Enforcement measuresRepossession following lease termination
Outline the basic repossession procedures following lease termination. How may the lessee lawfully impede the owner’s rights to exercise default remedies?
English law permits a lessor to repossess an aircraft without the need to obtain a court order (the ‘self-help’ remedy). In these circumstances, the lessor may only exercise such rights as have been granted to it under the lease, peaceably and lawfully. Accordingly the exercise of such rights on a self-help basis usually requires the lessee to accede to the exercise of the rights, and the more common course of action, in the more usual case where the lessee objects to repossession, is for the lessor to apply to court for a possession order.
The majority of cases arising out of the finance or lease of an aircraft are likely to be heard by the Commercial Court of the Queen’s Bench Division of the High Court in London. The lessor’s costs can be claimed procedurally and pursuant to express indemnity provisions in the transaction documentation as damages. We would expect there to be an element of irrecoverable costs; as a rule of thumb these would be approximately 25-30 per cent of total costs incurred.
While it is dependent on the court’s schedule, there is a good prospect of having the lessor’s claim finally decided within two months of service of the Claim Form. However, there are three court procedures that may be used to obtain swift judgment:
- failure to acknowledge particulars of claim: in this case, judgment can be obtained in 14 days;
- failure to file a defence: if the lessee fails to file a defence then judgment may be obtained in 28 days; and
- no arguable defence: the lessor may proceed to summary judgment.
Many of the points made in question 23 will also be relevant to enforcement by a lessor.Enforcement of security
Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?
Similarly to the above, the mortgagee of an aircraft registered with the CAA may take peaceful possession of an aircraft following a self-help remedy. The mortgagee will have the power to sell the aircraft if that power is set out in the mortgage.
However, there are circumstances where it may be safest for the mortgagee to proceed by way of court order, for example:
- where the mortgagor opposes repossession;
- when there is uncertainty as to whether or not an event of default has occurred; or
- where there may be competing third-party interests.
Self-help remedies, because they do not involve a court’s judgment on the rights of the mortgagee, leave open the risk of later claims by the mortgagor (or other parties having an interest in the aircraft) for wrongful interference with the aircraft, more particularly:
- in the event of wrongful taking of possession by the mortgagee exercising a self-help remedy, damages may be very high;
- the taking of possession may involve the mortgagee in the civil offence of trespass;
- a private sale by the mortgagee (as ‘mortgagee-in-possession’) may be challenged on various grounds, such as the authority of the mortgagee to pass good title, the right to sell and the lack of sale at the best price reasonably obtainable; and
- a judicial order will assist in demonstrating to third parties, such as airport authorities, that the bank’s right to seize the aircraft has arisen.
With respect to trespass, a standard mortgage will contain a right to enter premises to repossess the relevant aircraft. However, the right to enter upon any premises where the aircraft may be located is a right granted only by the mortgagor. It would not permit the mortgagee to enter the premises of third parties. This is a strong argument for proceeding by way of court order, unless whoever has possession of the aircraft is willing to grant the mortgagee access to it (and the aircraft’s technical records).
In a case of urgency, an injunction may be sought preventing the movement of the aircraft, before the issue of the mortgagee’s claim form (a freezing injunction). The application can be made quickly (within 24 hours or less if the evidence is ready). Where there are strong grounds for its justification (such as the possibility of the aircraft being removed from England), an application may be made without notice to the mortgagor supported by a witness statement. The mortgagee is obliged to disclose all relevant information, so as not to mislead the court. Failure to do so can have adverse consequences, such as the later release of the injunction and liability in damages to the mortgagor.
A completely private sale (ie, without any court involvement) of the aircraft is not generally possible except by exercising self-help remedies or by appointing a receiver. The mortgagee is obligated by law to obtain the best price reasonably obtainable. Judicial sale of the aircraft would be made pursuant to a court order and the court will specify the procedural requirements. A sale by public auction will often be required with certain notice requirements, for example publication in the national press and certain aviation publications. It may be possible for the mortgagee to request a private sale if it can be shown that a higher price would be obtained by such a sale.Priority liens and rights
Which liens and rights will have priority over aircraft ownership or an aircraft security interest? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?
The following aircraft-related liens and rights could have priority over aircraft ownership or an aircraft security interest:
- airport charges: providing the aerodrome authority the right to detain and sell the aircraft or any other aircraft for which the person in default is the operator at the time the detention begins. The application to sell the aircraft must be brought to the notice of persons whose interests may be affected (including the owner, lessor or mortgagee of the aircraft) to allow such person(s) an opportunity of becoming a party to the proceedings;
- air navigation charges (such as National Air Traffic Services and Eurocontrol charges): providing the CAA the right to detain and sell the aircraft or any other aircraft for which the person in default is the operator at the time the detention begins. The application to sell the aircraft must be brought to the notice of persons whose interests may be affected (including the owner, lessor or mortgagee of the aircraft) to allow such persons an opportunity of becoming a party to the proceedings;
- licensing, public health, noise, emissions, patent or safety contraventions: providing the relevant authority with a right to detain the aircraft;
- unpaid customs duties: providing customs authorities with a right to detain and, in some cases, impose forfeiture of the aircraft;
- unpaid EU ETS penalties: providing the Secretary of State with the right to detain and sell any aircraft for which the person in default is the operator at the time the detention begins. The application to sell the aircraft must be brought to the notice of persons whose interests may be affected (including the owner, lessor or mortgagee of the aircraft) to allow those persons an opportunity of becoming a party to the proceedings;
- tax law contraventions: providing the tax authorities with a right to detain and sell the aircraft;
- possessory repairers’ liens: in circumstances where a repairer or an outfitter has, in its lawful and continuous possession, an aircraft on which it has bestowed labour, enhancing the aircraft’s value, that person will have a common law lien on the aircraft to the extent it remains unpaid for its labour. There are a number of prerequisites for such a lien to exist. Liens may also be created by contract; and
- seller’s lien: giving an unpaid seller the right to detain the aircraft, stop the aircraft in transit if the buyer is insolvent and resell the aircraft.
It is believed by the main authorities in this area that the order of priority in respect of liens and detention rights will be as follows:
- statutory detention rights, for example, in relation to Eurocontrol charges;
- contractual liens created prior to the date of registration of a registered mortgage;
- possessory liens;
- registered mortgages in order of registration; and
- unregistered mortgages.
How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?
In the absence of any bilateral enforcement agreement between the United States and the United Kingdom, English courts must rely on the common law system i to enforce New York court judgments. Consequently, a separate debt claim may be brought in English courts to do so. The United Kingdom of Great Britain and Northern Ireland is party to the 1958 New York Convention.