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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Olympic Council of Asia v Novans Jets LLP [2021] EWHC 1063 (Comm) (30 April 2021) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2021/1063.html Cite as: [2021] EWHC 1063 (Comm) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
(Sitting as a Deputy Judge of the High Court)
____________________
OLYMPIC COUNCIL OF ASIA | Claimant | |
- and - | ||
NOVANS JETS LLP | Defendant |
____________________
(instructed by The Air Law Firm)
appeared for the Claimant
Mr John A Kimbell QC
(instructed by Bargate Murray Ltd)
appeared for the Defendant
Hearing date: 19 April 2021
____________________
Crown Copyright ©
Covid-19 Protocol: This judgment was handed down remotely by circulation to the parties' representatives by email and release to BAILII. The date and time for hand-down is deemed to be 10:30am on 30 April 2021.
MR SALTER QC:
Introduction
The ALPA
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 [sic] 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/takeoff 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 permits.
..
3. Payment
On 03rd September 2018 the Lessee shall make an initial payment of 8,100,000 USD (Eight Million One Hundred Thousand US Dollar) of the total 14,400,000 USD to Lessor. The remainder amount shall be paid in four partial payments equal to 1,575,000 USD (One Million Six Hundred Thousand US Dollar) not later than 15.01.2019, 15.01.2020, 15.01.2021, 15.01.2022, respectively or payable as per operational demand upon mutual agreement between Lessor and Lessee.
Payment by Lessee to Lessor shall be made upon issuance of an invoice within two (2) working days after invoice is received. Payment paid to Lessor is non-refundable and non-transferable to any other private aviation service or alternative aircraft, even in case of force majeure events (including but not limited to acts of civil unrest or adverse weather) .
7. Third party charters
7 .1. Whenever Lessee will not use the assigned aircraft, it may be used by Lessor to offer charter flights, charged at charter market prices to international third parties. The Lessor agrees to share with Lessee partial net profit margin that has been generated from aircraft charter sales at market prices. Aforementioned profit share can be executed as per below options:
a. Discount on the Price per Block Hour specified in clause B Price per Block Hour and Total Price
b. Transfer of Net Profit Margin share sixty (60) days after the completion of 3rd party charter operation.
7.2. All 3rd party charter flight expenses are charged directly to clients of Lessor and are not deducted from Lessee Block Hour balance.
11. Extension of Lease Term and Aircraft Purchase Option
It has been agreed that Lessee receives the priority option to extend the aircraft lease term and priority right to purchase the Aircraft.
a) Purchase During Lease Term
Lessee shall have the option, at any time after the 31.12.2020 and prior to 31.12.2022, to purchase the Aircraft. To purchase the aircraft Lessee shall inform Lessor not less than sixty (60) days prior to the commencement of third (3rd} year by written notice of its intent to purchase the Aircraft, specifying the proposed purchase date. After delivery of such notice, Lessor and Lessee shall engage in the sales and acquisition process. The Lessor and Lessee will mutually agree the aircraft sales price. Beside the sales price, an allowance for will legal , marketing and other professional fees will be mutually agreed.
b) Purchase At End of Lease Term
Lessee shall have the option, at the end of lease term on 31.12.2022, to purchase the Aircraft. To purchase the aircraft Lessee shall inform Lessor not less than sixty (60) days prior to the end of lease term by written notice of its intent to purchase the Aircraft, specifying the proposed purchase date. After delivery of such notice, Lessor and Lessee shall engage in the sales and acquisition process. The Lessor and Lessee will mutually agree the aircraft sales price. Beside the sales price, an allowance for will legal, marketing and other professional fees will be mutually agreed.
c) Extension of lease term
Lessee shall have the option, at the end of aforementioned agreed lease term, to extend the Aircraft lease term and mutually agree the terms and conditions for the extension . To extend the aircraft lease the Lessee shall inform Lessor not less than sixty (60) days prior to the end of lease term by written notice of its intent to extend the Aircraft lease.
10. Termination of Agreement
a) A termination notice may not be given within the first two (2) years of this Agreement; the Agreement may not be cancelled before 31.12.2020.
b) The hereby agreement shall be deemed canceled [sic] by the lessee's fault in case of (i) any breach of the payment obligations set forth in section "Payment" (clause 3) of the hereby agreement.
c) In the event of any negligent or intentional breach by either party of any provision of this agreement, such breach remaining uncured for a period of four ... 4) weeks , then the other party shall be entitled to terminate this agreement with the expiration of minimum term duration, unless another exit solution is agreed on . If either Party becomes insolvent, goes into liquidation or is declared bankrupt, the other party shall have the right to terminate this Agreement immediately and seek compensation within insolvency, liquidation or bankruptcy proceedings. In the event of a force majeure event not attributable to a party and beyond a party 's reasonable control , parties shall discuss forthwith any amendments required to the terms of this agreement in order to reach an equitable solution, failing which either party may terminate this agreement with immediate effect upon a four (4) weeks' notice.
The arguments of the parties
.. it is now well established that the court must ask itself four questions when faced with a claim for unjust enrichment. They are these: (1) Has the defendant been enriched? (2) Was the enrichment at the claimant's expense? (3) Was the enrichment unjust? (4) Are there any defences available to the defendant?
.. [f]ailure of the consideration for a payment . . . means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself ..[2]
.. If a contract has been terminated for breach, it is no longer subsisting, and, therefore, no longer prevents a claim in unjust enrichment from being brought. The fact that a party has committed a breach of contract does not deprive him of the right to claim in unjust enrichment. This holds true even where the claimant has committed a repudiatory breach, which has led to the contract being terminated ..
This remains the basic rule: benefits are not recoverable if the basis on which they were transferred has only partially failed.
.. whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract ...[7]
As Lord Goff said, in Stocznia Gdanska SA v Latvian Shipping Co[8]
.. the test is not whether the promisee has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due ..
21.1 Whincup v Hughes[9] in which money was paid for a six-year apprenticeship to a watchmaker. The watchmaker died after one year. The claim for restitution failed.
21.2 Kelly v Lombard Banking Co Ltd[10], in which a claim to recover an initial payment under a hire-purchase agreement for a car failed even though the contract ended before the hirer could exercise his option to purchase.
21.3 Hyundai Shipbuilding & Heavy Industries Co Ltd v Pournaras[11], which (like the Stocznia Gdanska[12] case) was a claim in relation to instalment payments under a terminated shipbuilding contract. In the Pournaras case, however, the Court of Appeal assumed (without deciding) that "as a matter of English law, the buyers can, in principle, recover from the yard the difference (if any) between the amount of the instalments and that sum which represents the loss or damages that the yard has suffered"[13]. Unlike the decision of the House of Lords in Stocznia Gdanska, this case therefore does not seem to me to advance Mr Kimbell's argument.
21.4 Baltic Shipping Co. v Dillon[14] in which a holiday maker's claim for restitution of the money she had had paid in advance for a 14-day holiday failed, even though the cruise was cut short after only 8 days, when the ship sank.
21.5 Giedo Van der Garde v Force India[15], in which a racing driver who was promised 6000km track time but received only a part of that brought a claim for restitution of a proportionate part of the USD 3m fee. Stadlen J dismissed the claim because the claimant had received part of what he had bargained for (which included but was not completely limited to track time) and there was therefore no total failure of consideration.
.. The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance. That general rule reflects a sound legal policy, which acknowledges the parties' autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation ..
Novans has suffered losses due to OCA's breach and altered its position in reliance on the repudiatory conduct of OCA by expending considerable sums of money. Novans is, and remains, liable for the payment of certain operational expenses [which] due to their nature .. cannot be recouped. They include set-up fees, insurance, operator costs, importation costs, professional fees, flight plans, etc. I understand that such expenses alone amount to approximately US$1,000,000. If relevant, a more detailed explanation of these costs and expenses will be provided as part of [the] evidence at trial and (if not agreed) by expert evidence.
Provision for forfeiture of sums paid may be a penalty
If an excessive deposit is subject to the penalty rules, it might seem a fortiori that the same would be true of a clause providing that, if one party commits a breach and the other terminates the contract, the party in breach will forfeit sums that it has already paid; again there may be no relationship between the amount paid and the likely loss or the innocent party's legitimate interest in obtaining performance.
Summary judgment
vii) The court should be especially cautious of striking out a claim in an area of developing jurisprudence, because in such areas decisions on novel points of law should be decided on real rather than assumed facts.
In the Easy Air case, however, paragraph (vii) was as follows:
vii) It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it ..
.. there is often a careful judgment to be made whether it is the occasion for "grasping the nettle", so as to decide a point that seems at the interlocutory stage to be clear-cut, or for allowing an arguable claim or defence, but one assessed at the interlocutory stage to be weak, to proceed to trial precisely because that is but an interlocutory assessment, the claim or defence is none the less arguable not completely hopeless, and (if relevant) the court has to have an eye, as best it can, to whether realistically there may be materially different or additional evidence available at a trial ..
Analysis
35.1 First whether OCA prima facie has a good claim in unjust enrichment on the grounds of a partial failure of basis (disregarding, for this purpose, both the "non-refundable" provisions in clause 3 of the ALPA and the defence of change of position)?
35.2 Second, if so, whether the "non-refundable" provisions in clause 3 preclude any such claim?
35.2.1 On their true construction, do those provisions continue to operate after the expiry or early termination of the ALPA?
35.2.2 If so, are those provisions to be disregarded under the rule against penalties?
35.3 Thirdly, if OCA's claim is otherwise established, whether Novans has a defence to all or part of that claim on the grounds of change of position.
If it is agreed that a payment shall be retained, whether or not performance occurs, there has been no failure of basis for the payment and no claim in unjust enrichment can arise.[26]
According to Mr Kimbell, clause 3 therefore provides Novans with a complete defence to OCA's unjust enrichment claim.
.. while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed ..[27]
.. whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation ..[32]
necessarily involves a consideration of the extent of the innocent party's legitimate interest, which again involves an enquiry into the commercial background:
.. the penal character of a clause depends on its purpose, which is ordinarily an inference from its effect. As we have already explained, this is a question of construction, to which evidence of the commercial background is of course relevant in the ordinary way ..
.. The onus of pleading and proving the change of position defence is on the defendant, who must put it forward "fairly and squarely" in his statement of case so that "its factual merits can be explored at the trial" ..[38]
That requires the defendant to give full details of the particular change(s) of position relied on, of reliance, and of any facts showing that that change (or those changes) would make it inequitable for the claimant to be granted restitution. It seems to me to be unlikely that a trial judge would regard the present paragraph 32(2) of the Amended Defence and Counterclaim as anything like a sufficiently particularised pleading for these purposes.
Disposition
Note 1 [2015] UKSC 66, [2016] AC 176 at [18]. [Back] Note 2 Barnes v Eastenders Cash and Carry Plc [2014] UKSC 26, [2015] AC 1 at [107], per Lord Toulson JSC, citing a well-known passage from Peter Birks, An Introduction to the Law of Restitution (Clarendon Press, 1989) p 223. [Back] Note 3 Andrew Burrows, Principles of the English Law of Obligations (OUP, 2015) at [3.90]. [Back] Note 4 Charles Mitchell, Paul Mitchell, Stephen Watterson, Goff & Jones: The Law of Unjust Enrichment (9th edn, Sweet & Maxwell, 2016) at [12-26]. [Back] Note 5 Fn 4 above at [3-36]. See also Rover International Ltd v Cannon Film Sales Ltd [1989] 1 WLR 912 at 928-932 and 936; and Newland Shipping and Forwarding Limited v Toba Trading FZC [2014] EWHC 661 at [75], per Leggatt J: “It is in any event clear law that a party who commits a repudiatory breach which leads to a contract being terminated is not thereby deprived of the right to claim in unjust enrichment”. [Back] Note 6 Fn 3 above at [3-89]. [Back] Note 7 Rover International Ltd v Cannon Film Sales Ltd (fn 5 above) at 923H, per Kerr LJ (emphasis added). [Back] Note 8 [1998] 1 WLR 574 at 588 (emphasis added). [Back] Note 9 (1871) LR 6 CP 78. [Back] Note 10 [1959] 1 WLR 41. [Back] Note 11 [1978] 2 Lloyd’s Rep 502 [Back] Note 13 At 508, per Roskill LJ. [Back] Note 14 [1993] HCA 4; 67 ALJR 228. [Back] Note 15 [2010] EWHC 2373 (QB) [Back] Note 16 [2011] EWCA Civ 930 at [21] to [30] [Back] Note 17 The flight log exhibited to Mr Smith’s first witness statement records that in March 2019 the Aircraft flew 3 such third-party charter legs, amounting to 7.50 “block hours”. Paragraph 28 of the Amended Defence and Counterclaim pleads that “Novans attempted to book 13 third party charters but due to OCA's preferential use of the Aircraft only eleven third-party charters have been fixed.” [Back] Note 18 Hugh Beale, Chitty on Contracts (33rd edn, Sweet & Maxwell, 2018) at [26-57]. [Back] Note 19 Goff and Jones (fn 4 above) at [27-33]. [Back] Note 20 [2007] EWHC 1044 (Ch), [2007] PNLR 28 at [4], [Back] Note 21 [2009] EWHC 339 (Ch) at [15]; approved by the Court of Appeal in AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098, [2010] Lloyd's Rep IR 301 at [24], per Etherton LJ, and in Global Asset Capital Inc and another v Aabar Block SARL [2017] EWCA Civ 37, [2017] 4 WLR 163 at [27], per Hamblen LJ. See also TFL Management Services Ltd v. Lloyds TSB Bank plc [2013] EWCA Civ 1415, [2014] 1 WLR 2006 at [26]-[27] per Floyd LJ. [Back] Note 22 [2020] EWHC 404 (Comm) at [17] – [18]. [Back] Note 23 [2020] EWHC 1624 (Comm), [2020] 4 WLR 98 at [3]. In that ruling, Andrew Baker J (inter alia) refused an application for reverse summary judgment in relation to claims on duty of care and unjust enrichment grounds against one of the many defendants to these actions by the Danish Customs and Tax Administration. By his further judgment ([2021] EWHC 974 (Comm)) handed down on 27 April 2021 following the “Revenue Rule Trial” of the preliminary issue of whether the claimant’s claims were inadmissible under the rule of law stated, eg, as Dicey Rule 3 (Dicey, Morris & Collins on the Conflict of Laws (15th edn, Sweet & Maxwell, 2012) para 5R-019), Andrew Baker J dismissed all of the claims in these actions. [Back] Note 24 [2017] UKSC 24, [2017] AC 1173. [Back] Note 25 Trillium (Prime) Property GP Limited v Elmfield Road Limited [2018] EWCA Civ 1556 at [9], per Lewison LJ. [Back] Note 26 Goff & Jones (fn 4 above) at [12-19] [Back] Note 27 Arnold v Britton [2015] UKSC 36, [2015] AC 1619 at [20], per Lord Neuberger of Abbotsbury PSC. [Back] Note 28 Paragraph 6 of the Amended Defence and Counterclaim pleads that the aircraft was purchased on 17 September 2018, just over two weeks later than the date of the ALPA. However, the Novans Jets Balance Statement for September 2018 exhibited to Mr Smith’s third witness statement appears to show a payment by Novans of a “Second Deposit and Moving Costs” of USD 1,140,000 on 27 August 2018, a few days prior to the date of the ALPA. [Back] Note 29 Paragraph 4(e) of the Amended Defence and Counterclaim pleads that “It is standard within the private jet charter market for lease and expenses payments due under a wet lease to be subject to the same strict invoicing and payment mechanism. This provides the lessor with security of receipt”. [Back] Note 30 Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, CA, at 1447, per Diplock LJ [Back] Note 31 Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, PC, at 59, per Lord Woolf. [Back] Note 32 Cavendish Square Holding BV v Makdessi [2016] AC 1172 at [32], per Lord Neuberger of Abbotsbury PSC [Back] Note 33 “Where proceedings involve issues of construction of a document in relation to which a party wishes to contend that there is a relevant factual matrix that party should specifically set out in its statement of case each feature of the matrix which is alleged to be of relevance. The “factual matrix” means the background knowledge which would reasonably have been available to the parties in the situation in which they found themselves at the time of the contract/document.”: The Commercial Court Guide (10th edn, 2017) at C1.2(h). [Back] Note 34 Barnes v Eastenders Cash and Carry Plc (fn 2 above) at [114], per Lord Toulson JSC. [Back] Note 36 As in cases such as Biggerstaff v Rowatt’s Wharf Ltd [1896] 2 Ch 93 and Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, on which Mr McLaren relied. [Back]