Alaska Airlines Inc. v Virgin Aviation TM Limited & Anor

A minimum royalty payable under a commercial trade mark licence may constitute a floor for a single payment obligation, rather than a severable payment for one particular contractual benefit. The court must construe the agreement as a whole and may consider its commercial consequences.

A broadly worded no set-off clause may require payment of an accrued debt even where the payer asserts an arguable restitutionary claim arising from total failure of consideration, provided the answer is properly characterised as circuity rather than a contention that no debt ever arose. A contractual obligation will be a condition precedent only where the contract clearly makes performance a prerequisite to the counter-obligation. An implied term will not be added where it is inconsistent with detailed contractual wording.

Alaska succeeded to a trade mark licensing agreement under which Virgin granted Airline Rights, including rights of use and exclusivity. The agreement required payment of Airline Royalties, subject to an annual Minimum Royalty. After Alaska ceased using the Virgin brand, earlier proceedings held that the Minimum Royalty remained payable: [2023] EWHC 322 (Comm), upheld by the Court of Appeal in [2024] EWCA Civ 622.

Alaska subsequently alleged that Virgin had breached the Exclusivity Obligation by operating a customer loyalty scheme involving Delta Air Lines. It claimed that the agreement had terminated in September 2022 and sought permission to amend its claim. Virgin sought summary judgment for the Minimum Royalty due up to 23 September 2022, relying on a no set-off clause. The central issues concerned severability, restitution, a condition precedent and an implied term.

1. Applications. Virgin was entitled to summary judgment for the Minimum Royalty due up to 23 September 2022, with interest. Alaska was refused permission to amend its Particulars of Claim.
2. The court had all material necessary to determine the construction and legal issues summarily. It was appropriate to decide the short points of law under Part 24 in accordance with Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch).
3. The Minimum Royalty was not a severable payment made solely for the Exclusivity Obligation. The TMLA granted a bundle of Airline Rights, including rights of use, sub-licensing, transfer in specified circumstances and exclusivity. The Airline Royalties, including the Minimum Royalty, were payable in consideration of that whole bundle. The Minimum Royalty operated as a floor for the single payment obligation, not as a separate payment referable to exclusivity.
4. Even if Alaska had an arguable restitutionary claim based on total failure of consideration, clause 8.9.1 was sufficiently wide to prevent that claim being raised as a defence to the debt. The answer was properly characterised as a circuity argument capable of being pursued independently. It was not a Pure No Debt argument establishing that the debt had never accrued.
5. Compliance with the Exclusivity Obligation was not a condition precedent to payment. The TMLA contained no clear wording making payment conditional on complete performance. The obligation was innominate, and whether a particular breach was repudiatory could not determine retrospectively whether it was a dependent obligation. The implied-term case failed for the same reasons and because the professionally drafted agreement was unlikely to leave such a significant provision unexpressed.