Saudi Arabian Airlines Corporation v Sprite Aviation No. 6 Designated Activity Company
[2023] EWHC 1758 (Comm)
Djinn Issuer Designated Activity Company & Anor v Vietjet Aviation Joint Stock Company
20 October 2023
[2023] EWHC 2650 (Comm)
High Court
Two companies leased planes, then deferred payments due to COVID. When the airline was late with a payment, the leasing companies demanded all the deferred money immediately. The judge said they could get all the overdue money but not extra interest, and the airline couldn’t reduce the debt by claiming money for plane repairs.
Key Facts
- •Two aircraft leases between Claimants (Irish companies) and Defendant (Vietnamese company) contained clauses for basic and supplemental rent, the latter forming a maintenance reserve.
- •Covid-19 pandemic caused significant disruption, leading to a 2022 agreement deferring some rent payments in 18 installments with 4% interest.
- •Supplemental rent due in December 2022 was late, constituting an event of default under the leases.
- •Claimants served grounding letters demanding accelerated payment of all deferred rent (~$12.6 million total), including amounts not yet due.
- •Defendant argued the deferral was only suspended during the default, not terminated, and disputed interest and maintenance cost calculations.
Legal Principles
Construction of contracts: The court must determine the objective intention of the parties.
Case Law (Implicit)
Contractual interpretation: All words and clauses must be given meaning; surplusage should be avoided.
Case Law (Implicit)
Contractual interpretation: The court will consider commercial context and rationale when interpreting the contract.
Case Law (Implicit)
Contractual precedence: A later agreement (deferral letter) takes precedence over earlier agreements (lease) where there is conflict.
Case Law (Implicit)
Outcomes
Claimants entitled to accelerated payment of all deferred rent.
The deferral validity clause means the deferral ends when a default continues at the time the lessor acts. The lessors were entitled to accelerate payments to protect themselves from further default, and preventing this would have given the defendant no incentive to pay on time.
Claimants only entitled to 4% interest on deferred payments.
The deferral letters, which took precedence over the lease, specified a 4% interest rate for deferred payments.
Defendant's maintenance cost claims cannot be offset against the claimants’ claim.
The lease prohibited set-off, and reimbursement for maintenance is disallowed during a continuing default.
Claimants entitled to a declaration of their right to ground the aircraft.
This protects the lessors, and further arguments about continuing grounding can be addressed later. An injunction was deemed unnecessary as the planes were already grounded.
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