London Executive Aviation Ltd v The Lily Partnership Llp

A contractual time limit for calculating an amount does not remove an accrued entitlement unless the contract clearly makes timeous calculation a condition of liability. An objectively ascertainable adjustment remains due, although late accounting may postpone payment. Contractual accounting provisions should be construed commercially and should not create disproportionate forfeiture consequences without clear language.

An estoppel based on an implied representation requires clarity, intended reliance and detriment. A bailee cannot ordinarily deny the title of its bailor. An offer made without consideration, or subject to an unfulfilled condition, is not contractually enforceable.

London Executive Aviation Limited managed and chartered an aircraft for The Lily Partnership LLP under an Aircraft Management and Charter Agreement. The agreement provided for charter incentive payments calculated by reference to the difference between the average charter rate and a target charter rate.

LEA claimed unpaid positive incentive payments. Lily disputed liability, principally because the calculations were late and were not initially included in monthly statements. Lily also sought deductions for missing equipment, silver vases, an auxiliary power unit hire charge and simulator training costs.

The court had to determine the construction and effect of the incentive-payment and accounting clauses, Lily’s alternative estoppel case, and the contractual or bailment basis of the proposed deductions.

1. Charter incentive payments. The entitlement to a positive or negative payment arose objectively from the difference between the target and average charter rates at the end of the relevant quarter. The calculation ascertained the entitlement; it did not create it. Failure to calculate within the two-month period therefore did not extinguish the entitlement.
2. The word “calculated” in the accounting clause was a drafting inconsistency without substantive significance. The clauses created an invoicing and accounting mechanism. Delay in providing a monthly statement postponed payment under the express machinery, but did not cause forfeiture of an accrued entitlement. A later notification and invoice of an omitted incentive payment was sufficient.
3. Estoppel. The pleaded representation was not the alleged representation relied on in submissions, and the amended case was not open to Lily. In any event, an omission from a statement was neither clear nor unequivocal. Lily could not reasonably infer that an omitted incentive payment was positive, nor establish intended reliance or detriment. The estoppel case would therefore have failed.
4. Other deductions. Lily could set off the agreed value of equipment not redelivered. LEA, as bailee, was estopped from denying Lily’s title to the silver vases, and Lily could recover their value. The proposed contribution to the auxiliary power unit hire was not contractual because the offer was conditional on payment of other outstanding sums, which did not occur; alternatively, it lacked consideration. The evidence did not establish an agreement that LEA would bear the simulator hire costs.
5. LEA was entitled to judgment for the incentive payments, subject to Lily’s permitted set-offs for the missing equipment and silver vases. The parties were directed to agree and draw up the order.