Aircraft Purchase Fleet Limited v Compagnia Aerea Italiana SPA [2018] EWHC 315 (Comm)

Background

The Claimant (“APFL”) entered into a framework agreement with the Defendant (“CAI”) to purchase aircraft from Airbus, and then to lease that same aircraft to CAI. In the period of 2009 to 2012, APFL struggled to secure financing. During this period, CAI also requested to lease different aircraft to those originally agreed (A319s rather than A320s). On multiple occasions, APFL had failed to find the funds needed to buy aircraft that Airbus was ready to deliver. Following a period of ‘crisis management’, unbeknownst to CAI, Airbus served its notice of termination of its obligation to sell aircraft to APFL, thereby cancelling future deliveries, consequently rendering APFL’s performance of its corresponding obligations to CAI under the framework agreement impossible.

APFL then claimed damages of $260m against CAI, claiming that CAI had renounced its obligations by insisting on the A319 model.

It was common ground that, if CAI had renounced the framework agreement, it would nonetheless have a defence to APFL's claim for damages if APFL had, independently, rendered itself incapable of performing its obligations under the contract.

CAI argued that this was not the case, and that this, in fact, arose by virtue of the application of the doctrine of frustration. It claimed that it had become impossible for either party to perform the framework agreement once Airbus had terminated its agreement with APFL.

Phillips J held that the fact that APFL had no aircraft to lease to CAI did not result in the framework agreement being frustrated and both parties being released from their obligations. Responsibility for matters giving rise to the impossibility of performance (i.e. the purchase of aircraft) was clearly allocated in the contract, and that, furthermore, APFL was responsible for its own inability to perform; APFL did not come close to discharging the burden of establishing that Airbus’ termination of its agreement with APFL was in any way influenced by CAI’s position.

The claim was therefore dismissed.

Stephenson Harwood comment

This case further highlights the narrow scope of the doctrine of frustration, and that a party irremediably disabled from performance is not discharged from their obligations under the doctrine of frustration if their inability to perform is attributable to matters within their control.