The High Court has refused an application for summary judgment on a claim for unpaid rent for a leased aeroplane which was not airworthy.
In ACG Acquisition XX LLC v Olympic Airlines SA (2010) (unreported), the lessor, ACG, applied for summary judgment against Olympic after the airline stopped paying rent on a Boeing 747 that it had leased for a period of five years. Olympic ceased rent payments after corroded spoiler cables meant that the plane had to be taken out of service just 14 days after it had been delivered. Further problems were also discovered and the aeroplane's certificate of airworthiness was withdrawn. Olympic counterclaimed against ACG for breach of the lease agreement and damages. It argued that the agreement was not merely for possession of an aeroplane but for ACG to supply the aircraft in an airworthy condition. ACG's breach in this respect would therefore defeat the claim for unpaid rent. ACG claimed that it had delivered the aircraft in an airworthy condition as stipulated in the lease, and that Olympic's signature on the delivery certificate was proof of its acceptance of the aeroplane which precluded Olympic from maintaining its claim.
Denying the application, Mr Justice Hamblen held that for Olympic to be precluded from maintaining its claim there would need to be clear words in the lease agreement that released ACG from liability to provide an airworthy aircraft. The lease did not expressly exclude ACG's liability in this way, and the signed acceptance was only proof that the aeroplane and documents were satisfactory. He also held that Olympic had a good arguable case that that there had been a failure of consideration, which could defeat ACG's rent claim. He added that the purpose of the lease was to give Olympic the use of a useable aircraft, not just possession of an aircraft.