Aircraft Purchase Fleet Ltd v Compagnia Aerea Italiana Spa

A party claiming damages for renunciation cannot recover where it was already unable to perform, unless that inability was caused by the renunciation. Frustration does not apply where the contract expressly or impliedly allocates responsibility for the event preventing performance. Where performance depends on a related agreement, the dependent party may be under an implied obligation not to permit that agreement to be terminated. A tax settlement governed by Articles 8 and 9 of the Decreto Legislativo no. 218 of 19 June 1997 becomes final and binding when the first agreed payment is made. A contractual contingent liability may crystallise when the creditor makes demand after the principal debtor’s liability has arisen.

Aircraft Purchase Fleet Ltd claimed US$260 million from Compagnia Aerea Italiana Spa, alleging that CAI had renounced a framework agreement requiring it to lease Airbus A320-family aircraft. APFL accepted that subsequent termination of its purchase arrangements with Airbus had made performance impossible, but contended that CAI’s insistence on A319 aircraft had caused or materially contributed to that result.

CAI denied renunciation and relied alternatively on APFL’s inability to perform. CAI also counterclaimed under a contractual provision concerning amounts payable by APFL’s parent, Toto, under a share purchase agreement. The principal issues were causation and the scope of APFL’s contingent payment obligation.

1. Claim for damages. The claim was dismissed. APFL could not establish that CAI’s alleged renunciation caused or materially contributed to Airbus terminating the relevant aircraft deliveries, refusing to reinstate them, or APFL entering a subsequent amendment.
2. Frustration was unavailable because the Framework Agreement allocated responsibility for the relevant risk. APFL’s performance depended on the Airbus purchase agreement, and business efficacy required an implied term that APFL would not act so as to permit Airbus to terminate that agreement or the relevant part of it: National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675.
3. It was accepted that an innocent party cannot recover damages for repudiatory breach where, at the date of breach, it was already irremediably disabled from performing, provided that its inability was not attributable to the repudiatory breach. The principle was applied from Acre 1127 Ltd (in liq) v De Montfort Fine Art Ltd [2011] EWCA Civ 87.
4. The evidence showed that Airbus’ decisions resulted from APFL’s repeated defaults, failure to finance and failure to take delivery. CAI’s position on A319 aircraft played no part in Airbus’ termination or refusal to reinstate deliveries. APFL was therefore independently unable to perform and CAI had a complete defence. The court did not decide whether CAI had renounced, whether any renunciation continued, or whether APFL affirmed the agreement.
5. Counterclaim. Under Articles 8 and 9 of the Decreto Legislativo no. 218 of 19 June 1997, the tax settlement became final and binding when the first instalment was paid. Only the payment made by Challey Ltd on 11 December 2013 fell within the contractual cut-off. APFL’s liability crystallised when CAI demanded payment in April 2015. Judgment was entered for €276,118.11, with interest from 11 December 2013, subject to CAI’s undertaking not to enforce while Toto complied with its later settlement obligations.