Commercial Court considers meaning of ‘airworthiness’ for first time

ACG Acquisition XX LLC v Olympic Airlines SA (in special liquidation) [2012] EWHC 1070 (Comm)

In a recent Commercial Court judgment, which has wide significance for the aviation industry, Teare J found that:

1. In the context of a lease of an aircraft intended for the safe carriage of passengers whether an aircraft is airworthy depends upon whether it is fit or safe for the carriage of passengers by air as a matter of fact. Whether a particular defect renders an aircraft unfit or unsafe for flight will depend upon the function of the part in question and the severity of the defect and not upon whether the operator of the aircraft knows of the defect or not.
2. Contrary to the terms of an English law operating lease, the Claimant (“ACG”) had delivered a Boeing 737-300 aircraft to the Defendant (“Olympic”) which was neither airworthy nor safe to fly and which “had not been properly maintained”.
3. Olympic’s signature of a ‘Certificate of Acceptance’ required by the lease immediately prior to delivery did not give rise to a ‘contractual estoppel’ preventing Olympic from arguing that the aircraft was not airworthy or otherwise in the required condition at delivery. On a proper construction of the lease the parties had not agreed that the ‘Certificate of Acceptance’ would be conclusive proof of such matters or that it would waive any right to damages for any breach by ACG of its obligation to deliver the aircraft in that condition.
4. An affiliated ACG entity had nevertheless relied on Olympic’s statement in the ‘Certificate of Acceptance’ that the aircraft “complied in all respects with the condition required at delivery” so as to be “absolutely certain that Olympic considered that the aircraft complied with the required condition”. Olympic was therefore estopped from resiling from that statement. As such ACG was entitled to rent and Olympic was estopped from pursuing its counterclaim for damages for breach of contract.

XXIV Old Buildings has prepared a legal update on the decision which can be found here and a copy of the judgment can be found here.

Philip Shepherd QC and Edward Cumming acted for Olympic, instructed by Fulbright & Jaworski International LLP.