Saudi Arabian Airlines Corporation v International Airfinance Corporation & Ors
[2024] EWHC 242 (Comm)
Saudi Arabian Airlines Corporation v Sprite Aviation No. 6 Designated Activity Company
16 June 2023
[2023] EWHC 1758 (Comm)
High Court
An airline owed money on a plane lease. They tried to avoid paying by claiming they were owed more money from the leasing company. The judge said the contract prevents that, except for a small separate debt where they *were* owed some money, meaning they only had to pay the larger sum.
Key Facts
- •Saudi Arabian Airlines Corporation (Saudia) leased an aircraft from Sprite Aviation No.6 (Sprite).
- •Sprite sought summary judgment against Saudia for outstanding rent ($2,758,732.40) and a debt ($200,000) related to aircraft redelivery.
- •Saudia claimed a right to set off these amounts against its larger claim against Sprite.
- •The dispute centered on whether the aircraft lease excluded Saudia's right of set-off.
Legal Principles
Net lease clauses often exclude rights of set-off.
International Lease Finance v. Buzz Stansted Limited [2004] EWHC 292 (Comm)
The interpretation of a contract should avoid tortured and strained constructions.
None explicitly cited, but implied throughout the judgment.
A clause excluding 'any defence' and 'any set-off' is sufficiently broad to encompass both legal and equitable set-off.
FG Wilson (Engineering) Limited v. John Holt & Co (Liverpool) Limited [2013] EWCA Civ. 1232
For equitable set-off, it must be manifestly unjust to allow one claim without considering the cross-claim, requiring a close connection between the claims.
Geldof Metaalconstructive NV v Simon Carves Ltd [2011] 1 Lloyd’s Reps 517
The rule in The Nanfri [1978] 2 Lloyd’s Rep 132, restricting set-off in time charter cases, does not necessarily apply to aircraft operating leases.
The Nanfri [1978] 2 Lloyd’s Rep 132
A successful party is generally entitled to the fruits of its judgment.
Not explicitly cited, but a general principle of law.
Outcomes
Summary judgment granted for Sprite for the outstanding rent ($2,758,732.40).
Clause 5.12 of the CTA effectively excluded Saudia's right of set-off. The court rejected Saudia's argument that the clause only applied to equitable set-off.
Summary judgment refused for Sprite for the $200,000 debt.
Clause 5.12 was not incorporated into the agreement for the $200,000 payment, and the court found that an equitable set-off was available to Saudia in this instance due to the close connection between the claims.
Application for a stay of execution refused.
No sufficient grounds were presented to justify a stay, despite Saudia's claim and Sprite's foreign incorporation. Sprite's financial stability was deemed sufficient.
Costs awarded to Sprite for the admission application up to the previous Friday’s hearing; no order as to costs thereafter.
The case initially proceeded on the wrong procedural track but Sprite was ultimately successful in recovering a significant amount.
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