Bird & Bird's Aviation Disputes team in London has successfully represented Singapore-based BOC Aviation and BOC Aviation, Ireland, in a landmark case against the now defunct Kingfisher Airlines Limited, and its parent United Breweries.
The UK High Court ruling ordered Kingfisher and United Breweries, to pay an estimated US$90 million in claims to our client, in respect of four contracts taken out by Kingfisher and guaranteed by United Breweries between 2004 and 2011.
The judgment, handed down in February by Justice Picken, allowed BOC Aviation and BOC Aviation (Ireland) to claim more than US$88 million from Kingfisher in unpaid rent and recovery costs under the leases and is considered to be a landmark victory, likely to pave the way for other similar claims from lessors seeking to recover lost rents and costs.
The case concerned BOC Aviation's decision in 2004-2005 to lease four aircraft to Kingfisher under three separate lease agreements which were due to expire in 2013 and 2015. When Kingfisher fell into arrears on the leases in 2011, BOC Ireland agreed to lease it the same three aircraft for a further three to four years, beginning when they were redelivered to BOC Singapore and on the condition that there be no further defaults. Kingfisher remained in default, however, and therefore the aircraft were never delivered under the new leases. The parties agreed to terminate one lease in November 2012 and BOC Aviation repossessed the other two aircraft in 2013. Kingfisher took out the fourth lease directly from BOC Ireland in 2011 but didn’t complete the process and eventually refused delivery of the aircraft.
The lessor claimed that, because none of the three aircraft came back into BOC Singapore’s possession in the redelivery conditions specified under their leases, it then incurred almost US$30 million in additional costs in bringing the planes back to an appropriate redelivery state. BOC Aviation told the court Kingfisher Airlines was 'contractually bound' to pay the security amount, but that the security paid by Kingfisher was not enough as per the agreement, following which BOC Aviation moved the London court for claim.
Neither Kingfisher nor United were represented in court, and it was noted that they had not engaged in the proceedings for some time. Both companies belong to the business empire of embattled Indian former politician Vijay Mallya, currently resident in the UK and fighting extradition to India, where he faces charges by India’s Central Bureau of Investigation. In February 2017, an Indian court ordered that United be wound up following petitions by creditors claiming they were owed over US$103 million by the company.
Justice Picken gave summary judgment in BOC Aviation's favour on the basis that Kingfisher would have no real prospect of success in defending them. The court noted that, in such circumstances, a lessor is entitled to recover the difference between the contractual rent payable under the lease and the market value of the aircraft, as well as the value of lost rent and costs during the remarketing process. Despite BOC Aviation managing to mitigate this loss by successfully remarketing the aircraft to Garuda Airlines, it was found that these costs would have totalled more than US$35 million.
Bird & Bird's team was led by Aviation Disputes partner Sophie Eyre with Simon Phippard and Jamie Ptaszynski.
You can find full details of the judgment here.