Edward Cumming QC and Erin Hitchens represent successful defendant in trial of aircraft leasing dispute in the Commercial Court

31 January 2022

Edward Cumming QC and Erin Hitchens represent successful defendant in trial of aircraft leasing dispute in the Commercial Court

After a hard-fought, in-person trial over two weeks in December 2021, the Commercial Court has handed down judgment in NAS Air Company v Genesis Ireland Aviation Trading 3 Limited [2022] EWHC 176 (Comm).

The dispute concerned the lease of an Airbus A320-214 aircraft, and, in particular,  the repairing obligations of the lessee, Saudi Arabia’s budget airline, NAS, and the obligations of the lessor (Genesis) to contribute to repairs from reserves of maintenance rent.  Both NAS’ claim and Genesis’ counterclaim turned upon the interpretation of the lease and of a written extension thereto known as Lease Extension 4 (LA4).  NAS also sought rectification of those contractual documents to try to ensure that they reflected what it argued was the parties’ shared intentions.

Under the terms of the lease, NAS was obliged to carry out full repairs and maintenance to the aircraft.  In respect of the engines, this included carrying out performance restoration shop visits (PRSVs) as and when required.  NAS paid to Genesis maintenance rent on a monthly basis which was applied towards the cost of any such repairs.  However, any excess cost of repairs above the maintenance rent reserve balance was to be funded by NAS.  NAS carried out the PRSVs during the extended lease term.

In bringing its claim against Genesis, NAS originally contended that, upon the proper interpretation of LA4, it had the right, during the extended lease term, to fit replacement engines onto the aircraft and thereby avoid carrying out the PRSVs, and paying any contribution to them.  It therefore claimed from Genesis the full cost of performing the PRSVs.  This claim was dismissed upon Genesis’ earlier application for summary judgment.  After attempting, unsuccessfully, to appeal this judgment, NAS amended its claim to contend that LA4 should be rectified, on the grounds, it said, that both parties had intended that during the extended lease period, when PRSVs were required, NAS would be allowed to provide its own engine and thereby avoid carrying out and contributing to the cost of the PRSVs.

Nicholas Vineall QC (sitting as a Deputy Judge of the High Court) dismissed this argument, finding on the evidence that neither party had intended that Genesis would lose its right to insist upon the PRSVs taking place during the extended lease term.  For the same reason he dismissed NAS’ claim for the monthly rental cost of providing replacement engines.

By its counterclaim Genesis claimed the cost of repairs to one of the engines, since, in breach of the terms of the lease, it did not comply with return conditions upon redelivery.  In particular, stage 1 blades in its low-pressure turbine (LPT) module had untwisted, resulting in the outer shroud interlock being out of flush, and LPT stage 3 blades had untwisted severely enough to have resulted in unlatched shrouds.  NAS sought to avoid liability in respect of these defects by alleging that, since Genesis had waived the requirement for NAS to carry out a 6Y Major Airframe Check prior to redelivery, it had thereby waived any return conditions contained in the lease relating to the engines.  The Judge disagreed, finding this interpretation of the contractual documents to be both inaccurate and wholly uncommercial, and awarded Genesis damages for the cost of repairs.

The full judgment can be read here.

Edward Cumming QC and Erin Hitchens were instructed by Alius Law.

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