The High Court has delivered a decision in AWAS Netherlands A320-1 BV v Pacific Airlines Aviation Joint Stock Company[1] in relation to an amount of lease rental and other damages Pacific Airlines (the Defendant) owed AWAS (the Claimant) pursuant to a settlement agreement, following an initial dispute over the Defendant’s failure to make rental payments under a lease agreement in respect of an Airbus A320-200 (the Aircraft).

BACKGROUND

The dispute regarding the unpaid rental payments began in May 2022, at which time the Claimant demanded the return of the Aircraft, with legal proceedings following shortly after. Those proceedings were discontinued in December 2022 following the execution of a settlement agreement (the Settlement Agreement), pursuant to which a repayment plan was agreed between the Claimant and the Defendant in relation to the Instalment Balance Amount, which was made up of:

1. the payment of an Initial Balance Amount of US$18,267,542.82, equal to the amount of the Claimant‘s losses based upon an assumed termination date of the lease agreement of 20 October 2022; and
2. the payment of a final Reconciliation Amount, reflecting theClaimant’s final third-party expenses incurred in respect of the Settlement Agreement which had not been included in the Initial Balance Amount (covering legal and technical expenses).

   The Settlement Agreement also provided for potential reductions from the Instalment Balance Amount:

1. to the extent that the Claimant re-leased the Aircraft at a monthly rate in excess of US$120,000, a deduction of such excess from the monthly payments in inverse order of maturity; and

1. a deduction in respect of 50% of the cost for any ferry flight for the Aircraft.

FAILURE TO AGREE FOLLOWING THE SETTLEMENT AGREEMENT

The parties were unable to reach a formal agreement as to the final Reconciliation Amount prior to the instalment commencement date (being the date on which the monthly instalments were due to start being paid) on 15 November 2023.

However, there was correspondence between the Defendant and the Claimant’s servicer in December 2023, where the Defendant indicated that an Instalment Balance Amount of US$19,064,540.46 “seems okay for [the Defendant's] working level” and that “there is no further enquiries”[2], before stating that there would be an internal approval process before the figure was confirmed.

In April 2024, by which time the Claimant had only received $100,000 of the $10,053,276.09 due and owing under the Settlement Agreement at that point, the Claimant issued proceedings against the Defendant seeking payment of all outstanding sums due under the Settlement Agreement. Although the Defendant had filed an acknowledgement of service, indicating that it intended to challenge this claim, the Defendant did not engage with the proceedings thereafter.

DECISION

Following the Claimant’s application for summary judgment, the Court granted summary judgment against the Defendant, ruling that the Instalment Balance Amount was US$19,064,534.17, and each monthly instalment was US$794,355.59, only slightly less than the figure which the Defendant said it considered to be “okay”[3]. The Court also ruled that, whilst the Aircraft was re-leased at rental in excess of US$120,000 per month, the excess was less than one month’s instalment of the Instalment Balance Amount, so the Claimant would not have needed to give credit for it until the final monthly instalment had been paid by the Defendant.

The Court ordered that as of the date of judgment, the Defendant owed the Claimant the sum of US$10,053,276.09. As the agreed schedule of payment of the Instalment Balance Amounts continues until October 2025, the Claimant still retains the right to claim any unpaid monthly Instalment Balance Amounts which fall due post 15 November 2024 (being the date of the judgement) up to 15 October 2025 (being the last date on which the monthly instalments continued to be due).

CONCLUSION

Despite the absence of a formal agreement between the parties with regard to a final payment amount, the Court was able to rely upon the email correspondence between the Defendant and the Claimant’s servicer in order to ascertain that an accord on the amount had in fact been reached.

This case also serves as confirmation that failure to engage with an English Court proceeding will not prevent the Court from finding against the non-participant.

*Paralegal, Cyrilla Everett, made significant contributions to this article.