Oxford Aviation Services Ltd. v Godolphin Management Company Ltd.

Where aircraft are supplied under an oral or incompletely documented hiring arrangement, the court determines the parties’ agreement from the evidence of their dealings, the surrounding documents and their conduct. A draft hire agreement may govern the bailment even though it was never signed, where the parties used the aircraft on that basis and no alternative arrangement is proved. An owner’s insurance policy does not, without a clear agreement or representation, cover the hirer’s liabilities. A bailee unable to disprove negligence is liable for the aircraft’s loss. Recoverable damages may include the aircraft’s value, outstanding hire charges and reasonable consequential loss, including substitute leasing costs, but not sums for which the claimant has shown no liability.

Oxford Aviation Services Ltd owned aircraft used by Godolphin Management Company Ltd for transporting jockeys and other personnel. Godolphin possessed a Piper Seneca aircraft when it crashed on take-off, causing the death of its pilot, injury to passengers and the aircraft’s destruction.

Oxford claimed the aircraft’s value, lost profits, hire charges, related expenses and declaratory relief. Godolphin admitted that it was the bailee and could not disprove the pilot’s negligence, but contended that Oxford had agreed or represented that Godolphin would be covered by Oxford’s insurance. It also advanced contractual, misrepresentation and negligence arguments and counterclaimed for sums paid in respect of an injured passenger. The central issues were the terms governing the bailment, the alleged insurance representation or agreement, and the recoverable loss.

1. Liability. Judgment was given for Oxford. Godolphin was liable as bailee for the destruction of the aircraft because it could not disprove negligence by the pilot. The court found that the aircraft had been supplied on the basis of the draft hire agreement, despite its lack of signature.
2. Contractual terms and insurance. The surrounding circumstances, the draft agreement, the invoices and the parties’ conduct established that Godolphin was to pay the agreed hourly hire rate and arrange its own insurance. The evidence did not establish any trial loan, intended purchase or long-term lease negotiation. Nor did it establish an agreement that Oxford’s insurance covered Godolphin’s liabilities.
3. Alleged representation. The alleged statements by Oxford’s junior sales executive were not proved. In any event, a general understanding that Oxford insured its own aircraft did not amount to a representation that the hirer’s liabilities were insured. A person with experience of aircraft operations could not reasonably rely on an unparticularised comment about insurance without checking the policy terms.
4. Damages. Oxford recovered £135,000 for the aircraft, £822.50 in outstanding hire charges and £172,937.50 for substitute leasing costs as loss naturally flowing from the destruction of its profit-earning chattel. The claim for £11,402.79 in survey fees failed as damages because Oxford had not shown liability for those sums, although they might be recoverable as costs.
5. Godolphin’s counterclaim concerning payments to Mr Cochrane was dismissed. Oxford was entitled to a declaration concerning indemnity for further claims arising from the accident. Interest was awarded at the rates specified in the judgment, and costs were to follow the event subject to submissions.