Gesner Investments Ltd v Bombardier Inc

Where contractual termination provisions are linked by a cross-reference, the court must read them together. A clause giving a buyer the right to terminate after 90 days of non-excusable delay pursuant to the termination article requires compliance with that article’s procedure, including written notice, a 10-day opportunity to cure, and continuing diligent correction. The reimbursement and interest provision is consequential; it does not create a free-standing right to terminate. Commercial awkwardness, apparent unfairness or an allocation of risk favouring a defaulting seller does not permit the court to rewrite reasonably clear words in a commercial contract between parties of equal bargaining power. A different procedure for excusable delay does not alter that construction.

Gesner Investments Limited appealed Blair J’s summary judgment in the Commercial Court in 2010 FOLIO 371. The Aircraft Purchase Agreement required Bombardier to have the aircraft ready for inspection and acceptance by 15 October 2009. The delay was non-excusable and 90 days expired on 14 January 2010. Gesner then served a termination notice without giving the written notice required by Article 9.2. Bombardier subsequently treated Gesner’s failure to pay the final instalment as a default and retained 10% of the purchase price as liquidated damages. The central issue was whether Article 8.4 created an immediate termination right after 90 days, or whether termination remained subject to the notice and cure procedure in Article 9.2.

Rix LJ gave the leading judgment. Longmore LJ agreed with his reasoning, and Patten LJ agreed with both judgments. The appeal was unanimously dismissed.

1. Contractual mechanism. Article 8.4 prevented termination pursuant to Article 9 during the first 90 days of non-excusable delay. Once that period expired, the reference to termination pursuant to Article 9 directed the buyer to the only applicable buyer’s termination right in Article 9.2. Article 9.1 was a mutual insolvency provision, and Article 9.3 supplied consequences rather than a termination right.
2. Required procedure. The buyer therefore had to serve written notice specifying the material default or breach, allow 10 days for the seller to act to cure it, and comply with the continuing obligation concerning diligent correction. Article 9.3 could not be adopted while the procedural requirements of Article 9.2 were discarded.
3. Commercial context. The court accepted that the agreement was poorly drafted and that the result was commercially unattractive. However, the contractual language was reasonably clear. The approach in Mitsui Construction Co v A-G of Hong Kong (1986) 33 BLR 1 did not justify using commercial rationality to impose a different bargain. The caution in Kookmin Bank v Rainy Sky [2010] EWCA Civ 582 was followed: a court should be particularly careful before reformulating provisions agreed by commercial parties of equal bargaining power.
4. Scope. Article 9.2 was intended primarily to address non-excusable delay. Difficulties might arise where a materially defective aircraft was tendered or delay continued after inspection, but those hypothetical issues did not require resolution and did not displace the agreed procedure.
5. Result. Gesner’s notice of 14 January 2010 was ineffective because it did not comply with Article 9.2. The seller’s subsequent termination following non-payment therefore took effect, and the claim to recover the retained 10% was dismissed. The judge’s separate conclusion on interest was not challenged.

1. Court of Appeal (Civil Division) — The appeal was dismissed on 11 October 2011: [2011] EWCA Civ 1118.
2. Queen’s Bench Division, Commercial Court — Blair J granted summary judgment against the buyer in 2010 FOLIO 371 and held that termination after 90 days of non-excusable delay required compliance with Article 9.2.