National Private Air Transport Company & Anor v Sheikh Abedlelah M. Kaki

A contractual recital will not ordinarily create an operative obligation merely because the agreement makes recitals integral and interpretative. A claim based on such a recital may also be time-barred if any obligation arose when the agreement was made. Misrepresentation claims are barred where the claimant knew, or could with reasonable diligence have known, the relevant facts at that time, and there is no realistic prospect of proving reliance. A contract is not void for mutual mistake where the alleged belief lacked reasonable grounds, the state of affairs was attributable to the claimant’s fault, or performance remained possible.

The claimant sought summary judgment against the defendant in respect of a primary claim for US$2,364,965. The claim arose from a Purchase Agreement and a Management Agreement concerning an interest in an aircraft. Earlier proceedings had established that the defendant had not acquired an aircraft interest, and the claimant’s application for permission to appeal that decision had been refused.

The claimant contended that the Management Agreement was breached, rescindable for misrepresentation, or void for mutual mistake. The defendant argued that each basis was time-barred or had no realistic prospect of success. The court therefore considered whether any of those causes of action could sustain the primary claim.

Application granted. Summary judgment was entered against the claimant on its primary claim.

1. Breach of contract. Recital A of the Management Agreement stated that the defendant owned the relevant interest. The recital was not, in the court’s view, an operative provision capable of breach. Clause 1.1, which made the recitals integral and interpretative parts of the agreement, indicated that they assisted interpretation but did not convert them into operative promises. In any event, any obligation concerning ownership would have been breached when the agreement was made. The claim was therefore time-barred, and the agreement did not impose a continuing obligation breached whenever the defendant used an aircraft.
2. Misrepresentation. The claims for rescission and damages had no realistic prospect of avoiding limitation. On either proposed approach, time began to run no later than the making of the Management Agreement in March 2008. The claimant knew, or could with reasonable diligence have known, that the Purchase Agreement required later notification, delivery and registration, and that it had not performed those acts. The claimant also had no realistic prospect of proving reliance, since it knew the terms of the Purchase Agreement and its own acts and omissions.
3. Mutual mistake. The court accepted the three objections advanced by reference to Associated Japanese Bank v Credit du Nord [1989] 1 WLR 225 and The Great Peace [2002] EWCA Civ 1407. The alleged belief lacked reasonable grounds. The non-existence of the relevant state of affairs was attributable to the claimant’s failure to notify delivery, deliver the interest or arrange registration. Further, the absence of an aircraft interest did not make performance of the Management Agreement impossible; the parties had in fact performed it.
4. The court concluded that none of the claimant’s proposed legal bases had a realistic prospect of success. Written submissions were invited on the form of order and costs.

The judgment records earlier proceedings in which summary judgment was entered for the present defendant. The claimant’s application to set that judgment aside was dismissed by Cooke J: [2015] EWHC 3655 (Comm). Permission to appeal was refused on paper and at an oral hearing.