Aircraft redelivery: the consequences of non-compliance

A recent English Commercial Court case has confirmed when amendments to a claim should be permitted, in the context of considering the terms of a standard aircraft operating lease relating to the redelivery of leased aircraft and whether specific conditions had been met. 

Background

In the case of GASL Ireland Leasing A-1 Limited v SpiceJet Limited [2023] EWHC 1107 (Comm), GASL (Lessor) claimed that SpiceJet (Lessee) had failed to comply with the redelivery conditions when returning the leased Boeing 737-800 aircraft following an event of default under the lease.

The Lessor claimed that the Lessee had failed to pay rent, returned the aircraft to the wrong country (India instead of Ireland), and failed to carry out the inspections and requirements in the way anticipated under the terms of the lease.

The Lessee filed a Defence that the Judge said did little more than put the Lessor to proof of its claim or deny breach of the lease in general terms, without putting forward any alternative version of events. The Lessee then sought an adjournment because the Lessor proposed amendments to its claim which the Lessee described as “substantial”.

The Judgment

The Judge refused to adjourn the proceedings and permitted the Lessor to amend its claim. In doing so, he confirmed that parties are expected to consent to limited amendments which can comfortably be addressed at trial. In this case the amendments were in fact very limited and brought the pleaded case as to quantum into line with the expert evidence that had been served, as frequently happens.  The amendments relied upon standard provisions in aircraft leases that the lessor can certify amounts due under the lease, which is binding in the absence of manifest error, with the result that those amounts are recoverable as a debt.

The Judge then considered whether certain redelivery conditions had been met, including relating to the condition of the engines and the calculation of the Redelivery Maintenance Payment Adjustments.  He also considered whether the Lessor was entitled to various other costs which it had certified under the lease were payable (having taken account of its own expert’s evidence on quantum).

Having decided that certain of the conditions had not been met, the Judge considered the wording in the lease on certification of the sums due, which was as follows:

“Any certification or determination as to any rate of interest…or as to any other amount payable under this Agreement shall, in the absence of manifest error, be conclusive and binding on Sublessee.”

The lease also contained a clear, binding requirement on the Lessee, in the event of non-compliance with the redelivery conditions, to indemnify the Lessor for the cost of putting the aircraft into the condition required by the lease, and for any losses the Lessor might suffer as a result of the aircraft not being in such condition.  The Judge concluded that the amounts claimed fell within the indemnity given and therefore constituted “any other amount payable under this Agreement.” 

Having considered the expert evidence provided by the Lessor (which went unchallenged by the Lessee), the Judge concluded that there had not been any manifest error in the amount certified by the Lessor, as it fell within a range of reasonable costs. Accordingly, the Lessor was entitled to judgment in the amount certified together with interest and costs.

Comment

This Judgment is helpful in confirming the meaning of standard aircraft lease wording relating to lessor certification of sums due and gives comfort to lessors that they should be able to certify and recover their costs, provided they are reasonable and have been calculated in accordance with the agreement.

It also acts as a reminder to lessees to comply with the stated redelivery terms of the lease; and if compliance with those terms is disputed, it will be insufficient simply to put the lessor to proof.  An alternative explanation of the position, supported by evidence (likely both factual and expert) will be needed. 

Procedurally speaking, unreasonable objections or delay will likely be detrimental to your case. Parties should first seek to agree any amendments to their statements of case, and if such requests are reasonable and/or minor, parties should think carefully about whether to agree and avoid troubling the Court.