FW Aviation (Holdings) 1 Limited v Vietjet Aviation Joint Stock Company

A security trustee may exercise contractual rights assigned to it under aircraft leases independently of additional enforcement powers which arise only after an enforcement event, unless the documents clearly impose that restriction. Contractual notices which automatically alter or terminate contractual rights must comply strictly with specified requirements as to date and amount. A restriction on assignment ordinarily renders a non-permitted assignment ineffective against the debtor. Relief from forfeiture may in principle be available for possessory rights under a JOLCO aircraft leasing structure, but it is exceptional in bespoke commercial transactions. Substantial and deliberate defaults, subsequent unauthorised use, misconduct closely connected with the application, commercial certainty and the unfairness of compelling renewed dealings may justify refusing relief.

The claimant, a security-rights holder within a JOLCO aircraft-financing structure, sought payment exceeding US$180 million and possession of four aircraft from the defendant airline. The defendant disputed the claimant’s title and the validity of the contractual assignments and termination notices. It also sought relief from forfeiture.

The court considered whether the security trustees could terminate the leases without an enforcement event, whether mandatory prepayment notices were compliant, whether a restructuring agreement had been concluded, whether the claimant’s acquisition of the lenders’ and security trustee’s rights was effective, and whether relief from forfeiture was available and should be granted.

1. Termination rights. The rights to terminate the head leases and sub-leases had been assigned to the security trustees as co-extensive contractual rights. They were not confined by the separate enforcement powers in the security assignments, which were exercisable only following an enforcement event. The termination notices were therefore effective despite the absence of such an event.
2. Mandatory prepayment notices. The notices failed to specify the repayment date and amount required by the loan agreements. Compliance with the notice clause was a condition precedent because the notices automatically altered or terminated contractual rights. The notices were non-compliant and could not independently terminate the leasing.
3. Restructuring and assignments. The correspondence did not establish a binding deferral agreement. FWC was a financial institution and qualifying lender within the agreements’ commercial context, including the broad approach in Essar Steel Ltd v The Argo Fund Ltd [2006] 2 Lloyd’s Rep 136. The CEO assignments were also supported by a continuing enforcement event. The borrower-consent issues therefore did not defeat the assignments. Had consent been required, the restriction would ordinarily have made the non-permitted assignments ineffective against the debtor.
4. Relief from forfeiture. Relief was available in principle because the JOLCO arrangements transferred substantial possessory and proprietary incidents of ownership and came close to the finance-lease end of the spectrum. The court declined to decide the Convention-related jurisdiction issue. Relief was refused in the discretion. The contractual termination payments were not a windfall; the defaults were substantial and longstanding; the defendant continued using the aircraft without paying rent; and its Vietnamese proceedings and regulatory correspondence were an egregious campaign closely connected with its application and intended to obstruct export and secure re-leasing.
5. FWA’s claim succeeded. The precise form of relief was left for further consideration or agreement.