ACG Court of Appeal Win

17 Apr 2013

Simmons & Simmons’ Win for Client Aviation Capital Group in Court of Appeal

The Court of Appeal has today given judgment in favour of Simmons & Simmons’ client, Aviation Capital Group, in ACG Acquisition XX v Olympic Airlines, a case which has attracted significant attention in the aviation industry. The outcome represents an outright victory for ACG.

In the very first decision in the case, in 2010, Mr Justice Hamblen refused to give ACG summary judgment, causing considerable consternation. He held it arguable that an aircraft lessee could bring a claim against the lessor for alleged breach of delivery condition, despite having accepted, at delivery, that the aircraft was indeed in the delivery condition.

This was despite all of the contractual clauses which were deliberately included to protect the lessor against such claims. It was also despite there being no suggestion that ACG knew of any defect in the aircraft which was unknown to Olympic, or that when the aircraft was grounded some weeks after delivery ACG was responsible for Olympic’s failure to return it to service. As such, the Hamblen decision suggested that important terms in the Lease Agreement, which allocated key areas of risk between the two parties, might in fact be ineffective.

Olympic went on to lose at trial, before Mr Justice Teare, in 2012. ACG won, and was awarded substantial damages, while Olympic’s counterclaim was rejected. The trial judge, however, reached that decision on an equitable rather than a contractual basis. This required ACG not only to show that the contractual documents contained a statement by Olympic accepting that the aircraft complied with the delivery condition, but also to demonstrate that ACG relied on that statement in a particular way, that in so doing it suffered detriment in a particular way, and that in the particular circumstances of the case it would be unconscionable for Olympic to go back on that statement. All of those are matters which will vary from one case to another, independently of the contractual terms themselves. That, therefore, appeared to raise the bar for the lessor as it looked to rely on the Certificate of Acceptance.

Olympic asked the Court of Appeal to overturn that judgment and award it millions of euros in damages for breach of the delivery condition. The Court of Appeal, however, not only dismissed Olympic’s appeal, but went even further in ACG’s favour than the trial judge had done. The unanimous decision of the 3 appeal judges emphatically rejected Olympic’s case, and held that the contractual clauses operate exactly as ACG had contended all along – meaning that the Lessee, when it signed the Certificate of Acceptance acknowledging that the Aircraft was in the required condition, was bound by it, and could not subsequently allege that the aircraft was not satisfactory.

This closes the chapter not only on the long-running litigation itself, but also on the concerns, raised by the Hamblen judgment and not fully dispelled by Olympic’s defeat at trial, that arguments such as those run by Olympic could defeat important clauses in the lease: not least, “as is, where is”, “hell or high water”, and “conclusive proof”. The Court of Appeal dismissed Olympic’s argument as “a most unlikely and uncommercial construction”.

The Simmons & Simmons team acting for ACG comprised partner Nick Benwell, managing associate Stephen Moses, and associates Sharley Willetts and Caroline Close-Smith, together with asset finance partner Mark Moody, and barristers Michael McLaren QC and Harriet Jones-Fenleigh of Fountain Court Chambers.

Managing associate Stephen Moses said: “The Court of Appeal’s clear judgment will be a source of great comfort to the aircraft leasing industry. The fact that the Court of Appeal took a very pragmatic, commercial approach, and dismissed Olympic’s arguments as “uncommercial”, gives reassurance that the English courts take a sensible, realistic view when it comes to enforcing contracts, rather than being tied up in needless nit-picking.”

Partner Nick Benwell said: “It has been a pleasure to work with the team at ACG and, at the end, to reach such a successful and unambiguous outcome, both for ACG and for the aircraft finance industry. It is another victory in what is already a successful year for the Simmons & Simmons dispute resolution practice. It is particularly satisfying that this judgment will make it much harder in future for litigants to drag proceedings out, and drive up their costs, as Olympic did relentlessly in this case.” 


Notes to editors:

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4. The full case name is ACG Acquisition XX LLC v Olympic Airlines S.A. (in special liquidation): ACG Acquisition XX LLC is a non-consolidated securitisation vehicle for which Aviation Capital Group, Corp. acts as servicer. References for the judgments are as follows: Appeal, A3/2012/1559 (neutral citation to follow; copy of the judgment available from Simmons & Simmons on request); trial (Teare J), [2012] EWHC 1070 (Comm); summary judgment (Hamblen J), [2010] EWHC 923 (Comm).

5. About Aviation Capital Group Corp.: ACG is the owner and manager of a diversified fleet of commercial jet aircraft leased to the world’s leading airlines. Its portfolio includes over 250 aircraft leased to approximately 90 airlines in 40 countries. ACG also provides asset management and remarketing services to aircraft investors and institutional clients. ACG was founded in 1989 and is a wholly-owned subsidiary of Pacific Life Insurance Company, a Pacific LifeCorp company.

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