S.C. Compania Nationala De Transporturi Aeriene Romane Tarom S.A. v Jet2.Com Ltd

In assessing damages for repudiation where contractual services were available at the innocent party’s request, the court must value the contractual benefit lost. The counterfactual assumes that the repudiating party was ready, able and willing to perform in accordance with the contract, and that this was apparent to the innocent party. The court must then make one composite assessment of whether, and to what extent, the innocent party would have used the services and what financial benefit would have resulted. The contract breaker cannot benefit from its own refusal or inability to perform. A provisional notice deadline did not operate as a condition precedent where later confirmation determined the operative service slots.

Tarom, a Romanian state airline, agreed to provide aircraft maintenance services to Jet2 under a three-year agreement, later extended to 2010. Jet2 was not obliged to send aircraft to Tarom, but the agreement fixed a favourable labour rate. After performance difficulties and failed renegotiations, Tarom terminated the agreement on 10 September 2007. Jet2 accepted the termination and claimed damages.

HHJ Mackie QC held that Tarom’s termination amounted to a renunciation and that Jet2 could recover damages. In judgments reported at [2012] EWHC 622 (QB) and [2012] EWHC 2752 (QB), he assessed the aircraft that Jet2 would have sent to Tarom and quantified the resulting loss. The central issues were the assumptions governing that assessment and whether Jet2’s failure to give an earlier work-slot notice barred recovery for 2007/08.

Appeal dismissed. Tarom’s repudiation entitled Jet2 to recover the value of the contractual benefits lost, notwithstanding that Jet2 was not bound to send any aircraft to Tarom.

1. For the purpose of assessing damages, the court had to assume that Tarom was ready, able and willing to perform the agreement according to its terms, and that this was apparent to Jet2. The assumption was necessary to give Jet2 the benefit of its bargain. It could not be treated as a secret fact available only to the court.
2. Causation and assessment were not separate inquiries governed by different factual assumptions. The composite question was whether, assuming Tarom’s readiness and willingness to perform, Jet2 would have sent any aircraft, and if so how many, and what saving would have resulted if Tarom had performed at the contractual rate. This approach was supported by the observations of Patten LJ in Durham Tees Valley Airport v bmibaby [2011] 1 Lloyds Rep 68, which were not limited to assessment after causation had independently been established.
3. The judge was entitled to find that Jet2 would have used Tarom for some aircraft because of the favourable contractual rate, while taking account of the advanced arrangements already made with other providers. His damages assessment was therefore not founded on legal error.
4. Appendix F required notice by 1 December, but the notice was provisional: dates had to be confirmed by 1 June, and additional dates could then be specified. The December notice did not itself create an entitlement to use slots. In that commercial context, time was not of the essence and a compliant December notice was not a condition precedent to issuing a request for service. Jet2’s later notices were sufficient to identify the relevant slots.
5. There was no basis for implying a term contradicting the express notice provision. Jet2 could have served a protective notice which would lapse if the agreement was not renewed. It was unnecessary to decide any alternative waiver or estoppel argument.

• Court of Appeal (Civil Division): In [2014] EWCA Civ 87, the appeal was dismissed.
• High Court, Queen’s Bench Division, Commercial Court: HHJ Mackie QC held in [2012] EWHC 622 (QB) that Tarom had repudiated the agreement and that Jet2 was entitled in principle to damages. In [2012] EWHC 2752 (QB), he assessed the aircraft that would have been sent to Tarom and quantified the damages.