Factual and Procedural Background
The Plaintiff, Company A, incorporated in the British Virgin Islands, and the Defendant, Company B, incorporated in the Isle of Man, entered into an Aircraft Sale and Purchase Agreement ("APA") on 28 May 2018. Under the APA, Company A agreed to sell and Company B agreed to buy a Boeing Business Jet for US$30,000,000. Prior to the APA, Company B deposited a refundable holding deposit of US$2,500,000 with an Escrow Agent. The Scheduled Delivery Date was 19 July 2018.
On 20 July 2018, Company B purported to terminate the APA citing breach of a warranty as to title and non-fulfilment of certain conditions precedent. Company A denied these breaches and subsequently purported to terminate the APA on 21 August 2018 due to Company B's failure to pay the balance of the purchase price and part of the Escrow Agent's fees. Both parties applied for summary judgment regarding entitlement to the Deposit held by the Escrow Agent.
The APA contemplated a simultaneous back-to-back transaction whereby Company A was to purchase the Aircraft from a third party, Company C, and sell it to Company B. The Aircraft was owned by Company C at the time of the APA, subject to a mortgage which was discharged before the Scheduled Delivery Date. The Escrow Agent's terms acknowledged the possibility of simultaneous closings involving the same aircraft.
Company B alleged breaches of warranty and conditions precedent by Company A, including failure to hold good and marketable title at the date of the APA and at Delivery, failure to provide evidence of authorization, failure to position the Aircraft at the Delivery Location, failure to provide evidence of registration as a transaction user entity, and failure to provide back-to-birth bills of sale. Company A disputed these claims, asserting that the warranty as to title applied only at Delivery, that Company B waived certain conditions by executing the APA, and that Company B failed to request or obtain necessary documents and evidence in advance.
The dispute proceeded to applications for summary judgment under CPR rule 24.2, with each party seeking entitlement to the Deposit based on the validity of their respective termination of the APA.
Legal Issues Presented
- Whether Company B validly terminated the APA on 20 July 2018 for breach of the warranty as to title and non-fulfilment of conditions precedent.
- Whether Company A validly terminated the APA on 21 August 2018 for Company B's failure to pay the balance of the purchase price and part of the Escrow Agent's fees.
- The proper construction and timing of the warranty as to title in clause 6.1 of the APA.
- The effect of the implied term regarding cooperation and the obligation on Company B to request and notify Company A of outstanding documents or evidence related to conditions precedent.
- Whether Company B waived or is estopped from relying on non-fulfilment of certain conditions precedent by executing the APA without receiving evidence of authorization.
- The impact of Company B's failure to pay on its entitlement to terminate or rely on non-fulfilment of other conditions precedent.
Arguments of the Parties
Defendant's (Company B's) Arguments
- The Scheduled Delivery Date was fixed at 19 July 2018 and was not extended by agreement.
- Company A breached the warranty in clause 6.1 by lacking good and marketable legal title at the date of the APA and at the Scheduled Delivery Date, due to the Aircraft being subject to a mortgage and owned by Company C.
- The two contracts (Company A to Company C and Company A to Company B) were separate and simultaneous performance was impossible under the APA.
- Company B had not received satisfactory evidence of Company A's authorization to execute the APA as required by clause 2.4(a).
- Conditions precedent in clauses 2.4(d), (f), and (g) were not satisfied at the Scheduled Delivery Date, including failure to position the Aircraft, failure to receive evidence of Company A's registration as a transaction user entity, and failure to receive all back-to-birth bills of sale.
- Company B did not waive or defer satisfaction of these conditions in writing.
- Company B's termination was valid despite its own failure to pay the balance of the purchase price and part of the Escrow Agent's fee, as termination rights were independent and Company A's inability to purchase from Company C was unrelated.
Plaintiff's (Company A's) Arguments
- Company B breached its obligation to pay the balance of the purchase price and part of the Escrow Agent's fees by the Scheduled Delivery Date, constituting a breach of condition precedent under clause 2.2(e).
- Accordingly, Company A was entitled to terminate the APA pursuant to clause 2.6.
- The warranty in clause 6.1 applies only at Delivery, not at the date of the APA or Scheduled Delivery Date, and was not breached as Delivery did not occur.
- Company B was aware that Company C owned the Aircraft and did not object to the back-to-back transaction prior to termination.
- Company B failed to request or obtain documents and evidence related to conditions precedent prior to termination and thus cannot rely on their non-provision, relying on clause 10.1 and an implied term requiring cooperation and timely requests.
- Company B waived the condition precedent in clause 2.4(a) regarding evidence of authorization by executing the APA without such evidence and proceeding with performance.
- Failure to position the Aircraft at the Delivery Location under clause 2.4(d) was conditional on Company B's payment obligations, which were not fulfilled, preventing reliance on this condition as a ground for termination.
- Evidence of Company A's registration as a transaction user entity was publicly available and Company B failed to take reasonable steps to obtain it or notify Company A of any deficiency.
- Back-to-birth bills of sale were provided up to Company C's acquisition, and the bill of sale from Company C to Company A would only exist at simultaneous completion, consistent with the APA and Escrow Agent's terms.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) |
Principles governing summary judgment applications, including the requirement of no real prospect of success and the caution against final decisions without trial where further evidence may alter outcome. |
The court applied these principles to assess whether either party had a real prospect of success and whether summary judgment was appropriate. |
| TFL Management Services Ltd v Lloyds TSB Bank plc [2013] EWCA Civ 1415; [2014] 1 WLR 2006 |
Court's caution in determining single issues on summary judgment and the need for careful consideration. |
The court considered these principles when deciding to refuse one party's application and grant the other's. |
| Aircraft Purchase Fleet Ltd v Compagnia Aerea Italiana [2018] EWHC 3315 (Comm) |
Independence of termination rights and the effect of breach of conditions precedent. |
The court relied on this case to support the argument that termination rights under the APA were independent and that Company B's failure to pay did not affect its right to terminate for other breaches. |
| Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 |
Doctrine of estoppel by convention regarding waiver of contractual conditions. |
The court held Company B was estopped from relying on non-fulfilment of authorization evidence condition due to its conduct in executing the APA. |
| Alghussein Establishment v Eton College [1988] 1 WLR 587 |
Principle that a party cannot rely on its own breach to justify termination (no taking advantage of own wrong). |
The court applied this to conclude Company B could not rely on failure of positioning condition where it had not fulfilled payment obligations. |
| Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742 |
Principles for implying terms into contracts: reasonableness, business efficacy, obviousness, clarity, and consistency with express terms. |
The court applied these principles to imply a term requiring Company B to cooperate and request documents reasonably in advance. |
| Ali v Petroleum Company of Trinidad and Tobago [2017] UKPC 2; [2017] ICR 531 |
Implied term requiring co-operation between contracting parties to enable performance. |
The court relied on this authority to support the implied term of cooperation in the APA. |
| Mackay v Dick (1881) 6 App Cas 251 |
General rule that parties agree to do all necessary acts to carry out contractual obligations, even if not expressly stated. |
The court cited this to support the implied cooperation term. |
Court's Reasoning and Analysis
The court first considered the proper construction of the warranty as to title in clause 6.1 of the APA. It rejected the Defendant's argument that the warranty required Company A to hold good and marketable title at the date of the APA. Instead, the court held that the warranty applied only at Delivery, defined as the passing of title evidenced by the execution and delivery of the Bill of Sale. Since Delivery never occurred, there was no breach of the warranty.
The court noted that the parties contemplated simultaneous back-to-back transactions involving Company A purchasing the Aircraft from Company C and selling it to Company B, as evidenced by the Escrow Agent's terms and the conduct of the parties. The court found no prohibition against such simultaneous transactions in the APA.
Regarding conditions precedent in clause 2.4, the court found that Company B was required to take reasonable steps to request and obtain documents or evidence necessary to fulfil those conditions in advance of the Scheduled Delivery Date. Company B failed to do so and did not notify Company A of any outstanding requirements, thereby precluding reliance on non-fulfilment.
The court held that Company B waived the condition precedent requiring evidence of Company A's authorization by executing the APA despite lacking such evidence. This estoppel prevented Company B from terminating on this ground.
On the condition precedent requiring positioning of the Aircraft, the court held that this obligation was conditional on Company B fulfilling its payment obligations. Company B's failure to pay prevented it from relying on non-positioning as a termination ground, as it would amount to taking advantage of its own breach.
Company A had provided evidence of registration as a transaction user entity, which was publicly accessible. Company B's failure to obtain or request this evidence barred reliance on its absence.
Back-to-birth bills of sale were provided up to Company C, and the absence of a bill of sale from Company C to Company A at the Scheduled Delivery Date was consistent with the anticipated simultaneous completion. This did not constitute a breach of the condition precedent.
The court did not accept that the Scheduled Delivery Date had been extended by agreement and declined to rely on any alleged waiver or grace period.
On the balance, the court concluded that Company B was not entitled to terminate the APA on 20 July 2018, but Company A's termination on 21 August 2018 was valid due to Company B's failure to pay. Accordingly, Company A was entitled to the Deposit.
Holding and Implications
The court's final decision was to grant summary judgment in favor of the Plaintiff, Company A, and dismiss the Defendant, Company B's, application.
Holding: Company B's purported termination of the APA on 20 July 2018 was invalid. Company A's termination on 21 August 2018 was valid and effective. Consequently, Company A is entitled to the Deposit held by the Escrow Agent.
Implications: The decision directly affects the parties by awarding the Deposit to Company A and dismissing Company B's claim for its return. The ruling clarifies the construction of warranties and conditions precedent in simultaneous aircraft sale transactions and confirms the necessity of cooperation and timely requests in fulfilling contractual conditions. No new legal precedent was established beyond the application of existing principles to the facts.