(2010) EWHC 40 (Cmm)

Tandrin (the Seller) applied to the court for a judgement against Aero Toy Store (the Purchaser). The Seller had agreed to sell an executive jet to the Purchaser for $31.75 million. The Purchaser had paid $3 million as a deposit to an Escrow Agent and the deposit and balance of the purchase price would be paid to the Seller on delivery of the Aircraft. However, the Purchaser failed to take delivery and, as a result, the Seller exercised its contractual right to terminate the agreement, claiming that it was entitled to the full deposit by way of liquidated damages. When the Purchaser refused to pay the liquidated damages the Seller raised an action against it.

The Purchaser in its defence claimed:- (1) the clause of the sale agreement which allowed the Seller to retain the deposit in the event of failure by the Purchaser to take delivery amounted to a penalty clause; (2) although governed by English law, the sale agreement contained a non-exclusive jurisdiction clause in it and England was an inappropriate jurisdiction for the Seller to seek specific performance, as proceedings had already been established between the two parties in Oklahoma and Florida and fresh proceedings would have to be brought about in Oklahoma or Florida to enforce any judgement made by the English court; and (3) the Purchaser was entitled to rely on the force majeure clause in the sale agreement because of the “unanticipated, unforeseeable and cataclysmic downwards spiral of the worlds financial markets”.

The court rejected the Purchaser’s arguments and found in favour of the Seller on the following grounds:- (1) the penalty argument could not be relied upon, as such deposit/liquidated damages clauses are common in aircraft sale agreements. The deposit itself was not unusually high and was a reasonable estimate of the Seller’s possible loss. In fact, the Seller’s actual loss was approximately $7.75 million; (2) the challenge to the jurisdiction was rejected on the basis that if the Seller applied for relief in the existing proceedings in Oklahoma, such an application would be likely to be fortified by a “reasonable, final and conclusive” judgement from the English court. Also, the Escrow Agent was likely to release the deposit to the Seller on an order being made by the English court to that effect, without the need for proceedings to be brought about in the US; and (3) the Purchaser could not rely upon force majeure, as it was well established under English law that market circumstances affecting the profitability of a contract was not force majeure. The Purchaser’s reference to the words “any other cause beyond the Seller’s reasonable control” within the force majeure clause in the contract could not be relied upon by the Purchaser as only the Seller could rely upon this.