Wilmington Trust SP Services (Dublin) Ltd & Ors v Spicejet Ltd

On an application for summary judgment, the court must determine whether the opposing case has a realistic prospect of success and whether there is any other compelling reason for trial. The court may decide a short point of law or construction where the evidence is sufficient, but must avoid a mini-trial.

Contractual obligations to pay rent under an aircraft dry lease may remain absolute despite grounding, illegality of operation, loss of use or commercial unprofitability. Frustration requires performance to have become radically different, having regard to the contractual allocation of risk and the surrounding circumstances. A temporary grounding will not ordinarily frustrate a long-term lease. A stay of execution may nevertheless be appropriate where enforcement risks insolvency and the creditor’s recovery would thereby be prejudiced.

The claimants, comprising a trustee-lessor and two aircraft lessors, sought summary judgment under CPR Part 24 for unpaid basic rent, supplemental rent and restoration of a security deposit under three aircraft lease agreements with the defendant airline.

The defendant accepted that rent had not been paid but raised issues concerning title to sue, illegality, the claimant’s entitlement to draw down and reallocate a security deposit, calculation of supplemental rent, implied conditions of satisfactory quality under the Supply of Goods and Services Act 1982, the Unfair Contract Terms Act 1977, set-off and frustration following the grounding of two aircraft.

The central questions were whether the defences had a realistic prospect of success or disclosed another compelling reason for trial, and whether execution should be stayed.

1. Summary judgment principles. The court adopted the approach in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch). A realistic prospect is more than fanciful or merely arguable. The court must not conduct a mini-trial, but may decide a short legal or construction issue where the evidence is sufficient and there is no reasonable prospect that further evidence would affect the result.
2. MSN 41397. The first claimant had no real prospect of failing for want of title to sue. It contracted personally as lessor, and the lease expressly permitted each indemnitee to enforce its rights. The illegality defence also failed: the dry lease transferred possession and operational risk to the lessee, and clauses 7.5(a), 7.5(b) and 19.1 made rent payable irrespective of unavailability or ineligibility for use.
3. The security-deposit claim was different. The evidence supported an arguable case that the deposit had been drawn down for sums owed to the other lessors, rather than to the first claimant, and that the first claimant could not subsequently reallocate it to cure the earlier application. Summary judgment for restoration of the deposit was therefore refused and that issue was left for trial.
4. Supplemental rent and implied terms. The calculation of supplemental rent properly allowed for the usage-related components. The express provisions did not unarguably exclude the statutory implied condition of satisfactory quality under the Supply of Goods and Services Act 1982; wording referring only to representations and warranties was insufficient. The court would nevertheless have concluded that the relevant provisions of the Unfair Contract Terms Act 1977 were excluded under sections 26(3) and 27. The no-set-off clause prevented reliance on the counterclaim as a defence to payment.
5. Frustration. Applying the multifactorial approach in The Sea Angel [2007] 2 Lloyd’s Rep. 517, the leases had not become radically different. They were ten-year dry leases allocating the commercial risk of operation and grounding to the defendant. The indefinite but temporary grounding, lasting about 10% of the term, was presently insufficient. The court did not exclude the possibility that a prolonged future ban might produce a different result.
6. Judgment was entered for the first claimant for US$2,464,600 and for the second and third claimants for US$11,663,456.59 and US$11,534,534.38 respectively. Execution of all judgments was stayed to facilitate mediation or other alternative dispute resolution; in the first claimant’s case, the stay extended at least until trial of the remaining claims and cross-claims.