Claimants tendered the aircraft for delivery to Azman on 28th June 2016 and 4th July 2016 respectively.

5

Soon afterwards, on 6th–7th July 2016, Azman informed the Claimants that it was not in a position to take delivery of the aircraft, because it was no longer able to participate in the 2016 Hajj airlift, which was the major reason or one of the major reasons for Azman's entry into the lease agreements. In response, on 8th July 2016, the Claimants called on Azman to take delivery of the aircraft. On 12th July 2016, Azman said was not in a position to accept either aircraft.

6

On 12th August 2016, the Claimants purported to terminate the lease agreements in accordance with the provisions of the lease agreements by reason of Azman's failure to accept delivery of the aircraft and to pay the first instalment of the rent due under the lease agreements.

7

The Claimants claim damages for breach of the lease agreements in accordance with the lease agreements.

8

Although Azman had pleaded a number of defences to this claim, by the time of the trial, the only substantive defence advanced by Azman to the Claimants' claim was that the Claimants are not entitled to damages because the lease agreements were void at common law for common mistake, the mistake being that it was believed or understood by both parties that Azman was expected to or would be approved to participate in the 2016 Hajj airlift, which was the or a major purpose of the lease agreements, but in fact at the time of the execution of the lease agreements, such approval had been withheld by GACA.

9

During the trial, Mr Philip Newman on behalf of Azman confirmed that if the defence of common mistake failed, Azman would be liable to compensate the Claimants for their losses arising from Azman's non-performance of the lease agreements.

10

Azman has required the Claimants to prove their losses.

The negotiation of the lease agreements

11

On 5th April 2016, Mr Kani Kurtulus, the Chief Executive Officer of Or Express Aviation & Airline (“Orex”), sent an email to Mr Hitesh Patel, the Chief Executive Officer of Veling Limited (“Veling”). Veling was the operating company of the group of which the Claimants formed a part. In this email, Orex enquired about leasing two Boeing 777 passenger aircraft for 4–5 years. Orex stated that it had a lease contract with Azman and that “ We will operate the aircraft for UMRAH and HAJJ operation mainly from Nigeria and west Africa to Saudi …”.

12

On 6th April 2016, Mr Patel replied to Mr Kurtulus' email, providing the specifications of five aircraft which Veling had available. On 8th April 2016, Mr Patel provided Mr Kurtulus with a Letter of Intent setting out the basic terms of a lease agreement between Veling and Orex. Mr Kurtulus forwarded this Letter of Intent to Mr Faisal Abdulmunaf, the Managing Director of Azman. On 9th April 2016, Mr Abdulmunaf sent an email to Mr Kurtulus making a number of observations on the Letter of Intent, including that the lease agreement would be with Orex and would be for five years. Mr Abdulmunaf concluded that it would be best to approach Veling with a proposal to purchase one of the aircraft and lease one aircraft “ for Hajj period only”. In response, Mr Kurtulus commented that Azman could lease the aircraft and that Veling would not accept a lease of less than five years.

13

On 10th April 2016, Mr Kurtulus sent an email to Mr Patel, stating that it would like the rental period to start on 15th August 2016 and that We will be able to start operation with only Hajj flights regarding delivery date .. we do not have any other option to fly before HAJJ as you understand”. In this email, Mr Kurtulus said that the “ main issue is seat configuration”. Orex's intention was to remove the first class and business class seating and to introduce extra economy class seating.

14

On 15th April 2016, Mr Kurtulus sent a copy of the signed Letter of Intent (identifying Veling and Orex as the parties) to Mr Patel. The Letter of Intent stated that the aircraft would be delivered in “ 3-class configuration” but that Veling had no objection to the reconfiguration of the aircraft after delivery.

15

On 26th April 2016, Mr Kurtulus informed Mr Abba Goni, Azman's technical advisor, that the seat reconfiguration (“upgrade”) would be carried out by GMF Garuda in Indonesia. On 4th May 2016, Garuda provided Mr Kurtulus with the proposed layout of passenger accommodation (“LOPA”) and Mr Kurtulus forwarded this to Mr Abdulmunaf, with a copy to Mr Goni. Mr Goni responded by stating that “ This LOPA is good enough for hajj operations” and requested that Garuda confirm the turn-around time in order to ensure that the reconfiguration was completed and the aircraft were positioned in Kano, Nigeria “ in good time for hajj operations”.

16

On 5th May 2016, Mr Goni inspected one of the aircraft.

17

On 11th May 2016, NAHCON wrote to Azman confirming NAHCON's approval for Azman to participate in the airlift of pilgrims registered under the State Muslim Pilgrims Welfare Boards/Agencies/Commissions to and from the Kingdom of Saudi Arabia for the 2016 Hajj. NAHCON stated that Azman's participation was subject to the certification of Azman's aircraft by the Nigerian and Saudi Arabian Civil Aviation Authorities.

18

On 16th May 2016, Garuda informed Mr Kurtulus that the reconfiguration work would commence on 4th July 2016 for the first aircraft and on 14th July 2016 for the second aircraft. On 17th May 2016, Mr Kurtulus forwarded this email to Mr Patel. That day, Orex entered into a contract with Garuda for the seat reconfiguration work.

19

On 26th May 2016, there was a meeting in Istanbul between Mr Patel, Mr Kurtulus and Mr Abdulmunaf to discuss the terms of the proposed lease agreements.

20

On 1st June 2016, Mr Patel requested Mr Kurtulus to provide details regarding the Nigerian Regulatory Authorities' method of allocation and the likelihood of Azman's allocation being cancelled. Later on 1st June 2016, Mr Abdulmunaf informed Mr Kurtulus, with a copy to Mr Patel, that The arrangement could only be cancel [sic] if it becomes obvious to the authorities that we can't meet the deadline, as time is very important in this business”.

21

On 2nd June 2016, Mr Patel provided Mr Kurtulus with a draft lease agreement.

22

On 8th June 2016, Veling asked Mr Abdulmunaf to provide a copy of the Hajj allocation letter or agreement between the Azman and the NAHCON, refleting [sic] the number allocated to Azman” and for evidence that Azman would be one of the selected airlines for the Hajj airlift for the next four years. In reply to the latter question, on 10th June 2016, Mr Kurtulus said that NOBODY HAS THIS KIND OF GUARANTEE … BUT NATIONAL HAJJ COMMITTEE GIVES THE NUMBERS OF PASSENGER (PILGRIMS) to the companies in Country. The yare [sic] 90.000 pilgrims that they have to give the capacity to all companies”.

23

On 10th June 2016, Mr Abdulmunaf sent Mr Patel a copy of the NAHCON appointment letter of 11th May 2016 by email.

24

Following further exchanges, there was a meeting between the parties on 11th June 2016, at which it was agreed that the lease agreements would be signed on 17th June 2016, that the parties to the lease agreements would be the Claimants as lessors and Azman as lessee, and that the aircraft would be registered in Nigeria. In an email dated 11th June 2016 addressed to Mr Patel, Mr Abdulmunaf said that up until the execution of the lease agreements, we are going on with all the necessary arrangements for the scheduled Hajj operation including processing of all the necessary permits and...

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