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

On an application for summary judgment, the claimant must show that the defence has no real prospect of success. A defendant may resist judgment where an issue has a real, though improbable, prospect of succeeding, but the court may protect the claimant by imposing a condition that the disputed sum be paid into court.

A lessor who has accepted repudiation of a lease does not ordinarily owe the lessee a mortgagee-like duty to preserve the leased asset. In assessing mitigation, the claimant must take objectively reasonable steps, but the duty is not exacting where the defendant’s own default created the difficulty. The defendant bears the burden of showing failure to mitigate.

Credit Suisse sought summary judgment against the lessee, its guarantor and a sublessee in respect of sums claimed under an aircraft finance lease following defaults, termination and repudiation. The aircraft had remained in the possession of a maintenance company, which asserted a substantial lien, before being sold.

The defendants argued that the claimant had caused or failed to prevent deterioration in the aircraft, had failed to mitigate its loss, and had claimed excessive or incorrectly calculated sums. They also relied by analogy on duties owed by mortgagees. The central questions were whether those defences had a real prospect of success and, if so, whether judgment should be conditional on payment into court.

1. Summary judgment. The claimant had to show that the defendants had no real prospect of successfully defending the claim. The guidance in Federal Republic of Nigeria v Santolina Investment Corporation & Ors [2007] EWHC 437 (Ch) was applied.
2. Contractual issues. The court considered the arguments concerning waiver of redelivery rights but found it unnecessary to determine them. The claimant appeared to have the stronger argument on the structure of the agreement and the interaction of its clauses.
3. Alleged duty to preserve the aircraft. The mortgagee authorities did not create a real prospect of success. The relevant principles concerned mortgagors and mortgagees. After acceptance of repudiation, the defendants had no continuing interest in the aircraft comparable to that of a mortgagor. The proposed duty owed by the lessor was therefore rejected as having no real prospect of succeeding. Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295 and McHugh v Union Bank of Canada [1913] AC 299 were distinguished.
4. Mitigation. The claimant had to take reasonable steps to mitigate its loss, judged objectively by reference to a person in its position. The burden was on the defendants to establish failure to mitigate. The duty was not exacting, particularly because the defendants’ defaults had created the difficult circumstances and they were themselves wrongdoers. The mitigation defence had no real prospect of success, subject to the court’s assessment of the remaining issues.
5. Remaining issues and order. The possible uncertainty concerning Fair Market Value and the mitigation evidence made it possible, although improbable, that parts of the defence might succeed. The defendants were therefore permitted to defend on those issues, conditional upon payment into court of the sums in dispute. The admitted arguable defence concerning $187,000 was to be deducted from the payment, with further financial consequences to be addressed after submissions.