Credit Suisse AG v Arabian Aircraft & Equipment Leasing Co EC & Ors

Particulars of claim must identify the essential facts and the legal basis on which those facts are said to justify the remedy claimed. A claimant may not pursue summary judgment on an alternative and mutually inconsistent contractual remedy which it has not pleaded, unless it obtains permission to amend.

Where a contractual compensation formula requires several prescribed elements, including a value established by a specified valuation procedure, compliance with that procedure may be an essential condition of recovery. The claimant cannot omit that element and require the defendant to prove the resulting prejudice.

A bank leased an aircraft to the first defendant under an agreement guaranteed or supported by the other defendants. Following payment defaults, the bank terminated the lease and claimed sums said to be due. Its particulars of claim relied on clauses 18.2 and 18.3, but its summary judgment application was argued exclusively under the alternative compensation mechanism in clause 18.4.

The Commercial Court ordered the defendants to pay US$2,563,000 into court as a condition of defending the claim: [2013] EWHC 1094 (Comm). The defendants appealed. The issues were whether the bank could rely on the unpleaded clause 18.4 and whether recovery under that clause was available without using the contractual procedure for determining the aircraft’s Fair Market Value.

1. Appeal allowed. The bank should not have been permitted to base its summary judgment application on clause 18.4. The order requiring payment into court was set aside and the application for summary judgment was dismissed.

2. Particulars of claim define the claim being made. They must state the essential factual allegations and identify the nature of the case so that the defendant and the court understand why the facts are said to confer the remedy claimed. On a fair reading, the bank’s pleading advanced a claim under clause 18.3. It referred expressly to clauses 18.1, 18.2 and 18.3, but not clause 18.4. Its supporting witness statements likewise omitted clause 18.4.

3. Clauses 18.3 and 18.4 provided alternative and mutually inconsistent methods of calculating compensation. The bank first relied exclusively on clause 18.4 in counsel’s skeleton argument shortly before the summary judgment hearing. It had therefore not done enough to advance that case either on the application or at trial. Permission to amend the particulars was required before clause 18.4 could be relied upon.

4. Clause 18.4 contemplated a formula containing six separate elements, including deduction of the aircraft’s Fair Market Value at termination. That value had to be established through the contractual procedure involving three independent valuers. The formula was not intended to operate without a figure for every element. The bank could not claim on the other five elements while requiring the lessee to prove the prejudice caused by the omitted valuation. Compliance with the valuation procedure was an essential condition of the bank’s rights under clause 18.4.

5. The possible claim under clause 18.3 had not been pursued on the summary judgment application and remained for trial. The court expressed no view on the defendants’ separate contention that the bank and the aircraft manufacturer were responsible for post-termination deterioration of the aircraft.

Moore-Bick LJ gave the leading judgment. Lloyd LJ agreed and emphasised both the need for amendment and the essential nature of the valuation procedure. Mummery LJ also agreed.

1. Court of Appeal (Civil Division): The defendants’ appeal was allowed unanimously. The payment-into-court order was set aside and the bank’s summary judgment application was dismissed: [2013] EWCA Civ 1169.

2. High Court, Commercial Court: His Honour Judge Mackie CBE QC ordered the defendants to pay US$2,563,000 into court as a condition of defending the bank’s claim: [2013] EWHC 1094 (Comm).