Martin’s Commercial Limited v Cineworld Cinemas Holdings Limited
[2023] EWHC 1925 (Ch)
SATA Internaçional - Azores Airlines SA v Hi Fly Limited
31 October 2024
[2024] EWHC 2762 (Comm)
High Court
An airline (SATA) owed money to its plane's owner (Hi Fly). They agreed to move the lease to a new company (AELF). The court said the agreement meant the new company was now owed the money. But it also said everyone involved mistakenly thought the original owner (Hi Fly) still got the money, so the court changed the agreement to reflect that.
Key Facts
- •SATA, an Azorean airline, leased an Airbus A300 from Hi Fly.
- •In 2019, SATA faced financial difficulties and fell behind on lease payments.
- •SATA, Hi Fly, and AELF (additional party) negotiated three agreements: a sale agreement (Hi Fly to AELF), a novation agreement (AELF became lessor), and a termination agreement.
- •SATA disputed its liability for rent arrears after September 2019.
- •The court had to determine if the novation agreement transferred the liability for post-September 2019 rent to AELF and, if so, whether rectification was warranted.
Legal Principles
Contractual interpretation is objective; it focuses on the words used and their objective meaning in context, considering the facts known to all parties.
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL); Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] AC 1101; Arnold v Britton [2015] UKSC 36, [2015] AC 1619; Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900; Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173.
Rectification is an equitable remedy to correct errors in a written document that misrepresent the parties' common intention. Three categories exist: prior agreement, shared mistaken belief, and unilateral mistaken belief.
FSHC Group Holdings Ltd v Glas [2019] EWCA Civ 1361, [2020] Ch 365; Joscelyne v Nissen [1970] 2 QB 86 (CA); Ralph v Ralph [2021] EWCA Civ 1106, [2022] 2 All ER 325.
Outcomes
The novation agreement, as originally drafted, transferred the right to recover rent accruing after September 1, 2019, to AELF.
The court's objective interpretation of the agreement's clauses (2.1, 2.3, 7.3) led to this conclusion. The 'Economic Closing Date' and 'Effective Time' distinction played a crucial role.
The novation agreement was rectified to reflect the shared intention of all parties that SATA remained liable to Hi Fly for rent arrears between September 1, 2019, and the effective time.
The court found convincing evidence that all parties (Hi Fly, AELF, and SATA, through Mr. Chaves) subjectively believed SATA would remain liable to Hi Fly for pre-novation arrears. The court considered evidence from witness testimonies, emails, and internal communications. The court acknowledged the challenges in reconstructing subjective beliefs but deemed the evidence sufficiently strong to overcome the presumption that the written agreement reflected the parties' true intentions.
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