Aircraft Purchase Fleet Limited sought $260 million in damages from Compagnia Aerea Italia

Facts
Arguments
Decision

Facts

In Aircraft Purchase Fleet Limited v Compagnia Aerea Italia (2018 EWHC 3315 (Comm)), the claimant, Aircraft Purchase Fleet Limited (APFL), sought $260 million in damages from the defendant, Compagnia Aerea Italia (CAI), for CAI's alleged repudiatory breach of a framework agreement under which CAI had agreed to take on lease certain new Airbus A320 family aircraft between 2012 and 2015. APFL had agreed to buy these aircraft from Airbus pursuant to a purchase agreement between Airbus and APFL.

Arguments

In court, APFL argued that CAI had repudiated its obligation to take the aircraft in March 2012 by insisting that it would take delivery of A319 aircraft only and would not lease A320 aircraft from APFL.

At the same time, and apparently without CAI's knowledge, Airbus had served a notice of termination of its obligations to sell aircraft to APFL due to APFL's unremedied breaches under the Airbus purchase agreement. APFL had been unable to obtain financing for the aircraft it had contracted to purchase pursuant to the purchase agreement and thus had been unable to pay the purchase price and take delivery of such contracted aircraft. This termination was confirmed by an amendment agreement between Airbus and APFL, which had been executed in September 2012.

The parties accepted that if CAI had repudiated the framework agreement, CAI would nonetheless have a defence against APFL's claim for damages if APFL had independently rendered itself incapable of performing its obligations under the contract.

CAI argued that this defence arose due to the doctrine of frustration – it had become impossible for either party to perform under the framework agreement following Airbus' termination.

Decision

The judge concluded that the doctrine of frustration did not apply to this case, stating:

Frustration of a contract can only arise where responsibility for the matters which give rise to the impossibly of performance is not allocated in the contract, either expressly or implicitly.(1)

In this instance, APFL's ability to perform under the framework agreement depended on the purchase agreement, to which it was a party, remaining in force. APFL accepted that by agreeing to the termination APFL had rendered itself incapable of performing its corresponding obligations to CAI under the framework agreement.

However, APFL claimed that CAI's refusal to accept A320 aircraft had caused or materially contributed to Airbus' termination in April 2012. On the evidence, Justice Phillips rejected APFL's argument that Airbus' actions had been in any way influenced by CAI's stance and concluded that APFL had been entirely responsible for rendering itself unable to perform its obligations under the framework agreement.

Accordingly, APFL's claim failed on the facts.

For further information on this topic please contact John Pearson or Jack Goold at Vedder Price LLP by telephone (+44 20 3667 2900 ) or email (jpearson@vedderprice.com or jgoold@vedderprice.com ). The Vedder Price LLP website can be accessed at www.vedderprice.com.

Endnotes

(1) Paragraph 110, Aircraft Purchase Fleet Limited v Compagnia Aerea Italia (2018 EWHC 3315 (Comm)).