Celestial Aviation Trading 71 Ltd v Paramount Airways Private Ltd

Under an aircraft lease, supplemental rent becomes due on the contractual date calculated by reference to prior use. An invoice is not a condition of liability where the lessee has the necessary information to calculate the sum. A continuing payment default may therefore prevent a contractual reduction in security and justify termination.

A clause making payment obligations absolute and excluding set-off may catch legal set-off. Relief against forfeiture remains available where possession has passed under an operating lease and forfeiture for non-payment is essentially security for payment. On a summary-judgment application, the court must assess whether that equitable relief has a realistic, rather than fanciful, prospect.

The claimant, an aircraft lessor, sought summary judgment for unpaid rent and supplemental rent under three aircraft leases, delivery up of the aircraft and damages. The defendant relied on an alleged entitlement to reduce its letter-of-credit security, asserted set-off, attributed its financial difficulties to conduct by companies in the same corporate group, and sought relief against forfeiture.

The court decided whether the payment defaults were established, whether the contractual and group-company arguments had a realistic prospect of success, and whether the possession claim should be summarily determined despite the possible equitable jurisdiction to relieve against forfeiture.

1. Payment default. Supplemental rent was payable on the fifteenth day after the relevant calendar month. The contractual scheme did not make payment conditional on an invoice, since the defendant had access to the usage information and could calculate the amount due. Non-payment therefore constituted a continuing event of default, defeating the defendant’s case that the security should have been reduced.
2. Set-off. Had it been necessary to decide the point, the court would have held that the words excluding “any ... set-off” in the net-lease clause caught legal set-off. The question whether termination was nevertheless invalid on the particular date was not argued and was left undecided.
3. Separate corporate entities. The principle that a party cannot rely on the other party’s prevention of performance did not have a realistic prospect of applying to torts or breaches by legally distinct companies in the same group. Corporate personality could not be ignored. Any possible claim against those companies did not provide a defence to the lessor’s claims.
4. Relief against forfeiture. The jurisdiction depends on the obligation for which the right to forfeit is actually exercised. Although the leases permitted termination for non-payment or other breaches, the established breach on this application was non-payment. That was the paradigm case in which forfeiture could be security for payment. The defendant had a realistic prospect of obtaining relief, having regard to the likely effect of losing three of its five aircraft, although the discretion would require consideration of all the circumstances.
5. Summary judgment was entered for US$791,944.54. The claim for delivery up was not summarily determined, and directions were to be given for a speedy trial of the forfeiture issue.

Not stated in the judgment.