Tandrin Aviation Holdings Ltd v Aero Toy Store Llc & Anor

A force majeure clause is construed according to its wording and commercial context. Financial difficulty, reduced profitability, increased expense and adverse market conditions do not ordinarily qualify unless the contract clearly provides otherwise. A clause referring to causes beyond the seller’s reasonable control cannot generally be converted into protection for the purchaser’s financing difficulties. A liquidated damages provision is enforceable where it represents a genuine pre-estimate of loss and is not extravagant or unconscionable. On a summary judgment application, the claimant must show that the pleaded defences have no real prospect of success.

The claimant sold a corporate jet to the first defendant. The first defendant paid a deposit but failed to accept delivery or pay the balance, relying on an alleged penalty clause, inappropriate jurisdiction and force majeure arising from the collapse of financial markets. The second defendant held the deposit as escrow agent and did not acknowledge service.

The claimant applied for summary judgment, declarations, specific or mandatory relief concerning the deposit, damages and an interim payment. The court also considered default judgment against the second defendant. The central issues were whether the deposit provision was an unenforceable penalty, whether the force majeure clause covered the purchaser’s financial difficulties, and whether the court should order relief concerning the escrowed deposit.

1. Summary judgment. The claimant had to establish that none of the defences had a real prospect of success. The first defendant’s failure to appear did not prevent the court from examining the evidence and pleaded issues.
2. Liquidated damages. Applying the principles summarised in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79, the deposit was not extravagant or unconscionable compared with the possible loss. The breach involved failure to accept the aircraft and pay the purchase price, rather than merely failure to pay a debt. The clause operated only on specified default, and precise estimation of loss was particularly difficult. The deposit was therefore an enforceable genuine pre-estimate of loss.
3. Jurisdiction and specific performance. The first defendant could not reopen issues already determined by Field J on the unsuccessful jurisdictional challenge. Questions of enforcement in Oklahoma or Florida were matters for those courts and did not justify declining relief in England.
4. Force majeure. The clause was directed to matters affecting the seller’s performance. Its reference to causes beyond the seller’s reasonable control could not sensibly include the purchaser’s financing arrangements or a back-to-back resale. A causal link was required between the relevant event and failure or delay in performing the seller’s obligations. Economic circumstances, increased cost and inability to obtain finance did not satisfy that requirement. The force majeure defence therefore had no real prospect of success.
5. Relief. Judgment was entered against the first defendant. The claimant was awarded damages to be assessed and an interim payment of £25,336.30, including interest, together with costs summarily assessed at £30,000. The second defendant was ordered to pay the deposit to the claimant. The alternative strike-out application was not pursued.